United States of America v. Halberstadt

Filing 21

ORDER adopting to the extent consistent with this Order 20 REPORT AND RECOMMENDATION denying 14 MOTION for summary judgment filed by United States of America. The Court NOTICES TRIAL: Bench Trial set DATE CERTAIN for1/14/2015 at 1 1:00 AM in Ocala Courtroom 3A before Chief Judge Anne C. Conway. No cameras or recording equipment are allowed in the building. Photo identification is required to enter the Courthouse. On or before December 29, 2014, the parties SHALL FILE their re spective Exhibit and Witness Lists. See Local Rules 3.06(c)(4), 3.06(c)(5), and 3.07 (b). The Clerk SHALL mail to Defendant a copy of the Clerk's approved Exhibit List form. Defendant may request the Court to appoint him counsel to represent him at trial in this matter. Any such request should be made by motion on or before November 21, 2014. Signed by Chief Judge Anne C. Conway on 11/5/2014. (SR)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
OCALA DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.

Case No: 5:14-cv-279-Oc-22PRL

STEVEN HALBERSTADT,
Defendant.
/
ORDER
This cause is before the Court for consideration of United States Magistrate Judge Philip
R. Lammens’ September 18, 2014 Report and Recommendation (the “R & R”) (Doc. No. 20)
pertaining to Plaintiff United States of America’s (the “United States”) Motion for Summary
Judgment and Memorandum of Law, filed on June 27, 2014. (Doc. No. 14). Defendant Steven
Halberstadt (“Defendant”) filed a response in opposition to Defendant’s summary judgment
motion. (Doc. No. 19). However, neither party filed an objection to the R & R. For the reasons
set forth below, the Court finds that a material issue of fact remains and sets this matter for trial.
I. BACKGROUND1,2
On December 20, 1974, Defendant obtained a student loan from The National Bank of
Wareham in the amount of $1,400.00 (the “Note”). See (Doc. No. 14 at pp. 9-10). The loan
obligation was guaranteed by the Massachusetts Higher Education Assistance Corporation (the
“MHEAC”) and then reinsured under loan guaranty programs authorized under Title IV-B of the
1 This background is largely taken from the R & R.
2 The Court notes that the United States attached a “Statement of Undisputed Facts” to its motion
for summary judgment “pursuant to Local Rule 7.5.” (Doc. No. 14 at pp. 11-12). This Court has no such
Local Rule. It does, however, appear that the Southern District of Florida used to have a “Local Rule 7.5”
before the Southern District renumbered that rule in 2011 to “Local Rule 56.1.” The undersigned expects
more from attorneys practicing before this Court, especially when they are litigating against a pro se
defendant.

Higher Education Act of 1965, as amended, 20 U.S.C. §§ 1071 et seq. (Id. at pp. 1, 9-10). On
March 13, 1976, more than thirty-eight years ago, Defendant defaulted on his payment
obligations under the Note. (Id. at p. 5). Upon default, the amount Defendant owed under the
Note became due and owing. (Id. at p. 9).3 After crediting $50.72 to the principal owed on the
loan, the holder of the Note demanded payment from Defendant. (Id. at p. 5). At some point
thereafter, the Note was assigned to the Department of Education. (Id.). Upon assignment, the
Department of Education applied a total of $550.00 in credits and/or payments to the Note. (Id.).
The United States moves for summary judgment on the grounds that it has met its prima
facie burden and demonstrated that Defendant received the student loan and failed to repay it.
(Id. at pp. 1-4). Further, the United States asserts that Defendant has failed to produce evidence
to support his affirmative defense that the debt was previously discharged in bankruptcy. (Id. at
pp. 3-4). In response, Defendant contests summary judgment on the grounds that the bankruptcy
court discharged his student loan in 1978.  (Doc. No. 19 at pp. 2-3). Defendant claims that
although he made multiple attempts to obtain documentation to show that the loan had been
discharged, all of the files have been destroyed. (Id. at p. 3). First, Defendant presents a letter
from the Deputy Clerk of the U.S. Bankruptcy Court in Norfolk, Virginia which states that
Defendant’s case file was archived in 1978, saved for 15 years, and subsequently destroyed. (Id.
at p. 6).4 The clerk enclosed a copy of the court’s records for proof of the filing which show that
Defendant filed his bankruptcy petition on August 14, 1978. (Id. at p. 7). This record further
reflects that the bankruptcy court granted a discharge on October 13, 1978. (Id.). Second,
Defendant states that the attorney who represented him in bankruptcy court has retired and
destroyed the documents related to the case. (Id. at p. 3). Third, Defendant asserts that his
3 The Note states: “This note shall, at the option of the holder, become due and payable without
notice or demand upon the occurrence of … (c) the maker default[ing] in the repayment of any loan
guaranteed by [the “MHEAC”], and the default remains uncollected after reasonable notice to the maker .
. . .” (Doc. No. 14 at p. 9).
4 Therefore, it appears that the files were destroyed sometime around 1993.
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personal files were destroyed after his father’s death. (Id.). Finally, Defendant attaches a letter,
dated September 13, 2005, from the U.S. Department of Education, Office of the Ombudsman.
(Id. at p. 12). In that letter, a “Collections Customer Care Team” member informed Defendant
that “[s]ince [the U.S. Department of Education, Debt Collection Services] could not obtain the
document to substantiate a bankruptcy discharge, [the] loan will not be discharged due to
bankruptcy.” (Id.).
Defendant also provides an affidavit from Irma Appleton. (Id. at p. 5). Defendant claims
that Appleton put him in touch with his bankruptcy lawyer and that she attended the bankruptcy
hearing in which the judge discharged all of his financial obligations, including his student loan.
(Id. at p. 3). In her affidavit, Appleton attests that she went to the Norfolk bankruptcy court and
heard the judge “grant[] this bankruptcy.” (Id. at p. 5).
II. LEGAL STANDARD
In the Eleventh Circuit, a district judge may accept, reject or modify a magistrate judge’s
report and recommendation after conducting a careful and complete review of the findings and
recommendations. 28 U.S.C. § 636(b)(1); Williams v. Wainwright, 681 F.2d 732, 732 (11th Cir.
1982), cert. denied, 459 U.S. 1112, 103 S.Ct. 744 (1983). A district judge must conduct a de
novo review of the portions of a magistrate judge’s report and recommendation to which a party
objects. 28 U.S.C. § 636(b)(1)(C). This requires that the district judge “give fresh consideration
to those issues to which specific objection has been made by a party.” Jeffrey S. v. State Bd. of
Educ., 896 F.2d 507, 512 (11th Cir. 1990) (citing H.R. Rep. No. 94-1609, 94th Cong., 2nd Sess.,
reprinted in 1976 U.S. Code Cong. & Admin. News 6162, 6163). A district judge reviews legal
conclusions de novo, even in the absence of an objection. See Cooper–Houston v. Southern Ry.,
37 F.3d 603, 604 (11th Cir. 1994).
III. DISCUSSION
A. The Magistrate Judge’s Recommendations
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The Magistrate Judge recommended that the United States’ Motion for Summary
Judgment be granted. See (Doc. No. 20). The Magistrate Judge found that the United States
established its prima facie case for its claim to recover under the Note. (Id. at pp. 4-5). The
Magistrate Judge further found that (a) Defendant failed to establish an issue of fact as to his
defense that the loan was discharged in Defendant’s bankruptcy, (b) Defendant’s statute of
limitations defense fails, and (c) Defendant’s undue hardship argument does not preclude the
United States’ claim. (Id. at pp. 5-8). For the reasons discussed below, the Court respectfully
declines to adopt the recommendation that Defendant has failed to show a disputed issue of fact
as to his discharge defense. The Court, however, adopts the Magistrate Judge’s R & R in all
other respects.
B. Defendant’s Discharge Defense5
“The dischargeability of student loan debts scheduled on a bankruptcy petition is
controlled by the law in effect when the petition in bankruptcy is filed.” United States. v.
Bradburn, 75 B.R. 108, 110 (Bankr. S.D. Ind. 1987) (citing In re Kammerud, 15 B.R. 1, 9
(Bankr. S.D. Ohio 1980)). On August 14, 1978, at the time Defendant filed for bankruptcy, “the
dischargeability of student loan debts was governed by Section 439A of the Higher Education
Act.” Bradburn, 75 B.R. at 110 (citations omitted). Section 439A of the Higher Education Act
provided in pertinent part:
(a) A debt which is a loan insured or guaranteed under the authority of this part
may be released by a discharge in bankruptcy under the Bankruptcy Act only if
such discharge is granted after the five-year period (exclusive of any applicable
suspension of the repayment period) beginning on the date of commencement of
the repayment period of such loan, except that prior to the expiration of that fiveyear period, such loan may be released only if the court in which the proceeding is
pending determines that payment from future income or other wealth will impose
an undue hardship on the debtor or his dependents.
5 In evaluating the pending summary judgment motion, the Court remains cognizant of
Defendant’s pro se status. The Court construes pro se filings liberally and holds pro se litigants to a lessstringent standard than those represented by counsel. Hughes v. Lott, 350 F.3d 1157, 1160 (11th Cir.
2003).
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(b) Subsection (a) of this section shall be effective with respect to any
proceedings begun under the Bankruptcy Act on or after September 30, 1977.
20 U.S.C. § 1087-3 (1976), repealed by Act of November 6, 1978, Pub. L. No. 95–598, § 317,
92 Stat. 2678.
Therefore, as the Magistrate Judge succinctly stated, “Under Section 439A of the Higher
Education Act, student loans were nondischargeable in bankruptcy unless the debt had been due
and owing more than five years prior to the filing of the bankruptcy petition.” (Doc. No. 20 at p.
5) (emphasis in original). “This time period could be avoided – or stated differently, a student
loan could be discharged prior to the expiration of the five-year period – if the bankruptcy court
determined that payment would impose an undue hardship on the debtor or his dependents.”
(Id.).
The Court finds that Defendant has presented a triable issue of fact on his discharge
defense. Defendant asserts that the bankruptcy court discharged his student loan in 1978.  (Doc.
No. 19 at pp. 2-3). Defendant further presents an affidavit from Irma Appleton who attests that
the bankruptcy court granted Defendant’s bankruptcy petition. (Id. at p. 5). To be sure,
Defendant has not come forward with specific evidence that his student loan was discharged
under the “undue hardship” exception. However, it is undisputed that Defendant’s bankruptcy
petition was filed and granted within the time period when the undue hardship exception could
be relied upon to discharge a student loan in bankruptcy.6 Furthermore, it appears that
Defendant’s inability to produce relevant records is mostly due to the United States’ extreme
delay in seeking enforcement of the Note. Viewing the evidence and drawing all justifiable

6 As the Magistrate Judge noted, “Subsection (b) of the Act rendered Section 439A effective with
respect to any proceeding begun under the Bankruptcy Act on or after September 30, 1977, but this
provision was repealed on November 6, 1978, by Section 317 of the Bankruptcy Reform Act of 1978.”
(Doc. No. 20 at p. 5 n.6 (citations omitted)). Defendant filed his bankruptcy petition on August 14, 1978,
which the bankruptcy court granted on October 13, 1978. Therefore, Defendant’s bankruptcy clearly falls
within the relevant time period before Congress repealed the undue hardship provision.
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inferences therefrom in a light most favorable to Defendant, the Court finds that the evidence is
sufficient for a fact-finder to conclude that Defendant’s student loan was discharged in his
bankruptcy some thirty-eight years ago.7 Therefore, the United States’ motion for summary
judgment is denied.
C. Appointment of a Lawyer for Trial
Defendant has indicated to the Court that his financial situation is grim. (Doc. No. 17 at
pp. 2-3). Defendant also represents that he is unfamiliar with the “procedural and substantive
aspects” of the court system. (Id. at p. 3). Therefore, in an effort to facilitate presentation of the
evidence at trial, Defendant may request the Court to appoint him counsel to represent him at
trial in this matter. Any such request should be made by motion on or before November 21,
2014.

IV. CONCLUSION
Therefore, based on the foregoing, it is ORDERED as follows:
1. Magistrate

Judge

Lammens’

September

18,

2014,

Report

and

Recommendation (Doc. No. 20) is ADOPTED, but only to the extent
consistent with this Order.
2. Plaintiff United States of America’s Motion for Summary Judgment and
Memorandum of Law, filed on June 27, 2014 (Doc. No. 14), is DENIED.
3. The Court NOTICES TRIAL: Bench Trial set DATE CERTAIN for
1/14/2015 at 11:00 AM in Ocala Courtroom 3A before Chief Judge Anne C.
7 The Court also notes that while it agrees with the Magistrate Judge’s conclusion that a statute of
limitations defense fails against the United States, this defense could be construed as a laches defense. In
the Court’s research, there is no binding authority precluding the defense of laches against the United
States in the student loan context. Therefore, given Defendant’s pro se status, Defendant may still attempt
to raise a laches defense at trial if he so chooses. See, e.g., United States v. Rhodes, 788 F. Supp. 339
(E.D. Mich. 1992) (finding that the doctrine of laches barred government’s suit to recover student loan
filed seventeen years after loan was allegedly due and unpaid).
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Conway. No cameras or recording equipment are allowed in the building.
Photo identification is required to enter the Courthouse.
4. On or before December 29, 2014, the parties SHALL FILE their respective
Exhibit and Witness Lists. See Local Rules 3.06(c)(4), 3.06(c)(5), and 3.07(b).
5. The Clerk SHALL mail to Defendant a copy of the Clerk’s approved Exhibit
List form.
6. Defendant may request the Court to appoint him counsel to represent him at
trial in this matter. Any such request should be made by motion on or before
November 21, 2014.
DONE and ORDERED in Orlando, Florida on November 5, 2014.

Copies furnished to:
Counsel of Record
Unrepresented Parties
Magistrate Judge Lammens

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