McCulloch v. Pnc Bank Inc.

• Decision Date: 17 July 2002
• Docket Number: No. 02-10058 Non-Argument Calendar.,02-10058 Non-Argument Calendar.
• Citation: 298 F.3d 1217
• Parties: Timothy McCULLOCH, individually and on behalf of all others similarly situated, Plaintiff, Rosie Bolton, Brenda Watts Brown, et al., Plaintiffs-Appellants, v. PNC BANK INC., a foreign corporation, BAC Inc., a Florida corporation, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

298 F.3d 1217

Timothy McCULLOCH, individually and on behalf of all others similarly situated, Plaintiff Rosie Bolton, Brenda Watts Brown, et al., Plaintiffs-Appellants, v. PNC BANK INC., a foreign corporation, BAC Inc., a Florida corporation, et al., Defendants-Appellees.

No. 02-10058 Non-Argument Calendar.

United States Court of Appeals, Eleventh Circuit.

July 17, 2002.

Charles D. Franken, Fort Lauderdale, FL, for Plaintiffs-Appellants.

Don A. Lynn, Shutts & Bowen, LLP, Elliot H. Scherker, Ronald M. Rosengarten, Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., Rudolph F. Aragon, Paul J. Schwiep, Aragon, Burlington, Weil & Crockett, P.A., Miami, FL, David A. Beke, John J. Witmeyer, III, Ford, Marrin, Esposito, Witmeyer & Gleser, New York City, Mark D. Brookstein, Alan N. Salpeter, Michael B. Goldberg, Mayer, Brown, Rowe & Maw, Chicago, IL, Darryl J. May, Ballard, Spahr, Andrews & Ingersoll, Philadelphia, PA, for Defendants-Appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before ANDERSON, CARNES and HULL, Circuit Judges.

PER CURIAM:

We affirm the district court's dismissal of plaintiff's complaint for the reasons set out in the district court's opinion dated October 19, 2001, which is attached as an Appendix.

AFFIRMED.¹

APPENDIX

United States District Court Southern District of Florida Miami Division

Case No. 01-2608-CIV-GRANAN

Decided Oct. 19, 2001.

Timothy A. McCulloch, et al., Plaintiffs,

vs.

Educational Finance Group, Inc., et al., Defendant.

ORDER

THIS CAUSE came before the Court upon the Motions to Dismiss of Defendants Academic Management Services Corporation (f/k/a Educational Finance Group, Inc.) ("U*MS") (D.E.23), and Marcus A. Katz (D.E.29).¹

THE COURT has considered the motions, the pertinent portions of the record, and is otherwise fully advised in the premises. Defendants argue that dismissal of the Class Action Complaint ("Complaint") is required pursuant to Rules 12(b)(1), 12(b)(6), and 9(b) of the Federal Rules of Civil Procedure. For the reasons set forth below, the Complaint must be dismissed.

I. BACKGROUND

This case involves the Federal Family Education Loan Program established by the Higher Education Act of 1965, as amended, 20 U.S.C. § 1071 et seq. ("HEA"). Defendants are lenders and marketers of student loans, including low-interest federal Parental Loans for Undergraduate Students ("Plus Loans").² Plus Loans enable parents with good credit histories to borrow at a rate that is lower than otherwise available to pay the education expenses of each child who is a dependent undergraduate student. See 20 U.S.C. § 1078-2.

Plaintiffs are a putative class of parents of college-bound high school students contacted by Defendants and turned down for Plus Loans on the ground of uncreditworthiness. Plaintiffs allege that after they were informed by Defendants that they did not qualify for a Plus Loan or could not obtain a guarantor to co-sign the Plus Loan, Defendants failed to inform them that their children (and not Plaintiffs) may qualify for federal Additional Unsubsidized Stafford Loans ("Stafford Loans") of up to $4,000 per year. See 20 U.S.C. § 1078-8.

Plaintiffs allege that the failure to disclose information about the potential availability of Stafford Loans after Plaintiffs were turned down for Plus Loans violates the HEA, 20 U.S.C. § 1078-8. Plaintiffs, however, concede that the HEA does not confer an express private right of action, and specifically request that this Court imply a private right of action under the HEA. Complaint, at ¶ 60-61.³

Beyond requesting that this Court imply a private claim for relief under the HEA, Plaintiffs appear to request that this Court imply and read into the HEA the very disclosure requirements upon which their HEA claim is predicated.⁴ Specifically, Plaintiffs appear to acknowledge that the duty to provide financial aid information rests with educational institutions. See Complaint, ¶ 17, 21(i), 21(q); 34 C.F.R. §§ 682.201, 668.41(d), 668.42. However, Plaintiffs suggest that this Court should impose those disclosure requirements on Defendants, on the theory that because Defendants contacted Plaintiffs well before Plaintiffs' children were accepted to college and thus before they had access to college financial aid offices, Defendants somehow usurped the financial aid offices' role and "undertook to control the flow of information to Plaintiffs concerning student financial aid." Plaintiff's Memorandum, at p. 2 (D.E.41).⁵

Plaintiffs also allege that Defendants' failure to provide alternative financial aid information about Stafford Loans constitutes mail and wire fraud, and thus violates the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961, et seq. ("RICO"). In addition, Plaintiffs assert that the failure to provide information about Stafford Loans constitutes common-law negligence, breach of fiduciary duty, and/or negligent misrepresentation.

As a result of the alleged scheme, Plaintiffs claim injury in that their children (and not Plaintiffs) were deprived of up to $16,000 in Stafford Loans. Further, Plaintiffs claim that as a result of Defendants' failure to disclose the potential availability of Stafford Loans, their children (and again, not Plaintiffs) were unable to attend the colleges or universities of their choice.

II. STANDARD OF REVIEW

For purposes of the motion to dismiss, the complaint is construed in the light most favorable to the plaintiff, and all well-pleaded facts alleged by the plaintiff are accepted as true. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). It is well-settled that a "complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

III. DISCUSSION

A. The HEA Claim.

Defendants move to dismiss Count I, which purports to assert a cause of action pursuant to Section 428(H) of the HEA, 20 U.S.C. § 1078-8, which authorizes federally insured Unsubsidized Stafford loans for borrowers who meet certain eligibility requirements. Plaintiffs contend that Defendants violated 20 U.S.C. § 1078-8 by failing to disclose information about Stafford Loans after Plaintiffs were turned down for Plus Loans.⁶

Plaintiffs concede that the HEA does not expressly confer a private right of action, as the HEA only provides for a suit brought by or against the Secretary of Education. 20 U.S.C. § 1082(a)(2). Indeed, the HEA provides an enforcement scheme which gives the Secretary of Education wide-ranging regulatory authority to enforce the provisions of the HEA. See 20 U.S.C. §§ 1070(b), 1071, 1082, 1094; 34 C.F.R. §§ 5668.84-.98.

Although the Eleventh Circuit has not addressed whether a private right of action exists under the HEA, it is important to note at the outset that nearly every court to consider the issue in the last twenty-five years has determined that there is no express or implied private right of action to enforce any of the HEA's provisions. See, e.g., Labickas v. Arkansas State University, 78 F.3d 333, 334 (8th Cir.1996); Parks School of Business v. Symington, 51 F.3d 1480, 1485 (9th Cir. 1995); L'ggrke v. Benkula, 966 F.2d 1346, 1348 (10th Cir.1992); Bartels v. Alabama Commercial College, 918 F.Supp. 1565, 1573 (S.D.Ga.1995); New York Institute of Dietetics, Inc. v. Great Lakes Higher Education Corp., [No. 94-CIV-4858, 1995 WL 562189 (S.D.N.Y. Sept.21, 1995)], Moy v. Adelphi Institute, Inc., 866 F.Supp. 696, 705 (E.D.N.Y.1994); Jackson v. Culinary School of Washington, 788 F.Supp. 1233, 1256-60 (D.D.C.1992), remanded on other grounds, 27 F.3d 573 (D.C.Cir.1994), vacated on other grounds, 515 U.S. 1139, 115 S.Ct. 2573, 132 L.Ed.2d 824 (1995); Keams v. Tempe Technical Institute, Inc., 807 F.Supp. 569, 570 (D.Ariz.1992), reversed on other grounds, 39 F.3d 222 (9th Cir.1994); Hudson v. Academy of Court Reporting, 746 F.Supp. 718, 721 (S.D.Ohio 1990); St. Mary of the Plains College v. Higher Education Loan Program of Kansas, Inc., 724 F.Supp. 803, 806-07 (D.Kan.1989); Graham v. Security Savings and Loan, 125 F.R.D. 687, 693 (N.D.Md.1989); aff'd sub nom Veal v. First American Savings Bank, 914 F.2d 909 (7th Cir.1990). Although these decisions provide persuasive precedent for declining to imply a private right of action, the Court will nevertheless conduct its own analysis to determine whether Congress intended to provide Plaintiffs with a private remedy for violations of the HEA.

B. The Cort v. Ash Test and Whether An Implied Private Right of Action Exists Under the HEA.

As mentioned above, Plaintiffs concede that the HEA does not provide an express private right of action. As such, the burden rests with Plaintiffs to establish that an implied private right of action exists. See, e.g., Bartels, 918 F.Supp. at 1573.

In Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), the Supreme Court articulated a four-part test for determining whether to imply a private cause of action in a statute not expressly providing for one. See id., 422 U.S. at 78, 95 S.Ct. 2080. The four factors relevant to determining congressional intent to create a private remedy are:

(1) whether plaintiffs constitute "one of the class for whose especial benefit the statute was enacted;"

(2) whether there is "any indication of legislative intent, explicit or implicit, either to create a remedy or to deny one;"

(3) whether inferring a private right of action would be "consistent with the underlying purposes of the legislative scheme;" and

(4) whether the cause of action "is traditionally relegated to state law ... so that it would be inappropriate to infer a cause of action based solely on federal law."

Id.

The Supreme Court has subsequently explained that the critical focus of the inquiry is the second Cort factor, and whether Congress...