Slover v. Equitable Variable Life Ins. Co.

• Decision Date: 09 August 2006
• Docket Number: No. 06-CV-222-JHP-SAJ.,06-CV-222-JHP-SAJ.
• Citation: 443 F.Supp.2d 1272
• Parties: Pobert C. SLOVER and Deborah A. Slover, Plaintiffs, v. The EQUITABLE VARIABLE LIFE INSURANCE COMPANY; Equitable Life Assurance Society of the United States; Axa Advisors, LLC; J. Michael Matlock, John Coburn, and Dan Nichols, et al., Defendants.
• Court: U.S. District Court — Northern District of Oklahoma

443 F.Supp.2d 1272

Pobert C. SLOVER and Deborah A. Slover, Plaintiffs, v. The EQUITABLE VARIABLE LIFE INSURANCE COMPANY; Equitable Life Assurance Society of the United States; Axa Advisors, LLC; J. Michael Matlock, John Coburn, and Dan Nichols, et al., Defendants.

No. 06-CV-222-JHP-SAJ.

United States District Court, N.D. Oklahoma.

August 9, 2006.

COPYRIGHT MATERIAL OMITTED

Bobby Leon Latham, Jr., Brian Jack Goree, Latham Stall Wagner Steele & Lehman PC, Tulsa, OK, P. Michael Yancey, Robert G. Methvin, Jr., McCallum Methvin & Terrell PC, Birmingham, AL, for Plaintiffs.

Christopher Benton Woods, Crowe & Dunlevy, David Len Bryant, Bryant Law Firm, Tulsa, OK, Harvey D. Ellis, Jr., Judy Hamilton Morse, Crowe & Dunlevy, Oklahoma City, OK, for Defendants.

ORDER and OPINION

PAYNE, District Judge.

Before the Court are Plaintiffs' Motion to Remand, Defendants' Response in opposition, and Plaintiffs' Reply thereto. This case originated in the District Court of Creek County, and was removed to this Court pursuant to 28 U.S.C. §§ 1332 and 1441. Plaintiffs allege that this Court lacks subject matter jurisdiction and therefore seek remand for the following reasons:

1. Defendants failed to establish the requisite amount in controversy in their Notice of Removal; and 2. Defendants incorrectly premised their fraudulent joinder claim on common defenses, and otherwise failed to show that Plaintiffs' claims against the non-diverse Defendants present no possibility of recovery.

Upon careful consideration of the issues presented, the Court finds that Plaintiffs' arguments are without merit, and that jurisdiction in this Court is proper under 28 U.S.C. § 1332. Accordingly, Plaintiffs' Motion to Remand is DENIED.

Background

In 1992, Plaintiffs purchased a "vanishing premium" insurance policy from Defendants.¹ Plaintiff Robert C. Slover was the named insured and owner of the policy, and Plaintiff Deborah A. Slover was the beneficiary of the policy.² The Equitable Defendants' sales agent³ allegedly told Plaintiffs that (1) they would only have to pay premiums out-of-pocket for eleven years; (2) after eleven years, the cash value and/or dividends in the policy would pay the remaining premiums for the life of the policy; (3) Plaintiffs would receive the full amount of the interest which accrued on the cash value; and (4) Plaintiffs would have approximately 847,000 in cash value in the policy when Mr. Slover turned 65, as well as the death benefit.

The sales agent's claims were all contradicted by the terms of the written policy, which was issued to Plaintiffs on April 9, 1992.⁴ The policy clearly requires payment of premiums for life. Further, although the policy allowed the insured to elect to use dividends "to help pay" any premium then due, Plaintiffs did not choose this option, but instead elected to use dividends to provide paid-up additional whole life insurance on the insured.⁵ The policy also specifies that the policyholder "may give up this policy for its net cash surrender value," which was projected to be $40,500 when Mr. Slover turned 65. By cashing out early, however, the policyholder would clearly surrender the death benefit. Despite the obvious differences between the alleged sales pitch and the actual terms of the policy, and despite the integration clause, which clearly indicated that the written policy superceded any oral representations, Plaintiffs did not take advantage of the "free look" provision in the policy, which allowed Plaintiffs to cancel the policy within ten days for any reason, without cost or penalty.

Plaintiffs first began to question the terms of the policy in or around March 2003. During this time, they spoke one time with each of the non-diverse Defendants and were allegedly "assured" each time that Plaintiffs' understanding of the sales agent's explanation of the policy was correct. Plaintiffs filed this lawsuit in Creek County District Court on March 30, 2006. Defendants removed the action to this Court soon thereafter. Currently at issue is the parties' dispute over this Court's exercise of jurisdiction.

Discussion

A defendant may remove a case filed in state court to federal court if the case could have been brought in federal court originally. 28 U.S.C. § 1441(a). Federal courts have diversity jurisdiction over all civil actions involving citizens of different states and an amount in controversy in excess of $75,000. 28 U.S.C. § 1332. It is axiomatic that complete diversity is required. See Strawbridge v. Curtiss, 3 Cranch 267, 7 U.S. 267, 267-68, 2 L.Ed. 435 (1806). For purposes of removal under § 1441(a), however, the Court disregards the citizenship of defendants sued under fictitious names. Id. A defendant's right of removal also "cannot be defeated by a fraudulent joinder of a resident defendant having no real connection With the controversy." Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 66 L.Ed. 144 (1921).

In this case, Defendants argue that Plaintiffs fraudulently joined the non-diverse Defendants J. Michael Matlock, John Coburn, and Dan Nichols in order to defeat diversity, and that this Court otherwise has jurisdiction pursuant to 28 U.S.C. § 1332. As the party invoking this Court's jurisdiction, Defendants bear the burden of establishing the jurisdictional requirements. Martin v. Franklin Capital Corp., 251 F.3d 1284, 1290 (10th Cir.2001). First, Defendants must establish the requisite amount in controversy. Id. ("When, as here, the plaintiffs damages are unspecified, courts generally require that a defendant establish the jurisdictional amount by a preponderance of the evidence."). Second, in order to prove fraudulent joinder, Defendants must show that Plaintiffs either (1) committed outright fraud in pleading the jurisdictional facts, or (2) have no possibility of recovery against the nondiverse Defendants. Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42-43 & n. 3 (5th Cir.1992).

Because Defendants have alleged fraudulent joinder, the Court may pierce the pleadings. Hale v. MasterSoft Int'l Pty. Ltd., 93 F.Supp.2d 1108, 1113 (D.Colo. 2000). Thus, the Court may consider certain underlying facts—such as the insurance policy at issue here—to determine whether the non-diverse parties are proper. Smoot v. Chi., Rock Island & Pac. R.R., 378 F.2d 879, 882 (10th Cir.1967) ("[U]pon specific allegations of fraudulent joiner the court may pierce the pleadings, consider the entire record, and determine the basis of joinder by any means available.") (emphasis added; internal citations omitted). The standard, however, is stringent, and the Court must resolve any ambiguities in Plaintiffs' favor. Martin, 251 F.3d at 1289-90 ("[R]emoval statutes are construed narrowly; where plaintiff and defendant clash about jurisdiction, uncertainties are resolved in favor of remand.") (quoting Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir.1994)).

I. The amount in controversy is in excess of the jurisdictional amount.

Plaintiffs allege that remand is due because Defendants failed to demonstrate in their Notice of Removal that the requisite amount in controversy was met. Because the Complaint did not set forth a specific amount, Defendants were required to perform "an economic analysis of the alleged damages supported by underlying facts." Archer v. Kelly, 271 F.Supp.2d 1320, 1322 (N.D.Okla.2003). The Court finds that Defendants have satisfied their burden.

Defendants' Notice of Removal (Dkt.# 2) states in pertinent part:

The amount in controversy exceeds the sum of $75,000, exclusive of interest and costs .... Plaintiffs have asserted claims for (a) breach of fiduciary duty (Count 1), (b) fraud by misrepresentation (Count 2), (c) fraud by suppression and omission (Count 3), negligence (Counts 4 and 8), (d) breach of contract (Count 7), and (e) conversion (Count 8)—with respect to the sale and administration by [Defendants] of a $100,000 whole life insurance policy ... . Plaintiffs claim damages for the (i) consideration they paid for the policy (premiums paid), (ii) the benefit of their bargain (cash value, interest, and loss of the policy of insurance that was represented), and (iii) suffering of mental and emotional anguish. Plaintiffs also seek damages for unjust enrichment measured by premiums and related fees.

[Notice of Removal at 3, ¶ 4 (internal quotations and citations omitted).] Defendants very clearly recite that Plaintiffs' damages include "the loss of the policy of insurance" with a face value of $100,000. [Id.; see also Compl. at 12, ¶ 28]. Under similar circumstances, many courts have held that the face value of the policy is the measure of the amount in controversy. See, e.g., McCord v. Minn. Mut. Life Ins. Co., 346 F.3d 830, 834-35 (8th Cir.2003) (citing In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F.Supp. 450, 503 (D.N.J.1997), aff'd, 148 F.3d 283 (3d Cir.1998) ("Where plaintiffs seek equitable relief pertaining to the enforcement of insurance policies, the face value of the policy is the measure of the amount in controversy."), and Guardian Life Ins. Co. of Am. v. Muniz, 101 F.3d 93, 94 (11th Cir. 1996) (noting that the face value of life insurance policies constitutes the amount in controversy)); see also Mass. Cas. Ins. Co. v. Harmon, 88 F.3d 415, 416 (6th Cir.1996) (following the "unanimous federal rule" that the face value of the policy must be considered in determining whether the jurisdictional amount has been satisfied). In this case, the face value of the policy, taken alone, satisfies the jurisdictional amount.

The Court further notes that Plaintiffs seek other compensatory and punitive damages, both of which may be considered in determining the amount in controversy. Flowers v. EZPawn Okla., Inc., 307 F.Supp.2d 1191, 1198 (N.D.Okla.2003) (citing Bell v. Preferred Life Assur. Soc'y, 320 U.S. 238, 240, 64 S.Ct. 5, 88 L.Ed. 15 (1943)). Plaintiffs also claim attorney fees, which Defendants rightly note can be...