Commonwealth of Pennsylvania v. Navient Corp ( 2020 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 19-2116
COMMONWEALTH OF PENNSYLVANIA
v.
NAVIENT CORP; NAVIENT SOLUTIONS LLC
Appellants
Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civil Action No. 3-17-cv-01814)
District Judge: Honorable Robert D. Mariani
Argued March 11, 2020
Before: McKEE, AMBRO, and PHIPPS, Circuit Judges
(Opinion filed: July 27, 2020)
Daniel T. Brier
Myers Brier & Kelly
425 Spruce Street, Suite 200
Scranton, PA 18503
James P. Brown
Jennifer Levy
Patrick Brown
Mike Kilgarriff
Kirkland & Ellis
1301 Pennsylvania Avenue, N.W.
Washington, DC 20004
Michael Shumsky (Argued)
Hyman Phelps & McNamara
700 Thirteenth Street, N.W., Suite 1200
Washington, DC 20005
Counsel for Appellants
Josh Shapiro
Attorney General State of Pennsylvania
Howard G. Hopkirk (Argued)
Senior Deputy Attorney General
Jesse F. Harvey
Chief Deputy Attorney General
John Abel
Senior Deputy Attorney General
Jill T. Ambrose
Deputy Attorney General
Office of the Attorney General of Pennsylvania
Strawberry Square
Harrisburg, PA 17120
Nicholas Smyth
Senior Deputy Attorney General
Office of Attorney General of Pennsylvania
2
1251 Waterfront Place, Mezzanine Level
Pittsburgh, PA 15222
Counsel for Appellee
Mary McLeod
General Counsel
John Coleman
Deputy General Counsel
Steven Y. Bressler
Assistant General Counsel
Lawrence Demille-Wagman
Senior Litigation Counsel
Christopher Deal (Argued)
Consumer Financial Protection Bureau
1700 G Street, N.W.
Washington, DC 20552
Counsel for Amicus Appellee
Consumer Financial Protection Bureau
Faith E. Gay
Maria Ginzburg
Yelena Konanova
Margaret Larkin
Ryan W. Allison
Selendy & Gay
1290 Avenue of the Americas, 17th Floor
New York, NY 10104
Mark Richard
Phillips, Richard & Rind, P.A.
9360 S.W., 72nd Street, Suite 283
3
Miami, FL 33173
Counsel for Amicus Appellee
American Federation of Teachers
Letitia James
Attorney General State of New York
Barbara D. Underwood
Solicitor General
Steven C. Wu
Deputy Solicitor General
Ester Murdukhayeva
Assistant Solicitor General of Counsel
Office of Attorney General of New York
28 Liberty Street, 23rd Floor
New York, NY 10005
Counsel for Amicus Appellee
State of New York
Jon Greenbaum
Lawyers’ Committee for Civil Rights Under Law
1500 K Street, N.W., Suite 900
Washington, DC 20005
Counsel for Amicus Appellee
Lawyers Committee for Civil Rights Under Law
Benjamin J. Roesch
Jensen Morse Baker
1809 Seventh Avenue, Suite 410
Seattle, WA 98101
4
Counsel for Amicus Appellees
Student Borrower Protection Center; Seniorlaw
Center; Center for Responsible Lending; New Jersey
Citizen Action; Lawyers Committee for Civil Rights
Under Law; Community Legal Services of
Philadelphia
OPINION OF THE COURT
AMBRO, Circuit Judge
We decide two issues in this appeal: first, whether the
Commonwealth of Pennsylvania may bring a parallel
enforcement action against Navient Corporation and Navient
Solutions, LLC (together, “Navient”) under the Consumer
Financial Protection Act of 2010 (the “Consumer Protection
Act”), codified in relevant part at 12 U.S.C. § 5552, after the
Consumer Financial Protection Bureau (the “Bureau”) has
filed suit; and second, whether and to what extent the federal
Higher Education Act of 1965 (the “Education Act”), 20
U.S.C. § 1001 et seq., preempts the Commonwealth’s loan-
servicing claims under its Unfair Trade Practices and
Consumer Protection Law (the “PA Protection Law”), 73 Pa.
Cons. Stat. §§ 201-1 to 201-9.3.
We hold that the plain language of the Consumer
Protection Act permits the Commonwealth’s concurrent
action. And we follow our sister Circuits in holding that
although the preemption provision of the Education Act
preempts claims based on failures to disclose information as
required by the statute, it does not preempt claims based on
affirmative misrepresentations. See Lawson-Ross v. Great
5
Lakes Higher Educ. Corp., 955 F.3d 908, 911 (11th Cir. 2020);
Nelson v. Great Lakes Educ. Loan Servs., Inc., 928 F.3d 639,
642 (7th Cir. 2019). Cf. Chae v. SLM Corp., 593 F.3d 936 (9th
Cir. 2010). As the Commonwealth’s claims under the PA
Protection Law based on affirmative misrepresentations and
misconduct are not preempted, we affirm the District Court’s
denial of Navient’s motion to dismiss.
I. BACKGROUND
A. Statutory and Regulatory Background
Congress enacted the Education Act in order “to keep
the college door open to all students of ability, regardless of
socioeconomic background.” Bible v. United Student Aid
Funds, Inc., 799 F.3d 633, 640 (7th Cir. 2015) (citation
omitted). To that end, the Act established two federal student
loan programs that are designed to help every student afford
the college or trade school of his or her choice: (i) the Direct
Loan Program, under which the Department of Education (the
“DOE”) lends federal taxpayer dollars directly to student
borrowers, see 20 U.S.C. § 1087a et seq.; and (ii) the Federal
Family Education Loan Program (the “Indirect Loan
Program”), under which the federal Government guarantees
privately funded loans to student borrowers, see 20 U.S.C.
§ 1071 et seq.
The federal Government does not directly administer
these loan programs. The DOE contracts with third parties like
Navient to administer and service loans under the Direct Loan
Program and imposes contractual requirements that govern
what servicers may do when acting on the DOE’s behalf. For
both Direct Loan Program and Indirect Loan Program loans,
the DOE has promulgated comprehensive regulations that
control the student loan process, including the types of charges
that are permitted, see 34 C.F.R. § 682.202; the kinds of
6
repayment plans that are available, see §§ 682.209, 685.208;
and the ways in which those plans can be restructured, see
§§ 682.210–11, 685.204–05.
Federal student loans are eligible for several types of
deferred payment plans to help borrowers avoid defaulting.
Servicers may grant a “forbearance” to borrowers having
financial trouble during the repayment period. This “permit[s]
the temporary cessation of payments, allowing an extension of
time for making payments, or temporarily accepting smaller
payments than previously were scheduled.” § 682.211(a)(1).
The DOE’s regulations specify the circumstances under which
a loan servicer may offer forbearance. See, e.g.,
§§ 682.211(a)(2), 685.205. Borrowers who enter forbearance
face significant costs, such as, among other things, having their
monthly payments increase due to accumulated unpaid
interest.
DOE regulations dictate how loan issuers and servicers
must communicate with borrowers about forbearance. Lenders
and servicers must make extensive disclosures, including those
related to fees and repayment options, at many stages of a
loan’s lifecycle: “before disbursement,” 20 U.S.C. § 1083(a);
“before repayment,” § 1083(b); “during repayment,”
§ 1083(e); to “a borrower having difficulty making payments,”
§ 1083(e)(2); and to “a borrower who is 60 days delinquent in
making payments on a loan,” § 1083(e)(3). Before placing
borrowers into forbearance, loan servicers must disclose its
terms, including that deferred interest will be capitalized. See
§§ 1083(a)(6)(B), 1083(e)(2); see also § 1087e(p); 34 C.F.R.
§ 682.211. Servicers must repeat that disclosure within 30
days of granting forbearance and must disclose every 180 days
during the forbearance period. See §§ 1083(b), 1087e(p); 34
C.F.R. § 682.211(e)(2).
7
In addition to forbearance, loan servicers offer an array
of alternate repayment plans, referred to as Income-Driven
Repayment (“IDR”) plans, when borrowers encounter
difficulties during the repayment period, each with varying
qualification requirements and repayment provisions plans.
Borrowers who enter an IDR plan do not defer payments
entirely but instead adjust their monthly payments. To qualify
for IDR, borrowers must fill out a federal application, submit
supporting documents, and then recertify their income and
family size annually. 34 C.F.R. §§ 682.215(e), 685.221(e).
As with forbearance, federal law details what, when,
and how loan servicers must communicate with borrowers
regarding the availability of IDR. See 20 U.S.C. § 1087e(p);
34 C.F.R. § 682.205(e). Once repayment begins, if “a
borrower . . . has notified the lender that the borrower is having
difficulty making payments,” the servicer must provide a
written disclosure “in simple and understandable terms” that
details both the expected costs associated with forbearance if
the borrower chooses that option, and instructions for seeking
IDR if a student borrower seeks an alternative to forbearance.
20 U.S.C. § 1083(e)(2) (Indirect Loan Program); see also
§ 1087e(p) (Direct Loan Program). 1
1
In addition, among other disclosures, federal law requires
lenders and loan servicers to disclose: the availability of IDR
when the loan is disbursed and before repayment begins,
§§ 1083(a)(11), (b)(6); 34 C.F.R. § 682.205(a)(2)(xii) (Indirect
Loan Program); § 1087e(p) (Direct Loan Program); the
availability of, and procedures for enrolling in, IDR before
repayment begins, 20 U.S.C. § 1077(a)(2)(H); 34 C.F.R.
§ 682.205(e) (Indirect Loan Program); 20 U.S.C.
§§ 1087e(d)(1)(D)–(E), 1087e(p) (Direct Loan Program); and
the specified information regarding IDR on every statement
8
DOE regulations also require that loan servicers provide
oral disclosures regarding forbearance and IDR at other times.
When a defaulted borrower orally requests a forbearance, the
servicer must “orally review with the borrower the terms and
conditions of the forbearance, including the consequences of
interest capitalization, and all other repayment options
available to the borrower,” and must send a written notice with
similar information. 34 C.F.R. §§ 682.211(d)(iii),
685.205(a)(8). DOE regulations do not require federal loan
servicers to disclose the availability of IDR on each phone call.
Federal law does require that multiple written or electronic
notices and disclosures be provided to borrowers, including
with each bill or statement. 20 U.S.C. §§ 1083(e)(1) (Indirect
Loan Program), 1087e(p) (Direct Loan Program).
The Education Act grants the DOE broad discretion to
regulate these loan programs, see, e.g., § 1082(a)(1), and
expressly requires the DOE to “prescribe standardized forms
and procedures regarding” deferments, forbearance, and
servicing, § 1082(I)(1)(D)–(F). These standardized procedures
must “include all aspects of the loan process,” § 1082(I)(2)(A),
“be designed to minimize administrative costs and burdens,”
id., and standardize and simplify procedures related to
servicing, § 1082(I)(3)(A). 2
sent to the borrower, including “a reminder that the borrower
has the option to change repayment plans,” and a link to the
DOE’s IDR website, 20 U.S.C. § 1083(e)(1)(I); 34 C.F.R.
§ 682.205(a)(3)(ix) (Indirect Loan Program); § 1087e(p)
(Direct Loan Program).
2
In the last decade, the federal Government considered
steps to promote awareness of IDR. For example, a 2012
Presidential Memorandum noted that “too few borrowers are
9
B. Navient’s Conduct
1. Loan-Originating Related Conduct
Navient has been “engaged in trade and commerce by
offering, selling, marketing and promoting student loans to
borrowers and by servicing and collecting on borrowers’
student loans.” App. 105.3 From 2004 until 2014, Navient’s
predecessors also were engaged in that business. 4
aware of the options available to them to help manage their
student loan debt, including reducing their monthly payment
through [IDR] . . . .” See The White House, June 7, 2012
Memorandum on Improving Repayment Options for Federal
Student Loan Borrowers, 77 Fed. Reg. 35,241 (June 13, 2012),
https://tinyurl.com/y5o39q4z. In July 2016, the DOE proposed
that federal regulations should be amended to require that
federal loan servicers employ “staff who receive enhanced
training related to repayment and forgiveness options,” and
who in turn would (A) “assess the borrower’s long-term and
short-term financial situation and consider all available
information about the borrower’s income and family size,” and
(B) “discuss the concept of [IDR] plans” with struggling
borrowers. DOE, Policy Direction on Federal Student Loan
Servicing (July 20, 2016), https://tinyurl.com/yxnkrava. In
2017, however, the DOE decided not to implement the
proposed regulatory changes. See Letter from Secretary of
Education re Student Loan Servicer Recompete (Apr. 11,
2017), https://tinyurl.com/y2v2m8uq.
3
The alleged facts recounted herein are drawn from the
Commonwealth’s complaint.
10
Until 2007, many school financial aid offices
maintained a preferred lenders list to give students guidance in
choosing between different lenders. Navient attempted to
place itself at the top of those lists to obtain access to schools’
potential borrowers. Navient marketed custom loan packages
to schools, including Indirect Loan Program loans, private
loans for borrowers who qualified for Navient’s standard
private student loan products (“prime loans”), and private loans
for students who did not qualify for standard private student
loans (“subprime loans”). This benefited schools by
maximizing enrollment and Navient by giving it a greater share
of the market.
Subprime loans typically had high variable interest rates
and high origination fees. Student borrowers who took out
subprime loans were not informed that the loans were part of a
subprime lending program and had a high likelihood of default.
Navient internally described this strategy as “Current Strategy
is Working: ––Use subprime to win school deals and secure
[Indirect Loan Program] and standard private volume––View
economics on an all-in basis.” App. 119. A 2007 internal
email describes one of Navient’s subprime loan programs as
“the baited hook to gain [Indirect Loan Program] volume.”
App. 119.
Navient allegedly loosened its required credit criteria so
that subprime borrowers could qualify without knowing the
4
In 2014, Navient assumed the liabilities of its
predecessors—SLM Corporation and Sallie Mae, Inc.—and
took over their student loan servicing and debt collection
business. The action against Navient includes conduct by
those predecessors. For convenience, we refer to Navient,
rather than its predecessors, during the time periods the latter
entities were involved.
11
true risk of default. Between 2000 and 2006 there was a
substantial increase in the number of high-risk subprime loans
made by Navient to students attending schools with a less than
a 50% graduation rate and to students with credit scores of less
than 640. From 2000 to 2007, between 68% and 87% of
Navient’s high-risk loans defaulted. 5
2. Loan Servicing-Related Conduct
a. Navient Allegedly Steered
Borrowers into Forbearance.
Navient allegedly has encouraged borrowers repeatedly
to communicate with its representatives for assistance, only to
steer them into forbearance rather than more affordable
alternatives like IDR plans. The Commonwealth argues that
this was done because enrolling a borrower in forbearance can
be completed in a few minutes without paperwork, while
enrolling in an IDR plan requires the submission of paperwork
5
In their Amicus Curiae brief, New York and its joining
States allege widespread abuses by servicers like Navient that
have harmed millions of borrowers by impeding their access to
IDR plans and public-service loan-forgiveness programs. For
example, an investigation by Illinois into Navient found that it
routinely steered consumers into forbearances rather than IDR
plans. California alleges that Navient misled struggling
borrowers about the amount needed to bring their accounts
current and induced them into making unnecessarily high
payments. California, Washington, and Mississippi have sued
Navient for these and other deceptive practices. The Attorneys
General for Colorado, Kansas, Oregon, New Jersey, New
York, and the District of Columbia have also issued civil
investigative demands to Navient. Amicus Curiae Br. for
States of New York et al. 7–13.
12
and annual recertification, and Navient representatives were
compensated based on average call time. Hence enrolling
borrowers in IDR plans was costly.
Navient allegedly enrolled many borrowers into
multiple consecutive forbearances even though they had
demonstrated a long-term inability to repay their loans. For
instance, between January 2010 and March 2015, Navient
enrolled more than 1.5 million borrowers in multiple
consecutive forbearances instead of helping them enroll in an
IDR plan. During the same time period, the number of
borrowers that Navient enrolled in forbearance generally
exceeded the number of borrowers enrolled in IDR plans.
Navient representatives would sometimes place borrowers in
voluntary forbearance even though they would have qualified
for $0 per month payments in an IDR plan. Navient also
unnecessarily placed borrowers in forbearance before
ultimately placing them in an IDR plan. The majority of IDR
plan participants were enrolled in forbearance for more than
three months before ultimately being enrolled in an IDR plan.
This resulted in borrowers being adversely affected by the
addition of interest to the loan’s principal and losing credit for
months that would have been counted toward loan
forgiveness. 6
6
Amici Curiae the Student Borrower Protection Center and
joining organizations state that approximately 43 million
people owe over $1.4 trillion on their federal student loans.
Amici argue that “the consequences of servicers’ misconduct
can be catastrophic for struggling borrowers’ . . . lives.”
Amicus Curiae Br. for Student Borrowers Protection Center et
al. 2–3. They further contend that older borrowers, facing
limited and declining income and less access to technology,
and borrowers of color (who are over-represented in the
13
b. Issues with Recertification of
IDR Plans
Between July 2011 and March 2015, more than 60% of
Navient’s borrowers who enrolled in IDR plans failed timely
to renew their enrollment. From January 2010 to December
2012, Navient’s annual renewal notices for IDR plans (sent via
U.S. mail) allegedly did not provide notice of the actual date
by which renewal applications had to be submitted. The
notices stated that the IDR period would expire in
“approximately 90 days” and that the “renewal process may
take at least 30 days” to complete. App. 139. The
Commonwealth alleges that the notices failed to advise
borrowers of the negative consequences of submitting an
student bodies of predatory for-profit schools), are
disproportionately affected by servicer misconduct. Id. at 3–4.
It thus “systematically strips wealth from . . . communities
which are already economically disadvantaged.” Id. at 18.
Amicus Curiae the American Federation of Teachers
(“AFT”) argues that Navient’s alleged schemes have especially
affected the long-term cost of student loans for public servants,
like AFT members, many of whom would be on track for the
Public Student Loan Forgiveness program (the “Loan
Forgiveness Program”), but who were steered into forbearance
by Navient. “Congress created the [Loan Forgiveness
Program] in 2007, promising to forgive the complete balance
of federal student loan debt for any public employee who
makes 120 on-time payments on a qualifying repayment plan.”
Amicus Curiae Br. for AFT at 5. Yet, as a result of servicers’
misconduct, public employees steered into forbearance by
servicers made fewer qualifying payments even as unpaid
interest accumulated on their account. Id. at 7–16.
14
untimely or incomplete application and of having a break in
their enrollment in an IDR plan (including an immediate
increase in monthly payments, accrued interest being added to
their loan principal, loss of interest subsidies, and delays in
loan forgiveness).
Between mid-2010 and March 2015, some borrowers
had to log into an electronic portal using their username and
password to view the notices. Seventy-five percent of
Navient’s federal loan borrowers agreed to receive electronic
communications. Borrowers were sent an e-mail with a
hyperlink to Navient’s website. However, the e-mail did not
provide any indication of the purpose of the notice.
c. Misrepresentations Related to
Cosigner Releases
A cosigner is generally required for a borrower to obtain
a private student loan. After a borrower begins repayment, he
or she can usually apply to release the cosigner after meeting
eligibility criteria. As of January 2010, one of the eligibility
criteria is that the borrower makes a minimum number of
“consecutive, on-time payments.” When a borrower makes
multiple payments at one time, Navient applies the payment
for the current month and then places the borrower in a “paid
ahead” status for subsequent months. App. 144. The borrower
is then sent a bill for $0 for the subsequent months covered by
the excess payment. However, until mid-2015, Navient
allegedly treated these “non-payments” as a failure to make
consecutive payments, reset the clock, and considered the
consecutive on-time monthly payments as being zero. This
increased the number of consecutive payments necessary to
release a cosigner. Nothing on Navient’s website, billing
statements, or other documents provided to borrowers
indicated that that the clock would be reset.
15
d. Repeated Payment Processing
Errors
The Commonwealth alleges that, since at least 2011,
many borrowers have complained that Navient has
misallocated or misapplied submitted payments, resulting in
borrowers and cosigners being improperly charged late fees
and increased interest charges, and in inaccurate negative
information being furnished to consumer reporting agencies.
Many borrowers have complained that, even after getting
Navient to correct an error, the same payment-processing
errors occurred repeatedly. Navient has allegedly failed to
correct these recurring problems.
C. Procedural History
In October 2017, the Commonwealth filed a complaint
against Navient alleging its actions in originating and servicing
student loans constitute unfair, deceptive, and abusive
practices in violation of both the Consumer Protection Act and
the PA Protection Law. The complaint contained nine counts:
Count I under the PA Protection Law for unfairly and
deceptively originating risky, expensive loans, which had a
high likelihood of default, among other unlawful conduct;
Count II under the PA Protection Law for steering borrowers
suffering long-term financial hardship into costly
forbearances; Count III under the Consumer Protection Act for
steering borrowers suffering long-term financial hardship into
costly forbearances; Count IV under the PA Protection Law for
loan servicing failures related to recertification of IDR plans;
Count V under the Consumer Protection Act for loan servicing
failures related to recertification of IDR plans; Count VI under
the PA Protection Law for misrepresentations relating to
cosigner releases; Count VII under the Consumer Protection
Act for misrepresentations relating to cosigner releases; Count
VIII under the PA Protection Law for repeated payment-
16
processing errors; and Count IX under the Consumer
Protection Act for repeated payment-processing errors.
Nine months before the Commonwealth filed its suit, in
January 2017, the Bureau, the State of Illinois, and the State of
Washington filed similar lawsuits alleging, among other
things, that Navient failed to disclose adequately the
availability of IDR programs to federal student loan borrowers.
See Compl., Consumer Fin. Prot. Bureau v. Navient Corp., et
al., No. 17-cv-101, 2017 WL 191446 (M.D. Pa., filed Jan. 18,
2017); Compl., Illinois v. Navient Corp., et al., No. 2017-CH-
00761, 2017 WL 374522 (Ill. Cir. Ct., filed Jan. 18, 2017);
Compl., Washington v. Navient Corp., et al., No. 17-2-01115-
1 SEA (Wash. Super. Ct., filed Jan. 18, 2017). Navient alleges
that the Commonwealth’s claims are “a virtual cut-and-paste
of the [Bureau]’s . . . . complaint.” Navient Br. 21. It admits
that the Commonwealth’s complaint differs in that it
challenges (A) the pre-2007 loan origination practices of
Navient’s corporate predecessor (Count I), and (B) Navient’s
alleged “fail[ure] to disclose a date certain by which a borrower
must submit materials to recertify an [IDR] plan,” App. 155–
56 (Count IV); Navient Br. 22.
In December 2017, Navient filed a motion to dismiss
the complaint for failure to state a claim. The District Court
denied the motion in its entirety. Pennsylvania v. Navient
Corp., 354 F. Supp. 3d 529 (M.D. Pa. 2018). First, it rejected
Navient’s argument that the Consumer Protection Act
precluded a concurrent lawsuit by Pennsylvania, and it held
that Section 5552(a)(1) of the Consumer Protection Act, 12
U.S.C. § 5552(a)(1), unambiguously confers a right on state
attorneys general to file suit to enforce the Consumer
Protection Act, and that there is nothing in the Act that would
bar a parallel state action. Id. at 543–47. Second, the Court
rejected Navient’s preemption argument and concluded that
the Commonwealth’s claims survived under both express-
17
preemption and conflict-preemption principles. It held that the
Commonwealth’s claims were not an attempt to impose
disclosure requirements on Navient, but were instead distinct
allegations of unfair and deceptive business practices brought
pursuant to Pennsylvania’s traditional state police powers. Id.
at 548–52. It then ruled that conflict preemption did not apply
because uniformity was not an express goal of Congress in
enacting the Education Act and, even if it were, this goal is not
defeated by allowing the Commonwealth to enforce its
consumer protection laws. Id. at 553.
The District Court certified to us three questions of law
for interlocutory appeal under 28 U.S.C. § 1292(b), see
Pennsylvania v. Navient Corp., No. 17-cv-1814, 2019 WL
1052014 (M.D. Pa. Mar. 5, 2019), and we granted permission
to appeal two of them, specifically: (1) whether the
Commonwealth may bring a parallel enforcement action under
the Consumer Protection Act after the Bureau has filed suit;
and (2) whether the Education Act preempts the
Commonwealth’s loan-servicing claims under the PA
Protection Law.
II. DISCUSSION 7
A. The Consumer Protection Act Permits
Concurrent State Claims.
Navient argues that that Consumer Protection Act does
not allow the state attorney general to bring a “copycat” claim
7
The District Court had jurisdiction under 28 U.S.C.
§§ 1331 and 1367. We have appellate jurisdiction pursuant to
28 U.S.C. § 1292(b), as we certified two questions of law for
interlocutory appeal. “When reviewing an interlocutory appeal
under 28 U.S.C. § 1292(b), we exercise plenary review over
the question certified.” Barbato v. Greystone All., LLC, 916
18
“on behalf of the same borrowers, against the same defendants,
for the same alleged conduct.” Navient Br. 25. Navient
acknowledges that the Consumer Protection Act expressly
permits state attorneys general to file Consumer Protection Act
claims, but argues that they may only do so where the Bureau
itself has not filed a lawsuit. To support this interpretation,
Navient cites the Consumer Protection Act’s requirement that
state attorneys general notify the Bureau before filing those
claims and its grant of authority for the Bureau to intervene in
states’ lawsuits.
1. The Plain Meaning of the Consumer
Protection Act Permits State
Concurrent Actions.
The plain language of the Consumer Protection Act
permits state concurrent actions. Section 5552 provides that
“the attorney general . . . of any State may bring a civil action
. . . to enforce provisions of this title . . . and to secure remedies
under provisions of this title or remedies otherwise provided
under other law.” 12 U.S.C. § 5552(a)(1). Courts typically do
not look beyond statutory language where the meaning is clear.
Valansi v. Ashcroft, 278 F.3d 203, 209 (3d Cir. 2002). They
“may look behind a statute only when the plain meaning
produces a result that is not just unwise but is clearly absurd.”
In re Visteon Corp., 612 F.3d 219, 220 (3d Cir. 2010) (citation
and internal quotation omitted). Here the plain meaning of
F.3d 260, 264 (3d Cir. 2019) (citation omitted). In reviewing
a motion to dismiss, we likewise review any legal
determinations anew and presume that a complaint’s factual
allegations are true. See James v. City of Wilkes-Barre, 700
F.3d 675, 679 (3d Cir. 2012).
19
§ 5552 is that the Pennsylvania attorney general may bring an
action to enforce the Consumer Protection Act.
Other provisions of the Consumer Protection Act do
expressly prohibit concurrent claims, but not § 5552. Thus,
under the canon of statutory construction announced in
Russello v. United States, 464 U.S. 16 (1983), “[w]here
Congress includes particular language in one section of a
statute but omits it in another section of the same Act, it is
generally presumed that Congress acts intentionally and
purposely in the disparate inclusion or exclusion.” Id. at 23
(citation omitted). Three other provisions of the Consumer
Protection Act prohibit concurrent claims. Section 5514
prohibits the FTC or the Bureau from filing a civil action
against a defendant if the other agency has previously filed an
action against the same defendant based on the same
“provision of law” and “any violation alleged in the
complaint.” 12 U.S.C. § 5514(c)(3)(B)(i). Section 5515 grants
the Bureau primary enforcement authority over “very large”
depository institutions and provides “[b]ackup enforcement”
for the other federal bank regulators to act if the Bureau does
not. § 5515(c)(3). And § 5538 provides for a state’s right of
action to enforce mortgage rules promulgated by the Bureau,
but contains an explicit bar on concurrent actions by states
when the Bureau has already filed its own action against a
party. § 5538(b)(6).
Thus, even if the language of § 5552(a)(1) were
ambiguous—and it is not—a court should presume that
Congress’s omission of an explicit prohibition against
concurrent claims from § 5552(a)(1) was intentional because
Congress explicitly prohibited concurrent claims in three
nearby sections of the statute.
20
2. The Consumer Protection Act’s Pre-
Suit Notice Requirement
Navient correctly points out that after initially granting
state attorneys general a right to file Consumer Protection Act
claims in § 5552(a), the Consumer Protection Act subjects that
general grant of authority to a limitation: it provides that
“[b]efore initiating any action,” the relevant state attorney
general “shall timely provide a copy of the complete complaint
to be filed and written notice describing such action or
proceeding to the Bureau.” 12 U.S.C. § 5552(b)(1)(A). In
addition to requiring the state attorney general to detail “the
alleged facts underlying the proceeding,” § 5552(b)(1)(C)(ii),
the statute requires that official to address “whether there may
be a need to coordinate the prosecution of the proceeding so as
not to interfere with any action, including any rulemaking,
undertaken by the Bureau,” § 5552(b)(1)(C)(iii) (emphasis
added).
Navient would have us stretch too far the meaning of
this pre-suit notice requirement. It argues that state-sponsored
Consumer Protection Act claims are intended solely to address
factual allegations and legal theories of which the Bureau is not
aware or which are not already subject to a pending Bureau
lawsuit. It suggests that in § 5552(b)(1)(C)(iii) “any action”
refers only to rulemaking and not to other judicial proceedings.
This fails. If Congress had intended to limit the phrase “action”
in § 5552(b)(1)(C)(iii) to mean only “rulemaking,” it could
have drafted a simpler provision. Reading “action” to mean
“rulemaking” only would render the words “any action,
including” mere surplusage. Cf. United States v. Miller, 527
F.3d 54, 62–63 (3d Cir. 2008).
Moreover, the word “including” “is frequently, if not
generally, used as a word of extension or enlargement rather
than as one of limitation or enumeration.” In re Fed. Mogul-
21
Global, Inc., 348 F.3d 390, 401 (3d Cir. 2003) (citation
omitted). And Congress twice used the phrase “any action” in
a manner that includes litigation in a nearby provision: (1) in
the pre-suit notice provision itself, § 5552(b)(1)(A) (“[b]efore
initiating any action in court”), and (2) in § 5531(a) (the Bureau
“may take any action authorized under part E”).
Navient also argues that § 5552(b)(1)’s notice
requirement would be superfluous if parallel actions were
allowed because if the Bureau files a suit, then it knows the
underlying facts such that there is no need for notice. This too
fails. First, there are many ways in which a parallel state action
could interfere with the Bureau’s suit and require coordination.
For example, there could be conflicting discovery schedules,
conflicting legal theories, or competing settlement offers. And
even if there is no conflict between the actions, the Bureau
benefits from the notice requirement because it could use the
information to identify additional victims or wrongs, to
coordinate strategies with the state, or alternatively to drop
certain counts from its own complaint because the issues will
be adequately addressed by the state. Amicus Curiae Br. of the
Bureau 19–20.
Thus, the Consumer Protection Act’s pre-suit notice
requirement does not negate the statute’s express authorization
of parallel state actions. 8
8
Navient also relies on a not relevant out-of-circuit
district court case, Navajo Nation v. Wells Fargo & Co., 344
F. Supp. 3d 1292 (D.N.M. 2018), where the Court dismissed
Consumer Protection Act claims filed by a tribal government
when the Bureau had already settled similar claims. Navajo
Nation is distinguishable because it was dismissed as res
judicata. Id. at 1308. Nothing in it suggests an implied
22
3. The Consumer Protection Act’s
Intervention Provision
Navient does correctly point out that the Bureau is
authorized to intervene as a party-plaintiff in any state-filed
Consumer Protection Act litigation. 12 U.S.C.
§ 5552(b)(2)(A). It argues that the intervention provision
demonstrates that Congress intended to prevent concurrent
state claims. Yet it fails to cite any case law supporting that,
where a statute allows third-party intervention, concurrent
claims are barred. And indeed, Congress has enacted
numerous statutes that authorize state enforcement while
limiting concurrent claims in some way and numerous statutes
that authorize state enforcement without limiting concurrent
claims. Compare 15 U.S.C. § 6103(d) with 49 U.S.C. § 14711.
That the Consumer Protection Act allows for the Bureau to
intervene does not clearly decide whether concurrent claims
are permitted.
Navient further asserts that allowing concurrent claims
would also run headlong into the rule against claim-splitting—
the longstanding bar against having a single party-plaintiff
simultaneously maintain two actions against the same
defendant. See, e.g., Walton v. Eaton Corp., 563 F.2d 66, 70
(3d Cir. 1977) (en banc). However, cases like Walton are
distinguishable. There, a single plaintiff filed two separate
employment lawsuits based on the same underlying facts, in
the same court, against the same defendant. Id. at 69–70. In
contrast, Pennsylvania and the Bureau are two separate
plaintiffs with two different lawsuits. Pennsylvania’s lawsuit
prohibition on concurrent claims under the Consumer
Protection Act.
23
is intended to protect the public from and remediate violations
of both Pennsylvania and federal laws. 9
4. Judicial Resources
Navient also argues that allowing Pennsylvania’s
concurrent claims will be a waste of judicial resources because
they, “by definition, cannot achieve anything that the
[Bureau’s] own lawsuit cannot achieve, no matter how well the
state litigates its . . . claims.” Navient Br. at 49. This argument
falters for at least three reasons. First, even if the Bureau
litigates this case through trial and obtains a judgment, it is
possible that Pennsylvania could still achieve outcomes
beyond what the Bureau achieves. For example, the
Commonwealth could find witnesses and facts that persuade
the court to order relief beyond that obtained by the Bureau.
Second, Pennsylvania and other states have a fundamental
right to protect their citizens and prevent harmful conduct from
occurring in their jurisdictions. The interests of the states and
the Bureau may not always be completely aligned. And third,
states may be able to pick up slack when the federal
9
The parties also dispute whether the Commonwealth
and Bureau actions can be consolidated and the significance of
that possibility. Navient argues that given the nine-month gap
in the bringing of the cases and the vast disparity in the
respective procedural postures, it would be impossible to
consolidate these cases, and at best one action could be stayed
until the other is resolved, at which point most issues in one
suit would be resolved by prior decisions in the other case.
This argument is a distraction. Navient can only speculate as
to what will happen if both actions proceed. It is not clear to
what extent issue preclusion will apply. Moreover, that this
particular case may not be suitable for consolidation does not
change the plain meaning of the statute.
24
Government fails to enforce and regulate. If the Bureau were
under pressure to settle or withdraw its lawsuit, 10 states would
still be free to protect the rights of consumers in their states.
The District Court correctly rejected Navient’s
argument that allowing concurrent claims would overburden
the courts, because although “federal courts are indeed
inundated with cases, adjudicating this case is a burden the
Court is required to assume, absent a recognized statutory or
procedural basis that precludes the Commonwealth from
bringing its action.” Navient, 354 F. Supp. 3d at 546.
Accordingly, we hold that the clear statutory language
of the Consumer Protection Act permits concurrent state
claims, for nothing in the statutory framework suggests
otherwise. 11
10
Indeed, Navient’s CEO has lobbied the Bureau to
drop its lawsuit. “Navient CEO Met with CFPB as Company
Seeks to End Lawsuit,” Politico, June 28, 2018,
https://www.politico.com/newsletters/morning-
education/2018/06/28/kennedy-resignation-could-spark-
changes-to-affirmative-action-266608.
11
Navient also raises several constitutional arguments
not raised before the District Court that go far beyond the
questions certified by us for interlocutory appeal. The
Commonwealth correctly points out that Navient cannot bring
a freestanding constitutional challenge for the first time in this
interlocutory appeal. See Metro. Edison Co. v. Pa. Pub. Util.
Comm’n, 767 F.3d 335, 352 (3d Cir. 2014) (stating that an
issue not raised in the district court is waived unless manifest
injustice would result). We accordingly do not address its
constitutional arguments at this stage.
25
B. The Education Act Does Not Preempt the
Commonwealth’s Claims Under the PA
Protection Law.
Navient claims that Section 1098g of the Education Act
both expressly and impliedly preempts the Commonwealth’s
state-law claims. We disagree and follow our sister Circuits in
holding that the Education Act expressly preempts only claims
based on failures of disclosure, not claims based on affirmative
misrepresentations, and that no other preemption principles bar
the Commonwealth’s claims. See Lawson-Ross, 955 F.3d at
911; Nelson, 928 F.3d at 648.
1. Preemption and the
Presumption Against
Preemption
The Supremacy Clause of the Constitution, U.S. Const.
art. VI, cl. 2, invalidates any state law that “interferes with or
is contrary to federal law[.]” Free v. Bland, 369 U.S. 663, 666
(1962). While not “rigidly distinct” categories, there are three
classes of preemption: (1) express preemption, (2) conflict
preemption, and (3) field preemption. Va. Uranium, Inc. v.
Warren, 139 S. Ct. 1894, 1901 (2019) (quoting Crosby v. Nat’l
Foreign Trade Council, 530 U.S. 363, 372 n.6 (2000));
Hillsborough Cnty. v. Automated Med. Labs., Inc., 471 U.S.
707, 713 (1985).
Express preemption applies where Congress explicitly
preempts state law in the statutory language. See Cipollone v.
Liggett Grp., Inc., 505 U.S. 504, 516 (1992). Conflict
preemption occurs “when a state law conflicts with federal law
such that compliance with both state and federal regulations is
impossible, or when a challenged state law stands as an
obstacle to the accomplishment and execution of the full
purposes and objectives of a federal law.” Id. (internal
26
citations and quotations omitted). Field preemption focuses on
when Congress does not expressly preempt state law but where
“‘federal law leaves no room for state regulation and that
Congress had a clear and manifest intent to supersede state law’
in that field.” Sikkelee v. Precision Airmotive Corp., 822 F.3d
680, 688 (3d Cir. 2016) (citation omitted). “Where Congress
expresses an intent to occupy an entire field, States are
foreclosed from adopting any regulation in that area, regardless
of whether that action is consistent with federal standards.” Id.
Each mode of preemption serves the same underlying function:
“Congress enacts a law that imposes restrictions or confers
rights on private actors; a state law confers rights or imposes
restrictions that conflict with the federal law; and therefore the
federal law takes precedence and the state law is preempted.”
Murphy v. Nat’l Coll. Athletic Ass’n, 138 S. Ct. 1461, 1480
(2018).
“In every preemption case, our inquiry is guided by two
principles. First, the intent of Congress is the ‘ultimate
touchstone’ of preemption analysis.” Farina v. Nokia Inc., 625
F.3d 97, 115 (3d Cir. 2010) (quoting Medtronic, Inc. v. Lohr,
518 U.S. 470, 485 (1996)). In discerning congressional intent,
we look to the “structure and purpose of the statute as a whole,
as revealed not only in the text, but through the . . . way in
which Congress intended the statute and its surrounding
regulatory scheme to affect business, consumers, and the law.”
Lohr, 518 U.S. at 486 (internal citation omitted). “Second, we
‘start[ ] with the basic assumption that Congress did not intend
to displace state law.’” Farina, 625 F.3d at 116 (quoting
Maryland v. Louisiana, 451 U.S. 725, 746 (1981)). “[B]ecause
the States are independent sovereigns in our federal system, we
have long presumed that Congress does not cavalierly pre-
empt state-law causes of action.” Lohr, 518 U.S. at 485. The
presumption applies with particular force when the state is
exercising its police power. Id.
27
2. Section 1098g Does Not Expressly
Preempt the Commonwealth’s Claims
Under the PA Protection Law.
Section 1098g provides that “[l]oans made, insured, or
guaranteed pursuant to a program authorized by Title IV of the
Higher Education Act . . . shall not be subject to any disclosure
requirements of any State law.” 20 U.S.C. § 1098g (emphases
added).
Navient suggests we begin and end our inquiry with this
language. It argues that Counts II and IV of the
Commonwealth’s Complaint fall squarely within § 1098g’s
prohibition because they target the sufficiency of the
disclosures Navient allegedly made to borrowers and expressly
fault it for failing to make “disclosures” or provide “notice”
that state law required Navient to provide. See App. 152
(Count II) (alleging Navient violated the PA Protection Law
because “[i]n phone calls[] [it] failed to meaningfully disclose
. . . that the federal [G]overnment offers IDR plans”); App. 156
(Count IV) (alleging Navient violated the PA Protection Law
because it “[f]ailed to disclose a date certain by which a
borrower must submit materials to recertify an [IDR] plan,”
and “[f]ailed to adequately notify borrowers . . . of the
existence of the renewal notice”).
The language of § 1098g is indeed broad and
unqualified; it expressly preempts “any” state claim premised
on “any” disclosure requirement imposed by state law
regarding such loans. However, as noted above, “the presence
of an express preemption provision does not end the inquiry.
While it means we need not inquire whether Congress intended
to preempt some state law, we still must examine congressional
intent as to the scope of the preemption provision.” Farina,
625 F.3d at 118. To identify the domain expressly preempted
by Congress, we read “the words of a statute . . . in their context
28
and with a view to their place in the overall statutory scheme.”
Home Depot U. S. A., Inc. v. Jackson, 139 S. Ct. 1743, 1748
(2019) (citation and internal quotation marks omitted).
Here, we are persuaded by the Eleventh and Seventh
Circuits’ recent statements on the scope of the Education Act’s
express preemption provision. In Lawson-Ross, borrowers
brought suit under Florida’s Consumer Collection Practices
Act against their federal student loan provider for making
affirmative misrepresentations about their eligibility for the
Public Student Loan Forgiveness program (the “Loan
Forgiveness Program”). 955 F.3d at 911. In determining what
domain is expressly preempted by the Education Act, the
Eleventh Circuit explained,
Section 1098g concerns ‘disclosure
requirements,’ but the [Education Act] does not
define ‘disclosure requirements’ or ‘disclosure.’
The [Education Act] does, however, identify the
disclosures it requires. Viewed in its statutory
context, then, the term ‘disclosure requirements’
refers to the [Education Act]’s requirements that
certain information be communicated to
borrowers during the various stages of a loan, as
laid out in § 1083 of the statute. Thus, the
domain § 1098g preempts is the type of
disclosures to borrowers that § 1083 requires.
Id. at 917 (citing 20 U.S.C. §§ 1083(a), (b), (e)). The Court
concluded “that the precise language Congress used in § 1098g
preempts only state law that imposes disclosure requirements;
state law causes of action arising out of affirmative
misrepresentations a servicer voluntarily made that did not
concern the subject matter of required disclosures impose no
disclosure requirements.” Id. (internal quotation marks
omitted).
29
The servicer in Lawson-Ross, like Navient here, argued
that borrowers’ affirmative misrepresentation claims were
actually based on a failure to disclose correct information. The
Court rejected this characterization of the claims. It saw “no
allegation that [the servicer] failed to provide them with any
information that it had a legal obligation to disclose. Rather,
the [b]orrowers alleged that when [the servicer] chose to
provide them with information it was not required to disclose
. . . it gave false information.” Id. at 918. The Court found
“support for this distinction between an affirmative
misrepresentation and a failure to disclose in the law of torts.
To succeed on a failure-to-disclose claim, the plaintiff must
establish that there was a duty to speak and the duty was
breached.” Id. at 918 (citing Chiarella v. United States, 445
U.S. 222, 228 (1980)). “In contrast, a claim alleging an
affirmative misrepresentation does not rely on a duty to
disclose.” Id. The borrowers’ claims about the servicer’s
misrepresentations about their eligibility for the Loan
Forgiveness Program were thus not preempted. Id. at 919-20.
Similarly, the Seventh Circuit in Nelson held that
§ 1098g does not expressly preempt state consumer protection
laws to the extent they target affirmative misrepresentations
rather than failures to disclose required information. 928 F.3d
at 647–50. There a borrower’s state-law consumer protection
and tort claims alleged that her federal student loan servicer
made affirmative misrepresentations while counseling her on
her repayment plan options. The Court concluded her claims
were not expressly preempted, explaining that
[w]e recognize that it would be possible to apply
state consumer protection laws to impose
additional disclosure requirements on loan
servicers of federally insured student loans.
Such applications would be preempted under
§ 1098g . . . . But that result is not necessary or
30
inherent in [the borrower’s] claims, at least to the
extent she alleges affirmative
misrepresentations. We cannot say on the
pleadings that all of [the borrower’s] claims are
preempted by § 1098g. On remand, the district
court may need to use jury instructions and other
tools to allow [the borrower] to proceed on her
claims of affirmative misrepresentations while
ensuring that the case does not become a vehicle
for state law to impose new disclosure
requirements.
Id. at 650 (internal citation omitted). The Court explained that
“[t]he common law tort of fraud ordinarily requires a
deliberately false statement of material fact. . . . An omission
or failure to disclose, on the other hand, will not support a
common law fraud claim but may be actionable as constructive
fraud or fraudulent concealment. . . .” Id. at 649 (internal
citations omitted). Because the borrower alleged that the
servicer “said something false that it was not required to say,”
the Court concluded that the claim did not imply a disclosure
requirement. Id. at 649.
Both Nelson and Lawson-Ross built on a distinction first
drawn by the Ninth Circuit in Chae, 593 F.3d 936, wherein
plaintiffs brought claims under California’s consumer
protection statute and accused Sallie Mae of both
“misrepresent[ation]” and “improper . . . disclosure” of
information to borrowers about federal student loans. 593 F.3d
at 942–43. The Court held that the plaintiffs’ attempt to assert
claims under California law regarding certain billing
statements and coupon books was expressly preempted by
§ 1098g of the Education Act, but the plaintiffs were not barred
from pursuing claims regarding other fraudulent and deceptive
practices. Id. at 943. The Court made clear, however, that
plaintiffs could not simply “relabel[]” their preempted
31
disclosure claims as misrepresentation claims. Id. at 943
(citation omitted).
We follow these well-reasoned decisions and adopt the
distinction between affirmative misrepresentation and failure
to disclosure information as required by the Education Act.
Section 1098g does not expressly preempt claims to the extent
they are alleging affirmative misrepresentations rather than
failures of disclosure.
Turning to our case, we are not convinced that all, or
even most, of the Commonwealth’s claims are based on
failures of disclosure. The Commonwealth’s core allegations
with respect to Counts II and IV are that Navient improperly
steered consumers into costly forbearances and made
misrepresentations to consumers regarding the recertification
of their IDR plans. This included misrepresenting to
consumers that Navient would inform them of the date by
which they needed to renew and misrepresenting the
consequences of failing to renew. To the extent the
Commonwealth faults Navient for failing to disclose or notify
borrowers of certain information, it does so only because
Navient’s failure to disclose certain information furthered the
affirmative misrepresentations Navient voluntarily chose to
make. For example, the Commonwealth alleges:
• Navient’s website misrepresented to borrowers that its
representatives would help them “make the right
decision for [their] situation” and “find an option
that . . . minimizes [their] total interest cost.” App. 130.
• Navient misrepresented to a consumer “that her only
option for loan assistance was a forbearance, despite the
fact that she qualified for an IDR plan.” App. 135.
32
• Navient gave false information about public service
loan forgiveness to one borrower, causing the borrower
to lose out on seven years of payments that could have
been applied to this forgiveness program but were not.
App. 136.
• Navient repeatedly enrolled a consumer in forbearance
various times over eleven years, allowing nearly
$27,000 in interest to accrue, despite his later eligibility
for an IDR plan. App. 136–37.
• Navient told a consumer enrolled in IDR who was
having trouble making payments that “forbearance was
his only option” when, in fact, “continuing his IDR plan
would have been a better option for him in the long
term.” App. 137.
• In a notice to borrowers, Navient misrepresented that it
would notify the borrowers when their IDR plan was up
for renewal and, at that time, it would provide the
borrower with a date to submit a new application. Yet
the notices it sent did not include this date. App. 138–
39.
• In a notice to borrowers, Navient misrepresented that
the only consequence of providing incorrect or
incomplete information during the IDR renewal process
would be a delay in renewal when, in fact, providing
incorrect or incomplete information resulted in financial
harm to borrowers. App. 140.
• Navient told a consumer that it would send him an
annual renewal reminder when, in fact, it did not. App.
142.
33
To the extent these allegations hold Navient accountable
for its affirmative misconduct, they are not preempted. The
Commonwealth cannot fault Navient for failing to provide
consumers with more information about IDR plans or
recertification, but it can fault Navient for providing
misinformation.
Navient attempts to distinguish our case from Nelson by
arguing that, unlike the voluntary and excessive statements
there, some of the alleged misstatements it posted were
required by federal law to appear on its website. Specifically,
the Commonwealth alleges that Navient made the following
statements on its website regarding its ability to help
borrowers:
• “If you’re experiencing problems making your loans
[sic] payments, please contact us. Our representatives
can help you by identifying options and solutions, so
you can make the right decision for your situation.”
• “We can help you find an option that fits your budget,
simplifies payment, and minimizes your total interest
cost.”
App. 130. The Nelson Court held nearly identical statements
were indeed affirmative misrepresentations not preempted by
§ 1098g because the servicer made those statements
voluntarily when it could have just remained silent or told the
truth. See Nelson, 928 F.3d at 649–50; see id. at 641–42 (“[o]ur
trained experts work on your behalf” and “[y]ou don’t have to
pay for student loan services or advice,” as “[o]ur expert
representatives . . . understand all of your options”).
Navient does not actually cite to any provision of law
that would have required it to misrepresent to borrowers that it
will help them “make the right decision for [their] situation” or
34
help them “minimize[] [their] total interest cost.” The
provisions it cites are off point. Section 1083 of the Education
Act merely requires that lenders include on a “bill or statement
. . . the lender’s or loan servicer’s address and toll-free phone
number for payment and billing error purposes” and “a link to
the appropriate page of [the DOE’s] website to obtain a more
detailed description of the repayment plans . . . .” 20 U.S.C.
§ 1083(e)(1)(H) & (I). It does not say what statements Navient
must make on its website. Navient went beyond providing
addresses, telephone numbers, and links while affirmatively
representing that it would help borrowers make the “right”
decisions and “minimize” their interest payments.
All this to say that the District Court correctly
concluded that the Commonwealth’s complaint alleges
Navient made numerous affirmative misrepresentations, and
claims based thereon are not expressly preempted by the
Education Act. It is possible that on remand (especially if
Navient again moves for dismissal) the District Court may
need to conduct a closer, allegation-by-allegation, assessment
of which claims in the Commonwealth’s complaint are based
on affirmative misrepresentations and which are possibly
based on failures of disclosure. It would need to do so in the
first instance in accord with this opinion and Pennsylvania law.
Lawson-Ross, 955 F.3d at 911, and Nelson, 928 F.3d at 648,
also provide guidance. 12
12
The District Court may also need to consider whether
the Commonwealth alleges any material omissions, and if so,
whether those claims would be preempted by § 1098g. While
Lawson-Ross, 955 F.3d at 911, and Nelson, 928 F.3d at 648,
provide insight into the distinction between an affirmative
misrepresentation on one end, and a failure to disclose on the
other, they do not discuss where the line is between the latter
35
and a material omission. If, for example, a Navient
representative told a borrower that her “best option” for
resolving loan repayment issues was forbearance but failed to
mention a more appropriate IDR plan, is the failure to mention
the IDR plan a material omission or an affirmative
misrepresentation? If the former, is it also expressly
preempted by the Education Act? We decline to rule on this
issue without briefing by the parties and without first giving
the District Court an opportunity to assess this issue in light of
Pennsylvania law. We also decline to say in the first instance
whether the Commonwealth alleges any material omissions.
We note that, under Pennsylvania law, to state a claim
for intentional misrepresentation a plaintiff must allege “(1) [a]
representation; (2) which is material . . .; (3) made falsely, with
knowledge of its falsity . . . ; (4) with the intent of misleading
another . . . ; (5) justifiable reliance on the misrepresentation;
and[] (6) the resulting injury was proximately caused by the
reliance.” Bortz v. Noon, 729 A.2d 555, 560 (Pa. 1999) (citing,
inter alia, Restatement (Second) of Torts § 525 (1977)). The
tort of “intentional non-disclosure has the same elements as
intentional misrepresentation except[,] in the case of
intentional non-disclosure, the party intentionally conceals a
material fact rather than making an affirmative
misrepresentation.” Id. (citation and internal quotation marks
omitted). Concealment of a material fact can amount to
actionable fraud if the seller intentionally concealed a material
fact to deceive the purchaser. See Moser v. DeSetta, 589 A.2d
679, 682 (Pa. 1991); Sevin v. Kelshaw, 611 A.2d 1232, 1237–
1238 (Pa. Super. Ct. 1992) (“[A]ctive concealment of defects
known to be material to the purchaser is legally equivalent to
an affirmative misrepresentation.”) (emphasis in original); see
36
3. Section 1098g Does Not Impliedly
Conflict Preempt the Commonwealth’s
State-Law Claims.
We next turn to Navient’s argument that even if § 1098g
does not expressly preempt Counts II and IV, ordinary conflict-
preemption principles bar them. See Geier v. Am. Honda
Motor Co., 529 U.S. 861, 869–70 (2000) (holding that the
presence of an express preemption clause does not preclude
“the ordinary working of conflict pre-emption principles”). To
repeat, state laws are preempted if it is impossible for a party
to comply with both state and federal law or they “stand[] as
an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress.” Crosby, 530 U.S. at 373
(citation omitted).
The Supreme Court explained in Cipollone that “[w]hen
Congress has considered the issue of pre-emption and has
included in the enacted legislation a provision explicitly
addressing that issue, . . . there is no need to infer congressional
intent to pre-empt state laws from the substantive provisions of
the legislation.” 505 U.S. at 517 (internal citation and
quotation marks omitted). The Court relied on the statutory
canon “of expressio[] unius est exclusio alterius [to include
also Derby & Co., Inc. v. Seaview Petroleum Co., 756 F. Supp.
868, 876 (E.D. Pa. 1991) (stating that “[t]he failure to disclose
a material fact amounts to a misrepresentation where
disclosure would correct a mistake as to a basic assumption and
non-disclosure amounts to a failure to act in good faith . . . .”).
But see Martin v. Hale Prods., Inc., 699 A.2d 1283, 1288 (Pa.
Super. Ct. 1997) (stating that “[m]ere silence in the absence of
a duty to speak” does not constitute fraud). Thus, it appears
that under Pennsylvania law intentional material omissions are
treated similarly to affirmative misrepresentations.
37
one is to exclude all others]: Congress’ enactment of a
provision defining the pre-emptive reach of a statute implies
that matters beyond that reach are not pre-empted.” Id.
We agree with the Eleventh and the Seventh Circuits
that, per the Supreme Court’s instruction in Cipollone, we need
not infer congressional intent to pre-empt state laws by the
Education Act. Both reasoned that “[w]hen Congress has
explicitly addressed preemption in a statute, an implication
arises that it did not intend to preempt other areas of state law.”
Lawson-Ross, 955 F.3d at 920 (citations omitted); Nelson, 928
F.3d at 648 (same). The Education Act includes several
provisions expressly preempting specific areas of state law,
including § 1098. See also 20 U.S.C. §§ 1078(d) (state usury
laws); 1091a(a)(2) (state statutes of limitations); 1091a(b)(2)
(state law infancy defense).
We note that the Ninth Circuit in Chae concluded
otherwise and held that although some of the borrowers’ claims
were not expressly preempted by § 1098g, they nonetheless
were implicitly preempted because they posed an obstacle to
the uniform operation of the Education Act. 593 F.3d at 946-
47. The Court concluded that uniformity was an intended
purpose of the Education Act as illustrated by Congress’s
direction to the DOE to standardize the Indirect Loan
Program’s forms, procedures, terms, conditions, and benefits
throughout federal student loan programs. Id. at 944–45. It
reasoned that allowing state law causes of action to proceed
would conflict with the purpose of uniformity. Id. at 943, 945.
We are not persuaded by the Ninth Circuit’s conclusion
that uniformity was an intended purpose of the Education Act,
and we join the other Circuits that have rejected that idea.
Lawson-Ross, 955 F.3d at 922; Nelson, 928 F.3d at 651;
College Loan Corp. v. SLM Corp., 396 F.3d 588, 597 (4th Cir.
2005) (“We are unable to confirm that the creation of
38
uniformity . . . was actually an important goal of the [Education
Act].”) (internal quotation marks omitted). “To infer pre-
emption whenever an agency deals with a problem
comprehensively is virtually tantamount to saying that
whenever a federal agency decides to step into a field, its
regulations will be exclusive.” Hillsborough, 471 U.S. at 717.
Thus we do not apply preemption from the comprehensive
nature of a regulation alone. See N.Y. State Dep’t of Soc. Servs.
v. Dublino, 413 U.S. 405, 415 (1973).
The Seventh Circuit aptly pointed out that Chae’s broad
language was based on a different sort of claim, relating to the
method of setting late fees, repayment start dates, and interest
calculations. The Nelson Court assumed that “the need for
nationwide consistency on those sorts of administrative
mechanics is substantial” and that there “the value of
uniformity would be more compelling.” 928 F.3d at 651
(emphasis added). Allegations of affirmative
misrepresentations and misconduct stand in stark contrast.
There is no indication that Congress had the sweeping goal of
regulating all misconduct that could possibly occur in student-
loan financing and requiring uniformity of all claims
tangentially related to the Education Act. “[S]tate law and
federal law can exist in harmony” under the Education Act,
Nelson, 928 F.3d at 651, and conflict preemption does not bar
the Commonwealth’s claims.
4. Section 1098g Does Not Field Preempt
the Commonwealth’s Claims under the
PA Protection Law.
Navient does not expressly argue that § 1098g preempts
the field of regulation of student loans, but, to the extent it
suggests as much, see Navient Br. 31, 35 (describing the
language of § 1098g as “unqualified” and creating a
“comprehensive federal regulatory scheme”), we reject that
39
suggestion as well. Field preemption exists “where Congress
has legislated so comprehensively [in an area of law] that it has
left no room for supplementary state legislation.” R.J.
Reynolds Tobacco Co. v. Durham Cty., 479 U.S. 130, 140
(1986). Every Circuit Court to consider the issue has
concluded that the Education Act does not field preempt the
regulation of student loans. See, e.g., Lawson-Ross, 955 F.3d
at 923; Nelson, 928 F.3d at 651-52; Chae, 593 F.3d at 941–42;
Armstrong v. Accrediting Council for Continuing Educ. &
Training, Inc., 168 F.3d 1362, 1369 (D.C. Cir. 1999); Keams
v. Tempe Tech. Inst., Inc., 39 F.3d 222, 226 (9th Cir. 1994).
And indeed, consumer protection is a field that states have
traditionally occupied. See, e.g., California v. ARC Am. Corp.,
490 U.S. 93, 101 (1989) (noting the long history of state
common-law and statutory remedies against unfair business
practices); Fla. Lime & Avocado Growers, Inc. v. Paul, 373
U.S. 132, 146 (1963) (observing that statute to “prevent the
deception of consumers” was within scope of state’s police
powers); In re Nortel Networks, Inc., 669 F.3d 128, 137–38 (3d
Cir. 2011) (noting that consumer protection is part of
governmental police powers).
From a practical standpoint, if we were to hold that the
Education Act preempts state-law consumer protection claims,
consumers would be left with no protection against unfair or
deceptive acts or practices by loan servicers because the
Education Act contains no general prohibition against those
practices. Taken to its logical conclusion, Navient’s proposed
outcome here would mean that servicers would in theory be
free to mislead consumers provided that they met the
Education Act’s technical disclosure requirements. That
outcome is untenable. “It is difficult to believe that Congress
would, without comment, remove all means of judicial
recourse for those injured by illegal conduct.” Silkwood v.
Kerr-McGee Corp., 464 U.S. 238, 251 (1984). Field
40
preemption thus does not apply to the Commonwealth’s
claims. 13
* * * * *
The Commonwealth’s parallel enforcement action
against Navient under the Consumer Protection Act is
permitted by the statute’s plain language, and the Education
Act does not expressly preempt the Commonwealth’s claims
under the PA Protection Law to the extent they are based on
affirmative misrepresentations and misconduct rather than
13
The States argue in their Amicus brief that they are
well positioned to protect their residents from unfair and
deceptive practices by student loan servicers. Many States
have developed comprehensive systems for tracking and
responding to complaints from consumers. In the last five
years, amici have collectively received and responded to
thousands of complaints about federal student loan servicers—
including many against Navient. And the federal Government
has for decades welcomed the States’ expertise and worked
with the States to provide active oversight in the student loan
industry. For example, the DOE’s regulations and servicer
contracts expressly require compliance with not only federal
laws but also state laws. See, e.g., 34 C.F.R. § 682.401.
Starting in 2000, at the latest, the DOE routinely disclosed
student loan information to state and local authorities that were
investigating and prosecuting crimes, civil frauds, and other
violations in the student loan industry. See Privacy Act of
1974, 64 Fed. Reg. 72384, 72399 (Dec. 27, 1999); Privacy Act
of 1974, 81 Fed. Reg. 12081-02, 12083 (Mar. 8, 2016).
Likewise, the Bureau shares with states information it receives
in consumer complaints. Amicus Curiae Br. for States of New
York et al. 16–17.
41
failures of disclosure. No other preemption principle stands as
a bar to the Commonwealth’s claims. We thus affirm the
District Court’s well-reasoned ruling.
42