LYONS v. GREAT LAKES EDUCATIONAL LOAN SERVICES, INC.

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

SIENNA LYONS, et al.,

No. 1:21-cv-01047

Plaintiffs,

v. OPINION

GREAT LAKES EDUCATIONAL LOAN

SERVICES, INC., et al.,

Defendants.

VICTORIA GALLAGHER, et al.,

No. 1:21-cv-01052

Plaintiffs,

v. OPINION

NAVIENT CORPORATION, et al.,

Defendants.

GARY STROCKBINE, et al.,

No. 1:21-cv-09096

Plaintiffs,

v. OPINION

PENNSYLVANIA HIGHER EDUCATION

ASSISTANCE AGENCY a/k/a PHEAA d/b/a

FEDLOAN SERVICING,

Defendant.

APPEARANCES:

NOAH AXLER

Anderson Kill, P.C.

1760 Market St.

Suite 600

Philadelphia, PA 19103

DAVID M. CEDAR

Williams Cedar, LLC

8 Kings Highway West

Suite B

Haddonfield, NJ 08033

On behalf of Plaintiffs Sienna Lyons, Danielle Labella, Saundra O’Donnell, Victoria

Gallagher, Megan O’Donnell, Gary Strockbine, Sean Maher, and Rachel Ann Philbin.

JONATHAN SPELLS KRAUSE and

CORINNE SAMLER BRENNAN

Klehr Harrison Harvey Branzburg, LLP

1000 Lincoln Drive East

Suite 201

Marlton, NJ 08053

On behalf of Defendants Great Lakes Educational Loan Services, Inc., Nelnet Diversified

Solutions, LLC, Nelnet Servicing, LLC, and Nelnet, Inc.

DAVID G. MURPHY and

DIANE A. BETTINO

Reed Smith LLP

506 Carnegie Center

Suite 300

Princeton, NJ 08540

On behalf of Defendants Navient Corporation and Navient Solutions LLC.

STEPHEN M. ORLOFSKY

Blank Rome LLP

300 Carnegie Center

Suite 220

Princeton, NJ 08540

BLAIR A. GEROLD

Blank Rome LLP

1 Logan Square

Philadelphia, PA 19103

On behalf of Defendant Pennsylvania Higher Education Assistance Agency a/k/a PHEAA

d/b/a FedLoan Servicing.

O’HEARN, District Judge.

Before the Court is the Joint Motion to Dismiss in three separately filed actions (Case No.

21-01047 (“Lyons”), ECF No. 33; Case No. 21-01052 (“Gallagher”), ECF No. 23; Case No. 21-

09096 (“Strockbine”), ECF No. 11) by Defendants Navient Corporation and Navient Solutions

LLC (collectively, “Navient”), Great Lakes Educational Loan Services, Inc. (“Great Lakes”),

Nelnet Diversified Solutions, LLC, Nelnet Servicing, LLC, and Nelnet, Inc. (collectively,

“Nelnet”), and Pennsylvania Higher Education Assistance Agency a/k/a PHEAA d/b/a FedLoan

Servicing (“PHEAA,” and together with Navient, Great Lakes, and Nelnet, the “Defendants”)

seeking to dismiss the Class Action Complaints (Lyons, ECF No. 1; Gallagher, ECF No. 1;

Strockbine, ECF No. 1) filed by Sienna Lyons, Danielle Labella, Saundra O’Donnell (together, the

“Lyons Plaintiffs”), Victoria Gallagher and Megan O’Donnell (together, the “Gallagher

Plaintiffs”), and Gary Strockbine, Sean Maher, and Rachel Ann Philbin (the “Strockbine

Plaintiffs,” and together with the Lyons Plaintiffs and the Gallagher Plaintiffs, the “Plaintiffs”).

The Court did not hear oral argument pursuant to Local Civil Rule 78.1. For the reasons

discussed herein, the Court GRANTS the Joint Motion to Dismiss.

I. BACKGROUND

These cases are three separately-filed putative class actions brought by several federal

student loan borrowers against multiple federal student loan servicers alleging that the loan

servicers wrongfully allocated the Plaintiffs’ payments made on their federal student loans after

the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was passed in March

2020.

A. Procedural Background

On January 22, 2021, the Lyons Plaintiffs filed a class action complaint (Lyons, ECF No.

1) (the “Lyons Complaint”) against Defendants Great Lakes and Nelnet asserting claims for breach

of contract, tortious interference with a business relationship, negligent misrepresentation, unjust

enrichment, negligence, violations of the New Jersey Consumer Fraud Act (the “NJCFA”) and

seeking declaratory judgment and injunctive relief (herein referred to as the “Lyons Case”).

On January 22, 2021, the Gallagher Plaintiffs filed a class action complaint (Gallagher,

ECF No. 1) (the “Gallagher Complaint”) asserting the same claims against the Navient Defendants

(the “Gallagher Case”) as were asserted in the Lyons Case.

On April 13, 2021, the Strockbine Plaintiffs filed a class action complaint (Strockbine, ECF

No. 1) (the “Strockbine Complaint,” and together with the Lyons Complaint and the Gallagher

Complaint, the “Complaints”) against PHEAA (the “Strockbine Case”) asserting the same claims

as those in the Lyons and Gallagher Cases, and also asserting claims for violation of the

Pennsylvania Unfair Trade Practices and Consumer Protection Law (the “UTPCPL”).

Given the overlapping allegations and issues presented in all three cases and the

Defendants’ expressed intention to each file a motion to dismiss in each case, the Court entered a

briefing schedule (Lyons, ECF No. 28; Gallagher, ECF No. 22; Strockbine, ECF No. 7) whereby

Defendants filed a Joint Motion to Dismiss (Lyons, ECF No. 33; Gallagher, ECF No. 23;

Strockbine, ECF No. 11), and Plaintiffs filed a Joint Response in Opposition (Lyons, ECF No. 38;

Gallagher, ECF No. 27; Strockbine, ECF No. 15), to which Defendants filed a Joint Reply (Lyons,

ECF No. 41; Gallagher, ECF No. 30; Strockbine, ECF No. 16).1

1 Because the allegations in the Complaints are substantially similar and the parties submitted

joint briefings, all citations to the record will refer to the docket in the Strockbine Case (Case No.

21-09096), unless otherwise noted, to avoid lengthy citations to the records in all three cases.

In their Joint Motion to Dismiss, Defendants argue that the Complaints must be dismissed

under Federal Rule of Civil Procedure (“Rule”) 12(b)(1) because Plaintiffs lack Article III standing

as they have not suffered an injury in fact, and therefore, this Court lacks subject matter

jurisdiction. (ECF No. 11 at 9–22). Defendants also argue that Plaintiffs have failed to state

cognizable claims under Rule 12(b)(6) (id. at 22–43) and moved to strike Plaintiffs’ class

allegations under Rule 12(f) and Rule 23(d)(1)(D) (id. at 44–50).

Having considered the parties’ arguments, this Court concludes that Plaintiffs lack Article

III standing to bring their claims, as they have not suffered an injury in fact, and any alleged future

injury is too speculative to satisfy the jurisdictional requirements placed on this Court by Article

III of the Constitution. Therefore, the Court dismisses the Complaints without prejudice.

B. Factual Background

1. Administration of the Federal Student Loan Program

Under the Higher Education Act (“HEA”), the U.S. Department of Education (the “DOE”)

has the authority to issue a variety of federal loans and grants to student borrowers. See 20 U.S.C.

§§ 1071–1099c. In the 1990s, the federal government began originating loans under the William

D. Ford Direct Loan Program, see 20 U.S.C. §§ 1087a–1087j, and in 2008, the DOE began

purchasing student loans from non-federal entities through the Federal Family Education Loan

Program, see (ECF No. 1, ¶ 14). The Federal Student Aid (“FSA”) office, a part of the DOE, is

responsible for managing these and other federal loan programs authorized under the HEA. (Id.).

Congress directed the DOE to enter into contracts for the “servicing” of these federal loans

and “such other aspects of the direct student loan program as the Secretary determines are

necessary.” 20 U.S.C. § 1087f. In 2009, the DOE awarded each Defendant a contract to service

federal loans (the “Servicing Contracts”) with five-year terms, each of which has been extended

numerous times. (ECF No. 1, ¶¶ 15–16, 22). The Servicing Contracts require the Defendants to

correctly record the borrowers’ interest rates, calculate borrowers’ balances, and appropriately

apply payments to borrowers’ accounts, among other obligations. (Id., ¶ 29). The DOE pays each

Defendant a dynamic monthly servicing fee calculated based on a number of factors including the

number of borrower accounts serviced by each Defendant and the repayment status of each

borrower account. (See id., ¶¶ 24–27, Ex. A, § B.13).

2. The CARES Act Places Federal Student Loans in Administrative Forbearance

In March 2020, in response to the COVID-19 pandemic, Congress passed the CARES Act,

which granted temporary relief to federal student loan borrowers by placing their loans in

administrative forbearance2 until September 30, 2020, meaning that all payments due for certain

student loans held by the DOE were suspended, interest on these loans would not accrue after

March 13, 2020, and the interest rates on these loans were temporarily reduced to 0% (the “CARES

Act Forbearance Period”).3 Before the CARES Act Forbearance Period expired on September 30,

2020, former President Trump directed the Secretary of Education to extend the administrative

forbearance until December 31, 2020, by Presidential Memorandum.4 Since that first extension,

2 34 C.F.R. § 685.205(a) (2020) (“‘Forbearance’ means permitting the temporary cessation of

payments, allowing an extension of time for making payments, or temporarily accepting smaller

payments than previously scheduled.”); 34 C.F.R. § 685.205(b) (2020) (“Administrative

forbearance. In certain circumstances, the Secretary grants forbearance without requiring

documentation from the borrower . . . due to a . . . local or national emergency.”).

3 CARES Act, Pub. L. No. 116-136, 134 Stat. 281, §§ 3513(a)–(b) (20 U.S.C. § 1001 et seq.).

4 Memorandum on Continued Student Loan Payment Relief During the COVID-19 Pandemic,

85 Fed. Reg. 49585 (Aug. 8, 2020), https://www.govinfo.gov/content/pkg/DCPD-

202000590/pdf/DCPD-202000590.pdf.

the CARES Act Forbearance Period has been extended several times, most recently until May 1,

2022.5

Because federal student loan borrowers are not required to make loan payments during the

CARES Act Forbearance Period, these payments are considered “prepayments” under federal

regulation, and are to be applied to repay a borrowers’ federal student loans in the following

manner: “first to any accrued charges and collection costs, then to any outstanding interest, and

then to outstanding principal.” 34 C.F.R. §§ 685.211(a)(1)–(2) (2014). Although this provision is

clear about how a prepayment should be allocated on amounts due under a single federal loan, the

regulation does not specify how a single prepayment should be allocated across student loans when

a student loan borrower has more than one loan.

3. The Plaintiffs’ Prepayments and Allegations Against Defendants

The Plaintiffs all made prepayments during various months falling within the CARES Act

Forbearance Period, with the first prepayment by a Plaintiff being made in March 2020, and the

last in February 2021.6 Without providing much detail about how student loan borrowers make

5 Press Release, U.S. Dep’t of Educ., Biden-Harris Administration Extends Student Loan

Pause through May 1, 2022 (Dec. 22, 2021), https://www.ed.gov/news/press-releases/biden-

harris-administration-extends-student-loan-pause-through-may-1-2022. Although the newest

extension of the CARES Act Forbearance Period had not been issued prior to the Complaints being

filed and the Joint Motion to Dismiss being fully briefed, the Court may take judicial notice of

such fact. Fed. R. Evid. 201(b); see also In re Synchronoss Secs. Litig., 705 F. Supp. 2d 367, 390

n.34 (D.N.J. 2010).

6 The Plaintiffs made prepayments in the following manner: Sienna Lyons made monthly

prepayments from July through September 2020 (Lyons, ECF No. 1, ¶¶ 84–92); Danielle Labella

made monthly prepayments in March 2020 and from May through September 2020 (id. at 95–

108); Saundra O’Donnell made monthly prepayments from April through September 2020 (id. at

110–124); Victoria Gallagher made a prepayment in August 2020 (Gallagher, ECF No. 1, ¶¶ 74–

78); Megan O’Donnell made monthly prepayments from March through June 2020 and in August

2020 (id. at ¶¶ 80–92); Gary Strockbine made prepayments in January and February 2021

(Strockbine, ECF No. 1, ¶¶ 74–78); Sean Maher made monthly prepayments from March through

July 2020 (id. at ¶¶ 82–92); and Rachel Ann Philbin made prepayments in March, May, June,

August, and September 2020 (id. at ¶¶ 96–106).

prepayments, Plaintiffs acknowledge in their class allegations and elsewhere in a footnote that

each Plaintiff had the option to select a “custom payment allocation,” whereby a Plaintiff’s

prepayment would be applied to the student loan of the Plaintiff’s choice. (ECF No. 1, ¶¶ 94 n.9,

110–12). With the exception of Strockbine Plaintiff Sean Maher’s May 2020 prepayment (id., ¶

94 n.9), none of the Plaintiffs chose a “custom payment allocation” indicating the loan to which

the prepayment should be applied. (Lyons, ECF No. 1, ¶¶ 83–124; Gallagher, ECF No. 1, ¶¶ 73–

92; Strockbine, ECF No. 1, ¶¶ 72–108). The Plaintiffs allege that the Defendants wrongfully

applied their prepayments proportionally across the various loans held by each Plaintiff, instead of

allocating them to the loans with the highest interest rates. (Id.). Plaintiffs allege that this

proportional payment allocation method violates federal and state law.

An example of Defendants’ proportional payment allocation method is instructive.

Strockbine Plaintiff Rachel Ann Philbin made a $500 prepayment toward her federal student loans

on May 28, 2020, during the CARES Act Forbearance Period and did not select how this

prepayment should be applied. (ECF No. 1, ¶ 99). At the time of her prepayment, she had no

outstanding interest that had accrued prior to March 13, 2020, so her $500 prepayment was

allocated proportionally among the principals of her five federal student loans as follows:

Loan Disbursement Applied to Principal Applied to Interest Interest Rate

Date Assigned Prior to

CARES Act

9/27/2012 $76.02 $0.00 3.150%

8/25/2013 $92.85 $0.00 3.610%

8/19/2014 $113.17 $0.00 4.410%

8/16/2015 $117.82 $0.00 4.040%

1/3/2017 $100.14 $0.00 3.510%

(Id. at ¶ 100). She asserts that PHEAA violated federal law when it proportionally allocated her

prepayment, as PHEAA should have allocated her $500 prepayment entirely to her loan that had

been assigned a 4.410% interest rate—the highest rate—prior to the CARES ACT Forbearance

Period. (Id. at ¶¶ 107–109).

In asserting that Defendants violated federal law, Plaintiffs rely on former President

Obama’s Presidential Memorandum issued in March 2015, which stated its intent to create a

“Student Aid Bill of Rights,” and directed that “As soon as practicable, the Secretary [of

Education] shall direct all Federal Direct student loan servicers to apply prepayments to loans with

the highest interest rate . . . unless otherwise instructed by borrowers.”7 The Strockbine Plaintiffs

also rely on guidance issued by the FSA (the “FSA Guidance”) on February 17, 2021 (after the

Lyons and Gallagher Complaints were filed), which “expressly requires” student loan servicers,

including Defendants, to “allocate any overpayments [or prepayments]8 to a borrower’s loans with

the highest interest rate first” using the interest rate that was assigned prior to the CARES Act

Forbearance Period for those prepayments where the borrower does not provide special

instructions indicating to which loan the prepayment should be applied. U.S. DEP’T OF EDUC.,

G3.21.01, FSA SERVICER GUIDANCE, OVERPAYMENT PROCESS – CARES ACT [hereinafter FSA

SERVICER GUIDANCE] (2021), (ECF No. 1 at 12).9

7 Student Aid Bill of Rights to Help Ensure Affordable Loan Repayment, 80 Fed Reg. 13473

(Mar. 13, 2015), https://www.federalregister.gov/documents/2015/03/13/2015-05933/student-aid-

bill-of-rights-to-help-ensure-affordable-loan-repayment.

8 The Complaints and the joint briefings refer to “prepayments” synonymously with

“overpayments,” and the Court finds the definitions of each to be substantially similar and

immaterial to its analysis. Compare 34 C.F.R. § 685.211(a)(2) (2014) (“If a borrower pays any

amount in excess of the amount due, the excess amount is a prepayment.”) with FSA SERVICER

GUIDANCE at 1 (“Overpayment: When a borrower makes a payment when none is due, or pays an

amount greater than the monthly payment amount.”).

9 The Court takes judicial notice of the full text of the guidance document, In re Synchronoss,

705 F. Supp. 2d at 390 n.34, and notes that the Strockbine Plaintiffs selectively quoted it, omitting

the opening portion which states: “There are no federal laws or regulations explicitly requiring

the allocation of borrower payments to the highest interest rate loan. Federal regulations instruct

only that payments must first be allocated to outstanding interest and fees, and then to principal.”

FSA SERVICER GUIDANCE at 1.

In asserting that Defendants violated New Jersey and Pennsylvania10 state law, Plaintiffs

rely on representations made on Defendants’ websites. The Lyons Plaintiffs assert that Great

Lakes’ and Nelnet’s websites advised borrowers that making payments during the CARES Act

Forbearance Period could help borrowers “save money in the long run,” and that Great Lakes e-

mailed borrowers advising them that making prepayments when the interest rates on their loans

were set to 0% would make “payments go farther toward reducing the principal balance of your

loan amount once any outstanding interest has been paid.” (Lyons, ECF No. 1, ¶¶ 62–65). The

Gallagher Plaintiffs allege that Navient provided similar advice on their website that making

prepayments could reduce the overall cost of a borrower’s loan. (Gallagher, ECF No. 1, ¶ 59). The

Strockbine Plaintiffs allege that PHEAA’s website which “was updated on April 2, 2021”

promised to allocate prepayments to the loan with the highest interest rate. (Strockbine, ECF No.

1, ¶¶ 60–61).

Plaintiffs allege that the “false and misleading statements regarding payment allocation”

on Defendants’ websites induced them to make prepayments, and that Defendants (i)

misrepresented how prepayments were applied to loans, (ii) made false and misleading statements

about interest capitalization, (iii) misrepresented the benefits gained by making prepayments, (iv)

created a likelihood of confusion or misunderstanding, and (v) purposefully failed to disclose

critical information to Plaintiffs regarding the repayment terms of their loans. (ECF No. 1, ¶¶ 183–

192).

Plaintiffs allege that Defendants’ proportional payment allocation method has resulted in

“unpaid interest added to the principal balance of loans along with amounts accrued as a result of

the capitalization of same” and “financial harm associated with lost progress towards loan payoff.”

10 Only the Strockbine Plaintiffs bring claims under Pennsylvania’s UTPCPL.

(Id., ¶ 127). Plaintiffs additionally make class action allegations pursuant to Rule 23 for other

individuals who made a prepayment during the CARES Act Forbearance Period without selecting

how the payment should be allocated and who have more than one federal student loan with

varying interest rates serviced by a Defendant. (Id. at 22–26).

II. LEGAL STANDARD

In their Joint Motion to Dismiss, Defendants argue under Rule 12(b)(1) that Plaintiffs fail

to bear their burden of establishing that the Court has subject matter jurisdiction because the

Complaints present no justiciable case or controversy. (ECF No. 11 at 1, 9–14). Defendants assert

that regardless of how Plaintiffs’ prepayments were allocated across their respective loans by the

Defendants, Plaintiffs cannot allege a cognizable injury to date as no interest is accruing; and

therefore, it would be impossible for Plaintiffs to have paid any additional amount in principal or

interest to date. (Id. at 10–11). Defendants argue that Plaintiffs’ alleged future injury, that they will

pay more in interest over the life of their loans, is too speculative and indefinite to confer Article

III standing at this moment. (Id. at 9–14).

In their Response in Opposition, Plaintiffs do not dispute that they have not yet paid any

interest on their loans that accrued during the CARES Act Forbearance Period, but argue that

Defendants’ “serial misapplication” of prepayments violates federal and state law, which is enough

to establish “concrete injuries in fact” sufficient to establish Article III standing. (ECF No. 15 at

17). Plaintiffs additionally assert that the Defendants’ conduct “will result in borrowers paying

more over the life of their loans,” and that this future harm is sufficiently imminent since interest

will again begin to accrue on the Plaintiffs’ student loans once the CARES Act Forbearance Period

ends. (Id.). Plaintiffs further argue that they are entitled to attorneys’ fees under the catalyst theory

because they brought about a change in Defendants’ conduct making them “prevailing parties.”

(Id. at 41–52).

A. Scope of the Rule 12(b)(1) Analysis

“A challenge to subject matter jurisdiction under Rule 12(b)(1) may be either a facial or a

factual attack.” Davis v. Wells Fargo, 824 F.3d 333, 346 (3d Cir. 2016). A facial attack “concerns

‘an alleged pleading deficiency’ whereas a factual attack concerns ‘the actual failure of [a

plaintiff’s] claims to comport [factually] with the jurisdictional prerequisites.’” CNA v. United

States, 535 F.3d 132, 139 (3d Cir. 2008) (quoting United States ex rel. Atkinson v. Pa. Shipbuilding

Co., 473 F.3d 506, 514 (3d Cir. 2007)). Submitting a signed declaration or otherwise presenting

competing jurisdictional facts presents a factual challenge. Davis, 824 F.3d at 346. When a party

presents a factual challenge to the Court’s jurisdiction, a court is not limited to the pleadings in

resolving the challenge. See United States ex rel. Customs Fraud Investigations , LLC. v. Victaulic

Co., 839 F.3d 281, 251 (3d Cir. 2002) (“When a Rule 12(b)(1) motion is evaluated as a ‘factual

attack’ on the Court's subject matter jurisdiction, the court may consider evidence outside the

pleadings in evaluating that attack.”).

B. Legal Standard for Article III Standing

Pursuant to Article III of the Constitution, this Court may only exercise jurisdiction to

resolve “Cases” and “Controversies.” U.S. CONST. art. III, § 2, cl. 1. “Thus, federal courts can

entertain actions only if they present live disputes, ones in which both sides have a personal stake.”

Hartnett v. Pa. State Educ. Ass’n, 963 F.3d 301, 305 (3d Cir. 2020). As the party invoking federal

jurisdiction at the start of litigation, the plaintiff bears the burden of establishing Article III

standing. Id. To establish standing, a plaintiff must show (1) “that he [or she] suffered an injury in

fact that is concrete, particularized, and actual or imminent;” (2) “that the injury was likely caused

by the defendant;” and (3) “that the injury would likely be redressed by judicial relief.” TransUnion

LLC v. Ramirez, 141 S. Ct. 2190, 2203 (2021) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555,

560–61 (1992)). “If ‘the plaintiff does not claim to have suffered an injury that the defendant

caused and the court can remedy, there is no case or controversy for the federal court to resolve.’”

TransUnion, 141 S. Ct. at 2203 (quoting Casillas v. Madison Ave. Assocs., Inc., 926 F.3d 329, 333

(7th Cir. 2019)).

“To allege injury in fact sufficiently, a plaintiff must claim ‘that he or she suffered an

invasion of a legally protected interest that is concrete and particularized and actual or imminent,

not conjectural or hypothetical.’” Cottrell v. Alcon Lab’ys, 874 F.3d 154, 162–63 (3d Cir. 2017)

(quoting Spokeo, Inc. v. Robins, 578 U.S. 330, 339 (2016)). “Typically, a plaintiff’s allegations of

financial harm will easily satisfy each of these components [of injury in fact], as financial harm is

a ‘classic’ and ‘paradigmatic form[]’ of injury in fact.” Cottrell, 874 F.3d at 162 (3d Cir. 2017)

(quoting Danvers Motor Co. v. Ford Motor Co., 432 F.3d 286, 291, 293 (3d Cir. 2005)).

However, “there is a significant difference between . . . an actual harm that has occurred”

and “a mere risk of future harm.” TransUnion, 141 S. Ct. at 2211. The Supreme Court has

repeatedly held that a risk of future injury must be “certainly impending” to constitute injury in

fact, and that allegations of “possible future injury” are not sufficient. Clapper v. Amnesty Int’l

USA, 568 U.S. 398, 409 (2013) (emphasis in original); Whitmore v. Arkansas, 495 U.S. 149, 158

(1990). “Although imminence is concededly a somewhat elastic concept, it cannot be stretched

beyond its purpose, which is to ensure that the alleged injury is not too speculative for Article III

purposes.” Lujan, 504 U.S. at 564 n.2. Of particular importance in this case, imminency “has been

stretched beyond the breaking point” where a “plaintiff alleges only an injury at some indefinite

future time, and the acts necessary to make the injury happen are at least partly within the plaintiff's

own control.” Id.

When a plaintiff fails to establish Article III standing, the court lacks subject matter

jurisdiction, Finkelman v. Nat’l Football League, 810 F.3d 187 (3d Cir. 2016), and dismissal is

required, Goodmann v. People’s Bank, 209 F. App’x 111, 113 (3d Cir. 2006); Fed. R. Civ. P.

12(b)(1). Where the named plaintiff fails to establish Article III standing, the putative class action

must be dismissed for lack of subject matter jurisdiction. Finkelman, 810 F.3d at 195.

III. ANALYSIS

In their Complaints, Plaintiffs allege that Defendants’ misallocation of their prepayments

has resulted in two injuries: (i) “unpaid interest added to the principal balance of loans along with

amounts accrued as a result of the capitalization of same” and (ii) “financial harm associated with

lost progress towards loan payoff.” (ECF No. 1, ¶ 127). Because the Court finds that Plaintiffs

have yet to suffer a cognizable injury, and any future harm is too speculative, Plaintiffs lack Article

III standing. The Court further concludes that they are not entitled to attorneys’ fees.

A. Plaintiffs Have Not Suffered a Cognizable Past or Present Injury

Plaintiffs cannot plausibly allege that they have suffered any economic harm because their

loans are now and have been continuously frozen in administrative forbearance during the CARES

Act Forbearance Period. Defendants correctly highlight that it would be impossible for any unpaid

interest to have been added to the Plaintiffs’ loan balances as no interest has been accruing on

Plaintiffs’ federal student loans while the interest rate has been set to 0% since March 2020. In

their Response in Opposition, Plaintiffs do not (and cannot) dispute that they have made no

payments on loan interest that accrued due to Defendants’ proportional payment allocation

method. Instead, Plaintiffs argue that Defendants’ alleged violation of federal and state law is

sufficient to establish Article III standing in itself. This is incorrect, as the Supreme Court has held

that “an injury in law is not an injury in fact” sufficient to confer Article III standing. TransUnion,

141 S. Ct. at 2205.

In TransUnion, the Supreme Court addressed “the Article III requirement that the

plaintiff’s injury in fact be ‘concrete’—that is, ‘real, and not abstract.’” Id. at 2204 (quoting

Spokeo, 578 U. S. at 340 (internal quotation marks omitted)). There, a class of consumers brought

a class action against the credit reporting agency TransUnion LLC under the Fair Credit Reporting

Act (“FCRA”) alleging that the agency failed to use reasonable measures to ensure the accuracy

of their credit files and instead maintained alerts in those files incorrectly designating the

consumers as “terrorists, drug traffickers, or serious criminals.” Id. at 2009. The class included

both members whose erroneously flagged credit reports had been disclosed to third party creditors,

and members whose misleading alerts in their credit files had not been disclosed to third parties.

Id. at 2210. After a jury returned a verdict for all class members, the Supreme Court reversed on

standing grounds with respect to those plaintiffs whose reports had not been disclosed because,

despite the statutory violation, these plaintiffs had not suffered a concrete injury. Id. The Court

stated: “Only those plaintiffs who have been concretely harmed by a defendant’s statutory

violation may sue that private defendant over that violation in federal court.” Id. at 2205 (emphasis

in original).11 Thus, even assuming Plaintiffs could establish a violation of the law, the Plaintiffs

in this case, like those in TransUnion, simply have no concrete harm sufficient to confer

standing—a statutory violation alone does not cut it.

11 The Plaintiffs cite Freedom from Religion Found. Inc v. New Kensington Arnold School

District, 832 F.3d 469, 473 (3d Cir. 2016), to support their assertion that a violation of federal and

state law in itself creates Article III standing. (Opp. Brief, ECF No. 15 at 17). However, Freedom

from Religion involves Article III standing in an action under the First Amendment’s

Establishment Clause, which presents a different factual and legal analysis under Article III than

presented in this case and thus is inapposite here.

While TransUnion addresses whether Congress may create constitutional standing for a

plaintiff to bring a claim in federal court alleging a federal statutory violation absent suffering a

concrete injury, it does not address the separate issue of whether a state legislature can elevate

harms to the status of Article III injuries in the context of diversity jurisdiction. See generally

TransUnion, 141 S. Ct. at 2204–05. This issue of whether a state legislature may create Article III

standing in federal court based on a state statutory violation absent a concrete injury from such

alleged violation “raises serious federalism concerns,” Finkelman, 810 F.3d at 196 n.65, yet

Plaintiffs cite no case law nor present any argument of how an alleged statutory violation of the

NJCFA or UTPCPL, assuming either even applies, may create constitutional Article III standing

absent a concrete injury, see (Opp. Brief, ECF No. 15 at 17).

Regardless, however, “[w]hatever the contours of Article III, the New Jersey Consumer

Fraud Act only permits a private plaintiff to sue when that plaintiff has suffered an ‘ascertainable

loss of moneys or property.’” Finkelman, 810 F.3d at 196 n.65 (quoting N.J. STAT. ANN. § 56:8–

19). Although the Court does not reach the merits of Plaintiffs’ claims, the Court nonetheless

observes that having failed to demonstrate an injury-in-fact in the constitutional standing analysis

under Article III, it is at least doubtful that Plaintiffs can establish statutory standing to bring an

NJCFA claim absent suffering a “real and measurable loss”—the kind of injury that New Jersey

law requires. See Thiedemann v. Mercedes-Benz USA, LLC, 872 A.2d 783, 794 (N.J. 2005) (“[A]

private [NJ]CFA plaintiff [must] demonstrate a real and measurable loss of property or moneys to

have [statutory] standing to pursue a [NJ]CFA action.”); N.J. STAT. ANN. § 56:8–19; see also

Finkelman, 810 F.3d at 196 n.65. Similarly, it is not clear to the Court that Plaintiffs have suffered

an “actual loss of money or property” to have statutory standing to bring a claim under

Pennsylvania’s UTPCPL. Benner v. Bank of Am., N.A., 917 F. Supp. 2d 338, 360 (E.D. Pa. 2013)

(“[T]he plain language of the statute indicate[s] an actual loss of money or property must have

occurred to state a cognizable UTPCPL claim.”); see also 73 PA. STAT. ANN. § 201–9.2 (requiring

a person to have suffered an “ascertainable loss of money or property” to bring a private action

under the UTPCPL).

Therefore, in absence of even any persuasive authority provided by Plaintiffs, the Court

declines to break new ground by extending the power to confer constitutional standing to state

legislatures when the Supreme Court has denied that same power to Congress and where it is not

evident to the Court that the Plaintiffs can state a claim under those state statutes. Accordingly,

without a concrete injury in fact that gives rise to Article III standing, Plaintiffs’ claims must be

dismissed for lack of standing.

B. Plaintiffs’ Alleged Future Injuries Are Too Speculative to Confer Article III

Standing and Are Not Imminent

Likewise, Plaintiffs’ alleged future injury is too speculative to give rise to Article III

standing. Plaintiffs’ alleged “lost progress towards loan payoff” is an alleged future injury—that

Defendants’ proportional payment allocation method “will result in borrowers paying more over

the life of their loans.” (Opp. Brief, ECF No. 15 at 16). Plaintiffs argue this future harm is

sufficiently imminent to confer Article III standing because interest will again begin to accrue on

the Plaintiffs’ student loans once the CARES Act Forbearance Period ends. (Id.). However, this

Court is not convinced that the alleged future injury will occur the moment that the CARES Act

Forbearance Period expires, and student loan interest again begins to accrue. As an initial matter,

given the continuing nature of the pandemic and the number of times the CARES Act has been

extended, the date when any interest may begin to accrue is indeterminate. Further, the future

injury would not materialize until the Plaintiffs have actually paid the interest that would not have

accrued but for Defendants’ proportional allocation of a Plaintiff’s prepayment across that

Plaintiff’s student loans.

Several cases cited by Defendants support this conclusion, albeit in a slightly different

context involving student loan servicers charged with mismanaging federal student loans under

the Public Student Loan Forgiveness (“PSLF”) program. The PSLF program provides loan

forgiveness to student loan borrowers that work in public service and make 120 on-time payments

towards repaying their student loans. 34 C.F.R. § 685.219 (2021). Numerous student loan

borrowers have brought suit against student loan servicers claiming they were wrongfully denied

access to the PSLF program. Courts have generally held that the plaintiff borrowers do not have

standing to sue until they have suffered the actual injury alleged: making more than 120 payments

while working in public service.

In Meenan v. Navient Corp., the U.S. District Court for the District of Arizona held that

the plaintiff student loan borrower would not have had Article III standing to bring suit until the

plaintiff’s injury arose and became concrete—i.e., once the plaintiff made more than 120 payments

towards repaying her student loans. No. 20-08122, 2020 WL 5057654, at *2 (D. Ariz. Aug. 27,

2020). The court denied the defendant loan servicer Navient’s motion to dismiss, which argued

the plaintiff’s claims were barred by the statute of limitations since the borrower became aware

years earlier that Navient had erroneously informed the plaintiff that her type of loans were eligible

for forgiveness and that she qualified for the PSLF program. Id. at *1. The court held that the

statute of limitations did not begin to run until the plaintiff’s injury arose and became concrete

when the plaintiff made her 121st payment, as an injury asserted years earlier would have been

considered too speculative to give rise to Article III standing. Id. at *3.

The U.S. District Court for the Central District of California likewise held that student loan

borrowers’ alleged injuries that they “will be required” to make more than the necessary 120

payments to obtain loan forgiveness under the PSLF program were hypothetical injuries that were

insufficient to confer standing. Winebarger v. Pa. Higher Educ. Assistance Agency, 411 F. Supp.

3d 1070, 1086 (C.D. Cal. 2019). The court noted that the plaintiffs may or may not make all of

their loan payments on time over the next five to seven years, they may not continue to work in

public service, or the defendant loan servicer PHEAA may correct any alleged wrongdoing. Id. at

1087. Therefore, the alleged future injury of paying more than required when repaying plaintiffs’

student loans was “wholly speculative and far too remote to confer standing.” Id.

Other district courts have held similarly. See Love v. Pa. Higher Educ. Assistance Agency,

No. 19-02387, 2020 WL 1545798, at *4–5 (N.D. Ga. Mar. 16, 2020) (holding plaintiff loan

borrowers did not have Article III standing to bring claims against defendant PHEAA for

negligence and breach of contract where plaintiffs alleged that PHEAA had incorrectly tallied

plaintiffs’ qualifying payments under the PSLF program because (i) plaintiffs had not yet made

120 payments and (ii) plaintiffs may not remain eligible for the program in the future created a

“speculative chain of possibilities”); Alexander v. Great Lakes Higher Educ. Corp, No. 17-00253,

slip op. at *12 (N.D. Fla. June 19, 2021) (holding that while plaintiff loan borrowers had alleged

sufficient facts to show misconduct on the part of loan servicer Great Lakes, those plaintiffs that

had not yet made sufficient payments to apply for PSLF loan forgiveness had not suffered an

Article III injury in fact, and any future injury was too speculative).

Like the plaintiffs in the above-referenced cases, Plaintiffs here allege that they will have

to pay more in the future to satisfy their outstanding federal student loans. While the student

borrower plaintiffs in the PSLF program alleged they would have to make more than 120 payments

to qualify for loan forgiveness due to those defendants’ conduct, Plaintiffs allege that they will

have to pay more in interest to fully satisfy their student loan debt due to Defendants’ proportional

payment allocation method. However, none of the Plaintiffs can say with certainty when student

loan interest may again begin to accrue, as the CARES Act Forbearance Period has been extended

numerous times since the original Complaints were filed, most recently until May 1, 2022.12

Additionally, no injury would materialize until Plaintiffs have to pay a single dollar towards

“wrongfully” accrued student loan interest—which could be years in the future. This “speculative

chain of possibilities” is the exact type of “hypothetical or abstract disputes” that federal courts

are prohibited from adjudicating under Article III of the Constitution. TransUnion, 141 S. Ct. at

2203.13

Further buttressing the conclusion that Plaintiffs’ alleged injury lacks immediacy,

Defendants submitted signed declarations along with their briefing from Nelnet, PHEAA, and

Great Lakes stating that all borrowers may contact their respective loan servicers to have the entire

amount of prepayments made during the CARES Act Forbearance Period fully refunded, (ECF

No. 11 at Ex. 4 ¶ 14, Ex. 5 ¶ 16, Ex. 6 ¶ 10), and PHEAA provides that borrowers may request to

12 Press Release, U.S. Dep’t of Educ., Biden-Harris Administration Extends Student Loan

Pause through May 1, 2022 (Dec. 22, 2021), https://www.ed.gov/news/press-releases/biden-

harris-administration-extends-student-loan-pause-through-may-1-2022.

13 The parties agree that the issues of standing and ripeness turn on the same question of

“whether the threat of future harm . . . is sufficiently immediate to constitute a cognizable injury,”

Free Speech Coal., Inc. v. Att’y Gen., 825 F.3d 149, 167 n. 15 (3d Cir. 2016), and if the Plaintiffs

do not have standing, the claims are also not ripe for judicial review. (ECF No. 11-1 at 14 n.5)

(ECF No. 15 at 20 n.16). Where the issue of standing and ripeness “boil down to the same

question” the Court may address both issues in tandem. ASAH v. N.J. Dep’t of Educ., 330 F. Supp.

3d 975, 1002 (D.N.J. 2018). Because the Plaintiffs lack Article III standing, their claims are also

not ripe for judicial review. Texas v. United States, 523 U.S. 296, 300 (1998) (“A claim is not ripe

for adjudication if it rests upon ‘contingent future events that may not occur as anticipated, or

indeed may not occur at all.’” (quoting Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568,

580–81 (1985))).

have prepayments reallocated to the borrower’s highest interest rate loan, (ECF No. 11 at Ex. 5 ¶

16). Nelnet asserts that it is has been allocating prepayments to borrowers’ highest interest rate

loans since before the CARES Act Forbearance Period began, (ECF No. 11 at Ex. 6, ¶8), and Great

Lakes has already reallocated all borrowers’ prepayments to each borrower’s highest interest rate

loan since June 2021 (ECF No. 16 at Ex. 9 ¶ 4). The declarations further state that this information

has been available to borrowers on PHEAA’s website since April 2020, (ECF No. 11 at Ex. 5 ¶

16), and on Nelnet’s website since May 2020, (id. at Ex. 6 ¶ 10).14 Because submitting signed

declarations or presenting competing jurisdictional facts presents a factual challenge to the Court’s

subject matter jurisdiction, Davis, 824 F.3d at 346, the Court may consider these affidavits, United

States ex rel. Customs Fraud Investigations, 839 F.3d at 251.

In Plaintiffs’ Response in Opposition, Plaintiffs do not dispute that Plaintiffs may contact

their respective Defendant student loan servicer to have their prepayments reallocated to their

highest interest rate loan or refunded. Plaintiffs instead cite Potts v. Johnson & Johnson Consumer

Inc., No. 20-10406, 2021 WL 2177386 (D.N.J. May 28, 2021), arguing that a refund offer does

not defeat Article III standing, (ECF No. 15 at 20), that any refund offer does not moot their claims,

(id. at 10), and any reallocation or offered reallocation was made in response to Plaintiffs’ cases,

making Plaintiffs “prevailing parties” entitled to attorneys’ fees, (id. at 41–51). The Court

addresses Plaintiffs’ argument for attorneys’ fees below, and does not address the parties’

mootness arguments because its injury-in-fact analysis is dispositive. The Court does not find Potts

instructive to its injury-in-fact analysis given the dissimilarity of the injuries alleged. The Potts

14 Navient did not submit a declaration, instead noting in a footnote that it was “planning to

implement changes to its allocation methodology.” (ECF No. 11 at 17 n.9). The Court’s analysis

regarding Plaintiffs’ control over alleged future harm is therefore narrowed to include only the

Lyons and Strockbine Plaintiffs.

plaintiffs did not allege future injuries as the Plaintiffs do here, but past physical injuries as well

as economic injuries, and the refund offer at issue was for the cost of cosmetic products alleged to

have caused those injuries. Potts, 2021 WL 2177386, at *5.

Despite Plaintiffs’ arguments to the contrary, the Court views the ability of Plaintiffs to

control the allocation of their prepayments (via either a refund to allocate per their wishes or via a

request to the Defendant to reallocate) to have “stretched beyond the breaking point” Article III’s

immediacy requirement because “the acts necessary to make the injury happen are at least partly

within the plaintiff’s own control.” Lujan, 504 U.S. at 564 n.2. The alleged future injury of paying

excess interest is certainly more than “partly” within the Plaintiffs’ own control, because a Plaintiff

may at any time contact their respective Defendant student loan servicer and request that their

prepayments be reallocated to their highest interest rate loan, avoiding any injury from ever

occurring. “[T]he underlying purpose of the imminence requirement” is to avoid this exact

scenario: a court “render[ing] an advisory opinion in ‘a case in which no injury would have

occurred at all.’” Animal Legal Def. Fund, Inc. v. Espy, 23 F.3d 496, 500 (D.C. Cir. 1994) (quoting

Lujan, 504 U.S. at 564 n.2).

Courts have routinely held that a plaintiff has failed to demonstrate imminent harm where

a plaintiff has control over an alleged future injury coming to pass. In Animal Legal Defense Fund,

a psychobiologist was one of several plaintiffs who brought suit against the Department of

Agriculture for its failure to include rats, mice, and birds in the definition of “animals” under the

Federal Laboratory Animal Welfare Act, which would have required research laboratories

registered under the Act to employ humane treatment of the rats and mice used in research. 23

F.3d at 498–99. The psychobiologist had left the research field six years prior but intended to

return to conduct research in registered laboratories in order to advance her career. Id. at 500. She

alleged that she would be unable to control whether laboratories humanely treated the rodents used

in her planned research studies, and that the inhumane treatment would directly impair her ability

to perform her research because she would be required to spend time advocating for the facility to

employ humane treatment. Id. The D.C. Circuit stated that the plaintiff was not in immediate

danger of sustaining this alleged injury because whether she returned to the research field was

“wholly within her control,” and she could exercise her choice to determine whether “to subject

herself” to the future injury. Id. at 500–01.

In Pennsylvania Prison Society v. Cortes, the Third Circuit held that the future harm that

prisoner plaintiffs may experience, being unable to be paroled due to changes to Pennsylvania’s

Board of Pardons, was not imminent because applying to the Board of Pardons for parole or a

commuted sentence was within the plaintiffs’ control, and no plaintiff presented evidence of

having submitted such an application. 508 F.3d 156, 166 (3d Cir. 2007). In New Jersey Physicians,

Inc. v. Obama, the plaintiff’s potential subjection to the individual mandate under the Affordable

Care Act was not an immediate harm to confer Article III standing, because inter alia it was

possible that he would not be subject to the mandate if he secured health insurance through an

employer before the mandate became effective in 2014—a factor that was within the plaintiff’s

control. 757 F. Supp. 2d 502, 507–08 (D.N.J. 2010), aff'd sub nom. New Jersey Physicians, Inc. v.

President, 653 F.3d 234 (3d Cir. 2011).

The fact that Plaintiffs may contact their respective student loan servicer to have their

prepayments refunded or reallocated per their wishes “stretches” immediacy “beyond the breaking

point.” Lujan, 504 U.S. at 564 n.2. This Court will not conduct mathematical gymnastics to

determine when the Plaintiffs may be required to pay “wrongfully accrued” student loan interest,

nor will the Court issue an advisory opinion where Plaintiffs maintain the choice over whether “to

subject [themselves]” to the future injury, and the future injury may never occur at all. Animal

Legal Def. Fund, 23 F.3d at 500–01.

C. Plaintiffs’ Request for Attorneys’ Fees Based on State Law Claims

Being unable to allege any past or immediate future injury, Plaintiffs next argue that if

Defendants changed their conduct to reallocate prepayments either retroactively or prospectively,

that the Plaintiffs are “prevailing parties” entitled to attorneys’ fees under the catalyst theory, since

Defendants changed their default payment allocation method “[a]s a direct result of this litigation.”

(ECF No. 15 at 41–42). “Under the catalyst theory . . . a litigant will qualify as a ‘prevailing party’

entitled to an award of attorney’s fees under a fee-shifting statute if the lawsuit ‘achieves the

desired result because [it] brought about a voluntary change in the defendant’s conduct.’” D.

Russo, Inc. v. Twp. of Union, 9 A.3d 1089, 1092–93 (N.J. Super. Ct. App. Div. 2010) (quoting

Mason v. City of Hoboken, 951 A.2d 1017, 1029 (N.J. 2008)); N.J. STAT. ANN. § 56:8-19. “In the

absence of a judgment or enforceable consent decree, the catalyst theory entitles a plaintiff to an

award of attorney’s fees if it ‘can demonstrate: (1) a factual causal nexus between plaintiff’s

litigation and the relief ultimately achieved; and (2) that the relief ultimately secured by plaintiffs

had a basis in law.’” Id. at 1093 (quoting Singer v. State, 472 A.2d 138, 142 (N.J. 1984)).

Both the NJCFA and the UTPCPL are fee-shifting statutes. See N.J. STAT. ANN. § 56:8-

19; 73 PA. CONS. STAT. § 201-9.2. Under New Jersey law, a party is considered a “prevailing

party” when they “‘obtain an enforceable judgment against the defendant . . . or comparable relief

through a consent decree or settlement.’” Tarr v. Ciasulli, 853 A.2d 921, 930 (N.J. 2004) (quoting

Farrar v. Hobby, 506 U.S. 103, 111 (1992)). In other words, a party must achieve “‘relief on the

merits of his [or her] claim.’” Id. (quoting Farrar, 506 U.S. at 111). A plaintiff cannot be entitled

to attorneys’ fees under the NJCFA as a “prevailing party” when their claim cannot survive a

motion to dismiss. See Perez v. Prof. Green LLC, 73 A.3d 452, 463–65 (N.J. 2013); Weinberg v.

Sprint Corp., 801 A.2d 281, 293 (N.J. 2002) (holding that “a plaintiff, who pleads but cannot

survive a motion for summary judgment” may not assert a claim for attorneys’ fees under the

NJCFA). As to a claim brought under the UTPCPL, Plaintiffs cite no cases applying the catalyst

theory to such a claim, and this Court’s “independent research did not locate any such decision.”

Gonzalez v. Owens Corning Sales, LLC, 367 F. Supp. 3d 381, 387 (W.D. Pa. 2019), aff’d sub nom.

Gonzalez v. Owens Corning, 813 F. App’x 53 (3d Cir. 2020) (similarly noting the dearth of

decisions applying the catalyst theory to any UTPCPL claim). The court in Gonzalez relied on the

Third Circuit’s decision in Templin v. Independence Blue Cross, 785 F.3d 861 (3d Cir. 2015), to

state that, “[e]ven if the court had authority to consider counsel fees under the catalyst theory, it

would decline to award them” because the plaintiffs did not obtain success “on the merits” of their

UPTCPL claim, and that “victory on procedural motions will not suffice.” Id. at 386–87 (citing

Templin, 785 F.3d at 867 n.3).

Defendants argue that neither the NJCFA nor the UTPCPL apply to their conduct as they

are federal student loan servicers retained by the DOE to service loans held by the DOE, and

therefore, they have not sold or advertised any merchandise or real estate to Plaintiffs for their

conduct to be regulated by the NJCFA, nor have they sold any goods or services to Plaintiffs for

their conduct to fall under the UTPCPL. (ECF No 11 at 41–43 (citing Lyons Compl., ECF No. 1,

¶¶ 15, 28)); see N.J. STAT. ANN. § 56:8-2 (describing unlawful practices “in connection with the

sale or advertisement of any merchandise or real estate”); 73 PA. CONS. STAT. § 201-9.2 (listing

elements of private actions to be brought by “[a]ny person who purchases or leases goods or

services”).

Defendants cite Huertas v. Galaxy Asset Management, arguing that the NJCFA is

“intended to encompass only consumer oriented commercial transactions involving the marketing

and sale of merchandise or services,” 641 F.3d 28, 35 (3d Cir. 2011), and cite cases where courts

have dismissed claims when a defendant’s alleged practices or statements are not made in

connection with the marketing or sale of merchandise or real estate. See Brancato v. Specialized

Loan Servicing, LLC, 2018 WL 2770137, at *7 (D.N.J. June 8, 2018) (dismissing NJCFA claim

where plaintiff “never bought any merchandise or real estate” from defendant mortgage loan

servicer); Boyko v. Am. Int’l Group, Inc., 2009 WL 5194431, at *4 (D.N.J. Dec. 23, 2009)

(dismissing NJCFA claim where defendant debt collector had not “sold merchandise or real estate”

to plaintiff and stating “debt collection efforts on behalf of a third party who might have sold

merchandise is not itself a sale of merchandise”). Relying on two Third Circuit cases, Defendants

argue that a private individual must have purchased or leased goods or services to have statutory

standing under the UTPCPL. Balderston v. Medtronic Sofamor Danek, Inc., 285 F.3d 238, 240 (3d

Cir. 2002); Gemini Physical Therapy & Rehab., Inc. v. State Farm Mut. Auto. Ins. Co., 40 F.3d

63, 65 (3d Cir. 1994) (“The [UTPCPL] contemplates as the protected class only those who

purchase goods or services, not those who may receive a benefit from the purchase.”).

In response, Plaintiffs argue that the NJCFA’s definition of “merchandise” includes

“services,” N.J. STAT. ANN. § 56:8-1(c), which clearly includes Defendants as student loan

servicers, and that it was the New Jersey Legislature’s intent for the NJCFA to be interpreted

broadly to combat consumer fraud. (Opp. Br., ECF No. 15 at 38 (citing Lemelledo v. Beneficial

Management Corp. of America, 696 A.2d 546 (N.J. 1997)). Plaintiffs further rely on Manetta v.

Navient Corp., where another court in this district has held that a plaintiff student loan borrower’s

NJCFA claim survived a motion to dismiss against federal student loan servicer Navient

Corporation. No. 20-7712, 2021 WL 2886115, at *5 (D.N.J. July 8, 2021). Similarly, Plaintiffs

argue that the UTPCPL should be interpreted broadly to protect consumers from fraud and unfair

or deceptive business practices. Ash v. Cont’l Ins. Co., 932 A.2d 877, 881 (Pa. 2007), and cite

several cases where the UTPCPL has been applied in the mortgage loan servicing context,

Hollenshead v. New Penn Financial, LLC, 447 F.Supp.3d 283 (E.D. Pa. 2020); Trunzo v. Citi

Mortg., 876 F.Supp.2d 521 (W.D. Pa. 2012).

Having reviewed the case law cited by the parties, the Court is doubtful that the NJCFA

applies to federal student loan servicers and does not find Manetta instructive because the issue of

the statute’s applicability was neither argued by the parties or addressed in that court’s ruling. 2021

WL 2886115, at *5. Further, the applicability of the UTPCPL to Defendants’ conduct where

Plaintiffs transacted with the DOE—not Defendants—to borrow federal student loans is far from

clear. Compare Balderston, 285 F.3d at 241 ( “[T]he [UTPCPL] unambiguously permits only

persons who have purchased or leased goods or services to sue. . . . Had the Pennsylvania

legislature wanted to create a cause of action for those not involved in a sale or lease, it would

have done so.” (internal quotation marks omitted)) with Nigro v. Pa. Higher Educ. Assistance

Agency, No. 19-02000, 2020 WL 5369980, at *10 (M.D. Pa. Sept. 8, 2020) (dismissing plaintiff

student loan borrower’s claim under the UTPCPL’s “catchall” provision but granting plaintiff

leave to amend complaint against defendant PHEAA).

However, for the Court to rule on whether either statute is intended to regulate Defendants’

conduct as federal student loan servicers, it would be required to reach the merits of Plaintiffs’

claims, which is improper when this Court lacks subject matter jurisdiction. Finkelman, 810 F.3d

at 193 (“A federal court’s obligation to assure itself that it has subject matter jurisdiction over a

claim is antecedent to its power to reach the merits of that claim.”). Furthermore, the catalyst

theory, as interpreted by New Jersey courts, requires a Plaintiff to obtain relief on the merits of

their claim, Tarr, 853 A.2d at 930, which Plaintiffs have not achieved here, and the Court is

doubtful that the catalyst theory is even applicable to the UTPCPL, particularly where the Third

Circuit has described this doctrine as “moribund,” Cottrell v. Nicholson Props. LLC, No. 12-

02128, 2018 WL 4062723, at *13 (D.N.J. Aug. 24, 2018), aff’d, 768 F. App’x 148 (3d Cir. 2019)

(quoting A.P. Boyd, Inc. v. Newark Pub. Schs., 44 F. App’x 569, 573 (3d Cir. 2002)). This Court

refuses to reach beyond its jurisdiction, and Plaintiffs’ request for attorneys’ fees is denied as a

matter of law.15 See S. Walk at Broadlands Homeowner’s Ass’n, Inc. v. OpenBand at Broadlands,

LLC, 713 F.3d 175, 186 (4th Cir. 2013) (affirming district court’s denial of party’s motion for

attorneys’ fees because dismissal for lack of Article III standing “does not constitute a decision on

the merits”).

Having concluded that this Court lacks subject matter jurisdiction over these actions, the

Court will not address Defendants’ remaining arguments,16 and Plaintiffs’ Complaints are

dismissed without prejudice. Kamal v. J. Crew Grp., Inc., 918 F.3d 102, 119 (3d Cir. 2019)

(discussing that a case should be dismissed without prejudice where the plaintiff lacks Article III

15 The Court further notes that Plaintiffs’ request for attorneys’ fees being included in its

Response in Opposition to the Joint Motion to Dismiss is procedurally improper. See Fed. R. Civ.

P. 54(d)(2).

16 Because the Court finds the issue of whether the Plaintiffs have met their burden of showing

an injury in fact to establish Article III standing to be dispositive of the pending Joint Motion to

Dismiss, the Court does not address the parties’ arguments regarding traceability under Article III,

issues of mootness, any arguments that Plaintiffs’ Complaints fail to state a claim under Rule

12(b)(6), or class allegations under Rule 12(f) and Rule 23(d)(1)(D). See Finkelman, 810 F.3d at

203 (3d Cir. 2016); Fensterer v. Cap. One Bank (USA), N.A., No. 20-05558, 2021 WL 838333, at

*4 (D.N.J. Mar. 5, 2021). The Court also does not reach Nelnet’s argument that they did not service

the Lyons’ Plaintiffs’ loans, as this presents a fact issue that cannot be resolved on a motion to

dismiss under Rule 12(b)(6). However, the Court does not find this issue of disputed fact relevant

to the outcome of this Motion because the Plaintiffs lack Article III standing, and the Complaints

are dismissed under Rule 12(b)(1).

standing and the district court has no subject matter jurisdiction to reach the merits of the claims);

see also Finkelman, 810 F.3d at 195 (“Absent [Article III] standing on the part of the named

plaintiffs, we must dismiss a putative class action for lack of subject matter jurisdiction.”).17

IV. CONCLUSION

For the reasons stated herein, Defendants’ Joint Motion to Dismiss (Lyons, ECF No. 33;

Gallagher, ECF No. 23; Strockbine, ECF No. 11) is GRANTED, Plaintiffs’ Complaints (Lyons,

ECF No. 1; Gallagher, ECF No. 1; Strockbine, ECF No. 1) are DISMISSED WITHOUT

PREJUDICE, and the Clerk of the Court is ordered to close these Cases. An appropriate order

follows.

Date: March 1, 2022

/s/ Christine P. O’Hearn

Christine P. O’Hearn

United States District Judge

17 Plaintiffs have requested leave to amend their Complaints in their Response in Opposition

to address the pleading deficiencies outlined in this Opinion, (ECF No. 15 at 54), but have not filed

a motion or done so properly. “[F]ailure to submit a draft amended complaint is fatal to a request

for leave to amend. . . . [W]e [have] held that a district court need not worry about amendment

when the plaintiff does not properly request it.” Fletcher-Harlee Corp. v. Pote Concrete

Contractors, Inc., 482 F.3d 247, 252 (3d Cir. 2007). Plaintiffs have made that fatal error here, and

thus the Court denies their request. Further, the Court cannot conceive of any facts that Plaintiffs

could plead that would change the analysis as outlined herein.