United States District Court, W.D. Wisconsin
MEREDITH D. DAWSON, Plaintiff,
GREAT LAKES EDUCATION LOAN SERVICES, INC., GREAT LAKES HIGHER EDUCATION CORPORATION, JILL LEITL, DAVID LENTZ and MICHAEL WALKER, Defendants.
OPINION AND ORDER
BARBARA B. CRABB District Judge.
Meredith D. Dawson has filed this putative class action
lawsuit against defendants Great Lakes Education Loan
Services, Inc., Great Lakes Higher Education Corporation and
certain Great Lakes Education Loan Services, Inc. executives.
She contends that defendants violated the Racketeer
Influenced and Corrupt Organizations Act (18 U.S.C.
§§ 1961-1964) (RICO), were negligent in
capitalizing certain types of interest that had accrued on
plaintiff's loans and made negligent misrepresentations
in connection with their actions.
before the court is plaintiff's motion for class
certification under Fed.R.Civ.P. 23(b)(3), which I am
denying. At this stage of the litigation, plaintiff's
claims remain too vague and her injury too ill-defined to
enable the court to conduct the necessary inquiry into
whether Rule 23(a) and Rule 23(b)(3)'s requirements are
met. I will give her an opportunity to submit additional
briefing in support of her motion for class certification and
I will deny defendants' motion to submit supplemental
briefing as moot.
the declarations, depositions and other materials submitted
by the parties, I find the following facts for the purpose of
deciding plaintiff's motion for class certification.
Lakes Education Loan Service, Inc. and Great Lakes Higher
Education Corporation are student loan servicing companies
that contract with the United States Department of Education
to service borrowers' accounts. (The parties do not
distinguish between these two entities in their briefs, so I
will refer to them collectively as “Great
Lakes.”) Defendants Jill Leitl, David Lentz and Michael
Walker are officers for Great Lakes.
majority of loans made by Great Lakes are held by the
Department of Education under the Federal Family Education
Loan program (FFEL loans) or the William D. Ford Direct Loan
program (Direct loans). Plaintiff took out both FFEL loans
and Direct loans serviced by Great Lakes.
interest rates borrowers must pay on FFEL loans and Direct
loans are determined by Congress. Generally, interest that
accrues on student loans is subject to capitalization, which
is the process by which unpaid interest is added to the
principal balance. Once added to the principal balance,
additional interest accrues on that capitalized amount. The
Department of Education promulgates rules and provides
guidance for capitalizing accrued interest.
general rule is that accrued interest is capitalized when the
interest accrues. However, during a B-9 Forbearance period,
the borrower's monthly payment obligations are suspended
for up to 60 days while Great Lakes processes certain
paperwork related to a borrower's request to switch
repayment plans. Government regulations clearly provide that
interest that accrues during a B-9 Forbearance
(“intra-forbearance interest”) is not subject to
capitalization. However, the regulations do not make it clear
whether the conclusion of a B-9 Forbearance qualifies as a
“triggering event” for purposes of capitalizing
the interest that accrued prior to the forbearance
(so-called “pre-forbearance interest”). Between
2009 and September 2014, Great Lakes generally capitalized
accrued pre-forbearance interest at the conclusion of the B-9
Forbearance period. The parties cite conflicting evidence on
the questions whether this practice was prohibited by the
governing regulations, what guidance defendants received from
the Department and the nature of the borrowers' master
October 3, 2013, plaintiff's loans were placed into a B-9
Forbearance period while she applied for a switch from a
standard repayment plan to an “income driven repayment
plan.” Her application for an income driven repayment
plan was approved. At the conclusion of the B-9 Forbearance
on November 28, 2013, Great Lakes capitalized $819.65 worth
of accrued interest on her loan, which included interest
accrued during the B-9 Forbearance period. Plaintiff filed
suit on July 31, 2015, contending that the capitalization of
this interest was “illegal” and in violation of
the regulations prohibiting the capitalization of
intra-forbearance interest. Great Lakes determined that its
system was programmed so that generally intra-forbearance
interest was not capitalized. However, it discovered two
errors that had improperly inflated plaintiff's principal
balance. First, Great Lakes had mistakenly programmed its
system so that only the interest that accrued up to, rather
than through, the sixtieth day of the B-9 Forbearance period
was exempt from capitalization. In other words, Great Lakes
was improperly capitalizing one day of B-9 Forbearance
interest. This single day of B-9 Forbearance interest
represented $4.09 of the $819.65 plaintiff contends was
illegally capitalized. Second, payments being made during the
B-9 Forbearance period were being credited improperly against
intra-forbearance interest before being credited against
pre-forbearance interest. By applying plaintiff's payment
to the intra-forbearance interest first, Great Lakes allowed
$125.78 of plaintiff's pre-forbearance interest to be
capitalized. Neither error was identified specifically in the
complaint and defendants assert that they have corrected
these programming errors and rectified plaintiff's and
all other borrowers' accounts.
has moved to certify a class under Fed.R.Civ.P. 23(b)(3).
Before I can consider whether certification is appropriate
under that rule, I must determine whether plaintiff has met
the requirements set forth in Fed.R.Civ.P. 23(a), which
provides that class certification is appropriate only when
“(1) the class is so numerous that joinder of all
members is impracticable; (2) there are questions of law or
fact common to the class; (3) the claims or defenses of the
representative parties are typical of the claims or defenses
of the class; and (4) the representative parties will fairly
and adequately protect the interests of the class.
Fed.R.Civ.P. 23(a). If those threshold requirements are met,
I must then determine whether plaintiff has met Rule
23(b)(3)'s requirements that “common questions of
law and fact predominate over individual questions” and
that a class action is “superior” to other
methods of adjudication. Fed.R.Civ.P. 23(b)(3). It is
plaintiff's burden to establish that each of these
elements is met. Retired Chicago Police Association v.
City of Chicago, 7 F.3d 584, 596 (7th Cir. 1993).
deciding a motion for class certification, the court cannot
accept the parties' assertions at face value. Instead,
the court must “look beyond pleadings in order to
properly understand the claims, defenses, relevant facts, and
applicable substantive law in order to make a meaningful
decision on class certification, as it must consider how a
trial on the merits would be conducted.” Joseph M.
McLaughlin, McLaughlin on Class Actions § 3:12
(11th ed. 2014) (citing Comcast Corp. v. Behrend,
133 S.Ct. 1426 (2013)). After reviewing plaintiff's
complaint and the parties' class certification materials,
I conclude that plaintiff's claims and her alleged
injuries are too vague to enable the court to conduct the
“rigorous analysis” required by Rule 23.