Hilgeman v. National Ins. Co. of America, No. 75-1724

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtGODBOLD
Citation547 F.2d 298
PartiesFed. Sec. L. Rep. P 95,879 Edward W. HILGEMAN, on behalf of himself and all other purchasers of "Security Charter Contracts" Issued and Sold by National Insurance Company of America, a North Dakota Corporation, Plaintiff-Appellant, v. NATIONAL INSURANCE COMPANY OF AMERICA, etc., et al., Defendants-Appellees.
Decision Date18 February 1977
Docket NumberNo. 75-1724

Page 298

547 F.2d 298
Fed. Sec. L. Rep. P 95,879
Edward W. HILGEMAN, on behalf of himself and all other
purchasers of "Security Charter Contracts" Issued and Sold
by National Insurance Company of America, a North Dakota
Corporation, Plaintiff-Appellant,
v.
NATIONAL INSURANCE COMPANY OF AMERICA, etc., et al.,
Defendants-Appellees.
No. 75-1724.
United States Court of Appeals,
Fifth Circuit.
Feb. 18, 1977.

Page 299

J. Vernon Patrick, Jr., Barton S. Sacher, Birmingham, Ala., for plaintiff-appellant.

Alan W. Heldman, Birmingham, Ala., for defendants-appellees.

Appeal from the United States District Court for the Northern District of Alabama.

Before GODBOLD, McCREE * and TJOFLAT, Circuit Judges.

GODBOLD, Circuit Judge:

The facts of this case are set forth in our earlier decision, Hilgeman v. National Insurance Company, 444 F.2d 446 (CA5, 1971). In that appeal we were unable to determine the basis upon which the district court dismissed Hilgeman's complaint, and we remanded the case for clarification of the dismissal order.

Page 300

The only additional facts of relevance to the disposition of the case before us are that while plaintiff resided in Alabama NICOA sent to him what it termed a "premium" notice and he paid that "premium."

On remand the district court added to its earlier dismissal order by holding that the Security Charter Contracts were not "securities" within the meaning of the federal Securities Acts and thus the court lacked subject matter jurisdiction. The district court has not reconciled its dismissal for lack of subject matter jurisdiction with the teachings of Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946), as required by our earlier decision, 444 F.2d at 446. As we noted in Mobil Oil Corp. v. Kelley, 493 F.2d 784, 786 (CA5), cert. denied, 419 U.S. 1022, 95 S.Ct. 498, 42 L.Ed.2d 296 (1974), Bell v. Hood establishes the principle that "a complaint that alleges the existence of a federal question establishes jurisdiction, even though the court ultimately decides that the plaintiff's federal rights were not violated." Dismissal for lack of jurisdiction is appropriate only where the court decides that the federal claim is insubstantial, i. e., frivolous, or where the claim is clearly foreclosed by prior decisions of the Supreme Court. Mays v. Kirk, 414 F.2d 131, 135 (CA5, 1969). Plaintiff's claim has not been foreclosed by any decision of the Supreme Court, nor is it so lacking in plausibility that it can be said to be frivolous. 1 Therefore, the complaint cannot be dismissed for lack of subject matter jurisdiction. Nonetheless, if the contracts are not "securities" plaintiff's claims could still be dismissed for failure to state a claim upon which relief can be granted. Therefore, we reverse the dismissal by the district court with directions that it reconsider its decision in light of our holding today in Grainger v. State Security Insurance Co. (CA5, 1977) No. 75-3061, 547 F.2d 303.

The district court went on to say that assuming that the Security Charter Contracts were securities, it would still dismiss the plaintiff's complaint on the following grounds: (a) lack of sufficient service of process on NICOA, Moody and Sando; (b) lack of personal jurisdiction over NICOA, Sando and Moody; (c) lack of proper venue as to the claims against NICOA, Moody and Sando; and (d) failure to state a claim upon which relief can be granted against Moody and Empire on the ground that those two defendants did not become controlling persons of NICOA until two years after the alleged misrepresentations were made to the plaintiff. 2 Plaintiff appeals from the court's clarifying order as well as from its denial of plaintiff's motion to be allowed to amend its complaint to allege violations of the 1940 Investment Company Act.

Service of process was made on NICOA and Empire by substituted service upon the Alabama Superintendent of Insurance pursuant to state law. 3 Service of process under the Alabama Unauthorized Insurers Process Act is limited to suits, actions or proceedings "arising out of" contracts of insurance. While the courts of Alabama have not interpreted the "arising out of" language in the statute, the Alabama legislature in its statement of the Act's purpose, declared that "it is a subject of concern that many residents of this state hold policies of insurance issued or delivered in this state by insurers while not authorized to do business in this state, thus presenting to such residents the often insuperable obstacle of resorting to distant forums for the purpose of asserting legal rights under

Page 301

the policy." 4 (Emphasis supplied.) The appellant does not assert that he holds an insurance policy and that the policy gives rise to enforceable rights. Instead, he maintains that he was sold a "security" within the meaning of the federal Securities Acts, and that he has a cause of action arising under those Acts. 5 The Alabama statute used by plaintiff was meant to cover the former situation, not the latter. 6 The court below was correct in dismissing the claims against Empire and NICOA for lack of proper service of process.

Service of process was made on Moody and Sando by U.S. marshals pursuant to the service of process provisions of the federal Securities Acts,15 U.S.C. §§ 78v, 78aa. The court below held that service was insufficient because neither Moody nor Sando is "found or is an inhabitant or transacts business in Alabama nor is the suit based upon an offer or sale that took place in Alabama." Service of process under the 1933 and 1934 Acts is nationwide, and may be served "in any . . . district of which the defendant is an inhabitant or wherever the defendant...

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83 practice notes
  • Securities Investor Protection Corp. v. Vigman, Nos. 84-6074
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • July 2, 1985
    ...jurisdiction over claims of violations of federal securities law. Id. at 73. See also, Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 301 (5th Cir.1977); Mariash v. Morrill, 496 F.2d at 1142; accord, GRM v. Equine Investment and Management, 596 F.Supp. 307, 311 (S.D.Tex.1984);......
  • Great Western United Corp. v. Kidwell, No. 77-2809
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • August 10, 1978
    ...Such interstate communication into the forum makes venue proper under § 27. See, e. g., Hilgeman v. National Insurance Co., 5 Cir. 1977, 547 F.2d 298; Mayer v. Development Co., 1975 D.Del., 398 F.Supp. Page 1273 B. 28 U.S.C. § 1391(b). Because subject matter jurisdiction in this case is not......
  • Williamson v. Tucker, No. 79-1058
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • May 20, 1981
    ...thereby limit the court's discretion to dismiss for lack of subject matter jurisdiction. Hilgeman v. National Insurance Co. of America, 547 F.2d 298 (5th Cir. 1977) (whether certain insurance policies were securities); Bell v. Health-Mor, Inc., supra (whether a referral sales agreement is a......
  • Appling County v. Municipal Elec. Authority of Georgia, No. 79-1308
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • July 23, 1980
    ...decision clearly forecloses the claim. See Bell v. Health-Mor, Inc., 549 F.2d 342, 344 (5th Cir. 1977); Hilgeman v. National Ins. Co., 547 F.2d 298, 300 (5th Cir. Page 1306 Olivares v. Martin, 555 F.2d 1192, 1195 (5th Cir. 1977). Here, under standards well-established by the Supreme Court, ......
  • Request a trial to view additional results
83 cases
  • Securities Investor Protection Corp. v. Vigman, Nos. 84-6074
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • July 2, 1985
    ...jurisdiction over claims of violations of federal securities law. Id. at 73. See also, Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 301 (5th Cir.1977); Mariash v. Morrill, 496 F.2d at 1142; accord, GRM v. Equine Investment and Management, 596 F.Supp. 307, 311 (S.D.Tex.1984);......
  • Great Western United Corp. v. Kidwell, No. 77-2809
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • August 10, 1978
    ...Such interstate communication into the forum makes venue proper under § 27. See, e. g., Hilgeman v. National Insurance Co., 5 Cir. 1977, 547 F.2d 298; Mayer v. Development Co., 1975 D.Del., 398 F.Supp. Page 1273 B. 28 U.S.C. § 1391(b). Because subject matter jurisdiction in this case is not......
  • Williamson v. Tucker, No. 79-1058
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • May 20, 1981
    ...thereby limit the court's discretion to dismiss for lack of subject matter jurisdiction. Hilgeman v. National Insurance Co. of America, 547 F.2d 298 (5th Cir. 1977) (whether certain insurance policies were securities); Bell v. Health-Mor, Inc., supra (whether a referral sales agreement is a......
  • Appling County v. Municipal Elec. Authority of Georgia, No. 79-1308
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • July 23, 1980
    ...decision clearly forecloses the claim. See Bell v. Health-Mor, Inc., 549 F.2d 342, 344 (5th Cir. 1977); Hilgeman v. National Ins. Co., 547 F.2d 298, 300 (5th Cir. Page 1306 Olivares v. Martin, 555 F.2d 1192, 1195 (5th Cir. 1977). Here, under standards well-established by the Supreme Court, ......
  • Request a trial to view additional results

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