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Gearhart v. United States Dep't of Educ.

United States District Court, N.D. California

July 22, 2019

Jeffrey Gearhart, Plaintiff,
v.
United States Dep't Of Educ., et al., Defendants.

          ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND RE: DKT. NO. 18

          YVONNE GONZALEZ ROGERS UNITED STATES DISTRICT COURT JUDGE.

         Plaintiff 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.)

         The 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.

         Having 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.

         I. Background

         The complaint alleges as follows:

         In 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.)[1] 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.)

         Thereafter, 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, 45.)

         In July 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.)

         In 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. ¶ 60.)

         In June 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.)

         II. Applicable Standard

         Under 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.

         A 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).

         III. ...


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