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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK MELISSA POLESKY & LOIS POLESKY, Plaintiffs, v. SIMM ASSOCIATES, INC., & AMERICAN EDUCATION SERVICES Defendants. NOTICE OF MOTION TO DISMISS COMPLAINT PLEASE TAKE NOTICE that, upon the Memorandum of Law in support of this motion, as well as all papers previously submitted in these proceedings, defendant Pennsylvania Higher Education Assistance Agency d/b/a American Education Services (PHEAA) will move this Court, at the United States District Courthouse for the Eastern District of New York, on a date and time to be designated by the Court, for an Order dismissing plaintiffs Melissa Poleskys and Lois Poleskys claims pursuant to Fed. R. Civ. P. 12(b)(6). PLEASE TAKE FURTHER NOTICE that counsel for PHEAA hereby requests oral argument. Dated: April 23, 2012 Respectfully submitted, /s/ Adam B. Michaels Adam B. Michaels (AM 9120) PEPPER HAMILTON LLP The New York Times Building 620 Eighth Avenue New York, NY 10018 (212) 808-2700 Attorneys for defendant Pennsylvania Higher Education Assistance Agency d/b/a American Education Services 12 CV 848 (ADS)(AKT)

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK MELISSA POLESKY & LOIS POLESKY, Plaintiffs, v. SIMM ASSOCIATES, INC., & AMERICAN EDUCATION SERVICES Defendants. MEMORANDUM OF LAW IN SUPPORT OF MOTION TO DISMISS COMPLAINT I. INTRODUCTION In this lawsuit, Melissa Polesky and her mother, Lois Polesky, (Plaintiffs) complain of abusive, harassing and deceptive debt collection activity surrounding Melissa Poleskys delinquent student loan account. They have named two defendants, Simm Associates, Inc. (Simm) (a debt collector) and Pennsylvania Higher Education Assistance Agency d/b/a American Education Services (PHEAA) ( a quasi-governmental entity that services student loans), and assert statutory claims under the federal Fair Debt Collection Practices Act and New York General Business Law 349, and a common law claim for intentional infliction of emotional distress. PHEAA is entitled to an order dismissing it from this lawsuit because Plaintiffs make no allegation that PHEAA engaged in any wrongful conduct that could possibly make it liable to Plaintiffs. Every single factual allegation of wrongdoing in the Complaint concerns the activity of Simm, not PHEAA. PHEAA is not a debt collector; it does not engage in debt collection activities; it did not attempt to collect any debt from Ms. Polesky or her mother; and it did not hire any debt collector to pursue Ms. Polesky. 12 CV 848 (ADS)(AKT)

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Plaintiffs attempt to lump PHEAA with debt collector Simm with generalized references to Defendants in the Complaint is insufficient to state a plausible claim against PHEAA. Equally unavailing is Plaintiffs conclusory allegation that PHEAA can be vicariously liable for Simms debt collection activity under some agency theory given the absence of a single plausible factual allegation demonstrating an agency relationship. Simply put, Plaintiffs have pled no factual content to allow the Court to draw any reasonable inference that the PHEAA is liable for misconduct. Under Fed. Rule Civ. P. 12(b)(6), and in accordance with the pleading standards set forth in Bell Atl. Corp. v. Twombly and Ashcroft v. Iqbal, the Complaint should be dismissed against PHEAA for failure to state a claim that is plausible on its face. II. STATEMENT OF FACTS A. Procedural History Plaintiff Melissa Polesky and her mother, Plaintiff Lois Polesky, commenced this lawsuit on February 17, 2012 by filing a Complaint and Demand for Jury Trial in the United States District Court for the Eastern District of New York. See Compl. (Docket Item No. 1). They name Simm Associates, Inc. and Pennsylvania Higher Education Assistance Agency d/b/a American Education Services (sued as American Education Services) as defendants. Id. Simm is a debt collection firm based in Newark, Delaware. Id. at 4. PHEAA is a statutorily-created instrumentality of the Commonwealth of Pennsylvania, see 24 PA. STAT. ANN. 5101.15199.9, that, among other activities, services student loan accounts for lenders throughout the nation. See Edmond v. Am. Educ. Servs., 2010 U.S. Dist. LEXIS 114834, at ** 1 2 (D.D.C. Oct. 28, 2010). PHEAA agreed to waive service of the summons, requiring it to file and serve a responsive pleading by April 24, 2012, 60 days after Plaintiffs requested waiver. See Waiver of Service (Docket Item No. 3).

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Plaintiffs bring claims against both Simm and PHEAA for violation of the federal Fair Debt Collection Practices Act (Count 1), for violation New York General Business Law 349 (Count 2), and for intentional infliction of emotional distress (Count 3). B. The Factual Allegations of the Complaint Three telephone calls, all of which occurred on December 21, 2011, form the factual basis of Plaintiffs claims. The first telephone call was made by an unidentified individual from Simm to Melissa Polesky in the morning of December 21, 2011. Compl. at 15. During this call, Simm informed Ms. Polesky that a $14,000 balance was due and owing on her student loan account and that PHEAA, who had been servicing Ms. Poleskys loan account, would no longer accept payment, discuss the debt, or even work with Ms. Polesky anymore. Compl. at 16, 25. Simm advised that the only way that Ms. Polesky could deal with PHEAA again was to make a $42.00 payment to Simm that day, and that the payment must be made by check by phone or debit card. Compl. at 17 20. In response, Ms. Polesky reluctantly provided Simm her debit card number so that the payment could be made. Compl. at 24. Although the allegations of the Complaint concerning this phone call refer to a conversation between Ms. Polesky and Defendants, the other allegations in the Complaint reveal that this was a conversation between Ms. Polesky and Simm. See e.g., Compl. at 27 - 29. The second telephone call was a call that Ms. Polesky made to PHEAA right after her conversation with Simm for the purpose of verifying what Simm told her about her debt. Compl. at 26. During this call PHEAA told Ms. Polesky that Defendant SIMM was not truthful, that [PHEAA] can still accept payment, and that Plaintiffs could pay [PHEAA] instead of Defendant SIMM. Compl. at 27, 29. PHEAA also informed Ms. Polesky that she

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had various repayment options available to her, including, but not limited to a forbearance, despite Defendant SIMMs statements and representations to the contrary. Compl. at 28. The third call, which Ms. Polesky made to an account manager at Simm later that day, is the crux of this lawsuit. In this call, Ms. Polesky advised Simm that she no longer wanted to make the $42.00 payment and instructed Simm to remove her debit card information from her account. Compl. at 30 31. According to Plaintiffs, the account manager responded by lecturing Ms. Polesky in an abusive and harassing manner, threatened to ruin her credit, threatened to report her non-payment to the credit agencies, and refused to provide requested verification of the debt. Compl. at 32 56. Plaintiffs do not indicate whether Simm ultimately canceled the $42.00 payment or removed the debit card number from Ms. Poleskys file. Again, although the allegations of the Complaint concerning this third phone call sometimes refer to a conversation with Defendants, it is plain from other allegations that this was a conversation between Ms. Polesky and a Simm account manager. See Compl. at 30, 43, 45. III. ARGUMENT A. The Motion To Dismiss Standard To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint is plausible on its face when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Iqbal, 556 U.S. at 678. [L]abels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Id. (quoting Twombly, 550 U.S. at 555).

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The Second Circuit has explained that, after Twombly, the Courts inquiry under Rule 12(b)(6) is guided by two principles. Harris v. Mills, 572 F.3d 66 (2d Cir. 2009). First, although a court must accept as true all of the allegations contained in a complaint, that tenet is inapplicable to legal conclusions, and [t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. at 72. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss and [d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. Id. (quoting Iqbal, 556 U.S. at 679). B. Plaintiffs Do Not Plead Factual Content Sufficient To Allow The Court to Draw A Reasonable Inference That PHEAA Is Liable For Any Alleged Misconduct Reduced to its essence, this case is about (1) Simms allegedly false representation to Ms. Polesky in the morning of December 21, 2011 that the only option for her delinquent student loan was to make an immediate payment over the phone to Simm and (2) Simms allegedly abusive and harassing response to Ms. Poleskys attempt to cancel the payment later that day. Assuming this conduct is sufficient at the pleadings stage to make out a prima facie case for the causes of action alleged, the simple fact is that none of it concerns PHEAA. In contrast, the allegations in the Complaint that do concern PHEAA describe PHEAAs efforts to assist Ms. Polesky by advising her that the debt collector was not being truthful with her and that she had several options available with respect to her delinquent loan. These allegations hardly support the charges of wrongdoing that Plaintiffs level against PHEAA. Plaintiffs effort to lump PHEAA together with Simm by repeatedly describing the wrongdoing as having been conducted by Defendants must not be accepted. It is apparent when reading the Complaint as a whole that the alleged misconduct was committed solely by -5-

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Simm during its telephone calls with Ms. Polesky. The implication that PHEAA was somehow involved in these phone calls is not supported by a single pled fact and, contradicted by other paragraphs of the Complaint such as Paragraph 30 which, in describing the third phone call, plainly states that Plaintiffs placed a telephone call to Defendant SIMM and at that time spoke with an account manager. See In re Livent, Inc. Noteholders Sec. Litig., 151 F. Supp. 2d 371, 405 (S.D.N.Y. 2001) ([A] court need not feel constrained to accept as truth conflicting pleadings that make no sense, or that would render a claim incoherent . . . .). Further, when a plaintiff for the most part, fails to distinguish between the defendants but rather levels their conclusory allegations against the defendants collectively plaintiffs complaint should be dismissed in its entirety. Ram v. Wachovia Mortg., 2011 U.S. Dist. LEXIS 32392, at *36 (E.D. Cal. Mar. 25, 2011); see also Robbins v. Oklahoma, 519 F.3d 1242, 1249-1250 (10th Cir. 2008) (finding that Rule 8 was not satisfied where no distinction as to what acts are attributable to whom was provided); Tatone v. Suntrust Mortg., Inc., 2012 U.S. Dist. LEXIS 31413, at *25 (D. Minn. Feb. 13, 2012) (A complaint which lumps all defendants together and does not sufficiently allege who did what to whom, fails to state a claim for relief because it does not provide fair notice of the grounds for the claims made against a particular defendant. ); Trans World Airlines, Inc. v. 47th Street Photo, Inc., 1990 U.S. Dist. LEXIS 4227, at *18 (S.D.N.Y. Apr. 13, 1990) (Where there are multiple defendants, the complaint must also clearly identify the nature of each defendants alleged participation in the fraud. Generalized statements of wrongdoing concerning all defendants will not be sufficient.). As for Plaintiffs legal contention that PHEAA can be found liable for Simms alleged misconduct, see Compl. at 63, the Complaint lacks any allegation that might support vicarious liability. Plaintiffs allege no facts of an agency relationship, but instead offer only a

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conclusory upon information and belief allegation that PHEAA or possibly National Collegiate Trust (apparently the current owner of the loan, and not a defendant in the lawsuit) sold Ms. Poleskys student loan to Simm for collection. See Compl. at 11. Even if PHEAA was responsible for engaging Simm (which it was not, that would have been done by the owner of the loan), this allegation does not make out a case of agency under New York law. A plaintiff must allege more than conclusory allegations regarding an agency relationship. Howl v. Bank of Am., N.A., 2012 U.S. Dist. LEXIS 36733, at *19 (N.D. Cal. Mar. 19, 2012); see also Precision Assocs. v. Panalpina World Transp., 2011 U.S. Dist. LEXIS 51330, at *66 (E.D.N.Y. Jan. 4, 2011) (The plaintiffs agency theory is based on conclusory and generic statements that do not even provide the barest allegations as to the elements of the agency relationship.); Roggio v. City of Gardner, 2011 U.S. Dist. LEXIS 34731, at *18 (D. Mass. Mar. 30, 2011) (An assertion that a co-defendant was acting within the scope of an agency relationship must be supported by factual allegations.); Sandry v. First Franklin Fin. Corp., 2011 U.S. Dist. LEXIS 7814, at *8 (E.D. Cal. Jan. 20, 2011) (dismissing fraud claim against lender where allegations were directed to misdeeds of mortgage broker and conclusory allegations of agency were insufficient). C. PHEAA Cannot Be Liable To Plaintiffs Under The FDCPA Even if Plaintiffs were to have alleged facts sufficient to support any of their claims against PHEAA, their claim for violation of the Fair Debt Collection Practices Act must nevertheless be dismissed because that statute cannot apply to a loan servicer like PHEAA in these circumstances. The FDCPA prohibits certain conduct taken by debt collectors, as that term is defined in the act. However loan servicers are not debt collectors under the FDCPA unless the debt being serviced was in default at the time the servicer obtained it. Taggart v. Wells Fargo Home Mortg., Inc., 2010 U.S. Dist. LEXIS 102747, at *34 (E.D. Pa. Sept. 27, 2010) -7-

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(citing 15 U.S.C. 1692a(6)(F)). Here, because Plaintiffs do not allege (and, in fact, cannot allege) that Ms. Poleskys student loan was in default when PHEAA started servicing it, dismissal of the FDCPA claim is warranted. In Edmond v. Am. Educ. Servs., a District of Columbia case involving PHEAA and raising this identical issue, the court granted PHEAAs motion to dismiss the plaintiffs FDCPA claim because the complaint did not allege that the loan was in default when PHEAA acquired it. 2010 U.S. Dist. LEXIS 114834, at **14-17 (D.D.C. Oct. 28, 2010) (Absent an allegation that plaintiffs loan was in default when AES acquired it, AES is not a debt collector and thus is not subject to the FDCPA.). Other courts have similarly dismissed FDCPA claims against loan services in the absence of allegations that the loan was in default when the loan servicer began servicing it. See e.g., Brumberger v. Sallie Mae Servicing Corp., 84 Fed. Appx. 458, 459 (5th Cir. 2004) (per curiam) (affirming dismissal of FDCPA claim against student loan servicer because [b]y its plain terms the FDCPA does not apply absent an allegation that plaintiff was in default at the time Sallie Mae began servicing his loans); Ramirez-Alvarez v. Aurora Loan Servs., U.S. Dist. LEXIS 132536, at *5 (E.D. Va. July 21, 2010) (granting summary judgment for mortgage loan servicer, which was not a debt collector for purposes of the FDCPA because it received the debt in question while it was not in default); Mondonedo v. Sallie Mae, Inc., No. 07-4059, 2009 U.S. Dist. LEXIS 25497, 2009 WL 801784, at *5 (D. Kan. Mar. 25, 2009) (granting summary judgment for loan servicer which obtained the loans originated by [a bank] for servicing prior to default and is exempt from liability under the FDCPA). Plaintiffs seek to avoid the consequences of these cases by labeling PHEAA the original lender. see Compl. at 18, 19, 26. But PHEAA is not the original lender, PNC Bank

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is. See Promissory Note, annexed hereto as Exhibit A. But even if PHEAA were the original lender or some other type of creditor, the acts and omissions of the debt collectors retained by a creditor cannot be imputed to the creditor for purposes of the FDCPA, as multiple courts have concluded. See e.g., Frascogna v. Wells Fargo Bank, N.A., 2009 WL 2843284, at *3 (S.D. Miss. 2009) (citations omitted); Gary v. Goldman & Co., 180 F. Supp. 2d 668, 673 (E.D. Pa. 2002); Havens-Tobias v. Eagle, et al., 127 F. Supp. 2d 889, 897-98 (S.D.Ohio 2001); see also, McKinney v. Cadleway Properties, Inc., 548 F.3d 496, 500 (7th Cir. 2008) (The FDCPA applies only to debt collectors seeking satisfaction of debts from consumers; it does not apply to creditors.). IV. CONCLUSION For these reasons, and pursuant to Fed. R. Civ. P. 12(b)(6), the Court should dismiss each and every one of Plaintiffs claims against PHEAA.

Dated: April 23, 2012

Respectfully submitted, /s/ Adam B. Michaels Adam B. Michaels (AM 9120) PEPPER HAMILTON LLP The New York Times Building 620 Eighth Avenue New York, NY 10018 (212) 808-2700 Attorneys for defendant Pennsylvania Higher Education Assistance Agency d/b/a American Education Services

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EXHIBIT A

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK MELISSA POLESKY & LOIS POLESKY, Plaintiffs, v. SIMM ASSOCIATES, INC., & AMERICAN EDUCATION SERVICES Defendants. ORDER WHEREAS, upon consideration of defendant Pennsylvania Higher Education Assistance Agency d/b/a American Education Services Motion to Dismiss and supporting Memorandum of Law, it is hereby ORDERED that the motion is granted and plaintiffs Melissa Polesky and Lois Poleskys claims are dismissed. 12 CV 848 (ADS)(AKT)

SO ORDERED. ________________________

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK MELISSA POLESKY & LOIS POLESKY, Plaintiffs, v. SIMM ASSOCIATES, INC., & AMERICAN EDUCATION SERVICES Defendants. RULE 7.1 DISCLOSURE On April 23, 2012, I, Adam B. Michaels, electronically filed defendant Pennsylvania Higher Education Assistance Agency d/b/a American Education Services Notice of Motion to Dismiss, Memorandum of Law in Support of Motion, and Rule 7.1 Statement through the Courts ECF system which will send a notice of electronic filing to the registered participants as identified on the Notice of Electronic Filing (NEF). 12 CV 848 (ADS)(AKT)

Dated: April 23, 2012

/s/ Adam B. Michaels