Grabis v. Navient Sols., LLC (In re Grabis)

• Decision Date: 11 December 2020
• Docket Number: Adv. Pro. No. 15-01420-JLG,Case No. 13-10669-JLG
• Parties: In re: Michael Grabis, Debtor. Michael Grabis, Plaintiff, v. Navient Solutions, LLC, et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

In re: Michael Grabis, Debtor.

Michael Grabis, Plaintiff, v. Navient Solutions, LLC, et al., Defendants.

Case No. 13-10669-JLG

Adv. Pro. No. 15-01420-JLG

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

December 11, 2020

NOT FOR PUBLICATION

Chapter 7

MEMORANDUM DECISION AND ORDER DENYING PLAINTIFF-DEBTOR'S OMNIBUS MOTION AND THE ADDITIONAL DISCOVERY REQUESTS.

APPEARANCES:

MICHAEL GRABIS

1 Hay Drive

Morristown, NJ 07960

Plaintiff-Debtor, pro se

PAUL J. HOOTEN

Paul J. Hooten & Associates

5505 Nesconset Highway, Suite 203

Mt. Sinai, NY 11706

Attorney for Navient Solutions, LLC

JOSEPH LUBERTAZZI, JR.

McCarter & English LLP

Four Gateway Center

100 Mullberry Street

Newark, NJ 07102

Attorney for Lafayette College

KENNETH L. BAUM

Law Offices of Kenneth L. Baum

167 Main Street

Hackensack, NJ 07601

Attorney for EMC, Inc.

HONNORABLE JAMES L. GARRITY, JR. UNITED STATED BANKRUPTCY JUDGE:

In this adversary proceeding, Michael Grabis, the pro se chapter 7 debtor herein (the "Debtor"), seeks a determination that his Student Loan Debt (defined below) is not excepted from discharge under section 523(a)(8) of the Bankruptcy Code. The matters before the Court are, the Debtor's (i) request to amend his complaint, and related relief (the "Omnibus Motion"),¹ and (ii) the Additional Discovery Requests (defined below). For the reasons set forth herein, the Court denies the Omnibus Motion and the Additional Discovery Requests.

Jurisdiction

The Court has jurisdiction over these matters pursuant to 28 U.S.C. §§ 1334(a) and 157(a) and the Amended Standing Order of Referral of Cases to Bankruptcy Judges of the United States District Court for the Southern District of New York (M-431), dated January 31, 2012 (Preska, C.J.). This is a core proceeding under 28 U.S.C. § 157(b)(2)(I).

Background

On March 5, 2013 (the "Petition Date"), the Debtor, through counsel, filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code in this Court (the "Petition").² In thePetition, the Debtor represented that: (i) he had fewer than 50 creditors; (ii) the estimated value of his assets was less than $50,000; and (iii) his liabilities exceeded $100,000, but were less than $500,000. In addition, he estimated the value of his personal property at $11,631.00 and reported that he did not hold any "contingent and unliquidated claims of [any] nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims." He listed cash, a bank account and used furniture and clothing as "Property Claimed As Exempt" under sections 522(d)(5) (bank account & cash) and 522(d)(3) (furniture & clothing).³ In the list of "Creditors Holding Unsecured Nonpriority Claims" accompanying the Petition, the Debtor included six claims held by the Student Loan Marketing Association ("Sallie Mae") totaling approximately $161,781.⁴ On April 8, 2013, the chapter 7 trustee of the Debtor's estate (the "Chapter 7 Trustee"), issued a "Report of No Distribution" in the chapter 7 case.⁵ On June 11, 2013, the Court entered a "Discharge of Debtor Order of Final Decree," and closed the case.⁶

On July 31, 2013, the Debtor, acting pro se, filed a motion to reopen his bankruptcy case in order to file an adversary proceeding to seek discharge of his Student Loan Debt (the "Motionto Reopen Case").⁷ In doing so, the Debtor also asked the Court to waive the filing fee to reopen the case (the "Motion to Waive Fee").⁸ The Court granted the Motion to Reopen Case, but denied the Motion to Waive Fee, without prejudice. By order dated August 27, 2013, the Court directed that "the case shall be reopened upon payment of the appropriate fee by the Debtor or further order of the Court after a renewed request for waiver of such fee for cause shown."⁹ On December 10, 2013, the Debtor, acting pro se, filed (i) a motion renewing his request to reopen the case to file an adversary complaint (the "Second Motion to Reopen Case");¹⁰ and (ii) a motion renewing his request to waive the fee to reopen the case (the "Second Motion to Waive Fee").¹¹ The Court denied the Second Motion to Reopen Case as moot, and denied the Second Motion to Waive Fee, without prejudice.¹² On May 6, 2014, the Debtor made a third request to reopen his case, and in connection with that request, the Debtor paid the filing fee,¹³ and on May 13, 2014, the Court reopened the case.

On May 1, 2014, SLM Corporation went through a corporate reorganization, creating a restructured SLM Corporation, which continued operating as a separate publicly traded companyand included Sallie Mae Bank, and Navient Corporation, of which defendant Navient Solutions, Inc. ("Navient") is a subsidiary. See Levy-Tatum v. Navient & Sallie Mae Bank, No. CV 15-3794, 2016 WL 75231 at *6 (E.D. Pa. Jan. 7, 2016).¹⁴ Navient, as successor to Sallie Mae, is the servicer of the Debtor's five private educational loans, having an aggregate balance, including principal, interest and fees, of more than $119,095.39 (the "Private Loans").

On June 12, 2015, the Debtor filed a letter with the Court stating that he intended to commence an adversary proceeding and requested that the Court keep his bankruptcy case open.¹⁵ On July 30, 2015, the Court entered an Order to Show Cause Why This Case Should Not Be Closed Pursuant to 11 U.S.C. §350(a) (the "Order to Show Cause"), which directed the Debtor to appear at a hearing scheduled for October 7, 2015 to explain why his case should not be closed due to the failure to file an adversary proceeding or take any other action in the bankruptcy case.¹⁶ The Court adjourned the hearing on the Order to Show Cause to December 15, 2015.¹⁷ On December 15, 2015, acting pro se, the Debtor commenced this adversaryproceeding by filing a complaint seeking a determination that his Student Loan Debt is not excepted from discharge under section 523(a)(8) of the Bankruptcy Code.¹⁸ The complaint named Sallie Mae Servicing, Inc., Navient, Lafayette College ("Lafayette"), and the University of Vermont as defendants. The Educational Credit Management Corporation ("ECMC") is a Minnesota not-for-profit corporation and guaranty agency created under the direction of the U.S. Department of Education (the "Department of Education") to provide guaranty services pursuant to the Federal Family Education Loan Program ("FFELP"). In its role as a guarantor under FFELP, ECMC accepts the transfer of title to certain student loan accounts on which the student loan borrower has filed for bankruptcy or when a debtor has filed an adversary proceeding seeking discharge of his/her student loans for undue hardship. In its capacity as a guarantor under FFELP, ECMC holds an interest in two consolidation loans owed by the Debtor, each of which was disbursed on or about June 24, 2005, in the original principal amounts of $19,934 and $30,096, respectively (the "Federal Loans," with the Private Loans, the "Student Loan Debt"). In that capacity, ECMC moved to intervene as a defendant in this action, and over the Debtor's objection, the Court granted ECMC leave to do so.¹⁹

With the Court's authorization, the Debtor amended the complaint several times. The operative complaint is the Debtor's "Third Adversary Complaint for Discharge of Student Loans" (the "Complaint").²⁰ In that complaint, the Debtor dropped Sallie Mae Servicing Inc, as a defendant, but added Sallie Mae, Inc. and the Department of Education as defendants. Insupport of the Complaint, the Debtor asserts that he filed this adversary proceeding "as an addition to my core bankruptcy proceeding to discharge my student loans under [Bankruptcy] Rule 4007(b), 11 U.S.C[. §] 523 (a)(8), as per my rights to a 'fresh start' under the U.S. Bankruptcy Code." Complaint at 2. He alleges that there are two reasons why this Court should discharge his Student Loan Debt. First, he says that he is entitled to "the full discharge of the unqualified private loan portion of my debt and full discharge of my federal debt, both under section 523(a)(8) of the [B]ankruptcy [C]ode[,]" because

[u]nder the standard tests for discharge of student loans I have made a good faith effort to repay my loans, I am currently unable and will be unable to repay the loans for a considerable period, and I have not been able to maintain a minimal standard of living as defined by the poverty guidelines.

Id. He asks this Court

to recognize that the size and nature of my debt make my case fundamentally different from any guidelines decided under the Brunner case standard which dealt with federal student loans for graduate education under $15,000 dollars close to 30 years ago in an economic environment far different from today. My debt is largely unqualified private student loans which are dischargeable under the bankruptcy code. The Southern District of New York has jurisdiction of the Brunner standard.

Id. He also maintains that he is entitled to relief under section 523(a)(8) to redress the harm allegedly caused to him by the defendants. He says that "I believe that my degree issuing college and lenders did not act in good faith in the origination and servicing of my student loans and, in fact, acted to collude, embezzle, and purposely defraud me as a student borrower." Id. at 1-2. Thus, in addition to his Brunner based arguments, he asserts that "I am alleging fraud, breach of contract, and unjust enrichment in my defense of repayment." Id. at 2. The Debtor is asking for damages that he says he has suffered by reason of the defendants' fraud. He maintains that although he is "seeking the full discharge of the unqualified private loan portion of my debt and my federal debt, both under sections 523(a)(8) of the [B]ankruptcy [C]ode[,] [t]he fraud thatoccurred also caused damage to me personally and I am asking the court to grant damages from these parties to pay towards the debt and personal costs incurred as a result of the fraud." Id.

The Debtor stipulated to dismiss the University of Vermont from the Complaint.²¹ Despite the fact that the Debtor does not owe any student...