Veterans Legal Clinic Files Class Action Against Massachusetts Treasury on Behalf of Veterans with Bad-Paper Discharges

Veterans Legal Clinic Files Class Action Against Massachusetts Treasury on Behalf of Veterans with Bad-Paper Discharges

Jeffrey Machado, one of the lead plaintiffs, while serving in Afghanistan.

Jeffrey Machado, one of the lead plaintiffs, while serving in Afghanistan.

On June 29, the Veterans Legal Clinic at the Legal Services Center of Harvard Law School filed a class action lawsuit in Massachusetts Superior Court on behalf of Army combat veteran Jeffrey Machado and an estimated 4,000 veterans from Massachusetts who served in Iraq, Afghanistan, or elsewhere since 9/11 but are considered to be undeserving of the state’s $1000 Welcome Home Bonus given to servicemembers when they are honorably discharged from the military.

The lead plaintiffs in this suit are two former Soldiers from Massachusetts who deployed to Afghanistan, honorably completed their enlistments, re-enlisted so that they could continue serving their country, and then later left the military with a bad-paper discharge assigned to their final enlistment periods.  Both are diagnosed with Post-Traumatic Stress Disorder (PTSD) related to their deployments and experienced family and health issues that contributed to the conduct that led to the bad-paper discharges.

The Massachusetts Legislature created the Welcome Home Bonus in 2005, continuing a long tradition of providing benefits to returning servicemembers from Massachusetts. However, the Massachusetts State Treasury, which is charged with administering the Bonus program, recently decided that the two veteran plaintiffs were not eligible for the Welcome Home Bonus because their final enlistment periods ended with bad-paper discharges, despite the fact that their prior enlistments during which they had deployed had ended with honorable discharges.

“As the class action complaint sets forth, the Treasurer has violated its governing statute by failing to give due credit to these two men and others like them who honorably completed enlistments, immediately reenlisted, but later left the military with bad-paper discharges that applied only to their final enlistment,” says Dana Montalto, Senior Clinical Fellow at the Veterans Legal Clinic at the Legal Services Center. “These veterans should be eligible for the Welcome Home Bonus based on the service that the military already deemed fully honorable.”

Daniel Nagin, Director of the Veterans Legal Clinic, adds, “The Treasury’s decision to deny bonuses to these veterans is especially unjust because they could have applied for the Bonus after they returned from Afghanistan and were still on active duty, and the Treasury would no doubt have approved their applications. Only because these veterans happened to apply after they left the service and returned to Massachusetts did the Treasury’s misunderstanding of the law cause these veterans to be denied the Bonus.”

Thousands of American men and women have deployed to Iraq and Afghanistan since 9/11, experienced hardships, and risked their lives in war zones. More than 135,000 post-9/11 veterans have bad-paper discharges. The Government Accountability Office recently found that 62 percent of servicemembers separated for misconduct from fiscal years 2011 through 2015 had been diagnosed within the prior two years with Post-Traumatic Stress Disorder, Traumatic Brain Injury, or another mental health condition.

“These men and women volunteered for military duty when most Americans do not,” notes Montalto. “Many of them have physical or mental wounds because of that service—but choose to reenlist and continue serving. Yet, when those mental and emotional burdens become too great and the end result is a bad-paper discharge, the Commonwealth is unlawfully choosing to find that the entirety of the military service of these individuals is worthless. The Welcome Home Bonus law does not permit that kind of judgment.”

More than 150,000 men and women from Massachusetts have volunteered to enlist in the armed forces since 9/11. About 7 percent of them left the military with a bad-paper discharge assigned to their last period of service. While many did not reenlist, the Veterans Legal Clinic team estimates that about 4,000 did complete their first enlistment contract with an honorable discharge and then re-enlisted, but received a bad-paper discharge related to that subsequent enlistment. This group should be eligible for the Welcome Home Bonus, Clinic attorneys say.

“Both plaintiffs feel that this case is less about the Bonus payment itself and more about having the Commonwealth recognize the honorable military service that they and thousands of fellow veterans dedicated to this nation,” says Montalto.  “We are filing this lawsuit on their behalf to ensure that they and others get the recognition they deserve.”

Click here for a copy of the complaint.

Additional coverage of the case comes from WBUR and Stars & Stripes.

Court Orders Department of Education to Consider Student Loan Relief Application, Calling Request for Further Delay “Frivolous and in Bad Faith”

The United States District Court for the Central District of California issued an Order today that directs the Department of Education to rule on the loan relief application of a former Corinthian student that has been pending for over two years.  To date, the Department of Education has not ruled on thousands of applications for loan relief submitted by borrowers whose federal student loans were originated by private banks under the Federal Family Education Loan Program.

The Plaintiff, Sarah Dieffenbacher, filed her first application for loan relief in March 2015. Her loans went into default while her application was still pending.  In late 2016, Sarah received a notice that her wages would be garnished. She works as a home health care phlebotomist to support herself and her four children. She objected to the wage garnishment because the terms of her loan and federal law both provide that Corinthian’s fraudulent actions render her loans unenforceable. She asked the Department to hold the hearing on her objections to which she was entitled.

After the Department of Education overruled her objection, citing the fact that her file included a signed loan contract, and ordered the garnishment to go forward, Sarah filed a lawsuit against the Department in March.  Represented by the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School, she argued that the Department did not consider the arguments or evidence she presented before rejecting her claim. As the Court noted, her application was supported by 254 pages of exhibits, which included a sworn statement from Sarah as well as records from the Attorney General of California regarding documented misconduct on the part of Everest and its parent company.  The Department also did not provide Sarah with the requested hearing before issuing a summary denial.

In response to the lawsuit, the Department filed a motion asking that the Court refrain from examining the case altogether.  The Court ruled that this request was not based on a “substantial or legitimate concern” but rather was “both frivolous and in bad faith,” and “appears to be an attempt to evade judicial review so that it can retain the ability to garnish Plaintiff’s wages without a conclusive ruling as to the enforceability of her loans.”  Under the ruling, the Department now has ninety days to provide Sarah with a conclusive ruling on her application for loan relief.  Responding to the ruling, Sarah said, “I’m fighting for myself, but also for so many others who were defrauded by for-profit schools.  I hope this case will put pressure on the Department to do the right thing.”

This ruling comes amidst growing concern that the Department of Education is refusing to take actions required by law and its own regulations designed to wipe out student loan debts that are the product of fraud and illegal activity by predatory schools.  Tens of thousands of applications for relief based on the fraud of Corinthian and other for-profit schools have been pending with the Department for months and even years.  “Today’s ruling confirms that student loan borrowers have rights that exist independently of political winds and caprices.  It is inexcusable to delay and thereby deny Sarah and other borrowers in similar positions their contractual and statutory rights,” said Toby Merrill, director of the Project on Predatory Student Lending and one of the lawyers representing Sarah.

Additional Information

Ms. Dieffenbacher is also represented by Alec Harris, Eileen Connor, and Deanne Loonin of the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School, as well as Robyn Smith of the Legal Aid Foundation of Los Angeles.

Click here for a copy of the Court’s Order.

Click here for the Project’s press release about the Order.