Gibbs v. Slm Corp.

Decision Date09 September 2004
Docket NumberNo. CIV.A.03-12565-PBS.,CIV.A.03-12565-PBS.
Citation336 F.Supp.2d 1
PartiesKipp R. GIBBS, Plaintiff, v. SLM CORPORATION, et al., Defendants.
CourtU.S. District Court — District of Massachusetts

Peter E. Gelhaar, Mathew Kane, Donnelly, Conroy, And Gelhaar, LLP, Boston, MA, for General Revenue Corporation, SLM Corporation, Sallie Mae Servicing, L.P., USA Funds, Nellie Mae, Defendants.


SARIS, District Judge.

Order entered adopting Report and Recommendations regarding Motion to Dismiss filed by SML Corporation, Sallie Mae Servicing, L.P., Nellie Mae, USA Funds, General Revenue Corporation. Action on motion: Allowed. "After review of the objections, the Court adopts the Report and Recommendation. The court allows Plaintiff to amend Count III (Negligence) and Count V (breach of contract) within 20 days. The other counts are dismissed with prejudice."


DEIN, United States Magistrate Judge.


Pro se plaintiff, Kipp R. Gibbs ("Gibbs"), seeks to bring this action on his own behalf and on behalf of other student loan borrowers against several defendants involved in the lending or collection process challenging various transactions which have transpired in connection with loans he obtained to fund his college education under the Federal Family Education Loan Program. This matter is presently before the court on the "Defendants' Motion to Dismiss the Amended Complaint (1/5/04)" (Docket # 16). For the reasons detailed herein, this court recommends to the District Judge to whom this case is assigned that the Motion to Dismiss be ALLOWED.1


When ruling on a motion to dismiss, "a court assumes as true the plaintiff's `well-pleaded factual averments' and favors the plaintiff with `every reasonable inference.'" Patterson v. Omnipoint Communications, Inc., 122 F.Supp.2d 222, 226 (D.Mass.2000) (internal citation omitted). Where, as here, the plaintiff is proceeding pro se, an even more liberal standard is applied. As the court explained in Overton v. Torruella, 183 F.Supp.2d 295, 303 (D.Mass.2001):

On a motion to dismiss, the court must read a pro se plaintiff's allegations liberally and apply a less stringent standard to a pro se pleading than to a complaint drafted by counsel.... Nonetheless, pro se plaintiffs must comply with the applicable procedural and substantive rules of law, and dismissal remains appropriate when the court lacks jurisdiction over the claims or the parties and when the complaint fails to even suggest an actionable claim.

(citations omitted). Applying these standards to the instant case, the relevant facts are as follows:

The plaintiff, Gibbs, is a resident of the Commonwealth of Massachusetts. (Amended Complaint ("Compl.") (Docket # 5) ¶ 1). Prior to 1995, he took out several loans under the federally-sponsored Federal Family Education Loan Programs ("FFELP") to fund his college education. (Compl. ¶¶ 12-13; Defs.' Mem. (Docket # 17) at 1). In general terms, the loan program operates as follows:

The Loan Program

In 1965, Congress passed the Higher Education Act of 1965, 20 U.S.C. §§ 1070, et seq. ("HEA"), in order to "`keep the college door open to all students of ability,'" regardless of socioeconomic background. Pelfrey v. Educ. Credit Mgmt. Corp., 71 F.Supp.2d 1161, 1162-63 (N.D.Ala.1999) (providing a detailed explanation of the loan program), aff'd (without op.), 208 F.3d 945 (11th Cir.2000) (per curiam). "Under the HEA, eligible lenders make guaranteed loans on favorable terms to students or parents to help finance student education. The loans are typically guaranteed by guaranty agencies (state or private) and ultimately by the government." Id. at 1163. FFELP is one of the federally-sponsored loan programs authorized by the HEA. Id.

Under FFELP, participating lending institutions use their own funds to make loans to qualified borrowers, in this case Gibbs. See id. The loans are guaranteed by state or private agencies. See id.; see generally 20 U.S.C. §§ 1071, et seq. Here, it is alleged that the defendant USA Funds, a private, non-profit corporation, guaranteed the loans. (Compl.¶ 5). It is alleged further that the defendant Nellie Mae (later acquired by defendant SLM Corp. in 1999) was responsible for "the processing and/or administration of student loans." (Id. ¶ 4). Sallie Mae Servicing, L.P. allegedly was "engaged in servicing student loans for national and state guarantee agencies for its own benefit and profit and the benefit and profit of SLM Corporation, its parent company, but is itself neither sponsored by nor an agency of the United States." (Id. ¶ 3). The defendant USA Funds "is a guarantor of student loans for national and state agencies" and "administers and/or provides accounting for more than $37 billion dollars of student loans." (Id. ¶ 5). Finally, the defendant General Revenue Corporation ("GRC") "is a collection agency for student loans and consumer loans" and "is the largest college and university-focused collection agency in the country." (Id. ¶ 6).2

Gibbs' Loans

According to the Complaint, in 1995, Gibbs consolidated his student loans into one consolidation note (the "Consolidated Loan"). (Id. ¶ 13). He now contends that he signed the Consolidated Loan under duress, and is challenging some of the terms of the Loan. (Id.). Gibbs requested and received a deferment in 1996 (11/1/96 through 4/21/97). (Id. ¶ 14). He then made payments on the Consolidated Loan in a timely manner until he received another deferment in 1998 (7/98 through 7/99). (Id. ¶¶ 14-15). In 1998, due to "a period of financial difficulty," Gibbs did not make payments on the Consolidated Loan. (Id. ¶ 16). USA Funds put Gibbs' Loan in default on August 18, 2000. (Id. ¶ 17). According to Gibbs, in connection with the default, the defendants applied an incorrect interest and penalty rate and made incorrect entries on his credit report, which he discovered on October 4, 2002. (Id. ¶¶ 18-20).3

Beginning in November, 2002, and continuing over several months, Gibbs was in communication with GRC, Nellie Mae, Sallie Mae Servicing, L.P. and USA Funds, first by phone, and then in writing, about the allegedly incorrect loan balance and credit reports. (Id. ¶¶ 21-36). However, his concerns were not addressed to his satisfaction. (Id. ¶¶ 29-32). At some point, GRC "attempted to coerce Mr. Gibbs to sign another promissory note which would increase the principal that he owed and would extend the amount of time it remained on his credit." (Id. ¶ 24). The proposed arrangement would have increased Gibbs' principal balance from $27,531.11 to approximately $50,000. (Id. ¶ 33). By no later than August 18, 2003, Gibbs informed the defendants that he would file suit if the matter was not resolved. (Id. ¶ 29).

Gibbs' last communication with the defendants prior to suit was by fax dated November 17, 2003. (Id. ¶ 36). He then filed suit in Barnstable Superior Court on December 3, 2003 and then amended his complaint on December 4 and 9, 2003. (Defs.' Mem. at 5). The case was removed to this court on December 19, 2003, and the plaintiff amended his complaint once again on December 23, 2003. (Id.; Docket 1, 4). On January 5, 2004, the plaintiff filed the Amended Complaint which is the subject of the instant Motion to Dismiss. (Docket # 5). Gibbs is seeking billions of dollars in class-wide damages. (E.g., Compl. ¶ 38(b)).

The relevant Complaint sounds in nine Counts, all of which are alleged against all of the defendants without distinction. These Counts are as follows:

Count I: defendants coerced "plaintiff to sign a new consolidation loan under duress, which significantly increased both the principal owed, the rate at which interest accrues and the amount of time that negative credit appears on his credit report." (Id. ¶ 37).

Count II: misrepresentations in connection with the terms of the 1995 Consolidated Loan. (Id. ¶ 38).

Count III: negligently reporting to credit bureaus and failure to train employees regarding credit collection practices under the Fair Debt Collection Practices Act, 15 U.S.C. § 1601. (Id. ¶ 39).

Count IV: wrongful overcharging of $939.79 in interest in violation of 34 C.F.R. (Id. ¶ 43).

Count V: breach of contract by overcharging interest. (Id. ¶ 44).

Count VI: conspiracy to defraud students by purposefully over-charging their accounts. (Id. ¶ 45).

Count VII: fraud by way of a plan to charge excess interest. (Id. ¶ 46).

Count VIII: mail fraud in violation of 18 U.S.C. § 1341. (Id. ¶ 47).

Count IX: violation of Department of Education ("DOE") regulations found in 34 C.F.R. by illegally augmenting penalties, resulting in an overcharge of $1,384.56 to Gibbs' account. (Id. ¶¶ 48-49).

A. Standard of Review

Defendants have moved to dismiss the Amended Complaint under Fed.R.Civ.P. 12(b)(6) for "failure to state a claim upon which relief can be granted." This court may grant such a motion "only if it appears that upon any set of facts which may be inferred from the complaint the plaintiff will be unable to recover." Danio v. Emerson College, 963 F.Supp. 61, 62 (D.Mass.1997) (citing Roma Constr. Co. v. aRusso, 96 F.3d 566, 569 (1st Cir.1996)). "The complaint will survive as long as it pleads sufficient facts to warrant recovery on any cognizable theory of the case." Tompkins v. United Healthcare of New England, Inc., 203 F.3d 90, 93 (1st Cir.2000) (citing Garita Hotel Ltd. P'ship v. Ponce Fed. Bank, F.S.B., 958 F.2d 15, 17 (1st Cir.1992)).

Although minimal, the pleading requirements at this stage "are not tantamount to nonexistent requirements." Cooperman v. Individual, Inc., 171 F.3d 43, 47 (1st Cir.1999) (internal citation and quotation omitted). Therefore, a "reviewing court is obliged neither to credit bald assertions, periphrastic circumlocutions, unsubstantiated conclusions, or outright vituperation, nor to honor...

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