Won v. Nelnet Servicing, LLC, Civ. No. 18-00381 ACK-RLP

CourtUnited States District Courts. 9th Circuit. United States District Court (Hawaii)
PartiesGhary David Won, Plaintiff, v. Nelnet Servicing, LLC, Defendant.
Docket NumberCiv. No. 18-00381 ACK-RLP
Decision Date09 April 2019

Ghary David Won, Plaintiff,
Nelnet Servicing, LLC, Defendant.

Civ. No. 18-00381 ACK-RLP


April 9, 2019


For the reasons discussed below, Defendant Nelnet Servicing, LLC's Motion to Dismiss, or Alternatively, for Summary Judgment, ECF No. 13, is hereby GRANTED.


On October 4, 2018, Plaintiff Ghary David Won ("Plaintiff Won") filed a Complaint against Defendants Experian Information Solutions, Inc. ("Defendant Experian") and Nelnet Servicing, LLC1 ("Defendant Nelnet") for violations of the Fair

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Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq. ECF No. 1. On November 14, 2018, Defendant Nelnet filed a Motion to Dismiss Complaint or, Alternatively, for Summary Judgment ("Motion"). ECF No. 13. After being prompted by the Court, Defendant Nelnet filed a Concise Statement of Facts ("Def. CSF") on December 19, 2018.2 ECF No. 20. On that same date, Defendant Nelnet filed a Request for Judicial Notice, ECF No. 21, requesting that the Court take judicial notice of Exhibits A-D submitted concurrently with its Motion, and Exhibit E submitted concurrently with its Request for Judicial Notice.

The Court set a hearing on Defendant Nelnet's Motion for February 5, 2019. On January 7, 2019, Plaintiff Won filed a Consent Motion to Continue Hearing, ECF No. 22, in which he sought a 30-day continuance of the hearing in order to effectively utilize Defendant Nelnet's discovery responses,

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which were due on January 7, 2019. The Court continued the hearing until April 1, 2019. ECF No. 23.

On February 25, 2019, Plaintiff Won filed a Motion for Entry of an Agreed Order Dismissing Defendant Experian, which Defendant Nelnet did not oppose. ECF No. 29. Counsels for Plaintiff Won and Defendant Experian stated that Plaintiff Won had settled his claims against Defendant Experian (Counts I through IV of the Complaint) and asked the Court to dismiss those claims with prejudice. The Court did so in an order dated March 4, 2019. ECF No. 30. The remaining claims (Counts V through VII of the Complaint) are asserted solely against Defendant Nelnet and are the subject of this Order.

On March 11, 2019, Plaintiff Won filed his Memorandum in Opposition to Defendant Nelnet's Motion ("Opposition"), ECF No. 31, Concise Statement of Facts in Opposition ("Pl. CSF"), ECF No. 32, and an Objection to Defendant Nelnet's Request for Judicial Notice. ECF No. 33. On March 18, 2019, Defendant Nelnet filed its Reply. ECF No. 36.

After reviewing the parties' filings, the Court issued a minute order on March 18, 2019 in which it directed the parties to resubmit copies of their CSFs because the CSFs failed to comply with the Local Rules. ECF No. 35. The parties

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attached their declarations and evidentiary exhibits3 to their memoranda in support of and in opposition to Defendant Nelnet's Motion rather than to their CSFs as Local Rule 56.1(h) requires. Defendant Nelnet submitted its corrected CSF, ECF No. 37, on March 19, 2019, and Plaintiff Won submitted his corrected CSF, ECF No. 38, on that same date. The Court held a hearing on Defendant Nelnet's Motion on Monday, April 1, 2019 at 11:00 a.m.


The undisputed facts of this case are as follows. In October 2012, Plaintiff Won executed a Master Promissory Note ("MPN") for a federal direct student loan under the William D. Ford Federal Direct Loan Program through the United States Department of Education ("DOE"). Pl. CSF ¶ 11; Ex. 4, ECF No. 38-4. The loan was serviced by Defendant Nelnet. Def. CSF ¶ 5; Pl. CSF ¶ 5; Pl. Ex. 2, ECF No. 38-2. Beginning in August 2014, Plaintiff Won fell behind on his student loan payments. Def. CSF ¶ 1; Pl. CSF ¶ 1; Won Decl., Pl. Ex. 5, ECF No. 38-5, ¶ 2-3. Plaintiff Won failed to make payments on his loan from August

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2014 through December 2016. Id. At some point thereafter, Plaintiff Won defaulted on his loan.4

On December 31, 2016, Plaintiff Won entered into a rehabilitation agreement with the DOE through its authorized agent, GC Services Limited Partnership ("GC Services"). Def. CSF ¶ 2; Pl. CSF ¶ 2; Pl. Ex. 1, ECF No. 38-1. The rehabilitation agreement states that when the loan is rehabilitated and transferred to a new loan servicer "[DOE] will request that credit reporting agencies remove the record of default on the rehabilitated loan[]." Pl. Ex. 1 at p. 3. Plaintiff Won's loan was successfully rehabilitated in July 2017. Def. CSF ¶ 4; Pl. CSF ¶ 4; Pl. Ex. 2. In a letter dated August 2, 2017 confirming that the loan had been rehabilitated, GC Services stated that "[t]he [DOE] will report the loan[] to the credit reporting agencies to reflect a current status, and the [DOE] will no longer report the loan[] as in default status." Pl. Ex. 2. Servicing of the loan was subsequently transferred from Defendant Nelnet to Navient, another loan servicer, on or about August 2, 2017. Def. CSF ¶ 5; Pl. CSF ¶ 5; Pl. Ex. 2.

On September 22, 2017 Plaintiff Won sent a letter to Defendant Nelnet and requested that it remove the record of

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default from his credit history in accordance with the terms of the rehabilitation agreement. Pl. CSF ¶ 22; Pl. Ex. 6, ECF No. 38-6. On September 27, 2017, Defendant Nelnet responded to Plaintiff Won's first inquiry with a letter stating that no adjustments to Plaintiff Won's credit history were required, and that the default would remain on his credit report for seven years from the date of default. Pl. CSF No. ¶ 23; Pl. Ex. 8. Notwithstanding this letter, Defendant Nelnet sent an Automated Universal Data ("AUD") form to the credit reporting agencies ("CRAs") indicating that the loan was transferred to another servicer, current, and reflected a "0" balance. Def. CSF ¶ 6; Def. Ex. A, ECF No. 13-3; Pl. CSF ¶ 6.

On October 1, 2017, Plaintiff Won sent a second letter to Defendant Nelnet acknowledging that it changed the status of the loan but arguing that the rehabilitation agreement also required removal of the record of default from his credit history. Pl. CSF ¶ 22; Pl. Ex. 7, ECF No. 38-7. Defendant Nelnet responded on October 6, 2017 with a letter identical to the one it sent on September 27, 2017. Pl. CSF ¶ 23; Pl. Ex. 9, ECF No. 38-9.

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Plaintiff Won next sent dispute letters to three CRAs—Equifax, Experian, and TransUnion.5 6 Pl. CSF ¶ 24; Pl. Ex. 10, ECF No. 38-10; Def. CSF ¶¶ 7-9; Def. Ex. B, ECF No. 13-4; Def. Ex. C, ECF No. 13-5; Def. Ex. D, ECF No. 13-6. The dispute letter to Equifax explains that pursuant to the rehabilitation agreement and 34 C.F.R. § 682.405(b)(3), "Department of Education/Nelnet was required to remove any record of default related to the loan."7 Pl. Ex. 10. The dispute letter also asks Equifax to "contact the Department of Education/Nelnet so

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that they can confirm [Plaintiff Won] completed the rehabilitation agreement." Pl. Ex. 10. The CRAs then transmitted Plaintiff Won's dispute notices to Defendant Nelnet via automated credit dispute verification ("ACDV") forms.8 Def. Exs. B, C, D; Pl. CSF ¶ 26. Defendant Nelnet sent responses via ACDV forms to Experian, Equifax, and TransUnion on February 14, 2018, March 19, 2018, and March 22, 2018, respectively. Def. CSF ¶¶ 7, 8, 9; Def. Exs. B, C, D; Pl. CSF ¶¶ 7, 8, 9. The ACDV form responses each confirmed that Plaintiff Won's loan had been transferred to a new servicer and that the account was current with a "0" account balance. Def. CSF ¶¶ 7, 8, 9; Def. Exs. B, C, D; Pl. CSF ¶¶ 7, 8, 9.

Plaintiff Won received the results of Equifax's reinvestigation9 on February 15, 2018. Pl. Ex. 3, ECF No. 38-3. The results indicate that his student loan account was closed in July 2015; the status is "Pays As Agreed;" the balance amount is reported as "$0;" and the account history indicates past due payments for each month from October 2014 through June 2015. Pl. Ex. 3.

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Plaintiff Won then filed suit against Defendant Nelnet alleging that it did not comply with § 1681s-2(b) of the FCRA. See Compl. Plaintiff Won argues that because his loan was successfully rehabilitated, the rehabilitation agreement requires Defendant Nelnet to remove all of the default information from his credit report including the past due payment notifications for the months of October 2014 through June 2015. Defendant Nelnet argues that it is only required to change the "default" status of Plaintiff Won's student loan, and that the rehabilitation agreement does not require it to remove past due payment notifications leading up to the default.

With these facts and the parties' dispute in mind, the Court will now address Defendant Nelnet's Motion.


Defendant Nelnet has asked the Court to dismiss Plaintiff Won's Complaint with prejudice or, alternatively, to grant summary judgment in its favor. Federal Rule of Civil Procedure 12(d) provides that on a motion under Rule 12(b)(6) where "matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion." Fed. R. Civ. P. 12(d); see also Carter v. Stanton, 405 U.S. 669, 671 (1972) (per curiam). Both

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parties have submitted CSFs and various extrinsic evidentiary documents that the Court has considered. Accordingly, the Court will treat Defendant Nelnet's Motion as one for summary judgment. See Hamilton Materials, Inc. v. Down Chem. Corp., 494 F.3d 1203, 1207 (9th Cir. 2007).

Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Rule 56(a) mandates summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to the party's case, and on which that party will...

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