Travis v. Navient Corp.

Decision Date18 May 2020
Docket Number17-CV-4885 (RRM) (ST)
Citation460 F.Supp.3d 269
Parties Marie TRAVIS, on behalf of herself and all others similarly situated, Plaintiff, v. NAVIENT CORPORATION and Navient Solutions, Inc., Defendants.
CourtU.S. District Court — Eastern District of New York

George Volney Granade, II, Reese LLP, Los Angeles, CA, Arthur M. Murray, Pro Hac Vice, Robin M. Primeau, Pro Hac Vice, Murray Law Firm, New Orleans, LA, Brian C. Gudmundsen, Pro Hac Vice, Michael Laird, Pro Hac Vice, Zimmerman Reed, P.L.L.P., Bryan L. Bleichner, Pro Hac Vice, Chestnut Cambronne PA, Karen Hanson Riebel, Pro Hac Vice, Lockridge Grindal Nauen P.L.L. P., Minneapolis, MN, Edward Ciolko, Pro Hac Vice, Jamisen Etzel, Pro Hac Vice, Gary F. Lynch, Pro Hac Vice, Carlson Lynch Sweet Kilpela & Carpenter, LLP, Kevin Tucker, Pro Hac Vice, East End Trial Group LLC, Pittsburgh, PA, Michael Robert Reese, Reese LLP, New York, NY, for Plaintiff.

Lisa M. Simonetti, Pro Hac Vice, Greenberg Traurig, LLP, Los Angeles, CA, for Defendants.

MEMORANDUM AND ORDER

ROSLYNN R. MAUSKOPF, Chief United States District Judge.

Plaintiff Marie Travis ("Travis" or "Plaintiff"), a New York resident who took out student loans issued by the federal government, brings this putative class action against the servicer of those loans, defendants Navient Corporation and Navient Solutions, Inc. (collectively, "Navient" or "Defendants"), both of which are incorporated and headquartered in Delaware. Travis alleges, among other things, that Navient falsely represented that it would help distressed borrowers find repayment plans that fit their needs, then improperly steered them into forbearance in order to maximize Navient's profits. Navient now moves pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Travis’ complaint as preempted by the Higher Education Act of 1965 and to dismiss each of Travis’ four causes of action for failure to state a claim. Navient also moves, in the alternative, to strike the class allegations of the complaint pursuant to Rule 12(f). For the reasons set forth below, the motion to dismiss is granted in part and denied in part and the motion to strike is denied as premature.

BACKGROUND

The allegations in Travis’ complaint were described to some degree in Judge Bianco's February 16, 2018, order, which denied a motion to intervene in this action. (Doc. No. 51.) Although familiarity Judge Bianco's order is assumed, the Court will repeat some portions of the judge's description here and detail other allegations which are relevant to the instant motion. The following facts are drawn from plaintiff's complaint and are assumed to be true for purposes of this memorandum and order.

In 20052006, Travis obtained two direct federal student loans and a private loan from Sallie Mae to cover the expenses of her college education. (Compl. (Doc. No. 1), ¶ 22.) Federal student loans, as compared to private student loans, have several benefits, including flexible repayment options. (Id. ¶¶ 6, 53.) Two of those repayment options are frequently mentioned in Travis’ complaint: income-driven repayment ("IDR") plans and forbearance. (Id. ¶¶ 57–62.) Under IDR plans, which are designed for borrowers experiencing long-term financial distress, borrowers pay a percentage of their discretionary income instead of a fixed monthly payment. (Id. ¶¶ 58–59.) In addition, IDR plans provide loan forgiveness after 20 to 25 years of monthly payments. (Id. ¶ 60.) Forbearance is designed for student loan borrowers who are experiencing temporary financial hardship. (Id. ¶ 61.) While this option allows borrowers to temporarily stop making student loan payments, loans in forbearance continue to accumulate unpaid interest, which is then added to the principal balance of the loan. (Id. ¶¶ 61–62.) Accordingly, if continued over the long term, forbearance can significantly increase the principal balance of the student loans. (Id. ¶ 62.)

Although the financing for the direct federal student loans is supplied by the federal government pursuant to the Health Care and Education Reconciliation Act, (id. ¶¶ 5, 52), those loans were initially serviced by Sallie Mae in accordance with its 2009 Servicing Contract with the United States Department of Education (the "DOE"), (id. ¶ 26). Following a corporate reorganization in 2014, Navient became the successor to Sallie Mae. (Id. ) Since then, Travis’ direct federal student loans have been managed by Navient pursuant to the 2009 Servicing Contract. (Id. ) According to that contract, "Navient is responsible for ‘any potential services to manage all types of Title IV student aid obligations, including, but not limited to, servicing and consolidation of outstanding debt’ and must provide ‘default aversion activity on loans serviced ... on the servicer's system.’ " (Id. ¶ 80.)

Following her graduation, Travis made continuous and timely monthly payments on the loans for nearly 10 years. (Id. ¶ 22.) In 2016, however, Travis was diagnosed with a "life-threatening syndrome" which rendered her disabled for a period of over six months. (Id. ¶ 108.) Since the $206 monthly payments on her two federal loans consumed more than half of her monthly disability benefit, she was unable to continue making those payments. (Id. ¶ 109.)

Navient's website and blog contained statements encouraging distressed borrowers to contact the servicer for help finding suitable repayment options. (Id. at ¶ 148.) For example, Navient told borrowers: "We can help you find an option that fits your budget, simplifies payment, and minimizes your total interest cost." (Id. at ¶ 148a.) Navient encouraged borrowers who were experiencing problems making loan payments to contact the servicer, offering help in making "the right decision for your situation." (Id. at ¶¶ 148b–c.)

In or about April 2016, Travis contacted Navient to inquire about options for reducing her monthly payments in light of her disability. (Id. ¶ 110.) Initially, Navient told her that she needed to continue paying the entire monthly amount. (Id. ) After Travis emphasized that she could not afford to do so, the customer service representatives placed her in forbearance. (Id. ) Although Travis informed the representatives that she might have a long-term disability, the representatives did not inform Travis about IDR plans and other federal programs to forgive student loan debt for borrowers were totally or permanently disabled. (Id. ¶ 111.) Instead, they told Travis that she had only two choices: pay the full amount or enter forbearance. (Id. )

Travis remained in forbearance for the next eight months. (Id. ¶ 112.) In January 2017, she returned to work and was able to pay her monthly loan payment. (Id. ) The following month, however, her condition returned, again rendering her unable to work. (Id. ¶ 113.) She called Navient to report this development and was again placed in forbearance. (Id. ) Navient neither told her that she might qualify for IDR nor inquired as to whether her disability was total and permanent. (Id. ) In addition, Navient did not respond at all to Travis’ two subsequent requests for "disability forgiveness." (Id. ¶ 114.) As a result, Travis never knew about the IDR plan option or that she might be eligible for reduced monthly payments. (Id. ¶ 115.)

Although Travis was placed on forbearance, Navient repeatedly contacted her parents, who had cosigned the loans, seeking to obtain the full monthly loan payment. (Id. ¶ 116.) According to Travis, Navient contacted her parents "upwards of 8–10 times daily." (Id. ) Travis alleges that she suffered both financial harm and emotional distress because of Navient's "utter lack of interest in providing her meaningful assistance with repaying her loans." (Id. ¶ 118.)

This Action

On August 18, 2017, Travis commenced this diversity action against Navient on behalf of herself and all others similarly situated. Her complaint seeks to certify a nationwide class consisting of "[a]ll individuals who are direct student loan borrowers from the federal government and who had at least one federal loan serviced by Navient and/or any of its predecessors between January 1, 2010 and the present who were placed in forbearance." (Id. ¶ 118.) The complaint also seeks to certify a New York subclass consisting of "[a]ll residents of New York" who fall within the nationwide class. (Id. ¶ 119.)

The complaint alleges four causes of action. The first, which is brought on behalf of the nationwide class, alleges that Navient violated the Delaware Consumer Fraud Act ("DCFA"), Del. Code Ann. tit. 6, § 2511 et seq. , by informing the federal student loan borrowers whose loans it serviced that they could rely on Navient to examine the borrowers’ financial situations and determine the best repayment plan. (Id. ¶ 129.) Travis alleges that "[s]tatements inducing customers to rely on Navient were, and still are, available on Navient's website and Navient's blog," and that Navient's Chief Executive Officer, Jack Remondi, "made numerous such statements available in various mediums." (Id. )

The second cause of action, which is brought on behalf of both the nationwide class and the New York subclass, alleges breach of the 2009 Servicing Contract between Navient and DOE. Travis asserts that Navient breached this contract "by failing to properly service borrowers’ federal student loans and instead, focusing on its own profits." (Id. ¶ 139.) Travis alleges that the DOE "clearly implemented a policy of encouraging servicers to educate borrowers about repayment options and to help borrowers assess their best repayment options" and claims that she and the putative class "are intended third-party beneficiaries under the Servicing Contract." (Id. ¶¶ 139, 141.)

The third cause of action, which is brought solely on behalf of the New York subclass, alleges that Navient violated New York General Business Law ("GBL") § 349, which prohibits "[d]eceptive acts or practices in the conduct of any business, trade, or commerce." (Id. ¶ 146.) Travis alleges that...

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