4th Cir.: Navient v. Loman- TCPA and Sham Litigation

Summary:

In this high-profile litigation, Navient Solutions, LLC—a major student loan servicer—sued a group of lawyers, debt-relief companies, and associated individuals, alleging they orchestrated a fraudulent scheme that encouraged borrowers to cease loan payments and file meritless lawsuits under the Telephone Consumer Protection Act (TCPA). Navient’s theory was that the defendants manufactured sham TCPA claims in order to generate settlements and debt forgiveness, thereby violating RICO and committing fraud and tortious interference.

At trial, Navient prevailed with a jury award of over $2 million. But the district court later granted Rule 50(b) motions for judgment as a matter of law, setting aside the verdict. The Fourth Circuit affirmed, holding that the TCPA litigation filed by the defendants was not “sham litigation” and was therefore protected by the First Amendment under the Noerr–Pennington doctrine. Because Navient’s damages were solely tied to the costs of defending those lawsuits (and not any independent wrongful acts), and because the suits themselves were not objectively baseless, Navient could not recover.

Key to the Fourth Circuit’s ruling was its application of Waugh Chapel South, LLC v. UFCW Local 27, 728 F.3d 354 (4th Cir. 2013), adopting the California Motor “series of lawsuits” standard for determining whether a pattern of litigation constitutes a sham. The court found that the TCPA actions—though possibly coordinated for economic gain—raised legitimate legal issues, especially considering the pre-Facebook v. Duguid (2021) uncertainty over what constituted an automatic telephone dialing system (ATDS). Navient had itself acknowledged the unsettled nature of the law and settled many of the suits.

The panel declined to opine on the broader questions of whether Noerr–Pennington immunity extends to private arbitration, pre-suit conduct, or to non-litigant participants, finding that Navient had waived those arguments or sought no damages stemming from such activity.

Commentary:

While not a bankruptcy case, Navient v. Lohman offers a revealing look at how far courts will stretch the Noerr–Pennington doctrine to protect even aggressive and perhaps morally dubious litigation strategies. The Fourth Circuit made clear that First Amendment protections for petitioning the government extend to serial TCPA filings—even if those suits were ginned up by debt-relief outfits coaching borrowers to manufacture claims—so long as the underlying legal issues are debatable.

For consumer bankruptcy practitioners, this case indirectly bolsters the ability of debtors’ attorneys to bring novel or coordinated legal actions without fear of RICO retaliation, provided their claims are grounded in real legal uncertainty. It may offer comfort to those involved in consumer advocacy against large creditors or servicers, particularly in areas where statutory interpretation remains in flux.

However, the opinion stops short of giving blanket immunity to all conduct surrounding such litigation. Practitioners should take note that if Navient had better quantified harm outside the litigation itself—say, through economic losses tied to broader marketing or pre-litigation conduct—the outcome might have been different.

In short, courts remain protective of access to legal process—even if used repeatedly, creatively, or for profit. But they may not look kindly on poorly framed damage theories or waived appellate issues.

Practice Tip:

In Chapter 13 bankruptcy case,  especially for nondischargeable debts,  debtors might include the following:

Nonstandard Plan Provision – Revocation of Consent to Receive Autodialed or Prerecorded Calls

Pursuant to 47 U.S.C. § 227 and applicable law, the Debtor(s) hereby revoke any and all prior express consent, whether written, oral, or implied, previously given to any creditor or their agents, servicers, debt collectors, or attorneys, to call or text any telephone number associated with the Debtor(s) using an automatic telephone dialing system (“ATDS”), artificial voice, or prerecorded voice.

This revocation applies to:

• All telephone numbers previously provided to creditors, including but not limited to mobile, landline, and VOIP numbers;

• All creditors listed in this plan and/or schedules, including successors and assigns, whether or not such creditors have filed a proof of claim;

• All calls or texts placed in connection with any debt, including but not limited to student loans, credit cards, auto loans, and mortgage obligations.

For the avoidance of doubt, this provision constitutes a permanent and unequivocal revocation of consent under the TCPA. Creditors who place ATDS, prerecorded, or artificial voice calls to the Debtor(s) after the effective date of plan confirmation may be subject to damages under the TCPA.

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