Opinion ID: 2828218
Heading Depth: 3
Heading Rank: 2

Heading: The “Disguised Claim” Theory

Text: In addition to its formal preemption argument, USA Funds argues that Bible’s state law claim is “preempted” because it is nothing more than a “disguised claim” for a violation of the HEA, and the HEA does not provide a private right of action. We considered and rejected this same theory in Wigod. There the defendant-lender referred to it as an “end-run” theory rather than a “disguised claim” theory. The difference is merely semantic. The defense theory in No. 14-1806 35 both cases is that the lack of a private right of action under a regulatory statute necessarily preempts or otherwise displaces a state law cause of action that makes the violation of that regulatory statute an element of the claim. This theory is mistaken at its core: “The absence of a private right of action from a federal statute provides no reason to dismiss a claim under a state law just because it refers to or incorporates some element of the federal law. To find otherwise would require adopting the novel presumption that where Congress provides no remedy under federal law, state law may not afford one in its stead.” Wigod, 673 F.3d at 581 (citation omitted). USA Funds attempts to distinguish Wigod on two grounds. First, it says there was no administrative enforcement scheme under the HAMP. That is simply not true as a matter of fact. See Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769, 773–74 (4th Cir. 2013) (describing administrative enforcement scheme under HAMP); Wigod, 673 F.3d at 556– 57 (same). Second, USA Funds contends that Wigod is distinguishable because there the Secretary of the Treasury had issued a directive saying that the HAMP must be implemented in compliance with state common law and statutes. See Wigod, 673 F.3d at 580. This does not distinguish Wigod either. We noted that the directive was additional evidence that federal law did not preempt state law. See id. (noting that Department of Treasury’s “tacit view of its program’s lack of preemptive force” was entitled to “some weight”). We did not suggest that our rejection of the end-run theory depended on this supplemental directive. (In fact, we discussed the supplemental directive in a different section in the opinion.) 36 No. 14-1806 If anything, there is even less reason to find preemption in this case because USA Funds voluntarily agreed to comply with the only federal requirements that Bible is attempting to enforce. In Wigod, by contrast, the plaintiff had brought claims against the defendant under state tort law in addition to her breach of contract claim. We reiterate the lesson from Wigod. The absence of a private right of action under federal law provides no reason to dismiss a state law claim just because the claim refers to or incorporates some element of the federal law. Congress’s decision not to supply a remedy under federal law does not necessarily mean that it also intended to displace state law remedies. The lack of a private right of action under the HEA itself does not preclude Bible’s breach of contract claim.