Schlafly v. The Lincoln National Life Insurance Company et al

REPLY BRIEF to Opposition to Motion

D.N.J.July 7, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY NEWARK VICINAGE Andrew L. Schlafly (AS4533) Attorney at Law 939 Old Chester Rd. Far Hills, NJ 07931 (908) 719-8608 Attorney for Plaintiff Andrew L. Schlafly ANDREW L. SCHLAFLY, on Behalf of Him- self Individually and on Behalf of All Other Members of Eagle Forum, a Non-Profit Mem- bership Corporation Plaintiff, vs. THE LINCOLN NATIONAL LIFE INSUR- ANCE COMPANY and JOHN HANCOCK LIFE INSURANCE COMPANY (USA), Defendants and Third-Party Plaintiffs, vs. ANNE SCHLAFLY CORI, EUNIE SMITH, CATHIE ADAMS, ROSINA KOVAR, CAR- OLYN MCLARTY, SHIRLEY CURRY, ED- WARD R. MARTIN, JR., JOHN F. SCHLAFLY, BRUCE S. SCHLAFLY, KATH- LEEN SULLIVAN, ESTATE OF PHYLLIS M. SCHLAFLY, THE PHYLLIS SCHLAFLY IR- REVOCABLE INSURANCE TRUST, EAGLE TRUST FUND, EAGLE FORUM EDUCA- TION AND LEGAL DEFENSE FUND, AND EAGLE FORUM, Third-Party Defendants. CASE No. 2:17-cv-02522-ES-SCM PLAINTIFF’S REPLY MEMORANDUM OF LAW IN SUPPORT OF JOHN HANCOCK LIFE INSURANCE COMPANY (USA)’S MOTION FOR DISCHARGE Case 2:17-cv-02522-ES-SCM Document 83 Filed 07/07/17 Page 1 of 8 PageID: 1306 ii TABLE OF CONTENTS Table of Contents ............................................................................................................................ ii Table of Citations ........................................................................................................................... iii Argument .........................................................................................................................................1 Conclusion .......................................................................................................................................5 Case 2:17-cv-02522-ES-SCM Document 83 Filed 07/07/17 Page 2 of 8 PageID: 1307 iii TABLE OF CITATIONS CASES Arthur J. Gallagher & Co. v. Roi, 2015 IL App (1st) 140786-U .................................................. 2 Bierman v. Marcus, 246 F.2d 200 (3d Cir. 1957) .......................................................................... 1 Escoett v. Aldecress Country Club, 16 N.J. 438, 109 A.2d 277 (1954) .......................................... 1 Hudson v. City of Chicago, 228 Ill. 2d 462, 889 N.E.2d 210, 321 Ill. Dec. 306 (2008) ............... 2 JPMorgan Chase Bank, N.A. v. Neu, Civ. No. 17-3475, 2017 U.S. Dist. LEXIS 79918, (D.N.J. May 24, 2017) .............................................................................................................. 3 Lexington Ins. Co. v. Jacobs Indus. Maint. Co., LLC, 435 F. App’x 144 (3d Cir. 2011) .............. 1 National Bank of Detroit v. Shelden, 730 F.2d 421 (6th Cir. 1984) .............................................. 4 NYLife Distribs. v. Adherence Grp., 72 F.3d 371 (3d Cir. 1995) .................................................. 4 State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523 (1967) ....................................................... 3 STATUTE AND RULE 28 U.S.C. § 1335 .................................................................................................................... 2, 3, 4 735 Ill. Comp. Stat. Ann. 5/11-101 ................................................................................................. 3 N.J. Court Rules, R. 4:32-1 ............................................................................................................. 1 Case 2:17-cv-02522-ES-SCM Document 83 Filed 07/07/17 Page 3 of 8 PageID: 1308 Plaintiff and Counterclaim Defendant Andrew L. Schlafly (“Plaintiff Schlafly” or simply “Plaintiff”) respectfully submits this Reply Memorandum of Law in Support of the Motion for Discharge by John Hancock Life Insurance Company (USA) (“John Hancock”) [D.E. 44]. Plaintiff Schlafly does not oppose John Hancock’s motion, and this Memorandum is in reply to Eagle Forum’s opposition Memorandum of Law. [D.E. 81] Argument Plaintiff Schlafly points out below several fundamental flaws in the opposition by Third- Party Defendant Eagle Forum to John Hancock’s Motion for Discharge. First, Eagle Forum mistakenly tries to argue the merits of the competing claims on the insurance policies, which is not even a factor. See Lexington Ins. Co. v. Jacobs Indus. Maint. Co., LLC, 435 F. App’x 144, 147 (3d Cir. 2011) (“‘[J]urisdiction in interpleader is not dependent upon the merits of the claims of the parties interpleaded, and a plaintiff can maintain the action even though he believes that one of the claims is valid and the other, or others, without merit.’”) (quoting Bierman v. Marcus, 246 F.2d 200, 202 (3d Cir. 1957)). Moreover, Eagle Forum misunderstands that it is a nonprofit membership organization (Plaintiff Am. Compl. ¶ 2), and that the membership funded the premiums on the life insurance policies at issue here (id. ¶ 15). This case is therefore entirely unlike the corporations at issue in the outdated 1905 and 1882 decisions upon which Eagle Forum relies in its response. (EF Resp. 5) The New Jersey Supreme Court has upheld a cause of action by a member of a non-profit membership organization on behalf of himself and other members. See, e.g., Escoett v. Aldecress Country Club, 16 N.J. 438, 440, 109 A.2d 277, 278 (1954) (reversing a trial court dismissal of an action by a member of a non-profit membership corporation, who sued “on behalf of himself and all other members”); N.J. Court Rules, R. 4:32-1. Case 2:17-cv-02522-ES-SCM Document 83 Filed 07/07/17 Page 4 of 8 PageID: 1309 2 John Hancock has clear authority to interplead its life insurance policy under 28 U.S.C. § 1335 here, given the adverse claims by the payors of the premiums on the policy – the members – and by others who are attempting to accomplish a hostile takeover of Eagle Forum. Nothing more is required for John Hancock to interplead its policy under this federal statute, which is all that is at issue on John Hancock’s motion. Second, the Illinois court order on which Eagle Forum heavily relies is merely a temporary restraining order to preserve the status quo (EF Resp. 2), as the order itself expressly states. See Exhibit A to both Eagle Forum Answers, p. 3 ¶ 8, 5 ¶ 17. Under Illinois law this order has absolutely no res judicata effect. The Illinois order cites no testimony because there was no evidentiary hearing, no depositions, and no adjudication on the merits. Indeed, the plaintiffs in the Illinois action have never even submitted to a single deposition during more than 14 months of litigation, let alone testify in court or be subject to cross-examination. As explained by an Illinois appellate court: The doctrine of res judicata provides that a “final judgment on the merits rendered by a court of competent jurisdiction bars any subsequent actions between the same parties or their privies on the same cause of action.” Hudson v. City of Chicago, 228 Ill. 2d 462, 467, 889 N.E.2d 210, 321 Ill. Dec. 306 (2008) (Internal citation omitted). Three requirements must be satisfied for the doctrine to apply: “(1) a final judgment on the merits has been rendered by a court of competent jurisdiction; (2) an identity of cause of action exists; and (3) the parties or their privies are identical in both actions.” Id. Arthur J. Gallagher & Co. v. Roi, 2015 IL App (1st) 140786-U, ¶¶ 25-26 (emphasis added). None of those three requirements for res judicata is satisfied by the Illinois court order. In addition, under Illinois law temporary restraining orders like the one upon which Eagle Forum relies here automatically expire after 10 days with respect to parties that did not have notice of it, which means the Illinois order thereby expired on October 31, 2016, more than eight months Case 2:17-cv-02522-ES-SCM Document 83 Filed 07/07/17 Page 5 of 8 PageID: 1310 3 ago, with respect to John Hancock and multiple other parties in this litigation. 735 Ill. Comp. Stat. Ann. 5/11-101. Moreover, Eagle Forum itself wrongly failed to comply with the Illinois order with respect to the issue of the litigation at bar, by failing to apply timely for the proceeds on the life insurance policies, as explained in the Third-Party Complaints filed here by John Hancock (CTPC ¶¶ 30-32) and The Lincoln National Life Insurance Company (CTPC ¶¶ 45-46). Third, as made clear two months ago by Judge John Michael Vazquez of this Court, “[t]he federal interpleader statute “is remedial and [should] be liberally construed.” JPMorgan Chase Bank, N.A. v. Neu, Civ. No. 17-3475, 2017 U.S. Dist. LEXIS 79918, at *7 (D.N.J. May 24, 2017) (quoting State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 533 (1967)). Eagle Forum’s arguments are entirely misplaced in light of the broad remedial purpose of the federal interpleader statute, 28 U.S.C. § 1335. Fourth, “the adverse claimant requirement [for an interpleader action] is satisfied when the defendants in an interpleader action dispute who control the funds at issue.” JPMorgan Chase Bank, 2017 U.S. Dist. LEXIS 79918, at *7. This is fully satisfied here in the dispute over the insurance proceeds, between the membership of Eagle Forum, as represented by Plaintiff, and the Third-Party Defendant Eagle Forum which “has lacked a properly functioning Board of Directors, and continues to lack one.” (Plaintiff Am. Compl. ¶ 10) As explained in Plaintiff’s Amended Complaint: The “[i]ndividuals who claim to be in control of the Board of Directors of Eagle Forum are overwhelmingly opposed by the membership of Eagle Forum, and these individuals were even expressly asked to resign by the Founder and leader of Eagle Forum for 41 years, Phyllis Schlafly, by letter dated April 10, 2016.” Case 2:17-cv-02522-ES-SCM Document 83 Filed 07/07/17 Page 6 of 8 PageID: 1311 4 (Id. ¶ 11) In addition, the “individuals who claim to be in control of the Board of Directors of Eagle Forum have already wrongfully dissipated and wasted assets of Eagle Forum properly belonging to its membership.” (Id. ¶ 14) In sum, the individuals who seek to be in control of the Eagle Forum Board are not functioning as a legitimate Board of Directors, and have no legitimate right to the proceeds of the life insurance policies at issue in this litigation. No court has established any legitimacy to the current Eagle Forum Board of Directors, and they have no authority to assert a claim to the life insurance policy proceeds now. Rather, “the proceeds of the above-referenced life insurance policies [belong to] those who paid the premiums on those policies – the membership of Eagle Forum.” (Id. ¶ 15) Interpleader under the federal statute has repeatedly been upheld as proper in numerous similar situations. See, e.g., NYLife Distribs. v. Adherence Grp., 72 F.3d 371, 382 (3d Cir. 1995) (reversing a district court dismissal of an interpleader action by an administrator of a fund, and emphasizing that “the trend over the years has been directed toward increasing the availability of interpleader and relaxing historical, technical restraints on the device”); National Bank of Detroit v. Shelden, 730 F.2d 421, 421-22 (6th Cir. 1984) (interpleader was appropriate under 28 U.S.C. § 1335 to determine who were the proper trustees of the trust). The interpleader action by John Hancock is likewise perfectly appropriate here. Case 2:17-cv-02522-ES-SCM Document 83 Filed 07/07/17 Page 7 of 8 PageID: 1312 5 Conclusion Plaintiff Schlafly respectfully requests that Eagle Forum’s opposition to John Hancock’s motion be rejected. Plaintiff Schlafly does not object to the motion by John Hancock. Dated: July 7, 2017 ANDREW L. SCHLAFLY, ESQ. /s/ Andrew L. Schlafly Andrew L. Schlafly (AS4533) Attorney at Law 939 Old Chester Road Far Hills, New Jersey 07931 908-719-8608 aschlafly@aol.com Attorney for Plaintiff and Counterclaim Defendant Andrew L. Schlafly Case 2:17-cv-02522-ES-SCM Document 83 Filed 07/07/17 Page 8 of 8 PageID: 1313 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY NEWARK VICINAGE Andrew L. Schlafly (AS4533) Attorney at Law 939 Old Chester Rd. Far Hills, NJ 07931 (908) 719-8608 Attorney for Plaintiff Andrew L. Schlafly ANDREW L. SCHLAFLY, on Behalf of Him- self Individually and on Behalf of All Other Members of Eagle Forum, a Non-Profit Mem- bership Corporation Plaintiff, vs. THE LINCOLN NATIONAL LIFE INSUR- ANCE COMPANY and JOHN HANCOCK LIFE INSURANCE COMPANY (USA), Defendants and Third-Party Plaintiffs, vs. ANNE SCHLAFLY CORI, EUNIE SMITH, CATHIE ADAMS, ROSINA KOVAR, CAR- OLYN MCLARTY, SHIRLEY CURRY, ED- WARD R. MARTIN, JR., JOHN F. SCHLAFLY, BRUCE S. SCHLAFLY, KATH- LEEN SULLIVAN, ESTATE OF PHYLLIS M. SCHLAFLY, THE PHYLLIS SCHLAFLY IR- REVOCABLE INSURANCE TRUST, EAGLE TRUST FUND, EAGLE FORUM EDUCA- TION AND LEGAL DEFENSE FUND, AND EAGLE FORUM, Third-Party Defendants. CASE No. 2:17-cv-02522-ES-SCM CERTIFICATE OF SERVICE Case 2:17-cv-02522-ES-SCM Document 83-1 Filed 07/07/17 Page 1 of 2 PageID: 1314 2 I, Andrew L. Schlafly, counsel for Plaintiff, do certify that on July 7, 2017, I electronically filed his Reply Memorandum of Law in Support of John Hancock Life Insurance Company (USA)’s Motion for Discharge, using the Electronic Case Filing system, which I understand to have caused electronic service on all parties that have appeared in this matter. s/ Andrew L. Schlafly Andrew L. Schlafly (AS4533) Attorney for Plaintiff Andrew L. Schlafly Case 2:17-cv-02522-ES-SCM Document 83-1 Filed 07/07/17 Page 2 of 2 PageID: 1315