In re Homaidan

640 B.R. 810

IN RE: Hilal Khalil HOMAIDAN, aka Helal K Homaidan, Debtor.

In re: Reeham Youssef, aka Reeham Navarro Youssef, aka Reeham N. Youssef, Debtor.

Hilal Khalil Homaidan on behalf of himself and all others similarly situated,

and

Reeham Youssef, Plaintiffs,

v.Sallie Mae, Inc., Navient Solutions, LLC, Navient Credit Finance Corporation, Defendants.

Case No. 08-48275-ess

Case No. 13-46495-ess

Adv. Pro. No. 17-1085-ess

United States Bankruptcy Court, E.D. New York.

Signed July 8, 2022

George F. Carpinello, Esq., Adam Shaw, Esq., Robert C Tietjen, Esq., Boies Schiller Flexner LLP, 30 South Pearl Street (11th Floor), Albany, NY 12207, Attorneys for Plaintiffs

Thomas M. Farrell, Esq., McGuire Woods LLP, JPMorgan Chase Tower, 600 Travis Street (Suite 7500), Houston, TX 77002, Attorneys for Defendants

Jason W. Burge, Esq., Kathryn J. Johnson, Esq., Fishman Haygood LLP, 201 Saint Charles Avenue (Suite 4600), New Orleans, LA 70170, Attorneys for Plaintiffs

Lynn E. Swanson, Esq., Peter N. Freiberg, Esq., Jones, Swanson, Huddell & Garrison, LLC, 601 Poydras Street (Suite 2655), New Orleans, LA 70130, Attorneys for Plaintiffs

Shawn R. Fox, Esq., Joseph A. Florczak, Esq., Dion W. Hayes, Esq., K. Elizabeth Sieg, Esq., McGuireWoods LLP, 1345 Avenue of the Americas (7th Floor), New York, NY 10105, Attorneys for Defendants

MEMORANDUM DECISION ON THE PLAINTIFFS’ MOTION FOR A TEMPORARY RESTRAINING ORDER

ELIZABETH S. STONG, UNITED STATES BANKRUPTCY JUDGE

Introduction

Before the Court is the motion for a temporary restraining order of Hilal Khalil Homaidan and Reeham Youssef (the "Plaintiffs"). The Plaintiffs seek, on behalf of themselves and all other similarly situated within a putative class, a temporary restraining order immediately to enjoin defendants Navient Solutions, LLC and Navient Credit Finance Corporation (together, "Navient") from continuing their collection efforts on certain loans held by the Plaintiffs and the members of the putative class (the "TRO Motion"). The Plaintiffs seek this relief on grounds that these private student loans are within the scope of their Chapter 7 bankruptcy discharges, and that Navient has disregarded that fact as it has continued its collection efforts for many years, including for the five years that this action has been pending.

In this adversary proceeding, the Plaintiffs allege, as to themselves and the putative class, that they attended or intended to attend Title IV institutions and received private loans owned or serviced by the Defendants that exceeded the cost of attendance at such institutions as defined by Internal Revenue Code Section 221(d), that they obtained bankruptcy discharges after January 1, 2005, that they have not reaffirmed their loans, and that they have been, and may continue to be, subjected to the Defendants’ actions to collect on these loans.

Specifically, the Plaintiffs argue that their private student loans were discharged in their Chapter 7 bankruptcy cases because these loans do not meet the requirements to be nondischargeable under Bankruptcy Code Section 523(a)(8)(B) – that is, their loans are not "qualified education loan[s]" pursuant to Internal Revenue Code Section 221(d)(1). Namely, the Plaintiffs assert their loans do not meet Internal Revenue Code Section 221(d) ’s requirement that a loan must not exceed the cost of attendance at a Title IV institution to be a "qualified education loan." As such, they assert, the Defendants’ continuing collection efforts on their outstanding private student loans that were discharged violate the statutory bankruptcy discharge contained in Bankruptcy Code Section 524(a)(2). And at this stage in these proceedings, the Plaintiffs argue, the requirements for interim injunctive relief in favor of the putative nationwide class have been met, and these collection efforts should be stopped.

Navient opposes the TRO Motion, on several grounds. As a threshold matter, they argue that the only pathway to a remedy for a violation of the bankruptcy discharge is a proceeding or motion for contempt. Navient states that this Court lacks the jurisdiction to address violations of discharge orders entered by other bankruptcy courts. Navient also argues that certain putative class members lack Article III standing to seek relief against Navient, as they have suffered no harm.

In addition, Navient contends that a temporary restraining order is not warranted here, as the Plaintiffs cannot establish a likelihood of success on the merits because, among other reasons, each plaintiff certified on their loan documents that their loans were within the cost of attendance at a Title IV institution. Further, Navient argues that irreparable harm is not present here, as the Plaintiffs substantially delayed in seeking this relief. And finally, Navient argues that the public interest weighs against granting the TRO Motion, as injunctive relief may harm certain members of the putative class.

For these reasons, among others, Navient argues that the Plaintiffs cannot meet their burden, and that the TRO Motion should be denied.

Jurisdiction

This Court has jurisdiction over this adversary proceeding pursuant to Judiciary Code Sections 157(b)(1) and 1334(b), and the Standing Order of Reference dated August 28, 1986, as amended by the Order dated December 5, 2012, of the United States District Court for the Eastern District of New York. In addition, this Court may adjudicate these claims to final judgment to the extent that they are core proceedings pursuant to Judiciary Code Section 157(b).

Background

Mr. Homaidan's Bankruptcy Case

On December 4, 2008, Hilal Khalil Homaidan, aka Helal K. Homaidan, filed a petition for relief under Chapter 7 of the Bankruptcy Code, Case No. 08-48275. On December 19, 2008, Mr. Homaidan filed his schedules and statements, and on March 9, 2009, he filed certain amended schedules. In re Homaidan , Case No. 08-48275, ECF Nos. 11, 19. In his Schedule F, "Creditors Holding Unsecured Nonpriority Claims," he listed "Tuition Answer" loans owed to Sallie Mae in the amounts of $7,983.19 and $8,190.11. In re Homaidan , Case No. 08-48275, ECF No. 19. On January 15, 2009, the Chapter 7 Trustee filed a "no-asset" report stating that "[t]he estate has no non-exempt property to distribute." In re Homaidan , Case No. 08-48275, Doc. entry dated January 15, 2009. On April 9, 2009, the Court entered an order discharging Mr. Homaidan, and on March 5, 2010, his bankruptcy case was closed.

On April 14, 2017, Mr. Homaidan moved to reopen his bankruptcy case to obtain a determination of the dischargeability of certain of his student loans, and on May 26, 2017, the Court entered an order reopening the case.

Ms. Youssef's Bankruptcy Case

On October 29, 2013, Reeham Youssef, aka Reeham Navarro Youssef, aka Reeham N Youssef, filed a petition for relief under Chapter 7 of the Bankruptcy Code, Case No. 13-46495. On October 29, 2013, Ms. Youssef filed her schedules and statements. In re Youssef , Case No. 13-46495, ECF No. 1. In her Schedule F, "Creditors Holding Unsecured Nonpriority Claims," she listed "Student Loan[s]" owed to Sallie Mae in the amounts of $9,055.00, $13,413.00, $6,415.00, $35,580.00, $23,596.00, $4,095.00, $16,275.00 and $29,493.00. Id . On December 13, 2013, the Chapter 7 Trustee filed a "no-asset" report stating that "there is no property available for distribution from the estate over and above that exempted by law." In re Youssef , Case No. 13-46495, Doc. entry dated December 13, 2013. On February 6, 2014, the Court entered an order discharging Ms. Youssef, and on that same day, her bankruptcy case was closed. In re Youssef , Case No. 13-46495, ECF No. 9.

On October 1, 2019, Ms. Youssef moved to reopen her bankruptcy case to obtain a determination of the dischargeability of certain of her student loans, and on December 4, 2019, the Court entered an order reopening the case.

Selected Procedural History of this Adversary Proceeding

On June 23, 2017, Mr. Homaidan commenced this adversary proceeding (the "Adversary Proceeding") as a putative class action, on behalf of himself and others similarly situated, by filing a complaint against SLM Corporation, Sallie Mae, Inc., Navient Solutions, LLC, and Navient Credit Finance Corporation. ECF No. 1. As to himself, Mr. Homaidan seeks a determination that certain debts that he incurred as a student are not nondischargeable student loan debts under Bankruptcy Code Section 523(a)(8)(B), and an award of damages, including attorneys’ fees and costs, for the Defendants’ willful violations of the bankruptcy discharge order entered in his case. And as to the class, he seeks the same the relief.

On October 30, 2017, Navient filed a motion to compel arbitration or, in the alternative, to dismiss the Adversary Proceeding (the "Motion to Compel or Dismiss") and a Memorandum of Law in Support of the Motion to Compel or Dismiss (the "Mot. to Compel or Dismiss Mem."). ECF Nos. 16, 17. In the Motion to Compel or Dismiss, Navient argued that Mr. Homaidan's private Tuition Answer Loans "constitute obligations to repay funds received as educational benefits, and are therefore excepted from discharge under [Section] 523(a)(8)(A)(ii) of the Bankruptcy Code." Mot. to Compel or Dismiss Mem. at 23-24. On December 1, 2017, the Court approved a stipulation of dismissal as to defendant SLM Corporation. ECF No. 23.

On January 8, 2018, Mr. Homaidan filed opposition to the Motion to Compel or Dismiss. ECF No. 27. On January 26, 2018, Navient filed a reply in support of the Motion to Compel or Dismiss. ECF No. 29.

On July 25, 2018, the Court issued a memorandum decision on the Motion to Compel or Dismiss, and denied the motion to the extent it sought to compel arbitration of Mr. Homaidan's claims. Homaidan v. SLM Corp. (In re Homaidan ), 587 B.R. 428 (Bankr. E.D.N.Y. 2018).

On January 31, 2019, the Court issued a second memorandum decision on the Motion to Compel or Dismiss, and denied the motion to the extent it sought to dismiss the...