United States District Court, W.D. Pennsylvania
UNITED STATES OF AMERICA, Plaintiff.
MELISSA A. DEUERLING, Defendant.
ALAN N. BLOCH, District Judge.
AND NOW, this 28th day of May, 2015, in consideration of Defendant Melissa Deuerling's pro se Motion to Dismiss Amended Complaint (Doc. No. 11) and memorandum in support thereof (Doc. No. 12), filed in the above-captioned matter on September 3, 2014, and in further consideration of Plaintiff United States of America's memorandum in opposition thereto (Doc. No. 15), filed in the above-captioned matter on September 10, 2014,
IT IS HEREBY ORDERED that, for the reasons set forth herein, Defendant's Motion is DENIED. IT IS FURTHER ORDERED, pursuant to Federal Rule of Civil Procedure 12(a)(4), that Defendant shall serve and file her answer to the Amended Complaint no later than June 18, 2015.
In this action, Plaintiff seeks to collect on student loan debts allegedly incurred by Defendant and owed to Plaintiff. Specifically, the Amended Complaint contends that Defendant executed a series of promissory notes to secure student loans from INB National Bank and NDB ("the holders"), and that Defendant defaulted on her obligations and is now indebted to Plaintiff as reinsurer of the loans in the amount of $23, 417.93, plus a filing fee, interest, and costs. Copies of the relevant promissory notes, along with the related Certificates of Indebtedness ("Certificates"), are attached as exhibits to the Amended Complaint (Doc. No. 8). The Certificates were signed under penalty of perjury, pursuant to 28 U.S.C. § 1746(2), by a loan analyst for the United States Department of Education.
According to the Certificates, the loans were guaranteed by United Student Aid Funds, Inc. ("United"), and reinsured by the Department of Education under loan guaranty programs authorized under Title IV-B of the Higher Education Act of 1965, as amended, 20 U.S.C. § 1070 et seq. (34 C.F.R. pt. 682). The Certificates further indicate that when Defendant defaulted on her obligations, the holders filed claims on United, and United paid their claims. Additionally, according to the Certificates, United was then reimbursed for those claims payments by the Department of Education under its reinsurance agreement, and United assigned its rights and titles to those loans to the Department of Education. Before the Court is Defendant's Motion to Dismiss the Amended Complaint. The Court will address each of Defendant's arguments in turn.
II. Legal Analysis
A. Lack of Jurisdiction
Defendant first contends that the Court lacks jurisdiction over this action because Plaintiff, as assignee of the promissory notes at issue, possesses only the rights of the original lenders and, therefore, may not bring suit in federal court since the original assignors could not have done so. In support of her claim, Defendant relies on the general contract law principle that an assignee stands in the shoes of the assignor. However, as Plaintiff points out in its brief, Defendant fails to take into account the relevant federal statutes that provide guaranteed loans to students like her.
Pursuant to the Higher Education Act, 20 U.S.C. § 1070 et seq., commercial lenders may provide educational loans to students, and a guaranty agency bears the risk of default. See United States v. Norcross, No. 8-37, 2008 WL 4360877, at *1 (D. Mont. Sept. 23, 2008). Indeed, the Certificates here note that, "[p]ursuant to 34 C.F.R. § 682.410(b)(4), once the guarantor [United] pays on a default claim, the entire amount paid becomes due to the guarantor as principal." (Doc. No. 8-1, at 4, 9, 12). The federal government as reinsurer then bears the guarantor's risk, and if the federal government must fulfill its obligation to pay the guarantor, the student is indebted to the federal government. See 20 U.S.C. § 1078(c)(8); United States v. Norcross, 2008 WL 4360877, at *1; United States v. Dold, 462 F.Supp. 801, 804 (D.S.D. 1978). In fact, 20 U.S.C. § 1080(b) specifically states that, upon payment of the claim, "the United States shall be subrogated for all of the rights of the holder of the obligation upon the insured loan and shall be entitled to an assignment of the note or other evidence of the insured loan by the insurance beneficiary." Additionally, 28 U.S.C. § 1345 specifically provides that federal district courts have jurisdiction over civil actions commenced by the United States, as is clearly the case here.
Thus, according to the Amended Complaint and attached Certificates, Plaintiff was subrogated for the rights of the holders of the obligations as a result of its payments to the guaranty agency, and Plaintiff appropriately commenced its collection action in this Court. Accordingly, Defendant's first argument, that this Court lacks jurisdiction to hear Plaintiff's claim pursuant to Federal Rule of Civil Procedure 12(b)(1), is rejected.
B. Failure to Join Indispensable Parties
Defendant next claims that Plaintiff has failed to join indispensable parties to this action pursuant to Federal Rules of Civil Procedure 12(b)(7) and 19. Specifically, Defendant argues that the holders and United are necessary parties because Defendant has provided no evidence of the assignments or guarantees between them, which could expose her to multiple obligations if a judgment is rendered in this case without those entities' involvement.
Rule 19 provides, in relevant part, that a party must be joined if feasible if they are subject to service of process and their joinder will not deprive the court of subject matter jurisdiction, and if "that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may... (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest." Fed.R.Civ.P. 19(a)(1)(B). If the party is deemed necessary, but joinder is not feasible, then the Court must ...