Handsome v. RUTGERS UNIVERSITY, ETC.

• Decision Date: 06 March 1978
• Docket Number: Civ. A. No. 78-143.
• Citation: 445 F. Supp. 1362
• Parties: Lynn A. HANDSOME, Plaintiff, v. RUTGERS UNIVERSITY, the STATE UNIVERSITY OF NEW JERSEY, Defendant.
• Court: U.S. District Court — District of New Jersey

445 F. Supp. 1362

Lynn A. HANDSOME, Plaintiff, v. RUTGERS UNIVERSITY, the STATE UNIVERSITY OF NEW JERSEY, Defendant.

Civ. A. No. 78-143.

United States District Court, D. New Jersey.

March 2, 1978.

As Amended March 6, 1978.

Essex-Newark Legal Services by Jonathan I. Epstein, Newark, N. J., for plaintiff.

Pitney, Hardin & Kipp by John W. Bissell, Morristown, N. J., for defendant.

OPINION

STERN, District Judge.

This case presents the question whether a state university may withhold transcripts and deny registration to a former student whose student loans have been discharged in bankruptcy. Not unmindful of the widespread abuse of the bankruptcy laws on the part of students, this Court holds that such thinly-veiled coercion on the part of a state university to compel repayment of loans duly discharged under the federal bankruptcy laws violates the Supremacy Clause and plaintiff's right to equal protection as guaranteed by the Fourteenth Amendment. Accordingly, the defendant is permanently enjoined from continuing those practices.

The facts here — perhaps more compelling than most — have been stipulated by the parties. Plaintiff Lynn Handsome attended Newark College of Arts & Sciences, a division of Rutgers University, from 1968 through 1974. While a student at Rutgers, she borrowed a total of $4,600 in the form of National Defense Student Loans and National Direct Student Loans.¹ It is undisputed that, at the time she took out these loans, she had every intention of repaying them.

Beginning in 1973, plaintiff experienced serious health problems and was forced to undergo surgery. Finally, in January of 1975, her health had deteriorated to the point where it interfered with her academic performance and she was forced to withdraw from college.

In the meantime, payments on plaintiff's NDLS loans began to fall due. Because of her medical expenses, she found herself unable to meet her repayment obligations. Upon her default, the NDLS loan principal was accelerated, payment was demanded in full and, in July 1976, Rutgers obtained a default judgment against plaintiff in state court in an amount of $4,991.75 plus costs and interests.

In April 1977, plaintiff filed a petition for bankruptcy. The liabilities listed in her petition were in excess of $25,000 — $7,000 representing medical expenses — and her assets totalled $368.85. Included in her schedule of creditors was Rutgers University, which made no objection to the discharge of her obligations in bankruptcy. On June 13, 1977, plaintiff was adjudicated a bankrupt.

In December 1977, plaintiff applied for readmission to Rutgers. By letter dated December 22, 1977, she was informed that the Scholastic Standing Committee had approved her readmission. However, it is the policy of the defendant to put "place hold" notices upon the records of all students who are more than three months delinquent in their debts to the university, precluding both their registration and the release of their transcripts. Accordingly, when plaintiff attempted to register on January 5, 1978, she was informed that such a notice had been placed on her records. Thus, not only was she prevented from registering, but she has been thwarted in her efforts to apply for admission to a Physician's Assistance Program, because she cannot supply the required transcripts.

It is at this point that plaintiff sought court intervention. On January 24, 1978 she filed the instant complaint alleging that Rutgers' actions violate the Constitution and the Bankruptcy Act, and she applied for temporary restraints.² The Court issued a temporary restraining order, directing Rutgers to allow plaintiff to register. At issue now is whether this temporary restraining order should ripen into a permanent injunction, compelling defendant both to permit plaintiff to remain at the university and to release her transcripts so that she will be able to pursue her education elsewhere.

Prior to passing on the merits of plaintiff's claims, the Court will dispose of defendant's contention that there is no federal subject matter jurisdiction over the matter under either 28 U.S.C. § 1331 or 28 U.S.C. § 1343(3) and (4).

Defendant argues that this Court lacks federal question jurisdiction under 28 U.S.C. § 1331 because the requisite amount in controversy is lacking. Insofar as plaintiff can be said to be asserting a claim which arises under the Bankruptcy Act, it appears undisputed that this action "arises under" federal law. See Girardier v. Webster College, 563 F.2d 1267 (8th Cir. 1977). However, defendant claims that the amount in controversy should be measured by the amount of the discharged loans, which concededly is under $10,000. Plaintiff asserts that the amount in controversy is the value of her right to a college education, an amount which none could doubt must be in excess of $10,000.

While the question is not free from doubt among the Circuits, see generally, Earnest, The Jurisdictional Amount in Controversy in Suits to Enforce Federal Rights, 54 Tex.L.Rev. 527 (1976), it is clear that in the Third Circuit, intangible rights can be accorded a monetary value for purposes of meeting the amount in controversy requirement. Thus, in Spock v. David, 469 F.2d 1047 (3rd Cir. 1972), an action by political candidates to compel defendants to permit them to campaign on a military base, Judge Gibbons rejected the contention that the rights asserted were incapable of valuation. Noting that in actions seeking injunctive relief, "the measure of jurisdiction is the value of the right sought to be protected", id. at 1052, Judge Gibbons looked to the value of a political campaign and concluded that it must exceed $10,000. Here, the right to be protected is the right to a college education. None can dispute that by withholding plaintiff's transcripts defendant forces her to repeat the education she has undergone thus far. In reality, of course, the withholding of transcripts does more than merely force her to repeat elsewhere courses already taken at Rutgers. It is unlikely that any college or university will admit plaintiff without a transcript of her prior work, or would permit her to repeat for credit courses already taken elsewhere. The only purpose that Rutgers has for refusing transcripts is to recoup monies owed. This much was candidly admitted at oral argument. And certainly no one can dispute that the cost of such an education is well in excess of $10,000.³ Accordingly, this Court finds there is federal question jurisdiction.

In any event, because the constitutional claims asserted are substantial — indeed so substantial that the Court finds for plaintiff on the merits — it is clear that there is subject matter jurisdiction under 28 U.S.C. § 1343(3) and (4),⁴ which has no requirement that there be an amount in controversy. See Jones v. Alfred H. Mayer Co., 392 U.S. 409, 88 S.Ct. 2186, 20 L.Ed.2d 1189 (1968). There being a substantial constitutional claim under 42 U.S.C. § 1983 that defendant's actions violate the Fourteenth Amendment's Equal Protection Clause, this Court has pendent jurisdiction over plaintiff's remaining claims under the Bankruptcy Act. See Hagans v. Lavine, 415 U.S. 528, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1973).

Plaintiff's principal contention is that defendant's actions impinge upon the policies of the Bankruptcy Act and are, therefore, invalid under the Supremacy Clause. She relies primarily on the Supreme Court's decision in Perez v. Campbell, 402 U.S. 637, 91 S.Ct. 1704, 29 L.Ed.2d 233 (1971).

In Perez, plaintiffs, two bankrupts whose licenses had been suspended, attacked the constitutionality of a state statute which provided for the suspension of the driver's licenses of persons who had outstanding automobile accident judgments against them, notwithstanding that such judgments may have been discharged in bankruptcy. The Supreme Court framed the issue as follows:

What is at issue here is the power of a State to include as part of a comprehensive enactment designed to secure compensation for automobile accident victims a section providing that a discharge in bankruptcy of the automobile accident tort judgment shall have no effect on the judgment debtor's obligation to repay the judgment creditor, at least insofar as such repayment may be enforced by the withholding of driving privileges by the State.

Id., at 643, 91 S.Ct., at 1708. Concluding that the sole purpose of the statute was to provide leverage for the collection of debts, the Supreme Court held the statute unconstitutional under the Supremacy Clause and overruled its decisions to the contrary.⁵

The Court stated that the purpose of the Bankruptcy Act is to give the debtor "a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt," id., at 648, 91 S.Ct., at 1710 citations omitted. The Court held that the statute "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress", id., at 649, 91 S.Ct., at 1711 citations omitted and, thus, was invalid under the Supremacy Clause.

On the authority of Perez the lower courts have invalidated a rule providing for the suspension of municipal employees who have invoked the bankruptcy laws, see Rutledge v. City of Shreveport, 387 F.Supp. 1277 (W.D.La.1975), appeal dismissed, No. 75-1775 (5th Cir., September 14, 1976); Matter of Loftin, 327 So.2d 543 (La.App. 1976); and a state statute providing for the suspension of the licenses of contractors who have been adjudicated bankrupts, see Grimes v. Hoschler, 12 Cal.3d 305, 115 Cal. Rptr. 625, 525 P.2d 65 (1974). Compare Marshall v. District of Columbia Government, 182 U.S.App.D.C. 105, 559 F.2d 726 (1977) (Perez does not proscribe police department's use of bankruptcy as a factor in evaluating applicant's fitness for employment). By contrast, the courts have refused to read Perez to proscribe discrimination against bankrupts on the part of...