Wilmington Trust, N.A. v. Lincoln Benefit Life Co.

328 F.Supp.3d 586

WILMINGTON TRUST, N.A., as Securities Intermediary, Plaintiff

v.LINCOLN BENEFIT LIFE COMPANY, Defendant

CIVIL ACTION NO. 3:17-cv-00185

United States District Court, N.D. Mississippi, Oxford Division.

Signed September 18, 2018

Casey D. Laffey, Pro Hac Vice, David M. Schlecker, Pro Hac Vice, Douglas R. Widin, Pro Hac Vice, Reed Smith, LLP, Philadelphia, PA, Jesus E. Cuza, Pro Hac Vice, Monica Vila Castro, Pro Hac Vice, Holland & Knight LLP, Miami, FL, Wilton V. Byars, III, Shea Stewart Scott, Daniel, Coker, Horton & Bell, Oxford, MS, for Plaintiff.

Jason P. Gosselin, Pro Hac Vice, Katherine L. Villanueva, Pro Hac Vice, Drinker Biddle & Reath LLP, Philadelphia, PA, William L. McDonough, Jr., Copeland, Cook, Taylor & Bush, Biloxi, MS, for Defendant.

ORDER

Michael P. Mills, UNITED STATES DISTRICT JUDGE

This cause comes before the court on the motion of defendant Lincoln Benefit Life Company ("LBL"), pursuant to Fed. R. Civ. P. 12(b)(2), to dismiss this action for lack of personal jurisdiction. Plaintiff Wilmington Trust, N.A. ("Wilmington") has responded in opposition to the motion, and the court, having considered the memoranda and submissions of the parties, concludes that the motion is not well taken and should be denied.

This is a bad faith insurance case arising out of allegations that defendant LBL unlawfully refused to pay benefits on a life insurance policy which it sold in October 2007. In its statement of facts, LBL has previewed what may prove to be a rather robust defense to plaintiff's bad faith claims, writing that:

Lincoln Benefit Life Company issued an insurance policy on the life of Adele Frankel, who was portrayed in the application as a wealthy, New York real estate tycoon. In reality, Frankel was a woman of modest means who had no need for a substantial life insurance policy and no ability to pay for it. Unbeknownst to Lincoln Benefit, the policy was a wager on human life for the benefit of complete strangers. The premiums were funded by Imperial Premium Finance, a former specialty finance company that was forced to exit the finance business after admitting during a criminal probe that it was involved in wide-scale fraud in the procurement of life insurance policies. Indeed, the accountant who verified Frankel's finances in this case pled guilty to mail and wire fraud in connection with Imperial's fraudulent insurance schemes. After learning that the policy was an illegal wagering contract and thus void ab initio, Lincoln Benefit filed a declaratory judgment action in Delaware, the home state of Wilmington Trust ("Wilmington"), the current record owner of the policy. Wilmington responded by filing the present action.

[Defendant's brief at 1-2].

In response, Wilmington points out that the insurance policy at issue in this case provided that LBL could not contest it after a two-year period, and it strongly disputes defendant's characterization of the alleged illegality of its business transactions in this case. As quoted above, there are separate actions pending in both Delaware state court and this court in relation to these issues, but the ultimate merits of this case are not presently before this court. This court is, at this juncture, concerned solely with the question of whether it has personal jurisdiction over LBL, and, as to this issue, plaintiff emphasizes that defendant sold the policy in this case to a Mississippi resident and collected premiums from that resident, just as it has collected many tens of millions of dollars in premiums from other Mississippi residents since 1981. Plaintiff argues that, in light of these facts, LBL is subject to personal jurisdiction in this state, and, as discussed below, this court agrees.

This court uses a two-step process to determine whether it may exercise personal jurisdiction over a non-resident defendant in diversity cases. "First, the law of the forum state must provide for the assertion of such jurisdiction; and, second, the exercise of jurisdiction under state law must comport with the dictates of the Fourteenth Amendment Due Process Clause." Thompson v. Chrysler Motors Corp. , 755 F.2d 1162, 1166 (5th Cir. 1985). In light of this authority, this court would ordinarily discuss the question of whether Mississippi's state law allows the assertion of personal jurisdiction over defendant first, but it will discuss the federal due process prong first in this case. This court chooses to do so primarily because, in its view, the law relating to the due process issues is considerably clearer than the Mississippi state law in this context. This court also considers it important to point out a flaw in defendant's personal jurisdiction analysis which permeates its briefing on both prongs of the personal jurisdictional inquiry.

It appears to this court that, in arguing that personal jurisdiction is lacking over it, defendant utilizes a straw man argument of sorts. That is, defendant offers repeated arguments and authorities for the proposition that the stringent requirements of general jurisdiction are not met in this case, and this court will assume for the purposes of this motion that this argument is correct. As discussed below, however, LBL ignores the fact that plaintiff plainly alleges in its briefing that specific , not general, personal jurisdiction exists in this case, and its arguments are thus not responsive to those made by plaintiff. Before discussing plaintiff's allegations in this regard, this court will briefly discuss the law applicable to these two forms of personal jurisdiction.

Personal jurisdiction may be "specific" or "general." To establish specific personal jurisdiction, a plaintiff must make a prima facie showing of minimum contacts by making a claim arising from the defendant's contact with the forum. Helicopteros Nacionales de Colombia, S.A. v. Hall , 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). In cases of general jurisdiction, by contrast, the plaintiff does not allege that its claim arose from the defendant's contacts with the forum, and, in such cases, the U.S. Supreme Court has made it much more difficult for the plaintiff to establish personal jurisdiction over the defendant. To establish general personal jurisdiction, a plaintiff makes the requisite showing when that defendant's contacts are "continuous and systematic," so that the exercise of jurisdiction is proper irrespective of the claim's relationship to the defendant's contact with the forum. Perkins v. Benguet Consol. Mining Co. , 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952).

In its briefing, defendant repeatedly cites the U.S. Supreme Court's 2014 decision in Daimler AG v. Bauman , 571 U.S. 117, 134 S.Ct. 746, 753, 187 L.Ed.2d 624 (2014) for the proposition that a corporation must be "essentially at home" in a particular state for general jurisdiction to be asserted against it in that state. As discussed below, defendant also cites a number of other federal cases dealing with the issue of general personal jurisdiction. Without question, Daimler and its progeny have made it quite difficult for a plaintiff to establish general jurisdiction over a corporation, but this holding has no impact upon a case in which plaintiff asserts that his claim arose from defendant's forum conduct, thus giving rise to specific , not general, jurisdiction.¹

Plaintiff makes it abundantly clear in its briefing that it is, in fact, asserting specific jurisdiction over defendant, writing that:

Minimum contacts exist if there is "specific jurisdiction" over the nonresident defendant. SeeHancock Fabrics, Inc. v. Rowdec, LLC , 2013 WL 866977, at *4 (N.D. Miss. Mar. 7, 2013). Specific jurisdiction, in turn, requires a showing that (1) the defendant purposely directed its activities toward the forum state or purposely availed itself of the privileges of conducting activities there; (2) the plaintiff's cause of action arises out of, or results from, the defendant's forum-related activities; and (3) the exercise of personal jurisdiction is fair and reasonable. Luv N' Care, Ltd. v. Insta-Mix, Inc. , 438 F.3d 465, 469 (5th Cir. 2006). Here, each of the three requirements for specific jurisdiction are satisfied.

First, LBL purposely directed its insurance activities to Mississippi and purposely availed itself of the benefits of transacting life insurance business in Mississippi. To be sure, LBL applied for, and obtained, a license from the Mississippi Insurance Department, which it has held since 1981. Ex. A. It is licensed to sell at least three different lines of insurance in Mississippi, including life insurance, and it has appointed close to 300 agents in Mississippi to market and sell LBL's products in Mississippi. Id. The Market Share Report available on the Mississippi Insurance Department's website reveals that in the past five years, LBL has collected between $9 and $12 million each year in premiums from the ordinary life insurance policies it has sold in Mississippi. Comp. Ex. E. Among the policies LBL has sold in Mississippi is the Policy at issue, which LBL sold in Mississippi to a Mississippi Trust whose Trustee was a Mississippi attorney. Finally, as required by statute, LBL has authorized both the Commissioner of Insurance and a registered agent who is a resident of Mississippi to accept service on its behalf. Given LBL's extensive contacts and conduct in Mississippi, LBL could certainly "anticipate being haled into court" here. SeeRowland v. Gen. Motors of Canada Ltd. , 2013 WL 3381512, at *1 (N.D. Miss. July 8, 2013). Thus, the first requirement for specific jurisdiction is satisfied.

Second, Plaintiff's claims clearly arise out of, or result from, LBL's contacts with Mississippi. It is precisely the activities LBL has directed to Mississippi—the issuance of life insurance policies—that gave rise to Plaintiff's claims for breach of contract and fraud. Specifically, the contract claim is based on LBL's breach of a Mississippi life insurance policy that LBL issued

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