By Dorothy Atkins

Law360 (June 9, 2020, 11:05 PM EDT) -- A California federal judge slammed the U.S. Department of Education on Tuesday for taking too long to finalize whether immigrants can access a $12.56 billion coronavirus relief fund created to help students, saying it seems the DOE is creating "roadblocks," even though Congress wants the funds distributed on an emergency basis.

During a hearing held via Zoom, the government's counsel Michael Andrew Zee urged U.S. District Judge Yvonne Gonzalez Rogers to hold off on deciding whether to block DOE guidelines barring undocumented students from accessing the newly created Higher Education Emergency Relief Fund.

Zee said the department is expected to issue final interim rules, which would moot the pending motion, no earlier than June 15 and possibly "in a matter of weeks." He added that the DOE is working "as quickly as feasible" to finalize the rules.

But the judge repeatedly asked why the DOE's rulemaking process is taking so long and noted that the delay seems to conflict with Congress' intent when it created the fund as part of the Coronavirus Aid, Relief and Economic Security, or CARES, Act earlier this year in response to the pandemic.

"How is that approach and tactic consistent with the word 'emergency'?" the judge asked. "It seems to me like you're putting roadblocks to the distribution of this money."

Judge Gonzalez Rogers pointed out that the DOE could put off finalizing its rules indefinitely, even though it appears that students would be irreparably harmed by the delays and it would be against the public interest and the balance of equities.

"People don't have money for food, for housing. People have lost their jobs," the judge said. "I can't frankly envision something that is more irreparable harm, when you're talking about funds that are there to deal with this unprecedented crisis that our country has never had to deal with before. … Our entire economy — people have lost jobs, our system is in trauma. So if you're wrong, can you really argue that there's not irreparable harm here?"

The judge's comments came during a hearing on a motion for preliminary injunction filed by plaintiffs Eloy Ortiz Oakley and several community colleges in May, after the DOE issued policy guidelines in April that exclude hundreds of thousands of community college students across California from accessing billions of dollars in emergency relief created under the CARES Act.

The DOE policy says only U.S. citizens and some green card holders can qualify for federal financial aid, while students covered by the Deferred Action for Childhood Arrivals program and undocumented students would not be entitled to relief.

During the hearing, Lee I. Sherman, who represents the plaintiffs, said they agree that the government is taking too long to issue final rules and noted that the DOE has already revised its stance on who is entitled to the relief five times since April.

Sherman argued that those guidelines are also having real consequences, because colleges haven't been able to distribute funds to students in need. As support, he pointed to a school's declaration that said the guidelines allowed it to distribute emergency funds to only 94 of 1,200 students who need it.

But Zee pointed out that roughly half of the $12.56 billion has been distributed to the schools already and nothing is currently stopping those schools from distributing the funds to students against the guidelines, because the DOE has said it wouldn't retroactively enforce its final rules.

He also noted that the schools are the named plaintiffs, and not the students, and the schools aren't being irreparably harmed by the guidelines.

"There's a difference between harm caused by the pandemic and the department's actions," the attorney said.

But Sherman fired back, arguing that the schools shouldn't be penalized for taking the "prudent action" and not distributing the funds against DOE guidelines. He added that although schools have received some funding from the government, they signed a certification when they accepted the funds that says they will follow the law.

Throughout the hearing, Judge Gonzalez Rogers pressed Zee on whether other federal agencies have implemented an "elongated rulemaking process" before distributing emergency funds under the CARES Act.

Initially, Zee said he wasn't aware of others, but he later corrected himself and said he believes the Small Business Administration has undertaken a similar rulemaking process, although he acknowledged that he doesn't know the details of SBA's process.

The judge responded by giving Zee less than 24 hours to file a brief on the rulemaking issue.

"You can let me know by filing tomorrow before noon," the judge said.

The judge didn't rule at the end of the hearing, but she warned the government that she might decide the motion before the DOE issues final interim rules.

"I don't see anything stopping you from moving faster," Judge Gonzalez Rogers said.

The plaintiffs are represented by Lee I. Sherman of the California Department of Justice.

The government is represented by Michael Andrew Zee of the U.S. Department of Justice's Civil Division.

The case is Eloy Oakley et al. v. Betsy DeVos et al., case number 4:20-cv-03215, in the U.S. District Court for the Northern District of California.

--Editing by Michael Watanabe.

For a reprint of this article, please contact reprints@law360.com.