Mixen v. Navient Solutions, LLC et al

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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
JOSEPH MIXEN,
Plaintiff,
v.
NAVIENT SOLUTIONS, LLC,
and TRANS UNION, LLC,
Defendants.
Case No. 3:24-CV-1471-NJR
MEMORANDUM AND ORDER
ROSENSTENGEL, Chief Judge:
This matter is before the Court on the Motion to Dismiss Plaintiff’s Second
Amended Complaint filed by Defendant Navient Solutions, LLC (“Navient”). (Doc. 64).
Defendant Trans Union, LLC, has joined in Navient’s motion and adopted its arguments.
(Docs. 65, 68). Plaintiff Joseph Mixen (“Mixen”) filed a response in opposition (Doc. 66),
and Navient filed a reply (Doc. 67). For the following reasons, the Motion to Dismiss is
granted in part and denied in part.
B ACKGROUND
The following facts are derived from the Second Amended Complaint and its
attachments (Docs. 62, 62-1) and are taken as true for the purposes of Navient’s Motion
to Dismiss.
Prior to 2019, Mixen had eight student loans serviced by Navient. (Id. at ¶ 7). Six
of the loans were private loans, while the remaining two were Federal Family Education
Loans (“FFEL Loans”). (Doc. 62 at pp. 6, 14, 25, 34, 45, 56, 65, 72). The loans financed
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Mixen’s attendance at ITT Technical Institute (“ITT Tech”). (Doc. 66 at p. 2).
On August 27, 2019, Mixen filed for bankruptcy under Chapter 13 of the
Bankruptcy Code. (Id. at ¶ 9). Navient filed Proofs of Claim on its eight loans in Mixen’s
bankruptcy case. (Id. at ¶ 10).
On October 20, 2022, Mixen received an email from the U.S. Department of
Education indicating Mixen’s federal loans funding his education at ITT Tech were
eligible for full loan discharge as part of a borrower defense program due to ITT Tech’s
widespread misconduct violating consumer protection laws. (Id. at ¶ 8; Doc. 62-1 at
pp. 17-18). The email further stated, in relevant part, “Please note: Borrower defense to
repayment does not apply to any private student loans you may have.” (Id. at p. 17).
Navient subsequently withdrew its Proofs of Claim for Mixen’s two FFEL Loans, but did
not withdraw its Proofs of Claim for the six private loans. (Doc. 62 at ¶ 13).
In the bankruptcy court, Mixen objected to Navient’s Proofs of Claim for the six
private loans. (Id. at ¶ 11). Mixen claimed that ITT Tech had committed breach of contract
and/or fraud, and loans relating to the school had been discharged by the Department of
Education under its borrower defense program. (Id. at ¶ 11). Navient did not respond to
Mixen’s objections.
Mixen asserts that the bankruptcy court then entered orders confirming that with
respect to the six private loans, nothing more was owed beyond what the bankruptcy
trustee had already paid. (Id. at ¶ 12). The orders, attached as exhibits to Mixen’s Second
Amended Complaint, stated: “No response having been filed by Creditor, IT IS
ORDERED that the Debtor’s objection is SUSTAINED. Claim [] is allowed in the amount
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of [], which represents the amount previously paid by the Trustee, and the balance of
Proof of Claim [] is DISALLOWED. (Doc. 62-1).
Mixen alleges that, because the Proofs of Claim were disallowed, all of his loans—
including his six private loans—should have been either deleted or reported by Navient
under code DA, which is a special code for discharges based on the closed school
borrower defense, with a zero balance. (Id. at ¶ 14). Yet, Navient continued to report to
the credit bureaus that the six private loans were charged off with substantial amounts
owing. (Id. at ¶ 15).
On April 9, 2024, Mixen, through counsel, sent the three credit bureaus a letter
demanding correction of his reports, with copies to Navient. (Id. at ¶ 16). The credit
bureaus contacted Navient while investigating the dispute, but Navient verified that its
reporting was correct. (Id. at ¶¶ 17-18). As of June 7, 2024, the loans continued to appear
on Mixen’s credit reports. (Id. at ¶ 20).
Mixen initiated this action on June 10, 2024, and is now proceeding on the Second
Amended Complaint. (Doc. 62). In Count I, Mixen asserts that Trans Union violated the
Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681i, in that it willfully or negligently
failed to take reasonable measures to investigate his dispute and failed to correct his
credit report. In Count II, Mixen claims that Navient violated the FCRA, § 1681s-2(b) by
failing to reasonably investigate his dispute and providing false information to the credit
bureaus when they contacted Navient in the course of investigating his complaints.
Finally, in Count III, Mixen seeks declaratory and injunctive relief as to Navient in the
form of a finding that any action on the loan agreements is barred by the breach of
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contract and/or fraud committed by ITT Tech.
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) “tests whether the complaint states a
claim on which relief may be granted.” Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir.
2012). The Court accepts as true the complaint’s well-pleaded factual allegations and
draws all reasonable inferences in the plaintiff’s favor. Burke v. 401 N. Wabash Venture,
LLC, 714 F.3d 501, 504 (7th Cir. 2013). To survive a Rule 12(b)(6) motion, the plaintiff only
needs to allege enough facts to state a claim for relief that is plausible on its face. Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). A plaintiff need not plead detailed
factual allegations, but must provide “more than labels and conclusions, and a formulaic
recitation of the elements.” Id.
In evaluating a complaint on a motion to dismiss, “district courts are free to
consider ‘any facts set forth in the complaint that undermine the plaintiff’s claim.’” Esco
v. City of Chicago, 107 F.4th 	673, 678 (7th Cir. 2024) (quoting Bogie v. Rosenberg, 705 F.3d
603, 609 (7th Cir. 2013)). Thus, a court may review exhibits attached to the complaint or
referenced in the pleading if they are central to the claim. Id.
DISCUSSION
I. 	Counts 1 and 2: Fair Credit Reporting Act
Navient 1 first asserts that Mixen has failed to state a valid FCRA claim. The
Seventh Circuit has adopted two threshold requirements for a claim under § 1681s-2(b).
First, “[t]he plaintiff must make a prima facie showing that the data furnisher provided
1 As noted above, Defendant Trans Union has joined in Navient’s motion and adopted its arguments.
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incomplete or inaccurate information.” Frazier v. Dovenmuehle Mortg., Inc., 72 F.4th 769,
775 (7th Cir. 2023). Second, the plaintiff must demonstrate “that the incompleteness or
inaccuracy was the product of an unreasonable investigation—that is, had the furnisher
conducted a reasonable investigation, it would have discovered that the data it provided
was incomplete or inaccurate.” Id. “[I]ncompleteness or inaccuracy under § 1681s-2(b)
requires a showing that the information the data furnisher provided was (1) patently
incorrect, or (2) materially misleading, including by omission.” Id. at 776. Materially
misleading means misleading in a way that it can be expected to adversely affect credit
decisions. Id.
Factual Accuracy of Navient’s Report
Navient challenges only the first prong of the § 1681s-2(b) test, i.e., whether Mixen
has alleged adequate facts demonstrating that Navient, as the data furnisher, provided
incomplete or inaccurate information to the credit bureaus. Navient asserts that its
reporting regarding Mixen’s private loans was factually accurate because the loans were
not discharged by the Department of Education, and they were not discharged by the
bankruptcy court. Accordingly, Mixen cannot establish a prima facie claim against Navient
for violation of § 1681s-2(b).
Mixen acknowledges that the Department of Education did not directly determine
that his private loans did not need to be repaid. (Doc. 66 at p. 4). But he argues that he
objected in the bankruptcy court to Navient’s Proofs of Claim on the basis that “ITT
Technical Institute had been found to be fraudulent by the Department of Education and
that he should not have to repay either the federal or the private loans.” (Doc. 66 at p. 4).
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According to Mixen, the bankruptcy court then “entered orders confirming that with
respect to six private loans, nothing more was owed beyond what had already been
paid.”
In reply, Navient contends that Mixen’s objections to Navient’s Proofs of Claim in
the bankruptcy court were “rooted in an erroneous starting premise.” That is, Mixen told
the bankruptcy court that the Department of Education determined the loans he received
to attend ITT Tech were eligible for full loan discharge under the borrower defense
regulations, but he did not specify that only his federal loans were eligible for full loan
discharge. 	Indeed, 	the 	letter 	Mixen 	received 	from 	the 	Department 	of 	Education
specifically states that the “[b]orrower defense to repayment does not apply to any
private student loans you may have.” (Id.). Thus, Mixen’s objections to Navient’s Proofs
of Claim in the bankruptcy proceeding were inaccurate from the start. Moreover, Navient
argues, while the balance of Navient’s Proofs of Claim were disallowed by the
Bankruptcy Court, the debts themselves were not discharged in bankruptcy. Navient
points to the Order of Discharge, signed by U.S. Bankruptcy Judge Laura Grandy on July
13, 2023, which specifically states: “Some debts are not discharged” including “debts for
most student loans . . . .” (Doc. 64-2).
“When the bankruptcy court confirms a plan, its terms become binding on debtor
and creditor alike.” Bullard v. Blue Hills Bank, 575 U.S. 496, 502 (2015) (citing 11 U.S.C.
§ 1327(a)). “Confirmation has preclusive effect, foreclosing relitigation of ‘any issue
actually litigated by the parties and any issue necessarily determined by the confirmation
order.’ ” Id. (quoting 8 Collier ¶ 1327.02[1][c], at 1327–6; see also United Student Aid Funds,
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Inc. v. Espinosa, 559 U.S. 260, 275 (2010) (finding a confirmation order “enforceable and
binding” on a creditor notwithstanding legal error when the creditor “had notice of the
error and failed to object or timely appeal”)). “Subject to certain exceptions, confirmation
‘vests all of the property of the [bankruptcy] estate in the debtor,’ and renders that
property ‘free and clear of any claim or interest of any creditor provided for by the plan.’”
Id. at 502-03 (quoting 11 U.S.C. §§ 1327(b), (c)).
Here, the bankruptcy court confirmed Mixen’s Chapter 13 plan on November 19,
2019. In re Mixen, Case No. 19-31146-lkg (S.D. Ill. Bankr.), at Doc. 27. It subsequently
approved modification of the plan after confirmation pursuant to 11 U.S.C. § 1329 on
October 4, 2022, April 26, 2023, and May 30, 2023. Id. at Docs. 57, 97, 101. Specifically, the
plan was amended on April 26, 2023, “to provide for 100% repayment to allowed non-
priority unsecured claims,” which included Navient’s allowed claims. Id. at Docs. 91, 97.
At no point did Navient object to the Chapter 13 plan or its proposed amendments,
respond to Mixen’s objections to its Proofs of Claim, or appeal the bankruptcy court’s
order confirming Mixen’s Chapter 13 plan. Navient is therefore bound by the terms of
the Chapter 13 plan.
Navient argues that the bankruptcy court’s orders disallowing the remaining
balances of its claims did not actually discharge the private loans outside of bankruptcy;
they merely disallowed further payment on Navient’s claims within the bankruptcy
proceeding. Navient notes that under 11 U.S.C. § 523(a)(8), an educational loan is not
dischargeable in bankruptcy without a finding that the debt would “impose an undue
hardship on the debtor and the debtor’s dependents,” and Bankruptcy Rule 7001(6)
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expressly requires an adversary proceeding to determine the dischargeability of a student
loan debt. Because that did not happen here, the loans could not have been discharged.
Navient cites to In re Diaz, 647 F.3d 1073, 1090 (11th Cir. 2011), where the court
explained the difference between claim disallowance and loan discharge. That case,
however, involved child-support debt, which the court emphasized is “not dischargeable
under any circumstances in Chapter 13 proceedings.” Id. at 1089-90 (citation omitted).
Student loan debt, on the other hand, is dischargeable under certain circumstances. See
11 U.S.C. § 523(a)(8). Therefore, the Court is not persuaded by Diaz.
Additionally, nowhere in the confirmed plan or its subsequent amendments does
it state that the balance of Navient’s disallowed claims would be excepted from discharge.
See In re Mixen, Case No. 19-31146-lkg (S.D. Ill. Bankr.). Mixen’s confirmed Chapter 13
plan did not provide for the further payment of any Navient loans, and the bankruptcy
court entered an Order of Discharge on July 13, 2023. Id. at Doc. 110. The Trustee’s Final
Report and Account, filed on September 6, 2023, lists the six Navient claims, the amount
of the claim asserted, the amount of the claim allowed, and the principal paid. Id. at
Doc. 113. The trustee further certified that Mixen paid the principal of all general
unsecured payments and that the estate was fully administered. Id.
The Court acknowledges that the Order of Discharge states, “Some debts are not
discharged” including “debts for most student loans.” Furthermore, the Bankruptcy
Code requires a debtor to show that excepting the debt from discharge “would impose
an undue hardship on the debtor and the debtor’s dependents.” 11 U.S.C. § 523(a)(8). The
Bankruptcy Rules further “require bankruptcy courts to make this undue hardship
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determination in an adversary proceeding, which the party seeking the determination
must initiate by serving a summons and complaint on his adversary.” Espinosa, 559 U.S.
at 263–64 (2010) (internal citations omitted). And, Mixen was clearly not forthcoming
with the bankruptcy court in his objections to Navient’s Proofs of Claim.
Navient, however, has not identified any authority that would allow this Court to
collaterally review an order of the bankruptcy court. If Navient had an issue with Mixen’s
objections or the bankruptcy court’s decisions or procedures, it should have raised those
issues in the bankruptcy or filed an appeal. Whether the bankruptcy court’s orders
disallowing the balance of Navient’s claims were erroneous, or based on an erroneous
factual premise, is not an issue for this Court to decide. Navient cannot use this FTCA
action to relitigate its claims or assert any errors by the bankruptcy court.
Because Mixen has made a prima facie showing that Navient provided incomplete
or inaccurate information when it reported Mixen’s loans as charged off with substantial
amounts owing, despite the bankruptcy court’s Order of Discharge, the Court declines to
dismiss Counts I and II of the Second Amended Complaint.
II. 	Count III: Declaratory Judgment
Navient also argues that Mixen has failed to state a claim for declaratory judgment.
In Count III, Mixen asks this Court to declare that the private loans Navient seeks to
collect are not legally enforceable due to ITT Tech’s breach of contract and/or fraud,
pursuant to 16 C.F.R § 433.2, also known as the “Holder Rule.”
The Federal Trade Commission’s Holder Rule requires a seller that offers credit to
finance consumer purchases to include the following notice in their credit contracts:
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NOTICE
ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT
TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD
ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED
PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY
HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID
BY THE DEBTOR HEREUNDER.
16 C.F.R § 433.2. The rule allows a consumer to assert any claim or defense against the
creditor that he would have against the seller. See Smith v. ComputerTraining.Com, Inc., 531
F. App’x 713, 714 (6th Cir. 2013).
Mixen claims that, under the Holder Rule, the holder of a loan agreement is subject
to the debtor’s defenses to repayment. (Doc. 62 at ¶ 42). Mixen alleges that the
Department of Education’s determination that ITT Tech “engaged in widespread
misconduct that violate[d] consumer protection laws under the borrower defense
regulations,” as to his federal loans provides “an indisputable basis for a finding that
Plaintiff’s loans are not enforceable and no debt is owed.” (Id. at ¶ 48). Mixen asks the
Court to declare that he is not obligated to make any further payments on his private
loans, to enjoin Navient from attempting to collect money from him, and to award costs.
In its Motion to Dismiss, Navient argues that although Mixen has styled his claim
as one for declaratory judgment, what he is really seeking is a finding that ITT Tech
committed breach of contract and/or fraud, which can then be passed on to Navient as
the holder of the contract. Yet, Mixen made no effort whatsoever to allege that ITT Tech
committed breach of contract or fraud. Navient asserts that nothing in the Holder Rule
gives Mixen the unilateral right to affirmatively declare entitlement to a discharge and to
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seek court approval through a declaratory judgment action. Rather, Mixen is seeking
“nothing more than an improper advisory opinion as to his potential defenses in case
NSL files a collections case against him in the future.” (Doc. 64-1 at p. 19).
In response, Mixen asserts that plaintiffs frequently seek declaratory judgments to
establish a defense and head off a claim, such as when insurance companies seek
declarations that they are not obligated to defend or indemnify claims against their
insureds. Thus, his claim for declaratory judgment is not a request for an advisory
opinion.
Mixen’s argument is foreclosed by Seventh Circuit and Supreme Court precedent.
Article III of the Constitution limits the jurisdiction of federal courts to “cases” and
“controversies.” Amling v. Harrow Indus. LLC, 943 F.3d 373, 377 (7th Cir. 2019). “The
phrase ‘case of actual controversy’ in the Declaratory Judgment Act refers to the type of
‘Cases’ and ‘Controversies’ that are justiciable under Article III.” Id. (quoting MedImmune,
Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)). “The requirements of the Act and those of
Article III are therefore coextensive.” Id.
A declaratory judgment action such as the claim alleged here is “ripe and
otherwise justiciable when ‘the facts alleged, under all the circumstances, show that there
is a substantial controversy, between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory judgment.’” Id. (quoting
MedImmune, 549 U.S. at 127). There must be a “definite and concrete,” “real and
substantial” dispute that “touches the legal relations of parties having adverse legal
interests” and “admits of specific relief through a decree of a conclusive character, as
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distinguished from an opinion advising what the law would be upon a hypothetical state
of facts.” Id.
Contrary to Mixen’s argument, insurance declaratory judgment actions are not
advisory opinions. Instead, “[t]hose cases teach that a live dispute between an insurer
and its insured over the insurer’s duties to defend and indemnify the insured against its
victim’s tort claims is also a live dispute between each of them and the victim.” Id. at 378.
What Mixen is asking the Court to do, however, is to pre-determine the outcome of his
breach of contract and/or fraud claims against Navient should it, as the holder of the
consumer contract, decide to file a collections action against him in the future. This
potential action is not sufficiently immediate to warrant the issuance of a declaratory
judgment.
Even if the issue were ripe for a declaratory judgment, Mixen has not alleged any
facts that demonstrate how, under Illinois law, he has a viable breach of contract and/or
fraud claim against ITT Tech that could be passed onto Navient under the Holder Rule.
Instead, Mixen alleges in a conclusory manner that because his federal loans were eligible
for discharge due to ITT Tech’s misconduct, his private loans issued by Navient should
also be discharged. These allegations are insufficient to establish a breach of contract
and/or fraud claim against ITT Tech.
For these reasons, Mixen’s claim for declaratory judgment in Count III is
dismissed.
CONCLUSION
For the reasons stated above, the Motion to Dismiss filed by Defendant Navient
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Solutions, LLC, is GRANTED in part and DENIED in part. Count III of the Second
Amended Complaint is DISMISSED without prejudice.
The previously imposed stay on discovery (Doc. 52) is hereby LIFTED. The parties
shall email the Court a proposed Amended Scheduling Order on or before December 23,
2025.
IT IS SO ORDERED.
DATED: 	December 9, 2025
____________________________
NANCY J. ROSENSTENGEL
Chief U.S. District Judge
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