Bland v. Educational Credit Management Corp.

Filing 17

MEMORANDUM OPINION. Signed by Judge Ellen L. Hollander on 2/22/12. (c/m 2/23/12 bmhs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

ROBBYN M. BLAND,
Plaintiff,
v.

Civil Action No.: ELH-11-02812

EDUCATIONAL CREDIT
MANAGEMENT CORP.,
Defendant.
MEMORANDUM OPINION
Robbyn Michelle Bland, the self-represented plaintiff, sued Educational Credit
Management Corporation (“ECMC”), defendant, alleging that, in February 2011, ECMC
fraudulently precipitated an offset of her federal and state tax refunds, in excess of $5,000,
because she allegedly failed to repay her student loans, over which ECMC served as guaranty
agency for the United States Department of Education. See Complaint (ECF 2). Plaintiff insists
that she did not take out the loans at issue, was not in default, and that the offset was improper.1
After suit was initiated by Bland in the District Court of Maryland for Baltimore City,
ECMC removed the case to federal court. See Notice of Removal (ECF 1). According to
ECMC, this Court possesses subject matter jurisdiction under 28 U.S.C. § 1331. Although
plaintiff’s complaint, on its face, purports to assert state law claims, defendant contends that
plaintiff’s claims arise under the Higher Education Act (“HEA”), 20 U.S.C. §§ 1001 et seq, and
“implicate” the Federal Family Education Loan Program (“FFELP”), which governs collection
activities for student loans that are in default, thus conferring federal jurisdiction. See Notice of

1

Because plaintiff is proceeding pro se, her filings have been “‘liberally construed’” and
are “‘held to less stringent standards than formal pleadings drafted by lawyers.’” Erickson v.
Pardus, 551 U.S. 89, 94 (2007) (citation omitted).

Removal (ECF 1). See also 28 U.S.C. § 1441(a)-(b) (authorizing removal of cases from state
court when jurisdiction is founded on a claim “arising under” federal law).
Following removal, defendant moved to dismiss, pursuant to FED. R. CIV. P. 12(b)(6), for
failure to state a claim upon which relief can be granted (“Motion,” ECF 8; see also “Motion
Memo,” ECF 8-1). Plaintiff opposes the Motion (“Opposition,” ECF 13), and defendant has
replied (“Reply,” ECF 14).
For the reasons that follow, I conclude that the Court lacks subject matter jurisdiction
over this case. Accordingly, the case will be remanded to state court.
Factual and Procedural Background
In September 2011, plaintiff filed suit in the District Court of Maryland for Baltimore
City, a state trial court of limited jurisdiction. See Md. Code (2006 Repl. Vol., 2011 Supp.), §§
1-601 et seq. & §§ 4-101 et seq. of the Courts & Judicial Proceedings Article (“C.J.”).2 As
noted, she alleged that she did not owe any money on student loans, and that her federal and
Maryland State tax refunds were improperly used to offset an alleged balance of about $22,000
owed on the student loans.
Civil actions in the Maryland district court are generally initiated by the filing of a form
complaint. See Md. Rules 3-303(a) & 3-701(b); see also C.J. § 6-403(a). In her form complaint,
plaintiff checked a box indicating that the case was an “action of contract.” Complaint at 1. In
the area of the form labeled “particulars of this case,” and in a single appended page addressed to
“Your Honor,” plaintiff wrote that defendant acted “fraudulently” and that she seeks a
“determin[ation of] the authenticity of the [loan] documents,” as well as $22,000 in damages.
See Complaint at 1-2.
2

In Maryland, the district court has original jurisdiction over civil actions in contract or
tort where the alleged damages do not exceed $30,000. C.J. § 4-401(1).
2

Defendant’s Motion Exhibit B (ECF 8-3) indicates that plaintiff owes a balance of
$22,491.78 on her student loans. Plaintiff’s Exhibit A, appended to her Opposition (ECF 13),
indicates that the federal offset was in the amount of $4,130, and the state offset was in the
amount of $1,336, for a total of $5,466. Id. Although the offsets occurred in February 2011,
plaintiff did not complain to ECMC about the offsets until June 2011. See defendant’s Exhibit D
(ECF 8-5). The tax refunds were restored to plaintiff in August 2011, based on plaintiff’s
financial hardship. See defendant’s Exhibit C (ECF 8-4).
ECMC articulates three primary grounds in support of its motion to dismiss for failure to
state a claim. ECMC maintains that plaintiff’s claim is “moot because ECMC repaid Plaintiff’s
state and federal tax refund to her on August 18, 2011,” in response to plaintiff’s claim of a
“financial hardship.” Motion Memo at 6. Further, ECMC contends that plaintiff’s claim must
fail because ECMC followed proper procedures in informing plaintiff of the offset and of her
opportunity to challenge it. Id. And, defendant observes that “[t]he essence of [plaintiff’s]
complaint is that ECMC has violated the HEA and corresponding federal regulations by
offsetting her tax refunds against defaulted student loans that she claims are not hers,” but “as a
matter of law . . . the HEA does not provide any express or implied private right of action for
violations of its provisions.” Id. at 5 (citation omitted).3
Discussion
Federal courts are courts of limited jurisdiction and “may not exercise jurisdiction absent
a statutory basis.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005). Of
import here, courts have “an independent obligation to determine whether subject-matter
jurisdiction exists, even when no party challenges it.” Hertz Corp. v. Friend, ___ U.S. ___, 130
3

As stated, supra, the Motion presupposes that plaintiff’s state law claims are preempted
by the HEA.
3

S. Ct. 1181, 1193 (2010); see also Sucampo Pharmaceuticals, Inc. v. Astellas Pharma, Inc., 471
F.3d 544, 548 (4th Cir. 2006). With regard to removed cases, 28 U.S.C. § 1447(c) requires: “If
at any time before final judgment it appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.”
As noted, defendant asserts in its Notice of Removal that the Court possesses subject
matter jurisdiction based on federal question jurisdiction, also known as “arising under”
jurisdiction. See 28 U.S.C. §§ 1331 & 1441(a)-(b). Section 1331 grants federal district courts
“original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the
United States.” In turn, § 1441, the general removal statute, permits “any civil action brought in
a State court of which the district courts of the United States have original jurisdiction” to be
“removed by the defendant or the defendants, to the district court of the United States for the
district and division embracing the place where such action is pending.” 28 U.S.C. § 1441(a).
When jurisdiction is based on a claim “arising under the Constitution, treaties or laws of the
United States,” the case is “removable without regard to the citizenship or residence of the
parties.” Id. § 1441(b).4
The “‘presence or absence of federal-question jurisdiction is governed by the “wellpleaded complaint rule,” which provides that federal jurisdiction exists only when a federal
question is presented on the face of the plaintiff’s properly pleaded complaint.’” Rivet v.
Regions Bank of La., 522 U.S. 470, 475 (1998) (citation omitted). In the event that a defendant
contends that a plaintiff’s state claims arise under federal law, the defendant may assert “federal”
or “ordinary” preemption “as a defense to the allegations in a plaintiff's complaint.” Caterpillar
4

Defendant does not assert that the Court possesses subject matter jurisdiction on the
basis of diversity of citizenship. See “Defendant’s Statement Concerning Removal” (ECF 12)
(“This action is not predicated on diversity jurisdiction.”). Moreover, the amount in controversy
here falls below the $75,000 threshold applicable to diversity cases. See 28 U.S.C. § 1332(a).
4

Inc. v. Williams, 482 U.S. 386, 392 (1987). But, it is “settled law that a case may not be removed
to federal court on the basis of a federal defense, including the defense of pre-emption, even if
the defense is anticipated in the plaintiff’s complaint, and even if both parties concede that the
federal defense is the only question truly at issue.” Id. at 393 (emphasis added). Put another
way, the “existence of a federal defense normally does not create statutory ‘arising under’
jurisdiction, and ‘a defendant [generally] may not remove a case to federal court unless the
plaintiff’s complaint establishes that the case ‘arises under’ federal law.’” Aetna Health, Inc. v.
Davila, 542 U.S. 200, 207 (2004) (internal citations omitted) (emphasis in original).
Complete preemption is distinct from the defense of federal preemption. The Supreme
Court has explained: “When [a] federal statute completely pre-empts [a] state-law cause of
action, a claim which comes within the scope of that cause of action, even if pleaded in terms of
state law, is in reality based on federal law.” Beneficial, 539 U.S. at 8 (emphasis added).5
Therefore, federal question jurisdiction is satisfied “when a federal statute wholly displaces the
state-law cause of action through complete pre-emption.” Beneficial Nat’l Bank v. Anderson,
539 U.S. 1, 8 (2003) (emphasis added); see also Vaden v. Discover Bank, 556 U.S. 49, ___, 129
S. Ct. 1262, 1273 (2009); Davila, 542 U.S. at 207-08.

5

For example, the Supreme Court has found complete preemption in the context of § 301
of the Labor Management Relations Act (“LMRA”), see, e.g., Caterpillar, supra, 482 U.S. 386
(1987); Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n of Machinists & Aerospace Workers, 390
U.S. 557 (1968); certain claims covered by the Employee Retirement Income Security Act
(“ERISA”), see, e.g., Davila, supra, 542 U.S. 200; Metropolitan Life Ins. Co. v. Taylor, 481 U.S.
58 (1987); the National Bank Act, see Beneficial, supra, 539 U.S. 1; and certain claims involving
Native American tribal rights, see Oneida Indian Nation of N.Y. State v. Oneida County, 414
U.S. 661 (1974). “The courts of appeals and the district courts have extended the completepreemption doctrine to a number of other substantive law contexts.” WRIGHT, MILLER, COOPER
& STEINMAN, 14B FEDERAL PRACTICE & PROCEDURE § 3722.2, at 507 (4th ed. 2009, 2011
Supp.).
5

To remove an action on the basis of complete preemption, “a removing defendant must
show not only that the defendant’s state law claim is cognizable as a federal claim, but also that
Congress clearly intended the federal claim to ‘provide the exclusive cause of action for claims
of overwhelming national interest’” (citation and quotation marks omitted) (emphasis in
original). Barbour v. Intern. Union, 640 F.3d 599, 631 (4th Cir. 2011). Complete preemption is
a jurisdictional doctrine that “‘converts an ordinary state common law complaint into one stating
a federal claim,’ and the federal claim is deemed to appear on the face of the complaint.” Pinney
v. Nokia, Inc., 402 F.3d 430, 449 (4th Cir. 2005) (citation omitted). By contrast, the defense of
federal preemption “does not appear on the face of a well-pleaded complaint, and, therefore,
does not authorize removal to federal court.” Id.
Defendant contends that “the essence of Bland’s Complaint is that ECMC has violated
the HEA,” Motion Memo at 5, and that, “as a matter of law,” the HEA “does not provide any
express or implied right of action for violations of its provisions.” Id. Plaintiff’s Complaint did
not invoke the HEA, however. As noted, she used a form complaint, on which she checked a
box indicating that she was asserting a contract claim. She also appeared to assert claims, albeit
inartfully, for fraud and for declaratory relief.

Accordingly, this Court has subject matter

jurisdiction only if, as defendant implies, the HEA completely preempts plaintiff’s state law
causes of action, converting those claims into claims “arising under” federal law. 28 U.S.C. §
1331.
The HEA does not preclude the pursuit of state tort and contract claims. In College Loan
Corp. v. SLM Corp., 396 F.3d 588 (4th Cir. 2005), the plaintiff, a student loan consolidation
lender, brought claims in the Eastern District of Virginia against defendants, a competing lender
and some of its affiliates, for breach of contract, breach of fiduciary duty, conversion, and

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tortious interference with contractual relations, as well as various other claims, including a
request for declaratory relief. Id. at 593.6 Plaintiff alleged that defendants failed to properly
process loan applications submitted for servicing by plaintiff in a “scheme” to divert the
applications (and the attendant loan business) to defendants. Id. at 592.
The defendants in College Loan moved to dismiss, contending that plaintiff’s claims
“constituted an impermissible effort to assert private rights of action under the HEA because,
‘[r]egardless of how [plaintiff] might try to disguise or plead [its] claims, they all boil down to,
and turn on, an alleged violation of the HEA’…” Id. at 593. Put another way, the College Loan
defendants asserted that plaintiff’s state law claims were preempted by the HEA, and, as such,
were barred, as the HEA does not provide for a private right of action.
The Fourth Circuit concluded that plaintiff’s state law tort and contract claims were not
preempted by the HEA. To be sure, the Court did not address the jurisdictional matter of
complete preemption—the case was already properly in federal court, based on diversity. But, in
so concluding with respect to federal preemption, the Court necessarily determined that there
was no complete preemption under the HEA.
In concluding that plaintiff’s state law claims were not preempted by the HEA, the Court
addressed the doctrine of federal preemption.

It explained that, in the context of federal

defensive preemption, state law claims are preempted under three circumstances: “(1) when
Congress has clearly expressed an intention to do so (‘express preemption’); (2) when Congress
has clearly intended, by legislating comprehensively, to occupy an entire field of regulation
(‘field preemption’); and (3) when a state law conflicts with federal law (‘conflict preemption’).”

6

Federal jurisdiction was based on diversity of citizenship. Id.
7

Id. at 595-96 (citation omitted). The Court then went on to explain that, with respect to the HEA,
none of these circumstances applied to the plaintiff's state law claims.
With respect to express preemption, the Court stated: “The doctrine of express
preemption has no application here…because the HEA makes no mention of preempting state
tort and contract claims.” Id. at 596.
With respect to field preemption, the Court observed, id. at 596 n. 5:
Certain sections of the HEA expressly preempt certain state law claims. See, e.g.,
20 U.S.C. § 1078(d) (2000) (displacing state usury laws); id. at § 1091a(a)
(displacing state statutes of limitations); id. at § 1091a(b) (displacing state infancy
defenses); id. at § 1099 (displacing state disclosure requirements). Because
Congress deemed it necessary to specifically preempt certain state laws, it is clear
that Congress could not have intended the HEA to so ‘occupy the field’ that it
would automatically preempt all state laws.
Thus, the Court concluded that “the second of the preemption doctrines, that of field
preemption,” did not apply to the tort and contract claims at hand. College Loan, 396 F.3d at
596. Further, the Court observed, id. at 596 n. 6: “Our analysis reveals that the courts addressing
the issue have consistently concluded that the HEA does not occupy the field of higher education
loans.”
And, with respect to conflict preemption, the Court said, id. at 596 (citation omitted):
[C]onflict preemption…may arise in two circumstances: from a direct conflict
between state and federal law, such that compliance with both is impossible
(called ‘direct conflict’), or because a state law ‘stands as an obstacle to the
accomplishment and execution of the full purposes and objectives of Congress’
(called ‘obstacle preemption’).
In College Loan, there was no apparent direct conflict between the HEA and the state law
claims—compliance with the HEA would not have subjected defendants to liability for
plaintiff’s state law tort and contract claims. The Court also concluded that the trial court erred
in holding that to permit plaintiff’s state law claims to proceed “would pose an ‘obstacle’ to the

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accomplishment of Congress's objectives in enacting the HEA.” Id. In rejecting the trial court’s
finding of obstacle preemption, the Court stated, id. at 598: “The existence of comprehensive
federal regulations that fail to occupy the regulatory field do not, by their mere existence,
preempt non-conflicting state law.”
The Court recognized that “courts have consistently held that no private right of action is
available for violation of the HEA.” Id. at 593. But, of import here, it observed that “the
availability of a state law claim is even more important in an area where no federal private right
of action exists.” Id. at 598. The Court reasoned that “the lack of a statutory private right of
action does not, in and of itself, bar a plaintiff from relying on violations of that statute as
evidence supporting a state law claim,” particularly as “an injured plaintiff may sue under state
law seeking redress for a violation of a federal regulation.” Id. at 599 n.9.
In my view, the HEA does not preempt plaintiff’s state law claims such that they are “in
reality based on federal law.” Beneficial, supra, 539 U.S. at 8. See Career Care Inst., Inc. v.
Accrediting Bureau of Health Educ. Sch., Inc., No. 08-1186, 2009 WL 742532, *4 (E.D.Va. Mar.
18, 2009) (holding that plaintiff’s Breach of Contract, Negligence, Tortious Interference with
Contract, and Tortious Interference with Prospective Business or Economic Advantage claims
were “state law claims that are not expressly or by necessary implication preempted by the
HEA” and denying defendant’s motion to dismiss on that ground); Murungi v. Texas
Guaranteed, 646 F.Supp.2d 804, 808-09 (E.D.La. 2009) (denying motion to dismiss on
preemption grounds because “[n]either the HEA nor its related regulations expressly preempt
state laws on fraud, IIED or defamation. Further, courts have concluded that the HEA does not
occupy the field of higher education loans and loan repayment,” and “[n]either defendant has
demonstrated an actual conflict….”). Accordingly, I am satisfied that this case is not one

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“arising under” federal law for removal purposes. As diversity jurisdiction is not satisfied, this
Court is without subject matter jurisdiction to hear the case.
This opinion does not foreclose defendant’s defense of federal preemption in the state
court, however. A “finding that complete preemption did not create federal removal jurisdiction
will have no preclusive effect on a subsequent state-court defense of federal preemption.” In re
Blackwater Security Consulting, LLC, 460 F.3d 576, 590 (4th Cir. 2006). Nor does this opinion
address defendant’s arguments regarding mootness, exhaustion, and/or the lack of a private right
of action under the HEA. Rather, these are questions that must be decided on the merits by the
state court, on remand.
Conclusion
For the foregoing reasons, I conclude that this Court lacks subject matter jurisdiction over
this case. Accordingly, pursuant to 28 U.S.C. § 1447(c), the case will be remanded to the
District Court of Maryland (Baltimore City). An Order implementing this ruling follows.

Date: February 22, 2012

/s/
Ellen Lipton Hollander
United States District Judge

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