"Third-Party Standing" Doctrine Shouldn't be Used to Block Lawsuits Challenging Biden's Student Loan Forgiveness Plan

Legal scholar Michael Dorf claims Supreme Court should rule on this basis. But the doctrine doesn't apply to this case, and is dubious anyway.

In a blog post building on points he made in our recent debate at his school, Cornell law Professor Michael Dorf argues that the plaintiffs in the Supreme Court cases challenging the legality of President Biden's massive student loan forgiveness plan should be denied, standing, based on rules disfavoring standing for "third parties." While his argument is clever, it overlooks the key point that third-party standing restrictions only apply to claims based on the constitutional rights of individuals, not those addressing structural limitations on government power. In addition, if the Court were to accept his reasoning, it would set a dangerous precedent blocking most legal challenges to illegal government spending.

Standing issues have long loomed as the biggest obstacle to challenging Biden's loan forgiveness plan in court. On the merits, the administration's position is very weak. Under current Supreme Court precedent, plaintiffs have to meet three requirements to get standing to file a lawsuit in federal court: They must 1) have suffered an "injury in fact," 2) the injury in question must be caused by the allegedly illegal conduct they are challenging, and 3) a court decision should be able to redress the injury.

The "injury in fact" requirement has been the main stumbling block for opponents of the loan forgiveness plan. The most obvious victims of the plan are taxpayers, who will foot the bill for this massive giveaway (estimated at $400 billion or more). But longstanding Supreme Court precedent rejects taxpayer standing, except in a few narrow situations that aren't relevant here. But in Biden v. Nebraska, a case brought by six Republican-controlled state government, the state of Missouri overcame this obstacle because  it has a state agency— the Missouri Higher Education Loan Authority (MOHELA)—that services student loans, including some that will be at least forgiven by the Biden plan. The Biden loan forgiveness program will predictably reduce MOHELA's revenue from those loans, and even a small financial loss of this kind is enough to qualify for standing under Supreme Court precedent.

In previous posts (see here and here), I criticized the Biden Administration's argument that Missouri lacks standing to bring claims on behalf of MOHELA because the latter is independent from other state government agencies. Dorf, however, argues that Missouri should be "denied so-called third-party standing under the general rule that parties may only bring their own claims." On this theory, Missouri and MOHELA are mere "third parties" because the possible illegality of the student loan forgiveness plan doesn't undermine any of their legal rights, as such. It merely breaches constitutional and statutory limits on executive power.

In support of this theory, Dorf relies on Justice Clarence Thomas's dissenting opinion June Medical v. Russo (2020), where Thomas argues the Court was wrong to grant standing to abortion providers to challenge a law restricting abortion. The constitutional right in question belonged to the pregnant women, and therefore could not be raised by the "third party" providers.

But, as Thomas notes, this third-party standing restriction applies to cases  where private parties"  try to  "bring suit to vindicate the constitutional rights of individuals who are not before the Court" [emphasis added]. It does not apply to cases involving structural limits on government power, such as federalism and (in this case) separation of powers. Dorf himself notes that the Supreme Court said as much in Bond v. United States (2011), where an individual charged with a federal crime was allowed to argue that the statute in question was unconstitutional because it exceeded the scope of federal power.

The Court unanimously ruled that individuals have standing to raise federalism issues  because "[b]y denying any one government complete jurisdiction over all the concerns of public life, federalism protects the liberty of the individual from arbitrary power. When government acts in excess of its lawful powers, that liberty is at stake." The Court went on to point out that the same principle applies to separation of powers cases:

The recognition of an injured person's standing to object to a violation of a constitutional principle that allocates power within government is illustrated, in an analogous context, by cases in which individuals sustain discrete, justiciable injury from actions that transgress separation-of-powers limitations. Separation-of-powers principles are intended, in part, to protect each branch of government from incursion by the others. Yet the dynamic between and among the branches is not the only object of the Constitution's concern. The structural principles secured by the separation of powers protect the individual as well.

Unlike individual rights claims, which—on this theory—can only be asserted by people who have suffered specific rights violations, structural claims can be raised by anyone, because structural restrictions on government power provide generalized protection for all Americans. In a wide-ranging recent Yale Law Journal article on third-party standing,  Curtis Bradley and Ernest Young note that "[a]lthough structural claims most directly protect the prerogatives of institutions, courts generally accord individuals standing to raise these claims without any talk of third–party standing."

The loan forgiveness case is exactly the kind of situation the Court was referring to in Bond. MOHELA—and the state of Missouri generally- has suffered "a discrete, justiciable injury from actions that transgress separation-of-powers limitations." If the plaintiffs are right, the executive has usurped Congress' spending power, and in the process inflicted an injury on MOHELA. As Dorf recognizes, that injury is exactly the type that would normally meet standing requirements ("third party" restrictions aside). To be sure, MOHELA and Missouri are state entities rather than private citizens. But separation of powers rules—like other structural limitations on federal government power—protect states, too.

As Thomas recognizes in his June Medical dissent, third party claims sometimes qualify for standing even in the individual rights context. Indeed, the Court allowed exactly that in June Medical itself, and also in a number of other cases, such as the famous 1925 ruling in Pierce v. Society of Sisters, where a private school was allowed to raise parental rights in its challenge to a state law requiring children to attend public schools from the age of eight to sixteen. Thomas believes all these cases are wrongly decided. I think he himself is the one who is wrong here. Regardless, even he does not go so far as to claim third party standing constraints should apply to structural cases.

Dorf further argues that MOHELA and Missouri's injury doesn't qualify for standing because it isn't the right type of harm:

But even acknowledging that structural protections exist to protect individuals, surely there is a limit to how far that principle extends. Bond herself had standing to object that the law that would apply to her exceeded the powers of Congress. But suppose that Bond's next-door neighbor wished to sue the government on the ground that if Bond went to prison, her house would be empty, which would create a greater risk of crime, which would lower the neighbor's property value. There are numerous objections one could make to such a suit, but one threshold objection ought to be that this simply isn't the kind of injury that counts–even if we assume that it's nearly certain to occur. Why not? Because the neighbor's expected pecuniary loss, even if substantial and nearly certain, has nothing to do with the alleged unconstitutionality of the statute as applied to Bond.

It's arguable that Bond's neighbor's injury in this hypothetical wouldn't qualify because it is in large part caused by the intervening actions of third parties: the criminals who might target the neighborhood, and would-be buyers who aren't willing to pay as high a price for houses in the area, as a result. Thus, the neighbor might lose based on the causation requirement for standing.

But such considerations don't apply to the MOHELA situation. Here, the administration's illegal actions directly cause the financial losses to MOHELA and the state. If Bond's neighbor suffered a similarly direct injury, she should have standing to sue as well.

And, as I noted in our earlier debate, I have the same response to Dorf's hypothetical involving an electric chair manufacturer whose contract with the government gets terminated because the president decides to commute all federal death penalties in ways that manufacturer claims exceed the scope of presidential authority. While the manufacturer's claims should fail on the merits (because such action is within the scope of the president's pardon power), he is entitled to standing.

If the Court were to reject the Missouri lawsuit based on Dorf's theory, it would set a very dangerous precedent. So long as there is no general taxpayer standing, almost all challenges to the legality of government spending must rely on injuries similar to those suffered by Missouri, where the government's expenditure inflicts some sort of economic loss on a state or private party. If the direct financial loss to MOHELA is not the right type of injury, it is difficult to see what would be.

The net effect of such standing rules would be to give presidents a near-blank check to raid the Treasury for their pet projects, free of fear that lawsuits might stop them. To be sure, one or both houses of Congress might still be able to bring a case, as the DC Circuit ruled in a challenge to Donald Trump's diversion of funds to build his border wall (Trump's border wall power grab has many parallels to Biden's loan forgiveness policy). But such a lawsuit is only likely to occur if the party opposed to the president controls at least one house of Congress. Thus, the president could still indulge in illegal spending during times of "united" government.

Even if you trust Biden with such power, you probably don't have similar confidence in Trump, Ron DeSantis, or whoever the next Republican president might be. If expansive third-party standing restrictions had a strong basis in the text and original meaning of the Constitution, perhaps we would just have to live with this danger. But, as Dorf recognized at our Cornell debate, they don't.

Indeed, the entire doctrine of standing is largely a judicial creation, and a very dubious one at that. In my view, the Supreme Court should just simply abolish it, or at least allow taxpayer standing in cases involving illegal expenditures. The justices are unlikely to do that anytime soon. But they should at least avoid expanding third-party standing restrictions to cover lawsuits over structural issues, as well as individual rights.

I think Dorf is on stronger ground in criticizing the standing claims asserted by the plaintiffs in Department of Education v. Brown, the other loan-forgiveness case before the Supreme Court; I have raised some doubts on that score, myself. But I also think this issue won't matter much to the ultimate resolution of these cases. If Missouri gets standing, that will be enough for a ruling invalidating the plan. If the justices deny standing to Missouri, they are unlikely to grant it in the other case, where the rationale for standing is much weaker.