Ritchey v. Metro. Life Ins. Co., Case No. 19 C 311

• Decision Date: 05 August 2020
• Docket Number: Case No. 19 C 311
• Citation: 476 F.Supp.3d 738
• Parties: Timothy J. RITCHEY, as Special Administrator of the Estate of Pamela Harris, deceased, and as Special Trustee of the Irrevocable Testamentary Trust Created Pursuant to Article V of the Last Will and Testament of Pamela Kaye Harris dated June 3, 2013, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, INC. and Courtland Stokes, Individually and as the Former Executor of the Estate of Pamela Harris, Deceased, Defendants. Ian Fidler, as Guardian Ad Litem for Z.K., a Minor, Interested Party. Metropolitan Life Insurance Company, Crossclaim Plaintiff/Defendant, v. Courtland Stokes, Crossclaim Defendant/Plaintiff.
• Court: U.S. District Court — Northern District of Illinois

476 F.Supp.3d 738

Timothy J. RITCHEY, as Special Administrator of the Estate of Pamela Harris, deceased, and as Special Trustee of the Irrevocable Testamentary Trust Created Pursuant to Article V of the Last Will and Testament of Pamela Kaye Harris dated June 3, 2013, Plaintiff,

v.METROPOLITAN LIFE INSURANCE COMPANY, INC. and Courtland Stokes, Individually and as the Former Executor of the Estate of Pamela Harris, Deceased, Defendants.

Ian Fidler, as Guardian Ad Litem for Z.K., a Minor, Interested Party.

Metropolitan Life Insurance Company, Crossclaim Plaintiff/Defendant,

v.Courtland Stokes, Crossclaim Defendant/Plaintiff.

Case No. 19 C 311

United States District Court, N.D. Illinois, Eastern Division.

Signed August 5, 2020

Kerry R. Peck, Peck, Bloom, Miller & Mitchell, Peter M. Brady, Peck Ritchey, LLC, Chicago, IL, for Plaintiff.

Jacqueline J. Herring, Smith von Schleicher & Associates, Chicago, IL, for Defendant Metropolitan Life Insurance Company, Inc.

George Jackson, III, Dred Scott LLP, Chicago, IL, for Defendant Courtland Stokes.

Courtland Stokes, Chicago, IL, pro se.

AMENDED MEMORANDUM OPINION AND ORDER

REBECCA R. PALLMEYER, United States District Judge

Plaintiff, the administrator of the estate of a deceased federal employee, brought this action to recover insurance proceeds that he alleges the insurer paid to the wrong party. Because the group insurance policy was issued through the Federal Employees’ Group Life Insurance ("FEGLI") program, Plaintiff originally named, as Defendants, not only the insurer (Metropolitan Life Insurance Company ["MetLife"], but also the United States Office of Personnel Management ("OPM") and the Office of Federal Employees’ Group Life Insurance. Plaintiff dismissed those federal defendants voluntarily in May 2019. Because it is undisputed that diversity jurisdiction is lacking, the court ordered Plaintiff and Defendant Metropolitan Life Insurance Company ("MetLife") to file memoranda setting forth the bases for federal jurisdiction. As discussed here, the court concludes that it lacks subject matter jurisdiction and dismisses the complaint without prejudice to proceedings in state court.

BACKGROUND

In 1954, Congress enacted the Federal Employees’ Group Life Insurance Act ("FEGLIA"), 5 U.S.C. § 8701 et seq. , to "provide low-cost group life insurance to Federal employees." Hillman v. Maretta , 569 U.S. 483, 486, 133 S.Ct. 1943, 186 L.Ed.2d 43 (2013) (internal quotation marks omitted). OPM administers FEGLIA. See id. "Pursuant to the authority granted to it by FEGLIA, OPM entered into a life insurance contract with" MetLife. Id. "Individual employees enrolled in the [FEGLI] Program receive coverage through this contract." Id. Under FEGLIA, life insurance benefits are paid upon an employee's death "in accordance with a specified ‘order of precedence.’ " Id. (quoting 5 U.S.C. § 8705(a) ). Relevant here, "[t]he proceeds accrue ‘[f]irst, to the beneficiary or beneficiaries designated by the employee in a signed and witnessed writing received before death.’ " Hillman , 569 U.S. at 486, 133 S.Ct. 1943 (quoting 5 U.S.C. § 8705(a) ). "A designation of beneficiary must be in writing, signed by the insured individual, and witnessed and signed by 2 people." 5 C.F.R. § 870.802(b).

Plaintiff Timothy J. Ritchey is the special administrator of Pamela Harris's estate. (Compl. [1] ¶ 1.) He is also the special trustee of the irrevocable trust created under Harris's June 3, 2013 Last Will and Testament for her minor granddaughter, Z.K. (Id. ¶ 1; see id. ¶¶ 14-15.) Harris worked for the United States Postal Service and obtained life insurance under FEGLIA. (Id. ¶ 13.) According to Plaintiff, Harris passed away in November 2013 and "was entitled to $400,000 in ‘Option B’ life insurance benefits under the FEGLI Program ... upon her death." (Id. )¹

Plaintiff alleges that in the June 2013 Will, Harris stated that the $400,000 Option B FEGLI proceeds should be placed in a trust for Z.K.’s benefit. (Id. ¶¶ 14-15; see June 2013 Will, Ex. A to Compl. [1-1], art. V ("(FEGLI)—Option B—Additional: $400,000—to my granddaughter [Z.K.], (as per irrevocable testamentary trust arrangement)").) Plaintiff also alleges that before Harris died, she "executed a Designation of Beneficiary Form ... which provides that 100% of the $400,000 in Option B proceeds under the Policy are to be distributed to the ‘Trustee or Successor Trustee as per my Last Will and Testament.’ " (Compl. ¶ 16 (quoting FEGLI Designation of Beneficiary Form, Ex. B to Compl. [1-2] ).) On April 2, 2014, MetLife distributed $400,520.82—the total Option B proceeds plus interest—to "Courtland Stokes Extr ULWT [Executor under last will and trust] [Z.K.] a minor." (Compl. ¶ 17 (quoting Check Stub, Ex. C to Compl. [1-3] ).)² According to the June 2013 Will, Stokes, also a Defendant in this action, is Harris's nephew. (See June 2013 Will, art. IV.) Plaintiff alleges that "[p]ursuant to Illinois law, Stokes was not appointed as an Executor and had not [sic] legal right to receive such funds." (Compl. ¶ 18; see also id. ¶ 37 (alleging that as of April 2, 2014, Stokes "was not the executor of Harris's estate," "the trustee of any trust for the benefit of" Z.K., or "the custodian of any account for" Z.K.).)

Harris's estate proceeding is pending in the Circuit Court of Cook County, Illinois. (Id. ¶ 1.) Plaintiff alleges that in April 2015, "Stokes was appointed as Executor of Harris's Estate." (Id. ¶ 38.) In August 2017, Plaintiff alleges, the probate court removed Stokes as executor. (Id. ¶ 41.) And in December 2017, the probate court allegedly appointed Plaintiff as special trustee of Z.K.’s trust. (Id. ¶¶ 15, 19.) Plaintiff alleges that the probate court gave him "full and sole authority under said Trust including collecting any assets to be deposited ... and Prosecuting any cause of action or otherwise." (Id. ¶ 19.) According to Plaintiff, on March 7, 2018, he filed a claim with MetLife "seeking the distribution of the $400,000 in Option B benefits payable under the Policy pursuant to the Beneficiary Designation." (Id. ¶ 23.) His claim and subsequent appeal were denied. (See id. ¶¶ 24-26.) Plaintiff also alleges that he "has an absolute and unconditional right to immediate possession of the $400,520.82 received by Stokes" and that Stokes refused his demands to relinquish the money. (Id. ¶¶ 31-35.) Finally, Plaintiff alleges that Stokes distributed the $400,520.82 "for his own benefit, or otherwise not to [Z.K.’s] Trust." (Id. ¶ 40.)

Plaintiff asserts a claim against MetLife for breach of the FEGLI insurance policy. He alleges that MetLife breached the policy by failing to (1) distribute the proceeds to the person identified in the beneficiary designation and (2) conduct a reasonable investigation before distributing the funds to Stokes. (Id. ¶¶ 27-28.) Plaintiff asserts claims against Stokes for conversion and, in the alternative, breach of fiduciary duty. (Id. ¶¶ 31-43.) For each claim, Plaintiff seeks (among other things) compensatory damages in the amount of $400,520.82.³

DISCUSSION

"[F]ederal courts have an independent obligation at each stage of the proceedings to ensure that [they] have subject matter jurisdiction over the dispute." Crosby v. Cooper B-Line, Inc. , 725 F.3d 795, 800 (7th Cir. 2013) (internal quotation marks omitted). This case does not satisfy the requirements for diversity jurisdiction. Plaintiff and MetLife argue that the court has federal question jurisdiction over the claim for breach of the FEGLI insurance policy and supplemental jurisdiction over the state-law claims for conversion and breach of fiduciary duty. (See Compl. ¶¶ 8-9 (citing 28 U.S.C. § 1331 ; 28 U.S.C. § 1367 ); Pl. Jdx. Mem. ¶ 5; Metlife Jurisdictional Memorandum ("MetLife Jdx. Mem.") [84] ¶¶ 1, 13.)

Under 28 U.S.C. § 1331, district courts have "original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." A case may arise under federal law in two ways. Evergreen Square of Cudahy v. Wisconsin Hous. & Econ. Dev. Auth. , 776 F.3d 463, 465 (7th Cir. 2015). The first is "when federal law creates the cause of action asserted." Id. (quoting Gunn v. Minton , 568 U.S. 251, 257, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013) ). This category "accounts for the vast bulk of suits that arise under federal law." Gunn , 568 U.S. at 257, 133 S.Ct. 1059. Second, a state-law claim may arise under federal law if "a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." Evergreen , 776 F.3d at 466 (quoting Gunn , 568 U.S. at 258, 133 S.Ct. 1059 ). The second path to federal jurisdiction is "rarely" successful. Evergreen , 776 F.3d at 466.

FEGLIA provides that "[t]he district courts of the United States have original jurisdiction, concurrent with the United States Court of Federal Claims, of a civil action or claim against the United States founded on this chapter." 5 U.S.C. § 8715 (emphasis added). Because Plaintiff is no longer asserting claims against the United States, FEGLIA does not create the causes of action in this case. See, e.g. , Miller v. Bruenger , 949 F.3d 986, 991-92 (6th Cir. 2020) (stating that FEGLIA does not create an express or implied right of action for a claim between private parties and that there would be federal jurisdiction over such a claim only if it presented a substantial question of federal law); Metro. Life Ins. Co. v. Thompson , No. 17-CV-06238 (ENV) (RER), 2018 WL 7324383, at *3 (E.D.N.Y. Dec. 14, 2018) (stating that because FEGLIA "does not create a private right of action," federal law "does not supply the cause of action"), report and recommendation adopted , No. 17-CV-6238 (ENV) (RER), 2019 WL 634651 (E.D.N.Y. Feb. 14, 2019) ; Spellers v. Metro. Life Ins. Co. , No. 15 C 1556 (N.D. Ill. Mar. 30, 2015), slip op. at 9-10 (remanding for lack of jurisdiction) ...