polesky simm aes motion to dismiss adam b michaels pepper hamilton llp pheaa

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK MELISSA POLESKY & LOIS POLESKY, Plaintiffs, v. SIMM ASSOCIATES, INC., & AMERICAN EDUCATION SERVICES Defendants.

12 CV 848 (ADS)(AKT)

NOTICE OF MOTION TO DISMISS COMPLAINT

PLEASE TAKE NOTICE that, upon the Memorandum of Law in support of this

motion, as well as all papers previously submitted in these proceedings, defendant Pennsylvania

Higher Education Assistance Agency d/b/a American Education Services (“PHEAA”) will move

this Court, at the United States District Courthouse for the Eastern District of New York, on a

date and time to be designated by the Court, for an Order dismissing plaintiffs Melissa Polesky’s

and Lois Polesky’s claims pursuant to Fed. R. Civ. P. 12(b)(6).

PLEASE TAKE FURTHER NOTICE that counsel for PHEAA hereby requests

oral argument.

Dated: April 23, 2012 Respectfully submitted, /s/ Adam B. Michaels Adam B. Michaels (AM 9120) PEPPER HAMILTON LLP The New York Times Building 620 Eighth Avenue New York, NY 10018 (212) 808-2700 Attorneys for defendant Pennsylvania Higher Education Assistance Agency d/b/a American Education Services

Case 2:12-cv-00848-ADS-AKT Document 4 Filed 04/23/12 of 1 PageID #: 15



MEMORANDUM OF LAW IN SUPPORT OF MOTION TO DISMISS COMPLAINT

I. INTRODUCTION

In this lawsuit, Melissa Polesky and her mother, Lois Polesky, (“Plaintiffs”)

complain of abusive, harassing and deceptive debt collection activity surrounding Melissa

Polesky’s delinquent student loan account. They have named two defendants, Simm Associates,

Inc. (“Simm”) (a debt collector) and Pennsylvania Higher Education Assistance Agency d/b/a

American Education Services (“PHEAA”) ( a quasi-governmental entity that services student

loans), and assert statutory claims under the federal Fair Debt Collection Practices Act and New

York General Business Law § 349, and a common law claim for intentional infliction of

emotional distress.

PHEAA is entitled to an order dismissing it from this lawsuit because Plaintiffs

make no allegation that PHEAA engaged in any wrongful conduct that could possibly make it

liable to Plaintiffs. Every single factual allegation of wrongdoing in the Complaint concerns the

activity of Simm, not PHEAA. PHEAA is not a debt collector; it does not engage in debt

collection activities; it did not attempt to collect any debt from Ms. Polesky or her mother; and it

did not hire any debt collector to pursue Ms. Polesky.

Case 2:12-cv-00848-ADS-AKT Document 4-1 Filed 04/23/12 Page 1 of 17 PageID #: 16

-2-

Plaintiffs’ attempt to lump PHEAA with debt collector Simm with generalized

references to “Defendants” in the Complaint is insufficient to state a plausible claim against

PHEAA. Equally unavailing is Plaintiffs’ conclusory allegation that PHEAA can be vicariously

liable for Simm’s debt collection activity under some agency theory given the absence of a single

plausible factual allegation demonstrating an agency relationship. Simply put, Plaintiffs have

pled no factual content to allow the Court to draw any reasonable inference that the PHEAA is

liable for misconduct. Under Fed. Rule Civ. P. 12(b)(6), and in accordance with the pleading

standards set forth in Bell Atl. Corp. v. Twombly and Ashcroft v. Iqbal, the Complaint should be

dismissed against PHEAA for failure to state a claim that is plausible on its face.

II. STATEMENT OF FACTS

A. Procedural History

Plaintiff Melissa Polesky and her mother, Plaintiff Lois Polesky, commenced this

lawsuit on February 17, 2012 by filing a Complaint and Demand for Jury Trial in the United

States District Court for the Eastern District of New York. See Compl. (Docket Item No. 1).

They name Simm Associates, Inc. and Pennsylvania Higher Education Assistance Agency d/b/a

American Education Services (sued as American Education Services) as defendants. Id. Simm

is a debt collection firm based in Newark, Delaware. Id. at ¶ 4. PHEAA is a statutorily-created

instrumentality of the Commonwealth of Pennsylvania, see 24 PA. STAT. ANN. §§ 5101.1-

5199.9, that, among other activities, services student loan accounts for lenders throughout the

nation. See Edmond v. Am. Educ. Servs., 2010 U.S. Dist. LEXIS 114834, at ** 1 – 2 (D.D.C.

Oct. 28, 2010). PHEAA agreed to waive service of the summons, requiring it to file and serve a

responsive pleading by April 24, 2012, 60 days after Plaintiffs requested waiver. See Waiver of

Service (Docket Item No. 3).


-3-

Plaintiffs bring claims against both Simm and PHEAA for violation of the federal

Fair Debt Collection Practices Act (Count 1), for violation New York General Business Law §

349 (Count 2), and for intentional infliction of emotional distress (Count 3).

B. The Factual Allegations of the Complaint

Three telephone calls, all of which occurred on December 21, 2011, form the

factual basis of Plaintiffs’ claims.

The first telephone call was made by an unidentified individual from Simm to

Melissa Polesky in the morning of December 21, 2011. Compl. at ¶ 15. During this call, Simm

informed Ms. Polesky that a $14,000 balance was due and owing on her student loan account and

that PHEAA, who had been servicing Ms. Polesky’s loan account, would no longer accept

payment, discuss the debt, or even work with Ms. Polesky anymore. Compl. at ¶¶ 16, 25. Simm

advised that the only way that Ms. Polesky could deal with PHEAA again was to make a $42.00

payment to Simm that day, and that the payment must be made by “check by phone” or debit

card. Compl. at ¶¶ 17 – 20. In response, Ms. Polesky reluctantly provided Simm her debit card

number so that the payment could be made. Compl. at ¶ 24. Although the allegations of the

Complaint concerning this phone call refer to a conversation between Ms. Polesky and

“Defendants,” the other allegations in the Complaint reveal that this was a conversation between

Ms. Polesky and Simm. See e.g., Compl. at ¶¶ 27 - 29.

The second telephone call was a call that Ms. Polesky made to PHEAA right after

her conversation with Simm for the purpose of verifying what Simm told her about her debt.

Compl. at ¶ 26. During this call PHEAA told Ms. Polesky that “Defendant SIMM was not

truthful,” “that [PHEAA] can still accept payment,” and that “Plaintiffs could pay [PHEAA]

instead of Defendant SIMM.” Compl. at ¶¶ 27, 29. PHEAA also informed Ms. Polesky that she


-4-

had various repayment options available to her, “including, but not limited to a forbearance,

despite Defendant SIMM’s statements and representations to the contrary.” Compl. at ¶ 28.

The third call, which Ms. Polesky made to an account manager at Simm later that

day, is the crux of this lawsuit. In this call, Ms. Polesky advised Simm that she no longer wanted

to make the $42.00 payment and instructed Simm to remove her debit card information from her

account. Compl. at ¶ 30 – 31. According to Plaintiffs, the account manager responded by

lecturing Ms. Polesky in an abusive and harassing manner, threatened to ruin her credit,

threatened to report her non-payment to the credit agencies, and refused to provide requested

verification of the debt. Compl. at ¶¶ 32 – 56. Plaintiffs do not indicate whether Simm

ultimately canceled the $42.00 payment or removed the debit card number from Ms. Polesky’s

file. Again, although the allegations of the Complaint concerning this third phone call

sometimes refer to a conversation with “Defendants,” it is plain from other allegations that this

was a conversation between Ms. Polesky and a Simm account manager. See Compl. at ¶¶ 30, 43,

45.

III. ARGUMENT

A. The Motion To Dismiss Standard

“To survive a motion to dismiss, a complaint 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 complaint is plausible on its face “when the plaintiff pleads factual content that allows the

court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

Iqbal, 556 U.S. at 678. “‘[L]abels and conclusions’ or ‘a formulaic recitation of the elements of

a cause of action will not do.’” Id. (quoting Twombly, 550 U.S. at 555).


-5-

The Second Circuit has explained that, after Twombly, the Court’s inquiry under

Rule 12(b)(6) is guided by two principles. Harris v. Mills, 572 F.3d 66 (2d Cir. 2009). “First,

although ‘a court must accept as true all of the allegations contained in a complaint,’ that ‘tenet’

‘is inapplicable to legal conclusions,’ and ‘[t]hreadbare recitals of the elements of a cause of

action, supported by mere conclusory statements, do not suffice.’” Id. at 72. “‘Second, only a

complaint that states a plausible claim for relief survives a motion to dismiss’ and ‘[d]etermining

whether a complaint states a plausible claim for relief will . . . be a context-specific task that

requires the reviewing court to draw on its judicial experience and common sense.’” Id. (quoting

Iqbal, 556 U.S. at 679).

B. Plaintiffs Do Not Plead Factual Content Sufficient To Allow The Court to Draw A Reasonable Inference That PHEAA Is Liable For Any Alleged Misconduct

Reduced to its essence, this case is about (1) Simm’s allegedly false

representation to Ms. Polesky in the morning of December 21, 2011 that the only option for her

delinquent student loan was to make an immediate payment over the phone to Simm and (2)

Simm’s allegedly abusive and harassing response to Ms. Polesky’s attempt to cancel the payment

later that day. Assuming this conduct is sufficient at the pleadings stage to make out a prima

facie case for the causes of action alleged, the simple fact is that none of it concerns PHEAA. In

contrast, the allegations in the Complaint that do concern PHEAA describe PHEAA’s efforts to

assist Ms. Polesky by advising her that the debt collector was not being truthful with her and that

she had several options available with respect to her delinquent loan. These allegations hardly

support the charges of wrongdoing that Plaintiffs level against PHEAA.

Plaintiffs’ effort to lump PHEAA together with Simm by repeatedly describing

the wrongdoing as having been conducted by “Defendants” must not be accepted. It is apparent

when reading the Complaint as a whole that the alleged misconduct was committed solely by


-6-

Simm during its telephone calls with Ms. Polesky. The implication that PHEAA was somehow

involved in these phone calls is not supported by a single pled fact and, contradicted by other

paragraphs of the Complaint such as Paragraph 30 which, in describing the third phone call,

plainly states that “Plaintiffs placed a telephone call to Defendant SIMM and at that time spoke

with an ‘account manager.’” See In re Livent, Inc. Noteholders Sec. Litig., 151 F. Supp. 2d 371,

405 (S.D.N.Y. 2001) (“[A] court need not feel constrained to accept as truth conflicting

pleadings that make no sense, or that would render a claim incoherent . . . .”). Further, when a

plaintiff “for the most part, fails to distinguish between the defendants but rather levels their

conclusory allegations against the ‘defendants’ collectively… plaintiffs’ complaint should be

dismissed in its entirety.” Ram v. Wachovia Mortg., 2011 U.S. Dist. LEXIS 32392, at *36 (E.D.

Cal. Mar. 25, 2011); see also Robbins v. Oklahoma, 519 F.3d 1242, 1249-1250 (10th Cir. 2008)

(finding that Rule 8 was not satisfied where “no distinction as to what acts are attributable to

whom” was provided); Tatone v. Suntrust Mortg., Inc., 2012 U.S. Dist. LEXIS 31413, at *25

(D. Minn. Feb. 13, 2012) (“A complaint which lumps all defendants together and does not

sufficiently allege who did what to whom, fails to state a claim for relief because it does not

provide fair notice of the grounds for the claims made against a particular defendant.” ); Trans

World Airlines, Inc. v. 47th Street Photo, Inc., 1990 U.S. Dist. LEXIS 4227, at *18 (S.D.N.Y.

Apr. 13, 1990) (“Where there are multiple defendants, the complaint must also clearly identify

the nature of each defendants alleged participation in the fraud. Generalized statements of

wrongdoing concerning all defendants will not be sufficient.”).

As for Plaintiffs’ legal contention that PHEAA can be found liable for Simm’s

alleged misconduct, see Compl. at ¶ 63, the Complaint lacks any allegation that might support

vicarious liability. Plaintiffs allege no facts of an agency relationship, but instead offer only a


-7-

conclusory “upon information and belief” allegation that PHEAA or possibly National Collegiate

Trust (apparently the current owner of the loan, and not a defendant in the lawsuit) sold Ms.

Polesky’s student loan to Simm for collection. See Compl. at ¶ 11. Even if PHEAA was

responsible for engaging Simm (which it was not, that would have been done by the owner of the

loan), this allegation does not make out a case of agency under New York law. “A plaintiff must

allege more than conclusory allegations regarding an agency relationship.” Howl v. Bank of Am.,

N.A., 2012 U.S. Dist. LEXIS 36733, at *19 (N.D. Cal. Mar. 19, 2012); see also Precision Assocs.

v. Panalpina World Transp., 2011 U.S. Dist. LEXIS 51330, at *66 (E.D.N.Y. Jan. 4, 2011)

(“The plaintiffs’ agency theory is based on conclusory and generic statements that do not even

provide the barest allegations as to the elements of the agency relationship.”); Roggio v. City of

Gardner, 2011 U.S. Dist. LEXIS 34731, at *18 (D. Mass. Mar. 30, 2011) (“An assertion that a

co-defendant was acting within the scope of an agency relationship must be supported by factual

allegations.”); Sandry v. First Franklin Fin. Corp., 2011 U.S. Dist. LEXIS 7814, at *8 (E.D. Cal.

Jan. 20, 2011) (dismissing fraud claim against lender where allegations were directed to

misdeeds of mortgage broker and conclusory allegations of agency were insufficient).

C. PHEAA Cannot Be Liable To Plaintiffs Under The FDCPA

Even if Plaintiffs were to have alleged facts sufficient to support any of their

claims against PHEAA, their claim for violation of the Fair Debt Collection Practices Act must

nevertheless be dismissed because that statute cannot apply to a loan servicer like PHEAA in

these circumstances.

The FDCPA prohibits certain conduct taken by “debt collectors”, as that term is

defined in the act. However “loan servicers are not ‘debt collectors’ under the FDCPA unless

the debt being serviced was in default at the time the servicer obtained it.” Taggart v. Wells

Fargo Home Mortg., Inc., 2010 U.S. Dist. LEXIS 102747, at *34 (E.D. Pa. Sept. 27, 2010)


-8-

(citing 15 U.S.C. § 1692a(6)(F)). Here, because Plaintiffs do not allege (and, in fact, cannot

allege) that Ms. Polesky’s student loan was in default when PHEAA started servicing it,

dismissal of the FDCPA claim is warranted.

In Edmond v. Am. Educ. Servs., a District of Columbia case involving PHEAA

and raising this identical issue, the court granted PHEAA’s motion to dismiss the plaintiff’s

FDCPA claim because the complaint did not allege that the loan was in default when PHEAA

acquired it. 2010 U.S. Dist. LEXIS 114834, at **14-17 (D.D.C. Oct. 28, 2010) (“Absent an

allegation that plaintiff’s loan was in default when AES acquired it, AES is not a debt collector

and thus is not subject to the FDCPA.”). Other courts have similarly dismissed FDCPA claims

against loan services in the absence of allegations that the loan was in default when the loan

servicer began servicing it. See e.g., Brumberger v. Sallie Mae Servicing Corp., 84 Fed. Appx.

458, 459 (5th Cir. 2004) (per curiam) (affirming dismissal of FDCPA claim against student loan

servicer because “[b]y its plain terms the FDCPA does not apply” absent an allegation that

plaintiff “was in default at the time Sallie Mae began servicing his loans”); Ramirez-Alvarez v.

Aurora Loan Servs., U.S. Dist. LEXIS 132536, at *5 (E.D. Va. July 21, 2010) (granting

summary judgment for mortgage loan servicer, which was not a debt collector for purposes of

the FDCPA because it “received the debt in question while it was not in default”); Mondonedo v.

Sallie Mae, Inc., No. 07-4059, 2009 U.S. Dist. LEXIS 25497, 2009 WL 801784, at *5 (D. Kan.

Mar. 25, 2009) (granting summary judgment for loan servicer which “obtained the loans

originated by [a bank] for servicing prior to default and is exempt from liability under the

FDCPA”).

Plaintiffs seek to avoid the consequences of these cases by labeling PHEAA “the

original lender.” see Compl. at ¶¶ 18, 19, 26. But PHEAA is not the original lender, PNC Bank


-9-

is. See Promissory Note, annexed hereto as Exhibit A. But even if PHEAA were the original

lender or some other type of creditor, the acts and omissions of the debt collectors retained by a

creditor cannot be imputed to the creditor for purposes of the FDCPA, as multiple courts have

concluded. See e.g., Frascogna v. Wells Fargo Bank, N.A., 2009 WL 2843284, at *3 (S.D.

Miss. 2009) (citations omitted); Gary v. Goldman & Co., 180 F. Supp. 2d 668, 673 (E.D. Pa.

2002); Havens-Tobias v. Eagle, et al., 127 F. Supp. 2d 889, 897-98 (S.D.Ohio 2001); see also,

McKinney v. Cadleway Properties, Inc., 548 F.3d 496, 500 (7th Cir. 2008) (“The FDCPA applies

only to ‘debt collectors’ seeking satisfaction of ‘debts’ from ‘consumers’; it does not apply to

‘creditors.’”).

IV. CONCLUSION

For these reasons, and pursuant to Fed. R. Civ. P. 12(b)(6), the Court should

dismiss each and every one of Plaintiffs’ claims against PHEAA.

Dated: April 23, 2012 Respectfully submitted, /s/ Adam B. Michaels Adam B. Michaels (AM 9120) PEPPER HAMILTON LLP The New York Times Building 620 Eighth Avenue New York, NY 10018 (212) 808-2700 Attorneys for defendant Pennsylvania Higher Education Assistance Agency d/b/a American Education Services


EXHIBIT A




ORDER

WHEREAS, upon consideration of defendant Pennsylvania Higher Education

Assistance Agency d/b/a American Education Services’ Motion to Dismiss and supporting

Memorandum of Law, it is hereby ORDERED that the motion is granted and plaintiffs Melissa

Polesky and Lois Polesky’s claims are dismissed.

SO ORDERED.

________________________




RULE 7.1 DISCLOSURE

On April 23, 2012, I, Adam B. Michaels, electronically filed defendant

Pennsylvania Higher Education Assistance Agency d/b/a American Education Services Notice of

Motion to Dismiss, Memorandum of Law in Support of Motion, and Rule 7.1 Statement through

the Court’s ECF system which will send a notice of electronic filing to the registered participants

as identified on the Notice of Electronic Filing (NEF).

Dated: April 23, 2012 /s/ Adam B. Michaels


polesky simm aes motion to dismiss adam b michaels pepper hamilton llp pheaa

Documents