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Lewis v. Pennsylvania Higher Education Assistance Agency

United States District Court, E.D. Kentucky, Central Division, Frankfort

March 1, 2017

MICHAEL THOMAS LEWIS, Plaintiff,
v.
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY and EDUCATIONAL CREDIT MANAGEMENT CORPORATION, Defendants.

          MEMORANDUM OPINION & ORDER

          Gregory F. Van Tatenhove United States District Judge

         Michael Thomas Lewis, the pro se Plaintiff, filed a verified complaint alleging violation of 42 U.S.C. § 1985, abuse of process, conversion, and intentional infliction of emotional distress by the Defendants, Pennsylvania Higher Education Assistance Agency and Educational Credit Management Corporation. [R. 1.] Following a pro se Chapter 7 bankruptcy proceeding in the Southern District of Indiana Bankruptcy Court, the Plaintiff believed that student loan debt in the amount of $28, 883.36 was discharged. The interest in the student loan, originally held by Nelnet, was assigned to the Pennsylvania Higher Education Assistance Agency (PHEAA) and later the Educational Credit Management Corporation (ECMC). Following an intervening Chapter 13 bankruptcy proceeding where the Plaintiff also petitioned the court pro se, PHEAA and later ECMC attempted to collect on the outstanding obligation. ECMC ultimately resorted to serving the plaintiff's employer with a wage garnishment order. Presently before the Court is the Defendants' Motion to Dismiss [R. 9], which, for the reasons set forth below, will be GRANTED.

         I

         A

         Given the present context, the factual summary that follows is taken from the verified complaint [R. 1] and construed in favor of the plaintiff. See Crugher v. Prelesnik, 761 F.3d 610, 614 (6th Cir. 2014) (citation omitted). As Mr. Lewis is appearing pro se, his complaint is held to less stringent standards than those drafted by attorneys. Burton v. Jones, 321 F.3d 569, 573 (6thCir. 2003); Hahn v. Star Bank, 190 F.3d 708, 715 (6th Cir. 1999). But, in the context of a Motion to Dismiss, the Court “need not accept as true legal conclusions or unwarranted factual inferences.” Id. (citation omitted). The Plaintiff filed a pro se voluntary Chapter 7 bankruptcy petition in October, 2005, in the Southern District of Indiana Bankruptcy Court. [R. 1 at 2.] In this bankruptcy petition, case number 05-26202-JKC-7A, the Plaintiff notified the bankruptcy court of student loan obligations to Nelnet in the amount of $28, 883.36. [Id. at 2-3.] Plaintiff alleges that Nelnet held an unsecured non-priority claim in these loans and that the student loans were “incurred through a subsidiary of U.S. Bank, EFS Services” but “guaranteed by PHEAA.” [Id. at 3.]

         During the Chapter 7 proceedings, notices were sent to all creditors which “indicat[ed] February 14, 2006 as the deadline to file a complaint objecting to discharge of the debtor…” [R. 1 at 3.] No creditors objected by the filing deadline. See Id. “On May 16, 2006 the debtor Plaintiff was awarded a general discharge that made no mention that the student loans were not included in the discharge or that the loans were non-dischargeable.” [Id.] Later, in June, Nelnet filed a claim for money loaned against the estate. Nelnet confirmed that “[t]here is no collateral or lien securing your claim” when notifying the estate of the student loan debt. Plaintiff, acting pro se, alleges insufficient process in claiming “immunity from the discharge of student loan under 11 U.S.C. § 524(8)(a) Exemptions.” [See R. 1 at 3-4.] Plaintiff also alleges that the student loans should be discharged because there are a lack of records that confirm that the loans were held by “a government unit, institutes of higher education or the corporate contracted guarantor during the two and a half year pendency of the bankruptcy case as required by legislative law and intent.” [R. 1 at 4.]

         In November, 2006, Nelnet received $643.27 from the bankruptcy trustee following liquidation of nonexempt assets towards the outstanding student loan obligation of $29, 371.51. [Id.] Plaintiff argues that “[t]here has not been a judgment or order under case number 05-26202-JKC-7A that states that the student loans were non-dischargeable or that the loans can be collected on.” [R. 1 at 6.] Plaintiff states that both Nelnet and PHEAA “honored the bankruptcy discharge for approximately 8 years.” [Id.] In November, 2012, the Plaintiff voluntarily filed a pro se Chapter 13 bankruptcy petition that was assigned case number 12-13217-JKC-13. [Id.]

         On April 12, 2013, PHEAA “filed a proof of claim in [the] subsequent bankruptcy case for the amount of $38, 510.59, which included over $10, 000.00 in interest from the time of the initial bankruptcy.” [Id.] Plaintiff then states that in July, 2013, PHEAA assigned its interest in the uncollected loans to Educational Credit Management Corporation (ECMC) but that this transfer was improper as these loans were “subject to a discharge in a subsequent bankruptcy case.” [R. 1 at 8.] Plaintiff objected to the claim on August 6, 2013, alleging that they had been previously discharged. [Id.] ECMC responded to the objection raising the defense of res judicata, as ECMC believed the previous chapter 7 proceedings had served as a final judgment on the merits. Plaintiff then concedes that in the chapter 13 proceedings, “[a]lthough legally a mischarge [sic] of justice, ECMC was awarded a judgment under 12-13217-JKC-13 in ECMC favor.” [R. 1 at 8.]

         Despite an adverse ruling in the Chapter 13 bankruptcy court proceedings, the Plaintiff insists that the student loans were discharged in the Chapter 7 proceedings pursuant to 11 U.S.C. § 524 and 18 U.S.C. § 1509. [See R. 1 at 8-9.] On October 6, 2013, the Chapter 13 bankruptcy proceedings were closed and shortly thereafter dismissed because the Plaintiff failed to make payments as required by the plan. [See R. 1 at 9.] While the timeline is not sufficiently clear from the complaint, the Plaintiff does allege that on March 12, 2015, PHEAA officially assigned its interest in the student loans to ECMC and ECMC accepted rights as guarantor by assignment. [See R. 1 at 9.] Following this transfer of interest, Plaintiff was notified that his allegedly discharged student loan obligations were not discharged by either bankruptcy proceeding and that the outstanding loan was in default and had increased in value to $57, 527.61. [Id.]

         Plaintiff attempted to obtain additional information concerning his loan obligation from ECMC, PHEAA, and the Department of Education. Upon receiving unsatisfactory responses, Plaintiff faxed a copy of the original chapter 7 general discharge to prove that the student loan debt had been discharged and to warn ECMC that awards have been given to individuals that are repeatedly harassed by collection attempts on debts that were not actually owed. [R. 1 at 9.] Plaintiff is employed by Allegis Group. In 2015, Allegis Group was presented with an “Order of Withholdings” by ECMC that required the employer to garnish plaintiff's wages. [Id. at 10.] This Order of Withholdings “made no mention of the Title 11 bankruptcy discharge that ECMC was bound by.” [Id.] Beginning March 23, 2015, Allegis Group began complying with the order and garnished plaintiff's wages.[1]

         In the Complaint Mr. Lewis alleges that PHEAA violated 42 U.S.C. § 1985 and the civil tort of abuse of process. Further allegations are raised against ECMC for violating 42 U.S.C. § 1985, conspiracy to interfere with civil rights, as well as the civil tort of abuse of process. ECMC is also charged with the civil tort of conversion for serving the plaintiff's employer with a garnishment order, and ECMC and PHEAA are both accused of intentional infliction of emotional distress. [See R. 1 at 14-15.] A jury trial is demanded.

         B

         This case is before the Court pursuant to its diversity jurisdiction under 28 U.S.C. § 1332(a)(1). Plaintiff Michael Thomas Lewis resides in the Eastern District of Kentucky in Shelbyville, Kentucky. [R. 1 at 2.] Defendant Pennsylvania Higher Education Assistance Agency is a corporate entity with its principal place of business in Harrisburg, Pennsylvania. Defendant Educational Credit Management Corporation is a corporate entity located in Oakdale, Minnesota. [Id.] The Plaintiff alleges that the amount in controversy is in excess of $75, 000, therefore this court has subject matter jurisdiction as the parties are diverse. Further, the Plaintiff also alleges that jurisdiction is appropriate in this civil action as the dispute concerns a federal question, “federal court proceedings and the application of federal regulations.” [R. 1 at 2.] In the Joint Motion to Dismiss ...


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