Ubaldi v. SLM Corp.

• Decision Date: 13 February 2012
• Docket Number: No. C 11–01320 EDL.,C 11–01320 EDL.
• Citation: 852 F.Supp.2d 1190
• Parties: Tina M. UBALDI, on behalf of herself and all others similarly situated, Plaintiff, v. SLM CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of California

852 F.Supp.2d 1190

Tina M. UBALDI, on behalf of herself and all others similarly situated, Plaintiff,

v.SLM CORPORATION, Defendant.

No. C 11–01320 EDL.

United States District Court,

N.D. California.

Feb. 13, 2012.

Janet Lindner Spielberg, Law Offices of Janet Lindner Spielberg, Michael D. Braun, Braun Law Group, P.C., Los Angeles, CA, Edward J. Feinstein, Joseph N. Kravec, Jr., Stember Feinstein Doyle Payne & Kravec, LLC, Pittsburgh, PA, William J. Genego, Nasatir Hirsch Podberesky Khero & Genego, Santa Monica, CA, for Plaintiff.

David Wesley Moon, Joseph A. Escarez, Julia B. Strickland, Lisa Marie Simonetti, Stroock & Stroock & Lavan LLP, Los Angeles, CA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

ELIZABETH D. LAPORTE, United States Magistrate Judge.

Before the Court is Defendant SLM Corporation's motion to dismiss the First Amended Complaint (“Mot.”). The Court held a hearing on Defendant's motion on December 13, 2011, at which the parties were represented by counsel. For the reasons stated at the hearing and set forth below, Defendant's motion to dismiss is GRANTED IN PART AND DENIED IN PART.

I. Background

Plaintiff Tina Ubaldi filed a putative class action asserting various claims against Defendant SLM Corporation d/b/a Sallie Mae, Inc., d/b/a Sallie Mae Servicing, arising from late charges incurred for failing to make timely payments on studentloans. Sallie Mae, Inc., a subsidiary of Defendant SLM Corporation, is engaged in the business of originating, servicing and purchasing loans to finance the cost of students' education. First Amended Complaint (“FAC”) ¶ 13. For purposes of this motion, Defendant SLM Corporation and its subsidiaries are referred to herein as “Sallie Mae.” See Mot. at 1 n. 1. Plaintiff alleges that the late charges she was assessed are improper liquidated damages under California Civil Code section 1671 and that the charges are unfair because they exceed the actual costs associated with a late payment. Ubaldi asserts claims against Sallie Mae for: (1) “unlawful” business practices under California's Unfair Competition Law, California Business and Professions Code section 17200 et seq. (the “UCL”); (2) “unfair” business practices under the UCL; and (3) unjust enrichment/quasi contract.

Sallie Mae “Private Education Loans” are loans made by Sallie Mae to students to pay for the students' cost of education, including tuition, fees, and associated costs and living expenses, commonly known and marketed by such Sallie Mae brand names as CEC Signature Loans. FAC ¶ 2. Plaintiff alleges that on June 24, 2003, she took out a CEC Signature Loan in the amount of $22,765, which she used to pay for her education at the California Culinary Academy in San Francisco, California. FAC ¶ 44 & Ex. 1. The Stillwater National Bank and Trust Company (“Stillwater”), a national bank located in Stillwater, Oklahoma, is identified as the lender on Plaintiff's application form. FAC ¶ 37; RJN Exs. A, B; FAC ¶ 44 & Ex. 3. However, Plaintiff alleges that the loan was actually made by Sallie Mae, pursuant to a forward purchase commitment agreement with Stillwater National Bank intended to disguise Sallie Mae's role as the de facto lender. FAC ¶ 44. The “CEC Loan Application” listed Sallie Mae's name and telephone number prominently on the top of the form, and directed Plaintiff to “Mail application to: Sallie Mae Servicing” in Panama City, Florida.” FAC ¶ 46. Defendant does not appear to dispute that Sallie Mae at all times has serviced Plaintiff's loan. Mot. at 3 (citing FAC ¶ 44).

Plaintiff's loan is a fixed term loan to be repaid in monthly installments of equal amounts. FAC ¶ 25. Like other fixed term installment loans, the payments are due within 15 days of the due date. In contrast to other fixed term installment loans, the FAC alleges that Sallie Mae computes and charges daily interest on its Private Education Loans. In addition to the daily interest on the outstanding principal that Sallie Mae earns every day, the promissory note provides that if a payment is not received within the 15 day period, Sallie Mae may assess a late charge of the greater of $5.00 or 5% of the payment amount not received. Plaintiff alleges that as a result of assessing a $5.00 or 5% fee for nonpayment and also continuing to charge the borrower daily interest for use of the funds, the borrower pays Sallie Mae twice—in two different ways—for being late on a single loan payment. FAC ¶ 25.

Defendant moves to dismiss the complaint pursuant to FRCP 12(b)(6) on the grounds that the claims are preempted under the National Bank Act, 12 U.S.C. § 21 et seq. (“NBA”) and that the First, Second and Third causes of action fail to state a claim under state law.

II. AnalysisA. Legal Standard

A complaint will survive a motion to dismiss if it contains “sufficient factual matter ... to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007)). The reviewing court's “inquiry is limited to the allegations in the complaint, which are accepted as true and construed in the light most favorable to the plaintiff.” Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th Cir.2008).

A court need not, however, accept as true the complaint's “legal conclusions.” Iqbal, 129 S.Ct. at 1949. “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. at 1950. Thus, a reviewing court may begin “by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.” Id.

Courts must then determine whether the factual allegations in the complaint “plausibly give rise to an entitlement of relief.” Id. Though the plausibility inquiry “is not akin to a probability requirement,” a complaint will not survive a motion to dismiss if its factual allegations “do not permit the court to infer more than the mere possibility of misconduct....” Id. at 1949 (internal quotation marks omitted), 1950. That is to say, plaintiffs must “nudge[ ] their claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955.

B. Discussion

Defendant seeks dismissal on the ground that Plaintiff's claims are preempted by federal law or, alternatively, on the ground that Plaintiff's claims fail to state a claim under California law.

1. Preemption

Defendant contends that the state law claims for unlawful business practices, unfair business practices and unjust enrichment are preempted by federal law because the original lender on Plaintiff's loan, Stillwater, is a national bank and the late charges challenged in this lawsuit are governed by the NBA.

“Federal preemption occurs when: (1) Congress enacts a statute that explicitly pre-empts state law; (2) state law actually conflicts with federal law; or (3) federal law occupies a legislative field to such an extent that it is reasonable to conclude that Congress left no room for state regulation in that field.” Chae v. SLM Corp., 593 F.3d 936 (9th Cir.2010), cert. denied,––– U.S. ––––, 131 S.Ct. 458, 178 L.Ed.2d 287 (2010). Defendant here relies on express preemption.

In Chae, the Ninth Circuit affirmed summary judgment for Sallie Mae on the claims of student loan borrowers under the UCL and CLRA alleging fraudulent misrepresentations and other state law claims. Unlike the “Private Education Loans” at issue here, commonly known as CEC Signature Loans, which are not guaranteed by the federal government, FAC ¶ 2, the student loans at issue in Chae were made under the Federal Family Education Loan Program. In Chae, the court of appeals held that “the plaintiffs' allegations that Sallie Mae makes fraudulent misrepresentations in its billing statements and coupon books are expressly preempted by the [Higher Education Act (“HEA”) ], and conflict preemption prohibits the plaintiffs from bringing their remaining claims because, if successful, they would create an obstacle to the achievement of congressional purposes.” 593 F.3d at 950. As Defendant in this case recognizes, Chae was decided under a “different regulatory scheme.” Mot. at 4 n. 4. The parties have not identified any statutory authority for Sallie Mae's “Private Education Loans” at issue here. The Court thus limits its preemption analysis to the NBA.

Pursuant to the NBA and federal banking regulations promulgated thereunder by the Office of the Comptroller of the Currency (“OCC”), loans originated by a national bank may include late charges and other forms of interest at the rate allowed by the laws of the state where the bank is located. See12 U.S.C. § 85 (“Any association may take, receive, reserve, and charge on any loan or discount made, or upon any notes, bills of exchange, or other evidences of debt, interest at the rate allowed by the laws of the State, Territory, or District where the bank is located, or at a rate of 1 per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal reserve bank in the Federal reserve district where the bank is located, whichever may be the greater, and no more, except that where by the laws of any State a different rate is limited for banks organized under State laws, the rate so limited shall be allowed for associations organized or existing in any such State under title 62 of the Revised Statutes.”) (emphasis added); 12 C.F.R. § 7.4001(a) (defining interest as “any payment compensating a creditor or prospective creditor for an extension of credit, making available of a line of credit, or any default or breach by a borrower of a condition upon which credit was extended[, including] late fees”); 12 C.F.R. § 7.4001(b) (“A national bank located in a state may charge interest at the maximum rate permitted to any state-chartered or licensed lending institution by the law of...