Valentino v. United States Department Education et al, No. 3:2009cv00006 - Document 39 (S.D. Cal. 2009)

Court Description: ORDER granting 34 motion to dismiss and granting leave to amend signed by Judge Jeffrey T. Miller on 9/16/09. The court determines that it presently lacks subject matter jurisdiction under the Little Tucker Act and HEA to entertain Plaintiff's claims. The court also grants Plaintiff l5 days leave to amend. (tkl) (av1).

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Valentino v. United States Department Education et al Doc. 39 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 MARIA E. VALENTINO, CASE NO. 09cv0006 JM(LSP) Plaintiff, 12 ORDER GRANTING MOTION TO DISMISS; GRANTING LEAVE TO AMEND vs. 13 15 UNITED STATES DEPARTMENT OF EDUCATION, EDUCATION SECRETARY ARNE DUNCAN; and NCO FINANCIAL SYSTEMS, INC., 16 Defendants. 14 17 18 Defendants U.S. Department of Education and Secretary Arne Duncan 19 (collectively the “Secretary” or “Federal Defendants”) move to dismiss all claims 20 asserted in Plaintiff Maria E. Valentino’s First Amended Complaint (“FAC”) for lack 21 of subject matter jurisdiction under Rule 12(b)(1) or, alternatively, to transfer the action 22 to the U.S. Court of Claims under Rule 12(b)(3). Plaintiff, represented by pro bono 23 counsel, opposes the motions. Pursuant to Local Rule 7.1(d)(1), this matter is 24 appropriate for decision without oral argument. For the reasons set forth below, the 25 motion to dismiss the action for lack of subject matter jurisdiction is granted. The court 26 also grants Plaintiff 15 days leave to amend from the date of entry of this order to file 27 a Second Amended Complaint. 28 -1- 09cv0006 Dockets.Justia.com 1 BACKGROUND 2 The operative First Amended Complaint (“FAC”), filed on January 13, 2009, 3 alleges four claims for breach of contract, accounting, declaratory relief, and temporary 4 injunction. In or around February 1989 Plaintiff entered into two different loan 5 agreements. Both loans, one for $4,000 and the other for $2,6850, were funded by 6 Chemical Bank. (FAC ¶7). Upon graduation in June 1990, Plaintiff commenced 7 repaying the loan. (FAC ¶8). She then obtained several deferments and resumed 8 payments on both loans in February 1995. Id. 9 Shortly after Plaintiff resumed her scheduled payments, Plaintiff received 10 delinquency notices from Chemical Bank indicating that she allegedly failed to make 11 the required payments. (SAC ¶9). Plaintiff contacted Chemical Bank and was informed 12 by a customer service representative that the matter would be investigated and that she 13 would be provided with an accounting. When Chemical Bank failed to investigate her 14 claims and to provide an accounting, Plaintiff attempted to contact someone at the bank 15 by leaving voice mail messages which were never returned. (FAC ¶10). Plaintiff did 16 not make her August 1995 payment. Id. 17 On August 25, 1995 Plaintiff received a notice from the Colorado Student Loan 18 Program ("CSLP”) informing Plaintiff that she was delinquent on one of her loans. She 19 spoke with a CSLP representative and was informed that the matter would be 20 investigated and someone would get back to her. (FAC ¶11). Plaintiff did not hear 21 back from CSLP and she did not make her September 1995 payment. Over the next two 22 years Plaintiff had “numerous telephone conversations with various representatives 23 from CSLP and other collection agencies assigned to collect on the loans.” (FAC ¶13). 24 “[N]othing was ever done to investigate Plaintiff’s claims and no accounting of the 25 payment history for the loans in question was ever provided.” Id. 26 From 1998 through about August 2004 Plaintiff allegedly made continued 27 attempts to resolve outstanding issues concerning her student loans. (FAC ¶¶14-17). 28 In August 2004, Plaintiff’s counsel at that time contacted Pioneer Credit Recovery, the -2- 09cv0006 1 collection agency then attempting to collect on the loans. (FAC ¶17). Plaintiff alleges 2 that she reached an agreement with Pioneer Credit Recovery to enter into a repayment 3 program whereby all accrued interest and penalties were waived and permitting her to 4 pay $100 per month on the outstanding balance. (FAC ¶18). Plaintiff alleges that she 5 never received the promised written agreement from Pioneer Credit Recovery. Id. 6 Recently, Plaintiff alleges that “Defendants have effected a wage garnishment at 7 Plaintiff’s place of employment.” (FAC ¶19). Plaintiff has allegedly attempted to 8 contact Federal Defendants on numerous occasions to obtain an accounting. Id. 9 Defendants have not responded to those requests. Id. 10 On October 11, 2008 Federal Defendants provided Plaintiff with a Notice of 11 Propose Wage Garnishment. (Faatalale Decl. ¶25). On December 2, 2009 Plaintiff’s 12 counsel responded to the notice and requested a hearing. (Id. ¶¶26, 27). On the same 13 date, Plaintiff spoke with representatives of the Federal Defendants and was informed 14 about the timetable for receiving information about prior payments. (Id. ¶27, 28). 15 On December 11, 2008 the Secretary received a request from Plaintiff for a 16 telephonic hearing. On or about January 5, 2009 Plaintiff submitted documentation to 17 ED’s Federal Student Aid personnel. (Id. ¶34). Federal Defendants represent that 18 Plaintiff will obtain an administrative hearing within 60days of the December 8, 2008 19 request for a hearing. (Fataalale Decl. ¶33). 20 On January 16, 2009, Plaintiff moved for a temporary restraining order (“TRO”) 21 to enjoin the United States from garnishing a portion of her wages. On February 13, 22 2009 the parties jointly moved to dismiss the motion for a TRO as moot because the 23 parties resolved the issues of wage garnishment. DISCUSSION 24 25 The Rule 12(b)(1) Motion 26 The United States moves to dismiss the complaint for lack of subject matter 27 jurisdiction pursuant to Rule 12(b)(1). The parties are in agreement that, to the extent 28 subject matter jurisdiction exists in the present case, such jurisdiction arises under the -3- 09cv0006 1 Little Tucker Act, 28 U.S.C. §1346(a)(2), or the Higher Education Act (“HEA”), 20 2 U.S.C. §1082. 3 Subject Matter Jurisdiction Under The Little Tucker Act 4 The Little Tucker Act waives sovereign immunity and provides district courts 5 with original jurisdiction to exercise subject matter jurisdiction over contract claims 6 against the government in an amount up to $10,000. 28 U.S.C. §1346(a)(2). In order 7 to bring a claim under the Little Tucker Act, “the claim must be for monetary relief; it 8 cannot be for equitable relief, except in very limited circumstances.” Gonzales & 9 Gonzales v. Dept. of Homeland Sec., 490 F.3d 940, 943 (9th Cir. 2007). What 10 characterizes a claim for “monetary relief” is not necessarily a straight-forward analysis. 11 The classic Tucker Act breach of contract claim arises where a party seeks “to 12 obtain compensation by the Federal Government for damage sustained.” Doe v. United 13 States, 372 F.3d 1308, 1312 (Fed.Cir. 2004) (quoting Eastport S.S. Corp. v. United 14 States, 178 Ct.Cl. 599, 372 F.2d 1002, 1010 (1967)). Even if characterized as a 15 declaration of rights or an injunction, such a claim constitutes a claim for monetary 16 relief for purposes of the Little Tucker Act where, in essence, a party “is seeking a 17 refund of money that it claims was wrongfully paid to the federal government” 18 Gonzales, 490 F.3d at 944-45 (quoting Brazos Electric Power Cooperative v. United 19 States, 144 F.3d 784, 787 (Fed.Cir. 1998)). Whether monies are received directly from 20 the Government or credited as an offset are irrelevant. “Either way [a party] would be 21 receiving monetary damages from the public fisc of the United States which is the 22 touchstone of Tucker Act jurisdiction.” Id. 23 In Gonzales, the government claimed that the plaintiff had breached 200 24 immigration bonds and plaintiff claimed that the United States “breached its contractual 25 obligations by refusing to cancel those same bonds.” Id. at 942. The district court 26 concluded that the alleged breach of the immigration bonds rendered plaintiff indebted 27 to the Government. Id. at 943. Finding that the amount of the bonds exceed the Little 28 Tucker Act’s $10,000 jurisdictional maximum, it transferred the action to the Court of -4- 09cv0006 1 Federal Claims. The Federal Circuit reversed, finding that the district court erred in 2 transferring the action because the court lacked subject matter jurisdiction. “[T]here is 3 a substantive difference between a plaintiff seeking the return of money it already paid 4 the government and a plaintiff never having to pay the government in the first place. 5 Simply stated, if the plaintiff in the second scenario prevails, he would not ‘be receiving 6 monetary damages from the public fisc of the United States.’” Id. at 945. The court 7 held that the plaintiff’s claim for debt cancellation was “not one for monetary 8 damages.” 9 Here, Plaintiff’s first claim for breach of contract fails because there is no 10 possibility of receiving monetary damages from the public fisc as there is an 11 outstanding balance on the loans. The principal amount of the loans total $6,658. 12 (Valentino Decl. ¶3). While the parties dispute whether the Government properly 13 credited Plaintiff’s payments during the period of June 1990 through January 1995, 14 (Valentino Decl. ¶¶21-32; Faatalale Decl. ¶¶20-24), the undisputed evidence 15 demonstrates that Plaintiff has an outstanding balance on her student loans. The 16 evidence submitted by the Government demonstrates that it has received total payments, 17 or refunds, in the total amount of $3,000.14, with an outstanding balance, including 18 principal and interest, as of January 23, 2009 in the amount of $14,084.83, not including 19 collection agency fees. (Fataalale Decl. ¶38). Plaintiff represents that she was wrongly 20 placed on default on August 8, 1995, in that she had made payments in the approximate 21 amount of $890 that were not credited to her account. (Valentino Decl. ¶21; Exh. G). 22 23 Whether Plaintiff was wrongly placed in default in 1995, or whether interest 24 payments were properly calculated is not an issue to be resolved by this court. This 25 court’s inquiry under the Little Tucker Act is whether Plaintiff’s claims will result in 26 the receipt of money damages “from the public fisc of the United States” either directly 27 or indirectly by an offset. Gonzales, 490 F.3d at 495. Here, there is no dispute that 28 Plaintiff has not made any payments on the loans since 1996 and that there is a -5- 09cv0006 1 substantial balance on the outstanding loans. (Fataalale Decl. ¶¶17-19). Plaintiff’s 2 declaration that “it is impossible to know with unequivocal certainty what I have paid 3 on my two loans and what is still owed, if anything,” (Valentino Decl. ¶32), is 4 insufficient to raise a credible claim that the United States treasury may be tapped to 5 pay Plaintiff monetary damages. To the contrary, the record demonstrates that Plaintiff 6 still owes substantial amounts on the loans and that the treasury will be the net 7 beneficiary upon receipt of outstanding principal and interest payments. Plaintiff 8 simply fails to identify any circumstances under which she will obtain monies from the 9 public fisc. 10 In sum, the court concludes that it lacks subject matter jurisdiction under the 11 Little Tucker Act to entertain the breach of contract claim or the causes of action for an 12 accounting, declaratory relief, or injunctive relief.1 13 Subject Matter Jurisdiction Under The Higher Education Act 14 Plaintiff contends the Secretary subjected itself to the jurisdiction of this Court 15 16 17 18 19 20 21 22 pursuant to 20 U.S.C. § 1082(a)(2), which states: In the performance of, and with respect to, the functions, powers and duties, vested in him by this part, the Secretary may(2) sue and be sued in any court of record of a State having general jurisdiction or in any district court of the United States, and such district courts shall have jurisdiction of civil actions arising under this part without regard to the amount in controversy, and action instituted under this subsection by or against the Secretary shall survive notwithstanding any change in the person occupying the office of Secretary or any vacancy in that office; but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Secretary or property under the Secretary's control and nothing herein shall be construed to except litigation arising out of activities under this part from the application of sections 509, 517, 547, and 2679 of Title 28; 23 24 20 U.S.C. § 1082(a)(2). Section 1082(a)(2) of the HEA allows the Secretary of 25 Education to “sue and be sued” with respect to the performance of duties under “this 26 part” of the Act. 20 U.S.C. § 1082(a)(2). This waiver expressly does not extend to 27 1 28 While the court dismisses the Little Tucker Act claim for lack of subject matter jurisdiction, the court notes that Plaintiff may have a claim to obtain pertinent records under the Administrative Procedures Act. However, Plaintiff does not assert a claim for such relief. -6- 09cv0006 1 injunctive relief, as § 1082(a)(2) prohibits injunctions against the Secretary except 2 where he exercises powers that are clearly outside his statutory authority. Id. A “sue 3 and be sued” clause also does not trump the general rule that federal agencies cannot 4 be sued in a damages action alleging constitutional violations. F.D.I.C. v. Meyer, 510 5 U.S. 471, 484-86 (1994). 6 Plaintiff specifically alleges that her third cause of action for an accounting is 7 appropriate under the 20 U.S.C. §1095a(2), (FAC ¶26), and argues in her opposition 8 that her claims for declaratory relief and breach of contract are also properly brought 9 under the HEA as well.2 (Oppo. at p. 10). “[A] waiver of the Government’s sovereign 10 immunity will be strictly construed, in terms of its scope, in favor of the sovereign.” 11 Lane v. Pena, 518 U.S. 187, 192 (1996); Dolan v. U.S. Postal Service, 546 U.S. 481 12 (2006). In demonstrating a waiver of sovereign immunity, Plaintiff, as the party 13 asserting federal jurisdiction has the burden to establish jurisdiction. Daimler Chrysler 14 Corp. v. Cuno, 547 U.S. 332, 342 (2006). 15 Here, the “sue and be sued” clause at issue is limited and permits the Secretary 16 to sue and be sued in district courts for “civil actions arising under this part.” 20 U.S.C. 17 §1082(a)(2). Plaintiff, as the party with the burden to demonstrate federal jurisdiction, 18 fails to identify the applicable provision of §1082 that authorizes an accounting, breach 19 of contact, or declaratory relief claim. A conclusory allegation of subject matter 20 jurisdiction without any reference to a federal statute authorizing the exercise of such 21 jurisdiction, constitutes a failure to establish jurisdiction. Daimler Chrysler, 547 U.S. 22 at 342. Even if Plaintiff could maintain a breach of contract claim under §1082(a)(2), 23 such a claim necessarily fails as the waiver of sovereign immunity does not permit 24 claims for monetary relief from the U.S. Treasury, only claims for funds under the 25 control of the Secretary; and for the above stated reasons, any funds would derive from 26 the Treasury. See Presidential Gardens Assoc. v. United States ex rel. Sec’y of Housing 27 28 2 For purposes of this part of the analysis, the court treats Plaintiff’s claim as one arising under 20 U.S.C. §1082(a)(2). -7- 09cv0006 1 and Urban Dev., 175 F.3d 132, 141 (2d Cir. 1999). Accordingly, Plaintiff fails to meet 2 its burden and the court dismisses the action for failure to establish subject matter 3 jurisdiction under §1082(a)(2).3 4 Exhaustion of Administrative Remedies 5 Plaintiff also asserts that she is entitled to a hearing and an accounting re: wage 6 garnishment pursuant to 20 U.S.C. §1095a(2). (FAC ¶26). As that section does not 7 exist, the court assumes that Plaintiff means §1095a(a)(3) (“the individual [subject to 8 wage garnishment] shall be provided an opportunity to inspect and copy records, 9 relating to the debt;”). From the parties’ submission, it appears undisputed that Plaintiff 10 requested a hearing in December 8, 2008 and has yet to receive a hearing.4 (Fataalale 11 Decl. ¶¶26-34; Valentino ¶¶5-19, 33). 12 Here, the record reveals that the parties have resolved, in large part, the issue of 13 wage garnishment. (Docket Nos. 21, 21). If so, there does not appear to be any issue 14 presently arising under §1095a(a)(3). In the absence of a wage garnishment dispute, this 15 issue does not appear ripe for adjudication. Further, it appears that Plaintiff may have 16 available administrative remedies that must be exhausted prior to seeking relief from 17 the court. As the record is not clear on the issue of whether Plaintiff has been afforded 18 3 19 20 21 22 23 24 25 26 27 28 While section 1082(f) authorizes the Secretary to audit and obtain access to records of any guaranty agency or lender, it is unclear whether this section would permit Plaintiff to maintain a claim against the Secretary under the “sue or be sued” clause. The court notes that §1082 is a lengthy and complex statute with numerous subparts that may, or may not be of assistance to Plaintiff. However, it is not the role of the court to analyze the statute and make the arguments for the parties. The court further notes that there is no doubt the “sue and be sued” clause of the HEA authorizes district courts to entertain certain claims against the Secretary. In Bartels v. Alabama Commercial College, 54 F.3d 702 (11th Cir. 1995) the Eleventh Circuit held that the “sue and be sued” clause of the HEA “through its specific mention of the federal courts, constitutes a separate and independent jurisdictional grant.” Id. at 707. The plaintiffs there alleged that the Alabama Commercial College fraudulently induced them to enroll in the school and to enter into federally guaranteed student loan contracts. On appeal, the Secretary agreed that subject matter jurisdiction was proper “because the case involves the Secretary’s administration of the GSL program (Guaranteed Student Loan Program). Id. at 707. Here, unlike the position taken by the Secretary in Bartels, the Secretary argues that the court lacks jurisdiction over Plaintiff’s claims. 4 The court notes that the Secretary argues that the request for a hearing is untimely because it provided Plaintiff with a Notice of Wage Garnishment on October 11, 2008. Plaintiff argues that her request for a hearing on December 8, 2008 was timely because she never received the October 11, 2008 Notice. -8- 09cv0006 1 an opportunity to inspect and copy pertinent records, or whether the Administrative 2 Procedures Act may afford Plaintiff some relief on her accounting claim, the court 3 grants Plaintiff 15 days leave to amend from the date of entry of this order. 4 In sum, the court determines that it presently lacks subject matter jurisdiction 5 under the Little Tucker Act and HEA to entertain Plaintiff’s claims. The court also 6 grants Plaintiff l5 days leave to amend. IT IS SO ORDERED. 7 8 DATED: September 16, 2009 9 Hon. Jeffrey T. Miller United States District Judge 10 11 cc: All parties 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -9- 09cv0006

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