Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-01845/USCOURTS-casd-3_13-cv-01845-2/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SHYRIAA HENDERSON,

Plaintiff,

v.

UNITED STUDENT AID FUNDS, INC.,

Defendant.

Case No.: 13cv1845 JLS (BLM)

ORDER (1) GRANTING 

DEFENDANT’S MOTION FOR

SUMMARY JUDGMENT AND 

DENYING AS MOOT (2) 

PLAINTIFF’S RENEWED MOTION 

FOR CLASS CERTIFICATION AND 

(3) DEFENDANT’S MOTION TO 

STRIKE

(ECF Nos. 142, 158, 173)

Presently before the Court is Defendant United Student Aid Funds’ Motion for 

Summary Judgment (“MSJ”), (ECF Nos. 173, 183); Plaintiff Shyriaa Henderson’s 

Opposition to Defendant’s Motion for Summary Judgment (“Opp’n”), (ECF Nos. 210, 

212), and Defendant’s Reply in Support of Motion for Summary Judgment (“Reply”), 

(ECF Nos. 219, 221). Also before the Court are Plaintiff’s Renewed Motion for Class

Certification, (ECF No. 142), and Defendant’s Motion to Strike, (ECF No. 158). Having 

considered the parties’ arguments and the law, the Court GRANTS Defendant’s Motion 

for Summary Judgment, and therefore DENIES AS MOOT Plaintiff’s Renewed Motion 

for Class Certification and Defendant’s Motion to Strike.

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BACKGROUND

I. Factual and Procedural Background

Plaintiff first took out a student loan in January of 1993. (Opp’n 7.) The loan became 

delinquent in 2002, entered into default in 2003, and was rehabilitated in 2004. (Id.) 

Plaintiff took out a second student loan in 2007 on which she later defaulted. (Id.) Plaintiff

currently owes $6,100 across both loans. 

Defendant was the guaranty agency for Plaintiff’s loans, and purchased the claims 

to the defaulted loans in 2010. (Id.) Defendant hired Navient Solutions, Inc. (“NSI”) to 

service and collect on the defaulted loans, and Plaintiff subsequently received “a number 

of unsolicited phone calls, featuring artificial or prerecorded voices, to her wireless phone” 

attempting to collect on the defaulted loans. (Id.) Plaintiff never gave Defendant or any 

relevant entity prior express consent to call her cellular telephone with the use of an 

autodialer or prerecorded message. (Id.)

Plaintiff filed suit against Defendant on August 8, 2013 in the form of a putative 

class action for damages and injunctive relief under the Telephone Consumer Protection 

Act (“TCPA”), 47 U.S.C. §§ 227 et seq. (ECF No. 1.) Plaintiff subsequently amended her 

complaint, adding Defendants NSI and several collectors who contracted with NSI. (ECF 

No. 47.) Several months later, the newly added Defendants were dismissed for lack of 

jurisdiction. (ECF No. 81.) Discovery proceeded for over a year, at which point Plaintiff 

filed the currently pending Motion for Class Certification, (ECF No. 142), and Defendant 

filed the currently pending Motion for Summary Judgment, (ECF Nos. 173, 183). The 

parties jointly moved for one, consolidated hearing date for both motions, (ECF No. 180), 

which the Court granted, (ECF No. 181).

II. Defendant’s Relationship with NSI and the Collectors

Defendant is a non-profit guaranty agency working in the Federal Family Education 

Loan Program (“FFELP”). (Tharp Dep. 12:5–7, ECF No. 210-3.) Consistent with FFELP 

regulations, Defendant contracts with NSI for loan servicing work. (Tharp Dep. 15:8–11; 

Verbrugge Dep. 15:6–16, ECF No. 210-4.) The agreement between Defendant and NSI 

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states that the parties will act “in independent capacities and not as agents[,]” (Tharp Dep. 

Ex. 2, Fifth Restated and Amended Guarantee Services Agreement for United Student Aid 

Funds, Inc. (“Service Agreement”) art. III.A.1, ECF No. 183-3), and to that end permits 

NSI to hire subcontractors (the “Collectors”) independent of any objections or 

recommendations Defendant might have, (id. art. III.A–B; id. Ex. A, ¶ 5). This includes 

NSI’s ability to terminate Collectors, an ability the Service Agreement does not explicitly 

provide to Defendant, and an action Defendant has never taken. (See id. art. III.B; Tharp 

Dep. 65:16–70:16.)

The Service Agreement also provides Defendant the right to audit any Collector and 

to view copies of the Collector’s agreements with NSI. (Id. art. III.B.) Defendant forwards 

any consumer complaints it receives regarding NSI Collectors on to NSI, (Tharp Dep. 

49:7–11, 138:11–17), pursuant to Defendant’s internal guidelines, (see id. 100:3–21), and 

Defendant’s and NSI’s contractual relationship, (see Service Agreement art. III.B).

Additionally, “[a]t least quarterly” NSI has to provide to Defendant “[p]erformance data 

for the entire USA Funds portfolio of defaulted Loans and for each collection vendor, 

including collection vendor performance rankings[,]” and “[a] written report on borrower 

litigation relating to Loans . . . .” (Id. art. III.M.) Finally, Defendant requires “all collection 

vendors on first placements of defaulted Loans [to] be within 87% of the top performing 

collection agency on first placement of defaulted loans.” (Id.)

Separate agreements between NSI and the various Collectors govern the 

relationships between NSI and the Collectors. As the NSI-Collector relationships relate to 

Defendant, “[o]nce the Collectors collect on a defaulted loan, they transfer the collected 

monies to NSI, which then remits the payment to USAF.” (Opp’n 25.) “USAF, in return, 

pays NSI a monthly portfolio management fee for its role in servicing the loans and 

managing the Collectors.” (Id.) Both the Service Agreement and the NSI-to-Collector 

agreements require absolute compliance with federal law. (Service Agreement art. II.A.2; 

Verbrugge Dep. Ex. 3, art. III.B.)

/ / /

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LEGAL STANDARD

Under Federal Rule of Civil Procedure 56(a), a party may move for summary 

judgment as to a claim or defense or part of a claim or defense. Summary judgment is 

appropriate where the Court is satisfied that there is “no genuine dispute as to any material 

fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); 

Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Material facts are those that may affect 

the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A 

genuine dispute of material fact exists only if “the evidence is such that a reasonable jury 

could return a verdict for the nonmoving party.” Id. When the Court considers the evidence 

presented by the parties, “[t]he evidence of the non-movant is to be believed, and all 

justifiable inferences are to be drawn in his favor.” Id. at 255.

The initial burden of establishing the absence of a genuine issue of material fact falls 

on the moving party. Celotex, 477 U.S. at 323. The moving party may meet this burden by 

identifying the “portions of ‘the pleadings, depositions, answers to interrogatories, and 

admissions on file, together with the affidavits, if any,’ ” that show an absence of dispute 

regarding a material fact. Id. When a party seeks summary judgment as to an element for 

which it bears the burden of proof, “it must come forward with evidence which would 

entitle it to a directed verdict if the evidence went uncontroverted at trial.” See C.A.R. 

Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (quoting 

Houghton v. South, 965 F.2d 1532, 1536 (9th Cir. 1992)).

Once the moving party satisfies this initial burden, the nonmoving party must 

identify specific facts showing that there is a genuine dispute for trial. Celotex, 477 U.S. at 

324. This requires “more than simply show[ing] that there is some metaphysical doubt as 

to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 

586 (1986). Rather, to survive summary judgment, the nonmoving party must “by her own 

affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’ 

designate ‘specific facts’ ” that would allow a reasonable fact finder to return a verdict for 

the non-moving party. Celotex, 477 U.S. at 324; Anderson, 477 U.S. at 248. The nonCase 3:13-cv-01845-JLS-BLM Document 228 Filed 02/28/17 PageID.<pageID> Page 4 of

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moving party cannot oppose a properly supported summary judgment motion by “rest[ing] 

on mere allegations or denials of his pleadings.” Anderson, 477 U.S. at 256. 

ANALYSIS

Defendant moves for summary judgment on two grounds: (1) the Bipartisan Budget 

Amendment Act of 2015 created an exception to the TCPA which applies to Defendant in 

the present case, and (2) there is no basis here to impose vicarious liability on Defendant.

1

 

The Court addresses each argument in turn.

I. The TCPA, the Bipartisan Budget Amendment Act of 2015, and the Subsequent 

FCC Rulemaking

Defendant argues that the loans which are the subject of Plaintiff’s TCPA complaint 

constitute debt “owed to or guaranteed by the United States” such that they fall into a newly 

added exception to the general TCPA autodialer and artificial or prerecorded voice

prohibitions. Plaintiff does not dispute that the new exception may be retroactively applied 

to the loans here at issue, but instead argues that the loans are merely insured by the United 

States and therefore do not fall within the newly added exception. The Court first sets the 

stage by outlining the historic contours of the TCPA, the recent exception to the same

added by the Bipartisan Budget Act of 2015, and the August 2017 FCC Report and Order’s 

construction of the recent exception. The Court then addresses the parties’ arguments 

regarding the exception.

Prior to 2015, the TCPA flatly outlawed any call using an “automatic telephone 

dialing system or an artificial or prerecorded voice” unless such call was for “emergency 

purposes” or pursuant to “prior express consent.” See 47 U.S.C. § 227(b)(1)(A)–(B) (2012).

However, the Bipartisan Budget Act of 2015 (“Budget Act”) loosened this prohibition by 

amending the TCPA with an exemption for any call “made solely to collect on a debt owed 

 

1 Plaintiff nowhere argues that Defendant directly violated the TCPA. (Compare, e.g., First Am. Compl. 

¶ 19, ECF No. 47 (“Defendant USA Funds did not make collection calls to Plaintiff.”), with, e.g., Def. 

United Student Aid Funds, Inc. d/b/a USA Funds’ Answer to First Am. Compl. ¶ 19, ECF No. 49 (“USA 

Funds admits that it did not place any collection calls to Plaintiff.”).)

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to or guaranteed by the United States” (“Budget Act Amendment”). Bipartisan Budget Act 

of 2015, Pub. L. No. 114-74, 129 Stat. 584 (2015); 47 U.S.C. § 227(b)(1)(A)(iii). 

Additionally, the Budget Act required the FCC to “prescribe regulations to implement the 

[Budget Act’s] amendments” to the TCPA. Budget Act, 129 Stat. at 588.

On May 6, 2016 the FCC issued a Notice of Proposed Rulemaking regarding the 

relevant sections of the Budget Act, Rules and Regulations Implementing the Telephone 

Consumer Protection Act of 1991, Notice of Proposed Rulemaking, FCC 16-57 (May 6, 

2016), and several months later issued a Report and Order regarding the same (“FCC

Order”), In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act 

of 1991, 31 F.C.C. Rcd. 9074 (2016) (“In this Report and Order . . . , we take steps to 

implement Section 301 of the Bipartisan Budget Act of 2015 . . . .”). Of particular relevance 

to the present case, the FCC Order construed the phrase “owed to or guaranteed by the 

United States” as including “only debts for which the United States is currently the owner 

or guarantor of the debt[,]” TCPA Report and Order, 31 F.C.C. Rcd. at 9082, to the 

exclusion of debts merely “insured by the United States[,]” id. at 9082, n.54. Although the 

FCC declined to “define or determine with particularity exactly which debts are included 

in or excluded from this phrase[,]” it noted that “definitions applicable to each specific 

federal program”—“and any agency or judicial interpretations of them”—constitute 

“highly relevant evidence regarding whether a debt is ‘owed to or guaranteed by the United 

States.’ ” Id. at 9082–83.

In the present case, Plaintiff’s loans were issued pursuant FFELP, and are therefore 

governed by Title 20, Chapter 28, Subchapter IV Part B of the United States Code. Section 

1071 sets forth the purposes of the relevant code provisions, including “to pay a portion of 

the interest on loans to qualified students which are insured under this part,” § 1071(1)(C), 

and “to guarantee a portion of each loan insured under a program of a State or of a nonprofit 

private institution or organization which meets the requirements of section 1078(a)(1)(B) 

of this title[,]” § 1071(1)(D). Section 1078(a)(1)(B)—in relevant part—triggers federal 

interest subsidies when a post-June 20, 1967 loan “was made by an eligible lender and is 

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insured under a program covered by an agreement made pursuant to subsection (b) of this 

section.” Subsection (b) is activated when there a valid agreement between the Secretary 

of Education and “[a]ny State or any nonprofit private institution” pursuant to the 

Secretary’s “determin[ation] that the student loan insurance program” meets any of several 

relevant criteria. § 1078(b)(1); see also generally § 1078(b)(1)(A)–(U).

Defendant argues that the statutory text governing the FFELP contains both a 

guarantee and insurance component which apply here, that Plaintiff makes too much of the 

FCC’s Order, and that “no matter how [the government’s] role is described, it is ultimately 

responsible for repayment of defaulted loans.” (Reply 2.) Plaintiff counters that the 

particular word used to describe the FFELP parties’ relationship does, in fact, matter, and 

that USAF itself has many times noted that it is “a non-profit guarantee agency working 

with federally insured student loans . . . .” (Opp’n 9 (quoting MSJ 1).) Ultimately, the Court 

agrees with Plaintiff.

As an initial matter, FCC final orders are not reviewable by this Court, and therefore 

are binding if they directly speak to a particular issue. See Pac. Bell v. Pac W. Telecomm, 

Inc., 325 F.3d 1114, 1125 (9th Cir. 2003). And although Defendant makes much of the fact 

that Plaintiff’s entire argument against applying the Budget Act Amendment to this case

hinges on a single footnote, there is no reason a footnote cannot be outcome determinative 

of an issue. Further, Defendant’s argument conspicuously avoids the underlying context of 

the FCC Rulemaking. The Budget Act Amendment required the FCC to “prescribe 

regulations to implement the amendments[,]” specifically including the newly minted 

exception for debts “owed to or guaranteed by the United States.” FCC Order, 31 F.C.C. 

Rcd. at 9074–75. And in the FCC’s Order it explicitly noted and accounted for the tension 

of “balanc[ing] the importance of collecting debt owed to the United States and the 

consumer protections inherent in the TCPA.” Id. at 9075 (footnote omitted). In this, the 

FCC was quite clear: “The measures we adopt today implement Congress’s mandate to 

ensure the TCPA does not thwart important calls that can help consumers avoid debt 

troubles while preserving consumers’ ultimate right to determine what calls they wish to 

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receive.” Id.2 Accordingly, it is clear that the FCC was well aware of the potential for any 

of the various Order provisions to expand or contract TCPA liability, and the corresponding 

importance to both the public and the government of any such changes.

Despite this general backdrop, Defendant argues that the language in the FCC 

footnote declining to expand the scope of the Amendment to “insured” debts “is a statement 

that the issue was not examined at all.” (Reply 4.) But this argument lacks support in either 

the text of the footnote or the balance of the FCC Order. Id. at 9083, n.54 (“We, therefore, 

determine that debts insured by the United States are not included in the language of the 

Budget Act amendments; only debts owed to or guaranteed by the United States are 

included in the language of the Budget Act amendments.” (emphasis added)). Compare 

id., and id. at 9083 (“We clarify that the debt must be currently owed to or guaranteed by 

the federal government at the time the call is made.” (emphases original)), with, e.g., id. at 

9080, n.43 (“Because we lack a developed record on the point, we do not formally define 

‘delinquent’ or ‘delinquency.’ ”). Accordingly, Defendant’s argument here fails.

Defendant’s final argument is that, “unlike the Budget Act Amendment itself,” the 

“agency rule does not have retroactive effect” and therefore Defendant here falls within the 

Amendment’s exception for purposes of this suit. (Reply 4.) Specifically, Defendant asserts 

that the Supreme Court’s statutory retroactivity analysis set forth in Landgraf v. USI Film 

 

2

See also id. at 9078 (“Consumer response to the NPRM reflects the public’s general dislike for robocalls 

and their desire for the Commission to provide them greater protection against unwanted calls. Over 

15,700 individuals filed comments directly in the record. Over 12,500 of those comments expressed a 

general dislike for robocalls, while approximately 2,500 included more pointed comments regarding debt 

collection and calls by the federal government. In addition to the 15,700 individual comments, Consumer’s 

Union submitted a petition containing 4,800 signatures asking the FCC to stop robocalls to cellphones and 

Americans for Financial Reform submitted a petition containing 5,346 comments from members in 

support of the FCC’s proposed limitations on calls. Commenters also report consumers’ fear of scam 

robocalls, fear for their safety when receiving robocalls while driving, and fear that robocalls impact the 

physical and mental health of senior adults. One commenter states that because the Budget Act 

amendments could expose an additional 47 to 61 million people to robocalls that previously required 

consent, the Commission must consider these concerns and the increase in the magnitude of these 

concerns.”).

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Products, 511 U.S. 244 (1994), should also apply to agency rules; i.e., unless there is “clear 

congressional intent” to affect rights retroactively, an agency rule should only apply 

prospectively if otherwise “it would impair rights a party possessed when he acted, increase 

a party’s liability for past conduct, or impose new duties with respect to transactions 

already completed[,]” see id. at 280.

It may well be true that as a general proposition statutory retroactivity analysis 

should apply to final agency actions; however, a necessary predicate to the success of 

Defendant’s argument here is that the initial Amendment’s exception for debts “owed to 

or guaranteed by the United States” was intended to include “government-insured” loans 

as well. To this end, Defendant offers evidence that the statutory scheme sometimes uses 

“guarantee,” “owed,” and “insured,” interchangeably, and that the United States 

Department of Education issued a report prior to the passage of the Budget Act Amendment 

arguably lobbying for an exception for any servicer of a loan implicating federal 

government reimbursement. (Reply 3–4.) But this ignores the plain language of the 

Amendment, the previously discussed careful calibration of the FCC Order (which the 

Court may examine as persuasive authority), and the fact that our own circuit has 

conspicuously noted the difference between the varying “layers” of FFELP guarantees and 

insurances. Chae v. SLM Corp., 593 F.3d 936, 939 (9th Cir. 2010) (summarizing three 

layers of FFELP transactions—(1) borrower to lender; (2) guaranty agency to lender; and 

(3) Department of Education to guaranty agency—each of which offers an opportunity for 

the relevant debtee to contact the initial borrower and obtain repayment). Presented with 

such evidence, the Court declines to depart from the plain language of the statute.

In sum, the Court concludes that the new exception to the TCPA created by the 

Budget Act Amendment applies solely when the calls are made during a period in which 

the United States’ obligations as the ultimate guarantor or debtee have been triggered and 

are active.

/ / /

/ / /

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II. Vicarious Liability

In 2013, the FCC clarified that the “TCPA contemplates that a seller may be 

vicariously liable under agency principles for violations of section 227(b) . . . .” In re DISH 

Network, LLC, 28 F.C.C. Rcd. 6574, 6590 n.124 (2013); see also Thomas v. Taco Bell 

Corp., 582 F. App’x 678, 679 (9th Cir. 2014) (quoting the same). The FCC further 

instructed that federal courts should turn to the federal common law of agency, and that 

vicarious liability under the TCPA could be established by “a broad range of agency 

principles, including not only formal agency, but also principles of apparent authority and 

ratification.” In re DISH Network, LLC, 28 F.C.C. Rcd. at 6584; see also Gomez v. 

Campbell-Ewald Co., 768 F.3d 871, 877–88 (9th Cir. 2014), aff’d, 136 S. Ct. 663 (2016), 

as revised (Feb. 9, 2016).

In the present case, Defendant argues that it may not be held liable under any theory 

of vicarious liability. Plaintiff argues that Defendant may be held liable under three theories 

of vicarious liability: (a) “classical” agency via subagency; (b) implied actual authority; 

and (c) ratification. The Court addresses each theory in turn.

A. “Classical” (Express Actual Authority and Subagency)

An entity may be liable for actions it did not itself take when the unlawful acts were 

performed by an agent of the entity. See generally Restatement (Third) of Agency (2006).

“An agent is one who ‘act[s] on the principal’s behalf and subject to the principal’s 

control.’ ” United States v. Bonds, 608 F.3d 495, 506 (9th Cir. 2010) (citing Restatement 

(Third) of Agency § 1.01)). “To form an agency relationship, both the principal and the 

agent must manifest assent to the principal’s right to control the agent.” Id. This in turn 

implicates “the degree of control exercised by the principal over the activities of the agent.” 

In re Coupon Clearing Serv., Inc., 113 F.3d 1091, 1099 (9th Cir. 1997). Agency is not 

established when “control may be exercised only as to the result of the work and not the 

means by which it is accomplished[;]” in such a case “an independent contractor 

relationship exists.” Id.

/ / /

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Plaintiff asserts that NSI was Defendant’s agent for purposes of hiring contractors, 

(Opp’n 11–13), and that pursuant to that agency relationship “NSI had actual authority 

from USAF to hire the Collectors as subagents[,]” (id. at 15). Defendant argues that NSI is 

merely an independent contractor: “USAF contracts with NSI to handle its collection 

efforts, and NSI is permitted to retain subcontrators . . . to assist.” (Reply 11.) The Court 

agrees with Defendant.

As noted above, to succeed in proving an agency relationship a party must show an 

alleged principal’s right to control more than just the result of an alleged agent’s work, 

“specifically, the manner and means of the [activities] they conducted.” Thomas v. Taco 

Bell Corp., 879 F. Supp. 2d 1079, 1084 (C.D. Cal. 2012), aff’d, 582 F. App’x 678 (9th Cir. 

2014). In the present case, the evidence indicates that Defendant controlled only the 

outcome of NSI’s work, rather than the manner and means by which it was accomplished.

As an initial matter, Defendant contracted with NSI for approximately twelve services, 

(Service Agreement Ex. A), only one of which is at issue in this case. For the service here 

at issue, NSI was not “required to use any particular subcontractor recommended by USA 

Funds[,]” (id. art. III.B), and Defendant was neither permitted to change the conduct of nor

explicitly granted a contractual right to terminate any NSI-hired Collectors, (see id.; Tharp 

Dep. 65:16–70:16). This follows naturally from the fact that Defendant and NSI structured 

their relationship “[a]s independent contractors” without “any right to make commitments 

of any kind or to create any obligation for or on behalf of the other without the prior written 

consent of the other party,” except in limited circumstances. (Service Agreement art. 

III.A.1.) And while Defendant and NSI met “annually to review the previous year’s 

experience and to discuss and share ideas and to communicate USA Funds’ desired vision 

regarding the philosophies and strategies for defaulted Loan collections for the upcoming 

fiscal year[,]” the resulting yearly plan NSI was to produce could only be reviewed by 

Defendant “for compliance with the Act and [the preexisting] Agreement.” (Id. art. III.M.) 

Even consumer complaints Defendant received would be forwarded on to NSI, (Tharp Dep. 

49:7–11, 138:11–17), pursuant to Defendant’s internal guidelines, (see id. 100:3–21), and 

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Defendant and NSI’s contractual relationship, (see Service Agreement art. III.B).3 This 

evidence strongly suggests that Defendant did not maintain sufficient control over NSI’s 

activities to constitute an agency relationship.

Plaintiff’s strongest argument to the contrary is that “[a]t least quarterly” NSI had to 

provide to Defendant “[p]erformance data for the entire USA Funds portfolio of defaulted 

Loans and for each collection vendor, including collection vendor performance 

rankings[,]” and “[a] written report on borrower litigation relating to Loans . . . .” (Id. art. 

III.M.) Additionally, if one of Defendant’s audits revealed low scores for a particular 

Collector, Defendant could submit a recommendation for either “suspension of placement 

to a given vendor or a decrease in placements over a given time period . . . .” (Verbrugge 

Dep. 41:21–25.) However, reviewing NSI and its Collectors’ work and making 

recommendations for improvement does not constitute control over the manner and means 

by which NSI and its Collectors achieve results for Defendant. NSI was not required to—

and did not always—take Defendant’s post-audit recommendations. (Id. 42:15–43:7.) Of 

course, Defendant had the power to terminate NSI if it felt the contractual relationship was 

no longer beneficial. But to extend vicarious liability to such a circumstance would result 

in almost any long-term contract automatically creating an agency relationship unless the 

hiring entity turned a completely blind eye to the contract once it was signed. See Thomas, 

879 F. Supp. 2d at 1086 (“[K]nowledge, approval, and fund administration do not amount 

to controlling the manner and means of the [TCPA-violating] campaign.”). Along these 

same lines, that here Defendant required “all collection vendors on first placements of 

defaulted Loans [to] be within 87% of the top performing collection agency on first 

placement of defaulted loans[,]” (Service Agreement art. III.M), does not exhibit sufficient 

 

3 This in turn reveals the common-sense meaning of Defendant’s and NSI’s contractual provision that

Defendant would “[p]rovide prompt direction to [NSI], as required or requested, in resolving issues that 

arise from Lenders, Educational Institutions, and Borrowers.” (Service Agreement art. IV.2.) Defendant 

did not handle complaints regarding collectors; therefore, the only reasonable inference regarding this 

lone contractual provision is that Defendant would be available to NSI if a particular entity or person had 

a question the only answer to which was within the sole possession of Defendant.

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control to establish an agency relationship. NSI maintained the ability to use (and 

terminate) any Collector of its choosing, an ability the Service Agreement did not provide 

to Defendant. Thus, Defendant’s requirement that newly defaulted loans be serviced by the 

upper echelon of Collectors was affected in the ultimate sense entirely by NSI’s 

independent decisionmaking as to the Collectors it used.4 

Even assuming that NSI possessed actual authority from Defendant to hire 

Collectors as subagents, an agent still may only act pursuant to authority actually granted 

by the principal or authority the agent “reasonably believes” was granted by the principal.

Restatement (Third) of Agency § 2.01. In other words, even if Defendant authorized NSI

as its agent to hire Collectors, some of whom ultimately violated the TCPA, it does not 

necessarily follow that Defendant granted NSI authority to hire Collectors who would 

violate the TCPA. Plaintiff argues that Defendant’s yearly audits of the NSI-hired 

Collectors amounted to a conferral of actual authority to the Collectors to engage in TCPA 

violations, but offers no evidence that the audits monitored TCPA compliance at all. 

(Opp’n 15.) In fact, most audits Defendant performed were federally mandated under the 

FFELP and thus had nothing to do with the TCPA. (E.g., Tharp Dep. 76:1–14.) This is 

unsurprising, because, as previously discussed, Defendant’s countervailing evidence 

shows that as against the NSI-hired Collectors Defendant had no ability to change their

conduct, take direct adverse action against them, or handle consumer complaints against 

them. (Supra note 3 and accompanying text.) In sum, Plaintiff has not shown sufficient 

 

4

It is even less likely that the Collectors constituted subagents of Defendants. “A person appointed by an 

agent to act on behalf of the agent’s principal is a subagent if the appointing agent has agreed with the 

principal that the appointing agent shall be responsible to the principal for the agent’s conduct.”

Restatement (Third) Of Agency § 3.15, cmt. b. Here, the Service Agreement explicitly provides that NSI 

“shall be responsible for performance of subcontracting arrangements with respect to all or any portion of 

this Agreement in accordance with the terms and conditions of this Agreement and the [relevant federal 

and state] requirements . . . .” (Service Agreement art. II.B); see Lushe v. Verengo Inc., No. CV 13-07632 

AB R, 2014 WL 5794627, at *5 (C.D. Cal. Oct. 22, 2014) (finding triable issue of fact, even though the 

“evidence [wa]s not overwhelming,” as to agency and sub-agency relationship because the defendant 

“reviewed, edited, and provided input” for calling scripts, the defendant would review the “call 

recordings,” and the relevant service agreements did not stipulate that the parties “would perform the 

contract in compliance with all applicable federal and state law”). 

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control by Defendant over the NSI-hired collectors or the methods by which NSI 

accomplishes the goals set forth in Defendant’s and NSI’s service contract to create a 

triable issue of fact as to liability under “classical” agency principles of express actual 

authority and subagency.

5

B. Implied Actual Authority

Assuming the existence of an agency relationship between Defendant and NSI and 

a subagency relationship between NSI and the NSI-hired Collectors, Plaintiff again 

attempts to show that because the NSI-hired Collectors were permitted to take certain 

actions affecting Defendant’s legal rights it was therefore reasonable for the Collectors to 

assume they had implied actual authority to act directly on Defendant’s behalf. (Opp’n 19–

20.) Specifically, Plaintiff argues that the NSI-hired Collectors were permitted to accept 

payments on Defendant’s behalf, and to offer extensions on payment deadlines without 

first contacting Defendant. However, the unremarkable fact that the NSI-hired Collectors 

were permitted to perform their jobs pursuant to their exclusive contracts with NSI—i.e., 

accept payments satisfying the debtors’ underlying debts as instructed by NSI—does not

confer implied actual authority for the Collectors to act as agents for Defendant, nor to 

breach the TCPA in so doing. See Restatement (Third) of Agency § 8.09 (“An agent’s 

interpretation of a principal’s manifestations and understanding of a principal’s objectives 

must be reasonable.”). And Plaintiff’s argument that when Defendant’s yearly audit 

indicated no problems with a NSI-hired Collector Defendant therefore “approve[d]” of the 

 

5 Plaintiff’s citation to Aranda v. Caribbean Cruise Line, Inc., 179 F. Supp. 3d 817 (N.D. Ill. 2016)—

which Plaintiff characterized at oral argument as speaking directly to a defendant’s liability for mere 

“willful ignorance” of potential TCPA violations—aside from being out of circuit, is readily 

distinguishable. Although the Aranda Court found a genuine issue of material fact concerning a finding 

of actual authority, that was because the relevant contractual agreements required the subcontractor to 

provide one of the defendants with “an exact telephone script along with an exact audio file of each” 

communication, “and evidence in the record show[ed] that on at least one occasion, [the defendant’s]

attorneys proposed edits to the survey script being used.” Id. at 832. Further, there was sufficient evidence 

to suggest that several of the defendants were alter egos, id., and thus enjoyed a much closer relationship 

than the parties here.

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Collector’s processes, procedures, and collection efforts is similarly unavailing. (Opp’n 

20.) As previously mentioned, supra Section II.A, there is no indication that Defendant’s 

audits even encompassed TCPA compliance. And even if they did, the fact that 

Defendant’s audits of particular Collectors did not reveal any violations even though they 

allegedly were, in fact, occurring, is insufficient to establish a reasonable belief on the part 

of those NSI-hired Collectors that Defendant impliedly granted them actual authority to 

breach the TCPA. In sum, as above, Plaintiff has not produced sufficient evidence to create 

a triable issue of fact as to an implied actual authority theory of vicarious liability.6

C. Ratification

Plaintiff’s final argument is that “even if the Collectors were not in an agency 

relationship with USAF (or were acting outside its scope), a jury could easily find that 

USAF ratified their conduct nonetheless.” (Opp’n 20.) However, Plaintiff’s argument 

directly ignores controlling Ninth Circuit authority: “Although a principal is liable when it 

ratifies an originally unauthorized tort, the principal-agent relationship is still a requisite, 

and ratification can have no meaning without it.” Batzel v. Smith, 333 F.3d 1018, 1036 (9th 

Cir. 2003). Here, as addressed above, supra Section II.A–B, Defendant did not exercise 

sufficient control over the NSI-hired collectors to establish an agency relationship and a 

corresponding grant of either express or implied actual authority. And because there is no 

principal-agent relationship established between Defendant and NSI, there can be no 

corresponding principal-agent relationship established between Defendant and the NSIhired contractors via subagency. Accordingly, on these facts there can be no ratification.

/ / /

/ / /

 

6 Plaintiff also offers one instance of a potential TCPA violation being noted in an audit report, (see Tharp 

Dep. 90:10–16), and one instance of Defendant directing NSI or its Collectors to cease contact with a 

specific borrower in response to a lawsuit against Defendant, (Verbrugge Dep. 107:4–6). However, 

Plaintiff in neither instance identifies the relevant Collector nor explains why an isolated instance would 

create a reasonable belief of implied actual authority in the contacted Collector, let alone other, distinct 

Collectors.

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CONCLUSION

Given the foregoing, the Court GRANTS Defendant’s Motion for Summary 

Judgment for failure to establish a genuine issue of material fact regarding vicarious 

liability. Accordingly, the Court also DENIES AS MOOT Plaintiff’s Renewed Motion for 

Class Certification and Defendant’s Motion to Strike. Because this concludes the litigation 

in this matter, the Clerk SHALL close the file.

IT IS SO ORDERED.

Dated: February 27, 2017

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