Student Loan – Breach of Contract

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Civil

7^th Circuit Court of Appeals

Officials: FLAUM, MANION, and HAMILTON, Circuit Judges

Student Loan – Breach of Contract

No.14-14806 Bryana Bible v. United Student Aid Funds, Inc.

Dismissal of appellant claim against guaranty agency for assessment of collection costs despite appellant compliance with all terms of rehabilitation agreement improper and not preempted by Higher Education Act.

“We are skeptical of this legal principle (our court has never adopted it), but we need not decide that question now because it is not presented by Bible’s allegations. USA Funds’ argument simply mischaracterizes Bible’s theory. Her RICO claim is not based on regulatory non-compliance. It is based on alleged misrepresentations and deception in the default letter and the rehabilitation agreement. Even if the regulations permitted USA Funds to assess the collection costs, Bible alleges that USA Funds committed fraud by concealing that these collection costs would be imposed when it sent the default letter and the rehabilitation agreement. Thus, Bible’s RICO claim does not necessarily require her to prove that USA Funds violated the HEA or its regulations, even if such proof might strengthen her claims.9 Even if we agreed with McCulloch and the district court in United Food & Commercial Workers on this issue, neither decision considered this alternative theory Bible is pursuing. See McCulloch, 298 F.3d at 1226–27 (lenders’ failure to comply with HEA disclosure obligations was not actionable under RICO); United Food & Commercial Workers, 2012 WL 3061859, at *4 (noting that plaintiff’s RICO claim depended on violation of regulatory statutes referenced in complaint). The absence of a private right of action under the HEA itself does not preclude Bible’s RICO claim.”

Reversed and Remanded

Manion Concurs & Dissents

Flaum Concurs

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.