                                                       United States Court of Appeals
                                                                Fifth Circuit
                                                             F I L E D
                 UNITED STATES COURT OF APPEALS              August 29, 2003

                      FOR THE FIFTH CIRCUIT              Charles R. Fulbruge III
                                                                 Clerk

                          No. 02-60608
                  (consolidated with 02-60609)


 SUSIE ROSS; DENITA JOHNSON; JAMES CURTIS; LARRY PICKENS; DORIS
KING; KAREN WHITLEY; RUBY MAGEE; ROY ALLEN, JR.; CHESTER NEWMAN;
                          SHARON WHITE,

                                              Plaintiffs-Appellants,

                             versus

 CITIFINANCIAL, INC., a Maryland Corporation, formerly known as
  First Family Financial Services, Inc.; CITIFINANCIAL, INC., a
   Maryland Corporation, formerly known as Commercial Credit of
    Mississippi; CITIFINANCIAL, INC., a Tennessee Corporation,
formerly known as Commercial Credit of Mississippi; CITIFINANCIAL
    SERVICES, INC., a Georgia Corporation; UNION SECURITY LIFE
  INSURANCE COMPANY; AMERICAN SECURITY INSURANCE COMPANY; TRACY
                MITCHELL; DARLA FARMER; JOE SMITH,

                                              Defendants-Appellees.


DENISE HOWARD; LENA CHAMBERS; PRISCILLA CHALMERS; BETTY WHITLEY;
FAYE DENISE LOGAN; CAROL BUSECK; KELVIN JOHNSON; PHILLIP GORDON;
 DEBBIE GORDON; ALISHA F. WILSON; MARGARET HAYMON; WANDA ALLEN;
MONROE HOGGATT; EUGENE HAYMON; EVA PARKER HALL,

                                              Plaintiffs-Appellants,

                             versus

 CITIFINANCIAL, INC., a Maryland Corporation, formerly known as
  First Family Financial Services, Inc.; CITIFINANCIAL, INC., a
   Maryland Corporation, formerly known as Commercial Credit of
    Mississippi; CITIFINANCIAL, INC., a Tennessee Corporation,
formerly known as Commercial Credit of Mississippi; CITIFINANCIAL
    SERVICES, INC., a Georgia Corporation; UNION SECURITY LIFE
  INSURANCE COMPANY; AMERICAN SECURITY INSURANCE COMPANY; TRACY
        MITCHELL; DARLA FARMER; JOE SMITH; JOHN DOES 1-50;
                          VALERIE STEVENS,
                                                   Defendants-Appellees.


           Appeal from the United States District Court
             for the Southern District of Mississippi
                (5:01-CV-185-BN and 3:01-CV-471-BN)


Before SMITH, WIENER, and BARKSDALE, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

     For these consolidated 28 U.S.C. § 1292(b) interlocutory

appeals from remand-denials where diversity-jurisdiction removal

was based on fraudulent joinder, at issue is whether there is

arguably   a   reasonable   basis   for     predicting   the     non-diverse

defendants could be liable under Mississippi law and, therefore,

not fraudulently joined.     AFFIRMED; REMANDED.

                                    I.

     Plaintiffs,   all   Mississippi      residents,   entered    into   loan

agreements with Citifinancial or its predecessors.         In conjunction

with those loans, Plaintiffs purchased insurance, such as credit

life and property, through Union Security Life Insurance Company

and American Security Insurance Company.

     Plaintiffs filed actions in Mississippi state court.                 In

addition to suing Citifinancial, American Security, and Union

Security (non-resident corporations), Plaintiffs sued Citifinancial

employees, who were licensed insurance agents and Mississippi

residents (collectively:    Individual Defendants).



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       Plaintiffs alleged:       their insurance premiums were excessive

compared to market rates; they were inflated by commissions; and

their loan interest and principal were increased by including the

insurance      polices    within   the        loan    amounts    or    unnecessarily

refinancing the loans.           Plaintiffs claimed breach of fiduciary

duty, breach of implied covenants of good faith and fair dealing,

fraudulent and negligent misrepresentation and omission, civil

conspiracy, negligence, and unconscionability under Mississippi

law.

       Along   this     line,   where    Defendants      submitted         evidence   of

Plaintiffs’      loan    documents,      they        contained    signed      separate

disclosure statements or signed provisions on the note or security

agreements, making clear that insurance was not required.                        These

statements included:        “CREDIT LIFE OR CREDIT DISABILITY INSURANCE

IS NOT REQUIRED TO OBTAIN THIS LOAN”; and “Credit Life and Credit

Disability Insurance are NOT REQUIRED in connection with this loan

and were not a factor in the approval of this extension of credit.

If you chose to obtain life insurance through Lender ... the cost

thereof   is    shown    ...    herein    and    is    included       in   the   Amount

Financed”.      Each of the remaining Plaintiffs has at least a high

school education except for one, who has a ninth grade education.

       In 2001, Defendants removed the actions to federal court under

28 U.S.C. § 1441, claiming diversity jurisdiction pursuant to 28




                                          3
U.S.C.    §    1332.      To    that    end,    Defendants      claimed    Individual

Defendants were fraudulently joined.

     The       district     court      denied     Plaintiffs’     remand     motions,

reasoning:         Individual       Defendants         were   fraudulently    joined;

therefore, jurisdiction was valid under § 1332.                    It held most of

Plaintiffs’ claims time-barred under Mississippi’s general three-

year statute of limitations, MISS. CODE. ANN. § 15-1-49(1).                       For

Plaintiffs’ remaining claims, it concluded there was no reasonable

basis for predicting Individual Defendants could be liable. Howard

v. Citifinancial, No. 3:01-CV-471BN (S.D. Miss. 13 Mar. 2002); Ross

v. Citifinancial, No. 5:01-CV-185BN (S.D. Miss. 18 Mar. 2002).                     (A

number of Plaintiffs had been voluntarily dismissed or did not

assert claims against Individual Defendants.)

                                          II.

     The interlocutory appeal for each action presents four issues:

(1) whether the district court applied the correct standard in

holding       non-diverse      defendants       were    fraudulently   joined;    (2)

whether, under Mississippi law, an affirmative act is required to

toll the statute of limitations for the claims at issue; (3)

whether a party may justifiably rely on an oral representation

contrary to the terms of a written contract; and (4) whether a

fiduciary relationship arises in first party insurance contracts

such as those at issue.




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                                    A.

     Fraudulent joinder is established by showing:              (1) actual

fraud in pleading jurisdictional facts; or (2) inability of the

plaintiff to establish a cause of action against the non-diverse

plaintiff.    Travis v. Irby, 326 F.3d 644, 647 (5th Cir. 2003)

(citing Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir.

1999)).    At issue is the standard to be applied for the second of

the two means for showing fraudulent joinder.

     The district court noted that the removing party has the

burden of showing fraudulent joinder, but that Plaintiffs could not

rest upon mere allegations in their pleadings.       Rather, the court

could pierce the pleadings.         It concluded:   “In the event the

court,    after   resolving   all   disputed   questions   of    fact   and

ambiguities of law in favor of the non-removing party, finds that

there is ‘arguably a reasonable basis for predicting that the state

law might impose liability on the facts involved, then there is no

fraudulent joinder’ and hence no basis for asserting diversity of

citizenship jurisdiction”.     Howard, slip op. at 8 (emphasis added)

(citing Jernigan v. Ashland Oil, Inc., 989 F.2d 812, 815 (5th

Cir.), cert. denied, 510 U.S. 868 (1993)); Ross, slip op. at 8

(same).

     Later, however, the district court stated:       “The issue before

the Court is whether there is a possibility that liability could be

imposed on the non-diverse Defendants/agents based on the facts of

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the case”.   Howard, slip op. at 10 (emphasis added); Ross, slip op.

at 9 (same).     The court concluded:              because Plaintiffs could not

prevail on any of their claims against Individual Defendants, they

were fraudulently joined.         Howard, slip op. at 30; Ross, slip op.

at 35.

       Plaintiffs assert that the “reasonable basis” standard is not

correct; that, instead, the standard is whether “there is no

possibility that plaintiff [could] establish a cause of action”.

Burchett v. Cargill, Inc., 48 F.3d 173, 176 (5th Cir. 1995).

Plaintiffs also claim the district court shifted the burden of

proof and did not construe all factual disputes in their favor.

They   contend    Defendants      only    refuted         their    allegations     with

allegations, and as such, Plaintiffs were not required to provide

evidence to refute them — that it is only after Defendants provide

evidence refuting Plaintiffs’ allegations that Plaintiffs must

provide evidence.

       Our opinions have described the fraudulent joinder standard in

various ways.     Recent    opinions,             however,    have clarified that

standard.      “Any    argument    that       a    gap    exists   between   the    ‘no

possibility’     and   ‘reasonable       basis’      of    recovery    language     was

recently narrowed, if not closed”.                 Travis, 326 F.3d at 648.         The

court must determine whether there is arguably a reasonable basis

for predicting that state law might impose liability. Great Plains

Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312


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(5th Cir. 2002).        This means that there must be a reasonable

possibility of recovery, not merely a theoretical one.                 Id.; Badon

v. RJR Nabisco, Inc., 236 F.3d 282, 286 n.4 (5th Cir. 2000)

(rejecting contention that theoretical possibility of recovery is

enough to support no fraudulent joinder, citing “reasonable basis”

standard);    Griggs,    181    F.3d   at    701     (“While     the   burden    of

demonstrating fraudulent joinder is a heavy one, we have never held

that a particular plaintiff might possibly establish liability by

the   mere   hypothetical      possibility    that    such      an   action   could

exist”.).

      Nonetheless,    the   burden     of   persuasion     on    those    claiming

fraudulent joinder remains a heavy one.              Travis, 326 F.3d at 648.

Along these lines, our court has recognized the similarity between

standards for Federal Rule of Civil Procedure 12(b)(6) (failure to

state claim) and fraudulent joinder.          Id.     See Great Plains Trust,

313 F.3d at 312.     The scope of the inquiry for fraudulent joinder,

however, is broader than that for Rule 12(b)(6).

      For fraudulent joinder vel non, it is well established that

the district court may “pierce the pleadings” and consider summary

judgment-type    evidence.        Travis,    326    F.3d   at    648-49   (citing

Carriere v. Sears, Roebuck and Co., 893 F.2d 98, 100 (5th Cir.),

cert. denied, 498 U.S. 817 (1990)).           In conducting this inquiry,

the district court “must also take into account all unchallenged

factual allegations, including those alleged in the complaint, in

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the light most favorable to the plaintiff”.             Travis, 326 F.3d at

649.    In addition, the court must resolve all ambiguities of state

law in favor of the non-removing party.          Id.

       The district court properly applied these standards. It cited

the “reasonable basis” standard; and, although it also discussed

the    “possibility”   of   recovery,    it   never    looked   for   a   “mere

theoretical possibility of recovery”. It also correctly noted that

it could “pierce the pleadings”, but that it must construe all

disputed questions of fact and ambiguities of law in Plaintiffs’

favor.    Contrary to Plaintiffs’ assertion, it did not shift the

burden to them upon Defendants’ asserting contrary allegations.

Finally, it construed all allegations and evidence in Plaintiffs’

favor.

                                    B.

       The district court ruled that most of Plaintiffs’ claims were

time-barred; their claims had not been fraudulently concealed; and,

had they been, the time for bringing an action would be tolled.              In

this regard, the court applied Mississippi’s general three-year

statute of limitations, MISS. CODE ANN. § 15-1-49(1) (“All actions

for which no other period of limitation is prescribed shall be

commenced within three (3) years next after the cause of such

action accrued, and not after”).        E.g., Stephens v. Equitable Life

Assurance Society of the United States, __ So. 2d __, 2003 WL




                                    8
1343254 at *3 (Miss. 20 March 2003) (applying statute to claim of

fraud and misrepresentation of sale of insurance).

     Claims   asserted   three   years   after   their   accrual   may   be

actionable if they were fraudulently concealed and Plaintiffs could

not discover them with reasonable diligence.        In that event, the

limitations period begins to run when the claims are discovered.

          If a person liable to any personal action
          shall fraudulently conceal the cause of action
          from the knowledge of the person entitled
          thereto, the cause of action shall be deemed
          to have first accrued at, and not before, the
          time at which such fraud shall be, or with
          reasonable diligence might have been, first
          known or discovered.

MISS. CODE. ANN. § 15-1-67.   Along this line, Robinson v. Cobb, 763

So. 2d 883 (Miss. 2000), provides that, in order to toll the

limitations period, Plaintiffs must prove: “[Defendant] engaged in

affirmative acts of concealment”; and “though [Plaintiffs] acted

with due diligence in attempting to discover [the claim], they were

unable to do so”.   Id. at 887 (emphasis added; internal quotation

and citation omitted).

     Nevertheless, Plaintiffs contend the district court erred by

requiring them to prove an affirmative act of concealment and

assert that, in cases of fraud, no subsequent act of concealment is

necessary.    Defendants counter that, although the Mississippi

Supreme Court has not ruled on this issue in the context of credit

insurance sales, it has established that a subsequent affirmative

act of fraudulent concealment is necessary to toll limitations

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where    the   underlying   claim   is     for    fraud.      Otherwise,   the

limitations begin to run when Plaintiffs receive documents which,

if read, would lead to discovery of the claim.

      Mississippi law is unambiguous:              Plaintiffs must prove a

subsequent affirmative act of fraudulent concealment to toll the

limitations.      Stephens, 2003 WL 1343254, held that the fraudulent

concealment doctrine applied to a fraud claim.              There, plaintiffs

alleged defendants misrepresented that a life insurance contract

had   vanishing    premiums.      The     court    stated    that   fraudulent

concealment was required to toll the limitations period; and,

because the terms were written in the policies, plaintiffs could

not show such concealment.

      Further, in Reich v. Jesco, Inc., 526 So. 2d 550 (Miss. 1988),

plaintiff’s     structure   collapsed     12     years   after   construction.

Plaintiff sued the builder for negligence, strict liability, and

breach of warranty.     He claimed the limitations period was tolled

because the faulty construction was not evident until after the

collapse.      In holding the limitations period was not tolled, the

Mississippi Supreme Court cited two prior opinions:              Dunn v. Dent,

153 So. 798 (Miss. 1934); and Lundy v. Hazlett, 112 So. 591 (Miss.

1927).

      In each, defendant falsely represented that land conveyed to

plaintiff was larger than it was.              Limitations were tolled in

Lundy, but not in Dunn.        In Reich, the court distinguished these


                                     10
cases    by    noting    that,   in   Lundy,    defendants    made   “express,

fraudulent representation[s] ... calculated to conceal ... after

completion of the sale”, Reich, 526 So. 2d at 552 (internal

quotation omitted); in Dunn, plaintiffs failed to show defendant

“did anything that could be construed as a concealment of the

falsity of the representation”, id. (internal quotation omitted).

     As stated, Mississippi law is unambiguous.              Pursuant to § 15-

1-67, Plaintiffs were required to prove an affirmative act of

fraudulent concealment post-completion of the insurance sales in

order to toll the statute of limitations.

                                        C.

     The      district   court   held   that,   under   Mississippi    law,   a

plaintiff has a duty to read a contract before signing it and

cannot reasonably rely on oral misrepresentations regarding its

terms.     Accordingly, it held both that the statute of limitations

was not tolled because Plaintiffs’ claim was not fraudulently

concealed and that Plaintiffs did not state valid substantive

claims of fraudulent or negligent misrepresentation.

     Plaintiffs maintain that, under Mississippi law, the rule that

a party must read a contract before signing it does not apply if

the party was induced by fraud or false representations in entering

into that contract.        Defendants counter that, as a general rule,

Mississippi imputes knowledge of a contract to the signatory, and

a contracting party cannot reasonably rely on oral representations


                                        11
that conflict with its written terms.    Defendants accept that the

Mississippi Supreme Court has created a limited exception for cases

of fraud in factum, that is, where the character of the document is

misrepresented.   Defendants assert that the exception does not

apply here, because Plaintiffs claim fraud in inducement, that is

misrepresentations about the terms of the contract.

     “[A] party is under an obligation to read a contract before

signing it, and will not as a general rule be heard to complain of

an oral misrepresentation the error of which would have been

disclosed by reading the contract”.   Godfrey, Bassett & Kuykendall

Architects, Ltd. v. Huntington Lumber & Supply Co., Inc., 584 So.

2d 1254, 1257 (Miss. 1991) (emphasis added).        See Russell v.

Performance Toyota, Inc., 826 So. 2d 719, 726 (Miss. 2002) (“In

Mississippi, a person is charged with knowing the contents of any

document that he executes”.); Cherry v. Anthony, Gibbs & Sage, 501

So. 2d 416, 419 (Miss. 1987) (in the context of an insurance

policy, knowledge of contract terms is “imputed to [the contracting

party] as a matter of law”).

     Stephens, 2003 WL 1343254, is highly persuasive authority that

the Mississippi Supreme Court would bar Plaintiffs’ claims. There,

plaintiffs sued an insurer and their agent, Bell, claiming Bell had

fraudulently represented that the life insurance policies they had

purchased had vanishing premiums.    They brought their claims after

the limitations period, but asserted it was tolled because of


                                12
fraudulent concealment.    Significantly, Stephens cited Godfrey,

Basset & Kuykendall for the following proposition:

          [I]nsureds are bound as a matter of law by the
          knowledge of the contents of a contract in
          which they entered notwithstanding whether
          they actually read the policy.    Any alleged
          oral agreement in this case does not have any
          effect on the written insurance contract.

2003 WL 1343254 at *4 (internal citation omitted).         The court

concluded plaintiffs could not show fraudulent concealment because

the terms of the insurance contract unambiguously stated that

premiums did not vanish.      Stephens and the actions at hand are

indistinguishable.

     The Mississippi Supreme Court appears to apply two exceptions

to the rule that knowledge of written terms is imputed to contract

signatories:   fraud in factum and equitable relief.         Neither

exception applies here.

     First, fraud in factum

          is defined as “[m]isrepresentation as to the
          nature of a writing that a person signs with
          neither knowledge nor reasonable opportunity
          to obtain knowledge of its character or
          essential terms.” BLACK'S LAW DICTIONARY 661
          (6th ed. 1990). Fraud in the inducement, which
          is broader, is defined as “[f]raud connected
          with [the] underlying transaction and not with
          the nature of the contract or document signed.
          Misrepresentation as to the terms, quality or
          other aspects of a contractual relation,
          venture or other transaction that leads a
          person to agree to enter into the transaction
          with a false impression or understanding of
          the risks, duties or obligations she has
          undertaken.” Id.



                                 13
FDIC v. Fireman’s Ins. Co., 109 F.3d 1084, 1089 n.1 (5th Cir.

1997). Tracking the definition of fraud in factum, the Mississippi

Supreme Court has applied an exception to the imputed knowledge

rule:

          If a person is ignorant of the contents of a
          written instrument and signs it under mistaken
          belief, induced by misrepresentation, that it
          is an instrument of a different character,
          without negligence on his part, the agreement
          is void.

Johnson v. Brewer, 427 So. 2d 118, 123 (Miss. 1983) (emphasis

added).

     Although it used the word “induced”, it is clear from this

language that the Mississippi Supreme Court is discussing fraud in

factum.   Here, this exception cannot apply because Plaintiffs do

not claim they misapprehended the character of the documents.

     Second, Godfrey, Bassett & Kuykendall provides an exception

for equitable relief: “[F]ailure to read a contract before signing

it, although it may constitute negligence, will not bar equitable

relief to one who has executed a contract in reliance upon false

representations made to him by the other contracting party”.    584

So. 2d at 1259.   See Turner v. Terry, 799 So. 2d 25, 36 (Miss.

2001) (citing Godfrey rule, but not applying because plaintiffs

failed to prove fraud).

     This exception does not apply because Plaintiffs are not

seeking equitable relief.   They seek damages.   In any event, the

facts are distinguishable. There, a construction contractor failed

                                14
to read a contract into which he entered with the construction site

owner.      The contract was drafted by a third-party architect.

Before    bidding    on   the    project,      the    contractor   contacted   the

architect    to    inquire   whether      the     contract   included   a   $9,000

contingency term that had to be included in the bid.                The architect

said it did not.      Inadvertently, the term was left in the contract

the contractor signed, and the owner refused to pay the contractor

$9,000.      The    contractor     sued     the      third-party   architect    for

restitution based on misrepresentation. Here, Plaintiffs are suing

the signatories and drafters of the contracts.

                                          D.

     For the final issue, the district court ruled that, as a

matter of law, no fiduciary relationship existed between Individual

Defendants (insurance agents) and Plaintiffs.                Plaintiffs contend

the district court erred because, at least arguably, a fiduciary

relationship      could   have    existed.        They    primarily   claim    that

Mississippi case law has previously held a fiduciary relationship

exists between an insurance agent and an insured, by virtue of

their relationship.       Further, they claim that, even if that is not

the case, the facts indicate Plaintiffs trusted the agents, which

brought about such a relationship.

     “Under Mississippi law, there is no fiduciary relationship or

duty between an insurance company and its insured in a first party

insurance contract.”         Langston v. Bigelow, 820 So. 2d 752, 756



                                          15
(Miss. Ct. App. 2002) (quoting Gorman v. Southeastern Fidelity Ins.

Co., 621 F.Supp. 33, 38 (S.D. Miss. 1985)).              See also General

Motors Acceptance Corp. v. Baymon, 732 So. 2d 262, 270 (Miss. 1999)

(“[T]he general rule is that there is no presumption of a fiduciary

relationship   between   a   debtor   and   creditor.”    (alteration   in

original; quotation omitted)), cert. denied, 534 U.S. 944 (2001).

“In Mississippi, the purchase of insurance is deemed to be an arms’

length transaction.”     Langston, 820 So. 2d at 756.

     Langston rejected claims like those asserted here:

          [Plaintiff]   claims   that  the  trust   and
          dependence with regard to insurance is
          inherent in the very nature of the contract,
          thus    creating   the    special   fiduciary
          relationship....     We find, though, that
          [Plaintiff] is mistaken in his belief that
          this mere contractual obligation on the part
          of the insurer to pay a claim creates any
          special trust or fiduciary relationship.

Id. at 756-57.

     A fiduciary duty may exist to procure insurance, if a bank

sells credit insurance.      First United Bank of Poplarville v. Reid,

612 So. 2d 1131 (Miss. 1992), considered whether a fiduciary duty

arose when a bank employee agreed to purchase credit life insurance

for a loan applicant.    The court concluded that the bank became an

insurance agent with a duty to procure insurance.            Nonetheless,

because the certificate of insurance showed its terms on its face,

the bank did not have a duty to disclose any terms, even though the

loan applicants had not read the policy.


                                    16
     Although    Plaintiffs   point    to   affidavits   in   which   some

Plaintiffs state they trusted and relied on Individual Defendants,

none of this evidence shows circumstances justifying such reliance.

Plaintiffs do not claim Defendants failed to procure insurance;

moreover, they do not claim Defendants violated the written terms

of the insurance contract or created a hidden scheme to defraud

them.   Cf.   American Bankers Ins. Co. of Florida v. Alexander, 818

So. 2d 1073 (Miss. 2001) (fiduciary duty between bank, credit

insurance company, and lendee arose where claim of “hidden scheme”

between bank and insurance company increasing insurance rates);

Lowery v. Guaranty Bank & Trust Co., 592 So. 2d 79 (Miss. 1991)

(fiduciary duty arose between bank and lendee/insured where long

history of dealings with bank aside from the note).

                                 III.

     For the foregoing reasons, because there is not arguably a

reasonable basis for predicting Individual Defendants could be

liable under Mississippi law, the remand-denials are AFFIRMED and

these cases are REMANDED for further proceedings consistent with

this opinion.

                                                 AFFIRMED; REMANDED.




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