Nelson v. Diversified Collection Services, Inc.

• Decision Date: 15 April 1997
• Docket Number: Civil Action No. CCB-96-831.
• Citation: 961 F.Supp. 863
• Parties: Alice NELSON v. DIVERSIFIED COLLECTION SERVICES, INCORPORATED and United Student Aid Funds.
• Court: U.S. District Court — District of Maryland

961 F.Supp. 863

Alice NELSON v. DIVERSIFIED COLLECTION SERVICES, INCORPORATED and United Student Aid Funds.

Civil Action No. CCB-96-831.

United States District Court, D. Maryland.

April 15, 1997.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Edward Smith, Jr., Baltimore, MD, for Plaintiff.

Paul D. Krause, Tracy A. Cannon, Wilson, Elser, Moskowitz, Edelman & Dicker, Washington, DC, Samuel D. Walker, Jonathan Mark Shaw, Wiley, Rein & Fielding, Washington, DC, for Defendants.

MEMORANDUM

BLAKE, District Judge.

Plaintiff Alice Nelson has brought suit against defendants Diversified Collection Services, Incorporated ("DCS"), and United Student Aid Funds ("USAF") alleging that defendants' efforts to collect her student loan debts violated Maryland provisions for wage garnishment and violated her procedural and substantive due process rights guaranteed under the Constitution. Now pending is defendants, motion for summary judgment. A hearing is not deemed necessary. See Local Rule 105.6. For the reasons set forth below, the motion for summary judgment will be granted.

BACKGROUND

Ms. Nelson alleges that after her student loans became due in August 1994, defendants issued an "Order of Withholding" to her employer for $2,965.31 without filing the order with the court. In August 1995, defendants issued her employer another "Order of Withholding" for $3,167.22 without filing with the court. As a result of the orders, Ms. Nelson's wages were garnished and some money was forwarded to defendants. Counsel for Ms. Nelson was notified in November 1995 that the outstanding debt totaled $900.00. Ms. Nelson disputes the amount of debt owed.

DCS, who was employed by USAF to collect the student loan debt, submitted contemporaneous business records prepared in the ordinary course of business indicating that notice of pending garnishment was sent to 7240 Park Heights Avenue, Unit 209, Pikesville, Maryland 21208 on July 12, 1994. (Defendant's Motion for Summary Judgment, Declaration of Donald Taylor ¶ 8 and attachment.) This is the same address on file at DCS and used by Ms. Nelson when she filed the complaint in this case. (See id.) According to the same records, Ms. Nelson called DCS on August 22, 1994 to discuss the pending garnishment. (Id. at ¶ 9.) It is undisputed that DCS has never received a written request for a hearing. Ms. Nelson filed this suit in March 1996.

ANALYSIS

Rule 56(c) of the Federal Rules of Civil Procedure provides that:

[Summary judgment] shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

The Supreme Court has clarified that this does not mean any factual dispute will defeat the motion:

By its very terms, this standard provides that 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.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (emphasis in original)

Moreover, the Supreme Court has explained that the Rule 56(c) standard mirrors the standard for judgment as a matter of law under Federal Rule of Civil Procedure 50(a). The Court has stated that "there is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson, 477 U.S. at 249, 106 S.Ct. at 2511; see also Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.), cert. denied, 513 U.S. 813, 814, 115 S.Ct. 67, 68, 130 L.Ed.2d 24 (1994); Catawba Indian Tribe v. South Carolina, 978 F.2d 1334, 1339 (4th Cir.1992), cert. denied, 507 U.S. 972, 113 S.Ct. 1415, 122 L.Ed.2d 785 (1993). "The party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials of [its] pleading, but must set forth specific facts showing that there is a genuine issue for trial." Rivanna Trawlers Unlimited v. Thompson Trawlers, Inc., 840 F.2d 236, 240 (4th Cir.1988). The court must "view the facts and draw reasonable inferences in a light most favorable to the nonmoving party," Shaw, 13 F.3d at 798, but it also must abide by its affirmative obligation to ensure that factually unsupported claims and defenses do not proceed to trial. Felty v. Graves-Humphreys Co., 818 F.2d 1126, 1128 (4th Cir.1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986)). "[A] defendant ... should not be required to undergo the considerable expense of preparing for and participating in a trial" unless the plaintiff has produced evidence on which a jury might rely in support of the claims alleged. E.F. Hutton Mortgage Corp. v. Equitable Bank. N.A., 678 F.Supp. 567, 573 (D.Md.1988).

Ms. Nelson filed a three count complaint and defendants move for summary judgment on all counts. In Count I Ms. Nelson alleges that defendants' garnishment violated Maryland wage garnishment statutes and Rule 3-646 which require that writs of garnishment be issued by the court and served on the debtor. In Counts II and III respectively, Ms. Nelson alleges that the garnishment also violated her procedural and substantive due process rights under the federal constitution. Defendants argue that the Maryland statutes do not apply to administrative garnishment pursuant to 20 U.S.C. § 1095a, and that their actions did not violate Ms. Nelson's due process rights.

I. Federal Garnishment Laws

DCS and USAF garnished Ms. Nelson's wages pursuant to the Higher Education Act ("HEA"), 20 U.S.C. § 1095a, which provides that "a guaranty agency ... may garnish the disposable pay¹ of an individual to collect the amount owed by the individual ..." 20 U.S.C. § 1095a(a) (1996).

The statute sets forth certain notice requirements:

(2) the individual shall be provided written notice, sent by mail to the individual's last known address, a minimum of 30 days prior to the initiation of proceedings, from the guaranty agency or the Secretary, as appropriate, informing such individual of the nature and amount of the loan obligation to be collected, the intention of the guaranty agency or the Secretary, as appropriate, to initiate proceedings to collect the debt through deductions from pay, and an explanation of the rights of the individual under this section....

20 U.S.C. § 1095a(a)(2).

Both pre-deprivation and post-deprivation hearings are provided under the statute upon request of the debtor:

A hearing ... shall be provided prior to issuance of a garnishment order if the individual, on or before the 15th day following the mailing of the notice described in subsection (a)(2) of this section, and in accordance with such procedures as the Secretary or the head of the guaranty agency, as appropriate, may prescribe, files a petition requesting such a hearing. If the individual does not file a petition requesting a hearing prior to such date, the Secretary or the guaranty agency, as appropriate, shall provide the individual a hearing under subsection (a)(5) of this section upon request....

20 U.S.C. § 1095a(b).² Issuance of a garnishment order without a pre-deprivation hearing is expressly permitted if the debtor did not request such a hearing. Id. Ms. Nelson claims that defendants' garnishment pursuant to these provisions violated both her procedural and substantive due process rights.

A. Count II—Violation of Procedural Due Process.

In Count II Ms. Nelson alleges that § 1095a violates the due process clause on its face and "as applied" in this case.³ Where a government actor seeks to take the property of a person, due process requires that the government provide notice and an opportunity to be heard. Linton v. Frederick County Bd. of County Comm'rs, 964 F.2d 1436, 1439 (4th Cir.1992). Notice and hearing requirements are reviewed in light of three factors:

First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976).

In order to find that a statute is facially violative of a debtor's procedural due process rights the debtor has to show that the provisions were wholly inadequate to protect due process rights: "A facial challenge to a legislative Act is, of course, the most difficult challenge to mount successfully, since the challenger must establish that no set of circumstances exists under which the Act would be valid." United States v. Salerno, 481 U.S. 739, 745, 107 S.Ct. 2095, 2100, 95 L.Ed.2d 697 (1987); see also Jordan v. Jackson, 15 F.3d 333, 343-44 (4th Cir.1994). A statute can violate procedural due process rights as applied if the notice and opportunity to be heard either were not provided to the plaintiff or their provision was inadequate.

1. Notice Provisions in the Statute.

"An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950). The notice provisions under 20 U.S.C. § 1095a(a)(2) require creditors to send written notice to debtor's last known address thirty days before the garnishment and include certain information such as the amount due and ...