Opinion
CIVIL ACTION NO. 3:02-CV-2776-P
June 24, 2003
ORDER
Now before the Court is Defendants' Motion to Dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted, filed March 10, 2003. Plaintiff filed a Response on March 13, 2003, and Defendants filed no reply. After considering the pleadings, the briefing, and the applicable law, the Court GRANTS Defendants' Motion to Dismiss.
BACKGROUND
Plaintiff Timothy Chatmon ("Chatmon" or "Plaintiff), proceeding pro se, filed his Complaint against the United States Department of Education ("DOE") and Diane Spadoni (collectively "Defendants") on December 23, 2002. In the Complaint, Plaintiff alleged that Defendants violated the United States Constitution and the Fair Debt Collection Practices Act ("FDCPA") and sought declaratory judgment on a number of matters affecting his responsibility to repay his student loans.
Plaintiff received two guaranteed student loans, which were authorized pursuant to the Higher Education Act of 1965, as amended, 20 U.S.C.A. §§ 1071, et seq. Mot. at 6. On June 15, 1984, Plaintiff received his first loan of $2,500 in order to attend the Columbia School of Broadcasting ("Columbia"). Id. The loan was issued by Citibank and guaranteed by the California Student Aid Commission ("CSAC"). Id. On January 25, 1985, Plaintiff received his second loan of $2,386 in order to attend Blackhawk Technical College. Id. at 7. The loan was issued by North Milwaukee State Bank and guaranteed by the Wisconsin Higher Education Corporation which later became the Great Lakes Higher Education Corporation ("Great Lakes"). Id.
Chatmon defaulted on the first loan on or about August 10, 1988, and the second loan on or about June 15, 1986. Mot. at 6-7. Neither CSAC nor Great Lakes ever received any payments from Chatmon. Id. As a result, CSAC and Great Lakes assigned the loans to the DOE on June 18, 1992, and March 9, 1993, respectively. Id. The DOE claims it sent Chatmon numerous letters pertaining to the loans in default but has received no payments. Id. at 7. On August 20, 2002, the DOE sent Chatmon notice specifying its intent to offset his federal payments under the Treasury Offset Program ("TOP"). Id. On October 15, 2002, the DOE provided Chatmon with a final hearing decision, which stated that all loans were legally enforceable. Id. at 8.
After securing the loans in 1984 and 1985, Chatmon became totally and permanently disabled and received Social Security benefits until 1989. Compl. at 2. Plaintiff was then incarcerated from 1989 to 2000 for a crime he claims he did not commit. Id. In 1990, Chatmon wrote a letter seeking to discharge the loans. He alleges that he did not receive any correspondence for an entire decade. Id. After receiving notice from the DOE, Plaintiff alleges that the Department continually harassed and threatened him by repeatedly calling him and his family about repayment of the loans. Id. On December 23, 2002, Chatmon filed suit against Defendants in this Court. Plaintiff claims that Defendants violated the FDCPA in their attempts to secure loan repayment from him and further seeks declaratory judgment from the Court on the following matters: (1) Plaintiff's debt is dischargeable because he suffered from a permanent disability; (2) Plaintiff's debt is dischargeable because his ability to borrow was improperly certified since he did not have a G.E.D. when he enrolled in either school; (3) Plaintiff's debt is dischargeable because the Columbia School of Broadcasting closed; (4) Plaintiff's debt is dischargeable because one of the schools he attended, the Columbia School of Broadcasting, promised him lifetime assistance and placement, but closed before graduation; (5) Plaintiff's debt is dischargeable because he was wrongfully convicted; (6) the DOE is time barred from collecting on Plaintiff's debts; and (7) the DOE violated principles of due process and equal protection by attempting to collect his debt after 15 years. Id. at 2-3. After receiving the Plaintiff's Complaint, Defendants filed this Motion to Dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted.
DISCUSSION
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint when the defendant shows that the plaintiff has failed to state a claim for which relief may be granted. A motion to dismiss for failure to state a claim is viewed with disfavor and should rarely be granted. See Kaiser Aluminum Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). Under the rule of Conley v. Gibson, a claim should not be dismissed unless it "appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." 355 U.S. 41, 45-46 (1957). The Court must render its decision taking the complaint in the light most favorable to the plaintiff and taking its allegations as true. Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). The Court limits its inquiry to whether plaintiff is entitled to offer evidence to support claims and does not address whether plaintiff will ultimately prevail on the merits. Johnson v. Dallas Ind. School Dist., 38 F.3d 198, 199 (5th Cir. 1994). However, dismissal is proper when "even the most sympathetic reading of [the] pleadings uncovers no theory and no facts that would subject the present defendants to liability." Jacquez v. Procunier, 801 F.2d 789, 791-92 (5th Cir. 1986).
I. Chatmon's Claim under the Fair Debt Collection Practices Act
Chatmon claims that Defendants are liable because they violated the Fair Debt Collection Practices Act, 15 U.S.C.A. §§ 1692, et seq, when attempting to secure repayment from him. The FDCP A was established for the purpose of eliminating abusive, deceptive, and unfair debt collection practices by debt collectors. 15 U.S.C.A. § 1692d(e). Furthermore, the FDCPA prohibits debt collectors from making repeated harassing phone calls and from making false or misleading representations. Id. The FDCPA, however, only imposes civil liability on those who properly fall within the definition of a "debt collector." 15 U.S.C.A. § 1692k. A "debt collector" under the FDCPA means:
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.A. § 1692a(6).
The DOE does not fall within the definition of a "debt collector" because (1) the collection of debts is not a principal purpose of its business, and (2) the DOE, in seeking repayment from Plaintiff, is collecting its own debts and not the debts of another. The DOE is assigned a range of functions but, as seen in 20 U.S.C.A. § 3402, Congress did not intend for the collection of debts to be a primary purpose of the organization. Furthermore, the DOE reimburses guarantee agencies for their losses when a student defaults on his or her loan. See 20 U.S.C.A. § 1078(c). Since the DOE had already reimbursed CSAC and Great Lakes when the loans were assigned to them, it was attempting to collect the debt for itself and not for another. Therefore, the DOE is not a "debt collector" for purposes of the FDCPA. See Vitti v. Nat'l Payments Or., CIV.A. No. 99-704 at *2-3 (W.D. Pa. June 5, 2002); Wallmuller v. United States, CIV.A. No. 98-325-S-ELJ (D. Idaho April 19, 1999).
Defendant Spadoni also does not fall within the definition of a "debt collector." The FDCPA provides that "any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor" is not a "debt collector." 15 U.S.C.A. § 1692a(6)(A). Since the DOE is collecting debt owed to it, it can be classified as a "creditor" under the FDCPA. See 15 U.S.C.A. § 1692a(4). Furthermore, Spadoni is acting within the scope of her employment with the DOE when attempting to collect debts from Plaintiff. Therefore, Defendant Spadoni is not a "debt collector" for the purposes of the FDCPA.
Accordingly, the Court GRANTS Defendants' Motion to Dismiss as to Plaintiff's claim under the FDCPA.
II. Chatmon's Claim for Loan Discharge Because of Permanent Disability
Under the amended Higher Education Act, a borrower who becomes permanently and totally disabled after receiving a loan may obtain a complete discharge of the amount remaining on that loan. See 20 U.S.C.A. § 1087(a). In order to obtain a cancellation of the loan amount, the borrower must submit a loan discharge application to the holder of the loan (here, the DOE), which includes a certification by a physician that the borrower is totally and permanently disabled, as defined in 34 C.F.R. § 682.200. See 34 C.F.R. § 682.402(c). The DOE defines "totally and permanently disabled" as "[t]he condition of an individual who is unable to work and earn money because of an injury or illness that is expected to continue indefinitely or result in death." See 34 C.F.R. § 682.200(b).
Chatmon claims in his Complaint that the loans should be discharged because he became totally and permanently disabled after receiving loans in 1984 and 1985. Since the amended Higher Education Act allows relief for borrowers who become totally and permanently disabled after onset of the disability, it appears that Chatmon has raised a claim for which relief can be granted. Therefore, Defendants will not be able to dismiss this claim pursuant to Rule 12(b)(6).
Nevertheless, if matters outside the pleadings are presented to and not excluded by the Court, the Court can treat the motion to dismiss as a motion for summary judgment under Rule 56. Fed.R.Civ.P. 12(b). Summary judgment is appropriate if "there is no genuine issue as to any material fact, and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party has the initial burden to identify "those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)). After the moving party has met this burden, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). In deciding whether there is a genuine issue of material fact, the Court must read all facts in the light most favorable to the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
Here, Defendants provide evidence to show that Chatmon should not be entitled to receive a discharge of his loans for being totally and permanently disabled. Chatmon originally raised his disability claim on the Request for Review form that was submitted for the Treasury Offset Program hearing. See Mot., Ex. 1, Att. 10. Upon receiving the form, the DOE sent Chatmon a letter stating that Social Security benefits do not automatically qualify him for loan discharge and that a discharge application form must be completed and received by the DOE within 15 days. See id. The letter also specified that if the discharge application form was not received, the DOE had the discretion to request that Chatmon's loans be offset by the Treasury Offset Program. See id. The DOE did not receive from Chatmon a completed application with a physician certification as required in 34 C.F.R. § 682.402(c) and therefore issued a Final Hearing Decision denying his objections and declaring his student loans legally enforceable. See Mot., Ex. 2, Att. 1. Plaintiff presents nothing to contradict Defendants' evidence. The Court therefore finds that no issue of material fact exists as to whether Chatmon should receive loan discharge for his permanent disability.
Since the Court has viewed evidence outside the Plaintiff's Complaint, the Defendants' Motion to Dismiss will be treated as a Motion for Summary Judgment, and the Court will hereby GRANT Summary Judgment for Defendants as to Plaintiff's claim for loan discharge because of permanent disability.
III. Chatmon's Claim for Loan Discharge Based on Improper Certification
The amended Higher Education Act provides for the discharge of certain loans if the borrower's eligibility to receive the loan was falsely certified by an eligible school. See 20 U.S.C.A. § 1087(c); 34 C.F.R. § 682.402(e). Thus, the DOE may discharge a student's loans if a student lacking a high school diploma or G.E.D. was certified as an eligible borrower under the Guaranteed Student Loan Program (now the Federal Family Education Loan Program). See 34 C.F.R. § 682.402(e). Chatmon in his Complaint claims that he did not have a high school diploma or G.E.D. when his federal loans were issued in 1984 and 1985 and, therefore, he did not have the ability to benefit from the training offered from either school.
Nevertheless, 20 U.S.C. § 1087(c) clearly states that loan discharge for improper certification is only available on loans disbursed after January 1, 1986. Chatmon received both of his loans before January 1, 1986, and thus cannot raise a claim for which relief can be granted. Accordingly, the Court GRANTS Defendants' Motion to Dismiss as to Plaintiff's claim for loan discharge based on improper certification.
IV. Chatmon's Claim for Loan Discharge Because of School Closure
The amended Higher Education Act provides for the discharge of certain loans disbursed on or after January 1, 1986, if a borrower is unable to complete the program in which he or she is enrolled due to the closure of the institution. See 20 U.S.C.A. § 1087(c); 34 C.F.R. § 682.402(d). Chatmon believes that the Court should declare that he is eligible for a complete loan discharge because he was not able to complete his education once the Columbia School of Broadcasting closed. However, Chatmon obtained his loan to attend Columbia in 1984, prior to January 1, 1986, and is not eligible to receive discharge relief authorized by 20 U.S.C.A. § 1087(c).
The DOE has as a matter of agency policy offered pro-rated discharge relief for the closure of schools on loans issued before January 1, 1986. This pro-rated relief is under the discretion and responsibility of the Department of Education. Plaintiff, however, did not seek this kind of administrative relief and even failed to raise this issue in the Request for Review which was submitted for the TOP hearing.
Accordingly, the Court GRANTS Defendants' Motion to Dismiss as to Plaintiff's claim for loan discharge because of school closure.
V. Chatmon's Claim for Loan Discharge Because of Columbia's Breach of Promise
Chatmon claims that the Columbia School of Broadcasting breached a promise of lifetime assistance and placement when it closed before graduation. As a result, Chatmon alleges that his debt should be discharged. However, the student loan held by the DOE and signed by Chatmon does not provide that Plaintiff would be given lifetime assistance and placement upon graduation at Columbia. Furthermore, Chatmon's grievance with Columbia does not affect his obligation to repay the student loans because neither the bank that issued the loan nor the DOE was a party to the alleged promise made by Columbia. See United States v. Durbin, 64 F. Supp.2d 635, 637 (S.D. Tex. 1999) (holding that a student must repay a student loan because neither the bank or government promised satisfaction with the school). Plaintiff has not stated a claim against Defendants.
Accordingly, the Court GRANTS Defendants' Motion to Dismiss as to Plaintiff's claim for loan discharge because of Columbia's alleged breach of promise.
VI. Chatmon's Claim for Loan Discharge Based on Wrongful Conviction
In the Complaint, Plaintiff alleges that the Defendants stated they would discharge his loans if he could prove that he was wrongfully convicted. However, the amended Higher Education Act does not allow for the discharge or repayment of a loan based on wrongful conviction. See 20 U.S.C.A. §§ 1071, et seq. Plaintiff cannot prevail as a matter of law. The claim for loan discharge based on wrongful conviction is DISMISSED.
VII. Chatmon's Claim that Defendants are Time Barred from Collecting Debt
In the Complaint, Plaintiff appears to assert that the Defendants are time barred from collecting on his student loan debts by either the statute of limitations or laches. However, the Higher Education Technical Amendments of 1991 eliminated the statute of limitations on student loans. See 20 U.S.C.A. § 1091a(a) (Supp. 1991). The section now reads:
Notwithstanding any other provision of statute, regulation, or administrative limitation, no limitation shall terminate the period within which suit may be filed, a judgment may be enforced, or an offset, garnishment, or other action initiated or taken . . . for repayment of the amount due from a borrower on a loan made under this chapter.Id.
In addition, Congress stated that the elimination of the statute of limitations would be retroactive and apply to all student loan debts. United States v. Phillips, 20 F.3d 1005, 1007 (9th Cir. 1994); United States v. Glockson, 998 F.2d 896, 897 (11th Cir. 1993). In United States v. Lawrence, the Fifth Circuit agreed that 20 U.S.C.A. § 1091 a abrogates all limitations defenses for the collection of student debts. 276 F.3d 193, 196 (5th Cir. 2001). The Fifth Circuit further held that § 109 la also eliminated the equitable defense of laches. Id. As a result of this amendment, Chatmon cannot seek a declaratory judgment from the Court because of the statute of limitations or laches.
Accordingly, the Court GRAJNTS Defendants' Motion to Dismiss as to Plaintiff's Claim that the Defendants are time barred from collecting his debt.
VIII. Chatmon's Claim that Defendants Violated Due Process and Equal Protection
Plaintiff alleges in his Complaint that the government violated constitutional principles of due process and equal protection by attempting to collect his debt after 15 years. Liberally read, it appears that Chatmon is asserting the claim that a retroactive application of the Higher Education Technical Amendments of 1991, which eliminated the six-year statute of limitations on student loans, violates due process and equal protection. In United States v. Hodges, the Eighth Circuit stated that statutes of limitations are legislatively created defenses and are thus subject to legislative amendment without any implication of due-process rights. 999 F.2d 341, 342 (8th Cir. 1993). The Eighth and Eleventh Circuits have held that the retroactive abrogation of the statute of limitations by § 1091a does not violate a debtor's due-process rights. Id. Glockson, 998 F.2d at 898. Although the Fifth Circuit has yet to decide this issue, the Court finds the logic of the Eighth and Eleventh Circuits convincing. Therefore, Chatmon cannot state a claim for deprivation of due process.
The Equal Protection Clause of the Fourteenth Amendment states that no State shall deny to any person within its jurisdiction the equal protection of the laws. U.S. Const. Amend. XIV. Although the Equal Protection Clause of the Fourteenth Amendment is not applicable to the federal government, the Supreme Court has established that the concepts of equal protection are implicit in the due process guarantee of the Fifth Amendment. See Weinberger v. Wiesenfeld, 420 U.S. 636, 638 (1975); Boiling v. Sharpe, 347 U.S. 497, 498-99 (1954). Thus, under the Fifth Amendment, the United States shall provide all people equal protection under the laws. See Buckley v. Valeo, 424 U.S. 1, 93 (1976). Chatmon, however, has not demonstrated that the DOE, through the Higher Education Technical Amendments, is treating him differently than anyone else. Therefore, Plaintiff has failed to state a claim based on a violation of his constitutional right to equal protection.
Accordingly, the Court GRANTS Defendants' Motion to Dismiss as to Plaintiff's claim that Defendants violated principles of due process and equal protection.
CONCLUSION
After a thorough review of the pleadings, the evidence, the parties' briefs, and the applicable law, for the reasons set forth above, the Court GRANTS Defendants' Motion to Dismiss as to all but two of Plaintiff's claims. As to Plaintiff's claim for loan discharge because of permanent disability, the Court hereby GRANTS Summary Judgment for the Defendants. As to Plaintiff's claim for loan discharge based on wrongful conviction, the Court hereby DISMISSES the claim as unviable as a matter of law.