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Washkoviak v. Student Loan Marketing Association

June 8, 2006


Appeal from the Superior Court of the District of Columbia (CAB-9282-01) (Hon. James E. Boasberg, Trial Judge).

The opinion of the court was delivered by: Ferren, Senior Judge

Argued January 11, 2006

Before WASHINGTON, Chief Judge, RUIZ, Associate Judge, and FERREN, Senior Judge.

Opinion for the court by Senior Judge FERREN.

Concurring opinion by Associate Judge RUIZ, at page 29.

Appellants John Washkoviak and Amy Dziondziakowski appeal an order of the trial court dismissing their amended complaint. They allege that appellee, the Student Loan Marketing Association ("Sallie Mae"), violated provisions of the District of Columbia Consumer Protection Procedures Act and the common law of the District of Columbia. In its order, the trial court concluded that appellants did not establish sufficient contacts between their claims and the District of Columbia to justify application of District of Columbia law. Appellants contend that (1) the trial court improperly considered factual assertions extrinsic to the pleadings in ruling for Sallie Mae, and that (2) the trial court erred in concluding that District of Columbia law should not be applied to appellants' complaint. We reverse and remand the case to the trial court for further proceedings consistent with this opinion.


A. The Parties

Appellants were the named plaintiffs in what they characterized as a nationwide class action suit against Sallie Mae.*fn1 Congress established Sallie Mae as "a private corporation which will be financed by private capital and which will serve as a secondary market and warehousing facility for student loans . . . and which will provide liquidity for student loan investments." 20 U.S.C. § 1087-2 (a) (2000). By law, Sallie Mae must "maintain its principal office in the District of Columbia and shall be deemed, for purposes of venue and jurisdiction in civil actions, to be a resident and citizen thereof." § 1087-2 (b)(1). However, "[o]ffices may be established by [Sallie Mae] in such other place or places as it may deem necessary or appropriate for the conduct of its business." Id.

In 1996, Congress enacted the Student Loan Marketing Reorganization Act of 1996, authorizing a restructuring that was to include the transfer of all Sallie Mae common shares to a holding company. 20 U.S.C. § 1087-3 (a) (2000). According to the terms of the reorganization:

On the reorganization effective date, employees of [Sallie Mae] shall become employees of the Holding Company (or any subsidiary of the Holding Company), and the Holding Company (or any subsidiary of the Holding Company) shall provide all necessary and appropriate management and operational support (including loan servicing) to [Sallie Mae], as requested by [Sallie Mae]. [Sallie Mae], however, may obtain such management and operational support from persons or entities not associated with the Holding Company.

§ 1087-3 (c)(3). The statute further provided that until its "dissolution date, [Sallie Mae] shall continue to have all of the rights, privileges and obligations set forth in, and shall be subject to all of the limitations and restrictions of, section 1087-2 of this title, and [Sallie Mae] shall continue to carry out the purposes of such section." § 1087-3 (c)(1).

Accordingly, the statute contemplated an effective date of "reorganization" and a subsequent date for Sallie Mae's "dissolution." But the statute did not specify either date. In fact, the statute required shareholder approval before the reorganization could commence. § 1087-3 (b). Although the statute suggested methods by which the Board of Directors could effectuate the reorganization, it left the precise methods to the discretion of the Board of Directors, subject to approval by the shareholders. § 1087-3 (a).*fn2

B. The 2001 Complaint

On December 21, 2001, appellants filed their original complaint against Sallie Mae. Although they characterized it as a class action complaint, they concede that they never moved for certification as required by D.C. Super. Ct. Civ. R. 23-I (b)(1).*fn3 Appellants' original complaint identified both Washkoviak and Dziondziakowski as Wisconsin residents. According to the complaint, Washkoviak acquired a federally guaranteed student loan through the International Beauty Academy, where he was enrolled between 1987 and 1989. Although the Great Lakes Higher Education Corporation "originated" the loan, Washkoviak consolidated his loans with Sallie Mae in 1992. The complaint further stated that Dziondziakowski, who attended both Marquette University and the University of Wisconsin--Parkside, acquired a federally guaranteed student loan through Sallie Mae, which subsequently refinanced the loan.

Both Washkoviak and Dziondziakowski signed promissory notes payable to Sallie Mae. Each listed a Wisconsin address on the note. Washkoviak's promissory note indicated that all payments were to be sent to an address in Merrifield, Virginia, while Dziondziakowski's note instructed her to send her payments to an office in Wilkes-Barre, Pennsylvania. Although both promissory notes contained the following language -- "this application/promissory note will be governed by Federal Law applicable to consolidation loans" -- neither included a choice of law provision.

The allegations in the complaint concerned the manner in which Sallie Mae collects and discloses late fees. Appellants' promissory notes authorize Sallie Mae to collect a six percent fee for each late payment. According to the complaint, Sallie Mae engages in the practice of "pyramiding," by which it applies payments first to all outstanding late fees, and then, only after all late fees have been paid, to the required monthly payment of principal and interest. As a result, if a borrower's payment proves sufficient to cover the borrower's required monthly payment, but insufficient to cover that payment combined with any late fees owed, an outstanding balance, equal to the amount of the unpaid late fees, remains on the required monthly payment. Accordingly, the borrower is subsequently charged additional late fees for failing to pay the entire required monthly payment (including late fees) on the scheduled date. The complaint also said that Sallie Mae misrepresents the manner in which it collects late fees and misleads borrowers about the amount of late fees they owe.

Appellants then claimed that Sallie Mae's actions violated D.C. Code § 28-3904 (f) (2001),*fn4 a disclosure provision of the District of Columbia Consumer Protection Procedures Act ("DCCPPA"), as well as D.C. Code ยง 28-3310 (b)(2) (2001), which prohibits multiple delinquent or late charges "for the same delinquent or late periodic ...

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