Cardan v. New York Life Insurance Company

Filing 13

ORDER granting 2 Motion to Dismiss as to Count IV of the Complaint; denying 8 Motion to Remand. Signed by Chief Judge Dana L. Christensen on 10/11/2016. (DLE)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION
PHILIP CARDAN,

CV 16–102–M–DLC

Plaintiff,
ORDER
vs.
NEW YORK LIFE INSURANCE
COMPANY,
Defendant.
Before the Court are the following ripe motions: (1) Plaintiff Philip
Cardan’s (“Cardan”) motion to remand; and (2) Defendant New York Life
Insurance Company’s (“New York Life”) motion to dismiss. For the reasons
explained below, the Court denies Cardan’s motion to remand, and grants New
York Life’s motion to dismiss Count IV of the Complaint.
FACTUAL AND PROCEDURAL BACKGROUND
Cardan purchased disability insurance in 1991 through the American
College of Surgeons Insurance Program. The insurance provided that in the event
Cardan became disabled before the age of 50, he would receive $6,000 per month
in disability benefits. In 1995, this benefit was increased to $8,000 per month. In
1997, the coverage provider was switched to New York Life.
In November 2000, at the age of 49, Cardan became disabled. After the 901

day waiting period under the plan, Cardan began receiving $8,000 per month in
disability benefits from New York Life. Cardan alleges that at various times since
2001, New York Life sent him letters confirming that he would continue to receive
$8,000 per month, with a benefit reduction of 50% at age 65.
On February 18, 2016, Cardan received a letter from New York Life
informing him that once he reached age 65, on March 1, 2016, his disability
benefits would terminate. New York Life terminated his coverage as of February
29, 2016, and Cardan has not received any disability benefits since that time.
On June 17, 2016, Cardan filed suit against New York Life in the Montana
Eleventh Judicial District Court alleging breach of contract, statutory violations,
negligence, and consumer protection act violations. (Doc. 6.) Cardan sought
declaratory relief and damages.
New York Life removed this case to federal court on August 9, 2016, citing
this Court’s diversity jurisdiction as the basis for removal. (Doc. 1.) On August
12, 2016, New York Life moved to dismiss Count IV (alleged violations of the
Montana Consumer Protection Act) of Cardan’s Complaint for failure to state a
claim upon which relief can be granted. (Doc. 2.) On September 1, 2016, Plaintiff
moved to remand the case, claiming that the litigation involves important issues of
state insurance regulation and the Court should exercise its discretion to abstain
from hearing the matter and remand to state court. (Doc. 8.) Plaintiff asserts that
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Montana state courts have a greater interest in regulating the conduct of insurers
within its borders. New York Life responds that it has met its burden of showing
diversity jurisdiction exists, that federal courts have authority to issue declaratory
judgments, and federal courts routinely hear cases in which insurance coverage is
the subject of a declaratory judgment request and, in so doing, interpret and apply
state law. (Doc. 11.)
LEGAL STANDARDS
A defendant may remove an action from state court only if the action could
have been brought in the federal district court originally. 28 U.S.C. § 1441(a);
Jackson v. S. Cal. Gas Co., 881 F.2d 638, 641 (9th Cir. 1989). “[R]emoval
statutes are strictly construed against removal.” Luther v. Countrywide Home
Loans Servicing, LP, 533 F.3d 1031, 1034 (9th Cir. 2008). “The presumption
against removal means that the defendant always has the burden of establishing
that removal is proper.” Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241,
1244 (9th Cir. 2009) (citations and internal quotation marks omitted). “Federal
jurisdiction must be rejected if there is any doubt as to the right of removal in the
first instance.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citing
Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir.1979)).
Federal district courts have original jurisdiction in all civil actions where the
matter in controversy exceeds $75,000 and is between citizens of different states.
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28 U.S.C. § 1332. More specifically, declaratory judgment actions regarding
insurance matters may be removed to federal court on the basis of diversity
jurisdiction. Countrywide Home Loans, Inc. v. Mortgage Guaranty Ins. Corp.,
642 F.3d 849, 852 (9th Cir.2011); Gov’t Employees Ins. Co. v. Dizol, 133 F.3d
1220, 1225 (9th Cir. 1998). “Where a district court is presented with a claim
[removed from state court], it should ascertain whether the questions in
controversy between the parties to the federal suit, and which are not foreclosed
under the applicable substantive law, can better be settled in the proceeding
pending in the state court.” Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495
(1942).
The Ninth Circuit expanded upon the holding in Brillhart and enumerated
the following factors that a district court should consider when determining if
remand is proper: (1) whether the state court could provide a full resolution of all
the issues; (2) whether proceeding in federal court would result in an unnecessary
federal determination of state law; (3) whether the case raises unresolved issues of
state law better decided in a state trial court from which an appeal would go to a
state appellate court; (4) whether retention of the action in federal court would
encourage forum shopping; (5) whether one court is more convenient to the
parties; and (6) whether removing the case from state court gives rise to comity
concerns such that proceeding in federal court should be avoided. Dizol, 133 F.3d
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at 1225–1226. Nonetheless, “a district court cannot decline to entertain such an
action as a matter of whim or personal disinclination.” Id. at 1223 (citations
omitted).
Either by motion or on its own, a court should dismiss an action for lack of
subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil
Procedure if it determines it does not have “power to hear the case.” Morrison v.
Natl. Australia Bank. Ltd., 561 U.S. 247, 254 (2010) (citations omitted). Where
the attack on a plaintiff’s jurisdictional averments is “facial,” i.e. the movant
“accepts the truth of the plaintiff’s allegations but asserts that they are insufficient
on their face to invoke federal jurisdiction,” a district court reviews the motion as
it would a motion to dismiss for failure to state a claim. Leite v. Crane Co., 749
F.3d 1117, 1121 (9th Cir. 2014) (citations and internal quotation marks omitted).
In order to survive a Rule 12(b)(6) motion to dismiss for failure to state a
claim, a complaint must “contain sufficient factual matter, accepted as true, to
state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). Courts generally limit their considerations under this standard to the
allegations in the complaint. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–559
(2007). Those allegations are accepted as true and viewed in a light most
favorable to the plaintiff. Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th
Cir. 2008).
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ANALYSIS
Before turning to the merits of New York Life’s motions to dismiss, the
Court must first determine if the case should be remanded.
I.

Cardan’s Motion to Remand.
With Brillhart and Dizol in mind the Court determines that this case will not

be remanded to Montana state court. Cardan argues that under Thibodaux and
Burford, the Court should exercise its discretion to decline jurisdiction over claims
that impact state court issues. See Louisiana Power & Light Co. V. City of
Thibodaux, 360 U.S. 25, 30 (1959); Burford v. Sun Oil Co., 319 U.S. 315,
317–318 (1943). New York Life counters, arguing that Brillhart is precedent and
the Brillhart factors do not support remand.
The Court agrees that Brillhart is binding precedent on the issue.
Consequently, this Court will weigh each Brillhart factor. The first factor justifies
proceeding in federal court, because a state court declaratory judgment would
render relief essentially identical to a federal court declaratory judgment. The
second factor weighs in favor of keeping the case in federal court, because this
Court is given discretion under diversity jurisdiction to interpret insurance policy
language under established principles of Montana law. The third factor does not
apply, because Cardan has presented no evidence that this case turns on some

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novel issue of Montana insurance law yet to be addressed by the state courts.1
The fourth factor weighs in favor of keeping the case in federal court,
because allowing defendants the opportunity to remove to federal court under
diversity jurisdiction is assured by the constitution. As long as the removal is
proper, as it is here, the Court will not decline jurisdiction based on what is often
stigmatized as “forum shopping.” The fifth factor is neutral, because both the
state court and the federal court are located in Western Montana and are readily
accessible to the parties. The sixth factor also weighs against remand, because it
is not an imposition on state sovereignty for a federal court to resolve issues of
Montana insurance law under diversity jurisdiction.
Taken together, the relevant factors weigh against exercising this Court’s
discretion to remand this declaratory judgment action.
II.

New York Life’s Motion to Dismiss Count IV.
New York Life moves to dismiss Count IV of Cardan’s Complaint which

alleges a violation of the Montana Consumer Protection Act (“MCPA”). Cardan
alleges under the MCPA that New York Life’s practices were likely to mislead the
average consumer and were unfair and deceptive. (Doc. 6 at 7–8.) Cardan further

1

The Court understands that the issue of whether Montana law allows private actions
against insurers under the Montana Consumer Protection Act and the Montana Unfair Trade
Practices Act is contested by the parties. However, this Court’s findings under subsection II.,
regarding the motion to dismiss, explain that the issue is resolved under Montana law. Thus, a
Montana state court would come to the same conclusion.
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contends that the conduct he refers to “occurred prior to and outside of the claims
handling process.” (Id.) As such, Cardan argues it is not preempted by the
Montana Unfair Trade Practices Act (“MUTPA”). (Doc. 6 at 8.)
Under the MCPA, it is well-settled in Montana that private rights of action
against insurers are expressly exempted from the MCPA. Mont. Code Ann. § 3014-105(1) (2015) (“This part does not apply to actions or transactions permitted
under laws administered by the Montana public service commission or the state
auditor”); Britton v. Farmers Ins. Group, 721 P.2d 303, 323–324 (Mont. 1986)
(“[T]he provisions of the Unfair Trade Practices and Consumer Protection Act, as
relied on by [the insured] may not be applied with respect to insurance company
practices, and [the insured] must be confined to such relief as may arise out of the
insurance code for unfair claims settlement practices.”). Thus, under the Montana
Code Annotated, there is a clear separation between the MCPA and the regulation
of insurance. Cardan’s claim is invalid under the MCPA.
Because New York Life has not moved to dismiss Count II of the
Complaint, which asserts a claim under the MUTPA, the Court will not address
the merits of that claim at this time, except to point out that Cardan has conceded
that New York Life’s unfair and deceptive practices occurred before Cardan filed
his initial insurance claim. The MUTPA allows a private right of action only for
violations that occur once a claim has been filed. Thomas v. Nw. Nat. Ins. Co.,
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973 P.2d 804, 809 (Mont. 1998) (“the [MUTPA] addresses the relationship
between an insured and an insurance company once a claim has been filed,” and
not causes of action that “pertain to events that occurred prior to the handling of
the claim.”); Williams v. Union Fid. Life Ins. Co., 123 P.3d 213, 225 (Mont. 2005).
This calls into question the viability of Count II.2 Nevertheless, in a very recent
decision from the Montana Supreme Court, Mark Ibsen, Inc. v. Caring for
Montanans, Inc., 371 P.3d 446 (Mont. 2016), the Court found that there was a
distinction between pursuing damages for violation of a statute and pursuing an
independent common law cause of action. In any event, Count IV is dismissed in
its entirety.
Accordingly, IT IS ORDERED that Plaintiff Cardan’s motion to remand
(Doc. 8) is DENIED.
IT IS FURTHER ORDERED that Defendant New York Life’s motion to
dismiss Count IV (Doc. 2) is GRANTED.
DATED this 11th day of October, 2016.

2

The Court defers judgment as to Count II of the Complaint, assuming this will be the
subject of a future motion and briefing.
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