Minneapolis Trailer Sales, Inc. et al v. The Lincoln National Life Insurance Company
Filing
66
ORDER denying 30 Motion to Dismiss for Lack of Jurisdiction; denying 30 Motion to Transfer/Change Venue. Signed by Senior Judge David S. Doty on 9/21/2015. (DLO)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 15-435(DSD/HB)
Minneapolis Trailer Sales, Inc.,
Keith Kornovich and Mark Kornovich,
Plaintiffs,
ORDER
v.
The Lincoln National Life
Insurance Company,
Defendant/Third-Party Plaintiff,
v.
Universitas Education, LLC and
Grist Mill Trust Welfare Benefit Plan,
Third-Party Defendants.
Kristin B. Rowell, Esq., Anthony Ostlund Baer & Louwagie, PA,
90 South 7th Street, Suite 3600, Minneapolis, MN 55402, counsel
for plaintiffs.
Jeffrey Mason, Esq., Stinson Leonard Street, LLP, 150 South 5th
Street, Suite 2300, Minneapolis, MN 55402, counsel for
defendant/third-party plaintiff.
Paula Colbath, Esq., Loeb & Loeb, LLP, 345 Park Avenue, New
York, NY 10154 and Rory D. Zamansky, Esq., Zelle Hofmann
Voebel & Mason , LLP 500 Washington Avenue South, Suite 4000,
Minneapolis, MN 55415, counsel for third-party defendants.
This matter is before the court upon the motion to dismiss or
transfer by
third-party
defendant
Universitas
Education,
LLC.
Based on a review of the file, record, and proceedings herein, and
for the following reasons, the court denies the motion.
BACKGROUND
This
dispute
arises
out
of
two
life
insurance
policies
currently owned by third-party defendant Grist Mill Trust Welfare
Benefit Plan (GMT).
In 2005, plaintiff Minneapolis Trailer Sales,
Inc. (MTS) agreed to participate in the GMT and made annual
contributions to the Trust on behalf of certain MTS employees.
Compl. ¶¶ 7-8.
GMT used the contributions to purchase life
insurance from Jefferson Pilot,1 listing MTS shareholders and
employees, plaintiffs Mark and Keith Kornovich as insureds. Id. ¶¶
2, 3, 9.
¶ 9.
GMT holds the policies in trust for the Kornovichs.
Id.
In August 2014, plaintiffs requested that GMT transfer
ownership of the policies to the Kornovichs.
Id. ¶ 13.
GMT agreed
to do so and, on August 26, 2014, formally requested that Lincoln
effectuate the transfer.
Id. ¶ 14.
The next day, Universitas, a judgment creditor of GMT, filed
a “restraining notice” in Universitas Education, LLC v.
Nova
Group, Inc., Case Nos. 11-1590-LTS and 11-8726-LTS (S.D.N.Y.)
(Nova),
purportedly
barring
Lincoln
and
other
entities
from
“permitting any sale, assignment or transfer of any property in
which the Grist Mill Trust has an interest.”
2.
Rowell Aff. Ex. 9, at
To comply with the restraining notice, Lincoln has not changed
1
In 2006, Jefferson Pilot merged with defendant and thirdparty plaintiff Lincoln National Life Insurance Company. Id. ¶ 10.
The policies are now identified by Lincoln Financial Group Policy
Nos. 546103549 (Keith) and 546103551 (Mark). Id. ¶ 11.
2
ownership
of
the
policies.
Am.
Third-Party
Compl.
¶
13.
Plaintiffs made a special appearance in Nova as interested parties,
and filed a motion to compel Lincoln to turn the policies over to
them.
Id. ¶ 14.
The court denied the motion, finding that it was
“attenuated” and well beyond the scope of the court’s ancillary
jurisdiction.
Rowell Aff. Ex. 16, at 5.
plaintiffs from the case without prejudice.
The court dismissed
Id. at 7.
On January 5, 2015, plaintiffs filed the instant suit against
Lincoln seeking a declaration that they are owners of the policies
and alleging breach of contract by Lincoln due to its failure to
transfer the policies. Lincoln responded by bringing a third-party
interpleader claim against Universitas and GMT under 28 U.S.C.
§ 1335, requesting a declaratory judgment regarding ownership of
the policies.2
Universitas now moves to dismiss the third-party
complaint for failure to comply with the interpleader statute or,
in the alternative, to transfer the entire matter to the United
States District Court for the Southern District of New York.
DISCUSSION
I.
Motion to Dismiss
A court must dismiss an action over which it lacks subject-
matter jurisdiction.
Fed. R. Civ. P. 12(h)(3).
2
In a facial
Lincoln does not take a position as to ownership of the
policies.
3
challenge under Rule 12(b)(1), the court accepts the factual
allegations in the pleadings as true and views the facts in the
light most favorable to the nonmoving party.
See Hastings v.
Wilson, 516 F.3d 1055, 1058 (8th Cir. 2008); see also Osborn v.
United
States,
918
F.2d
724,
729
n.6
(8th
Cir.
1990)
(“The
nonmoving party receives the same protections [for facial attacks
under Rule 12(b)(1)] as it would defending against a motion brought
under
Rule
12(b)(6).”).
In
considering
a
facial
12(b)(1)
challenge, the court limits its inquiry to the pleadings.
918 F.2d at 729, n.6.
public record.
Osborn,
The pleadings, however, include matters of
Porous Media Corp. v. Pall Corp., 186 F.3d 1077,
1079 (8th Cir. 1999).
Universitas
argues
that
the
court
lacks
subject
matter
jurisdiction over the third-party claim because Lincoln has not
satisfied
§
1335’s
deposit
requirement.
Universitas,
while
acknowledging that no transfer has occurred, asserts that Lincoln
must pay the accumulated cash value of the policies - nearly
$1,000,000 - to meet the deposit requirement.
Lincoln responds
that because ownership of the policies, rather that their value, is
at stake, it may deposit its copy of the policies with the court
and/or post a bond in the amount of $500.
Section 1335 provides,
in relevant part,
The district courts shall have original jurisdiction of
any civil action of interpleader or in the nature of
interpleader filed by any ... corporation ... having in
... its custody or possession money or property of the
4
value of $500 or more, or having issued a ... policy of
insurance ... of value or amount of $500 or more, ... if
(2) the plaintiff has deposited such money or property or
has paid the amount of or the loan or other value of such
instrument or the amount due under such obligation into
the registry of the court, there to abide the judgment of
the court, or has given bond payable to the clerk of the
court in such amount and with such surety as the court or
judge may deem proper, conditioned upon the compliance by
the plaintiff with the future order or judgment of the
court with respect to the subject matter of the
controversy.
28 U.S.C. § 1335(a) (emphasis added).
“The determination of what
‘property’ is to be deposited under Tit. 28 § 1335 depends upon the
person who invokes interpleader and what he asserts to be the
subject matter of the controversy.”
Kitzer v. Phalen Park State
Bank of St. Paul, 379 F.2d 650, 652 (8th Cir. 1967).
In
the
amended
third-party
complaint,
Lincoln
“interpleads ownership and control of the Policies.”
expressly
Third-Party
Am. Compl. ¶ 31. Universitas’s arguments that the accumulated cash
value of the policies are instead at issue, and thus should be
deposited with the court, are unpersuasive.3
Further, requiring
Lincoln to deposit the cash value of the policies with the court,
3
The court notes that Universitas’s position has been
inconsistent. For example, Universitas first prevented transfer of
the policies by serving Lincoln with the restraining notice.
Rowell Aff. Ex. 9. Universitas then reversed course mid-briefing,
advising the court that it would “lift the restraining notice and
permit the transfer.”
ECF No. 58, at 4.
But then, at oral
argument, Universitas represented that it filed an emergency
application in New York to extend the term of the restraining
notice, which may further prevent transfer of the policies. Hr’g
Tr. at 26:15-27:10.
5
in addition to paying future death benefits, would expose Lincoln
to double liability.
The interpleader statute is specifically
designed to prevent such a result.
See Gaines v. Sunray Oil, 539
F.2d 1136, 1141 (8th Cir. 1976) (“Interpleader is a procedural
device
whereby
a
party
holding
money
or
property
concededly
belonging to another may join in a single suit two or more parties
asserting mutually exclusive claims to the fund.
The stakeholder
is thereby freed from the threat of multiple liability and/or the
vexation of multiple lawsuits.”).
Because ownership of the policies, rather than their value, is
at issue, the court finds it unnecessary to require Lincoln to
deposit their accumulated value into the court registry. The court
instead orders Lincoln to post a surety bond in the amount of $500,
along with its copies of the policies.
See Kitzer, 379 F.2d at
653-54 (upholding deposit of bond in lieu of value of shares of
stock at issue).
II.
Motion to Transfer
Universitas argues that, if the case is not dismissed, it
should be transferred under 28 U.S.C. § 1404(a) to the Southern
District of New York so that it may be consolidated with other
similar cases pending there.4
4
The consolidated cases are not part of the Nova litigation.
See The Penn Mut. Life Ins. Co. v. Kehoe, Civ. No. 15-111
(S.D.N.Y.) and Life Ins. of the Sw. v. Kehoe, Civ. No. 15-4594
(S.D.N.Y.).
6
Section 1404(a) provides: “For the convenience of parties and
witnesses,
in
the
interest
of
justice,
a district
court
may
transfer any civil action to any other district or division where
it might have been brought.”
Deciding whether to order a transfer
under § 1404(a) “require[s] a case-by-case evaluation of the
particular
circumstances
relevant factors.”
at
hand
and
a
consideration
of
all
Terra Int’l, Inc. v. Miss. Chem. Corp., 119
F.3d 688, 691 (8th Cir. 1997). The relevant factors fall generally
into three categories: (1) the convenience of the parties; (2) the
convenience of the witnesses; and (3) the interests of justice.
Id.
There is, however, “no exhaustive list of specific factors to
consider ....”
Id.
“Whether an action might be brought in a
district depends on personal and subject-matter jurisdiction, venue
and service of process.”
Fisher v. Wyeth, No. 04-3107, 2011 WL
797449, at *2 (D. Minn. Feb. 28, 2011).
Plaintiffs
contest
personal
jurisdiction
in
New
York,
asserting that they have no contacts there and that the underlying
facts and circumstances occurred in Minnesota.
¶¶ 4-6.
See Kornovich Aff.
Universitas disagrees, arguing that (1) plaintiffs have
submitted to specific personal jurisdiction in New York given their
appearance as interested parties in Nova, and (2) the interpleader
statute provides the basis for nationwide personal jurisdiction
over this case as a whole.
Neither argument is persuasive.
Plaintiffs’ appearance as interested parties in a related -
7
but separate - lawsuit in New York is insufficient to establish
jurisdiction there for purposes of this case.
A forum state has
specific jurisdiction when the cause of action “arise[s] out of” or
“relate[s] to” a party’s activities within that state. Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (citation and internal
quotation marks omitted). In other words, specific jurisdiction is
“appropriate only if the injury giving rise to the lawsuit occurred
within or had some connection to the forum state, meaning that the
[party] purposely directed its activities at the forum state and
the claim arose out of or relates to those activities.” Steinbuch
v. Cutler, 518 F.3d 580, 586 (8th Cir. 2008).
met here.
That standard is not
Plaintiffs’ only apparent connection to New York is
their involvement in Nova, through which they sought to resolve the
same dispute presented here.
As a result, plaintiffs’ injury does
not arise out of or relate to their appearance in New York.
Nor
have plaintiffs otherwise consented to jurisdiction in New York
beyond the scope of the Nova proceedings.
The interpleader statute is likewise unavailing to establish
jurisdiction over plaintiffs in New York.
Although Universitas is
correct that § 1335 allows for nationwide service of process on,
and thus personal jurisdiction over, parties to such a claim,
plaintiffs are not parties to that claim.
(“In
any
civil
action
of
interpleader
See 28 U.S.C. § 2361
or
in
the
nature
of
interpleader under section 1335 of this title, a district court may
8
issue its process for all claimants ....”) (emphasis added). Under
the current posture of the case, there is no basis to find that
plaintiffs are subject to jurisdiction in New York.
Although the
interpleader statute establishes jurisdiction over Universitas in
Minnesota
for
jurisdiction
jurisdiction.
purposes
over
of
other
this
case,
it
parties
in
fora
does
not
establish
otherwise
lacking
That is particularly so with respect to plaintiffs
who are not parties to the interpleader aspect of the case and have
not been served process relating to that claim.
Even if transfer were possible, however, the court would be
disinclined to grant the motion given that Minnesota is no more or
less convenient to the parties or witnesses than New York.
Nor is
the court convinced that the possibly related proceedings in New
York are so similar that the interests of justice favor transfer of
this case for consolidation.
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CONCLUSION
Accordingly, IT IS HEREBY ORDERED that:
1.
The motion to dismiss or to transfer venue [ECF No. 30]
is denied;
2.
Third-party plaintiff shall deposit its copies of the
policies in the court registry; and
3.
Third-party plaintiff shall also post a bond in the court
registry in the amount of $500.
Dated:
September 21, 2015.
s/David S. Doty
David S. Doty, Judge
United States District Court
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