Heath v. Jackson National Life Insurance Company

Filing 24

ORDER granting 12 Motion to Remand to State Court. Signed by Judge Samuel H. Mays, Jr on 10/26/2017. (Mays, Samuel)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

GREGORY A. HEATH,

)
)
Plaintiff,
)
)
v.
)
)
JACKSON NATIONAL LIFE INSURANCE )
COMPANY AND JOHN FINLEY,
)
)
Defendants.
)

No. 2:17-cv-02494-SHM

ORDER

Before the Court is Plaintiff Gregory A. Heath’s Motion to
Remand for lack of subject matter jurisdiction, dated August 14,
2017.

(ECF No. 12; cf. ECF No. 14.)

Defendant Jackson National

Life Insurance Company responded on August 28, 2017.

(ECF No.

17.)
For the following reasons, the Motion to Remand is GRANTED.
I.

Background
Defendant Jackson National Life Insurance Company (“Defend-

ant Jackson”) issued a life insurance policy to Kathryn Finley
(“Ms. Finley”).

(ECF No. 14 at 117.)1

Finley’s life in the amount of $150,000.
1

The policy insured Ms.
(Id.)

Plaintiff and

Unless otherwise noted, all pin cites for record citations are
to the “PageID” page number.

Defendant John Finley (“Defendant Finley”) were the designated
beneficiaries of the policy.

(Id.)

The policy provided that

policyholders could submit Change of Beneficiary forms by fax.
(Id. at 118.)
On May 19, 2015, Ms. Finley submitted a Change of Beneficiary form by fax to Defendant Jackson.

(Id.)

Ms. Finley re-

quested that, after her death, Plaintiff should receive 67% of
the proceeds and Defendant Finley should receive 33% of the proceeds.2
would

(Id.)
receive

$49,500.

Based on Ms. Finley’s $150,000 policy, Plaintiff
$100,500

and

Defendant

Finley

would

receive

(Id.)

Ms. Finley died on June 14, 2015.

(Id.)

Defendant Jackson

issued a check to Plaintiff for $49,535.10 and a check to Defendant Finley for $100,500.

(Id. at 118-19.)

After receiving

his check, Plaintiff contacted Defendant Jackson to protest the
amount he had received.

(Id. at 119.)

In a letter dated Sep-

tember 18, 2015, Defendant Jackson informed Plaintiff that the
May 19, 2015 Change of Beneficiary form submitted by Ms. Finley
had been declined.

(Id.)

Thus, Plaintiff’s portion of the pol-

icy proceeds had not been changed to 67%.
Plaintiff’s counsel, acting on

(Id.)

Plaintiff’s

behalf, asked

Defendant Jackson to provide Plaintiff with a copy of the insur2

The record does not indicate the portions of Ms. Finley’s policy that Plaintiff and Defendant Finley were to receive before
May 19, 2015.
2

ance policy and all correspondence between Defendant Jackson and
Ms. Finley.
refused.

(Id.)

Plaintiff represents that Defendant Jackson

(Id.)

On May 23, 2017, Plaintiff filed a Complaint for Declaratory Judgment in the Chancery Court for Shelby County, Tennessee,
against Defendant Jackson and Defendant Finley.
1-3 at 19-26.)

(Id.; ECF No.

The Complaint alleges that Defendant Jackson has

breached its contract with Plaintiff by: (1) refusing to provide
Plaintiff with a copy of the policy and correspondence between
Defendant Jackson and Ms. Finley; (2) refusing to honor Ms. Finley’s May 19, 2015 Change of Beneficiary form; and (3) paying
Plaintiff 33% instead of 67% of the policy proceeds.
1-3 at 23-25.)

(ECF No.

On July 24, 2017, Defendant Jackson filed a No-

tice of Removal to this Court on the basis of diversity.

(ECF

No. 1.)
On August 14, 2017, Plaintiff filed a Motion to Remand.
(ECF No. 12; cf. ECF No. 14.)

Plaintiff argues that the Court

does not have subject matter jurisdiction because there is not
complete diversity between the parties and the amount in controversy does not exceed $75,000.

(ECF No. 14 at 120-22.)

ant Jackson responded on August 28, 2017.
II.

Defend-

(ECF No. 17.)

Standard of Review
28 U.S.C. § 1441

grants defendants in civil suits the

right to remove cases from state courts to federal district

3

courts when the latter would have had original jurisdiction.
Jerome–Duncan, Inc. v. Auto–By–Tel, L.L.C., 176 F.3d 904, 907
(6th Cir. 1999).

To permit removal, “there must be complete di-

versity of citizenship both at the time the case is commenced
and at the time that the notice of removal is filed.”

Id.

“‘When a non-diverse party has been joined as a defendant,
then in the absence of a substantial federal question[,] the removing defendant may avoid remand only by demonstrating that the
non-diverse party was fraudulently joined.’”
tations omitted).

Id. (internal quo-

The burden of proving fraudulent joinder of a

non-diverse defendant is “a heavy one” and lies on the removing
party.
(6th

Walker v. Philip Morris USA, Inc., 443 F. App'x 946, 953

Cir.

2011)

(internal

quotations

omitted);

Alexander

v.

Electronic Data Systems Corp., 13 F.3d 940, 948–949 (6th Cir.
1994).
“To prove fraudulent joinder, the removing party must present sufficient evidence that plaintiff could not have established a cause of action against non-diverse defendants under
state law.”

Coyne v. American Tobacco Co., 183 F.3d 488, 493

(6th Cir. 1999).

One basis for remand is failure to state a

colorable claim for recovery against a non-diverse defendant.
Id.

“[A] claim is colorable ‘if the state law might impose lia-

bility

on

the

resident

defendant

under

the

facts

alleged.’”

Kent State Univ. Bd. of Trs. v. Lexington Ins. Co., 512 F. App'x

4

485, 489 (6th Cir. 2013) (internal quotations omitted).

In de-

ciding whether a defendant has been fraudulently joined, the
district court must resolve “all disputed questions of fact and
ambiguities in the controlling . . . state law in favor of the
nonremoving party.”

Coyne, 183 F.3d at 493 (internal quotations

omitted).
III. Analysis
Plaintiff and Defendant Finley are citizens of Tennessee.
(ECF No. 1 at 4-5; ECF No. 1-3 at 19.)

Defendant Jackson is a

foreign

place

corporation

Michigan.

with

(Id. at 5.)

its

principal

of

business

in

There is no diversity on the face of the

complaint because Plaintiff and Defendant Finley are citizens of
the same state.
Defendant Jackson argues that Plaintiff fraudulently joined
Defendant Finley to defeat diversity jurisdiction.
at 137.)

(ECF No. 17

Defendant Jackson argues that joinder was fraudulent

because “Plaintiff has asserted no colorable claims or alleged
any facts giving rise to a cause of action against Defendant
Finley.”

(Id.)

“If Plaintiff is able to prove that he is enti-

tled to the additional death benefit, his recovery will only be
against [Defendant Jackson], not Defendant Finley.”
138.)

5

(Id. at

The “colorable claim” standard is not the only standard for
analyzing whether a non-diverse defendant has been fraudulently
joined.
Federal courts . . . have found that a non-diverse defendant was not fraudulently joined, even though no
colorable claim was asserted against it and no relief
was sought from that party, where it was a necessary
party to the action under state law because its interests would be substantially [a]ffected by a judgment.
Scott

v.

State

Farm

Fire

&

Cas.

Co.,

No.

1313287,

2014

WL

3054784, at *4 (E.D. Mich. July 7, 2014) (citing cases in support of the proposition).

Although Plaintiff alleges no claim

against Defendant Finley, Defendant Finley is a necessary party.
Tenn. Code Ann § 29-14-107(a) requires that, in a declaratory
action, all persons who have a claim or interest be made parties.

Accord Huntsville Util. Dist. of Scott County v. Gen.

Trust Co., 839 S.W.2d 397, 403 (Tenn. Ct. App. 1992) (“Because
of the nature of declaratory relief, the Declaratory Judgments
Act makes it incumbent that every person having an affected interest be given notice and an opportunity to be heard before declaratory relief may be granted.”).

Defendant Finley has an

interest in the matter because he will lose $50,964.90 of the
proceeds he has received from Defendant Jackson if Plaintiff
prevails.

(ECF No. 14 at 122; ECF No. 17 at 139.)

Under Ten-

nessee law, Defendant Finley must be joined as a necessary party

6

to Plaintiff’s declaratory judgment action.

Defendant Finley

was not fraudulently joined.
The parties are not completely diverse because Plaintiff
and Defendant Finley are both citizens of Tennessee.
at 4-5; ECF No. 1-3 at 19.)

(ECF No. 1

The Court lacks subject matter ju-

risdiction.
IV.

Conclusion

For the foregoing reasons, Plaintiff’s Motion to Remand is
GRANTED.

So ordered this 26th day of October, 2017.

/s/ Samuel H. Mays, Jr. ____
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE

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