De Jesus Chavez v. LTV Aerospace Corp., CA 3-75-0607-C.

• Decision Date: 28 April 1976
• Docket Number: No. CA 3-75-0607-C.,CA 3-75-0607-C.
• Citation: 412 F. Supp. 4
• Parties: Maria DE JESUS CHAVEZ v. LTV AEROSPACE CORPORATION and LTV Education Systems, Inc.
• Court: U.S. District Court — Northern District of Texas

412 F. Supp. 4

Maria DE JESUS CHAVEZ v. LTV AEROSPACE CORPORATION and LTV Education Systems, Inc.

No. CA 3-75-0607-C.

United States District Court, N. D. Texas, Dallas Division.

April 28, 1976.

Edward B. Cloutman, III, Mullinax, Wells, Mauzy & Baab, Inc., Dallas, Tex., and Edward W. Dunbar, Christie, Berry & Dunbar, El Paso, Tex., for plaintiff.

Wilson W. Herndon and Boyd Waggoner, Strasburger, Price, Kelton, Martin & Unis, Dallas, Tex., for defendants.

MEMORANDUM OPINION AND ORDER

WILLIAM M. TAYLOR, Jr., Chief Judge.

Defendants LTV Aerospace Corporation and LTV Education Systems, Inc., have filed a motion to dismiss plaintiff's complaint for a) lack of subject matter jurisdiction, b) failure to state a claim upon which relief can be granted, and c) failure to allege the existence of necessary facts to comply with Rule 23, Federal Rules of Civil Procedure, with respect to plaintiff's class action allegations. Briefs in support of and in opposition to the motion were filed by the defendants and plaintiff. After having considered the jurisdictional question, the Court has concluded that the following order should be entered.

Plaintiff, bringing this suit on her own behalf and on behalf of all others similarly situated, alleges that defendants violated 20 U.S.C. § 1071, et seq., the Higher Education Act of 1965, which governs the terms and conditions of the federally insured student loan program. Plaintiff alleges that defendants charged plaintiffs for items not authorized by the statutes and regulations promulgated pursuant thereto; that defendants charged plaintiffs sums not applied to their tuition but rather passed on to the lenders, and that these charges exceeded the maximum interest rate allowable for their student loans; and that defendants passed on the costs of making the loan to plaintiffs in the form of higher tuition charges or otherwise in violation of the federal statutes.

Plaintiff bases jurisdiction on 28 U.S.C. § 1337 and maintains that the Higher Education Act and regulations promulgated thereunder regulate commerce by setting the conditions for federal loan insurance, borrower eligibility, the payment of the federal interest subsidy, and the terms of student loans, including the maximum permissible rate of interest. Plaintiff also alleges jurisdiction pursuant to 28 U.S.C. §§ 2201-2202.

The basic issue to be decided is whether or not a private cause of action was created or exists under the terms of 20 U.S.C. § 1071, et seq. While § 1082(a) provides for suits to be brought by or against the Commissioner of Health, Education and Welfare, neither the statutory language nor the legislative history provides an answer to the specific question at bar. Moreover, it appears that this is a case of first impression in the courts. Both parties have drawn analogies to other statutes which are silent with regard to the maintenance of a private cause of action. Some cases have interpreted various of these statutes as providing a private cause of action, Gibson v. First Federal Savings and Loan Assoc. of Detroit, 504 F.2d 826 (6th Cir. 1974), and Partain v. First National Bank of Montgomery, 467 F.2d 167 (5th Cir. 1972); and other cases have interpreted other similar statutes as not creating a private cause of action, National Railroad Passenger Corp. v. National Association of Railroad Passengers, 414 U.S. 453, 94 S.Ct. 690, 38 L.Ed.2d 646 (1974) and Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975).

The Court is of the opinion that the proper statutory analysis is set out in Cort v. Ash, ibid. Justice Brennan, writing for a unanimous Court, stated that several factors are relevant in determining whether a private remedy is implicit in a statute not expressly providing one:

First, is the plaintiff "one of the class for whose especial benefit the statute was enacted, Texas & Pacific Railroad Co. v. Rigsby, 241 U.S. 33, 39 36 S.Ct. 482, 484, 60 L.Ed. 874 (1916) (emphasis supplied) — that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? See, e. g. National Railroad Passenger Corp. v. National Association of Railroad Passengers, 414 U.S. 453, 458, 460 94 S.Ct. 690, 693, 694, 38 L.Ed.2d 646 (1974) (Amtrak). Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? See, e. g. Amtrak, supra; Securities Investor Protection Corp. v. Barbour, 421 U.S. 412 95 S.Ct. 1733, 44 L.Ed.2d 263; Calhoon v. Harvey, 379 U.S. 134 85 S.Ct. 292, 13 L.Ed.2d 190 (1964). And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?

Id. at 95 S.Ct. 2087-88, 45 L.Ed.2d at 36.

The plaintiff maintains, and the Court agrees, that plaintiff is indeed "one of the class for whose especial benefit the statute was enacted." Student borrowers were a primary concern of the Higher Education Act of 1965. The Commissioner of Education is directed, in the Act's Statement of Purpose, 20 U.S.C. § 1071, to encourage the creation of state and private non-profit loan insurance programs, to provide a federal program of student loan insurance for lenders and students without access to state and private non-profit programs, to pay an interest subsidy on qualified loans, and finally, to guarantee portions of certain loans. The entire program is based on the needs of the student borrower and exists for his benefit.

A violation of these regulations by a lending or educational institution works an injury on the class the Act intended to protect. Under the Act, and its regulations, members of the class have a right to be charged within a given interest rate (20 U.S.C. Section 1077(b); 45 C.F.R. Section 177.6(a)), to have their individual loan monies not applied to certain purposes (45 C.F.R. Section 177.6(2)), to have the loan charges limited to given services (45 C.F.R. Section 177.6(d)), and to repay the loan under certain conditions (20 U.S.C. Section 1077(c)). The class is possessed of specific rights in a given field of commerce.

The opinion in Cort, supra, 95 S.Ct. at 2090, 45 L.Ed.2d at 39, took notice of such statutory rights in discussing the second factor:

In situations in which it is clear that federal law has granted a class of persons

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