Stephens v. Gentilello

• Decision Date: 14 February 2012
• Docket Number: Civil Action No. 11–5766.
• Citation: 853 F.Supp.2d 462
• Parties: Deborah STEPHENS and Ronald Isaacs on behalf of themselves and all others similarly situated, Plaintiffs, v. Anthony GENTILELLO, Karen Jeffery, Richard Fortune, AFR Financial Group, Inc., Walnut Street Securities, National Planning Corp., Wealth Financial Group, Metropolitan Life Insurance Company, Metlife Investors Distribution Company, Metlife Investors USA Insurance Company, Defendants.
• Court: U.S. District Court — District of New Jersey

853 F.Supp.2d 462

Deborah STEPHENS and Ronald Isaacs on behalf of themselves and all others similarly situated, Plaintiffs,

v.Anthony GENTILELLO, Karen Jeffery, Richard Fortune, AFR Financial Group, Inc., Walnut Street Securities, National Planning Corp., Wealth Financial Group, Metropolitan Life Insurance Company, Metlife Investors Distribution Company, Metlife Investors USA Insurance Company, Defendants.

Civil Action No. 11–5766.

United States District Court, D. New Jersey.

Feb. 14, 2012.

Michael Phillip Lalli, Silverman & Fodera PC, Philadelphia, PA, for Plaintiffs.

Penelope M. Taylor, McCarter & English, LLP, Newark, NJ, Joel M. Wertman, Marshall, Dennehey, Warner, Coleman & Goggin, Philadelphia, PA, for Defendants.

MEMORANDUM OPINION & ORDER

JOSEPH H. RODRIGUEZ, District Judge.

This matter is before the Court on Plaintiffs' motion to remand and for attorneys' fees and costs [13]. For the reasons set forth below, the case will be remanded, with each party to bear its own costs.

Factual Background and Procedural History

This matter was originally filed as a putative class action, entitled Deborah Stephens v. Anthony Gentilello, et al., on October 19, 2009, in the Superior Court of New Jersey, Law Division, Burlington County, at docket no. BUR–L–3489–09. Plaintiff alleged that she, and others, purchased annuities from the Defendants without a Guaranteed Income Benefit Rider (GIB Rider), which would have protected the purchasers' annuity income regardless of how the annuity actually performed on the market. Thus, with the GIB Rider, albeit at a higher cost, the purchaser would have been guaranteed a minimum level of income from the annuity, even if the annuity funds performed below market level. (Compl., Oct. 19, 2009, ¶¶ 1–3.) Plaintiff alleged that Defendants negligently failed to attach said GIB Rider to her policy, and the policies of the putative class members, resulting in large profits for the Defendants without the benefit of the GIB Rider to the annuity for the Plaintiff and potential class members. ( Id. ¶¶ 4–6.) The original Complaint alleged breach of contract, negligence, unjust enrichment, and violations of the New Jersey Consumer Fraud Act.

That Complaint was removed to this Court on November 30, 2009 by Walnut Street Securities, Inc., Metropolitan Life Insurance Company, MetLife Investors Distribution Company, MetLife Investors USA Insurance Company, Anthony Gentilello, and AFR Financial Group, Inc. Removing Defendants asserted that “Removal of this case is proper and necessary under the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), 15 U.S.C. § 78bb(f) and 15 U.S.C. § 78bb(f) and 15 U.S.C. § 77p, which mandates that certain securities class actions brought under state law must be removed to federal court.” Stephens v. Gentilello, No. 09–cv–6063, Notice of Removal, Nov. 30, 2009, ¶ 5.

On December 15, 2009, Plaintiff amended her Complaint, withdrawing the claim under the New Jersey Consumer Fraud Act while stressing that the parties and transactions at issue were located predominantlyin New Jersey, and only State law claims sounding in negligence were alleged. “The Amended Complaint alleged breach of contract, breach of fiduciary duty, negligence, and unjust enrichment.” Stephens v. Gentilello, No. 09–cv–6063, Plaintiff's First Amended Class Action Complaint, Doc. [6].

Subsequently, the parties agreed to remand the matter back to State court, in the words of removing Defendants, “in light of plaintiff's voluntary amendment of her Complaint prior to Defendants moving to dismiss the claims barred by the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”).” Stephens v. Gentilello, No. 09–cv–6063, Dec. 29, 2009 Correspondence to Court, Doc. [7]. At Defendants' request, the Court entered a Consent Order for Remand on February 4, 2010. Stephens v. Gentilello, No. 09–cv–6063, Consent Order for Remand, Doc. [8]. The federal case between the parties was closed at that time.

On June 29, 2010 in State court, Plaintiff filed a Second Amended Class Action Complaint. The allegations were essentially the same, asserting breach of contract, breach of fiduciary duty, negligence, and unjust enrichment. Plaintiff's purpose in amending was to remove Karen Anthony and Jeffery Gentilello, substituting Karen Jeffery for them. After obtaining leave of court, Plaintiff filed a Third Amended Class Action Complaint in State court on September 22, 2010, again asserting breach of contract, breach of fiduciary duty, negligence, and unjust enrichment. This time, Ronald Isaacs was added as a Plaintiff and Richard Fortune and Wealth Financial Group were added as Defendants.

On October 4, 2011, this matter was again removed to this Court by Metropolitan Life Insurance Company, MetLife Investors Distribution Company, MetLife Investors USA Insurance Company, Walnut Street Securities, Inc., Anthony Gentilello, Karen Jeffrey, AFR Financial Group, Inc., Richard Fortune, and Wealth Management Group based on alleged preemption by the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), 15 U.S.C. § 78bb(f) and 15 U.S.C. § 77p. While the Removing Defendants acknowledged that none of the Amended Complaints set forth on its face a claim of fraud, they point to Ms. Stephens' deposition taken on July 20, 2011, wherein Defendants contend she alleged that her claim was based on “lies” and “intentional misstatements” made to her by Defendants. See Notice of Removal, ¶¶ 17–19. Defendants add that the September 14, 2011 deposition of Plaintiff Isaacs revealed that his claim was also based on “lies” and “intentional misstatements” made to Isaacs by sales representative Richard Fortune. Id. ¶ 20. Removing Defendants contend that it was not until Isaacs' deposition that they first ascertained that the case was removable as to all parties. Id. ¶ 21.

Plaintiffs have now filed a motion to remand and for attorneys' fees and costs associated with the latest removal of this matter, arguing that Defendants had no objectively reasonable basis for removal.

Standard on a Motion for Remand

A case must be remanded if, at any time before final judgment, the district court discovers that it lacks subject matter jurisdiction to hear the case. See 28 U.S.C. § 1447(c). As the party removing the case, the defendant has the burden to prove that federal court jurisdiction is proper at all stages of the litigation. See Samuel–Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 396 (3d Cir.2004); Boyer v. Snap–On Tools Corp., 913 F.2d 108, 111 (3d Cir.1990); Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir.1985). The district court must resolve all contestedissues of fact and uncertainties of law in favor of the plaintiff. See Boyer, 913 F.2d at 111. Moreover, the court should strictly construe removal statutes and resolve all doubts in favor of remand. See Abels, 770 F.2d at 29. The strict construction of removal statutes honors Congress' power to determine the contours of the federal court's limited subject matter jurisdiction. See Bowles v. Russell, 551 U.S. 205, 212–13, 127 S.Ct. 2360, 168 L.Ed.2d 96 (2007) (internal citation omitted) (“Because Congress decides whether federal courts can hear cases at all, it can also determine when, and under what conditions, federal courts can hear them.”).

In order for removal to be proper, the federal court must have original jurisdiction to hear the case. See28 U.S.C. § 1441(a); U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383, 389 (3d Cir.2002). One basis of original jurisdiction is federal question jurisdiction. See28 U.S.C. § 1331; U.S. Express, 281 F.3d at 389. Federal question jurisdiction applies to “all civil actions arising under the Constitution, laws, or treatises of the United States.” 28 U.S.C. § 1331. If the federal court has original jurisdiction based upon federal question, the case may be removed without regard to the citizenship of the parties. See28 U.S.C. § 1441(b). One claim conferring federal question jurisdiction is sufficient for the entire case to be removed to federal court. See id. § 1441(c). The district court, however, may exercise its discretionary powers to remand all matters to state court in which state law predominates. See id.

When a federal issue is embedded in a state law claim, the federal court has jurisdiction over the claim when it “necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities.” See Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005). Only a “slim category” of state law claims satisfy this test. See Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 701, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006). The federal interest must be substantial enough to justify turning a state law claim “into a discrete and costly ‘federal case.’ ” See id.

Next, the well-pleaded complaint rule requires that the face of the plaintiff's complaint provide the basis for federal question jurisdiction by raising issues of federal law. See City of Chicago v. Int'l Coll. of Surgeons, 522 U.S. 156, 163, 118 S.Ct. 523, 139 L.Ed.2d 525 (1997). Federal jurisdiction cannot arise from a defense that raises a federal question. See Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986). The basis for federal question jurisdiction must exist within the four corners of the complaint. See id. In light of the presumption in favor of remand, district courts should remand close or doubtful cases to the state courts from which they were removed. See Abels, 770 F.2d at 29. Remand to state court avoids a later determination that the federal court is without jurisdiction, and places the case in a forum having clear jurisdiction over the case. See id. (internal citation omitted).

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