Case Information
UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA
ASHLEY THERESA GOODMAN Civil No. 21-2648 (JRT/LIB)
Plaintiff, MEMORANDUM OPINION AND ORDER v. GRANTING DEFENDANTS’ AES AND PHEAA MOTION TO DISMISS CORONADO STUDENT LOAN TRUST, PENNSYLVANIA HIGHER EDUCATION
ASSISTANCE AGENCY, AND AMERICAN
EDUCATION SERVICES,
Defendants. Bryan M. Wiley and Timothy D. Johnson, SMITH JADIN JOHNSON PLLC , 7900 Xerxes Avenue South, Suite 2020, Bloomington, MN 55378, for plaintiff;
Orin J. Kipp, WILFORD GESKE & COOK PA , 7616 Currell Boulevard, Suite 200, Woodbury, MN 55125, for defendant Coronado Student Loan Trust; Karl Joseph Johnson, TAFT STETTINIUS & HOLLISTER LLP , 2200 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402, for defendants Pennsylvania Higher Education Assistance Agency and American Education Services.
Plaintiff Ashley Theresa Goodman filed this action against Defendants Coronado Student Loan Trust (“Coronado”), Pennsylvania Higher Education Assistance Agency (“PHEAA”) and American Education Services (“AES”) alleging a violation of the Federal Debt Collection Practices Act (“FDCPA”) in relation to Goodman’s student loans. AES was the servicer of Goodman’s student loans and PHEAA is the parent company of AES. AES and PHEAA brought the Motion to Dismiss currently before the Court. Because AES and PHEAA are not “debt collectors” as the FDCPA defines the term, the Court will grant their Motion to Dismiss, and the claims asserted against them in Goodman’s Complaint are dismissed with prejudice.
BACKGROUND
From 2008 to 2011, Goodman attended the Art Institutes of California and the Art Institute of Pittsburgh for which she was required to take out student loans. (Compl., ¶ 27, Dec. 10, 2021, Docket No. 1.) Goodman’s student loans were primarily used for personal, family, or household purposes. ( Id. ¶ 28.) Goodman’s loans were owned by Education Management Corporation—a for-profit company who then sold and assigned the loans to Coronado. ( Id. ¶¶ 3, 29.) AES administered collections on behalf of its parent PHEAA and Coronado. ( Id. ¶¶ 43–44.)
Goodman defaulted on her loans in 2019 and on November 22, 2019, Goodman voluntarily filed for Chapter 13 Bankruptcy. ( Id. ¶ 51; Id. , Ex. M.) None of the lenders of the student loans filed claims on their own behalf in the bankruptcy action. ( Id. ¶¶ 57– 61.) Goodman’s bankruptcy counsel filed claims on behalf of the student loan lenders and subsequently objected to those claims based on their merit. ( Id. ¶¶ 64–72.) None of the creditors appeared in relation to Goodman’s objections and the bankruptcy court, therefore, disallowed those claims. ( Id. ¶¶ 68–72.) The bankruptcy court’s orders did not discuss the merits of any of the claims. (Decl. Karl Johnson Supp. Mot. Dismiss, Exs. 4–8, Jan. 25, 2022, Docket No. 8.) The lenders were then notified of the bankruptcy court’s findings. ( Id. ¶ 73.)
Subsequent to the entry of the claim disallowance orders and Defendants’ knowledge of the same, Defendants have continued to attempt to collect the student loan debt. ( See generally Compl.) As such, Goodman filed the present action against Defendants asserting one count of a violation of the FDCPA. It appears as though Coronado intends to answer the Complaint, but AES and PHEAA have brought this current Motion to Dismiss the claim against them. (Stip. Extend Time Ans., Mar. 3, 2022, Docket No. 14; Mot. Dismiss, Jan. 25, 2022, Docket No. 4.)
DISCUSSION
I. STANDARD OF REVIEW
In reviewing a motion to dismiss under Rule 12(b)(6), the Court considers all facts
alleged in the complaint as true to determine if the complaint states a “‘claim to relief
that is plausible on its face.’”
Braden v. Wal-Mart Stores, Inc.,
II. ANALYSIS
As stated above, Goodman only brings one cause of action against the
Defendants—a violation of the FDCPA. An FDCPA claim must meet three elements: “(1)
the plaintiff has been the object of collection activity arising from a consumer debt; (2)
the defendant is a debt collector as defined by the FDCPA; and (3) the defendant has
engaged in an act or omission prohibited by the FDCPA.”
Klein v. Stewart Zlimen &
Jungers, Ltd.
, No. 18-cv-658,
The main dispute here is whether AES and its parent company PHAES are “debt
collectors” as defined under the FDCPA. A “debt collector” for purposes of the statute is
any person who “uses any instrumentality of interstate commerce or the mails in any
business the principal purpose of which is the collection of any debts, or who regularly
collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be
owed or due another.” 15 U.S.C. § 1692a(6). The term does not include any person
collecting or attempting to collect a debt when such activity “concerns a debt which was
not in default at the time it was obtained by such person.”
Id.
at § 1692a(6)(F). Many
courts have held that a student loan servicer who begins servicing the loans prior to
default is not a debt collector for FDCPA purposes.
Brumberger v. Sallie Mae Servicing
Corp.
, 84 Fed. App’x 458 (5 Cir. 2004);
Rivelli v. Penn. Higher Educ. Assistance Agency
,
AES asserts that it began servicing Goodman’s student loan debt prior to the debt falling into default and cannot fall under the definition of “debt collector.” Goodman claims that AES and PHEAA have not established that they were not debt collectors because the record, as it stands now, does not make clear when the student loans were in default. And in fact, she argues that default occurred when late fees were assessed to her account beginning in July 2019 and since Coronado was sold Goodman’s loan in December 2019, AES and PHEAA began service after the loan was in default. Attached to Goodman’s own complaint is a financial activity summary from AES provided to Goodman upon her request. (Compl., Ex. M.) The financial activity summary shows that there were disbursements in 2008, 2009, and 2010 and that payment was made to AES as early as 2012. ( Id. ) The document also shows that payments were consistently made to AES between 2015 and July 2019 when late fees were charged to the account. ( Id. ) Further, AES and PHEAA submitted a statement, from AES sent to Goodman dated January 11, 2012. (Johnson Decl., Ex. 2.) This demonstrates that AES was servicing Goodman’s loan as early as 2012.
The Court must, then, determine or at least estimate when the loan fell into
default. Goodman argues that it is unclear when the loans went into default but points
to nothing in the record or any assertion in her complaint that it was earlier than July
2019, when she was assessed late fees. In fact, the only time the complaint mentions
default is in relation to an AES letter sent in November 2021. (Compl., ¶ 227.) Courts
have concluded that “the FDCPA’s legislative history is consistent with construing ‘in
default’ to mean a debt that is at least delinquent, and sometimes more than overdue.”
De Dios v. Int’l Realty & Inv.
,
Goodman bears the burden of at least plausibly alleging her student loan was in default prior to AES servicing the loan. The record shows that AES began servicing the loan well before July 2019, the earliest date at which, based upon the record, the debt was in default. As such, the Court finds that AES does not fall under the definition of “debt collector” as defined under the FDCPA. Perhaps Goodman’s cause of action could be amended if she were able to show the loan was in default prior to AES’s assumption of service, but Goodman cannot make such a showing. Her attempt would be futile because the record before the Court clearly establishes that the loan was not in default when AES began servicing it. Munro v. Lucy Activewear, Inc. , 899 F.3d 585, 589 (8 Cir. 2018) (holding that a court may deny leave to amend in instances where an amendment would be futile and the amended complaint would still be unable to survive a motion to dismiss).
Thus, a claim under the FDCPA against AES cannot survive a motion to dismiss and AES will be dismissed from this action. PHEAA is also dismissed because Goodman asserts her claim against PHEAA based upon a theory of respondeat superior. As AES is not a debt collector for purposes of the FDCPA neither is its parent company, PHEAA. In sum, the Court will grant AES and PHEAA’s Motion to Dismiss and terminate them from this action.
ORDER Based on the foregoing, and all the files, records, and proceedings herein, IT IS HEREBY ORDERED that Defendants’ AES and PHEAA Motion to Dismiss [Docket No. 4] is GRANTED and the claims asserted against AES and PHEAA in Plaintiff’s Complaint [Docket No. 1] are DISMISSED WITH PREJUDICE .
DATED: September 1, 2022 ___ ____ at Minneapolis, Minnesota. JOHN R. TUNHEIM
United States District Judge
Notes
[1] Neither AES nor PHEAA were involved in the bankruptcy case as they are not the lenders of the loan.
[2] Nowhere has Goodman asserted that AES is associated with Coronado and began servicing her loan only when Coronado took possession of it. The date when the loan was sold to Coronado has no significance as to when AES began servicing the loan.
[3] The Court may consider this document because it does not contradict the complaint in that Goodman did not explicitly state the exact date when AES began servicing her student loan in the Complaint. Further, the statement actually does comport with exhibits attached to the Complaint.
[4] Because the Court is granting the Motion to Dismiss on these grounds, it need not reach the additional arguments made in the briefs.