Smith v. Collection Techs., Inc.

GREG SMITH, Plaintiff, v. COLLECTION TECHNOLOGIES, INC. Defendant.

CIVIL ACTION NO. 2:15-cv-06816

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA CHARLESTON DIVISION

March 22, 2016

MEMORANDUM OPINION AND ORDER

Before the Court are Plaintiff's Motion to Remand and for Hearing [ECF No. 3], Motion to Amend the Complaint [ECF No. 7], and subsequent Motion for Hearing [ECF No. 21]. Also pending are Defendant Collection Technologies, Inc.'s Motion to Dismiss [ECF No. 4] and Motion to Strike or, in the alternative, Motion for Leave to File Surreply [ECF No. 10]. For the reasons that follow, the Court DENIES Plaintiff's Motion to Remand and accompanying Motion for Hearing [ECF No. 3], DENIES CTI's Motion to Dismiss [ECF No. 4], GRANTS Plaintiff's Motion to Amend the Complaint [ECF No. 7], and DENIES AS MOOT CTI's Motion to Strike or for Leave to File a Surreply [ECF No. 10] and Plaintiff's Motion for Hearing [ECF No. 21].

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Plaintiff Greg Smith brings this civil action in response to CTI Collection Technologies, Inc.'s ("CTI") garnishment of his wages for repayment of a student loan. CTI, a debt collector, has purportedly garnished thousands of dollars of Plaintiff's income in an attempt to recover payments for a defaulted loan that Plaintiff allegedly repays directly to the United States Department of Education ("DOE") through an income-based repayment plan.

Plaintiff filed suit against CTI in the Circuit Court of Kanawha County, West Virginia on April 22, 2015. His four-count Complaint alleges violations of the West Virginia Consumer Credit and Protection Act ("WVCCPA"), negligence, intentional infliction of emotional distress, and conversion. CTI was served on April 27, 2015 and timely removed the action to this Court on May 27, 2015. CTI asserts that this Court has subject matter jurisdiction under the federal officer removal statute codified at 28 U.S.C. § 1442(a)(1). Plaintiff contests that statute's applicability and moves to remand.¹ CTI has since filed a Rule 12(b)(6) motion to dismiss Plaintiff's Complaint on grounds that each of its state law claims is preempted by the Higher Education Act, 20 U.S.C. § 1070 et seq. ("HEA"), and its corresponding regulations. Plaintiff moved for leave to amend his Complaint shortly after receipt of CTI's motion to dismiss. His amended pleading adds factual detail to comply, he explains, to the more stringent pleading requirements of the federal courts. The claims asserted in the First Amended Complaint are identical to those raised in the original pleading. Seeing the motion is unopposed, the Court GRANTS the motion to amend [ECF No. 7] and relies on this amended pleading in its resolution of the parties' remaining motions.

II. DISCUSSION

A. Motion to Remand

The federal officer removal statute set forth in 28 U.S.C. § 1442(a) confers federal jurisdiction over a civil action directed at "any officer (or any person acting under that officer) of the United States or any agency thereof, in an official or individual capacity, for or relating to any act under color of such office." The words "acting under" are to be interpreted broadly, Willingham v. Morgan, 395 U.S. 402, 406-07 (1969), and the statute must be construed liberally. Watson v. Philip Morris Companies, Inc., 551 U.S. 142, 147 (2007); Willingham, 395 U.S. at 406-07 ("The federal officer removal statute is not 'narrow' or 'limited.' . . . Congress has decided that federal officers . . . require the protection of a federal forum. This policy should not be frustrated by a narrow, grudging interpretation of § 1442(a)(1)."). Thus, the general rule requiring strict construction of removal statutes, see Mulcahey v. Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir. 1994), is inapplicable to cases removed under § 1442(a)(1). See Durham v. Lockheed Martin Corp., 445 F.3d 1247, 1252 (9th Cir. 2006); Gordon v. Air & Liquid Sys. Corp., 990 F. Supp. 2d 311, 316 (E.D.N.Y. 2014) (distinguishing between general removal statutes and federal officer removal).

To successfully remove a state lawsuit under this statute, a defendant must establish that "(1) it is a 'person' within the meaning of the statute, (2) it acted under the direction of a federal officer, (3) it has a colorable federal defense to the [plaintiff's] claims, and (4) there is a causal nexus . . . 'between the . . . claims and acts it performed under color of federal office.'" Carter v. Monsanto Co., 635 F. Supp. 2d 479, 488 (S.D. W. Va. 2009) (citing Virden v. Altria Group, Inc., 304 F. Supp. 2d 832, 843 (N.D. W. Va. 2004)); see also In re Methyl Tertiary Butyl Ether ("MTBE") Products Liab. Litig., 488 F.3d 112, 124 (2d Cir. 2007) (citations omitted) (enunciatinga three-part test because the "acting under" requirement subsumes the existence of causation between the charged conduct and asserted governmental authority). The parties do not dispute that CTI is a "person" within the meaning of the statute. See Isaacson v. Dow Chem. Co., 517 F. 3d 129, 135-36 (2d Cir. 2008) (finding corporations are "persons" under § 1442(a)); Virden, 304 F. Supp. 2d at 844 (same).

This removal statute deviates from the traditional application of the "well-pleaded complaint" rule. Kircher v. Putnam Funds Trust, 547 U.S. 633, 644 n. 12 ("Section 1442(a) is an exception to the 'well-pleaded complaint' rule . . . ."). Under that rule, a case is typically removable on federal question grounds only if the plaintiff's complaint establishes that the case "arises under" federal law. See Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 9-10 (1983). Federal defenses are generally irrelevant. Id. (citations omitted). However, "[u]nder the federal officer removal statute, suits against federal officers may be removed despite the nonfederal cast of the complaint; the federal-question element is met if the defense depends on federal law." Jefferson Cty. v. Acker, 527 U.S. 423, 431 (1999). The Court can thus summarily dispense with Plaintiff's first argument in opposition to removal; that is, that removal is not proper on the basis of CTI's federal defense. The federal officer removal statute is an exception to the general rule on which Plaintiff relies; indeed, the existence of a colorable federal defense is the crux of the statute. See id. The Court addresses Plaintiff's remaining contentions starting with a discussion of the "acting under" and "causal nexus" prongs of the applicable standard.

i. "Acting Under" and Causal Nexus Requirements

A defendant "acts under" the control of a federal agency if the agency has "direct and detailed control" over the activity. Carter, 635 F. Supp. 2d at 488 (citing Pack v. AC and S, Inc., 838 F. Supp. 1099, 1103 (D. Md. 1993)); State v. Ivory, 906 F.2d 999, 1001 (4th Cir. 1990). Thedefendant's "'acting under' must involve an effort to assist, or to help carry out, the duties or tasks of the federal superior." Watson, 551 U.S. at 152 (citing Davis v. South Carolina, 107 U.S. 597, 600 (1883)) (emphasis in original). A "special relationship" must exist between the two. Id. at 156. CTI's Notice of Removal states that under a Task Order contract with the DOE, it is contractually obligated to support collection and administrative resolution activities on debts held by that agency. (Not. of Removal at 4, ECF No. 1.) CTI claims that it "acts under" the DOE by virtue of the authority delegated under this contract. Plaintiff, on the other hand, endorses a more limited view of the "acting under" requirement that he claims was endorsed by the United States Supreme Court's opinion in Watson.

The United States Supreme Court has recognized that the "acting under" language in 1442(a) is "broad" but not "limitless." Watson, 551 U.S. at 147. In Watson, the Supreme Court considered whether the Philip Morris Companies ("Philip Morris") were "acting under" a federal officer when they tested and regulated tobacco cigarettes in accordance with detailed regulations promulgated by the Federal Trade Commission. Id. at 142. The Court held that "the help or assistance necessary to bring a private person within the scope of the statute does not include simply complying with the law." Id. at 152 (emphasis in original). Thus, a regulated corporation does not "act under" a federal officer merely because its activities are closely monitored and subject to highly detailed and technical regulations.²

The Watson Court did not pass on the question of whether § 1442(a)'s removal provision had potential application to a private entity contracting with the Government. Id. at 156. However, it took care to distinguish cases where the government's close supervision of a private contractor was deemed sufficient to meet the "acting under" statutory requirement. Id. at 154 ("[W]e need not further examine here (a case where private contracting is not at issue) whether and when particular circumstances may enable private contractors to invoke the statute."). The analysis employed by the Court to find that Philip Morris was not a federal actor, however, suggests the opposite conclusion may be appropriate when applied to a private entity contracting with the Government. Id. at 153, 154 (noting that a private contractor "assists" or "helps carry out" the federal officer's duties by "produc[ing] an item that it needs" or performing tasks that, "in the absence of a contract with a private firm, the Government itself would have had to perform.").

Plaintiff reads Watson to foreclose removal under § 1442(a) by any individual or entity other than those employed by the federal government. Because Watson pointedly distinguished cases where a contractual relationship exists between a private firm and the government, however, Plaintiff's interpretation is unjustifiably narrow. Post-Watson, lower courts are still held to the obligation to read "acting under" broadly where such a construction is consistent with the purposes of the...