Wilmington Trust, N.A. v. Lincoln Benefit Life Co.
Docket: CIVIL ACTION NO. 3:17-cv-00185
Court: District Court, N.D. Mississippi; September 18, 2018; Federal District Court
Defendant Lincoln Benefit Life Company (LBL) filed a motion to dismiss the bad faith insurance case brought by plaintiff Wilmington Trust, N.A., arguing a lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2). The court, after reviewing the parties' submissions, found the motion unpersuasive and denied it. The case centers on allegations that LBL unlawfully refused to pay benefits on a life insurance policy issued in October 2007, which LBL claims was based on fraudulent representations about the insured, Adele Frankel. LBL contends that Frankel, falsely portrayed as a wealthy individual, was actually of modest means and that the policy constituted an illegal wager on human life, funded by a company involved in extensive fraud. In contrast, Wilmington argues that the policy included a provision preventing LBL from contesting it after two years and disputes LBL's claims of illegality. The court notes ongoing related actions in Delaware and emphasizes that the current focus is solely on personal jurisdiction. Wilmington asserts that LBL is subject to jurisdiction in Mississippi, having sold the policy to a Mississippi resident and collected substantial premiums from residents of the state. The court outlines a two-step process to determine personal jurisdiction, prioritizing the due process analysis over state law considerations and identifying a flaw in LBL’s arguments regarding personal jurisdiction.
Defendant argues that the criteria for general jurisdiction are not satisfied in this case, and the court assumes this argument to be correct for the sake of the motion. However, plaintiff asserts that specific personal jurisdiction exists, which the defendant's arguments fail to address. The court outlines the distinction between specific and general personal jurisdiction. Specific jurisdiction requires a plaintiff to show minimum contacts related to the defendant's activities in the forum, whereas general jurisdiction necessitates proof of continuous and systematic contacts with the forum, as established in cases such as Helicopteros Nacionales de Colombia and Perkins v. Benguet Consol. Mining Co.
Defendant cites Daimler AG v. Bauman to argue that a corporation must be "essentially at home" in a state for general jurisdiction to apply, emphasizing that this standard complicates establishing general jurisdiction. However, this standard does not affect cases where the claim arises from the defendant's conduct in the forum, qualifying for specific jurisdiction. Plaintiff explicitly claims specific jurisdiction, asserting that minimum contacts exist as per Hancock Fabrics, Inc. v. Rowdec, LLC. To establish this, the plaintiff must demonstrate that (1) the defendant directed activities toward the forum, (2) the claim arises from those activities, and (3) exercising jurisdiction is fair and reasonable.
In this case, all three requirements for specific jurisdiction are met: LBL directed its insurance activities toward Mississippi, availed itself of the state's benefits by obtaining a license from the Mississippi Insurance Department since 1981, and has appointed nearly 300 agents in the state to market its products.
LBL has collected annual premiums of $9 to $12 million from ordinary life insurance policies sold in Mississippi over the past five years, including the policy at issue, which was sold to a Mississippi Trust managed by a local attorney. LBL has also authorized the Mississippi Commissioner of Insurance and a registered agent to accept service on its behalf, establishing sufficient contacts with the state for personal jurisdiction. The plaintiff's claims for breach of contract and fraud arise directly from LBL's activities in Mississippi, specifically relating to a life insurance policy issued to a Mississippi resident, compliant with Mississippi law and approved by the state's Insurance Commissioner. The policy's provisions, particularly the 'incontestability' clause, are central to the fraud allegations, as the plaintiff contends that LBL fraudulently represented its conditions. Although LBL argues that ownership transfer of the policy to Wilmington eliminates jurisdictional claims, the plaintiff asserts that the original contacts and transactions involving LBL in Mississippi are relevant to the jurisdictional analysis.
Wilmington's fraud claim hinges on statements made by Lincoln Benefit in Nebraska and received in Michigan or Delaware, with no identified Mississippi-based conduct related to the alleged fraudulent statements. Premium payments for the policy were made from Michigan or Delaware to Lincoln Benefit in Nebraska, which does not establish jurisdiction in Mississippi. The court notes that the defendant has not provided precedent supporting its argument that false promises in an insurance policy should be disregarded for specific personal jurisdiction if the policy is later sold to a third party. The court finds the situation not unusual, as contractual rights are commonly transferred. Cited cases, Submersible Systems and Bristol-Myers Squibb, do not present applicable authority since their facts differ significantly from the current case. The court emphasizes that the focus should be on the defendant's actions, particularly regarding the insurance policy issued in Mississippi containing an incontestability clause that Wilmington claims was breached. Personal jurisdiction's fairness is assessed by the defendant's "minimum contacts" with the forum state, as established by the Due Process Clause of the Fourteenth Amendment. The court remains open to relevant authority from the defendant, which has not been provided.
Minimum contacts require that a defendant purposefully avails itself of the privilege of conducting activities within the forum state, thereby invoking the benefits of its laws. In this case, the court finds that the defendant, LBL, purposefully engaged in business activities in Mississippi, notably by selling an insurance policy to a Mississippi resident. LBL has been authorized to sell insurance in Mississippi since 1981 and has collected between $9 and $12 million annually in premiums from policies sold in the state over the past five years. The court emphasizes that LBL's choice to sell a policy with a two-year incontestability clause to a Mississippi resident demonstrates its deliberate engagement in the state's market, regardless of the subsequent resale of the policy by the resident.
The court acknowledges potential public policy concerns regarding the resale of life insurance but asserts that these do not affect the personal jurisdiction analysis. The court concludes that exercising personal jurisdiction over LBL aligns with federal due process standards and finds no barriers under Mississippi's long-arm statute, Miss. Code Ann. § 13-3-57, which encompasses three prongs: 'contract,' 'tort,' and 'doing business.' Although there may be limitations for non-resident plaintiffs under the 'contract' and 'doing business' prongs, the court deems it unnecessary to analyze the 'tort' prong further. It notes that LBL is authorized to sell insurance in Mississippi and has designated a Mississippi resident as its agent for service of process.
Key facts are critical in light of the Mississippi Supreme Court's ruling in Read v. Sonat Offshore Drilling, Inc., which established that a nonresident corporation qualified to do business in Mississippi, with a resident agent for service of process, does not require reliance on the Long-Arm Statute for personal jurisdiction. In Read, a Delaware corporation was found liable for an injury to a Mississippi plaintiff in Louisiana, as it was subject to personal jurisdiction in Mississippi due to its registration and appointment of a resident agent. A Mississippi district court affirmed that once a non-resident business registers with the Secretary of State, it is treated as a resident corporation for due process purposes, negating the need for the Long-Arm Statute.
The court interprets that these principles apply to insurance companies authorized to operate in Mississippi with registered agents. The defendant challenges the relevance of Read, arguing it is outdated and superseded by recent Supreme Court rulings limiting personal jurisdiction. However, the court contends that the lack of subsequent challenge to Read reinforces its authority. The defendant's cited cases primarily address general personal jurisdiction and are seen as inapplicable, as the plaintiff's case is based on specific personal jurisdiction. The court points out that interpretations of federal due process differ from state law limitations on personal jurisdiction and that some states impose no additional hurdles, which is permissible under federal law. Therefore, federal cases like Daimler should not be used to assess Mississippi's personal jurisdiction framework, as they address different legal inquiries.
Defendant attempts to differentiate the case from Read by highlighting variances in statutory language and the authority under which it was authorized to operate in Mississippi. However, the court notes that defendant fails to provide any case law supporting the assertion that these differences are significant. While the involvement of the Mississippi Insurance Department may provide some basis for distinction, the court finds this argument weak. The defendant, as an insurer, has subjected itself to personal jurisdiction in Mississippi by issuing policies to both the original policyholder and numerous other customers in the state. The plaintiff's complaint relates to alleged breaches of this Mississippi policy.
The court questions whether the Mississippi Legislature or Supreme Court would impose barriers to service of process on an insurer authorized to do business and having a resident agent for service. The court sees no justification for such barriers. Under the long-arm statute, service of process is only required to demonstrate one of its prongs for nonresident entities, and since the defendant is an insurance company, the State Department of Insurance determines its authorization to sell policies in Mississippi.
The court emphasizes that precedent from Read indicates that once a non-resident firm is qualified to do business and has appointed a resident agent, any plaintiff can serve process on that agent without needing to satisfy the long-arm statute's prongs. Although the defendants in Read and Farani were not insurance companies, the court believes that the Mississippi Supreme Court would arrive at a similar conclusion if faced with an insurance company authorized by the Department of Insurance. The long-arm statute's language does not specifically require authorization from the Secretary of State, allowing for the broader interpretation that includes authorization from the Department of Insurance. Additionally, the court agrees with the plaintiff’s argument that the necessity for the defendant to appoint a resident agent for service of process distinguishes this case from others with less formal authorizations. Courts in the Circuit suggest that such a requirement serves as adequate qualification under the long-arm statute.
In Herrley v. Volkswagen of Am. Inc., the court determined that a license under the Mississippi Motor Vehicle Commission Act did not qualify as sufficient authorization because the Commission does not allow for an agent's appointment for service of process. Similarly, in the Dale Carter, Inc. v. Specialty Claim Services case, the Fifth Circuit ruled that an adjuster's license from the Mississippi Department of Insurance did not qualify a non-resident plaintiff without evidence of any laws or regulations requiring the appointment of an agent. This court finds the Carter decision particularly relevant, noting the lack of cited regulations regarding agent appointments for licensing. To address the concerns raised by the Fifth Circuit, the court references Mississippi Code Ann. § 83-21-1, which mandates that an insurance company must appoint a resident agent for service of process before being authorized to issue policies. LBL has satisfied these requirements, leading the court to support the plaintiff's argument that LBL should be considered a resident company, negating the need for long-arm jurisdiction. However, the court acknowledges that Carter, being unpublished, does not create binding legal precedent. The court speculates that the Mississippi Supreme Court would apply its previous ruling in Read to claims involving insurance policies issued by licensed companies with appointed resident agents. All necessary factors are met in this case, and thus, the court concludes that Mississippi law does not prevent personal jurisdiction over the defendant. The court has already found personal jurisdiction under federal due process and denies the defendant's motion to dismiss on those grounds.
Defendant's motion to dismiss is denied. The court rejects defendant's claim that the plaintiff conflated general and specific jurisdiction, determining that it is the defendant who has made this error. While the defendant references district court rulings to argue the absence of personal jurisdiction over similarly situated defendants, the cited cases, Mullen v. Bell Helicopter Textron, Inc. and Lanham v. Pilot Travel Ctrs. LLC, specifically address general jurisdiction rather than the specific jurisdiction at issue here. Additionally, the defendant requests the court to abstain from hearing the case in light of a parallel action in Delaware state court, citing Colorado River Water Conservation Dist. v. United States. However, the court notes that U.S. Supreme Court precedent has limited Colorado River abstention, affirming that federal courts have a strong obligation to exercise their jurisdiction despite the existence of parallel actions. The court finds that this case does not meet the exceptional circumstances warranting abstention, particularly since all parties agree that Mississippi law applies, and the court has greater expertise in this area than a Delaware court.
