Dean v. American General Finance, Inc., Civil Action No. 95-A-665-N.
| Decision Date | 23 January 1996 |
| Docket Number | Civil Action No. 95-A-665-N. |
| Citation | 191 BR 463 |
| Parties | Doshea DEAN; Annie Jenkins; Curtis Smith; Yolanda Smith; Brenda Austin; and Doris Thomas, Plaintiffs, v. AMERICAN GENERAL FINANCE, INC.; American General Corporation; Merit Life Insurance Co.; Yosemite Insurance Company; Danny Plunkett; Debbie Shultz; Connie Love; Lisa Harrison; et al., Defendants. |
| Court | U.S. District Court — Middle District of Alabama |
COPYRIGHT MATERIAL OMITTED
Jere L. Beasley, Thomas James Methvin, Beasley, Wilson, Allen, Main & Crow, P.C., Montgomery, AL, Darron C. Hendley, Montgomery, AL, Paul W. Brunson, Jr., Clayton, AL, for Doshea Dean, Annie Jenkins, Curtis Smith, Yolanda Smith, Brenda Austin and Doris Thomas.
T. Thomas Cottingham, Robert S.W. Given, Robert H. Rutherford, Richard C. Keller, Burr & Forman, Birmingham, AL, for American General Finance, Inc., Merit Life Ins. Co., Yosemite Ins. Co., Danny Plunkett, Debbie Shultz, Connie Love, Lisa Harrison and Ed Reeves.
T. Thomas Cottingham, David A. Elliott, Robert S.W. Given, Robert H. Rutherford, Richard C. Keller, Burr & Forman, Birmingham, AL, for American General Corporation.
This cause is now before the court on a Motion to Remand, filed by the Plaintiffs on June 19, 1995.
On April 18, 1995, Plaintiffs filed this action in the Circuit Court of Bullock County, Alabama. Named as Defendants in this lawsuit were American General Finance, Inc. ("AGF"); American General Corporation ("AGC");1 Merit Life Insurance Co. ("Merit"); Yosemite Insurance Company ("Yosemite"); Danny Plunkett; Debbie Shultz; Connie Love; and Lisa Harrison. Plaintiffs' claims relate to certain loans obtained from AGF, and to credit insurance purchased from Merit in connection with the loans. Specifically, Plaintiffs allege that the Defendants committed fraud by: (i) misrepresenting to Plaintiffs that Plaintiffs must take out new loans rather than take money advances on former loans; (ii) failing to disclose to Plaintiffs that they were paying excessive and unnecessary fees and higher interest rates on the new loans; (iii) fraudulently concealing that credit insurance was already on the loans; (iv) fraudulently stating that insurance was required on the loans; and (v) misrepresenting Defendant's ability to take out a security interest in household goods, as well as actually taking out such a security interest and charging collateral protection interest on those goods.
On May 19, 1995, Defendants removed this case to federal court on the basis that (1) federal law supplied the grounds for the Plaintiffs' claim relating to the alleged security interest in household goods, and (2) Plaintiffs Curtis Smith and Yolanda Smith have currently pending proceedings in the United States Bankruptcy Court for the Middle District of Alabama, and 28 U.S.C. § 1334(b) grants jurisdiction to federal district courts in civil proceedings arising under title 11, or arising in or relating to cases under title 11. Therefore, Defendants asserted that removal was proper under 28 U.S.C. § 1441 and 28 U.S.C. § 1452(a).
On June 19, 1995, Plaintiffs filed a motion to remand, asserting that this court did not have jurisdiction of this matter because (i) all of their claims are based on state law causes of action; and (ii) the fact that two plaintiffs are in Chapter 13 Bankruptcy does not allow the case to be removed. On July 13, 1995, Defendants filed a memorandum in opposition to Plaintiffs' motion to remand.
For the reasons stated below, this court finds that the Motion to Remand is due to be GRANTED.
Federal courts are courts of limited jurisdiction. See, Kokkonen v. Guardian Life Ins. Co. of Am, ___ U.S. ___, ___, 114 S.Ct. 1673, 1675, 128 L.Ed.2d 391 (1994); Burns v. Windsor Insurance Co., 31 F.3d 1092, 1095 (1994); Wymbs v. Republican State Executive Committee, 719 F.2d 1072, 1076 (11th Cir.1983), cert. denied, 465 U.S. 1103, 104 S.Ct. 1600, 80 L.Ed.2d 131 (1984). As such, they have the power to hear only those cases that they have been authorized to hear by Congress or by the Constitution. Kokkonen, ___ U.S. at ___, 114 S.Ct. at 1675. More generally, the law in the Circuit favors remand where federal jurisdiction is not absolutely clear. As stated by the 11th Circuit, in deciding a motion to remand where the plaintiff and defendant disagree on issues of jurisdiction, questions or doubts are to be resolved in favor of returning the matter to state court. Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir.1994).
Defendants assert that Count V of the Plaintiffs' complaint is grounded exclusively on federal law because it is based upon the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1) ("FTCA"), and the regulations promulgated thereunder, 16 C.F.R. §§ 444.1 and 444.22 (). Therefore, Defendants contend that federal jurisdiction exists because at least a part of the case "arises under" federal law.
The Plaintiffs' allegation states that the "Defendants . . . entered into a scheme to defraud such Plaintiffs by taking a security interest in their household goods" (Complaint ¶ 59). Plaintiffs contend, presumably under the FTCA,3 that the Defendants should not have taken security interests in Plaintiffs' household goods (Complaint ¶ 60). Furthermore, Plaintiffs contend that the Defendants charged the Plaintiffs a premium plus interest for collateral protection insurance on the household goods (Complaint ¶ 61-62). Defendants argue that Plaintiffs cannot sue under state law because no state law prohibits the taking of a non-purchase money security interest in household goods. If there is no viable state law theory of recovery for Count V, the Plaintiffs will be unable to win on this count in state court. If Count V makes a claim for fraud or deceit under state law, proving a violation of the FTCA is only one element which Plaintiffs will have to prove. See ALA.CODE §§ 6-5-100 through 104 (1993 Replacement Volume).
It is well established that the mere presence of a federal issue in a state cause of action does not automatically confer federal question jurisdiction. See, e.g., Textile Workers v. Lincoln Mills, 353 U.S. 448, 460, 77 S.Ct. 912, 919-20, 1 L.Ed.2d 972 (1957). The United States Supreme Court has stated that when Congress does not provide a federal remedy for the violation of a federal statute, it is "tantamount to a congressional conclusion that the presence of a claimed violation of the statute as an element of a state cause of action is insufficiently `substantial' to confer federal-question jurisdiction." Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 814, 106 S.Ct. 3229, 3235, 92 L.Ed.2d 650 (1986). Accordingly, the Court in Merrell Dow held that "a complaint alleging a violation of a federal statute as an element of a state cause of action, when Congress has determined that there should be no private, federal cause of action for the violation, does not state a claim `arising under the Constitution, laws, or treaties of the United States.'" Merrell Dow, 478 U.S. at 817, 106 S.Ct. at 3236-37 (citations omitted).
Congress has not provided a federal remedy for the violation of the FTCA. Fulton v. Hecht, 580 F.2d 1243, 1249 n. 2 (5th Cir. 1978)4 (); Dreisbach v. Murphy, 658 F.2d 720, 730 (9th Cir.1981); American Airlines v. Christensen, 967 F.2d 410, 414 (10th Cir.1992). Additionally, the violation of the FTCA alleged by the Plaintiffs in this case is merely an element of a state law fraud claim. This court agrees with the Plaintiffs that Count V does not state a claim "arising under" the Constitution, laws, or treaties of the United States; therefore, this court does not have jurisdiction on that basis.
28 U.S.C. § 1334(a) provides federal courts with original and exclusive jurisdiction over cases under Title 11 (Bankruptcy Code). "Cases under Title 11" refers merely to the original bankruptcy petition. An adversary proceeding is not one of the for purposes of § 1334(a). See Cady v. Sapp, 1994 WL 329371 (Bankr.S.D.Ga. 1994). This case is not, therefore, a case "under title 11."
Section 1334(b) confers original but not exclusive jurisdiction on federal courts in three circumstances: civil proceedings (1) arising under title 11; (2) arising in cases under title 11; and (3) related to cases under title 11. Disputes which "arise under title 11" or "arise in cases under title 11" are called "core proceedings." See Cook v. Griffin, 102 B.R. 875, 876 (Bankr.N.D.Ga.1989).5 Core proceedings are those proceedings which would not exist in law in the absence of the Bankruptcy Code. Thomasson v. Am-South Bank, N.A., 59 B.R. 997 (N.D.Ala. 1986). Although all three circumstances may confer jurisdiction on federal courts, there is an important distinction between core proceedings and proceedings "related to cases under title 11." Section 1334(c)(1) (permissive abstention) allows district courts to abstain from hearing proceedings "arising under title 11 or arising in or related to a case under title 11," when abstention is proper in the interest of justice, or in the interest of comity with State courts or respect for state law. Section 1334(c)(2) (mandatory abstention), however, requires federal courts to abstain when:
Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is...
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