Smith v. Collection Technologies, Inc.
2:15-cv-06816
S.D.W. VaMar 22, 2016Background
- Greg Smith sued Collection Technologies, Inc. (CTI) after CTI garnished his wages to collect a defaulted federal student loan; Smith alleges CTI continued garnishment despite his request for loan rehabilitation.
- Smith filed in West Virginia state court asserting WVCCPA, negligence, intentional infliction of emotional distress, and conversion claims; CTI removed under the federal-officer removal statute, 28 U.S.C. § 1442(a)(1).
- CTI asserted it acted under a DOE Task Order and federal HEA regulations requiring guaranty agencies/contractors to pursue administrative wage garnishment and raised federal defenses (government-contractor immunity and HEA preemption).
- Smith moved to remand; CTI moved to dismiss under Rule 12(b)(6) arguing HEA preemption or, alternatively, failure to state WVCCPA/conversion claims.
- The court allowed Smith to amend his complaint, denied remand, found CTI met § 1442(a) removal requirements (acting under, causal nexus, colorable federal defenses), and denied CTI’s motion to dismiss on preemption and pleading-sufficiency grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether removal under 28 U.S.C. § 1442(a) was proper | Smith: CTI cannot remove as a private contractor merely complying with federal law; remand is required | CTI: It acted under DOE authority via a Task Order, creating a special relationship and causal nexus; it has colorable federal defenses | Denied remand; CTI satisfied "acting under," causal nexus, and colorable federal-defense requirements |
| Availability of the government-contractor defense | Smith: Boyle-based immunity is for military procurement only and not applicable here | CTI: Government-contractor defense plausibly applies to non-military contractors performing federal duties | Court: Defense is colorable for removal purposes (plausible application beyond strictly military context) |
| Whether HEA/regulations preempt Smith’s state-law claims | Smith: WVCCPA and common-law claims complement, not conflict with, HEA; they challenge misconduct after garnishment began | CTI: HEA and implementing regs preempt state-law claims that would hinder garnishment or create conflict | Court: Express preemption limited to laws that would prohibit/hinder garnishment; conflict preemption requires actual contradiction. Court held Smith’s claims (alleging CTI ignored rehabilitation obligations) are not categorically preempted and survive dismissal on preemption grounds |
| Sufficiency of WVCCPA and conversion claims under Rule 12(b)(6) | Smith: Pleads deception and wrongful dominion (conversion) by alleging CTI ignored rehabilitation requests to continue garnishment | CTI: Pleading is insufficient and conversion is precluded because garnishment was authorized by DOE | Court: Pleadings state plausible WVCCPA and conversion claims; factual disputes about whether CTI acted outside DOE authority are for discovery; dismissal denied |
Key Cases Cited
- Willingham v. Morgan, 395 U.S. 402 (Court construed § 1442(a) broadly to protect federal officers)
- Watson v. Philip Morris Cos., 551 U.S. 142 (private compliance with federal regulation does not by itself satisfy "acting under")
- Jefferson Cty. v. Acker, 527 U.S. 423 (federal defense can supply federal-question element for § 1442 removal)
- Mesa v. California, 489 U.S. 121 (discussion of removal based on federal defenses)
- Boyle v. United Techs. Corp., 487 U.S. 500 (government-contractor defense framework)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility pleading standard)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- Chae v. SLM Corp., 593 F.3d 936 (HEA and FFELP background and preemption issues)
- College Loan Corp. v. SLM Corp., 396 F.3d 588 (Fourth Circuit treatment of HEA preemption)
- Cliff v. Payco Gen. Am. Credits, Inc., 363 F.3d 1113 (scope of HEA’s "notwithstanding any provision of State law" preemption clause)
- Isaacson v. Dow Chem. Co., 517 F.3d 129 (corporations as "persons" under § 1442 and causal-nexus discussion)
- In re MTBE Prods. Liab. Litig., 488 F.3d 112 (preemption as a colorable federal defense under § 1442)