Sarro v. Bank of Am.

ANTHONY J. SARRO, MD, PRO-SE, Plaintiff, v. BANK OF AMERICA; and MUTUAL OF NEW YORK, Defendants.

16-cv-5066 (ENV) (ST)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

July 31, 2018

MEMORANDUM & ORDER

VITALIANO, D.J.

In June 2016, Dr. Anthony Sarro filed a pro se complaint in Kings County Supreme Court against defendants Bank of America ("BOA") and Mutual of New York ("MONY"), which was removed here. Dr. Sarro has moved to remand; defendants have moved to dismiss. For the reasons that follow, remand is denied and the complaint is dismissed.

Background¹

On October 18, 1989, MONY issued a group life insurance certificate, which insured, presumably among others, the life of Dr. Sarro, and, as to him, in the amount of $2,400,000. Dkt. No. 1-2 at 4. The certificate was issued under a group universal life plan. In fact, the policywas issued as part of a group multiple employer welfare benefit plan and trust. Dkt. No. 1-3 at 2. The certificate's owner was not Dr. Sarro, rather, it was designated as the group universal life plan policyholder. Id. At the time of issuance, the policyholder was Norstar Trust Company ("Norstar"). Id. The policy contained a section that provided definitions applicable in interpreting the policy. Perhaps confusingly, the "owner" of the policy is referred to as "you." At no time, did a policy reference to "you" ever mention Dr. Sarro. Using the policy's nomenclature, "you" or "Certificate Holder who is so named on page 1," means, in this case, the group policyholder. Dkt. No. 1-3 at 7. The policy went on to provide that, without regard to the identity of the policyholder, during Dr. Sarro's lifetime, "all rights under his coverage belong to you." Dkt. No. 1-3 at 13. It also authorizes the group policyholder to surrender Dr. Sarro's coverage, at any time before his death, for its cash surrender value. Dkt. No. 1-3 at 16. The certificate also provided that, if coverage "is surrendered for its surrender value," coverage is terminated. Dkt. No. 1-3 at 17. Finally, the certificate provided that annual reports would be sent to the defined "you," again a defined term that never referenced Dr. Sarro. Dkt. No. 1-3 at 9. Unhinged to specific policy terms, Dr. Sarro alleges that MONY "allowed ownership of the policy to fall into the hands of others, surrendering it, failing to notify the insured, leaving him without insurance protection to this date, and allowing others to profit enormously." Dkt. No. 1-2 at 5.

Dr. Sarro alleges that Norstar was acquired by Security Pacific Bank ("Pacific") in May 1991, and that Pacific then became the successor plan trustee and certificate owner. Dkt. No. 1-2 at 5. In September 1991, a quarter of a century before this complaint was filed, the certificate was surrendered by Pacific. Id. In return, MONY issued a check to Pacific for the surrender proceeds in the amount of $521,507.08. Id. Thereafter, the facts are murkier. The complaintand Dr. Sarro's reply to the motions to dismiss include a slew of documents relating to plaintiff's efforts to investigate what became of his insurance certificate. What is clear from those documents beyond the murk is that, between 1991 and 2012, Dr. Sarro did not inquire at all about the policy. It was then that he sent a demand letter to BOA. See, e.g., Dkt. No. 35-10 at 7 (September 5, 2012, "Letter of Demand" to BOA).

Four years after his demand letter, Dr. Sarro filed a pro se complaint in Kings County Supreme Court (June 21, 2016), against MONY and BOA. Dkt. No. 1-2. Those defendants each received the summons and complaint on August 17, 2016. MONY filed its notice of removal on September 13, 2016, which BOA consented to. Dkt. Nos. 1, 1-4.²

Standard of Review

Despite the suggested supremacy of their title, federal courts are courts of limited subject matter jurisdiction. Atanasio v. O'Neill, 235 F. Supp. 3d 422, 424 (E.D.N.Y. 2017). The federal removal statute does not expand those jurisdictional limitations placed on federal courts. See 28 U.S.C. § 1441(a) (permitting "any civil action brought in a State court of which the district courts of the United States have original jurisdiction" to be removed to federal court). Accordingly, if a federal court lacks subject matter jurisdiction over the removed action, the case must be remanded to the court it originated in. See 28 U.S.C. § 1447(c). Moreover, removal statutes are to be strictly construed in light of the significant federalism concerns they raise, and, resultingly, any doubts are to be resolved in favor of remand. BGC Partners, Inc. v. Avison Young (Canada), Inc., 919 F. Supp. 2d 310, 313 (S.D.N.Y. 2013). The party seeking removal "bears the burden of demonstrating the propriety of removal." O'Donnell v. AXA Equitable LifeIns. Co., 887 F.3d 124, 128 (2d Cir. 2018).

Assuming the existence of federal subject matter jurisdiction, under Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). When reviewing such motions, a court "must accept the factual allegations set forth in the complaint as true and draw all reasonable inferences in favor of the [p]laintiff." Charles P. Anzelone, Christopher Young, v. ARS Nat'l Servs., Inc., 2018 WL 3429906 (E.D.N.Y. Jul. 16, 2018). To survive a 12(b)(6) motion, a complaint must plead enough facts "'to state a claim to relief that is plausible on its face.'" Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L.Ed.2d 929 (2007) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L.Ed.2d 868 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Although a plaintiff need not provide "detailed factual allegations," Twombly, 550 U.S. at 555, 127 S. Ct. at 1964, the pleading rules do demand "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678, 129 S. Ct. at 678. Of course, where a plaintiff proceeds pro se, as here, the district court must read the complaint liberally, affording his pleadings the strongest interpretation possible. See Erickson v. Pardus, 551 U.S. 89, 94, 127 S. Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007).

Discussion

Dr. Sarro's complaint raises two foundational grievances. First, he claims that he was wrongfully kept in the dark because MONY failed to send him annual reports, which he contends they were contractually obligated to do. Dkt. No. 1-2 at 5-6. MONY, he contends, failed toquestion the timing of the surrender, and should have discussed the proposed surrender with him or informed him of its happening. Id. By failing to do so, Dr. Sarro argues, MONY breached fiduciary duties to him. Id. Second, as to BOA, his complaint alleges that, because Pacific was acquired by BOA, BOA has assumed the assets, liabilities, and benefits of Pacific, and that the surrender payment profited BOA, presumably at his expense. Id. at 6. Because BOA, standing in the shoes of Pacific, has profited, he argues that by their failure "to recognize the inherent fraudulent nature" of the transactions in question, BOA must compensate him.

Affording Dr. Sarro the solicitude due his pro se status, the Court reads his complaint to bring common law breach of contract and breach of fiduciary duty claims against MONY, and common law fraud and conversion claims against BOA. In that posture, Dr. Sarro tersely requests that his complaint be remanded to state court.³ Dkt. No. 18 at 1. He contends that his state law claims are not preempted under ERISA, pointing to 29 U.S.C. § 1144(b)(2)(A), and arguing that "ERISA does not preempt state insurance rules and regulations." Id. at 3-4.

In response, MONY replies that Dr. Sarro "is not relying on any state law" regulating insurance for his claims, but, rather, his complaint asserts "generic common law claims for breach of contract and breach of fiduciary duty." Dkt. No. 24 at 2. That leads MONY to its contention that Dr. Sarro's claims are preempted by ERISA's express preemption provision, 29 U.S.C. § 1144(a), which wipes out "any and all State laws insofar as they may now or hereafterrelate to any employee benefit plan." Dkt. No. 20 at 5 (citing § 1144(a)). MONY notes, moreover, that the Second Circuit has held that state law claims are only saved from ERISA preemption "if they are based upon a state law [regulating] insurance," and, if that state law is "specifically directed towards entities engaged in the business of insurance." Id. at 2-3. As applied here, MONY argues, preemption does oust state law because Dr. Sarro seeks to recover money allegedly owed to him under the Certificate's terms through state law claims, which do not fall within ERISA's savings clause. Id. at 2-3. BOA offers a "me, too" argument, observing that through his own factual allegations, Dr. Sarro admits that ERISA applies, and that his life insurance relates to an employee benefit plan - specifically, the pension plan. Dkt. No. 32 at 9.⁴

Ultimately, as the waffling in Dr. Sarro's sur-reply suggests, preemption does not present a close question. Defendants are correct that Dr. Sarro's claims are preempted by ERISA. First, the Supreme Court has made plain that state laws must be "specifically directed toward the insurance industry in order to fall under ERISA's saving clause." Kentucky Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329, 334, 123 S. Ct. 1471, 1475, 155 L.Ed.2d 468 (2003). To start, Dr. Sarro has not indicated that his claims are brought pursuant to a specific state law regulating insurance. In fact, the language that he uses, e.g., "fraud," "fiduciary duty," and the relief that he seeks - money - make clear that he seeks to vindicate his rights under state common law of contract and tort. Dispo...