Maldonado v. Higher Education Loan Authority of the State of Missouri
- Vince Chhabria
- 3:24-cv-07850
- U.S. District Court · Northern District of California
- 4
In Maldonado v. MOHELA, Judge Chhabria denied MOHELA’s motion to dismiss, allowing claims involving immunity, alleged credit harm, and class allegations to proceed.
The ruling affects the plaintiffs and MOHELA: the case remains pending, MOHELA must answer within 14 days, and the class allegations remain in the case for now.
What happened
In Maldonado v. Higher Education Loan Authority of the State of Missouri, the plaintiffs sued MOHELA over allegations involving their student loans, credit reporting, unpaid balances, and unprocessed refunds. MOHELA asked the court to dismiss the case and to strike the class allegations.
The court ruled that MOHELA was not protected by Missouri’s sovereign immunity or by immunity claimed as a federal contractor. The court also found that the plaintiffs had sufficiently alleged actual harm under the California Consumer Credit Reporting Agencies Act. It denied MOHELA’s request to strike the class allegations, stating that concerns about overlap with another class settlement could be addressed later.
Judge Vince Chhabria denied MOHELA’s motion to dismiss and denied its request to strike the class allegations. He ordered MOHELA to file an answer within 14 days and continued the case-management conference to May 9, 2025.
The detailed version
- Maldonado v. Higher Education Loan Authority of the State of Missouri · No. 3:24-cv-07850
- Vince Chhabria
- Apr. 9, 2025
Background
The plaintiffs sued the Higher Education Loan Authority of the State of Missouri, identified as MOHELA. MOHELA moved to dismiss the case and asked the court to strike the class allegations. The opinion assumes familiarity with the parties’ facts, legal standards, and arguments, so it does not provide a complete account of the underlying claims.
Sovereign Immunity
The court held that MOHELA was not entitled to sovereign immunity as an arm of the State of Missouri under the Ninth Circuit’s test. The court emphasized MOHELA’s broad commercial activity as a loan servicer, including servicing federal loans for people who may have no connection to Missouri. The court also rejected MOHELA’s argument that its market-participant activities were irrelevant to whether it should be treated as an arm of the state.
The court separately held that MOHELA was not entitled to derivative sovereign immunity as a federal contractor. MOHELA had waived any immunity claim for work performed under one federal contract. Regarding another contract, MOHELA did not prove what challenged operations fell solely under that contract or that it had no discretion in designing the work and completely followed government specifications.
Alleged Harm Under the California Credit-Reporting Law
The court held that the plaintiffs sufficiently alleged “actual damage” under the California Consumer Credit Reporting Agencies Act. The plaintiffs alleged that they spent time contacting MOHELA to try to have their loans discharged, that their debt was reported to credit-reporting agencies, and that unpaid balances continued to appear on their accounts. They also alleged uncertainty about their loans and inability to access money because refunds had not been processed.
Class Allegations
The court denied MOHELA’s request to strike the class allegations. It stated that any administrative concerns about overlap between this case and the Sweet class-action settlement could be addressed at the class-certification stage.
Disposition
The court denied MOHELA’s motion to dismiss and denied its request to strike the class allegations. The court ordered MOHELA to file an answer within 14 days. It also continued the case-management conference from April 18, 2025, to May 9, 2025.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.