Andrich v. Navient Solutions Incorporated

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Devin Andrich, No. CV-18-02766-PHX-SMB 10 Plaintiff, ORDER 11 v. 12 Navient Solutions Incorporated, et al., 13 Defendants. [14] 15 Pending before the Court is Plaintiff’s Motion to Amend Complaint. (Doc. 108, 16 “Mot.”)1 Defendants Navient Solutions LLC, Navient Education Loan Corporation and 17 Sallie Mae Bank responded to Plaintiff’s Motion and filed a supporting declaration.2 (Doc. 18 117, “Navient Resp.”; Doc. 118, “Noren Decl.”) Fellow Defendant Pennsylvania Higher 19 Education Assistance Agency separately responded. (Doc. 119, “PHEAA Resp.”) Plaintiff 20 replied to each defendant separately. (Doc. 120, “Reply to Navient”; Doc. 125, “Reply to 21 PHEAA”.) No oral argument was requested. The Court considers the pleadings and enters 22 the following Order: 23 I. BACKGROUND 24 Plaintiff Devin Andrich seeks to file this complaint for a fifth time3 since August of 25 2018. 26 a. Factual Background 27 1 Plaintiff’s Fourth Amended Complaint, (“4AC”), is attached as Exhibit A. (Doc. 108-1.) 2 For purposes of this Order, the three parties jointly opposing Plaintiff’s latest amendments 28 in Doc. 117 are referred to collectively as “Navient.” 3 This tally includes the Complaint, (Doc. 1), as originally filed. 1 Although the facts alleged and parties identified by the successive versions of 2 Plaintiff’s Complaint vary slightly, the central thrust of the allegations is as follows.4 3 Plaintiff claims he entered into a loan agreement with SLM Corporation and SLM 4 Education Loan Corporation, (collectively, “SLM”)5 on or about October 5, 2003. (4AC ⁋ 5 20.) Navient Solutions, LLC, (“NSL”), informed Plaintiff via writing that Plaintiff’s Loan 6 Agreement had been amended or modified to name NSL as SLM’s loan servicer under 7 Plaintiff’s Loan Agreement. (4AC ¶ 42). 8 Between 2003 and 2014, Plaintiff notified SLM and NSL of a change in Plaintiff’s 9 permanent address three times by notifying SLM and NSL via the mailing address 10 previously provided—P.O. Box 9500, Wilkes-Barre, Pennsylvania 18773-9500 (the 11 “Mailing Address”). (4AC ¶¶ 41, 44). Each time after Plaintiff corresponded, SLM and 12 NSL subsequently caused delivery of forms and correspondence to Plaintiff at Plaintiff’s 13 new permanent address. (4AC ¶ 45). Each time between 2003 and 2014 that Plaintiff 14 requested deferment and forbearance forms from SLM and NSL via the Mailing Address, 15 SLM and NSL subsequently caused delivery of deferment and forbearance forms to 16 Plaintiff at Plaintiff’s new permanent address.6 (4AC ¶ 46). 17 On July 10, 2015, Plaintiff began serving a 3 1/2-year prison sentence at the Arizona 18 Department of Corrections for committing multiple felony counts of fraud, theft, and 19 forgery. (4AC ¶¶ 55, 58; Doc. 119-2 at 2.) On December 22, 2015, Plaintiff mailed a letter 20 to NSL via the Mailing Address informing NSL of Plaintiff’s then-permanent address in 21 Tucson, Arizona and enclosing a form created by NSL that borrowers can use when [22] 23 4 This Court’s prior orders dismissing Plaintiff’s Second Amended Complaint as to Navient, (Doc. 123), and PHEAA, (Doc. 116) examine the factual allegations in greater 24 detail. 5 Plaintiff’s Complaint refers to SLM Corporation and SLM Education Loan Corporation 25 collectively, as “SLM.” For purposes of simplicity, this Order generally follows suit unless identification of the specific entity invoked—i.e., SLM Corporation or SLM Education 26 Loan Corporation—is necessary. Sallie Mae Bank (“SMB”) notes that it is improperly named in the Second Amended Complaint as “SLM Corporation” and that “SLM 27 Education Loan Corporation” changed its name to Navient Education Loan Corporation, (“NELC”), in 2014. (Doc. 117 at 1.) 28 6 Plaintiff does not allege how many times he requested deferment and forbearance forms from SLM and NSL between 2003 and 2014. 1 requesting a student loan payment deferment or forbearance. (4AC ¶¶ 70, 76). Plaintiff 2 again mailed a letter to NSL at the Mailing Address on October 21, 2016, informing NSL 3 of Plaintiff’s then-permanent address and requesting the status of Plaintiff’s student loan 4 payment deferment or forbearance application previously submitted, or alternatively, 5 requesting a student loan payment deferment or forbearance. (SAC ¶¶ 57–59). Between 6 December 22, 2015, and the date of the First Amended Complaint, NSL neither responded 7 to Plaintiff’s December 22, 2015 or October 21, 2016 correspondence, nor mailed any 8 correspondence to Plaintiff’s then-permanent addresses warning Plaintiff of a pending or 9 possible default under the Loan Agreement. (SAC ¶¶ 56, 61). 10 After Plaintiff’s release from prison, he mailed a letter to SLM and NSL at the 11 Mailing Address on October 1, 2017 updating his permanent address and requesting a 12 student loan payment deferment or forbearance. (SAC ¶¶ 66, 67). On November 1, 2017, 13 SLM and NSL mailed a letter to Plaintiff stating that SLM and NSL could not approve 14 Plaintiff for a student loan payment deferment or forbearance under the Loan Agreement 15 because SLM and NSL declared and entered Plaintiff’s default under the Loan Agreement. 16 (SAC ¶ 68). Upon SLM and NSL declaring and entering Plaintiff’s default under the Loan 17 Agreement, SLM and NSL subsequently sold or otherwise assigned their rights under the 18 Loan Agreement to Defendant PHEAA, the guarantor of the Loan. (SAC ¶ 71). Plaintiff 19 alleged that SLM and NSL made numerous false statements to PHEAA that Plaintiff 20 defaulted under the Loan Agreement. (SAC ¶ 69). Plaintiff also alleged that SLM and 21 NSL made numerous false statements to several credit reporting agencies that Plaintiff 22 defaulted under the Loan Agreement. (SAC ¶ 70). 23 b. Procedural Background 24 Plaintiff initiated this action on August 31, 2018 bringing claims against three 25 named entities and one individual: PHEAA, Performant Recovery Services, Inc., Navient 26 Solutions, Inc. and Sara Evans. Plaintiff claimed violations of the Fair Credit Reporting 27 Act (“FCRA”), 15 U.S.C. § 1681 et seq., against Defendants Navient and PHEAA and 28 violations of the Fair Debt Collections Practices Act (“FDCPA”), 15 U.S.C. § 1682 et seq., 1 against Performant and Evans. This original complaint was deficient, however, as it failed 2 to allege that Plaintiff had submitted disputes to the relevant credit reporting agencies. (See 3 Doc. 18.) Plaintiff amended this first complaint through stipulation, (Doc. 15), on 4 November 9, 2018. (Doc. 18.) The First Amended Complaint, too, required amendment as 5 its defamation claim was preempted and FCRA claim premature. (See id.) Plaintiff filed 6 Second Amended Complaint on December 28, 2018. (Doc. 29.) Both Navient, (Doc. 66), 7 PHEAA, (Doc. 55), and SLM and SLM Education Loan Corporation, (Doc. 97) moved to 8 dismiss that latest incarnation. With those motions under advisement, Plaintiff filed a Third 9 Amended Complaint without the Court’s leave. (Docs. 91-92.) The Court struck that 10 complaint, (Doc. 113), and proceeded to oral argument on Defendants’ motions to dismiss, 11 scheduled for August 8, 2019. The day of oral argument, however, came approximately 12 eleven hours too late. The night before oral argument commenced, Plaintiff filed the instant 13 motion to amend. (Doc. 108.) The Court subsequently dismissed the Second Amended 14 Complaint’s claims against PHEAA on August 16, 2019 and Navient on September 3, 15 2019,7 but left judgment on Plaintiff’s late request for leave to amend unresolved, pending 16 full briefing. (See Doc. 116 (as to PHEAA); Doc. 123 (as to Navient).) 17 i. Fourth Amended Complaint 18 In his Fourth Amended Complaint, Plaintiff brings ten claims. Largely, the Fourth 19 Amended Complaint tracks the claims in the Second Amended Complaint (discussed 20 previously) but focus in on Defendants’ breach of specific paragraphs of the Loan 21 Agreement. 22 The first three counts are distinct claims of “Defamation/False Light/Libel” against 23 Defendants SML, Navient, and Bank of NY ELT SLMA Trusts. Count One pertains to 24 reporting Plaintiff’s default under the Loan Agreement to PHEAA, Count Two for 25 knowingly reporting an incorrect permanent address to PHEAA, and Count Three for 26 reporting Plaintiff’s default to the National Student Loan Data System (“NSLDS”). (4AC 27 7 The Court granted both Navient’s and PHEAA’s motions to dismiss, (Docs. 116, 123), but stayed the outstanding responsive motions to SLM and SLM Education Loan 28 Corporation’s motion to dismiss pending the outcome of the instant motion to amend. (See Doc. 115.) 1 at 40.) Count Four alleges a claim common to each incarnation of the complaint: a FCRA 2 violation—against SML, Navient, Bank of NY ELT SLMA Trusts, and PHEAA—for 3 reporting Plaintiff’s default to credit reporting agencies. (4AC at 43-44.) Counts 5-10 4 repeat allegations familiar to previous versions of the complaint, but now focus on breaches 5 of various paragraphs of a section of the Loan Agreement entitled “Borrower’s Rights and 6 Responsibilities.” Count Five details SLM and Navient’s breach of Paragraphs 2, 8, 9. 7 (4AC at 51-52.) Count Six alleges a breach of the Covenant of Good Faith and Fair Dealing 8 against SLM and Navient. Count Seven alleges Negligent Misrepresentation under the 9 Loan Agreement as to SLM and Navient. (4AC at 59.) Count Eight alleges Common Law 10 Fraud against SLM and Navient. (4AC at 62.) Count Nine alleges PHEAA breached the 11 “Borrower’s Rights and Responsibilities” Paragraph 5. (4AC at 67-68.) Count Ten alleges 12 Navient violation of the “Good Samaritan Doctrine and Increasing Risk of Economic Harm 13 to Plaintiff.” Count Eleven alleges negligent misrepresentation by PHEAA. (4AC at 75.) 14 Finally, Count Twelve alleges contract interference against all Defendants for preventing 15 Plaintiff from fulfilling the terms of his release conditions and probation. (4AC at 78-83.) 16 II. LEGAL STANDARD 17 “After a party has amended a pleading once as a matter of course, it may only amend 18 further after obtaining leave of the court, or by consent of the adverse party.” Eminence 19 Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (citing Fed. R. Civ. P. 20 15(a)). “Generally, Rule 15 advises the court that leave shall be freely given when justice 21 so requires.” Id. (quotation marks omitted). “The power to grant leave to amend . . . is 22 entrusted to the discretion of the district court, which determines the propriety of a motion 23 to amend by ascertaining the presence of any of four factors: bad faith, undue delay, 24 prejudice to the opposing party, and/or futility.”8 Weber v. Allergan Inc., No. CV-12- 25 8 As portions of Plaintiff’s proposed amendments relate to events that occurred after Plaintiff filed his initial complaint, the Fourth Amended Complaint could properly be 26 considered a supplemental filing under Rule 15(d). (Doc. 117 at 3.) But, as Defendants correctly identify, Plaintiff’s new amendments allege conduct that occurred both before 27 and after Plaintiff filed his complaint, thus also invoking Rule 15(a). See 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 1504 (3d ed. 28 2019) (dissecting the differences between amended pleadings under Rule 15(a) and supplemental pleadings under Rule 15(d)). Although Plaintiff is a former attorney, the 1 02388-PHX-SRB, 2016 WL 8114210 , at *2 (D. Ariz. Feb. 17, 2016) (quotation marks 2 omitted) (citing Serra v. Lappin, 600 F.3d 1191, 1200 (9th Cir. 2010)); see also Jackson v. 3 Bank of Hawaii, 902 F.2d 1385, 1387 (9th Cir. 1990) (“A trial court may deny [a motion 4 for leave to amend] if permitting an amendment would prejudice the opposing party, 5 produce an undue delay in the litigation, or result in futility for lack of merit.”). “[L]eave 6 to amend should be denied as futile ‘only if no set of facts can be proved under the 7 amendment to the pleadings that would constitute a valid and sufficient claim or defense.’” 8 Barahona v. Union Pac. R.R. Co., 881 F.3d 1122, 1134 (9th Cir. 2018) (quoting Sweaney 9 v. Ada County, 119 F.3d 1385, 1393 (9th Cir. 1997)). Granting a motion to amend is a 10 matter of the court’s discretion, Skinner v. Ryan, No. CV-12-1729-PHX-SMM (LOA), [11] 2013 WL 3967619 , at *1 (D. Ariz. Aug. 2, 2013), and discretion “is especially broad where 12 the court has already given a plaintiff one or more opportunities to amend his complaint.” [13] Id. (quoting DCD Programs, Ltd. v. Leighton, 833 F.2d 183 , 187 n.3 (9th Cir. 1987)); see 14 also Ascon Prop., Inc. v. Mobil Oil Co., 866 F.2d 1149 , 1160 (9th Cir. 1989) (“The district 15 court’s discretion to deny leave to amend is particularly broad where the plaintiff has 16 previously amended the complaint.”). 17 III. DISCUSSION 18 a. Rule 15 Factors Justify Denying Plaintiff’s Motion to Amend 19 To determine the propriety of granting Plaintiff’s requested amendment, the Court 20 examines four factors: bad faith,9 undue delay, prejudice to the opposing party, and futility. [21] Court notes his pro se status in construing the proposed Fourth Amended Complaint as an 22 amended pleading under Rule 15(a). See U.S. for Use of Atkins v. Reiten, 313 F.2d 673, 675 (9th Cir. 1963) (emphasizing a court’s discretion in considering leave to amend); see 23 also Athena Feminine Techs., Inc. v. Wilkes, No. C 10-4868 SBA, 2013 WL 450147 , at *2 (N.D. Cal. Feb. 6, 2013) (“stating that “[t]he legal standard for granting or denying a motion 24 to supplement under Rule 15(d) is the same as the standard for granting or denying a motion under Rule 15(a)”); Glatt v. Chicago Park Dist., 87 F.3d 190, 194 (7th Cir. 1996) (holding 25 that “[a]lthough these are cases under Fed. R. Civ. P. 15(a) and not Rule 15(d). . . the standard is the same”). 26 9 The Court avers from making a bad faith finding but notes that such an inference is possible. Plaintiff’s actions, at times, were unaccompanied by good faith efforts to inform 27 Defendants of actions likely to prejudice Defendants. See Allen v. City of Beverly Hills, 911 F.2d 367, 373-74 (9th Cir. 1990) (“[W]e need not apply all five factors here because 28 the final two plainly reveal that the district court did not abuse its discretion in dismissing [the plaintiff’s] action with prejudice.”). 1 Weber, 2016 WL 8114210 , at *2. The Court has also kept in mind that although Plaintiff 2 is proceeding pro-se, he has practiced law and is not entitled to as much leniency as an 3 untrained pro-se litigant. 4 i. Futility 5 The Court previously granted Plaintiff leave to amend his initial Complaint on three 6 separate occasions. Plaintiff’s previous attempts at amendment all failed. The instant 7 attempt, Plaintiff’s fourth, is also likely to fail. Thus, this factor weighs in favor of denying 8 Plaintiff’s motion. Williams v. California, 764 F.3d 1002, 1018-19 (9th Cir. 2014) (“The 9 fact that Plaintiffs have already had two chances to articulate clear and lucid theories 10 underlying their claims, and they failed to do so, demonstrates that amendment would be 11 futile.”). As explained below, the Court sees little need to prolong litigation by permitting 12 further amendment. See Lipton v. Pathogenesis Corp., 284 F.3d 1027, 1038-39 (9th Cir. 13 2002). 14 1. Proposed Amendments as to PHEAA10 15 Before diving headlong into analysis of Plaintiff’s amendments as they concern 16 PHEAA, it is worth noting that Plaintiff offers little in the way of new facts to support his 17 amendments. Plaintiff takes issue with this characterization and instead argues that 18 PHEAA’s material breach of Paragraph 6 of the Loan Agreement11 occurred on July 30, 19 2019, with Plaintiff receiving notice of the breach on August 2, 2019. (Doc. 125 at 4.) This 20 conclusion, however, is premised on a mistaken reading of both the Loan Agreement and 21 PHEAA’s letter that allegedly effectuated the breach. First, Plaintiff points to a PHEAA 22 notice in its discovery disclosures that allows a debtor’s to object in writing to “the 23 [c]ollection of debt.” (Doc. 125 at 4 (emphasis added).) But the section grants Plaintiff the 24 right to object to the collection of his student loans, not to the notice. The Court agrees with 25 10 Analysis in this section primarily concerns arguments raised by Defendant PHEAA in its separately filed response, (Doc. 119). 26 11 The Court can consider the Loan Agreement, attached as an exhibit to Navient’s motion to dismiss, without converting the motion into a motion for summary judgment “because 27 the complaint refers to the Agreement, it is central to one of the plaintiff’s breach of contract claims, and no party questions the authenticity of the document.” BioD, LLC v. 28 Amnio Tech., No 2:13-cv-1670-HRH, 2014 WL 11515617 , at *2 n.11 (D. Ariz. Jul. 22, 2014). 1 PHEAA that Plaintiff’s reliance on his July 2019 correspondence with PHEAA does 2 nothing to change the fact that Plaintiff was aware of PHEAA’s credit reporting 3 requirement in his loan agreement, and that such a report had been made at the time he 4 initiated the instant suit. (See Doc. 119 at 7 n.4.) 5 a. Count 3: Defamation as to PHEAA12 6 Plaintiff contends that PHEAA made “public and patently false statements” by 7 reporting his default under the Loan Agreement. (4AC ⁋ 172.) To assert a defamation claim 8 under Arizona law a plaintiff must show: “(1) that the defendant has made a false statement, 9 (2) that the statement was published or communicated to someone other than the plaintiff, 10 and (3) that the statement tends to harm the plaintiff’s reputation.” Prostollo v. Scottsdale 11 Healthcare Hosp., No. CV-17-0409-PHX-DJH, 2018 WL 501414 , at *4 (D. Ariz. Jan. 12, 12 2018). Plaintiff fails to clear the first hurdle. As this Court previously established, “there is 13 no question that [Plaintiff’s] account was in default,” notwithstanding any forbearance or 14 deferment requests made to Navient. (Doc. 116 at 6.) Plaintiff’s argues that the Paragraph 15 6 of the Loan Agreement “expressly bars” PHEAA from either entering or communicating 16 Plaintiff’s default until PHEAA conducts “a review of the debt before the default is 17 reported [to national credit reporting bureaus].” (Doc. 125 at 8.) This misreads to the Loan 18 Agreement to mandate PHEAA’s review. Plaintiff misreads the agreement’s grant of a 19 right to timely petition PHEAA for a review with an inviolate precondition that PHEAA 20 conduct that review. (See id.) The Loan Agreement does assign certain responsibilities to 21 PHEAA—to notify Plaintiff in advance of default, to wait thirty days prior to disclosing 22 Plaintiff’s default, to promptly respond to Plaintiff’s request for review, and, implicitly, to 23 conduct that review when appropriate—all of which PHEAA complied with. (See Doc. 9824 1 at 6 ⁋ 6.) Lastly, as discussed previously, Plaintiff’s invocation of PHEAA’s July 2019 25 correspondence is a red herring. (See Doc. 125 at 8.) Plaintiff’s request (and PHEAA’s July 26 2019 responses) concern his rights prior to collection of his debts, not the reporting of his [27] 12 Plaintiff also claims false light and libel. Those claims, like his defamation claims, fail 28 for reasons discussed in the two prior orders dismissing his Second Amended Complaint’s claims against PHEAA and Navient. (See Docs. 117, 123.) 1 default. (Compare Doc. 125-1 at 4 (instructing a debtor how “To Object in Writing to the 2 Collection of the Debt”) with Doc. 98-1 at 6 ⁋ 6 (outlining a borrower’s rights and 3 responsibilities prior to “Credit Bureau Notification”)). The Court’s earlier analysis on this 4 issue remains undisturbed. With the veracity of PHEAA’s report established, Plaintiff 5 cannot state a defamation claim under any set of facts. 6 b. Count 4: FCRA Claim 7 Argument over Plaintiff’s FRCA claim against PHEAA largely duplicates the 8 analysis of the defamation claim above. The Court previously dismissed Plaintiff’s FCRA 9 claims because he could not satisfy the first element of a cause of action under 15 U.S.C. 10 § 1681s-2(b)—that there was an inaccuracy in his credit report. (Doc. 116 at 6.) That has 11 not changed. The only change to Plaintiff’s previously dismissed FCRA claim is an 12 allegation that PHEAA violated a Loan Agreement provision requiring notice prior to the 13 report of default to credit reporting agencies. (Compare Doc. 39, Count 2 with Doc. 10814 1, Count 4.) Again, the question of notice does not distract from the accuracy of PHEAA’s 15 report. Plaintiff’s loan was in default. PHEAA is statutorily mandated to report that default. 16 See 34 C.F.R. § 682.410 (b)(5).13 Like the defamation claim above, Plaintiff’s FRCA claim 17 is futile. 18 c. Count 9: Breach of Loan Agreement 19 Amending from the dismissal of his previous breach of loan agreement claim, (see 20 Doc. 116 at 6), Plaintiff now alleges that PHEAA breached his loan agreement by refusing 21 to provide him notice of the impending report his default to credit reporting agencies. (See 22 Doc. 108-1 at ⁋⁋ 267-72.) To state a claim here, Plaintiff must allege that “(1) a contract 23 exists between the plaintiff and the defendant; (2) the defendant breached the contract; and 24 (3) the breach resulted in damage to the plaintiff.” Nerdig v. Electric Ins. Co., No. CV-1725 C1859-PHX-GMS, 2018 WL 4184926 , at *3 (D. Ariz. Aug. 31, 2018). PHEAA contends [26] 13 Even when a borrower, like Plaintiff here, timely requests administrative review of his 27 records, PHEAA “may continue reporting the debt to consumer reporting agencies until it determines that the borrower has demonstrated that the loan obligation is not legally 28 enforceable or that alternative payment arrangements satisfactory to the agency have been made with the borrower.” 34 C.F.R. § 682.410 (b)(5)(iv)(A). 1 Plaintiff cannot satisfy the second or third elements under any set of facts. The Court 2 agrees. 3 First, the Court does not accept Plaintiff’s invitation to treat this as a factual issue 4 properly resolved after discovery. A court my deny leave to amend due to futility or legal 5 insufficiency if the amendment would fail a motion to dismiss under Rule 12(b)(6). Miller 6 v. Rykof-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). Thus, accepting the factual 7 allegations as true, a court may dismiss a complaint where “there is no cognizable legal 8 theory or an absence of sufficient facts alleged to support a cognizable legal theory.” 9 Zamani v. Carnes, 491 F.3d 990, 996 (9th Cir. 2007) (citation omitted). The crux of 10 Plaintiff’s argument is that discovery may show that PHEAA breached the loan agreement 11 by failing to diligently inspect the records furnished to PHEAA by Navient upon Plaintiff’s 12 default. Because those records may show Plaintiff’s “correct” address, Plaintiff argues the 13 question is best reserved for discovery. But Plaintiff, in his proposed amendments, also 14 concedes that PHEAA complied with the terms of the loan agreement. He agrees PHEAA 15 mailed notice to Plaintiff using an address furnished by Navient exactly as the loan 16 agreement requires. (See Doc. 23-1 at 4 (“Any notice required to be given to me will be 17 effective if mailed by first class mail the latest address the lender has for me”); 4AC ⁋⁋ 9518 96 (acknowledging that Navient “informed Defendant PHEAA that . . . Plaintiff’s then19 permanent address was in Phoenix, Arizona”).) By his own admission, Plaintiff’s 20 amendment here is likely futile. See Weisbuch v. County of Los Angeles, 119 F.3d 778 , 783 21 n.1 (9th Cir. 1997) (recognizing that a “plaintiff may plead h[im]self out of court” if he 22 “plead[s] facts which establish that he cannot prevail on his . . . claim”) (citation and 23 internal quotation marks omitted). 24 Second, Plaintiff does not successfully allege that damages resulted from the alleged 25 breach. Plaintiff argues that PHEAA’s alleged failure to mail notice to the correct address 26 resulted in the loss of a federal student aid award of not more than $20,000. (Doc. 125 at 27 10.) But Plaintiff admits that PHEAA furnished notice to the address provided by Navient 28 and that he eventually received such notice and submitted a request for review. (Doc. 1081 1 ⁋⁋ 95-96, 139-40, 143, 151-52.) There is no question as to whether Plaintiff had defaulted 2 on his loan obligations (he had). (See Doc. 116 at 6.) Further, as discussed above, § 3 682.410(b)(5) requires PHEAA to disclose that default and, further, allows PHEAA to 4 continue reporting a debtor’s default until it determines that the loan obligation is not 5 legally enforceable, even when a debtor timely petitions for PHEAA’s review. See supra 6 n.5. Thus, Plaintiff cannot satisfy the damages element of his breach of loan agreement 7 claim. 8 d. Count 11: Negligent Misrepresentation 9 Plaintiff also claims that PHEAA negligently misrepresented that it would, as 10 required by his loan agreement, provide notice and opportunity to seek review of his debt 11 prior to reporting his default to credit reporting agencies. (4AC ⁋⁋ 286-300.) 12 In its response, PHEAA argues that Plaintiff’s negligent misrepresentation claim is 13 barred by the economic loss doctrine, “a common law rule limiting a contracting party to 14 contractual remedies for the recovery of economic losses unaccompanied by physical 15 injury to persons or other property.” Flagstaff Afford/able Hous. Ltd. P’ship v. Design 16 Alliance, Inc., 223 P.3d 664, 667 (Ariz. 2010). The losses here are purely economic and 17 Plaintiff concedes they are “directly linked to Defendant PHEAA[‘s] breach of Paragraph 18 6 of the Loan Agreement.” (Doc. 125 at 10; 4AC ⁋⁋ 145-47.) Although Arizona courts 19 have yet to apply the economic loss doctrine in the context of a defaulted student loan, the 20 Court finds the doctrine likely to bar Plaintiff’s negligent misrepresentation claim, 21 particularly where, as here, the harm allegedly suffered by a claimant is directly attributable 22 to the alleged breach of a specified contractual provision and the foreseeable result of such 23 breach. See Salt River Project Agr. Imp. and Power Dist. v. Westinghouse Elec. Corp., 143 24 Ariz. 368 , 379-80 694 P.2d 198 (1984) (holding that “[i]f the only loss is non-accidental . 25 . . or is of a consequential nature” contract remedies will govern “and strict liability and 26 other tort theories will be unavailable”); see also Del Mar Land Partners, LLC v. Stanley 27 Consultants, Inc., No. CV-11-8013-PCT-PGR, 2011 WL2692959, at *4 (D. Ariz. July 12, 28 2011) (applying Arizona’s economic loss doctrine to a bar negligent misrepresentation 1 claim where “the harm allegedly suffered . . . is not one that is separate and distinct from 2 any harm that would foreseeably result from the defendant’s failure to perform as the 3 parties’ contract required”). Further, as Plaintiff recognizes, cases applying the economic 4 loss doctrine to bar tort recovery often involve “detailed contracts allocating risk of loss 5 and specifying remedies.” (Doc. 125 at 11 (citing Cook v. Orkin Exterminating Co., Inc. [6] 258 P.3d 149 (Ariz. Ct. App. 2011) (considering a home extermination contract) and 7 Sherman v. Premier Garage Sys., LLC, No. CV-10-0269-PHX-MHM, 2010 WL 3023320 , 8 at *4 (D. Ariz. July 30, 2010) (applying the economic loss doctrine to a residential garage 9 door contract)).) Although applied in a different context, this case is not meaningfully 10 different.14 11 Regardless of whether the economic loss doctrine validly applies, Plaintiff cannot 12 satisfy the necessary elements of a negligent misrepresentation claim. To claim negligent 13 misrepresentation a plaintiff must allege: “(1) the defendant provided false information in 14 a business transaction; (2) the defendant intended for the plaintiff to rely on the incorrect 15 information or knew that it reasonably would rely; (3) the defendant failed to exercise 16 reasonable care in obtaining or communicating the information; (4) the plaintiff justifiably 17 relied on the incorrect information; and (5) resulting damage.” Jackson v. Wells Fargo 18 Bank, N.A., No. CV-13-0617-PHX-SPL, 2015 WL 13567130 , at *6 (D. Ariz. Aug. 31, 19 2015). PHEAA argues that Plaintiff cannot satisfy the first four elements. (Doc. 119 at 20 12.) It is likely PHEAA is correct—this claim is unlikely to survive an attempted dismissal. 21 As set forth previously, Plaintiff himself alleges facts that establish PHEAA largely 22 complied with the Loan Agreement. (See 4AC ⁋⁋ 107, 151-52.) The facts alleged by the 23 Fourth Amended Complaint—establishing PHEAA sent notice to Plaintiff based on the 24 address provided by Navient—make satisfying the first, second, and third elements 25 implausible. 26 14 The fact that the Loan Agreement’s detailed remedies and risk of loss apportionment is statutorily mandated rather than strictly bargained-for by the parties is of little 27 consequence. Cf. Keller v. GC Servs. L.P., No. 13-cv-1654, 2013 WL 3213338 , at *3 n.6 (E.D. Penn. Jun. 23, 2013) (finding in the student loan context, that the economic loss 28 doctrine not applicable to a claim resting on deceptive or fraudulent communication extraneous to the contract at issue). 1 e. Count 12: Tortious Interference with a Contract 2 Plaintiff’s final claim against PHEAA includes all Defendants and alleges tortious 3 interference with a contract, namely his “Uniform Conditions of Supervised Probation” 4 following his release from prison.15 (See Doc. 108-1 at ⁋ 304.) Tortious contract 5 interference requires (1) a valid contractual relationship, (2) the defendant’s knowledge of 6 the relationship, (3) intentional interference inducing or causing breach, (4) resultant 7 damage to the property whose relationship has been disrupted, and (5) proof that the 8 defendant acted improperly. AGA Shareholders, LLC v. CSK Auto, Inc., 589 F.Supp. 2d 9 1175, 1190 (D. Ariz. Nov. 21, 2008). Plaintiff’s argument boils down to an allegation that 10 by reporting his default, PHEAA prevented him from obtaining federal student aid to attend 11 community college. But, as Defendants counter, Plaintiff’s release conditions do not 12 require he attend school and are silent regarding the provision of any student loans. (Doc. 13 119-1 at 1-5 (mandating Plaintiff “seek, obtain, and maintain employment . . . and/or attend 14 school.”).) Plaintiff’s claim is deficient for this reason alone.16 15 2. Proposed Amendments as to Navient, Bank of NY ELT 16 SLMA Trusts, and NELC17 17 a. “New” Defendants 18 Navient takes specific issue with the proposed Fourth Amended Complaint’s 19 addition of Defendants Navient Corporation, Bank of NY ELT SLMA Trusts, and NELC.18 20 (Doc. 117 at 9-10.) Regarding Bank of NY ELT SLMA Trusts, Plaintiff provides nothing 21 aside from a conclusory allegation it is the alter ego of SLM or Navient to establish it has 22 any connection to this action.19 (See 4AC ⁋ 12.) The Court agrees that Plaintiff’s broad, 23 15 The Court may also consider Plaintiff’s “Uniform Conditions of Supervised Probation” without converting the motion into a motion for summary judgment for reasons explained 24 supra at 7 n.10. 16 And as discussed previously, supra p. 10, Plaintiff cannot establish the damages element 25 of his claim. 17 The following analysis focuses on arguments raised by Defendants Navient Solutions, 26 LLC, Navient Education Loan Corporation and Sallie Mae Bank in Doc. 117. 18 NELC, formerly known as SLM Education Corporation, has already appeared in this 27 action and is also included in the proposed Fourth Amended Complaint. Thus, even if not futile, further amendment is likely necessary to clarify the claims against the parties. 28 19 Plaintiff does not elucidate Bank of NY ELT SLMA Trust’s relationship to Plaintiff, to the facts supporting his complaint, or respond to the argument raised in Navient’s response. 1 conclusory, and unsupported claims against Bank of NY ELT SMLA Trusts are futile. 2 Plaintiff’s claims against Navient Corporation are also futile. As with Bank of NY ELT 3 SLMA Trusts, it is unclear what connection Navient Corporation, the parent holding 4 company of NSL, has to this dispute. United States v. Bestfoods, 524 U.S. 51, 61 , 118 S.Ct. 5 1876, 1884, 141 L.Ed.2d 43 (1998) (“It is a general principle of corporate law deeply 6 ‘ingrained in our economic and legal systems’ that a parent corporation . . . is not liable for 7 the acts of its subsidiaries.”) Navient Corporation’s (lack of) connection to the dispute is 8 attested to. (See Doc. 118-1) Plaintiff does not reply to this information or argument. (See 9 Doc. 120.) 10 b. Defamation and FRCA Claims—Counts 1-4 11 Plaintiff’s “defamation/false light/libel” claims fail for reasons discussed ad 12 nauseam in prior motions and orders. See supra at 7-8. Recognizing that, as Navient now 13 argues, the issue of whether any singular defendant breached the loan agreement by failing 14 to provide sufficient notice of Plaintiff’s default to the correct address is distinct from 15 Plaintiff’s failure to make payments on his loans, the Court found that no “false 16 information” or “false publication” by Defendants was possible. Plaintiff’s amendments 17 do not change this analysis. 18 Plaintiff attempts to sidestep this roadblock by arguing that Defendants’ “daily 19 material breaches” excused his performance (and thus negates his default) under the loan 20 agreement. This argument also fails. First, even indulging Plaintiff’s chosen interpretation 21 of Defendants’ conduct as “material breaches” of the Loan Agreement, it is unclear exactly 22 how this erases his prior default. The alleged breaches occurred after Plaintiff defaulted by 23 failing to make the required payments and meet his loan obligations. He does not explain 24 how Defendants’ allegedly improper notice excuses the failure to repay his loan in the past. 25 Second, stealing a page from Plaintiff’s book, it is clear one party did materially breach the 26 loan agreement—Plaintiff himself. Again, there is no dispute regarding Plaintiff’s failure 27 in this regard. The proposed amendments fail to plausibly state a claim that alters this [28] (Doc. 117 at 10.) 1 reasoning. 2 c. Count 10: Negligent Performance 3 Count 10 of Plaintiff’s proposed Fourth Amended Complaint adds a new cause of 4 action alleging that Navient Corporation, NSL, and NELC committed negligent 5 performance of an undertaking in violating the “Good Samaritan Doctrine.” (4AC ⁋ 282 6 (citing McCutchen v. Hill, 147 Ariz. 401, 404 (1985)).) 7 To Defendants, this cause of action is likely time-barred by the applicable two-year 8 statute of limitations and barred by the economic loss doctrine (as to NELC).20 Both 9 Plaintiff and Defendants agree a two-year statute of limitations applies. See Rowland v. 10 Kellogg Brown and Root, Inc., 210 Ariz. 586, 588 , 898 P.2d 964 (Ariz. Ct. App. 2005) 11 (applying A.R.S. § 12-542). They differ, however, regarding when the cause of action 12 accrued. A cause of action accrues, and the statute of limitations commences, when one 13 party can sue another. Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 182 14 Ariz. 586, 588 , 809 P.2d 964 (Ariz. 1995). Put otherwise, a cause of action “does not accrue 15 until a plaintiff knows or, in the exercise of reasonable diligence, should know the facts 16 underlying the cause.” Id. Plaintiff dates accrual to a November 1, 2017 letter from Sallie 17 Mae and Navient to Plaintiff which makes Plaintiff’s cause of action timely. (4AC ⁋ 115.) 18 Defendants point to the November 23, 2016 through June 2, 2017 time period wherein 19 “Navient’s negligent performance” caused his loan to be placed in default. (Id. ⁋⁋ 93, 284.) 20 Essentially, Plaintiff points to when he affirmatively knew the facts underlying his claim 21 and Defendants to when he should have known (in reasonable diligence). The Court agrees 22 the claim is likely time-barred. By his own admission, Plaintiff knew his attempts to inform 23 Defendants that his address and request a deferment had changed failed. (Id. ⁋ 69.) He also 24 attests that as early as September 2015, he knew he qualified for a deferment based on his 25 inability to meet his loan obligations. (Id. ⁋⁋ 63-74.) Thus, by November 23, 2016—the 26 earliest date by which Defendants allegedly reported Plaintiff’s default—Plaintiff had 27 sufficient knowledge to appreciate the risk of impending default and, “in the exercise of 28 20 Application of the economic loss doctrine to all negligence-based claims is explored in analysis of Count 11. See supra p. 10. That analysis likewise applies here. 1 reasonable diligence, should [have] know[n] the facts underlying the cause.” Gust, 182 2 Ariz. at 588. 3 The claim likely fails on its merits too.21 Plaintiff’s allegations fall outside the 4 narrow circumstances where the Good Samaritan Doctrine applies. In the loan servicing 5 context, Arizona courts have only applied the doctrine when: (1) a lender, or its 6 agent/representative, induces a borrower to default on his loan by promising a loan 7 modification in the event of default; (2) the borrower, relying on that promise to modify 8 the loan, subsequently defaults; (3) after the default, the lender or its agent/representative 9 negligently processes or fails to process the loan modification, or due to similar negligence, 10 the borrower is not granted the loan modification; and (4) based on the default, the lenders 11 subsequently forecloses on the borrower’s property. Steinberger v. McVey ex rel. County 12 of Maricopa, 234 Ariz. 125, 138 , 318 P.3d 419 (Ariz. Ct. App. 2014). Here, Plaintiff fails 13 to allege any discussion between his lender and any agent or representative that induced 14 his default. Mere compliance with the terms of his Loan Agreement and attempts to 15 exercise his rights under the agreement do not suffice. This cause of action, too, is futile. 16 ii. Undue Delay 17 Plaintiff’s latest attempted amendment comes nearly a year after he filed his first 18 Complaint. (See Doc. 1.) This delay, while not alone enough to support denial, is 19 nevertheless relevant. Loehr v. Ventura County Community College Dist., 743 F.2d 1310 , 20 1319-20 (9th Cir. 1984). “Whether the moving party knew or should have known the facts 21 and theories raised in the proposed amendment at the time it filed its original pleadings is 22 a relevant consideration in assessing untimeliness.” Castro v. City of Union City, No. 1423 cv-00272-MEJ, 2015 WL 3799521 , 7 (N.D. Cal. 2015) (citing Jackson v. Bank of Hawaii, [24] 902 F.2d 1385, 1388 (9th Cir. 1990)). Accordingly, “late amendments to assert new 25 theories are not reviewed favorably when the facts and the theory have been known to the 26 21 A claim for increased risk of harm under the “Good Samaritan Doctrine” requires a plaintiff allege: (1) defendants undertook to render services to the plaintiff that they should 27 have recognized were necessary for the protection of the plaintiff’s property; (2) the defendants’ failure to exercise reasonable care while doing so increased the risk of harm to 28 the plaintiff; and (3) the plaintiff was in fact harmed because of the defendants’ actions. Steinberger, 234 Ariz. at 138 . 1 party seeking amendment since the inception of the cause of action.” Acri v. Int’l Ass’n of 2 Machinists & Aerospace Workers, 781 F.2d 1393, 1398 (9th Cir. 1986). “At some point, . 3 . . a party may not respond to an adverse ruling by claiming that another theory not 4 previously advanced provides a possible [ground] for relief and should be considered.” 5 Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149 , 1161 (9th Cir. 1989) (quotation marks 6 omitted). The fundamental facts and legal theories supporting Plaintiff’s claims have 7 changed little, if at all, from the outset of this case on August 31, 2018. (See Doc. 1.) 8 Further, Plaintiff’s attempts to include newly discovered claims and factual allegations, as 9 discussed above, are likely futile. The drawn-out nature of the early stages of these 10 proceedings also weighs in favor of denying Plaintiff’s motion. 11 iii. Prejudice to the Opposing Parties 12 PHEAA argues that granting Plaintiff leave to amend his Complaint for the fourth 13 time would be unduly prejudicial. (Doc. 119 at 15-16.) “[T]he inquiry into prejudice when 14 considering a motion for leave to amend is limited to the prejudice to the opposing party 15 by virtue of allowance of the amendment.” EEOC v. SWMW Management, Inc., No. CV16 08-0946-PHX-GMS, 2009 WL 1097543 , at *4 (D. Ariz. Apr. 22, 2009). Prejudice, “the 17 touchstone of the inquiry under rule 15(a),” carries the outsized weight. Lone Star Ladies 18 Inv. Club v. Scholtzky’s Inc., 238 F.3d 363, 368 (5th Cir. 2001); see also DCD Programs, 19 Ltd. v. Leighton, 833 F.2d 183, 185 (9th Cir. 1987). Some types of amendment incur 20 outsized cost. Those that “alter the nature of the litigation or require [a] [d]efendant to 21 change its litigation strategy” are particularly prone to cause undue prejudice. See Weber, [22] 2016 WL 8114210 , at *3 (citing Morongo Band of Mission Indians v. Rose, 893 F.3d 1074 , 23 1079 (9th Cir. 1990)). PHEAA sees Plaintiff’s amendments in this light. Looking to the 24 fact that, to date, Plaintiff’s five versions of his Complaint include five different sets of 25 claims and allegations against PHEAA, all found to be insufficient, the Court agrees. The 26 revolving cycle of separate challenges reflect the evolving and unsettled legal theories that 27 undergird Plaintiff’s claims against PHEAA and Defendants generally. Unsurprisingly, 28 Defendants have found crafting a defense strategy nearly impossible and the Court 1 recognizes the clear prejudice of allowing endless amendments invoking distinct, meritless 2 claims. 3 As discussed previously, the timing of Plaintiff’s motion certainly does not help. 4 Indeed, a court could find the seeds of bad faith in Plaintiff’s instant motion to amend—a 5 surprise filing submitted the night before oral argument on pending (and eventually 6 successful) motions to dismiss. The cases cited by Defendants concern similar “eleventh 7 hour” amendment attempts, albeit in more advanced stages of proceedings. See Roberts v. 8 Arizona Board of Regents, 661 F.2d 796 798 , (9th Cir. 1981) (summary judgment); 9 Schlacter-Jones v. General Tel., 936 F.2d 435, 443 (9th Cir. 1991) (summary judgment); 10 M/V/ American Queen v. San Diego Marine Const. Corp., 708 F.2d 1483 , 1492 (9th Cir. 11 1983) (pending motion for summary judgment). While these cases thus do not guide the 12 Court’s judgment, their overarching lesson is well-taken and Defendants’ claims of 13 prejudice are well-founded.22 14 IV. CONCLUSION 15 It is well-settled in this circuit that, absent a strong showing of one of the factors— 16 futility, bad faith, undue delay, and prejudice to the opposing party—there exists a 17 presumption under Rule 15(a) in favor of granting leave to amend. See Eminence Capital, 18 LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). Here however, on Plaintiff’s 19 fourth attempt to amend his claims, the Court’s discretion to deny leave to amend is at its 20 peak. See Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990) (quoting Ascon 21 Props., Inc., 866 F.2d at 1160 (quotation marks omitted). Three of the factors warrant the 22 denial of Plaintiff’s proposed amendment. 23 Accordingly, 24 IT IS ORDERED DENYING Plaintiff’s Motion to Amend Complaint, (Doc. 108). 25 IT IS FURTHER ORDERED DISMISSING with prejudice Plaintiff’s Fourth 26 Amended Complaint, (Doc. 108-1). 27 22 Regardless of his intent, Plaintiff’s twilight amendment filing undoubtedly complicated and delayed a decision on the merits of pending motions to dismiss, interfered with the 28 expeditious consideration of his claims, frustrated efforts to defend against them, and prejudiced Defendants. 1 IT IS FURTHER ORDERED lifting the stay, (Doc. 115), on Defendant Navient 2 || Education Loan Corporation’s and Sallie Mae Bank’s Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6), (Doc. 97), and ordering Plaintiff to file a response no later than April 4|| 7, 2020 and Defendants to file replies no later than April 14, 2020. 5 Dated this 30" day of March, 2020. 6 Se . ~P 7 SO ~ 8 A lonorable Susan M. Brnovich United States District Judge [28] -19-