Dawson v. Great Lakes Educ. Loan Servs., Inc.
| Decision Date | 29 March 2021 |
| Docket Number | 15-cv-475-jdp |
| Court | U.S. District Court — Western District of Wisconsin |
| Parties | MEREDITH D. DAWSON, Plaintiff, v. GREAT LAKES EDUCATIONAL LOAN SERVICES, INC., GREAT LAKES HIGHER EDUCATION CORPORATION, JILL LEITL, DAVID LENTZ, and MICHAEL WALKER, Defendants. |
This case is about the capitalization of student loan interest. Capitalization is the practice of adding accrued but unpaid interest to the account's principal balance. When accrued interest is capitalized, the borrower's principal debt increases, and so too does the amount on which future interest will accumulate.
Plaintiff Meredith Dawson has federal student loans that are serviced by defendant Great Lakes Educational Loan Services, Inc. (GLELSI). As a servicer, GLELSI doesn't own Dawson's debt. Instead, GLELSI has a contract with the U.S. Department of Education to manage the account, including by determining when to capitalize interest in accordance with federal law. Defendant Great Lakes Higher Education Corporation (GLHEC) is GLELSI's parent company. The individual defendants are GLELSI officers.
Dawson received what the parties call a "B-9 Forbearance" (named after 34 C.F.R. § 685.205(b)(9)) on her student loans. When a borrower receives a forbearance, the borrower's repayment obligation is temporarily halted, but interest continues to accrue on the outstanding principal balance of the loan.
Dawson alleges that, at the end of the B-9 forbearance period, GLELSI wrongly capitalized interest that had accrued both before the forbearance period (pre-forbearance interest) and during the forbearance period (intra-forbearance interest), and that defendants misrepresented the amount Dawson owed in communications to her. She asserts claims for fraud under the Racketeer Influenced and Corrupt Organizations Act (RICO) and for negligence and negligent misrepresentation under Wisconsin common law.
The court has certified a class of borrowers who received a B-9 forbearance and whose federal student loans were serviced by GLELSI between 2006 and the present. See Dkt. 171, at 24.1 But the court limited the certification order to liability issues and deferred a decision on certifying damages. The court later invited the parties to include in their summary judgment materials arguments on whether damages should be decided on a class-wide basis. See Dkt. 305.
Defendants concede that GLELSI erred by capitalizing interest that accrued both before and during the forbearance period. They say that the capitalization of intra-forbearance interest was the result of what they call "programming errors," Dkt. 341, ¶ 135, and that the capitalization of pre-forbearance interest was the result of a misunderstanding of Department regulations, id., ¶ 160. But defendants deny that their errors give rise to liability under state or federal law, and they move for summary judgment on all claims. Dkt. 308.
Defendants don't challenge Dawson's claims on the ground that she can't prove fraud or negligence. Instead, defendants say that Dawson's RICO claims fail because she hasn't met multiple requirements of the relevant statute, and that her state-law claims are preempted byfederal law or barred under an immunity doctrine. Defendants also contend that Dawson can't show any harm because GLELSI has since corrected the errors on the class members' accounts.
The court will grant defendants' motion in part and deny it in part. Dawson concedes that she can't prevail on her claims against individual defendants David Lentz and Michael Walker, Dkt. 330, at 30 n.7, so the court will dismiss those defendants. The court will also dismiss Dawson's RICO claims. Dawson hasn't shown that the parties have the type of relationship with which RICO is concerned.
The court will allow Dawson's state-law claims against the corporate defendants to proceed. Defendants haven't shown a conflict between Dawson's claims and state law, so their preemption argument fails. And they don't meet the requirements for the immunity doctrines that they cite.
As for defendants' contention that Dawson hasn't shown harm, defendants are confusing Dawson's burden with their own. It is undisputed that GLELSI improperly capitalized the class members' interest, so Dawson has shown harm. It is defendants' burden to show that their remediation efforts made the class whole, which defendants haven't done. Defendants rely solely on conclusory declarations from their employees to demonstrate that class members' accounts have been corrected, so it is impossible at this stage to assess the accuracy of defendants' efforts.
The court agrees with Dawson that the remaining damages issues can be resolved on a class-wide basis. The court will amend the certification order accordingly and grant Dawson's motion to hold a conference to set a schedule for the remainder of the proceedings.
Dawson has also filed a motion for sanctions. She hasn't identified any persuasive reasons for sanctioning defendants, so the court will deny that motion.
Dawson devotes 13-pages of her 144-page opposition brief to her contention that she is entitled to "a procedural denial" of defendants' motion for summary judgment. Dkt. 330, at 18-30. Her first three reasons in support of that contention involve alleged violations of the court's summary judgment procedures: (1) some of defendants' proposed findings of fact are not limited to a single factual proposition; (2) some of defendants' proposed findings of fact recite expert opinions or parties' arguments; and (3) some of defendants' proposed findings of fact include restatements of documents or interpretations of the meaning of documents. Dawson also contends that the court must deny defendants' summary judgment motion because defendants falsely represented that some facts are undisputed. According to Dawson, a decision to grant any aspect of defendants' summary judgment motion will be proof that the court applied its rules "unequally as between the parties." Dkt. 330, at 25 (quoting Modrowski v. Pigatto, 712 F.3d 1166, 1168 (7th Cir. 2013)).
The alleged procedural violations are not independent grounds for denying summary judgment, and Dawson cites no authority to the contrary. Dawson accurately identifies several of the court's rules for preparing proposed findings of fact, see Dkt. 182, at 2, but the consequence for violating a rule isn't an automatic denial of the offending party's summary judgment motion. Rather, the court has discretion to disregard any improper proposed findings of fact. See Petty v. City of Chicago, 754 F.3d 416, 420 (7th Cir. 2014).
The court did not consider proposed findings of fact that violated the court's rules. But defendants' motion for summary judgment relied primarily on legal contentions rather than factual propositions, and most of defendants' proposed findings of facts aren't relevant to issuesthat that are properly before the court. So many of Dawson's objections simply have no bearing on resolving defendants' motion.
Dawson also contends that Goka v. Bobbitt, 862 F.2d 646 (7th Cir. 1988), requires the court to deny defendants' summary judgment motion because defendants failed to acknowledge evidence undermining their proposed finding of fact that GLELSI employees were "surprised" when the Department of Education informed them in 2016 that B-9 forbearances aren't a "capitalization event." Dkt. 330, at 27 (citing Dkt. 341, ¶ 160).2 As the court of appeals has explained, Goka stands for the proposition that "[a] lawyer has an ethical obligation, enforceable under Rule 11, not to seek summary judgment if the facts show that his client is not entitled to that relief." Herman v. City of Chicago, 870 F.2d 400, 404 (7th Cir. 1989) (citing Goka, 862 F.2d at 650-51). Goka doesn't say that a district court must deny a motion for summary judgment anytime a moving party wrongly identifies a proposed finding of fact as undisputed. In this case, defendants aren't contending that they are entitled to summary judgment because they were "surprised" by the Department's notice. So Goka simply doesn't apply.
As for Dawson's contention that it is evidence of unequal treatment if the court rejects her request for a "procedural denial," Dawson neither explains what she means nor points to any unequal treatment. Specifically, Dawson doesn't cite any examples in which the court has applied its rules more strictly against her. So the court will deny Dawson's request and consider the merits of defendants' summary judgment motion.
Dawson's RICO claims arise under 18 U.S.C. § 1962(c), which provides: "It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt."3 Racketeering activity is defined in 18 U.S.C. § 1961 as a list of prohibited predicate acts, including mail fraud as defined by 18 U.S.C. § 1341, and wire fraud as defined by 18 U.S.C. § 1343. In this case, Dawson alleges that defendants committed mail and wire fraud in the form of misrepresentations about when defendants were capitalizing interest on student loans.
Both sides devote most of the discussion about RICO to Dawson's claim that GLELSI conducted the affairs of GLHEC through a pattern of racketeering activity. But Dawson also says that defendant Jill Leitl (GLELSI's former chief serving officer and current chief operating officer) conducted the affairs of GLELSI, and that GLELSI conducted the affairs of the Department of Education.
For the purpose of their motion for summary judgment, defendants don't deny that they engaged in racketeering in the form of mail fraud and wire fraud.4 Instead, defendants contend that Dawson hasn't satisfied other elements of § 1962(c).
To continue reading
Request your trial