Opinion
MDL NO. 1122
April 30, 2004
MEMORANDUM OPINION ON PLAINTIFF'S MOTION TO REMAND
Now before the Court in this multidistrict case, in Gwin v. Jackson National Life Ins. Co., W.D. Mich. No. 5:03-CV-57, is the motion of plaintiff Lorean Gwin to remand this action to state court in Mississippi. Plaintiff contends her complaint was improperly removed to the United States District Court for the Southern District of Mississippi despite the lack of complete diversity of citizenship between herself and defendants. Defendant Jackson National Life Insurance Company, which removed the action, recognizes that defendant Mark E. Bagley is non-diverse, but contends his citizenship must be disregarded because he was "fraudulently joined." For the reasons that follow, the motion to remand will be granted.
I
Plaintiff Lorean Gwin is a citizen of Mississippi. Defendant Jackson National is a Michigan corporation. Defendant Mark E. Bagley, an independent insurance sales agent, is a citizen of Mississippi.
In 1991, plaintiff purchased a $10,000 Jackson National Ultimate II life insurance policy through defendant Bagley. At the time of purchase, plaintiff alleges she understood, based on a Jackson National computer generated sales illustration and on representations made by Bagley, that she would be required to make annual premium payments only for a relatively short period of time, eight to ten years. Thereafter, she understood, the policy would be paid up and no further out-of-pocket premium payments would be required to sustain the policy for the remainder of her lifetime. Contrary to defendants' representations, however, plaintiff has been required to continue making premium payments beyond the eight-to-ten year period.
Plaintiff alleges she was wrongfully induced to purchase the policy by defendants' intentional and deliberate misrepresentations. She asserts claims under Mississippi law for fraud, intentional and negligent misrepresentation, fraudulent concealment, fraudulent inducement, civil conspiracy, breach of the covenant of good faith and fair dealing, breach of fiduciary and quasi-fiduciary obligations, and gross negligence.
The complaint was originally filed on September 9, 2002 in the Circuit Court of Holmes County, Mississippi. Jackson National removed the action to the United States District Court for the Southern District of Mississippi based on the parties' diversity of citizenship. 28 U.S.C. § 1332, 1441. Plaintiff moved to remand, but before the District Court for the Southern District of Mississippi addressed the motion, the case was transferred to this Court by the Multidistrict Litigation Panel pursuant to 28 U.S.C. § 1407.
II
The matter of federal subject matter jurisdiction in multidistrict litigation is governed by the law of the circuit in which the transferee court sits. See In re Cardizem CD Antitrust Litigation, 90 F. Supp.2d 819, 823 (E.D. Mich. 1999). In the Sixth Circuit, the removal statutes are to be strictly construed. First Nat'l Bank of Pulaski v. Curry, 301 F.3d 456, 462 (6th Cir. 2002). Jackson National, as the removing party, has the burden of establishing federal subject matter jurisdiction. Jerome-Duncan Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904, 907 (6th Cir. 1999). To establish that defendant Bagley's citizenship must be disregarded because he was fraudulently joined by plaintiff, Jackson National must demonstrate that plaintiff has failed to state even a colorable claim against him. Id. Plaintiff's motive in naming Bagley as a defendant is immaterial. Id. The question is whether there is arguably a reasonable basis for predicting that plaintiff could prevail against Bagley under the governing state law. Alexander v. Electronic Data Systems, Inc., 13 F.3d 940, 949 (6th Cir. 1994). The Court must resolve all disputed questions of fact and ambiguities in the controlling state law in favor of the non-removing party. Coyne v. American Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999). All doubts as to the propriety of removal are resolved in favor of remand. Id. If plaintiff has a colorable claim against defendant Bagley, diversity jurisdiction does not exist and the matter must be remanded to state court.
Jackson National contends plaintiff has no colorable claim against Bagley because any and all claims against him are time-barred. Although her complaint is nonspecific, for purposes of this motion, plaintiff argues that she has stated claims against defendant Bagley for intentional and negligent misrepresentation, breach of fiduciary duty, and fraudulent concealment. All claims stem essentially from Bagley's alleged oral representation that, although plaintiff's premium obligation would continue for the remainder of her lifetime, she would not have to make out-of-pocket premium payments after eight to ten years. Under Mississippi law, the parties agree, plaintiff's claims against Bagley are subject to a three-year statute of limitations. Miss. Code Ann. § 15-1-49.
By affidavit, Bagley attests he told plaintiff that premiums on the policy would be payable for life, but he does not refute the allegation that he also told her she would not have to make out-of-pocket premium payments after eight to ten years.
A cause of action for fraud ordinarily accrues, plaintiff acknowledges, upon completion of the sale induced by the false representation. Stephens v. Equitable Life Assurance Society of the United States, 850 So.2d 78, 82 (Miss. 2003). Yet, Mississippi law also recognizes that in actions which involve latent injury, the cause of action does not accrue until the plaintiff has discovered, or by reasonable diligence should have discovered, the injury. Miss. Code Ann. § 15-1-49. Plaintiff contends she did not discover the falsity of Bagley's representation until 10 years after she purchased the policy, when she learned, contrary to his assurance, that continuing out-of-pocket premium payments were required after all.
Jackson National contends that plaintiff nonetheless, in the exercise of reasonable diligence, should have discovered the falsity of Bagley's representation when she read the policy. See Stephens, 850 So.2d at 82 (holding that whether an insured reads the entire policy or not, knowledge of its contents is imputed to the insured as a matter of law). At the least, the argument goes, the lack of any express provision limiting the number of out-of-pocket payments should be deemed to have put plaintiff on inquiry notice. In contrast to the facts of Stephens, however, plaintiff maintains there is no express language in the policy that can be deemed to have put her on notice that Bagley's representation was false. Yes, the policy indicates that premiums must be paid for life, but it does not foreclose the possibility that premiums could be paid from accumulated values in the policy, rather than out-of-pocket. In fact, plaintiff alleges, Bagley's representation was corroborated by the Jackson National sales illustration she was shown, demonstrating that her obligation to make out-of-pocket premium payments would "vanish" after a specific number of years. Hence, plaintiff had no reason to suspect any inconsistency between Bagley's representation and the actual performance of the policy until 2001. Indeed, only in 2001, when she was required to make continuing out-of-pocket premium payments, was plaintiff's "injury" evident. Her complaint was filed well within three years thereafter.
In this regard, the Court finds the instant facts materially distinguishable from the factual premises for the case law relied on by Jackson National. In Stephens, for instance, the policy language was correctly deemed to put the plaintiff insureds on notice that oral representations on which they relied were false. Knowledge of the contents of the policy having been imputed to the plaintiffs as a matter of law, their cause of action was deemed to have accrued (and the period of limitation began running) when they purchased and received a copy of the policy. Id., 850 So.2d at 83. Because the period of limitation had otherwise run long before the plaintiffs filed suit, the Stephens court reasoned their action was time-barred unless the statute was tolled pursuant to the fraudulent concealment doctrine.
The fraudulent concealment doctrine applies to any cause of action under Mississippi law, provided two requirements are satisfied. First, the plaintiffs were required to prove that the defendant engaged in some affirmative act of concealment that was designed to prevent and did in fact prevent discovery of the claim. Second, the plaintiffs were required to prove that they acted with due diligence and were nonetheless unable to discover their claim. Id. at 83-84.
Relying on the Stephens analysis, as followed by the Fifth Circuit in Ross v. Citifinancial, Inc., 344 F.3d 458 (5th Cir. 2003), Jackson National argues that plaintiff Gwin is not entitled to tolling of the statute of limitations because she has failed to show any affirmative act of concealment by defendant Bagley. The Court agrees that such an evidentiary showing is lacking. Yet, the question of tolling comes into play only if the period of limitation would otherwise have expired. Here, for the reasons cited by plaintiff, the Court remains unpersuaded that the period of limitation had expired before plaintiff filed suit. Where the terms of the policy did not expose the falsity of defendant Bagley's alleged misrepresentation, and plaintiff did not know of the fraud, actually or constructively, until 2001, the cause of action did not accrue until then, and tolling of the statute need not be invoked to render the action timely filed. The instant facts are thus more analogous to those presented in other cases that were expressly distinguished by the Stephens court. See id. at 84-85.
The Court expresses no opinion on the ultimate merits of plaintiff's intentional and negligent misrepresentation claims against defendant Bagley. Resolving disputed questions of fact and ambiguities in controlling law in plaintiff's favor, however, the Court cannot hold, on the present record, that her claim is necessarily time-barred. There is a reasonable basis for predicting that plaintiff could overcome the statutory time-bar and obtain a favorable adjudication on the merits. Jackson National has thus failed to carry its burden of demonstrating that plaintiff has no colorable claim against defendant Bagley.
The Court notes that the factual support for plaintiff's breach of fiduciary duty and fraudulent concealment claims is weak, but the finding that plaintiff has stated a colorable claim for intentional or negligent misrepresentation, for purposes of this fraudulent joinder analysis, renders further consideration of these additional claims unnecessary.
III
It follows that defendant Bagley was not fraudulently joined, and that complete diversity is lacking. Plaintiff's motion to remand must therefore be granted. An order consistent with this opinion shall issue forthwith.ORDER OF REMAND
In accordance with the memorandum opinion of even date, in Gwin v. Jackson National Life Ins., W.D. Mich. No. 5:03-CV-57;
IT IS HEREBY ORDERED that the motion of plaintiff Lorean Gwin, to remand this action to state court as having been improperly removed, is GRANTED; and
IT IS FURTHER ORDERED that this action is hereby REMANDED to the Circuit Court of Holmes County, Mississippi, pursuant to 28 U.S.C. § 1447(c), for lack of subject matter jurisdiction.