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Edmond v. American Education Services

October 28, 2010


The opinion of the court was delivered by: John D. Bates United States District Judge


This matter is before the Court on the Motion to Dismiss Submitted by the Pennsylvania Higher Education Assistance Agency/American Education Services and on plaintiff's Motion for Equitable Relief by Specific Performance. For the reasons stated below, the Court will dismiss Counts I, II, IV and V of plaintiff's Amended Complaint and will deny plaintiff's request for equitable relief.


While attending Suffolk University Law School, see Plaintiff's Amended Complaint ("Am. Compl.") ¶ 2, plaintiff obtained a student loan from Bank of America, N.A.; Doris Muellner, his common-law spouse, id. ¶ 13, was the co-signor. See Motion to Dismiss Submitted by the Pennsylvania Higher Education Assistance Agency/American Education Services ("Def.'s Mot.") [Dkt. #4], Ex. 1 (Cosigned Loan Request/Credit Agreement) at 1 & 2-3 (Note Disclosure Statements) (exhibit numbers designated by the Court).*fn1 The Pennsylvania Higher Education Assistance Agency, d/b/a American Education Services ("AES"), serviced the loans.*fn2 See Am. Compl. ¶¶ 3-4; Def.'s Mot. at 1-2. According to plaintiff, AES erroneously reported his accounts delinquent to three credit reporting agencies, Am. Compl. ¶ 13, denied his request for forbearance, id. ¶ 25, and subjected him and Ms. Muellner to "shrill, harassing and predatory acts" in its attempt to collect the debt, see id. ¶¶ 22-23. He learned of the alleged delinquency "when Bank of America notified [Ms.] Muellner that the joint credit card account she shares with [plaintiff] would be subjected to a reduction in available credit" due to the delinquent student loan. Id. ¶ 14.

Plaintiff claims that AES breached its covenant of good faith (Count I), violated the Fair Credit Reporting Act (Count II), defamed him (Count III), engaged in unfair and deceptive business practices (Count IV), and violated the Fair Debt Collection Practices Act (Count V). He demands compensatory damages among other relief. See id. at 15.


A. Dismissal Under Rule 12(b)(6)

The Federal Rules of Civil Procedure require that a complaint contain "'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); accord Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam). Although "detailed factual allegations are not necessary to withstand a Rule 12(b)(6) motion to dismiss, to provide the grounds of entitle[ment] to relief, a plaintiff must furnish more than labels and conclusions or a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555-56 (internal quotation marks omitted); see also Papasan v. Allain, 478 U.S. 265, 286 (1986). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. __, __, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570); Atherton v. District of Columbia Office of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009), cert. denied, 130 S.Ct. 2064 (2010). A complaint is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. However, "the court need not accept inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint." Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). Nor must the court accept "a legal conclusion couched as a factual allegation." Iqbal, 129 S.Ct. at 1949-50 (citation omitted); see also Aktieselskabet AF 21. November 2001 v. Fame Jeans Inc., 525 F.3d 8, 17 n.4 (D.C. Cir. 2008) (stating that the court has "never accepted legal conclusions cast in the form of factual allegations"). "[A] naked assertion . . . gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility." Twombly, 550 U.S. at 557.

B. Breach of Covenant of Good Faith (Count I)

"Plaintiff alleges that AES breached its contractual duty to act in good faith by willfully choosing to inflict harm through deceptive, misleading and predatory behavior and practices it knew or should have known would cause harm." Am. Compl. ¶ 31. AES argues that the complaint not only fails to allege the existence of a contract between the parties but also "fail[s] to plead any facts that might constitute an agreement or meeting of the minds between the plaintiff and AES as a loan servicer, and thus cannot establish an implied contract." Memorandum of Law in Support of the Motion to Dismiss Submitted by the Pennsylvania Higher Education Assistance Agency/American Education Services (Incorrectly Identified as American Educational Services) ("AES Mem.") at 3. Further, AES asserts that its contract with the lender, Bank of America, "does not create contractual privity between AES and [p]laintiff." Id. at 4.

A claim for breach of contract includes four elements: "(1) a valid contract between the parties; (2) an obligation or duty arising out of the contract; (3) a breach of that duty; and (4) damages caused by breach." Ihebereme v. Capital One, N.A., No. 10-1106, 2010 WL 3118815, at *3 (D.D.C. Aug. 9, 2010) (quoting Tsinolas Realty Co. v. Mendez, 984 A.2d 181, 187 (D.C. 2009)) (internal quotation marks omitted). "Under District of Columbia law, every contract contains within it an implied covenant of both parties to act in good faith and damages may be recovered for its breach as part of a contract action." Choharis v. State Farm Fire & Cas. Co., 961 A.3d 1080, 1087 (D.C. 2008) (citing Murray v. Wells Fargo Home Mortg., 953 A.2d 308, 321 (D.C. 2008)). This implied covenant means that "neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Allworth v. Howard Univ., 890 A.2d 194, 201 (D.C. 2006) (citations omitted).

Here, plaintiff alleges that he "entered into a loan agreement with a private lender," Am. Compl. ¶ 2, and that AES is the loan servicer, id. ¶ 3. Aside from his conclusory allegation that "AES breached its contractual duty," id. ¶ 31, nowhere in the complaint does plaintiff allege the existence of a contract with AES. "Without a contractual duty, there can be no breach of contract." Ihebereme, 2010 WL 3118815, at *4. Accordingly, the Court will grant AES's motion to dismiss Count I of the Amended Complaint because the pleading fails to adequately allege a breach of contract claim.*fn3 See Shugart v. Ocwen Loan Servicing, LLC, No. 2:09-cv-1123, 2010 WL 3894155, at *3 (S.D. Ohio Sept. 28, 2010) (dismissing breach of contract claim against "a servicer of the note and mortgage, not a party to or holder of or assignee of the note or mortgage," where conclusory allegation that the servicer breached its contract with plaintiff "does not suffice to allege the existence of contractual privity between Plaintiff and [the servicer]"); Griley v. Nat'l City Mortg., No. CIV. 2:10-1204, 2010 WL 3633766, at *6 (E.D. Cal. Sept. 14, 2010) (dismissing breach of contract claim where "plaintiff's pleading amounts to bare recitation of the elements of breach of contract"); Burke v. 401 N. Wabash Venture, LLC, No. 08 C 5330, 2010 WL 2330334, at *2 (N.D. Ill. June 9, 2010) ("The Court fails to see how, post- Iqbal, a plaintiff could state a claim for breach of contract without alleging which provision of the contract was breached."); Johnson v. Homeownership Preservation Found., No. 09-600, 2009 WL 6067018, at *7 (D. Minn. Dec. 18, 2009) (Magistrate Report and Recommendation to dismiss a pro se plaintiff's breach of contract claim because the amended complaint "failed to plead facts from which this Court could determine that it was plausible that a contract was formed and breached"), adopted, 2010 WL 1050333 (D. Minn. Mar 18, 2010).

C. Fair Credit Reporting Act and Defamation (Counts II and III)

Plaintiff describes AES as both a loan servicer, Am. Compl. ¶ 3, and a data furnisher for purposes of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq., Am. Compl. ¶ 34. Accepting as true plaintiff's allegation that AES reported his loan delinquent to the major credit bureaus, id. ¶ 13; see Plaintiff's Memorandum in Opposition to Motion to Dismiss ("Pl.'s Opp'n") at 6, the Court deems AES a data furnisher subject to the provisions set forth in 15 U.S.C. § 1681s-2. See Carney v. Experian Info. Solutions, Inc., 57 F. Supp. 2d 496, 501 (W.D. Tenn. 1999) ("[C]ommon sense dictates that the term [data furnisher] would encompass an entity . ...

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