Reavis v. Pa. Higher Educ. Assistance Agency

• Decision Date: 14 July 2020
• Docket Number: DA 19-0510
• Citation: 467 P.3d 588,2020 MT 181,400 Mont. 424
• Parties: James REAVIS, Plaintiff and Appellant, v. PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY d/b/a FedLoan Servicing, Defendant and Appellee.
• Court: Montana Supreme Court

400 Mont. 424

467 P.3d 588

2020 MT 181

James REAVIS, Plaintiff and Appellant,

v.PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY d/b/a FedLoan Servicing, Defendant and Appellee.

DA 19-0510

Supreme Court of Montana.

Argued: May 20, 2020

Submitted: May 26, 2020

Decided: July 14, 2020

For Appellant: Robert M. Farris-Olsen (argued), David K.W. Wilson, Morrison, Sherwood, Wilson & Deola, PLLP, Helena, Montana

For Appellee: Kenneth K. Lay (argued), Brett P. Clark, Crowley Fleck, PLLP, Helena, Montana

For Amicus Curiae Timothy C. Fox, Montana Attorney General: Timothy C. Fox, Montana Attorney General, Matthew T. Cochenour, Acting Solicitor General, Jon Bennion, Deputy Attorney General, Helena, Montana, Mark W. Mattioli, Bureau Chief, Chuck R. Munson, Assistant Attorney General, Office of Consumer Protection, Helena, Montana

For Amicus Curiae Montana Federation of Public Employees: Jonathan McDonald, McDonald Law Office, PLLC, Helena, Montana

For Amicus Curiae Veteran's Education Success: Keif Storrar, Doubek, Pyfer & Storrar, Helena, Montana

For Amici Curiae Montana Legal Services Association, National Consumer Law Center, and Student Borrower Protection Center, John Heenan, Heenan & Cook, PLLC, Billings, Montana

Justice Ingrid Gustafson delivered the Opinion of the Court.

¶1 James Reavis appeals from the order of First Judicial District Court, Lewis and Clark County, dismissing his complaint against his student loan servicer Pennsylvania Higher Education Assistance Agency (PHEAA) as expressly preempted by the Higher Education Act (HEA), 20 U.S.C. § 1098g. We address the following issues on appeal:

Whether Reavis's state law claims against PHEAA are expressly or implicitly preempted by the HEA .

¶2 We conclude they are not. We reverse the District Court's order dismissing Reavis's claims and remand the case for further proceedings.

PROCEDURAL AND FACTUAL BACKGROUND

¶3 This case involves the administration of student loans by a private loan servicer in the federal student loan system established by the HEA. "The HEA was originally passed in 1965 ‘[t]o strengthen the educational resources of our colleges and universities and to provide financial assistance for students in postsecondary and higher education.’ " Leveski v. ITT Educ. Servs., Inc. , 719 F.3d 818, 819 (7th Cir. 2013) (quoting Higher Education Act of 1965, Pub. L. No. 89-329, 79 Stat. 1219, 1219 (1965)) (alterations in original). Congress passed the HEA "to keep the college door open to all students of ability, regardless of socioeconomic background." Rowe v. Educ. Credit Mgmt. Corp. , 559 F.3d 1028, 1030 (9th Cir. 2009) (internal quotations omitted) (citing 20 U.S.C. § 1070(a) ).

¶4 Originally, the HEA provided for the United States Department of Education to act as a guarantor of loans made to student borrowers by private lenders. See 20 U.S.C. § 1071. However, since 2010, the Department of Education has exclusively loaned money directly to student borrowers and contracts with private entities to service those loans. See 20 U.S.C. §§ 1071(d), 1087a, 1087f. The Department of Education issues a variety of loans directly to student borrowers through the William D. Ford Direct Loan Program under Title IV of the HEA. See generally , 20 U.S.C. §§ 1087a - 1087j. Student borrowers rarely interact with the actual holder of their debt. Rather, borrowers communicate with their federal loan servicer. A servicer "contract[s] with a lender or guaranty agency to administer ... any aspect of the lender's or guaranty agency's" programs. 34 C.F.R. § 682.200. The functions of a student loan servicer include an array of acts and responsibilities, including receiving and applying payments to a borrower's account, maintaining account records, and other "[i]nteractions with a borrower, including activities to help prevent default on obligations arising from post-secondary education loans conducted to facilitate" repayment. 12 C.F.R. § 1090.106.

¶5 In 2007, Congress created the Public Service Loan Forgiveness program (PSLF) to encourage students to enter public service careers by promising student loan forgiveness. See College Cost Reduction and Access Act, Pub. L. No. 110-84, § 401, 121 Stat. 784, 800 (2007), codified as amended at 20 U.S.C. § 1087e(m). Through PLSF, a borrower with direct loans from the Department of Education may have his or her loan balances forgiven after meeting certain requirements: The borrower must make 120 on-time monthly payments on direct loans under a qualifying repayment program while working for a qualifying public service employer. PHEAA has the exclusive contract to administer loans for which forgiveness is sought under the PSLF and is the loan servicer contracted to service Reavis’ student loans.

¶6 Because the District Court dismissed this case on a motion to dismiss, the following facts are drawn from Reavis's complaint and accepted as true.

¶7 Reavis attended the University of Montana School of Law from 2007 to 2010 and obtained a juris doctorate degree. He then went on to the Monterey Institute of International Studies for an additional two years of study and ultimately obtained a master's degree in Public Administration in 2012. While pursuing his masters, Reavis also took language courses in the summers of 2010 and 2011. He funded these graduate studies with student loans.

¶8 In 2012, Reavis consolidated his loans into federal direct loans to ensure all of his loans would qualify for forgiveness under PSLF. Reavis began working for the Montana Office of the Public Defender (OPD) in May 2012 and continues to work as an appellate defender. OPD is a qualifying employer under PSLF. Reavis has consistently made his payments on time and in the correct amount under a qualifying repayment program. Reavis alleges PHEAA, however, has consistently failed to accurately account for his payments.

¶9 PHEAA has broken Reavis's loans into a series of loan sequences. Reavis maintains all of his loans came out of their respective grace periods at the same time, the first payments for all of the loan sequences should have started on the same day, and thus each loan sequence should have the same number of qualifying payments made on it. He alleges that between June 2012 and the filing of his complaint he had made 65 qualifying payments. But according to PHEAA's accounting, Reavis has not made the same number of qualifying payments on each loan sequence. PHEAA reported to Reavis he has made between 34 and 54 qualifying payments on the different loan sequences.

¶10 In addition, Reavis alleged PHEAA provided him with conflicting information regarding the amount that was due during particular pay periods. Reavis alleges he would often call PHEAA to determine the amount of payment due during a particular pay period, but the payment amount he was told over the phone would not match the amount on the written statement he would receive later.

¶11 Further, Reavis alleges inconsistencies in PHEAA's administration of his income-based repayment plan. The income-based payment plan required Reavis to update his employment information regularly. From 2012 to 2017, Reavis reported this information annually each May to PHEAA. In 2017, PHEAA changed the length of the review period and only qualified Reavis through October 2017, rather than through May 2018 as expected. PHEAA did not inform Reavis he was only qualified through October 2017. PHEAA's records also show an additional consolidation of Reavis’ loans in March 2014, but Reavis does not recall signing any consolidation other than the one in 2012. In another instance, PHEAA advised Reavis to switch payment plans from income-based repayment to Revised Pay As You Earn (REPAYE), which he did. Finally, PHEAA's online system would not accept a payment made on a Saturday until the following Monday.

¶12 Reavis filed suit against PHEAA on August 8, 2018, raising claims that PHEAA violated the Consumer Protection Act; was negligent in its accounting of his payments; engaged in deceit, negligent misrepresentation, or constructive fraud; and breached the implied covenant of good faith and fair dealing. Additionally, Reavis sought declaratory relief with respect to the number of qualifying payments he has made under the PSLF program. All of these claims arise under state law. PHEAA moved to dismiss the case under M. R. Civ. P. 12(b)(1) on the grounds that Reavis's claims were not ripe and therefore not justiciable, because Reavis is not yet eligible to apply for PSLF loan forgiveness. PHEAA filed a second motion to dismiss under M R. Civ. P. 12(b)(6) on the grounds that all of Reavis's claims were preempted by the HEA and otherwise failed to state a claim for relief. The District Court determined the HEA expressly preempted Reavis's claims and granted PHEAA's Rule 12(b)(6) motion to dismiss. The District Court did not address the other grounds for dismissal set forth in the Rule 12(b)(6) motion or Rule 12(b)(1) motion.

STANDARD OF REVIEW

¶13 We review de novo a district court's ruling on a M. R. Civ. P. 12(b)(6) motion to dismiss. Hein v. Sott , 2015 MT 196, ¶ 7, 380 Mont. 85, 353 P.3d 494. We construe the complaint in the light most favorable to the plaintiff and all allegations of fact are taken as true. Hein , ¶ 7.

DISCUSSION

¶14 Whether Reavis's state law claims against PHEAA are expressly or implicitly preempted by the HEA

¶15 The District Court determined the HEA expressly preempted Reavis's claims based on the statutory language of 20 U.S.C. § 1098g, which preempts any state law disclosure requirements on federal loan servicers. The District Court concluded Reavis’ claims all arose from or related to alleged disclosures or non-disclosures made by PHEAA to him and that a claim that a servicer misrepresented a business practice is merely the converse of a state law requirement to make alternate disclosures, which is expressly preempted.

¶16 Under the United States Constitution's Supremacy Clause, federal law is "the supreme Law of the Land; ... any...