1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
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 Defendant Navient Solutions, LLC’s Motion to Dismiss 16 Pursuant to Rule 12(b)(6). (Doc. 66, “Mot.”). Plaintiff Devin Andrich filed a Response, 17 (Doc. 85, “Resp.”), and Defendant filed a Reply, (Doc. 83, “Reply”). Oral argument was 18 held on August 8, 2019. The Court has now considered the Motion, Response, and Reply, 19 along with arguments and relevant case law. 20 I. BACKGROUND 21 Plaintiff initiated this action on August 31, 2018. (Doc. 1). He filed a Second 22 Amended Complaint on December 28, 2018, (Doc. 39, “SAC”), naming as defendants 23 (1) SLM Corporation, (2) SLM Education Loan Corporation, (3) Navient Solutions, Inc., 24 (4) Navient Solutions, LLC, (5) Pennsylvania Higher Education Assistance Agency 25 (“PHEAA”), (6) Performant Recovery Services, Inc., and (7) DOES I-X, as individuals or 26 entities. Defendant Performant Recovery Services, Inc. was dismissed from the action on 27 January 22, 2019. (Doc. 53). Plaintiff refers to Defendants SLM Corporation and SLM 28 Education Loan Corporation collectively as “Sallie Mae.” (SAC ¶ 4). Plaintiff refers to 1 Defendants Navient Solutions, Inc. and Navient Solutions, LLC collectively as “Navient.” 2 (SAC ¶ 7). However, due to counsels’ representations of entity name changes that have 3 occurred over the time period at issue, the Court will refer to Defendants SLM Corporation 4 and SLM Education Loan Corporation collectively as “SLM.” The Court will refer to 5 Navient Solutions, Inc. and Navient Solutions, LLC collectively as “NSL.” 6 The following facts are assumed to be true for the purpose of deciding this Motion.1 7 Plaintiff entered into a loan agreement with SLM on or about October 5, 2003 (the “Loan 8 Agreement”). (SAC ¶ 18). Plaintiff alleges that the following terms are included in the 9 Loan Agreement:
10 • Plaintiff would update his permanent address with Defendant SLM or its designated assignee when Plaintiff changed permanent mailing addresses. 11 (SAC ¶ 23). 12 • Plaintiff would notify SLM or its designated assignee when Plaintiff’s status changed that would affect Plaintiff’s Loan Agreement. (SAC ¶ 24). 13 • Upon request, SLM or its designated assignee would provide Plaintiff with a 14 deferment application that explains Plaintiff’s eligibility requirements to Plaintiff’s permanent address. (SAC ¶ 26). 15 • Plaintiff had a right to defer or postpone repayments to Defendant SLM or 16 its designated assignee, while Plaintiff experienced “an economic hardship as determined by federal law.” (SAC ¶ 27). 17 • Defendant SLM or its designated assignee was required to grant Plaintiff a 18 forbearance if Plaintiff had “a monthly debt burden for Title IV loans that collectively equal[ed] or exceed[ed] 20% of [Plaintiff’s] total monthly gross 19 income.” (SAC ¶ 28). 20 SLM identified SallieMae Servicing Corporation as the loan servicer under the Loan 21 Agreement. (SAC ¶ 31). Sometime between 2003 and 2014, NSL informed Plaintiff via 22 writing that Plaintiff’s Loan Agreement had been amended or modified to name NSL as 23 SLM’s loan servicer under Plaintiff’s Loan Agreement. (SAC ¶ 33). Additionally, SLM 24 and its assignees entered into an agreement with PHEAA regarding the consolidation and 25 servicing of Plaintiff’s consolidated student loans (the “Guarantor Agreement”).2 (SAC 26 ¶ 39). 27 1 This Order focuses only on the aspects of Plaintiff’s allegations that relate to the counts 28 against NSL. 2 A copy of the Guarantor Agreement has not been submitted with any of the filings. 1 Between 2003 and 2014, Plaintiff notified SLM and NSL of a change in Plaintiff’s 2 permanent address approximately three times by notifying SLM and NSL via the mailing 3 address previously provided—P.O. Box 9500, Wilkes-Barre, Pennsylvania 18773-9500 4 (the “Mailing Address”). (SAC ¶¶ 32, 35). Each time after Plaintiff corresponded, SLM 5 and NSL subsequently caused delivery of forms and correspondence to Plaintiff at 6 Plaintiff’s new permanent address. (SAC ¶ 36). Each time between 2003 and 2014 that 7 Plaintiff requested deferment and forbearance forms from SLM and NSL via the Mailing 8 Address, SLM and NSL subsequently caused delivery of deferment and forbearance forms 9 to Plaintiff at Plaintiff’s new permanent address.3 (SAC ¶ 37). 10 On July 10, 2015, Plaintiff began serving a 3 1/2-year prison sentence at the Arizona 11 Department of Corrections. (SAC ¶¶ 49, 50). On December 22, 2015, Plaintiff mailed a 12 letter to NSL via the Mailing Address informing NSL of Plaintiff’s then-permanent address 13 in Tucson, Arizona and enclosing a form created by NSL that borrowers can use when 14 requesting a student loan payment deferment or forbearance. (SAC ¶¶ 52–54). Plaintiff 15 again mailed a letter to NSL via the Mailing Address on October 21, 2016, informing NSL 16 of Plaintiff’s then-permanent address and requesting the status of Plaintiff’s student loan 17 payment deferment or forbearance application previously submitted, or alternatively, 18 requesting a student loan payment deferment or forbearance. (SAC ¶¶ 57–59). Between 19 December 22, 2015, and the date of the First Amended Complaint, NSL neither responded 20 to Plaintiff’s December 22, 2015 or October 21, 2016 correspondence, nor mailed any 21 correspondence to Plaintiff’s then-permanent addresses warning Plaintiff of a pending or 22 possible default under the Loan Agreement. (SAC ¶¶ 56, 61). 23 After Plaintiff’s release from prison, he mailed a letter to SLM and NSL at the 24 Mailing Address on October 1, 2017 updating his permanent address and requesting a 25 student loan payment deferment or forbearance. (SAC ¶¶ 66, 67). On November 1, 2017, 26 SLM and NSL mailed a letter to Plaintiff stating that SLM and NSL could not approve 27
28 3 Plaintiff does not allege how many times he requested deferment and forbearance forms from SLM and NSL between 2003 and 2014. 1 Plaintiff for a student loan payment deferment or forbearance under the Loan Agreement 2 because SLM and NSL declared and entered Plaintiff’s default under the Loan Agreement. 3 (SAC ¶ 68). Upon SLM and NSL declaring and entering Plaintiff’s default under the Loan 4 Agreement, SLM and NSL subsequently sold or otherwise assigned their rights under the 5 Loan Agreement to Defendant PHEAA, the guarantor of the Loan. (SAC ¶ 71). Plaintiff 6 alleges that SLM and NSL made numerous false statements to PHEAA that Plaintiff 7 defaulted under the Loan Agreement. (SAC ¶ 69). Plaintiff also alleges that SLM and 8 NSL made numerous false statements to several credit reporting agencies that Plaintiff 9 defaulted under the Loan Agreement. (SAC ¶ 70). 10 In his Second Amended Complaint, Plaintiff brings eight causes of action against 11 NSL:
12 • Count One – violation of the Fair Credit Reporting Act (the “FCRA”), 15 U.S.C. § 1681 et seq., for making false statements to PHEAA; 13 • Count Two – defamation; 14 • Count Three – violation of the FCRA for making false statements to Credit Reporting Agencies; 15 • Count Five – breach of the Loan Agreement; 16 • Count Six – breach of the covenant of good faith and fair dealing; • Count Seven – negligent misrepresentation; 17 • Count Eight – fraud; 18 • Count Ten – breach of the “Guarantor Agreement.” 19 II. LEGAL STANDARD 20 To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meet 21 the requirements of Rule 8(a)(2). Rule 8(a)(2) requires a “short and plain statement of the 22 claim showing that the pleader is entitled to relief,” so that the defendant has “fair notice 23 of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 24 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Dismissal 25 under Rule 12(b)(6) “can be based on the lack of a cognizable legal theory or the absence 26 of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police 27 Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). A complaint that sets forth a cognizable legal 28 theory will survive a motion to dismiss if it contains sufficient factual matter, which, if 1 accepted as true, states a claim to relief that is “plausible on its face.” Ashcroft v. Iqbal, 2 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Facial plausibility exists if 3 the pleader sets forth “factual content that allows the court to draw the reasonable inference 4 that the defendant is liable for the misconduct alleged.” Id. “Threadbare recitals of the 5 elements of a cause of action, supported by mere conclusory statements, do not suffice.” 6 Id. 7 Although a complaint attacked for failure to state a claim does not need detailed 8 factual allegations, the pleader’s obligation to provide the grounds for relief requires “more 9 than labels and conclusions, and a formulaic recitation of the elements of a cause of action 10 will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). Rule 8(a)(2) “requires 11 a ‘showing,’ rather than a blanket assertion, of entitlement to relief,” as “[w]ithout some 12 factual allegation in the complaint, it is hard to see how a claimant could satisfy the 13 requirement of providing not only ‘fair notice’ of the nature of the claim, but also ‘grounds’ 14 on which the claim rests.” Id. at 555 n.3 (citing 5 Charles A. Wright & Arthur R. Miller, 15 Federal Practice & Procedure § 1202, at 94–95 (3d ed. 2004)). Thus, Rule 8’s pleading 16 standard demands more than “an unadorned, the-defendant-unlawfully-harmed-me 17 accusation.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). 18 In ruling on a Rule 12(b)(6) motion to dismiss, the well-pled factual allegations are 19 taken as true and construed in the light most favorable to the nonmoving party. Cousins v. 20 Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). However, legal conclusions couched as 21 factual allegations are not given a presumption of truthfulness, and “conclusory allegations 22 of law and unwarranted inferences are not sufficient to defeat a motion to dismiss.” Pareto 23 v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). A court ordinarily may not consider evidence 24 outside the pleadings in ruling on a Rule 12(b)(6) motion to dismiss. See United States v. 25 Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). “A court may, however, consider materials— 26 documents attached to the complaint, documents incorporated by reference in the 27 complaint, or matters of judicial notice—without converting the motion to dismiss into a 28 motion for summary judgment.” Id. at 908. 1 III. ANALYSIS 2 A. FCRA 3 Plaintiff brings claims against NSL under the FCRA in Counts One and Three. In 4 Count One, Plaintiff alleges that NSL violated the FCRA when making false statements to 5 PHEAA. In Count Three, Plaintiff alleges that NSL violated the FCRA when making false 6 statements to credit reporting agencies. 7 “Congress enacted the [FCRA] to ensure fair and accurate credit reporting, promote 8 efficiency in the banking system, and protect consumer privacy.” Gorman v. Wolpoff & 9 Abramson, LLP, 584 F.3d 1147, 1153 (9th Cir. 2009) (internal citations and quotation 10 marks omitted). “[T]o ensure that credit reports are accurate, the FCRA imposes some 11 duties on the sources that provide credit information to [credit reporting agencies], called 12 ‘furnishers’ in the statute.” Id. Under Counts One and Three, Plaintiff asserts NSL violated 13 15 U.S.C. § 1681s-2(b)(1): “Duties of furnishers of information upon notice of dispute.” 14 Subsection 1681s-2(b)(1) provides that after receiving a notice of dispute, the furnisher 15 shall:
16 (A) conduct an investigation with respect to the disputed information; (B) review all relevant information provided by the consumer reporting 17 agency pursuant to section 1681i(a)(2) of this title; 18 (C) report the results of the investigation to the consumer reporting agency; (D) if the investigation finds that the information is incomplete or inaccurate, 19 report those results to all other consumer reporting agencies to which the 20 person furnished the information and that compile and maintain files on consumers on a nationwide basis; and 21 (E) if an item of information disputed by a consumer is found to be inaccurate 22 or incomplete or cannot be verified after any reinvestigation under paragraph (1), for purposes of reporting to a consumer reporting agency only, as 23 appropriate, based on the results of the reinvestigation promptly– 24 (i) modify that item of information; (ii) delete that item of information; or 25 (iii) permanently block the reporting of that item of information. 26 15 U.S.C. § 1681s-2(b)(1). “These duties arise only after the furnisher receives notice of 27 dispute from a [credit reporting agency]; notice of a dispute received directly from the 28 consumer does not trigger furnishers’ duties under subsection (b).” Gorman, 584 F.3d at 1 1154. On inquiry by a credit reporting agency (“CRA”), a furnisher must “conduct at least 2 a reasonable, non-cursory investigation[.]”4 Id. at 1157. In order to state a claim under 15 3 U.S.C. § 1681s-2(b), plaintiff must
4 plead the following four elements . . . against a credit furnisher: (1) a credit reporting inaccuracy existed on plaintiff’s credit 5 report; (2) plaintiff notified the consumer reporting agency that 6 plaintiff disputed the reporting as inaccurate; (3) the consumer reporting agency notified the furnisher of the alleged 7 inaccurate information of the dispute; and (4) the furnisher 8 failed to investigate the inaccuracies or further failed to comply with the requirements in 15 U.S.C. 1681s-2(b)(1)(A)–(E). 9 Cook v. Mountain Am. Fed. Credit Union, No. 2:18-CV-1548-HRH, 2018 WL 3707922, 10 at *3 (D. Ariz. Aug. 3, 2018) (internal quotation marks and citations omitted). “[A]n item 11 on a credit report can be ‘incomplete or inaccurate’ . . . ‘because it is patently incorrect, or 12 because it is misleading in such a way and to such an extent that it can be expected to 13 adversely affect credit decisions.’” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 14 890 (9th Cir. 2010) (quoting Gorman, 584 F.3d at 1163). 15 1. Count One – Statements to PHEAA 16 In Count One, Plaintiff alleges that NSL violated the FCRA when making false 17 statements to PHEAA. NSL argues that the FRCA “only provides consumers with a private 18 right of action against a furnisher, like NSL, for violations of Section 1681s-2(b), which 19 relates to furnishing information to a CRA”, and because “PHEAA is not a CRA, Count 20 [One] must be dismissed.” (Mot. at 6). NSL relies on Harris v. Pennsylvania Higher 21 Education Assistance Agency, 696 Fed. App’x 87, 90 (3d Cir. 2017), which held that “the 22 District Court properly dismissed [Plaintiff’s] amended complaint . . . because PHEAA is 23 not a ‘consumer reporting agency’ under the FCRA.” In order for NSL to be in violation 24 of Section 1681s-2 as it relates to furnishing information to PHEAA, PHEAA would need 25 to be considered a CRA under the FCRA. 26 27 4 A consumer reporting agency “regularly engages in whole or in part in the practice of 28 assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties[.]” 15 U.S.C. § 1681a(f). 1 While Plaintiff does allege that he notified PHEAA regarding the accuracy of the 2 information provided by NSL to PHEAA (SAC ¶ 80), and that NSL failed to conduct a 3 reasonable investigation, (SAC ¶ 95), he only provides a conclusory allegation that 4 PHEAA is a CRA as defined under 15 U.S.C. §1681a(f). (SAC ¶ 10). In concluding that 5 PHEAA was not a CRA under the FCRA, the Third Circuit noted that “[t]he three major 6 consumer credit reporting agencies are TransUnion, Experian, and Equifax.” Harris, 696 7 F. App’x at 90, n.1. Plaintiff does not contest NSL’s argument that PHEAA is not a CRA, 8 but rather asserts that “[t]o the exten[t] that Defendant PHEAA is not a credit reporting 9 agency, then Plaintiff can cure the pleading defect in the Third Amended Complaint.” 10 (Resp. at 8). It is unclear how Plaintiff intends to cure this deficiency. Accordingly, Count 11 One is dismissed as it relates to NSL. 12 2. Count Three – Statements to Credit Reporting Agencies 13 In Count Three, Plaintiff alleges that NSL violated the FCRA when making false 14 statements to credit reporting agencies. NSL argues that Plaintiff cannot state a claim under 15 Section 1681s-2(b) for two reasons. First, NSL argues that Plaintiff cannot plead that “he 16 found an inaccuracy in his credit reporting,” which is the first element required in order to 17 state a claim. (Mot. at 7). NSL asserts that “[s]imply seeking forbearance or deferment 18 did not excuse Plaintiff from making his monthly payments, or prevent NSL from 19 determining [Plaintiff] was in default if he did not qualify for such forbearance or 20 deferment.” (Id.). NSL further asserts that Plaintiff admits that he did not actually receive 21 a forbearance or deferment. (Mot. at 8). In response, Plaintiff argues that NSL knew the 22 information was inaccurate because it had deliberately withheld requested forbearance 23 applications from Plaintiff. (Resp. at 9). 24 NSL cites to Fluegge v. Nationstar Mortgage, LLC, No. 12-CV-15500, 2015 WL 25 4430062, at *11 (E.D. Mich. July 20, 2015), where the court stated that plaintiff could not 26 show that the allegedly adverse information was inaccurate. That court reasoned that a 27 mortgage remained in force even if the plaintiff could state a claim for breach of contract, 28 and that the reports that plaintiff was in default on the Note were therefore accurate. Id. 1 The same reasoning applies here. Plaintiff does not deny that the account was in default, 2 but rather argues that he should have been granted a deferment. As pleaded, Plaintiff has 3 not alleged that the information was “patently incorrect” or “misleading,” as there is no 4 question that the account was in default. Accordingly, Plaintiff cannot satisfy the first 5 element of this cause of action. 6 Even if Plaintiff could satisfy the first element, NSL argues that Plaintiff’s allegation 7 regarding NSL’s failure to conduct a reasonable investigation is “conclusory,” “too vague 8 to raise the right to relief above the speculative level,” and fails “to describe with 9 particularity the reasons why the investigation was unreasonable.” (Mot. at 8). Plaintiff 10 makes the following relevant allegations:
11 • [NSL] informed Equifax, Experian and TransUnion that Plaintiff defaulted under the Loan Agreement . . . 12 • On November 7, 2018, Plaintiff contacted Equifax, Experian 13 and TransUnion to dispute the accuracy of the information [NSL] reported about Plaintiff. 14 • Upon information and belief, [NSL] received notification of 15 Plaintiff’s dispute from Equifax, Experian and TransUnion no later than November 18, 2018. 16 • [NSL] failed to conduct a reasonable investigation into the 17 accuracy of information related to the disputed trade line, in violation of Section 1681s-2(b)(1). 18 • [NSL] continued entering a default against Plaintiff; and made 19 false statements to Equifax, Experian and TransUnion that Plaintiff defaulted under the Loan Agreement. 20 • [NSL] failed to satisfy their duties under Section 1681s-2(b) of 21 updating incomplete or inaccurate information it had previously reported to Equifax, Experian and TransUnion upon 22 receipt of each notice from Equifax, Experian and TransUnion 23 that Plaintiff disputed the accuracy of the previously reported information. 24 (SAC ¶¶ 114, 116, 117, 119, 120, 122). Plaintiff has done no more than plead the elements 25 of the cause of action. Even if these allegations were sufficient, Plaintiff has not pled “that 26 a credit reporting inaccuracy existed on plaintiff’s credit report.” Accordingly, Count 27 Three is dismissed as it relates to NSL. 28 B. Defamation/False Light 1 In Count Two, Plaintiff asserts claims of “Defamation/False Light/Libel Against 2 Plaintiff When Declaring a Default of Plaintiff’s Loan Agreement to Defendant PHEAA – 3 Assuming That Defendant PHEAA Is Not a Consumer Reporting Agency.” (SAC at 21). 4 Under Arizona law, there are three elements of a defamation claim: “(1) defendant made a 5 false defamatory statement about plaintiff, (2) defendant published the statement to a third 6 party, and (3) defendant knew the statement was false, acted in reckless disregard of 7 whether the statement was true or false, or negligently failed to ascertain the truth or falsity 8 of the statement.” Farrell v. Hitchin’ Post Trailer Ranch, No. 1 CA-CV 11-0011, 2011 9 WL 6057930, at *2 (Ariz. Ct. App. Dec. 6, 2011) (citing Peagler v. Phoenix Newspapers, 10 Inc., 560 P.2d 1216, 1222 (Ariz. 1977)). “To be defamatory, a publication must be false 11 and must bring the defamed person into disrepute, contempt, or ridicule, or must impeach 12 plaintiff’s honesty, integrity, virtue, or reputation.” Godbehere v. Phoenix Newspapers, 13 Inc., 783 P.2d 781, 787 (Ariz. 1989). While the distinction between defamation and false 14 light invasion of privacy is subtle, they are recognized as separate torts in Arizona. Desert 15 Palm Surgical Grp., P.L.C. v. Petta, 343 P.3d 438, 449–50 (Ariz. Ct. App. 2015). “To 16 establish a claim for false light invasion of privacy, a plaintiff must show (1) the defendant, 17 with knowledge of falsity or reckless disregard for the truth, gave publicity to information 18 placing the plaintiff in a false light, and (2) the false light in which the plaintiff was placed 19 would be highly offensive to a reasonable person in the plaintiff’s position.” Id. at 450; 20 see also Fedoseev v. Alexandrovich, No. CV-05-536-TUC-DCB, 2006 WL 964281, at *5 21 (D. Ariz. Apr. 11, 2006) (“To succeed on a claim for false light invasion of privacy, a 22 plaintiff must show: (1) the defendant knowingly or recklessly; (2) gave publicity to: (3) 23 false information or innuendo about the plaintiff; (4) that a reasonable person would find 24 highly offensive.” (citing Hart v. Seven Resorts, Inc., 947 P.2d 846, 854 (Ariz. Ct. App. 25 1997)). 26 NSL argues that “[t]o the extent the alleged statement(s) included Plaintiff’s default 27 on the Loan, such a statement cannot form the basis of a defamation claim – it was true.” 28 (Mot. at 9). As stated above, Plaintiff does not dispute that the account was in default, but 1 rather argues that such default was improper due to his requests for deferment or 2 forbearance. Accordingly, Plaintiff has not pled that a “false publication” or “false 3 information” was published, and Count Two is dismissed as it relates to NSL. 4 C. Breach of the Loan Agreement 5 NSL argues that Plaintiff’s breach of contract claim fails because NSL only ever 6 serviced the Loan and “because Plaintiff cannot show that NSL was a party to the Loan or 7 any other contract with Plaintiff.” (Mot. at 10). NSL further asserts that the Promissory 8 Note shows that the lender is “SLM Education Loan Corp.” and that Plaintiff concedes that 9 he entered the loan with SLM. (Mot. at 10–11). NSL argues that “[c]ourts have 10 consistently held that loan servicers are not liable to borrowers for breach of contract absent 11 a separate contract with borrower.” (Mot. at 11). 12 Here, neither party disputes that NSL serviced the loan. Plaintiff alleges that NSL 13 informed him that it became the loan servicer. (SAC ¶ 33). And although Plaintiff alleges 14 that “[SLM] either notified Plaintiff that [SLM] sold or otherwise assigned the Loan 15 Agreement to Defendant [NSL], or alternatively, that Defendant [SLM] assigned its loan 16 servicing duties under the Loan Agreement to Defendant [NSL],” (SAC ¶ 45), Plaintiff’s 17 statements are conclusory and the Court is “not required to accept as true conclusory 18 allegations which are contradicted by documents referred to in the complaint.” Sprewell 19 v. Golden State Warriors, 266 F.3d 979, 990 (9th Cir.) (citation omitted). The Loan 20 Agreement, which is incorporated by reference in the SAC, is between SLM and Plaintiff. 21 And Plaintiff has not provided any plausible allegations indicating that SLM sold the loan 22 to NSL. Mere loan servicers are not often found to be in privity with borrowers. See, e.g., 23 Mazzei v. Money Store, 308 F.R.D. 92, 109 (S.D.N.Y. 2015), aff’d, 829 F.3d 260 (2d Cir. 24 2016) (“A number of courts have addressed whether servicers that are nonsignatories to 25 mortgage loan agreements may be held liable by the mortgagor in a breach of contract 26 action. A significant majority of courts have concluded that loan servicers are not in privity 27 of contract with mortgagors where the servicers did not sign a contract with the mortgagors 28 or expressly assume liability.”) (collecting cases); Conder v. Home Sav. of Am., 680 F. 1 Supp. 2d 1168, 1174 (C.D. Cal. 2010) (“The fact that Aurora entered into a contract with 2 HSA to service Plaintiff’s loan does not create contractual privity between Aurora and 3 Plaintiff.”); cf. Modderno v. Ocwen Loan Servicing, LLC, No. 1:17-CV-77 (JCC/TCB), 4 2017 WL 1234287, at *3 (E.D. Va. Apr. 4, 2017), aff’d sub nom. Modderno v. Sur. 5 Trustees, LLC, 699 F. App’x 183 (4th Cir. 2017) (“Loan servicers are regularly found to 6 be in privity with the lender on whose behalf they are servicing the loan, placing Ocwen 7 (the servicer) in privity with RFC (the lender).”). 8 Accordingly, Plaintiff’s breach of contract claim against NSL is dismissed. 9 D. Breach of the Covenant of Good Faith and Fair Dealing 10 “Arizona ‘law implies a covenant of good faith and fair dealing in every contract.’” 11 Bike Fashion Corp. v. Kramer, 46 P.3d 431, 434 (Ariz. Ct. App. 2002) (quoting Rawlings 12 v. Apodaca, 726 P.2d 565, 569 (Ariz. 1986)). “[I]mplied terms are as much of a contract 13 as are the express terms.” Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement 14 Masons Local No. 395 Pension Trust Fund, 38 P.3d 12, 28 (Ariz. 2002). “The purpose of 15 such terms is so ‘neither party will act to impair the right of the other to receive the benefits 16 which flow from their agreement or contractual relationship.’” Bike Fashion Corp., 46 17 P.3d at 434 (quoting Rawlings, 726 P.2d at 569–70). “Arizona law recognizes that a party 18 can breach the implied covenant of good faith and fair dealing both by exercising express 19 discretion in a way inconsistent with a party’s reasonable expectations and by acting in 20 ways not expressly excluded by the contract’s terms but which nevertheless bear adversely 21 on the party’s reasonably expected benefits of the bargain.” Id. at 435. 22 NSL argues first that Count Six, Plaintiff’s Breach of the Covenant of Good Faith 23 and Fair Dealing claim, fails because there is no agreement between NSL and Plaintiff. As 24 stated above, Plaintiff has failed to state a claim for breach of contract. 25 But even if the breach of contract claim remained, NSL argues that Count Six fails 26 because “it is duplicative of his breach of contract claim” and alleges only breach of express 27 terms in the contract. (Mot. at 14). NSL cites to Aspect Systems, Inc. v. Lam Research 28 Corp., No. 06-1620-PHX-NVW, 2006 WL 2683642, at *2 (D. Ariz. Sept. 16, 2006), where 1 the court held that the plaintiff’s breach of the covenant of good faith and fair dealing claim 2 failed because plaintiff had “not explained how Defendants ha[d] breached the implied 3 covenant other than through the breach of an express contractual term.” And here Plaintiff 4 also alleges breach of terms he deems express. See, e.g., SAC ¶¶ 152, 153, 154, 155. 5 Nowhere in the Complaint does he allege, or alternatively allege, that the breaches stem 6 from “implied” terms of the contract. Accordingly, Count Six is dismissed as it relates to 7 NSL. 8 E. Negligent Misrepresentation and Fraud 9 NSL argues that Plaintiff’s Negligent Misrepresentation (Count Seven) and Fraud 10 (Count Eight) claims fail because, among other reasons, they are duplicative of Plaintiff’s 11 breach of contract claim. Plaintiff fails to address NSL’s arguments in his Response. 12 In Counts Seven and Eight, Plaintiff does not allege conduct separate from the 13 alleged breach of contract. See Ireland Miller, Inc. v. Shee Atika Holdings Phx., LLC, No. 14 CV-10-00354-PHX-ROS, 2010 WL 2743653, at *3 (D. Ariz. July 12, 2010) (dismissing 15 claims in negligence as “duplicative of the breach of contract claim” and noting that 16 “claiming that Seller breached a duty set forth in the parties’ agreement merely is another 17 attempt to plead a breach of contract claim (i.e., if the agreement required disclosure and 18 Defendants failed to do so, that is a breach of the agreement)”). Plaintiff only alleges the 19 same conduct as he alleges in his breach of contract claim—that NSL failed to perform 20 under the Loan Agreement by not updating his address, not providing him a deferment 21 application, and not granting him a deferment or forbearance. 22 But in absence of a valid breach of contract claim (see section III.C above), these 23 claims still fail. Both negligent misrepresentation and fraud causes of action require the 24 defendant to have provided a false representation or false information to the plaintiff.5
25 5 “The elements of negligent misrepresentation are: (1) the defendant provided false information in a business transaction; (2) the defendant intended for the plaintiff to rely on 26 the incorrect information or knew that it reasonably would rely; (3) the defendant failed to exercise reasonable care in obtaining or communicating the information; (4) the plaintiff 27 justifiably relied on the incorrect information; and (5) resulting damage.” KB Home Tucson, Inc. v. Charter Oak Fire Ins. Co., 340 P.3d 405, 412 n.7 (Ariz. Ct. App. 2014). 28 “An actionable fraud claim requires the concurrence of nine elements: (1) a representation, (2) its falsity, (3) its materiality, (4) the speaker’s knowledge of its falsity or ignorance of Since Plaintiffs allegations concern the Loan Agreement, the alleged representations were || made by the lender SLM, not the servicer NSL. Counts Seven and Eight are dismissed. 3 F. Breach of the “Guarantor Agreement” 4 In Count Ten, Plaintiff asserts a claim for Breach of the Guarantor Agreement. In 5 || his Response and at oral argument, Plaintiff withdrew this Count. 6|| IV. LEAVE TO AMEND 7 Before the Court ruled on this motion, Plaintiff filed a “Motion to Amend 8 || Complaint.” (Doc. 108). Therefore, the Court will not grant or deny leave to amend to 9|| Plaintiff in this ruling but will instead consider Plaintiff's later filed request when fully ripe || for ruling. 11 Accordingly, 12 IT IS ORDERED granting Defendant Navient Solutions, LLC’s Motion to 13 || Dismiss (Doc. 66), and denying Plaintiff’s request to amend, pending ruling on his Motion 14], to Amend. 15 Dated this 3rd day of September, 2019. 16 17 “Ss SO fonorable Susan M. Brnovich = 19 United States District Judge 20 21 22 23 24 25 26 its truth, (5) his intent that it should be acted upon by the person and in the manner reasonabl contemplated, (6) the hearer’s ignorance of its falsity, (7) his reliance on its truth, (8) his right to rely thereon, and (9) his consequent and proximate injury.” Simes v. 28 Sparkman, No. 1 CA-CV 18-0413, 2019 WL 1410635, at *2 (Ariz. Ct. App. Mar. 28, 2019) (citing Nielson v. Flashberg, 419 P.2d 514, 517-18 (1966)). -14-