Students with loans with Student Loan Express
I have been receiving many phones calls, emails and letters inquiring about the letters that former SSH students that have Student Loan Xpress loans been receiving from AES regarding final settlement. These letters are confusing because they contradict prior letters from AES. The operative letter is the letter that references the “Holman Settlement” dated August 11, 2011. This letter is the correct letter that has each individual student’s settlement. The amount that each individual student must pay was based on the number of certificates received while attending SSH. The payment amount is made up of the following: 1. Loan amount, 2. Interest from the date the loan was funded through February 4, 2008 and 3. loan origination fee. For example, if your loan was $69,900.00 and you received zero certificates, 75 percent was deducted from the total of your loan amount plus interest through February 4, 2008 and the loan origination fee. If you are my client and you have any question regarding the settlement of your Student Loan Xpress loan, please e-mail my Senior Associate Attorney Georgeann Nicol. Her e-mail is georgeann.nicol@bankruptcypower.com. Georgeann is also the attorney handling the settlement of SLX loans for former students that are not part of the class action case.
Students with loans with KeyBank
KeyBank is still insisting on a settlement scheme based solely on flight hours. This scheme is far less favorable to the majority of our clients than the class action settlement approved in the Holman case for former SSH students with Student Loan Xpress loans. 4 of our former SSH students with low flight hours and with loans from KeyBank have settled their loans using KeyBank's formula. The rest of our KeyBank clients are at a standoff with KeyBank, waiting for a better settlement offer or a favorable court ruling to come along. We are still waiting for an Appellate Court ruling on the dismissal of the Pinnacle Law Group's proposed California class action case . We do not know when the Court will rule on the Appeal, but as soon as we know the results on the ruling, we will post it on the blog.
Wednesday, August 24, 2011
Wednesday, April 20, 2011
What Is New for Former Students of Silver State Helicopters?
Our office received numerous phone calls and e-mails regarding an "Order Scheduling Settlement Conference" for May 10, 2011 in the Silver State Helicopters, LLC bankruptcy case that was mailed out by the Court to creditors. This Order does not apply to former SSH students and it does not affect them. It relates to a dispute between the SSH and its major secured creditor Orix.
We are waiting for Student Loan Xpress ("SLX") to send new bills to former SSH students who were covered by the class action settlement agreement with SLX. These bills will reflect the reduced principal and interest amounts set forth in the class action settlement agreement approved by the Judge Merryday. The attorneys for SLX continue to tell me that they do not know when the new bills will be mailed out.
Senior Associate Attorney Georgeann Nicol and I have begun settlement discussions with counsel for SLX regarding clients of ours who were former SSH students who obtained loans from SLX to attend SSH but were not members of the class action. This includes former SSH students who were not enrolled at the time of the filing of the SSH Bankruptcy. At the request of counsel for SLX, these discussions were postponed until after the class action settlement was approved by the Court.
KeyBank continues to be the most difficult bank for us to deal with in connection with the loans that it made to former SSH students.
KeyBank's offer to our clients was based on the number of flight hours that the student had at SSH, not on the flight certifications obtained. This is generally less favorable to our clients than the number of flight certifications standard that was agreed to by SLX in the class action. To date, only four of our clients with KeyBank loans accepted KeyBank’s settlement offer.
The remainder of our former SSH students with KeyBank loans are still waiting for a better offer and / or a favorable ruling from the Ninth Circuit Court of Appeal with regards to the District Court's dismissal of the proposed California class action suit against KeyBank brought by Andrew August and his firm Pinnacle Law Group, LLP.
We are waiting for Student Loan Xpress ("SLX") to send new bills to former SSH students who were covered by the class action settlement agreement with SLX. These bills will reflect the reduced principal and interest amounts set forth in the class action settlement agreement approved by the Judge Merryday. The attorneys for SLX continue to tell me that they do not know when the new bills will be mailed out.
Senior Associate Attorney Georgeann Nicol and I have begun settlement discussions with counsel for SLX regarding clients of ours who were former SSH students who obtained loans from SLX to attend SSH but were not members of the class action. This includes former SSH students who were not enrolled at the time of the filing of the SSH Bankruptcy. At the request of counsel for SLX, these discussions were postponed until after the class action settlement was approved by the Court.
KeyBank continues to be the most difficult bank for us to deal with in connection with the loans that it made to former SSH students.
KeyBank's offer to our clients was based on the number of flight hours that the student had at SSH, not on the flight certifications obtained. This is generally less favorable to our clients than the number of flight certifications standard that was agreed to by SLX in the class action. To date, only four of our clients with KeyBank loans accepted KeyBank’s settlement offer.
The remainder of our former SSH students with KeyBank loans are still waiting for a better offer and / or a favorable ruling from the Ninth Circuit Court of Appeal with regards to the District Court's dismissal of the proposed California class action suit against KeyBank brought by Andrew August and his firm Pinnacle Law Group, LLP.
Monday, January 31, 2011
Comments on the Dischargeability of Student Loans in Bankruptcy
1. Overview
The Bankruptcy Code provides that student loans are not discharged in any bankruptcy proceeding unless “excepting such debt from discharge would impose an undue hardship on the debtor.” Section 523(a)(8).
The test – undue hardship – is very difficult to meet. It is the debtor’s burden to prove the undue hardship at trial. Undue hardship means an inability to maintain a “minimal standard of living,” essentially forever.
2. The Procedure
To obtain a discharge of student loans, a person must:
a. File a bankruptcy proceeding, chapter 7, 11 or 13, and,
b. During the pending bankruptcy proceeding, file a Complaint against the student loan lender (or lenders) asking the court to “declare” that repayment of the student loan will be an undue hardship on the debtor.
Filing the Complaint begins an adversary proceeding. This is the same thing as litigation outside of bankruptcy. The lender is the “defendant” in the proceeding. The lender will file an “Answer” or other response to the Complaint. The Court will set a status conference and eventually set a trial date. During the interim between the filing of the Complaint and trial will be a “discovery period.” The lender defendant will take the deposition of the debtor and possibly the debtor’s other witnesses. The lender will request documents from the debtor including income and expense records and employment records. The lender may file various motions such as Motion for Summary Judgment.
The time between the filing of the Complaint and trial varies but can be generally estimated to be six months to a year. Trial generally will take a few days. After hearing the debtor’s witnesses and other evidence and the lender’s response and its evidence, the Bankruptcy Court will rule and “declare” whether any or all of the student loans represent an undue hardship to the debtor.
3. Determining Whether There is Undue Hardship
The Bankruptcy Courts use a three prong test called the Brunner Test to determine whether or not there is undue hardship. The Brunner Test (831 F.2d at 396) requires that the debtor prove all of the following:
a. that the debtor cannot maintain, based on current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the loans;
b. that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
c. that the debtor has made good faith efforts to repay the loans.
3.1 The First Brunner Prong – Inability to Pay Now
The first prong is the easiest to meet. The debtor must offer evidence at trial that repayment of the loan is not possible “based on current income and expenses.” This is established usually by the debtor’s own testimony and personal records. The debtor’s testimony is that he has a job (or does not), makes x amount of money, and that amount is not enough to allow him to maintain a minimal standard of living.
The lender will often argue that the debtor can get a better job, or work more hours, or cut back on expenses, get a less expensive place to live, and thereby pay some of the loans and still maintain a minimal standard of living. A minimal standard of living does not include private schools for children, putting money away for retirement, or supporting other family members or unrelated persons.
3.2 The Second Brunner Prong – Inability to Pay in the Future
To meet the second prong, the debtor must prove at trial that “this state of affairs,” i.e., his current financial condition, will continue forever essentially. The debtor will need evidence at trial that he will not make significantly more in the future than he is making now. The debtor can certainly get on the stand and say that his position is as high as he will ever get however that will generally carry little weight with the judge. This usually requires an expert in the particular industry. This prong obviously involves a lot of speculation but the burden belongs to the debtor. He must prove to the Bankruptcy Court with evidence at trial that things are never going to improve.
The lender will certainly retain an expert who will likely testify that in this particular industry the debtor can be expected to make considerably more in the future.
3.3 The Third Brunner Prong – Good Faith Efforts to Repay the Loan
The debtor must establish at trial that he has made a good faith attempt to repay the loans. The most basic part of this requirement is that the debtor show the court that he has attempted to reach some sort of arrangement with the lender which will permit reduced payments or a period of no payments.
The United States Department of Education, William D. Ford Federal Direct Loan Program offers various repayment options for student loan debtors. One of these is the Income Contingent Repayment Plan.
Systems of bankruptcy are designed to relieve the honest debtor from the weight of indebtedness which has become oppressive, and to permit him to have a fresh start in business or commercial life, freed from the obligation and responsibilities which may have resulted from business misfortunes. Essentially, once a student loan debtor is on an ICR plan, monthly payments are calculated on the basis of adjusted gross income, family size, and total amount of Direct Loan debt. This can give student loan debtors the flexibility and breathing room they need during difficult times. Direct Loan provides a handy calculator for approximating ICR plan payments. The calculator is located at www.ed.gov/offices/OSFAP/DirectLoan/calc.html. The maximum repayment period under an ICR plan is twenty-five years. If a debtor makes payments under an ICR plan for twenty-five years, and there are still amounts left owing, those unpaid amounts are forgiven. More information on ICR plans and other Direct Loan repayment options can be found at www.ed.gov/DirectLoan or by calling 1-800-848-0979.
It is pretty clear that failure to use the Ford Program Options will, by itself, prevent any portion of the student loan from being discharged.
The Ford Program does not apply to many loans. The debtor must attempt to settle or otherwise resolve the issue with the other lenders before seeking a discharge. The debtor will need evidence of these efforts at trial. A statement by the debtor on the witness stand that “I tried” will be given little weight. The debtor needs names and dates and rejection letters are even better.
Some courts have ruled that failure to make payments before filing the bankruptcy case is a factor against the debtor.
4. The “Partial Discharge”
A relatively new development in the discharge of student loans is the “partial discharge.” The Bankruptcy Court is permitted to determine that some portion of the total student loan debt is discharged. This occurs usually when the amount owed is huge, for example a few hundred thousand dollars or more. Applying interest to that amount means that the payments will be several thousand dollars per months for many years. The Bankruptcy Court may decide that x amount of the total is to be repaid and the rest discharged. Remember that the burden is on the debtor to show the court at trial what portion cannot be repaid.
This article was prepared by By: M. Jonathan Hayes and is
Reprinted from the CDCBAA February, 2010 Newsletter
The Bankruptcy Code provides that student loans are not discharged in any bankruptcy proceeding unless “excepting such debt from discharge would impose an undue hardship on the debtor.” Section 523(a)(8).
The test – undue hardship – is very difficult to meet. It is the debtor’s burden to prove the undue hardship at trial. Undue hardship means an inability to maintain a “minimal standard of living,” essentially forever.
2. The Procedure
To obtain a discharge of student loans, a person must:
a. File a bankruptcy proceeding, chapter 7, 11 or 13, and,
b. During the pending bankruptcy proceeding, file a Complaint against the student loan lender (or lenders) asking the court to “declare” that repayment of the student loan will be an undue hardship on the debtor.
Filing the Complaint begins an adversary proceeding. This is the same thing as litigation outside of bankruptcy. The lender is the “defendant” in the proceeding. The lender will file an “Answer” or other response to the Complaint. The Court will set a status conference and eventually set a trial date. During the interim between the filing of the Complaint and trial will be a “discovery period.” The lender defendant will take the deposition of the debtor and possibly the debtor’s other witnesses. The lender will request documents from the debtor including income and expense records and employment records. The lender may file various motions such as Motion for Summary Judgment.
The time between the filing of the Complaint and trial varies but can be generally estimated to be six months to a year. Trial generally will take a few days. After hearing the debtor’s witnesses and other evidence and the lender’s response and its evidence, the Bankruptcy Court will rule and “declare” whether any or all of the student loans represent an undue hardship to the debtor.
3. Determining Whether There is Undue Hardship
The Bankruptcy Courts use a three prong test called the Brunner Test to determine whether or not there is undue hardship. The Brunner Test (831 F.2d at 396) requires that the debtor prove all of the following:
a. that the debtor cannot maintain, based on current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the loans;
b. that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
c. that the debtor has made good faith efforts to repay the loans.
3.1 The First Brunner Prong – Inability to Pay Now
The first prong is the easiest to meet. The debtor must offer evidence at trial that repayment of the loan is not possible “based on current income and expenses.” This is established usually by the debtor’s own testimony and personal records. The debtor’s testimony is that he has a job (or does not), makes x amount of money, and that amount is not enough to allow him to maintain a minimal standard of living.
The lender will often argue that the debtor can get a better job, or work more hours, or cut back on expenses, get a less expensive place to live, and thereby pay some of the loans and still maintain a minimal standard of living. A minimal standard of living does not include private schools for children, putting money away for retirement, or supporting other family members or unrelated persons.
3.2 The Second Brunner Prong – Inability to Pay in the Future
To meet the second prong, the debtor must prove at trial that “this state of affairs,” i.e., his current financial condition, will continue forever essentially. The debtor will need evidence at trial that he will not make significantly more in the future than he is making now. The debtor can certainly get on the stand and say that his position is as high as he will ever get however that will generally carry little weight with the judge. This usually requires an expert in the particular industry. This prong obviously involves a lot of speculation but the burden belongs to the debtor. He must prove to the Bankruptcy Court with evidence at trial that things are never going to improve.
The lender will certainly retain an expert who will likely testify that in this particular industry the debtor can be expected to make considerably more in the future.
3.3 The Third Brunner Prong – Good Faith Efforts to Repay the Loan
The debtor must establish at trial that he has made a good faith attempt to repay the loans. The most basic part of this requirement is that the debtor show the court that he has attempted to reach some sort of arrangement with the lender which will permit reduced payments or a period of no payments.
The United States Department of Education, William D. Ford Federal Direct Loan Program offers various repayment options for student loan debtors. One of these is the Income Contingent Repayment Plan.
Systems of bankruptcy are designed to relieve the honest debtor from the weight of indebtedness which has become oppressive, and to permit him to have a fresh start in business or commercial life, freed from the obligation and responsibilities which may have resulted from business misfortunes. Essentially, once a student loan debtor is on an ICR plan, monthly payments are calculated on the basis of adjusted gross income, family size, and total amount of Direct Loan debt. This can give student loan debtors the flexibility and breathing room they need during difficult times. Direct Loan provides a handy calculator for approximating ICR plan payments. The calculator is located at www.ed.gov/offices/OSFAP/DirectLoan/calc.html. The maximum repayment period under an ICR plan is twenty-five years. If a debtor makes payments under an ICR plan for twenty-five years, and there are still amounts left owing, those unpaid amounts are forgiven. More information on ICR plans and other Direct Loan repayment options can be found at www.ed.gov/DirectLoan or by calling 1-800-848-0979.
It is pretty clear that failure to use the Ford Program Options will, by itself, prevent any portion of the student loan from being discharged.
The Ford Program does not apply to many loans. The debtor must attempt to settle or otherwise resolve the issue with the other lenders before seeking a discharge. The debtor will need evidence of these efforts at trial. A statement by the debtor on the witness stand that “I tried” will be given little weight. The debtor needs names and dates and rejection letters are even better.
Some courts have ruled that failure to make payments before filing the bankruptcy case is a factor against the debtor.
4. The “Partial Discharge”
A relatively new development in the discharge of student loans is the “partial discharge.” The Bankruptcy Court is permitted to determine that some portion of the total student loan debt is discharged. This occurs usually when the amount owed is huge, for example a few hundred thousand dollars or more. Applying interest to that amount means that the payments will be several thousand dollars per months for many years. The Bankruptcy Court may decide that x amount of the total is to be repaid and the rest discharged. Remember that the burden is on the debtor to show the court at trial what portion cannot be repaid.
This article was prepared by By: M. Jonathan Hayes and is
Reprinted from the CDCBAA February, 2010 Newsletter
Wednesday, January 12, 2011
Kilgore v. KeyBank Appeal Briefing Complete
All of the briefing is complete in the 9th Circuit Court of Appeals in the California proposed class action case on behalf of California residents who attended Silver State Helicopters, obtained student loans from KeyBank to do so, and were still enrolled at SSH at the time that it filed bankruptcy. KeyBank has cited the dismissal of this case in the District Court when threatening its borrowers with collection action. A hearing date is anticipated in March. The ruling in this case, while only binding on California residents, is expected to have influence on KeyBank with respect to its dealings with all of its former SSH student borrowers. For now, KeyBank continues to place collection calls and write collection letters to former SSH students, without suing or seeking arbitration against any of them. If you are my client and you receive a collection call or letter from KeyBank, respond by telling the collector that I represent you and ask the collector to call me at my office: 310 271-6223.
Student Loan Xpress Proposed Class Action Settlement Approved
Judge Merryday has issued his order granting final approval of the proposed class action settlement agreement for students that attended Silver State Helicopters School ("SSH") and obtained student loans from Student Loan Xpress ("SLX") and were still enrolled at SSH at the time that SSH filed bankruptcy. Judge Merryday has not yet entered a final judgment on that order. Class counsel has filed a joint motion with SLX to have Judge Merryday enter judgment ASAP. Class members can expect to receive updated loan information from SLX, including the new reduced amount of their loan balance and their loan payments, in the next 30-60 days. Any questions about this should be addressed to Andrew August: settlementquestions@gmail.com
Saturday, December 04, 2010
No Difference
Many of my clients with loans from Student Loan Xpress recently received a recently informing them that the loan servicer on their loan has been changed from Xpress Loan Servicing (XLS) to American Education Services (AES). This change does not make any meaningful difference to any of my clients. It does not change the owner of the loans. It does not change the terms of the loans. It does not have any affect on the proposed settlement of the class action lawsuit which we are all waiting to have finally approved by Judge Merryday.
The letter that I am referring to begins, "This is to inform you that Xpress Loan Servicing (XLS) will no longer be servicing the following private student loans" and goes on to say that "The new servicer of these loan(s), American Education Services (AES) will be contacting you within the next 30 days."
If you received this letter, don't worry. No action on your part is needed now. If the proposed class action settlement agreement is approved by the court and if and when you begin making payments under that agreement, you will simply send your payment to a different collector.
The letter that I am referring to begins, "This is to inform you that Xpress Loan Servicing (XLS) will no longer be servicing the following private student loans" and goes on to say that "The new servicer of these loan(s), American Education Services (AES) will be contacting you within the next 30 days."
If you received this letter, don't worry. No action on your part is needed now. If the proposed class action settlement agreement is approved by the court and if and when you begin making payments under that agreement, you will simply send your payment to a different collector.
Friday, November 12, 2010
Settling with Jerry Airola and Thomas Pickett
James F. Lisowski, Sr., the Chapter 7 Trustee in the Silver State Helicopters, LLC Bankruptcy Case, wants to settle with Jerry Airola and Thomas Pickett and 2 of their companies. Jerry Airola was the founder and CEO of Silver State Helicopters, LLC ("SSH"). Thomas Pickett was the Chief Financial Officer of SSH. On November 3, 2010, Lisowski filed a Motion to Approve Compromise and Settlement Between Trustee and Jerry Airola, Steve Pickett, First American Equity, LLC and Stars and Stripes Heliplex, LLC. The Hearing on the Trustee's Motion is Set for December 8, 2010 at 9:30 am. Former students who attended SSH and who hold Jerry Airola personally reponsible for tens of thousands of dollars in student loans that they are still obligated to repay will be disappointed in the proposed settlement. Those of us waiting for criminal prosecution of Airola and jail time for Airola will not find any comfort in the proposed settlement agreement.
Here are the key terms of the proposed settlement agreement:
1. Commercial property located at 800 South 3110 West Provo, Utah 84601 that is owned by SSH but allegedly subject to a $1,587,049.75 - $1,703,805.48 deed of trust in favor of Jerry Airola will be sold and the proceeds split with 2/3 going to the bankruptcy estate of SSH and 1/3 going to Airola. Several commercial office buildings and hangars are located on the property. The estimated value of the property is approximately $1,500,000.00. The Trustee describes the financial benefit of this and other consideration to be received by the bankruptcy estate as "close to one million dollars." This other consideration to be received by the Trustee includes a $10,000.00 earnest money deposit forfeited by a proposed buyer of the West Provo property and an unsecured, non-priority proof of claim with a face amount of $714,000.00 but no clear value in the bankruptcy of a company called Stars and Stripes, LLC. $1,000,000.00 seems to be a paltry sum compared to the harm done by Airola. Moreover, little or none of this money is likely to go to former students of SSH. The Trustee says in this moving papers that "the likelihood of paying a dividend to unsecured creditors, particularly unsecured creditors, is nonexistent." Former students of SSH who included a priority claim in their proofs of claim, as I did for all of my SSH clients, may or may not fare slightly better.
2. While the Trustee focuses on the close to one million dollars that SSH will receive from the sale of the West Provo property, Airola will personally receive 1/3 of the proceeds from the West Provo property, or approximately $500,000.00. In addition, Airola will be allowed to keep two custom motorcycles manufactured by Orange County Choppers which were the subject of a separate adversary proceeding filed by the Trustee against Airola and Airola will be allowed to keep certain proofs of claim in the SSH bankruptcy.
3. Upon approval of his settlement Motion, the Trustee will dismiss both of his adversary proceedings against Airola.
4. The Settlement agreement provides for a mutual general release of all claims between the Defendants, the Debtor, The Trustee and the Estate. Former SSH CFO Thomas Pickett gets a free ride. He pays nothing to the bankruptcy estate of SSH, but gets a complete release of all claims from the Trustee.
Here are the key terms of the proposed settlement agreement:
1. Commercial property located at 800 South 3110 West Provo, Utah 84601 that is owned by SSH but allegedly subject to a $1,587,049.75 - $1,703,805.48 deed of trust in favor of Jerry Airola will be sold and the proceeds split with 2/3 going to the bankruptcy estate of SSH and 1/3 going to Airola. Several commercial office buildings and hangars are located on the property. The estimated value of the property is approximately $1,500,000.00. The Trustee describes the financial benefit of this and other consideration to be received by the bankruptcy estate as "close to one million dollars." This other consideration to be received by the Trustee includes a $10,000.00 earnest money deposit forfeited by a proposed buyer of the West Provo property and an unsecured, non-priority proof of claim with a face amount of $714,000.00 but no clear value in the bankruptcy of a company called Stars and Stripes, LLC. $1,000,000.00 seems to be a paltry sum compared to the harm done by Airola. Moreover, little or none of this money is likely to go to former students of SSH. The Trustee says in this moving papers that "the likelihood of paying a dividend to unsecured creditors, particularly unsecured creditors, is nonexistent." Former students of SSH who included a priority claim in their proofs of claim, as I did for all of my SSH clients, may or may not fare slightly better.
2. While the Trustee focuses on the close to one million dollars that SSH will receive from the sale of the West Provo property, Airola will personally receive 1/3 of the proceeds from the West Provo property, or approximately $500,000.00. In addition, Airola will be allowed to keep two custom motorcycles manufactured by Orange County Choppers which were the subject of a separate adversary proceeding filed by the Trustee against Airola and Airola will be allowed to keep certain proofs of claim in the SSH bankruptcy.
3. Upon approval of his settlement Motion, the Trustee will dismiss both of his adversary proceedings against Airola.
4. The Settlement agreement provides for a mutual general release of all claims between the Defendants, the Debtor, The Trustee and the Estate. Former SSH CFO Thomas Pickett gets a free ride. He pays nothing to the bankruptcy estate of SSH, but gets a complete release of all claims from the Trustee.
Tuesday, October 12, 2010
Student Loan Xpress Class Action Settlement Update
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.
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.
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.
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