Allen v. United Student Aid Funds, Inc. et al
Filing
29
OPINION AND ORDER re: 15 MOTION to Dismiss Complaint of Defendants. filed by Navient, Pioneer Credit Recovery, Inc., Navient Solutions, LLC, 16 MOTION to Dismiss Pursuant to Rule 12(b)(6). filed by United Student Aid Funds, Inc. For the foregoing reasons, Defendants' motions are GRANTED, and Plaintiffs claims are dismissed with prejudice. The Clerk of Court is respectfully directed to terminate the pending motions, (Docs. 15, 16), enter judgment for Defendants, and close this case. SO ORDERED. (Signed by Judge Vernon S. Broderick on 9/28/2018) (rro) Transmission to Orders and Judgments Clerk for processing.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------------------------------- X
:
HEPZIBAH Z. ALLEN,
:
:
Plaintiff,
:
:
- against :
:
UNITED STUDENT AID
:
FUNDS, INC., et al.,
:
:
Defendants. :
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9/28/2018
17-CV-8192 (VSB)
OPINION & ORDER
Appearances:
Hepzibah Z. Allen
New York, New York
Pro Se Plaintiff
Silvia L. Serpe
Serpe Ryan LLC
New York, New York
Counsel for Defendant United Student Aid Funds, Inc.
Eric Matthew Hurwitz
Jacqueline Marie Aiello
Stradley Ronon Stevens & Young, LLP
New York, New York
Counsel for Defendants Navient Solutions LLC & Pioneer Credit, Inc.
VERNON S. BRODERICK, United States District Judge:
Pro se Plaintiff Hepzibah Allen brings this action against Defendants Navient Solutions
LLC (“NSL”), Navient,1 Pioneer Credit Recovery, Inc. (“Pioneer,” and collectively with NSL
and Navient, the “Navient Defendants”), and United Student Aid Funds, Inc. (“USAF”), alleging
1
The Navient Defendants explain that Navient Corporation, the parent company of NSL and Pioneer, has been
misidentified by Plaintiff as Navient, an entity that does not exist. (Navient Defs.’ Mem. 1.) For the purposes of
this motion, I construe any claims asserted against Navient as if they had been asserted against Navient Corporation.
“Navient Defs.’ Mem.” refers to the Memorandum of Law in Support of Motion to Dismiss of Defendants Navient
Solutions, LLC, “Navient,” and Pioneer Credit Recovery, Inc., filed January 4, 2018. (Doc. 15-1.)
violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq.
Before me are the motions of the Navient Defendants and USAF to dismiss the Complaint.
Because Defendants do not qualify as debt collectors under the FDCPA, Defendants’ motions are
GRANTED.
Background2
On January 21, 2003, Plaintiff obtained a student loan (the “Loan”) under the Federal
Family Education Loan Program (“FFELP”). (Compl. Ex. B.)3 FFELP loans are guaranteed by
state agencies or private non-profit organizations and are reinsured and often subsidized by the
Department of Education (“DOE”). See 20 U.S.C. §§ 1078, 1087-1. In the event a borrower
defaults in repaying the loan, the guarantor, pursuant to its guarantee commitment, pays on the
claim to the holder of the loan, and ownership of the loan then vests with the guarantor. See 20
U.S.C. § 1078(b); 34 C.F.R. § 682.401(b)(9). After the loan vests with the guarantor, the
guarantor may independently try to collect the debt from the debtor. NSL serviced Plaintiff’s
Loan from origination, and the guarantor at the time the Loan was originated was designated as
USAF. (See Compl. Ex. A, B, D.)
On October 14, 2016, Plaintiff defaulted on the Loan, and USAF, acting as guarantor,
purchased the Loan. (See id. Ex. A, D.) Thereafter, USAF sent Plaintiff a letter dated April 30,
2017 (the “April 2017 Letter”), indicating what efforts USAF could take to recover the amount
due and owing under the note. (Id. Ex. C.) The April 2017 Letter also informed Plaintiff that
future collection efforts might include, among other things, garnishment, offset of income tax
2
The following factual summary is drawn from the allegations of the complaint, which I assume to be true for the
purposes of this motion, see Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007), and
documents attached to or relied upon in the complaint, Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir.
2002)). My references to these allegations should not be construed as a finding as to their veracity, and I make no
such findings.
3
“Compl.” refers to Plaintiff’s complaint (“Complaint”), filed October 24, 2017. (Doc. 1.)
2
refunds, and civil litigation. (See id.)
Plaintiff alleges that Defendants improperly assigned the debt, misrepresented the amount
owed, engaged in improper wage garnishments, and failed to supply Plaintiff with debt
verification language in USAF’s April 2017 Letter.
Procedural History
On October 24, 2017, Plaintiff filed her Complaint. (Doc. 1.) On January 4, 2018, the
Navient Defendants filed their motion to dismiss the Complaint, (Doc. 15), along with a
memorandum of law in support of their motion, (Doc. 15-1). On the same day, USAF filed its
motion to dismiss the Complaint, (Doc. 16), and memorandum in support, (Doc. 17). On
January 11, 2018, Plaintiff filed oppositions to Defendants’ motions. (Docs. 19, 21.) The
Navient Defendants filed their reply in further support of their motion on January 18, 2018,
(Doc. 23); USAF did the same on February 14, 2018, (Doc. 24).
On February 20 and 21, 2018, Plaintiff filed letters in further opposition to Defendants’
replies, (Doc. 25, 26), which attached, among other documents, (i) a letter dated September 18,
2017 from Navient to Plaintiff and (ii) a letter dated August 9, 2017 from USAF to Plaintiff. On
February 23, 2018, the Navient Defendants submitted a letter requesting that I disregard
Plaintiff’s letters because the additional information was not included in the Complaint or in
Plaintiff’s oppositions.4 (Doc. 27.)
4
The additional information provided in and attached to Plaintiff’s letters does not change the outcome of this
Opinion & Order. USAF’s request to disregard Plaintiff’s letters is therefore denied as moot.
3
Legal Standards
A.
Motion to Dismiss
To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). A claim will have “facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Id. This standard demands “more than a sheer possibility that a defendant has acted
unlawfully.” Id. “Plausibility . . . depends on a host of considerations: the full factual picture
presented by the complaint, the particular cause of action and its elements, and the existence of
alternative explanations so obvious that they render plaintiff’s inferences unreasonable.” L-7
Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 430 (2d Cir. 2011).
In considering a motion to dismiss, a court must accept as true all well-pleaded facts
alleged in the complaint and must draw all reasonable inferences in the plaintiff’s favor.
Kassner, 496 F.3d at 237. A complaint need not make “detailed factual allegations,” but it must
contain more than mere “labels and conclusions” or “a formulaic recitation of the elements of a
cause of action.” Iqbal, 556 U.S. at 678 (internal quotation marks omitted). Although all
allegations contained in the complaint are assumed to be true, this tenet is “inapplicable to legal
conclusions.” Id. A complaint is “deemed to include any written instrument attached to it as an
exhibit or any statements or documents incorporated in it by reference.” Chambers, 282 F.3d at
152 (quoting Int’l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995)).
4
B.
The FDCPA
“[T]he FDCPA is ‘primarily a consumer protection statute.’” Avila v. Riexinger &
Assocs., LLC, 817 F.3d 72, 75 (2d Cir. 2016) (quoting Jacobson v. Healthcare Fin. Servs., Inc.,
516 F.3d 85, 95 (2d Cir. 2008)). Courts construe the FDCPA liberally to further the purpose
Congress intended for the Act, which was to “eliminate abusive debt collection practices by debt
collectors, to insure that those debt collectors who refrain from using abusive debt collection
practices are not competitively disadvantaged, and to promote consistent State action to protect
consumers against debt collection abuses.” Id. (quoting 15 U.S.C. § 1692(e)).
In determining whether there has been a violation of the FDCPA, courts “apply the ‘least
sophisticated consumer’ standard.” Id. (quoting Clomon v. Jackson, 988 F.2d 1314, 1318 (2d
Cir. 1993)). The “least sophisticated consumer” is a “naïve” and “credulous” person who
possesses a “rudimentary amount of information about the world and a willingness to read a
collection notice with some care.” Altman v. J.C. Christensen & Assocs., Inc., 786 F.3d 191,
193–94 (2d Cir. 2015) (quoting Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360, 363
(2d Cir. 2005)). In applying this standard, courts “ask how the least sophisticated consumer . . .
would understand the collection notice” at issue. Avila, 817 F.3d at 75. “Under this standard, a
collection notice can be misleading if it is ‘open to more than one reasonable interpretation, at
least one of which is inaccurate.’” Id. (quoting Clomon, 988 F.2d at 1319). “Thus, even if a debt
collector accurately conveys the required information, a consumer may state a claim if she
successfully alleges that the least sophisticated consumer would inaccurately interpret the
message.” Carlin v. Davidson Fink LLP, 852 F.3d 207, 216 (2d Cir. 2017). FDCPA protection,
however, “does not extend to every bizarre or idiosyncratic interpretation of a collection notice,
and courts should apply the standard in a manner . . . that protects debt collectors against liability
5
for unreasonable misinterpretations of collection notices.” Eades v. Kennedy, PC Law Offices,
799 F.3d 161, 173 (2d Cir. 2015) (quoting Easterling v. Collecto, Inc., 692 F.3d 229, 233–34 (2d
Cir. 2012)).
C.
Pro Se Litigant
Even after Twombly and Iqbal, a “document filed pro se is to be liberally construed and a
pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal
pleadings drafted by lawyers.” Boykin v. KeyCorp, 521 F.3d 202, 214 (2d Cir. 2008) (quoting
Erickson v. Pardus, 551 U.S. 89, 94 (2007)). Further, pleadings of a pro se party should be read
“to raise the strongest arguments that they suggest.” Brownell v. Krom, 446 F.3d 305, 310 (2d
Cir. 2006) (quoting Jorgensen v. Epic/Sony Records, 351 F.3d 46, 50 (2d Cir. 2003)).
Nevertheless, dismissal of a pro se complaint is appropriate where a plaintiff fails to state a
plausible claim supported by more than conclusory factual allegations. See Walker v. Schult, 717
F.3d 119, 124 (2d Cir. 2013). In other words, “the duty to liberally construe a plaintiff’s
complaint is not the equivalent of a duty to re-write it.” Geldzahler v. N.Y. Med. Coll., 663 F.
Supp. 2d 379, 387 (S.D.N.Y. 2009) (internal quotation marks omitted).
Discussion
Defendants argue that Plaintiff fails to differentiate between each Defendant in her
Complaint, (Navient Defs.’ Mem. 4–5; USAF Mem. 7–8),5 which provides an independent basis
for dismissal, see, e.g., Atuahene v. City of Hartford, 10 F. App’x 33, 34 (2d Cir. 2001)
(summary order) (upholding dismissal of a complaint pursuant to Rules 8 and 12 of the Federal
Rules of Civil Procedure where the complaint alleged “a host of constitutional and state common
5
“USAF Mem.” refers to USAF’s Memorandum of Law in Support of its Motion to Dismiss, filed January 4, 2018.
(Doc 17.)
6
law claims” but “failed to differentiate among the defendants, alleging instead violations by ‘the
defendants’”). Defendants are correct, but in light of Plaintiff’s pro se status, I will not dismiss
the Complaint on this basis alone.
Defendants also argue that they are not debt collectors under the FDCPA and that the
Complaint otherwise fails to adequately allege that Defendants violated the FDCPA. Because I
find that Defendants do not fall within the definition of debt collectors under the Act, I do not
reach Defendants’ remaining arguments.
A.
“Debt Collector” Under the FDCPA
1. Applicable Law
To establish a violation of the FDCPA, a plaintiff must satisfy three elements: (i) the
plaintiff must be a “consumer;” (ii) the defendant must be a “debt collector;” and (iii) the
defendant must have committed some act or omission in violation of the FDCPA. Okyere v.
Palisades Collection, LLC, 961 F. Supp. 2d 508, 514 (S.D.N.Y. 2013) (quoting Schuh v.
Druckman & Sinel, L.L.P., 751 F. Supp. 2d 542, 548 (S.D.N.Y. 2010)). Accordingly, “a
defendant can only be held liable for violating the FDCPA if she is a ‘debt collector’ within the
meaning of the [FDCPA].” Feldman v. Sanders Legal Grp., 914 F. Supp. 2d 595, 599 (S.D.N.Y.
2012) (citing Daros v. Chase Manhattan Bank, 19 F. App’x 26, 27 (2d Cir. 2001) (summary
order)). A “debt collector” is a person “who regularly collects . . . debts owed . . . another” or a
person involved “in any business the principal purpose of which is the collection of any debts.”
15 U.S.C. § 1692a(6).
The same provision exempts “any person collecting or attempting to collect any debt
owed or due . . . to the extent such activity . . . concerns a debt which was originated by such
person; [or] concerns a debt which was not in default at the time it was obtained by such person”
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from the FDCPA’s definition of a debt collector. Id. “District courts in the Second Circuit have
interpreted [§] 1692a(6) to exclude originating creditors and their assignees, as well as loan
servicers who obtain a debt prior to default, from the definition of an FDCPA debt collector.”
Vallecastro v. Tobin, Melien & Marohn, No. 3:13–cv–1441 (SRU), 2014 WL 7185513, at *3 (D.
Conn. Dec. 16, 2014) (collecting cases); cf. Maguire v. Citicorp Retail Serv., Inc., 147 F.3d 232,
235 (2d Cir. 1998) (finding that the FDCPA does not apply to entities attempting to collect debts
owed to them). In other words, “[w]hen a loan servicer obtains an account prior to its default,
that loan servicer operates as a creditor, not a debt collector, for the purposes of the FDCPA.”
Vallecastro, 2014 WL 7185513, at *3.
Section 1692a(6) also exempts “any person collecting or attempting to collect any debt
owed or due or asserted to be owed or due another to the extent such activity is incidental to a
bona fide fiduciary obligation.” 15 U.S.C. § 1692a(6)(F)(i). “Two requirements must be
satisfied for an entity to come within the exception to the FDCPA for collection activities
‘incidental to a bona fide fiduciary obligation.’” Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d
1028, 1032 (9th Cir. 2009) (quoting § 1692a(6)(F)(i)).6 “First, the entity must have a ‘fiduciary
obligation.’” Id. Second, the entity’s collection activity must be ‘incidental to’ its ‘fiduciary
obligation.’” Id. Although “[f]ew courts have addressed the fiduciary obligation exception,”
Hooks v. Forman Holt Eliades & Ravin LLC, No. 11 Civ. 2767(LAP), 2015 WL 5333513, at *13
(S.D.N.Y. Sept. 14, 2015), at least one court explicitly concluded that USAF fits within this
exemption under the FDCPA, see Davis v. United Student Aid Funds, Inc., 45 F. Supp. 2d 1104,
1109 (D. Kan. 1998) (“The court thus concludes that [USAF], as a guaranty agency, ‘holder’ of
6
Defendants do not cite to, nor am I aware of, any Second Circuit case discussing the fiduciary obligation exception
in this context. However, I see no reason to depart from the out-of-Circuit authority cited herein.
8
[the plaintiff’s] note, and trustee owing a fiduciary duty to the Secretary of Education, fits within
the ‘fiduciary’ exemption stated in 15 U.S.C. § 1692[a](6)(F)(i).”).
2. Application
a. The Navient Defendants
Accepting Plaintiff’s assertions as true for the purposes of the motion to dismiss, as I
must, she has not pleaded sufficient facts to classify any of the Navient Defendants as debt
collectors within the meaning of the FDCPA. As to Navient and Pioneer, there are no nonconclusory allegations in the Complaint that Navient or Pioneer was a debt collector, or that
Navient or Pioneer engaged in any debt collection activity. Nor are there any allegations that
Navient or Pioneer was ever the servicer of the Loan, owned the Loan, or made any efforts to
collect the Loan.
As to NSL, Plaintiff concedes that NSL was the servicer of the Loan, which in turn is
confirmed by the documents attached to the Complaint. (Compl. ¶ 7; id. Ex. B.) Moreover,
Plaintiff admits that NSL was formerly known as Sallie Mae, Inc.—the originator of Plaintiff’s
Loan—and thus NSL has serviced the Loan since origination. See Spyer v. Navient Sols., Inc.,
No. 15-3814 (NLH/JS), 2016 WL 1046789, at *3 (D.N.J. Mar. 15, 2016), reconsideration
denied, No. 15-3814 (NLH/JS), 2016 WL 5852849 (D.N.J. Oct. 4, 2016) (“Navient is not a “debt
collector” under the FDCPA under these circumstances because it became the loan servicer (first
as Sallie Mae before it changed its name) while plaintiff’s loan were not in default.”). By
definition, Navient began servicing the loans prior to any default. See Caione v. Navient Corp.,
No. 16-0806(NLH/JS), 2016 WL 4432687, at *5 (D.N.J. Aug. 18, 2016) (holding that “the facts
pled indicate Navient (as corporate successor to Sally Mae) was the loan originator” and “[b]y
definition, then, Navient began servicing the loans prior to any default”). Plaintiff does not
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plausibly allege any facts to support the claim that any of the Navient Defendants were debt
collectors, and her FDCPA claims against the Navient Defendants are therefore dismissed.
b. USAF
Nor has Plaintiff pleaded sufficient facts to classify USAF as a debt collector within the
meaning of the FDCPA. Plaintiff attempts to allege that USAF is a debt collector by stating that
Defendants “admitted in . . . exhibit C that they were acting collectively as ‘debt collectors.’”
(Compl. ¶ 19.) Exhibit C is a letter dated April 30, 2017 from USAF to Plaintiff, which states:
“This is an attempt to collect a debt and any information will be used for that purpose.” (Compl.
Ex. C, at 3.) An attempt to collect a debt, however, does not amount to the FDCPA’s definition
of a “debt collector.”
Plaintiff does not dispute that USAF acted in its capacity as guarantor for the Loan. (See
Compl. ¶ 13 (“The Communication confessed that an alleged ‘guarantor’ purchased the loan on
October 24, 2016 although the details of the alleged purchase remains shrouded in mystery.”).)
Moreover, the materials attached to Plaintiff’s Complaint further demonstrate that USAF acted in
its capacity as guarantor. (See id. Exs. A, C.) USAF administers the loan program and conducts
collection activities as fiduciaries of the DOE. See, e.g., Rowe, 559 F.3d at 1034 (“Every court
that has addressed whether a guaranty agency owes a fiduciary obligation to the DOE has held
that it does.” (citing cases)). Furthermore, Plaintiff does not allege that USAF’s central activity
(as opposed to an “incidental” activity) is that of a debt collector. 15 U.S.C. § 1692a(6)(F).
Instead, “[g]enerally speaking, the collection of defaulted debts by a guaranty agency is
‘incidental to’ its primary function.” Rowe, 559 F.3d at 1035 (explaining that “a central part of a
guaranty agency’s administrative function is—as the name suggests—guaranteeing student loans
made by other entities”).
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Further, although the fiduciary obligation exception has rarely been addressed in this
Circuit, and even less so in this context, this particular issue was raised in a litigation outside of
this Circuit, in which the district court explicitly exempted USAF under the fiduciary obligation
exception. See Davis v. United Student Aid Funds, Inc., 45 F. Supp. 2d 1104, 1109 (D. Kan.
1998). I see no reason to depart from the reasoning in Davis and the other cases cited herein.
Because USAF, acting as a guarantor, has a bona fide fiduciary obligation to the DOE, and
because USAF’s collection activity is incidental to that fiduciary obligation, USAF is not a “debt
collector” as defined by the FDCPA. See 15 U.S.C. § 1692a(6)(F)(i) (exempting “any person
collecting or attempting to collect any debt owed or due or asserted to be owed or due another to
the extent such activity is incidental to a bona fide fiduciary obligation”). Plaintiff’s FDCPA
claims against USAF are therefore dismissed.
B.
Declaratory Relief
Count One of Plaintiff’s Complaint seeks declaratory relief under the FDCPA. Although
the Second Circuit has not had occasion to address this issue, see Hecht v. United Collection
Bureau, Inc., 691 F.3d 218, 223 n.1 (2d Cir. 2012), district courts in this Circuit have held that
neither equitable nor declaratory relief is available to private litigants under the FDCPA, see
Sparkman v. Zwicker & Assocs., P.C., 374 F. Supp. 2d 293, 298 (E.D.N.Y. 2005) (collecting
cases and explaining that “[t]he FDCPA contains no express provision for injunctive or
declaratory relief in private actions”). Similarly, courts outside of this Circuit have concluded
that neither injunctive nor declaratory relief is available to private litigants under the FDCPA.
See, e.g., Weiss v. Regal Collections, 385 F.3d 337, 342 (3d Cir. 2004) (concluding that the
FDCPA contains no express provision for declaratory or injunctive relief in private actions);
Crawford v. Equifax Payment Servs., Inc., 201 F.3d 877, 882 (7th Cir. 2000) (“[A]ll private
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actions under the Fair Debt Collection Practices Act are for damages.”). Because the FDCPA
does not expressly provide for injunctive or declaratory relief in private actions, Plaintiff’s
claims for declaratory relief under the Act are dismissed.
C.
Dismissal With Prejudice
Rule 15(a) of the Federal Rules of Civil Procedure requires that courts grant leave to
amend “when justice so requires.” Fed. R. Civ. P. 15(a). “[I]t is within the sound discretion of
the court whether to grant leave to amend.” In re Alcon S’holder Litig., 719 F. Supp. 2d 280,
281 (S.D.N.Y. 2010) (quoting John Hancock Mut. Life Ins. Co. v. Amerford Int’l Corp., 22 F.3d
458, 462 (2d Cir. 1994)). Complaints brought by pro se litigants are typically dismissed without
prejudice. See Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000) (leave to amend should be
given unless there is no indication that the pro se plaintiff will be able to assert a valid claim);
Gomez v. USAA Fed. Sav. Bank, 171 F.3d 794, 795–96 (2d Cir. 1999) (per curiam) (pro se
complaints generally “not dismiss[ed] without granting leave to amend at least once when a
liberal reading of the complaint gives any indication that a valid claim might be stated” (citation
omitted)).
Here, I granted Plaintiff leave to amend her Complaint after she received Defendants’
motions to dismiss, (see Doc. 18), and she chose not to file an amended pleading. Nor has
Plaintiff requested leave to amend in the event that Defendants’ motions are granted. Although I
am cognizant of Plaintiff’s pro se status, a liberal reading of the Complaint does not suggest any
indication that a valid claim might be stated. Accordingly, Plaintiff’s claims are dismissed with
prejudice.
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Conclusion
For the foregoing reasons, Defendants’ motions are GRANTED, and Plaintiff’s claims
are dismissed with prejudice. The Clerk of Court is respectfully directed to terminate the
pending motions, (Docs. 15, 16), enter judgment for Defendants, and close this case.
SO ORDERED.
Dated: September 28, 2018
New York, New York
______________________
Vernon S. Broderick
United States District Judge
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