Williams v. Tennessee Student Assistance Corporation et al (RLJ2)
Filing
14
MEMORANDUM AND OPINION as set forth in following order. Signed by District Judge R Leon Jordan on 4/12/16. (c/m)(ABF)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
MARK WILLIAMS
Plaintiff,
v.
TENNESSEE STUDENT ASSISTANCE
CORPORATION and
RUSS DEATON, in his official
capacity as Executive Director
Defendants.
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No. 3:16-cv-52
MEMORANDUM OPINION
This matter comes before the Court on Defendants’ Motion to Dismiss [doc. 4]. In
accordance with this opinion, Defendant’s Motion will be GRANTED in part and DENIED in
part.
I.
FACTS
In 2001, Plaintiff endorsed a document titled “TENNESSEE STUDENT ASSISTANCE
CORPORATION TENNESSEE CONSOLIDATION LOAN PROGRAM APPLICATION AND
PROMISSORY NOTE FOR A CONSOLIDATION LOAN”. The document consolidated three
of Plaintiff’s student loans into a single loan in the aggregate amount of $71,947. Plaintiff does
not dispute that he borrowed the money or that he signed the document. The original lender of
the consolidation loan was First Tennessee Bank. However, the instrument later passed to several
other financial institutions. (Compl. [doc. 1] at ¶ 2). Tennessee Student Assistance Corporation’s
role in the initial transaction or subsequent transfers is unclear, and Plaintiff claims that TSAC
made conflicting statements as to who owned the loan. (Compl. [doc. 1] at ¶ 4). However, TSAC
began garnishing Plaintiff’s wages for an alleged debt of $166,199.59 in 2010.
In January 2015, Plaintiff sent TSAC a document titled “Bill in Equity”. The Bill in
Equity was styled as a legal affidavit and “asserted [Plaintiff’s] absolute legal and equitable title
to the instrument[.]” (Compl. [doc. 1] at ¶ 6; Bill in Equity [doc. 1-1]). The Bill in Equity
ordered TSAC to “rebut the enclosed affidavit . . . under penalty of perjury . . . within fifteen
(15) business days[.]” (Compl. [doc. 1] at ¶ 42; Bill in Equity [doc. 1-1] at p. 22). The Bill in
Equity declared that a failure to rebut the affidavit would constitute admission of its accuracy
and waiver of any defenses. (Id.) TSAC evidently failed to do rebut the Bill in Equity. Plaintiff
asserts that he acquired sole ownership of the note by operation the Bill in Equity. (Compl. [doc.
1] at ¶ 44).
Plaintiff filed this § 1983 action against TSAC and Russ Deaton, TSAC’s executive
director, (hereafter collectively “Defendant” or “TSAC”) claiming that Defendant lacks authority
to garnish his wages because it did not satisfy the requirements in 20 U.S.C. § 1095a. He claims
that TSAC was not the legal holder of the instrument and that garnishing his wages is a
constructive conversion of his property rights in the instrument. Plaintiff seeks an injunction to
end the wage garnishment and a judgment that would allow him to collect damages against the
Defendant.
II.
STANDARD OF REVIEW
Defendant brings this Motion under Rule 12(b)(6) of the Federal Rules of Civil
Procedure. Rule 12(b)(6) authorizes dismissal of a complaint for "failure to state a claim upon
which relief can be granted." In resolving a motion under Rule 12(b)(6), the court must "construe
the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw
all reasonable inferences in favor of the plaintiff." Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th
Cir. 2007). However, the Court does not give credence to mere recitations of the elements of a
claim, nor will it consider conclusory statements as valid support. "The factual allegations,
assumed to be true, must do more than create speculation or suspicion of a legally cognizable
cause of action[.]" League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir.
2007) (emphasis in original) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56
(2007)). "[A] complaint must contain sufficient factual matter, accepted as true, to 'state a claim
to relief that is plausible on its face.' . . . A claim has 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. The plausibility standard is not akin to a ‘probability requirement,’
but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v.
Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556, 557).
In addressing a motion under Rule 12(b)(6), the court "may consider the Complaint and
any exhibits attached thereto, public records, items appearing in the record of the case and
exhibits attached to defendant's motion to dismiss so long as they are referred to in the
Complaint and are central to the claims contained therein." Bassett v. Nat'l Collegiate Athletic
Ass'n, 528 F.3d 426, 430 (6th Cir. 2008) (citation omitted); see also Gee v. UnumProvident
Corp., No. 1:03-CV-147, MDL 1:03-MD-1552, 2005 WL 534873, at *7 (E.D. Tenn. Jan. 13,
2005) ("[I]f documents are attached to, incorporated by, or specifically referred to in the
complaint, they are considered part of the complaint and the Court may consider them.") (citing
Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir.1997)).
III.
SOVEREIGN IMMUNITY
The Eleventh Amendment of the U.S. Constitution provides that states and their agencies
are not subject to suit unless they have waived their immunity or a federal law has abrogated it.
Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 100 (1984). Where the doctrine of
sovereign immunity applies to shield a government entity, the federal courts lack subject matter
jurisdiction. Bodin v. Vagshenian, 462 F.3d 481, 484 (5th Cir. 2006). Plaintiff does not does not
deny that TSAC is a state agency, nor does he argue any law waiving the state’s immunity
against claims for garnishing wages as a loan guarantor. Suits against state employees in their
official capacity are treated as suits against the state of which they are agents. Brandon v. Holt,
469 U.S. 464, 471, 105 S. Ct. 873, 877 (1985); Will v. Michigan Dep't of State Police, 491 U.S.
58, 71 (1989) (stating that suits against state officials are “no different from a suit against the
State itself.”). Thus, immunity from suit extends to individuals sued for money damages in their
official capacity. See S & M Brands, Inc. v. Cooper, 527 F.3d 500, 507 (6th Cir. 2008); see also
Will v. Mich. Dep't of State Police, 491 U.S. 58, 71, 2312 (1989) (stating that “neither a State nor
its officials acting in their official capacities are "persons" under §1983.”). Because Plaintiff
sues Mr. Deaton in his official capacity as a state employee, he is immune. Thus, to the extent
that Plaintiff seeks a monetary award, “a writ of assistance to collect damages”, or any judgment
that would permit him to receive a monetary award, there is no jurisdiction in this Court.
However, the Plaintiff also seeks injunctive relief, claiming that the TSAC has not
satisfied the requirements that would allow it to garnish the Plaintiff’s wages under 20 U.S.C.
§1095a. He appears to argue that the Eleventh Amendment does not apply to his claims for nonmonetary relief. This is incorrect. “The Eleventh Amendment prohibits all suits, whether for
injunctive, declaratory, or monetary relief against the state and its departments.” Thiokol Corp. v.
Dep't of Treasury, State of Mich., Revenue Div., 987 F.2d 376, 381 (6th Cir. 1993) A narrow
exception to this immunity applies where a claimant seeks prospective injunctive relief against
state officers in their official capacity. Id. Called the Ex Parte Young doctrine, the exception is
based on the principle that where an official acts outside the bounds of federal law, he is
“stripped of official or representative character” so that immunity does not apply. Pennhurst
State School & Hosp. v. Halderman, 465 U.S. at 104-05 (quoting Ex parte Young, 209 U.S. 123,
160 (1908)). In other words, the Eleventh Amendment does not bar a federal court from
enjoining a state official from acting in violation of federal law. Plaintiff’s Complaint alleges that
his wages are being garnished contrary to 20 U.S.C. § 1095a. Plaintiff argues that this is a
violation of his due process rights, protected by the Fifth Amendment and 42 U.S.C. §1983. This
Court therefore has subject matter jurisdiction over Plaintiff’s claim for injunctive relief against
Mr. Deaton in his capacity as a state official. Thus, if Mr. Deaton, as director of TSAC, is indeed
garnishing Plaintiff’s wages in violation of 20 U.S.C. § 1095a, this Court has jurisdiction to
enjoin that action.
Section 1095a permits a guaranty agency to garnish a debtor’s disposable income to
satisfy a debt, but only where the agency meets the debtor’s procedural due process rights to
notice and opportunity to be heard. Plaintiff does not claim that he did not receive notice or an
opportunity for a hearing to contest the garnishment. Rather, Plaintiff claims that the state of
Tennessee is not eligible to collect payment on the note because TSAC was not the owner of the
note. Thus, he claims that garnishing his wages is a conversion of his property.
Defendant is correct in arguing that the Bill in Equity was not effective to confer the note
to the Plaintiff. There is no law or statute permitting debtors to erase their debt on demand, and
Plaintiff cannot unilaterally transfer ownership of his debt to himself. Thus, the “Bill in Equity”
had no legal effect on the title of the note. Because Plaintiff is not the owner of the promissory
note, his “Second Cause of Action,” in which he asserts that TSAC deprived him of his property
rights in the note, fails to state a claim upon which relief can be granted. Plaintiff’s claim for
constructive conversion will be DISMISSED.
However, a determination that Plaintiff does not own the note does not trigger a finding
as to who has rights to collect on it. Defendant’s argument assumes that TSAC was the holder of
the note or was a guaranty agency eligible to collect on it under 20 U.S.C. § 1095a, whereas
Plaintiff claims he believed that the note was owned by other institutions. The original
application to consolidate the loan does not state TSAC’s role as a lender or guaranty agency,
only First Tennessee Bank’s role as the lender. For its own part, TSAC makes no statement as to
its interest in the note or its role in the transaction. While it would be natural to assume that
TSAC was and is the loan’s guarantor, this Court cannot make that assumption without evidence,
particularly when the only documentation the Court has is over fifteen years old and subsequent
transactions have occurred. TSAC has not shown that it is an eligible collector for the purposes
of 20 U.S.C. 1095a.
Construed liberally, Plaintiff’s complaint also alleges that TSAC refused to allow it to
inspect records related to the debt (Compl. [doc. 1] at ¶¶ 40-41) and that he did not have
opportunity to negotiate a repayment agreement (Compl. [doc. 1] at ¶¶ 48), both of which are
required under §1095a. If Plaintiff’s allegations are true, it is plausible that TSAC was not
eligible to garnish the Defendant’s income. As to Plaintiff’s “First Cause of Action,” TSAC’s
motion will be DENIED.
IV.
INSUFFICIENT SERVICE OF PROCESS
Defendant next moves to dismiss based on insufficient service of process under Rule
12(b)(5) of the Federal Rules of Civil Procedure. TSAC states that Plaintiff failed to meet the
requirements for service on a state government.
Rule 4(j) of the Federal Rules provides that service on a governmental entity requires
plaintiff to comply with the law of the state for service of process on that particular entity.
Tennessee law requires claimants to “deliver[] a copy of the summons and of the complaint to
the attorney general of the state or to any assistant attorney general.” Tenn. R. Civ. Pro. R.
4.04(6). The record indicates that Plaintiff served summons on Mr. Deaton, in his capacity as
executive director of TSAC. [docs. 3-4]. Plaintiff did not effect service on the state Attorney
General. He therefore failed to comply with Tennessee law and service is insufficient in this
case.
Rule 12(b)(5) provides that a complaint may be dismissed for insufficient service of
process. Despite the seeming unfairness of dismissal where a defendant clearly has knowledge of
a suit, the Sixth Circuit is clear that “actual knowledge and lack of prejudice cannot take the
place of legally sufficient service. “actual knowledge and lack of prejudice cannot take the place
of legally sufficient service.” LSJ Inv. Co. v. O.L.D., Inc., 167 F.3d320, 324 (6th Cir. 1999).
“[D]ue process requires proper service of process in order to obtain in personam jurisdiction.”
Amen v. City of Dearborn, 532 F.2d 554, 557 (6th Cir. 1976). Thus, proper service of process “is
not some mindless technicality.” Friedman v. Estate of Presser, 929 F.2d1151, 1156 (6th Cir.
1991) (citing Del Raine v. Carlson, 826 F.2d 698, 704 (7th Cir. 1987)). However, dismissal for
insufficient service is not automatic. Rule 4(m) provides:
If a defendant is not served within 90 days after the complaint is filed, the court-on motion or on its own after notice to the plaintiff--must dismiss the action
without prejudice against that defendant or order that service be made within a
specified time.
Because Plaintiff is proceeding pro se in this action, it is likely that his failure to properly
serve Defendants is attributable to mistake or ignorance of the rules for service of process.
Unfortunately, mistake or ignorance of the rules does not excuse compliance. See Moncrief v.
Stone, 961F.2d 595, 597 (6th Cir. 1992). However, Plaintiff made an effort to effect proper
service. Under the circumstances, justice is not served by dismissing the complaint. Plaintiff is
hereby ordered to properly serve the Defendant with process within forty-five days of the entry
of this order or his claims will be dismissed.
Having denied the motion to dismiss Plaintiff’s claims in federal law, the Court does not
reach the issue of pendent jurisdiction over any state law claims. However, the Court would note
that it is not clear what, if any, claims Plaintiff intends to make under state law.
V.
CONCLUSION
The Eleventh Amendment precludes Plaintiff’s claims for injunctive and monetary relief
against the Tennessee Student Assistance Corporation, and for monetary relief against Mr.
Deaton. Thus, in so far as Plaintiff seeks monetary relief, Defendant’s Motion is GRANTED
and Plaintiff’s claims are DISMISSED.
However, the Eleventh Amendment permits Plaintiff’s claim for injunctive relief against
Mr. Deaton in his official capacity. Plaintiff’s allegations, if true, state a plausible claim that
Defendant has not satisfied the requirements for garnishing his wages under 20 U.S.C. §1095a
and is thus acting in violation of federal law. As to Plaintiff’s claim for injunctive relief against
Mr. Deaton as an official of the TSAC, Defendant’s motion is therefore DENIED.
To the extent that Plaintiff seeks any relief for “constructive conversion” of his
ownership rights in the subject promissory note, the Motion will be granted and Plaintiff’s claim
DISMISSED.
Plaintiff has failed to properly serve process under Rule 4 of the Federal Rules of Civil
Procedure. Plaintiff is hereby ORDERED to effect proper service within forty-five days.
An Order consistent with this opinion will be entered.
IT IS SO ORDERED.
ENTER:
s/ Leon Jordan
UNITED STATES DISTRICT JUDGE
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