[Cite as Santagate v. Pennsylvania Higher Edn. Assistance Agency, 2020-Ohio-3153.]

                             IN THE COURT OF APPEALS OF OHIO

                                  TENTH APPELLATE DISTRICT


Christopher P. Santagate,                            :

                Plaintiff-Appellant,                 :                  No. 19AP-705
                                                                     (C.P.C. No. 16CV-7291)
v.                                                   :
                                                                 (REGULAR CALENDAR)
Pennsylvania Higher Education Assistance :
Agency (PHEAA) d.b.a. FedLoan Servicing,
                                         :
             Defendant-Appellee.
                                         :



                                          D E C I S I O N

                                      Rendered on June 2, 2020


                On brief: Bailey Cavalieri, LLC, Christopher P. Santagate,
                and Mark A. Glumac, for appellant.

                On brief: Fisherbroyles, LLP, Michael R. Travern, and
                Robert B. Graziano, for appellee.

                 APPEAL from the Franklin County Court of Common Pleas

LUPER SCHUSTER, J.
        {¶ 1} Plaintiff-appellant, Christopher P. Santagate, appeals from a judgment entry
of the Franklin County Court of Common Pleas granting the motion for summary judgment
of defendant-appellee, Pennsylvania Higher Education Assistance Agency (PHEAA), d.b.a.
FedLoan Servicing. Santagate additionally appeals from the trial court's previous decision
granting in part PHEAA's motion to dismiss. For the following reason, we affirm in part
and reverse in part.
I. Facts and Procedural History
        {¶ 2} On August 4, 2016, after initially filing a complaint in the trial court,
removing the action to federal court, and the federal court dismissing his claims,
No. 19AP-705                                                                             2


Santagate re-filed a complaint against PHEAA asserting claims for (1) breach of
contract, (2) fraud/fraudulent representation/fraudulent concealment, (3) negligent
misrepresentation/concealment, (4) breach of fiduciary duty, (5) unjust enrichment, and
(6) violation of the Ohio Consumer Sales Protection Act ("CSPA"). In his complaint,
Santagate stated he applied for and received several federal student loans from the United
States Department of Education on June 11, 2008, with a final disbursement scheduled for
August 12, 2011. The application and master promissory note, which Santagate attached to
his complaint, provided that the Direct Loan Servicing Center ("DLSC") would service
Santagate's loans. However, the complaint alleges that in June 2013, the Department of
Education awarded a contract to PHEAA to service loans previously serviced by DLSC, and,
as a result, PHEAA began servicing Santagate's loans on June 14, 2013.
       {¶ 3} Santagate further alleged in his complaint that on June 28, 2013, he received
a message from PHEAA's online messaging center notifying him of an income-contingent
repayment ("ICR") plan. Santagate categorized this message as being in breach of the notes
which required correspondence either to be mailed to Santagate's physical address or to be
sent as an electronic message to Santagate's registered email address. Further, Santagate
alleged the ICR plan notice informed Santagate he must submit an application within ten
days or his monthly payments would increase from less than $800.00 per month to
$1,716.61 per month. However, Santagate alleged he did not become aware of the online
message until September 4, 2013, thereby missing the ten-day deadline to submit an
application. After Santagate contacted PHEAA to discuss the matter, he alleged that
PHEAA placed his loans into forbearance without him requesting it, causing his interest
rate to increase. Santagate additionally alleged PHEAA improperly calculated the accrued
interest on his loans.
       {¶ 4} PHEAA responded to Santagate's complaint with a Civ.R. 12(B)(6) motion to
dismiss filed September 6, 2016. In its motion to dismiss, PHEAA noted it did not own
Santagate's loans, but acted only as the loan servicer. Instead, PHEAA asserted the master
promissory notes exist between Santagate and the Department of Education. PHEAA then
argued Santagate's complaint failed to state a claim for a violation of the CSPA, breach of
contract, unjust enrichment, breach of fiduciary duty, fraud, fraudulent concealment, and
negligent misrepresentation.
No. 19AP-705                                                                            3


       {¶ 5} In a November 8, 2017 decision and entry, the trial court granted in part and
denied in part PHEAA's motion to dismiss. Specifically, the trial court granted PHEAA's
motion to dismiss Santagate's claims for violation of the CSPA, unjust enrichment, breach
of fiduciary duty, fraud/fraudulent representation/fraudulent concealment, and negligent
misrepresentation. However, the trial court denied PHEAA's motion to dismiss Santagate's
claim for breach of contract because Santagate alleged he was a third-party beneficiary to
the contract between the Department of Education and PHEAA. Because the trial court
concluded it did not appear beyond doubt that Santagate could not establish grounds for
breach of contract on the theory of third-party beneficiary, the trial court determined it
could not dismiss Santagate's claim for breach of contract under Civ.R. 12(B)(6).
Subsequently, on November 22, 2017, PHEAA filed an answer for the sole remaining claim
of breach of contract.
       {¶ 6} Following discovery, PHEAA filed a motion for summary judgment on
September 18, 2018 on Santagate's sole remaining claim of breach of contract. Santagate
opposed the motion in a November 15, 2018 memorandum contra.
       {¶ 7} In a September 11, 2019 decision and entry, the trial court granted PHEAA's
motion for summary judgment. Specifically, the trial court found there was no privity
between Santagate and PHEAA so the only remaining issue was whether Santagate was a
third-party beneficiary to the servicing contract between PHEAA and the Department of
Education. The trial court then concluded that the contract between PHEAA and the
Department of Education was a government contract and, as such, there remained no
genuine issue of material fact that Santagate was not an intended third-party beneficiary
under the contract. Based on that finding, the trial court concluded PHEAA was entitled to
summary judgment on Santagate's sole remaining claim of breach of contract. The trial
court then entered judgment in favor of PHEAA in a September 24, 2019 judgment entry.
Santagate timely appeals.
II. Assignments of Error
       {¶ 8} Santagate assigns the following errors for our review:
              [1.] The trial court erred in holding the Ohio Consumer Sales
              Protection Act does not cover a student loan transaction.
No. 19AP-705                                                                               4


               [2.] The trial court erred in clarifying its finding of privity of
               contract between a "Direct Loan" borrower and his servicer to
               hold none exists.

               [3.] The trial court erred in holding a "Direct Loan" borrower is
               not an intended third-party beneficiary of the contract between
               his servicer and the Department of Education.

               [4.] The trial court erred in holding no special relationship or
               fiduciary relationship can exist between a student loan
               borrower and his servicer.

               [5.] The trial court erred in holding a student loan borrower is
               not permitted to bring a claim for fraud against his student loan
               servicer.

               [6.] The trial court erred in holding that a "Direct Loan"
               servicer cannot be unjustly enriched by a "Direct Loan"
               borrower.

III. Standard of Review and Applicable Law
       {¶ 9}   Santagate appeals from both the trial court's November 8, 2017 decision and
entry granting in part PHEAA's motion to dismiss and the trial court's September 11, 2019
decision and entry granting PHEAA's motion for summary judgment. More specifically,
Santagate's first, fourth, fifth, and sixth assignments of error relate to the trial court's
decision granting in part PHEAA's motion to dismiss, while Santagate's second and third
assignments of error relate to the trial court's decision and entry granting PHEAA's motion
for summary judgment.
       A. Standard of Review for Civ.R. 12(B)(6) Motion to Dismiss
       {¶ 10} Under Civ.R. 12(B)(6), a defendant may move to dismiss a complaint for
failure to state a claim upon which relief can be granted. A Civ.R. 12(B)(6) motion to
dismiss tests the sufficiency of a complaint. O’Brien v. Univ. Community Tenants Union,
Inc., 42 Ohio St.2d 242, 245 (1975). In ruling on a motion to dismiss pursuant to Civ.R.
12(B)(6), the court must construe the complaint in the light most favorable to the plaintiff,
presume all factual allegations in the complaint are true, and make all reasonable
inferences in favor of the plaintiff. Mitchell v. Lawson Milk Co., 40 Ohio St.3d 190, 192
(1988). The dismissal of a complaint for failure to state a claim is proper when it appears,
No. 19AP-705                                                                                5


beyond doubt, that the plaintiff can prove no set of facts entitling him to relief. Celeste v.
Wiseco Piston, 151 Ohio App.3d 554, 2003-Ohio-703, ¶ 12 (11th Dist.). When reviewing a
decision on a Civ.R. 12(B)(6) motion to dismiss for failure to state a claim upon which relief
can be granted, this court’s standard of review is de novo. Foreman v. Dept. of Rehab. &
Corr., 10th Dist. No. 14AP-15, 2014-Ohio-2793, ¶ 9.
       B. Standard of Review for Motion for Summary Judgment
       {¶ 11} An appellate court reviews summary judgment under a de novo standard.
Coventry Twp. v. Ecker, 101 Ohio App.3d 38, 41 (9th Dist.1995); Koos v. Cent. Ohio
Cellular, Inc., 94 Ohio App.3d 579, 588 (8th Dist.1994). Summary judgment is appropriate
only when the moving party demonstrates (1) no genuine issue of material fact exists,
(2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds
could come to but one conclusion and that conclusion is adverse to the party against whom
the motion for summary judgment is made, that party being entitled to have the evidence
most strongly construed in its favor. Civ.R. 56(C); State ex rel. Grady v. State Emp.
Relations Bd., 78 Ohio St.3d 181, 183 (1997).
       {¶ 12} Pursuant to Civ.R. 56(C), the moving party bears the initial burden of
informing the trial court of the basis for the motion and identifying those portions of the
record demonstrating the absence of a material fact. Dresher v. Burt, 75 Ohio St.3d 280,
293 (1996). However, the moving party cannot discharge its initial burden under this rule
with a conclusory assertion that the nonmoving party has no evidence to prove its case; the
moving party must specifically point to evidence of the type listed in Civ.R. 56(C)
affirmatively demonstrating that the nonmoving party has no evidence to support the
nonmoving party's claims. Id.; Vahila v. Hall, 77 Ohio St.3d 421, 429 (1997). Once the
moving party discharges its initial burden, summary judgment is appropriate if the
nonmoving party does not respond, by affidavit or as otherwise provided in Civ.R. 56, with
specific facts showing that a genuine issue exists for trial. Dresher at 293; Vahila at 430;
Civ.R. 56(E).
IV. First Assignment of Error – CSPA Claim
       {¶ 13} In his first assignment of error, Santagate argues the trial court erred in
granting PHEAA's motion to dismiss his claim for a violation of the CSPA.
No. 19AP-705                                                                                    6


       {¶ 14} Santagate brought his claim pursuant to the CSPA, which provides "[n]o
supplier shall commit an unfair or deceptive act or practice in connection with a consumer
transaction." R.C. 1345.02(A). "Such an unfair or deceptive act or practice violates this
section whether it occurs before, during, or after the transaction." R.C. 1345.02(A).
However, PHEAA argues, and the trial court found, that the CSPA does not apply to
Santagate's allegations because PHEAA is not a "supplier" within the meaning of the CSPA
and does not engage in a "consumer transaction" as required by the CSPA.
       {¶ 15} PHEAA relies on the Supreme Court of Ohio's decision in Anderson v.
Barclay's Capital Real Estate, Inc., 136 Ohio St.3d 31, 2013-Ohio-1933, which held that a
servicer of a residential mortgage loan is not a "supplier" within the meaning of the CSPA,
and that the servicing of a residential mortgage loan is not a "consumer transaction" within
the meaning of the CSPA. Anderson at syllabus. In considering the nature of mortgage
servicing, the Supreme Court noted the servicing of a real estate mortgage does not involve
the transfer of a service to a consumer. Id. at ¶ 12. Further, the Supreme Court stated:
               Mortgage servicing is a contractual agreement between the
               mortgage servicer and the financial institution that owns both
               the note and mortgage. Mortgage servicing is carried out in
               the absence of a contract between the borrower and the
               mortgage servicer. We recognize that the mortgage servicer's
               duties may involve direct and indirect interactions with
               borrowers on behalf of the financial institution. Sometimes the
               mortgage servicer may even assist the borrower in modifying
               the terms of the note, but the mortgage servicer undertakes the
               negotiation not for itself but on behalf of the financial
               institution.

(Emphasis added.) Anderson at ¶ 13. Thus, the Supreme Court reasoned that mortgage
servicing is a "collateral service" that is not necessary to effectuate the underlying real estate
transaction, and thus it does not qualify as a consumer transaction within the meaning of
the CSPA. Id. at ¶ 14
       {¶ 16} Moreover, the Supreme Court in Anderson reasoned that a mortgage servicer
is not a "supplier" within the meaning of the CSPA because the mortgage servicer does not
"engage in the business of effecting or soliciting consumer transactions." Id. at ¶ 31.
Instead, in the context of residential mortgages, the transaction occurs between the
No. 19AP-705                                                                               7


financial institution and the borrower, and "simply servicing the mortgage is not causing a
consumer transaction to happen." Id.
          {¶ 17} Although Santagate argues Anderson should not apply here because that case
involved the servicer of a residential mortgage loan as opposed to a servicer of a federal
student loan, we find this to be a distinction without a difference. Here, the note provides
that the student loan servicer's function is to service the loan, answer questions about the
loan, and process payments on the loan; in other words, the same functions provided by
the servicer of a residential mortgage loan. Additionally, the underlying transaction
occurred between the Department of Education and Santagate; there was not a contractual
relationship between PHEAA and Santagate. See Powers v. Green Tree Servicing, L.L.C.,
8th Dist. No. 102753, 2015-Ohio-3355, ¶ 15 (reasoning "[t]he holding in Anderson that the
servicing of a mortgage was not a consumer transaction was largely based on a lack of a
contractual relationship between the servicer and the consumer and the fact that the
interaction between the servicer and consumer did not have any of the hallmarks of an
exchange"). Thus, we find that the Supreme Court's decision in Anderson applies to
student loan servicers. It follows, then, that PHEAA is not a "supplier" within the meaning
of the CSPA, and that student loan servicing is not a "consumer transaction" within the
meaning of the CSPA. Accordingly, the trial court did not err in granting PHEAA's motion
to dismiss Santagate's CSPA claim. We overrule his first assignment of error.
V. Second Assignment of Error – Privity of Contract
          {¶ 18} In his second assignment of error, Santagate argues the trial court erred in
concluding there exists no privity of contract between Santagate and PHEAA.
          {¶ 19} To succeed on a claim of breach of contract, a plaintiff must demonstrate
(1) the existence of a contract, (2) plaintiff's performance, (3) defendant's breach, and
(4) damages or loss to the plaintiff. Thyssen Krupp Elevator Corp. v. Constr. Plus, Inc.,
10th Dist. No. 09AP-788, 2010-Ohio-1649, ¶ 13, citing Jarupan v. Hanna, 173 Ohio App.3d
284, 2007-Ohio-5081, ¶ 18 (10th Dist.). However, " 'a contract is binding only upon parties
to a contract and those in privity with them.' " Thyssen Krupp Elevator Corp at ¶ 13,
quoting Samadder v. DMF of Ohio, Inc., 154 Ohio App.3d 770, 2003-Ohio-5340, ¶ 25 (10th
Dist.).
No. 19AP-705                                                                                 8


       {¶ 20} Generally, privity is "[t]he connection or relationship between two parties,
each having a legally recognized interest in the same subject matter." Shoemaker v.
Gindlesberger, 118 Ohio St.3d 226, 2008-Ohio-2012, ¶ 10; Hahn v. Satullo, 156 Ohio
App.3d 412, 2004-Ohio-1057, ¶ 65 (10th Dist.). Santagate argues the trial court erred in
finding he is not a party to the servicing contract between the Department of Education and
PHEAA and that Santagate is not in privity with the Department of Education or PHEAA
on the servicing contract.
       {¶ 21} Despite Santagate's attempts to categorize the three-way relationship
between Santagate, the Department of Education, and PHEAA as one that necessarily
suggests privity on the servicing contract, we agree with the trial court that Santagate is not
a party to the servicing contract between the Department of Education and PHEAA and
that Santagate is not in privity with the Department of Education or PHEAA on the
servicing contract. See Thyssen Krupp Elevator Corp. at ¶ 13 (a party cannot maintain a
breach of contract action against an entity not a party to the contract at issue). Further,
while the note itself references the role of DLSC, the prior loan servicer, nothing in the
language of the note indicates that the loan servicer is a party to the note. Although there
are multiple agreements here related to Santagate's student loan, the presence of these
separate agreements does not give the parties of one agreement privity with the parties on
the other agreement. See, e.g., State v. Harding, 10th Dist. No. 13AP-362, 2014-Ohio-1187,
¶ 29 (rejecting an argument that contractual privity exists simply because the parties are
both subject to separate contracts that are part of the same loan transaction, noting that
"relationship does not allow defendants to sue or be sued on contracts * * * to which they
are not parties but [the other entity] is").
       {¶ 22} Having reviewed the pleadings and the materials submitted in support of
PHEAA's motion for summary judgment, we conclude that Santagate is not in privity with
the Department of Education and PHEAA on the servicing contract. Thus, we overrule
Santagate's second assignment of error.
VI. Third Assignment of Error – Third-Party Beneficiary
       {¶ 23} In his third assignment of error, Santagate argues the trial court erred in
concluding he is not an intended third-party beneficiary of the servicing contract between
the Department of Education and PHEAA.
No. 19AP-705                                                                                9


       {¶ 24} Generally, "only an intended beneficiary may exert rights to a contract of
which he is not a party." TRINOVA Corp. v. Pilkington Bros., P.L.C., 70 Ohio St.3d 271,
277 (1994); Grant Thorton v. Windsor House, Inc., 57 Ohio St.3d 158, 161 (1991) ("[o]nly a
party to a contract or an intended third-party beneficiary of a contract may bring an action
on a contract in Ohio"). A third-party beneficiary, while not a party to a contract, is " 'one
for whose benefit a promise has been made in a contract.' " Maghie & Savage, Inc. v. P.J.
Dick Inc., 10th Dist. No. 08AP-487, 2009-Ohio-2164, ¶ 40, quoting Chitlik v. Allstate Ins.
Co., 34 Ohio App.2d 193, 196 (8th Dist.1973). "While an intended third-party beneficiary
'has enforceable rights under a contract, an incidental third-party beneficiary does not.' "
State ex rel. DeWine v. Mastergard, 10th Dist. No. 14AP-1024, 2016-Ohio-660, ¶ 10,
quoting Maghie & Savage, Inc. at ¶ 40.
       {¶ 25} For a third party to acquire intended beneficiary status, it must present
evidence that the promisee intended to directly benefit the third party. Huff v. FirstEnergy
Corp. 130 Ohio St.3d 196, 2011-Ohio-5083, ¶ 11; TRINOVA Corp. at 277-78; Hill v. Sonitrol
of Southwestern Ohio, Inc., 36 Ohio St.3d 36, 40 (1988). A third party who receives a mere
happenstance benefit from the promisee's performance of a contract is only an incidental
beneficiary, to whom the promise owes no duty. Hill at 40.
       {¶ 26} "Private citizens generally do not have the right to enforce government
contracts as a third-party beneficiary on their own behalf, unless a different intention is
clearly manifested in the contract." Walker v. Jefferson Cty., 7th Dist. No. 02 JE 14, 2003-
Ohio-3490, ¶ 40, citing Doe v. Adkins, 110 Ohio App.3d 427, 436 (4th Dist.1996). See also
Mastergard at ¶ 22 (noting the "general contract principle that third party beneficiaries of
a government contract generally are assumed to be merely incidental beneficiaries, and
may not enforce the contract absent clear intent to the contrary"), citing Hodges v. Pub.
Bldg. Comm., 864 F.Supp. 1493, 1509 (N.D. Ill.1994). "It is not necessary for the third party
to be expressly identified in the contract, however, the contract must have been made and
entered into with the intent to benefit that individual." Bungard v. Dept. of Job & Family
Servs., 10th Dist. No. 07AP-447, 2007-Ohio-6280, ¶ 23. The parties' intention to benefit
a third party will generally be found in the language of the agreement. Graham v.
Lakewood, 8th Dist. No. 106094, 2018-Ohio-1850, ¶ 53, citing Huff at ¶ 12.
No. 19AP-705                                                                                 10


       {¶ 27} Though Santagate argues the servicing contract is not a government contract,
we agree with the trial court's conclusion that the servicing contract is, indeed, a
government contract, as the Department of Education is a government agency. Thus, to
determine whether the servicing contract manifested an intent that a private citizen could
enforce it as a third-party beneficiary, we must review the language of the contract.
       {¶ 28} Upon review of the servicing contract, we conclude the contract between the
Department of Education and PHEAA does not contain any language expressing a clear
intention that any specific borrowers would have a right to enforce the terms of the
servicing contract against PHEAA. While Santagate continues to argue, as he did in the
trial court, that he is affected by the servicing contract, he cannot overcome the lack of clear
intention that he have any enforceable rights under the servicing contract. He is, at best,
an incidental beneficiary to the servicing contract. See Long v. Mount Carmel Health Sys.,
10th Dist. No. 16AP-511, 2017-Ohio-5522, ¶ 16.
       {¶ 29} Accordingly, we conclude the trial court did not err in granting summary
judgment to PHEAA on Santagate's breach of contract claim because Santagate is not an
intended third-party beneficiary under the servicing contract. We overrule Santagate's
third assignment of error.
VII. Fourth Assignment of Error – Breach of Fiduciary Duty
       {¶ 30} In his fourth assignment of error, Santagate argues the trial court erred in
dismissing his claim for breach of fiduciary duty. More specifically, Santagate asserts the
trial court erred in finding no special relationship existed between himself and PHEAA
sufficient to create a fiduciary duty.
       {¶ 31} In order to prevail on claim for breach of fiduciary duty, a plaintiff must
demonstrate: (1) the existence of a duty arising from a fiduciary relationship, (2) the
defendant's failure to observe the duty, and (3) an injury proximately resulting from the
breach. Cristino v. Admr., Ohio Bur. of Workers' Comp., 10th Dist. No. 12AP-60, 2012-
Ohio-4420, ¶ 16, citing Wells Fargo Bank, N.A. v. Sessley, 188 Ohio App.3d 213, 2010-
Ohio-2902, ¶ 36 (10th Dist.). " 'When there is no fiduciary relationship between the parties,
a breach-of-fiduciary-duty claim necessarily fails.' " Cristino at ¶ 16, quoting Wells Fargo
Bank at ¶ 36.
No. 19AP-705                                                                                11


       {¶ 32} The Supreme Court of Ohio has defined a fiduciary relationship as a
relationship " 'in which special confidence and trust is reposed in the integrity and fidelity
of another and there is a resulting position of superiority or influence, acquired by virtue of
this special trust.' " Groob v. KeyBank, 108 Ohio St.3d 348, 2006-Ohio-1189, ¶ 16, quoting
In re Termination of Emp. of Pratt, 40 Ohio St.2d 107, 115 (1974). "A fiduciary is an entity
that has a duty, created by its undertaking, to act primarily for the benefit of another in
matters connected with its undertaking." Cristino at ¶ 17, citing State v. Massien, 125 Ohio
St.3d 204, 2010-Ohio-1864, ¶ 35.
       {¶ 33} Ordinarily, a business transaction in which the parties deal at arm's length
will not create a fiduciary relationship. Hoyt v. Nationwide Mut. Ins. Co., 10th Dist. No.
04AP-941, 2005-Ohio-6367, ¶ 30. However, "[a] fiduciary relationship can be created by a
formal agreement or may arise de facto from an informal relationship if both parties
understand that a special trust or confidence has been reposed." Id., citing Umbaugh Pole
Bldg. Co. v. Scott, 58 Ohio St.2d 282 (1979), syllabus.
       {¶ 34} Because the trial court dismissed Santagate's breach of fiduciary duty claim
pursuant to Civ.R. 12(B)(6), we must look to the complaint to see if Santagate sufficiently
pled facts to establish the existence of a fiduciary relationship between Santagate and
PHEAA. Although Santagate states several times throughout the complaint that he placed
trust and confidence in PHEAA, Santagate failed to make any allegation that PHEAA
understood that Santagate held such trust or confidence in it. Hoyt at ¶ 31 (noting a de
facto fiduciary relationship "can only be created where both parties understand that a
special trust or confidence has been reposed," but appellant made no factual allegation that
the entity intended to create such a relationship between himself and appellant, "regardless
of Hoyt's unilateral understanding of their relationship"). See also Groob at ¶ 21 (noting
that parties stand at arm's length when negotiating the terms and conditions of a consumer
loan, so, absent an understanding by both parties that a special trust and confidence has
been created, no fiduciary duty results); Belvedere Condominium Unit Owners' Assn. v.
R.E. Roark Companies, 67 Ohio St.3d 274, 284 (1993) (holding that "a condominium
owners' association may not maintain an action against a condominium developer for
breach of fiduciary duty absent an understanding by both parties that special trust and
confidence have been reposed in the developer") (emphasis added).              Moreover, the
No. 19AP-705                                                                                12


complaint contains numerous statements evincing that Santagate understood PHEAA
worked for the Department of Education and not for him. Stated another way, though
Santagate attempts to make the legal assertion that he had a fiduciary relationship with
PHEAA, he did not plead any facts in the complaint demonstrating that his relationship
with PHEAA was anything other than an arm's length relationship. Groob at ¶ 26.
       {¶ 35} Because Santagate failed to plead facts sufficient to demonstrate the
existence of a fiduciary relationship between himself and PHEAA, the trial court did not err
in dismissing his claim for breach of fiduciary duty. We overrule Santagate's fourth
assignment of error.
VIII. Fifth Assignment of Error – Fraud-Based Claims
       {¶ 36} In his fifth assignment of error, Santagate argues the trial court erred in
dismissing his claims for fraud, fraudulent representation, and/or fraudulent concealment.
       {¶ 37} To prevail on a fraud claim, "a plaintiff must prove: (1) a representation, or if
a duty to disclose exists, concealment of a fact, (2) that is material to the transaction at
issue, (3) made falsely, with knowledge of its falsity, or with such utter disregard and
recklessness as to whether it is true or false that knowledge may be inferred, (4) with the
intent to mislead another into relying on it, (5) justifiable reliance upon the representation
or concealment, and (6) a resulting injury proximately caused by the reliance." Andrew v.
Power Marketing Direct, Inc., 10th Dist. No. 11AP-603, 2012-Ohio-4371, ¶ 49, citing Burr
v. Stark Cty. Bd. of Commrs., 23 Ohio St.3d 69, 73 (1986).
       {¶ 38} The trial court determined dismissal of Santagate's fraud-based claims was
warranted both because of the economic loss rule and the Higher Education Act ("HEA").
Generally, the economic loss rule prevents recovery in tort of damages for purely economic
loss. Clemens v. Nelson Fin. Group, Inc., 10th Dist. No. 14AP-537, 2015-Ohio-1232, ¶ 34,
citing Corporex Dev. & Constr. Mgt., Inc. v. Shook, Inc., 106 Ohio St.3d 412, 2005-Ohio-
5409, ¶ 6. "The economic-loss rule stems from the principle that, '[i]n the absence of privity
of contract between two disputing parties the general rule is "there is no * * * duty to
exercise reasonable care to avoid intangible economic loss or losses to others that do not
arise from tangible physical harm to persons and tangible things." ' " Waverly City School
Dist. Bd. of Edn. v. Triad Architects, Inc., 10th Dist. No. 08AP-329, 2008-Ohio-6917, ¶ 26,
No. 19AP-705                                                                               13


quoting Floor Craft Covering, Inc. v. Parma Community Gen. Hosp. Assn., 54 Ohio St.3d
1, 3 (1990), quoting Prosser & Keeton, Law of Torts, Section 92, 657 (5th Ed.1984).
       {¶ 39} There are exceptions, however, to the application of the economic loss rule to
bar recovery in tort of purely economic loss. "A plaintiff may pursue such a tort claim if it
is 'based exclusively upon [a] discrete, preexisting duty in tort and not upon any terms of a
contract or rights accompanying privity.' " Clemens at ¶ 36, quoting Corporex at ¶ 9. These
types of exempt claims may include negligent misrepresentation, breach of fiduciary duty,
fraud, and conversion. Clemens at ¶ 36, citing Potts v. Safeco Ins. Co., 5th Dist. No. 2009
CA 0083, 2010-Ohio-2042, ¶ 21, and Morgan v. Mikhail, 10th Dist. No. 08AP-87, 2008-
Ohio-4598, ¶ 69.
       {¶ 40} Despite the exemption of a fraud claim from the economic loss rule, PHEAA
argues, and the trial court found, that dismissal of Santagate's fraud-based claims were still
appropriate because of the HEA. The student assistance portions of the HEA, codified at
20 U.S.C. 1070-1100, govern federal student loans. Significantly, the HEA does not create
a private right of action. Thomas M. Cooley Law School v. The Am. Bar Assn., 459 F.3d
705, 710 (6th Cir.2006) (noting "nearly every court to consider the issue in the last twenty-
five years has determined that there is no express or implied private right of action to
enforce any of the HEA's provisions"), citing McCulloch v. PNC Bank Inc., 298 F.3d 1217,
1221 (11th Cir.2002).
       {¶ 41} Here, PHEAA argues the HEA precludes Santagate's claims even though he
attempted to plead them as fraud-based claims. In support, PHEAA relies on several
federal district court cases in which fraud-like claims were dismissed because, despite how
they were pled, they were really claims for violations of the HEA. See Salerno v. Am. Edn.
Servs., M.D. Pa. No. 3:13-CV-1549, 2013 U.S. Dist. LEXIS 159172 (Oct. 3, 2013) (dismissing
complaint on the grounds that the allegations related to interest accrual and penalties, as
well as excessive collection calls, asserted violations of the HEA rather than separate tort
actions); Carter v. U.S. Dept. of Edn., N.D. Ill. No. 01 C 757, 2001 U.S. Dist. LEXIS 17365
(Oct. 23, 2001) (dismissing complaint on grounds that the allegations that the Department
of Education "negligently or deliberately wronged" the plaintiff in the calculation of his
student loan debt and interest asserted violations of the HEA).
No. 19AP-705                                                                               14


       {¶ 42} In particular, PHEAA relies on Nehorai v. U.S. Dept. of Edn. Direct Loan,
E.D.N.Y. No. 08-CV-920, 2008 U.S. Dist. LEXIS 30161 (Apr. 14, 2008). In Nehorai, the
federal district court dismissed a complaint from a borrower who alleged the Department
of Education misled her about her eligibility for student financial aid. Although the
borrower did not identify any federal law, the court in Nehorai nonetheless construed the
complaint as attempting to assert a claim under the HEA and dismissed the complaint. Id.
Here, the trial court agreed with PHEAA's reliance on Nehorai and found that Santagate's
complaint, despite purporting to assert fraud-based claims, was actually asserting a claim
arising under the HEA for which there is no private cause of action.
       {¶ 43} However, despite PHEAA's and the trial court's reliance on Nehorai, other
more recent federal cases have concluded that the HEA does not expressly preempt state
law claims for fraud brought against a federal student loan servicer. Specifically, the United
States Court of Appeals for the Eleventh Circuit recently held that the HEA neither
expressly nor implicitly preempts state law claims for fraud based on a student loan
servicer's affirmative misrepresentations. Lawson-Ross v. Great Lakes Higher Edn. Corp.,
955 F.3d 908, 911, 919-20 (11th Cir.2020) (concluding the HEA did not preempt state law
claims related to borrowers' allegation that their federal student loan servicer "made
affirmative misrepresentations to them and other borrowers that they were on track to have
their student loans forgiven based on their public-service employment when, in fact, their
loans were ineligible for the forgiveness program," and specifically noting the Department
of Education had encouraged borrowers to consult their loan servicers for repayment
options). In Lawson-Ross, the Eleventh Circuit made the important distinction that while
the HEA would preempt a state law claim based on a misleading disclosure of information
that a federal student loan servicer was required to disclose under the HEA and
accompanying federal regulations, the HEA would not preempt state law claims for
affirmative misrepresentations made on a matter on which the student loan servicer had
no required disclosure under the HEA. Id. at 919-20.
       {¶ 44} Similarly, the United States Court of Appeals for the Seventh Circuit recently
held that the HEA did not preempt a student loan borrower's state law claims that a federal
student loan servicer made affirmative misrepresentations to the borrower while
counseling her on her repayment plan options. Nelson v. Great Lakes Educational Loan
No. 19AP-705                                                                             15


Servs., Inc., 928 F.3d 639, 642 (7th Cir.2019) (noting the distinction between affirmative
misrepresentations and failures to disclose). The Seventh Circuit in Nelson specifically
noted that the HEA and accompanying regulations impose specific disclosure obligations
on student loan servicers and preempt state law claims based on those disclosures. Thus,
the Seventh Circuit clarified that a student loan borrower "may proceed on her claims based
on affirmative misrepresentations, as distinct from those that require proof that defendant
failed to disclose information." Nelson at 650.
       {¶ 45} We find the reasoning employed by the Eleventh Circuit and the Seventh
Circuit to be persuasive. Thus, based on both Lawson-Ross and Nelson, we disagree with
the trial court's conclusion that the HEA necessarily preempts any fraud claim brought by
a student loan borrower against a federal student loan servicer. Pursuant to the Seventh
Circuit's decision in Nelson and the Eleventh Circuit's decision in Lawson-Ross, to the
extent Santagate alleged that PHEAA made affirmative misrepresentations to him in
counseling him on his repayment options, the HEA would not operate to bar those claims.
In his complaint, Santagate alleges PHEAA made affirmative misrepresentations that he
relied upon to his detriment. Because we must construe Santagate's factual allegations as
true for purposes of a Civ.R. 12(B)(6) motion to dismiss, we find the trial court erred in
granting PHEAA's motion to dismiss the fraud-based claims based on PHEAA's affirmative
misrepresentations. We, therefore, sustain Santagate's fifth assignment of error.
IX. Sixth Assignment of Error – Unjust Enrichment
       {¶ 46} In his sixth and final assignment of error, Santagate argues the trial court
erred in dismissing his claim for unjust enrichment.
       {¶ 47} "The doctrine of unjust enrichment 'applies when a benefit is conferred and
it would be inequitable to permit the benefitting party to retain the benefit without
compensating the conferring party.' " Garb-Ko v. Benderson, 10th Dist. No. 12AP-430,
2013-Ohio-1249, ¶ 25, quoting Meyer v. Chieffo, 193 Ohio App.3d 51, 2011-Ohio-1670, ¶ 16
(10th Dist.). To prove an unjust enrichment claim, a plaintiff must demonstrate (1) the
plaintiff conferred a benefit upon the defendant, (2) the defendant knew of the benefit, and
(3) it would be unjust to allow the defendant to retain the benefit without repayment to the
plaintiff. Garb-Ko at ¶ 25, citing Meyer at ¶ 37, citing Maghie & Savage, Inc. v. P.J. Dick
No. 19AP-705                                                                                16


Inc. at ¶ 33. Santagate alleges he improperly overpaid due to PHEAA placing his loans in
forbearance and, as a result, PHEAA was unjustly enriched.
       {¶ 48} It is clear from the face of the complaint that PHEAA does not receive any
funds from Santagate.      Instead, as the trial court noted and as we have previously
concluded, PHEAA's contractual relationship is with the Department of Education. Thus,
the only entity potentially "enriching" PHEAA is the Department of Education, a non-party
to this action. Because Santagate did not allege facts sufficient to demonstrate, if true, that
he conferred a benefit upon PHEAA, the trial court did not err in granting PHEAA's motion
to dismiss the claim for unjust enrichment. We overrule Santagate's sixth and final
assignment of error.
X. Disposition
       {¶ 49} Based on the foregoing reasons, the trial court did not err in granting
PHEAA's motion for summary judgment on Santagate's breach of contract claim based on
a theory of third-party beneficiary, in concluding Santagate was not in privity with PHEAA,
or in dismissing Santagate's claims for violation of the CSPA, breach of fiduciary duty, and
unjust enrichment. However, the trial court erred in granting PHEAA's motion to dismiss
Santagate's fraud-based claims that alleged affirmative misrepresentations by PHEAA.
Having sustained Santagate's fifth assignment of error and having overruled Santagate's
first, second, third, fourth, and sixth assignments of error, we affirm in part and reverse in
part the judgment of the Franklin County Court of Common Pleas, and we remand the
matter to that court for further proceedings consistent with this decision.
                        Judgment affirmed in part and reversed in part; cause remanded.

                                     BROWN, J., concurs.
                       Nelson, J., concurs in part and dissents in part.


NELSON, J., concurring in part and dissenting in part.
       {¶ 50} I agree with the majority that the trial court did not err in finding that Mr.
Santagate was not in privity with PHEAA, in granting summary judgment against his
contract claim, and in dismissing his CSPA, breach of fiduciary duty, and unjust enrichment
claims. I also agree with what I understand to be the majority's view that even under the
rubric of fraud, Mr. Santagate cannot pursue against PHEAA claims based on the terms of
No. 19AP-705                                                                                       17


the Notes or the commands of the Higher Education Act. And I agree with the majority
that in this context, any fraud claims must be limited to "affirmative misrepresentations
made on a matter on which the student loan servicer had no required disclosure under the
HEA" (as opposed, we are told, to "misleading disclosure of information that a federal loan
servicer was required to disclose," or to a failure to disclose information); Mr. Santagate's
fraud claims must be confined to allegations of "affirmative misrepresentations that he
relied upon to his detriment." See Majority Decision at ¶ 43-45 (emphasis in original).
       {¶ 51} So I agree with what the majority has ruled out. I diverge from the majority
only because, after all that, I don't think there's anything left to Mr. Santagate's complaint.
His "fraudulent concealment" allegations, for example, go by the boards, in that they don't
allege "affirmative misrepresentations." That excluded category encompasses his concerns
that the loan servicer "intentionally does not provide new total monthly amounts in
disclosure statements to borrowers," Complaint at ¶ 66, that its representatives "did not
mention any other repayment plan options," id. at ¶ 70, that it "intentionally withheld
information," id. at ¶ 73, see also, e.g., id. at ¶ 76 ("[a]s a result of [the servicer's] intentional
withholding of repayment option information * * *, Plaintiff's Loans have been subject to
higher interest rates and increased total amounts due and owing"), id. at ¶ 111
("intentionally withheld accounting information"), or that it "intentionally delayed review
and processing," id. at ¶ 81, and the like.
       {¶ 52} Similarly, Mr. Santagate's assertion that PHEAA misrepresented its agents as
"fully versed in repayment options," id. at ¶ 190, requires some additional claim of
misconduct to state a fraud claim and, lacking some link to "affirmative
misrepresentations" leading to damage, cannot be used to smuggle in recovery here on the
"concealment" or "failure to disclose" claims.               His assertions regarding PHEAA
"representations on forbearance," as the trial court noted, fail to make out a fraud claim
because his complaint explicitly disclaims that he acted in reliance on any such statements:
he "took no action to place his Loans into forbearance before, during, or after the
September 30, 2013 Discussion and did not direct [PHEAA] to place his Loans into
forbearance." Id. at ¶ 87; see also id. at ¶ 88 (alleging that PHEAA "unilaterally, and without
Plaintiff's consent, placed Plaintiff's Loans into forbearance"). His allegation of a PHEAA
"promise that Plaintiff was receiving [an] EDA Rebate," id. at ¶ 190, falls prey to his
No. 19AP-705                                                                               18


allegations that the notes called for such a rebate and that the alleged "assurances" came
not from PHEAA but "from the Direct Loan Servicing Center," a different entity, see id. at
¶ 15, 51-52. His allegations that PHEAA told him during conversations of November 4 and
21, 2013, and again in conversations of January 6 and 21, 2014, that he would receive
"additional information" or an "accounting breakdown" of accrued interest, see id. at ¶ 103,
105, 116, 117, are matched by allegations that "[o]n November 27, 2013 [PHEAA] mailed to
Plaintiff what it considered to be the full accounting of Plaintiff's Loans requested by
Plaintiff" and that it did the same in a "Second Accounting" on January 27, 2014, see id. at
¶ 108, 118. These are not allegations of "affirmative misstatements" that give rise to a fraud
claim outside of HEA dictates.
         {¶ 53} There are other examples, but in sum, I find no sufficiently pleaded
allegations of "affirmative representations" that Mr. Santagate says he relied on to his
detriment that fall outside the purview of the federal HEA and that come within the very
narrow subclass of fraud claims on which the court majority says he may proceed. It is not
dispositive, but I think it is telling, that Mr. Santagate identifies no such particular
affirmative representations in the portions of his opening brief here or of his reply that
address his fifth assignment of error and the trial court's handling of his fraud allegations.
See Appellant's Brief at 43-48 (not citing any paragraph of his complaint); Reply Brief at
13-18.    Mr. Santagate submits that he "sufficiently alleges fraud" because he relied on
PHEAA to "(i) provide all repayment plan options, (ii) maintain and provide full and
accurate accountings of his Loans, (iii) apply payments in a way that minimizes amounts
owed, (iv) not increase interest rates in violation of the terms of the Notes, (v) investigate
charges PHEAA admitted should not have been applied, and (vi) not put him in forbearance
when they said they would not." Reply Brief at 14-15. Item (vi) does not track the allegations
of paragraphs 85-96 of his complaint (reciting no reliance), and the first five items he lists
relate to information allegedly withheld or to actions taken or not taken rather than to
"affirmative misrepresentations."
         {¶ 54} I think that the trial court was correct in dismissing Mr. Santagate's fraud
claim in its entirety, not just to some very substantial degree. I therefore would affirm the
No. 19AP-705                                                                                19


judgment of the trial court in full, and I respectfully dissent from the majority's decision to
the limited extent that it reverses the trial court's judgment. I otherwise concur in the
decision of this court.
