Kuehl v. Jefferson Pilot Financial et al
FINDINGS AND RECOMMENDATION - The plaintiff's Motion to Amend (Filing No. 21 ) is denied to the extent the plaintiff seeks to add Jefferson Pilot Financial Insurance Company as a defendant and granted in all other respects. The plaintiff shal l have to on or before November 21, 2012, to file the amended complaint. It is recommended to Judge Joseph F. Bataillon that: The plaintiffs Motion for Remand (Filing No. 11 ) be denied. Any objection to this Order or Findings and Recommendation shall be filed with the Clerk of the Court within fourteen (14) days after being served with a copy of this Order and Findings and Recommendation. Ordered by Magistrate Judge Thomas D. Thalken. (AOA)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
JEFFERSON PILOT FINANCIAL and
LINCOLN FINANCIAL GROUP,
This matter comes before the court on the plaintiff’s Motion for Remand (Filing No.
11) and Motion to Amend (Filing No. 21). The plaintiff argues remand in necessary
because this court lacks diversity jurisdiction and seeks to amend the complaint to add
allegations and correct the misnamed defendants. The motions are related and will be
The plaintiff filed a brief (Filing No. 12) and an index of evidence (Filing No. 13) in
support of the Motion for Remand. The defendants filed a brief (Filing No. 16) and an
index of evidence (Filing No. 17) in response to the Motion for Remand. The plaintiff filed
a brief (Filing No. 20) in reply. The plaintiff attached to the Motion to Amend a draft of the
proposed amended pleading (Filing No. 21-1) and filed a brief (Filing No. 22). The
defendants filed a brief (Filing No. 24) and an index of evidence (Filing No. 25) in
opposition to the Motion to Amend. The plaintiff filed a brief (Filing No. 26) and an index
of evidence (Filing No. 27) in reply.
The plaintiff’s action arises from his purchase of a life insurance policy. See Filing
No. 1 - Ex. 1 Complaint. The plaintiff alleges the following facts in the complaint. The
plaintiff, a natural person, resides in Douglas County, Nebraska. Id. ¶ 1. The named
defendants, Jefferson Pilot Financial and Lincoln Financial Group, are insurance
companies who do business in Nebraska and issued an insurance policy for which the
plaintiff was the owner and beneficiary. Id. ¶¶ 2-3. Mike C. Kuehl was the insured under
the policy. Id. ¶ 3. Mike C. Kuehl died in February 2012. Id. ¶ 4. The defendants failed
to properly invoice the plaintiff, resulting in inadvertent non-payment of the insurance
premium. Id. ¶¶ 5-6. The defendants also failed to provide proper notice to the plaintiff
before terminating the insurance policy. Id. ¶¶ 7-8. Based on these alleged facts, the
plaintiff asserts claims for breach of contract, breach of the covenant of good faith and fair
dealing, and bad faith. Id. at 3-4.
On July 30, 2012, the defendants removed this action from the District Court of
Douglas County, Nebraska, to the United States District Court for the District of Nebraska.
See Filing No 1 - Notice of Removal. The defendants allege this action is removable
pursuant to 28 U.S.C. § 1332(a) because it involves a controversy for an amount in excess
of $75,000 and the parties are citizens of different states. Id. at 1-2. Specifically, the
unpaid life insurance benefits and other monetary relief sought exceed $250,000. Id. at
2. Additionally, the defendants argue the named defendants are misjoined and the proper
party to the lawsuit is a citizen of a different state than the plaintiff. Id. at 1-2. The
defendants have filed an answer to the complaint, denying liability. See Filing No. 14.
On July 30, 2012, the plaintiff filed a motion to remand, arguing the defendants
failed to comply with the procedural requirements for removal. See Filing No. 2. On July
31, 2012, the plaintiff withdrew the July 30, 2012, motion. See Filing No. 5. On August 29,
2012, the plaintiff filed the instant motion to remand, arguing this court lacks diversity
jurisdiction because the entity Jefferson Pilot Financial Insurance Company was
incorporated in Nebraska, although it later became inactive and merged with Lincoln
Financial. See Filing No. 12 - Brief p. 1.
The defendants oppose remand, arguing the plaintiff failed to name the proper party
defendant. See Filing No. 16 - Brief p. 1-2. Specifically, the defendant states the plaintiff’s
insurance policy was issued by Jefferson Pilot Life Insurance Company, who was not
named as a party in this action. Id. at 1; Filing No. 17 - Ex. A Policy. Further, after merger,
The Lincoln National Life Insurance Company, who was not named as a party in this
action, unconditionally assumed all Jefferson Pilot Life Insurance Company’s policy
obligations. See Filing No. 16 - Brief p. 1. Accordingly, the defendants contend The
Lincoln National Life Insurance Company is the only real party in interest and only proper
defendant. Id. at 1-2. The Lincoln National Life Insurance Company was incorporated and
has its principal place of business in Indiana. See Filing No. 1 - Notice of Removal p. 2.
In any event, the defendant states “[t]here has at no time been an entity known as
‘Jefferson Pilot Financial’” or as “Lincoln Financial Group.” Id.; see Filing No. 16 - Brief p.
2. In sum, the defendants argue diversity is not destroyed by the former citizenship of an
inactive corporation that was not named as a defendant, and which has no current legal
obligation under the insurance policy at issue. Id.
The plaintiff seeks to amend the complaint to accurately identify the two companies
the plaintiff believes are the proper defendants in this action: The Lincoln National Life
Insurance Company and Jefferson Pilot Financial Insurance Company. See Filing No. 21 Motion to amend; Filing No. 26 - Reply p. 1. The defendants do not oppose the plaintiff’s
motion to amend “to the extent it seeks leave to file an amended pleading that names ‘The
Lincoln National Life Insurance Company’ as the sole defendant, or to make the factual
clarifications contained in the proposed pleading (though many are not accurate).” See
Filing No. 24 - Response p. 1. The defendants argue, however, any claims against
Jefferson Pilot Financial Insurance Company are legally futile. Id.
For the reasons set forth below, the undersigned magistrate judge recommends the
plaintiff’s motion to remand be denied.1
The court is entering this Findings and Recom m endation in this m atter in light of the split in court
decisions over whether a m agistrate judge has authority to rule on a m otion to rem and. Compare Vogel v.
U.S. Office Prods. Co., 258 F.3d 509, 517 (6th Cir. 2001) (finding “rem and m otions are dispositive and, as
such, can only be entered by district courts”), Williams v. Beemiller, Inc., 527 F.3d 259 (2d Cir. 2008),
Stefanik v. City of Holyoke, 597 F. Supp. 2d 184, 185 (D. Mass. 2009), and Johnson v. Tyson Fresh
Meats, Inc., No. C-06-1002, 2006 W L 1004970, at *1 (N.D. Iowa Apr. 17, 2006), w ith W hite v. State Farm
Mut. Auto. Ins. Co., 153 F.R.D. 639 (D. Neb. 1993) (concluding rem and of a case to the state court was not
an Article III function and could be ordered by a m agistrate judge). In Vogel, the court concluded:
[W ]e apply a functional equivalency test to see if a particular m otion has the
sam e practical effect as a recognized dispositive m otion. Applying that test,
. . . we too find that a rem and order is the functional equivalent of an order
to dism iss. The practical effect of rem and orders and orders to dism iss can
be the sam e; in both, cases are perm itted to proceed in state rather than
Vogel, 258 F.3d at 517. Accord First Union Mortgage Corp. v. Smith, 229 F.3d 992 (10th Cir. 2000); In
re U.S. Healthcare, 159 F.3d 142, 145 (3d Cir. 1998); see also Meier v. Premier Wine & Spirits, Inc., 371
F. Supp. 2d 239, 241-42 (E.D.N.Y. 2005) (noting that “[m ]ost district courts to have considered this issue have
found rem and to be within a m agistrate judge's authority under 28 U.S.C. 636(b)(1)(A). On the other hand,
every appellate court that has weighed the issue has determ ined a rem and to be the functional equivalent of
a dispositive order, and therefore beyond a m agistrate judge's authority.”) (collecting cases). The undersigned
m agistrate judge concludes a recom m endation is the m ost appropriate course of action in this m atter.
The court must look to federal statute to determine if an action was properly
removed to federal court. The federal statute governing removal provides:
Except as otherwise expressly provided by Act of Congress,
any civil action brought in a State court of which the district
courts of the United States have original jurisdiction, may be
removed by the defendant or the defendants, to the district
court of the United States for the district and division
embracing the place where such action is pending.
28 U.S.C. § 1441(a). “The district courts shall have original jurisdiction of all civil actions
arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331.
Absent a federal question, as in the case at bar, the court must determine whether diversity
of the parties exists in order to confer federal jurisdiction. See 28 U.S.C. § 1332(a).
The United States District Court has original jurisdiction over civil actions “where the
matter in controversy exceeds the sum or value of $75,000” and is between “citizens of
different States.” 28 U.S.C. § 1332(a). This type of subject matter jurisdiction is known as
diversity jurisdiction. The plaintiff need not bring the motion to remand based on lack of
subject matter jurisdiction within thirty days of filing the notice of removal. See Wisconsin
Dep’t of Corr. v. Schacht, 524 U.S. 381, 389 (1998). Under the removal statute: “If at
any time before final judgment it appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). There is no question the
amount in controversy exceeds the $75,000 statutory requirement. The parties dispute
whether complete diversity exists.
The party seeking removal and opposing remand has the burden of establishing
federal subject matter jurisdiction by a preponderance of the evidence. In re Prempro
Prods. Liab. Litig., 591 F.3d 613, 620 (8th Cir. 2010). Since removal to federal court is
a statutory right, and not one granted under the Constitution, removal jurisdiction must be
narrowly construed in favor of the non-removing party. Shamrock Oil & Gas Corp. v.
Sheets, 313 U.S. 100, 107-09 (1941). “All doubts about federal jurisdiction should be
resolved in favor of remand to state court.” Knudson v. Sys. Painters, Inc., 634 F.3d
968, 975 (8th Cir. 2011).
The determination about whether a federal court has removal jurisdiction is made
on the basis of the record at the time of removal. Lexecon Inc. v. Milberg Weiss
Bershad Hynes & Lerach, 523 U.S. 26, 43 (1998) (“[R]emoval is permissible only where
original jurisdiction exists at the time of removal or at the time of the entry of final
judgment.”); Keene Corp. v. United States, 508 U.S. 200, 207-08 (1993) (noting
“subject-matter jurisdiction turns on the facts upon filing” in federal court); James Neff
Kramper Family Farm P’ship v. IBP, Inc., 393 F.3d 828, 834 (8th Cir. 2005) (noting a
court judges “the legitimacy of the amount in controversy ‘based on information known to
the court at the time jurisdiction [is] challenged’”). Therefore, “jurisdictional facts must be
judged at the time of the removal, and any post petition affidavits are allowable only if
relevant to that period of time.” Dyrda v. Wal-Mart Stores, Inc., 41 F. Supp. 2d 943, 948
(D. Minn. 1999) (citing Gilmer v. Walt Disney Co., 915 F. Supp. 1001, 1007 (W.D. Ark.
1996) (quoting Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995))).
Moreover, “an anticipated or actual federal defense generally does not qualify a case for
removal.” Jefferson County, Ala. v. Acker, 527 U.S. 423, 430-31 (1999).
“[F]raudulent joinder [is] an exception to the complete diversity rule.” In re Prempro
Prods., 591 F.3d at 620. Fraudulent joinder is “the filing of a frivolous or otherwise
illegitimate claim against a non-diverse defendant solely to prevent removal.” Filla v.
Norfolk S. Ry. Co., 336 F.3d 806, 809 (8th Cir. 2003). The court requires “a defendant
seeking removal to prove that the plaintiff’s claim against the diversity-destroying defendant
has ‘no reasonable basis in fact and law.’” Knudson, 634 F.3d at 980 (quoting Filla, 336
F.3d at 810); see Murphy v. Aurora Loan Servs. LLC, No. 12-1398, slip op. at 3 (8th Cir.
Nov. 8, 2012) “Fraudulent joinder does not exist where ‘there is arguably a reasonable
basis for predicting that the state law might impose liability based upon the facts involved.’”
Block v. Toyota Motor Corp., 665 F.3d 944, 948 (8th Cir. 2011) (quoting Junk v.
Terminix Int’l Co., 628 F.3d 439, 446 (8th Cir. 2010)); see Murphy, No. 12-1398, slip op.
at 5. A defendant’s burden is greater than merely proving a plaintiff’s claim should be
dismissed under Rule 12(b)(6). Block, 665 F.3d at 948; see Junk, 628 F.3d at 445 (noting
Rule 12(b)(6) standard is “more demanding” where a plaintiff’s claim must be plausible on
its face). This is because “[a]ll doubts arising from defective, ambiguous and inartful
pleadings [in a removed case] should be resolved in favor of the retention of state court
jurisdiction.” Wilkinson v. Shackelford, 478 F.3d 957, 964 (8th Cir. 2007) (second
alteration in original) (quoting Greenshields v. Warren Petroleum Corp., 248 F.2d 61,
65 (10th Cir. 1957)).
In this case, the plaintiff admits the original “complaint does not accurately identity
the two companies that plaintiff believes are the proper defendants in this action.” See
Filing No. 22 - Brief p. 1. The parties do not dispute one of the misnamed defendants
should be The Lincoln National Life Insurance Company. See Filing No. 24 - Response
p. 1; Filing No. 26 - Reply p. 1. The amendment changing the party’s name relates back
to the date of the original pleading. See Fed. R. Civ. P. 15(c)(1)(C). The Lincoln National
Life Insurance Company was incorporated and has its principal place of business in
Indiana. See Filing No. 1 - Notice of Removal p. 2. Accordingly, The Lincoln National Life
Insurance Company is diverse from the plaintiff.
The parties dispute the impact of a second defendant on diversity jurisdiction. The
plaintiff acknowledges “Jefferson Pilot Financial” is not a proper defendant in this case.
See Filing No. 22 - Brief p. 1. Because Jefferson Pilot Financial is not a proper defendant
in this action there can be no dispute no arguably reasonable basis exists for predicting
state law might impose liability based upon the facts involved. Accordingly, Jefferson Pilot
Financial was erroneously joined and its citizenship cannot be relied upon to destroy
diversity. Assuming the plaintiff may amend the complaint, as requested, to change the
misnamed defendant, the court will assess the addition of Jefferson Pilot Financial
Insurance Company for purposes of diversity jurisdiction.
Jefferson Pilot Life Insurance Company issued the plaintiff’s insurance policy on
April 13, 2006. See Filing No. 17 - Ex. A p. 1 Policy. The plaintiff does not seek to add
Jefferson Pilot Life Insurance Company as a defendant. The application for insurance
dated March 15, 2006, has a header reading, “Jefferson Pilot Financial.” Id. at 22
Application. Additionally, the top of the document states, “Please check appropriate
underwriting company: Jefferson-Pilot Life Insurance Company [or] . . . Jefferson Pilot
Financial Insurance Company.” Id. Neither of the two boxes are checked. The plaintiff
suggests Jefferson-Pilot Life Insurance Company was a division of Jefferson Pilot Financial
Insurance Company at the time the policy was issued. See Filing No. 26 - Brief p. 2.
On May 1, 2007, Jefferson Pilot Financial Insurance Company, a corporation
incorporated in Nebraska, became inactive. See Filing No. 13-1 Ex. A. Effective July 2,
2007, Jefferson Pilot Financial Insurance Company merged into The Lincoln National Life
Insurance Company, a foreign corporation domiciled in Indiana. Id.; Filing No. 25-2
Articles of Merger. The Articles of Merger filed with the Nebraska Secretary of State in
connection with the transaction provide that upon the effective date of the merger, “the
separate existence of the Merged Companies shall cease” and “the Surviving Company
shall thenceforth be responsible and liable for all the liabilities, obligations and penalties”
of the merged company. Id. at 4, 5. The surviving company was The Lincoln National Life
Insurance Company. Id. at 1. Similar to the contractual language, Nebraska law confirms
that following a merger, “the separate existence of every corporation except the surviving
corporation shall cease” and “the surviving corporation shall have all liabilities of each
corporation party to the merger.” Neb. Rev. Stat. § 21-20,133(1)(a), (c).
In reliance upon the merger, the plaintiff’s initial complaint alleges Lincoln Financial
Group is Jefferson Pilot Financial’s successor. See Filing No. 1-1 Complaint ¶ 2. Similarly,
the proposed amended complaint alleges that “[i]n 2007, Jefferson Pilot merged with
Lincoln National . . . [who] continues to do business in Nebraska.” See Filing No. 21-1
Proposed First Amended Complaint ¶ 2.
The plaintiff argues he feels compelled to name Jefferson Pilot Financial Insurance
Company due to the notice issues involved in this case. See Filing No. 20 - Reply p. 1-2.
Specifically, the insurance policy was issued prior to the merger and the allegations involve
conduct or failures to act prior to or at the time of the merger. Id. Additionally, the plaintiff
argues despite merger, the merging entity, if operating as a division of the parent
corporation, may still be considered to be a citizen of the state where it is doing business.
Id. at 3 (citing Jackson v. Tenn. Valley Auth., 462 F. Supp. 45, 49 (M.D. Tenn. 1978)).
Jefferson Pilot Financial Insurance Company’s citizenship does not destroy diversity.
The parties do not dispute The Lincoln National Life Insurance Company conducts
business in Nebraska and other states. Further, the plaintiff does not dispute The Lincoln
National Life Insurance Company’s principal place of business is in Indiana. Further, the
court need not evaluate Jefferson Pilot Financial Insurance Company’s citizenship because
it is not a party to this action. Jefferson Pilot Financial Insurance Company did not issue
the relevant policy. Nor is there any evidence in the record the issuer of the policy merged
into or was a division of Jefferson Pilot Financial Insurance Company. In any event, if
Jefferson Pilot Financial Insurance Company were named as a defendant, its presence
would be as a nominal party. Based on the Articles of Merger and Nebraska merger law,
effective July 2, 2007, the separate existence of Jefferson Pilot Financial Insurance
Company ceased and The Lincoln National Life Insurance Company assumed all liabilities
of each corporation party to the merger. Because Jefferson Pilot Financial Insurance
Company is not a proper defendant in this action there can be no dispute no arguably
reasonable basis exists for predicting state law might impose liability based upon the facts
involved. Accordingly, Jefferson Pilot Financial Insurance Company would be erroneously
joined and its citizenship cannot be relied upon to destroy diversity. For the same reasons,
the plaintiff’s motion to amend the complaint to add Jefferson Pilot Financial Insurance
Company as a defendant is denied as futile. See Fed. R. Civ. P. 15(a); Amrine v. Brooks,
522 F.3d 823, 833 (8th Cir. 2008) (noting “denial of leave to amend may be justified by
undue delay, bad faith on the part of the moving party, futility of the amendment or unfair
prejudice to the opposing party”); see also Briscoe v. County of St. Louis, Mo., 690 F.3d
1004, 1015 (8th Cir. 2012).
Based on the merger and assumption of liabilities, any remaining issues about the
timing of the policy’s issuance, in relation to the merger, or when or which company failed
to provide proper notices to the plaintiff does not require Jefferson Pilot Financial Insurance
Company to remain a party to this case. Similarly, the plaintiff’s concern a later court may
find Jefferson Pilot Financial Insurance Company’s citizenship defeat jurisdiction and his
reliance on Jackson is unavailing. The Jackson court noted the merged corporation had
been incorporated in Illinois prior to the merger with a Delaware corporation. Jackson,
462 F. Supp. at 49. Nevertheless, a corporation is a citizen of its state of incorporation and
the state where its business is principally conducted.
28 U.S.C. § 1332(c)(1).
determining the corporation’s principal place of business, the Jackson court determined
that after the merger a substantial portion of the parent corporation’s business was in
Illinois. Jackson, 462 F. Supp. at 49. The court did not merely rely on whether the
merged entity still conducted business in its state of incorporation as a division of the
Based on the facts of this case and the attending case law, jurisdiction appears
proper in United States District Court. Therefore, the undersigned magistrate judge
recommends the plaintiff’s motion to remand be denied. Upon consideration,
IT IS ORDERED:
The plaintiff’s Motion to Amend (Filing No. 21) is denied to the extent the plaintiff
seeks to add Jefferson Pilot Financial Insurance Company as a defendant and granted in
all other respects. The plaintiff shall have to on or before November 21, 2012, to file the
IT IS RECOMMENDED TO JUDGE JOSEPH F. BATAILLON that:
The plaintiff’s Motion for Remand (Filing No. 11) be denied.
Pursuant to NECivR 72.2 any objection to this Order or Findings and
Recommendation shall be filed with the Clerk of the Court within fourteen (14) days after
being served with a copy of this Order and Findings and Recommendation. Failure to
timely object may constitute a waiver of any objection. The brief in support of any objection
shall be filed at the time of filing such objection. Failure to file a brief in support of any
objection may be deemed an abandonment of the objection.
DATED this 8th day of November, 2012.
BY THE COURT:
s/ Thomas D. Thalken
United States Magistrate Judge
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