Maldonado v. Higher Education Loan Authority of the State of Missouri
3:24-cv-07850
| N.D. Cal. | Apr 9, 2025Background
- Plaintiffs sued MOHELA, a nonprofit student loan servicer, in the Northern District of California alleging misconduct related to federal student loan servicing.
- MOHELA moved to dismiss, arguing it was entitled to sovereign immunity as an arm of the state of Missouri and also sought dismissal on the grounds of derivative federal contractor immunity.
- MOHELA also challenged the sufficiency of the plaintiffs’ harm under the California Consumer Reporting Agencies Act (CCRAA) and sought to strike the class allegations due to overlap with other actions.
- The Court analyzed whether MOHELA, given its structure and activities, qualifies for immunity and considered the plaintiffs' factual allegations regarding harm.
- The district court denied MOHELA’s motion in full and ordered MOHELA to answer within 14 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sovereign Immunity as Arm of State | MOHELA is not an arm of the State of Missouri given its commercial activity | MOHELA is an arm of the state; immunity applies | MOHELA is not entitled to arm-of-state immunity |
| Derivative Federal Contractor Immunity | MOHELA waived immunity under the USDS contract and did not meet legal standard | Acts as federal contractor, thus entitled to derivative immunity | MOHELA not entitled; waiver and insufficient proof |
| Actual Harm under CCRAA | Plaintiffs suffered actual harm (time, uncertainty, credit issues, unprocessed refunds) | No actual harm alleged sufficient under the CCRAA | Plaintiffs sufficiently alleged actual harm |
| Striking Class Allegations | Class allegations are appropriate; concerns are manageable at certification | Administrative issues; overlap with other class actions necessitate striking | Court denies request to strike class allegations |
Key Cases Cited
- Kohn v. State Bar of California, 87 F.4th 1021 (9th Cir. 2023) (establishing test for arm-of-the-state sovereign immunity in the Ninth Circuit)
- Biden v. Nebraska, 600 U.S. 477 (2023) (addressing MOHELA’s relationship to Missouri but not controlling here)
- College Savings Bank v. Fl. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666 (1999) (state doesn’t waive immunity simply by market participation)