Archavage v. Professional Account Services, Inc.
Filing
22
MEMORANDUM (Order to follow as separate docket entry) re 5 MOTION to Remand to State Court filed by Steven Archavage Signed by Magistrate Judge Joseph F. Saporito, Jr on 3/29/17. (ms)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
STEVEN ARCHAVAGE, on his own
behalf and on behalf of all other
CIVIL ACTION NO. 3:16-CV-00319
similarly situated,
Plaintiffs,
(SAPORITO, M.J.)
v.
PROFESSIONAL ACCOUNT
SERVICES, INC.,
Defendant.
MEMORANDUM
On January 25, 2016, this civil action was initiated by Steven
Archavage on his own behalf and on behalf of all others similarly
situated in the Court of Common Pleas of Luzerne County filed to
Docket No. 2016-566. Archavage named Professional Account Services,
Inc. (“PAS”) as the defendant. PAS is a debt collector in the business of
collecting debts. (Doc. 2 ¶ 17). In his complaint, Archavage asserted
several Pennsylvania claims for unfair and deceptive debt collection
activities on behalf of himself and other persons similarly situated
under (1) the Fair Credit Extension Uniformity Act, 73 P.S. § 2270.1 et
seq.; (2) common law fraud; (3) the Unfair Trade Practices and
1
Consumer Protection Law, 73 P.S. § 201-3; (4) the Wiretapping and
Electronic Surveillance Control Act, 18 Pa. Cons. Stat. Ann. § 5703; and
(5) for unjust enrichment.
On February 22, 2016, PAS filed a notice of removal (Doc. 1) to
this court alleging subject matter jurisdiction under 28 U.S.C. §
1332(d)(2) (diversity of citizenship and amount in controversy greater
than $5,000,000) and 28 U.S.C. § 1331 (federal question). Before the
court is Archavage’s motion to remand (Doc. 5) the case to the Court of
Common Pleas of Luzerne County. The parties have fully briefed the
issues and for the reasons set forth herein we will grant the motion.
I.
Background
Archavage has alleged that on various occasions in 2012, he
received medical treatment at the Wilkes-Barre General Hospital (the
“hospital”) for which the hospital sought payment. (Doc. 2 ¶ 18). Most
of the medical bills were processed and paid by applicable insurance
and when some of the bills went unpaid, the hospital sent the unpaid
bills to PAS for collection. (Id. ¶ 19).
Archavage alleges that PAS
conducted its collection activity under the guise of being the original
2
creditor, wrongfully cloaking itself with the identity of the creditor and
referring to itself as the original creditor. (Id. ¶10).
He further alleged that PAS learned that Archavage’s unpaid
medical bills of the hospital should have been paid by his workers
compensation insurance carrier.
(Id. ¶ 22).
Thereafter, Archavage
alleged that in an attempt to ascertain information about the
outstanding hospital bills, a representative of PAS made a telephone
call to the workers compensation carrier’s third party administrator.
(Id. ¶ 23). During the call, the PAS representative unlawfully recorded
the telephone call, failed to identify herself as a debt collector, falsely
claimed that she was calling from the hospital, requested and received
the name and contact information of the workers compensation claims
adjuster, and failed to secure the appropriate consent from Archavage.
(Id. ¶¶ 23-28). Archavage asserts that at least three of PAS’s female
representatives telephoned the adjuster for his workers compensation
carrier as well as his counsel and represented themselves as being from
the hospital or “the business office,” or the “corporate office from the
hospital.” (Id. ¶¶ 29-37). During all of those calls to counsel, (1) the
representatives concealed that they were debt collectors, (2) failed to
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state they were attempting to collect a debt, (3) created phony
letterhead of the hospital and sending it by facsimile to counsel, and (4)
unlawfully tape recorded the telephone conversations. (Id. ¶¶ 38-45).
By way of history, on February 14, 2013, Archavage had filed a
different, prior suit against PAS in the Court of Common Pleas of
Luzerne County (“Archavage I”). (Doc. 6-2, at 2). This action is active
and still pending in the Luzerne County Court of Common Pleas. (Id.).
In that lawsuit, Archavage has alleged that his claims are based on
PAS’s collection activities relative to his unpaid medical bills, and PAS
is liable for damages based on the following:
1.
Violation of the Fair Debt Collection Act – 15
U.S.C.A. § 1692;
2.
Fraud;
3.
Violation of the Pennsylvania Fair Credit
Extension Uniformity Act – 73 P.S. § 2270.4;
4.
Violation of the Unfair Trade Practices and
Consumer Protection Law – 73 P.S. § 201-3.
(Id.). Furthermore, Archavage claimed that PAS used the telephone
and other instrumentalities of interstate commerce in its attempts to
collect debts, and specifically a debt allegedly owed by Archavage. (Id.).
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On December 8, 2015, Archavage had also filed a separate prior
class action complaint in the Court of Common Pleas of Luzerne County
(“Archavage II”).
(Id. at 58).
There, Archavage alleged those same
violations of state and federal law as in Archavage I.
(Id.).
The
complaint in Archavage II alleged the total amount in controversy for
each member as less than $75,000, and it also alleged that members of
the class in Pennsylvania exceed one-thousand persons. (Id. at 62, 71).
PAS then filed a notice of removal on January 12, 2016, and Archavage
II was removed to this Court. (Id. at 87). After a scheduling order was
signed by the Honorable Richard P. Conaboy (Id. at 125), Archavage
filed a notice of voluntary dismissal of that action, without prejudice.
(Id. at 127).
On January 25, 2016, Archavage filed the instant action against
PAS (“Archavage III”) in the Court of Common Pleas of Luzerne County
Pennsylvania. (Doc. 2). This complaint contains the same factual basis
as those previously filed; however, Archavage removed all explicit
claims based on federal statutes. (Id.). Nevertheless, in his complaint,
Archavage refers to the Fair Debt Collection Practices Act (“FDCPA”),
15 U.S.C. § 1692 and references the FDCPA’s purpose to eliminate
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abusive debt collection practices by debt collectors. (Id. ¶ 2). However,
he claims that the Pennsylvania law counterpart, the Pennsylvania Fair
Credit Extension Uniformity Act (“FCEUA”), also provides that if a debt
collector violates any of the provisions of the FDCPA, it shall constitute
a violation of the FCEUA under 73 Pa. Stat. Ann. § 2270.4(a). (Id. ¶¶ 24). Archavage makes no explicit claim for relief under the FDCPA in
Archavage III.
In this case, Archavage explicitly states that the total amount in
controversy for Archavage and those similarly situated is $5,000,000 or
less.” (Id. ¶ 13). Furthermore, Archavage asserts that the members of
the class in Pennsylvania and as described in paragraph 8 of the
complaint are less than or equal to 100 in number. (Id. ¶ 61). PAS
timely filed a notice of removal on February 22, 2016 (Doc. 1), and
Archavage has subsequently filed the instant motion to remand which
is now before this Court for disposition. (Doc. 5).
II.
The Removal Standard
28 U.S.C. § 1441 governs the removal of a case to federal court.
Generally, “any civil action brought in a State court of which the district
courts of the United States have original jurisdiction, may be removed
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by the defendant . . . to the district court of the United States for the
district and division embracing the place where such action is pending.”
28 U.S.C. § 1441(a). “The removal statutes ‘are to be strictly construed
against removal and all doubts should be resolved in favor of remand.’”
Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990) (quoting
Steel Valley Auth. v. Union Switch & Signal Div., 809 F.2d 1006, 1010
(3d Cir. 1987) (other citations omitted)); Batoff v. State Farm Ins. Co.,
977 F.2d 848, 851 (3d Cir. 1992). Where a motion for remand is filed,
the defendant has the burden of proving that removal was proper.
Scanlin v. Utica First Ins. Co., 426 F. Supp. 2d 243, 246 (M.D. Pa. 2006)
(citing Boyer, 913 F.2d at 111).
In removal cases, the existence of
federal court jurisdiction is usually determined under the well-pleaded
complaint rule, which provides that federal question jurisdiction is
established when the face of a properly pleaded complaint asserts a
federal question. Caterpillar, Inc. v. Williams, 482 U.S. 286, 392 (1987).
The well-pleaded complaint rule “makes the plaintiff the ‘master of the
claim,’ meaning that he or she may avoid federal jurisdiction by
foregoing federal causes of action and basing the claim on only state
law.” Scott v. Sysco Food Serv. of Metro N.Y., L.L.C., Civ. A. No. 07-
7
3656(SRC), 2007 WL 3170121, at *2 (D.N.J. Oct. 26, 2007) (citing
Caterpillar, 482 U.S. at 392).
III.
Discussion
PAS has removed this action from state court under 28 U.S.C. §
1441 on the basis of diversity jurisdiction under 28 U.S.C. § 1332 and
federal question jurisdiction under 28 U.S.C. § 1331. PAS contends that
Archavage has strategically fashioned the pleadings to avoid Federal
court jurisdiction. (Doc. 1 ¶ 11).
Archavage urges us to grant the
remand motion because PAS has failed to meet its burden of proving
diversity of citizenship and that the amount in controversy exceeds
$5,000,000. Further, Archavage maintains that as the master of the
complaint, he can choose to seek state law remedies only and not invoke
federal question jurisdiction.
We begin our analysis with the pertinent statutes. A defendant in
any civil action brought in a state court which the district courts of the
United States have original jurisdiction may be removed to the district
court of the United States for the district embracing the place where
such action is pending. 28 U.S.C. § 1441(a). Removal can be based
upon diversity of citizenship provided that the defendant is not a citizen
8
of the State in which such action is brought. 28 U.S.C. § 1441(b)(2).
Removal can also occur if the civil action includes a claim arising under
the Constitution, laws, or treaties of the United States under 28 U.S.C.
§ 1331. 28 U.S.C. § 1441(c)(1)(A).
A. PAS has failed to prove its citizenship
Removal, based upon diversity of citizenship, is permitted if the
matter in controversy exceeds the value of $5,000,000, exclusive of
interest and costs, and is a class action in which any member of the
class of plaintiff is a citizen of a State different from any defendant and
the number of members is less than 100. See 28 U.S.C. § 1332(d)(2)(A)
and 28 U.S.C. § 1332(d)(5)(B). It is the defendant’s burden to prove
diversity of citizenship. Boyer, 913 F.2d at 111 (3d Cir. 1990). Removal
statutes are to be strictly construed against removal and all doubts
should be resolved in favor if remand. Id. Here, PAS maintains that it
is a Tennessee corporation with a principal place of business located in
Brentwood, Tennessee. (Doc. 1 ¶ 4). Although PAS was served at a
location in Pennsylvania, it contends that it has no physical presence in
Pennsylvania. (Doc. 6-1, at 10). As a result, PAS simply concludes that
diversity of citizenship is easily satisfied. (Id.). A corporation is deemed
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to be a citizen of every State by which it is incorporated and of the State
where it has its principal place of business. 28 U.S.C. § 1332(c)(1).
Archavage correctly points out that the complaint asserts a class of
plaintiffs limited to not more than 100 Pennsylvania citizens. (Doc. 5-1,
at 1; Doc. 2 ¶¶ 8, 61). Further, the complaint alleges that PAS “either
has its principal place of business in Pennsylvania, or does sufficient
business in, or has sufficient minimum contacts with, or intentionally
avails itself of the markets of the Commonwealth of Pennsylvania
through its business operation in Pennsylvania.” (Doc. 2 ¶ 14). In its
notice of removal, PAS alleged that it “has a business office located at
c/o Corporation Service Company, 2595 Interstate Drive, Suite 103,
Harrisburg, PA 17110.” (Doc. 1 ¶ 5). PAS has sufficiently proved that
it is a corporation organized under the laws of the State of Tennessee.
(Doc. 6-2, at 195). However, it has not addressed whether it has its
principal place of business in Pennsylvania. Rather, in its opposition
brief, PAS correctly states the law that the principal place of business in
federal diversity jurisdiction refers to the place where a corporation’s
officers direct, control, and coordinate the corporation’s activities¾its
“nerve center.” Hertz Corp. v. Friend, 559 U.S. 77, 93 (2010). It has not
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submitted any proof that Tennessee and not Pennsylvania is its
principal place of business.
We are left to decide the issue on the
plaintiffs’ uncontradicted allegation that PAS’s principal place of
business is Pennsylvania. Under these circumstances, and resolving all
doubts in favor or remand as we must, we find that PAS has failed to
prove diversity of citizenship.
B. PAS has failed to demonstrate that the amount in
controversy exceeds $5,000,000
We now must decide whether this putative class action case
removed to a federal court as a diversity matter properly meets the
requisite amount in controversy set by the Class Action Fairness Act of
2005, (“CAFA”) 28 U.S.C. § 1332(d). It is now settled that the party
asserting federal jurisdiction in a removal case bears the burden of
showing, at all stages of the litigation, that the case is properly before
the federal court. Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392,
396 (3d Cir. 2004); see also Morgan v. Gay, 471 F.3d 469, 473 (3d Cir.
2006) (“Under CAFA, the party seeking to remove the case to federal
court bears the burden to establish that the amount in controversy is
satisfied.”).
Like the plaintiff in Morgan, here Archavage expressly
limited the amount in controversy to an amount lower than the
11
jurisdictional requirement, stating in the complaint that “the total
amount in controversy for the named plaintiff and each member is
$5,000,000 or less. (Doc. 2 ¶13).
Morgan, reiterated the Supreme
Court’s long held rule that plaintiffs may limit their claims to avoid
federal subject matter jurisdiction. Morgan 471 F.3d at 474; St. Paul
Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 294 (1938) (“if [the
plaintiff] does not desire to try his case in the federal court he may
resort to the expedient of suing for less than the jurisdictional amount
and though he would be justly entitled to more, the defendant cannot
remove.”). CAFA does not challenge the proposition that the plaintiff is
the master of his own claims. Morgan, 471 F.3d at 474. As Morgan
stated, because the plaintiff is the “master of the case” and “may limit
his claims . . . to keep the amount in controversy below the threshold,”
the removing party must “show not only what the stakes of the
litigation could be, but also what they are given the plaintiff’s actual
demands.” Id. There is, however, a broad good faith requirement in a
plaintiff’s complaint with respect to the amount in controversy. Red
Cab, 303 U.S. at 288; Golden v. Golden, 382 F.3d 348, 354-55 (3d Cir.
2004). Good faith in this context is entwined with the “legal certainty”
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test, so that a defendant will be able to remove the case to federal court
by “show[ing] to a legal certainty that the amount in controversy
exceeds the statutory minimum[.]” Samuel-Bassett, 357 F.3d at 398.
Thus, Morgan held where the plaintiff expressly limits her claim below
the jurisdictional amount as a precise statement in the complaint,
applying the maxim that the plaintiff is the master of her own
complaint, the proponent of the federal subject matter jurisdiction is
held to a higher burden; that is, the proponent of jurisdiction must
show, to a legal certainty, that the amount in controversy exceeds the
statutory threshold. Frederico v. Home Depot, 507 F.3d 188, 195 (2007).
Here, PAS urges us to deny the motion on the basis of Archavage’s
settlement demand of $45,000 which, it contends, represents the value
of Archavage’s claim. (Doc. 6-1, at 12).
However, PAS ignores the
values it placed on the case when it offered Archavage $8,000 on one
occasion and $11,000 on another occasion to settle the case. (Doc. 6-2 at
198-199).
Moreover, in his brief, Archavage claims that PAS’s last
settlement offer to Archavage was $25,000. (Doc. 5-1, at 12).
PAS’s
brief is silent on any increase of settlement beyond $11,000. As it is
PAS’s burden to prove that the amount in controversy exceeds $5
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million, these offers of settlement multiplied by 100 potential class
members falls woefully short of the threshold to invoke federal court
jurisdiction even if attorney’s fees and punitive damages were added in.
Also, in its answers to Archavage’s interrogatories, PAS stated that
there were no accounts referred to it by the hospital beginning
November 19, 2010, where PAS held itself out as the “Wilkes-Barre
General Hospital” to the consumer. (Doc. 5-2, at 10). Therefore, it can
be reasonably concluded that PAS is asserting that this is not a class
action and therefore has no basis to invoke CAFA. Thus, removal based
upon diversity of citizenship and amount in controversy fail.
Our
inquiry does not end there.
C. PAS has not sustained its burden to invoke federal
question jurisdiction
In its notice of removal, PAS has asserted that this court would
have had original jurisdiction under 28 U.S.C. § 1331 because
Archavage’s complaint alleged that PAS violated the FCEUA which
mirrors the FDCPA. (Doc. 1 ¶¶ 9-10). However, in its opposition brief,
PAS makes no argument supporting federal question jurisdiction other
than to conclude that the facts as pled by the plaintiffs support federal
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court jurisdiction based upon diversity of citizenship “and/or” federal
question. (Doc. 6-1, at 9). Perhaps PAS has abandoned removal on the
basis of federal question.
Nevertheless, under 28 U.S.C. § 1441, a case is removable to the
federal district court embracing the place where the action is pending if
the district court has original jurisdiction. Under 28 U.S.C. § 1331, the
district courts have original jurisdiction over any federal claim arising
under the Constitution, laws, or treaties of the United States. Courts
generally determine removal jurisdiction based on the pleadings on the
state court docket at the time of removal, Pullman Co. v. Jenkins, 305
U.S. 534, 537 (1939), assuming as true all factual allegations in the
complaint. Steel Valley Auth., 809 F.2d at 1010. The Supreme Court
has instructed that “[t]he presence or absence of federal-question
jurisdiction is governed by the well-pleaded complaint rule, which
provides that federal jurisdiction exists only when a federal question is
presented on the face of the plaintiff’s properly pleaded complaint.”
Caterpillar, 482 U.S. at 392. Further, the Court adds that this rule
“makes the plaintiff the master of the claim; he or she may avoid federal
jurisdiction by exclusive reliance on state law.” Id. However, “[t]he
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state suit need not invoke a federal law in order to arise under it for
removal purposes. It is sufficient that the merits of the litigation turn
on a substantial federal issue that is an element, and an essential one,
of the plaintiff’s cause of action.” U.S. Express Lines, Ltd. v. Higgins,
281 F.3d 383, 389 (3d Cir. 2002).
Also, a consequence to the well-
pleaded complaint rule is the “further principle that a plaintiff may not
defeat removal by omitting to plead necessary federal questions.” Rivet
v. Regions Bank of Louisiana, 522 U.S. 470, 475 (1998).
Here, the complaint does not make any claims under federal law.
The complaint does not request that the state court rule upon the
FDCPA or any other federal law. This case does not present a situation
where a substantial, disputed question of federal law is a necessary
element of the plaintiff’s well-pleaded state claims. Smith v. Northland
Grp., Inc., No. 3:13-CV-249, 2013 WL 1766775 at *4 (M.D. Pa. Apr. 24,
2013) (a section of a potential state cause of action referencing the
FDCPA to determine what constitutes an unfair or deceptive debt
collection act or practice does not give rise to federal question
jurisdiction).
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Accordingly, we find that PAS has not demonstrated that this
court would have had original jurisdiction on the basis of federal
question under 28 U.S.C. § 1331.
An appropriate order follows.
s/ Joseph F. Saporito, Jr.
JOSEPH F. SAPORITO, JR.
U.S. Magistrate Judge
Dated: March 29, 2017
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