United States District Court, N.D. California
ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND
RE: DKT. NO. 18
GONZALEZ ROGERS UNITED STATES DISTRICT COURT JUDGE.
Jeffrey Gearhart (“Gearhart”), federal student
loan borrower, brought this action against defendants United
States Department of Education (“the Department”)
and Secretary of Education Betsy DeVos (“the
Secretary”) alleging violations of his due process
rights under the Fifth Amendment pursuant to 42 U.S.C.
section 1983 and the Administrative Procedure Act
(“APA”). In his complaint filed February 11,
2019, Gearhart alleges the Department denied his request for
an oral hearing on his objection to a tax garnishment to
collect on his federal student loan debt. Gearhart seeks
injunctive and declaratory relief. (Dkt. No. 1, Complaint.)
Secretary and the Department bring the instant motion to
dismiss (Dkt. No. 18) pursuant to Rule 12(b)(6) for failure
to state a claim upon which relief can be granted. Defendants
also move pursuant to Rule 12(b)(1) to dismiss or strike
plaintiff's prayer for injunctive and declaratory relief
for lack of subject matter jurisdiction because the Higher
Education Act of 1965 (“HEA”) explicitly
prohibits injunctive relief against the Department.
carefully considered the papers submitted, and for the
reasons set forth below, the Court hereby
Orders that the Motion to Dismiss is
Granted With Leave to Amend.
complaint alleges as follows:
1997, Gearhart obtained a $12, 000 Federal Family Education
Loan Program (FFELP) loan to attend WyoTech for a
certification in Applied Automotive Technology. (Complaint
¶¶ 36, 37.) Plaintiff graduated in 1999 and made
payments of $400 per month for several years thereafter.
(Id. ¶ 39, 40.) When Plaintiff stopped
receiving statements in 2005 from the servicer, Directloans,
he believed his account was paid in full, so he stopped
making monthly payments. (Id. ¶¶ 40, 42.)
the Department mistakenly attempted to collect from Gearhart
on a separate “loan” originated in 2003, though
he had completed his studies at Wyotech four years prior to
that time. (Id. ¶ 38.) The Department failed to
correct the records despite plaintiff's multiple attempts
to resolve this error. (Id. ¶¶ 38, 44,
2008, Gearhart enrolled in a different vocational program at
the California Culinary Academy (“CCA”) and
obtained two loans in the amounts of $3, 500 and $6, 000.
(Id. ¶¶ 46, 47.) Gearhart was hit by a
drunk driver two years into his CCA program and sustained
serious injuries which preventing him from completing his
course of study. (Id. ¶¶ 49, 50.) Gearhart
deferred his CCA loans for a period of time, and then he and
his mother made payments totaling over $12, 000 towards them.
(Id. ¶ 52.) In July 2011, Gearhart's mother
settled the total CCA loan balance with Collection Bureau
Hudson Valley, Inc. by making a payment of $6, 030.
(Id. ¶ 53.) In September 2012, plaintiff
received correspondence notifying him of a class action
settlement that entitled him to forgiveness of the CCA loans.
(Id. ¶ 54.)
2016, Gearhart learned that the Department had intercepted
his 2015 Tax Return to collect on student loan debt the
Department believed he owed. (Id. ¶ 57.) On
July 12, 2016, the Department sent him a letter alleging the
validity and existence of three FFELP loans in Gearhart's
name, in the amounts of (i) $17, 747.68, (ii) $3, 500, and
(iii) $6, 000, and a balance owed of $32, 919.77.
(Id. ¶ 59.) In the July 12 letter, the
Department also denied any responsibility for alleged credit
bureau misreporting and asserted that the part of the balance
traceable to plaintiff's schooling at CCA was not
resolved by the class action settlement. (Id. ¶
2017, by and through his counsel, Gearhart submitted a
request for an oral wage garnishment hearing, including as
supporting documentation his loan promissory note and
correspondence with CCA. (Id. ¶ 62.) The
Department denied Gearhart's request on grounds that he
failed to provide enough information to show the dispute
could not be conducted through documentary review.
(Id. ¶ 63.) In May 2018, Gearhart submitted a
second request to the Department for an oral hearing,
asserting financial hardship as a defense against wage
garnishment. (Id. ¶ 62.) The Department
rejected the financial hardship claim and his hearing request
as well. (Id. ¶ 66.) Gearhart submitted a third
request for a hearing, which the Department subsequently
denied in September 2018. (Id. ¶ 69.)
Federal Rule of Civil Procedure 12(b)(6), a district court
must dismiss a complaint if it fails to state a claim upon
which relief can be granted. To survive a Rule 12(b)(6)
motion, a plaintiff must allege “enough facts to state
a claim to relief that is plausible on its face.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). A claim is facially plausible when the plaintiff
pleads facts that “allow the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). There must be “more than a sheer
possibility that a defendant has acted unlawfully.”
Id. While courts do not require the
“heightened fact pleading of specifics, ” a
plaintiff must allege facts sufficient to “raise a
right to relief above the speculative level.”
Twombly, 550 U.S. at 555, 570.
defendant may raise the defense of lack of subject matter
jurisdiction by motion pursuant to Federal Rule of Civil
Procedure 12(b)(1). “If the court determines at any
time that it lacks subject-matter jurisdiction, the court
must dismiss the action.” Fed.R.Civ.P. 12(h)(3). The
party asserting jurisdiction always bears the burden of
establishing subject matter jurisdiction. Kokkonen v.
Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).