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Henderson v. United Student Aid Funds, Inc.

United States Court of Appeals, Ninth Circuit

March 22, 2019

Shyriaa Henderson, on behalf of herself, and all others similarly situated, Plaintiff-Appellant,
v.
United Student Aid Funds, Inc., DBA USA Funds, Defendant-Appellee.

          Argued and Submitted October 10, 2018 San Francisco, California

          Appeal from the United States District Court for the Southern District of California D.C. No. 3:13-cv-01845-JLS-BLM Janis L. Sammartino, District Judge, Presiding

          Alexander Glenn Tievsky (argued), Roger Perlstadt, and Ryan D. Andrews, Edelson PC, Chicago, Illinois; Kas Gallucci, Alexis Wood, and Ronald A. Marron, Law Offices of Ronald A. Marron, San Diego, California; for Plaintiff-Appellant.

          Lisa Marie Simonetti (argued), Vedder Price (CA) LLP, Los Angeles, California; Bryan K. Clark, Vedder Price P.C., Chicago, Illinois; for Defendant-Appellee.

          Before: Dorothy W. Nelson, William A. Fletcher, and Jay S. Bybee, Circuit Judges.

         SUMMARY[*]

         Telephone Consumer Protection Act

         The panel reversed the district court's grant of summary judgment in favor of the defendant, the owner of the plaintiff's student loans, and remanded for further proceedings in an action under the Telephone Consumer Protection Act.

         The panel held that a reasonable jury could hold the defendant vicariously liable for alleged TCPA violations by debt collectors. The defendant hired a student loan servicer, which hired the debt collectors. The panel held that the defendant was not per se vicariously liable under FCC orders. Under federal common law, however, there were genuine issues of material fact as to whether the defendant ratified the debt collectors' calling practices and had a principal-agent relationship with the debt collectors.

         Dissenting, Judge Bybee agreed that the FCC orders did not create per se liability. He wrote that, assuming ratification may create an agency relationship, he disagreed with the majority that there was a material issue of fact as to whether the defendant ratified the debt collectors' conduct or granted the debt collectors implied actual authority to violate the TCPA.

          OPINION

          D.W. NELSON, CIRCUIT JUDGE

         OVERVIEW

         Shyriaa Henderson appeals the district's order granting summary judgment in favor of Defendant-Appellee United Student Aids Funds, Inc. (USA Funds). The district court incorrectly held that a reasonable jury could not hold USA Funds vicariously liable for the debt collectors' alleged Telephone Consumer Protection Act (TCPA) violations. Accordingly, we REVERSE and REMAND.

         BACKGROUND

         Henderson applied for and received a loan to attend university through the Federal Family Education Loan Program (FFELP). After experiencing some financial difficulty, she stopped paying back her loans. Then, five different debt collection companies started calling her about the money she had not paid back. Henderson received prerecorded messages many times in short intervals on a phone number she neither provided in connection with her student loans nor consented to be called on. Henderson contends this pattern shows that the companies were combining the use of skip tracers and auto dialers.

         Navient Solutions, Inc., a servicer of student loans, hired these debt collectors to collect on unpaid loans on behalf of USA Funds, which owned Henderson's loans. USA Funds operates under a government program by which it guarantees student loans made by private lenders and then takes ownership of those loans if a student-borrower defaults.

         Although USA Funds owns billions of dollars in student loan debt, it does not interact with the borrowers directly once they stop paying back their loans. Instead, it hires companies, like Navient, to service its loans, including debt collection. In turn, Navient hires debt collectors to collect on defaulted loans. The debt collectors handle many aspects of collecting and repayment, including making calls to borrowers, setting up payment plans, granting temporary delays, and accepting loan payments.

         While USA Funds did not have a contractual relationship with the debt collectors or any day-to-day dealings with them, USA Funds had access to Navient's daily, weekly, and monthly reports tracking the debt collectors' performance. Similarly, USA Funds could, and did, review debt collectors' calling notes when it had "an issue" with a debt collector's calling practices. USA Funds also regularly reviewed Navient's operations and performance, including its regulatory compliance, or lack thereof. Though USA Funds' service agreement with Navient did not give USA Funds the ability to fire debt collectors, USA Funds could ask Navient to replace underperforming collectors and could have fired Navient if it did not comply.

         USA Funds also conducted an annual audit of the debt collectors. The audit focused on the various repayment programs that borrowers had a right to use in the FFELP. TCPA compliance was not one of the FFELP audit parameters. However, during each of USA Funds' audits from 2000, 2009, and 2010, debt collectors called borrowers on phone numbers that they did not consent to be called on, prompting USA Funds to note "improper collection practices" and to recommend "corrective action." Navient, however, continued to use these debt collectors, and USA Funds did not object when the same debt collectors were used in the following years. Moreover, USA Funds was aware that debt collectors handling USA Funds' loans had been sued regarding their calling practices but USA Funds did nothing to ensure TCPA compliance.

         Henderson sued USA Funds for alleged TCPA violations related to the collection of her student loan debt. Though Henderson also sued Navient and several debt collectors, those defendants were dismissed for lack of personal jurisdiction.

         STANDARD OF REVIEW

         We "review a district court's grant of summary judgment de novo" to determine "whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law." Oklevueha Native Am. Church Of Haw., Inc. v. Lynch, 828 F.3d 1012, 1015 (9th Cir. 2016). We view the facts "as a whole and in the light most favorable to the party opposing the motion." Pavoni v. Chrysler Grp., LLC, 789 F.3d 1095, 1098 (9th Cir. 2015). "An issue of material fact is genuine 'if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

         DISCUSSION

         Henderson challenges the district court order granting USA Funds' summary judgment motion on two grounds. First, Henderson argues that under an FCC order, USA Funds is per se vicariously liable for the debt collectors' TCPA violations. Second, she argues that USA Funds is similarly liable under the federal common law agency principles of ratification and implied actual authority. Henderson's theory of liability is that USA Funds has a principal-agent relationship with the debt collectors and that a court may hold it liable for their TCPA violations. We agree. We, therefore, reverse the district court's summary judgment order because there are "genuine issues of material fact" as to whether USA Funds ratified the debt collectors calling practices. We remand for further proceedings.

         I. TCPA Liability

         Under the TCPA, it is unlawful to "to make any call (other than . . . with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice . . . to any telephone number assigned to a . . . cellular telephone service." 47 U.S.C. § 227(b)(1)(A)(iii). Telemarketers, debt collectors, and others obtain phone numbers consumers did not consent to be called on through skip tracing.[1] Because consumers did provide these callers with their phone numbers, the consumers have not given "prior express consent" to be called on those numbers. Therefore, if the numbers were also auto dialed, the calls violated the TCPA. 47 U.S.C. § 227(b)(1)(A)(iii).

         Debt collectors that auto dialed Henderson on a phone number she did not provide in connection with her student loan would be liable under this section. For USA Funds to be liable under this section, Henderson must show that there is an agency relationship between USA Funds and these liable debt collectors.

         II. FCC Orders Do Not Create Per Se TCPA Liability

         Henderson argues that USA Funds is per se vicariously liable for the debt collectors' alleged TCPA violations. She bases this conclusion on her analysis of In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 23 F.C.C. Rcd. 559, 565 (2008) ("2008 FCC Order"), which states, "[c]alls placed by a third party collector on behalf of that creditor are treated as if the creditor itself placed the call." Because Congress has not acted directly on this issue and because the 2008 FCC Order is a fully adjudicated declaratory ruling, the panel must afford it Chevron deference. See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 843 (1984). Though the 2008 FCC Order implies a creditor could be liable for a debt collector's TCPA violations, the Order does not make such liability per se or automatic, as Henderson argues. To the contrary, in a 2013 order, the FCC clarified that a court should determine whether a ...


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