Opinion
CIVIL ACTION NO. 4:02CV510LN
June 27, 2003
MEMORANDUM OPINION AND ORDER
This cause is before the court on the motion of plaintiffs Clydia Rawls, Katrina Edmon, Philliemenia Jones, Mildred Pierce, Jerry Satcher, Chris Young, Betty Houston and Nakisha McDougle to remand this cause to the Chancery Court of Wayne County, Mississippi. Defendants Friedman's Inc. d/b/a Friedman's Jewelers, American Bankers Insurance Company of Florida, American Bankers Life Assurance Company of Florida and American Reliable Insurance Company (Insurer Defendants) have responded in opposition to the motion, and the court, having considered the parties' arguments and submissions, concludes that plaintiffs' motion is not well taken and should be denied.
The eight plaintiffs in this cause, all Mississippi residents, filed this action in state court on October 28, 2002 against Friedman's and the Insurer Defendants, all of diverse citizenship from plaintiffs, as well as five resident/nondiverse employees of Friedman's, alleging a variety of claims stemming from loans from Friedman's for plaintiffs' purchase of jewelry, which also included fees for insurance premiums allegedly added without plaintiffs' knowledge or consent. Defendants timely removed the action to this court on the basis of diversity jurisdiction, 28 U.S.C. § 1332, arguing that the resident defendants had been fraudulently joined, and now, plaintiffs have moved to remand, contending that a reasonable possibility of recovery does exist against the resident defendants.
The employees of Friedman's named in the complaint, Amanda Calcoat, Kenny Foreman, Donna Darnell, Carolyn Leland, Heather Barrere and Mindy Card, like the plaintiffs, are all residents of Mississippi.
To establish fraudulent joinder, defendants must prove that plaintiffs have no reasonable possibility of establishing a cause of action against the resident defendants in state court. Travis v. Irby, 326 F.3d 644, 647 (5th Cir. 2003) (citing Grigggs v. State Farm Lloyds, 181 F.3d 694, 698 (5th Cir. 1999)); Great Plains Trust Co. v. Morgan Stanley Dean Witter Co., 313 F.3d 305, 312 (5th Cir. 2002). When determining whether such a possibility exists, this court may "pierce the pleadings" and consider "summary judgment-type evidence such as affidavits and deposition testimony." Cavallini v. State Farm Mutual Auto Ins. Co., 44 F.3d 256 (5th Cir. 1995). In so doing, this court must resolve all disputed questions of fact and all ambiguities in the controlling state law in favor of the non-removing party. Carriere v. Sears, Roebuck Co., 893 F.2d 98, 100 (5th Cir. 1990).
However, "if the plaintiff[s'] pleadings [are] pierced and it is shown that as a matter of law there is no reasonable basis for predicting that the plaintiff[s] might establish liability on [their] claim[s] against the in-state defendant[s]," then removal is proper and remand will be denied. Badon v. R J R Nabisco Inc., 224 F.3d 382, 390 (5th Cir. 2000). That is, for example, if defendants present summary judgment-type evidence to show that plaintiffs1 allegations in their complaint are unfounded as a matter of fact, then they, to secure remand, "may not rest on the mere allegations or denials of [their] pleadings,"Beck v. Texas State Bd. of Dental Examiners, 204 F.3d 629, 633 (5th Cir. 2000), or rely on conclusory or generic allegations of wrongdoing on the part of the non-diverse defendants to show that the defendants were not fraudulently joined, Badon, 224 F.3d at 394 (emphasis added); see id. 224 F.3d 393-94 (stating, "`[W]e resolve factual controversies in favor of the nonmoving party, but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts. We do not, however, in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts.'") (quoting Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc)) (emphasisBadon).
As an initial matter, this court notes that it has previously addressed many of the claims raised by the plaintiffs in prior opinions. Specifically, plaintiffs1 complaint alleges,inter alia, breach of fiduciary duties, fraudulent/negligent misrepresentation and/or omission, civil conspiracy, negligence and unconscionability, all based on allegations that defendants made misrepresentations and/or failed to disclose certain material information to plaintiffs in connection with their respective financing transactions, and that defendants otherwise engaged in what they term predatory lending practices, including packing their loans with credit insurance charges (for insurance which defendants allegedly misrepresented was required as a condition of the loans), charging exorbitant interest rates, repeatedly refinancing and "flipping" plaintiffs' loans in order to increase commissions and profits, bad faith failure to pay claims, negligently failing to monitor and train agents, and violating the Mississippi Unfair or Deceptive Acts and Practices Act, Miss. Code Ann. § 75-24-3, etseq.
The complaint in this action is almost identical to the complaints in prior decisions where this and other federal courts in Mississippi have found remand inappropriate based on the claims contained in those complaints. See, infra n. 4
In their response to plaintiffs' motion to remand, defendants advance a number of bases that they contend support their assertion that plaintiffs have no possibility of recovery on any of their claims against the resident defendants. They contend, for example, that a number of the loans to which plaintiffs' complaint is addressed are time-barred, and that as to those which are not time-barred, plaintiffs have no viable claim since the defendants had and/or breached no duty owing to plaintiffs. Indeed, having considered the applicable law and having reviewed plaintiffs' deposition testimony and their various loan documents in light of the governing substantive law, it is clear that some of the claims are time-barred, and that as to those that are not, there are no facts in the record which would serve to distinguish this action from the many prior cases in which this court has denied motions to remand when confronted with similar allegations.
All of plaintiffs1 claims are governed by a three-year statute of limitations, Miss. Code. Ann. § 15-1-37; and it does appear from plaintiffs1 complaint that some of the plaintiffs are complaining of loans that they received more than three years before this suit was filed. Plaintiffs assert that their claims relating to these loans are timely by virtue of application of the doctrine of fraudulent concealment, arguing, in particular, that the resident defendants fraudulently concealed from plaintiffs the fact that they were receiving "secret commissions" from the sale of the credit insurance. The court has previously considered and rejected this very argument, see, e.g.Strong v. First Family Financial Servs., Inc., 202 F. Supp.2d 536, 540 (S.D. Miss. 2002) (finding that any fiduciary duty owed by one who offers to procure credit insurance does not include a duty to disclose that he or the lender is receiving a commission), White v. City Finance Co., Civ. Act. No. 4:02CV495LN, at *6 (S.D. Miss. May 22, 2003), and does so here, as well.
See Bender v. Friedman's Inc., Civ. Act. No. 4:02CV509LN (S.D. Miss. May 30, 2003); Vaucrhn, v. CitiFinancial, Inc., Civ Act. No. 4:02CV452LN (S.D. Miss. May 19, 2003);Satcher v. American General Finance Co., Civ. Act. No. 4.-02CV254LN, 2003 WL 1191182 (S.D. Miss. 2003); Cooley v. Washington Mutual Finance Group, Civ. Act. No. 4:02CV8LN, 2002 WL 1768897 (S.D. Miss. 2002);Cooper v. Friedman's Inc., Civ. Act. No. 3.-01CV827BN (S.D. Miss.April 12, 2002); Strong, 202 F. Supp.2d 536; Harrison v. Commercial Credit Corp., Civ. Act. No. 4:01CV151LN, 2002 WL 548281 (S.D. Miss. 2002); Ellis v. Washington Mutual Finance Group, Civ.Action No. 4;01CV144LN (S.D. Miss. May 7, 2002); Howard v. CitiFinancial, Inc., 195 F. Supp.2d 811 (S.D. Miss. 2002); see also Johnson v. CitiFinancial, Inc., 2003 WL 345347 (S.D. Miss. 2003) defendant's motion for summary judgment on similar claims not referable to arbitration); Ross v. First Family Financial Serv., Civ. Act. No. 2:01CV218PB, 2002 WL 31059582 (S.D. Miss. 2002) (denying motion to remand based on similar claims); Aldridge v. Friedman's Inc., Civ. Act. No. 4:01CV266 (N.D. Miss. July 19, 2002).
The majority of plaintiffs base their claims herein on the resident defendants1 alleged failure to disclose certain allegedly material information about their loans, including, for example, that credit insurance was not required as a condition of the loans, that the insurance was overpriced, that the agents received a commission for the sale of insurance, and that the interest rate was exorbitant. Yet the information alleged to have been withheld from plaintiffs was either disclosed in the loan documents themselves, which were readily available to plaintiffs, or was not required to be disclosed. In this vein, the court observes that all the plaintiffs claim to have been in a fiduciary relationship with the resident defendants, which gave rise to a duty on their part to disclose information that these defendants might otherwise have been justified in keeping to themselves. However, in the face of defendants' evidence, which belies the existence of any fiduciary relationship, plaintiffs have presented no evidence that would tend to support a finding that such a relationship did, in fact, arise that would have required these defendants to make the disclosures which plaintiffs claim were withheld.
The court recognizes that one of the plaintiffs, Satcher, has testified that the resident defendant who handled his loan transaction(s) affirmatively misrepresented that credit insurance was necessary for his loan(s). Yet it appears that Satcher's loan was obtained more than three years before this suit was filed, and not only did Satcher claim to have read his loan documents at the time of his loan transaction, which documents plainly disclosed that insurance was not required for the loan, but he was given copies of the loan documents to take home with him and thus was at all times in possession of copies of his loan documents. Satcher's claims, therefore, are all time-barred.
See supra note 3; see also American Bankers' Ins. Co. of Fla. v. Wells, 819 So.2d 1196, 1202 (Miss. 2001) (holding that statute of limitations began to run on the plaintiff's fraud claims from the date he received documents from which a reasonable person would have known of the basis for his claim).
Even if Satcher's claims were not time-barred, he would have no cognizable claim for alleged misrepresentation, for he had no right to reasonably rely on any alleged representation that was flatly contradicted by the terms of the loan documents. See Ross, Civ. Act. No. 2:01CV218PB, 2002 WL 31059582, at *5 ("where the terms of a contract are made available to a contracting party, any reliance on alleged misrepresentations of those terms is per se unreasonable").
For the reasons stated, the court is convinced that plaintiffs have no reasonable possibility of recovery against the resident defendants on their breach of fiduciary duty, misrepresentation, negligence, conspiracy, Mississippi Unfair or Deceptive Acts and Practices Act, breach of the duty of good faith and fair dealing, flipping, packing, churning, failure to adequately monitor and train agent and unconscionability claims.
Neither do plaintiffs have any possibility of recovery on their putative claims for bad faith refusal to pay insurance benefits. In response to plaintiffs' motion, defendants have submitted uncontradicted evidence that none of the plaintiffs ever submitted a formal claim for benefits under their respective insurance contracts, and hence none were ever denied payment of benefits. In fact, with the exception of plaintiff Young, all the plaintiffs took the position in their depositions that they were not even aware they had purchased insurance on their loans until they received notice of pending litigation against Friedman's. In the absence of a claim for benefits, there can have been no bad faith denial of a claim for benefits. See Blue Cross Blue Shield of Miss., Inc. v. Campbell, 466 So.2d 833, 847 (Miss. 1984). Accordingly, no reasonable possibility of recovery exists regarding plaintiffs1 bad-faith denial of benefits claim.
The court is aware of plaintiff Young's testimony that following the theft of the necklace he had purchased from Friedman's, he sought assistance from a Friedman's employee, but was told there was "nothing [Friedman's] could do" to replace the necklace or relieve him of his payment obligations. However, even if Young's actions could be construed as a claim for benefits (a proposition of which this court is doubtful given Young's admission that he was not making a claim under an insurance policy since he did not even know he had insurance on that loan), Young testified that he cannot remember the name of any employee he dealt with at Friedman's, other than the employee who assisted him with his loan transaction; and he specifically did not remember dealing with any of the other named resident defendants. Moreover, the evidence submitted by both parties establishes that Young's necklace was not insured at the time he made the putative claim for benefits because he had refinanced his loan for the necklace to purchase a ring several days before the theft and at that time was refunded any unearned premiums on the coverage for the necklace. Clearly, then, Young, the only plaintiff who ever even made an arguable claim for benefits, has no viable claim for bad faith denial of benefits against any named resident defendant.
For the foregoing reasns, the court concludes that plaintiffs have no reasonable possibility of recovery against the resident defendants on any claim set forth in their complaint. Therefore, there is complete diversity of citizenship, and plaintiffs' motion to remand will be denied.
The court concludes that, inasmuch as it has ruled that no possibility of recovery exists against the resident defendants, dismissal of these defendants on the basis of their fraudulent joinder is in order.See Griggs v. State Farm Lloyds. 181 F.3d 694, 698 (5th Cir. 1999) (affirming district court's orders dismissing nondiverse defendants as fraudulently joined.).
Two related motions of the parties merit only brief discussion. First, plaintiffs have filed a motion to dismiss the counterclaim for declaratory relief asserted against them by the insurer defendants. Plaintiffs' basis for seeking dismissal of this counterclaim is their argument, set forth fully in their motion to remand, that the court lacks subject matter jurisdiction over this action. Since the court has concluded that it has diversity jurisdiction over this action, plaintiffs' motion to dismiss the counterclaim is denied. Second, defendants have filed a motion under Rule 37(d) of the Federal Rules of Civil Procedure to dismiss the claims of McDougle against the resident defendants based on her remand-related discovery violations. However, as this court has determined that the resident defendants were fraudulently joined, defendants1 motion is moot.
IT IS, THEREFORE, ORDERED that plaintiffs' motion to remand is denied.
SO ORDERED