Jackson v. Culinary School of Washington, Civ. A. No. 91-782 (CRR).

• Decision Date: 06 January 1993
• Docket Number: Civ. A. No. 91-782 (CRR).
• Parties: Michael JACKSON, et al., Plaintiffs, v. CULINARY SCHOOL OF WASHINGTON, et al., Defendants.
• Court: U.S. District Court — District of Columbia

811 F. Supp. 714

Michael JACKSON, et al., Plaintiffs, v. CULINARY SCHOOL OF WASHINGTON, et al., Defendants.

Civ. A. No. 91-782 (CRR).

United States District Court, District of Columbia.

January 6, 1993.

COPYRIGHT MATERIAL OMITTED

Paul Fiscella of Northern Virginia Legal Services, Alexandria, VA, for plaintiffs.

Mark E. Shure of McDermott, Will & Emery, with whom Amy E. Hancock, Chicago, IL, was on the brief, for defendant Higher Educ. Assistance Foundation.

Mark B. Bierbower of Hunton & Williams, with whom Virginia W. Powell and Russell R. Johnson, III, Washington, DC, were on the brief, for defendant Crestar Bank.

Laurie J. Pangle of Fifth Third Bank of Toledo, N.A., Toledo, OH, for defendant Fifth Third Bank of Toledo, N.A.

Michael R. Hatcher of Israel & Raley, Chartered, Washington, DC, with whom David J. Hanson and Ann Ustad Smith of Michael, Best & Friedrich were on the brief; Richard D. George of Great Lakes Higher Educ. Ass'n, Madison, WI, was of counsel, for defendant Great Lakes Higher Educ. Ass'n.

W. Scott Davis of Bruckner, O'Gara, Keating, Sievers & Hendry, Lincoln, NE, with whom Saul L. Moskowitz of Clohan & Dean, Washington, DC, and Paul R. Dean of Reed, Smith, Shaw & McClay, McLean, VA, were on the brief, for defendant Nebraska Student Loan Program.

W. Scott Davis of Bruckner, O'Gara, Keating, Sievers & Hendry, Lincoln, NE, with whom Paul R. Dean of Reed, Smith, Shaw & McClay, McLean, VA, was on the brief, for defendant Texas Guaranteed Student Loan Program.

Leslie H. Wiesenfelder of Dow, Lohnes & Albertson, Washington, DC, for defendant Ohio Student Loan Com'n.

Fred E. Haynes, Asst. U.S. Atty., Dist. of Columbia, with whom were Jay B. Stephens, U.S. Atty., John D. Bates, Asst. U.S. Atty., on the brief; Fred Marinucci and Natalia Leons, of Office of General Counsel, Dept. of Educ., Washington, DC, were of counsel, for defendant Secretary of Educ.

Richard C. Kast, Asst. Atty. Gen., State of Va., with whom was Mary Sue Terry, Atty. Gen. of State of Va., Richmond, VA, on the brief, for defendant Virginia State Educ. Assistance Authority.

                                                       TABLE OF CONTENTS
                I.    INTRODUCTION ......................................................................  717
                II.   DISCUSSION ........................................................................  719
                      A. Because the Defendants have established the absence of any specific
                          facts tending to show the existence of an agency relationship between
                          the Department of Education and the Culinary School here
                          involved, the Plaintiffs may not recover on the basis of such a
                          relationship ..................................................................  719
                      B. Because the Defendants have shown the absence of any evidence that
                          the lenders delegated any substantial lender functions or responsibilities
                          to the School, no special relationship can exist between the
                          lenders and the School. Consequently, the Plaintiffs may not prevent
                          the Secretary of Education from collecting on the student loans
                          in this case on the basis of the nonexistent special relationship .............  720
                      C. Because the Plaintiffs concede that they have no evidence of preferential
                          treatment rising to the level of a "Quid Pro Quo" between the
                          School and the other Defendants, there can be no claim upon which
                          relief can be granted under D.C.Code § 28-3809(a)(3) against the
                          Secretary, guaranty agencies, or lenders ......................................  722
                      D. The Omission of the FTC Holder Notice is not fatal to Defendant's
                          position herein, and this ministerial technicality does not give rise to
                          a claim upon which relief can be granted pursuant to D.C.Code § 28-3904. .  723
                         1.  Because the Defendants have established that the failure to include
                              the FTC Holder Notice does not make the promissory
                              contract unreasonably favorable to the Defendants, and the
                              Plaintiffs have not set forth evidence that the contract was
                              unreasonably favorable to the Defendants, the omission of the
                              Notice is not an unconscionable trade practice under § 28-3904(r) .........  723
                         2.  Plaintiffs' claim under § 28-3904(x) must fail because this section
                              applies only to goods and not to services, which are here involved ........  724
                III. CONCLUSION .........................................................................  725
                

CHARLES R. RICHEY, District Judge.

I. INTRODUCTION

The Court has before it several Motions for Summary Judgment, the opposition thereto, the replies, and upon consideration thereof, the Court has decided for the reasons hereinafter set forth to grant the Defendants' Motions for Summary Judgment.¹

The Plaintiffs have already obtained an entry of default against the Culinary School of Washington and from Barkev Kibarian, the Chairman of the School's Board of Directors. The Plaintiffs also reached a private accommodation with the Defendant Ohio Student Loan Commission, which was dismissed from the case on September 9, 1992. They now seek to obtain relief against the Secretary of Education, various state and private guaranty lending agencies, and two lenders, namely, Crestar Bank and the Fifth Third National Bank of Toledo, Ohio.

In March, 1992, this Court ruled on various Motions to Dismiss and concluded that there might be five possible grounds of recovery as to the above-named Defendants. Jackson v. Culinary School of Washington, 788 F.Supp. 1233 (D.D.C. 1992). These claims are now before the Court after the Court's Opinion, and after discovery and the filing of Local Rule 108(h) Statements of Material Facts not in Dispute.

The Court proceeds under the summary judgment standard set forth in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor," id. at 255, 106 S.Ct. at 2513, but "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Id. at 247-48, 106 S.Ct. at 2509-10.

The burden rests with the moving party "to show initially the absence of a genuine issue concerning any material fact." Adickes v. S.H. Kress and Co., 398 U.S. 144, 159, 90 S.Ct. 1598, 1609, 26 L.Ed.2d 142 (1970). The moving party may demonstrate the absence of any genuine issues of material fact in two ways. First, the moving party may, through affidavits, depositions, or other supporting evidence, negate an essential element of the non-movant's claim or claims. Id. at 159-60, 90 S.Ct. at 1609. Second, the moving party may, through similar documentation, point out to the court the absence of evidence to support an essential element of the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). In other words, "the moving party must explain its reasons for concluding that the record does not reveal any genuine issues of material fact...." Bias v. Advantage Int'l, Inc., 905 F.2d 1558, 1560 (D.C.Cir.), cert. denied, 498 U.S. 958, 111 S.Ct. 387, 112 L.Ed.2d 397 (1990). When the moving party meets its burden through either one of the above methods, the non-moving party must then go beyond the pleadings and "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); Celotex Corp., 477 U.S. at 325, 106 S.Ct. at 2553. "When the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). In this case, the Defendants have established, through their submitted materials, that the Plaintiffs will not be able to meet their burden of proof at trial. The Plaintiffs, on the other hand, have not shown that there is a genuine issue of material fact for trial.

After careful review of the record the Court must conclude that the Plaintiffs may not recover against the Secretary or the Banks or the state or private guaranty agencies because these entities had no involvement in the allegedly fraudulent activities of the two Defendants against whom the Plaintiffs already have a default. Moreover, the terms of the loan documents do not violate local or federal law so as to give rise to a claim for which relief may be granted in the Federal Courts against the Defendants remaining in the case because the terms of the loans are not unconscionable nor do they constitute a deceptive trade practice insofar as the guaranty agencies, the two Banks, and the Secretary are concerned.

Merely because there may have been a higher than usual default rate on the student loans here involved, as the Plaintiff alleges, it cannot be disputed on this record that the current Defendants had no knowledge of the alleged fraudulent activities of the Culinary School in question or its Board. These current Defendants are so far detached from the cause of the Plaintiffs here that they cannot and should not be found liable for conduct they had nothing to do with in the first place. The Court takes some satisfaction in the fact that, in the future, schools such as the one here involved will not be eligible to participate in student loan programs if the schools maintain a high student loan default rate. 20 U.S.C. § 1085(a)(3) (Supp.1992).

In addition, the purpose of the student loan program in this country as presently operated is designed to provide students with a low-cost method of obtaining an education, but not a warranty or guarantee of the quality of the educational program. As a...