947 F.3d 1122
9th Cir.2019Background
- Lima defaulted on student loans from the 1970s; New York State Higher Education Services Corporation (guarantor) obtained a judgment in 1991.
- DOE and Education Management Credit Corporation (ECMC) agreed in 2008–09 that ECMC would take assignments of certain judgment accounts; New York assigned Lima’s judgment to ECMC in 2009.
- ECMC mailed Lima notice in 2009 that DOE sought to collect by Treasury offset of federal payments; Lima did not respond and later said he did not receive the letter.
- Beginning in Aug. 2012 Treasury offset Lima’s Social Security benefits (~$200/month), totaling about $6,900 through June 2015.
- Lima sued alleging FDCPA violations, a Fifth Amendment due-process claim, and state-law claims; the district court granted summary judgment for ECMC on federal claims and declined supplemental jurisdiction over state claims.
- The Ninth Circuit affirmed: it held ECMC fell within the FDCPA’s definition of debt collector but was exempt under the fiduciary exception, rejected Lima’s due-process challenge, and upheld the district court’s jurisdictional decision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FDCPA status: Is ECMC a "debt collector" under 15 U.S.C. §1692a(6)? | Lima: ECMC regularly collected debts owed to another (the U.S.) via offsets, so it is a debt collector. | ECMC: monies collected via Treasury offset belong to the U.S.; ECMC was not collecting for its own account. | ECMC regularly attempted to collect debts owed to the United States and thus qualifies as a "debt collector." |
| Fiduciary exception: Is ECMC exempt under §1692a(6)(F) because collection was incidental to a bona fide fiduciary obligation? | Lima: ECMC’s role was essentially collection-focused, so the exception should not apply. | ECMC: upon assignment it assumed broader guaranty/fiduciary duties (recordkeeping, reporting, potential obligations to release judgments), making collection incidental. | Exception applies: ECMC’s collection activity was incidental to bona fide fiduciary obligations, so FDCPA claims fail. |
| Due Process / State Action: Did ECMC violate procedural due process or act under color of state law? | Lima: ECMC’s garnishment of Social Security benefits was arbitrary, malicious, and amounted to state action violating due process. | ECMC: it is a private actor not subject to the Constitution; it provided constitutionally adequate notice and procedures. | Court: Even assuming state action, notice was reasonably calculated to apprise Lima; no due-process violation. ECMC is not a state actor for Bivens relief and cannot be sued under Bivens. |
| Supplemental jurisdiction: Should district court have retained state-law claims after dismissal of federal claims? | Lima: district court should retain and decide state claims. | ECMC: appropriate to dismiss state-law claims after federal claims are resolved. | District court did not abuse its discretion in declining to exercise supplemental jurisdiction over state-law claim. |
Key Cases Cited
- Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (2017) (purchaser of defaulted debt collecting for its own account is not a debt collector)
- Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028 (9th Cir. 2009) (fiduciary-exception analysis for guaranty agencies; exception not available if primary role is collection)
- Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950) (notice must be reasonably calculated to apprise interested parties)
- Poursina v. U.S. Citizenship & Immigration Servs., 936 F.3d 868 (9th Cir. 2019) (application of Mullane standard to agency notice)
- Bank of Am. NT & SA v. Pengwin, 175 F.3d 1109 (9th Cir. 1999) (harmless errors in notices do not necessarily violate due process)
- Garrett v. Derbes, 110 F.3d 317 (5th Cir. 1997) (volume of collection attempts supports finding of ‘‘regularly’’ collecting debts for another)
- Corr. Servs. Corp. v. Malesko, 534 U.S. 61 (2001) (Bivens remedies do not extend to private corporations)
- Lugar v. Edmondson Oil Co., 457 U.S. 922 (1982) (state-action test for constitutional claims)