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United States v. Machinski

United States District Court, N.D. California, San Francisco Division

June 16, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
ROBERT MACHINSKI, Defendant.

          ORDER REGARDING THE DEFENDANT'S SUPPLEMENTAL SUMMARY-JUDGMENT BRIEFING & MOTION TO STRIKE Re: ECF 101 & 113

          LAUREL BEELER United States Magistrate Judge

         INTRODUCTION & BACKGROUND

         This is a student-loan default case. The court already granted the government's summary-judgment motion, and incorporates by reference here the facts and analysis in the order at ECF No. 90.[1] Although the court granted that motion, it deferred entering judgment and asked the government to consider a new settlement offer.[2] The government declined to do so.[3]

         Separately, also post-summary judgment, Mr. Machinski moved for reconsideration based on (1) a discrepancy between his loan consolidation application and the total loans disbursed, and (2) outstanding discovery that the government had not responded to.[4] The court set forth a process to address those issues and to give Mr. Machinski an opportunity to supplement the record before judgment is entered.[5]

         Mr. Machinski filed a supplemental brief and declaration in opposition to the government's summary-judgment motion, and the government responded.[6] Mr. Machinski also moved to strike the government's statement regarding its settlement offer under Federal Rule of Civil Procedure 12(f).[7]

         Mr. Machinski's supplemental briefing does not alter the court's summary-judgment analysis. His arguments, which are largely evidentiary objections, do not rebut the government's prima facie case. The court's summary-judgment order stands. Mr. Machinski's motion to strike also fails.

         ANALYSIS

         The court addresses Mr. Machinski's supplemental briefing and motion to strike in turn: first, the court overrules his objections to the government's evidence and the sufficiency thereof; second, it denies his motion to strike.

         1. Objection #1 - Application and Disbursement Discrepancy

         Mr. Machinski reasserts his objection to the loan-value discrepancy between the consolidation application ($21, 200) and the actual amount disbursed ($21, 706.09).[8] He takes issue with the government's explanations for the discrepancy - the government originally said the difference was caused by interest accrued between the application and disbursement dates, but now says the application sum was only an estimate - and the government's supporting evidence.

         The government submits the declaration of Philippe Guillon, a Senior Loan Analyst at the Department of Education, and custodian of records kept by the Department relating to student loans.[9] Mr. Guillon has “access to the Department's Debt Management and Collections System, ” a database that contains “records of payment transactions, collection actions, and telephonic and written contacts between borrowers and the Department.”[10] He is familiar with the circumstances of Mr. Machinski's loan and explains the application-disbursement discrepancy.[11]

         The consolidation application and promissory note reflects a $21, 200 loan balance consisting of six separate loans: $4, 800, $4, 300, $1, 500, $4, 800, $1, 400, $4, 400.[12] Mr. Guillon explains that Mr. Machinski (as the borrower) filled out those sums “as an estimate of the amounts owed on each loan to be consolidated.”[13] He points out that each loan to be consolidated was rounded to $100, and that “this would not be the case if the ‘actual' balances were ascertained” because “in most cases there would be numerical dollar and cents amounts.”[14] Mr. Guillon goes on to explain that the application information “is used to locate each prior loan and to give the lender and the borrower awareness of the approximate amounts sought for consolidation.”[15] Then, “[o]nce the payoff on each loan is determined, a Disclosure Statement and Repayment Schedule is mailed to the borrower showing the exact amount to be paid to each respective underlying servicer.”[16]

         Mr. Guillon attaches a copy of that Disclosure Statement and Repayment Schedule, which reflects a total consolidated balance of $21, 706.09 (the same as reflected in the Certificate of Indebtedness[17]), consisting of six loans in dollars-and-cents amounts: $4, 725.55, $4, 401.48, $1, 598.04, $4, 871.27, $1, 467.82, $4, 641.93.[18]

         Mr. Machinski takes issue with Mr. Guillon's explanation for three reasons: (1) Mr. Guillon did not “produce any calculation or loan statements on how the disbursement amounts identified on the Disclosure Statement were actually derived”; (2) he did not “offer any explanation as to what interest rates were applied”; and (3) his explanation “is nothing more than speculation and should be given no weight.”[19]

         The court disagrees. First, Mr. Guillion explained how the Disclosure Statement amounts were derived: those amounts represent the dollars-and-cents values of Mr. Machinski's loans that were paid off by Nellie Mae (the consolidating lender).[20] The application and promissory note specifically contemplates - just above Mr. Machinski's signature - that the consolidated loan amount would be determined by the amount paid off and confirmed in a disclosure statement. That document reads:

I further authorize Nellie Mae to issue the proceeds of my consolidation loan to each holder listed in the “Student Loan Information” section of this application. I understand that the amount of my consolidation loan will be the sum of the balances of my outstanding eligible loans which I have chosen to consolidate. My outstanding balance on each loan to be consolidated will include unpaid principal, accrued unpaid interest and late charges, as certified by each holder. . . .
I understand that if I am eligible for a consolidation loan I will receive a Repayment Schedule and Disclosure that identifies my loan amount (as determined by Nellie Mae), interest rate, due dates, payment amounts and late charges.[21]

         Mr. Machinski does not provide any evidence showing that the consolidated loan disbursement was inaccurate.

         Second, the court cannot see how Mr. Machinski's interest-rate-based argument is relevant here. It may be that it is in response to the government's past argument - articulated at the summary-judgment hearing - that the application and disbursement discrepancy was a result of accumulated interest. If so, that issue is moot in light of Mr. Guillon's declaration.

         Third, Mr. Guillon's declaration is not mere speculation, as Mr. Machinski asserts. Mr. Guillon, a Senior Loan Analyst, record custodian, and person familiar with Mr. Machinski's loan account records has adequately demonstrated the knowledge necessary to offer this explanation.

         The court overrules Mr. Machinski's objections based on the discrepancy between the application and the actual amount disbursed.

         2. Objection #2 - Disclosure Statement Authentication

         Mr. Machinski's second objection is that the Disclosure Statement and Repayment Schedule has not been properly authenticated.[22] He appears to argue that the Disclosure Statement cannot be authenticated because it is not signed by a Nellie Mae representative, that he has a right to confront whoever prepared the document, and that the government refused to produce the perparer's name.[23]

         A party submitting an item of evidence “must produce evidence sufficient to support a finding that the item is what the proponent claims it is.” Fed.R.Evid. 901(a). This may be done by the testimony of a witness with knowledge of the item, testifying “that an item is what it is claimed to be.” Id. 901(b)(1). An item may also be authenticated based on “[t]he appearance, contents, substance, internal patterns, or other distinctive characteristics of the item, taken together with all the circumstances.” Id. 901(b)(4).

         Here, Mr. Guillon declares that he is a Senior Loan Analyst for the Department of Education, is the custodian of the Department's student-loan records, is “familiar with the circumstances of [Mr. Machinski's] loan[, ] and [has] personal knowledge of the records pertaining to [it].”[24] He states that the Disclosure Statement attached to his declaration is a “true and correct copy.”[25] This declaration, plus the circumstances of the Disclosure Statement - including (1) the general (though not precise) consistency in the number and amount of the loans, and (2) the same name, address, and social security number appearing on the application and Disclosure Statement[26] - is sufficient to show that the Statement is what the government claims it is. The court overrules Mr. Machinski's authentication objection.

         3. Objection #3 - Legibility of Promissory Note

Mr. Machinski challenges the promissory note as illegible.[27] The court denied this argument in its summary-judgment order and said:

Indeed, the originally filed duplicate is difficult to read - the court cannot make out the amount disbursed or the interest rate. But the government provided the court and Mr. Machinski with a legible copy at the November 3 case-management conference, which was also filed electronically. And, importantly, Mr. Machinski does not deny that promissory note relates to his student loan. He does not deny that it is his signature on the note, and he maintains only that the name on the top has the wrong middle initial. The government named Mr. Machinski in this case as “Robert P. Machinski aka Robert F. Machinski”; he never objected until now. Moreover, the offending initial easily could be an “F.”[28]

         Mr. Machinski's supplemental argument is substantially the same, but now he argues, “[s]pecifically, [that] the terms of the interest and transfer clauses are illegible.”[29] Those two provisions appear on the back of the application and promissory note.[30] The court agrees that the image quality is not ideal - there is a stamp overlapping these two provisions.[31] But, notwithstanding a few illegible words, the material terms of those provisions are clear, and the court reproduces them below:

Interest: (1) I agree to pay simple interest on the [unreadable] principal from the date of loan disbursement until the entire principal sum and accrued interest are paid in [unreadable] . . . . responsible for the payment of all the interest that accrues on this loan in accordance with the terms of the repayment schedule. (3) This consolidation loan note shall bear interest at an annual rate on the unpaid principal balance of the loan which is equal to the weighted [unreadable] interest rates on the loans consolidated, rounded to the nearest whole percent except that such interest rate shall not be less than 9 percent.
Transfer of Note: If Nellie Mae sells the loan or otherwise transfers the right to receive payment, I will be sent a clear notification which spells out my obligations to the party to whom the loan was sold. I will have the same rights and responsibilities with the subsequent holder that I have with regard to the lender. This not is not intended to be a negotiable instrument under the Uniform Commercial Code as adopted by any state, and a subsequent holder of this Note cannot be a holder in due course.[32]

         These provisions are not a model of legibility, but their meaning is clear: the consolidated loan would bear an interest of at least 9% (which it did[33]) and Mr. Machinski would be obligated to any subsequent purchaser of the loan.

         There is no material dispute regarding these terms. The court denies Mr. Machinski's argument.

         4. Objection #4 - Proof of Payment

         Mr. Machinski next argues that the government “has not provided any documentation indicating [his] prior payments” and, as such, “it is unclear whether the amount that [the government] alleges is the correct amount.”[34]

         Mr. Machinski confuses the burden of proof. As described in the court's summary-judgment order, the government has the burden of establishing (1) the existence of the promissory note, (2) Mr. Machinski's default, and (3) the amount due.[35] United States v. Freeman, No. C 01-1859 SI, 2002 WL 467688, at *1 (N.D. Cal. Mar. 25, 2002) (citing United States v. Irby, 517 F.2d 1042, 1043 (5th Cir. 1975); see also United States v. Gray, No. C-11-02988 SLM (JCS), 2012 WL 1657112, at *4 (N.D. Cal. May 10, 2012). “The burden [then] shifts to [Mr. Machinski] to prove that the amount due is not owing.” United States v. Chu, No. 00-3450 BZ, 2001 WL 1382156, at *1 (N.D. Cal. Oct. 31, 2001) (quoting United States v. Glaude, No. C-99-0182-VRW, 1999 WL 1080680, at *1 (N.D. Cal. Nov. 12, 1999)) (alteration in original).

         The government satisfied its burden (as described in the court's prior order) through the signed consolidation application and promissory note, the Certificate of Indebtedness, and (now) the Disclosure Statement.[36] The government even produced an accounting of Mr. Machinski's debt payments, which included $2, 156.83 credited against his account between May 1993 and August 1994, and a credit of $16, 123.87 in treasury offsets.[37] (The accounting was “given final approval by the U.S. Department [of] Education.”[38])

         The burden then shifted to Mr. Machinski to prove that the amount due is wrong. The court explained to Mr. Machinski that he cannot simply assert that the government's “‘claim for damages exceed what, if anything, it would have been entitled to receive by the amounts already paid to [it] through offsets and other payments [he] ha[s] already made.'”[39] But he has not produced evidence rebutting the government's case; it is not enough to speculate that payments may not have been taken into account.[40]See Irby, 517 F.2d at 1043 (reversing district court's holding that it was the government's duty to “prove all credits given to defendants; that the [g]overnment had the ‘duty to prove how they arrived at the credits ...


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