Patenaude v. Nelnet Inc. et al

Filing 24

ORDER granting in part and denying in part Motion for summary judgment and granting leave to file second amended complaint. Signed by Chief District Judge Dana M. Sabraw on 08/01/2022. (jpp)

Download PDF
1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 VICTOR PATENAUDE, 12 13 14 15 16 Case No. 3:22-CV-00279-DMS-AGS Plaintiff, ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT, AND GRANTING LEAVE TO FILE SECOND AMENDED COMPLAINT v. ECMC, a nonprofit corporation and Does 1-10, Defendants. 17 18 This case is before the Court on Defendant Educational Credit Management 19 Corporation (“ECMC”)’s motion to dismiss. The matter is fully briefed and the Court 20 heard oral argument on the motion; the matter is ripe for adjudication. For the 21 following reasons, the Court grants the motion to dismiss in part and denies in part, 22 and grants Plaintiff leave to file a second amended complaint. 23 I. 24 BACKGROUND 25 Plaintiff is an attorney with law school debt who alleges violations of the (1) 26 Fair Debt Collection Practices Act (“FDCPA”), (2) Rosenthal Act, (3) Telephone 27 Consumer Protection Act (“TCPA”), and (4) Fair Credit Reporting Act (“FCRA”) 28 1 1 against ECMC in relation to the handling of his federal student loan. (ECF No. 9.) 2 Plaintiff filed his complaint in state court and former Defendant Nelnet Servicing 3 LLC (“Nelnet”), removed it to the district court. (ECF No. 1.) The Court held an 4 informal telephonic 12(b)(6) conference with the parties on April 7, 2022. Both 5 Defendants raised numerous issues with the complaint, including that they were not 6 debt collectors as defined by the FDCPA. 7 The parties agreed, and the Court ordered, that Plaintiff would file a first 8 amended complaint (“FAC”) within three weeks to address deficiencies in his initial 9 pleading. (ECF No. 5.) Plaintiff failed to do so, filing only after the Court issued an 10 order to show cause (“OSC”). (See ECF Nos. 8–10.) The FAC was filed on May 18, 11 2022; the Court accepted the filing and discharged the OSC. (ECF No. 12.) Shortly 12 after, Nelnet was voluntarily dismissed after reaching a settlement with Plaintiff. 13 (See ECF Nos. 14, 16, 18.) 14 Defendant ECMC filed the instant motion to dismiss on June 16, 2022. (ECF 15 No. 15.) Plaintiff filed a response in opposition (ECF No. 17) and Defendant filed a 16 reply. (ECF No. 20.) The Court heard oral argument on the motion on July 29, 2022. 17 (ECF No. 23.) 18 II. 19 20 DISCUSSION Defendant ECMC moves to dismiss under Federal Rule of Civil Procedure 21 12(b)(6) for failure to state a claim upon which relief can be granted. (ECF No. 15.) 22 Plaintiff agrees in his opposition to dismiss his claims under the Rosenthal Act, 23 TCPA, and FCRA. (ECF No. 17.) Accordingly, these claims are dismissed with 24 prejudice. 25 Plaintiff opposes dismissal of the FDCPA claim and in his opposition seeks 26 leave to file a second amended complaint (“SAC”) alleging additional facts on this 27 cause of action. (ECF No. 17 at 2–3.) He also seeks to add a new claim, for invasion 28 2 1 of privacy. (Id.) During oral argument, Defense counsel agreed that a separate 2 noticed motion on the leave to amend is unnecessary, as Defendant adequately 3 addressed this request in its reply. 4 A. FDCPA Claim 5 Plaintiff alleges ECMC is a debt collector, as it regularly attempts to collect 6 student loans, and attempted to collect on Plaintiff’s defaulted student loan. (Id. at 7 1). ECMC argues that it does not qualify as a debt collector, as Plaintiff’s debt was 8 not in default when it was acquired by ECMC, as required by the FDCPA. See 15 9 U.S.C. 1692a(6)(F)(iii) (excluding from the definition of debt collector one collecting 10 on a debt “which was not in default at the time it was obtained”). During oral 11 argument, Defense counsel stated he was confident that Plaintiff’s debt was not in 12 default when acquired by ECMC. Plaintiff’s counsel responded that he believed he 13 could allege in good faith that ECMC met the definition of a debt collector as 14 concerns Mr. Patenaude. Given the liberal standard for granting amendments and 15 the lack of undue prejudice to Defendant—the most important factor when assessing 16 requests to amend—Plaintiff’s request for leave to file a SAC alleging these facts is 17 granted. See Foman v. Davis, 371 U.S. 1778, 182 (1962); Eminence Capital, LLC v. 18 Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (affirming that “prejudice to the 19 opposing party [] carries the greatest weight” when determining whether leave to 20 amend should be granted). 21 The SAC must squarely address whether Plaintiff’s debt was in default when 22 it was acquired by ECMC. Plaintiff’s counsel here is reminded of his obligations 23 under Federal Rule of Civil Procedure 11, that is, that he must ensure a reasonable 24 inquiry has been made to gather information and that all “factual contentions have 25 evidentiary support.” Fed. R. Civ. P. 11. Gathering this information may include 26 conferring with defense counsel, as discussed during the hearing. Should Plaintiff’s 27 counsel fail to comply with Rule 11, Defendant may choose to move for sanctions 28 3 1 under Rule 11(c). Plaintiff can move to voluntarily dismiss the FDCPA claim should 2 he discover he cannot credibly allege that ECMC acquired the debt when it was 3 already in default. 4 B. Privacy Claim 5 Plaintiff also seeks to add a state law claim for violation of the right to privacy 6 to the SAC. (ECF No. 17 at 2.) Defendant represents that such a claim was discussed 7 during the informal 12(b) conference, and thus contemplated by Plaintiff prior to the 8 filing of the FAC. By failing to include this complaint in the FAC, Defendant argues, 9 Plaintiff was not diligent and thus should not be granted leave to include this claim 10 in the SAC. (ECF No. 20 at 3). During oral argument, Plaintiff’s counsel represented 11 that this claim against ECMC was only discovered—through informal discovery with 12 Nelnet—after the 12(b) conference and the filing of the FAC. Based on these 13 representations, the Court grants Plaintiff leave to include the privacy claim in the 14 SAC. Again, in filing the SAC, Plaintiff is reminded of his Rule 11 obligations. 15 Should the FDCPA claim be dismissed, this Court will be deprived of jurisdiction, in 16 which case Plaintiff may elect to refile the right of privacy claim in state court. 17 III. 18 CONCLUSION AND ORDER 19 Plaintiff’s claims against Defendant ECMC under the Rosenthal Act, TCPA, 20 and FCRA are dismissed with prejudice. Plaintiff’s motion for leave to file a second 21 amended complaint is granted. Plaintiff shall file the SAC by August 15, 2022. 22 / / / 23 / / / 24 / / / 25 / / / 26 / / / 27 28 4 1 Before filing, the Court invites the parties to meet and confer regarding 2 whether ECMC meets the definition of a debt collector, specifically whether 3 Plaintiff’s debt was in default when acquired by ECMC. Following the filing of the 4 SAC, Defendant may file a 12(b) or other appropriate motion, including a Rule 11 5 filing if believed to be warranted. 6 IT IS SO ORDERED. Dated: August 1, 2022 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?