Synthia Brooks v. Salle Mae, Inc. (2011)

Memorandum of Decision on Cross Motions for Summary Judgment (Nos. 143 and 145)

Procedural/Factual Background

The plaintiff, Synthia Brooks, a resident of Greenwich, on dates prior to 2003 obtained student loans administered under the Federal Family Education Loan Program.   All her student loans were consolidated and are administered through the defendant Sallie Mae, Inc., which is now the holder of those loans.   After obtaining a doctorate in psychology and becoming a neuropsychologist, plaintiff alleges that she found her income to be insufficient to make the monthly payments on her student loans.   She applied to Sallie Mae for a period of forbearance which was granted for a period of five years which expired on or about December, 21, 2007 when the defendant began contacting the plaintiff about late student loan payments.   Plaintiff advised a Sallie Mae representative that her income was insufficient to permit her to make the payments.   Plaintiff's Amended Complaint of March 5, 2010, which is the operative complaint, alleges that a Sallie Mae representative by the name of Joan Banks then advised the plaintiff to apply for an Economic Hardship Deferment, and that the plaintiff sent a signed Economic Hardship Deferment Request form (“EHDR”) to Sallie Mae on December 20, 2007 along with a copy of her most recently filed federal income tax return for the year 2006, which she claims was in accordance with the instructions given to her by Ms. Banks and with the written instructions on the EHDR form.   Plaintiff alleges that despite the fact that she had submitted the EHDR form, the defendant sent account statements to the plaintiff showing that she failed to make any payments on her student loans during January, February and March 2008.   Moreover, in late March 2008, Banks contacted the plaintiff and requested that she complete a new form because her previous one had failed to include a social security number.   The plaintiff then faxed another completed form and a copy of her 2006 federal tax return to the defendant on April 7, 2008.   On April 15, 2008, Banks again contacted the plaintiff and told her that the defendant would only accept either a 2007 federal tax return or pay stubs as proof of the plaintiff's income.   The plaintiff informed Banks that she had yet to file a 2007 federal tax return and that she did not have any pay stubs because she was self-employed.   Banks told the plaintiff that a tax return or pay stubs were the only documents that the defendant could accept in order to verify her income.   The plaintiff was subsequently told by another representative of the defendant, Lisa, that the defendant would also accept quarterly tax statements, quarterly withholding statements or recent pay stubs.   Nevertheless, the plaintiff also did not have any of these documents.   Furthermore, the plaintiff was told that the defendant could not process her deferment request until after the plaintiff paid the balance and late fees owed on her loans.

The plaintiff further alleges that pursuant to 34 C.F.R. § 682.210(s)(6)(ix), the defendant could have accepted other documentation to substantiate her income, but the defendant chose not to do so because it wanted to delay purposefully the processing of her deferment request in order to drive up late fees.   As a result of the defendant's alleged mishandling of the plaintiff's request for an economic hardship deferment, the plaintiff alleges that, inter alia, she suffered damages because her loans entered into default and she incurred late fees, accrual of interest and collection fees.   Consequently, the plaintiff's one-count amended complaint alleges a cause of action against the defendant for violations of the Connecticut Unfair Trade Practices Act, General Statutes § 42–110a et seq.  (CUTPA).

On August 13, 2010, the defendant filed an answer along with three special defenses in response to the plaintiff's amended complaint.   On January 4, 2011, pursuant to the plaintiff's substitute motion to strike, this court (Adams, J.) struck the first two special defenses.   In its only surviving special defense, the defendant alleges that the plaintiff's CUTPA claim is preempted by the federal Higher Education Act of 1965, 20 U.S.C. §§ 1001–115 (“HEA”).

On July 1, 2011, the plaintiff filed a motion for summary judgment on the ground that there is no genuine issue of material fact as to the defendant's conduct, which she alleges was in violation of CUTPA.   On July 27, 2011, the defendant filed a cross motion for summary judgment on the grounds that the plaintiff has failed to produce any evidence satisfying the “cigarette rule” so as to substantiate her CUTPA claim and that the plaintiff's CUTPA claim is preempted by the HEA. The plaintiff filed a supplemental memorandum of law in support of its motion for summary judgment on August 3, 2011, to which the plaintiff attached her own affidavit of August 2, 2011 as an exhibit.   On August 16, 2011, the defendant moved to strike this affidavit on the ground that it is unreliable in that it contains statements that contradict the plaintiff's deposition testimony and that it is filled with inadmissible hearsay.   The matter was heard at the short calendar on August 22, 2011, at which the plaintiff's counsel withdrew its supplemental pleadings that were the subject of the defendant's motion to strike on the ground that the contents of the affidavit was already contained in the plaintiff's memorandum of law in opposition to the defendant's motion for summary judgment.   Accordingly, the court marked off the defendant's motion to strike as moot.

In support of her motion, the plaintiff submits the following evidence:  (1) a copy of the plaintiff's economic hardship deferment request form;  (2) a copy of an invoice sent by the defendant on April 15, 2008;  (3) a copy of the plaintiff's filed 2006 federal income tax return;  and (4) copies of the plaintiff's deferment requests on December 15, 2007 and March 31, 2008.   The defendant submits the following evidence in support of its cross motion:  (1) the signed and sworn affidavit of James Austin, a Customer Advocate of the defendant;  (2) copies of the defendant's communications with the plaintiff from August 16, 2007 through September 18, 2008;  and (3) the deposition testimony of the plaintiff.

Discussion

“Practice Book § 17–49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.   In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.”  (Internal quotation marks omitted.)  Sherman v. Ronco, 294 Conn. 548 (2010).  “The party moving for summary judgment has the burden of showing the absence of any genuine issue of material fact and that the party is, therefore, entitled to judgment as a matter of law.”  Viola v. O'Dell, 108 Conn.App. 760, 763–64 (2008).  “In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist.”  Nolan v. Borkowski, 206 Conn. 495, 500 (1988).  “The test is whether a party would be entitled to a directed verdict on the same facts ․ A motion for summary judgment is properly granted if it raises at least one legally sufficient defense that would bar the plaintiff's claim and involves no triable issue of fact.”   (Emphasis in original;  internal quotation marks omitted.)  Byrne v. Burke, 112 Conn.App. 262, 268 (2009).

The plaintiff makes the following arguments.   First, regarding the defendant's preemption claim, CUTPA is not preempted by the HEA. There is no conflict preemption, as CUTPA is not an obstacle to the HEA;  CUTPA is invoked only when there is non-compliance with the HEA. Moreover, the court held in College Loan Corp. v. SLM Corp., 396 F.3d 588 (4th Cir.2005), that a defendant cannot rely upon an HEA preemption defense on the ground that may be enforced only by the Department of Education.   The United States Supreme Court has recognized that the availability of a state law claim is even more important in an area, such as here, where no federal private right of action exists.   Second, the plaintiff supplied the required information to the defendant for her deferment request and qualified for deferment, but the defendant refused to approve the request.   Although the federal regulations provide that the documentation provided must be “satisfactory to the lender,” there is no room for interpretation and no reason for the defendant to argue that a borrower's most recently filed federal income tax return is not satisfactory documentation to qualify a borrower for a given category.   Finally, the plaintiff argues that a failure to comply with the HEA is a violation of CUTPA.   Specifically, because the defendant's non-compliance with the federal regulations is an internal policy, the violation was not mere negligence, but rather intentional.   Moreover, the plaintiff suffered substantial injury as her loans entered into default, including capitalized interest added to the plaintiff's balance and the assessment of a debt collection fee.   The plaintiff did not benefit from her loan entering into default, and there was no way for the plaintiff to avoid the injury.   The plaintiff's only options were deferment, forbearance or payment.   The plaintiff could not afford to pay, and only the defendant was in a position to offer forbearance if deferment was not possible, as the plaintiff was not in a position to demand forbearance.

The defendant argues the following.   First, the defendant did not violate CUTPA, as it processed the plaintiff's deferment request promptly, just days after the receipt of the request.   Moreover, negligent acts are not sufficient to form the basis of a CUTPA claim, and the plaintiff is essentially alleging that the defendant was negligent in both its communication about the requirements for deferment and in its processing of the plaintiff's request;  and a misrepresentation or failure to exercise diligence does not give rise to a CUTPA claim.   Furthermore, the regulations issued by the Department of Education govern the processing of deferment requests and under those regulations, the plaintiff was required to submit not only documentation satisfactory to the lender, but also evidence showing the amount of her monthly income because this was an initial deferment request.   The plaintiff did not satisfy this requirement.   Also, not only has the plaintiff failed to prove a causal link between the defendant's alleged unfair acts and her alleged injury, she has not provided evidence to satisfy the substantial injury prong of her CUTPA claim.   The plaintiff had ample time and opportunity to prevent her alleged damages, as her loan defaulted as a result of the plaintiff's own inaction.   Regarding preemption, the defendant argues that numerous courts have ruled that state law claims of misrepresentation and unfair and deceptive acts and practices are preempted by the HEA. For instance, in Chae v. SLM Corp., 593 F.3d 936 (9th Cir.2010), cert. denied, 131 S.Ct. 458, 178 L.Ed.2d 287 (2010), the court held that the borrowers' state law claims, including those for unfair trade practices and for misrepresentation, were preempted by the HEA under express and conflict preemption.   A dispute concerning the application and eligibility for a deferment falls within the comprehensive framework of the HEA.

Since summary judgment for a defendant is properly granted if it raises at least one valid defense which does not involve a triable issue of fact, Byrne, supra, the court will address initially the defendant's special defense of preemption by the HEA. Before getting into the preemption issues it is necessary to review the background of that federal statute and its Federal Family Education Loan Program (FFELP).

1. Background on HEA and FFELP

“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 ․ The attempted accomplishment of these purposes has resulted in a complicated set of statutes and regulations.”  (Citation omitted;  internal quotation marks omitted.)   McNamee, Lochner, Titus & Williams, P.C. v. Higher Education Assistance Foundation, 50 F.3d 120, 121 (2d Cir.1995).  “Title IV of the Higher Education Act governs federally-funded student financial aid programs for college and post-secondary vocational training.  20 U.S.C. § (s)1070 et seq.”   Coalition of New York State Career Schools, Inc. v. Riley, 129 F.3d 276, 277 (2d Cir.1997).  “Title IV provides the statutory scheme for Federal Family Education Loan programs ․ by which eligible students may receive financial assistance for higher education ․ FFEL programs include, among other things, the Federal Stafford Loan program and the Federal Supplemental Loans for Students program ․ The purpose of these programs is to make available and subsidize student loans from private lenders with repayment insured by the government.”  (Citations omitted.)  Chauffeur's Training School, Inc. v. Spellings, 478 F.3d 117, 120 (2d Cir.2007).   The Secretary of the Department of Education is authorized to prescribe such regulations as may be necessary to carry out the purposes” of the Federal Family Education Loan Programs.  20 U.S.C. § 1082(a)(1);  see also Chae v. SLM Corp., supra, 593 F.3d 939.   “Under that authority, the [Department of Education] has promulgated detailed regulations.   See 34 C.F.R. §§ 682.100–682.800.” Chae v. SLM Corp., supra, 593 F.3d 939.

Among those regulations is § 682.210(s)(6), which governs economic hardship deferments under the HEA. “An eligible borrower is entitled to an economic hardship deferment for periods of up to one year at a time that, collectively, do not exceed 3 years ․ if the borrower provides documentation satisfactory to the lender showing that the borrower is within any of the categories described in paragraphs (s)(6)(i) through (s)(6)(vi) of this section.”  34 C.F.R. § 682.210(s)(6).   One of those categories involves students who are working full-time and who have a “monthly income that does not exceed the greater of (as calculated on a monthly basis)—(A) The minimum wage rate ․ or (B) An amount equal to 150 percent of the poverty guideline applicable to the borrower's family size ․” 34 C.F.R. § 682.210(s)(6)(iii).

2. Preemption

Under the supremacy clause of the United States Constitution, “state laws that conflict with federal law are without effect.”  (Internal quotation marks omitted.)  Altria Group, Inc. v. Good, 555 U.S. 70, 76, 129 S.Ct. 538, 172 L.Ed.2d 398 (2008).  “[S]tate law is pre-empted under the [s]upremacy [c]lause ․ in three circumstances.   First, Congress can define explicitly the extent to which its enactments pre-empt state law ․ Preemption fundamentally is a question of congressional intent ․ and when Congress has made its intent known through explicit statutory language, the courts' task is an easy one.   Second, in the absence of explicit statutory language, state law is pre-empted where it regulates conduct in a field that Congress intended the [f]ederal [g]overnment to occupy exclusively.   Such an intent may be inferred from a scheme of federal regulation ․ so pervasive as to make reasonable the inference that Congress left no room for the [s]tates to supplement it, or where an [a]ct of Congress touch[es] a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject ․ Where ․ the field which Congress is said to have pre-empted includes areas that have been traditionally occupied by the [s]tates, congressional intent to supersede state laws must be clear and manifest ․ Finally, state law is pre-empted to the extent that it actually conflicts with federal law.   Thus, the [c]ourt has found pre-emption where it is impossible for a private party to comply with both state and federal requirements ․ or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”  (Internal quotation marks omitted.)  Rodriguez v. Testa, 296 Conn. 1, 8–9 (2010).   An “inquiry into the scope of a statute's pre-emptive effect is guided by the rule that [t]he purpose of Congress is the ultimate touchstone in every pre-emption case ․ Congress may indicate pre-emptive intent through a statute's express language or through its structure and purpose.”  (Citation omitted;  internal quotation marks omitted.)  Altria Group, Inc. v. Good, supra, 555 U.S. 76.

In this case, the defendant alleges that the plaintiff's CUTPA claim is preempted by the HEA and its regulations.¹  To support this claim, the defendant must prove that:  (1) the HEA explicitly preempts CUTPA;  (2) Congress legislated so comprehensively in the area of student financial lending that the HEA occupies an entire field of regulation and leaves no room for state law;  or (3) CUTPA conflicts with the HEA such that it is impossible for a party to comply with both, or CUTPA is an obstacle to the achievement of the objectives of the HEA.

a. Express Preemption

The following provisions of the HEA include express preemption language:  20 U.S.C. § 1091a(a)(2) (state statutes of limitations);  id. § 1078(d) (state usury laws);  id. § 1091a(b) (state law infancy defense);  and id. § 1098g.   The only preemption provision implicated by the plaintiff's pleadings is § 1098g, which provides in relevant part:  “Loans made, insured, or guaranteed pursuant to a program authorized by title IV of the Higher Education Act of 1965 ․ shall not be subject to any disclosure requirements of any State law.”  (Citation omitted.)   Thus, to the extent that a plaintiff brings suit alleging that a student loan provider violated state disclosure requirements, § 1098g expressly preempts that law.   See Chae v. SLM Corp., supra, 593 F.3d 942–43.   Here, the plaintiff alleges that the defendant “failed to inform [the plaintiff] of her other options if she was unable to comply with [economic deferment] requirements as [the defendant] had represented them” and refused to inform the plaintiff of “what other information she could submit as proof of her recent income which would allow [the defendant] to determine her eligibility for [economic deferment].”   The plaintiff makes these allegations as part of her CUTPA claim.   To the extent that CUTPA requires the defendant to disclose the information that the plaintiff sought, there is no genuine issue of material fact but that § 1098g ² preempts those factual allegations.

The plaintiff further alleges that the defendant “misrepresented the documentation requirements to determine eligibility” for economic deferment and “misrepresented that [the plaintiff] had to pay all late fees” before she could enter economic deferment.   There is authority for ruling that misrepresentation claims are, in fact, improper disclosure claims.   See Chae v. SLM Corp., supra, 593 F.3d 942–43.   In Chae, students brought suit against Sallie Mae, alleging that Sallie Mae's method of calculating interest, practice of assessing late fees and method of setting the first repayment date on a Consolidation or PLUS loan violate California business, contract and consumer-protection law.   The plaintiffs further alleged breach of contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing and the use of fraudulent and deceptive practices apart from the billing statements.   The federal government intervened as a plaintiff, seeking a declaratory judgment that the plaintiffs' state law claims were preempted by the HEA. The court held that the HEA preempted the plaintiffs' state law claims under express and conflict preemption.   Regarding express preemption, the court held that § 1098g applies to, and thus precludes, the plaintiffs' first three state law claims.  Id., 942.   The court reasoned that the plaintiffs' misrepresentation claims are, in essence, improper-disclosure claims and, therefore, are subject to express preemption under § 1098g.  Id., 942–43.   “At bottom, the plaintiffs' misrepresentation claims are improper-disclosure claims.   The plaintiffs do not contend that California law prevents Sallie Mae from employing any of the three loan-servicing practices at issue.   We consider these allegations in substance to be a challenge to the allegedly misleading method Sallie Mae used to communicate with the plaintiffs about its practices.   In this context, the state-law prohibition on misrepresenting a business practice is merely the converse of a state law requirement that alternate disclosures be made.”  (Internal quotation marks omitted.)  Id. The court added that “[u]nder the very terms of the FFELP, a ‘misleading’ disclosure would be improper ․ A properly-disclosed FFELP practice cannot simultaneously be misleading under state law, for state disclosure law is preempted by the federal statutory and regulatory scheme.”  (Citations omitted.)  Id., 943.   The court thus concluded that the plaintiffs' misrepresentation claims were “restyled improper-disclosure claims” and, therefore, were expressly preempted under § 1098g.  Id. Nevertheless, the court held that the plaintiffs' claim of breach of contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing and the use of fraudulent deceptive practices apart from the billing statements “are not impacted by any of the FFELP's express preemption provisions.”  Id.

In the present case, the plaintiff's misrepresentation allegations are not unlike those in Chae. The plaintiff's allegations that the defendant misrepresented the documentation requirements to determine eligibility for economic deferment and misrepresented that the plaintiff had to pay all late fees before she could enter economic deferment are no different than a claim that the defendant failed to make proper disclosures to the plaintiff regarding its policies for economic deferment.   If properly disclosed, the information that the plaintiff sought could not simultaneously be misleading.   See id.   Accordingly, these aspects of the plaintiff's CUTPA claim are also subject to express preemption under § 1098g.   Nevertheless, the plaintiff further alleges that the defendant “purposefully delayed the processing of her December 2007 [economic deferment request] in order to drive up late fees” and “refused to accept income information supplied by [the plaintiff]” that complied with § 682.210(s)(6)(vi).   These allegations are not improper-disclosure claims and, therefore, are not expressly preempted by § 1098g, nor by any of the other preemption provisions of § 682.210.

Given that specific factual allegations of the plaintiff's CUTPA claim are expressly preempted by § 1098g while other parts of the claim are not, the issue arises as to whether summary judgment still can be granted for the defendant on parts of the plaintiff's CUTPA claim.  “Connecticut does not have a procedure for rendering judgment for a defendant on part of a count unless it disposes of all the issues in a count.”  (Internal quotation marks omitted.)   Salyer v. Carey, Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No. X08 CV 04 4003396 (April 18, 2007, Jennings, J.).   “There is no appellate authority as to whether a court can permit summary judgment against a party relative to individual allegations within a single count of a complaint.   At the trial court level there is a split of authority on the issue.   A review of the decisions finds that the majority of the cases do not allow a party to eliminate some, but not all, of the allegations of a single count through a motion for summary judgment.   Nevertheless, some courts have found that the language of Practice Book § 17–51 ․ authorizes the entry of summary judgment on part of a claim within a single count provided final judgment can be entered with respect to that part of the claim and it can be severed from the remainder of the claim ․ The Connecticut Supreme Court recently noted, but did not resolve, this split of authority.  Liberty Mutual Ins. Co. v. Lone Star Industries, Inc., 290 Conn. 767, 809 n. 41 (2009).  “This court has previously determined that a party cannot isolate a single issue ․ and resolve it on a motion for summary judgment ․ Consequently, in the absence of appellate authority to the contrary, this court will adhere to its past rulings and determine that it cannot grant summary judgment as to the allegations within a count.”  (Citations omitted;  internal quotation marks omitted.)   Estrada v. Stamford Board of Education, Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No. CV 06 5002313 (November 19, 2010, Tobin, J.).   Accordingly, because factual allegations at issue within the plaintiff's CUTPA claim are not expressly preempted, this court cannot grant summary judgment as to the plaintiff's single count on the ground of express preemption.

b. Field Preemption

The questions remain as to whether the plaintiff's CUTPA claim is subject to field preemption or conflict preemption.   Although Congress gave the Secretary of the Department of Education extensive authority to promulgate regulations to enforce the HEA;  see § 1082(a)(1);  that delegation of power does not mean that Congress intended to occupy the entire regulatory field and to leave no room for state law.  “The fact that the Secretary has promulgated extensive regulations pursuant to the HEA does not, standing alone, persuade us to the contrary.   The existence of comprehensive federal regulations that fail to occupy the regulatory field do not, by their mere existence, preempt non-conflicting state law.”  College Loan Corp. v. SLM Corp., supra, 396 F.3d 598.   Furthermore, the fact that the HEA contains provisions that expressly preempt state law, as mentioned above, precludes a finding that the HEA occupies the regulatory field and leaves no room for state law.   See Cliff v. Payco General American Credits, Inc., 363 F.3d 1113, 1126 (11th Cir.2004).   “When Congress has considered the issue of pre-emption and has included in the enacted legislation a provision explicitly addressing that issue, and when that provision provides a reliable indicium of congressional intent with respect to state authority ․ there is no need to infer congressional intent to pre-empt state laws from the substantive provisions of the legislation ․ Such reasoning is a variant of the familiar principle of expressio unius est exclusio alterius:  Congress' enactment of a provision defining the preemptive reach of a statute implies that matters beyond that reach are not pre-empted.”  (Quoting Cipollone v. Liggett Group, Inc., 505 U.S. 504, 517, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992);  internal quotation marks omitted.)  Id. Finally, “consumer protection is a field traditionally regulated by the states ․ and the Supreme Court has ․ reaffirmed that there is a presumption against finding implied preemption of state law in these fields.  (Citation omitted.)  Id., 1125.   Accordingly, the defendant is not entitled to summary judgment on the ground of field preemption of the plaintiff's CUTPA claim.

c. Conflict Preemption

Under the final preemption analysis, involving conflict preemption, it is necessary to look at the statutory purposes underlying the two causes of action that the defendant alleges conflict with each other:  CUTPA and the HEA. CUTPA is a statutory cause of action under General Statutes § 42–110b(a), which provides:  “No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”   “CUTPA provides a private cause of action to [a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a [prohibited] method, act or practice ․” (Internal quotation marks omitted.)  Harris v. Bradley Memorial Hospital and Health Center, 296 Conn. 315, 351, (2010).   Therefore, a CUTPA claim challenges the way that a person or entity conducts specific practices.   CUTPA also relies on federal rulings and cases to govern what specific conduct is prohibited under the statute.  “CUTPA was enacted to provide a cause of action for plaintiffs harmed by acts of unfair or deceptive business practices or acts, or unfair competition ․ The CUTPA statute ³ requires the court to look to the Federal Trade Commission for guidance in construing the intent of the state legislature in determining what conduct is prohibited ․ Federal Trade Commission ․ rulings and cases under the Federal Trade Commission Act ․ serve as a lodestar for interpretation of the open-ended language of CUTPA.”   (Citation omitted;  internal quotation marks omitted.)   Fisher v. Yale University, Superior Court, judicial district of New Haven, Docket No. CV 044003207 (April 3, 2006, Munro, J.) (41 Conn. L. Rptr. 137, 140).   Therefore, federal law plays a role in the interpretation of CUTPA.

The statutory purposes of FFELP are delineated in 20 U.S.C. § 1071(a)(1) and include “encouraging states and non-profit organizations to make loans to students for post-secondary education, providing loans to those students who might not otherwise have access to funds, paying a portion of the interest accruing on student loans, and guaranteeing lenders against losses.”   College Loan Corp. v. SLM Corp., supra, 396 F.3d 597.   Nevertheless, the federal circuits are not in complete agreement over the intent of Congress behind the HEA. For instance, in Chae, the court held that the plaintiff's state law claims were subject to conflict preemption by the HEA. The court reasoned that “Congress intended to subject FFELP participants to uniform federal law and regulations”;  Chae v. SLM Corp., supra, 593 F.3d 947;  and that “subjecting the federal regulatory standards to the potentially conflicting standards of fifty states on contract and consumer protection principles would stand as a severe obstacle to the effective promotion of the funding of student loans.”  Id., 950.   Conversely, in College Loan, the court was “unable to confirm that the creation of ‘uniformity,’ ․ was actually an important goal of the HEA.” College Loan Corp. v. SLM Corp., supra, 396 F.3d 597.   The court added that “neither the district court nor the parties have explained how these statutory purposes [of FFELP] would be compromised by a lender ․ pursuing breach of contract or tort claims against other lenders or servicers.”  Id.

This court takes the position of College Loan and concludes that enforcement of CUTPA is not an obstacle to the achievement of the objectives of the HEA. If Congress intended that uniformity be a goal of the HEA, and FFELP in particular, then it easily could have stated that objective in § 1071(a)(1).   Furthermore, parties should be able to comply with both CUTPA and the HEA since each statute serves different purposes and has different objectives, as discussed above.   Moreover, given the fact that CUTPA is based on federal law through the Federal Trade Commission Act, it is unlikely that a party would be unable to comply simultaneously with the HEA and CUTPA, two products of federal law.   See English v. General Electric Co., 496 U.S. 72, 90, 110 S.Ct. 2270, 110 L.Ed.2d 65 (1990) (“[P]re-emption is ordinarily not to be implied absent an actual conflict ․ The teaching of this Court's decisions ․ enjoin[s] seeking out conflicts between state and federal regulation where none clearly exists”) (citation omitted;  internal quotation marks omitted).   In short, because uniformity is not mentioned as a goal of the HEA in § 1071(a)(1), because CUTPA and the HEA serve different objectives and because CUTPA and the HEA are both derived from federal law, CUTPA is not an obstacle to the achievement of the objectives of the HEA and parties should be able to comply with both statutes.   Accordingly, the defendant is not entitled to summary judgment on the ground of conflict preemption of the plaintiff's CUTPA claim.

3. CUTPA Claim

Having established that the plaintiff's CUTPA claim is not entirely preempted by the HEA, the court can now turn to the merits of the plaintiff's CUTPA claim.   In determining whether a practice is unfair within the meaning of § 42–110b(a), courts look to the criteria set out in the cigarette rule by the federal trade commission:

“(1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers, [competitors or other business persons] ․ All three criteria do not need to be satisfied to support a finding of unfairness.   A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.”  (Internal quotation marks omitted.)   Harris v. Bradley Memorial Hospital and Health Center, supra, 296 Conn. 350–51.

Although plaintiff has argued in her briefing and at oral argument that Sallie Mae's responses to her EHDR application were not in accordance with Department of Education regulations, plaintiff did not allege the first prong of the cigarette rule (offense against public policy as established by a federal regulation) in her complaint and expressly disclaimed any reliance on the first prong at oral argument.   Plaintiff's case then is based only on allegations of unfairness under the second prong (a practice which is immoral, unethical, oppressive, or unscrupulous) and the third prong (a practice causing substantial injury to consumers).   Plaintiff has not met her initial burden of showing the absence of any issue of material fact such that she is entitled to judgment as a matter of law as to her non-preempted claims that defendant purposefully delayed the processing of her December 2007 economic deferment request in order to drive up late fees and “refused to accept income information supplied by [the plaintiff]” that complied with § 682.210(s)(6)(vi).”   To satisfy the initial burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact.   As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent.  Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, (2008).

The plaintiff argues that she suffered substantial injury from the defendant's acts in that she supplied all of the required information to the defendant for her deferment request and that the defendant refused to accept that information, causing her student loans to be defaulted.   The defendant responds that the plaintiff's consolidation loan already had been granted five years of forbearance, that the loan had been in repayment status as of January 21, 2008 and the plaintiff had received warnings for months from the defendant regarding the impending default of her loan before the loan actually defaulted, and that the plaintiff continuously failed to provide the defendant with fully completed deferment request forms or the evidence that is required by federal law, satisfactory to the defendant, of her monthly income.   At its core, the parties' arguments and their evidence centers on whether the plaintiff's deferment requests were complete and whether the defendant improperly denied these requests.

It is undisputed that plaintiff's EHDR application was her request for an initial period of economic deferment, as contrasted with a request for a subsequent period of deferment.   Dept. Of Education Regulation, 34 C.F.R. § 682.210(s)(6) spells out six categories of hardship or other entitlement to an economic hardship deferment, “if the borrower provides documentation satisfactory to the lender showing that the borrower is within any of [those six] categories ․ The regulations then go on to require the lender to require the borrower to submit certain evidence with the EHDR request.  Section 682.210(s)(6)(viii) provides that “[f]or an initial period of deferment ․ the lender must require the borrower to submit evidence showing the amount of borrower's monthly income.”  Section 682.210(s)(6)(ix) provides that for a subsequent period of deferment “the lender must require the borrower to submit evidence showing the amount of the borrower's monthly income or a copy of the borrower's most recently filed Federal income tax return.  (Emphasis added.)   This would seem to imply that a lender could refuse to accept an application for an initial period of deferment which is accompanied only by a copy of the applicant's most recently filed tax return, because the tax return option is only mentioned in the section regarding subsequent periods of deferment.   But that implication fades away when one goes on to § 682.210(s)(6)(x) which says:  “For purposes of paragraph (s)(6) of this section [which presumably would include both subsection (s)(6)(viii) and (s)(6)(ix) ], a borrower's monthly income is the gross amount of income received by the borrower from employment and from other sources, or one-twelfth of the borrower's adjusted gross income as recorded on the borrower's most recently filed Federal Income tax return.”   Stringing subsections (viii) and (x) together plaintiff makes a plausible argument that the submission of her 2006 tax return to Sallie Mae in seeking an initial period of deferment in the period December 2007 through April 2008, she was in compliance with the Department of Education regulations and defendant wrongfully insisted on other verification of her monthly income.   But the problem with that argument is that those subsections go to the nature of the evidence that Sallie Mae must require the applicant to submit.   Section 682.210(s)(6) still permits Sallie Mae to grant a deferment only if the evidence submitted is satisfactory to show that the borrower is within one of the six categories of entitlement.   The plaintiff in her EHDR forms checked the box for category (s)(6)(iv) which compares a full-time worker-applicant's monthly income to her Federal education debt burden, the minimum wage rate of the Fair Labor Standards Act, and the poverty line determined in accordance with the Community Service Block Grant Act. Those criteria are expressed in the present tense (“Is working full time ․”;  “has a Federal education debt burden that equals or exceeds ․ “;  is less than 220% ․” etc.).   The clear implication is that, if Sallie Mae finds the required evidence less than satisfactory, it can withhold judgment on the application pending receipt of other evidence which is more timely or more relevant than the initially required evidence of monthly income.

Plaintiff has withdrawn her Supplemental Memorandum which included her own affidavit of August 2, 2011.   She has submitted her motion for summary judgment strictly on the wording of the three evidentiary subsections of the federal regulations, copies of her EHDR requests, and the undisputed fact that defendant received with her applications a copy of her 2006 tax return, a copy of which is submitted.   From this evidence she claims that Sallie Mae wrongfully asked for a more recent tax return to see if plaintiff fit into her claimed category of entitlement at the time of application.   Plaintiff has submitted absolutely nothing of the “satisfactory proof” aspect of her application.   Particularly in a case such as this where plaintiff is not claiming the first prong of the cigarette rule for a violation of or offense to the public policy established by a regulation or even the “penumbra” of a regulation ⁴ the scope of plaintiff's submission is too narrow and limited to entitle her to judgment under CUTPA as a matter of law.   Even if she has shown a technical violation of subsection (viii) as read in conjunction with “subsection (x), it would be a triable issue of fact for the court or jury at a full trial on the merits, considering the broader scope of the application process, to determine if the defendant's conduct was immoral, unethical, oppressive, or unscrupulous or a practice that caused the plaintiff substantial consumer injury which is not outweighed by any countervailing benefits to consumers which the consumers could not have reasonably avoided.⁵  The plaintiff virtually concedes the existence of a CUTPA issue for the finder of fact, saying in her memorandum in support of this motion, at p. 12:  “The question before this court is whether or not Sallie Mae's conduct of failing to enroll Dr. Brooks in to EHD when it was in possession of all information to verify that she qualified under 34 C.F.R. 682.210(s)(6)(iv) was immoral, unethical, oppressive, or unscrupulous.   There seems to be no bright line test.   If the violation was intentional, the act may very well meet this prong.   If mere negligence, it may not.”   The plaintiff therefore has failed to meet the initial burden of a party' moving for summary judgment.

In this case, the defendant Sallie Mae has also moved for summary judgment.   In support of that motion it submits the signed and sworn affidavit of James Austin, who attests that the “[p]laintiff's 2006 Federal income tax return was unsatisfactory to Sallie Mae, and was insufficient evidence of Plaintiff's monthly income in late 2007 and early 2008.”   Under the regulations, the defendant was mandated to require the plaintiff to submit her most recently filed tax return (for the year 2006) but not required to accept that tax return as the sole evidence of plaintiff's monthly income in support of her economic deferment request under one of the six categories of entitlement.   Just as the plaintiff focused entirely on the evidentiary aspects of the application process without consideration of the “satisfactory documentation” requirement, defendant has focused almost entirely on the “satisfactory documentation” aspect with only scant reference to the evidentiary rules.   In fact defendant totally ignores and makes no mention of § 682.210(s)(6)(x) which makes the most recently filed tax return option available for any EHDR application, whether initial or subsequent.   On the facts submitted by defendant, plaintiff's CUTPA claim does not fail as a matter of law.   Simply because the defendant exercised its discretion under § 682.210(s)(6) in refusing to accept the plaintiff's 2006 federal income tax return as sole evidence does not eliminate all genuine issues of material fact as to a second and/or third prong CUTPA violation on the part of the defendant.   Construing the evidence most favorably to the plaintiff, as previously mentioned, a fact finder might find that defendant's conduct was in violation of subsection (viii) of the regulation read in conjunction with subsection (x), or, even if there was not an actual violation of the regulation, that the conduct of the defendant was under the circumstances immoral, unethical, oppressive, or unscrupulous or caused a substantial consumer injury which could not reasonably have been avoided by the consumer.   Furthermore the defendant's refusal to accept the plaintiff's 2006 federal income tax return is only one of several factual allegations that the plaintiff pleads as part of her CUTPA claim.⁶  The plaintiff further alleges that the defendant “purposefully delayed the processing of her December 2007 [economic deferment request] in order to drive up late fees.”   This factual allegation creates a genuine issue of material fact remains as to whether the defendant's conduct was unfair, immoral, unethical, oppressive and unscrupulous or caused substantial injury to the plaintiff.

The defendant argues that negligent acts are not sufficient to form the basis of a CUTPA claim and that its actions, as alleged by the plaintiff, amount to no more than negligence.   Nevertheless, the court has held that acts of negligence can be the basis of a CUTPA claim so long as those negligent acts satisfy the cigarette rule.   Briere v. Waters, Superior Court, judicial district of Windham, Docket No. CV 95 0052402 (March 21, 1996, Sferrazza, J.) (18 Conn. L. Rptr. 631, 632) (“While acts of negligence can be the basis of a legitimate CUTPA claim, those negligent acts must still satisfy the criteria set forth in the “cigarette rule.”  A–G Foods, Inc v. Pepperidge Farms, Inc., 216 Conn. 200, 215 (1990)).   See also Ulbrich v. Groth, Superior Court, judicial district of Waterbury, Docket No. CV X06 08 4016022 (May 19, 2010, Stevens, J.) (“[A] CUTPA violation need not involve fraud on the part of the violator ․ Even an innocent misrepresentation may underlie a CUTPA claim”) (citations omitted;  internal quotation marks omitted).  “[T]he first prong, by itself, is insufficient to support a CUTPA violation, at least when the underlying claim is grounded solely in negligence.”   Wilkinson v. Alco Investments VII, LLC, Superior Court, judicial district of Middlesex, Docket No. CV 03 0102226 (May 26, 2005, Aurigemma, J.).   Therefore, the plaintiff's CUTPA claim is not necessarily barred even if her allegations amount to no more than mere negligence.   Accordingly, the plaintiff's CUTPA claim should be decided by a trier of fact to determine whether the plaintiff's allegations satisfy the cigarette rule.

The defendant, like the plaintiff, has failed to meet the initial burden of a moving party to demonstrate the absence of any issue of material fact such that the movant is entitled to judgment as a matter of law, and to make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact.

Conclusion

For the foregoing reasons, the plaintiff's motion for summary judgment, and the defendant's cross-motion should deny the plaintiff's motion for summary judgment and the defendant's motion for summary judgment are each denied.

Alfred J. Jennings, Jr.

Judge Trial Referee

FOOTNOTES

FN1. Connecticut has not addressed the issue of whether the HEA preempts CUTPA claims.   See Brooks v. Sallie Mae, Inc., supra, Superior Court, Docket No. CV 09 6002530 (January 4, 2011, Adams, J.) (in striking two of the defendant's three special defenses, stressing that the court “has not made a legal finding that the plaintiff's CUTPA cause of action is preempted by the Higher Education Act”)..  FN1. Connecticut has not addressed the issue of whether the HEA preempts CUTPA claims.   See Brooks v. Sallie Mae, Inc., supra, Superior Court, Docket No. CV 09 6002530 (January 4, 2011, Adams, J.) (in striking two of the defendant's three special defenses, stressing that the court “has not made a legal finding that the plaintiff's CUTPA cause of action is preempted by the Higher Education Act”).

FN2. Section 1098(g) of HEA is entitled “Exemption from State disclosure requirements” and provides:  “Loans 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..  FN2. Section 1098(g) of HEA is entitled “Exemption from State disclosure requirements” and provides:  “Loans 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.

FN3. CUTPA (Conn.Gen.Stat. § 42–110b(b)) provides:  “It is the intent of the legislature that, in construing subsection (a) of this section, the commissioner and the courts of this state shall be guided by interpretations given by the Federal Trade Commission and the federal courts ․ as from time to time amended.”.  FN3. CUTPA (Conn.Gen.Stat. § 42–110b(b)) provides:  “It is the intent of the legislature that, in construing subsection (a) of this section, the commissioner and the courts of this state shall be guided by interpretations given by the Federal Trade Commission and the federal courts ․ as from time to time amended.”

FN4. See Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80, 105–06 (1992), where the Supreme Court stated the first prong of the cigarette rule:  “whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law or otherwise—whether, in other words, it is within at least the penumbra of some common law, statutory or other established concept of unfairness.”.  FN4. See Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80, 105–06 (1992), where the Supreme Court stated the first prong of the cigarette rule:  “whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law or otherwise—whether, in other words, it is within at least the penumbra of some common law, statutory or other established concept of unfairness.”

FN5. Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 592 (1995).   With respect to the “reasonable avoidance” part of the third prong, the plaintiff here has submitted nothing about why she would not have completed, filed, and produced a copy of her 2007 tax return which fell due on April 15, 2008 during the period that the parties were in communication regarding plaintiff's EHDR application..  FN5. Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 592 (1995).   With respect to the “reasonable avoidance” part of the third prong, the plaintiff here has submitted nothing about why she would not have completed, filed, and produced a copy of her 2007 tax return which fell due on April 15, 2008 during the period that the parties were in communication regarding plaintiff's EHDR application.

FN6. As discussed above, however, some of these factual allegations are expressly preempted by the HEA..  FN6. As discussed above, however, some of these factual allegations are expressly preempted by the HEA.

Jennings, Alfred J., J.T.R.