Lindenberg v. Jackson National Life Insurance Co., 122118 FED6, 17-6034

Docket Nº:17-6034, 17-6079
Opinion Judge:CLAY, CIRCUIT JUDGE.
Party Name:Tamarin Lindenberg, individually and as natural guardian of her minor children ZTL and SML, Plaintiff-Appellee/Cross-Appellant, v. Jackson National Life Insurance Company, Defendant-Appellant/Cross-Appellee, State of Tennessee, Intervenor-Appellee.
Attorney:Gadson W. Perry, BUTLER SNOW LLP, Memphis, Tennessee, for Appellant/Cross-Appellee. Molly A. Glover, BURCH, PORTER & JOHNSON, PLLC, Memphis, Tennessee, for Appellee/Cross-Appellant. Joseph Ahillen, OFFICE OF THE ATTORNEY GENERAL OF TENNESSEE, Nashville, Tennessee, for Intervenor Appellee Gadson W...
Judge Panel:Before: CLAY, STRANCH, and LARSEN, Circuit Judges. CLAY, J., delivered the opinion of the court in which STRANCH, J., joined, and LARSEN, J., joined in part. LARSEN, Circuit Judge, concurring in part and dissenting in part.
Case Date:December 21, 2018
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Tamarin Lindenberg, individually and as natural guardian of her minor children ZTL and SML, Plaintiff-Appellee/Cross-Appellant,

v.

Jackson National Life Insurance Company, Defendant-Appellant/Cross-Appellee,

State of Tennessee, Intervenor-Appellee.

Nos. 17-6034, 17-6079

United States Court of Appeals, Sixth Circuit

December 21, 2018

Argued: May 3, 2018

Appeal from the United States District Court for the Western District of Tennessee at Memphis. No. 2:13-cv-02657-Jon Phipps McCalla, District Judge.

ARGUED:

Gadson W. Perry, BUTLER SNOW LLP, Memphis, Tennessee, for Appellant/Cross-Appellee.

Molly A. Glover, BURCH, PORTER & JOHNSON, PLLC, Memphis, Tennessee, for Appellee/Cross-Appellant.

Joseph Ahillen, OFFICE OF THE ATTORNEY GENERAL OF TENNESSEE, Nashville, Tennessee, for Intervenor Appellee

BRIEF:

Gadson W. Perry, Daniel W.Van Horn, Michael C. McLaren, BUTLER SNOW LLP, Memphis, Tennessee, for Appellant/Cross-Appellee.

Molly A. Glover, Charles S. Higgins, BURCH, PORTER & JOHNSON, PLLC, Memphis, Tennessee, for Appellee/Cross-Appellant.

Joseph Ahillen, OFFICE OF THE ATTORNEY GENERAL OF TENNESSEE, Nashville, Tennessee, for Intervenor Appellee

Before: CLAY, STRANCH, and LARSEN, Circuit Judges.

CLAY, J., delivered the opinion of the court in which STRANCH, J., joined, and LARSEN, J., joined in part.

OPINION

CLAY, CIRCUIT JUDGE.

Defendant Jackson National Life Insurance Company ("Defendant") appeals from the district court's judgment enforcing a jury trial verdict of $350, 000 in actual damages, $87, 500 in bad faith damages, and $3, 000, 000 in punitive damages in favor of Plaintiff Tamarin Lindenberg ("Plaintiff"), individually and in her capacity as natural guardian of her minor children, ZTL and SML.1 Plaintiff cross-appeals, challenging a statutory cap that the district court applied to reduce the award of punitive damages to $700, 000. The State of Tennessee ("the State") intervened to defend the statute. For the reasons that follow, we AFFIRM the district court's judgment on all issues raised in Defendant's appeal, REVERSE on the issue raised in Plaintiff's cross-appeal, VACATE the judgment as to punitive damages, and REMAND with instructions for the district court to recalculate the award of punitive damages in accordance with the jury verdict and with this Court's holding that the statutory cap on punitive damages, T.C.A. § 29-39-104, is unconstitutional.

BACKGROUND

This case arises in diversity and concerns a dispute over a $350, 000 life insurance policy issued by Defendant to Thomas A. Lindenberg ("Decedent"). Plaintiff Tamarin Lindenberg, the former wife of Decedent, brought suit individually and in her capacity as the natural guardian of her minor children, ZTL and SML, the two children of Plaintiff and Decedent. Plaintiff's claims included breach of contract and both statutory and common law bad faith.

Plaintiff is the primary beneficiary designated in the life insurance policy at issue (the "Policy") and was to receive 100% of the proceeds of the Policy upon Decedent's death. The contingent beneficiaries of the Policy are Decedent's "surviving children equally." (R. 125 at PageID #1854.) During their marriage, Plaintiff and decedent adopted ZTL and SML. Third-Party Defendant Mary Angela Williams ("Williams") is Decedent's daughter from a prior marriage.

Plaintiff and Decedent executed a Marital Dissolution Agreement ("MDA") in 2005, and a divorce decree was issued in 2006. The MDA required that "Wife shall pay for the Life Insurance premium for the Columbus and [Defendant] policies for so long as she is able to do so and still support the parties['] children." (Trial Ex. 10 at 7.) Additionally, the MDA required "Husband at his expense [to] maintain in full force insurance on his life having death benefits payable to the parties' children as irrevocable primary beneficiaries[.]" (Id. at 9.)

Decedent died on January 22, 2013. On February 6, 2013, Plaintiff filed a claim under the Policy for the death benefit. On March 11, 2013, Plaintiff's attorney sent Defendant a letter seeking expedited review of the claim and payment of the death benefit. On March 22, 2013, Defendant responded with a letter requiring further action by Plaintiff, including obtaining "waivers to be signed by the other potential parties" and "court-appointed Guardian(s) for the Estates of the two minor children." (Trial Ex. 23.) Defendant stated that another option would be for Plaintiff to waive her rights to the claim so that Defendant could disburse the proceeds to the minor children. Throughout the month of May 2013, Plaintiff and Defendant were in communication about how to proceed and whether Defendant would interplead the funds with the court. This discussion culminated in Plaintiff filing the instant lawsuit.

With its answer, Defendant included an interpleader complaint that implicated Plaintiff and Williams. Defendant later maintained that its interpleader complaint also implicated the minor children, ZTL and SML.2 Defendant asserted that it was "not in a position to determine, factually or legally, who is entitled to the Death Benefit," and requested that the district court "determine to whom said benefits should be paid." (R. 4 at 7.)

Plaintiff and Williams jointly moved to dismiss the interpleader complaint. While the motion was pending, and after several months of litigation, the parties filed a joint motion to appoint guardians ad litem for the minor children, which the district court granted. The court then granted the motion to dismiss Defendant's interpleader complaint. The court further ordered Defendant "to disburse life insurance policy benefits to Plaintiff in the amount of $350, 000 with interest from January 23, 2013, until the date of payment." (R. 32 at 17.) Plaintiff's claims against Defendant remained.

Defendant filed a motion to dismiss, attacking Plaintiff's claims for punitive damages and bad faith. Through a series of orders, the court granted in part and denied in part Defendant's motion. The court dismissed Plaintiff's claims for common law bad faith. The court allowed Plaintiff to proceed with her claims for common law breach of contract, statutory bad faith, and common law punitive damages predicated on breach of contract.

Following discovery, Defendant filed for summary judgment. The district court denied the motion on all claims Plaintiff asserted in her personal capacity but granted the motion on all claims Plaintiff asserted on behalf of the minor children, ZTL and SML. The court held a weeklong trial. Defendant moved for judgment as a matter of law, which the district court denied. The jury returned a verdict finding that (1) Defendant breached its contract with Plaintiff, resulting in actual damages in the amount of $350, 000; (2) Defendant's refusal to pay was in bad faith, resulting in additional damages in the amount of $87, 500; and (3) Defendant's refusal to pay was either intentional, reckless, malicious, or fraudulent. The jury then returned a special verdict awarding Plaintiff punitive damages in the amount of $3, 000, 000. Defendant renewed its motion for judgment as a matter of law.

Defendant also argued that the district court must apply T.C.A. § 29-39-104, a Tennessee statute that caps punitive damages at two times the amount of compensatory damages awarded or $500, 000, whichever is greater. In response, Plaintiff argued that the statutory punitive damages cap violates the Tennessee Constitution. On this basis, Plaintiff filed a motion to certify the issue of the punitive damages cap's constitutionality to the Tennessee Supreme Court. The State of Tennessee then moved to intervene, which the district court permitted. The district court agreed to certify the following two questions to the Tennessee Supreme Court: 1. Do the punitive damages caps in civil cases imposed by Tennessee Code Annotated Section 29-39-104 violate a plaintiff's right to a trial by jury, as guaranteed in Article I, section 6 of the Tennessee Constitution?

2. Do the punitive damages caps in civil cases imposed by Tennessee Code Annotated Section 29-39-104 represent an impermissible encroachment by the legislature on the powers vested exclusively in the judiciary, thereby violating the separation of powers provisions of the Tennessee Constitution?

(R. 188 at PageID # 4270.) The Tennessee Supreme Court recognized that the "certified questions raise issues of first impression not previously addressed by the appellate courts of Tennessee" but declined to provide an opinion on either of the certified questions. (R. 209-1 at PageID #4916.)

The district court then rejected Defendant's renewed motion for judgment as a matter of law, rejected Plaintiff's constitutional challenge to...

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