                  UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF COLUMBIA

_____________________________
                              )
BRENDA KAY PFEIFFER,          )
                              )
               Plaintiff,     )
                              )
                              )    Civ. No. 07–522 (EGS)
          v.                  )
                              )
ARNE DUNCAN,1 Secretary       )
of Education, et. al.,        )
                              )
               Defendants.    )
_____________________________ )

                       MEMORANDUM OPINION

     Student loan borrower Brenda Kay Pfeiffer has brought this

breach of contract action against the U.S. Secretary of

Education, the Department of Education, and the United States

(collectively “DOE” or “defendants”).    Plaintiff alleges that

defendants violated the terms of the promissory note governing

her student loan repayment plan, and has moved for partial

summary judgment on the issue of liability.    Defendants have also

filed a motion for summary judgment.    The question before the

Court is whether the promissory note executed by plaintiff

contractually authorizes defendants to capitalize interest that

accrued during the period between defendants’ receipt of


     1
        The complaint, filed on March 19, 2007, named as
defendant Margaret Spellings, in her official capacity as U.S.
Secretary of Education. Arne Duncan was sworn in as Secretary of
Education on January 20, 2009 and is therefore substituted in his
official capacity for Ms. Spellings as a defendant in this case
pursuant to Fed. R. Civ. P. 25(d).
plaintiff’s June scheduled payment and June 30 – the date on

which DOE annually capitalizes accrued interest – for those years

when plaintiff’s loan was in a “negative-amortization condition”

under the Income Contingency Repayment Plan (“ICRP”) in which she

participated.     Upon consideration of the motions, responses and

replies thereto, the applicable law, the entire record, and for

the reasons stated below, the Court GRANTS IN PART AND DENIES IN

PART both parties’ motions.

I.   Background

     A.     DOE’s Direct Loan Program

     DOE lends money to students pursuing post-secondary

education through the William D. Ford Direct Loan Program (the

“Direct Loan Program”).    Borrowers participating in the Direct

Loan Program are given a number of repayment plans from which to

choose, see 34 C.F.R. § 685.208; Defs.’ Mot. at 4 n.2, one of

which is the ICRP.    Under the ICRP, a borrower’s scheduled

monthly payment is determined by a formula based on “adjusted

annual income, family size and the principal balance of the

loan.”    Pl.’s Statement of Undisputed Material Facts (“Pl.’s

Statement”) ¶ 8; see 34 C.F.R. § 685.209(a) (explaining

calculation of borrower’s repayment amount under ICRP).    Because

the monthly scheduled payments of borrowers participating in the

ICRP are based primarily on their income rather than on the

amount of their loan, the scheduled payment can sometimes be an


                                   2
amount less than the interest accruing on their loans each month.

Pl.’s Statement ¶ 10; Defs.’ Mot. at 7.       DOE designates these

loans as being in a negative-amortization condition.       See Pl.’s

Mot. at 2; Defs.’ Statement of Material Facts as to Which There

Are No Genuine Issues to Be Tried (“Defs.’ Statement”) ¶ 21.

     Individuals who obtain student loans from DOE pursuant to

the Direct Loan Program execute identical or substantially

identical form promissory notes.       Pl.’s Statement ¶¶ 1-2.    The

promissory note contains “the terms and conditions of the loan,

including how and when the loan must be repaid.”       Pl.’s Statement

¶ 2 (internal citations and quotation marks omitted).

     When a student borrower’s loan enters repayment, DOE assigns

each borrower a monthly “payment due date” of the 7th, 14th,

21st, or 28th of each month.2   Pl.’s Statement ¶ 6; Tr. of Nov.

14, 2008 Mot. Hr’g (“Tr.”) at 45, 56.       When the agency receives a

payment on a student loan, it applies the payment “first to any

accrued charges and collection costs, then to any outstanding

interest, and then to outstanding principal.”       34 C.F.R. §

685.211(a)(1).   On each monthly due date, DOE bills the borrower

for the interest that has accrued as of his or her payment date.

Pl.’s Mot. at 2.   Interest that accrues after a borrower’s


     2
        At the hearing held on November 14, 2008, counsel for
defendants initially stated that borrowers actually pick their
due dates. Tr. at 19. Counsel later clarified that the agency
assigns a payment due date to the borrower, but the borrower has
the ability to change that date. Tr. at 62.

                                   3
monthly due date is not billed until the borrower’s next monthly

due date the following month.   Pl.’s Mot. at 2.

     B.   DOE’s Capitalization of Interest

     Borrowers participating in the ICRP who are in a negative-

amortization condition may be subject to the capitalization of

certain interest that accrues on their loans.   As defined by 34

C.F.R. § 685.202(b)(1), capitalization is the process of

increasing the principal balance of a loan by “add[ing] unpaid

accrued interest to the borrower’s unpaid principal balance.”

DOE’s form promissory notes describe the agency’s practice of

capitalizing interest as follows:

     Interest. Except for interest [DOE] does not charge me
     during an in-school, grace or deferment period, I agree
     to pay interest on the principal amount of my Direct
     Consolidation Loan from the date of disbursement until
     the loan is paid in full or discharged. [DOE] may add
     interest that accrues but is not paid when due to the
     unpaid principal balance of this loan, as provided
     under the Act. This is called capitalization.

Pl.’s Mot. at Ex. 6 (form promissory note used in 2001); Defs.’

Mot. App. at 27 (same).

     DOE regulations also address the agency’s authority to

capitalize interest, but the regulatory language differs somewhat

from the language contained in the form promissory notes.

Specifically, 34 C.F.R. § 685.202(b) states that “the Secretary

[of Education] annually capitalizes unpaid interest when the

borrower is paying under the [ICRP] and the borrower’s scheduled



                                 4
payments do not cover the interest that has accrued on the loan.”

Id. § 685.202(b)(4).

     The standard form promissory notes executed by borrowers

also contain a section relating to governing law.    See Pl.’s Mot.

at Ex. 3.    That provision of the promissory note states that

     [t]he terms of this [promissory note] will be
     interpreted in accordance with the Higher Education Act
     of 1965, as amended (20 U.S.C. 1070 et seq.), the U.S.
     Department of Education’s . . . regulations, as they
     may be amended in accordance with their effective date,
     and other applicable federal laws and regulations
     (collectively referred to as the “Act”).

Id.; Defs.’ Mot. App. at 30.

     Since at least March 19, 2001, DOE has been capitalizing

interest accrued on loans in a negative-amortization condition

not paid as of June 30 each year, a date that is not specified in

the regulations but is chosen by the agency for administrative

reasons.    See Pl’s Statement ¶ 11; Tr. at 37, 44-45.   These

interest-capitalization procedures are based upon a borrower’s

scheduled payment amount, regardless of the amount of the

borrower’s actual payments and payment due date.    Defs.’

Statement of Genuine Issues ¶ 11, attached to Defs.’ Mot.

(“Defs.’ Opp’n Statement”).    Moreover, the unpaid accrued

interest annually capitalized on June 30 includes interest

accruing after receipt of the borrower’s June payment through

June 30.    Id.




                                  5
     C.    Plaintiff’s Participation in the Direct Loan
           Program

     Plaintiff graduated from chiropractic school in 1994 with

multiple DOE student loans.   Compl. ¶ 7.   She executed two

variable interest rate notes with the agency in 1997, and another

note in November 2001 that consolidated her loans and “locked in”

a fixed interest rate.   See Pl.’s Statement ¶¶ 13-14; Defs.’

Statement ¶¶ 1-2, 7.   Since she executed the 2001 promissory

note, plaintiff has participated in the Federal Direct

Consolidation Loan Program, one of the four program components of

the Direct Loan Program which “provides loans to borrowers to

consolidate certain Federal educational loans.”    34 C.F.R. §

685.100(a)(4); Defs.’ Mot. at 3 n.1.    Plaintiff has at all times

elected to use the ICRP for repayment of her loan.    Defs.’

Statement ¶ 6.

     Plaintiff’s monthly scheduled payments were less than the

amount of interest that accrued on her loan in the years ending

June 30, 2002; June 20, 2004; and June 30, 2005.    Defs.’ Mot. at

7.   In those years, plaintiff was not contractually required to

make payments that covered the entire amount of interest accruing

on her loan.   Defs.’ Mot. at 7.   Because plaintiff’s scheduled

monthly payments were less than the amount of monthly interest

accruing on her loan, her loan was designated in negative-

amortization condition for these years, and defendants



                                   6
capitalized all unpaid interest as of June 30 in those years.

Defs.’ Mot. at 7.

     Plaintiff’s actual monthly loan payments since November 2001

have been timely and at an amount “equal to or greater than the

interest accrued in the previous month as estimated by [DOE].”

Compl. ¶ 16.   Thus, even though plaintiff’s scheduled monthly

payments for the years in question did not cover the entire

amount of the interest accruing on her loan, plaintiff’s actual

payments were greater than her scheduled monthly payment listed

on the statements she received from DOE.

     D.   Procedural History

     On March 19, 2007, plaintiff filed a complaint against

defendants on behalf of herself and all others similarly situated

seeking damages and injunctive and declaratory relief.3   See

generally Compl.    Plaintiff alleges that DOE has breached the

terms of her 2001 form promissory note by capitalizing interest

that accrued after her June payment date through June 30, because

payment for such interest was not required until her July payment


     3
        Pursuant to Federal Rule of Civil Procedure 23, plaintiff
seeks to maintain this suit as a class action on behalf of “[a]ll
individuals who have been obligated to repay money to the United
States Department of Education at any time since March 19, 2001
pursuant to a Federal Direct Consolidation Loan Promissory Note.”
Compl. ¶ 28. In January 2008, plaintiff filed a motion to
certify a class. The Court subsequently denied that motion
without prejudice to refiling pending resolution of the motions
for summary judgment. This Memorandum Opinion therefore does not
address any issues relating to plaintiff’s request for class
certification.

                                  7
date.       See Compl. ¶¶ 1, 37-39.   The complaint does not challenge

defendants’ interest-capitalization practices with regard to her

1997 promissory notes.       Defs.’ Mot. at 7 n.5.    Furthermore, as

her scheduled monthly payments exceeded the amount of interest

that accrued on her loan for the years ending in June 30, 2003

and June 30, 2006,4 plaintiff’s complaint does not address her

loan payments during these years.         Defs.’ Mot. at 7 n.6.

     On January 31, 2008, defendants filed a motion for summary

judgment on the basis that the promissory note executed by

plaintiff expressly authorizes DOE to capitalize interest in the

challenged manner.      Plaintiff filed a cross-motion for partial

summary judgment with respect to defendants’ liability for breach

of contract.       She seeks an Order from the Court (1) declaring

that defendants’ practice of capitalizing interest that accrues

between a borrower’s June payment due date and June 30 each year

constitutes a breach of the form promissory note; (2) enjoining

defendants from continuing this practice; and (3) directing the

parties to meet in an attempt to stipulate as to the proper

measure of damages.       The Court heard oral argument on November

14, 2008, at which point it directed the parties to submit

supplemental briefing on the applicability of Segar v. Mukasey,



        4
       Plaintiff’s scheduled monthly payments exceeded the
amounts of interest that accrued on her loan for the year ending
June 30, 2007 as well, though that date occurred after plaintiff
filed her complaint.

                                      8
508 F.3d 16 (D.C. Cir. 2007).     On March 16, 2009, the Court

denied the parties cross-motions without prejudice and ordered a

renewed round of consolidated briefing.       The parties have

rebriefed the issues and the cross-motions are now ripe for

decision.

II.   Standard of Review

      Summary judgment is appropriate if the pleadings on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to judgment as a matter of law.       Fed. R. Civ. P.

56(c).     Material facts are those that “might affect the outcome

of the suit under the governing law.”        Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248 (1986).     The party seeking summary

judgment bears the initial burden of demonstrating an absence of

a genuine issue of material fact.      Celotex Corp. v. Catrett, 477

U.S. 317, 322 (1986); Tao v. Freeh, 27 F.3d 635, 638 (D.C. Cir.

1994).     In considering whether there is a triable issue of fact,

the court must draw all reasonable inferences in favor of the

non-moving party.     Tao, 27 F.3d at 638.

III. Discussion

      A.     Contract Interpretation

      Courts interpreting a contract to which the United States is

a party apply general principles of contract law.        See Franconia

Assocs. v. United States, 536 U.S. 129, 141 (2002).       The starting

                                   9
point for such interpretation is the plain language of the

contract and the ordinary meaning of its terms – “unless the

parties mutually intended and agreed to an alternative meaning.”

Boeing Co. v. United States, 75 Fed. Cl. 34, 42 (2007) (quoting

Harris v. Dep’t of Veteran Affairs, 142 F.3d 1463, 1467 (Fed.

Cir. 1998)).   Because contract interpretation is a matter of law,

issues of contract interpretation are often “readily susceptible

of resolution via summary judgment.”   Id.

     In the event that a contract provision is ambiguous, the

ambiguity is to be resolved against the drafter, which in this

case is DOE.   See United States v. Seckinger, 397 U.S. 203, 216

(1970) (noting that this principle merited “considerable

emphasis” in that case “because of the Government’s vast economic

resources and stronger bargaining position in contract

negotiations”).   A contract provision, however, “‘is not

ambiguous merely because the parties later disagree on its

meaning.’   It is ambiguous only ‘if it is reasonably susceptible

of different constructions.’”   Segar v. Mukasey, 508 F.3d 16, 22

(D.C. Cir. 2007) (quoting Bennett Enters. v. Domino’s Pizza,

Inc., 45 F.3d 493, 497 (D.C. Cir. 1995)).

     “When a contract incorporates a regulation by reference,

that regulation becomes a part of the contract for the indicated

purposes as if the words of that regulation were set out in full

in the contract.”   United States ex rel. Dep’t of Labor v. Ins.


                                10
Co. of N. Am. (“INA II”), 131 F.3d 1037, 1042 (D.C. Cir. 1997)

(concluding that a bond provision, which stated that liability

would be determined “pursuant to [the relevant] Act and the

applicable regulations duly promulgated thereunder,” evidenced an

unambiguous intent by the parties to incorporate by reference the

statute and implementing regulations).   Here, the governing law

section of the promissory note and the reference to the Act in

the note’s section dealing with interest make clear that the

language of the applicable DOE regulations is incorporated by

reference into the note.5

     In the present case then, the Court’s task is to interpret

the promissory note in a way that reconciles the language of 34

C.F.R. § 685.202(b) (defining capitalization as the practice of

adding “unpaid accrued interest” to the loan balance and

permitting DOE to capitalize “unpaid interest” (emphasis added)),

with the language in the promissory note stating that the agency

will annually capitalize “interest that accrues but is not paid

when due,” Pl.’s Mot. at Ex. 6; Defs.’ Mot. App. at 30.    See,

e.g., United States v. Ins. Co. of N. Am. (“INA I”), 83 F.3d

1507, 1511 (D.C. Cir. 1996) (“[T]he ‘cardinal principle of



     5
       Although plaintiff did not explicitly concede this point,
plaintiff’s counsel did acknowledge at oral argument “that the
regulation and the note should be construed consistently.” Tr.
at 42. The Court in any event finds no serious room for doubt
that the regulatory language is incorporated by reference into
the promissory note.

                               11
contract construction [is] that a document should be read to give

effect to all its provisions.’” (quoting Mastrobuono v. Shearson

Lehman Hutton, Inc., 514 U.S. 52, 63 (1995))); Shulman v. Voyou,

LLC, 251 F. Supp. 2d 166, 169 (D.D.C. 2003) (“[W]here two

seemingly conflicting contract provisions exist within a

contract, it is the province and duty of the court to find

harmony between them and reconcile them if possible.”).    In so

doing, the Court is mindful that it “must give reasonable meaning

to all parts of the contract and not render portions of the

contract meaningless.”    YRT Servs. Corp. v. United States, 28

Fed. Cl. 366, 389 (1993).

     B.   Scope of the Parties’ Dispute

     At the outset, the Court notes the substantial number of

issues not seriously disputed by the parties.    Both plaintiff and

defendants agree that interest accrues on plaintiff’s loan on a

daily basis, but that for the convenience of both parties, DOE

does not require daily payment of such interest.    See Defs.’ Mot.

at 12; Tr. at 48, 63.    The parties also agree that DOE clearly

has the authority to capitalize interest under certain

circumstances – namely, that the promissory note authorizes the

agency to capitalize any interest that accrues and has not been

paid as of the borrower’s scheduled payment date.    Furthermore,

defendants do not dispute that during the relevant time period,

plaintiff voluntarily submitted payments in excess of her


                                 12
scheduled payment amount, but that she was nevertheless subject

to capitalization of the interest that accrued between the

agency’s receipt of her June scheduled payment and June 30.            See

Defs.’ Opp’n Statement ¶¶ 16-20.          Finally, defendants acknowledge

that under DOE’s current practices, the only way for plaintiff to

avoid the capitalization of the interest that accrues during that

period would be to send a second payment of that amount to DOE

and ensure that the agency actually processes the payment on June

30.6       See Tr. at 19-20.   There also appears to be no dispute that

this course of action is foreclosed as a practical matter because

a borrower has no control over when the agency processes her

payment.

       The resolution of the parties’ cross-motions instead rests

on the narrow question of whether the promissory note – and

incorporated regulations – authorized defendants to capitalize

interest that accrued during the period between DOE’s receipt of

plaintiff’s June payment through June 30.         Plaintiff contends

that such a practice violates the terms of the promissory note,

because the note provides that DOE will capitalize “interest that

accrues but is not paid when due,” but payment of interest

accruing between her June scheduled payment date and June 30 is



       6
        This is because, as the parties appear to agree, the
agency lacks the authority to apply any excess payment by a
borrower to interest that has not yet accrued at the time the
payment is processed. See 34 C.F.R. § 685.211(a)(1).

                                     13
not required (i.e., “due”) until her July payment due date.         In

other words, plaintiff argues that DOE is prematurely

capitalizing unpaid accrued interest by capitalizing before that

interest is “due.”   Pl.’s Mot. at 2.      By contrast, defendants

claim that an interpretation of the note that permits the

agency’s current capitalization practice is the only way to

harmonize the phrase “not paid when due” with 34 C.F.R. §

685.202(b), which expressly authorizes DOE to “add unpaid accrued

interest” to a borrower’s principal loan and specifically directs

the Secretary to “annually capitalize unpaid interest.”       Defs.’

Mot. at 13-14.   Framed by the parties in this way, the question

before the Court is how to harmonize the note’s use of the phrase

“not paid when due” and the regulations’ reference to “unpaid

interest” and “unpaid accrued interest.”

     The Court agrees with defendants that a reasonable reading

of the plain terms of 34 C.F.R. § 685.202(b), standing alone,

might permit Defendant’s current practice of annually

capitalizing “unpaid interest.”    Moreover, defendants correctly

note that if plaintiff were challenging the validity of the

agency’s interpretation of § 685.202(b), the agency would be

entitled to “‘considerable deference’ with regard to the

construction” of the regulation.       Defs.’ Mot. at 29 (quoting

Chevon USA, Inc. v. Nat’l Resource Defense Council, Inc., 467

U.S. 837, 844 (1984)).   But plaintiff here is not challenging the


                                  14
regulation itself.    Rather, she is arguing that the promissory

note she executed has been breached.    In these circumstances,

where the agency is a party to a disputed contract, the Court

applies “neutral principles of contract law, not the deferential

principles of regulatory interpretation.”    Mesa Air Group v.

Dep’t of Transp., 87 F.3d 498, 503 (D.C. Cir. 1996).

     The recognition that the language in the regulations might

otherwise permit the challenged capitalization practice does not

end the matter, however, because the Court must read the language

of the regulations and the language of the promissory note in

conjunction with one another.    The language contained in the

promissory note does not refer to capitalizing “unpaid interest,”

but states that the agency will capitalize interest that is “not

paid when due.”   Plaintiff’s claim of a breach rests upon her

contention that the inclusion of the phrase “not paid when due”

in the promissory note bars DOE from capitalizing interest that

is not yet “due.”    This interpretation, in turn, is based on

plaintiff’s argument that “due” means “payment required,” so that

the interest accruing between her June payment and June 30 cannot

be “due” before her July payment date.    See Pl.’s Mot. at 5-6.

     By contrast, defendants argue that “due” means owed as a

debt.   Because interest accrues on plaintiff’s loan every day,

defendants contend that the interest accruing between plaintiff’s

scheduled payment date and the date that DOE capitalizes interest


                                 15
is owed as a debt and properly capitalized under the terms of the

promissory note.   See Defs.’ Mot. at 18.   The heart of the

dispute between the parties – and the key to interpreting the

promissory note and incorporated regulations – therefore rests in

large part on the meaning of the word “due.”

     C.   The Parties’ Proffered Interpretations

     Both parties claim that the unambiguous language of the

promissory note and incorporated regulations support their

proffered interpretation, relying on both the plain meaning of

the relevant terms and related portions of the regulations in an

attempt to demonstrate that the note should be interpreted in

their favor.

          1.   Plain Meaning

     Plaintiff contends that the regulatory reference to “unpaid”

interest and the promissory note’s reference to interest “not

paid when due” permit DOE to capitalize only “interest that was

not paid as it became due[,] because ‘unpaid’ is synonymous with

‘due.’”   Pl.’s Mot. at 8 (emphasis in original) (citing Roget’s

II, The New Thesaurus, Third Edition (1995)).    Accordingly,

plaintiff asserts that the ordinary meaning of both the

regulation and the promissory note allow annual capitalization of

interest not paid by a borrower’s scheduled due date, but not any

interest that accrues between that date and June 30.   Pl.’s Mot.

at 9.


                                16
     Plaintiff also cites Biggs v. Wilson, 1 F.3d 1537 (9th Cir.

1993), a case interpreting the Fair Labor Standards Act, in

support of her conclusion that “unpaid” interest is interest “not

paid when due” on a borrower’s scheduled payment date.      See id.

at 1538-40 (holding that California’s failure to issue paychecks

promptly when due violated the statute’s minimum-wage provision,

because the provisions at issue “necessarily assume that wages

are due at some point, and thereafter become unpaid”).

     Defendants contend that Biggs is inapplicable in the present

case, Defs.’ Mot. at 25 n.18, and further claim that plaintiff’s

reference to the particular Thesaurus definition she cites is

selective.    Defs.’ Mot. at 26.   As DOE points out, the full

Thesaurus definition of “unpaid” cited by plaintiff reads: “Owed

as a debt: due, outstanding, owed, owing, payable, receivable,

unsettled.”    Defs.’ Mot. at Ex. D.    Defendants argue that the

full definition actually supports the agency’s proffered

interpretation, that “unpaid” means “[o]wed as a debt.” Defs.’

Mot. at 26.

     DOE further argues that the interchangeability of the words

“unpaid” and “due” in the above definition confirms that both

terms should be read as a reference to whether a borrower has

incurred a liability and not whether the borrower has reached the

point in time after which payment would be delinquent.      Def.’s

Mot. at 26.    In other words, according to defendants, although


                                   17
interest accruing after plaintiff’s June payment date is not

billed until her July payment date, it is still considered “due”

on June 30.    They further note that this construction of “due” is

consistent with the relevant definition in Black’s Law

Dictionary, which includes among its definitions for “due”:

“Owing or payable; constituting a debt.”   Defs.’ Mot. at 27

(citing Black’s Law Dictionary (8th ed. 2004)).7

          2.     Interpretations Based on the
                 Regulatory Framework

     Both parties also rely on the regulations themselves to

support their arguments as to when the DOE may capitalize

interest that has accrued but that was not paid when due.

     Plaintiff argues that if the regulations permit DOE to

capitalize interest before it is listed and due in a monthly

scheduled payment, then the regulations contradict and nullify

the “not paid when due” language in the promissory note.    Pl.’s

Mot. at 7.    Thus, she contends that the only way to harmonize the

language in the promissory note with the language in the

regulations is to conclude that “unpaid accrued interest” refers




     7
        Black’s Law Dictionary also includes as a definition for
“due”: “Immediately enforceable,” as in “payment is due on
delivery.” Black’s Law Dictionary (8th ed. 2004). Defendants
assert that in regards to repayment of a promissory note, under
scheduled payments, “the notion of immediate enforceability is
inapposite because no delivery is involved with a promissory
note.” Defs.’ Mot. at 27 n.19.

                                 18
to interest that has accrued and that was not paid as of the

debtor’s scheduled monthly payment date.   Pl.’s Mot. at 8.

     Plaintiff also argues that her interpretation of “due”

comports with the principle that a regulatory section should be

interpreted in the context of the remainder of the regulation of

which it is a part.   Pl.’s Mot. at 9 (citing McCarthy v. Bronson,

500 U.S. 136, 139 (1991)).   For instance, the regulations

describe when “unpaid accrued interest” may be capitalized into

the debtor’s “unpaid principal balance.”   34 C.F.R. §

685.202(b)(1).   Plaintiff asserts that within this regulation,

the word “unpaid” cannot mean the same thing as “accrued,” and

indeed, that if “unpaid” meant “accrued,” DOE would not have used

both words in the phrase “unpaid accrued interest.”   Plaintiff

further argues that the remaining sections of the regulations

also treat the words “unpaid” and “accrued” as having two

different meanings.   Pl.’s Mot. at 9-10 (citing other subsections

of 34 C.F.R. § 685.202(b) and 34 C.F.R. § 685.102(b)).

     Finally, plaintiff points out that nothing in the

regulations states that the annual capitalization of accrued

interest that was “not paid when due” must occur on June 30.    If

DOE capitalized such interest on the date of the debtor’s timely

June payment, DOE would be in compliance with both the promissory

note and regulations and would not be prematurely capitalizing

accrued interest.


                                19
     DOE argues, in contrast, that the word “due” does not mean

“scheduled payment date” because that interpretation cannot be

reconciled with the regulations incorporated in the promissory

note.     Defs.’ Mot. at 17.   DOE notes that other sections of the

regulations allow interest to be capitalized at times when there

are no scheduled payment dates, such as in grace periods,

deferments, and forbearances.     Defs.’ Mot. at 17 (citing 34

C.F.R. § 685.202(b)(2)-(3)).     Thus, defendants contend that

plaintiff’s interpretation of the word “due” would render these

other regulation sections meaningless.

     DOE also points out that many debtors in a negative-

amortization state have scheduled monthly payments that are less

than the amount of interest that has accrued on the loan.     Def.’s

Mot. at 17-28.     In that situation, interest accrues between each

scheduled payment but is not “due” on the scheduled payment date.

Nevertheless, the interest that accrues over the course of the

year but is not paid is properly capitalized under the terms of

the promissory note and regulations.     Accordingly, DOE argues

that the proper interpretation of “due” is “owed as a debt”

because only such an interpretation harmonizes the terms of the

promissory note and regulations.

     D.      The Promissory Note and Incorporated
             Regulations Are Not Ambiguous

     Upon consideration of the parties’ proffered

interpretations, the relevant authority, and the record, the

                                   20
Court concludes that the language of the promissory note and

incorporated regulations is not ambiguous and that plaintiff’s

interpretation is correct.

     The parties agree that a student loan constitutes an

outstanding debt and that interest accrues on that debt on a

daily basis.   But the entire amount of the outstanding debt is

not “due” on a daily basis, nor is the interest that accrues each

day for the entire lifetime of the loan.     The promissory note

specifies that the debtor will repay the loan plus accrued

interest in “monthly installments” and that DOE will provide the

debtor “with a repayment schedule that identifies [the debtor’s]

payment amounts and due dates.”    Pl.’s Mot. at Ex. 3 (Federal

Direct Consolidation Loan Application and Promissory Note).

Debtors are sent monthly statements that indicate the amount due

(i.e., listing the amount of interest that has accrued) as well

as the scheduled monthly payment.      See Pl.’s Mot. at Ex. 12

(plaintiff’s monthly billing statements).

     For a typical loan, the amount due is the same as the

monthly scheduled payment, which covers the accrued interest on

the principal balance and a partial payment of the principal.      It

is only in the unique situation of the ICRP that the amount due

is not necessarily the same as the scheduled monthly payment.      In

that situation, the amount of interest that has accrued on the

loan is due each month, but the parties have a separate


                                  21
contractual agreement not to require payment of the full amount

that is due.   If the debtor does pay the entire amount due,

however, which the debtor has the right to do (there is no

penalty for prepayments), then no further amount of money is

“due” until the next scheduled monthly payment.   This is true

even though interest accrues on the outstanding principal balance

on a daily basis, starting again the day after each monthly

scheduled payment is processed.

     This interpretation, that accrued interest is only “due” on

each monthly scheduled payment date – whether or not the

scheduled payment amount covers everything that is due – is in

harmony with the rest of the language of the promissory note.

The note specifies that DOE will provide the debtor with a

repayment schedule, payment amounts, and “due” dates.   Pl.’s Mot.

at Ex. 3.   In addition, the note provides for “acceleration” of

the entire amount of the loan if the debtor defaults.   Pl.’s Mot.

at Ex. 3.   The acceleration clause therefore makes clear that the

entire amount of the debtor’s outstanding debt is not “due” on a

daily basis.   Rather, the entire amount of the principal and all

accrued interest can only become “due” all at once if the debtor

defaults on the loan.   Pl.’s Mot. at Ex. 3.

     This interpretation is also in harmony with the regulations,

which spell out how the DOE capitalizes “unpaid accrued

interest,” but do not define that phrase.   Insofar as this phrase


                                  22
becomes a part of the promissory note itself, it must be defined

in the context of the other language in the note.   The

regulations do make clear, however, that the words “unpaid” and

“accrued” must mean two different things; otherwise, both words

need not have been included in the regulations.    No one disputes

that interest that accrues on the principal balance between

monthly payments but is not paid by the debtor in her monthly

payment is “unpaid accrued interest” that can be capitalized

annually.   Indeed, the interest that accrues each month is “due”

even though the debtor and DOE have a separate agreement that

permits the debtor to pay less than what is due.    This does not

mean, however, that DOE can choose any date of the year to

capitalize interest that, while it is “unpaid” and has “accrued,”

is not “due” under the debtor’s repayment schedule issued by DOE.

     If any ambiguity exists in the promissory note or

regulations with regard to how interest is capitalized, the

ambiguity is created by the fact that DOE has chosen a date to

capitalize interest that is arbitrary with respect to the debtor.

At the hearing, defendants indicated that June 30 is the date the

DOE capitalizes interest because July 1 is the date the Secretary

adjusts interest rates for variable interest loans.   Tr. at 37.

June 30 might make sense for DOE’s administrative processes, but

it is not tied in any way to the debtor’s individual loan.    The

fact that this date is arbitrary with regard to the individual


                                23
debtor is underscored by the fact that (1) similarly situated

debtors experience different levels of capitalization based

solely on how much time passes between their payment due date and

June 30, despite the fact that the debtor does not initially

choose her payment date; and (2) it is a virtual impossibility

for a debtor in plaintiff’s situation to avoid some amount of

interest being capitalized each year despite every effort to pay

the entire amount of interest that has accrued.    Moreover,

although the amount of damages that this creates might be nominal

with respect to some debtors, there is no dispute that the annual

capitalization of interest between a debtor’s June payment and

June 30 increases the overall cost of the loan to the debtor.

Indeed, the promissory note itself warns the debtor that

capitalization will increase the overall cost of the loan to the

debtor.   Pl.’s Mot. at Ex. 3.

     E.    Plaintiff’s Interpretation of the Promissory
           Note is Supported by Authority

     The fact that plaintiff and DOE can articulate differing

interpretations of the language in the promissory note and the

incorporated regulations does not mean that the language is

ambiguous.   See Segar, 508 at 22.    In Segar, for instance, the

D.C. Circuit held that the language in a footnote to the

agreement must be interpreted within the context of the entire

agreement, thereby holding that the language of the agreement was

not ambiguous.   Id. at 23-24.

                                 24
     Similarly, the Court must interpret the language in the

regulations within the context of the promissory note into which

the regulations were incorporated.   If the Court concluded that

DOE could capitalize interest that accrues between a debtor’s

June payment and June 30, the Court would essentially be writing

out of the promissory note the language that allows DOE to

capitalize accrued interest that is “not paid when due.”    That

phrase cannot be interpreted to simply mean “owed as a debt” or

“accrued,” because such an interpretation would render the phrase

meaningless and the sentence nonsensical.   The sentence would

essentially read “interest that accrues but is not paid when

accrued.”   Thus, although the dictionary definition of the word

“due” may include “owed as a debt,” in the context of this

promissory note, the plain language of the note calls for

capitalization of interest that is not paid by the scheduled

monthly payment date; it does not call for capitalization of

interest merely because it has accrued since the debtor sent in

her timely monthly payment that covered all interest that had

accrued to date.

     In sum, the only interpretation of “due” and “not paid when

due” that harmonizes the language of the regulations and makes

sense within the context of the entire promissory note is

plaintiff’s interpretation.   The promissory note allows DOE to

capitalize interest on an annual basis if the debtor has not paid


                                25
the entire amount of interest that has accrued within the course

of the year’s scheduled monthly payments.   DOE’s current practice

of capitalizing interest that accrues between a debtor’s June

payment and June 30 is not authorized by the promissory note or

the incorporated regulations and is therefore inappropriate.

     F.    The Court Lacks Jurisdiction To Grant
           Injunctive and Declaratory Relief

     Defendants argue that because the Court’s jurisdiction in

this case is premised on the Little Tucker Act, 28 U.S.C.

§ 1346(a)(2), the Court lacks the authority to grant declaratory

or injunctive relief.   Therefore, according to defendants, DOE is

entitled to summary judgment on all of plaintiff’s non-monetary

claims.   This Court agrees.

     The Tucker Act grants jurisdiction to the U.S. Court of

Federal Claims over, inter alia, “any claim against the United

States founded . . . upon any express or implied contract with

the United States.”   28 U.S.C. § 1491(a)(1).   Jurisdiction under

the Tucker Act is limited to claims for monetary relief,

Richardson v. Morris, 409 U.S. 464, 465 (1973) (per curiam), with

the following narrow exception:

     To provide an entire remedy and to complete the relief
     afforded by the judgment, the court may, as an incident
     of and collateral to any such judgment, issue orders
     directing restoration to office or position, placement
     in appropriate duty or retirement status, and
     correction of applicable records, and such orders may
     be issued to any appropriate official of the United
     States.


                                  26
Id. § 1491(a)(2).   The Little Tucker Act, in turn, “grants

concurrent Tucker Act jurisdiction to district courts where the

amount in controversy is less than $10,000.”    Cartwright Int’l

Van Lines, Inc. v. Doan, 525 F. Supp. 2d 187, 194 (D.D.C. 2007)

(citing 28 U.S.C. § 1346(a)(2)); see also Richardson, 409 U.S. at

466 (noting that § 1346(a)(2) “did no more than authorize the

District Court to sit as a court of claims and . . . the

authority thus given to adjudicate claims against the United

States does not extend to any suit which could not be maintained

in the Court of Claims” (quoting United States v. Sherwood, 312

U.S. 584, 591 (1941))).

     Plaintiff argues that her non-monetary claims are not barred

under the Little Tucker Act because of the exception granting

“subject matter jurisdiction over both monetary claims and ‘any

incidental relief in equity in aid of such a judgment.’”   Pl.’s

Reply at 8 (quoting Blanc v. United States, 244 F.2d 708, 709-10

(2d Cir. 1957)).    But see Blanc, 244 F.2d at 709 (concluding

that, with respect to the claims for equitable relief in that

case, Tucker Act jurisdiction was lacking).    Section 1491(a)(2),

however, clearly delineates the situations under which such

relief “incident of and collateral to” a monetary judgment may be

granted.   The relief requested by plaintiff in this case plainly

does not qualify under the narrow types of equitable relief

permitted by the Tucker Act (i.e., the issuance of “orders


                                 27
directing restoration to office or position, placement in

appropriate duty or retirement status, and correction of

applicable records”), and her non-monetary claims must therefore

be dismissed from the action.   See Greenhill v. Spellings, 482

F.3d 569, 576 (D.C. Cir. 2007) (explaining that § 1491(a)(2) has

been “narrowly construed” and that the D.C. Circuit has “found

very sharp constraints on district court jurisdiction to grant

equitable relief on contract claims against the government”); cf.

Transohio Sav. Bank v. Dir., Office of Thrift Supervision, 967

F.2d 598, 608 (D.C. Cir. 1992) (“[T]he [Tucker] Act has long been

construed as waiving sovereign immunity only for claims seeking

damages, and not for those seeking equitable relief (except in

very limited circumstances).” (internal quotation marks

omitted)); Sharp v. Weinberger, 798 F.2d 1521, 1523 (D.C. Cir.

1986) (noting that “the Tucker Act and Little Tucker Act

impliedly forbid [claims for declaratory and injunctive]

relief”).

IV.   Conclusion

      For the reasons stated above, this Court concludes that

plaintiff is entitled to summary judgment on her claim that

defendants are liable for damages resulting from their breach of

the promissory note.   Defendants, however, are entitled to

summary judgment as to plaintiff’s claims for declaratory and

injunctive relief.   Accordingly, the parties’ cross-motions are


                                28
GRANTED IN PART AND DENIED IN PART.    An appropriate Order

accompanies this Memorandum Opinion.


Signed:   Emmet G. Sullivan
          United States District Judge
          October 5, 2009




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