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Estate of Brown v. New York Life Insurance Co.

United States District Court, W.D. Louisiana, Monroe Division

March 6, 2018

THE ESTATE OF JESSE CLARENCE BROWN, SR.
v.
NEW YORK LIFE INSURANCE COMPANY, ET AL.

          ROBERT G. JAMES, JUDGE

          REPORT AND RECOMMENDATION

          KAREN L. HAYES, UNITED STATES MAGISTRATE JUDGE

         Before the undersigned Magistrate Judge, on reference from the District Court, are two motions: 1) a motion to remand filed by plaintiffs, the heirs of the estate of Jesse Clarence Brown, Sr.; and 2) a motion to dismiss for failure to state a claim upon which relief can be granted [doc. # 10] filed by defendant, Jim Donelon, in his capacity as Commissioner of Insurance. The motions are opposed. For reasons assigned below, it is recommended that both motions be denied, and that plaintiffs' claims against Jim Donelon, in his capacity as Commissioner of Insurance, be dismissed, without prejudice, for lack of subject matter jurisdiction.

         Background

         On October 6, 2017, the heirs of the Estate of Jesse Clarence Brown, Sr.: Jesse Clarence Brown, Jr.; Rene Felippe Brown; Delicia Carrie Marshall; and Danna Derrell Brown, filed the instant petition for damages for breach of contract, fraud, and for unfair and deceptive insurance practices in the 6th Judicial District Court for the Parish of Tensas, State of Louisiana, against defendants, New York Life Insurance Company (“NYLife”) and Jim Donelon, in his capacity as Commissioner of Insurance. (Petition). Plaintiffs allege that their now-deceased father Jesse Clarence Brown, Sr., had life insurance polices with NYLife, but that NYLife failed to pay sums due under the policies within 60 days after March 15, 2017, - the date that plaintiffs notified NYLife of their father's October 6, 2016, passing. Id., ¶¶ I, V-VIII. Plaintiffs further allege that Jim Donelon, in his capacity as Commissioner of Insurance, was aware of certain actions by NYLife that formed the basis of a putative class action on behalf of policy holders who purchased life insurance polices from NYLife between 1982 through 1994. See Banks v. New York Life Ins. Co., 737 So.2d 1275, 1278 (La. 1999); Petition, ¶¶ XIII-XVII. Plaintiffs contend that they each are entitled to damages in an amount in excess of $328, 954, plus penalties, and attorney's fees. (Petition, ¶ XII).

         On November 13, 2017, NYLife removed the suit to federal court on the sole basis of diversity jurisdiction, 28 U.S.C. § 1332. (Notice of Removal). NYLife is a mutual insurance company incorporated under the laws of New York, with its principal place of business in said state. See 1st Amend. Notice of Removal, ¶ 6.[1] Plaintiffs are citizens of Louisiana or Texas. (Petition, Preamble). Moreover, Jim Donelon, in his capacity as Commissioner of Insurance, is considered, for purposes of diversity, either a citizen of Louisiana, or not a citizen at all.[2] To overcome the patent lack of complete diversity and obstacle to removal presented by the inclusion of the Commissioner of Insurance as a defendant in the suit, NYLife argued in its removal notice that plaintiffs have no reasonable possibility of recovery against the Commissioner, and therefore, he was improperly joined in an effort to defeat diversity and removal jurisdiction.

         Plaintiffs disagree with NYLife's assessment of their claims against the Commissioner, and on December 5, 2017, filed the instant motion to remand for lack of subject matter jurisdiction because of the presence of the non-diverse/diversity-destroying defendant.[3] Plaintiffs also argued that defendants waived their right to remove the matter to federal court because of their pre-removal activities in state court. In addition, plaintiffs asserted that their suit is a probate matter, and therefore, the federal court may not exercise its jurisdiction.

         NYLife filed its opposition to the motion to remand on December 21, 2017. [doc. # 7]. The next day, the Commissioner of Insurance filed his opposition to the motion to remand, together with an incorporated motion to dismiss plaintiffs' claims against him for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). On December 28, 2017, plaintiffs filed a reply brief in support of their motion to remand. [doc. # 17]. Thus, the matter is ripe.[4]

         Discussion

         I. Motion to Dismiss Under Rule 12(b)(6)

         In 2016, the Fifth Circuit recognized that as long as a non-diverse party “remains joined, the only issue the court may consider is that of jurisdiction itself.” Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 209 (5th Cir.2016) (“IEVM”). Thus, were this court to determine that plaintiffs enjoy a viable cause of action against the non-diverse/diversity-destroying defendant, then the court would lack subject matter jurisdiction over the entire case, and remain unable to reach a merits-based Rule 12(b)(6) motion. Id. Alternatively, were the court to find that plaintiffs improperly joined the Commissioner of Insurance, then the court would be obliged to dismiss him, without prejudice, because it would lack jurisdiction over that defendant for purposes of an adjudication on the merits. See IEVM, supra.[5] In other words, no matter how the court resolves the improper joinder issue, the Rule 12(b)(6) motion must be denied.[6]

         II. Motion To Remand

         a) Removal and Improper Joinder Principles

         A defendant may remove an action from state court to federal court, provided the action is one in which the federal court may exercise original jurisdiction. Manguno v. Prudential Property and Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (citing 28 U.S.C. § 1441(a)). The removing defendant bears the burden of establishing federal subject matter jurisdiction and ensuring compliance with the procedural requirements of removal. Id. Because federal courts are courts of limited jurisdiction, a suit is presumed to lie outside this limited jurisdiction unless and until the party invoking federal jurisdiction establishes to the contrary. Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001) (citation omitted). The removal statutes are strictly construed in favor of remand. Manguno, supra.

         As recited earlier, NYLife invoked this court's subject matter jurisdiction via diversity, which requires an amount in controversy greater than $75, 000, and complete diversity of citizenship between plaintiffs and defendants, 28 U.S.C. § 1332(a). It is manifest that plaintiffs' claims each exceed the jurisdictional minimum. See Petition, ¶ XII. Thus, the sole jurisdictional issue is whether the parties are completely diverse.

         The diversity jurisdiction statute presupposes a civil action between “citizens of different states, ” where all plaintiffs are diverse from all defendants. 28 U.S.C. § 1332; Farrell Const. Co. v. Jefferson Parish, La., 896 F.2d 136, 139-140 (5th Cir. 1990). Again, removing defendant, NYLife, and plaintiffs are citizens of different states. However, some of the plaintiffs and defendant, the Commissioner of Insurance, potentially share common Louisiana citizenship, or alternatively, plaintiff's official capacity claims against the Commissioner render him an arm of the state, and thus, a non-citizen for purposes of diversity.

         To disregard the Commissioner of Insurance's citizenship (or lack of citizenship), NYLife must establish that he is but a nominal defendant/improperly joined. The improper joinder doctrine affords a “‘narrow exception' to the rule of complete diversity, and the burden of persuasion on a party claiming improper joinder is a ‘heavy one.'” Campbell v. Stone Ins., Inc., 509 F.3d 665, 669 (5th Cir.2007) (citing McDonal v. Abbott Laboratories, 408 F.3d 177, 183 (5thCir. 2005)). To establish improper joinder, the removing party must demonstrate “(1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.” McDonal, supra (citing Travis v. Irby, 326 F.3d 644, 647 (5th Cir.2003)).

         In the case sub judice, there are no allegations of actual fraud. Accordingly, the court must determine whether removing defendant has demonstrated that plaintiffs have “no possibility of recovery” against the diversity-destroying defendant, i.e. that there is “no reasonable basis” for the district court to predict that plaintiffs might recover against him. Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568 (5th Cir. 2004) (en banc). The court may resolve this issue in one of two ways: 1) the court can look at the allegations of the complaint to determine whether the complaint states a claim against the non-diverse defendant under state law (Fed.R.Civ.P. 12(b)(6) analysis); or 2) in the few cases where the plaintiff has stated a claim, but has misstated or omitted discrete facts that would determine the propriety of joinder, the court may, in its discretion, pierce the pleadings and conduct a summary inquiry. Smallwood, supra. However, the “summary inquiry is appropriate only to identify the presence of discrete and undisputed facts that would preclude plaintiff's recovery against the in-state defendant.” Id.[7]

         “[A] court may choose to use either one of these two analyses, but it must use one and only one of them, not neither or both.” IEVM, 818 F.3d at 207-208. Here, defendants contend that plaintiffs' complaint fails to state a claim against the Commissioner of Insurance. Accordingly, the court will employ a Rule 12(b)(6)- type analysis, which requires application of the federal pleading standard. Id.

         b) Rule ...


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