COURT: Navient involuntary Chapter 11 judge grants motion to dismiss case; petitioners’ counsel is a no-show - Update

25 February 2021

[This updates an earlier Debtwire report to provide additional detail.]

 

The bankruptcy judge overseeing the involuntary Chapter 11 case of Navient Solutions has granted the company’s motion to dismiss the case.

 

Judge Martin Glenn of the US Bankruptcy Court for the Southern District of New York ruled that the petitioners’ claims should go forward in the various districts where the company is already embroiled in student loan litigation.

 

“The proper place for that litigation to proceed at this step is in the courts that are currently grappling with the issues and not jumping the queue by filing this ill-informed involuntary petition,” the judge said.

 

Student borrowers Sarah Bannister, Brandon Hood and LaBarron Tate filed an involuntary petition against Navient on 8 February, claiming that the student loan company “hounded and lied to” them for years in order to extract USD 45,600 in overpayments.

 

Navient filed a motion to dismiss the petition last week, calling it a bad faith filing that is divorced from reality. The company called the petition “frivolous” and alleged that “nothing about the filing is based on reality, facts, or evidence,” calling it a “gross waste” of resources. The company accused petitioners’ counsel of filing the case in bad faith to “continue a media crusade riddled with falsehoods.”

 

Petitioners’ counsel Austin Smith, of Smith Law Group, did not object to dismissal despite receiving extensions of time from the court to do so. Neither Smith nor any other petitioners representative appeared in court today, but a lawyer for another party who filed a joinder to the involuntary petition said Smith had told him that Smith had a reoccurrence of cancer that “worsened significantly” in the past few days.

 

That lawyer was Michael Wolk, of the Law Offices of Michael B Wolk, representing Public Interest Capital LLC. Wolk purports that Public Interest Capital is a proposed creditor class claim representative on behalf of certain student loan borrowers. He made his case for keeping the case alive in the absence of debtor counsel, but Judge Glenn was unconvinced and eventually threatened to hold Wolk in contempt as he repeatedly interrupted other parties and raised his voice.

 

Smith had filed a letter with the court on 22 February, asking for a five-hour extension of the 12pm ET deadline to submit his objection as he was “diligently preparing the opposition but fears he will be unable to submit a clean version by noon.” Judge Glenn granted that request as well as an amended request for a 12-hour extension but shot down a further letter asking for a 24-hour extension. Despite the extra time, the objection never came.

 

Navient trades on NASDAQ and closed trading at USD 12.50 per share on Wednesday (24 February) with a market capitalization of USD 2.31bn.

 

by Pat Holohan