Homaidan v. SLM Corp. (In re Homaidan)

587 B.R. 428
CourtUnited States Bankruptcy Court, E.D. New York
DecidedJuly 25, 2018
DocketCase No. 08-48275-ess; Adv. Pro. No.: 17-01085-ess
StatusPublished
Cited by3 cases

This text of 587 B.R. 428 (Homaidan v. SLM Corp. (In re Homaidan)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Homaidan v. SLM Corp. (In re Homaidan), 587 B.R. 428 (N.Y. 2018).

Opinion

HON. ELIZABETH S. STONG, UNITED STATES BANKRUPTCY JUDGE

*431Introduction

Before the Court is a motion to compel arbitration by defendants Navient Solutions, LLC, Navient Credit Finance Corporation, and Sallie Mae, Inc. (the "Defendants"). The Defendants seek an order referring the parties to arbitration with respect to the claims set forth in Hilal Khalil Homaidan's complaint, and argue that the Federal Arbitration Act requires that this Court compel arbitration pursuant to arbitration agreements between the Defendants and Mr. Homaidan.1 Mr. Homaidan responds that compelling arbitration here would create an inherent conflict with the purposes and policies of the Bankruptcy Code, and for those reasons, the Court should not compel arbitration, and the Defendants' motion should be denied.

Jurisdiction

This Court has jurisdiction over this proceeding pursuant to Judiciary Code Sections 157(b)(1) and 1334(b), and the Standing Order of Reference dated August 28, 1986, as amended by the order dated December 5, 2012, of the United States District Court for the Eastern District of New York. In addition, this Court may adjudicate these claims to final judgment to the extent that they are core proceedings pursuant to Judiciary Code Section 157(b), and to the extent that they are not core proceedings, pursuant to Judiciary Code Section 157(c) because the parties have stated their consent to this Court entering a final judgment. See Wellness Int'l Network, Ltd. v. Sharif , --- U.S. ----, 135 S.Ct. 1932, 1940, 191 L.Ed.2d 911 (2015) (holding that in a non-core proceeding, a bankruptcy court may enter final orders "with the consent of all the parties to the proceeding" (quoting 28 U.S.C. § 157(c)(2) ).

Background

Mr. Homaidan's Bankruptcy Case

On December 4, 2008, Hilal Khalil Homaidan, aka Helal K. Homaidan, filed a petition for relief under Chapter 7 of the Bankruptcy Code, Case No. 08-48275. On January 15, 2009, the Chapter 7 Trustee filed a "no-asset" report stating that "[t]he estate has no non-exempt property to distribute." Case No. 08-48275, Doc. entry dated January 15, 2009. On April 9, 2009, the Court entered an order discharging Mr. Homaidan (the "Discharge Order"), and on that same day, his bankruptcy case was closed. On April 14, 2017, Mr. Homaidan *432filed a motion to reopen his bankruptcy case to obtain a determination of the dischargeability of certain of his student loans, and on May 26, 2017, the Court entered an order reopening the case.

This Adversary Proceeding

On June 23, 2017, Mr. Homaidan commenced this adversary proceeding as a putative class action, on behalf of himself and others similarly situated, by filing a complaint (the "Complaint") against SLM Corporation, Sallie Mae, Inc., Navient Solutions, LLC, and Navient Credit Finance Corporation seeking a determination that certain debts that he incurred as a student are not nondischargeable student loan debts under Bankruptcy Code Section 523(a)(8)(B), and a finding of civil contempt for willful violations of the bankruptcy discharge injunction. Compl., Adv. Pro No. 17-01085, ECF No. 1.

On October 30, 2017, the Defendants filed this motion to compel arbitration, or in the alternative, to dismiss. And on December 1, 2017, the Court approved a stipulation of dismissal as to defendant SLM Corporation.

The Complaint

Mr. Homaidan alleges that "[f]or the last ten years, the Defendants have ... engaged in a massive effort to defraud student debtors and to subvert the orderly working of the bankruptcy courts." Compl. ¶ 2. He claims that the "Defendants ... originat[ed] and service[ed] dischargeable consumer loans [while] disguising them as nondischargeable student loans." Id . Mr. Homaidan advances these allegations on behalf of an alleged class of similarly situated "individuals who have declared bankruptcy since 2005 [across the United States,] with loans originated and/or serviced by Defendants." Compl. ¶ 4. And he alleges that these loans "do not meet the definition of a non-dischargeable qualified education loan" as set forth in Internal Revenue Code Section 221(d) and Bankruptcy Code Section 523(a)(8)(B). Id .

Mr. Homaidan attended Emerson College in Boston, Massachusetts during the four academic years from 2003 to 2007. He withdrew from Emerson College in the Fall of 2006, and returned in the Spring of 2007 to complete his degree. During the 2006-07 academic year, Mr. Homaidan received $4,800 in scholarship funds from Emerson College, and $22,100 in school-certified loans from the Defendants. He alleges that the Defendants lent him "an additional $12,567 in 'direct to consumer' ... loans that were made outside the financial aid office and were not made for qualified education expenses." Compl. ¶ 40. He claims that the Defendants knew that these "were not qualified education loans" exempt from discharge as defined in Bankruptcy Code Section 523(a)(8)(B), and notes that Internal Revenue Code Section 6050S requires lenders to issue 1098-E tax forms to all customers with qualified education loans, and he never received a 1098-E tax form. Compl. ¶ 42.

Mr. Homaidan alleges that the "Defendants represented to student debtors that the Bankruptcy Code prohibited discharge of any loan made to any person for any educational purpose." Compl. ¶ 28. He claims that the Defendants utilized bankruptcy laws "to defraud vulnerable and unsophisticated student borrowers." Compl. ¶ 29. Mr. Homaidan states that the "Defendants either misrepresented or failed to disclose facts and information related to the dischargeability of private loans," and that the Defendants did not make the same misrepresentations "to more sophisticated borrowers." Compl. ¶ 33.

He alleges that while the Defendants and other lenders informed consumers that their loans were nondischargeable, these lenders securitized these same obligations *433for sale on the secondary market. And he asserts that the prospectuses for these asset-backed securities cautioned investors that, pursuant to Bankruptcy Code Section 523(a)(8), "only private loans made for qualified expenses were excepted from discharge." Compl. ¶ 34. He alleges that instead of then treating these debts as discharged, the Defendant Navient Solutions, LLC "engaged the services of various collection firms to attempt to collect on this discharged debt in violation of this Court's [o]rder and the Bankruptcy Code," and on December 6, 2008, the Defendant "sent correspondence to Hamaidan stating that they received notice of the bankruptcy filing and requested a copy of the 'first meeting of creditors.' " Compl. ¶ 48.

Mr.

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587 B.R. 428, Counsel Stack Legal Research, https://law.counselstack.com/opinion/homaidan-v-slm-corp-in-re-homaidan-nyeb-2018.