Cohen et al v. Birrane et al

Filing 14

MEMORANDUM OPINION. Signed by Judge Richard G. Andrews on 6/23/2017. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
JEFFREY COHEN, et al.
Plaintiffs,

v.

: Civ. No. 16-893-RGA

KATHLEEN BIRRANE, et al.,
Defendants.

Jeffrey Cohen, FCI Hazelton, Bruceton Mills, West Virginia. Pro Se Plaintiff.

MEMORANDUM OPINION

I

i
I

f

I

!
June '1}, 2017
Wilmington, Delaware

I

I

t

I

Plaintiff Jeffrey Cohen, an inmate at FCI Hazelton in Bruceton Mills, West
Virginia, filed this action personally and as sole shareholder of IDG Companies, LLC, 1
raising claims under 42 U.S.C. § 1983 and supplemental claims under Delaware law
pursuant to 28 U.S.C. § 1367. (D.I. 1, 3). He appears prose and has been granted
leave to proceed in forma pauperis. (D.I. 8, 11 ). Cohen also moves for injunctive relief
and requests counsel. (D.I. 4, 9). The Court now proceeds to review and screen the
Complaint pursuant to 28 U.S.C. § 1915(e)(2)(B) and§ 1915A(a).
BACKGROUND 2
Cohen brings this lawsuit for claims relating to a Delaware receivership action
currently pending in the Court of Chancery of the State of Delaware, In the Matter of the
Liquidation of Indemnity Insurance Corporation, RRG, C.A. No. 8601-CB. Indemnity
Insurance Corporation, RRG ("llC") is a risk retention group founded by Cohen and

t

f

I
I

l

1

Cohen, as sole shareholder, may not proceed prose on behalf of IDG. "Just as
a business entity cannot represent itself in court, Simbraw, Inc. v. United States, 367
F.2d 373, 373 (3d Cir. 1966), neither may a shareholder acting on behalf of a corporate
entity." Cohen v. Moore, 2016 WL 7474815, at *2 (W.D. Pa. Dec. 29, 2016) (citing
Phillips v. Tobin, 548 F.2d 408, 411-15 (2d Cir. 1976) ("Since a corporation may not
appear except through an attorney, likewise the representative shareholder cannot
appear without an attorney.")). Thus, Cohen cannot under any circumstances maintain
a suit "as sole shareholder of IDG Companies, LLC" unless he is represented by
counsel.
2

Background information is taken from the Complaint and its supporting 32-page
single-spaced memorandum. There are numerous related proceedings that provide
context for the Complaint's allegations, including an April 9, 2014 Delaware Supreme
Court opinion, Cohen v. State ex. rel. Stewart, 89 A.3d 65 (Del. 2014), various
Delaware Court of Chancery opinions, opinions issued in the United States District
Court for the District of Maryland in Cohen v. Stewart, 2014 WL 257 4550 (D. Md. June
5, 2014), and Cohen v. INS Consultants, Inc., 2015 WL 847473 (D. Md. Feb. 25, 2015),
and an opinion from the United States District Court for the Western District of
Pennsylvania in Cohen v. Moore, 2016 WL 7474815 (W.D. Pa. Dec. 29, 2016).

I

I

I

domiciled in Delaware. Cohen v. Stewart, 2014 WL 2574550, at *1. IDG Companies,
LLC ("IDG") is an affiliated company owned by Cohen. Id. After a routine investigation
by the Delaware Department of Insurance uncovered concerns about llC's solvency,
the Insurance Commissioner of the State of Delaware, then Karen Weldin Stewart,
sought a seizure order from the Delaware Court of Chancery. Id. On May 30, 2013,
the Court of Chancery entered a confidential seizure and injunction order that vested
Commissioner Stewart with the title to all llC property. Id. On June 17, 2013, the
seizure order was enrolled in the Circuit Court for Baltimore County in the State of
Maryland, State of Delaware v. Indemnity Insurance Corp., RRG, No. 03-C-13006820
(Cir. Ct. Baltimore County, Md). Id.
On September 13, 2013, three llC employees became aware of, and concerned
about, unauthorized activity in their deferred-compensation accounts. Cohen was the
only person with access to the accounts. Id. The employees contacted the Delaware
Department of Insurance, and Commissioner Stewart froze the three accounts before
they could be emptied. Id. On September 25, 2013, the Court of Chancery issued an
order imposing sanctions against Cohen due to actions taken by him during the Court
of Chancery proceedings. Cohen v. State ex. rel. Stewart, 89 A.3d at 80. On October
7, 2013, Cohen filed an expedited motion to modify or, alternatively, for relief from the
order imposing sanctions. Id. The Court of Chancery denied the motion without
prejudice. Id. at 81. The Court of Chancery entered an additional sanctions order
against Cohen on November 1, 2013, following his continued contumacious behavior.
Id. at 81-83.

2

On November 6, 2013, Commissioner Stewart filed a petition for the entry of a
rehabilitation and injunction order with consent of llC's board. Cohen v. Stewart, 2014
WL 257 4550, at *1. On November 7, 2013, the Court of Chancery entered the order,
placed llC into receivership, and appointed Commissioner Stewart as the receiver. 3
Id.

Cohen then appealed to the Delaware Supreme Court challenging multiple
orders. Cohen v. State ex. rel Stewart, 89 A.3d at 68. "Central to [the] appeal [was]
whether the delinquency proceedings [for llC] violated the constitutional due process
rights [of] Jeffrey 8. Cohen." Id. On April 9, 2014, the Delaware Supreme Court
affirmed the Court of Chancery's rulings and concluded there were no violations of
Cohen's right to due process. Id. at 68-69. The next day, on April 10, 2014, the Court
of Chancery entered a liquidation order. Cohen v. Stewart, 2014 WL 2574550, at *1.
In the meantime, on December 31, 2013, Cohen had filed a motion for emergency relief
in the Court of Chancery. In the Matter of the Liquidation of Indemnity Insurance
Corporation, RRG, C.A. No. 8601-CB at BL-549. 4
3

On March 4, 2014, Cohen filed suit in the United States District Court for the
District of Maryland seeking injunctive relief to recover funds he alleged were unlawfully
and improperly seized as part of the llC receivership because they were outside the
receivership's scope. The motion was denied on June 5, 2014 for failure to show the
likelihood of success on the merits due to want of jurisdiction and on abstention
grounds. Cohen v. Stewart, 2014 WL 2574550. On March 13, 2014, Cohen
commenced a second action in the United States District Court for the District of
Maryland raising claims related to the Delaware receivership. Cohen v. INS
Consultants, Inc., 2015 WL 847473. The matter was dismissed on February 25, 2015
for want of jurisdiction. Id. at *1. On February 13, 2015, Cohen commenced a third
action in the United States District Court for the District of Maryland raising claims
related to the Delaware receivership. The case was dismissed on April 2, 2015. Cohen
v. Bealuk, No. 15-470 (D. Md.) (D.I. 1), aff'd, 624 F. App'x 84 (41h Cir. 2015).
4

"BL-549" is how the Court of Chancery designates docket items.

3

Cohen was indicted and charged in Maryland with fifteen counts of wire fraud,
five counts of aggravated identity theft, two counts of money laundering, five counts of
making false statements to an insurance regulator, and four counts of obstructing
justice. United States v. Cohen, 2015 WL 4641072 (D. Md. Aug, 3, 2015). On June 5,
2015, he pied guilty to wire fraud, aggravated identity theft, making false statements to
an insurance regulator, and obstructing justice. Id. He was sentenced on December
10, 2015, to a term of 240 months imprisonment. See United States v. Cohen, Crim.
No. 14-310-GLR (D. Md.) (D.I. 590). An appeal is pending. (41h Cir., No. 15-4780).
On October 3, 2016, this Court received Plaintiff's Complaint5 for declaratory and
injunctive relief and for damages naming as Defendants Kathleen Birrane, Michael
Teichman, Michael Johnson, Greg Bealuk, and possibly'3 Commissioner Stewart.7 (D.I.
1). The Complaint asserts jurisdiction pursuant to 28 U.S.C. § 1331 (federal question),
28 U.S.C. § 1343 (civil rights and elective franchise), and 28 U.S.C. § 1367
(supplemental jurisdiction). (D.I. 1 at p.3).
Cohen has previously sued Teichman, Johnson, Bealuk, and Stewart for
racketeering in the United States District Court for the District of Maryland. See Cohen
v. Ins Consultants, No. 14-768 (D.I. 44,

-n 52 & Count VII) (D.

Md.) (filed March 13,

5

The Complaint refers to several exhibits, some of which (Exs. 11, 12, 13) were
not provided to the Court.
6

Commissioner Stewart's name does not appear in the case caption, but she is
listed with the other defendants on page 2 of Cohen's narrative. (D.I. 3). On the other
hand, the allegations do not seem to be directed at her as a defendant. (Id. at 27-29).
7

The Complaint was mailed in an envelope postmarked September 19, 2016.
(D.I. 1). The Complaint was signed by Cohen on August 16, 2016, but the cover letter
submitting the Complaint is dated September 19, 2016. (Id. at pp.4, 7). In the cover
letter, Cohen states that he "attempted to mail" the complaint on August 16, 2016.

4

2014). Teichman is a Delaware attorney whose hiring was authorized by Cohen. (D.I.
3 at 9). Bealuk and Johnson are insurance professionals who were hired by the
Commissioner to operate IDG while it was in the delinquency proceedings. (Id. at 10).
Birrane, a Maryland attorney, represented Bealuk and Johnson in the INS case.
The instant Complaint refers to acts allegedly taken by Defendants from 2010
through April 2014. Plaintiff raises claims under 42 U.S.C. § 1983 for violations of his
right to procedural due process under the Fourth, Fifth, and Fourteenth Amendments of
the United States Constitution, as well as supplemental state law claims under
Delaware law for negligence, gross negligence, conversion, breach of fiduciary duty,
fraud, and conspiracy. (D.I. 3 at pp.21-32).
SCREENING OF COMPLAINT
A federal court may properly dismiss an action sua sponte under the screening
provisions of 28 U.S.C. § 1915(e)(2)(B) and§ 1915A(b) if "the action is frivolous or
malicious, fails to state a claim upon which relief may be granted, or seeks monetary
relief from a defendant who is immune from such relief." Ball v. Famiglio, 726 F.3d 448,
452 (3d Cir. 2013); see also 28 U.S.C. § 1915(e)(2) (in forma pauperis actions); 28
U.S.C. § 1915A (actions in which prisoner seeks redress from a governmental
defendant). The Court must accept all factual allegations in a complaint as true and
take them in the light most favorable to a pro se plaintiff. Phillips v. County of
Allegheny, 515 F.3d 224, 229 (3d Cir. 2008); Erickson v. Pardus, 551 U.S. 89, 93

(2007). Because Plaintiff proceeds prose, his pleading is liberally construed and his
complaint, "however inartfully pleaded, must be held to less stringent standards than

5

I
I

I

I

I

formal pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. at 94 (citations
omitted).
An action is frivolous if it "lacks an arguable basis either in law or in fact."
Neitzke v. Williams, 490 U.S. 319, 325 (1989). Under 28 U.S.C. § 1915(e)(2)(B)(i) and
§ 1915A(b)(1), a court may dismiss a complaint as frivolous if it is "based on an
indisputably meritless legal theory" or a "clearly baseless" or "fantastic or delusional"
factual scenario. Neitzke, 490 U.S. at 327-28; Wilson v. Rackmill, 878 F.2d 772, 774
(3d Cir. 1989).
The legal standard for dismissing a complaint for failure to state a claim pursuant
to§ 1915(e)(2)(B)(ii) and§ 1915A(b)(1) is identical to the legal standard used when
ruling on Rule 12(b)(6) motions. Tourscher v. McCullough, 184 F.3d 236, 240 (3d Cir.
1999). However, before dismissing a complaint or claims for failure to state a claim
upon which relief may be granted pursuant to the screening provisions of 28 U.S.C. §§
1915 and 1915A, the Court must grant Plaintiff leave to amend his complaint unless
amendment would be inequitable or futile. See Grayson v. Mayview State Hosp., 293
F.3d 103, 114 (3d Cir. 2002).
Under Rule 12(b)(6), a motion to dismiss may be granted only if, accepting the
well-pleaded allegations in the complaint as true and viewing them in the light most
favorable to the plaintiff, a court concludes that those allegations "could not raise a
claim of entitlement to relief." Bell At/. Corp. v. Twombly, 550 U.S. 544, 558 (2007).
'Though 'detailed factual allegations' are not required, a complaint must do more than
simply provide 'labels and conclusions' or 'a formulaic recitation of the elements of a
cause of action."' Davis v. Abington Mem'I Hosp., 765 F.3d 236, 241 (3d Cir. 2014)

6

(quoting Twombly, 550 U.S. at 555). In addition, a plaintiff must plead facts sufficient to
show that a claim has substantive plausibility. See Johnson v. City of Shelby,
_U.S._, 135 S.Ct. 346, 347 (2014). A complaint may not dismissed, however, for
imperfect statements of the legal theory supporting the claim asserted. See id. at 346.
When reviewing the sufficiency of a complaint, a court should follow a three-step
process: (1) consider the elements necessary to state a claim; (2) identify allegations
that are merely conclusions and therefore are not well-pleaded factual allegations; and
(3) accept any well-pleaded factual allegations as true and determine whether they
plausibly state a claim. See Connelly v. Lane Constr. Corp., 809 F.3d 780, 787 (3d Cir.
2016); Williams v. BASF Catalysts LLC, 765 F.3d 306, 315 (3d Cir. 2014). Deciding
whether a claim is plausible will be a "context-specific task that requires the reviewing
court to draw on its judicial experience and common sense." Ashcroft v. Iqbal, 556 U.S.
662, 679 (2009).
The complaint in this case is not viable in this Court, for multiple reasons. I do
not address most of them, because to do so would unnecessarily extend the length of
this opinion.
ABSTENTION
Under the Younger abstention doctrine, a federal district court must abstain from
hearing a federal case which interferes with certain state proceedings. See Younger v.
Harris, 401 U.S. 37 (1971 ). The Court may raise the issue of Younger abstention sua
sponte. O'Neill v. City of Philadelphia, 32 F.3d 785, 786 n.1 (3d Cir. 1994). Under
Younger, federal courts are prevented from enjoining pending state proceedings absent

7

I
I

l

extraordinary circumstances. 8 Middlesex Cnty. Ethics Comm. v. Garden State Bar
Ass'n, 457 U.S. 423, 437 (1982). Abstention is appropriate only when: (1) there are

ongoing state proceedings that are judicial in nature; (2) the state proceedings implicate
important state interests; and (3) the state proceedings provide an adequate
opportunity to raise the federal claims. Lazaridis v. Wehmer, 591 F.3d 666, 670 (3d Cir.
2010). The doctrine applies to proceedings until all appellate remedies have been
exhausted, unless the matter falls within one of the Younger exceptions. 9 Huffman v.
Pursue Ltd., 420 U.S. 592, 608 (1975).

The Court takes judicial notice that the llC Receivership proceedings remain
pending in the Court of Chancery. The relief sought in the Complaint includes
injunctive and other relief that appears to implicate the receivership proceedings. In
Count I, Cohen seeks a declaration that Defendants violated Cohen's due process
rights by failing to operate the "owned entities in a reasonable manner." (D.I. 3 at 30).
Cohen seeks to enjoin Defendants from "committing future violations of [his] due
process rights." (Id.).

8

The abstention doctrine as defined in Younger v. Harris, 401 U.S. 37 (1971),
provides that federal courts are not to interfere with pending state criminal proceedings.
The Younger doctrine has been extended to civil cases and state administrative
proceedings. Middlesex Cnty. Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423
(1982); Huffman v. Pursue Ltd., 420 U.S. 592 (1975).
9

Exceptions to the Younger doctrine exist where irreparable injury is "both great
and immediate," Younger, 401 U.S. at 46, where the state law is "flagrantly and patently
violative of express constitutional prohibitions," id. at 53, or where there is a showing of
"bad faith, harassment, or ... other unusual circumstances that would call for equitable
relief." Id. at 54.

8

Cohen has filed for a preliminary injunction. (D.I. 4). The relief the motion seeks
is to "enjoin Defendants from using any funds from Indemnity Insurance Corporation,
Inc., RRG ('llC') and or from IDG Companies, LLC ('IDG') to pay for the defense of this
matter." (Id. at 3). llC is the subject of the Receivership proceedings, and the
injunction he seeks would, in effect, subject the Receivership proceedings to a federal
court injunction.
Delaware has an important state interest in regulating the insurance industry and
protecting the interests of policyholders and creditors from delinquent insurers.
Cohen has an adequate opportunity to raise his federal claims in state court.
Indeed, he has raised constitutional claims in the Delaware Courts and, of course, he
may also raise claims brought under Delaware law in the Delaware State courts. See
Laziridis, 591 F.3d at 670. Nothing indicates that the Delaware courts are inadequate

for addressing Cohen's constitutional claims. For these reasons, it appears that the
Court should abstain under the Younger abstention doctrine.
STATUTE OF LIMITATIONS
Even if abstention were not required, Cohen's federal claims would fail as they

°

are time-barred. Cohen raises federal claims pursuant to 42 U.S.C. § 1983. 1 For
purposes of the statute of limitations, § 1983 claims are characterized as personal
injury actions. Wilson v. Garcia, 471 U.S. 261, 275 (1983). In Delaware,§ 1983 claims
10

Section 1983 applies to persons who act "under color of any statute,
ordinance, regulation, custom or usage of any State." There are no allegations that
conceivably would make attorneys Teichman and Birrane persons acting under color of
state law. See Henderson v. Fisher, 631F.2d1115, 1119 (3d Cir. 1980) ("Liability ...
cannot be predicated solely on the state's licensing of attorneys."). It may also be the
case that Bealuk and Johnson are not alleged to be acting under color of state law, but,
under the circumstances, I do not need to reach that issue.

9

are subject to a two-year limitations period. See 1O Del. C. § 8119; Johnson v. Cullen,
925 F. Supp. 244, 248 (D. Del. 1996). Section 1983 claims accrue "when the plaintiff
knew or should have known of the injury upon which its action is based." Sameric Corp.
v. City of Philadelphia, 142 F.3d 582, 599 (3d Cir. 1998).

The statute of limitations is an affirmative defense that generally must be raised
by the defendant, and it is waived if not properly raised. See Benak ex rel. Alliance
Premier Growth Fund v. Alliance Capital Mgmt. L.P., 435 F.3d 396, 400 n.14 (3d Cir.

2006); Fassett v. Delta Kappa Epsilon, 807 F.2d 1150, 1167 (3d Cir. 1986). "[W]here
the statute of limitations defense is obvious from the face of the complaint and no
development of the factual record is required to determine whether dismissal is
appropriate, sua sponte dismissal under 28 U.S.C. § 1915 is permissible." Davis v.
Gauby, 408 F. App'x 524, 526 (3d Cir. 2010) (quoting Fogle v. Pierson, 435 F.3d 1252,

1258 (101h Cir. 2006)).
The last act complained of by Cohen occurred on April 9, 2014, when the
Delaware Supreme Court issued its opinion affirming rulings by the Court of Chancery.
Cohen did not file his Complaint until September 19, 2016. 11 Hence, it is evident from

11

The computation of time for complaints filed by prose inmates is determined
according to the "mailbox rule." A prisoner's filing is deemed filed as of the date it is
delivered to prison officials for mailing to the Court. See Houston v. Lack, 487 U.S. 266
(1988); Burns v. Morton, 134 F.3d 109, 112 (3d Cir. 1998); Gibbs v. Decker, 234 F.
Supp. 2d 458, 463 (D. Del. 2002).
Here, Plaintiff's Complaint was signed on August 16, 2016, the cover letter
mailing it to the Clerk of Court is dated September 19, 2016, and the envelope it was
mailed in is post-marked September 29, 2016. Therefore, Plaintiff's Complaint was
delivered to prison authorities for mailing on or after September 19, 2016, the date of
his cover letter, and the earliest date possible that it could have been delivered to prison
officials in West Virginia for mailing. Even if for some reason the filing date were
considered to be August 16, 2016, the analysis and conclusion would be the same.
10

the face of the Complaint that the § 1983 claims raised are barred by the two year
limitations period, having been filed some four months after the expiration of the
limitation period. Granting leave to amend on the statute of limitations is futile. Cohen
actually filed suit against Defendants Teichman and Johnson in the District of Maryland
on March 13, 2014, and on May 29, 2014, amended the complaint to include
Defendants Bealuk and Stewart, which amended complaint included a § 1983
allegation against Defendant Teichman (see Cohen v. Ins Consultants, Inc., No. 14768-WDQ (D. Md. May 29, 2014) (D.I. 44)). Therefore, I will not grant leave to amend
on the § 1983 claims. The Court will dismiss the § 1983 claims as legally frivolous
pursuant to 28 U.S.C. § 1915(e)(2)(B)(i) and§ 1915A(b)(1).
The Complaint fails to state a federal claim. The Court declines to exercise
jurisdiction over Cohen's supplemental state law claims. See 28 U.S.C. § 1367; De
Asencio v. Tyson Foods, Inc., 342 F.3d 301, 309 (3d Cir. 2003). Thus, the state law
claims will be dismissed without prejudice.
CONCLUSION
For the above reasons, the Court will: (1) dismiss the 42 U.S.C. § 1983 claims
as legally frivolous pursuant to 28 U.S.C. § 1915(e)(2)(B)(i) and§ 1915A(b)(1) and
decline to exercise supplemental jurisdiction over the claims raised under Delaware law;
and (2) dismiss as moot Plaintiff's motion for preliminary injunction and request for
counsel (D.I. 4, 9). Amendment of the federal claim is futile.
An appropriate order will be entered.

11