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Consumer Financial Protection Bureau v. The National Collegiate Master Student Loan Trust

United States District Court, D. Delaware

October 19, 2018

CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff,
v.
THE NATIONAL COLLEGIATE MASTER STUDENT TRUST, et al, Defendants.

          Carolyn I. Hahn, Colin T. Reardon, Gabriel S.H. Hopkins, Consumer Financial Protection Bureau, Washington, DC - Attorneys for Plaintiff

          Defendants, The National Collegiate Master Student Trusts, currently unrepresented by counsel

          Kurt M. Heyman, Melissa N. Brochwicz Donimirski, Heyman Enerio Gattuso & Hirzel LLP, Wilmington, DE; Erik W. Haas, Peter W. Tomlinson, Patterson Belknap Webb & Tyler LLP, New York, NY - Attorneys for Ambac Assurance Corporation

          Jamie L. Edmonson, Venable LLP, Wilmington, DE, Allyson B. Baker, Meredith L. Boylan, Sameer P. Sheikh, Katherine M. Wright, Venable LLP, Washington, DC - Attorneys for Transworld Systems Inc.

          Andrew D. Cordo, Ashby & Geddes, PA, Wilmington, DE; Michael Hanin, Uri Itkin, Kasowitz Benson Torres LLP, New York, NY - Attorneys for Objecting Noteholders

          Rebecca L. Butcher, Landis Rath & Cobb LLP, Wilmington, DE; John P. Doherty, William Hao, Alston & Bird LLP, New York, NY - Attorneys for GSS Data Services, Inc.

          Stacey A. Scrivani, Stevens & Lee, P.C., Wilmington, DE - Attorneys for The Pennsylvania Higher Education Assistance Agency d/b/a American Education Services

          Stephen B. Brauerman, Sara E. Bussiere, Bayard, P.A., Wilmington, DE - Attorneys for Wilmington Trust Company

          John W. Shaw, David M. Fry, Shaw Keller LLP, Wilmington, DE; Stephen H. Meyer, Sullivan & Cromwell, LLP, Washington, DC - Attorneys for U.S. Bank National Association in its capacity as Successor Special Servicer

          John W. Shaw, David M. Fry, Shaw Keller LLP, Wilmington, DE; Matthew A. Martel, Keith M. Kollmeyer, Jones Day, Boston, MA - Attorneys for U.S. Bank in its capacity as Indenture Trustee

          MEMORANDUM OPINION

          NOREIKA, U.S. DISTRICT JUDGE

         Before the Court are eight motions to intervene in the current litigation between the Consumer Financial Protection Bureau ("CFPB") and fifteen Delaware statutory trusts, called the National Collegiate Student Loan Trusts (collectively "the Trusts"). The motions have been filed by Ambac Assurance Corporation ("Ambac") (D.I. 4); Transworld Systems Inc. ("TSI") (D.I. 9); Objecting Noteholders ("Noteholders") (D.I. 11); GSS Data Services, Inc. ("GSS") (D.I. 12); the Pennsylvania Higher Education Assistance Agency d/b/a American Education Services ("PHEAA") (D.I. 20); Wilmington Trust Company ("WTC") (D.I. 31); U.S. Bank National Association ("U.S. Bank") in its capacity as Successor Special Servicer (D.I. 33); and U.S. Bank in its capacity as Indenture Trustee (D.I. 35). For the reasons discussed below, the Court grants each of the motions to intervene and places no limitation on the intervenors' participation in this litigation.

         I. BACKGROUND

         The Trusts were created between 2001 and 2007 pursuant to the Delaware Statutory Trust Act, 12 Del. Code § 3801, et. seq., to acquire private student loans, collect payments from borrowers, and distribute gains to the holders of notes. (D.I. 54 at 4). The Trusts have no employees or internal management and rely on certain trust-related agreements to provide their operating structure. These agreements include trust agreements, administration agreements, servicing agreements, and indentures (collectively "Trust Related Agreements") and provide a structure that includes an Owner Trustee, Administrator, Indenture Trustee, Primary Servicer, Special Servicer, and Sub-servicers. (D.I. 54, 4-5).

         WTC is the Owner Trustee of the Trusts. (D.I. 21 at 1). In this role, WTC "acts pursuant to the authority granted to it under Trust Related Agreements and can be directed by the equity owners of the Trust or the Administrator." (Id. at 2). Should a conflict arise between a directive by the equity owners and the terms of the Trust Related Agreements, the Trust Related Agreements control. (Id.).

         GSS is the Administrator of the Trusts and is responsible for the administrative functions set forth in the Trust Related Agreements. (D.I. 12 at 1-2).

         U.S. Bank serves as both the Indenture Trustee and Special Servicer. As Indenture Trustee, U.S. Bank is pledged all assets of the Trusts including, but not limited to, "the underlying student loans held by the Trusts, the collections from such loans, and the contractual agreements governing the Trusts' activities, including the servicing related agreements." (D.I. 36 at 4). As Special Servicer, U.S. Bank's role is to engage Sub-servicers. (D.I. 24 at 6).

         PHEAA is the Primary Servicer for the Trusts and responsible for "customer service and correspondence, payment posting, and credit reporting duties" relating to student loans that are current in making payments or are no more than 30 days delinquent. (D.I. 20 at 2-3). PHEAA does not, however, ...


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