Allstate Life Ins. Co. v. Hanson

• Decision Date: 03 May 2002
• Docket Number: No. 01-C-412.,01-C-412.
• Citation: 200 F.Supp.2d 1012
• Parties: ALLSTATE LIFE INSURANCE COMPANY, Plaintiff, v. Misti HANSON, and Elizabeth Hanson, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

200 F.Supp.2d 1012

ALLSTATE LIFE INSURANCE COMPANY, Plaintiff, v. Misti HANSON, and Elizabeth Hanson, Defendants.

No. 01-C-412.

United States District Court, E.D. Wisconsin.

May 3, 2002.

Jeffrey A. Schmeckpeper, for Allstate.

Terence P. Cahill, for Misti Hanson.

Robert J. Wagner, for Elizabeth Hanson.

DECISION AND ORDER

ADELMAN, District Judge.

I. PROCEDURAL BACKGROUND

This case involves a dispute between Misti Hanson, the former wife of Richard Hanson, now deceased, and Elizabeth Hanson, Richard's mother and only heir. The dispute concerns who is entitled to the benefits of Richard's life insurance policy. Misti is the named beneficiary of the policy, but a recently-enacted Wisconsin statute changed the status of former spouses named as beneficiaries of life insurance policies. The new law creates a presumption that divorce revokes the beneficiary status of former spouses; and it applies retroactively.

The case began when plaintiff Allstate Life Insurance Co. filed an interpleader action in Wisconsin state court naming Misti and Elizabeth as defendants. Misti is a citizen of Wisconsin, and Elizabeth is a citizen of Illinois. Elizabeth timely removed the case to federal court. Neither Allstate nor Misti objected to removal or moved to remand the case to state court. The case was assigned to the Hon. John W. Reynolds and, when Judge Reynolds died, was randomly reassigned to me. Allstate deposited the benefits under the policy, $509,189.80, with the Clerk of Court and was dismissed as a party.

Misti now moves for summary judgment, asserting that she is entitled to the proceeds of the policy. She argues that the new law presumptively revoking her beneficiary status violates federal and state constitutional provisions prohibiting the enactment of laws that impair the obligation of contract.

II. SUBJECT MATTER JURISDICTION

Although no party raised the issue, the case raises a question of the court's jurisdiction. Federal courts are obliged to police their own jurisdiction even if neither party challenges it. See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999). Further, 28 U.S.C. § 1447(c) requires that, if at any time it appears that a federal court lacks subject matter jurisdiction of a removed case, "the case shall be remanded." Thus, before proceeding further, I must address the jurisdictional issue.

Federal courts are courts of limited jurisdiction. They can adjudicate only those cases that the Constitution and Congress authorize them to adjudicate—generally those involving diversity of citizenship, a federal question, or to which the United States is a party. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). One source of jurisdiction is 28 U.S.C. § 1335, which provides that "district courts shall have original jurisdiction of any civil action of interpleader" involving more than $500 if "two or more adverse claimants, of diverse citizenship" claim entitlement to the money, and if the plaintiff deposits the money with the court. Under § 1335 plaintiff could have filed an interpleader action in federal court. More than $500 is at stake, plaintiff deposited the money with the court, and the case involves two claimants, Misti and Elizabeth, who are both adverse and diverse. Thus, this court would have had original jurisdiction over the case.

Removal jurisdiction, however, is, in some respects narrower than original jurisdiction. Title 28 U.S.C. § 1441(b) provides that a non-federal question "civil action of which the district courts have original jurisdiction ... shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." The present case is a civil action of which the district courts would have had original jurisdiction. Such jurisdiction was based on § 1335 rather than on the presence of a federal question. Thus, the case was removable under § 1441(b) except for the problem of Misti's citizenship. However, because Misti was properly joined and served as a defendant and was a citizen of Wisconsin, the state in which the action was brought, § 1441(b) barred removal. The rule barring removal in cases where a defendant is a citizen of the forum state is sometimes called the "forum, defendant rule," and "is designed to preserve the plaintiff's choice of a (state) forum, under circumstances where it is arguably less urgent to provide a federal forum to prevent prejudice against an out-of-state party." Hurley v. Motor Coach Indus., Inc., 222 F.3d 377, 378-81 (7th Cir.2000). Thus, because of the forum defendant rule, Elizabeth's removal of the case was improper.

Additionally, courts have interpreted 28 U.S.C. § 1441(a), the statute that permits removal by "the defendant or the defendants," to require that all defendants join in the removal petition. See Speciale v. Seybold, 147 F.3d 612, 617 n. 4 (7th Cir. 1998) (internal citation omitted); Doe v. Kerwood, 969 F.2d 165, 167 (5th Cir.1992). Thus, in the present case the removal procedure was also defective because Elizabeth removed without obtaining the consent of Misti, a co-defendant.

However, neither Allstate nor Misti objected to removal. Neither moved to remand within thirty days as required by 28 U.S.C. § 1447(c), but rather both proceeded to litigate the case in federal court. Thus, the question presented is whether Elizabeth's defective removal was waived. This depends on whether the forum defendant rule and the requirement that all defendants consent to removal are jurisdictional in nature and, thus, nonwaivable, or are defects of a lesser order, hence, waivable. Hurley, 222 F.3d at 379 (stating that non-jurisdictional defects in removal are waivable but jurisdictional defects are not). The Seventh Circuit has recently joined the overwhelming majority of other circuits in holding that the forum defendant rule is non-jurisdictional. Id. The court based its conclusion in part on the fact that the case could have been filed in federal court in the first place. Id. at 380; see also Korea Exch. Bank v. Trackwise Sales Corp., 66 F.3d 46, 50 (3d Cir.1995) ("we conclude ... that an irregularity in removal of a case to federal court is to be considered `jurisdictional' only if the case could not initially have been filed in federal court.").

As previously stated, the present case could have been properly filed in federal court pursuant to § 1335. Because the forum defendant rule is non-jurisdictional, the failure of a party to object to removal within thirty days constitutes a waiver of the right to have the case remanded to state court. Further, the failure of a removing defendant to file a written consent to removal from a codefendant is similarly a non-jurisdictional matter. See Page v. City of Southfield, 45 F.3d 128, 133 (6th Cir.1995). Such failure is a "defect in removal procedure" within the meaning of § 1447(c). Like the forum defendant rule, it is an irregularity that must be raised by a motion to remand within thirty days after filing the notice of removal, or it is waived. Thus, even though the case was improperly removed from state court, neither of the deficiencies in the removal process was jurisdictional. Both were waivable and waived. Thus, the court has subject matter jurisdiction. Therefore, I will proceed to address Misti's motion for summary judgment.

III. FACTUAL BACKGROUND

Misti and Richard married in 1989 and each purchased a $500,000 Allstate life insurance policy naming each other as beneficiary but reserving the power to change the beneficiary designation. In 1997, Misti and Richard divorced. The marital settlement agreement stated that "[n]either party shall be obligated to maintain life insurance for the benefit of the other party," (R. 18 Ex. D at 4) and awarded each party the life insurance policy in his or her own name. In addition, the agreement stated "each party shall be divested of and each party waives, renounces, and gives up ... all right, title, and interest in and to property awarded to the other. All property and money received and retained by the parties shall be the separate property of the respective parties, free and clear of any right, title, interest or claim of the other party." (Id. at 8.) Nothing in the agreement or decree expressly changed the beneficiaries in Misti's and Richard's life insurance policies, and Misti and Richard did not expressly change the beneficiaries later.

When Misti and Richard purchased the policies and when they divorced, Wisconsin law presumptively treated each divorced spouse as having pre-deceased the other for purposes of awarding probate assets at death. Wis. Stat. § 853.11(3) (1991), amended by Wis. Stat. § 854.15 (1998); see also Howard S. Erlanger, Wisconsin's New Probate Code, 71 Wis. Lawyer 6, 48 (Oct.1998). However, nonprobate assets, such as life insurance policies, were treated differently. See Bersch v. VanKleeck, 112 Wis.2d 594, 599, 334 N.W.2d 114 (1983). When spouses who had named each other as beneficiaries in life insurance policies divorced, the former spouse remained the presumed beneficiary unless the divorce decree "unequivocally and explicitly" divested the spouse of that interest, and the parties notified the insurance company of the change. Id.

In 1998, the Wisconsin Legislature revised the state probate code bringing it into closer alignment with the Uniform Probate Code. Erlanger, Wisconsin's New Probate Code, 71 Wis. Lawyer at 6-7. The new provision states that divorce "[r]evokes any revocable disposition of property made by the decedent to the former spouse or a relative of the former spouse in a governing instrument." Wis. Stat. § 854.15(3)(a). The effect of this change was to apply the presumption previously applicable to the probate assets of divorcing spouses to nonprobate assets and presumptively treat each divorced spouse as having pre-deceased the...