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Arsenault v. Devos

United States District Court, E.D. Michigan, Southern Division

July 26, 2019

SECRETARY BETSY DEVOS, et al., Defendants.



         This matter is presently before the Court on the motions to dismiss filed by defendants Michigan State University (“MSU”) and Great Lakes Higher Education Corporation (“Great Lakes”) [docket entries 12 and 20]. Plaintiff has filed a response in opposition to MSU's motion, and MSU has filed a reply. Plaintiff has not responded to Great Lakes' motion, and the time for him to do so has expired. Pursuant to E.D. Mich. LR 7.1(f)(2), the Court shall decide these motions without a hearing.


         This action challenges “the wrongful and unlawful denial” of plaintiff's February 5 and March 7, 2019, loan discharge applications, in which plaintiff sought “federal student loan discharges by [defendants] the U.S. Department of Education [(‘USDE')] and Secretary Bet[s]y DeVos . . . due to the invalidity and identity thefts of three [to] five USDE student loans.”[1] Compl. ¶ 8; id., Exs. 1-2. This action

also challenges, pursuant to the [Administrative Procedure Act (“APA”)], Defendants' unlawful delays of the effective date of an updated false certification discharge eligibility rule intended to clarify student loan debt discharge eligibility for involuntary USD[E] student loans made to citizens who have found themselves unknowingly and involuntarily taken advantage of by others and made the victims of identity theft.

Id. ¶ 9 (alterations added) (emphasis in original). Plaintiff states that he is a “victim[] of identity theft” and that this lawsuit is a petition to the USDE for “forgive[ness] [of] the financial responsibility to repay identity theft victim loans.” Id. ¶ 60.

         At issue in this case are a “Federal Direct PLUS Loan Master Promissory Note” from the William D. Ford Federal Direct Loan Program “for one or more Federal Direct PLUS . . . Loans, ” a “Summer 2016 Federal PLUS Loan” for $6, 133.00, and three “Federal Direct PLUS Loans” totaling $49, 195.00. Id., Exs. 4-6. The master promissory note and the loans identify plaintiff as the borrower, [2] and their stated purpose is to fund his daughter's undergraduate education at MSU. Id.

         Plaintiff claims that he “never actually signed” the master promissory note dated July 16, 2015, that bears his electronic signature. Id. ¶ 11. He “admits” that he signed the application for the Summer 2016 loan on May 1, 2016, id. ¶ 26, but states that he “never knew, never planned and never consented to be liable for” what he believes are three to five other loans that post-date the master promissory note and the Summer 2016 loan application because he did not sign “any MSU Plus Loan Application (or any other student loan application) after his May 1, 2016 signature.” Id. ¶¶ 25, 30, 51. Plaintiff alleges that at some point “after the $6, 133.00 loan was made” he contacted “the MSU Student Loan office” and Great Lakes, the loan servicer, by telephone and told them about his lack of knowledge and consent with respect to the master promissory note and any loans other than the Summer 2016 loan, yet “within days after he hung up, MSU and Great Lakes disbursed a third and then subsequently made and disbursed two to three other semester student loans without any pre-notice to him.” Id. ¶¶ 31-32. Plaintiff claims that he learned of these other loans “when I tried to get preapproved on a mor[t]gage back in Oct[.] ¶ 2016.” Id., Ex. 1 (PageID.20). He claims that these other loans “were arranged by unknown persons other than Plaintiff, ” id. ¶ 30, and that his identity was stolen. Id. ¶¶ 41-42, 57.

         In a Voluntary Statement Form he submitted to the Chesterfield Police Department, plaintiff claimed that when he asked Great Lakes for a copy of the master promissory note, Great Lakes sent him “a bill” indicating that the “loan is up to $70, 634.24.”[3] Id., Ex. 1 (PageID.20). A letter signed by a USDE Borrowing Services Hearing Official that is addressed to plaintiff and attached to the complaint as Exhibit 6 indicates that as of February 4, 2019, the outstanding balance on plaintiff's account for the three “Federal Direct PLUS Loans” was $58, 547.53, with “$51, 749.92 in unpaid principal and $6, 797.61 in accrued interest.” Id., Ex. 6 (PageID.41, 43). The letter explains that at some point after the three loans were declared to be in default, Great Lakes assigned the account to the USDE's Default Resolution Group. Id. (PageID.41). The loans were entered into the USDE's database on December 6, 2018. Id. As of the date of the letter the USDE had received no payments towards the account. Id. (PageID.42).

         The USDE hearing official's letter states that the letter is a “response to [plaintiff's] recent request for a hearing on your objection to offset your federal and/or state tax refunds and other payments for a debt held by the U.S. Department of Education, Federal Student Aid.” Id. (PageID.41). The letter contains information about how to apply for a loan discharge, including “an identity theft discharge.” Id. (PageID.42-43). It informs plaintiff that based on a review of documentary evidence, [4] plaintiff's “student aid obligation [is] past due and legally enforceable, ” and therefore, the USDE “will request the U.S. Department of the Treasury to offset your federal and/or state tax refunds and other payments to collect this debt.” Id. (PageID.43). Plaintiff “ha[d] the option to avoid [this] offset . . . by sending payment in the amount of $58, 547.53 . . . or by entering into a repayment agreement satisfactory to the Department . . . .” Id.

         On April 5, 2019, plaintiff initiated this action against Secretary of Education Betsy DeVos, the USDE, MSU, and Great Lakes “pursuant to 28 U.S.C. 1331, the Administrative Procedures Act (‘APA'), 5 U.S.C. 701-706, and the Declaratory Judgment Act, 28 U.S.C. 2201-2202, the common law and Michigan's statutory law (e.g. Michigan's Uniform Commercial Code).” Id. at 1. Plaintiff also references the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681. Id. at 11; id. ¶ 62. The complaint contains seven counts. Count I is entitled “MPN Liability Does Not Exist Because the Purported Borrower Never Actually Signed the MPN Note.” Id. at 3 (emphasis in original). Count II is entitled “Liability Admitted on ‘Summer 2016 Loan.'” Id. at 5. Count III is entitled “No Liability for Other Three to Five Loans.” Id. at 6. Count IV is entitled “Regulation of Claims Based on False Certification.” Id. at 7. Count V is entitled “Unreasonable Challenge Requirements and Deficiencies.” Id. at 11. Count VI is entitled “Fair Credit Reporting Act.” Id. Count VII is entitled “False Hearing - Appeal.” Id. at 12.

         For relief, plaintiff asks that the master promissory note “and any and all other loans (except the Summer 2016 loan actually signed by Plaintiff Arsenault) be held void and null, void and unenforceable against [him], ” id. at 14, and that the USDE be prevented from “request[ing] the U.S. Department of the Treasury . . . offset [his] federal and/or state tax refunds and other payments to collect this debt.” Id. at 15 (quoting id., Ex. 6 (PageID.43)). Plaintiff also wants defendants to notify the credit reporting agencies that “no sum is presently owed” by plaintiff and to “immediately remove all references to student loans” from his credit reports. Id. ¶ 63; id. at 14. He asks for an immediate stay of any pending “USDE administrative proceedings.” Id. at 14. In addition, plaintiff seeks accounting information regarding the loans, as well as a declaratory judgment, damages, costs, interest, and attorney fees “pursuant to 42 U.S.C. 1988.” Id. ¶ 27; id. at 14-16.

         MSU's Motion to Dismiss

         It is unclear from the face of the complaint which counts are directed specifically against MSU. Plaintiff refers to the loans in dispute as “MSU federal student loans, ” id. ¶¶ 25, 30, and indicates that the Summer 2016 loan was taken out to cover part of his daughter's undergraduate tuition at MSU. Id. ¶¶ 22, 49. He alleges that MSU disbursed three to four loans without prior notice after he communicated to its student loan office that he did not know about, and did not consent to, any loan that was not the Summer 2016 loan. Id. ΒΆΒΆ 31-32. MSU argues that dismissal of the complaint is appropriate under Fed.R.Civ.P. 12(b)(6) because the complaint fails to state a claim against this defendant. MSU also argues that ...

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