Mayo v. Hartford Life Ins. Co., No. 01-CV-2139.

• Court: United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
• Writing for the Court: Atlas
• Citation: 220 F.Supp.2d 714
• Parties: Scott MAYO, et al., Plaintiffs, v. HARTFORD LIFE INSURANCE CO., et al., Defendants.
• Docket Number: No. 01-CV-2139.
• Decision Date: 07 August 2002

220 F.Supp.2d 714 Scott MAYO, et al., Plaintiffs,
v.
HARTFORD LIFE INSURANCE CO., et al., Defendants. No. 01-CV-2139. United States District Court, S.D. Texas, Houston Division. August 7, 2002.

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Scott Monroe Clearman, Michael D. Myers, Robert H. Espey, II, Dwaine Massey, McClanahan & Clearman, LLP, Houston, TX, for Plaintiffs.

Barry A. Chasnoff, Akin Gump et al., San Antonio, TX, Michael M. Wilson, Clements O'Neill et al., Houston, TX, Howard Kleinhendler, Kaye Scholer et al., Myron Kirschbaum, Kaye Scholer LLP, New York City, Daniel M. McClure, Fulbright & Jaworski, Thomas Francis, Hetherington, Bracewell & Patterson, Houston, TX, Paul A. Fischer, Jorden Burt LLP, James F. Jorden, Attorney at Law, Washington, DC, for Defendants.

AMENDED AND SUPPLEMENTAL MEMORANDUM OPINION

ATLAS, District Judge.

 TABLE OF CONTENTS
                I. BACKGROUND FACTS ................................................722
                II. THE PARTIES' BASIC CONTENTIONS .................................724
                

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III. APPLICABLE LEGAL STANDARDS .................................................725
                 A. Standard for Motions to Dismiss .........................................726
                 B. Summary Judgment Standard ...............................................726
                 C. Texas Insurable Interest Doctrine .......................................727
                IV. CHOICE OF LAW ...............................................................728
                 A. Applicable Contract Choice of Law Principles .............................728
                 B. Analysis of Restatement § 6 Considerations in Insurable Interest
                 Cases ..................................................................731
                 1. Relevant Policies of the Forum (Texas) ................................731
                 (a) The Griffin Cases, Other Insurable Interest Decisions and
                 Texas Public Policy ............................................731
                 (b) Wal-Mart and Other Defendants' Attack on the Current
                 Viability of Texas Insurable Interest Doctrine .................733
                 (c) Wal-Mart's Contention that Texas Public Policy is Not
                 Implicated .....................................................737
                 (d) Texas Insurance Code Article 21.42 ..............................738
                 2. Policies of Other Interested States, and the Relative Interests of
                 The Various States in the Determination of the Insurable Interest
                 Issues ................................................................739
                 (a) Georgia's Interests in Determination of the Issues ................739
                 (b) Extraterritorial Enforcement of Texas or Georgia Law under
                 Home Insurance v. Dick ..................................739
                 3. The Basic Policies Underlying the Particular Field of Law:
                 Insurance Law .........................................................741
                 4. Protection of Justified Expectations and the Need for Certainty,
                 Predictability, and Uniformity of Result ..............................742
                 5. Needs of Interstate and International Systems and Ease in the
                 Determination and Application of the Law to be Applied ................743
                 C. Application of Texas Contract Choice of Law Principles to Defendants'
                 COLI Contracts .......................................................744
                 1. Restatement § 188 Principles for Contract Disputes ...............744
                 2. Choice of Law Analysis for the Wal-Mart COLI Policies .................745
                 (a) Features of the Wal-Mart Trust ..................................745
                 (b) Place of Contracting ............................................747
                 (c) Place of Negotiation ............................................752
                 (d) Place of Performance ............................................754
                 (e) Location of the Subject Matter of the Contract ..................756
                 (f) Domicile of the Parties .........................................758
                 (g) Conclusion on the Choice of Law Under Restatement § 188
                 & § 6 ...............................................................758
                 (h) The Fifth Circuit Baum Decisions .................................759
                 3. The Camelot COLI Policies ..............................................761
                 D. Conclusion on Choice of Law ..............................................763
                V. CONTENTIONS RELATED TO SIMS ESTATE'S CLAIMS ..................................764
                 A. ERISA Preemption .........................................................764
                 1. Standard for ERISA Preemption .........................................764
                 2. Relatedness to Wal-Mart's ERISA Plan ..................................765
                 B. Statute of Limitations ...................................................768
                 1. Length of Limitations Period ..........................................769
                 2. Accrual of the Sims Estate's Claim ....................................769
                 C. AIG's Motion to Dismiss ..................................................772
                 1. Overview and Applicable Legal Standards ...............................772
                 2. Allegations in the Complaint ..........................................772
                 3. Analysis ..............................................................773
                VI. CAMELOT-RELATED CONTENTIONS .................................................776
                 A. Ripeness .................................................................776
                 1. Declaratory Judgment Standards and the Ripeness Doctrine ..............777
                

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 2. Defendants' Ripeness Arguments ..................................777
                B. The Merits of Camelot Plaintiffs' Claims for Relief .................780
                 1. Camelot Plaintiffs' Claim for Declaration that Camelot Defendants
                 Lack an Insurable Interest .......................................780
                 2. Camelot Plaintiffs' Claim for a Constructive Trust and Ownership
                 of the COLI Policies .............................................784
                 (a) COLI Policy Proceeds Upon a Plaintiff's Death ................784
                 (b) Living Plaintiffs' Remedies ..................................785
                VII. CONCLUSION AND ORDER ..............................................791
                

The parties in this case dispute the validity of corporate-owned life insurance policies purchased by employers on the lives of their employees and former employees. Plaintiffs are Texas citizens suing as representatives of a putative class of individuals, and estates of individuals, who worked for Defendant Camelot Music, Inc. ("Camelot") and Trans World Entertainment Corporation ("Trans World") (collectively, the "Camelot Defendants") and Wal-Mart Stores, Inc. ("Wal-Mart"). These companies, collectively referred to as the "Employer Defendants," are named in this action as representatives of a putative class of employers who purchased corporate-owned life insurance policies ("COLI policies") insuring the lives of Texas citizens. The Employer Defendants purchased these life insurance policies from various insurance companies, including Hartford Life Insurance Company ("Hartford") and AIG Life Insurance Company ("AIG").

The Court has before it several motions. The Camelot Defendants move to dismiss Plaintiffs' claims in their entirety.¹ The Camelot Defendants also move for summary judgment.² Plaintiffs have cross-moved for partial summary judgment against the Camelot Defendants.³

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Defendant Wal-Mart moves for summary judgment on the claims against it.⁴ The Wachovia Bank of Georgia, N.A. ("Wachovia"), as trustee ("Trustee") for Defendant Wal-Mart Stores, Inc. Corporation Grantor or Trust ("Wal-Mart Trust"), seeks summary judgment in its favor.⁵ Defendant Hartford also moves for summary judgment.⁶ Defendant AIG moves to dismiss and for summary judgment.⁷ The Court

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heard argument on these motions on September 7, 2001 and January 11, 2002.⁸ The parties submitted supplemental materials after the January 11 Hearing.⁹ On March 5, 2002, the Court issued an opinion exhaustively addressing the parties' contentions in the original motions.¹⁰ The Court granted some aspects of certain parties' motions and denied others.

Wal-Mart then filed a motion seeking reconsideration of the March 5th Opinion. Plaintiff Sims Estate has responded,¹¹ and that Motion is ripe for adjudication. The Court granted Wal-Mart's Reconsideration Motion on August 2, 2002.¹² The Court has reconsidered all the parties' submissions, the entire record, and the applicable authorities, the Court again grants some aspects of certain parties' motions and denies others. This Amended and Supplemental Memorandum Opinion ("Amended Opinion") modifies various rulings in the March 5th Opinion as to both the Wal-Mart Defendants and the Camelot Defendants. This Amended Opinion supersedes the Court's March 5th Opinion, which is withdrawn.

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I. BACKGROUND FACTS

This case is an uncertified class action that involves a dispute over the rights to benefits from company-owned life insurance policies. Plaintiffs Scott Mayo, Toribio Rochas, Jr., Tomas Pena, Daniel Garza, and Charles W. Holmes, Jr. are Texas citizens who were employees of Defendant Camelot (collectively, sometimes referred to as the "Camelot Plaintiffs"). Another Plaintiff is the Estate of Douglas Sims ("Sims Estate"), which is represented in this action by Deborah Sims, the independent executrix of the Sims Estate and a Texas citizen. Douglas Sims was a Texas citizen who worked for Defendant Wal-Mart until his death on December 1, 1998.

Defendant Camelot was a Pennsylvania corporation. Camelot was acquired in December 1997 by Defendant Trans World, a New York corporation with its principal place of business in New York. Defendant Wal-Mart is a Delaware corporation with its principal place of business in Arkansas. Defendant Wal-Mart Stores, Inc. Corporation Grantor Trust ("Wal-Mart Trust" or the "Trust") was established by Wal-Mart in Georgia and is represented in this action by its trustee, Defendant Wachovia, a bank that was originally located in Georgia.¹³ Defendant Hartford is a Connecticut insurance company with its principal place of business in Connecticut. Defendant AIG is a...