McPhillips v. Nationwide Life Insurance Company

Filing 27

OPINION AND ORDER: it is the ORDER, JUDGMENT, and DECREE of the court that plf Julian McPhillips's 14 Motion to Remand is granted and that, pursuant to 28 USC § 1447(c), this case is remanded to the Circuit Court of Montgomery County, Ala bama for want of jurisdiction; further ORDERED that all other pending motions are left for resolution by the state court after remand; DIRECTING the clerk to take appropriate steps to effect the remand. Signed by Honorable Judge Myron H. Thompson on 10/20/2011. (wcl, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

JULIAN McPHILLIPS,

)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.
NATIONWIDE LIFE
INSURANCE COMPANY,
Defendant.

CIVIL ACTION NO.
2:11cv634-MHT
(WO)

OPINION AND ORDER
Plaintiff Julian McPhillips filed this “vanishing
premiums”

lawsuit

in

state

court

Nationwide Life Insurance Company.

against

defendant

Pursuant to 28 U.S.C.

§§ 1332, 1441, and 1446, Nationwide removed this case to
federal

court

jurisdiction.

based

on

diversity-of-citizenship

McPhillips now moves for remand to state

court because Nationwide has failed to demonstrate that
the $ 75,000 amount in controversy required for diversity
jurisdiction has been met in this case.

For the reasons

that follow, McPhillips’s remand motion will be granted.

I.
Where, as here, the defendant seeks to remove a case
on diversity-jurisdiction grounds and the damages have
not

been

specified

by

the

plaintiff,

the

removing

defendant “must prove by a preponderance of the evidence
that the amount in controversy exceeds the $ 75,000
jurisdictional requirement.”

Leonard v. Enterprise Rent

A Car, 279 F.3d 967, 972 (11th Cir. 2002).

“A removing

defendant bears the burden of proving proper federal
jurisdiction.”

Id.

The court may not “speculate in an

attempt to make up for the notice’s failings.”

Lowery v.

Alabama Power Co., 483 F.3d 1184, 1215 (11th Cir. 2007).
Finally,

this

court’s

jurisdiction

is

determined

based on the complaint as it existed at the time of
removal, not a subsequently amended complaint.

See Burt

Co. v. Clarendon Nat’l Ins. Co., 385 Fed. Appx. 892 (11th
Cir. 2010) (per curiam). (Because this case will be
remanded back to state court, this court need not address
McPhillips’s pending motion to amend the complaint.)

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II.
According to McPhillips, Nationwide informed him that
a single payment of $ 4,772.57 would provide a $ 250,000
life-insurance policy for the remainder of his son’s
life; in other words, the premiums would “vanish” after
the first payment.
but

Nationwide

McPhillips made the initial payment,
now

demands

additional

premiums.

McPhillips has complied with these requests for payment
and currently holds a valid life-insurance policy for his
son.
With

this

lawsuit,

McPhillips

claims

contract, misrepresentation, and suppression.

breach

of

He seeks

a declaratory judgment that he is entitled to the lifeinsurance policy based on the $ 4,772.57 payment, as well
as compensatory and punitive damages.

The complaint’s ad

damnum clause does not specify the amount of damages
sought.

McPhillips does not seek injunctive relief.

3

III.
Because McPhillips’s complaint does not specify the
amount of damages sought in this case, the burden is on
Nationwide to establish the jurisdictional amount by a
preponderance of the evidence.
972.

See Leonard, 279 F.3d at

Nationwide contends that, because McPhillips seeks

equitable relief related to an insurance policy, the
relevant

amount

in

controversy

is

the

policy’s

face

value: $ 250,000.
Nationwide argues that several Eleventh and binding
former Fifth Circuit Courts of Appeals cases dictate that
removal is proper.

Bonner v. City of Prichard, 661 F.2d

1206, 1209 (11th Cir. 1981) (en banc) (the Eleventh
Circuit adopted as binding precedent all of the decisions
of the former Fifth Circuit handed down prior to the
close of business on September 30, 1981).

In Guardian

Life Ins. Co. of America v. Muniz, 101 F.3d 93 (11th Cir.
1996), and New York Life Ins. Co. v. Swift, 38 F.2d 175
(5th Cir. 1930), insurance companies filed suit against

4

policyholders seeking to void policies.

The Eleventh

Circuit and former Fifth Circuit reasoned that, when an
insurance company attempts to void a contract, the amount
in controversy for diversity-of-citizenship purposes is
the face value of the policy.
Swift, 38 F.2d at 176.

See Muniz, 101 F.3d at 94;

And in C.E. Carnes & Co. v.

Employer’s Liability Assur. Corp., Ltd., 101 F.2d 739
(5th

Cir.

1939),

the

insurance

company

sought

a

declaratory judgment that harms caused by butane gas were
not covered by the policy.

The former Fifth Circuit held

that the “amount in controversy is the value of that
which is sought to have declared free from doubt--the
policy for $ 25,000.”

Id. at 741.

Nationwide also cites In re Minnesota Mutual Life
Ins. Co. Sales Practices Litigation, 346 F.3d 830 (8th
Cir. 2003), where the Eighth Circuit Court of Appeals
confronted a “vanishing premium” case.
policyholders

let

their

policies

lapse

The plaintiff
after

premiums continued past the vanishing point.

5

their

See id. at

835.

Seeking to restore their policies, the plaintiffs

filed suit alleging various forms of fraud and breach of
contract.
company

See id. at 833.

removed

the

case

After the defendant insurance
to

federal

court

based

on

diversity of citizenship, the Eighth Circuit held that,
because the plaintiffs sought equitable relief to enforce
the contract, the face value of the policy satisfied the
amount in controversy. See id. at 835.
McPhillips responds that he is not challenging the
validity

of

the

insurance

policy.

He

seeks

only

repayment of approximately $ 6,100 in additional premiums
and a declaratory judgment that the initial $ 4,772.57
payment will fund the policy for the remainder of his
son’s life.
Read as a whole, the cases relied on by Nationwide
establish that when the validity of an insurance policy
is at stake–-because either the insurance company seeks
to void the contract or the plaintiff requests injunctive

6

relief to restore a lapsed policy–-the jurisdictional
amount in controversy is the face value of the policy.
But, here, McPhillips is not challenging the validity
of the policy; as the facts currently stand, McPhillips’s
policy is valid.

Regardless of the result of this

lawsuit, McPhillips would still be entitled to a benefit
upon his son’s death.
Unlike the plaintiffs in In re Minnesota Mutual Life,
therefore, McPhillips is not seeking injunctive relief to
restore an entire policy and make the defendant liable
for its face value.

McPhillips requests only declaratory

relief that he not pay any additional premiums to keep
the life-insurance policy valid.
in

controversy

is

the

value

Thus, the true amount
of

premiums--past

and

future–-after the $ 4,772.57 payment.
McPhillips

contends

that

the

overpaid

premiums

approximate $ 6,100, a figure well below the $ 75,000
amount in controversy requirement; he does not predict
the value of future premiums.

7

By contrast, Nationwide

has failed to provide any estimate of (1) McPhillips’s
post-vanishing point payments and (2) the value of any
future premiums.

As Nationwide bears the burden of

establishing a $ 75,000 amount in controversy, the court
concludes that the compensatory damages at stake fall
below the jurisdictional floor.
Nationwide further contends that McPhillips’s request
for punitive damages pushes the amount in controversy
above $ 75,000.

In support, Nationwide cites Alabama

jury verdicts awarding plaintiffs millions of dollars.
The court has reviewed these cases and found them to be
legally and factually distinguishable.
Nationwide, therefore, has failed to satisfy its
burden of proof by a preponderance of the evidence.

***

Accordingly, it is the ORDER, JUDGMENT, and DECREE of
the court that plaintiff Julian McPhillips’s motion to

8

remand (Doc. No. 14) is granted and that, pursuant to 28
U.S.C. § 1447(c), this case is remanded to the Circuit
Court

of

Montgomery

County,

Alabama

for

want

of

jurisdiction.
It is further ORDERED that all other pending motions
are left for resolution by the state court after remand.
The

clerk

of

the

court

is

DIRECTED

to

appropriate steps to effect the remand.
DONE, this the 20th day of October, 2011.

/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE

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