Opinion
No. 2:99CV227-B-B
August 23, 2000
MEMORANDUM OPINION
This cause comes before the court on the plaintiffs' motion to remand. The court has duly considered the parties' memoranda and is ready to rule.
The plaintiffs brought this action in state court to recover actual and punitive damages arising out of the sale and financing of wireless cable television systems a/k/a home satellite systems. The plaintiffs further seek rescission and cancellation of the subject open-end credit agreements. The complaint alleges breach of covenant of good faith and fair dealing, economic duress, negligence, intentional, gross and negligent infliction of emotional distress and mental anguish, fraud, conspiracy to defraud, breach of contract and tortious breach of contract, negligent hiring, training and supervision, and state statutory violations of Mississippi Unfair or Deceptive Acts and Practices Act, Miss. Code Ann. § 75-24-3, et seq. and the Mississippi Home Solicitation Sales Act, Miss. Code Ann. § 75-66-1, et seq. The complaint expressly states:
Plaintiffs make no claim under any federal statutory or common law authority or based on violation of federal law, and Plaintiffs further specifically waive any right to pursue herein any federal statutory or common law remedies.
Defendant Sky Scanner Satellite [Sky Scanner] removed this cause on the ground of federal question jurisdiction under 28 U.S.C. § 1331 and 1337 and bankruptcy jurisdiction under 28 U.S.C. § 1334. The plaintiffs assert that plaintiff Epps' bankruptcy proceeding, filed more than six months prior to commencement of the instant cause, is closed and that the defendants have not moved to reopen his bankruptcy estate. The plaintiffs further assert that plaintiff Buchanan's bankruptcy proceeding, filed more than nine months prior to commencement of the instant cause, did not include any debt owed to the defendants herein. In any event, the plaintiffs contend that the court has the discretion to sever plaintiff Buchanan's cause of action or abstain from exercising bankruptcy jurisdiction pursuant to 28 U.S.C. § 1334(c)(1) and remand the instant cause to state court pursuant to 28 U.S.C. § 1452(b). Sky Scanner concedes that the court has the discretionary authority to consider remand on equitable grounds for purposes of bankruptcy jurisdiction but asserts that federal question jurisdiction under the artful pleading doctrine "provides the basis for this Court's jurisdiction in this case." The threshold jurisdictional issue is whether the complaint raises an issue of federal law under the well-pleaded complaint doctrine. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 95 L.Ed.2d 55, 63 (1987). Under the well-pleaded complaint rule, a federal question must appear on the face of the plaintiff's properly pleaded complaint to establish federal question jurisdiction. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 96 L.Ed.2d 318, 327 (1987). The plaintiff is "the master of the claim" and "may avoid federal jurisdiction by exclusive reliance on state law." Id. Sky Scanner expressly opposes the instant motion to remand on the basis of jurisdiction under TILA, 15 U.S.C. § 1601, et seq. The purpose of TILA is "to assure a meaningful disclosure of credit terms so that the consumer will be able to . . . avoid the uninformed use of credit." 15 U.S.C. § 1601(a). See Regulation Z, 12 C.F.R. § 226, et. seq. (defining open end credit and mandating disclosure). The complaint does not expressly allege a TILA claim or any other federal claim. Sky Scanner characterizes the plaintiff's claim for breach of implied covenant of good faith and fair dealing as exclusively a TILA claim on the ground that it cannot be maintained under state law. Under the artful pleading doctrine, where the plaintiff necessarily has available no legitimate or viable state cause of action, but only a federal claim, he may not avoid removal by artfully casting his federal suit as one arising exclusively under state law. Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 366, 367 (5th Cir. 1995).
The notice of removal states that Sky Scanner was the only served defendant at the time of removal.
The notice of removal alleges:
The Plaintiffs' complaint asserts claims tantamount to alleged violations of the Truth-in-Lending Act, 15 U.S.C. § 1601, et seq. and the regulations promulgated thereunder ("TILA"); the Fair Debt Collection Practices Act, 15 U.S.C. § 1692(a), et seq.; the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.; and the Fair Credit Billing Act, 15 U.S.C. § 1666 et seq.
The notice alleges that two of the thirty-nine plaintiffs, namely Calvin Epps and Mary Buchanan, had filed bankruptcy petitions.
Defendant's Memorandum Brief in Opposition to Motion to Remand at 9.
Defendant's Memorandum Brief at 4-5 n. 4.
Sky Scanner asserts that other state law claims raised in the complaint implicate the TILA statutory and regulatory disclosure requirements but does not contend that such claims are not viable under Mississippi law. Defendant's Memorandum Brief at 4 n. 3. It is not disputed that TILA does not invoke the complete preemption doctrine.
The artful pleading doctrine is a narrow exception to the well-pleaded complaint doctrine. Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 367 (5th Cir. 1995).
The allegations under count I of the complaint entitled "Breach of Covenant of Good Faith and Fair Dealing," read in part:
Defendants breached their duty to act in good faith and to deal fairly and breached their contract with Plaintiffs when they chose not to disclose the true nature of the open end credit transaction and when [they] further collected or attempted to collect on the contracts that they knew or should have known had been fraudulently induced.
Sky Scanner asserts that Mississippi law recognizes an implied covenant of good faith and fair dealing only in the performance of a contract, as opposed to the negotiation or formation of the contract. Baldwin v. Laurel Ford Lincoln-Mercury, Inc., 32 F. Supp.2d 894, 899 (S.D.Miss. 1998) (construing Mississippi law). Nondisclosure is not the only factual basis for the plaintiffs' implied covenant claim. Arguably, the crux of the plaintiffs' implied covenant claim is the defendants' debt collection and continued collection efforts within the purview of the enforcement of the parties' contracts. E.g., Cenac v. Murry, 609 So.2d 1257, 1272 (Miss. 1992) ("All contracts contain an implied covenant of good faith and fair dealing in performance and enforcement."); Miss. Code Ann. § 75-1-203 ("Every contract or duty within [the Mississippi Uniform Commercial Code] imposes an obligation of good faith in its performance or enforcement.") (emphasis added). See Allen v. City Finance Co., 224 B.R. 347, 350-51 (S.D.Miss. 1998) ("alleged `flipping' and compounding of interest apparently took place after formation of the contract").
The complaint in Allen v. City Finance Co. alleged, inter alia, that the defendant loan company charged unnecessary credit protection insurance, concealed its method of interest calculation, "flipped" loans for increased premiums, took improper security interests in the plaintiffs' goods, unlawfully compounded interest and padded amounts financed. 224 B.R. 347, 348 (S.D.Miss. 1998). The claims included breach of implied covenant of good faith and fair dealing, negligence, and fraudulent and negligent misrepresentation and/or omission, as in the instant cause.
It is well settled that any doubts as to removal jurisdiction must be resolved in favor of remand. Boston v. Titan Indem. Co., 34 F. Supp.2d 419, 423 n. 21 (N.D.Miss. 1999) (citations omitted), appeal dismissed without op., 199 F.3d 437 (5th Cir. 1999). As in the instant cause, Allen involved pre-formation and post-formation conduct and the plaintiffs "expressly state that they are not pursuing any claims arising under any federal law or regulation." 224 B.R. at 348, 351. As in Allen, "the Court cannot say that Plaintiffs have not stated a claim under state law for breach of implied covenant of good faith and fair dealing." Id. at 350-51 (citing Paxton v. Weaver, 553 F.2d 936, 939 n. 2 (5th Cir. 1977)). A TILA violation is not essential to the instant breach of implied covenant claim, as alleged, since recovery for wrongful collection and collection attempts will require proof of the viable state law claim of fraud in the inducement.
The Fifth Circuit in Paxton stated:
It is not our task to determine exactly how Mississippi courts would pass on appellants' various theories of liability. We only need to decide whether, under a liberal review of Mississippi law or what it might be, arguable grounds exist for recovery under appellants' theories.Paxton v. Weaver, 553 F.2d 936, 939 n. 2 (5th Cir. 1977), quoted in Allen v. City Finance Co., 224 B.R. 347, 351 (S.D.Miss. 1998).
For the foregoing reasons, the court finds that the artful pleading doctrine does not apply in this cause and the breach of implied covenant claim does not arise under federal law. Assuming arguendo the existence of bankruptcy jurisdiction, the plaintiffs contend that the equities weigh in favor of abstention and remand. Since the removing defendant does not challenge this contention, the court declines to address the issue of bankruptcy jurisdiction and will remand this cause for lack of subject matter jurisdiction under 28 U.S.C. § 1331 and 1337.
An order granting the instant motion to remand will issue accordingly.