The Washington Post (Danielle Douglas-Gabriel) covers the story, in an article titled “MOHELA, student loan servicer, tells advocacy group to stop ‘misleading claims’.” The article links to MOHELA’s request letter, which closes with,
This letter provides the SBPC [the Student Borrower Protection Center] with notice of the falsity of the statements and insinuations described above. Accordingly, if the SBPC continues to make and publish any such false and misleading statements, MOHELA will treat such continuation as if it were made with knowledge of the falsity of the statements or with reckless disregard of their truth or falsity, which may lead to punitive damages for defamation. laws and other related laws. MOHELA hopes you understand that MOHELA will take all appropriate actions necessary to stop this conduct if you persist. MOHELA highly values and aggressively protects its rights and reputation and intends to vigorously enforce its rights.
But MOHELA is a government agency and government agencies cannot sue for defamation, regardless of whether they can display conscious or reckless falsehoods.
[1.] First Biden v. Nebraska (2023), the Court recognized that MOHELA is a government agency; there, it did so for the purpose of deciding whether harm to MOHELA is harm to the State, but the logic extends to other constitutional contexts as well. To quote the Court,
MOHELA is a “public instrument” of the State. Mo. Rev. Stat. § 173.360. Missouri established the Authority to perform the “essential public function” of helping Missourians access the student loans needed to pay for college. To fulfill this public purpose, the Authority is empowered by the State to invest or finance student loans, including by issuing bonds. §§ 173.385(1)(6)-(7). It can 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 nearly $300 million in grants and scholarships for Missouri students.
The Authority is subject to the supervision and control of the State. Its board consists of two state officials and five members appointed by the Governor and approved by the Senate. § 173.360. The governor may remove any member of the council for cause. Ibid. MOHELA must provide annual financial reports to the Missouri Department of Education, detailing its revenues, expenses and assets. § 173.445. The Authority is therefore “directly responsible” towards the State. The “set” state[s] the terms of its existence”, and only the State “can abolish it [MOHELA] and fix the terms of its dissolution.”
By law and function, MOHELA is an instrument 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 signed by the Missouri Attorney General in that case,
MOHELA is a public body created and controlled by the State that carries out essential public functions for the State. As such, MOHELA is part of Missouri….
And, from further on in the brief,
MOHELA is part of the Missouri government. First, the legislature created MOHELA by special law. Second, Missouri states that “the exercise of [MOHELA] of the powers vested” in it, which include ensuring access to loans for Missouri students, is “fulfilling an essential public function.” Third, the governor appoints five of MOHELA’s seven members; the remainder two are officials of other state entities; and all seven are “remov[able] by the governor” for just cause.
For another example of how the Court recognizes this type of company as a private entity, see Lebron v. National Railroad Passenger Corporation (1995), which “holds that Amtrak was government for constitutional purposes, regardless of its designation as private by Congress; it was organized under federal law to accomplish government objectives and was directed and controlled by federal appointees” (to quote one subsequent case). MOHELA is therefore also a state body for constitutional purposes.
[2.] Generally, the law cannot punish false statements about government bodies – even if they are lies – on the basis that they damage the government bodies’ reputation. In the words of New York Times v. Sullivan (1964) (citing and arguing an old state law case),
For good reason, “no court of last resort in this country has ever held, or even suggested, that government defamation prosecutions have any place in the American jurisprudential system.”
And in context, the Court was applying that principle to civil liability (the very issue involved Sullivan) and not just criminal proceedings. Likewise, Rosenblatt v. Baer (1966) clarified that “absent sufficient evidence that the attack was focused on the plaintiff, an otherwise impersonal attack on government operations cannot be used to establish defamation against those who administer the operations.” A charge “based on defamation of the government,” rather than of a particular government official, “is constitutionally insufficient.”
And this one offers greater First Amendment protection than the most famous Sullivan establish that the alleged defamation of a public official cannot give rise to civil or criminal liability without demonstrating knowing or reckless falsehood. Alleged government defamation cannot lead to such liability, period. Lower court cases have consistently applied this principle. See, for example, Nampa Charter School, Inc. v. DeLaPaz (Idaho 2003) (“For purposes of this defamation and defamation action against DeLaPaz, NCS should be treated similarly to a school district and is a government entity in terms of its ability to sue or be sued. Under Sullivan, Rosenblatt, AND weeks, the school cannot bring an action for defamation and slander against an individual when that individual speaks on a matter of public interest.”).
I have emailed MOHELA’s general counsel for comment, and if I get a response, I will update this post accordingly.