Oakley v. Coast Professional, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA

AT BLUEFIELD

CARLA OAKLEY,

Plaintiff,

v. CIVIL ACTION NO. 1:21-00021

COAST PROFESSIONAL, INC.,

PERFORMANT FINANCIAL CORP.,

and PERFORMANT RECOVERY, INC.

Defendants.

MEMORANDUM OPINION

On September 30, 2021, the court entered an order (1)

granting without prejudice the motion to dismiss of defendant

Performant Financial Corp. (“PFC”) for lack of personal

jurisdiction (ECF No. 9); (2) denying the motion to dismiss of

defendants PFC and Performant Recovery, Inc. (“PRI”) (ECF No.

11); and (3) denying the motion to dismiss of defendant Coast

Professional, Inc. (“Coast”) (ECF No. 13). (ECF No. 52.) In

this Memorandum Opinion, the court sets forth its reasoning for

denying PFC and PRI’s motion to dismiss (ECF No. 11) and Coast’s

motion to dismiss (ECF No. 13).

I. Background

This is a putative class action alleging deceptive debt

collection practices by defendants in violation of the West

Virginia Consumer Credit and Protection Act (“WVCCPA”).

Plaintiff says defendants violated the WVCCPA when they sent her

a letter regarding her defaulted student loan. She says that

the letter was deceptive and misleading under the WVCCPA because

it represented that the collection agency’s contingency fee was

due and owing as part of the “current balance” even though the

agency had not yet earned the contingency fee by collecting the

debt. The contingency fee was listed in the category “FEES &

COSTS” and was computed assuming that there would be a full

recovery of the principal and interest then due on the defaulted

loan. There was a false implication, says plaintiff, that the

contingency fee (in the amount listed) was “unavoidable” and

“fixed.” (See, e.g., First Am. Compl. ¶ 66.)

Plaintiff says that defendants compounded the deception by

using language in the body of the letter that attached the U.S.

Department of Education’s (“ED”) imprimatur to the amount due,

and further, by attempting to qualify the “FEES & COSTS” with an

asterisk and cryptic note (on the back of the letter) suggesting

that the amount listed may not be due presently after all, and

may change. Plaintiff also points to language on the front page

of the letter stating that the amount ultimately due may be

greater than the current balance but failing to acknowledge that

the amount due may be less (because the contingency fee is

ultimately less).

Plaintiff has named three defendants in her First Amended

Complaint (“FAC”): Coast, PFC, and PRI. Coast allegedly

contracted with the ED to collect the debt and then

subcontracted with PRI, which is a wholly owned subsidiary of

PFC. PRI sent the collection letter at issue. The letter

states that PRI sent it while acting on behalf of Coast.

Although PFC is not mentioned in the letter, plaintiff alleges

that PFC and PRI sent the letter jointly. Moreover, plaintiff

alleges that PFC operates as a single business with a single

management team that reports to its CEO.

II. Legal Standard

“The purpose of a Rule 12(b)(6) motion is to test the

[legal] sufficiency of a complaint; importantly, [a Rule

12(b)(6) motion] does not resolve contests surrounding the

facts, the merits of a claim, or the applicability of defenses.”

Edwards v. City of Goldsboro, 178 F.3d 231, 243–44 (4th Cir.

1999) (citations and internal quotation marks omitted). A Rule

12(b)(6) defense asserts that even if all the factual

allegations in a complaint are true, they remain insufficient to

establish a cause of action. This court is also mindful that

“[w]hether a particular ground for opposing a claim may be the

basis for dismissal for failure to state a claim depends on

whether the allegations in the complaint suffice to establish

that ground, not on the nature of the ground in the abstract.”

Jones v. Bock, 549 U.S. 199, 215 (2007).

Accordingly, Federal Rule of Civil Procedure 8(a)(2)

requires that “a pleading . . . contain a ‘short and plain

statement of the claim showing that the pleader is entitled to

relief.’” Ashcroft v. Iqbal, 556 U.S. 662, 677—78 (2009)

(citing Fed. R. Civ. P. 8(a)(2)). The purpose of Rule 8(a)(2)

is to ensure that “the defendant [receives] fair notice of what

the . . . claim is and the grounds upon which it rests.” Conley

v. Gibson, 355 U.S. 41, 47 (1957). A plaintiff must allege

“enough facts to state a claim to relief that is plausible on

its face” and “raise a right to relief above the speculative

level.” Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599,

615 n.26 (4th Cir. 2009).

The United States Supreme Court has maintained that

“[w]hile a complaint . . . does not need detailed factual

allegations, . . . a plaintiff’s obligation to provide the

grounds of his entitle[ment] to relief requires more than labels

and conclusions, and a formulaic recitation of the elements of a

cause of action will not do.” Bell Atl. Corp. v. Twombly, 550

U.S. 544, 555 550 (2007) (citations and internal quotation marks

omitted). The court need not “accept as true unwarranted

inferences, unreasonable conclusions, or arguments.” E. Shore

Mkts., Inc. v. J.D. Assocs. Ltd P’ship, 213 F.3d 175, 180 (4th

Cir. 2000). Courts must also take care to avoid confusing the

veracity or even accuracy underlying the allegations that a

plaintiff has leveled against a defendant with the allegations’

likelihood of success. While “the pleading must contain

something more . . . than . . . a statement of facts that merely

creates a suspicion [of] a legally cognizable right of action,”

5 C. Wright & A. Miller, Federal Practice and Procedure § 1216

(3d ed. 2004), “assum[ing]” of course “that all the allegations

in the complaint are true (even if doubtful in fact),” Twombly,

550 U.S. at 555, it is also the case that “Rule 12(b)(6) does

not countenance . . . dismissals based on a judge’s disbelief of

a complaint’s factual allegations.” Neitzke v. Williams, 490

U.S. 319, 327 (1989). Therefore, courts must allow a well-

pleaded complaint to proceed even if it is obvious “that a

recovery is very remote and unlikely.” Scheuer v. Rhodes, 416

U.S. 232, 236 (1974).

III. Discussion

Defendants jointly make three arguments in support of

dismissal: (1) plaintiff did not comply with the WVCCPA’s

right-to-cure notice requirement; (2) federal law preempts

plaintiff’s claims; and (3) the collection letter at issue is

not deceptive or misleading within the meaning of the WVCCPA.

The first argument is unavailing because the statutory language

contemplates sending the right-to-cure notice after a case is

filed, and plaintiff did so long ago. The second argument fails

because the allegations do not limit this case to a

nondisclosure case and because the claims here obstruct no

important federal interest in the manner required to invoke

obstacle preemption successfully. Finally, because the third

argument presents a close call that is best suited for

determination after further development of the record, it does

not prevail at the pleading stage.

Coast separately argues that it must be dismissed because

it did not send the letter at issue and because plaintiff does

not sufficiently allege an agency relationship between Coast and

the sender, PRI. The court disagrees with this argument.

Plaintiff quotes a portion of the letter in the FAC which states

that Coast had authorized PRI to act on Coast’s behalf.

Although PRI qualifies this statement with “as a subcontractor,”

plaintiff is entitled to the benefit of a reasonable inference

at this stage that there was an agency relationship. Coast may

seek to establish with a summary judgment motion that PRI was

acting as a mere independent contractor.

a. Right to Cure

The WVCCPA contains a right-to-cure provision, the

operative version of which1 reads in pertinent part as follows:

1 The provision was amended effective June 16, 2021.

No action may be brought pursuant to this article

. . . until the consumer has informed the creditor or

debt collector in writing and by certified mail,

return receipt requested . . . of the alleged

violation and the factual basis for the violation and

provide the creditor or debt collector forty-five days

from receipt . . . of the notice of violation but

twenty days in the case a cause of action has already

been filed to make a cure offer . . . .

W. Va. Code § 46A-5-108(a) (2017).

Plaintiff sent the required notice to PRI prior to filing

her original complaint in state court. However, at the time

plaintiff filed her FAC, adding Coast and PFC, on November 24,

2020, she had not provided additional notices to these new

defendants. She provided such notices on February 5, 2021

(after Coast’s removal of the case to this court and the same

day defendants filed their motions to dismiss).

Plaintiff argues that there is no deficiency now that she

has sent the right-to-cure notices and the requisite time has

elapsed. She asserts that the statutory provision contemplates

the sending of such notices when “a cause of action has already

been filed.” She further contends that the defendants are all

closely related; thus, notice to one was effectively notice to

all. Finally, plaintiff contends that in these circumstances,

the appropriate remedy for any non-compliance the court may find

is leave to amend.

The right-to-cure notice requirement is non-jurisdictional.

Adkins v. Midland Credit Mgmt., Inc., No. 5:17-CV-04107, 2019 WL

1370872, at *3 (S.D.W. Va. Mar. 26, 2019). The statutory

language sends mixed messages about whether post-filing

compliance is appropriate. On one hand, it says that “[n]o

action may be brought” until the notice is sent. On the other,

it suggests that notices may be sent when “a cause of action has

already been filed.” It is plausible that this provision

contemplates situations such as this one, where the plaintiff

does not realize that additional defendants should be added

until after filing her original complaint.

If the purposes of the right-to-cure provision are to

provide defendants with notice and an opportunity to minimize

litigation costs and their potential exposure, it appears that

those purposes were substantially achieved here. Defendants do

not argue that any deficiency in the notices deprived them of

notice or a meaningful opportunity to make a cure offer. In

light of defendants’ interrelatedness, plaintiff’s substantial

compliance with § 46A-5-108(a), and the language of § 46A-5-

108(a) suggesting that post-filing right-to-cure notices are at

least sometimes permissible, the court finds that dismissal is

an inappropriate outcome here.2

2 In any event, the court would be inclined to grant leave to

amend.

b. Preemption

The Constitution’s Supremacy Clause requires state law to

yield to federal law (including the Constitution itself) in the

event of a conflict. See U.S. Const. art. VI, cl. 2.; Altria

Grp., Inc. v. Good, 555 U.S. 70, 76 (2008); Coll. Loan Corp. v.

SLM Corp., 396 F.3d 588, 595 (4th Cir. 2005). The “taxonomy of

preemption yields four fundamental varieties: express

preemption, field preemption, impossibility preemption, and

obstacle preemption.” Gregory M. Dickinson, Calibrating Chevron

for Preemption, 63 Admin. L. Rev. 667, 672 (2011).

At issue here are express preemption and obstacle

preemption. Express preemption applies “when Congress expressly

so provides.” Duvall v. Bristol-Myers-Squibb Co., 103 F.3d 324,

328 (4th Cir. 1996). With this kind of preemption, “Congress

announces its intent to invalidate state law through ‘an express

preemption provision’ explicit in the federal statute itself.”

Student Loan Servicing All. v. District of Columbia, 351 F.

Supp. 3d 26, 51 (D.D.C. 2018) (quoting Arizona v. United States,

567 U.S. 387, 399 (2012)). Congress’s intention must be clear.

Coll. Loan, 396 F.3d at 595–96. “Express preemption doctrine

therefore involves the difficult but familiar judicial task of

determining the intended preemptive reach of statutory

language.” Dickinson, 63 Admin. L. Rev. at 671.

Obstacle preemption is one of the two forms of conflict

preemption (the other being impossibility preemption). Coll.

Loan, 396 F.3d at 596. With this kind of preemption, state law

“stands as an obstacle to the accomplishment and execution of

the full purposes and objectives of Congress.” Columbia

Venture, LLC v. Dewberry & Davis, LLC, 604 F.3d 824, 829–30 (4th

Cir. 2010). The party asserting obstacle preemption must make

“an essential threshold showing” that the federal goal at stake

is “significant.” Smith v. BAC Home Loans Servicing, LP, 769 F.

Supp. 2d 1033, 1039 (S.D.W. Va. 2011); see also Coll. Loan, 396

F.3d at 597 (implying that federal goal must be “important”).

“What is a sufficient obstacle is a matter of judgment, to

be informed by examining the federal statute as a whole and

identifying its purpose and intended effects.” PPL EnergyPlus,

LLC v. Nazarian, 753 F.3d 467, 478 (4th Cir. 2014), aff’d sub

nom. Hughes v. Talen Energy Mktg., LLC, 578 U.S. 150 (2016). In

deciding whether conflict preemption applies, courts must

“independently . . . consider national interests and their

putative conflict with state interests.” Columbia Venture, 604

F.3d at 830. Quite unlike the express preemption analysis, the

obstacle preemption analysis “is more an exercise of policy

choices by a court than strict statutory construction.” See id.3

3 Justice Thomas has called into question the policy-driven

nature of the obstacle preemption analysis, aloof from the text

Courts are admonished not to “seek out conflicts between state

and federal regulation where none clearly exists.” Coll. Loan,

396 F.3d at 598.

Instead, in weighing whether state law is preempted, courts

are to seek out Congressional intent and presume that Congress

generally intends to leave state law intact. See Wyeth v.

Levine, 555 U.S. 555, 565, 565 n.3 (2009). “The presumption

applies with particular force when the state is exercising its

police power.” Pennsylvania v. Navient Corp., 967 F.3d 273, 288

(3d Cir. 2020). Of course, the presumption against preemption

is rebuttable and yields in the face of a “clear and manifest”

Congressional purpose to preempt state law. Id. Notably, there

is also a presumption that Congress intends preemption doctrine

to resolve impossibility and obstacle conflicts. See Wyeth, 555

U.S. at 565 (Supreme Court has “assumed that Congress would not

want either kind of conflict”). When there is a true conflict,

as it sometimes is. See Kansas v. Garcia, 140 S. Ct. 791, 808

(2020) (Thomas, J., concurring) (noting that obstacle preemption

doctrine “rests on judicial guesswork”); Wyeth, 555 U.S. at 587-

88 (Thomas, J., concurring) (“This Court’s entire body of

‘purposes and objectives’ pre-emption jurisprudence is

inherently flawed. The cases improperly rely on legislative

history, broad atextual notions of congressional purpose, and

even congressional inaction in order to pre-empt state law.”).

The court is of course bound to follow the obstacle preemption

jurisprudence of the Supreme Court and the Fourth Circuit Court

of Appeals as it presently stands. The court notes Justice

Thomas’s criticism merely for its value in elucidating the

nature of the obstacle preemption analysis.

Congressional intent to displace state law is “inferred.” See

Abbot by Abbot v. Am. Cyanamid Co., 844 F.2d 1108, 1116 (4th

Cir. 1988) (Wilkins, J., concurring).

Neither express nor obstacle preemption applies to defeat

the claims here. For express preemption to apply, the court

would need to conceptualize plaintiff’s misrepresentation claims

as mere nondisclosure claims in disguise. There may be a fine

line between the misrepresentation claims that plaintiff asserts

and nondisclosure claims, but at the pleading stage, it appears

that plaintiff’s claim is on the permissible side of the line.

Obstacle preemption does not apply because plaintiff’s claims

thwart no important federal interest. For obstacle preemption

to apply, the federal interest generally must be clear and

specific, and the conflict must be sharp enough to infer a

Congressional intent to displace state law. Such is not the

case here.

1. Express Preemption

The basic question is whether 20 U.S.C. § 1098g preempts

the claims here. That section provides, “Loans made, insured,

or guaranteed pursuant to a program authorized by title IV of

the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.) shall

not be subject to any disclosure requirements of any State law.”

20 U.S.C. § 1098g (emphasis added). This language unambiguously

“preempts state laws requiring federal student loan servicers to

make additional disclosures beyond what the [Higher Education

Act] requires.” Lawson-Ross v. Great Lakes Higher Educ. Corp.,

955 F.3d 908, 916 (11th Cir. 2020). That much is

uncontroverted. The rub is whether the claims of deception here

are, at their core, mere nondisclosure claims. If so, express

preemption applies.

Federal appellate courts in other circuits, plodding

similar ground, have helped draw boundaries between preempted

and non-preempted misrepresentation-based claims. In Chae v.

SLM Corp., the Ninth Circuit Court of Appeals held that certain

claims styled as misrepresentation claims were really

nondisclosure claims, and thus, were preempted. 593 F.3d 936,

942 (9th Cir. 2010). The preempted claims included those

alleging the use of “billing statements and coupon books that

trick[ed] borrowers into thinking that interest [was] being

calculated via the installment method” instead of “a simple

daily calculation.” Id. at 942. The court concluded that “[a]t

bottom, the plaintiff’s misrepresentation claims [were]

improper-disclosure claims.” Id. The court conceptualized the

plaintiffs’ claims under a California consumer protection

statute as an indirect method of regulating disclosures: “[T]he

state-law prohibition on misrepresenting a business practice ‘is

merely the converse’ of a state-law requirement that alternate

disclosures be made.” Id. at 943 (quoting Cipollone v. Liggett

Group, Inc., 505 U.S. 504, 527 (1992)). A broad reading of Chae

would suggest that the court there took an expansive view of

what counts as a mere nondisclosure claim for purposes of

§ 1098g preemption.

The Third, Seventh, and Eleventh Circuit Courts of Appeals

have distinguished Chae and allowed similar claims to proceed

that, in those courts’ estimation, were on the non-preempted

side of the line. See Navient, 967 F.3d at 290; Nelson v. Great

Lakes Educ. Loan Servs., Inc., 928 F.3d 639, 642 (7th Cir.

2019); Lawson-Ross, 955 F.3d at 919.4

The plaintiff in Nelson alleged that the defendant

wrongfully steered her and others similarly situated toward loan

forbearance instead of income-driven repayment plans. 928 F.3d

at 644. The Seventh Circuit perceived Nelson’s complaint as

alleging a mixture of “affirmative misrepresentations . . . such

as recommending forbearance as the best option for a particular

borrower, and failures to disclose information.” Id. at 645.

“[T]he difference between affirmative misrepresentation and

failure to disclose information” was the decisive factor to the

court. Id. at 644.

4 The court will discuss these appellate decisions in the order

in which they were decided: Nelson, Lawson-Ross, Navient.

In reversing the district court, which had granted

dismissal on preemption grounds, the Seventh Circuit stated as

follows:

When a plaintiff alleges a defendant’s actionable

failure to disclose, it is easy to understand how that

claim implies a “disclosure requirement,” to use the

language of § 1098g. But when a plaintiff alleges a

defendant’s false affirmative misrepresentation,

recasting the claim as imposing a “disclosure

requirement” is not necessary and may not even be

appropriate. If the claim is that the defendant said

something false that it was not required to say in the

first place, the claim does not necessarily imply a

disclosure requirement. The defendant could have

complied with its legal obligations, under the

plaintiff’s theory, by merely refraining from making

the false affirmative misrepresentation about its

expertise, its work in borrowers’ best interests, and

its recommendation of forbearance to most distressed

borrowers.

In this case, the district court relied upon a broad

reading of the Ninth Circuit’s opinion in Chae v. SLM

Corp., 593 F.3d 936 (9th Cir. 2010), to treat Nelson’s

complaints about affirmative misrepresentations as

implying some additional disclosure requirements.

While Chae may apply to some of Nelson’s claims, it

was a mistake to read Chae so broadly. The plaintiffs

in Chae complained about the supposed failures to

disclose key information in specific ways, such as

loan terms and repayment requirements. Since the

defendant was required to disclose that information by

federal law and had disclosed it in ways permitted by

federal law, the Ninth Circuit found that the

plaintiffs were implicitly seeking to impose

additional disclosure requirements under state law.

We do not disagree with the Ninth Circuit’s reasoning,

but Chae itself made clear that § 1098g would not

extend to other sorts of disclosures to borrowers.

Chae limited the reach of some of its broader language

by holding that other state-law claims, focusing on

the “use of fraudulent and deceptive practices apart

from the billing statements,” are not preempted by

§ 1098g. 593 F.3d at 943 (emphasis added).

Id. at 649-50.

In seeking out the scope of “disclosure requirements” under

§ 1098g (and thus, the scope of preemption), the court

considered the typical function of disclosures:

In general, disclosure requirements are familiar

regulatory tools applied to consumer borrowing and

other financial transactions. Rather than regulating

the substance of the transaction terms (such as usury

laws do by limiting interest rates), disclosure

requirements are intended to ensure that consumer-

borrowers have accurate, relevant information and can

make their own informed choices about their financial

affairs.

Id. at 647. Because § 1098g offers “no specific guidance about

the scope of ‘disclosure requirements,’” the court looked to

§ 1083, which mandates certain disclosures, as a “backdrop.”

Id. at 647–48.

The court rejected the district court’s “broad reading” of

Chae, saying it was “a mistake” to apply Chae to all of the

claims at issue. Id. at 649-50. It limited Chae to situations

where defendants make disclosures that are mandatory under

federal law and do so in a manner that conforms with federal

law, but then a claim under state law seeks to hold that

disclosure deficient. Id. at 649-50. By contrast, when a

defendant had no mandate to communicate the allegedly false

information, and when the plaintiff’s claim does not depend upon

“proof that [the] defendant failed to disclose information,” the

claim can proceed. Id. at 650.

Lawson-Ross featured claims under Florida law that a

student loan servicer “made affirmative misrepresentations to

[the plaintiffs] and other borrowers that they were on track to

have their student loans forgiven based on their public-service

employment when, in fact, their loans were ineligible for the

forgiveness program.” 955 F.3d at 911. The express preemption

argument, once again, was that the “claims were based on alleged

failures to disclose information” and that allowing the claims

to proceed “would effectively impose additional disclosure

requirements, in violation of § 1098g.” Id. at 914. The

defendants argued, in other words, that plaintiffs’ “affirmative

misrepresentation claims, at their core, [were] based on a

failure to disclose correct information.” Id. at 916. The

Eleventh Circuit rejected this argument.

The court’s opinion drew a distinction between (1) claims

regarding how loan servicers disclose information that federal

law requires them to disclose; and (2) claims regarding

“voluntarily provided information on a matter on which [the

servicer] was not required to disclose.” Id. at 919. The court

understood Chae as prohibiting only the former kind of claim,

that is, one where a servicer makes a mandatory disclosure in

compliance with federal law but then faces a claim under state

law that it should have made the disclosure differently. Id.5

Because the plaintiffs “made no claim that [the defendant]

disclosed in a misleading manner information it was required to

disclose,” but instead claimed that the defendant “voluntarily

provided [false] information on a matter on which it was not

required to disclose,” the court was not persuaded that Chae was

on point. Id. at 919.

Finally, the Navient court stated that it would follow its

sister circuits (including the Ninth Circuit in Chae) and “adopt

the distinction between affirmative misrepresentation and

failure to disclosure information as required by the Education

Act.” 967 F.3d at 290. It held that “[s]ection 1098g does not

expressly preempt claims to the extent they are alleging

affirmative misrepresentations rather than failures of

disclosure.” Id.

The plaintiff in Navient alleged that the defendant had

falsely stated that forbearance was the only loan-assistance

option, had provided false information about loan forgiveness,

enrolled a debtor in forbearance wrongfully, promised and then

failed to provide information about Income-Driven Repayment

(IDR) plans, and promised and then failed to send an annual

5 It is unclear under the Lawson-Ross court’s analysis whether

omission-based misrepresentation claims avoid preemption when

the duty to speak derives not from the HEA but from a duty under

state law not to make a material, fraudulent omission.

renewal reminder. Id. at 290-91. The court drew a line between

misrepresentation and lack of disclosure, stating, “To the

extent these allegations hold Navient accountable for its

affirmative misconduct, they are not preempted. The

Commonwealth cannot fault Navient for failing to provide

consumers with more information about IDR plans or

recertification, but it can fault Navient for providing

misinformation.” Id. at 291 (emphasis added).6

Thus, the Seventh and Eleventh Circuits distinguished the

allegations before them from those in Chae by focusing heavily

on the voluntary nature of the alleged misrepresentations.

These courts read Chae narrowly, but they appeared to accept

that § 1098g sometimes preempts “misrepresentation” claims as

indirectly seeking to regulate disclosure requirements. The

Third Circuit (with the most recent opinion) took a somewhat

different tack. It accepted Chae’s determination that

6 The court raised but declined to resolve at the appellate level

the issue of whether § 1098g preempts “material” omissions, such

as would constitute fraud by intentional non-disclosure.

Navient, 967 F.3d at 292 n.12. Under West Virginia common law,

“[f]raud is the concealment of the truth just as much as it is

the utterance of a falsehood.” Smith v. First Cmty. Bancshares,

Inc., 575 S.E.2d 419, 432 (W. Va. 2002). As in Navient, the

parties have not fully briefed this precise preemption issue.

The court will assume at present that, even if plaintiff’s

claims are omission-based, the omissions are material, and

fraudulent omissions are not preempted under § 1098g as mere

nondisclosures. Defendants are free to argue otherwise on

summary judgment.

misrepresentation claims are sometimes impermissible

nondisclosure claims by a different name. Its ultimate

distinction, however, was between allegations of a lack of

information (preempted) and allegations of “misinformation” (not

preempted). Navient also noted the voluntary nature of the

alleged misrepresentation, but to a lesser degree. See id. at

290 (“To the extent the [plaintiff] faults [the defendant] for

failing to disclose or notify borrowers of certain information,

it does so only because [the defendant’s] failure to disclose

certain information furthered the affirmative misrepresentations

[the defendant] voluntarily chose to make.”). The defendant

argued that some of the “alleged misstatements” were required by

federal law, but the court disagreed because the defendant did

“not actually cite to any provision of law that would have

required” it to use the language at issue. See id. at 291.

Here, defendants’ express preemption argument carries some

weight when analyzed in light of these persuasive authorities.

The court rejects an overly broad reading of Chae that would

perceive of every fraud claim as a nondisclosure claim for

preemption purposes. But the Courts of Appeals that have

distinguished Chae have not done so on bases that clearly

distinguish this case. Under the voluntary/mandatory

distinction employed in the Seventh and Eleventh Circuits, the

claims here may not survive because the “current balance” was a

mandatory disclosure. See 20 U.S.C. § 1083. It is more likely

that the claims would survive in the Third Circuit, which did

not draw as bright of a line between voluntary and mandatory

disclosures, but instead, between “more information” and

“misinformation.” See Navient, 967 F.3d at 291. Even in the

Third Circuit, though, if the disclosure is specifically

prescribed by federal law, it is preempted even if inaccurate.

At the pleading stage, plaintiff’s claims pass muster

because it remains unclear whether federal law prescribed the

alleged misrepresentations. Defendants cite a procedures manual

suggesting that the contingency fee should be included in the

current balance figure. Plaintiff disputes whether the manual

sets forth mandatory procedures and contends that defendants

take the manual’s language out of context. The court notes that

immediately before the procedures manual suggests that

collection costs are to be included, it says, “If the Collection

Costs are included, are they within 18.5% of the total principal

and interest?” (ECF No. 32-1, at 7 (emphasis added).)7

It is also not clear whether the manual sets forth

mandatory procedures. Federal regulations carrying the force of

law may preempt state law. Wyeth v. Levine, 555 U.S. 555, 576–

7 Full text of the procedures manual available at

https://www.governmentattic.org/33docs/EDpcaManual_2016.pdf.

77. But standing alone, a guidance document does not carry the

force of law and is not entitled to deference beyond its power

to persuade. See Perez v. Cissna, 914 F.3d 846, 860 (4th Cir.

2019) (King, J., dissenting), rev’d en banc sub nom. Perez v.

Cuccinelli, 949 F.3d 865 (4th Cir. 2020). Nevertheless, a

guidance document “might help explain how state law affects a

regulatory scheme.” Koch & Muphy, Admin. L. & Prac. § 4:24 (3d

ed.) (2021).8

It is likewise unclear at the pleading stage whether

defendants had the scienter to defraud by omission, which may be

another way of distinguishing non-preempted misrepresentation

claims from preempted nondisclosure claims. The court will

await the clarity of a more developed record. For now, the

8 Commentators suggest that even though guidance documents do not

carry the force of law, to the extent they impose mandatory

requirements on regulated parties, they present a “fairness”

issue that may guide the preemption analysis:

Still the public may be stuck in the middle. Thus,

where the public is placed in a dilemma between

compliance with state law and the compulsions of a

guidance documents [sic], fairness should determine

the extent to which a federal guidance document

preempts state law. The balance may shift in the

direction of preemption where conformity to the

guidance document is necessary to the national

program.

Id. Whether a “fairness” factor is appropriate for

preemption is unclear, but this consideration may speak to

the equities of this case in general, should it turn out

that defendants were following or attempting to follow the

requirements of a guidance document.

court makes the preliminary conclusion at the pleading stage

that the claims are not preempted. See Nelson, 928 F.3d at 650

(“We cannot say on the pleadings that all of Nelson’s claims are

preempted by § 1098g. On remand, the district court may need to

use jury instructions and other tools to allow Nelson to proceed

on her claims of affirmative misrepresentations while ensuring

that the case does not become a vehicle for state law to impose

new disclosure requirements.”).

2. Obstacle Preemption

Defendants also seek to apply Chae’s broad conflict-

preemption holding to this case. The court there held that the

state-law claims posed an obstacle to the congressional purpose

of uniformity. Chae, 593 F.3d at 947, 950. The court concluded

that the obstacle “must bow to the overriding principles of

conflict preemption and federal law supremacy.” Id. In doing

so, the Chae court rejected (and distinguished) the law of the

Fourth Circuit. Id. at 945-46.

In the Fourth Circuit, uniformity is not recognized as an

important federal objective of the Higher Education Act (“HEA”)

for purposes of obstacle preemption. Coll. Loan, 396 F.3d at

597 (“We are unable to confirm that the creation of

‘uniformity,’ a goal relied on by the district court in its

Preemption Ruling, was actually an important goal of the HEA.”).

Chae rejected College Loan as not being the law of the Ninth

Circuit. 593 F.3d at 945-46 (9th Cir. 2010). Chae also

distinguished College Loan on two bases. First, the court noted

that College Loan was a dispute between lenders, not a borrower

and a lender, and that the federal law was not primarily

designed to regulate the lender-lender relationship. Id. at

946. Second, the court stated that the plaintiffs in College

Loan were ultimately trying to enforce, not undermine, federal

law. Id.

Federal appellate courts have not followed Chae’s lead with

respect to obstacle preemption. Although the Nelson court

“assume[d]” that there was a substantial need for nationwide

consistency with reference to the particular claims in Chae, it

declined to apply Chae’s “broad language on conflict preemption

and the value of uniformity in the federal loan program” to a

different set of claims. 928 F.3d at 651.

The court’s analysis pointed out that the HEA’s express

preemption provisions counsel against a hasty finding of

obstacle preemption: “The number of those provisions and their

specificity show that Congress considered preemption issues and

made its decisions. Courts should enforce those provisions, but

we should not add to them on the theory that more sweeping

preemption seems like a better policy.” Id. at 650 (emphasis

added). The court was loath to strike down state law in

circumstances where “state law and federal law [could] exist in

harmony.” Id. at 651. Among Nelson, Navient, and Lawson-Ross,

Nelson was actually the least critical of Chae’s obstacle

preemption analysis.

Consistent with the Nelson court, the Lawson-Ross court

stated, “When Congress has explicitly addressed preemption in a

statute, an implication arises that it did not intend to preempt

other areas of state law.” 955 F.3d at 920. The court went on

to explain that even without the express preemption of the HEA,

the court would still not apply obstacle preemption. Id. at

921. The court specifically rejected the “premise” that that

there existed a Congressional goal of “uniformity of

communications between loan servicers and borrowers,” calling it

“mistaken.” Id. And even assuming a uniformity purpose within

the HEA, held the court, state law claims prohibiting

“affirmative misrepresentations to borrowers—in contrast to

[claims] imposing a duty to disclose—does no harm to

standardization of disclosures for federal student loan

programs.” See id. at 923.

The Navient court agreed that the express preemption

provisions of the HEA made the applicability of obstacle

preemption less likely. 967 F.3d at 293. The court disagreed

with Chae’s holding regarding uniformity: “We are not persuaded

by the Ninth Circuit's conclusion that uniformity was an

intended purpose of the Education Act, and we join the other

Circuits that have rejected that idea.” Id. The court further

explained that “[t]o infer preemption whenever an agency deals

with a problem comprehensively is virtually tantamount to saying

that whenever a federal agency decides to step into a field, its

regulations will be exclusive.” Id. There was little

difficulty rejecting the obstacle preemption argument.

Here, binding authority holds, for purposes of obstacle

preemption under the HEA, that uniformity does not qualify as an

important federal goal. Coll. Loan, 396 F.3d at 597. Coast

attempts to distinguish College Loan in the same way that the

Ninth Circuit did in Chae. Coast points out that College Loan

involved a lender-lender dispute and argues that the nature of

that conflict did not implicate a uniformity concern in the same

way it does here.

The language quoted from College Loan in both Chae and

Coast’s argument is this: “Importantly, neither the district

court nor the parties have explained how these statutory

purposes would be compromised by a lender, such as College Loan,

pursuing breach of contract or tort claims against other lenders

or servicers.” 396 F.3d at 597 (emphasis added). Coast changes

“these” to “the” in the quote, but that slight change alters the

meaning because “these statutory purposes” that our Court of

Appeals was referring to expressly did not include uniformity.

Instead, “these statutory purposes” were those that the court

listed in the preceding sentence: “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.” Id. at 597. Accordingly, the “uniformity”

line of argument is a dead end in this circuit.

Perhaps recognizing this, PFC and PRI point to slightly

different federal interests: “The policy at issue here is the

federal government’s express directive that it be protected

against losses from defaulted borrowers and that those

collecting on its behalf be shielded from multifarious state law

liability.” (See ECF No. 29, at 10.) The second part of the

sentence is essentially saying the federal interest is

uniformity, but in different words. The first part carries more

weight, but it too fails. By making borrowers liable for

collection costs, Congress suggested that it was not interested

in subsidizing collection activity. But it does not follow that

Congress wanted to provide collection agencies with full

immunity from consumer protection laws. Had it wanted to do so,

it could have expressly so provided.

Even without the binding precedent on this matter,

defendants’ obstacle preemption argument would fail. In the

area of obstacle preemption, citing overarching goals of federal

law and saying that state law hinders them is generally

insufficient. Judge Goodwin’s opinion in Smith v. BAC Home

Loans Servicing is instructive here. 769 F. Supp. 2d 1033

(S.D.W. Va. 2011). In Smith, a bank argued that federal banking

law preempted a consumer’s claims under the WVCCPA (relating to

the foreclosure of her home). Id. at 1037. The bank’s position

was that because the claims “directly implicated” how the bank

serviced the loans, they were preempted. See id. at 1045.

In rejecting the bank’s argument, Judge Goodwin explained

that “[o]bstacle preemption is not triggered merely because West

Virginia’s broad statute prohibiting unlawful forms of debt

collection happens to ensnare certain practices of national

banks.” Id. at 1046. He further noted,

In my view, forcing BAC to comply with the WVCCPA

provisions identified in the Complaint will not stand

as an obstacle to the significant regulatory

objectives underlying the NBA and the relevant OCC

regulations—allowing national banks and their

operating subsidiaries to engage in mortgage servicing

free from unduly burdensome state regulation. It is

not as if, by contrast, West Virginia has attempted to

outlaw mortgage servicing as a whole or even sought to

place any direct limits on the nature of that

business.

Id.

A successful obstacle preemption argument generally

identifies an important federal goal with precision. For

example, in Geier v. American Honda Motor Co., the defendant

successfully argued obstacle preemption by pointing to a very

specific provision of a regulation: one concerning whether

airbags were mandatory. See 529 U.S. 861, 864-65 (2000). The

regulation made it mandatory for manufacturers to put airbags in

new vehicles, but only ten percent of them. Id. at 879. The

Court concluded that in limiting its mandate to only ten

percent, the federal regulation “deliberately sought a gradual

phase-in of passive restraints,” to allow more time for research

and development, as well as public acceptance, and to produce a

“mix” of safety devices in cars traveling U.S. roads. Id. The

regulation was also designed to make the adoption of state

seatbelt laws more likely. Id. at 881. The regulation had a

very extensive procedural history, which included a rejection of

an all-airbag standard and reflected significant concern with

public sentiment and public safety. Id. at 878-89.

Beyond deriving from a very specific regulation, the

federal interest itself in Geier was specific: the maintenance

of manufacturer choice in passive restraint systems to promote

safety. Id. at 886; Williamson v. Mazda Motor of Am., Inc., 562

U.S. 323, 330 (2011) (“In Geier, we found that the state law

stood as an obstacle to the accomplishment of a significant

federal regulatory objective, namely, the maintenance of

manufacturer choice.” (internal quotation marks omitted)). The

specificity of the federal interest there brought a concrete

obstacle into focus.

The purported federal interests here are not specific and

are not firmly rooted in the text of federal law. And the

purported conflict is not sharp. Granted, plaintiff’s claims

may cause collection costs to go up and ultimately lead to

higher financing costs, but a mere tension between state and

federal law is not an obstacle conflict. Defendants essentially

ask this court to make a policy judgment that these claims are

not a benefit to society. To a certain extent, the obstacle

preemption analysis requires the court to exercise policy

judgment at the margins, where there is a specific federal

interest and a sharp conflict that the court can presume

Congress would disdain. Here, however, while disallowing

plaintiff’s claims might make for good policy, it would make for

bad law to do so on obstacle preemption grounds. The court

would essentially have to rewrite the preemptive scope of the

HEA.

Lastly, the court must address defendants’ argument that

the ED’s 2018 informal guidance supports its obstacle preemption

argument. See Federal Preemption and State Regulation of the

Department of Education’s Federal Student Loan Programs and

Federal Student Loan Servicers, 83 FR 10619 (Mar. 12, 2018).

But the court need not dwell on this argument long. As Judge

Friedman explained, this guidance is entitled to no Chevron

deference9 and lacks any power to persuade under Skidmore v.

Swift & Co., 323 U.S. 134 (1944). Student Loan, 351 F. Supp. 3d

at 47-51, 70.

What is more, the ED itself recently reversed course,

calling the 2018 guidance “seriously flawed.” 86 FR 44277. In

revoking the 2018 interpretation, the ED stated as follows:

In short, an approach that is marked by Federal-State

cooperation is likely to secure better implementation

of student aid programs as well as better service to

borrowers and their families. Out of this cooperation

may come a broader understanding of how these mutual

efforts can advance the central goal of facilitating

affordable access to higher education for students in

every part of the country. For these reasons, the

Department is issuing this interpretation with the

explicit purpose of revoking and superseding the 2018

interpretation.

86 FR 44277.

In light of the original lack of persuasiveness of the 2018

guidance and the subsequent revocation of that guidance, it does

not support defendants’ preemption argument.

c. Whether the FAC States a WVCCPA Claim

Defendants argue that plaintiff’s claim fails on the

merits—that is, the letter did not contain any “fraudulent,

deceptive or misleading representation” within the meaning

§ 46A-2-127. They say that the letter accurately presented the

total amount of plaintiff’s indebtedness under her loan terms as

9 See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467

U.S. 837 (1984).

of the date of the sending. Upon default, they say, plaintiff

immediately owed reasonable collection costs, so the letter

accurately indicates that she owed “fees and costs” in an amount

equal to the percentage of the total principal and interest that

the lender had agreed to pay defendants.

Defendants frame plaintiff’s contention as one merely that

the contingency fee could have been less if she negotiated a

resolution for less than the total amount due. Defendants

contend that, moreover, the disclaimer stating that the fees and

costs were not due until the time of payment accurately

described the situation.10 Further, defendants argue that

accepting plaintiff’s argument would lead to absurd results: If

the collection agency omitted the contingency fee from the total

balance due, it would then need to separately pursue collection

of the contingency fee based on the total resolution amount, in

which case borrowers would likely consider the “balance” without

the collection fee added to be misleading. Defendants also say

that their language concerning ED’s indication that the “entire

balance as indicated above is due and payable,” which plaintiff

contends is false, was not false within the meaning of the

10 On the front of the letter, there is a small asterisk before

the label “FEES & COSTS.” On the back of the letter, there is

another asterisk with the following statement: “This collection

agency fee is not due until the time of payment and the amount

of the fee may decrease at the time of payment depending on the

amount that is ultimately paid.” (ECF No. 27-1.)

WVCCPA because the letter as a whole did not purport to be from

the ED and because, moreover, the ED had approved the sending of

the letter.

Plaintiff focuses on the nature of a contingency fee: It

is not earned (and thus not due) until the contingency is

fulfilled, and the ultimate amount cannot be known until the

collection agency’s degree of success is known. Plaintiff does

not dispute that, had she paid her total principal and interest,

she would immediately owe collection costs in the amount

indicated in the letter. She says that it was deceptive,

however, for defendants to lead her to believe that the “FEES &

COSTS” were unavoidable and already incurred. Thus, according

to plaintiff, it was a misrepresentation to list the amount of

fees and costs due and payable immediately (“as of the date of

this letter”) as the maximum potential contingency fee that

could materialize (if plaintiff paid in full) as of the date of

the letter. What is more, plaintiff says, defendants falsely

suggested that the ED had calculated the amount and had deemed

it presently due.

Plaintiff further argues that the asterisk statement did

not clarify the misrepresentation. She points out that the

statement says the collection fee “may” decrease when, in

reality, it would certainly decrease unless she paid in full.

Together with language on the front of the page stating that the

total balance may go up, plaintiff says that the asterisk

explanation could easily lead a borrower to conclude that her

willingness to pay more could reduce the collection fee.

In the absence of sufficient state case law fleshing out

the issue of whether the allegations here state a claim, the

parties look to analogous cases decided under the Fair Debt

Collection Practices Act (FDCPA), a federal law which the

Supreme Court of West Virginia has described as “nearly

identical” to the WVCCPA. See Fleet v. Webber Springs Owners

Ass’n, Inc., 772 S.E.2d 369, 379 (W. Va. 2015). District courts

are split on whether allegations like those here state a claim.

The conflict in persuasive authority comes into focus by looking

at three analogous claims in the FDCPA context.

In Ossipova v. Pioneer Credit Recovery, Inc., Judge Woods

concluded that because the plaintiff’s default triggered

liability for reasonable collection costs, the inclusion of a

reasonable collection fee—contingent or not—in the total balance

was not misleading:

Pioneer indicated in their June 22, 2018 letter to

Plaintiff after her default that her outstanding

principal and interest totaled $78,968.86, and that

the associated collection charge was 119,221.03 [sic]—

exactly 24.34% of $78,968.86. Given this, the Court

finds it impossible to reconcile the conclusory

allegations in Plaintiff's complaint that she did not

owe the collection costs identified in Pioneer’s

letter at the time she received it with the provisions

of the MPN, the HEA, and ED regulations—which are

incorporated by reference into her complaint—and which

together belie Plaintiff's allegations. The agreed-

upon terms of the MPN obligated Plaintiff to pay

“reasonable collection fees and costs” that would

become “immediately due and payable” upon her default

and which would be governed by the HEA and applicable

ED regulations. As a result, the Court concludes that

Pioneer’s inclusion of the $19,221.03 collection

charge in its June 22, 2018 letter was neither false,

deceptive, or misleading, nor did it constitute the

use of unfair or unconscionable means to collect or

attempt to collect on a debt.

No. 1:18-EV-11015-GHW, 2019 WL 6792318, at *4-5 (S.D.N.Y. Dec.

11, 2019).

The facts in Ossipova were substantially similar to those

here, with two exceptions. First, the letter clearly listed the

collection cost as a “Collection Charge,” not as “FEES & COSTS,”

as here, with an asterisk that later suggests that this means a

collection cost. Id. at *1-2. Second, there does not appear to

have been a statement in the letter suggesting that the ED

calculated the amount due and payable to include the contingency

fee. See id.

By contrast, in Reizner v. Pioneer Credit Recovery, Inc.,

Judge Linares concluded that similar allegations to those here

passed muster at the pleading stage:

Considering that the collection charge was allegedly

contingent on the collection of the debt, Plaintiff

claims that the collection charge could not be

calculated, nor could it be determined as reasonable,

at the time Defendant sent its collection letter.

When taking these allegations as true, which the Court

must at this stage of the proceedings, and under the

least sophisticated debtor standard, Plaintiff has

sufficiently stated a FDCPA claim in order to survive

dismissal based on the allegedly false or misleading

inclusion of a contingent fee that had yet to be

charged, incurred, or due.

No. CV 18-16014 (JLL), 2019 WL 1569824, at *3 (D.N.J. Apr. 11,

2019) (citation omitted). The court determined that “[t]o

conclude otherwise would be inappropriate at this early stage of

the proceedings where the Court only considers the pleadings and

where the parties have not had the benefit of discovery.” Id.

Finally, in Francis v. General Revenue Corp., Judge Cogan

granted summary judgment to the plaintiff, holding that a

similarly worded letter was deceptive. See No. 18-CV-6955

(BMC), 2020 WL 4586392, at *1 (E.D.N.Y. Aug. 10, 2020). The

court noted the disagreement among other courts on this issue.

Ultimately, the court found that it was acceptable to list the

collection charges, but deceptive to hide the fact that they

were contingent:

I do not consider a reasonable, contingent,

percentage-based collection fee to be improper in and

of itself given plaintiff’s broad obligation to pay

“all attorney’s fees and other reasonable collection

costs.” However, defendant’s failure to disclose the

contingent nature of the collection cost – instead

representing the fee as an out-of-pocket expense that

the creditor has already paid, or at least definitely

will pay in the future – was deceptive.

Id. at *4 (citation omitted).

The court further stated,

[T]he collection letter represents the collection fee

as definite when it is not. Defendant is entitled to

$1,680.04 if and only if it successfully collects the

entire balance. If the collection letter explained

that the collection fee was contingent on the

collected amount, there would likely be no violation.

But the lack of disclosure renders the collection

letter deceptive to the least sophisticated consumer,

who “could easily misinterpret the defendant’s letter

to mean that the plaintiff actually owed $1,680.04 in

collection costs, when in fact she did not.”

Id. (quoting Annunziato v. Collecto, Inc., 207 F. Supp. 3d 249,

261 (E.D.N.Y. 2016)).

Judge Woods’s reasoning in Ossipova does carry some weight.

Reasonable collection costs become due immediately upon default,

they are calculated as a percentage of the principal and

interest, and the lender is under no obligation to accept a

reduced amount; thus, it is arguably not misleading to say that

the contingency fee is presently due.

But Judge Cogan’s reasoning is also persuasive: It is

inaccurate to suggest that a lender has already incurred or paid

the collection fee or that it is otherwise non-contingent. And

the court is likewise persuaded by Judge Linares’s decision to

allow for a better-developed record before ruling on the merits.

Moreover, the additional allegation here regarding the ED’s

indication of the amount presently due may distinguish this case

from Ossipova. Another additional issue in this case is the

asterisk and accompanying note. The note gestures toward

explaining that the collection fee is contingent, but ultimately

stops well short of doing so.

In her surreply,11 plaintiff asks the court to make a

“preliminary conclusion at the motion to dismiss stage: that

Defendants’ collection letter falsely represented as immediately

due a total balance not yet owed and falsely misrepresented that

the Department of Education had authorized or approved of the

amount demanded.” (ECG No. 32-1, at 10.) In denying the motions

to dismiss, the court does note that its conclusion on the

merits is indeed preliminary.12

d. Coast’s Argument Regarding Non-Involvement

Coast separately argues that because it did not send the

letter, and because plaintiff has not alleged that Coast

controlled the sender (PRI), plaintiff fails to state a claim as

to Coast. The court disagrees.

One of the essential elements of an agency relationship is

the existence of some degree of control by the principal over

11 The court GRANTS plaintiff’s motion to file a surreply (ECF

No. 32) because there is some merit to her argument that the

reply briefs presented new material and because the surreply was

helpful to the court.

12 The court may also need to revisit the preemption issue.

Under Judge Cogan’s analysis, the failure to disclose the

contingent nature of the collection fee was the crucial problem.

Because that case was decided under federal law (the FDCPA), it

did not implicate § 1098g. Here, if the case boils down to a

failure to disclose the contingent nature of the collection

cost, it could turn out that the claim is preempted. For now,

the court assumes that the failure to disclose the contingent

nature of the collection cost was fraudulent and that § 1098g

does not preempt fraudulent omissions (see note 4, supra).

the conduct and activities of the agent. Syl. Pt. 3, Teter v.

Old Colony Co., 441 S.E.2d 728, 730 (W. Va. 1994).

It is always incumbent upon one who asserts vicarious

liability to make a prima facie showing of the

existence of the relation of master and servant or

principal and agent or employer and employee.

However, once a prima facie showing has been made, it

is incumbent upon one who would defeat liability on

the basis of an independent contractor relationship to

show such fact.

Sanders v. Georgia-Pac. Corp., 225 S.E.2d 218, 222 (W. Va.

1976).

In West Virginia, whether the existence of an agency

relationship is a question of fact or law depends on whether the

facts are disputed:

When the facts relied upon to establish the existence

of an agency are undisputed, and conflicting

inferences can not be drawn from such facts, the

question of the existence of the agency is one of law

for the court; but if the facts pertaining to the

existence of an agency are conflicting, or conflicting

inferences may be drawn from them, the question of the

existence of the agency is one of fact for the jury.

All Med, LLC. v. Randolph Eng’g Co., 723 S.E.2d 864, 870 (W. Va.

2012).

Here, the letter at issue plainly states that PRI was

acting on Coast’s behalf in sending the letter. The language is

quoted in the complaint and the letter is incorporated by

reference. Accordingly, at this stage, and in light of the

other facts alleged, plaintiff is entitled to the reasonable

inference that PRI was acting as Coast’s agent. It is true that

the letter says PRI was acting as a subcontractor, but whether

an agency relationship existed remains to be seen on a more

developed record.

Iv. Conclusion

For the reasons stated above, the court denied PFC and

PRI’s motion to dismiss (ECF No. 11) and Coast’s motion to

dismiss (ECF No. 13) in its order of September 30, 2021.

The Clerk is directed to send a copy of this Memorandum

Opinion to counsel of record.

IT IS SO ORDERED this 4th day of November, 2021.

BNTER:

Raut O Dabo

David A. Faber

Senior United States District Judge

40