Nicole Nelson v. Great Lakes Educational Loan S
928 F.3d 639
7th Cir.2019Background
- Nicole Nelson borrowed federally insured student loans serviced by Great Lakes and, after income loss, contacted Great Lakes for repayment help.
- Great Lakes’ website and representatives represented they were "experts," worked on borrowers’ behalf, and that borrowers didn’t need outside advice.
- Nelson alleges Great Lakes steered struggling borrowers into forbearance or deferment—benefiting servicer/lenders and harming borrowers—while failing to disclose or discuss income‑driven repayment options.
- Nelson brought state‑law claims: Illinois Consumer Fraud and Deceptive Business Practices Act, constructive fraud, and negligent misrepresentation, alleging both affirmative misrepresentations and omissions.
- The district court dismissed under express preemption (20 U.S.C. § 1098g), treating Nelson’s claims as disclosure‑based; the Seventh Circuit reviewed de novo.
- The Seventh Circuit vacated and remanded, holding claims alleging affirmative misrepresentations are not necessarily preempted; conflict and field preemption also do not bar those claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 20 U.S.C. § 1098g (exemption from state disclosure requirements) preempts Nelson's state‑law claims | Nelson: claims include affirmative false statements by servicer (not merely omissions), so § 1098g does not preempt those claims | Great Lakes: Nelson's claims are essentially failures to disclose and thus are preempted as state disclosure requirements | Court: § 1098g does not bar claims based on voluntary affirmative misrepresentations; such claims need not impose additional disclosure requirements and survive preemption at pleading stage |
| Whether Chae v. SLM requires preemption of Nelson's counseling‑based claims | Nelson: Chae is distinguishable; it addressed required disclosures, not voluntary affirmative misrepresentations | Great Lakes: Chae supports broad preemption to ensure uniform federal scheme | Court: Chae applies to disclosure‑type claims but does not control claims premised on affirmative misrepresentations; Chae’s scope is limited |
| Whether conflict preemption bars Nelson’s claims | Nelson: state tort/consumer law can coexist with HEA and its targeted preemption provisions | Great Lakes: state law would frustrate federal program objectives and require uniformity | Court: no actual impossibility; specified HEA preemption provisions show Congress chose limited preemption, so conflict preemption not established |
| Whether field preemption applies to state regulation of loan servicing | Nelson: HEA does not occupy the entire field; Congress left room for state law | Great Lakes: servicing implicates federal interests that should displace state law | Court: field preemption is inapplicable; courts have repeatedly held HEA does not occupy the field and Congress preempted only specific topics |
Key Cases Cited
- Chae v. SLM Corp., 593 F.3d 936 (9th Cir. 2010) (preemption of state disclosure requirements in FFELP context; distinguishes disclosure‑type claims from other deceptive practices)
- Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996) (statutory text and context govern express preemption scope)
- Altria Group, Inc. v. Good, 555 U.S. 70 (2008) (state fraud claims for affirmative misrepresentations not necessarily preempted by federal law)
- Boyle v. United Technologies Corp., 487 U.S. 500 (1988) (federal contractor preemption framework; displacement requires a significant conflict between federal interests and state law)
- Hillsborough County v. Automated Medical Labs., Inc., 471 U.S. 707 (1985) (Supremacy Clause preemption principle and analysis)