United States District Court, N.D. California, San Jose Division
AMENDED ORDER GRANTING DEFENDANTS' MOTIONS TO
DISMISS WITH LEAVE TO AMEND [Re: ECF 9, 10]
LABSON FREEMAN United States District Judge
Christian Wellisch brings this suit, which was originally
filed in state court, against Defendants Pennsylvania Higher
Education Assistance Agency (“PHEAA”) and James
L. Preston (collectively, “Defendants”), claiming
that Defendants failed to comply with the California Military
and Veterans Code (“CMVC”) and the Federal
Servicemembers Civil Relief Act (“SCRA”). See
generally Ex. B to Notice of Removal
(“Compl.”), ECF 1-2. Captain Wellisch's
claims arise out of issues related to PHEAA's servicing
of his student loans while he was on active duty as a
commissioned officer in the California Army National Guard
(“CAARNG”). Id. ¶¶ 8-9, 11.
before the Court is Defendants' motions to dismiss all of
the claims against them. See generally PHEAA Mot.,
ECF 9; Preston Mot., ECF 10. Pursuant to Civ. L.R. 7-1(b),
the Court finds Defendants' motions suitable for
submission without oral argument and hereby VACATES the
hearing scheduled for June 8, 2017. For the reasons stated
herein, the Court GRANTS Defendants' motion to dismiss
WITH LEAVE TO AMEND.
is a Captain in the California Army National Guard, and was
called up to active duty overseas on two occasions between
2015 and 2016, the first from February to September of 2015,
and the second from February to October 2016. Compl.
¶¶ 9, 10. During this time, Wellisch lost his
eligibility for Income-Based Repayment (“IBR”) of
his student loans. Id. ¶¶ 8, 11-15, 17.
IBR is an income-driven repayment (“IDR”) plan
for federal student loans provided for in the College Cost
Reduction and Access Act, pursuant to which monthly payments
are calculated based on the borrower's annual income.
See 34 C.F.R. § 682.215; Compl. ¶ 8.
Eligibility for IBR requires the existence of partial
financial hardship, as defined in 34 C.F.R. §
682.215(a)(4). Partial financial hardship must be certified
annually. 34 C.F.R. § 682.215(e). A qualifying person
obtains substantial reduction in monthly repayment
student loans were disbursed between August 2010 and
September 2012, before he was called to active duty service.
Compl. ¶ 8. PHEAA is Plaintiff's loan servicer, and
Preston is the President and Chief Executive Officer
(“CEO”) of PHEAA. Id. ¶¶ 4, 5.
Wellisch alleges that despite concerted efforts to ensure
continuation of his IBR payment plan without interruption,
PHEAA determined that Wellisch no longer had a partial
financial hardship, rendering him ineligible for the IBR
plan. Id. ¶17. This determination triggered
capitalization of interest on his loans and resulted in
increased monthly payment amounts. Id.
filed this action in Monterey County Superior Court on
December 28, 2016, alleging that Defendants failed to comply
with the CMVC and SCRA. See generally Compl.
Defendants subsequently removed the action to this Court. ECF
1. Wellisch seeks relief from fine or penalty, pursuant to
CMVC § 403 and relief from pre-service liability,
pursuant to CMVC § 409, and brings claims for unfair
business practices under Cal. Bus. & Prof. Code §
17200 et seq., the SCRA, and suppression of fact
under Cal. Civ. Code § 1710(3). See generally
Id. On April 24, 2017, the Court remanded
Plaintiff's MIL 010 Petition to the Monterey County
Superior Court and stayed his claim under CMVC § 409.3
pending the result of his equivalent claim in the state court
proceeding. ECF 40. Defendants now move to dismiss
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) for failure to state a claim upon which relief can
be granted ‘tests the legal sufficiency of a
claim.'” Conservation Force v. Salazar,
646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro
v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When
determining whether a claim has been stated, the Court
accepts as true all well-pled factual allegations and
construes them in the light most favorable to the plaintiff.
Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681,
690 (9th Cir. 2011). However, the Court need not
“accept as true allegations that contradict matters
properly subject to judicial notice” or
“allegations that are merely conclusory, unwarranted
deductions of fact, or unreasonable inferences.” In
re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th
Cir. 2008) (internal quotation marks and citations omitted).
While a complaint need not contain detailed factual
allegations, it “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. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is
facially plausible when it “allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Id.
PHEAA's Motion to Dismiss
contends that Wellisch's motion relies on statutory
requirements that do not exist or do not apply, and thus, he
fails to state a claim for relief pursuant to Rule 12(b)(6).
See generally PHEAA Mot. Captain Wellisch opposes
PHEAA's motion. See Opp'n to PHEAA Mot., ECF
preliminary matter, the Court first addresses an issue raised
in Wellisch's opposition to Preston's motion to
dismiss that was also raised in his prior motion to remand:
whether PHEAA may litigate this matter. Opp'n to Preston
Mot. 3. Specifically, Captain Wellisch claims that PHEAA was
and continues to be legally barred from taking any litigation
action as a suspended corporation. Id. The Court
rejected this argument in its initial order denying
Plaintiff's motion to remand, and does so here for the
same reasons previously enunciated. See ECF 40.
Finding that PHEAA can properly litigate this action, the
Court next addresses the adequacy of Plaintiff's
allegations under the SCRA, which provides the basis for this