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National Education Financial Services, Inc. v. U.S. Bank, National Association

United States District Court, Eastern District of Pennsylvania

March 6, 2014

NATIONAL EDUCATION FINANCIAL SERVICES, INC., et al.,
v.
U.S. BANK, NATIONAL ASSOCIATION.

MEMORANDUM

L. Felipe Restrepo United States District Court Judge

On November 28, 2012, National Education Financial Services, Inc. and National Education Services, LLC (collectively “National Education”) filed suit against U.S. Bank, National Association. Now before the Court is Defendant’s motion to dismiss, in part, Plaintiffs’ Second Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons that follow, the motion will be granted.

I. FACTS AND PROCEDURAL HISTORY

A. The Formation of a Contract

The facts, as alleged in the Second Amended Complaint (“SAC”), are as follows: Plaintiffs are “established marketer[s], originator[s] and servicer[s] of federal and private student loans both for many student lending institutions and on [their] own account.” SAC ¶ 7. Plaintiffs market these “education loans by working closely with college and university financial aid offices.” Id. ¶ 8. In or around December of 2010, Defendant contacted Plaintiffs and expressed interest “in contracting National Education to market U.S. Bank’s student loan product.” Id. ¶ 12. In essence, Plaintiffs, using their expertise and contacts, “would market the U.S. Bank student loan product to hundreds of schools and incalculable numbers of students.” Id. ¶ 13.

On or about February 18, 2011, the parties entered into a marketing agreement (“the Agreement”) that is the basis for the dispute here. Id. ¶ 15. The Agreement was derived from a template provided by Plaintiffs, but substantially edited by Defendant. Id. ¶ 16. Defendant was represented by counsel, while Plaintiffs, two related corporations with more than fifty employees, Oral Arg. Tr. 4:5-7, ECF No. 23, were not represented, SAC ¶ 16.

B. Relevant Terms of the Contract

Important terms of the Agreement, ECF No. 27, Ex. A, include:

• Section 2.1: “Obligations of U.S. Bank.” Section 2.1 provides that Defendant agrees to (a) cooperate with Plaintiffs in the marketing of student loans; (b) let Plaintiffs use Defendant’s marks; (c)-(d) provide timely responses to Plaintiffs; (e) monitor the business that comes from Plaintiffs’ work under the contract so that Plaintiffs are adequately compensated; and, (f) provide a unique code that would allow Plaintiffs to list co-branded student loans on industry lender lists. Id. At 3.
• Section 2.6: “Reputation.” Section 2.6 provides that each party acknowledges the importance of good will and the good reputation of the other parties in the education loan environment, and thus agrees to “take no action . . . that reasonably may be anticipated to reflect badly on any of the other Parties.” Id at 5.
• Section 5: “Termination.” Section 5 provides detail about the termination process. Section 5.1 provides that the Agreement shall last for two years, “unless otherwise terminated earlier in accordance with Section 5.2 or Section 5.3.” Section 5.2 (“General Termination”) provides that “any Party may terminate this Agreement for convenience upon 60 days written notice to the other Parties.” Id at 7-8.
• Section 11.1: “Governing Law.” Section 11.1 selects Delaware law as governing the terms of the Agreement. Id at 13.

C. The Performance and Termination of the Contract

The SAC further alleges that after executing the Agreement, Plaintiffs shifted approximately eighty-five percent of their resources to promoting and marketing Defendant’s loan products. Id ¶ 20. In doing so, Plaintiffs moved their business away from other national lending institutions and turned down opportunities for new business. Id The SAC further explains that the market for student loans is a highly competitive one, centering around a 75-day “window of opportunity,” where schools decide what lenders may market their products to their students. Id. ¶ 22. This time period is resource intensive, and requires a large-scale commitment of resources from businesses like Plaintiffs. Id.

Despite the Agreement being signed late in the year, the first year was successful for Plaintiffs, who procured approximately four million dollars in disbursement volume for Defendant. Id. ¶ 28. During year two of the Agreement, Plaintiffs continued their work for Defendant, including during the intensive “window of opportunity.” Id. Plaintiffs did so with the active encouragement of Defendant, including on March 8 and March 26, 2012. Id. ¶ 30. However, on March 27, 2012, Defendant directly notified educational institutions that it was immediately ending its student-loan line of business, including the very student-loan products that Plaintiffs were actively marketing. Id. ΒΆ 32. Two days later, on March 29, 2012, Defendant notified Plaintiffs of its decision to leave the market and terminate the Agreement. ...


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