Rainwater v. Lamar Life Ins. Co., Civ.A.2:01CV179PG.

• Decision Date: 27 June 2002
• Docket Number: No. Civ.A.2:01CV179PG.,Civ.A.2:01CV179PG.
• Citation: 207 F.Supp.2d 561
• Parties: Richard C. RAINWATER and Anna D. Rainwater, Plaintiffs, v. LAMAR LIFE INSURANCE COMPANY; Conseco Life Insurance Company; Thomas Stroo; James Payton; and Other Related Companies the Identity of Which Will be Ascertained Through Discovery in This Action, Defendants.
• Court: U.S. District Court — Southern District of Mississippi

207 F.Supp.2d 561

Richard C. RAINWATER and Anna D. Rainwater, Plaintiffs, v. LAMAR LIFE INSURANCE COMPANY; Conseco Life Insurance Company; Thomas Stroo; James Payton; and Other Related Companies the Identity of Which Will be Ascertained Through Discovery in This Action, Defendants.

No. Civ.A.2:01CV179PG.

United States District Court, S.D. Mississippi, Hattiesburg Division.

June 27, 2002.

COPYRIGHT MATERIAL OMITTED

Lawrence E. Abernathy, III, Laurel, MS, for plaintiffs.

Phillip B. Abernathy, Emerson Barney Robinson, III, Butler, Snow, O'Mara, Stevens & Cannada, Jackson, MS, for Lamar Life Ins. Co., Conseco Life Ins. Co., defendants.

Frank D. Montague, Jr., Montague, Pittman & Varnado, Hattiesburg, MS, David M. Ratcliff, Ratcliff & Ratcliff, Laurel, MS, Douglas R. Duke, Shell Buford, PLLC, Jackson, MS, for Thomas Stroo, defendant.

Norman G. Hortman, Jr., Chris B. McDaniel, Gibbes, Graves, Mullins, Hortman, Harlow, Martindale & Jones, PLLC, Laurel, MS, for James Payton, defendant.

MEMORANDUM OPINION AND ORDER

PICKERING, District Judge.

Before the Court is the Plaintiffs' Motion to Remand this case to state court. Having considered the motion, the responses, the briefs of counsel, the cited authorities, the pleadings, and exhibits on file, this Court finds as follows:

FACTUAL BACKGROUND

Plaintiffs, Richard and Anna Rainwater, filed a complaint in the Chancery Court of the Second Judicial District of Jones County, Mississippi on May 25, 2001, alleging fraud and misrepresentation that occurred when Thomas Stroo and James Payton, life insurance agents who at all relevant times were employed by Lamar Life Insurance Company, sold replacement life insurance policies to the Rainwaters. The named Defendants are Lamar Life Insurance Company, Conseco Life Insurance Company, Stroo and Payton. Although Lamar Life Insurance was incorporated in the State of Mississippi with its principal place of business in Mississippi, it merged into Conseco in December 1998; therefore, Lamar Life was a fictitious entity as of the date the Rainwater's action was filed. 28 U.S.C. § 1441(c). Plaintiffs as well as Stroo and Payton are residents of Mississippi. Conseco is an Indiana corporation.

Plaintiffs allege that Defendants engaged in fraudulent representations and fraudulent concealment commencing in January 1987. Plaintiffs allege that Defendants' fraud consisted in Stroo and Payton advising Plaintiffs that previously issued insurance policies they had with Lamar Life were paid up, when in fact they were not paid up, advising Plaintiffs that they needed to invest in additional policies, concealing or suppressing facts and details concerning the continuation of the policies, and the fact that there was no investment plan involved in the policies, and that the dividend performance under the policies could alter both the amount of paid up insurance and the ultimate values. Plaintiffs in their depositions indicated some confusion as to whether they understood the new policies to be merely "updated" policies or actual "replacement" policies. However, Defendants testified that Plaintiffs signed certificates acknowledging that the policies involved were replacement policies, or new policies, and although Plaintiffs did not confirm their signatures on these certificates, neither did they deny them. Consequently, there is no dispute in the record that Plaintiffs signed certificates acknowledging receipt of replacement policies.

Plaintiffs allege that more than five policies were replaced in violation of Mississippi's twisting statute, that a surrender charge was added to the updated policies, that Plaintiffs incurred monthly expenses with the updated policies, that the policy fee cap increased with the new policies and that all of this information was suppressed or concealed. Plaintiffs further allege that the resident Defendants induced them to replace their insurance policies for no viable economic benefits to Plaintiffs, causing Plaintiffs to sustain economic loss and that the resident Defendants engaged in illegal "churning" and "twisting." The last sale took place in August of 1990. However, Plaintiffs allege that the resident Defendants continuously up to and through the summer of 2000 assured Plaintiffs that their investments were doing well and that the policies were going to be worth a lot of money.

It is undisputed that Plaintiffs had in their files copies of the insurance policies involved in this action and copies of annual statements pertaining to the insurance policies and that these policies and annual reports reflected that these were not paid up policies, that the dividend rate was not guaranteed, and that the performance of the policies could fluctuate depending upon the rate of return earned as to the dividends.

It is likewise clear that the Mississippi statute of limitation which was six years for fraud committed prior to July 1989, and three years for fraud committed after July 1989 ran long before these suits were filed. Miss.Code Ann. § 15-1-49. The question presented to this Court is whether or not there is any possibility that the statute of limitations was tolled under the provisions of Miss.Code Ann. § 15-1-67.

POSITIONS OF THE PARTIES

The Rainwaters allege that this Court lacks subject matter jurisdiction over the present cause of action because Defendants Stroo and Payton are Mississippi residents and accordingly the parties lack complete diversity. They assert that this case should be remanded to state court. The Defendants counter that the Rainwaters' claims against Stroo and Payton are barred by the statute of limitations, that the statute of limitations was not tolled, that their inclusion as defendants constitutes fraudulent joinder, that the individual Defendants should be dismissed with prejudice, and Plaintiffs' motion to remand should be denied.

LAW ON REMOVAL AND REMAND

The Fifth Circuit consistently has held that the party urging jurisdiction upon the District Court bears the burden of demonstrating that the case is one which is properly before that Court. See Jernigan v. Ashland Oil, Inc., 989 F.2d 812, 815 (5th Cir.1993); Village Fair Shopping Co. v. Sam Broadhead Trust, 588 F.2d 431 (5th Cir.1979); Ray v. Bird & Son and Asset Realization Co., Inc., 519 F.2d 1081 (5th Cir.1975). "The burden of persuasion placed upon those who cry `fraudulent joinder' is indeed a heavy one." B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir.1981). "The removing party must show either that there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court; or that there has been outright fraud in the plaintiff's pleadings of jurisdictional facts." Id. at 549; (emphasis added) (citing Keating v. Shell Chemical Co., 610 F.2d 328 (5th Cir.1980); Tedder v. F.M.C. Corp. et al, 590 F.2d 115 (5th Cir.1979); Bobby Jones Garden Apts. v. Suleski, 391 F.2d 172 (5th Cir.1968); Parks v. New York Times Co., 308 F.2d 474 (5th Cir.1962), cert. denied, 376 U.S. 949, 84 S.Ct. 964, 11 L.Ed.2d 969 (1964)).

This Court must refer to the allegations made in the original pleading to determine whether the Plaintiff can make out a viable claim against the resident Defendants. See Tedder v. F.M.C. Corp., 590 F.2d at 116; Gray v. U.S. Fidelity and Guaranty, 646 F.Supp. 27, 29 (S.D.Miss. 1986). Those allegations must be construed most favorably to the Plaintiff as the party opposing removal, resolving all contested issues of fact and ambiguities in the law in favor of the Plaintiff. B. Inc., 663 F.2d at 549; see also, Bobby Jones Garden Apts., 391 F.2d at 177; Howard v. General Motors Corp., 287 F.Supp. 646, 648, (N.D. Miss.1968).

Regardless of the above, "[w]hen a federal court is properly appealed to in a case over which it has, by law, jurisdiction, it has a duty to take such jurisdiction.'" England v. Louisiana Medical Examiners, 375 U.S. 411, 84 S.Ct. 461, 11 L.Ed.2d 440, 445 (1964) (citation omitted). Chief Justice Marshall wrote in Cohens v. Virginia, 19 U.S. 264, 404, 6 Wheat. 264, 5 L.Ed. 257, 291 (1821), "It is true that this court will not take jurisdiction if it should not; but it is equally true, that it must take jurisdiction if it should."

When considering whether a non-diverse defendant has been fraudulently joined to defeat diversity of citizenship jurisdiction, courts should "pierce the pleadings" and consider "summary judgment-type" evidence such as affidavits and deposition testimony. See Cavallini v. State Farm Auto Ins. Co., 44 F.3d 256, 263 (5th Cir.1995). Conclusory or generic allegations of wrongdoing on the part of the non-diverse defendant are not sufficient to show that a defendant was not fraudulently joined. See Badon v. RJR Nabisco, Inc. 224 F.3d 382, 392-93 (5th Cir.2000); Peters v. Metropolitan Life Ins. Co., 164 F.Supp.2d 830, 834 (S.D.Miss.2001). Removal is proper if the plaintiff's pleading is pierced, and it is shown that as a matter of law there is no reasonable basis for predicting that the plaintiff might establish liability on that claim against the in-state defendant. Badon, 224 F.3d at 390.

CONTROLLING LAW

Since this is a diversity case, this Court is Erie bound, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), to follow decisions of the Mississippi Supreme and Appellate Courts. If these Courts have not spoken on an issue, and the Fifth Circuit has spoken on that issue, this Court is bound to follow the Fifth Circuit's interpretation of Mississippi law. If neither the Mississippi Courts nor the Fifth Circuit have spoken on an issue, then this Court is required to make an Erie guess, not as to what this Court, or some other federal court would do, but as to what the Mississippi Supreme Court would do if presented with these same issues. Jackson v Johns-Manville Sales Corp., 781 F.2d 394, 397 (5th Cir.) (en banc), cert. denied, 478 U.S. 1022, 106 S.Ct. 3339, 92 L.Ed.2d 743 (1986) ("...