The Olga J. Nowak Irrevocable Trust v. Voya Financial, Inc. et al

Filing 23

MEMORANDUM. Signed by Judge Richard G. Andrews on 8/3/2018. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

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THEOLGAJ.NOWAK
IRREVOCABLE TRUST,

Plaintiff,
V.

VOYA FINANCIAL, INC.; SECURITY LIFE
OF DENVER INSURANCE COMPANY;

Civ. No. 17-1404-RGA

Defendants.
MEMORANDUM
Currently before the court is a motion filed by Plaintiff, The Olga J. Nowak Irrevocable
Trust, to remand this action to the Superior Court of the State of Delaware pursuant to 28 U.S.C.
§ 1447 on the ground that diversity of citizenship is lacking. (D.I. 12).
On May 18, 2017, Plaintiff filed a civil action in the Delaware Superior Court against
defendant Voya Financial, Inc., asserting several state law claims based on Voya's failure to pay
a death benefit purportedly owed under a life insurance policy. (D.I. 1-2). On September 6, 2017,
Plaintiff amended its complaint to add a subsidiary of Voya, defendant Security Life of Denver
Insurance Company (collectively with Voya, "Defendants").

(D.I. 1-4).

Security thereafter

removed the action to this court pursuant to 28 U.S.C. § 1441. (D.I. 1). Security contends that
this court has diversity jurisdiction over the matter even though Plaintiff and Voya are both citizens
of Delaware, because Voya was fraudulently joined. (Id.).
In support of its fraudulent joinder assertion, Security attached the declaration of Jean
Weng, Voya's Corporate Secretary and Deputy General Counsel, to the removal notice. (D.I. 11). In response, Plaintiff has filed a motion to strike the Weng declaration. (D.I. 16). Plaintiff

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argues that the declaration sets forth unsupported facts and conclusions of law that contradict the
allegations in the complaint. (D.I. 13 at 1). For the reasons set forth below, Plaintiff's motion to
remand is granted, and Plaintiffs motion to strike is dismissed as moot.

I.

BACKGROUND 1

A. The Insurance Policy
In 1999, the Nowak family was exploring strategies to preserve the wealth of Olga J.
Nowak, who was then 83 years old. (D.I. 1-4 at ,r 17). Acting on the advice of Mark Wilcock, an
agent of Southland Life Insurance Company, the Nowak family established The Olga J. Nowak
Irrevocable Trust. The Trust then purchased a life insurance policy on the life of Ms. Nowak from
Southland. (Id.). The policy had an annual premium of approximately $250,000 and a death
benefit of $4 million. (Id. at ,r 18).
According to the amended complaint, at the time Plaintiff purchased the life insurance
policy, Mr. Wilcock represented that the $4 million death benefit would continue to be payable
even if Ms. Nowak lived beyond 100. (D.I. 1-4 at

,r 18). Defendants repeatedly confirmed

Plaintiffs understanding of the mechanics of the insurance policy by providing illustrations on
January 3, 2002, March 5, 2004, February 1, 2006, February 7, 2008 and April 9, 2009 that did
not show the death benefit declining or terminating after the attained age of 100. (Id. at

,r 19).

Instead, the illustrations showed the policy paying a $4 million death benefit until Ms. Nowak
reached an "end of year age" of 110. (Id. at ,r 20).
In 2010, however, Mr. Wilcock sent Plaintiff an illustration prepared by Defendants which
ended at an "end of year age" of 100, not 110. (Id. at ,r 22). Plaintiff raised questions about the

The facts provided herein are taken from the amended complaint and assumed, for the
purposes of this opinion, to be true.
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change in the illustration and language in the policy regarding the "surrender value." (Id. at ,r,r 2124). Mr. Wilcock assured Plaintiff that it was misreading the policy and that "the death benefit is
the surrender value thus 4M is the surrender value." (Id. at ,r 23). Separately, Defendants said that
their system "now cannot illustrate past age 100." (Id. at

,r

24). In 2011, however, Plaintiff

received a policy illustration which illustrated the policy out to the age of 110. (Id. at ,r 25). It
showed, for the first time, that after age 100 the death benefit changed from $4 million to the
"surrender value," which was a significantly smaller sum than the death benefit. (Id. at ,r,r 25-27).
This is the position Defendants now take in litigation: the $4 million death benefit was
payable only until the insured's "attained age" of 100. 2 (D.I. 7 at ,r 1). Once the insured reached
the attained age of 100, the death benefit became the "surrender value." (D.I. 1-4 at ,r 11; D.I. 7 at

,r 11).
4 at

Ms. Nowak passed away on June 29, 2016, 130 days past the attained age of 100. (D.I. 1-

,r,r

11, 31). Thus, Plaintiff is entitled to the surrender value of $336,242. (Id). Plaintiff,

however, has paid over $3 million in premiums. (Id.).

B. The Parties' Involvement in the Insurance Policy
Sometime before January 2002, Internationale-Nederland Group of the Hague ("ING")
acquired Southland, the company from whom Plaintiff had purchased the insurance policy. (See
D.I. 12-1, Bxs. Al and A2). Two years later, in October 2004, ING caused its subsidiary,
Southland, to merge into another wholly-owned subsidiary, Security, with Security as the
surviving entity. (Id. at Ex. B). Security is a Colorado corporation with its principal place of

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"Attained age" is a defined term in the insurance policy that means "the Insured's Age plus
the number of completed Policy Years." (D.I. 18-1, Ex. 1 at 7). The parties do not seem to use
"attained age" consistent with the policy definition, since it would seem to me that Ms. Nowak's
attained age under this definition would have reached 100 in about 2007 or 2008. That is, she
would have then reached age 92 and had the policy for eight years. For the purpose of the remand
motion, I do not need to figure this out.
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business in Minnesota. (D.I. 1 at ,r 10; D.I. 1-4 at ,r 16). In 2014, ING changed its name to Voya.
(D.I. 1-4 at ,r 2). Voya is a Delaware corporation. (Id. at ,r 16).
The complaint alleges that Defendants sent several communications to Plaintiff on ING
letterhead and included various self-references (used interchangeably) to "Southland Life
Insurance Company," "ING," "ING Southland Life," and "ING Security Life" without making
any substantive distinction among the entities and without suggesting that each had not assumed
liabilities under the insurance policy. (D.I. 1-4 at

,r 2).

Plaintiff makes particular note of an

October 1, 2004 communication on ING letterhead informing policyholders of the merger between
Southland and Security which states: "So, while Southland Life has merged into Security Life, our
commitment to you is constant, and fulfilling our contractual obligations to you is our highest
priority. ING remains dedicated to helping its member companies provide first-rate service,
diversified product options, and exceptional communications to all its customers." (D.I. 12-1, Ex.
B.). That letter directs inquiries for more information to the "ING Service Center" and lists its
return address as the "ING Service Center." (Id.). It also states that requests for forms from
Security are to be directed through the "ING Service Center." (Id.). Other documents Plaintiff
notes are: a March 5, 2004 policy illustration faxed from an ING fax number with an ING return
address stating it is from the "ING ILLUSTRATIONS DEPARTMENT, Minot Service Center"
(D.I. 12-1, Ex. A2); a February 1, 2006 policy illustration faxed from an ING fax number with an
ING return address, stating it is from "ING," and stating that the policy was "Serviced by: ING
Security Life" (Id. at Exs. A3 and A4); a February 7, 2008 policy illustration faxed from an ING
fax on ING letterhead, indicating that the policy is "serviced by: Home Office PO Box 5065,

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Minot, ND 58702-5085," which is the home office address for ING, not Security4 (Id. at Ex. A5);
and a July 14, 2015 email enclosing policy illustrations on "Voya Financial" letterhead, including
Voya's address in Minot, and stating that the illustration was prepared by "Voya Service Center."
(Id. at Ex. A6). Plaintiff asserts that none of these "entities"-ING Illustrations Department, ING

Security Life, ING Security or ING Service Center-is registered as a separate corporation nor as
a fictitious name under which any Defendant is transacting business. (D.I. 12-2).

II.

LEGAL STANDARD
Pursuant to 28 U.S.C. § 1441(a), a defendant in a state court action can remove the case to

federal court if the federal court would have original jurisdiction over that action. This court has
original jurisdiction over "all civil actions where the matter in controversy exceeds the sum or
value of $75,000, exclusive of interests and costs, and is between ... citizens of different States."
28 U.S.C. § 1332(a). When a case involves multiple parties, there must be complete diversityi.e., "no plaintiff [may] be a citizen of the same state as any defendant." Zambelli Fireworks Mfg.

Co., Inc. v. Wood, 592 F.3d 412, 419 (3d Cir. 2010). However, the complete diversity rule may
be disregarded where a defendant has been fraudulently joined. Balazik v. Cty. of Dauphin, 44
F.3d 209, 213 n. 4 (3d Cir. 1995).
"[J]oinder is fraudulent where there is no reasonable basis in fact or colorable ground
supporting the claim against the joined defendant, or no real intention in good faith to prosecute
the action against the defendant or seek a joint judgment." Boyer v. Snap-On Tools Corp., 913
F.2d 108, 111 (3d Cir.1990) (citations omitted). "If there is even a possibility that a state court
would find that the complaint states a cause of action against any one of the resident defendants,

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Security's home office address is 1290 Broadway, Denver, CO 80203-5699. (D.I. 12-1,
Ex.Bat 3).

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the federal court must find that joinder was proper and remand the case to state court." Id.
(citations omitted). For the joinder to be fraudulent, plaintiff's failure to state a claim must be
"obvious according to settled rules of the state." Id. at 112. The court must resolve in favor of the
plaintiff "all contested issues of substantive fact" and any "uncertainties" as to the controlling
substantive law. Id. at 111. "[A]ll doubts should be resolved in favor of remand." Id.

III.

DISCUSSION

The amended complaint asserts seven claims against Defendants. Five of those claims are
based on the contract: Breach of Contract (Count I); Bad Faith Breach of Contract (Count II);
Reformation Based upon Mutual Mistake (Count IV); Reformation Based upon Mistake Coupled
with Inequitable Conduct (Count V); and Unconscionability (Count VI). (D.I. 1-4 at ,r,r 35-63).
The remaining two claims are Violation of the Delaware Consumer Fraud Act (Count III) and
Unjust: Enrichment (Count VII). (Id.).
Defendants' grounds for removal and defenses to the motion to remand rely on disputes of
fact and law. According to Defendants, Voya "did not issue or underwrite the Policy, did not
provide the illustrations Plaintiff alleges were misleading, and had no involvement in the Policy's
administration." (D.I. 1 at ,r 17). Any communications that appeared to be from Voya due to the
presence of Voya's logo, contact information, and references to itself, were mere "branding" for
which it cannot be held liable. (Id. at ,r,r 18, 24). Thus, Plaintiff's contract claims fail, because
Voya is not, and never has been, a counterparty to the insurance policy. (D.I. 18 at 10). Plaintiff's
unjust enrichment claim fails because Voya has not received or retained any benefit, money, or
property of Plaintiff. (Id. at 16). And, Voya's consumer fraud claim fails, because "post-sale
representations which are not connected to the sale or advertisement of the [policy] do not
constitute consumer fraud under the act." (Id. (quoting Norman Gershman's Things to Wear, Inc.

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v. Mercedes-Benz of N. Am., Inc., 558 A.2d 1066, 1074 (Del. Super. Ct. 1989)). Defendants
support these assertions through the declaration of Voya's Corporate Secretary and Deputy
General Counsel, which provides facts contrary to the complaint and not yet subject to discovery
or cross-examination. (D.I. 1-1 at ff 7-8).
Defendants' assertions may yet be vindicated, but they are not, under the lens with which
the court must review the complaint, "obvious." During the life of the policy, there was one
acquisition (when Voya purchased Southland), one merger (when Voya merged Southland into
Security), and several years between these two events. It is not obvious which entity held which
legal obligations at which point or whether any changes in obligor has an impact on who may now
be held liable for Plaintiffs claims. Defendants complain that Plaintiff fails to distinguish between
the various entities involved in the insurance policy. But the amended complaint itself alleges that
Defendants did not make any substantive distinction among these entities and did nothing to
correct the misleading suggestion that each had assumed liabilities under the insurance policy.
(D.I. 1-4 at

,r 2).

Plaintiff points, for example, to various communications where Defendants

referred to themselves as "ING Southland Life," and "ING Security Life." (Id.). Plaintiffs also
point to communications from Defendants stating that the policy and/or policy illustrations are
"serviced by: ING Security Life" or ING's "Home Office." (D.I. 12-1, Exs. A3, A4, and A5).
In the end, these communications may not be sufficient to find Voya (as the successor to
ING) liable on any of Plaintiffs claims. But "it is possible that a party is not fraudulently joined"
even if "the claim against that party ultimately is dismissed for failure to state a claim." Batoffv.

State Farm Ins. Co., 977 F.2d 848, 852 (3d Cir. 1992). After a careful reading of the parties'
papers, the court finds that a resolution of the parties' disputes requires a level of scrutiny into the

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facts and law that goes beyond what is permitted on a motion to remand. Accordingly, the motion
to remand is granted.

IV.

CONCLUSION
For the foregoing reasons, Plaintiffs motion to remand (D.I. 12) is granted. This action is

remanded to the Superior Court of the State of Delaware in and for New Castle County. Plaintiffs
motion to strike (D.I. 16) is dismissed as moot.
An appropriate order will be entered.

Dated: August

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2018
UNITEDSTA

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