HICA Educ. Loan Corp. v. Danziger

• Decision Date: 10 August 2012
• Docket Number: No. 11 Civ. 1690(MGC).,11 Civ. 1690(MGC).
• Citation: 900 F.Supp.2d 341
• Parties: HICA EDUCATION LOAN CORPORATION, Plaintiff, v. Laurence DANZIGER, Defendant.
• Court: U.S. District Court — Southern District of New York

900 F.Supp.2d 341

HICA EDUCATION LOAN CORPORATION, Plaintiff,

v.Laurence DANZIGER, Defendant.

No. 11 Civ. 1690(MGC).

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

Aug. 10, 2012.

Law Office of Allen M. Rosenthal, by: Frank Steven Tate, Esq., Hicksville, NY, for Plaintiff.

MEMORANDUM OPINION AND ORDER

CEDARBAUM, District Judge.

HICA Education Loan Corporation (“HICA”), a private holder of a student loan, sues Laurence Danziger to recover unpaid monies due and owing under the promissory note that he signed when he received the loan. Neither the United States nor an agency of the United States is a party to this action. The summons was personally served on Danziger's wife on March 28, 2011. Danziger has not appeared or answered. Pursuant to Fed.R.Civ.P. 55(b)(2), HICA has moved for entry of a default judgment against Danziger. Since there is no basis for federal jurisdiction in this case, the complaint must be dismissed.

BACKGROUND

The complaint alleges that HICA is the “owner and/or holder” of a promissory note executed under the Health Education Assistance Loan (“HEAL”) program. The federal government created the HEAL program to assist students seeking educational training in medical fields, and the loans are insured by the United States Department of Health and Human Services. On the return date of HICA's motion for a default judgment, I directed HICA to submit supplemental briefing on the issue of subject matter jurisdiction.

DISCUSSION

Federal courts have an independent obligation to determine whether subject matter jurisdiction exists, even in the absence of a challenge from any party. Arbaugh v. Y & H Corp., 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006). “If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed. R. Civ. P. 12(h)(3).

[2] HICA contends that subject matter jurisdiction is proper because this claim arises under federal law. See28 U.S.C. § 1331. Although the note was executed under the HEAL program and is governed by federal regulations, see42 U.S.C. §§ 292–292p and 42 C.F.R. pt. 60, HICA's cause of action to recover on a promissory note is created by state law. A state law claim may “arise under” federal law if, but only if, it “necessarily raise[s] a stated federal issue, actually disputed and substantial,” and only if the federal forum may entertain the claim without disturbing the balance of federal and state judicial responsibilities. Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005).

HICA argues that the Court has subject matter jurisdiction because HEAL program loans are creatures of federal statutes and regulations. Yet the fact that HEAL loans are regulated does not bear on the issue of whether Danziger defaulted. “It is the nature of the action before the court, not the nature of the loan program, that establishes the existence or absence of federal jurisdiction.” Inter–Am. Univ. of Puerto Rico, Inc. v. Concepcion, 716 F.2d 933, 934 (1st Cir.1983) (dismissing lender's action to collect student debt issued under a federal loan program and regulated by the Department of Education).

Likewise, although a default on a HEAL program loan is a violation of a federal regulation, this action to recover on a promissory note does not require the Court to decide a substantial federal issue. Cf. Grable, 545 U.S. at 314, 125 S.Ct. 2363. At most, the claim requires reference to an interest rate calculated by the Secretary of the Department of Health and Human Services, though the formula for this rate is set forth in the note. A state court is competent to apply federal law to the extent it is relevant. Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 701, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006).

HICA also contends that there is subject matter jurisdiction because commencement of an action for default is part of the federal insurance claims process. However, a federal interest alone is not enough to open the door of “arising under” jurisdiction. Empire Healthchoice, 547 U.S. at 696, 701, 126 S.Ct. 2121. HICA has not shown a significant conflict between a federal interest and state law, such that the displacement of state law or exercise of federal jurisdiction in this action is warranted. Id. at 693, 126 S.Ct. 2121.¹ The federal government's...