Dumas v. GC Servs., L.P.

DENEEN DUMAS Plaintiff, v. GC SERVICES, L.P., UNITED STATES DEPARTMENT OF EDUCATION, Defendants.

Case No. 18-12992

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

February 11, 2019

HON. AVERN COHN

MEMORANDUM AND ORDER GRANTING DEFENDANT DEPARTMENT OF EDUCATION'S MOTION TO DISMISS (Doc. 8)¹

I. Introduction

This is a consumer rights case. Plaintiff Deneen Dumas (Dumas) is suing defendant GC Services, L.P. (GC Services) a collection agency, and the United States Department of Education (the government) making claims related to a student loan debt. As will be explained, Dumas believes she resolved her debt when she entered into a settlement agreement with GC Services regarding its collection efforts on the debt. She asserts claims under the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and breach of contract.

Before the Court is the government's motion to dismiss on the grounds that Dumas' claims against it are barred by sovereign immunity and otherwise fail to state a plausible claim for relief. The Court agrees. Accordingly, for the reasons that follow,the motion will be granted.

II. Background

The relevant facts as gleaned from the record follow. Dumas admits she took out a student loan. At some point thereafter, collection on the loan was assigned to CG Services. Eventually, in April 2011, the debt was assigned to the government for collection.

A.

In October of 2010, Dumas sued GC Services in state court, claiming "improper and illegal collections and garnishment." Id. at Pg ID 8. To resolve the 2010 action, Dumas and GC Services entered into a settlement agreement in which GC Services paid Dumas $900.00 and agreed, "to no longer implement the garnishment of Plaintiff's wages for purposes of collecting the student loan debt at issue." Id. at Pg ID 32. The settlement agreement also contained a release and discharge provision releasing GC Services from any claims by Dumas. However, there was no reciprocal release providing that Dumas's student loan debt was discharged. Id. at Pg ID 31. The settlement agreement stated that it was the entire agreement between the parties. Id. at Pg ID 32. The government was not a party to the settlement agreement.

B.

In December 2017, Dumas received a Notice of Proposed Wage Garnishment Due to Debt Owed to U.S. Government. Id. at Pg ID 40. Dumas considered the wage garnishment a breach of her settlement agreement with GC Services based on her claim that the settlement agreement released her from liability for her student loan debt.

C.

Dumas then filed this action in state district court against GC Services following the wage garnishment. Significantly, Dumas alleges that the loan is "paid off" because the settlement agreement with GC services "specifically set forth terms that Plaintiff did not owe the debt." (Doc. 1-1, Pg ID 8, 10.) She later filed an amended complaint adding the government as a defendant. The government then removed the case to federal court.

As to the government, Dumas alleges that the government has adversely reported her student loan status on unspecified dates, resulting in a drop in her credit score. Id. at Pg ID 13. She further alleges that the government ignored her "26 page fax demonstrating she did not owe any debt" which she viewed as a request to correct her credit information. Id. at Pg ID 13-14. The fax contained correspondence regarding the wage garnishment and her settlement agreement with GC Services. Id. at Pg ID 20-45.

III. Legal Standards

The government moves to dismiss under both Rule 12(b)(1) and 12(b)(6). A motion under Rule 12(b)(1) to dismiss a complaint for lack of subject matter jurisdiction must be considered prior to other challenges since proper jurisdiction is a prerequisite to determining the validity of a claim. See Gould v. Pechiney Ugine Kulmann & Trefimetaux, 853 F.2d 445, 450 (6th Cir. 1988). When a 12(b)(1) motion is made, the plaintiff has the burden of proving jurisdiction in order to survive the motion. Moir v. Greater Cleveland Regional Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990).

In assessing a Rule 12(b)(6) motion, the district court must construe thecomplaint in the light most favorable to the plaintiff and accept all well-pleaded factual allegations as true. Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 512 (6th Cir. 2001). The factual allegations of the complaint must be enough to raise a right to relief above the speculative level. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Further, a court is "not bound to accept as true a legal conclusion couched as a factual allegation." Id.

"In deciding a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), th[e] Court may only consider 'the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings, and matters of which the [Court] may take judicial notice.'" Murray v. Geithner, 624 F. Supp. 2d 667, 671 (E.D. Mich. 2009) (citing 2 James Wm. Moore et al., Moore's Federal Practice 12.342 (3d ed. 2000).

IV. Analysis

A. 12(b)(1)

The government says that Dumas' claims against it under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et seq., and the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681, et seq must be dismissed for lack of jurisdiction because the government is immune from suit under these statutes. "It is axiomatic that the United States may not be sued without its consent and that the existence of consent is a prerequisite for jurisdiction." Munaco v. United States, 522 F.3d 651, 652 (6th Cir. 2008) (quoting United States v. Mitchell, 463 U.S. 206, 212 (1983)). "The objection to a suit against the United States is fundamental, whether it be in the form of an original action, or a set-off, or a counterclaim. Jurisdiction in either case does not exist, unless there is specific Congressional authority for it." UnitedStates v. Shaw, 309 U.S. 495, 503 (1940) (quoting Nassau Smelting & Refining Works v. United States, 266 U.S. 101, 106 (1924). "Federal courts are courts of limited jurisdiction" that "possess only that power authorized by Constitution and statute." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted). "It is to be presumed that a cause lies outside this limited jurisdiction... which is not to be expanded by judicial decree." Id. "A waiver of the Federal Government's sovereign immunity must be unequivocally expressed in statutory text, and will not be implied." Lane v. Pena, 518 U.S. 187, 192 (1996) (citations omitted). "Moreover, a waiver of the Government's sovereign immunity will be strictly construed, in terms of its scope, in favor of the sovereign." Id. A court must "construe ambiguities in favor of immunity." Id. The burden of establishing a waiver of sovereign immunity "rests upon the party asserting jurisdiction." Kokkonen, 511 U.S. at 377.

1. FDCPA

The FDCPA is intended "to eliminate abusive debt collection practices by debt collectors." 15 U.S.C. § 1692(e). The statute provides that "any debt collector who fails to comply" with the provisions of the FDCPA is subject to civil liability. Id. § 1692k(a). By its terms, however, the FDCPA excludes from the definition of "debt collector" "any officer or employee of the United States or any State to the extent that collecting to attempting to collect any debt is in the performance of his official duties." Id. § 1692a(6)(C).

The Sixth Circuit has not addressed the issue of whether the FDCPA contains a waiver of sovereign immunity. However, courts addressing the issue have uniformly held that the FDCPA does not contain such a waiver. See Wagstaff v. United StatesDep't of Education, 509 F.3d 661, 664 (5th Cir.2007); Williams v. United States Dist. Ct. for the Dist. of Newark, New Jersey, 455 F. App'x 142, 143 (3rd. Cir. 2011); Allen v. U.S. Dep't of Education, 755 F. Supp. 2d 122, 124 (D.D.C. 2010); Ha v. United States Dep't of Education, 680 F. Supp. 2d 45, 47 (D.D.C. 2010); Coble v. Wilkins, No. 1:11CV211, 2012 WL 665976, at *2 (M.D.N.C. Feb.29, 2012); Manalansan-Lord v. Direct Loan Servicing Center, No. 4:08cv0676 TCM, 2008 WL 4693410, at *2 (E.D. Mo. Oct. 22, 2008); Little v. Tenn. Student Assistance Corp., 537 F. Supp. 2d 942, 944 (W.D. Tenn. 2008); Sorrell v. Ill. Student Assistance Comm'n, 314 F. Supp. 2d 813, 817 (C.D. Ill. 2004).

In accordance with these decisions, the Court similarly concludes that the FDCPA does not contain an express waiver of sovereign immunity. Therefore, the Court will not assert jurisdiction over Dumas' claim under the FDCPA against the government in accordance with "the longstanding principle that only Congress can waive an executive agency's sovereign immunity." Wagstaff, 509 F.3d at 664.

To the extent that Dumas argues that the government itself has waived its immunity, this argument fails. The ability to waive sovereign immunity lies with Congress alone; thus, any argument that the federal government or one of its agencies waived its immunity "by acting through a third party to collect on [a] student loan debt" must be rejected. Wagstaff, 509 F.3d at 664. See also Ha, 680 F. Supp. 2d at 47; United States v. Skutt, No. 11-13218, 2012 WL 1956855, at *5-6 (E.D. Mich. May 10, 2012), report and recommendation adopted, No. 11-CV-13218, 2012 WL 1957303 (E.D. Mich. May 31, 2012) (dismissing FDCPA counterclaim against the government in a student loan case based on governmental immunity). Therefore, the government isimmune from any potential liability under the FDCPA. Dumas' claim must therefore be dismissed.

2. FCRA

The Sixth Circuit has also has not addressed the government's sovereign immunity and the FCRA and, as the government notes, circuits have differed. The Ninth Circuit recently found the FCRA does not waive sovereign immunity for damages against the government. Daniel v. National Park Service, 891 F.3d 762, 776 (9th Cir. 2018). In Daniel, the Ninth Circuit noted that while the FCRA broadly defines "person"...