FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHARLES STEPHAN LIMA, No. 17-16299
Plaintiff-Appellant,
D.C. No.
v. 1:15-cv-00242-KSC
UNITED STATES DEPARTMENT
OF EDUCATION, OPINION
Defendant,
and
EDUCATIONAL CREDIT
MANAGEMENT CORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Hawaii
Kevin S. Chang, Magistrate Judge, Presiding
Argued and Submitted October 22, 2019
Honolulu, Hawaii
Filed December 18, 2019
Before: Susan P. Graber, Milan D. Smith, Jr., and
Paul J. Watford, Circuit Judges.
Opinion by Judge Graber
2 LIMA V. EDUC. CREDIT MANAGEMENT CORP.
SUMMARY*
Debt Collection
The panel affirmed the district court’s summary judgment
in favor of the defendant on claims under the Fair Debt
Collection Practices Act and the Due Process Clause.
Defendant, a nonprofit guaranty agency, caused an offset
against plaintiff’s Social Security benefits, to recover on a
judgment it had obtained by assignment after plaintiff
defaulted on his student loans. Under the Higher Education
Act, student loans are guaranteed by guaranty agencies,
which receive guarantees from the United States.
The panel held that, under the FDCPA’s definition of a
debt collector, defendant regularly collected or attempted to
collect debts asserted to be owed or due another. Defendant
was not collecting a debt for its own account, but rather was
collecting a debt for the United States. Nonetheless,
defendant fulfilled the criteria of the fiduciary exception
because it had a broader fiduciary role with respect to
plaintiff’s debt than merely collecting the debt, and its
collection activity was incidental to its fiduciary obligation to
the Department of Education. Accordingly, defendant was
not a debt collector under the FDCPA.
Assuming without deciding that defendant was a state
actor, the panel held that defendant did not violate plaintiff’s
procedural due process rights because it provided plaintiff
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
LIMA V. EDUC. CREDIT MANAGEMENT CORP. 3
with notice of the debt, of defendant’s intention to seek a
Treasury offset against plaintiff’s Social Security benefits,
and of the means by which plaintiff could respond.
COUNSEL
Amani S. Floyd (argued) and George C. Harris, Morrison &
Foerster LLP, San Francisco, California, for Plaintiff-
Appellant.
Troy A. Gunderman (argued), ECMC Shared Services
Comp., LLC, Minneapolis, Minnesota; Theodore D. C.
Young, Cades Schutte LLP, Honolulu, Hawaii; for
Defendant-Appellee.
OPINION
GRABER, Circuit Judge:
Defendant Education Management Credit Corporation
caused an offset against Plaintiff Charles Lima’s Social
Security benefits, to recover on a judgment obtained after
Plaintiff defaulted on his student loans. Plaintiff filed a civil
action alleging, among other things, violations of the Fair
Debt Collection Practices Act and the Fifth Amendment’s
Due Process Clause. The district court granted summary
judgment to Defendant. We affirm.
4 LIMA V. EDUC. CREDIT MANAGEMENT CORP.
BACKGROUND
A. Statutory Framework
The Higher Education Act of 1965 (“Act”) established the
Federal Family Education Loan Program (“Loan Program”),
which the Department of Education (“DOE”) administers.
Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028, 1030 (9th
Cir. 2009). Under the Act, lenders provide loans to students
or their parents to help finance higher education. Typically,
those loans are guaranteed by guaranty agencies, which are
“[s]tate or private nonprofit organization[s]” that have
agreements with the Secretary of Education to administer the
Loan Program. 34 C.F.R. §§ 682.200, 682.401(a). Those
agencies, in turn, receive guarantees from the United States.
Guaranty agencies, therefore, operate as intermediaries
between the student-loan lender and the United States. Rowe,
559 F.3d at 1030.
If a borrower defaults on a student loan, the lender must
try to obtain repayment from the borrower. If the lender is
unsuccessful, it can file a claim with the guaranty agency and
be repaid the outstanding balance of the loan. In that
situation, the guaranty agency is assigned the loan from the
lender. The guaranty agency, in turn, is repaid by the DOE in
exchange for undertaking “due diligence” activities to attempt
to collect the debt from the borrower. Id. Those “due
diligence” activities include “locating the defaulting
borrower, offsetting federal and state tax refunds . . .,
initiating administrative garnishment proceedings . . ., and
filing suit against the borrower.” Id. (citing 34 C.F.R.
§ 682.410(b)(6)(i)–(iv)).
LIMA V. EDUC. CREDIT MANAGEMENT CORP. 5
B. Factual Background
Plaintiff obtained three student loans, totaling $8,500, in
the 1970s. The New York State Higher Education Services
Corporation (“New York Corporation”) acted as guarantor for
those loans under the Act. Plaintiff defaulted on the loans in
1980. In 1991, New York Corporation obtained a judgment
against Plaintiff for approximately $14,000, representing both
principal and interest.
Defendant is a nonprofit guaranty agency under the Act.
In 2008, the DOE and Defendant agreed that Defendant
would take assignment of certain Loan Program accounts in
which judgments had been obtained by other guaranty
agencies.
Pursuant to that agreement, New York Corporation
assigned its judgment against Plaintiff to Defendant in 2009.
Through that assignment, Defendant assumed all right, title,
and interest in the judgment, and Defendant became obligated
to satisfy any guaranty responsibilities remaining on the
underlying debt. In August 2009, Defendant notified
Plaintiff, by mail, that the DOE held a claim against him,
which it intended to collect by having the United States
Department of the Treasury (“Treasury”) offset “all payment
streams authorized by law,” including his Social Security
benefits. Plaintiff did not respond.
In August 2012, Treasury began offsetting Plaintiff’s
Social Security benefits by about $200 per month. Plaintiff
then contacted Defendant and asserted that he did not receive
the 2009 letter and that the debt already had been satisfied.
Between August 2012 and June 2015, Treasury garnished
6 LIMA V. EDUC. CREDIT MANAGEMENT CORP.
approximately $6,900 from Plaintiff’s Social Security
benefits.
In 2015, Plaintiff filed this action against Defendant.1 As
relevant here, Plaintiff claimed violations of the Fair Debt
Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692; the
Fifth Amendment’s Due Process Clause; and state law. The
district court granted summary judgment to Defendant on all
federal claims. The court held that Defendant is not subject
to the FDCPA because Defendant is not a “debt collector.”
The court then held that Defendant is not subject to the Due
Process Clause because Defendant is not a state actor.
Finally, the district court declined to exercise supplemental
jurisdiction over the state-law claims. Plaintiff timely
appealed.
STANDARDS OF REVIEW
We review de novo the district court’s grant of summary
judgment, and we may affirm on any ground supported by the
record. Chemehuevi Indian Tribe v. Newsom, 919 F.3d 1148,
1150–51 (9th Cir. 2019). We review for abuse of discretion
the district court’s decision to decline supplemental
jurisdiction. Oliver v. Ralphs Grocery Co., 654 F.3d 903, 911
(9th Cir. 2011).
1
Plaintiff also named the DOE as a defendant, but the parties
dismissed the DOE by stipulation.
LIMA V. EDUC. CREDIT MANAGEMENT CORP. 7
DISCUSSION
A. Fair Debt Collection Practices Act2
The FDCPA “authorizes private civil actions against debt
collectors who engage in certain prohibited practices.”
Rotkiske v. Klemm, No. 18-328, slip op. at 1 (U.S. Dec. 10,
2019). Plaintiff seeks statutory damages under § 1692k(a) of
the FDCPA. To obtain damages, Plaintiff first must establish
that Defendant is a “debt collector.” As relevant here, the
FDCPA defines a “debt collector” as “any person . . . who
regularly collects or attempts to collect, directly or indirectly,
debts owed or due or asserted to be owed or due another.” 15
U.S.C. § 1692a(6). Defendant asserts that it is not a debt
collector under that definition. Defendant also argues that,
even if it meets that statutory definition, it is not a debt
collector because it fulfills the criteria of the fiduciary
exception, § 1692a(6)(F).
We hold that Defendant “regularly collects or attempts to
collect” debts “asserted to be owed or due another.”
Nonetheless, we affirm the district court’s grant of summary
judgment because Defendant’s collection activities were
“incidental to a bona fide fiduciary obligation.” 15 U.S.C.
§ 1692a(6)(F)(i).
1. Defendant “regularly” attempts to collect debts
“owed” to another.
In Henson v. Santander Consumer USA Inc., 137 S. Ct.
1718 (2017), the Supreme Court held that a defendant who
2
The relevant provisions of the FDCPA are included in Appendix A.
8 LIMA V. EDUC. CREDIT MANAGEMENT CORP.
purchased a defaulted loan and sought to collect the debt was
not a “debt collector.” The Court explained that, when
applying the “regularly collects” definition of “debt
collector,” “[a]ll that matters is whether the target of the
lawsuit regularly seeks to collect debts for its own account or
does so for ‘another.’” Id. at 1721. Because the Henson
defendant “purchased defaulted debt for its own account,” the
Court held that the defendant was not a “debt collector.” Id.
at 1724 (emphasis added).
Whether a lender in Defendant’s position is seeking to
collect a debt for its “own account” is a question of first
impression in our circuit. To answer that question, Henson
requires us to focus on who ultimately would receive the
payments on the debt being collected. See, e.g., Infante v.
Law Office of Joseph Onwuteaka, P.C., 735 F. App’x 839,
842–43 (5th Cir. 2018) (per curiam) (unpublished) (holding
that, because a limited liability corporation has a distinct legal
identity, a lawyer who was collecting debt on behalf of an
LLC that he owned was a debt collector);3 Bank of N.Y.
Mellon Tr. Co. N.A. v. Henderson, 862 F.3d 29, 34 (D.C. Cir.
2017) (holding that a bank was not a debt collector because
the debt was owed to the bank).
Here, Plaintiff’s debt is owed, or asserted to be owed, to
the United States. The monies obtained from Plaintiff’s
Social Security benefits through Treasury offset belong to the
Treasury, not to Defendant. Instead, the money moves
between federal agencies, and Defendant is notified of the
transfers only for record-keeping purposes. And, even if
3
Federal Rule of Appellate Procedure 32.1(a) and United States
Court of Appeals for the Fifth Circuit Rule of Appellate Procedure 28.7
permit the citation of unpublished judicial decisions.
LIMA V. EDUC. CREDIT MANAGEMENT CORP. 9
Plaintiff had paid the debt, or part of it, the money would
constitute property of the United States and would end up in
an account owned and controlled by the United States. 20
U.S.C. § 1072(g)(1); 34 C.F.R. § 682.410(a)(1). Though
Defendant possesses all right, title, and interest in the
judgment against Plaintiff, Defendant was not collecting a
debt for its “own account.” Instead, Defendant was collecting
a debt for the United States.
The record evidences that Defendant “regularly” attempts
to collect debts owed, or asserted to be owed, to the United
States. Under the applicable agreement, Defendant was
obligated to receive accounts like Plaintiff’s for a one-year
period, and Defendant received a long list of such accounts.
See Garrett v. Derbes, 110 F.3d 317, 318 (5th Cir. 1997) (per
curiam) (holding that “a person who, during a single nine-
month period, attempts to collect debts owed another by 639
different individuals ‘regularly’ attempts to collect debts
owed another, and thus is a ‘debt collector’ under
§ 1692a(6)”).
2. Defendant’s collection activity is incidental to a bona
fide fiduciary obligation.
The FDCPA exempts from the definition of debt collector
“any person collecting or attempting to collect any debt . . .
owed or due another to the extent such activity . . . is
incidental to a bona fide fiduciary obligation.” 15 U.S.C.
§ 1692a(6)(F) (emphasis added). For the fiduciary exception
to apply, Defendant must have a “fiduciary obligation” and
Defendant’s collection activity must be “incidental to” that
fiduciary obligation. Rowe, 559 F.3d at 1032. Plaintiff
concedes, and we agree, that Defendant owes a fiduciary
obligation to the DOE.
10 LIMA V. EDUC. CREDIT MANAGEMENT CORP.
The “incidental to” requirement prevents fiduciaries
“whose sole or primary function is to collect a debt on behalf
of the entity to whom the fiduciary obligation is owed” from
escaping FDCPA coverage. Id. at 1034. Accordingly, to
qualify for the fiduciary exception, Defendant’s collection
activity “must not be ‘central to’ [its] fiduciary relationship.”
Id.
In Rowe, we reversed the dismissal of a complaint for
failure to state a claim under the FDCPA. The plaintiff
claimed that the defendant guaranty agency’s “sole function
was to take assignment of the loan from [another agency] and
to act as a collection agent.” Id. at 1035 (emphasis added).
We held that, because the only role alleged to have been
played by the guaranty agency was to collect the debt, the
fiduciary exception did not apply. We distinguished between
that alleged collection-only activity and cases in which an
agency guarantees a loan and then attempts to collect on the
loan, holding that the former type of collection activity “is not
‘incidental to’ [the defendant]’s fiduciary duty to the DOE.”
Id.
This case differs from Rowe because Defendant had a
broader role than merely collecting a debt. When Defendant
took the assignment of Plaintiff’s judgment account,
Defendant took on all outstanding guaranty obligations. For
example, Defendant is obligated to release its judgment
against Plaintiff if Plaintiff’s debt is consolidated,
rehabilitated, or repaid. Defendant also is obligated to
maintain records, report to the National Student Loan
Database System, and properly administer its operating fund.
Those obligations are not illusory, even if Defendant has not
had to perform some of them. A fiduciary relationship is not
characterized only by what activity has happened to date.
LIMA V. EDUC. CREDIT MANAGEMENT CORP. 11
Fiduciary relationships naturally include reasonably
foreseeable responsibilities that may arise in the future.4
DOE’s regulations place Defendant on standby should such
fiduciary activities become necessary. Accordingly, we
conclude that Defendant had a broader fiduciary role with
respect to Plaintiff’s debt than merely collecting the debt.
Therefore, Defendant’s collection activity was “incidental to”
its fiduciary obligation to the DOE.
B. Due Process
Plaintiff alleges that Defendant violated his procedural
due process rights by “arbitrarily and maliciously” garnishing
his benefits. Plaintiff seeks a declaratory judgment,
injunctive relief, and damages.
To obtain declarative and injunctive relief,5 Plaintiff must
establish: (1) that he suffered a “constitutional deprivation”
that was “caused by the exercise of some right or privilege
created by the State or by a rule of conduct imposed by the
[S]tate or by a person for whom the State is responsible,” and
(2) that “the party charged with the deprivation [is] a person
4
By way of analogy, lawyers owe various fiduciary duties that may
be dormant during their representation of clients. For example, lawyers
must inform their clients of settlement offers. If an opposing party never
tenders a settlement offer, a lawyer cannot apprise the client of an offer.
Yet, even if the lawyer has not received a settlement offer, the lawyer has
a present fiduciary obligation to the client.
5
Plaintiff cannot recover damages because Defendant is a private
corporation, and actions under Bivens v. Six Unknown Named Agents of
Federal Bureau of Narcotics, 403 U.S. 388 (1971), cannot proceed against
private entities. Corr. Servs. Corp. v. Malesko, 534 U.S. 61, 66, 74
(2001).
12 LIMA V. EDUC. CREDIT MANAGEMENT CORP.
who may fairly be said to be a state actor.” Lugar v.
Edmondson Oil Co., 457 U.S. 922, 937 (1982). Here,
Plaintiff challenges only the district court’s conclusion that
Defendant is not a state actor.
Assuming, without deciding, that Defendant is a state
actor, we affirm the summary judgment in Defendant’s favor
because Defendant did not violate Plaintiff’s due process
rights. Defendant provided Plaintiff with notice of the debt,
of Defendant’s intention to seek a Treasury offset against
Plaintiff’s Social Security benefits, and the means by which
Plaintiff could respond. See United States v. Alisal Water
Corp., 431 F.3d 643, 657 (9th Cir. 2005) (“At its core, due
process requires that a party have adequate notice and
opportunity to be heard.”). The notice was sent to the proper
address and was, therefore, “reasonably calculated” to ensure
that Plaintiff received it. Poursina v. U.S. Citizenship &
Immigration Servs., 936 F.3d 868, 876 (9th Cir. 2019)
(quoting Farhoud v. INS, 122 F.3d 794, 796 (9th Cir. 1997);
see also Mullane v. Cent. Hanover Bank & Trust Co., 339
U.S. 306, 318 (1950) (“[W]ithin the limits of practicability
notice must be such as is reasonably calculated to reach
interested parties.”). And Defendant’s misstatement, that
Plaintiff’s debt arose from a single loan worth $8,500 rather
than three loans totaling $8,500, does not violate due process.
See Bank of America, NT & SA v. PENGWIN, 175 F.3d 1109,
1119 (9th Cir. 1999) (holding that a foreclosure notice that
stated the wrong location of a vessel and that failed to
mention fishing rights did not violate due process because the
notice was nonetheless “reasonably calculated” to apprise
interested parties of the action and afford them an opportunity
to object).
LIMA V. EDUC. CREDIT MANAGEMENT CORP. 13
C. Supplemental jurisdiction
Because no federal claims remain, the district court did
not abuse its discretion by declining to exercise supplemental
jurisdiction over Plaintiff’s state-law claim. See Whalen v.
McMullen, 907 F.3d 1139, 1153 (9th Cir. 2018) (holding that
the district court did not abuse its discretion when it declined
to exercise supplemental jurisdiction over a state-law claim
when the plaintiff’s only federal claim was dismissed on
summary judgment).
AFFIRMED.
14 LIMA V. EDUC. CREDIT MANAGEMENT CORP.
APPENDIX A
Relevant provisions of the FDCPA.
15 U.S.C. § 1692a(6):
The term “debt collector” means any person
who uses any instrumentality of interstate
commerce or the mails in any business the
principal purpose of which is the collection of
any debts, or who regularly collects or
attempts to collect, directly or indirectly,
debts owed or due or asserted to be owed or
due another. Notwithstanding the exclusion
provided by clause (F) of the last sentence of
this paragraph, the term includes any creditor
who, in the process of collecting his own
debts, uses any name other than his own
which would indicate that a third person is
collecting or attempting to collect such debts.
For the purpose of section 1692f(6) of this
title, such term also includes any person who
uses any instrumentality of interstate
commerce or the mails in any business the
principal purpose of which is the enforcement
of security interests. The term does not
include--
(A) any officer or employee of a creditor
while, in the name of the creditor,
collecting debts for such creditor;
LIMA V. EDUC. CREDIT MANAGEMENT CORP. 15
(B) any person while acting as a debt
collector for another person, both of
whom are related by common ownership
or affiliated by corporate control, if the
person acting as a debt collector does so
only for persons to whom it is so related
or affiliated and if the principal business
of such person is not the collection of
debts;
(C) any officer or employee of the United
States or any State to the extent that
collecting or attempting to collect any
debt is in the performance of his official
duties;
(D) any person while serving or
attempting to serve legal process on any
other person in connection with the
judicial enforcement of any debt;
(E) any nonprofit organization which, at
the request of consumers, performs bona
fide consumer credit counseling and
assists consumers in the liquidation of
their debts by receiving payments from
such consumers and distributing such
amounts to creditors; and
(F) 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 (i) is incidental to a bona fide
fiduciary obligation or a bona fide escrow
16 LIMA V. EDUC. CREDIT MANAGEMENT CORP.
arrangement; (ii) concerns a debt which
was originated by such person; (iii)
concerns a debt which was not in default
at the time it was obtained by such person;
or (iv) concerns a debt obtained by such
person as a secured party in a commercial
credit transaction involving the creditor.
15 U.S.C. § 1692k(a):
Except as otherwise provided by this section,
any debt collector who fails to comply with
any provision of this subchapter with respect
to any person is liable to such person in an
amount equal to the sum of--
(1) any actual damage sustained by such
person as a result of such failure;
(2)(A) in the case of any action by an
individual, such additional damages as the
court may allow, but not exceeding
$1,000; or
(B) in the case of a class action, (i) such
amount for each named plaintiff as could
be recovered under subparagraph (A), and
(ii) such amount as the court may allow
for all other class members, without
regard to a minimum individual recovery,
not to exceed the lesser of $500,000 or 1
per centum of the net worth of the debt
collector; and
LIMA V. EDUC. CREDIT MANAGEMENT CORP. 17
(3) in the case of any successful action to
enforce the foregoing liability, the costs of
the action, together with a reasonable
attorney’s fee as determined by the court.
On a finding by the court that an action
under this section was brought in bad faith
and for the purpose of harassment, the
court may award to the defendant
attorney’s fees reasonable in relation to
the work expended and costs.