Chery v. Conduent Educ. Servs., LLC

• Citation: 581 F.Supp.3d 436
• Decision Date: 20 January 2022
• Docket Number: 1:18-CV-75
• Parties: Jeffrey CHERY, on behalf of himself and all others similarly situated, Plaintiff, v. CONDUENT EDUCATION SERVICES, LLC, formerly known as ACS, Access Group, Inc., and Access Funding 2015-1, LLC, Defendants.
• Court: U.S. District Court — Northern District of New York

581 F.Supp.3d 436

Jeffrey CHERY, on behalf of himself and all others similarly situated, Plaintiff,

v.CONDUENT EDUCATION SERVICES, LLC, formerly known as ACS, Access Group, Inc., and Access Funding 2015-1, LLC, Defendants.

1:18-CV-75

United States District Court, N.D. New York.

Signed January 20, 2022

JUSTIN A. KUEHN, ESQ., MOORE KUEHN, PLLC, Attorneys for Plaintiff, 30 Wall Street, 8th Floor, New York, NY 10005.

LAWRENCE P. EAGEL, ESQ., BRAGAR EAGEL & SQUIRE, P.C., Attorneys for Plaintiff, 810 Seventh Avenue, Suite 620, New York, NY 10019.

JOHN GRUGAN, ESQ., DANIEL C. FANASELLE, ESQ., ELIZABETH SEIDLIN-BERNSTEIN, ESQ., THOMAS BURKE, ESQ., BALLARD, SPAHR LAW FIRM, Attorneys for Defendants, 1735 Market Street, 51st Floor, Philadelphia, PA 19103.

MEMORANDUM-DECISION and ORDER

DAVID N. HURD, United States District Judge

I. INTRODUCTION

On January 18, 2018, named plaintiff Jeffrey Chery ("Chery") filed this class action against defendants Conduent Education Services, LLC ("Conduent"), Access Group, Inc. ("Access Group"), and Access Funding 2015-1, LLC ("Access Funding") (collectively "Conduent"), three entities that held or serviced Federal Family Education Loan Program ("FFELP") loans.

Chery alleged that Conduent interfered with borrowers’ rights to prepay or consolidate their FFELP loans in accordance with guarantees set out in the loan agreements and federal law. The complaint asserted six claims: (1) a violation of New York General Business Law § 349 ; (2) a breach of contract; (3) a breach of the implied covenant of good faith and fair dealing; (4) a request for a declaratory judgment; (5) negligence; and (6) unjust enrichment. Dkt. No. 19.

On April 24, 2018, Conduent moved to dismiss Chery's complaint. Dkt. No. 20. That motion was denied. Chery v. Conduent Educ. Servs., LLC ("Chery I "), 2019 WL 1427140 (N.D.N.Y. Mar. 29, 2019). Thereafter, the parties engaged in some contested discovery before U.S. Magistrate Judge Christian F. Hummel. Dkt. No. 60; Chery v. Conduent Educ. Servs., LLC ("Chery II "), 2020 WL 4783167 (N.D.N.Y. Aug. 18, 2020) (Hummel, M.J.).

On January 15, 2021, Chery moved under Federal Rule of Civil Procedure ("Rule") 23 to certify a class of student loan borrowers whose right to prepay their FFELP loans was thwarted because Conduent failed to provide them with a timely Loan Verification Certificate ("LVC"). Dkt. No. 79.

On May 5, 2021, Chery's motion for class certification was granted over Conduent's opposition. Chery v. Conduent Educ. Servs., LLC ("Chery III "), 2021 WL 1791756 (N.D.N.Y.). The Court appointed Chery as representative and certified the following Class:

All student loan borrowers who submitted an application to consolidate one or more FFELP Loans into a Direct Consolidated Loan between January 18, 2012, and the date of the Order certifying the Class, for which Defendants failed to provide an LVC within ten days of receiving the request therefor.

Chery III , 2021 WL 1791756, at *3. Conduent sought leave to take an immediate¹ appeal, but was denied permission by the U.S. Court of Appeals for the Second Circuit in a mandate issued on July 26, 2021. Dkt. No. 87.

On August 13, 2021, the parties cross-moved under Rule 56 for summary judgment. Chery's motion seeks a judgment in favor of the Class on the General Business Law § 349 (" Section 349") claim. Dkt. No. 91. Conduent, on the other hand, seeks a judgment dismissing the class action in its entirety. Dkt. No. 92. Conduent has also moved to preclude Chery's expert on damages. Dkt. No. 93. These motions have been fully briefed and will be considered on the basis of the submissions without oral argument.

II. BACKGROUND

Each Class member took out one or more FFELP loans. Pl.’s Facts, Dkt. No. 91-2 ¶ 2. Although some of these loans were eventually transferred to a different loan servicer, it is undisputed that Conduent serviced each Class members’ loan for at least some portion of time between January 18, 2012, and May 5, 2021 (the "Class period").² Id. ¶ 3. Each loan included a Master Promissory Note ("MPN"). Id. ¶ 4. And each Class member received a form disclosure statement ("Disclosure Statement").³ Id.

The MPN and Disclosure Statement were materially the same for all members of the Class. Pl.’s Facts ¶ 5. As relevant here, these documents provided that: (a) a borrower may prepay all or any part of the unpaid balance on their loans at any time without penalty; (b) the loan is subject to the Higher Education Act of 1965, as amended ( 20 U.S.C. § 1070, et seq. ), and applicable U.S. Department of Education regulations; and (c) repayment obligations are interpreted according to Federal Law ( 20 U.S.C. § 1071 to 1087–4 ) and Regulations (34 C.F.R. § 682), applicable state law and regulations governing the Federal Family Education Loan Program and the terms of the MPN. Id. ¶ 6.

Each Class member sought to either pay off their loans or to consolidate them into a federal Direct Consolidation Loan. Pl.’s Facts ¶ 25. When a borrower applies for consolidation under that particular loan program, the Secretary of Education sends the borrower's current servicer a request for an LVC. 34 C.F.R. § 685.220(f)(1)(i) ; Defs.’ Facts ¶¶ 15–16 (explaining that four companies are authorized to service Direct Loans).

The LVC provides information that is necessary to complete the loan consolidation process. Pl.’s Facts ¶ 25. As relevant here, the loan servicer "must complete and return the Secretary's request for certification of the amount owed within 10 business days of receipt" or else "provide to the Secretary a written explanation of the reasons for its inability to provide the certification." § 685.220(f)(1)(i).

In January of 2019, Conduent entered into a Consent Order with the New York State Department of Financial Services ("DFS"). Id. ¶ 7. A few months later, on April 26, 2019, Conduent entered into a Consent Order with the Consumer Financial Protection Bureau ("CFPB"). Id. ¶ 8. According to the findings in the CFPB's Consent Order, Conduent failed to return timely LVCs in at least 3,680 instances (as of 2015). Id. ¶ 9. Likewise, the DFS's Consent Order found that "[Conduent's] failure to process LVCs caused borrowers financial harm." Defs.’ Resp. to Pl.’s Facts ¶ 10. Both Consent Orders include language expressly preserving the rights of individual borrowers to bring actions against Conduent. Id. ¶ 11.

Conduent has produced in discovery a spreadsheet (the "Class Data") that lists "all loan packets for which Conduent received an LVC request from a different servicer and did not return an LVC within 10 business days of receiving the request." Defs.’ Resp. to Pl.’s Facts ¶ 26. This Class Data identifies the number of borrowers in the Class, the number of student loans associated with each borrower, and details, for each loan, the: (1) dates each LVC request was received and responded to; (2) information reported on the LVC responses; (3) payment status and, if relevant, the borrower's repayment plan before consolidation; and (4) other available information regarding consolidation. Pl.’s Facts ¶ 27.

The Class Data shows that Conduent routinely failed to return timely LVCs during the Class Period. Defs.’ Resp. to Pl.’s Facts ¶ 28; see also Pl.’s Facts ¶¶ 14–24. The Class Data also shows that Conduent's delay affected 7,394 loan packets and resulted in an average delay of 173 days. Defs.’ Resp. to Pl.’s Facts ¶ 29. According to William Jeffers, a Chartered Financial Analyst retained by Chery as an expert on damages, the Class suffered $3,344,568 as a result of this delay. Pl.’s Facts ¶ 32.⁴

III. LEGAL STANDARD

The entry of summary judgment is warranted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). An issue of fact is material for purposes of this inquiry if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). And a dispute of material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

In assessing whether there are any genuine disputes of material fact, "a court must resolve any ambiguities and draw all inferences from the facts in a light most favorable to the nonmoving party." Ward v. Stewart , 286 F. Supp. 3d 321, 327 (N.D.N.Y. 2017) (citation omitted). Summary judgment is inappropriate where a "review of the record reveals sufficient evidence for a rational trier of fact to find in the [non-movant's] favor." Treglia v. Town of Manlius , 313 F.3d 713, 719 (2d Cir. 2002) (citation omitted).

"Where, as here, the parties have cross-moved for summary judgment, a reviewing court must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Cayuga Nation v. Tanner , 448 F. Supp. 3d 217, 233 (N.D.N.Y. 2020) (cleaned up). "In undertaking this analysis, it bears nothing that a district court is not required to grant judgment as a matter of law for one side or the other." Id.

IV. DISCUSSION

Chery contends summary judgment is warranted in favor of the Class on the Section 349 claim because Conduent failed to provide timely LVCs "for the thousands of Class members who sought to prepay or consolidate their federal student loans." Pl.’s Mem., Dkt. No. 91-1 at 5.⁵ As Chery explains, the DFS and CFPB Consent Orders demonstrate that Conduent "suffered extensive servicing failures" and "failed to correct its servicing problems." Id. at 6. Rather than "compensate, or even notify borrowers," Chery contends that Conduent "continued to operate under the guise that its system was functioning properly" even though "it knew for years that was not the case." Id.

Conduent, on the other hand, argues that the whole class action should be dismissed because "Chery has produced no evidence that he was...