Ratliff v. The United States Dep't of Educ. (In re Ratliff), 2:01-bk-21157
| Decision Date | 27 August 2021 |
| Docket Number | Adversary Proceeding 2:19-ap-02016,2:01-bk-21157 |
| Court | U.S. Bankruptcy Court — Southern District of West Virginia |
| Parties | IN RE: GLEN ERVIN RATLIFF and MARSHA KAY RATLIFF, Debtors. v. THE UNITED STATES DEPARTMENT OF EDUCATION and THE UNIVERSITY OF CHARLESTON, INC. Defendants. GLEN ERVIN RATLIFF and MARSHA KAY RATLIFF, Plaintiffs, |
Pending are two matters: (1) the United States Department of Education's Motion to Dismiss (the "MTD") [dckt. 9]; and (2) the Ratliffs' Motion for Default Judgment against the University of Charleston (the "MDJ") [dckt. 18]. Briefing has been completed in both matters and both are ripe for adjudication.
A. Facts and Arguments
Marsha Kay Ratliff received student loans from 1995 to 1999 in the total amount of $47, 992. She and her husband Glen Irvin Ratliff filed their Chapter 7 case on May 4, 2001. In their schedules, they listed the University of Charleston ("UOC") and Sallie Mae as unsecured creditors. The Chapter 7 Trustee filed his Report of No Distribution on June 11, 2001, the Ratliffs received their discharge on August 22 2001, and the case was closed on October 9, 2001.
On February 11, 2002, the Ratliffs moved to reopen their bankruptcy case for the purpose of filing an adversary complaint against Sallie Mae Servicing to determine the dischargeability of their student loans. Their case was reopened and the adversary proceeding was filed (No. 2:02-ap-00027). During the pendency of the adversary proceeding, Ms. Ratliff submitted an administrative application to the Department of Education ("DOE") asking that her student loans be discharged due to disability. On February 7, 2003, the DOE confirmed that Ms. Ratliffs' application was approved and that her student loans had been administratively discharged. However, along with that discharge came continuing requirements; Ms. Ratliff had to disclose her income to the DOE for a period of three years following the discharge.
Ultimately, the Court entered an agreed order dismissing the 2002 adversary proceeding (the "Agreed Order"). The Agreed Order simply stated that the parties "stipulate that the Ratliffs' student loans have previously been administratively discharged on the basis of total and permanent disability." No further discussion of applicable law was undertaken. The adversary proceeding was dismissed as moot and the Ratliffs' case was closed again on January 26, 2005.
On November 20, 2019, the Ratliffs again moved to reopen their case. They wished to file an adversary complaint against parties who had been attempting to collect what they termed their "discharged student loan debt." The case was reopened, and the above-captioned adversary proceeding was filed on December 16, 2019.
The Ratliffs alleged in their complaint that the DOE employed NCO Financial Systems, Inc. ("NCO") as a debt collection agency to collect on one of the Ratliffs' discharged student loans. The Ratliffs further asserted that the UOC was also continuing its efforts to collect on the discharged student loan. The Ratliffs argued that the student loan in question was discharged pursuant to the agreed order dismissing the 2002 adversary proceeding (the "2002 Order"), which stated that the loan was discharged due to permanent physical disability.
Specifically, the DOE initiated federal tax return offsets and intercepted the Ratliffs' 2007 tax return refund in the amount of $683, their 2013 tax return refund in the amount of $4, 593, their 2014 tax return refund in the amount of $899, and their 2015 tax return refund in the amount of $2, 405. The total amount intercepted is $8, 580. The Ratliffs argue that these collection efforts were undertaken in contempt of the Agreed Order and are a violation of the Ratliffs' discharge (although no Bankruptcy Code section is listed in the Complaint, the Court will assume that the Ratliffs refer to the discharge injunction contained in § 524).
The Ratliffs also argue that the UOC has been contacting them in an effort to collect the discharged student loan debt. They assert that each attempt to collect the debt is a separate violation of the West Virginia Consumer Credit and Protection Act ("WVCCPA") and is an action taken in contempt of the 2002 Order. In all, the Ratliffs request an award of damages under the WVCCPA, return of the $8, 580 collected via tax return offsets, and further relief as deemed appropriate by this Court.
In its MTD, the DOE alleges that the administrative discharge based on total and permanent disability issued in February, 2003, was cancelled due to Ms. Ratliffs' noncompliance with the requirement that she disclose her income for the three following years. Although not reported in her filings, Ms. Ratliff re-applied to the DOE for total and permanent disability discharge of her student loans on March 18, 2018. Her 2018 application was approved on July 26, 2019. She must comply with the same requirement;[1] she must disclose her income for three years following her discharge.
The DOE puts forth several arguments. The first is that this action is premature because the Ratliffs have not exhausted their administrative remedies prior to seeking judicial review as required by applicable caselaw. The second, similarly, is that this Court does not have jurisdiction over this matter pursuant to the doctrine of sovereign immunity and because the remaining claims sound in West Virginia state law (the WVCCPA).
With regards to the UOC, the Ratliffs received a Clerk's Entry of Default on October 6, 2020 and thereafter filed the MDJ. The UOC has not responded to any filing in this adversary proceeding.
Under Federal Rule of Civil Procedure 12(b)(1), made applicable to this proceeding by Federal Rule of Bankruptcy procedure 7012, a party may request dismissal of an adversary proceeding based on "lack of subject matter jurisdiction." Fed.R.Civ.P. 12(b)(1). With regards to that rule, "the court should grant the Rule 12(b)(1) motion to dismiss only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Lockhart v. Jackson (In re Lockhart, ) A.P. No. 1:20-ap-38, 2021 WL 2632765, at *1 (Bankr. N.D. W.Va. June 24, 2021) (quoting Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999) (internal quotation marks omitted)). Federal Rule of Civil Procedure 8(a)(2) requires that a pleader provide "a short and plain statement of the claim showing . . . entitle[ment] to relief." Fed.R.Civ.P. 8(a)(2); Erickson v. Pardus, 127 S.Ct. 2197, 2200 (2007). Rule 12(b)(6) correspondingly permits a defendant to challenge a complaint when it "fail[s] to state a claim upon which relief can be granted . . . ." Fed.R.Civ.P. 12(b)(6). The required "short and plain statement" must provide "'fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957), overruled on other grounds, Twombly, 550 U.S. at 562-63); McCleary-Evans v. Maryland Dep't of Transp., State Highway Admin., 780 F.3d 582, 585 (4th Cir. 2015). Additionally, the showing of an "entitlement to relief" amounts to "more than labels and conclusions . . . ." Twombly, 550 U.S. at 558. It is now settled that "a formulaic recitation of the elements of a cause of action will not do." Id. at 555; McCleary-Evans, 780 F.3d at 585; Giarratano v. Johnson, 521 F.3d 298, 304 (4th Cir. 2008).
The complaint need not "forecast evidence sufficient to prove the elements of [a] claim," but it must "allege sufficient facts to establish those elements." Wright v. N. Carolina, 787 F.3d 256, 270 (4th Cir. 2015); Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (internal quotation marks and citation omitted). Stated another way, the operative pleading need only contain "[f]actual allegations . . . [sufficient] to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555; Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (). In sum, the complaint must allege "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. It follows that "[c]onclusory statements and facts 'merely consistent with a defendant's liability' do not suffice to carry a complaint over 'the line between possibility and plausibility.'" Fairfax v. CBS Corp., 2 F.4th 286, 291-92 (4th Cir. June 23, 2021) (quoting Iqbal, 556 U.S. at 678); see also Nemet Chevrolet, Ltd. V. Consumeraffairs.com, Inc., 591 F.3d 250, 258 (4th Cir. 2009).
The decision in Iqbal provides some additional markers concerning the plausibility requirement:
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