Hope D. Darrisaw v. Pennsylvania Higher Education Assistance Agency (PHEAA)

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 17-12113
________________________
D.C. Docket No. 3:16-cv-00082-DHB-BKE
HOPE D. DARRISAW,
Plaintiff-Appellant,
versus
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY (PHEAA),
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Georgia
________________________
(February 7, 2020)
Before WILLIAM PRYOR, MARTIN, and KATSAS, * Circuit Judges.
WILLIAM PRYOR, Circuit Judge:
*
Honorable Gregory G. Katsas, United States Circuit Judge for the District of Columbia
Circuit, sitting by designation.
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This appeal presents the question whether a guaranty agency for federal
student loans qualifies as a “debt collector” under the Fair Debt Collection
Practices Act, 15 U.S.C. § 1692a(6), when it mistakenly attempts to collect a
nonexistent student-loan debt. Hope Darrisaw, a student-loan borrower, sued the
Pennsylvania Higher Education Assistance Agency under the Act after it tried to
collect a debt she never incurred. The district court dismissed her complaint on the
ground that the Agency, which guarantees federal student loans for the Secretary of
Education, is not a “debt collector” under the Act; it concluded that the Agency fell
within an exception for persons who collect debts “incidental to a bona fide
fiduciary obligation.” Id. § 1692a(6)(F)(i). We agree that the Agency falls within
this exception, so we affirm.
I. BACKGROUND
Because this appeal is from the dismissal of a complaint, we accept the
allegations of the complaint as true. See Am. Dental Ass’n v. Cigna Corp., 605
F.3d 1283, 1288 (11th Cir. 2010). We recount the facts as alleged in the complaint.
And we construe them in the light most favorable to the plaintiff. See id.
Hope Darrisaw obtained student loans to attend college. In July 2014, her
loan servicer, Nelnet, placed the loans in deferment because Darrisaw was
“enrolled in school at least half-time.” Nelnet scheduled the deferment to last from
July 2014 until December 2016, during which time no payments would be due.
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In April 2016, Darrisaw received a letter from the Pennsylvania Higher
Education Assistance Agency stating that the Agency had “paid a default claim on
your student loan(s) identified below” and was “now the legal owner of your
loan(s).” The letter identified four loans and informed Darrisaw that because of her
default she was “required to pay [her] loan(s) in full immediately” to the Agency.
Darrisaw had not obtained those four loans and believed the letter was sent “in
error,” so she did not initially respond to the letter.
The following month, May 2016, the Agency sent Darrisaw a second letter.
That letter warned Darrisaw that her defaulted loan was “now a federal debt” and
would be “subject to collection efforts” if she failed to remit payment in the
amount of $18,812.83. Concerned, Darrisaw called the Agency at “the number
listed on the Federal Student Aid website” because she “did not trust the
information in the letters.” She planned to “inquire about the debt” and “correct the
error.” But the representative Darrisaw called denied that she had an outstanding
debt with the Agency and terminated the call because the Agency’s “records did
not contain any reference to” Darrisaw.
Darrisaw received a third letter from the Agency in June 2016. This letter
stated that the Agency would begin garnishing Darrisaw’s wages to collect her
defaulted student loans unless she established a repayment plan by the following
month. Because the Agency had denied the existence of the debt over the
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telephone, Darrisaw believed the collection letters were part of “a fake debt
collection scam,” so she continued to ignore them.
In July 2016, the Agency sent a garnishment order to Darrisaw’s employer
directing it to deduct and remit to the Agency 15 percent of her disposable pay.
The Agency sent a second letter in September 2016 notifying Darrisaw’s employer
that it had not received any garnishment payments and explaining that the Agency
could take legal action if the employer failed to comply with the garnishment
order. Darrisaw’s employer began garnishing her wages shortly after receiving the
second letter.
Darrisaw filed a pro se complaint against the Agency for alleged violations
of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. She also
brought claims under the Federal Trade Commission Act, 15 U.S.C. § 45, and
against James Preston, the President and CEO of the Agency. The district court
dismissed those claims after screening Darrisaw’s complaint, 28 U.S.C.
§ 1915(e)(2)(B), and Darrisaw does not appeal those dismissals.
Darrisaw alleges that the debts the Agency sought to collect were “assigned
to [her] in error, either on the part of the lender, the [Department of Education], or
the [Agency].” She alleges that she “does not owe the debt” the Agency sought to
collect and that the Agency “abdicated its responsibilities . . . to maintain
procedures reasonably adapted to avoid such an error.” She also asserts that the
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Agency made “false or misleading representations,” was “negligen[t],” and
“fail[ed] to validate the debt.” And she accuses the Agency of engaging in
“fraudulent” business practices.
The Agency moved to dismiss Darrisaw’s claim under the Fair Debt
Collection Practices Act. See Fed. R. Civ. P. 12(b)(6). The Agency argued it was
not a “debt collector” under the Act. As a federal guaranty agency, the Agency
argued it fell within an exception to the Act’s definition of “debt collector” for
persons “collecting or attempting to collect any debt owed or due or asserted to be
owed or due another to the extent such activity . . . is incidental to a bona fide
fiduciary obligation.” 15 U.S.C. § 1692a(6)(F)(i). The district court granted the
Agency’s motion to dismiss.
II. STANDARD OF REVIEW
We review de novo the dismissal of a complaint. Culverhouse v. Paulson &
Co., 813 F.3d 991, 993 (11th Cir. 2016). We construe the allegations of a pro se
complaint liberally, in the light most favorable to the plaintiff. Dixon v. Hodges,
887 F.3d 1235, 1237 (11th Cir. 2018).
III. DISCUSSION
Congress enacted the Higher Education Act of 1965 “[t]o strengthen the
educational resources of our colleges and universities and to provide financial
assistance for students in postsecondary and higher education.” Higher Education
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Act of 1965, Pub. L. No. 89-329, 79 Stat. 1219, 1219; see also Cliff v. Payco Gen.
Am. Credits, Inc., 363 F.3d 1113, 1122 (11th Cir. 2004). Title IV of the Act
empowers “the Secretary of Education to administer several federal student loan
and grant programs, including the Federal Family Education Loan Program.” Cliff,
363 F.3d at 1122; see also 20 U.S.C. § 1071 et seq. Under the programs, “lenders
make guaranteed loans under favorable terms to students and their parents, and
these loans are guaranteed by guaranty agencies and ultimately by the federal
government.” Cliff, 363 F.3d at 1122; see also 34 C.F.R. § 682.100.
Guaranty agencies are either states or nonprofit organizations that agree with
the Secretary to administer a loan-guarantee program under the Higher Education
Act. 20 U.S.C. § 1078(b)(1); 34 C.F.R. § 682.200(b). Under the agreements, these
agencies guarantee private lenders against loss when a borrower defaults on a
federal student loan. 34 C.F.R. § 682.100(b)(1). If a borrower defaults, the
guaranty agency pays the default claim to the lender and is reimbursed by the
Secretary. Id.; 20 U.S.C. § 1078(c)(1)(A). The guaranty agency must then attempt
to collect the unpaid loan from the borrower on behalf of the Secretary. 34 C.F.R.
§ 682.410(b)(6)(i); see 20 U.S.C. § 1078(c)(2)(A), (c)(6). The guaranty agency
returns most of any payments it collects to the Secretary but may keep a percentage
of the payments for use in its operating fund. 20 U.S.C. §§ 1078(c)(2)(D), (c)(6),
1072b(c)(5).
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Because guaranty agencies must recover and safeguard money that belongs
to the federal government, federal law regulates their relationships with the
Secretary. The Higher Education Act requires the agreements between guaranty
agencies and the Secretary to establish procedures “to protect the United States
from the risk of unreasonable loss” and “to assure that due diligence will be
exercised in the collection of loans insured under the program.” Id.
§ 1078(c)(2)(A). The implementing regulations describe the relationship between a
guaranty agency and the Secretary as that of a fiduciary. 34 C.F.R. § 682.419(a)
(“The guaranty agency must exercise the level of care required of a fiduciary
charged with the duty of protecting, investing, and administering the money of
others.”).
We must decide whether the Agency acted as a “debt collector” when it
attempted to collect student-loan debts from Darrisaw that she never incurred. 15
U.S.C. § 1692a(6). The Act excludes from its definition of “debt collector” “any
person collecting or attempting to collect any debt owed or due or asserted to be
owed or due another to the extent such activity . . . is incidental to a bona fide
fiduciary obligation.” Id. § 1692a(6)(F)(i). The Agency argues that it falls within
this exclusion because it sought to collect the debts from Darrisaw pursuant to its
fiduciary obligation to the Secretary. Although Darrisaw agrees that guaranty
agencies act “incidental to a bona fide fiduciary obligation” when they attempt to
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collect valid debts for the Secretary, she argues they do not fall within the
exclusion when they attempt to collect nonexistent debts. We agree with the
Agency.
We have held that a guaranty agency acts “incidental to a bona fide fiduciary
obligation” when it attempts to collect a debt from a borrower who defaulted on a
federal student loan. Pelfrey v. Educ. Credit Mgmt. Corp., 208 F.3d 945, 945 (11th
Cir. 2000) (internal quotation marks omitted). In Pelfrey, we affirmed a judgment
in favor of a guaranty agency “on the ground that the [Act] does not apply to the
[guaranty agency]” because the agency fell within the exception for fiduciaries. Id.
(internal citation omitted). It was undisputed in Pelfrey that the guaranty agency
attempted to collect a student loan on which the borrower defaulted and that a
guaranty agency had paid a default claim to the private lender that made the loan.
See Pelfrey v. Educ. Credit Mgmt. Corp., 71 F. Supp. 2d 1161, 1162 (N.D. Ala.
1999). But unlike the borrower in Pelfrey, Darrisaw alleges she never incurred the
debts the Agency attempted to collect from her. She argues that allegation makes
all the difference.
Darrisaw argues that a guaranty agency is not protecting federal assets when
it attempts to collect a nonexistent debt, so it does not act “incidental to a bona fide
fiduciary obligation” in that circumstance. She points to federal regulations
acknowledging that guaranty agencies sometimes perform tasks “outside of their
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[federal] guaranty activities” and requiring guaranty agencies “to ensure that
Federal funds are not subsidizing non-[federal] guaranty activity.” 61 Fed. Reg.
49,382, 49,382 (Sept. 19, 1996). She also maintains that the Higher Education Act
requires guaranty agencies to exercise “due diligence . . . in the collection of loans
insured under the program”—but not in the collection of false, nonexistent loans.
20 U.S.C. § 1078(c)(2)(A) (emphasis added). Because Darrisaw alleges she never
took out the loans the Agency attempted to collect from her, she argues there are
no federal funds at issue. And because the Agency was not acting to protect any
federal funds, Darrisaw argues it did not act “incidental to a bona fide fiduciary
obligation.” 15 U.S.C. § 1692a(6)(F)(i).
The Agency responds that application of the fiduciary-obligation exception
does not depend on whether the debt a guaranty agency attempts to collect is valid
or nonexistent. It points to the text of the Act, which says the exception applies
whenever a person attempts to collect any debt that is “owed or due or asserted to
be owed or due another” if the activity “is incidental to a bona fide fiduciary
obligation.” Id. (emphasis added). To give effect to the phrase “or asserted to be
owed or due,” the Agency contends we must reject Darrisaw’s interpretation.
We agree with the Agency that Darrisaw’s interpretation of the phrase
“incidental to a bona fide fiduciary obligation” would read out of the statute the
language about debts “asserted to be owed or due another.” Id. The text of the Act
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makes clear that a person may attempt to collect a debt “incidental to a bona fide
fiduciary obligation” whether the debt sought to be collected is “owed or due”
another or only “asserted to be owed or due another.” Id. To hold that a guaranty
agency can never act incidental to a bona fide fiduciary obligation when it attempts
to collect a debt that is only “asserted to be owed,” id., but not actually owed,
would cause that phrase to “have no operation at all.” Marbury v. Madison, 5 U.S.
(1 Cranch) 137, 174 (1803). A venerable canon makes clear that an interpreter
must, if possible, give effect to every word and phrase in a statute. See Antonin
Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts § 26, at
174 (2012). Although lawmakers sometimes use redundant terms in a statute, we
cannot adopt an interpretation that would render a term meaningless, as Darrisaw
asks us to do. See United States v. Butler, 297 U.S. 1, 65 (1936) (“These words
cannot be meaningless, else they would not have been used.”).
Our dissenting colleague maintains that Darrisaw’s interpretation gives
effect to the phrase “asserted to be owed or due” and offers an example of how,
even under Darrisaw’s interpretation, a guaranty agency can act as a fiduciary
while collecting a debt that is only “asserted to be owed or due.” See Dissenting
Op. at 19–20. But the dissent’s example cannot withstand scrutiny. The dissent
says that a guaranty agency could qualify as a fiduciary if it tried to collect “a
federal student loan that has recently been paid off by the debtor.” Id. But that
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example instead contradicts the dissent’s interpretation because a guaranty agency
that tries to collect a debt that no longer exists is still trying “to collect a
nonexistent debt,” which according to the dissent means the agency cannot be
“acting ‘incidental to a fiduciary obligation.’” Id. at 18. When a guaranty agency
tries to collect an already-satisfied debt, it does not “act[] to recover and
safeguard” any “federal assets.” Id. at 20. We agree that a guaranty agency in that
circumstance could qualify as a fiduciary, but only because the fiduciary-obligation
exception can apply even when the debt a guaranty agency seeks to collect does
not exist.
Congress easily could have written the Act to impose liability on persons
who attempt to collect nonexistent debts pursuant to a fiduciary obligation.
Congress could have narrowed the exception to the definition of “debt collector” to
cover only persons attempting to collect debts “owed or due” another—that is, it
could have omitted the phrase “asserted to be owed or due” from the exception.
But Congress made a different choice. And to give effect to that choice, we must
conclude that whether a debt is “owed” or only “asserted to be owed” is not
dispositive of whether the exception applies. What matters is not whether the debt
is real or nonexistent, but whether the guaranty agency acted “incidental to a bona
fide fiduciary obligation” in attempting to collect it. 15 U.S.C. § 1692a(6)(F)(i).
Darrisaw contends that our interpretation of the fiduciary-obligation
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exception would allow a guaranty agency that sometimes collects valid debts for
the Secretary to commit fraud by collecting debts that it knows never existed, but
we disagree. To fall within the exception, a person must act “incidental to a bona
fide fiduciary obligation.” Id. (emphasis added). Bona fide means “[i]n or with
good faith; honestly, openly, and sincerely; without deceit or fraud.” Bona Fide,
Black’s Law Dictionary (5th ed. 1979); accord Bona Fide, Webster’s New
International Dictionary (2d ed. 1959) (“In or with good faith; without fraud or
deceit.”). If a guaranty agency knowingly attempted to collect nonexistent debt as
Darrisaw contemplates, it would not act incidental to a good-faith fiduciary
obligation. It would instead act in bad faith, with fraud and deceit, and so could not
claim the exception.
The dissent argues that we must “rewrite” the fiduciary-obligation exception
to conclude that a guaranty agency does not act incidental to a good-faith fiduciary
obligation when it acts in bad faith to collect a nonexistent debt. Dissenting Op. at
21. Not true. To be sure, as the dissent points out, the adjective “bona fide”
modifies the term “fiduciary obligation.” Id. (quoting 15 U.S.C. § 1692a(6)(F)(i)).
That is, a good-faith fiduciary obligation is the kind of obligation a person must act
“incidental to” in order to claim the exception. 15 U.S.C. § 1692a(6)(F)(i). But we
do not see how a debt-collection activity taken in bad faith to collect a nonexistent
debt could be “incidental to” a good-faith fiduciary obligation. Id. And the dissent
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does not argue otherwise. Nor does it propose an alternative reading of the statute
that gives effect to the term “bona fide.” So our dissenting colleague is wrong to
say that our interpretation relies on “a grammatically incoherent reading” of the
statute. Dissenting Op. at 20.
Although a guaranty agency may not claim the fiduciary-obligation
exception if it acts in bad faith, the text of the Act makes clear that it need not be
perfect. After all, the exception applies even to those who collect debts that are
only “asserted to be owed.” 15 U.S.C. § 1692a(6)(F). Like other fiduciaries, a
guaranty agency may act based on a good-faith fiduciary obligation even if it
makes an honest mistake. Cf. Stone ex rel. AmSouth Bancorporation v. Ritter, 911
A.2d 362, 370 (Del. 2006) (explaining that corporate directors failed to discharge
their fiduciary obligations in good faith only if they “knew that they were not
discharging their fiduciary obligations”). When a guaranty agency acts in good
faith to collect a debt that is mistakenly “asserted to be owed” the Secretary, it acts
incidental to a bona fide fiduciary obligation.
The problem for Darrisaw is that her complaint fails to allege that the
Agency acted in bad faith. She alleges that the debts the Agency sought to collect
were “assigned to [her] in error, either on the part of the lender, the [Department of
Education], or the [Agency].” She accuses the Agency of “abdicat[ing] its
responsibilities . . . to maintain procedures reasonably adapted to avoid such an
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error.” And she asserts that the Agency made “false or misleading representations,”
was “negligen[t],” and “fail[ed] to validate the debt.” That is, Darrisaw’s complaint
alleges that the Agency negligently but mistakenly tried to collect a debt she did
not owe, not that the Agency purposefully sought to collect a debt it knew she did
not owe. When asked at oral argument whether the complaint alleged that the
Agency acted in bad faith, even Darrisaw’s counsel did not contend that the
complaint alleged the Agency knew the debt it sought to collect was nonexistent.
Oral Argument at 3:43–5:08 (Dec. 3, 2019). Although Darrisaw’s complaint
accuses the Agency of engaging in “fraudulent” business practices, that conclusory
allegation of “fraud” is a legal conclusion we are not required to accept as true. See
Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009).
Considering only the factual allegations of the complaint, and construing
them liberally in the light most favorable to Darrisaw, she has not plausibly alleged
that the Agency acted with “[d]ishonesty of belief, purpose, or motive” in
attempting to collect the debts from her. Bad Faith, Black’s Law Dictionary (11th
ed. 2019). Because a defendant’s status as a “debt collector” is an element of a
plaintiff’s claim under the Act, it was Darrisaw’s burden to allege facts plausibly
establishing that the Agency qualifies as a debt collector. See Reese v. Ellis,
Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1216, 1218 (11th Cir. 2012).
She failed to do so, and the district court correctly dismissed her complaint.
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IV. CONCLUSION
We AFFIRM the dismissal of Darrisaw’s complaint.
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MARTIN, Circuit Judge, dissenting:
The majority affirms dismissal of Ms. Darrisaw’s pro se complaint, giving
the reason that she did not plausibly allege that the Pennsylvania Higher Education
Assistance Agency’s (“PHEAA”) collection efforts were undertaken in bad faith. I
dissent because my reading of the statute that excepts those who are acting as
fiduciaries does not support this result. As I understand it, a guaranty agency acts
as a fiduciary to the Department of Education—and is thus exempt from
limitations put on debt collectors—only when it collects on a federal student loan
debt. Because Ms. Darrisaw’s complaint plausibly alleges that PHEAA directed its
debt-collection efforts toward her for a debt that did not exist, PHEAA cannot
qualify under the fiduciary-obligation exception. And even if I agreed with the
majority that PHEAA comes within the fiduciary-obligation exception (I don’t),
Ms. Darrisaw has stated a claim in any event because she plausibly alleges
PHEAA acted in bad faith.
I.
Under the Fair Debt Collection Practices Act (“FDCPA”), a person is not a
“debt collector” if they are “collecting or attempting to collect any debt owed or
due or asserted to be owed or due another to the extent such activity [] is incidental
to a bona fide fiduciary obligation.” 15 U.S.C. § 1692a(6)(F). In her complaint,
Ms. Darrisaw alleges that PHEAA is a debt collector and attempted to collect a
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debt from her that does not exist. We must accept this allegation as true when
reviewing a motion to dismiss. Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283,
1288 (11th Cir. 2010). Thus, the proper question before this Court is whether
PHEAA can act “incidental to a bona fide fiduciary obligation” when it tries to
collect a nonexistent debt. As I read the statute, it cannot.
The majority is correct in recognizing that a guaranty agency like PHEAA
can act pursuant to a “bona fide fiduciary obligation” to the federal government
when attempting to collect defaulted student loan debt. See Pelfrey v. Educ. Credit
Mgmt. Corp., 71 F. Supp. 2d 1161, 1180 (N.D. Ala. 1999), aff’d, 208 F.3d 945
(11th Cir. 2000) (per curiam). That is because when a guaranty agency makes a
“default payment” to a private lender to acquire defaulted student loan debt, it does
so using federal funds. Id. Given that federal funds are used to acquire the
defaulted loans, they remain assets of the Department of Education throughout the
collection process. Id. (citing 20 U.S.C. § 1072(g)(1)). This means when a
guaranty agency collects defaulted federal student loan debt, it acts pursuant to its
fiduciary obligation to the federal government to recover and safeguard federal
assets. See Pelfrey, 71 F. Supp. 2d at 1173 (“Student loan guarantors collect
[federal] loans pursuant to a fiduciary obligation because they use [federal] funds
to acquire these loans[.]” (citing testimony of Larry Oxendine, then-Director of
Lender and Guarantor Oversight for the Department of Education)); 20 U.S.C.
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§ 1078(c)(2)(A) (providing that guaranty agencies are required, in their collection
activities, “to protect the United States from the risk of unreasonable loss”).
As Ms. Darrisaw points out, however, this does not mean that an agency
acting as a fiduciary for some loans is given fiduciary status for everything else it
does. See Federal Family Education Loan (FFEL) Program, 61 Fed. Reg. 49,382,
49,382 (Sept. 19, 1996) (recognizing that guaranty agencies may act “outside of
their [federal loan program] guaranty activities”); see also Peete-Bey v. Educ.
Credit Mgmt. Corp., 131 F. Supp. 3d 422, 429 n.4 (D. Md. 2015) (observing that a
company which “often acts as a guarantor” does not always act in that capacity).
For example here, when a guarantee agency collects debt that is not part of a
federal loan program, it is not acting as a fiduciary to the federal government
because it is not attempting to recover or safeguard federal assets. See 20 U.S.C.
§ 1078(c)(2)(A) (requiring guaranty agencies to exercise due diligence in the
collection of loans “insured under the [federal student loan] program.”).
Thus, an agency taking collection actions is not acting “incidental to a
fiduciary obligation” when it tries to collect a nonexistent debt. Certainly, a
nonexistent debt is, by definition, outside the scope of a federal student loan
program. And this is precisely what Ms. Darrisaw alleges in her complaint. She
claims she never incurred the loans referenced in PHEAA’s numerous collection
letters, and that even PHEAA representatives admitted they had “no record of
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[these debts].” Because Ms. Darrisaw plausibly alleges that PHEAA attempted to
collect student loan debt that never existed, I would hold that PHEAA’s collection
efforts were not “incidental to a bona fide fiduciary obligation.” This means those
collection efforts are not protected under the fiduciary-obligation exception. As a
result, I would reverse the District Court’s dismissal of Ms. Darrisaw’s complaint.
II.
The majority offers fiduciary protection to PHEAA by relying on what I
view as an erroneous interpretation of the fiduciary-obligation exception. I believe
the majority makes two principal mistakes in its analysis.
a. The Majority Incorrectly Concludes That Ms. Darrisaw’s Interpretation
of the Exception Renders Meaningless the Term “Assert[ed].”
The majority says Ms. Darrisaw’s interpretation of the FDCPA, which limits
the exception to agencies collecting existing federal student loans, would render
inoperable the phrase “asserted to be owed or due.” Maj. Op. at 9–10. The
majority correctly points out that the fiduciary-obligation exception applies not
only to the collection of debts that are “owed or due,” but also to debts that are
merely “asserted to be owed or due.” 15 U.S.C. § 1692a(6)(F) (emphasis added).
But the majority is wrong when it says that accepting Ms. Darrisaw’s interpretation
would mean that a guaranty agency never acts incidental to a bona fide fiduciary
obligation when collecting debt that is “not actually owed.” Maj. Op. at 10. A
guaranty agency might, for instance, seek collection of a federal student loan that
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has recently been paid off by the debtor. That loan would not be “owed,” but only
“asserted to be owed.” Nonetheless, the guaranty agency’s collection activity is
incidental to its fiduciary obligation because the agency sought to collect a loan
that was acquired using federal funds, and thus acted to recover and safeguard
federal assets. 20 U.S.C. § 1078(c)(2)(A). Ms. Darrisaw’s interpretation of the
statute would not, therefore, render inoperable the term “assert[ed] to be owed or
due.”
b. The Majority Incorrectly Concludes that a Guaranty Agency Must Act in
Bad Faith to Fall Outside the Scope of the Exception.
The majority opinion says the fiduciary-obligation exception applies even
when a guaranty agency attempts to collect a debt that never existed, as long as it
does so in “good faith.” Maj. Op. at 12. The majority opinion starts from the
premise that “bona fide” means “in or with good faith.” Id. (alteration adopted).
The opinion then says that a guaranty agency “acts incidental to a bona fide
fiduciary obligation” whenever it “acts in good faith to collect a debt.” Id. at 13. I
reject this interpretation of the statute.
In my view, the majority’s result can only be achieved by a grammatically
incoherent reading of the exception. Substituting the words “good faith” for the
words “bona fide” in the statute, as the majority proposes, would make the
exception apply to “any person collecting or attempting to collect any debt owed or
due or asserted to be owed or due another to the extent such activity [] is incidental
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to a [good faith] fiduciary obligation.” 15 U.S.C. § 1692a(6)(F). Applying basic
grammar principles, the adjective “bona fide” (or, as the majority prefers, “good
faith”) should modify the term directly following it, which is “fiduciary
obligation.” But under the majority’s interpretation, which (unlike the statute)
requires only that a guaranty agency “act[] in good faith to collect a debt,” Maj.
Op. at 13, it is the agency’s collection efforts, rather than its fiduciary obligation,
which must be in good faith. For the majority’s interpretation to make sense,
therefore, the court must rewrite the fiduciary-obligation exception to cover “any
person collecting or attempting to collect [in good faith] any debt . . . to the extent
such activity is incidental to a bona fide fiduciary obligation.” That is something
we may not do. See Korman v. HBC Fla., Inc., 182 F.3d 1291, 1296 (11th Cir.
1999) (“It is not the business of courts to rewrite statutes.”).
III.
Based on this rewriting of the fiduciary-obligation exception, the majority
says a plaintiff bringing an FDCPA claim against a guaranty agency must
specifically plead that the agency acted in “bad faith.” Again, the words “bad
faith” do not appear in the statute, so imposing the obligation on Ms. Darrisaw to
specifically plead bad faith would have required her to be able to see into the future
to anticipate the interpretation of the statute given by the majority opinion here.
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Even if I were to accept the majority’s interpretation as correct, I would hold that
Ms. Darrisaw’s complaint adequately alleges PHEAA acted in “bad faith.”
In an appeal from the dismissal of a complaint, we must “accept[] the factual
allegations in the complaint as true and constru[e] them in the light most favorable
to the plaintiff.” Fourth Estate Pub. Benefit Corp. v. Wall-Street.com, LLC, 856
F.3d 1338, 1339 (11th Cir. 2017) (quotation marks omitted). Complaints by pro
se litigants, “however inartfully pleaded, must be held to less stringent standards
than formal pleadings drafted by lawyers.” Erickson v. Pardus, 551 U.S. 89, 94,
127 S. Ct. 2197, 2200 (2007) (per curiam) (quotation marks omitted). This more
liberal pleading standard for pro se plaintiffs requires federal courts to “look
beyond the labels” used in a complaint and instead to the substance of the
plaintiff’s allegations when determining if the plaintiff has stated a
claim. See Means v. Alabama, 209 F.3d 1241, 1242 (11th Cir. 2000) (per curiam).
The gravamen of Ms. Darrisaw’s complaint is that PHEAA tried collecting
debt from her that did not exist, and that it continued its collection efforts even
after acknowledging that Ms. Darrisaw owed it nothing. She alleges, for instance,
that after PHEAA told her that “its records did not contain any reference to [the
debt],” she considered future collection attempts to be “dubious” and part of “a
fake debt collection scam.” She said that notwithstanding her efforts to obtain
information about this so-called debt from PHEAA, that it “concealed material
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facts” from her. Ms. Darrisaw also alleges that because PHEAA denied any
knowledge or record of her student loan debt, that it “knowingly violate[d] the
FDCPA” when it attempted to collect on the loan through a treasury offset.
Finally, she claims that after PHEAA denied, for a second time, that she had “an[y]
outstanding student loan debt with [PHEAA],” it “still characterize[d] the debt as
owed.” On these facts, Ms. Darrisaw has by any measure alleged bad faith on the
part of PHEAA. Cf. Westmoreland Cty. Emp. Ret. Sys. v. Parkinson, 727 F.3d
719, 726 (7th Cir. 2013) (observing that in the fiduciary context, “conscious”
wrongdoing constitutes “bad faith”).
It’s true, as the majority notes, that Ms. Darrisaw’s complaint at times
describes PHEAA’s shortcomings as resulting from mere negligence. Maj. Op.
13–14. I recognize that Ms. Darrisaw’s complaint is not the paragon of clarity.
But as a pro se pleading, it need not be. See Erickson, 551 U.S. at 94, 127 S. Ct. at
2200. And while certain allegations in Ms. Darrisaw’s complaint suggest PHEAA
acted negligently, under our more lenient standard for reviewing pro se pleadings
we must focus on the substance of Ms. Darrisaw’s claims rather than the labels she
uses when explaining PHEAA’s activity. See Means, 209 F.3d at 1242. The
fundamental substance of Ms. Darrisaw’s claim is that PHEAA tried (and
succeeded) in collecting debt from her that did not exist, even after acknowledging
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that Ms. Darrisaw did not owe it anything. This allegation sounds in bad faith, not
negligence. 1
Therefore, even applying the majority’s interpretation of the fiduciary-
obligation exception, I would reverse the District Court’s dismissal of Ms.
Darrisaw’s complaint. I respectfully dissent from the majority’s decision to allow
that dismissal to stand.
1
The majority says that “Darrisaw’s counsel did not contend that the complaint alleged the
Agency knew the debt it sought to collect was nonexistent.” Maj. Op. at 14. I did not
understand counsel’s position that way. It’s true that when Darrisaw’s counsel was first asked
whether the complaint alleges PHEAA “knew that [the debt] was nonexistent,” counsel
responded that it was “not entirely clear.” Oral Argument at 4:48–4:52 (Dec. 3, 2019). But on
rebuttal, counsel said that Darrisaw’s allegation characterizing PHEAA’s efforts as a “fake debt
collection scam[,] . . . read in tandem with” other allegations in the complaint, suggest “there was
no basis to believe that this debt existed . . . at all.” Id. at 30:05–31:15. And even I were to
ignore counsel’s clarification of its position (as the majority opinion does), my analysis would
remain the same. As an initial matter, a pro se complaint need not be “entirely clear” to state a
claim. See Erickson, 551 U.S. at 94, 127 S. Ct. at 2200 (even “inartfully pleaded” pro se
complaints can state a claim). Beyond that, counsel’s statement does not bind us because it was
not a concession, let alone an unambiguous one. See Crowe v. Coleman, 113 F.3d 1536, 1542
(11th Cir. 1997) (“[W]aivers and concessions made in appellate oral arguments need to be
unambiguous to change the outcome of an appeal[.]”).
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