Former SSH Students with loans from Student Loan Xpress have been waiting a long time for Judge Merryday to approve or reject the proposed class action settlement. During this time, a lot of work was being done behind the scenes to try to improve the proposed settlement for the students and to address two concerns that were raised by Judge Merryday. These efforts have now born fruit, and a revised, improved, proposed settlement agreement has been filed with the Court.
Under the terms of the original proposed settlement agreement, 10% of the debt forgiveness level was unconditional immediately upon final approval of the settlement with the remaining 90% being forgiven upon full payment by the student of the remaining amount. Under the new, revised settlement agreement, the unconditional debt forgiveness portion of the settlement has been increased from 10% to 50%. This benefits each and every class member and is of special benefit to class members that may not be able to complete all of the payments called for in the settlement agreement.
Tuesday, October 12, 2010
Friday, September 17, 2010
Silver State Helicopters, Student Loan Xpress and KeyBank Update
Here is all of the latest news for clients of mine who attended Silver State Helicopters and have student loans either with Student Loan Xpress or KeyBank
Student Loan Xpress
The long delayed class action settlement pending approval before United States District Court Judge Steven D. Merryday is now once again (in my opinion) moving forward towards approval. The revised settlement agreement will include a change that is favorable to all class members. I am prohibited by written confidentiality agreements from saying anything more specific about this change until the appropriate papers are filed in Court.
Pending before the court now is a Motion to add three additional subclass 3 representatives (former students that received 2 certifications while attending SSH) to resolve a conflict with the existing subclass 3 Representative that has held up the proposed settlement agreement.
KeyBank Litigation
For the latest information regarding the lawsuit filed by Pinnacle Law Group against KeyBank, as well as live links to briefs filed in the appeal in that case, click here: http://www.pinnaclelawgroup.com/news/silver_state_litigation.php
Here is a copy of the September 10, 2010 update posted on the Pinnacle Law Group website:
"Kilgore v. KeyBank
September 10, 2010 Update
On August 30, 2010 Pinnacle Law Group LLP filed the Opening Brief in the United States Court of Appeals for the Ninth Circuit seeking reversal of the District Court's Order dismissing the suit against KeyBank. A copy of the Opening Brief can be found here. On September 3, 2010 the Attorney General of the State of Montana filed an amicus brief ("friend of the court" brief) in support of our appeal. Since then, the Attorney Generals from the States of Idaho, Illinois, Nevada, Oklahoma and Oregon joined in Montana's brief. The Montana brief can be found here. On September 8, 2010 the National Consumer Law Center, the National Association of Consumer Advocates and the National Consumers League also filed an amicus brief in support of our Appeal which can be found here. We are very grateful for this support and believe it speaks volumes about the merit of our Appeal.
KeyBank will file an opposition to our Opening Brief and we will then file a reply brief to their opposition. Thereafter, the Ninth Circuit will set a hearing date on the Appeal (which likely will not happen until 2011). We will continually update this site as events warrant. As mentioned in the "July 2010 Update" (link below), if you have any questions, please contact us at keybanklitigation@gmail.com. However, because we are counsel for the proposed class, we are unable at this time to give you individual advice but we do want to give you an update on the status of the case so you and your lawyer can assess your individual situation. Thank you for your support."
Here is more information and advice from the Pinnacle Group web site (it's July 10, 2010 update) regarding the KeyBank litigation:
"Status of Action Against KeyBank
We are aware that many of you have been receiving letters from KeyBank(either directly or through your personal lawyers) threatening to put you back into collection and/or offering a settlement based on the number of flight hours you had
while enrolled at the school. Because we are counsel for the proposed class, we are unable at this time to give you individual advice as to how to respond to these letters but we do want to give you an update on the status of the case so you and
your lawyer can assess your individual situation. As most of you know, in April the action filed by our office against KeyBank on behalf of all California Silver State Helicopter students whose loans were funded by KeyBank and who were enrolled as of the date of school’s bankruptcy was dismissed by a California federal district court judge. In the settlement letter from KeyBank, its lawyers refer to the 23 page order from the court dismissing the case. What KeyBank fails to tell you, however,is that the court spent the first 15 pages of its opinion explaining how and why we properly
and adequately alleged that KeyBank aided and abetted SSH in violating federal consumer protection regulations and thereby violated California’s consumer protection law. The judge dismissed the case not because KeyBank is innocent of wrongdoing (actually, he concluded the exact opposite based on allegations which
KeyBank cannot refute) but because he believes federal banking law prevents you (as
opposed to the federal government) from suing a national bank. In evaluating your options this is a critical distinction (which presumably is why KeyBank did not disclose it in its letters). We are working on our Opening Brief for the Ninth Circuit Court of Appeal which will be filed on July 30, 2010. As part of the drafting process, we have been consulting with several legal experts on the issue the court relied on to dismiss the case – legally referred to as “federal peemption”. These experts are uniformly confounded by the judge’s ruling which is internally inconsistent and not well reasoned (which is very unusual for this judge who is a very well respected jurist). They believe that he dismissed the case not because he believes we have no case but because he knew this case presents unprecedented threshold legal issues that would almost certainly have been decided in the Ninth Circuit Court of Appeals no matter who prevailed at trial. By ruling the way he did at this point in the case,both the students and KeyBank will now get a final determination on these issues much sooner and with less expense than had we gone to trial and then faced an appeal. Their opinion – which we share – is supported by the fact that the Ninth Circuit is generally considered the most consumer protection oriented circuit court in the federal system and the district court judge has long been viewed a champion of individual rights. Shortly after we file our Opening Brief, several national consumer protection organizations and, hopefully several state attorneys general, will file what are referred to as “friend of the court” briefs (amicus curiae) arguing to the Court of Appeal why the district court judge was wrong and how his ruling, if upheld, will be detrimental for all consumers who borrow money from national banks. While of course we cannot predict how the Court of Appeals will rule, we and the appellate lawyers we are working with are optimistic about obtaining a reversal of the district court’s dismissal. With respect to KeyBank’s settlement proposal, the Bank is approaching settlement from the perspective that what you borrowed is money for flight hours rather than FAA certifications or job opportunities. Based on the information we have reviewed, this approach will result in the large majority of the students having to repay in excess of 80% of their principal loan balance plus most of the accrued interest. Moreover, KeyBank has not offered to reduce the interest rate going forward. By point of reference, the proposed SLX settlement that is before the court provides for between 30% - 75% loan forgiveness (depending on the number of FAA certifications received) and an across the board 3% interest rate reduction as well as a waiver of all interest accrued after SSH filed bankruptcy. If you choose to enter into a settlement with KeyBank, you will likely be forced to give up any right you may have to participate in our class action (this applies only to California students) or in any action that may be brought in any other state in the future if the Court of Appeal rules in our favor on the California action. Also, you will likely be forced to give up any defenses you may now have in the event you are unable to comply with the terms of your settlement agreement and KeyBank has to sue you for breaching the settlement agreement. Given KeyBank’s likely demand that you give up all of your rights, coupled with the miniscule amount of offered forgiveness (for most borrowers), we do not support such a settlement while the appeal is pending. However, before making any decision whether to settle, you should consult with your personal lawyer so that you fully understand your options. Finally, with respect to KeyBank’s letter threatening to end its “voluntary forbearance” and begin reporting your debt to the credit reporting agencies, because the case is still pending, you should have your individual lawyer inform the credit agencies in writing that this is a disputed debt and refer them to the court of appeal case. Also, because KeyBank continues to attempt to force this dispute into binding arbitration, it is very unlikely KeyBank will file a lawsuit against you in court (if they do, we will argue it has waived its arbitration argument). Based on the Master Promissory Notes we have reviewed, KeyBank will have to initiate arbitration against each of you individually with JAMS in each of your respective jurisdictions. KeyBank will have to initiate the arbitration and front 100% of expense of doing so. So be sure you advise your lawyer that you have been served with the arbitration papers. Also, please be sure to contact us immediately so we can provide you and your lawyer with whatever assistance we are able to. If you have any questions, please contact us at keybanklitigation@gmail.com. Again, however, we cannot give advice on an individual basis and even as to the class claims, at this time we represent only California students. Regardless of whether you are a California resident or a resident of another state, we strongly encourage you to contact your state’s Attorney General’s office (usually the department of consumer protection) and urge the AG to take action against KeyBank and support our efforts before the Ninth Circuit."
Student Loan Xpress
The long delayed class action settlement pending approval before United States District Court Judge Steven D. Merryday is now once again (in my opinion) moving forward towards approval. The revised settlement agreement will include a change that is favorable to all class members. I am prohibited by written confidentiality agreements from saying anything more specific about this change until the appropriate papers are filed in Court.
Pending before the court now is a Motion to add three additional subclass 3 representatives (former students that received 2 certifications while attending SSH) to resolve a conflict with the existing subclass 3 Representative that has held up the proposed settlement agreement.
KeyBank Litigation
For the latest information regarding the lawsuit filed by Pinnacle Law Group against KeyBank, as well as live links to briefs filed in the appeal in that case, click here: http://www.pinnaclelawgroup.com/news/silver_state_litigation.php
Here is a copy of the September 10, 2010 update posted on the Pinnacle Law Group website:
"Kilgore v. KeyBank
September 10, 2010 Update
On August 30, 2010 Pinnacle Law Group LLP filed the Opening Brief in the United States Court of Appeals for the Ninth Circuit seeking reversal of the District Court's Order dismissing the suit against KeyBank. A copy of the Opening Brief can be found here. On September 3, 2010 the Attorney General of the State of Montana filed an amicus brief ("friend of the court" brief) in support of our appeal. Since then, the Attorney Generals from the States of Idaho, Illinois, Nevada, Oklahoma and Oregon joined in Montana's brief. The Montana brief can be found here. On September 8, 2010 the National Consumer Law Center, the National Association of Consumer Advocates and the National Consumers League also filed an amicus brief in support of our Appeal which can be found here. We are very grateful for this support and believe it speaks volumes about the merit of our Appeal.
KeyBank will file an opposition to our Opening Brief and we will then file a reply brief to their opposition. Thereafter, the Ninth Circuit will set a hearing date on the Appeal (which likely will not happen until 2011). We will continually update this site as events warrant. As mentioned in the "July 2010 Update" (link below), if you have any questions, please contact us at keybanklitigation@gmail.com. However, because we are counsel for the proposed class, we are unable at this time to give you individual advice but we do want to give you an update on the status of the case so you and your lawyer can assess your individual situation. Thank you for your support."
Here is more information and advice from the Pinnacle Group web site (it's July 10, 2010 update) regarding the KeyBank litigation:
"Status of Action Against KeyBank
We are aware that many of you have been receiving letters from KeyBank(either directly or through your personal lawyers) threatening to put you back into collection and/or offering a settlement based on the number of flight hours you had
while enrolled at the school. Because we are counsel for the proposed class, we are unable at this time to give you individual advice as to how to respond to these letters but we do want to give you an update on the status of the case so you and
your lawyer can assess your individual situation. As most of you know, in April the action filed by our office against KeyBank on behalf of all California Silver State Helicopter students whose loans were funded by KeyBank and who were enrolled as of the date of school’s bankruptcy was dismissed by a California federal district court judge. In the settlement letter from KeyBank, its lawyers refer to the 23 page order from the court dismissing the case. What KeyBank fails to tell you, however,is that the court spent the first 15 pages of its opinion explaining how and why we properly
and adequately alleged that KeyBank aided and abetted SSH in violating federal consumer protection regulations and thereby violated California’s consumer protection law. The judge dismissed the case not because KeyBank is innocent of wrongdoing (actually, he concluded the exact opposite based on allegations which
KeyBank cannot refute) but because he believes federal banking law prevents you (as
opposed to the federal government) from suing a national bank. In evaluating your options this is a critical distinction (which presumably is why KeyBank did not disclose it in its letters). We are working on our Opening Brief for the Ninth Circuit Court of Appeal which will be filed on July 30, 2010. As part of the drafting process, we have been consulting with several legal experts on the issue the court relied on to dismiss the case – legally referred to as “federal peemption”. These experts are uniformly confounded by the judge’s ruling which is internally inconsistent and not well reasoned (which is very unusual for this judge who is a very well respected jurist). They believe that he dismissed the case not because he believes we have no case but because he knew this case presents unprecedented threshold legal issues that would almost certainly have been decided in the Ninth Circuit Court of Appeals no matter who prevailed at trial. By ruling the way he did at this point in the case,both the students and KeyBank will now get a final determination on these issues much sooner and with less expense than had we gone to trial and then faced an appeal. Their opinion – which we share – is supported by the fact that the Ninth Circuit is generally considered the most consumer protection oriented circuit court in the federal system and the district court judge has long been viewed a champion of individual rights. Shortly after we file our Opening Brief, several national consumer protection organizations and, hopefully several state attorneys general, will file what are referred to as “friend of the court” briefs (amicus curiae) arguing to the Court of Appeal why the district court judge was wrong and how his ruling, if upheld, will be detrimental for all consumers who borrow money from national banks. While of course we cannot predict how the Court of Appeals will rule, we and the appellate lawyers we are working with are optimistic about obtaining a reversal of the district court’s dismissal. With respect to KeyBank’s settlement proposal, the Bank is approaching settlement from the perspective that what you borrowed is money for flight hours rather than FAA certifications or job opportunities. Based on the information we have reviewed, this approach will result in the large majority of the students having to repay in excess of 80% of their principal loan balance plus most of the accrued interest. Moreover, KeyBank has not offered to reduce the interest rate going forward. By point of reference, the proposed SLX settlement that is before the court provides for between 30% - 75% loan forgiveness (depending on the number of FAA certifications received) and an across the board 3% interest rate reduction as well as a waiver of all interest accrued after SSH filed bankruptcy. If you choose to enter into a settlement with KeyBank, you will likely be forced to give up any right you may have to participate in our class action (this applies only to California students) or in any action that may be brought in any other state in the future if the Court of Appeal rules in our favor on the California action. Also, you will likely be forced to give up any defenses you may now have in the event you are unable to comply with the terms of your settlement agreement and KeyBank has to sue you for breaching the settlement agreement. Given KeyBank’s likely demand that you give up all of your rights, coupled with the miniscule amount of offered forgiveness (for most borrowers), we do not support such a settlement while the appeal is pending. However, before making any decision whether to settle, you should consult with your personal lawyer so that you fully understand your options. Finally, with respect to KeyBank’s letter threatening to end its “voluntary forbearance” and begin reporting your debt to the credit reporting agencies, because the case is still pending, you should have your individual lawyer inform the credit agencies in writing that this is a disputed debt and refer them to the court of appeal case. Also, because KeyBank continues to attempt to force this dispute into binding arbitration, it is very unlikely KeyBank will file a lawsuit against you in court (if they do, we will argue it has waived its arbitration argument). Based on the Master Promissory Notes we have reviewed, KeyBank will have to initiate arbitration against each of you individually with JAMS in each of your respective jurisdictions. KeyBank will have to initiate the arbitration and front 100% of expense of doing so. So be sure you advise your lawyer that you have been served with the arbitration papers. Also, please be sure to contact us immediately so we can provide you and your lawyer with whatever assistance we are able to. If you have any questions, please contact us at keybanklitigation@gmail.com. Again, however, we cannot give advice on an individual basis and even as to the class claims, at this time we represent only California students. Regardless of whether you are a California resident or a resident of another state, we strongly encourage you to contact your state’s Attorney General’s office (usually the department of consumer protection) and urge the AG to take action against KeyBank and support our efforts before the Ninth Circuit."
Sunday, July 04, 2010
Status of California KeyBank Litigation and KeyBank Settlements
Here is the latest word from our friends Andrew August and Kevin Rooney at Pinnacle Law Group regarding the status of the proposed class action case that they filed in California against KeyBank:
"As we mentioned last week, the District Court granted KeyBank's Motion to Dismiss. While this was extremely disappointing, the District Court went out of its way to spend two-thirds of its written opinion holding that we adequately alleged KeyBank engaged in unlawful and unfair acts and practices under California’s Unfair Competition Law by aiding and abetting Silver State’s violation of the Holder Rule, a federal consumer protection regulation. However, the Judge felt constrained to dismiss the entire case on the ground of federal conflict preemption.
On April 21, 2010 we filed a Notice of Appeal to the Ninth Circuit Court of Appeal of the District Court's ruling granting KeyBank's Motion to Dismiss. We and several amicus curiae ("friends of the court") with whom we will be working are confident this part of the decision will be reversed and KeyBank will be held to answer at minimum for its aiding and abetting Silver State's unlawful conduct."
For my former SSH student clients with KeyBank loans, I continue to work client by client to settle the cases of clients with relatively low flight hours who have received reasonable offers to settle, or who I can get reasonable offers for. For those clients that have 175 flight hours or more and are currently being offered nothing off the principal of their loans and 50% off the interest from the loan start date to the date of settlement, I continue to fight on and hope that a better offer or a better litigation result will come.
"As we mentioned last week, the District Court granted KeyBank's Motion to Dismiss. While this was extremely disappointing, the District Court went out of its way to spend two-thirds of its written opinion holding that we adequately alleged KeyBank engaged in unlawful and unfair acts and practices under California’s Unfair Competition Law by aiding and abetting Silver State’s violation of the Holder Rule, a federal consumer protection regulation. However, the Judge felt constrained to dismiss the entire case on the ground of federal conflict preemption.
On April 21, 2010 we filed a Notice of Appeal to the Ninth Circuit Court of Appeal of the District Court's ruling granting KeyBank's Motion to Dismiss. We and several amicus curiae ("friends of the court") with whom we will be working are confident this part of the decision will be reversed and KeyBank will be held to answer at minimum for its aiding and abetting Silver State's unlawful conduct."
For my former SSH student clients with KeyBank loans, I continue to work client by client to settle the cases of clients with relatively low flight hours who have received reasonable offers to settle, or who I can get reasonable offers for. For those clients that have 175 flight hours or more and are currently being offered nothing off the principal of their loans and 50% off the interest from the loan start date to the date of settlement, I continue to fight on and hope that a better offer or a better litigation result will come.
Tuesday, June 22, 2010
New Letter From KeyBank
All former Silver State Helicopters students with outstanding loans from KeyBank can expect to receive a letter from KeyBank, typically dated June 15, 2010, based on the following template:
KeyBank
4910 Tiedeman Road
Brooklyn, OH 44144
Name
Address
Student Loan Acct#
Dear __________________:
KeyBank is corresponding with you regarding the loans that you obtained to attend Silver State Helicopters. In connection with certain legal proceedings brought in California against KeyBank and other student lenders concerning the closure of Silver State, KeyBank voluntarily suspended collection and reporting activity on your account. The California law suit against KeyBank has been dismissed. A federal judge has determined that KeyBank has no liability to student borrowers for any failures of Silver State to deliver the educational program.
This letter is to advise you that your account will be removed from forbearance and applicable collection activity will resume, including credit bureau reporting. If your account is delinquent, payment arrangements should me made as soon as possible, but not later than July 15, 2010 if you wish to avoid collection activity.
KeyBank understands the difficulty that Silver State's closure caused to many students, particularly those enrolled at the time of closure. KeyBank stopped making loans to Silver State students nearly three years before the school closed. Many KeyBank loan borrowers obtained all or substantial portions of the training contemplated as the SSH program was 18 months long in duration. KeyBank expects students to accept financial responsibility for his/her individual decision to attend SSH and the training they actually received.
If you received less than the flight hours contained in the student agreement, KeyBank may entertain a reduction in your total debt. If you would like KeyBank to entertain a reduction to your debt or you need to discuss payment arrangements, you must contact us at 1-877-593-6608.
Key Education Resources
I have discussed this letter with many of my clients. I have also discussed it with Scott O'Connell of Nixon Peabody, counsel for KeyBank. Here are a few points for all of my KeyBank clients to note regarding the June 15, KeyBank letter:
1. I have informed counsel for KeyBank that all settlement negotiations for my clients are to go through me. Counsel for KeyBank understands this and has so instructed his client. If I represent you on the SSH matter, you do not need to call the 1-877-593-6608 Key Educational Risk Management telephone number. If I do not represent you on the SSH matter, you may hire other counsel to negotiate with KeyBank or you may proceed on your own.
2. It is true that the proposed class action filed in Northern California by Pinnacle Law Group has been dismissed by a federal judge. This dismissal, however, is on appeal. Andy August of Pinnacle Law Group has told me that he believes that he will prevail on the appeal. I expect to publish another blog update about this appeal in the near future. Please note that this proposed class action is for California residents only. I am not aware of any pending action against KeyBank on behalf of former students of SSH who do not reside in California.
3. Please note that the letter states that "collection activity will resume, including credit bureau reporting," but it does not state that the borrower will be sued, not does it state that arbitration proceedings will be started against the borrower.
4. Unlike Student Loan Xpress, which focused on the number of flight certifications that former student borrowers received from Silver State Helicopters ("SSH"), KeyBank has focused on the number of flight hours that its former SSH student borrowers received while attending SSH. SSH contracts typically provided for (amongst other things) 175 flight hours. This is the context for the statement in the June 15 KeyBank letter, "If you received less than the flight hours contained in the student agreement, KeyBank may entertain a reduction in your total debt."
This focus on flight hours is generally less favorable for my clients than a focus on flight certifications achieved, but there are exceptions.
5. While the written confidentiality agreement between myself and counsel for KeyBank regarding settlement negotiations is still in effect, I can now reveal the 2 part formerly secret formula by which KeyBank has based its offers to my California clients and by which KeyBank apparently now intends to base offers to all former SSH students with KeyBank loans throughout the country:
Part a: The # of your flight hours @ SSH/175 x your principal loan balance = the proposed reduced amount of the principal part of your loan balance if the # of your flight hours is less than 175. If the number of your flight hours is 175 or more, there is no offer of a principal reduction.
Part b: Interest on the promissory note is cut in half from the start of accrual of interest to the date of acceptance of the KeyBank offer.
This revelation is made after my discussion with opposing counsel, after receipt of 42 proposed settlement letters, and after KeyBank's disclosures as set forth in the Jne 15, 2010 letters. There is no guarantee that KeyBank will continue to use this formula in the future, but I believe that it will.
One thing that is NOT part of the KeyBank settelement formula for now is financial hardship. Nevertheless, I am collecting financial hardship information from my KeyBank clients in anticipation that this may change at some time in the future. In my opinion, KeyBank's current unwillingness to consider the financial hardship of the borrower and the resulting difficulty that KeyBank would have to collect on its debt is both unfair and unwise.
If you are one of my KeyBank clients and you are interested in receiving a settlement offer from KeyBank based on the number of your flight hours @ SSH, please e-mail me with your flight hours and a copy of your flight log. If you are suffering from financial hardship, please write to me about this as well. I will follow up for you.
If you are one of my clients that do not want to accept any such offer, this will leave you with the choice of paying as KeyBank demands or having KeyBank place you in collection. No one can guarantee that you will get better results later. Personally, I would not accept any settlement that did not give me a substantial principal reduction.
Whatever choice you make, I will continue to use my best efforts on your behalf.
KeyBank
4910 Tiedeman Road
Brooklyn, OH 44144
Name
Address
Student Loan Acct#
Dear __________________:
KeyBank is corresponding with you regarding the loans that you obtained to attend Silver State Helicopters. In connection with certain legal proceedings brought in California against KeyBank and other student lenders concerning the closure of Silver State, KeyBank voluntarily suspended collection and reporting activity on your account. The California law suit against KeyBank has been dismissed. A federal judge has determined that KeyBank has no liability to student borrowers for any failures of Silver State to deliver the educational program.
This letter is to advise you that your account will be removed from forbearance and applicable collection activity will resume, including credit bureau reporting. If your account is delinquent, payment arrangements should me made as soon as possible, but not later than July 15, 2010 if you wish to avoid collection activity.
KeyBank understands the difficulty that Silver State's closure caused to many students, particularly those enrolled at the time of closure. KeyBank stopped making loans to Silver State students nearly three years before the school closed. Many KeyBank loan borrowers obtained all or substantial portions of the training contemplated as the SSH program was 18 months long in duration. KeyBank expects students to accept financial responsibility for his/her individual decision to attend SSH and the training they actually received.
If you received less than the flight hours contained in the student agreement, KeyBank may entertain a reduction in your total debt. If you would like KeyBank to entertain a reduction to your debt or you need to discuss payment arrangements, you must contact us at 1-877-593-6608.
Key Education Resources
I have discussed this letter with many of my clients. I have also discussed it with Scott O'Connell of Nixon Peabody, counsel for KeyBank. Here are a few points for all of my KeyBank clients to note regarding the June 15, KeyBank letter:
1. I have informed counsel for KeyBank that all settlement negotiations for my clients are to go through me. Counsel for KeyBank understands this and has so instructed his client. If I represent you on the SSH matter, you do not need to call the 1-877-593-6608 Key Educational Risk Management telephone number. If I do not represent you on the SSH matter, you may hire other counsel to negotiate with KeyBank or you may proceed on your own.
2. It is true that the proposed class action filed in Northern California by Pinnacle Law Group has been dismissed by a federal judge. This dismissal, however, is on appeal. Andy August of Pinnacle Law Group has told me that he believes that he will prevail on the appeal. I expect to publish another blog update about this appeal in the near future. Please note that this proposed class action is for California residents only. I am not aware of any pending action against KeyBank on behalf of former students of SSH who do not reside in California.
3. Please note that the letter states that "collection activity will resume, including credit bureau reporting," but it does not state that the borrower will be sued, not does it state that arbitration proceedings will be started against the borrower.
4. Unlike Student Loan Xpress, which focused on the number of flight certifications that former student borrowers received from Silver State Helicopters ("SSH"), KeyBank has focused on the number of flight hours that its former SSH student borrowers received while attending SSH. SSH contracts typically provided for (amongst other things) 175 flight hours. This is the context for the statement in the June 15 KeyBank letter, "If you received less than the flight hours contained in the student agreement, KeyBank may entertain a reduction in your total debt."
This focus on flight hours is generally less favorable for my clients than a focus on flight certifications achieved, but there are exceptions.
5. While the written confidentiality agreement between myself and counsel for KeyBank regarding settlement negotiations is still in effect, I can now reveal the 2 part formerly secret formula by which KeyBank has based its offers to my California clients and by which KeyBank apparently now intends to base offers to all former SSH students with KeyBank loans throughout the country:
Part a: The # of your flight hours @ SSH/175 x your principal loan balance = the proposed reduced amount of the principal part of your loan balance if the # of your flight hours is less than 175. If the number of your flight hours is 175 or more, there is no offer of a principal reduction.
Part b: Interest on the promissory note is cut in half from the start of accrual of interest to the date of acceptance of the KeyBank offer.
This revelation is made after my discussion with opposing counsel, after receipt of 42 proposed settlement letters, and after KeyBank's disclosures as set forth in the Jne 15, 2010 letters. There is no guarantee that KeyBank will continue to use this formula in the future, but I believe that it will.
One thing that is NOT part of the KeyBank settelement formula for now is financial hardship. Nevertheless, I am collecting financial hardship information from my KeyBank clients in anticipation that this may change at some time in the future. In my opinion, KeyBank's current unwillingness to consider the financial hardship of the borrower and the resulting difficulty that KeyBank would have to collect on its debt is both unfair and unwise.
If you are one of my KeyBank clients and you are interested in receiving a settlement offer from KeyBank based on the number of your flight hours @ SSH, please e-mail me with your flight hours and a copy of your flight log. If you are suffering from financial hardship, please write to me about this as well. I will follow up for you.
If you are one of my clients that do not want to accept any such offer, this will leave you with the choice of paying as KeyBank demands or having KeyBank place you in collection. No one can guarantee that you will get better results later. Personally, I would not accept any settlement that did not give me a substantial principal reduction.
Whatever choice you make, I will continue to use my best efforts on your behalf.
Monday, June 07, 2010
Status On Proposed Class Action Settlement With Student Loan Xpress
Judge Merryday still has not ruled on the proposed class action settlement agreement submitted for his approval on March 22, 2010.
KeyBank Settlement Offers Go Out to 42 Clients
On Friday, June 4, 2010 I e-mailed individual settlement offers from KeyBank, National Association and Great Lakes Educational Loan Services (collectively "KeyBank") to 42 of my clients who obtained loans from KeyBank to attend Silver State Helicopters School. I anticipate e-mailing individual settlement offers to additional clients of mine with KeyBank loans as soon as I receive these offers from KeyBank's counsel Nixon Peabody, LLP. These offers and the negotiations leading up to them are covered by a written confidentiality agreement. If you received one of these offers, you should call me @ 310 271-6223 to receive my advice regarding the settlement offer.
Thursday, April 22, 2010
HOUSE PANEL CONSIDERS BILL TO DISCHARGE PRIVATE STUDENT LOANS IN BANKRUPTCY
The House Judiciary Subcommittee on Commercial and Administrative Law today weighed a bill to amend the Bankruptcy Code to allow private student loans to be discharged. Witnesses at the hearing today on H.R. 5043, the "Private Student Loan Bankruptcy Fairness Act of 2010," included Deanne Loonin of the National Consumer Law Center, John A. Hupalo of the investment firm Samuel A. Ramirez & Co., Inc., consumer Valisha Cooks and Adrian M. Lapas representing the National Association of Consumer Bankruptcy Attorneys. This proposed change in the law, if enacted by Congress, would make the private student loans that my clients obtained from Student Loan Xpress and KeyBank to attend SSH dischargeable in bankruptcy.
Monday, April 12, 2010
Bad News
United States District Court Judge Thelton E Henderson signed a 23 page Order today Granting KeyBank's Motion to Dismiss Third Amended Complaint in the Northern District of California case entitled Matthew C. Kilgore et al. v KeyBank National Association, et al., Case No. C08-2958 TEH today. The judge dismissed the case with prejudice. This means that the case is lost, unless an appeal later reverses the judge. This is the same lawsuit in which Pinnacle Law Group sued Student Loan Xpress and AES and then later dismissed SLX after entering into the proposed class action settlement that is now awaiting approval or rejection by Judge Merryday in Florida.
Plaintiffs and their counsel sought to stop KeyBank and its loan services provider Great Lakes Educational Loan Services ("Great Lakes") from collecting the loans or reporting the loan balances to credit reporting agencies. Plaintiffs had 6 claims for relief, all of which were thrown out by Judge Henderson.
A full explanation of the judge's ruling will be posted later. For now, I quote the judge's conclusion: "Defendants' motion to dismiss is GRANTED. Plaintiffs first, second and sixth causes of action are dismissed for failure to state a claim, and their third, fourth and fifth claims are dismissed on federal preemption. The TAC (third amended complaint) is DISMISSED without leave to amend. The clerk shall enter judgment and close the file. IT IS SO ORDERED."
I spoke to Andy August of Pinnacle Law Group about this loss tonight and he described this loss as "the greatest disappointment" of his career.
For my clients throughout the country with KeyBank loans, this is not the end. I will continue my efforts on your behalf. For my clients with SLX loans, this loss for students with KeyBank loans underlines one of the reasons for the proposed settlement with SLX: the fact that when you do not settle, you risk a total loss in court.
Plaintiffs and their counsel sought to stop KeyBank and its loan services provider Great Lakes Educational Loan Services ("Great Lakes") from collecting the loans or reporting the loan balances to credit reporting agencies. Plaintiffs had 6 claims for relief, all of which were thrown out by Judge Henderson.
A full explanation of the judge's ruling will be posted later. For now, I quote the judge's conclusion: "Defendants' motion to dismiss is GRANTED. Plaintiffs first, second and sixth causes of action are dismissed for failure to state a claim, and their third, fourth and fifth claims are dismissed on federal preemption. The TAC (third amended complaint) is DISMISSED without leave to amend. The clerk shall enter judgment and close the file. IT IS SO ORDERED."
I spoke to Andy August of Pinnacle Law Group about this loss tonight and he described this loss as "the greatest disappointment" of his career.
For my clients throughout the country with KeyBank loans, this is not the end. I will continue my efforts on your behalf. For my clients with SLX loans, this loss for students with KeyBank loans underlines one of the reasons for the proposed settlement with SLX: the fact that when you do not settle, you risk a total loss in court.
Friday, April 02, 2010
A False Claim
Someone opposed to the proposed class action settlement has asserted that the SLX SSH loans are no longer collectible because CIT Group (SLX’s parent company) has “written off” the SSH loans. This assertion is a false claim. I spoke with class counsel Andy August about this today. Here are his thoughts:
"This assertion is not true and is dangerously misleading. The person who made the accusation is neither a lawyer nor accountant and clearly lacks an understanding of the requirements for Securities and Exchange Commission filings, accounting, tax or federal securities laws. Regrettably, this assertion was made without prior consultation with Class Counsel (or any other lawyer, apparently).
From the very beginning of Class Counsels’ involvement in the case Class Counsel closely monitored CIT’s SEC filings regarding its SSH loan portfolio. Class Counsel has also been in touch with the lawyers who have filed securities class actions on behalf of investors in CIT. For example, everyone who attended and participated in the initial mediation in August 2008 knew that CIT had established a loss reserve for the SSH loans in excess of $120 million. In fact, this amount was one of the factual bases for the negotiations that followed. Class Counsel has monitored every subsequent SEC filing and nothing in any of the filings or the fact that CIT filed bankruptcy (SLX did not file bankruptcy) alters SLX’s ability to attempt to collect every dollar owed to it under the loans.
Class counsel has consulted with securities, accounting, bankruptcy and tax experts who have unanimously advised that CIT’s most recent filings, which treat the loans as “non-accrual” loans, have no effect whatsoever on SLX’s ability to collect from you the full amount of the loans if they prevail. The following is a lay explanation obtained by Mr. August of why a lender, under the circumstances present here, may make a change in how a loan is accounted on its books. It explains that “non-accrual” is not the same as walking away from a loan and that characterizing a loan portfolio as in “non-accrual”, has no impact on a lender’s ability to collect in any way:
Normally, the lender will treat itself as receiving income as interest comes due—accrues—on the loan. Under normal circumstances, the lender can expect to actually receive the cash in a very short period of time afterward. When a borrower defaults and does not pay its interest, and the default continues for several months, the lender will reach the point where it begins to doubt if it will ever receive the cash for the interest that is accruing. At that point, it does not make business sense and, in fact, is in many cases against federal securities laws, to keep acting as if the lender were receiving income. As a result, the lender places the loan on “nonaccrual”, and stops posting income from the loan. This is a bookkeeping and accounting action only. It does not mean the lender will not attempt to collect every nickel of money due to it.
Because there has been no collection activity on the SSH loans for more than two years, CIT is obligated to treat the loans as “non-accrual” loans in its SEC filings. However, CIT’s compliance with federal “Fresh Start Accounting” rules does nothing to change the realities of SLX’s ability to collect the SSH loans. Please do not think or believe otherwise."
I agree with Andy August's analysis. In my own bankruptcy practice, I have seen many instances of banks collecting on or selling old debts that others described as having been "written off."
As of today, Judge Merryday has neither approved of nor rejected the proposed settlement, nor has he given any indication of when he will issue his ruling. I will post complete information about his ruling as soon as the ruling is made.
"This assertion is not true and is dangerously misleading. The person who made the accusation is neither a lawyer nor accountant and clearly lacks an understanding of the requirements for Securities and Exchange Commission filings, accounting, tax or federal securities laws. Regrettably, this assertion was made without prior consultation with Class Counsel (or any other lawyer, apparently).
From the very beginning of Class Counsels’ involvement in the case Class Counsel closely monitored CIT’s SEC filings regarding its SSH loan portfolio. Class Counsel has also been in touch with the lawyers who have filed securities class actions on behalf of investors in CIT. For example, everyone who attended and participated in the initial mediation in August 2008 knew that CIT had established a loss reserve for the SSH loans in excess of $120 million. In fact, this amount was one of the factual bases for the negotiations that followed. Class Counsel has monitored every subsequent SEC filing and nothing in any of the filings or the fact that CIT filed bankruptcy (SLX did not file bankruptcy) alters SLX’s ability to attempt to collect every dollar owed to it under the loans.
Class counsel has consulted with securities, accounting, bankruptcy and tax experts who have unanimously advised that CIT’s most recent filings, which treat the loans as “non-accrual” loans, have no effect whatsoever on SLX’s ability to collect from you the full amount of the loans if they prevail. The following is a lay explanation obtained by Mr. August of why a lender, under the circumstances present here, may make a change in how a loan is accounted on its books. It explains that “non-accrual” is not the same as walking away from a loan and that characterizing a loan portfolio as in “non-accrual”, has no impact on a lender’s ability to collect in any way:
Normally, the lender will treat itself as receiving income as interest comes due—accrues—on the loan. Under normal circumstances, the lender can expect to actually receive the cash in a very short period of time afterward. When a borrower defaults and does not pay its interest, and the default continues for several months, the lender will reach the point where it begins to doubt if it will ever receive the cash for the interest that is accruing. At that point, it does not make business sense and, in fact, is in many cases against federal securities laws, to keep acting as if the lender were receiving income. As a result, the lender places the loan on “nonaccrual”, and stops posting income from the loan. This is a bookkeeping and accounting action only. It does not mean the lender will not attempt to collect every nickel of money due to it.
Because there has been no collection activity on the SSH loans for more than two years, CIT is obligated to treat the loans as “non-accrual” loans in its SEC filings. However, CIT’s compliance with federal “Fresh Start Accounting” rules does nothing to change the realities of SLX’s ability to collect the SSH loans. Please do not think or believe otherwise."
I agree with Andy August's analysis. In my own bankruptcy practice, I have seen many instances of banks collecting on or selling old debts that others described as having been "written off."
As of today, Judge Merryday has neither approved of nor rejected the proposed settlement, nor has he given any indication of when he will issue his ruling. I will post complete information about his ruling as soon as the ruling is made.
Friday, March 26, 2010
A Strange Letter
Many of my clients reported receiving a strange letter stating that their loan was being sold by Student Loan Xpress, Inc. to Student Loan Xpress, Inc. My investigation shows that this letter was sent in error by AES and that it has no effect whatsoever on the proposed class action settlement agreement.
Proposed Class Action Settlement for Former SSH Students with Loans from Student Loan Xpress Loans is "Under Submission"
The hearing on the proposed class action settlement agreement took place on Monday, March 21 in Florida, but no ruling has been made yet. I spoke this week with Andy August of Pinnacle Law Group, one of the class counsel lawyers that attended the hearing on Monday. I also spoke with Robert Stone, one of SLX's lawyers that attended the hearing. Both reported that the judge heard argument and testimony for and against the settlement, and expressed concerns regarding several issues, including the interest rate reduction under the settlement agreement, the debt forgiveness schedule, and the tax treatment of any debt forgiveness. In the end, the judge said that he was taking the matter under submission. A ruling either approving or disapproving the proposed class action settlement is expected in the near future. The judge did not say when he would issue his ruling.
KeyBank Update
This is a status update for all of my clients with KeyBank loans. I have signed a confidentiality agreement with counsel for KeyBank and am renewing my attempts to negotiate a proposed settlement agreement that I can recommend to you. I do not have any such agreement yet. Meanwhile, Andy August of Pinnacle Law Group is litigating a California Class Action Case against KeyBank. There is a hearing on KeyBank's Motion to Dismiss set for Monday, March 29, 2010. Although this action is limited to California students, if it is successful, it may help me to help former SSH students with KeyBank loans throughout the country.
Wednesday, January 27, 2010
Dispute Resolution Process
I have noticed that the settlement administrator, counsel for SLX and class counsel have not yet resolved any of the disputes that have arisen so far regarding my clients' ratings. Instead, my clients get e-mails back from silverstatesettlement@gardencitygroup.com saying only that "we are investigating" or "the investigation is continuing." Many of my clients are concerned that these disputes will not be resolved before the February 13, 2010 deadline. It is now apparent that some of these disputes will not be resolved until after the February 13, 2010 deadline. I discussed this matter yesterday and today with class counsel Andy August and Kevin Rooney. Andy August assured me that the Settlement Administrator, counsel for SLX and Class Counsel are in the process of resolving the disputes that have been submitted regarding the number of certifications and the incorrect assignment to the settlement subclasses. There is a detailed settlement dispute process outlined in the Settlement Agreement. It generally works as follows:
1. Student’s Notice states more certifications than actually received while at Silver State (i.e., includes other certifications obtained before or after attendance at SSH);
2. Student contacts settlementquestions@gmail.com and is directed to follow instructions on the FAQs by submitting appropriate evidence to the Settlement Administrator (with a cover letter signed “under penalty of perjury”);
3. Student sends information and cover letter to the Settlement Administrator at Silverstatesettlement@gardencitygroup.com and sends hard copy to:
Silver State Loan Settlement Administrator
P.O. Box 9462
Dublin, Ohio 43107-4562
Be sure to send a copy to Class Counsel at the settlementquestions@gmail.com
4. Settlement Administrator sends e-mails back to student that "we are investigating" or "the investigation is continuing."
5. The Settlement Administrator then sends your evidence to both the Class Counsel and to SLX’s lawyers.
6. If SLX disagrees with the evidence submitted by the student, then the Class Counsel and SLX’s lawyers “meet and confer” about each student’s challenge. This will be done on an on-going basis. If there is no disagreement, the student is re-classified. If there is a disagreement, the Class Action lawyers will represent your interest before Judge William Cahill who will have the final say.
Many of these disputes may be resolved before the February 13, 2010 deadline, especially if you have submitted your evidence already or do so immediately. Some of these disputes will not be resolved until after the February 13, 2010 deadline.
You will not have to make any payments under the Settlement Agreement until you receive a “Reduced Monthly Repayment Notice” from SLX/AES which should reflect your proper classification by showing the proper amount due (it will not show a change in the number of certifications).
Here is the relevant part of the settlement agreement in its entirety:
"10. Dispute Resolution Procedure. If a Class Member disagrees with the number of FAA certifications, the corresponding percentage of unconditional debt forgiveness and conditional debt forgiveness being provided, or the amount of his/her Debt, the following dispute resolution procedure shall be used:
10.1 The Class Member shall send to the Settlement Administrator a written statement
signed under penalty of perjury setting forth the basis of the Class Member’s dispute and submitting his/her evidence or documentation to support that assertion (including any written statements from witnesses supporting the person’s position, log books, flight records, correspondence with Silver State, SLX, or AES, FAA records regarding the number of FAA Certifications obtained, and any other evidentiary material) (“Disputed Claim”). To be timely,the Class Member must send the Disputed Claim so that it is received by the Settlement Administrator on or before the Disputed Claim Deadline. No Disputed Claims received after the Disputed Claim Deadline shall be considered. No evidence or documentation received after the
Disputed Claim Deadline submitted in support of a Disputed Claim received prior to the Disputed Claim Deadline shall be considered.
10.2 The Settlement Administrator shall provide a copy of each Disputed Claim,
including any evidence or documentation submitted in connection therewith, to Class Counsel and to Counsel for SLX within ten (10) days of its receipt.
10.3 SLX’s counsel and Class Counsel shall meet and confer on the Disputed Claims.
If Class Counsel and SLX’s counsel agree as to the resolution of the Disputed Claims, their agreement shall control.
10.4 If SLX’s counsel and Class Counsel cannot reach agreement on the resolution of
the Disputed Claims, such Disputed Claims shall be submitted to retired California Superior Court Judge William J. Cahill (Ret.) of JAMS for resolution on or before ninety (90) days after the Notice Date [December 30, 2009]. SLX may submit evidence to Judge Cahill regarding any such Disputed Claim(s), with a copy to Class Counsel, by that same date. All Disputed Claims shall be decided by Judge Cahill without a hearing, unless such a hearing is requested by Judge Cahill, in which case, the participants may partic ipate by telephone. The parties shall request that Judge Cahill decide all Disputed Claims within thirty (30) days of their submission. The decision of Judge Cahill shall be final, non-appealable and binding on the Class Member and SLX. Judge Cahill’s fees, if any, shall be split equally between SLX and Class Counsel."
In every case that I have seen in which SLX made an error regarding the FAA certifications received by my clients, SLX has charged former students for certifications that they received before they attended SSH or after SSH filed bankruptcy. This certification information appears in section 7 of the Settlement Notices. It is important that every class member check the Notice carefully to see if he or she has been credited with the proper number of certifications and placed in the proper subclass.
1. Student’s Notice states more certifications than actually received while at Silver State (i.e., includes other certifications obtained before or after attendance at SSH);
2. Student contacts settlementquestions@gmail.com and is directed to follow instructions on the FAQs by submitting appropriate evidence to the Settlement Administrator (with a cover letter signed “under penalty of perjury”);
3. Student sends information and cover letter to the Settlement Administrator at Silverstatesettlement@gardencitygroup.com and sends hard copy to:
Silver State Loan Settlement Administrator
P.O. Box 9462
Dublin, Ohio 43107-4562
Be sure to send a copy to Class Counsel at the settlementquestions@gmail.com
4. Settlement Administrator sends e-mails back to student that "we are investigating" or "the investigation is continuing."
5. The Settlement Administrator then sends your evidence to both the Class Counsel and to SLX’s lawyers.
6. If SLX disagrees with the evidence submitted by the student, then the Class Counsel and SLX’s lawyers “meet and confer” about each student’s challenge. This will be done on an on-going basis. If there is no disagreement, the student is re-classified. If there is a disagreement, the Class Action lawyers will represent your interest before Judge William Cahill who will have the final say.
Many of these disputes may be resolved before the February 13, 2010 deadline, especially if you have submitted your evidence already or do so immediately. Some of these disputes will not be resolved until after the February 13, 2010 deadline.
You will not have to make any payments under the Settlement Agreement until you receive a “Reduced Monthly Repayment Notice” from SLX/AES which should reflect your proper classification by showing the proper amount due (it will not show a change in the number of certifications).
Here is the relevant part of the settlement agreement in its entirety:
"10. Dispute Resolution Procedure. If a Class Member disagrees with the number of FAA certifications, the corresponding percentage of unconditional debt forgiveness and conditional debt forgiveness being provided, or the amount of his/her Debt, the following dispute resolution procedure shall be used:
10.1 The Class Member shall send to the Settlement Administrator a written statement
signed under penalty of perjury setting forth the basis of the Class Member’s dispute and submitting his/her evidence or documentation to support that assertion (including any written statements from witnesses supporting the person’s position, log books, flight records, correspondence with Silver State, SLX, or AES, FAA records regarding the number of FAA Certifications obtained, and any other evidentiary material) (“Disputed Claim”). To be timely,the Class Member must send the Disputed Claim so that it is received by the Settlement Administrator on or before the Disputed Claim Deadline. No Disputed Claims received after the Disputed Claim Deadline shall be considered. No evidence or documentation received after the
Disputed Claim Deadline submitted in support of a Disputed Claim received prior to the Disputed Claim Deadline shall be considered.
10.2 The Settlement Administrator shall provide a copy of each Disputed Claim,
including any evidence or documentation submitted in connection therewith, to Class Counsel and to Counsel for SLX within ten (10) days of its receipt.
10.3 SLX’s counsel and Class Counsel shall meet and confer on the Disputed Claims.
If Class Counsel and SLX’s counsel agree as to the resolution of the Disputed Claims, their agreement shall control.
10.4 If SLX’s counsel and Class Counsel cannot reach agreement on the resolution of
the Disputed Claims, such Disputed Claims shall be submitted to retired California Superior Court Judge William J. Cahill (Ret.) of JAMS for resolution on or before ninety (90) days after the Notice Date [December 30, 2009]. SLX may submit evidence to Judge Cahill regarding any such Disputed Claim(s), with a copy to Class Counsel, by that same date. All Disputed Claims shall be decided by Judge Cahill without a hearing, unless such a hearing is requested by Judge Cahill, in which case, the participants may partic ipate by telephone. The parties shall request that Judge Cahill decide all Disputed Claims within thirty (30) days of their submission. The decision of Judge Cahill shall be final, non-appealable and binding on the Class Member and SLX. Judge Cahill’s fees, if any, shall be split equally between SLX and Class Counsel."
In every case that I have seen in which SLX made an error regarding the FAA certifications received by my clients, SLX has charged former students for certifications that they received before they attended SSH or after SSH filed bankruptcy. This certification information appears in section 7 of the Settlement Notices. It is important that every class member check the Notice carefully to see if he or she has been credited with the proper number of certifications and placed in the proper subclass.
Silver State Helicopters / Student Loan Xpress Class Action Settlement Conference Call 2 This Saturday @ 4:00 PM Pacific Time
My last conference call on the SSH/SLX Class Action Settlement was a spirited one, with 135 participants! The vast majority have decided to take my advice and accept the benefits under the proposed class action settlement. Every day since then, I have answered numerous e-mails and spoken to many clients about the proposed settlement agreement. Due to popular demand, I am going to do another conference call this Saturday, January 30 from 4:00 pm to 6:00 pm Pacific Time.
To participate in this conference call, use the Conference Dial-in Number:
(641) 715-3200. When prompted, enter the following access code: 323990 followed by the # key.
Once connected to the conference, you will be able to talk and have access to the touch tone commands listed below.
Participant Feature Keys
*3 Exit - exit the call
*4 Instructions - conference instructions
*6 Mute/Unmute - caller controlled muting
This conference call will be a chance for all of my clients to ask me questions about the proposed settlement agreement and my reasons for recommending it.
Of course, all of my clients are always free to contact me personally by e-mail and by telephone. Many of you have already done so. In addition, I will continue to post FAQs about the settlement, and link to class counsels' FAQs re the settlement.
To participate in this conference call, use the Conference Dial-in Number:
(641) 715-3200. When prompted, enter the following access code: 323990 followed by the # key.
Once connected to the conference, you will be able to talk and have access to the touch tone commands listed below.
Participant Feature Keys
*3 Exit - exit the call
*4 Instructions - conference instructions
*6 Mute/Unmute - caller controlled muting
This conference call will be a chance for all of my clients to ask me questions about the proposed settlement agreement and my reasons for recommending it.
Of course, all of my clients are always free to contact me personally by e-mail and by telephone. Many of you have already done so. In addition, I will continue to post FAQs about the settlement, and link to class counsels' FAQs re the settlement.
Thursday, January 07, 2010
Silver State Helicopters / Student Loan Xpress Class Action Settlement Conference Call This Saturday @ 1:00 PM Pacific Time
I have set up a conference call for all of my SSH clients with questions about the proposed class action settlement for former students of SSH who were still enrolled @ SSH on February 4, 2008 and whose student loans are now owned by SLX. This conference call will take place from 1:00 - 3:00 pm Pacific Time this Saturday, January 9, 2010. To participate in this conference call, use the Conference Dial-in Number: (641) 715-3200. When prompted, enter the following access code: 323990 followed by the # key.
Once connected to the conference, you will be able to talk and have access to the touch tone commands listed below.
Participant Feature Keys
*3 Exit - exit the call
*4 Instructions - conference instructions
*6 Mute/Unmute - caller controlled muting
This conference call will be a chance for all of my clients to ask me questions about the proposed settlement agreement and my reasons for recommending it. Senior Assocate Attorney Georgeann Nicol will be joining me in hosting this conference call.
Of course, all of my clients are always free to contact me personally by e-mail and by telephone. Many of you have already done so. In addition, I will continue to post FAQs about the settlement, and link to class counsels' FAQs re the settlement.
Once connected to the conference, you will be able to talk and have access to the touch tone commands listed below.
Participant Feature Keys
*3 Exit - exit the call
*4 Instructions - conference instructions
*6 Mute/Unmute - caller controlled muting
This conference call will be a chance for all of my clients to ask me questions about the proposed settlement agreement and my reasons for recommending it. Senior Assocate Attorney Georgeann Nicol will be joining me in hosting this conference call.
Of course, all of my clients are always free to contact me personally by e-mail and by telephone. Many of you have already done so. In addition, I will continue to post FAQs about the settlement, and link to class counsels' FAQs re the settlement.
Tuesday, January 05, 2010
What Is The Secret Password?
Class Action Counsel has posted a good set of class action frequently asked questions and answers @ http://www.jameshoyer.com/class_settlement.html
These FAQs are updated periodically, and are also set forth @ http://www.pinnaclelawgroup.com/news/silver_state_faqs.php
If you are a class member or potential class member and you want the secret password to access these FAQs, send an e-mail to settlementquestions@gmail.com.
These FAQs are updated periodically, and are also set forth @ http://www.pinnaclelawgroup.com/news/silver_state_faqs.php
If you are a class member or potential class member and you want the secret password to access these FAQs, send an e-mail to settlementquestions@gmail.com.
Monday, January 04, 2010
SSH / Student Loan Xpress Class Action Settlement Notices Have Been Mailed Out
10 Page Class Action Settlement Notices have been mailed out to all eligible class members. If you were a student enrolled at Silver State Helicopters on February 4, 2008 and you received a loan from Student Loan Express, you should receive this notice on or before January 11, 2009. If you have not received it, please send an e-mail to the settlement administrator at silverstatesettlement@gardencitygroup.com. Include your full name, current address, loan number, and social security number and say, "Please e-mail me a copy of my class action settlement notice."
There are 4 versions of the settlement notice. The first version is for students that all parties agree are in the class. The second vesion is for their co-signers. As to these students and their co-signers, as the notice says, "You do not need to take any action at this time in order to receive the benefits available under the settlement."
The third version is for students as to which the parties are uncertain as to whether or not the student was still enrolled at Silver State as of February 4, 2008. The fourth version is for their co-signers. These students and their co-signers must file a proof of claim by February 13, 2010 to receive the benefits under the settlement.
Here is how you can tell if you are required to fill in a claim form:
1. Section 1 of your Notice, "Why did I get this Notice," will say, "The Court sent you this Notice because you are a former student of Silver State, and your student loan is owned by SLX, but the parties have not been able to determine whether you were still enrolled at Silver State on February 4, 2008.
2. Section 13 of your Notice, "What do I have to do to participate in the settlement?," will say, "To qualify for settlement benefits, you or your co-signer must send in a claim form. A claim form is enclosed with this Notice. It must be completed and returned under penalty of perjury so that it is received by the Settlement Administrator by February 13, 2009."
3. A claim form will be attached to the Notice.
It is important that you read the Notice carefully!
The heart of the settlement agreement is a schedule which provides debt forgiveness based on the total number of FAA Certifications Received at Silver State.
0 Certifications = 75% debt forgiveness
1 Certification = 60% debt forgiveness
Most of my clients fit in one of these 2 categories.
2 Certifications = 47.5% debt forgiveness
3 Certifications = 30% debt forgiveness
4 Certifications = 20% debt forgiveness
Additional benefits of the settlement agreement as outlined in the Notice include the following:
Interest Forgiveness
"All interest that would have accrued on your loan between February 4, 2008 until shortly after final approval of the settlement will be forgiven."
Lower Interest Rates
"Interest on your restructured loan will accrue at the lower of either (a) your existing interest rate or (b) an new interest rate that is 3% lower that your existing rate, but that cannot be lower that 6%. Your new interest rate will remain a variable interest rate."
Early Repayment Refund
"If you timely pay off your restructured loan within five years of when the first payment is due, you will receive a refund equal to 2.5% of your original loan amount reduced by the debt forgiveness under the settlement."
Effect On Your Credit Report
"SLX has agreet to request that credit reporting agencies (Equifax, Experian, Innovis and TransUnion) remove any previous reports by SLX or its agents about your loan. But, if you fail to make your lower monthly payments after the settlement is approved or exclude yourself from the settlement, then SLX may make additonal reports."
There are 4 versions of the settlement notice. The first version is for students that all parties agree are in the class. The second vesion is for their co-signers. As to these students and their co-signers, as the notice says, "You do not need to take any action at this time in order to receive the benefits available under the settlement."
The third version is for students as to which the parties are uncertain as to whether or not the student was still enrolled at Silver State as of February 4, 2008. The fourth version is for their co-signers. These students and their co-signers must file a proof of claim by February 13, 2010 to receive the benefits under the settlement.
Here is how you can tell if you are required to fill in a claim form:
1. Section 1 of your Notice, "Why did I get this Notice," will say, "The Court sent you this Notice because you are a former student of Silver State, and your student loan is owned by SLX, but the parties have not been able to determine whether you were still enrolled at Silver State on February 4, 2008.
2. Section 13 of your Notice, "What do I have to do to participate in the settlement?," will say, "To qualify for settlement benefits, you or your co-signer must send in a claim form. A claim form is enclosed with this Notice. It must be completed and returned under penalty of perjury so that it is received by the Settlement Administrator by February 13, 2009."
3. A claim form will be attached to the Notice.
It is important that you read the Notice carefully!
The heart of the settlement agreement is a schedule which provides debt forgiveness based on the total number of FAA Certifications Received at Silver State.
0 Certifications = 75% debt forgiveness
1 Certification = 60% debt forgiveness
Most of my clients fit in one of these 2 categories.
2 Certifications = 47.5% debt forgiveness
3 Certifications = 30% debt forgiveness
4 Certifications = 20% debt forgiveness
Additional benefits of the settlement agreement as outlined in the Notice include the following:
Interest Forgiveness
"All interest that would have accrued on your loan between February 4, 2008 until shortly after final approval of the settlement will be forgiven."
Lower Interest Rates
"Interest on your restructured loan will accrue at the lower of either (a) your existing interest rate or (b) an new interest rate that is 3% lower that your existing rate, but that cannot be lower that 6%. Your new interest rate will remain a variable interest rate."
Early Repayment Refund
"If you timely pay off your restructured loan within five years of when the first payment is due, you will receive a refund equal to 2.5% of your original loan amount reduced by the debt forgiveness under the settlement."
Effect On Your Credit Report
"SLX has agreet to request that credit reporting agencies (Equifax, Experian, Innovis and TransUnion) remove any previous reports by SLX or its agents about your loan. But, if you fail to make your lower monthly payments after the settlement is approved or exclude yourself from the settlement, then SLX may make additonal reports."
Tuesday, December 29, 2009
From Today's Herald -Zeitung Newspaper in New Braunfels, Texas
Settlement offered to Silver State students
By Chris Cobb
The Herald-Zeitung
Published December 29, 2009
Some measure of relief could soon be landing in the mailboxes of former students of Silver State Helicopters.
The nationwide flight school had plans to relocate its headquarters to New Braunfels before abruptly going bankrupt in February 2008 — cutting short flight training for thousands of students across the county who had already paid as much as $70,000 up-front through student loans.
After more than a year of bankruptcy proceedings in various states, a settlement offer to Silver State students from their largest lender is being mailed out this week, an attorney representing a number of the former trainees said Monday.
An agreement between 12 states was struck in October with Student Loan Xpress, which lent money to some 2,300 Silver State students nationwide, and is expected to have the company erase nearly $113 million in student debt.
The deal would forgive up to 75 percent of the loan amount for Silver State students who borrowed money from Student Loan Xpress.
Now that it is court approved, students can expect detailed notices explaining the settlement to arrive in early January, according to Michael Berger, a California-based bankruptcy attorney.
“I feel bad for people to have to pay anything, and I know that can be a great hardship,” Berger said. “But I think if they don’t take this deal, there’s a really good chance they could be stuck with 100 percent of the debt.”
Student Loan Xpress was the largest of three lenders used by Silver State’s more than 3,000 trainees — including nearly 50 in New Braunfels.
CitiBank had already forgiven 100 percent of the outstanding Silver State loans, although Citibank only represented around 100 students, Berger said.
A settlement is not expected any time soon with Key Bank, the third lender, according to Berger.
Although Texas was not one of the states that helped broker the settlement with Student Loan Xpress, it will still apply to Texas students.
“The settlement is written so that it applies to students in all states,” Berger said.
The settlement is only for students who were enrolled in Silver State when it went bankrupt.
The amount forgiven is based on a sliding scale, depending on whether a student received certification. If they did not receive any, 75 percent of their debt would be forgiven.
“I think it’s the best that can be done under the circumstances,” Berger said.
Silver State operated 34 campuses in 17 states.
It ran the air traffic control tower in New Braunfels, as well as a flight school.
Its bankruptcy in February 2008 cost the City of New Braunfels hundreds of thousands of dollars in unpaid fuel sales the company had been buying on credit, and left dozens of students and former employees wondering what to do next.
The large-scale legal battle over its bankruptcy has been going on ever since, with students waiting to hear if they might get some relief after paying thousands for training they would never receive.
“Everybody has just kind of been in limbo,” said Derrick Smith, president of Veracity Aviation, a helicopter flight school he started in New Braunfels after the bankruptcy. “No one has really known what’s going on.”
For the majority of students who borrowed from Student Loan Xpress, they might be getting some of their money back.
“It’s a drag to pay anything because they never got to be helicopter pilots,” Berger said. “But we think this is the best deal they’re going to get.”
By Chris Cobb
The Herald-Zeitung
Published December 29, 2009
Some measure of relief could soon be landing in the mailboxes of former students of Silver State Helicopters.
The nationwide flight school had plans to relocate its headquarters to New Braunfels before abruptly going bankrupt in February 2008 — cutting short flight training for thousands of students across the county who had already paid as much as $70,000 up-front through student loans.
After more than a year of bankruptcy proceedings in various states, a settlement offer to Silver State students from their largest lender is being mailed out this week, an attorney representing a number of the former trainees said Monday.
An agreement between 12 states was struck in October with Student Loan Xpress, which lent money to some 2,300 Silver State students nationwide, and is expected to have the company erase nearly $113 million in student debt.
The deal would forgive up to 75 percent of the loan amount for Silver State students who borrowed money from Student Loan Xpress.
Now that it is court approved, students can expect detailed notices explaining the settlement to arrive in early January, according to Michael Berger, a California-based bankruptcy attorney.
“I feel bad for people to have to pay anything, and I know that can be a great hardship,” Berger said. “But I think if they don’t take this deal, there’s a really good chance they could be stuck with 100 percent of the debt.”
Student Loan Xpress was the largest of three lenders used by Silver State’s more than 3,000 trainees — including nearly 50 in New Braunfels.
CitiBank had already forgiven 100 percent of the outstanding Silver State loans, although Citibank only represented around 100 students, Berger said.
A settlement is not expected any time soon with Key Bank, the third lender, according to Berger.
Although Texas was not one of the states that helped broker the settlement with Student Loan Xpress, it will still apply to Texas students.
“The settlement is written so that it applies to students in all states,” Berger said.
The settlement is only for students who were enrolled in Silver State when it went bankrupt.
The amount forgiven is based on a sliding scale, depending on whether a student received certification. If they did not receive any, 75 percent of their debt would be forgiven.
“I think it’s the best that can be done under the circumstances,” Berger said.
Silver State operated 34 campuses in 17 states.
It ran the air traffic control tower in New Braunfels, as well as a flight school.
Its bankruptcy in February 2008 cost the City of New Braunfels hundreds of thousands of dollars in unpaid fuel sales the company had been buying on credit, and left dozens of students and former employees wondering what to do next.
The large-scale legal battle over its bankruptcy has been going on ever since, with students waiting to hear if they might get some relief after paying thousands for training they would never receive.
“Everybody has just kind of been in limbo,” said Derrick Smith, president of Veracity Aviation, a helicopter flight school he started in New Braunfels after the bankruptcy. “No one has really known what’s going on.”
For the majority of students who borrowed from Student Loan Xpress, they might be getting some of their money back.
“It’s a drag to pay anything because they never got to be helicopter pilots,” Berger said. “But we think this is the best deal they’re going to get.”
SLX Class Action Settlement Q and A
Q. When will I receive Notice of the Class Action Settlement?
A. Notices are being mailed out now. They are expected to be sent out by an independent administrator between December 28 and December 30, 2009. If you are my client and you have not received notice of the settlement by January 7, 2009 and you believe that you are a member of the class, you should e-mail me @ michael.berger@bankruptcypower.com and I will follow up for you.
Q. How has Michael Berger and his law firm been involved in the negotiation of the proposed class action settlement with Student Loan Xpress?
A. I have worked closely with class action counsel on this matter throughout the last 18 months. My work began before the first class action lawsuit was filed. I have strategized and consulted extensively with class action counsel and assisted them per their request, in the district court, in the bankruptcy court, and in the protracted negotiations with Student Loan Xpress.
Q. Why was this case settled in the District Court in Tampa, Florida and not in the Nevada Bankruptcy Court?
A. James, Hoyer filed the first Silver State Helicopters / Student Loan Xpress case in the District Court in Tampa, Florida on behalf of a former SSH student representing himself and all SLX/SSH students. Pinnacle Law Group filed a case in the District Court in San Francisco on behalf of all California KeyBank/SLX/SSH students. Thereafter, Class Counsel strategized with each other and with me about which venue would be the most favorable to the students’ legal positions. After thoughtful consideration of all issues and after discussing this at length with each other, we all decided that bankruptcy court was the least desirable forum. There were several reasons for this. First, all of the lawyers were concerned that we would be unable to get the bankruptcy court to exercise jurisdiction over a creditor versus creditor action that did not involve the debtor (SSH). Second, bankruptcy courts are usually unfamiliar with the very complex nuances of class action lawsuits because they very rarely see such cases. Third, we very likely would have been unable to have a jury trial on any of the issues because the ability to have a jury trial in bankruptcy court is very limited. Fourth, based on the state law legal issues in the case, the bankruptcy court would have been a far less appropriate forum to deal with these issues (as distinct from pure questions of bankruptcy law). Finally, and most importantly, we believed that the individual federal district court judges that were assigned to the cases filed by Pinnacle Law Group and the James, Hoyer firms would be more sympathetic to your interests than the bankruptcy court.
Although I initially told you that I would consider filing an adversary proceeding on behalf of my clients in the bankruptcy court, I become convinced over time that this was not the best way to pursue this matter. At the time that I made this proposal, there were no class actions on file in any court with regard to the SSH matter. After many hours of discussions with class action counsel as well as my own extensive legal and factual research about the best place to take your fight to the banks, I became convinced that bankruptcy court was not the best forum. After seeing how things played out, I am now convinced more than ever that I engaged in the correct analysis and made the correct decision.
Q. How did the settlement come about? What was the process?
A. Andrew August and Keven Rooney of Pinnacle Law Group and I began negotiations with SLX's counsel in mid-2008. After numerous telephone calls, e-mails, letters and in person meetings, we were approached by SLX’s counsel who inquired if we were interested in participating in a mediation to seek a negotiated settlement of the case. We agreed and the parties agreed to use Judge William Cahill (Ret.) in San Francisco to facilitate settlement discussions. In September 2008 we had our first mediation session with Judge Cahill. A Class Representative and Dan Reed were present and part of the mediation team. I attended by phone from Los Angeles. Although there was initial agreement on using FAA certifications as a basis for the settlement (largely because the information with the FAA was objectively verifiable) after more than 12 hours, we could not reach any common ground on the amount of debt forgiveness, interest rate reduction or other essential terms and we therefore adjourned the mediation. We then sent SLX a letter stating that we no longer were interested in discussing settlement given its unacceptable and intransigent positions on these crucial issues. In response to this letter, Judge Cahill contacted the parties and persuaded the parties to attend a second mediation session in November 2008. At this session, which also lasted in excess of 12 hours, progress was made but still no agreement was reached. The parties returned in December 2008 for a third session but again, no agreement was reached. Judge Cahill thereafter presented what he thought was a fair settlement for all parties and presented it to the counsel. Only then were the material terms agreed to.
For the next 10 months Class Counsel, myself, Dan Reed and Counsel for SLX negotiated the details of the written settlement agreement and related documents. Thereafter Attorneys General of a Multi-State Task force investigating SSH reviewed the settlement agreement and negotiated additional modifications as well as their own agreement.
Although SLX expressly denies any wrongdoing in the settlement, the amount of debt forgiveness achieved (more than $112 million dollars in principal alone) is to the best of our knowledge unprecedented in the world of student loan modification. While we do not know for certain SLX’s reasoning for agreeing to the terms of this settlement or its agreement with the Attorneys General, it is reasonable to assume SLX considered the factual allegations made in the course of our lawsuit including its failure to conduct adequate due diligence into SLX before making the loans, not ensuring the education and training was being provided before disbursing the loan proceeds to SLX and not adequately monitoring the students’ progress.
Q What role did Michael Berger and/or Dan Reed play in negotiating the terms of the settlement?
A. I played in integral role in our successful battle with the SSH Trustee to obtain a complete copy of the SSH computer system and in negotiating and drafting the terms of the settlement agreement dealing with the bankruptcy issues. I met and negotiated with counsel for SLX both with and without other Plaintiff's counsel. Dan Reed attended the mediation in San Francisco that eventually resulted in the settlement and has assisted Class Counsel in negotiating and drafting the settlement agreement and advising his personal clients on the terms of the settlement.
Q Can you discharge your student loan obligation to Student Loan Xpress by filing bankruptcy?
A. In a word, no. In general, student loans can NOT be discharged in bankruptcy absent a very difficult to make showing of "undue hardship." After extensive research, all Plaintiff's counsel agree that the Student Loan Xpress loans are in fact student loans that are NOT discharged by the mere filing of a bankruptcy. To even attempt to discharge these loans in bankruptcy, the debtor must file a separate Adversary Proceeding (a lawsuit against the lender within the bankruptcy case)and prove that repaying the debt would constitute "undue hardship." An example of undue hardship would be that the debtor is permanently disabled and will never be able to repay the loan. Temporary unemployment or low income is NOT undue hardship.
I recently reviewed a bankruptcy court decision in Texas involving a Silver State Helicopters student who went to the trouble and expense of filing an Adversary Proceeding to try to discharge his SLX loan. The court granted summary judgment against the SSH student and denied his request to discharge the debt to SLX.
While we have succeeded in several instances in winning these cases for students who attended other schools and were unable to work due to permanent physical or mental problems, in each case we charged a fee $10,000.00 in addition to the $2,000.00 fee for the bankruptcy itself. We also paid expert witnesses to document the disability. It was not cheap, easy or quick. These adversary proceedings are separate lawsuits within the bankruptcy case, and require all the work of a separate lawsuit including, but not limited to, the preparation of a summons, notice of status conference and complaint, discovery, including written interrogatories, requests for production of documents, requests for admission and depositions, status conferences, mediations, pre-trial and trial. Numerous motions may be involved as well. In short, don't count on bankruptcy getting you out of your debt to SLX. For a free, expert, personalized analysis as to whether or not you can meet this undue hardship standard, call me.
Q. What has Michael Berger been doing with regards to the SSH bankruptcy cases?
A. I have monitored both SSH bankruptcy cases from the very start. In addition to filing proofs of claim for all of my clients, I have reviewed all of the documents filed in the 2 cases and in the related adversary proceeding cases. To date, more than 1710 documents have been filed in the lead SSH case. I have been in regular contact with counsel for the Trustee and have reviewed all of the Proofs of Claim filed in the 2 cases.
Q. What is my proof of claim in the SSH bankruptcy worth?
A. My best estimate is that each one of the former SSH students proof of claim will be worth somewhere between $0 and $3,000.00. No one else has been willing to provide a dollar estimate. I am in regular contact with Tony Zmaila, the attorney for the Trustee. I review documents filed in the SSH bankruptcy cases every day. Here is where we stand: (a) Most assets of the estate have already been liquidated for the benefit of the secured lender Orix (b)Orix, the secured lender, has received most of its money back, but is still owed several million dollars (c) the bankruptcy estate is currently administratively insolvent, meaning that there is not enough money to pay all of the claims for legal fees, trustees fees, administrative rent, etc. that must be paid before any distribution is made to unsecured creditors; (d) The Trustee and Trustee's counsel have not objected to any of the former student's proof of claims because there is no point in doing so unless there is going to be any money for unsecured creditors; (e)Legal costs continue to rise, with additional recoveries for the estate being uncertain; (f) There is not telling if and when any distribution to creditors will be made; (g) There are more than $450,000,000 in unsecured claims against the SSH estate; If any distribution is made to former SSH students, priority claims will be paid before general unsecured claims. Unlike most of the proofs of claims prepared by other attorneys or by former students on their own, the proofs of claim that I prepared for my clients all included a priority claim for the maximum amount allowed for services paid for but not received: $2,425.00. It is this priority claim that is largely responsible for the high end of the range that I have set forth hereinabove. Priority claims are paid ahead of general unsecured claims.
Q. Which is worth more to me, the discount that the class action settlement gives me on my student loan or my proof of claim?
A. This is an easy question. Based on all of the information that is available to me,the value of the discount on the student loan far exceeds the value of the proof of claim in every case. As an example, if you received no certifications (75% discount) or one flight certification (60% discount) and you owe $70,000.00 to SLX, the savings to you before considering additional discounts for early payments or reduced interest rates is between $42,000 and $52,500.00. The value of your proof of claim is somewhere between $0 and $3,000.00. Giving up your proof of claim for this discount, something that is required under the proposed SLX class action agreement, is a good deal for you and is somthing that I would do myself if I was in your situation.
Q. Will the Bankruptcy of CIT Group have an effect on the proposed settlement?
A. No one knows. My best guess is that it will not have any impact on the proposed settlement.
Q. If SLX files bankruptcy, will that wipe out my debt to SLX?
A. No. The debt would then be payable to the bankruptcy estate of SLX. It is possible that the debt could be sold to a third party that would then try to collect the debt.
Q. Do I have to accept the proposed settlement if I am a class action member?
A. No, you can accept it or opt out of it. I recommend that you accept it, but if you are my client I will do my best for you either way. The problem with opting out is that you are betting that you can do better than all of plaintiffs' counsel and the attorney generals from 12 states have been able to do. Counsel for SLX has specifically stated that they will NOT offer more favorable terms to those that opt out. You will have to face the very real risk of being sued individually and the very real risk of SLX getting a judgment against you for the full amount of principal + attorneys fees and costs, with no discount.
Q. If I opt out of the class action settlment now, can I come back and accept it later?
A. No.
Q. If I am your client in the SSH matter, what is included in your representation of me and what is not included?
A. Included matters include (a) all negotiations with your SSH student loan lenders, regardless of whether it is SLX, KeyBank, Citibank, or as it is in a few cases, Sallie Mae or Deutsche Bank; (b) the filing and defense of your proof of claim in the Bankruptcy Court; (c) the monitoring of the SSH bankruptcy, and, if appropriate, any other action taken in the SSH bankruptcy case; (d) advice regarding the class action cases and my cooperation with class action counsel; (e) my cooperation with all governmental agencies investigation SSH, Airola, Pickett, EOS, and all related entities; (f) my ongoing efforts to get relief for you any way that I can, including political appeals; and, if appropriate, group litigation against KeyBank. For now, I am cooperating with class action counsel in its litigation against KeyBank, but I have reserved the right to file my own separate action if class action counsel is unable to achieve satisfactory results.
Matters that are not included in the $800.00 flat fee that each one of my SSH clients paid me: (a) The filing a personal bankruptcy for the former student (For this service, I charge an additional fee of $2,000.00 + 299.00 filing fee. This service is only available for my California clients);
(b) The filing of an Adversary Proceeding against your student loan lender within a bankruptcy proceeding (This is not recommended absent a showing of undue hardship and is subject to the payment of a $10,000.00 flat fee if I believe that you can in fact satisfy the undue hardship standard); (c) The defense of a lawsuit against you by your student loan lender (this is a real possibility for those who opt out of the class action settlement).
Q. Why should I agree to pay anything at all to SLX?
A. Because of the very real risk that if you turn down this settlement offer, you will may to pay much more later. I know that some of you feel that you should not have to pay any money to SLX. I am very proud and happy to have helped to achieve 100% debt forgiveness for my Citibank clients, and I sincerely wish that I could have done this for my SLX clients too. This simply was not possible in this case, despite my best efforts and the best efforts of class action counsel, other
Plaintiffs' counsel, and the attorney generals of 12 states. Each lender had separate facts. Thousands of documents have been reviewed, but there has been no "smoking gun" that would make it likely in my opinon that we could ever do better than the settlement offer that we now have. This case poses very unique risks for all parties. Many of the legal issues are novel ones that could be decided against you. Indeed, as my KeyBank clients are aware, KeyBank has refused to make any real settlement offer because it believes it will prevail on the legal issues (which are being litigated in the California federal district court and the 9th Circuit Court of Appeals by Pinnacle Law Group). Most importantly, the reality is that even if we prevailed at a trial, I cannot say the outcome would have been better because a judge could conclude that almost all of the students received some tangible or intangible benefit for which they should have to pay money. For all of these reasons, I strongly advise you to participate in the settlement.
Q. Is Michael Berger receiving any fee from SLX in connection with the proposed settlement?
A. No.
Q. How can I contact class action counsel to ask them questions about the settlement agreement?
A. Send your questions to settlementquestions@gmail.com.
Q. Will Michael Berger be attending any of the Town Hall Meetings to Discuss and Explain the Settlement Agreement?
A. Yes, I will be attending the Town Hall Meeting currently scheduled for Sunday, January 10, 2009 at 2:00 pm at the Long Bach Marriot Hotel, 4700 Airport Plaza Drive, Long Beach, CA 90815. I will answer questions at the meeting and will stay as long as needed after the meeting until each and every student attending has my answer to any question that he or she has.
A. Notices are being mailed out now. They are expected to be sent out by an independent administrator between December 28 and December 30, 2009. If you are my client and you have not received notice of the settlement by January 7, 2009 and you believe that you are a member of the class, you should e-mail me @ michael.berger@bankruptcypower.com and I will follow up for you.
Q. How has Michael Berger and his law firm been involved in the negotiation of the proposed class action settlement with Student Loan Xpress?
A. I have worked closely with class action counsel on this matter throughout the last 18 months. My work began before the first class action lawsuit was filed. I have strategized and consulted extensively with class action counsel and assisted them per their request, in the district court, in the bankruptcy court, and in the protracted negotiations with Student Loan Xpress.
Q. Why was this case settled in the District Court in Tampa, Florida and not in the Nevada Bankruptcy Court?
A. James, Hoyer filed the first Silver State Helicopters / Student Loan Xpress case in the District Court in Tampa, Florida on behalf of a former SSH student representing himself and all SLX/SSH students. Pinnacle Law Group filed a case in the District Court in San Francisco on behalf of all California KeyBank/SLX/SSH students. Thereafter, Class Counsel strategized with each other and with me about which venue would be the most favorable to the students’ legal positions. After thoughtful consideration of all issues and after discussing this at length with each other, we all decided that bankruptcy court was the least desirable forum. There were several reasons for this. First, all of the lawyers were concerned that we would be unable to get the bankruptcy court to exercise jurisdiction over a creditor versus creditor action that did not involve the debtor (SSH). Second, bankruptcy courts are usually unfamiliar with the very complex nuances of class action lawsuits because they very rarely see such cases. Third, we very likely would have been unable to have a jury trial on any of the issues because the ability to have a jury trial in bankruptcy court is very limited. Fourth, based on the state law legal issues in the case, the bankruptcy court would have been a far less appropriate forum to deal with these issues (as distinct from pure questions of bankruptcy law). Finally, and most importantly, we believed that the individual federal district court judges that were assigned to the cases filed by Pinnacle Law Group and the James, Hoyer firms would be more sympathetic to your interests than the bankruptcy court.
Although I initially told you that I would consider filing an adversary proceeding on behalf of my clients in the bankruptcy court, I become convinced over time that this was not the best way to pursue this matter. At the time that I made this proposal, there were no class actions on file in any court with regard to the SSH matter. After many hours of discussions with class action counsel as well as my own extensive legal and factual research about the best place to take your fight to the banks, I became convinced that bankruptcy court was not the best forum. After seeing how things played out, I am now convinced more than ever that I engaged in the correct analysis and made the correct decision.
Q. How did the settlement come about? What was the process?
A. Andrew August and Keven Rooney of Pinnacle Law Group and I began negotiations with SLX's counsel in mid-2008. After numerous telephone calls, e-mails, letters and in person meetings, we were approached by SLX’s counsel who inquired if we were interested in participating in a mediation to seek a negotiated settlement of the case. We agreed and the parties agreed to use Judge William Cahill (Ret.) in San Francisco to facilitate settlement discussions. In September 2008 we had our first mediation session with Judge Cahill. A Class Representative and Dan Reed were present and part of the mediation team. I attended by phone from Los Angeles. Although there was initial agreement on using FAA certifications as a basis for the settlement (largely because the information with the FAA was objectively verifiable) after more than 12 hours, we could not reach any common ground on the amount of debt forgiveness, interest rate reduction or other essential terms and we therefore adjourned the mediation. We then sent SLX a letter stating that we no longer were interested in discussing settlement given its unacceptable and intransigent positions on these crucial issues. In response to this letter, Judge Cahill contacted the parties and persuaded the parties to attend a second mediation session in November 2008. At this session, which also lasted in excess of 12 hours, progress was made but still no agreement was reached. The parties returned in December 2008 for a third session but again, no agreement was reached. Judge Cahill thereafter presented what he thought was a fair settlement for all parties and presented it to the counsel. Only then were the material terms agreed to.
For the next 10 months Class Counsel, myself, Dan Reed and Counsel for SLX negotiated the details of the written settlement agreement and related documents. Thereafter Attorneys General of a Multi-State Task force investigating SSH reviewed the settlement agreement and negotiated additional modifications as well as their own agreement.
Although SLX expressly denies any wrongdoing in the settlement, the amount of debt forgiveness achieved (more than $112 million dollars in principal alone) is to the best of our knowledge unprecedented in the world of student loan modification. While we do not know for certain SLX’s reasoning for agreeing to the terms of this settlement or its agreement with the Attorneys General, it is reasonable to assume SLX considered the factual allegations made in the course of our lawsuit including its failure to conduct adequate due diligence into SLX before making the loans, not ensuring the education and training was being provided before disbursing the loan proceeds to SLX and not adequately monitoring the students’ progress.
Q What role did Michael Berger and/or Dan Reed play in negotiating the terms of the settlement?
A. I played in integral role in our successful battle with the SSH Trustee to obtain a complete copy of the SSH computer system and in negotiating and drafting the terms of the settlement agreement dealing with the bankruptcy issues. I met and negotiated with counsel for SLX both with and without other Plaintiff's counsel. Dan Reed attended the mediation in San Francisco that eventually resulted in the settlement and has assisted Class Counsel in negotiating and drafting the settlement agreement and advising his personal clients on the terms of the settlement.
Q Can you discharge your student loan obligation to Student Loan Xpress by filing bankruptcy?
A. In a word, no. In general, student loans can NOT be discharged in bankruptcy absent a very difficult to make showing of "undue hardship." After extensive research, all Plaintiff's counsel agree that the Student Loan Xpress loans are in fact student loans that are NOT discharged by the mere filing of a bankruptcy. To even attempt to discharge these loans in bankruptcy, the debtor must file a separate Adversary Proceeding (a lawsuit against the lender within the bankruptcy case)and prove that repaying the debt would constitute "undue hardship." An example of undue hardship would be that the debtor is permanently disabled and will never be able to repay the loan. Temporary unemployment or low income is NOT undue hardship.
I recently reviewed a bankruptcy court decision in Texas involving a Silver State Helicopters student who went to the trouble and expense of filing an Adversary Proceeding to try to discharge his SLX loan. The court granted summary judgment against the SSH student and denied his request to discharge the debt to SLX.
While we have succeeded in several instances in winning these cases for students who attended other schools and were unable to work due to permanent physical or mental problems, in each case we charged a fee $10,000.00 in addition to the $2,000.00 fee for the bankruptcy itself. We also paid expert witnesses to document the disability. It was not cheap, easy or quick. These adversary proceedings are separate lawsuits within the bankruptcy case, and require all the work of a separate lawsuit including, but not limited to, the preparation of a summons, notice of status conference and complaint, discovery, including written interrogatories, requests for production of documents, requests for admission and depositions, status conferences, mediations, pre-trial and trial. Numerous motions may be involved as well. In short, don't count on bankruptcy getting you out of your debt to SLX. For a free, expert, personalized analysis as to whether or not you can meet this undue hardship standard, call me.
Q. What has Michael Berger been doing with regards to the SSH bankruptcy cases?
A. I have monitored both SSH bankruptcy cases from the very start. In addition to filing proofs of claim for all of my clients, I have reviewed all of the documents filed in the 2 cases and in the related adversary proceeding cases. To date, more than 1710 documents have been filed in the lead SSH case. I have been in regular contact with counsel for the Trustee and have reviewed all of the Proofs of Claim filed in the 2 cases.
Q. What is my proof of claim in the SSH bankruptcy worth?
A. My best estimate is that each one of the former SSH students proof of claim will be worth somewhere between $0 and $3,000.00. No one else has been willing to provide a dollar estimate. I am in regular contact with Tony Zmaila, the attorney for the Trustee. I review documents filed in the SSH bankruptcy cases every day. Here is where we stand: (a) Most assets of the estate have already been liquidated for the benefit of the secured lender Orix (b)Orix, the secured lender, has received most of its money back, but is still owed several million dollars (c) the bankruptcy estate is currently administratively insolvent, meaning that there is not enough money to pay all of the claims for legal fees, trustees fees, administrative rent, etc. that must be paid before any distribution is made to unsecured creditors; (d) The Trustee and Trustee's counsel have not objected to any of the former student's proof of claims because there is no point in doing so unless there is going to be any money for unsecured creditors; (e)Legal costs continue to rise, with additional recoveries for the estate being uncertain; (f) There is not telling if and when any distribution to creditors will be made; (g) There are more than $450,000,000 in unsecured claims against the SSH estate; If any distribution is made to former SSH students, priority claims will be paid before general unsecured claims. Unlike most of the proofs of claims prepared by other attorneys or by former students on their own, the proofs of claim that I prepared for my clients all included a priority claim for the maximum amount allowed for services paid for but not received: $2,425.00. It is this priority claim that is largely responsible for the high end of the range that I have set forth hereinabove. Priority claims are paid ahead of general unsecured claims.
Q. Which is worth more to me, the discount that the class action settlement gives me on my student loan or my proof of claim?
A. This is an easy question. Based on all of the information that is available to me,the value of the discount on the student loan far exceeds the value of the proof of claim in every case. As an example, if you received no certifications (75% discount) or one flight certification (60% discount) and you owe $70,000.00 to SLX, the savings to you before considering additional discounts for early payments or reduced interest rates is between $42,000 and $52,500.00. The value of your proof of claim is somewhere between $0 and $3,000.00. Giving up your proof of claim for this discount, something that is required under the proposed SLX class action agreement, is a good deal for you and is somthing that I would do myself if I was in your situation.
Q. Will the Bankruptcy of CIT Group have an effect on the proposed settlement?
A. No one knows. My best guess is that it will not have any impact on the proposed settlement.
Q. If SLX files bankruptcy, will that wipe out my debt to SLX?
A. No. The debt would then be payable to the bankruptcy estate of SLX. It is possible that the debt could be sold to a third party that would then try to collect the debt.
Q. Do I have to accept the proposed settlement if I am a class action member?
A. No, you can accept it or opt out of it. I recommend that you accept it, but if you are my client I will do my best for you either way. The problem with opting out is that you are betting that you can do better than all of plaintiffs' counsel and the attorney generals from 12 states have been able to do. Counsel for SLX has specifically stated that they will NOT offer more favorable terms to those that opt out. You will have to face the very real risk of being sued individually and the very real risk of SLX getting a judgment against you for the full amount of principal + attorneys fees and costs, with no discount.
Q. If I opt out of the class action settlment now, can I come back and accept it later?
A. No.
Q. If I am your client in the SSH matter, what is included in your representation of me and what is not included?
A. Included matters include (a) all negotiations with your SSH student loan lenders, regardless of whether it is SLX, KeyBank, Citibank, or as it is in a few cases, Sallie Mae or Deutsche Bank; (b) the filing and defense of your proof of claim in the Bankruptcy Court; (c) the monitoring of the SSH bankruptcy, and, if appropriate, any other action taken in the SSH bankruptcy case; (d) advice regarding the class action cases and my cooperation with class action counsel; (e) my cooperation with all governmental agencies investigation SSH, Airola, Pickett, EOS, and all related entities; (f) my ongoing efforts to get relief for you any way that I can, including political appeals; and, if appropriate, group litigation against KeyBank. For now, I am cooperating with class action counsel in its litigation against KeyBank, but I have reserved the right to file my own separate action if class action counsel is unable to achieve satisfactory results.
Matters that are not included in the $800.00 flat fee that each one of my SSH clients paid me: (a) The filing a personal bankruptcy for the former student (For this service, I charge an additional fee of $2,000.00 + 299.00 filing fee. This service is only available for my California clients);
(b) The filing of an Adversary Proceeding against your student loan lender within a bankruptcy proceeding (This is not recommended absent a showing of undue hardship and is subject to the payment of a $10,000.00 flat fee if I believe that you can in fact satisfy the undue hardship standard); (c) The defense of a lawsuit against you by your student loan lender (this is a real possibility for those who opt out of the class action settlement).
Q. Why should I agree to pay anything at all to SLX?
A. Because of the very real risk that if you turn down this settlement offer, you will may to pay much more later. I know that some of you feel that you should not have to pay any money to SLX. I am very proud and happy to have helped to achieve 100% debt forgiveness for my Citibank clients, and I sincerely wish that I could have done this for my SLX clients too. This simply was not possible in this case, despite my best efforts and the best efforts of class action counsel, other
Plaintiffs' counsel, and the attorney generals of 12 states. Each lender had separate facts. Thousands of documents have been reviewed, but there has been no "smoking gun" that would make it likely in my opinon that we could ever do better than the settlement offer that we now have. This case poses very unique risks for all parties. Many of the legal issues are novel ones that could be decided against you. Indeed, as my KeyBank clients are aware, KeyBank has refused to make any real settlement offer because it believes it will prevail on the legal issues (which are being litigated in the California federal district court and the 9th Circuit Court of Appeals by Pinnacle Law Group). Most importantly, the reality is that even if we prevailed at a trial, I cannot say the outcome would have been better because a judge could conclude that almost all of the students received some tangible or intangible benefit for which they should have to pay money. For all of these reasons, I strongly advise you to participate in the settlement.
Q. Is Michael Berger receiving any fee from SLX in connection with the proposed settlement?
A. No.
Q. How can I contact class action counsel to ask them questions about the settlement agreement?
A. Send your questions to settlementquestions@gmail.com.
Q. Will Michael Berger be attending any of the Town Hall Meetings to Discuss and Explain the Settlement Agreement?
A. Yes, I will be attending the Town Hall Meeting currently scheduled for Sunday, January 10, 2009 at 2:00 pm at the Long Bach Marriot Hotel, 4700 Airport Plaza Drive, Long Beach, CA 90815. I will answer questions at the meeting and will stay as long as needed after the meeting until each and every student attending has my answer to any question that he or she has.
Tuesday, November 24, 2009
Questions About The Class Action Settlement
All former students of Silver State Helicopters with questions about the proposed class action settlement with Student Loan Xpress are invited to e-mail their questions to settlementquestions@gmail.com. This is a special e-mail address set up by class action counsel for this purpose. In addition, in person meetings with former SSH students and class action counsel are being set up for January, 2010 for Fort Lauderdale, Jacksonville, Melbourne, Oakland, Long Beach, Las Vegas, Salt Lake City and Poughkeepsie. I will be answering questions and giving my opinions at the Long Beach, CA meeting.
All clients of mine with questions about the proposed settlement are invited to contact me directly. Many of you have all ready done so. Every class member will have a chance to opt out of the proposed settlement agreement. If you do not like the agreement and think that you can do better, you will NOT be forced to accept the proposed settlement. You should wait until you have received all relevant information before you make this decision.
For former SSH students that are not in the class, it is important for you to know that class counsel do NOT represent you. You will not be covered by the class action settlement. This applies also to all class members who reject the proposed settlement. You will want to have the best possible legal representation to help you in resolving your ongoing SSH problems. I represent many students in this category. I am still signing up a limited number of former SSH students, including students that left SSH prior to its bankruptcy filing, students that are currently in bankruptcy, students with Loans from KeyBank, and students that paid off their SLX loans.
All clients of mine with questions about the proposed settlement are invited to contact me directly. Many of you have all ready done so. Every class member will have a chance to opt out of the proposed settlement agreement. If you do not like the agreement and think that you can do better, you will NOT be forced to accept the proposed settlement. You should wait until you have received all relevant information before you make this decision.
For former SSH students that are not in the class, it is important for you to know that class counsel do NOT represent you. You will not be covered by the class action settlement. This applies also to all class members who reject the proposed settlement. You will want to have the best possible legal representation to help you in resolving your ongoing SSH problems. I represent many students in this category. I am still signing up a limited number of former SSH students, including students that left SSH prior to its bankruptcy filing, students that are currently in bankruptcy, students with Loans from KeyBank, and students that paid off their SLX loans.
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