Commercial Litigation and Arbitration

Documents on 12(b)(6) Motion: Even If “Integral” to Complaint, Doc. Won’t Be Considered If Authenticity Disputed — Existence of Website Considered But Not Truth of Contents

Russo v. Navient Sols., LLC, 2018 U.S. Dist. LEXIS 48263 (D. Vt. Mar. 23, 2018):

Plaintiff Kayla Russo brings this action against Defendants Navient Solutions, LLC ("Navient"), SLM Private Credit Student Loan Trust 2006-A, SLM Private Education Student Loan Trust 2010-C, SLM Private Education Student Loan Trust 2011-A, SLM Private Education Student Loan Trust 2011-B, and Navient Private Education Loan Trust 2015-A [*2]  (the "Loan Trust Defendants") (collectively, the "Defendants"). She alleges four state law claims arising from the origination and repayment of student loans in her name: (1) negligence, (2) violations of the Vermont Consumer Protection Act ("VCPA"), 9 V.S.A. § 2453, (3) negligent misrepresentation, and (4) invasion of privacy.

Pending before the court is Defendants' motion to dismiss the Second Amended Complaint for failure to state a claim upon which relief can be granted. (Doc. 44.) Plaintiff opposes dismissal. Plaintiff also moves to strike documents attached to Defendants' motion to dismiss, which Defendants oppose. (Doc. 45.) On December 1, 2017, the court took the pending motions under advisement.


II. The Allegations of the Second Amended Complaint.

Plaintiff is a resident of Vermont. Defendant Navient is a corporation with its principal place of business in Reston, Virginia and is a subsidiary of a Delaware corporation, Navient Corporation. Plaintiff does not allege a state of incorporation or principal place of business for the Loan Trust Defendants.

Plaintiff claims that Defendant Navient is engaged in the business of creating asset-backed securities for resale to investors and created the Loan Trust Defendants as "part of a scheme . . . to make subprime loans and securitize subprime loans from underqualified borrowers." (Doc. 38 at 2, ¶ 11.) She alleges that the Loan [*4]  Trust Defendants "claim to be and are the owners and holders of certain notes evidencing student loans made to Plaintiff." Id. at 2, ¶ 3. According to Plaintiff, the Loan Trust Defendants have no employees and Defendant Navient was the servicer, agent, and manager for them, creating them as financial vehicles for bundling and securitizing private student loans.

To facilitate the application for student loans, Defendant Navient offers professional services to borrowers through its website. Plaintiff alleges that it negligently provides these professional services by allowing the extension of "subprime loans without reasonable oversight . . . to unqualified borrowers, including Plaintiff." Id. at 3, 17. Plaintiff further alleges that the "practice of subprime lending" was part of a "business strategy to the detriment of Plaintiff, who was a subprime borrower[,]" id. at 3, 18, whereby Defendant Navient would "knowingly or negligently approve[] loans to individuals, including Plaintiff, who did not have the ability to repay" them. Id. at 3, ¶ 19. In doing so, Defendant Navient "ignor[ed] its obligation to the subprime borrower" as part of its business strategy. Id. at 3, ¶ 20. Plaintiff claims that Defendant Navient knew or should have [*5]  known that Plaintiff would not have qualified for a conventional loan.

Plaintiff alleges that in 2005, 2006, 2008, and 2009, an applicant identified as Kathryn Blank completed four student loan applications on Defendant Navient's website using Plaintiffs identifying information and indicating that Plaintiff was the borrower.1 Plaintiff claims that she did not apply for the 2006, 2008, and 2009 loans, however, her allegations do not address whether she applied for the 2005 loan. Defendant Navient purportedly did not "appropriately verify[]" whether Plaintiff was the applicant when processing and approving the 2006, 2008, and 2009 loan applications, id. at 5, ¶ 42, consistent with its "history of allowing unidentified third parties, through its website, to apply for loans in the name of the student without appropriately ensuring that the student was the actual loan applicant[.]" (Doc. 38 at 5, ¶ 43.) For the 2006, 2008, and 2009 loan applications, Plaintiff alleges that had Defendant Navient conducted "any due diligence[] [it] would have known" that the current outstanding loan balances provided in the application were incorrect. Id. at 4, ¶ 29; see also id at 4, ¶¶ 33, 37. Instead, in each instance, Defendant [*6]  Navient approved the loan application, extended the requested amount in credit, and bundled the loan "into a Loan Trust selected by [Defendant] Navient." Id. at 4, ¶ 30. 2

Plaintiff makes no claim that she did not receive the disbursement of the loan funds, or at least accept the benefit of them, and makes no claim that she was the victim of identity theft or the fraudulent practices of Kathryn Blank. Rather, she alleges that "[a]fter graduating from college[,] [she] became aware of the extent of the Navient loans and tried to repay the loans as best she could." Id. at 5, ¶ 45.3 Despite her employment as a teacher and "multiple second jobs," Plaintiff "had no possibility of keeping current" on her student loans with Defendant Navient. Id. at 5, ¶ 46.

Defendant Navient provides counseling services to assist borrowers in the repayment of their loans through direct communication with the borrower. It informs borrowers that it provides such services through its website, which encourages them to contact Defendant Navient for guidance and assistance. After it became "apparent that Plaintiff had no possibility of keeping current on the Navient loans, [Defendant] Navient counseled Plaintiff and [*7]  advised [her to] place all of the Navient loans in forbearance so that Plaintiff and [Defendant] Navient could work together on a repayment plan." (Doc. 38 at 6, ¶ 49.) Plaintiff claims that she "justifiably relied on this advice." Id.

In early August 2014, Plaintiff requested that Defendant Navient allow her to pay under their "Income Based Repayment plan." Id. at 6, ¶ 50. In response, Defendant Navient advised Plaintiff that forbearance was her best option while it reviewed the loans. Plaintiff alleges she relied on this advice and, on August 19, 2014, submitted a written request to Defendant Navient, again seeking to participate in Navient's Income Based Repayment Plan. In response, Defendant Navient allegedly counseled Plaintiff that forbearance was still her best option and that it needed more time to consider her request for income based repayment. Plaintiff relied on this advice which she claims was "false and misleading." Id. at 6, ¶ 52.

On August 25, 2014, Defendant Navient informed Plaintiff that her loans were in forbearance until October 17, 2014 and instructed her to contact customer service for additional assistance once the forbearance period ended. This letter "did not offer or explain [*8]  any other options for Plaintiff or inform Plaintiff that an income driven repayment plan was not available to Plaintiff." Id. at 6, ¶ 53. Plaintiff claims that this advice was "false[,] . . . misleading and not in [her] best interest[,]" id., and part of a strategy to "keep the loans in forbearance to Plaintiff's detriment and to [Defendant] Navient's benefit." Id. at 7, ¶ 55. She avers that Defendant Navient never explained to her that forbearance would result in the accumulation of unpaid interest on the loans which would be added to the outstanding principal amount due and that consecutive forbearances would exacerbate these detrimental consequences.

On September 2, 2014, Plaintiff wrote Defendant Navient again requesting that she be allowed to participate in the Income Based Repayment Plan. On September 9, 2014, Defendant Navient wrote to Plaintiff and informed her, allegedly for the first time, that it would not offer Plaintiff the Income Based Repayment Plan for her loans. Plaintiff asserts that this information directly contradicted Defendant Navient's prior representations to her when it allegedly steered her into forbearance.

On September 16, 2014, Plaintiff called Defendant Navient's customer [*9]  service, as allegedly directed by the Navient September 9, 2014 letter. Defendant Navient advised Plaintiff to enter into another forbearance period. On December 15, 2014, Defendant Navient telephoned Plaintiff, informing her that she did not qualify for a lower payment option, and recommended that she enroll in its interest only repayment plan. In counseling Plaintiff, Defendant Navient purportedly "misled Plaintiff about the effect and consequences if [she] agreed to allow the loans to be put into forbearance." (Doc. 38 at 8, ¶ 65.)

In spring of 2015, Plaintiff could no longer afford to make interest payments to Defendant Navient and stopped making them. Defendant Navient then began contacting Plaintiff "every day by telephone, calling [her] up to seven (7) times a day, demanding money from [her]." Id. at 8, ¶ 67. Defendant Navient's employees called her while she was working as a teacher, despite Plaintiff's request that they not call her during school hours. If Plaintiff did not answer the phone because she was in class, Defendant Navient called the school asking the school to transfer the call to Plaintiff's classroom. These collection practices "disrupted Plaintiff's employment and injured [*10]  her reputation with her employer and peers." Id. at 8, ¶ 70. After Defendant Navient refused Plaintiff's oral request that its agents contact her only after work hours and not call her employer, Plaintiff wrote Defendant Navient on October 8, 2015, requesting that she only be contacted in writing. Plaintiff alleges that Defendant "Navient disregarded [this request] and continued its relentless telephone assault and campaign of annoyance and intimidation on Plaintiff." Id. at 9, ¶ 72.

III. Conclusions of Law and Analysis.

A. Whether the Court May Consider Documents Attached to Defendants' Motion to Dismiss.

Defendants attach to their motion to dismiss documents they allege must be considered in adjudicating the motion, including what they claim are the 2005, 2006, 2008, and 2009 student loan application and promissory note forms at issue. (Docs. 44-1 - 44-4) They also attach a series of printouts from an athletic website from the college Plaintiff allegedly attended which purport to show her graduation date. (Doc. 44-5.) Finally, they attach a "Repayment Option Request Form" (the "Repayment Form") signed by Kayla Blank, Plaintiffs maiden name, and faxed to Defendant Navient in December 2010 from Plaintiff's [*11]  counsel, which they assert negates any claim that Plaintiff was misled regarding whether the interest on her loans would be capitalized. (Doc. 44-6.) The Repayment Form states in relevant part:

Before signing this document, please read it thoroughly to ensure you understand all of the following: . . . If I am past due on my loan payments because of my financial circumstances, I request a forbearance to cover all payments due before this schedule begins. I understand that all accrued interest will be capitalized (added to my loan principal). . . . Unpaid interest on private student loans will be capitalized at the end of the forbearance period.

(Doc. 44-6 at 2.)

Plaintiff moves to strike consideration of the documents, contending they are not appropriate for judicial notice and are neither incorporated by reference nor integral to her claims, except for the "alleged uncertified copies of the loan notes, which are not properly authenticated[.]" (Doc. 45 at 1.)

In analyzing a motion to dismiss for failure to state a claim, the court considers the facts alleged in the complaint, "any written instrument attached to [the complaint] as an exhibit[,]" "documents incorporated in [the complaint] [*12]  by reference[]" and any documents considered "integral to the complaint." Nicosia v., Inc., 834 F.3d 220, 230 (2d Cir. 2016) (internal quotation marks omitted). A document is "integral" to the complaint if the complaint's allegations rely "heavily upon [the document's] terms and effect[.]" Id. (internal quotation marks omitted) (citing DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010)). A plaintiff's "mere notice" of the document or "possession" of it is insufficient to render a document integral to a complaint. Id. at 231 (internal quotation marks omitted). "This generally occurs" when the incorporated material is a "contract or other legal document containing obligations upon which the plaintiff's complaint stands or falls, but which for some reason - usually because the document, read in its entirety, would undermine the legitimacy of the plaintiffs claim - was not attached to the complaint." Id. There is no doubt that the student loan applications and the Repayment Form are integral to Plaintiff's Second Amended Complaint.

However, even when a document is "integral" to the complaint, it will not be considered if a "dispute exists regarding the authenticity or accuracy of the document." Id.; see also Gorbaty v. Wells Fargo Bank, NA., 2014 U.S. Dist. LEXIS 135513, 2014 WL 4742509, at *14 (E.D.N.Y. Sept. 23, 2014) ("Even if [the] Equity Note provided by [Defendant] were 'integral' to [Plaintiff's] breach [*13]  of contract claim, the court would still be unable to consider [it] to [Plaintiff's] detriment as she expressly disputes the documents' authenticity."); Barberan v. Nationpoint, 706 F. Supp. 2d 408, 415, 416 n.4 (S.D.N.Y. 2010) (refusing to consider a promissory note and mortgage even though the plaintiffs referenced these documents in their complaint and their authenticity objections appeared "less than genuine" and "of questionable validity"). "This principle is driven by a concern that a plaintiff may lack notice that the material will be considered to resolve factual matters." Nicosia, 834 F.3d at 231 (internal quotation marks and citations omitted).

1. The Alleged Copies of the Loan Applications and the Repayment Form.

Plaintiff objects to the court's consideration of the alleged copies of the 2005, 2006, 2008, and 2009 loan applications and promissory note forms, even though they are clearly incorporated by reference in the Second Amended Complaint and integral to her claims. She asserts that the documents require "test[ing] in discovery and questions remain regarding their authenticity and reliability." (Doc. 45 at 2.) Assuming this representation is made in good faith, the court accepts it at face value. See Fed. R. Civ. P. 11 (requiring a good faith factual and legal basis for claims or representations [*14]  made to the court). The court therefore GRANTS Plaintiff's motion to strike consideration of the alleged copies of the loan notes. See DiFolco, 622 F.3d at 111 ("[E]ven if a document is `integral' to the complaint, it must be clear on the record that no dispute exists regarding the authenticity or accuracy of the document.") (internal quotation marks omitted); see also Gorbaty, 2014 U.S. Dist. LEXIS 135513, 2014 WL 4742509, at *14 (refusing to consider an equity note on a motion to dismiss where the plaintiff "expressly challenged the authenticity of her signature[]" on the note).

In contrast, Plaintiff does not dispute the veracity or authenticity of the "Repayment Form," bearing a cover sheet and timestamps indicating that Plaintiff's counsel sent the document to Defendant Navient in December 2010. When a document is not incorporated by reference in the complaint, however, a court can consider it only if "the complaint relies heavily upon its terms and effect, thereby rendering the document integral to the complaint." Nicosia, 834 F.3d at 230 (internal quotation marks omitted) (citing DiFolco, 622 F.3d at 111). "[M]ere notice or possession is not enough." Id. at 231 (internal quotation marks omitted).

In this case, Plaintiff alleges that she became aware of the extent of the student loans only after she graduated college and [*15]  at that point made efforts to repay the loans. She further avers that she requested, in writing, that Defendant Navient offer her an income based repayment plan. In the Repayment Form, Plaintiff requested that Sallie Mae, now known as Defendant Navient, authorize a repayment plan with four years of monthly payments "that may be as low as interest only[.]" (Doc. 44-6 at 2.) By signing the form, Plaintiff represented that if her loans were placed in forbearance, she "underst[ood] that all accrued interest will be capitalized (added to [her] loan principal)[]" and that "[u]npaid interest on private student loans will be capitalized at the end of the forbearance period." Id.

Because the Repayment Form documents Plaintiff's efforts to repay the loans and to seek an alternative repayment plan, Plaintiff's allegations rely heavily upon its contents. Consequently, the court will consider the Repayment Form in analyzing Defendants' motion to dismiss. The court thus DENIES Plaintiff's motion to strike this document.

2. Printouts from Plaintiff's College Athletics Website.

Plaintiff moves to strike printouts allegedly showing she graduated from college in 2010. These documents are not referenced, [*16]  incorporated, or integral to her Second Amended Complaint, and Defendants do not contend otherwise.

Plaintiff argues that the website printouts are not appropriate for judicial notice. On a motion to dismiss, the court can take judicial notice of a document "to establish the existence of the [statements in the document], not for the truth of the facts asserted" therein. Glob. Network Commc'ns, Inc. v. City of New York, 458 F.3d 150, 157 (2d Cir. 2006) (internal quotation marks omitted); see also Apotex Inc. v. Acorda Therapeutics, Inc., 823 F.3d 51, 60 (2d Cir. 2016) ("[A court] may properly take judicial notice of [a] document" when the document is "publicly available and its accuracy cannot reasonably be questioned."); Fed. R. Evid. 201(b)(2) (providing that a court "may judicially notice a fact that is not subject to reasonable dispute because it[] . . . can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.").

In taking judicial notice of a website, the court can consider the existence of a webpage but not the truth of its contents, if disputed. See Moukengeschaie v. Eltman, Eltman & Cooper, P.C., 2016 U.S. Dist. LEXIS 43725, 2016 WL 1274541, at *13 (E.D.N.Y. Mar. 31, 2016) ("[E]ven if the [c]ourt took judicial notice of the website, the [c]ourt could only take notice of the fact that [the] website states it has an asset investigation department, as opposed to the fact that such a department actually exists, which Plaintiff disputes."). [*17]  In this case, Defendants seek judicial notice of webpages that are publicly available, and Plaintiff does not dispute their authenticity or the truth of their contents. See Boarding Sch. Review, LLC v. Delta Career Educ. Corp., 2013 U.S. Dist. LEXIS 48513, 2013 WL 6670584, at *1 n.1 (S.D.N.Y. Mar. 29, 2013) (taking judicial notice of college website homepages attached to the defendants' motions to dismiss where the authenticity of the websites and printouts of the websites "have not been challenged" and are "not subject to reasonable dispute.") (internal quotation marks omitted); see also Wells Fargo Bank, N.A. v. Wrights Mill Holdings, LLC, 127 F. Supp. 3d 156, 167 (S.D.N.Y. 2015) ("[The opposing party] does not actually dispute the factual material reflected in these websites. He simply would prefer that the [c]ourt not consider these materials."). As a result, the website printouts are the proper subject of judicial notice and the court may consider them to establish when Plaintiff graduated from college. For this reason, the court DENIES Plaintiff's motion to strike consideration of the website printouts attached to Defendants' motion to dismiss.


Defendants assert that Kathryn Blank is Plaintiff's mother although this relationship is not apparent on the face of the Second Amended Complaint.

While Plaintiff avers that the 2005 loan is held by Defendant SLM Private Credit Student Loan Trust 2006-A, she does not specify which Loan Trust Defendant was selected for bundling the 2006, 2008, and 2009 loans or which defendant currently holds each of these loans.

In her opposition to the motion to dismiss, Plaintiff asserts that she "never discovered that the loans were taken out in her name until sometime well after she graduated from college." (Doc. 46 at 7) (emphasis supplied). She cannot amend her Second Amended Complaint in this manner. See Peacock v. Suffolk Bus Corp., 100 F. Supp. 3d 225, 231 (E.D.N.Y. 2015) ("It is well-settled that a plaintiff cannot amend [a] complaint by asserting new facts or theories for the first time in opposition to a motion to dismiss.") (internal quotation marks and alteration omitted) (citing K.D. ex rel. Duncan v. White Plains Sch. Dist., 921 F. Supp. 2d 197, 209 n.8 (S.D.N.Y. 2013)).

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