557 F.3d 285 (6th Cir. 2009), 08-3062, United States v. Petroff-Kline

Docket Nº:08-3062.
Citation:557 F.3d 285
Party Name:UNITED STATES of America, Plaintiff-Appellee, v. Patricia PETROFF-KLINE, Defendant-Appellant.
Case Date:March 03, 2009
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

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557 F.3d 285 (6th Cir. 2009)

UNITED STATES of America, Plaintiff-Appellee,


Patricia PETROFF-KLINE, Defendant-Appellant.

No. 08-3062.

United States Court of Appeals, Sixth Circuit

March 3, 2009

Argued: Jan. 23, 2009.

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[Copyrighted Material Omitted]

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D. James Petroff, Faulkner, Muskovitz & Phillips, Cleveland, Ohio, for Appellant.

Lori White Laisure, Assistant United States Attorney, Cleveland, Ohio, for Appellee.


D. James Petroff, Faulkner, Muskovitz & Phillips, Cleveland, Ohio, for Appellant.

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Lori White Laisure, Assistant United States Attorney, Cleveland, Ohio, for Appellee.

Before GIBBONS and McKEAGUE, Circuit Judges; SHADUR, Senior District Judge.[*]


SHADUR, Senior District Judge.

Patricia Petroff-Kline (" Petroff-Kline" ) appeals the district court's grant of summary judgment to the United States and its corresponding denial of Petroff-Kline's cross-motion for summary judgment. Acting on behalf of the Department of Health and Human Services (" HHS" ), the Government brought the action against Petroff-Kline to collect the amount of Health Education Assistance Loan (" Health Education Loan" ) indebtedness that Petroff-Kline had incurred while she was a student at Tufts University's School of Dentistry (" Tufts" ). After considering the parties' cross-motions for summary judgment and supplemental briefing as to the amount of Petroff-Kline's indebtedness, the district court granted the Government's motion for summary judgment in the amount of $208,349.20 plus interest accrued from August 15, 2007. We affirm.


Patterned after the United States' Guaranteed Student Loan (" Student Loan" ) program, the Health Education Loan program was enacted to meet the needs of health profession students who had to borrow substantially more than the borrowing limit under the Student Loan program. Health Education Loans were made available to full-time students in certain health profession schools. Administered by the Public Health Services of HHS, the Health Education Loan program employs a three-party structure: (1) private lenders make the loans, (2) the schools administer their application and disbursement and (3) HHS guarantees the loans. Lenders often sell their Health Education Loans to the Student Loan Marketing Association (" Sallie Mae" ), a secondary loan market established by statute.

After the borrower's graduation or departure from school, the lender establishes a repayment schedule that begins the first day of the tenth month after the borrower ceases to be a full-time student at a Health Education Loan school and allows the borrower up to 33 years to repay the loan. After the repayment period begins the borrower may request a forbearance, which provides an extension of time for making loan payments to avoid the borrower's default on his or her payments.

In the event of the borrower's default, death, total and permanent disability or bankruptcy, HHS will pay off the lender's loss in principal and interest if the lender has complied with the terms of the Health Education Loan insurance contract, the statute and the regulations. HHS is then assigned the borrower's notes.

While Petroff-Kline was a student at Tufts, she applied for and obtained six Health Education Loans, and Tufts approved all the requests. Petroff-Kline signed promissory notes for the Health Education Loans, and Bay Bank Norfolk Trust Company (" Bay Bank" ) approved Petroff-Kline for all six loans: (1) $13,060 on September 12, 1986, (2) $6,940 on December 4, 1986, (3) $14,675 on August 15, 1987, (4) $18,730 on August 8, 1988, (5) $1,261 on January 5, 1989 and (6) $6,355 on October 13, 1989.

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Sallie Mae later purchased Petroff-Kline's Health Education Loans from Bay Bank. Following five periods of forbearance from April 1, 1991 to May 6, 1993, Sallie Mae provided Petroff-Kline with repayment schedules on or about June 9, 1993 and notified her that payments were to begin on July 6, 1993. Petroff-Kline filed for Chapter 7 bankruptcy on July 31, 1995, and on September 9, 1995 she filed an adversary proceeding to seek an undue hardship discharge of the Health Assistance Loans. Although she was discharged from bankruptcy on October 3, 1997, her Health Education Loan debt was not discharged.

As a result of the adversary proceeding, Sallie Mae filed an insurance claim with HHS on September 19, 1995. About a week later HHS paid the claim in the amount of $105,495 and received an assignment of Petroff-Kline's promissory notes. On September 29, 1995 HHS sent Petroff-Kline a letter telling her that the promissory notes for her Health Education Loans had been assigned to the Government.

HHS informed Petroff-Kline about March 3, 1998 that her Health Education Loan debt had been referred to Payco American Corporation for collection and that her account would be referred to the United States Department of Justice (" DOJ" ) if she failed to either remit payment in full or enter into a repayment agreement. Petroff-Kline did not comply.

Then HHS wrote Petroff-Kline a March 26, 1998 letter stating that it intended to refer her Health Education Loan debt to other federal agencies for the purpose of administrative offset under the Debt Collection Improvement Act of 1996. Petroff-Kline was advised that a written response and repayment agreement or payment in full within 60 days from the date of the letter would terminate administrative offset action. Again Petroff-Kline did not respond.

Six years passed without full compliance by Petroff-Kline (as indicated later, she made some payments on account during that period). Then in an April 6, 2004 letter HHS notified her that she had 60 days to resolve her delinquent debt. She was further advised that if she was unwilling to establish a repayment agreement, her case would be referred immediately to the Office of the Inspector General for exclusion from participation in the Medicare and Medicaid programs. HHS also told Petroff-Kline that her debt would be transferred to the DOJ for enforced collection if she did not enter into a repayment agreement. Once more Petroff-Kline did not respond.

HHS thereafter warned Petroff-Kline repeatedly-in letters dated July 23, 2004, April 18, 2005, September 12, 2005 and January 26, 2006-that if she did not enter into a repayment agreement her debt would be referred to the DOJ. Petroff-Kline still remained unresponsive. HHS finally referred Petroff-Kline's Health Education Loan debt to the DOJ for enforced collection on May 26, 2006.

Petroff-Kline had made payments totaling $9,764.11 to Sallie Mae on her Health Education Loans from September 20, 1990 to April 14, 1995. Sallie Mae refunded $66.96 to Petroff-Kline's account on April 5, 1996. Although not pursuant to any repayment agreement, Petroff-Kline also made 71 payments totaling $22,450 on the loans from October 20, 1998 to November 15, 2006. Thus the total amount paid on account by Petroff-Kline over the years came to $32,281.07. According to the Government, as of August 15, 2007 Petroff-Kline's outstanding debt on her Health Education Loans totaled $208,349.20.

On August 31, 2006 the Government filed an action in the Northern District of

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Ohio on behalf of HHS to recover the asserted amount of Petroff-Kline's Health Education Loan indebtedness. As stated earlier, both the Government and Petroff-Kline then filed motions for summary judgment. On October 17, 2007 the district court granted the Government's motion as to the existence of Petroff-Kline's indebtedness but denied summary judgment to the Government as to the amount of that indebtedness.

Just a few weeks later-on November 5, 2007-the district court held a telephonic conference during which it vacated its partial order denying summary judgment as to the amount of indebtedness and allowed Petroff-Kline to file a supplemental motion on that issue. After permitting the Government to file a response, the district court then reconsidered the Government's motion for summary judgment on the issue of the amount of indebtedness, and on November 14, 2007...

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