Missouri Government Agency Threatening to Sue Critic for Libel

But lawsuits for libeling the government do not "have any place in the American system of jurisprudence."

(Levente Bodo / Dreamstime.com)

The Washington Post (Danielle Douglas-Gabriel) covers the story, in an article titled "Student loan servicer MOHELA tells advocacy group to stop 'misleading claims.'" The article links to MOHELA's demand letter, which closes with,

This letter provides the SBPC [the Student Borrower Protection Center] with notice of the falsity of the above-described statements and insinuations. Consequently, if the SBPC continues to make and publish any of these false and misleading statements, MOHELA will treat that continuation as done with knowledge of the statements' falsity or with reckless disregard of their truth or falsity, which can lead to punitive damages under libel laws and other related laws. MOHELA is hopeful that you understand that MOHELA will take all appropriate action necessary to stop this conduct if you persist. MOHELA greatly values and aggressively protects its rights and reputation and intends to vigorously enforce its rights.

But MOHELA is a government entity, and government entities cannot sue for libel, regardless of whether they can show knowing or reckless falsehood.

[1.] First, in Biden v. Nebraska (2023), the Court recognized that MOHELA is a government entity; there, it did so for the purpose of deciding whether a harm to MOHELA is a harm to the state, but the logic extends equally to other constitutional contexts. To quote the Court,

MOHELA is a "public instrumentality" of the State. Mo. Rev. Stat. § 173.360. Missouri established the Authority to perform the "essential public function" of helping Missourians access student loans needed to pay for college. To fulfill this public purpose, the Authority is empowered by the State to invest in or finance student loans, including by issuing bonds. §§ 173.385(1)(6)-(7). It may also service loans and collect "reasonable fees" for doing so. §§ 173.385(1)(12), (18). Its profits help fund education in Missouri: MOHELA has provided $230 million for development projects at Missouri colleges and universities and almost $300 million in grants and scholarships for Missouri students.

The Authority is subject to the State's supervision and control. Its board consists of two state officials and five members appointed by the Governor and approved by the Senate. § 173.360. The Governor can remove any board member for cause. Ibid. MOHELA must provide annual financial reports to the Missouri Department of Education, detailing its income, expenditures, and assets. § 173.445. The Authority is therefore "directly answerable" to the State. The State "set[s] the terms of its existence," and only the State "can abolish [MOHELA] and set the terms of its dissolution."

By law and function, MOHELA is an instrumentality of Missouri: It was created by the State to further a public purpose, is governed by state officials and state appointees, reports to the State, and may be dissolved by the State.

Or, to quote a brief cosigned by the Missouri Attorney General in that case,

MOHELA is a state-created and state-controlled public entity that performs essential public functions for the State. As such, MOHELA is part of Missouri ….

And, from later in the brief,

MOHELA is part of Missouri's government. First, the legislature created MOHELA by special law. Second, Missouri declares that "the exercise by [MOHELA] of the powers conferred" on it, which include ensuring access to loans for Missouri students, is "the performance of an essential public function." Third, the governor appoints five of MOHELA's seven members; the remaining two are officials of other state entities; and all seven are "remov[able] by the governor" for cause.

For another example of the Court recognizing this sort of corporation as a private entity, see Lebron v. National Railroad Passenger Corporation (1995), which "held that Amtrak was the Government for constitutional purposes, regardless of its congressional designation as private; it was organized under federal law to attain governmental objectives and was directed and controlled by federal appointees" (to quote a later case). MOHELA is thus likewise a state government entity for constitutional purposes.

UPDATE: The Biden v. Nebraska discussion of MOHELA cited Lebron as support, which suggests that the analysis of what is a government entity for state-standing-via-injury-to-the-government purposes (the question in Biden v. Nebraska) tracks the analysis of what is a government entity for state action purposes (the question in Lebron). And Beedle v. Wilson, 422 F.3d 1059 (10th Cir. 2005), applied state action analysis—the same analysis the Court used in Lebron—to decide whether a hospital was barred from suing for libel.

[2.] Generally speaking, the law can't punish false statements about government entities—even knowing lies—on the grounds that they damage the government entities' reputation. In the words of New York Times v. Sullivan (1964) (quoting and endorsing an older state law case),

For good reason, "no court of last resort in this country has ever held, or even suggested, that prosecutions for libel on government have any place in the American system of jurisprudence."

And in context, the Court was applying that principle to civil liability (the very issue involved in Sullivan) and not just criminal prosecutions. Likewise, Rosenblatt v. Baer (1966) made clear that "in the absence of sufficient evidence that the attack focused on the plaintiff, an otherwise impersonal attack on governmental operations cannot be utilized to establish a libel of those administering the operations." A claim "based on libel of government," rather than of a particular government official, "is constitutionally insufficient."

And this offers more First Amendment protection than the more famous Sullivan rule that an alleged libel of a public official can't lead to civil or criminal liability without a showing of knowing or reckless falsehood. An alleged libel of the government can't lead to such liability, period. Lower court cases have consistently applied this principle, including to governmental corporations and the like. See, e.g., Nampa Charter School, Inc. v. DeLaPaz (Idaho 2003) ("For the purposes of this libel and slander action against DeLaPaz, NCS should be treated similarly to a school district and is a governmental entity in terms of its ability to sue or be sued. Under Sullivan, Rosenblatt, and Weeks, the school cannot maintain an action for libel and slander against an individual when that individual is speaking out on an issue of public concern."); ACLU of Minn. v. Tarek ibn Ziyad Acad., No. CIV.09-138(DWF/JJG), 2009 WL 4823378 (D. Minn. Dec. 9, 2009) (charter school); Cap. Dist. Reg'l Off-Track Betting Corp. v. Ne. Harness Horsemen's Ass'n, 92 Misc. 2d 232 (N.Y. Sup. Ct. 1977) ("public benefit corporation organized under the provisions of the Regional Off-Track Betting Corporation Law of the State of New York"); Beedle v. Wilson, 422 F.3d 1059 (10th Cir. 2005) (hospital); Beedle v. Darby, 2000 OK 1 (nonprecedential) (hospital); Cox Enterprises v. Carroll City/County Hosp. Auth., 247 Ga. 39 (1981) (hospital); Atlanta Humane Soc. v. Mills, 274 Ga. App. 159 (2005) (Humane Society). [UPDATE: I added the citations starting with ACLU of Minn.]

I've e-mailed MOHELA's General Counsel for comment, and if I get an answer I'll update this post accordingly.