MARGIE HAMILTON, Plaintiff, v. EDUCATIONAL CREDIT MANAGEMENT CORP., Defendant.
Civil Action No. 20-10006
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION
September 22, 2020
Honorable Matthew F. Leitman; Magistrate Judge Elizabeth A. Stafford
REPORT AND RECOMMENDATION TO GRANT DEFENDANT’S MOTION TO DISMISS OR FOR SUMMARY JUDGMENT [ECF NO. 13]
Plaintiff Margie Hamilton, proceeding pro se, sues Defendant Educational Credit Management Corporation (ECMC), asserting that it does not have the authority to collect on her outstanding student loan debt. [ECF No. 12]. She seeks discharge of her obligation to repay her defaulted student loans and declaratory relief stating that ECMC has no authority to collect on her debt through wage garnishment and tax offset. [Id. at 243]. The Honorable Matthew F. Leitman referred the case to the undersigned for all pretrial matters under
II. BACKGROUND
This suit stems from ECMC’s collection on Hamilton’s defaulted student loan debt, amounting to $112,679.04. [ECF No. 12]. In her amended complaint, she alleges that ECMC has collected 15% of her weekly pay through a writ of garnishment since April 2019 and a portion of her tax returns through a tax offset. [Id., PageID.231]. Hamilton asserts that ECMC has no legal right to collect the sums claimed. [Id.].
In support, Hamilton alleges that ECMC falsely represented that a legally valid negotiation between it and the original creditor exists, but “no negotiation can exist” because the student loans’ promissory note “is not negotiable.” [Id., PageID.231, 235-236]. She asserts that until ECMC produces an authenticated promissory note that establishes that the defaulted student loan amount is owed to it, ECMC has no valid legal claim to collect through either administering wage garnishment or tax offset. [Id., PageID.231-235].
Hamilton’s amended complaint includes: Count I, violation of the
In the motion before the Court, ECMC contends that Hamilton’s claims fail because her state law claims are preempted by federal law; because she improperly asserts a private right of action; because ECMC is not a state actor, as required to sustain some of Hamilton’s claims; and because her fraud claim lacks merit and was filed after the expiration of the statute of limitations. [ECF No. 13].
III. ANALYSIS
A.
A motion to dismiss under
In deciding whether a plaintiff has set forth a “plausible” claim, the Court must construe the complaint in the light most favorable to the plaintiff and accept as true all well-pleaded factual allegations. Id. But “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice,” Iqbal, 556 U.S. at 678, and the Court has no duty to create a claim not spelled out in the pleadings, Freightliner of Knoxville, Inc. v. DaimlerChrysler Vans, LLC, 484 F.3d 865, 871 n.4 (6th Cir. 2007).
Documents attached to a motion to dismiss form part of the pleadings if they were referred to in a complaint and are central to the claim. Moors on behalf of Grady El v. Canton Police Dept., 20-CV-10361, 2020 WL 2308679, at *1 (E.D. Mich. May 8, 2020) (citing Armengau v. Cline, 7 F. App’x 336, 344 (6th Cir. 2001)). Pleadings filed by pro se litigants are entitled to a more liberal reading than would be afforded to formal pleadings drafted by lawyers, but such complaints still must plead a
“The Court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
The party seeking summary judgment bears the initial burden of informing the Court of the basis for its motion and must specify the portions of the record that show the absence of a genuine dispute as to any material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant satisfies this burden, the burden shifts to the non-moving party to go beyond the pleadings and set forth specific facts showing a genuine issue for trial. Id. at 324. The Court must view the factual evidence in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 380 (2007).
ECMC first argues that Hamilton’s state law claims—violation of Michigan’s Uniform Commercial Code, common law conversion and statutory conversion—are preempted by the Higher Education Act (HEA),
Express preemption occurs when the statute’s language explicitly manifests Congress’ intent to preempt state law. Id. Hamilton argues that the “HEA neither explicitly nor implicitly preempts all state law,” and “it is possible to comply with both state and federal requirements.” [ECF No. 14, PageID.345, 349 (citing Tipton v. Secretary of Education, 768 F. Supp. 540 (S.D. W. Va. 1991))].
The HEA was enacted to promote financial assistance to students in higher education. Hunt v. Sallie Mae, Inc., No. 11-11324, 2011 WL 2847428, at *1 (E.D. Mich. July 19, 2011) (citing Chae v. SLM Corp., 593 F.3d 936, 946 (9th Cir.2010)). The HEA established the Federal Family Education Loan Program (FFELP) to administer student loans through the Department of Education (DOE). See
Kerry Klisch, a litigation specialist of ECMC, states in an affidavit that ECMC is a guaranty agency under the HEA. [ECF No. 13-2, PageID.290-291]. Klisch states that he reviewed the records associated with Hamilton’s student loan, and that those records show that she executed a promissory note for a federally guaranteed student loan that is governed by the HEA. [Id., PageID.291]. ECMC attaches a copy of Hamilton’s signed promissory note for her student loan from Key Bank, dated March 2000. [ECF No. 13-2, PageID.297-298].
According to Klisch, after Hamilton defaulted on her loan in March 2008, the original guarantor assigned the loan to ECMC, giving ECMC all rights, title and interest in the loan. [ECF No. 13-2, PageID.291-292]. ECMC provides a copy of this 2009 assignment of rights. [ECF No. 13-5,
As the guaranty agency, ECMC was permitted to administratively garnish Hamilton’s wages “[n]otwithstanding any provision of State law.”
At bottom, Hamilton’s mere denial that the promissory note is a true copy of one that she signed is not enough to withstand summary judgment. Moldowan v. City of Warren, 578 F.3d 351, 374 (6th Cir. 2009) (“The non moving party also may not rest upon its mere allegations or denials of the
C.
ECMC also moves to dismiss Hamilton’s claims because they “are improper attempts to privately enforce the HEA,” which does not have a private right of action. [ECF No. 13, PageID.275-278]. It asserts that she is attempting to improperly “circumvent the lack of private action in the HEA.” [Id., PageID.275].
The Sixth Circuit, along with “nearly every court to consider the issue,” has held that “there is no express or implied private right of action to enforce any of the HEA’s provisions.” Thomas M. Cooley Law Sch. v. Am. Bar Ass‘n, 459 F.3d 705, 710 (6th Cir. 2006) (collecting cases). Citing Cliff v. Payco Gen. Am. Credits, Inc., 363 F.3d 1113 (11th Cir. 2004), Hamilton
Here, Hamilton does not challenge ECMC’s collection practices; she alleges that ECMC has no legal right to collect from her through garnishment or offset. [ECF No. 9, PageID.229-235]. Her challenge therefore falls within the auspices of the HEA. Cliff, 363 F.3d at 1125. “Accordingly, to the extent that the Court construes [Hamilton’s] complaint as articulating a claim under the HEA, the Court must dismiss the claim in the absence of any private cause of action to contest” ECMC’s attempt to collect on her defaulted student loans. Brinn v. Great Lakes Educ. Loan Servs., Inc., No. 1:14-CV-626, 2016 WL 8467792, at *3 (W.D. Mich. Jan. 8, 2016).
D.
Hamilton’s amended complaint claims that ECMC “unlawfully engaged in involuntary collection activities against [her]” in violation of the Debt Collection Improvement Act (DCIA). [ECF No. 12, PageID.236-237]. The DCIA regulates the way in which “executive, judicial, or legislative agency” collect purported debts owed to the federal government.
ECMC argues that it is not collecting a debt owed to the United States and that it is not an agent of the United States. [ECF No. 13, PageID.279]. It says that, although ECMC was created under the direction of the DOE, it is a private, nonprofit organization. [ECF No. 13-2, PageID.290]. But Hamilton asserts that the DCIA applies to ECMC’s actions because it is a government actor. [ECF No. 14, PageID.353-354]. Hamilton’s argument lacks merit.
A private entity can be a government actor only when it performs a
Nor is Hamilton’s debt owed to the federal government; all “rights, title and interest” in Hamilton’s loan have been assigned to ECMC. [See ECF No. 13-5, PageID.300]. Thus, the DCIA does not apply to the ECMC’s collection of Hamilton’s student loan debt. Gruen v. EdFund, No. C 09-00644 JSW, 2009 WL 2136785, at *2 (N.D. Cal. July 15, 2009) (DCIA did not apply when debt did not belong to federal government and the defendants were not actors whose collections efforts were governed by the DCIA).
Hamilton’s claims under the APA are also inapplicable to the actions of ECMC. “The APA allows judicial review for persons ’suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action,’ and defines ’agency’ as ’each authority of the Government of the United States.’” Sw. Williamson Cty. Cmty. Ass’n, Inc. v. Slater, 173 F.3d 1033, 1035 (6th Cir. 1999) (citing
F.
Hamilton claims that ECMC violated her due process rights “by conducting an administrative wage garnishment and tax offset without a meaningful hearing.” [ECF No. 12, PageID.239]. “The Due Process Clause of the Fifth Amendment prohibits the United States, as the Due Process Clause of the Fourteenth Amendment prohibits the States, from depriving any person of property without due process of law.” Dusenbery v. United States, 534 U.S. 161, 167 (2002). ECMC is not a government actor to which the Due Process Clause applies. Halzack Watkins, 2011 WL 2015479 at *8-11 (ECMC is not a federal actor for Fifth Amendment
In opposition to ECMC’s motion for summary judgment, Hamilton notes that “ECMC argued that it was a state actor for purposes of avoiding judgment under the Fair Debt Collection Practices Act [FDCPA]” in Pelfrey v. Educational Credit Management Corp., 71 F. Supp. 2d 1161 (N.D. Ala. 1999). [ECF No. 14, PageID.356]. But the Pelfrey court noted that ECMC’s argument was contrary to a Ninth Circuit holding. 71 F. Supp. 2d at 1175 (citing Brannan v. United Student Aid Funds, Inc., 94 F.3d 1260, 1263 (9th Cir.1996)). In Brannan, the court held that a guaranty agency was “a private nonprofit organization with a government contract; it is not a government agency or employee.” Brannan, 94 F.3d at 1263. And though the Pelfrey court held that guaranty agencies were exempt from liability under the FDCPA, its holding did not rely on a finding that ECMC was a government actor. Pelfrey, 71 F.Supp. 2d at 1179-1180.
Hamilton cites Games v. Cavazos, 737 F. Supp. 1368 (D. Del. 1990), as finding a guaranty agency to be a government actor under the FDCPA. The reasons for the Games court to grant the defendants’ motion for summary judgment were many; among them was a finding that “USA
Thus, the weight of authority supports a finding that ECMC is not a government actor and Hamilton’s due process claim should be dismissed.
G.
In the last count of Hamilton’s amended complaint, she alleges that ECMC committed fraud in the factum. Her amended complaint cites Langley v. Fed. Deposit Ins. Corp., 484 U.S. 86 (1987), as describing the type of fraud in the factum on which she relies. [ECF No. 13, PageID.242]. But Hamilton’s complaint alleges that ECMC engaged in “fraud in the factum under Michigan common law.” [ECF No. 12, PageID.242-243]. A Michigan Court of Appeals opinion described fraud in the factum as:
“Fraud occurring when a legal instrument as actually executed differs from the one intended for execution by the person who executes it, or when the instrument may have had no legal existence. Compared to fraud in the inducement, fraud in the
factum occurs only rarely, as when a blind person signs a mortgage when misleadingly told that the paper is just a letter.”
Seung Wook Ahn v. Bellhur, Inc., No. 318043, 2015 WL 213185, at *4 (Mich. Ct. App. Jan. 15, 2015) (quoting Black’s Law Dictionary (9th ed.)).
Hamilton alleges that ECMC is liable for fraud in the factum because it “procure[d]” her “signature to alleged promissory note and inserted the ’Loan Repayment Schedule Disclosure Statement’ to the alleged note.” [ECF No. 12, PageID.242]. The promissory note at issue refutes this allegation on its face. First, when Hamilton signed the promissory note in 2000, Key Bank was the lender. [ECF No. 13-4]. ECMC was assigned the loan in 2009. [ECF No. 13-5]. Thus, even if Hamilton’s signature was wrongly procured, ECMC was not the procurer.
Hamilton analogizes her claim to the one in Fed. Deposit Ins. Corp. v. Turner, 869 F.2d 270 (6th Cir. 1989), but the analogy is misplaced. The Turner court found fraud in the factum when someone was induced into signing a guaranty based on misrepresentations, and the person making the misrepresentations had “erased the original bank’s name and inserted the name of another bank” after the document was signed. Id. at 274. As a result, “Turner was defrauded as to the guaranty’s essential terms.” Id. In contrast, ECMC did not induce Hamilton to sign the promissory note—it had no part in her signing that document. In addition, Hamilton presents no
Hamilton’s fraud in the factum claim is also filed too late. The statute of limitations for common law fraud under Michigan law is six years. Snider v. Lone Star Art Trading Co., 659 F. Supp. 1249, 1257 (E.D. Mich. 1987) (citing
As noted, Hamilton signed the promissory note in March 2000. [ECF No. 13-4]. Her claim that ECMC wrongly procured her signature, made in her 2020 amended complaint, is woefully late.
H.
In Count V of Hamilton’s amended complaint, she seeks declaratory judgment that ECMC “violated and continue[s] to violate the DCIA and the APA.” [ECF No. 12, PageID.240]. She relied on the Declaratory Judgment
IV. CONCLUSION
The Court recommends that ECMC’s motion to dismiss or for summary judgment [ECF No. 13] be GRANTED.
Dated: September 22, 2020
s/Elizabeth A. Stafford
ELIZABETH A. STAFFORD
United States Magistrate Judge
NOTICE TO THE PARTIES ABOUT OBJECTIONS
Within 14 days of being served with this report and recommendation, any party may serve and file specific written objections to this Court’s findings and recommendations.
Each objection must be labeled as “Objection #1,” “Objection #2,” etc., and must specify precisely the provision of this report and recommendation to which it pertains. Within 14 days after service of objections, any non-objecting party must file a response to the objections, specifically addressing each issue raised in the objections in the same order and labeled as “Response to Objection #1,” “Response to Objection #2,” etc. The response must be concise and proportionate in length and complexity to the objections, but there is otherwise no page limitation. If the Court determines that any objections are without merit, it may rule without awaiting the response.
CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served upon counsel of record and any unrepresented parties via the Court’s ECF System to their respective email or First Class U.S. mail addresses disclosed on the Notice of Electronic Filing on September 22, 2020.
s/Marlena Williams
MARLENA WILLIAMS
Case Manager