Lima v. U.S. Dep't of Educ., CIVIL NO. 15-00242 KSC

Decision Date25 April 2017
Docket NumberCIVIL NO. 15-00242 KSC
CourtU.S. District Court — District of Hawaii



Before the Court are Plaintiff Charles Lima's ("Plaintiff") Motion for Summary Judgment and Defendant Educational Credit Management Corporation's ("ECMC") Motion for Summary Judgment, filed October 3, 2016, and November 30, 2016, respectively. The Court elects to decide these matters without a hearing pursuant to Rule 7.2(d) of the Local Rules of Practice for the U.S. District Court for the District of Hawaii. For the reasons articulated below, the Court HEREBY DENIES Plaintiff's Motion and GRANTS ECMC's Motion.

I. Factual History

On November 10, 1976, December 6, 1977, and March 27, 1979, Plaintiff signed Interim Promissory Notes and Disclosures ("Notes") in the amounts of $2,500.00, $2,500.00, and $3,500.00, respectively, for attendance at Antioch School of Law. ECMC's Concise Statement of Facts ("CSF") at ¶ 2, Ex. 1. New York State Higher Education Services Corporation ("NYHESC") was the original guarantor for the Notes, and was established for the purpose of acting as a "guaranty agency".1 Id. at ¶ 4, Decl. of Jennifer Skerbinc ("Skerbinc Decl.") at ¶ 8. NYHESC lent money, guaranteed student loans, and entered into cooperative agreements with the federal government to administer and operate federal student aid programs. Id.; N.Y. Educ. Law § 652(2); N.Y. Educ. Law § 680(1).

Plaintiff defaulted on his student loan obligation in July 1980. ECMC's CSF at ¶ 6; Skerbinc Decl. at ¶ 9. The lender of the loans submitted a claim for reimbursement in the amount of $8,733.09 to NYHESC. ECMC's CSF, Ex. 2. The claim for reimbursement identified three loan disbursements - $2,500.00 in 1976; $2,500.00 in 1977; and $3,500.00 in 1979 - which amounts are consistent with Plaintiff's Notes. Id. As guarantor of the loans, NYHESC paid the lender's claim. Id. NYHESC subsequently filed a reinsurance claim with the U.S. Department of Education ("DOE").

NYHESC sought, and on September 26, 1991 obtained, a judgment in the District Court of the State of New York in the amount of $13, 898.39 ("1991 Judgment").2 Id., Ex. 3. By agreement dated September 18, 2008, NYHESC and DOE decided that certain judgments obtained by other guarantee agencies would be assigned to ECMC. Id., Ex. 4. As a result, ECMC assumed the guarantor role over the accounts, including Federal Family Education Loan Program ("FFELP") guarantor responsibilities. Id.

On September 18, 2008, NYHESC and ECMC entered into an agreement for transfer of judgment accounts, whereby NYHESC relinquished and assigned to ECMC all right, title, and interest in and to certain judgment accounts "effective on the date of receipt by ECMC of a Letter of Assignment executed by [NYHESC] attached to a loan transmission form listing the Judgment Accounts to be transferred." Id., Ex. 5. Pursuant to the agreement, "[u]pon assignment of a Judgment Account, ECMC shall assume all the remaining guaranty responsibilities for the Judgment Account." Id. By letter dated March 12, 2009, NYHESC assigned certain student loans identified in a manifest attachment to the letter, including Plaintiff's Notes. Id., Ex. 6.

On August 12, 2009, ECMC, on DOE's behalf, mailed written notice ("Notice") to Plaintiff informing him that DOE intended to collect on his defaulted Notes by treasury offset. Id., Skerbinc Decl. at ¶ 14, Ex. 7. Plaintiff did not respond to the Notice and as a result, the Department of Treasury ("DOT") commenced the offset of Plaintiff's Social Security benefits.

On September 18, 2012, ECMC received a letter dated August 17, 2012 from Plaintiff. Id., Ex. 9. In the letter, Plaintiff claimed to have never received the Notice and he requested that the Notice, together with any supporting documents, and copies of documents evidencing the underlying debt, be sent to him. Id.

ECMC responded on September 25, 2012, explaining that Plaintiff's account was transferred from NYHESC to ECMC, with ECMC serving as the new guarantor of the loans. Id., Ex. 10. ECMC enclosed a copy of the Notice and informed Plaintiff that it was in the process of obtaining the relevant promissory note. Id.

On October 1, 2012, ECMC sent Plaintiff copies of his Notes, related loan applications, and the 1991 Judgment. Id.

Plaintiff responded by sending ECMC a memorandum dated January 31, 2013, asserting a number of challenges to ECMC's claims and requesting a full justification of DOE's position with documentary and legal support. Pl.'s CSF, Ex. F.

In early 2013, Plaintiff communicated with DOE's Federal Student Aid Ombudsman Group to ascertain the validity of the debt held by ECMC. Pl.'s Reply, Ex. A; ECMC's CSF, Ex. 12.

A letter dated March 5, 2013, from ECMC to Plaintiff, explained that "the student loans ECMC holds in your name is [sic] a Stafford Subsidized loan which was disbursed on January 29, 1979 in the amount of $8,500.00 for educational expenses incurred at Antioch University . . . Enclosed are copies of the promissory notes and loan applications." ECMC's CSF, Ex. 11.

On April 3, 2013, Plaintiff responded, accusing ECMC of raising more questions than it answered, and challenging ECMC's assertion of the existence of a Stafford Subsidized loan dated January 29, 1979. Pl.'s CSF, Ex. H. Plaintiff requested a copy of the aforesaid note.

On April 17, 2013, the ombudsman opined that:

ECMC has demonstrated that it holds a federal student loan account for which you are responsible. You have not demonstrated that all federal student loans you took have been paid. As such, collection efforts such as offset of federal payments is an option that ECMC may exercise to recover those funds borrowed through the federal student loan program.
The student loan ombudsman provides informal and impartial dispute resolution services. Our office does not have enforcement authority or the ability to act as an advocate for any party to a dispute. Further, this office cannot compel a party to vacate a position and agree to or with a particular outcome.
ECMC maintains the debt it holds is valid andcollectable. You maintain the debt has been satisfied. Insofar as both parties have reached an impasse, the informal dispute resolution process is no longer the appropriate venue for this dispute. You must now consider your available options going forward, including formal resolution processes through the courts.

ECMC's CSF, Ex. 12.

Via letter dated May 9, 2013, ECMC again transmitted copies of the Notes to Plaintiff. Pl.'s CSF, Ex. I.

II. Procedural History

On June 26, 2015, Plaintiff commenced this action, asserting the following claims against DOE3 and ECMC: 1) breach of 31 U.S.C. § 3716 (Count I); 2) serial violations of the Fair Debt Collections Practices Act4 (Count II); 3) conversion (Count III); and 4) denial of due process (Count IV). Compl. at 5-7. In the prayer for relief, Plaintiff requests: 1) a declaration that his loan obligation is not a federal student loan or a claim of the U.S. Government and is therefore not subject to administrative offset; 2) an order prohibiting garnishment or otherwise attaching or levying upon Plaintiff's Social Security Benefits or assets; 3) a declaration that ECMC's actions violate the Fifth Amendment of the U.S. Constitution and 31 U.S.C. § 3716; 4) an order requiringreimbursement for all monies garnished from Plaintiff's Social Security benefits; 5) an award of statutory damages pursuant to 15 U.S.C. § 1692k(a); 6) an award of punitive damages equal to the salary and commissions paid to ECMC's CEO in 2014, or $1.5 million, whichever is lower; 7) an award of pre- and post-judgment interest; 8) an award of costs and expenses, including attorneys' fees; and 9) any other appropriate relief. Id. at 7-8.


Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). "A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing Celotex Corp. v. Citrate, 477 U.S. 317, 323 (1986)); T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). In a motion for summary judgment, the court must view the facts in the light most favorable to the nonmoving party. State Farm Fire & Cas. Co. v. Martin, 872 F.2d 319, 320 (9th Cir. 1989).

Once the moving party has met its burden of demonstrating the absence of any genuine issue of material fact, the nonmoving party must set forth specific facts showing that there is a genuine issue for trial. T.W. Elec., 809 F.2d at 630; Fed. R. Civ. P. 56(c). The opposing party may not defeat a motion for summary judgment in the absence of any significant probative evidence tending to support its legal theory. Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1558 (9th Cir. 1991). The nonmoving party cannot stand on its pleadings, nor can it simply assert that it will be able to discredit the movant's evidence at trial. T.W. Elec., 809 F.2d at 630; Blue Ocean Preservation Soc'y v. Watkins, 754 F. Supp. 1450, 1455 (D. Haw. 1991).

If the nonmoving party fails to assert specific facts, beyond the mere allegations or denials in its response, summary judgment, if appropriate, shall be entered. Lujan v. Nat'l Wildlife Fed'n, 497 U.S....

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