Hanahan v. John Hancock Life Ins. Co. (Usa)

• Decision Date: 12 October 2007
• Docket Number: C.A. No. 9:07 cv 2715-PMD.
• Parties: Ralph B. HANAHAN as attorney-in-fact for Grey M. Geissler under Durable Power of Attorney dated November 29, 2006; as the Manager of Salt Creek Investments, LLC, Conch Point, LLC, and Lyttleton Street, LLC as Trustee of The Grey M. Geissler Trust Agreement dated July 5, 2005, as amended, merged, and re-stated, and as Trustee of the Grey M. Geissler Trust dated February 12, 2007; Grey M. Geissler, individually, as beneficiary and former Trustee of The Rudolph Geissler, Jr. Trust dated April 6, 1999, as amended, and on behalf of the remainder beneficiary and the Successor Trustee(s) of The Rudolph Geissler, Jr. Trust dated April 6, 1999, as amended and of its Marital and Family Trusts; as income beneficiary and former Trustee of the Marital Trust created under Article IX of The Rudolph Geissler, Jr. Trust dated April 6, 1999, as amended; as income beneficiary and former Trustee of the Family Trust created under Article X of The Rudolph Geissler, Jr. Trust dated April 6, 1999, as amended; as the income and principal beneficiary and as the Settlor and Trustee of The Grey Rhett Geissler Trust dated January 25, 2003; as Settlor and former Trustee of The Grey M. Geissler Trust Agreement dated July 5, 2005 as amended, merged, and re-stated; as beneficiary of The Grey M. Geissler Trust Agreement dated July 5, 2005 as amended merged, and re-stated; as Settlor of The Grey M. Geissler Irrevocable Trust Agreement dated December 19, 2005, as Settlor of The Grey M. Geissler Irrevocable Trust Agreement II dated February 27, 2006; and, as named insured in those certain policies of life insurance issued by John Hancock Life Insurance Company, Inc., (USA), Plaintiffs, v. JOHN HANCOCK LIFE INSURANCE COMPANY, INC., (USA), Jeffery Covelli, Brian Kreider, Signator Insurance Agency, Haynes Brokerage Group, William M. Rhett, Jr. individually, as fiduciary for Grey M. Geissler, as the former Trustee of The Grey M. Geissler Trust Agreement dated July 5, 2005 as amended, as former Attorney-in-Fact and Fiduciary under General Durable Power of Attorney for Grey M. Geissler, as the present or former Manager and/or Agent of Salt Creek Investments, LLC, Conch Point LLC, and of Lyttleton Street, LLC; De facto Trustee of the Rudolph Geissler, Jr. Trusts; as beneficiary of the Grey M. Geissler Irrevocable Trust Agreement dated December 19, 2005; and as beneficiary of the Grey M. Geissler Irrevocable Trust Agreement II dated February 27, 2006; Nancy Rhett, individually, as De facto Trustee of the Rudolph Geissler, Jr. Trust, as Financial Manager of Salt Creek Investments LLC, and as a fiduciary for Grey M. Geissler as beneficiary of the Grey M. Geissler Irrevocable Trust Agreement dated December 19, 2005; as beneficiary of the Grey M. Geissler Irrevocable Trust Agreement II dated February 27, 2006; and as De facto Trustee of The Grey M. Geissler Trust Agreement dated July 5, 2005 as amended; Douglas S. Delaney, individually and as former Trustee of The Grey M. Geissler Irrevocable Trust Agreement dated December 19, 2005; as Trustee of The Grey M. Geissler Irrevocable Trust Agreement II dated February 27, 2006, as De facto Trustee of the Rudolph Geissler, Jr. Trust; as attorney for The Rudolph Geissler, Jr. Trust, Grey M. Geissler, Salt Creek Investments, LLC, Conch Point, LLC, Lyttleton Street, LLC, William M. Rhett, Jr., and Nancy Rhett; and Douglas S. Delaney, P.A., Defendants.
• Court: U.S. District Court — District of South Carolina

518 F.Supp.2d 780

Ralph B. HANAHAN as attorney-in-fact for Grey M. Geissler under Durable Power of Attorney dated November 29, 2006; as the Manager of Salt Creek Investments, LLC, Conch Point, LLC, and Lyttleton Street, LLC as Trustee of The Grey M. Geissler Trust Agreement dated July 5, 2005, as amended, merged, and re-stated, and as Trustee of the Grey M. Geissler Trust dated February 12, 2007; Grey M. Geissler, individually, as beneficiary and former Trustee of The Rudolph Geissler, Jr. Trust dated April 6, 1999, as amended, and on behalf of the remainder beneficiary and the Successor Trustee(s) of The Rudolph Geissler, Jr. Trust dated April 6, 1999, as amended and of its Marital and Family Trusts; as income beneficiary and former Trustee of the Marital Trust created under Article IX of The Rudolph Geissler, Jr. Trust dated April 6, 1999, as amended; as income beneficiary and former Trustee of the Family Trust created under Article X of The Rudolph Geissler, Jr. Trust dated April 6, 1999, as amended; as the income and principal beneficiary and as the Settlor and Trustee of The Grey Rhett Geissler Trust dated January 25, 2003; as Settlor and former Trustee of The Grey M. Geissler Trust Agreement dated July 5, 2005 as amended, merged, and re-stated; as beneficiary of The Grey M. Geissler Trust Agreement dated July 5, 2005 as amended merged, and re-stated; as Settlor of The Grey M. Geissler Irrevocable Trust Agreement dated December 19, 2005, as Settlor of The Grey M. Geissler Irrevocable Trust Agreement II dated February 27, 2006; and, as named insured in those certain policies of life insurance issued by John Hancock Life Insurance Company, Inc., (USA), Plaintiffs, v. JOHN HANCOCK LIFE INSURANCE COMPANY, INC., (USA), Jeffery Covelli, Brian Kreider, Signator Insurance Agency, Haynes Brokerage Group, William M. Rhett, Jr. individually, as fiduciary for Grey M. Geissler, as the former Trustee of The Grey M. Geissler Trust Agreement dated July 5, 2005 as amended, as former Attorney-in-Fact and Fiduciary under General Durable Power of Attorney for Grey M. Geissler, as the present or former Manager and/or Agent of Salt Creek Investments, LLC, Conch Point LLC, and of Lyttleton Street, LLC; De facto Trustee of the Rudolph Geissler, Jr. Trusts; as beneficiary of the Grey M. Geissler Irrevocable Trust Agreement dated December 19, 2005; and as beneficiary of the Grey M. Geissler Irrevocable Trust Agreement II dated February 27, 2006; Nancy Rhett, individually, as De facto Trustee of the Rudolph Geissler, Jr. Trust, as Financial Manager of Salt Creek Investments LLC, and as a fiduciary for Grey M. Geissler as beneficiary of the Grey M. Geissler Irrevocable Trust Agreement dated December 19, 2005; as beneficiary of the Grey M. Geissler Irrevocable Trust Agreement II dated February 27, 2006; and as De facto Trustee of The Grey M. Geissler Trust Agreement dated July 5, 2005 as amended; Douglas S. Delaney, individually and as former Trustee of The Grey M. Geissler Irrevocable Trust Agreement dated December 19, 2005; as Trustee of The Grey M. Geissler Irrevocable Trust Agreement II dated February 27, 2006, as De facto Trustee of the Rudolph Geissler, Jr. Trust; as attorney for The Rudolph Geissler, Jr. Trust, Grey M. Geissler, Salt Creek Investments, LLC, Conch Point, LLC, Lyttleton Street, LLC, William M. Rhett, Jr., and Nancy Rhett; and Douglas S. Delaney, P.A., Defendants.

C.A. No. 9:07 cv 2715-PMD.

United States District Court, D. South Carolina, Charleston Division.

October 12, 2007.

John Rhett Crosswell Bowen, Laughlin and Bowen, Hilton Head Island, SC, for Plaintiffs.

Leslie Arlen Cotter, Jr., Richardson Plowden and Robinson, Columbia, SC,

Sean Michael Bolchoz, Hale and Bolchoz, Hilton Head Island, SC, Thomas S. Tisdale, Jr., Nexsen Pruet Jacobs Pollard and Robinson, Charleston, SC, for Defendants.

ORDER

PATRICK MICHAEL DUFFY, District Judge.

This matter is before the court on Plaintiffs' Motion to Remand pursuant to 28 U.S.C. § 1332. Plaintiffs claim that the matter must be remanded to state court because no federal jurisdiction exists. The complaint asserts no federal issue of law and Plaintiffs assert complete diversity of citizenship is lacking because Plaintiffs and Defendants William M. Rhett, Jr. and Nancy Rhett are all citizens of South Carolina. Defendants claim that complete diversity exists because Defendants William M. Rhett, Jr. and Nancy Rhett are no longer parties to this, action. For the reasons set forth herein, Plaintiffs' Motion for Remand is denied.

BACKGROUND

Plaintiffs Ralph B. Hanahan ("Hanahan") and Grey M. Geissler ("Geissler"), both citizens of South Carolina, filed an amended complaint in the Court of Common Pleas for Beaufort County on March 2, 2007. (Pls.' Ex. A.) This amended complaint commenced an action against, among others, the removing Defendants Jeffrey Covelli ("Covelli"), Brian Kreider ("Kreider"), and Haynes Brokerage Group ("HBG"). All three removing Defendants are citizens of jurisdictions other than South Carolina.¹

The complaint alleged fourteen separate causes of action against Defendants stemming from their alleged participation in a scheme of wrongful conversion of certain property belonging to Geissler, an 87 year-old widow, and trusts set up for Geissler's benefit, as well as the wrongful procurement of a life insurance policy on Geissler. (Pls.' Ex. A.) A number of other Defendants to this action were acknowledged by both parties to be citizens of South Carolina.

Also on March 2, 2007, the state court entered a Consent Order between the Plaintiffs and Defendants William M. Rhett, Jr. and Nancy Rhett (collectively, "the Rhetts"). This Consent Order, entitled "Covenant Not To Execute and Agreement," stipulated that so long as the Rhetts complied with certain provisions of the agreement, Plaintiffs agreed to release the Rhetts from any liability they may face in the action. (Pls.' Ex. I.)

By July, the Plaintiffs had either dismissed or settled their claims with all remaining South Carolina Defendants.² On August 6, 2007, the Defendants filed a Notice of Removal with this court, asserting that complete diversity now existed between the parties, and this court had jurisdiction under 28 U.S.C. §§ 1332, 1441, and 1446. On August 30, Plaintiffs filed a Motion to Remand, claiming that the Rhetts had made material misrepresentations and not honored their obligations under the Consent Order, and thus were still parties to this action, which would defeat diversity jurisdiction. Defendants filed a Response on September 14, asserting that the Consent Order released the Rhetts from the litigation, meaning that they were no longer real parties in interest and their South Carolina citizenship should not be considered by the court for the purposes of determining whether diversity existed between the parties or not.

Neither party disputes that, aside from the Rhetts, all South Carolina Defendants named in the amended complaint are no longer parties to this litigation. Neither party disputes that more than $75,000 is in dispute in this litigation. The sole issue before the court is to determine whether the Consent Order, and the Rhetts' alleged noncompliance with the conditions set forth therein, means that the Rhetts are no longer parties in interest to this litigation, and thus whether their South Carolina citizenship should be taken into account in determining diversity jurisdiction.

ANALYSIS

The burden of demonstrating jurisdiction resides with "the party seeking removal." Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir.2004) (citing Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir.1994)). The court is obliged to construe removal jurisdiction strictly because of the "significant federalism concerns" implicated. Id. Therefore, "[i]f federal jurisdiction is doubtful, a remand [to state court] is necessary." Id.

Section 1441 of Title 28 provides that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). In this case, Defendants allege that removal was proper because the district court had original jurisdiction to hear Plaintiff's case under 28 U.S.C. § 1332. Section 1332 grants district courts "original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of all interest and costs, and is between citizens of different states." 28 U.S.C. § 1332(a). Section 1446 governs cases where complete diversity arises after the commencement of the litigation, and provides that:

If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable ...

28 U.S.C. § 1446(b).

In order for a federal court to have diversity jurisdiction, the plaintiff must be a citizen of a separate jurisdiction from each and every defendant. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806). If, after the commencement of the litigation, a plaintiff enters into a covenant not to execute with all remaining nondiverse parties, complete diversity can arise, and the case can then be removed to federal court. See, e.g., Self v. General Motors Corp., 588 F.2d 655 (9th Cir.1978). The key question a court must decide is whether the settlement or dismissal was a voluntary act of the plaintiff which "has demonstrated the plaintiffs desire not to pursue the case against the non-diverse party." Higgins v. E.I. Du-Pont de Nemours & Co., 863 F.2d 1162, 1166 (4th Cir.1988). See also Wingfield v....