Wolf v. Bankers Life and Cas. Co.

Decision Date25 September 2007
Docket NumberNo. 1:07-cv-622.,1:07-cv-622.
Citation519 F.Supp.2d 674
PartiesJohn B. WOLF, Sr., and Margaret A. Wolf, Plaintiffs, v. BANKERS LIFE AND CASUALTY COMPANY, Shannon Nelson, and Two Unidentified Michigan Residents John Doe and Jane Doe, Defendants.
CourtU.S. District Court — Western District of Michigan

Philip R. Rosi, Rosi & Gardner, PC, Traverse City, MI, for Plaintiffs.

David A. James, Halleland Lewis Nilan & Johnson, Minneapolis, MN, Jennifer J. Stocker, Varnum Riddering Schmidt & Howlett LLP, Grand Rapids, MI, for Defendants.

Opinion and Order

PAUL L. MALONEY, District Judge.

Granting Plaintiff's Motion to Remand this Case to State Court Denying As Moot the Defendant's Motion to Dismiss the First Amended Complaint Denying as Moot the Plaintiff's Motion for Leave to File a Second Amended Complaint

For the reasons that follow, the court will grant the plaintiffs' motion to remand this matter to state court and deny all other pending motions as moot.

BACKGROUND

Plaintiffs John B. Wolf, Senior, and Margaret A. Wolf (collectively "Wolf') are Michigan residents who hold long-term care insurance policies issued by defendant Bankers Life and Casualty Company ("Bankers"), and defendant Shannon Nelson resides in Michigan and is the manager of Bankers' office in Traverse City, Michigan.1 Am. Comp. ¶¶ 1-2, 6, and 9-11. In 1999, Nelson participated in the decision to hire Margaret Zimmerman as a Bankers insurance sales agent and representative, id. ¶ 13, and he had supervisory authority over Zimmerman, id. ¶ 17, who sold the long-term care policies in question to the Wolfs in July 1999, id. ¶ 19. Based at least in part on Nelson's recommendation, Bankers terminated the employment of Zimmerman in 2002 due to her use of business practices that Bankers considered unethical. Id. ¶¶ 20-28.

The Wolfs allege that despite their repeated inquiries, personnel at Bankers' Traverse City office (including defendants Nelson, John Doe, and Jane Doe) refused or failed to tell them where Zimmerman was working or why Bankers had terminated Zimmerman. Id. ¶¶ 29-55. In June 2002, the Michigan Department of Consumer and Industry Services ("the Michigan agency") sent a letter to a Bankers executive regarding a complaint that it had received about Zimmerman's conduct, yet to date Bankers has never told the Michigan agency that it had terminated Zimmerman due to unethical business practices, nor has Bankers contacted criminal authorities about Zimmerman's possibly illegal conduct. Id. ¶¶ 56-77 and 91-93 and 106-112. Instead, Bankers directed defendant Nelson to prepare a report about Zimmerman's conduct while employed with Bankers; in July 2002, Nelson submitted her report, which included allegations that Zimmerman committed forgery and fraud, to numerous Bankers executives and employees in the Traverse City office (including defendants John Doe and Jane Doe). Id. ¶¶ 78-86. The Wolfs allege that an Assistant General Counsel of Bankers read Nelson's report but then informed the Michigan agency in July 2002 only that Bankers had terminated Zimmerman "For cause due to ... inappropriate sales practices." Id. ¶¶ 87-90. The Wolfs allege that even after Nelson circulated her report, Bankers never honestly revealed to the Wolfs the reason why it had terminated their former sales agent Zimmerman-not in a July 16, 2002 letter from agent Janice Fron or otherwise. Id. ¶¶ 94-104.

Finally, the Wolfs allege that from some time before Bankers terminated Zimmerman (April 10, 2002), Bankers knew or should have known that Zimmerman "was not a person who Plaintiffs, as Bankers Life policy holders, should trust to properly, fairly, honestly and ethically handle any of Plaintiffs' insurance and financial interests" and that Zimmerman was likely to contact the Wolfs and other policyholders. Am. Comp. ¶¶ 104-105. Zimmerman contacted the Wolfs in the fall of 2002 and eventually persuaded them, in February 2004, to invest money in a project that she recommended; the Wolfs characterize the project as a Ponzi scheme and allege that they lost over $114,000 therein. Id. ¶ 113. The Wolfs claim that they never would have invested their money in a project recommended by Zimmerman if Bankers had told them that they had terminated her as a sales agent because of unethical business practices. Id. ¶¶ 114-17.2

PROCEDURAL HISTORY AND CLAIMS

On May 29, 2007 and June 8, 2007, Wolf filed the original complaint and first amended complaint, respectively, in the Circuit Court of Grand Traverse County, Michigan ("state court"). The amended complaint asserts eight claims. Counts III contend that Bankers, John Doe, and Nelson breached their common-law duties to warn them of the danger posed by terminated sales agent Zimmerman, Am. Comp. ¶¶ 124-57 and 158-78 and 179-94. Count IV contends that all four defendants committed intentional misrepresentation and silent fraud in violation of Michigan common law. Id. ¶¶ 95-246. Count V contends that Bankers and Nelson were negligent and intentionally or negligently breached their duty to report Zimmerman's violations of the law as required by 18 U.S.C. § 43 and to inform the Michigan agency of the true reasons for her termination as required by Michigan statute. Id. ¶¶ 247-291. Counts VI, VII, and VII allege concert of action, civil conspiracy, and violation of the Michigan Consumer Protection Act. Id. 292-97 and 298-308 and 309-30. The amended complaint seeks compensatory damages "in excess of $118,000", unspecified punitive damages, as well as interest, costs, and attorney fees for the Michigan Consumer Protection Act claim. Am. Comp. at 48.

On June 29, Bankers and Nelson jointly filed a timely notice removing the case to this court. On July 12, Wolf moved to remand this case to state court; Bankers filed an opposition brief on August 13 and Wolf filed a reply brief on August 27.4

LEGAL STANDARD: Removal to Federal Court

Title 28 U.S.C. § 1441 authorizes defendants to remove cases to federal district court if there exists diversity or federal-question jurisdiction. Section 1441 provides, in its entirety:

(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court for the United States for the district and division embracing the place where the action is pending. For purposes of removal under this chapter, the citizenship of defendants sued under fictitious names shall be disregarded.

(b) Any civil action of which the district courts have original jurisdiction founded on a claim of right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the state in which such action is brought.

Because removal jurisdiction raises significant federalism concerns, the Court must strictly construe removal jurisdiction. Shamrock Oil & Gas v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941) "The removing party bears the burden of establishing federal jurisdiction, and all doubts should be resolved against removal." Harnden v. Jayco, Inc., 496 F.3d 579, 581-82 (6th Cir.2007) (emphasis added) (citing Eastman v. Marine Mech. Corp., 438 F.3d 544, 549-50 (6th Cir.2006)). Removal is proper only if federal jurisdiction existed at the time of removal, without considering subsequent events, whether caused by the plaintiff or beyond his control. Williamson v. Aetna Life Ins. Co., 481 F.3d 369, 375 (6th Cir.2007) (Griffin, J.) (citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 293, 58 S.Ct. 586, 82 L.Ed. 845 (1938) and Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 872 (6th Cir.2000)).

DISCUSSION:

Has Defendant Bankers Life Established that it is Diverse from the Wolfs?

Title 28 U.S.C. § 1332 authorizes district courts to exercise diversity jurisdiction only when there is complete diversity of citizenship. Probus v. Charter Communications, LLC, 234 Fed.Appx. 404, 407 (6th Cir.2007) (citing Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999)). Complete diversity exists only when no plaintiff and no defendant are citizens of the same state. Curry v. U.S. Bulk Transport, Inc., 462 F.3d 536, 540 (6th Cir.2006) (citing Jerome-Duncan. Inc. v. Auto-by-Tel, LLC, 176 F.3d 904, 907 (6th Cir.1999)).

The general rule is that for the purpose of determining diversity jurisdiction and removability, a corporation is deemed to be a citizen both of any state where it is incorporated and the state where it maintains its principal place of business. 28 U.S.C. § 1332(c)(1). The parties agree that Bankers is incorporated in Illinois and has its principal place of business in Illinois, see Am. Comp. ¶ 5 and Bankers Br. at 3 ¶ 12, so under the general rule Bankers is a citizen of Illinois alone. The statute makes an exception, however, that can restrict diversity jurisdiction for certain direct actions against insurers:

[I]n any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen, as well as of any State by which the insurer has been incorporated and of the State where it has its principal place of business.

Id. (emphasis added). Wolf contends that this exception applies to defendant Bankers Life and Casualty Company, i.e., that the instant action is a "direct action against the insurer of a policy or contract of liability insurance." The court disagrees.

Our Circuit has explained the purpose of the direct-action exception to the corporate-diversity rule as...

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