Carson v. H & R Block, Inc., 5:02-CV-89 (BR)(S).

• Decision Date: 29 January 2003
• Docket Number: No. 5:02-CV-89 (BR)(S).,5:02-CV-89 (BR)(S).
• Citation: 250 F.Supp.2d 669
• Court: U.S. District Court — Southern District of Mississippi
• Parties: Mary H. CARSON, et al. Plaintiffs v. H & R BLOCK, INC. and H & R Block Eastern Tax Services, Inc. Defendants

250 F.Supp.2d 669

Mary H. CARSON, et al. Plaintiffs v. H & R BLOCK, INC. and H & R Block Eastern Tax Services, Inc. Defendants

No. 5:02-CV-89 (BR)(S).

United States District Court, S.D. Mississippi, Western Division.

January 29, 2003.

Dean Andrews, Jr., Dean Andrews, Jr., Attorney, Vicksburg, MS, Joseph L. Tucker, Jackson & Shuttlesworth, P.C., Birmingham, AL, for Plaintiffs.

Sheryl M. Bey, Baker, Donelson, Bearman & Caldwell, Jackson, MS, for Defendants.

MEMORANDUM OPINION AND ORDER

BRAMLETTE, District Judge.

This matter is before the Court on the plaintiffs' motion to remand (docket entry 6). Having carefully considered the motion, response, briefs, applicable statutory and case law, and being otherwise fully advised in the premises, the Court finds as follows:

The plaintiffs filed this action in the Circuit Court of Jefferson County, Mississippi, on April 25, 2001. An amended complaint adding defendant H & R Block Eastern Tax Services, Inc., was filed on February 11, 2002, and served on said defendant on February 21, 2002. The defendants filed a timely notice of removal, pursuant to 28 U.S.C. § 1441(b), alleging that the plaintiffs' claims could have been properly brought within the original subject matter jurisdiction of this Court, pursuant to 28 U.S.C. § 1331.

The plaintiffs are Mississippi residents. As customers of the defendants' tax preparation services, the plaintiffs were solicited to participate in the defendants' program for "tax refund anticipation loans." (Complaint, If 19). Each of the plaintiffs participated in the program. They allege that the defendants "collected and charged fees" while "misrepresent[ing] the true costs of said tax refund anticipation loan." (Complaint, ¶ 19, 20). Included in the plaintiffs' claims are allegations that the defendants "withheld, concealed, and suppressed from [the] Plaintiffs [that] ..." "the Plaintiffs['] fees and interest rate would be substantially higher than the rate disclosed" (Complaint, ¶ 29); and that the defendants breached a fiduciary duty by suppressing the fact that "the charges paid by the Plaintiffs exceeded the rate disclosed to the plaintiffs." (Complaint, ¶ 39). The plaintiffs expressly disavow any claims based upon federal law and waive any right to recovery under any federal law. (Complaint, ¶ 15).

The defendants contend that the allegations against them "fall squarely within a field completely preempted by federal law pursuant to the National Bank Act, 12 U.S.C. §§ 85 and 86." Section 85 provides:

Any [national bank] may take, receive, reserve, and charge on any loan or discount made ... interest at the rate allowed by the laws of the State ... where the bank is located ....

Section 86 provides:

The taking, receiving, reserving, or charging a rate of interest greater than is allowed by section 85 of this title, when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. In case the greater rate of interest has been paid, the person by whom it has been paid, or his legal representatives, may recover back, in an action in the nature of an action of debt, twice the amount of interest thus paid from the association taking or receiving the same: Provided, That such action is commenced within two years from the time the usurious transaction occurred.

The burden of establishing federal jurisdiction is on the removing party. Wilson v. Republic Iron and Steel Co., 257 U.S. 92, 42 S.Ct. 35, 66 L.Ed. 144 (1921). This Court may not exercise jurisdiction over cases removed from state court unless there is a showing of federal jurisdiction. Under our doctrine of "federalism" this Court may not usurp authority over cases that are properly in state court. See Shamrock Oil and Gas Corp. v. Sheets, 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214 (1941); Butler v. Polk, 592 F.2d 1293, 1296 (5th Cir.1979).

Federal courts are courts of limited jurisdiction, and the plaintiff is the master of his complaint. "The party who brings a suit is master to decide what law he will rely upon." Willy v. Coastal Corp., 855 F.2d 1160, 1167 (5th Cir.1988). See also Healy v. Sea Gull Specialty Co., 237 U.S. 479, 35 S.Ct. 658, 659, 59 L.Ed. 1056 (1915). "A plaintiff with a choice between federal and state law claims may elect to proceed in state court on the exclusive basis of state law, thus defeating the defendant's opportunity to remove, but taking the risk that his federal claims will one day be precluded." Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 809, n. 6, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986). Thus, the "well pleaded complaint" rule provides that a case may be removed only if the plaintiffs properly pleaded complaint reveals that the claim is based on federal law. Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal, 463 U.S. 1, 9-10, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). Under the well-pleaded complaint rule, a case in which the plaintiff asserts only state-law claims may not be removed to federal court based on the existence of a federal defense, even the defense of ordinary preemption. Caterpillar Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). "Congress has long since decided that federal defenses do not provide a basis for removal." Id. at 399,107 S.Ct. 2425.

In Howery v. Allstate Insurance Co., 243 F.3d 912 (5th Cir.2001), the Fifth Circuit defines the test for federal jurisdiction as follows:

[T]he complaint also creates federal question jurisdiction when it states a cause of action created by state law and (1) a federal right is an essential element of the state claim, (2) interpretation of the federal right is necessary to resolve the case, and (3) the question of federal law is substantial. Ultimately, whether a federal issue embedded in the matrix of a state law claim will support federal question jurisdiction entails a pragmatic assessment of the nature of the federal interest at stake ....

Id. at 917.

Under a straightforward application of the well-pleaded complaint rule, it is obvious that the plaintiffs' claims do not "state a claim created by the Constitution or laws of the United States." Id. (construing American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 36 S.Ct. 585, 60 L.Ed. 987 (1916)). The Court further finds that the plaintiffs' complaint has at its heart the allegation that the defendants deceived them as to the true nature of the loans. Nothing in these allegations suggests an attack on the interest rates themselves, except in the most peripheral manner. The plaintiffs' complaint does not, as the defendants urge, strike at the legality of the rate of interest. Instead, the plaintiffs complain that they were told one rate, and the actual rate was different, regardless of the legality of the rate charged. Their cause of action lies in fraudulent misrepresentation, not usury. There is no complaint by the plaintiffs that the rate of interest is usurious under state law or federal law, and their right to relief does not depend upon the construction or application of federal law. Thus, this Court's removal jurisdiction cannot be invoked on this basis.

As an alternative to the substantial federal question variation of the well-pleaded complaint rule, the defendants also predicate removal on the singular recognized exception to the well-pleaded complaint rule, the artful pleading doctrine.

[I]n certain situations where the plaintiff necessarily has available no legitimate or viable state causes 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. Although a defense, preemption may so forcibly and completely displace state law that the plaintiffs cause of action is either wholly federal or nothing at all.

Carpenter v. Wichita Falls Indep. Sch. Dist, 44 F.3d 362, 366 (5th Cir.1995).

The defendants contend that the NBA completely preempts the plaintiffs' state law claims. The Fifth Circuit has recognized that the doctrine of complete preemption is to be narrowly applied. Heimann v. National Elevator Industry Pension Fund, 187 F.3d 493, 500 (5th Cir. 1999). In fact, the United States Supreme Court has found complete preemption to exist only under the Labor Management Relations Act of 1947 and the Employee Retirement Income Security Act of 1974. El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 484 n. 6, 119 S.Ct. 1430, 143 L.Ed.2d 635 (1999) (citing Caterpillar Inc. v. Williams, 482 U.S. 386, 393-94, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987) (LMRA); Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65-66, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987) (ERISA)).

Recognizing that the doctrine should be applied with "circumscription," the Fifth Circuit requires evidence of clear Congressional intent to show that claims preempted by state law are removable. Heimann, 187 F.3d at 500; Aaron v. National Union Fire Ins., 876 F.2d 1157, 1165 (5th Cir. 1989). In Aaron, the Fifth Circuit formulated a three-part test for determining whether complete preemption exists. In order to completely exempt state law so as to permit removal to federal court, the federal statutory law in question must:

(1) provide a civil enforcement provision that creates a federal cause of action that replaces and protects the same interests as the preempted state law causes of action;

(2) provide a specific jurisdictional grant to the federal courts to enforce the cause of action created by the federal statute; and

(3) reflect a clear Congressional intent to make the preempted state claims removable to federal court.

Aaron, 876 F.2d at 1164-65; see also Rheams v. Bankston, Wright & Greenhill, 756 F.Supp. 1004,1008 (W.D.Tex.1991).

As the Fifth Circuit has recently noted, "[t]he courts of appeals are divided as to whether §§85 and 86 completely preempt state-law usury claims against a...