ALBERT v. OSI EDUCATION SERVICES INC

Full title: Ikechi Kallys Albert, Plaintiff, v. OSI Education Services, Inc., et al.…

Court: United States District Court, D. Minnesota

Date published: Mar 11, 2004

Civil No. 03-6122 (RHK/AJB) (D. Minn. Mar. 11, 2004)

Opinion

Civil No. 03-6122 (RHK/AJB)

March 11, 2004

Ikechi Kallys Albert, Minneapolis, Minnesota, for Plaintiff

Mary L. Trippler, Minnesota, for Defendant

MEMORANDUM OPINION AND ORDER

RICHARD KYLE, District Judge

Introduction

This matter comes before the Court on a motion to dismiss. Plaintiff Ikechi Kallys Albert has sued Defendants OSI Education Services, Inc., Great Lakes Higher Education Guaranty Corp., and the United States Department of the Treasury ("the Treasury") in this pro se action regarding the collection of Albert's student loan through an offset of his federal tax refund. The Treasury has moved to dismiss on the ground that the Court lacks jurisdiction to grant the relief requested. For the reasons set forth below, the Court will grant the Treasury's motion.

Background ¹

1 While the Court sets forth the facts as alleged in the Complaint, it makes no presumption regarding the truthfulness of these facts.See Osborn v. United States, 918 F.2d 724, 729-30 (8th Cir. 1990).

In August 1995, Ikechi Kallys Albert applied for a Stafford student loan. (Compl. ¶ i.) The application was approved, and over the next two years, Albert received disbursements totaling $6,345 to help defray the cost of his studies at Minneapolis Community and Technical College. (Id.) The $6,345 in principal was subject to a variable interest rate. (Id. ¶ ii.) Albert dropped out of school in 1998. (Id. ¶ iv.)

On February 14, 2000, Albert was provided with a pre-default payment history by the Great Lakes Higher Education Corp. ("Great Lakes"). (Id. ¶ iv.) Upon receiving this document, he noticed certain charges that had not been disclosed to him at the time he took out the loan. (Id. ¶ v.) For instance, the payment history listed $598.41 as the "[i]nterest amount purchased," $269.61 as an "[i]nterest cap," and 21.29% as the "percentage rate of interest." (Id.) These amounts were not part of the terms and conditions of the loan. (Id.) While Albert contacted Great Lakes on several occasions, it did not provide him with documentation clearly describing his indebtedness. (Id. ¶ x.)

On August 5, 2002, Albert received a letter indicating that "[t]he US Department of [E]ducation (ED) holds a claim against you for your defaulted student loan[s] which it intends to collect by offset." (Id. ¶ xiii.) He was directed to send payment to OSI Education Services, Inc. ("OSI"). (Id.) According to the letter, the Department of Education intended to collect $7,347 in principal and interest from Albert's federal income tax refund. (Id. ¶ xiv.) A month later, Albert received a "notice about wage withholding" indicating a total indebtedness of $8,786.85. (Id. ¶ xv.) Confronted with these varying figures, Albert contacted Great Lakes and OSI. (Id. ¶ xvi.) Neither company, however, was able to resolve his confusion. (Id.)

Despite Albert's strong objection, the Treasury began recapturing his federal yearly income tax refund and sent that money-the so-called "offset"-to the Department of Education in partial satisfaction of the debt. (Id. ¶ xix.) Despite making numerous demands, however, Albert did not receive a proper accounting of either his total indebtedness or the offset amount. (Id. ¶ xxii.) As his financial picture worsened, Defendants provided Albert's name to national credit bureaus and likely future lenders. (Id. ¶ xxiv.) As a result, his ability to secure credit, loans, and other financial assistance was dramatically reduced. (Id. ¶ xxv.)

Standard of Decision

Federal Rule of Civil Procedure 12(b)(1) provides that a party may make a motion for dismissal based on lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). Through such a motion, a party may challenge the sufficiency of the pleading on its face or may challenge the factual truthfulness of its averments. See Titus v. Sullivan 4 F.3d 590, 593 (8th Cir. 1993). The Court may consider matters and submissions outside the pleadings and makes no presumptions of truthfulness of the allegations of the Complaint. Osborn, 918 F.2d at 729-30. The party asserting jurisdiction has the burden of establishing its existence. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).

Analysis

The Treasury has moved to dismiss Albert's claim against it on the ground that the Court lacks subject matter jurisdiction. While Albert concedes that "the Plaintiff may not strictly oppose the dismissal of [the Treasury] as a party to the instant action" (Pl.'s Mem. in Opp'n to Mot. to Dismiss at 3), he nonetheless argues that dismissal would violate certain statutory and constitutional rights.

Through his Complaint, Albert has challenged the collection of his student loan through the offset of his federal tax refund. By statute, federal agencies owed a past-due, legally enforceable debt by any person are required to inform the Treasury of the monies owed. 31 U.S.C. § 3720A(a). Upon receiving such information, the Treasury determines whether the debtor is owed a federal tax refund.Id. § 3720A(c). If a refund is payable, the Treasury must reduce or offset the debtor's refund by an amount equal to the debt.Id.

The Treasury argues that Congress has precluded review of its actions with respect to the offsetting of federal income tax refunds. Under 26 U.S.C. § 6402(f),

No court of the United States shall have jurisdiction to hear any action, whether legal or equitable, brought to restrain or review a reduction [of a federal income tax refund]. . . . This subsection does not preclude any legal, equitable, or administrative action against the Federal agency . . . to which the amount of such reduction was paid This statute obviates the courts' subject matter jurisdiction over cases in which "plaintiffs seek review of the United States' interception and reduction of the plaintiffs' tax refunds."

Satorius v. United States Dept. of Treasury, 671 F. Supp. 592, 594 (E. D. Wis. 1987).

Albert's claim against the Treasury falls squarely within this jurisdictional limit. The only activity of the Treasury challenged by Albert is its processing of his offset. While Albert contends that this leads to an unconstitutional result, the Court disagrees.²

To function efficiently, the tax intercept program must avoid the administrative burden of subjecting the Secretary of Treasury to challenges concerning refunds . . . . The tax intercept program's limits on jurisdiction to suits against the agency to which the debt is owed is not unconstitutional because the program provides access to a judicial challenge to government interception of overpayments. Restricting judicial review while the debt is processed, so long as it affords to those affected reasonable opportunity to be heard and present evidence, does not offend against due process.

Richardson v. Baker, 663 F. Supp. 651, 654-55 (S.D.N.Y. 1987).

2 Albert asserts that dismissal would violate: (1) 26 U.S.C. § 7482; (2) 42 U.S.C. § 1983; and (3) The Seventh Amendment to the United States Constitution. None of these provisions is relevant. Section 7482, which grants exclusive jurisdiction to the United States Courts of Appeals to review Tax Court decisions, does not apply to this action. Likewise, § 1983 and the Seventh Amendment have no bearing here.

Albert remains free to pursue any and all remedies he may have against "the Federal agency . . . to which the amount of such [income tax refund] reduction was paid." 26 U.S.C. § 6402(f). He may not, however, point the guns of this lawsuit against the Treasury.

Conclusion

Based on the foregoing, and all of the files, records and proceedings herein, IT IS ORDERED that Defendant United States Department of the Treasury's Motion to Dismiss (Doc. No. 5) is GRANTED. The Complaint (Doc. No. 1) against Defendant United States Department of the Treasury is DISMISSED WITH PREJUDICE.