In re N.Y. Life Ins. Co. Agents' Class Claimants, Civil Action No. MDL 1149.

Citation92 F.Supp.2d 564
Decision Date28 April 1997
Docket NumberCivil Action No. MDL 1149.
PartiesIn re NEW YORK LIFE INSURANCE COMPANY AGENTS' CLASS CLAIMANTS SOLICITATION LITIGATION.
CourtU.S. District Court — Eastern District of Louisiana
MEMORANDUM AND ORDER

SEAR, Chief Judge.

Background:

This multidistrict litigation is comprised of the following "core" cases:

Lionel Smith v. Randy Ungar & Associates, Inc., et al. E.D.LA., C.A. No. 2:96-3032

Scott K. McGuire v. Randy Ungar & Associates, Inc., et al. E.D.LA., C.A. No. 2:97-0373
Allen Garcia v. Randy J. Ungar & Associates, Inc., et al. E.D.LA., C.A. No. 2:97-0374

and the following "tag-along" case:

Harold Mustin v. Randy Ungar & Associates, Inc., et al. E.D.LA., C.A. No. 2:97-0657

Plaintiffs are self-employed, independent insurance agents who sell policies and products of New York Life Insurance Company. All plaintiffs are Louisiana citizens. Defendants are (1) Randy J. Ungar & Associates ("Ungar & Associates"), a New Orleans-based law firm; (2) Randy J. Ungar, a New Orleans-based attorney who is employed by and is the owner of Ungar & Associates; (3) Fleming, Hovencamp & Grayson, a Houston-based law firm; and (4) Debra Hayes, a Houston-based attorney who is employed by Fleming, Hovencamp & Grayson.

Plaintiffs allege that defendants acted in a joint venture to solicit NYLIC policyholders in order to persuade them to opt out of a class action lawsuit in New York entitled Wilson, et al. v. New York Life Insurance Company, et al., and to join defendants' class action lawsuit against NYLIC in Louisiana. In furtherance of this joint venture to attract clients, defendants allegedly placed advertisements in newspapers, mailed letters directly to policy holders, employed telemarketers, and held solicitation meetings.

Plaintiffs claim that in the solicitations, defendants misrepresented facts to the public including statements that NYLIC insurance policies were "worthless" and that NYLIC and its agents defrauded the policy holders. As a result of defendants' actions, plaintiffs claim that numerous policy holders either cancelled their policies or failed to renew their policies. Plaintiffs also allege that their sales to potential clients were adversely affected as a result of defendants' conduct.

Defendants removed the actions to federal court based on diversity jurisdiction. 28 U.S.C. §§ 1332, 1441. On the face of the complaints, complete diversity is absent since all plaintiffs are Louisiana citizens and two of the defendants, Ungar & Associates and Randy J. Ungar, are also Louisiana citizens. However, defendants argue that the Louisiana defendants are improperly or fraudulently joined because plaintiffs' complaints fail to state a claim against these defendants upon which relief can be granted. Therefore, defendants argue that the court should disregard the citizenship of these defendants in determining diversity jurisdiction.

In each action, the respective plaintiff has filed a motion to remand and defendants have filed an opposition to remand.

Discussion:

The removing party has the heavy burden of proving fraudulent joinder. Cavallini v. State Farm Mutual Auto Ins., 44 F.3d 256, 259 (5th Cir.1995). "The removing party must prove that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the in-state defendant in state court, or that there has been outright fraud in the plaintiff's pleading of jurisdictional facts." Id. Since the citizenship of the parties is not in dispute, the sole question is whether there is a possibility that plaintiffs have set forth a valid cause of action against one of the Louisiana defendants. See id. In making this determination, the court evaluates the factual allegations in plaintiffs' state court pleadings in the light most favorable to plaintiffs, resolving all contested issues of substantive fact and all uncertainties of the relevant state law in favor of plaintiffs. Id. Ultimately, if there is arguably a reasonable basis for predicting that the state law might impose liability on a non-diverse defendant, then there is no fraudulent joinder. Jernigan v. Ashland Oil, Inc. 989 F.2d 812, 816 (5th Cir.1993).

In determining whether the federal courts have original jurisdiction, the court looks at the complaints as they existed at the time of removal. Hook v. Morrison Milling, Co., 38 F.3d 776, 780 (5th Cir. 1994). However, the court is not limited to the face of plaintiffs' complaints, but rather, the court may consider the facts disclosed on the record as a whole in determining the propriety of removal or remand. 14C Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3734.

Choice of Law

Plaintiffs have asserted numerous tort claims against defendants under both Louisiana and Texas law. The first question I must resolve is which state's substantive law applies to these actions.

Federal courts sitting in diversity must apply the conflict-of-law rules of the state in which they are situated. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Cherokee Pump & Equipment Inc. v. Aurora Pump, 38 F.3d 246, 250 (5th Cir.1994). Thus, I must apply Louisiana's statutory directives on choice-of-law to determine whether Louisiana or Texas substantive law applies to these cases.

The statutory choice-of-law directives for tort claims are addressed in La.C.C. Art. 3542, which provides:

Except as otherwise provided in this Title, an issue of delictual or quasi-delictual obligations is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.

That state is determined by evaluating the strength and pertinence of the relevant policies of the involved states in light of: (1) the pertinent contacts of each state to the parties and the events giving rise to the dispute, including the place of the conduct and injury, the domicile, habitual residence, or place of business of the parties, and the state in which the relationship, if any, between the parties was centered; and (2) the policies referred to in Article 3515, as well as the policies of deterring wrongful conduct and of repairing the consequences of injurious acts.

In determining which state's policies would be most seriously impaired, the domicile of the parties is a paramount question. See Levy v. Jackson, 612 So.2d 894, 897 (La.App. 4 Cir.1993). In this case, all plaintiffs are citizens of Louisiana. Louisiana clearly has a significant interest in protecting its citizens regardless of where the tort occurs. Id. In addition, two out of the four defendants are also Louisiana citizens. Overall, the citizenship of the parties weighs in favor of applying Louisiana law.

In regard to the conduct in question, the defendants' joint venture was allegedly designed to solicit Louisiana policy holders to join a class action in Louisiana. The defendants allegedly placed an advertisement in a Louisiana newspaper, mailed letters directly to Louisiana residents, called Louisiana policyholders, and held solicitation meetings in several Louisiana cities. Furthermore, plaintiffs allege that their damages occurred in Louisiana since sales to their Louisiana clientele were adversely affected.

The only contacts with Texas are that two of the defendants are Texas citizens and defendants' "direct marketing" center was located in Texas. At the direct marketing center, defendants prepared and mailed the solicitation letters and employed telemarketers to call and receive calls from the Louisiana policy holders.

Considering the two states, I find that the policies of Louisiana would be most seriously impaired if its laws were not applied — most of the parties are Louisiana citizens, the targets of the solicitations were Louisiana policy holders, and most of the conduct in question occurred in Louisiana. Accordingly, Louisiana substantive law applies to these actions.

Plaintiffs allege six causes of action under Louisiana law: (1) intentional tortious conduct, (2) defamation, (3) invasion of privacy, (4) misrepresentation, (5) tortious interference with contractual relations, and (6) abuse of rights. If defendants fail to prove that there is "absolutely no possibility" that plaintiffs will be able to establish a cause of action against the non-diverse defendants, then the actions must be remanded for lack of subject matter jurisdiction.

Defamation

Plaintiffs claim that defendants are liable for defamation. This cause of action requires the following elements: (1) defamatory words; (2) publication; (3) falsity; (4) malice; and (5) resulting injury. Gugliuzza v. K.C.M.C., Inc., 606 So.2d 790, 791 (La.1992); Cangelosi v. Schwegmann Brothers Giant Super Markets, 390 So.2d 196, 198 (La.1980).

A defamatory communication is one that tends to harm the reputation of another so as to lower him in the estimation of the community or to deter third persons from associating or dealing with him. Gugliuzza, 606 So.2d at 791; Guilbeaux v. Times of Acadiana, Inc., 661 So.2d 1027, 1031 (La.App. 3rd Cir.1995). Accusations of criminal conduct are defamatory per se, and in such cases, proof of actual malice is not required. Cangelosi, 390 So.2d at 198; Guilbeaux, 661 So.2d at 1031. Finally, to be actionable, the defamatory words must be "of and concerning" the plaintiff or, directly or indirectly, cast a personal reflection on the plaintiff. Guilbeaux, 661 So.2d at 1031.

In their complaints, plaintiffs allege that defendants, through their telemarketers, advised callers and contacts that NYLIC agents had falsely represented facts, policy information, products, and services rendered. Plaintiffs further allege that these telemarketers advised...

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