United States Court of Appeals

for the Fifth Circuit

No. 20-60991

Kimberly Henley, on behalf of herself and all others similarly situated, 

Plaintiff—Appellant,

versus

Biloxi H.M.A., L.L.C., a Mississippi Limited Liability Company, doing 

business as Merit Health Biloxi, 

Defendant—Appellee.

Appeal from the United States District Court 

for the Southern District of Mississippi

Case No. 1:19-CV-544

Before King, Dennis, and Ho,1 Circuit Judges.

James L. Dennis, Circuit Judge:

This is an appeal from a district court’s grant of a Rule 12(b)(6) 

motion to dismiss for failure to state a claim. Plaintiff-appellant, Kimberly 

1

Judge Ho concurs in Sections I and II. He would certify the question addressed 

in Section III to the Mississippi Supreme Court for consideration. See, e.g., JCB, Inc. v. The 

Horsburgh & Scott Co., 941 F.3d 144, 145 (5th Cir. 2019).

United States Court of Appeals

Fifth Circuit

FILED

August 31, 2022

Lyle W. Cayce

Clerk

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Henly (“Henly”2), sought a declaratory judgment that defendant-appellee 

Biloxi H.M.A., L.L.C., doing business as Merit Health Biloxi (“Merit 

Health”), a hospital, has a duty to disclose that it charges a “facility fee,” 

also referred to as a “surcharge,” to all emergency room patients who receive

care at its facility. The district court, making an Erie guess informed by the 

Mississippi Supreme Court’s references to, and partial application of, the 

Restatement (Second) of Torts § 551, determined that Merit Health did not 

have a duty to disclose because the surcharge was not a “fact basic to the 

transaction,” see § 551(2)(e) and comment j., and it therefore granted the 

motion to dismiss. For the following reasons, we REVERSE and 

REMAND for further proceedings.

I.

A.

Henly’s complaint included the following factual allegations: Merit 

Health charges every emergency room patient that visits one of its facilities 

in Mississippi a surcharge set at one of five levels. For example, according to 

the complaint, the 2019 surcharge levels at Merit Health’s Biloxi location 

were: (1) Basic—$589.32; (2) Limited—$1,323.39; (3) Intermediate—

$1,840.01; (4) Extensive—$2,377.89; and (5) Major—$3,567.89. These 

surcharges are not based on the individual services or treatments that a 

patient receives; rather, Merit Health includes a surcharge in the bill of every 

patient that is seen at the emergency room of its facility, in addition to the 

line-item charges for specific services provided. Merit Health does not 

inform patients prior to treatment, either verbally or through signage, of the 

existence or amounts of the surcharges. These facts are alleged in the 

2 The official case caption misspells the plaintiff’s name as “Henley,” while the

complaint uses the correct spelling “Henly.” In this opinion, we follow the latter spelling.

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complaint and therefore are controlling at this motion to dismiss stage of the 

proceedings.

Henly sought emergency care at Merit Health’s Biloxi location on 

May 19, 2018. She alleges she received no notice or warning, either verbally 

or through signage, regarding surcharges. She was subsequently billed a 

gross amount (before discounts) of $17,752.47, which included a $2,201.75 

surcharge. Merit Health then applied a 65% self-pay discount to Henly’s bill, 

reducing the total to $6,213.36, including a discounted surcharge of $770.61. 

The surcharge appeared on the itemized billing statement as “ER DEPT 

EXTENSIV,” but the billing statement did not identify the charge as a 

surcharge or explain that the charge was a surcharge added on top of lineitem chargesfor specific treatments.

3 According to the complaint, Henly was 

“shocked” when she found out she had been charged a surcharge on top of 

the amounts billed for specific treatments and services she had been 

provided. She avers she would have sought treatment elsewhere if she had 

been informed about the surcharge prior to receiving treatment. At the time 

the complaint was filed, Henly had paid more than $1,500 of her bill, but 

continued to receive statements from Merit Health for the outstanding 

balance. 

According to the complaint, patients like Henly are not aware that the

surcharge will be added to their bills and that Merit Health knows that 

patients are unaware of the surcharge. Merit Health “represent[s] [itself] as 

a caring community-based organization,” and “[u]nlike a normal armslength transaction between a buyer and a seller, a patient seeking medical

services” at Merit Health “places a great degree of trust and confidence on 

3 We note that the surcharge constituted nearly 12.5% of the total billed amount. 

Put another way, the addition of the surcharge increased the amount billed by 14%. 

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the good intention of the hospital to treat him or her fairly and with 

compassion.” Henly avers that, if known prior to treatment, the existence of 

the surcharge would be a substantial factor in a patient’s decision about 

where to receive treatment. 

B.

Henly brought a putative class action lawsuit against Merit Health 

pursuant to 28 U.S.C. § 2201 seeking a declaratory judgment that the 

hospital had a duty under Mississippi state law to disclose the surcharge to 

patients prior to treatment. However, the district court did not rule on the 

class action certification and the parties have not briefed it on appeal.

Merit Health moved to dismiss under Rule 12(b)(6) for failure to state 

a claim. The district court granted the motion and dismissed Henly’s 

complaint with prejudice, holding that the complaint did not sufficiently 

allege that the surcharge was a “fact basic to the transaction” as per 

Restatement (Second) of Torts § 551(2)(e) and comment j. that would trigger 

a duty to disclose under Mississippi law. Henly appealed. 

II.

We review a dismissal pursuant to a Rule 12(b)(6) motion for failure 

to state a claim de novo, accepting all well-pleaded factual allegations as true. 

Alexander v. Verizon Wireless Servs., L.L.C., 875 F.3d 243, 249 (5th Cir. 

2017). “To survive a motion to dismiss, a complaint must contain sufficient 

factual matter, accepted as true, to state a claim to relief that is plausible on 

its face. A claim has facial plausibility when the plaintiff pleads factual 

content that allows the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 

662, 678 (2009) (citations and quotations omitted). 

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In diversity cases, “federal courts must apply state substantive law.” 

In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir. 2007) (citing 

Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). “To determine state law, 

federal courts sitting in diversity look to the final decisions of the state’s 

highest court.” Am. Int’l Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 

254, 260 (5th Cir. 2003) (citation omitted). “In the absence of a final 

decision by the state’s highest court on the issue at hand, it is the duty of the 

federal court to determine, in its best judgment, how the highest court of the 

state would resolve the issue if presented with the same case.” Id. “We 

consider Mississippi Supreme Court cases that, while not deciding the issue, 

provide guidance as to how the Mississippi Supreme Court would decide the 

question before us.” Keen v. Miller Env’t Grp., Inc., 702 F.3d 239, 244 (5th 

Cir. 2012) (quoting Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589, 594 

(5th Cir. 2011)) (cleaned up). 

III.

According to the Mississippi Supreme Court, “[i]n order to be liable 

for nondisclosure, a party must have had a legal duty to communicate a 

known material fact.” Mabus v. St. James Episcopal Church, 13 So. 3d 260, 

265 (Miss. 2009). “Thus, nondisclosure in itself, even if fraudulent, does 

not give rise to a legal claim. The party must have concealed something that 

he or she was legally required to disclose.” Id. 

The Mississippi Supreme Court has “long recognized the principle 

that a party is liable for its silence where its silence ‘relate[s] to material fact 

or matter known to the party and . . . it is [the party’s] legal duty to 

communicate to the other contracting party.’” Daniels v. Crocker, 235 So. 3d 

1, 14 (Miss. 2017) (quoting Guastella v. Wardell, 198 So. 2d 227, 230 (Miss. 

1967). “The duty to disclose is based upon a theory of fraud that recognizes 

that the failure of a party to a business transaction to speak may amount to 

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the suppression of a material fact which should have been disclosed and is, in 

effect, fraud.” Holman v. Howard Wilson Chrysler Jeep, Inc., 972 So. 2d 564, 

568 (Miss. 2008) (citing Welsh v. Mounger, 883 So. 2d 46, 49 (Miss. 2004)). 

The question in this case is whether a duty to disclose arises under

Mississippi law on the facts alleged in Henly’s complaint. We agree with the 

district court’s assessment that there is no final authority from the 

Mississippi Supreme Court conclusively deciding the issue of whether a duty 

to disclose exists under the circumstances presented by this case. Thus, we 

must rely on the Mississippi Supreme Court’s decisions to provide guidance 

as we determine how it would resolve the issue. Am. Int’l Specialty Lines Ins. 

Co., 352 F.3d at 260; Keen, 702 F.3d at 244. 

In Holman v. Howard Wilson Chrysler Jeep, Incorporated, two 

customers seeking to buy a new car were actually sold a demonstrator model 

that had been damaged in a wreck and repaired for a sum of $2,190.38 prior 

to the sale. 972 So. 2d at 567–569. The purchase price of the car was $33,685.

Id. at 568. Citing to the Restatement (Second) of Torts § 551(2)(b), (d), and 

(e), along with other Mississippi precedents, the Mississippi Supreme Court 

reversed a grant of summary judgment to the dealership, holding that the 

dealership might have owed a duty to disclose the repaired damage to the 

customers. Id. at 568–69. The Court found that genuine issues of material 

fact existed regarding whether the dealership owed a duty to disclose, 

including disputes as to whether “knowledge of the damage would be 

material to [the customer’s] purchase of the automobile” and whether 

language in the dealership’s purchase contract provided adequate notice. Id.

at 569. 

In Green Realty Management Corporation v. Mississippi Transportation 

Commission, the Mississippi Transportation Commission (MTC) purchased 

two pieces of undeveloped land from Green Realty as part of a road-widening 

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project. 4 So. 3d 347, 348–49 (Miss. 2009). Only after construction began 

did Green Realty learn that the project would increase the flow of surface 

water onto its adjacent property. Id. The trial court granted summary 

judgment for the MTC, reasoning that the agency had no duty to disclose the 

water flow issue, but rather that Green Realty had a duty to investigate the 

public records, where drawings of the project were on file. Id. at 349–50. The 

Mississippi Supreme Court reversed, holding that “whether the drawings 

were on file is immaterial if the agency withheld material facts” and therefore 

made a “fraudulent misrepresentation.” Id. “If the state agency knew it 

would divert water flow, which would cause damage to property . . . and 

remained silent as to this fact, the agency suppressed material facts. Given 

that scenario, a material misrepresentation by silence was visited upon 

Green.” Id. at 351. 

In analyzing the duty to disclose, Green Realty cited the Restatement 

(Second) of Torts § 551, as well as Mississippi case law and the American 

Jurisprudence 2d on Fraud and Deceit. Green Realty, 4 So. 3d at 350 (citing 

Guastella, 198 So.2d at 230–31; Holman, 972 So. 2d at 568; Am. Jur. 2d

Fraud and Deceit § 258; Restatement (Second) of Torts

§ 551(2)(b)). 

The Restatement (Second) of Torts § 551(1) describes a general 

theory of liability for nondisclosure:

One who fails to disclose to another a fact that he knows may 

justifiably induce the other to act or refrain from acting in a 

business transaction is subject to the same liability to the other 

as though he had represented the nonexistence of the matter 

that he has failed to disclose, if, but only if, he is under a duty 

to the other to exercise reasonable care to disclose the matter 

in question.

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Restatement (Second) of Torts § 551(1); see also Mabus, 13 So. 3d 

at 265 (“In order to be liable for nondisclosure, a party must have had a legal 

duty to communicate a known material fact.”).

Section 551(2) has five subsections—(a) through (e)—that describe 

five different situations in which a duty to disclose arises:

(2) One party to a business transaction is under a duty to 

exercise reasonable care to disclose to the other before the 

transaction is consummated,

(a) matters known to him that the other is entitled to know 

because of a fiduciary or other similar relation of trust and 

confidence between them; and

(b) matters known to him that he knows to be necessary to 

prevent his partial or ambiguous statement of the facts from 

being misleading; and

(c) subsequently acquired information that he knows will make 

untrue or misleading a previous representation that when made 

was true or believed to be so; and

(d) the falsity of a representation not made with the expectation 

that it would be acted upon, if he subsequently learns that the 

other is about to act in reliance upon it in a transaction with 

him; and

(e) facts basic to the transaction, if he knows that the other is 

about to enter into it under a mistake as to them, and that the 

other, because of the relationship between them, the customs 

of the trade or other objective circumstances, would reasonably 

expect a disclosure of those facts.

Restatement (Second) of Torts § 551(2).

The Mississippi Supreme Court first referred to, and partially applied,

a then-draft version of § 551 in Guastella v. Wardell, 198 So. 2d at 230, and 

has cited the current version of § 551 numerous times since. See Daniels, 235 

So. 3d at 14–15; Green Realty, 4 So. 3d at 350; Holman, 972 So. 2d at 568–69; 

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Welsh, 883 So. 2d at 49–50. Therefore, we conclude that the Mississippi 

Supreme Court’s common law duty to disclose jurisprudence has been 

influenced by and derived from several sources, including but not limited to 

the Restatement (Second) of Torts § 551. 

The Mississippi Supreme Court’s duty-to-disclose decisions also 

include consideration of other common law sources—for example, American 

Jurisprudence 2d on Fraud and Deceit, see Green Realty, 4 So. 3d at 350.

Thus, the Mississippi Supreme Court’s duty-to-disclose jurisprudence is not 

limited to the Restatement (Second) of Torts § 551’s formulation of the duty, 

nor synonymous with the language of § 551. Rather, Mississippi

jurisprudence includes references to and partial applications of ideas from 

the Restatement (Second) of Torts § 551, but not to the exclusion of other

precedents and tort principles; in other words, we do not believe the 

Mississippi Supreme Court intends to treat § 551 as if it were a statute so as 

to be bound by its every jot and tittle, and this applies especially to the “fact 

basic to the transaction” language in § 551(2)(e) comment j. relied upon by 

the district court.

From Guastella, Holman, and Green Realty emerge three requirements 

for a duty to disclose to arise under Mississippi law: (1) a material fact; 

(2) one party’s knowledge that the other is under a mistake as to the fact, and 

(3) the other party’s reasonable expectation that it would be disclosed. See 

Guastella, 198 So. 2d at 230; Holman, 972 So. 2d at 568–69; Green Realty, 4 

So. 3d at 350–51. These requirements are also consistent with the 

Restatement (Second) of Torts § 551. 

Applying the foregoing legal precepts, we think that the Mississippi 

Supreme Court would hold that Henly has sufficiently alleged facts that 

Merit Health had a duty to exercise reasonable care to disclose the surcharge. 

First, Henly alleged that the surcharge was a material fact. According to the 

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complaint, knowledge of the surcharge prior to treatment “would be a 

substantial factor in a patient’s . . . decision to remain at the hospital and 

proceed with treatment.” Henly alleged that she was “shocked” to learn 

that her bill included a surcharge of $2,201.75 ($770.61 after discounts) and 

“would have left and sought less expensive treatment elsewhere” if she had 

been informed of the surcharge beforehand. Second, Henly alleged that 

Merit Health was aware that patients like her were unaware of the surcharge, 

but nonetheless failed to disclose it. Third, Henly alleged that she had a 

reasonable expectation of disclosure because Merit Health holds itself out to 

be a “caring community-based organization” and patients like her expected 

Merit Health to disclose the surcharge based on the confidence and trust that 

they placed in the hospital. 

In reaching its contrary ruling, the district court focused on the 

Restatement (Second) of Torts § 551(2)(e). The court considered each 

section of § 551(2), and determined that Henly had not pleaded sufficient 

facts to allege a duty to disclose arising under subsections (a)-(d). Then, the 

district court considered subsection (e) and its “facts basic to the 

transaction” language as described in comment j. In doing so, the district 

court mistakenly applied the comments to the Restatement to determine 

whether Henly had alleged a “basic” fact, instead of considering whether she 

had alleged a “material” fact. 

According to § 551(2)(e) comment j.: “[a] basic fact is a fact that is 

assumed by the parties as a basis for the transaction itself. It is a fact that goes 

to the basis, or essence, of the transaction, and is an important part of the 

substance of what is bargained for or dealt with.” The comment also 

distinguishes the narrower category of “basic” facts from “material” facts: 

“Other facts may serve as important and persuasive inducements to enter 

into the transaction, but not go to its essence. These facts may be material, 

but they are not basic.” Relying solely on comment j, the district court ruled 

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that the surcharge was not “a fact basic to the transaction” because the

“basis for the transaction . . . was [Henly’s] need or desire for emergency 

medical treatment.” The district court concluded that Henly’s allegation 

that she would have sought treatment elsewhere had she known of the 

surcharge established that the surcharge was a “material” fact, but not one 

“basic” to the transaction.

4

 

We disagree with the district court’s Erie guess for two reasons. First, 

we think that the Mississippi Supreme Court would not rely on § 551(2)(e) 

comment j. in the manner that the district court did, applying its text and its 

comments like a statute, because none of the Mississippi Supreme Court

cases apply § 551 or its comments as if they were strictly binding to the 

exclusion of all other elements of that Court’s jurisprudence. Second, the 

distinction in comment j between “material” and “basic” facts, relied upon 

by the district court, is not found in the Mississippi duty-to-disclose caselaw. 

The Mississippi Supreme Court’s Guastella decision, which first cited 

to a then-draft version of § 551, used the words “basic” and “material” 

interchangeably. 198 So. 2d at 230 (stating that “liability for nondisclosure 

[] must relate to material fact[s],” referring to “knowledge of these material 

4 The district court also found Henly’s complaint deficient because it did not allege 

affirmative concealment of the surcharge “nor . . . account for the fact that the existence 

and amount of the surcharge was accessible to [Henly] on Merit Health’s online 

chargemaster through the exercise of reasonable diligence.” We think the district court 

fell into error in concluding—at the pleading stage, without evidence in the record—that 

Henly could have ascertained the existence and amount of the surcharge by looking at Merit 

Health’s online “chargemaster,” i.e. its master price list, when the complaint did not 

include any allegations concerning the chargemaster or its accessibility. Henly asserts in 

her briefing to this court that the price list was not available online at the time she sought 

treatment, and that even if it had been available online, the information is not in a format 

reasonably usable by consumers. We take no position on this and other factual issues as 

they must be resolved in the district court to which we must remand the case for further 

proceedings.

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facts” and “suppression of material facts,” and in the next paragraph 

referring to the same as “a fact basic to the transaction”). Similar to 

Guastella, the two Mississippi cases that cite the current version of 

§ 551(2)(e)—one from the Mississippi Supreme Court and one from an 

appellate court—do not apply the “facts basic to the transaction” language

from comment j or distinguish “basic” from “material” facts. Instead, both 

cases referred only to a duty to disclose “material” facts. See Holman, 972 

So. 2d at 568–69 (referring to “suppression of a material fact” and whether 

“knowledge of [a fact] would be material”); Saucier v. Peoples Bank of Biloxi, 

150 So. 3d 719, 734 (Miss. Ct. App. 2014) (referring to a “duty to disclose 

material information” and “suppression of a material fact”). The broader 

Mississippi jurisprudence on negligent and fraudulent misrepresentation, of 

which the duty to disclose is one component, similarly refers only to 

“representations[s] or “omission[s]” that are “material or significant,” see 

e.g., Shogyo Int’l Corp. v. First Nat’l Bank, 475 So. 2d 425, 427 (Miss. 1985), 

or to the “materiality” of “a representation,” see, e.g. Rankin v. Brokman, 

502 So. 2d 644, 646 (Miss. 1987).

Merit Health argues that a duty to disclose would only arise on the 

facts alleged in Henly’s complaint if the lack of disclosure were “so extreme 

and unfair, as to amount to a form of swindling, in which the plaintiff is led 

by appearance into a bargain that is a trap.” We do not think this is an 

accurate statement of Mississippi law. First, in making this argument, Merit 

Health (as did the district court) treats the Restatement and its comments

like a statute, which the Mississippi Supreme Court has not done. Second, 

the Mississippi duty-to-disclose jurisprudence does not consider the extent 

to which the nondisclosure negatively impacted the other’s benefit of the 

bargain in deciding whether a duty to disclose exists. For example, in 

Holman, the Court did not consider what loss-in-value had been suffered by 

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the purchasers, nor was the extent of flooding relevant to the holding in Green 

Realty.

Merit Health also raises policy-based arguments against requiring 

disclosure, suggesting that a disclosure duty would be impractical and would 

lack any limiting principle. But these arguments ignore the limits already 

contained in Mississippi’s duty-to-disclose jurisprudence, namely, that the 

duty to disclose only arises when material facts are concerned and when the

other party has a reasonable expectation of disclosure. Further, these 

arguments ignore that the duty that arises is a “duty to exercise reasonable 

care to disclose,” not a strict-disclosure regime, as Merit Health fears. See 

Holman, 972 So. 2d at 568; Green Realty, 4 So. 3d at 350.

IV.

For these reasons, we REVERSE the district court’s grant of Merit 

Health’s motion to dismiss and REMAND for further proceedings 

consistent with this opinion.

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