United States District Court, W.D. Arkansas, Hot Springs Division
TIMOTHY BAINUM and MARY LYNDA ROBBINS, as Co-Trustees of the Bainum Family Insurance Trust PLAINTIFFS
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY and AGENCY SERVICES OF ARKANSAS, INC. DEFENDANTS
OPINION AND ORDER
HOLMES, III CHIEF U.S. DISTRICT JUDGE.
the Court are Plaintiffs' motion to remand (Doc. 20) and
brief in support (Doc. 21). Defendant The Lincoln National
Life Insurance Company (“Lincoln”) filed a
response in opposition (Doc. 26). For the following reasons,
the Court finds that Plaintiffs' motion to remand (Doc.
20) should be granted.
2002, Lincoln issued a $10 million life insurance policy
(“Policy”) to the Bainum Family Insurance Trust
(“Trust”). The Policy insured the life of Evea
Bainum. Agency Services of Arkansas, Inc. (“ASA”)
brokered the Policy on behalf of the Trust.
Trust made periodic premium payments between February 2002
and February 2008, and the Policy accumulated a “cash
value” of $2, 038, 922. In February 2008, the Trust
stopped paying premiums because the cash value of the Policy
was sufficient to make these payments.
December 2013, the Trust asked ASA to prepare an illustration
showing the cash value of the policy. In response, ASA
prepared an illustration which showed that the policy would
lapse sometime in 2015 if no more premiums were paid.
February 9, 2015 and March 5, 2015, Lincoln sent letters to
the Trust indicating that the Trust had missed a premium
payment and that if the payment was not made by April 9,
2015, the Policy would be cancelled. On April 15, 2015,
Lincoln sent a letter to the Trust stating that it was
cancelling the policy.
allege that they did not receive any of these letters because
they were mailed to the Trust's previous address which
was no longer in use. Plaintiffs also allege that ASA
received the letters and knew that they has been sent to the
Trust's previous address, but did not inform Plaintiffs
that the Policy would be cancelled if they did not make a
premium payment or that the Policy was subsequently
learned that Lincoln had cancelled the Policy on September
28, 2016. On October 14, 2016, Evea Bainum died. Lincoln
refused to pay the $10 million policy benefit.
August 11, 2017, Plaintiffs filed a complaint (Doc. 1-1) in
the Circuit Court of Pike County, Arkansas. Plaintiffs
brought claims for declaratory judgment, breach of contract,
and breach of the duty of good faith and fair dealing against
Lincoln. Plaintiffs brought claims for breach of contract and
negligence against ASA.
January 22, 2018, Lincoln filed a notice of removal (Doc. 1)
asserting that Plaintiffs fraudulently joined ASA to evade
the jurisdiction of this Court. On February 20, 2018,
Plaintiffs filed their motion to remand this case to Circuit
Court of Pike County, Arkansas (Doc. 20).
Timothy Bainum and Mary Lynda Robbins, who bring this suit in
their capacity as co-trustees of the Trust, are both citizens
of Arkansas. ASA is also a citizen of Arkansas, its place of
incorporation and its principal place of business. 28 U.S.C.
§ 1332(c)(1). Lincoln is a citizen of both Indiana, its
place of incorporation, and Pennsylvania, its principal place
of business. Id. As Plaintiffs and ASA are citizens
of the same state, ASA's presence in the litigation
defeats federal diversity jurisdiction. See 28
U.S.C. § 1332(a)(1). Lincoln removed this case to
federal court arguing (1) ASA was fraudulently joined in the
state court action to defeat federal diversity jurisdiction;
(2) ASA should therefore be dismissed as a defendant; and (3)
once ASA is dismissed, subject matter jurisdiction in this
Court will be proper due to the presence of complete
diversity of citizenship among the remaining parties.
plaintiff cannot defeat a defendant's ‘right of
removal' by fraudulently joining a defendant who has
‘no real connection with the controversy.'”
Knudson v. Sys. Painters, Inc., 634 F.3d 968, 976
(8th Cir. 2011) (quoting Chesapeake & Ohio Ry Co. v.
Cockrell, 232 U.S. 146, 152 (1914)). Fraudulent joinder
occurs when a plaintiff files a frivolous or illegitimate
claim against a non-diverse defendant solely to prevent
removal. Filla v. Norfolk S. Ry. Co., 336 F.3d 806,
809 (8th Cir. 2003). To prove fraudulent joinder, the
removing defendant must show that there is no
“reasonable basis for predicting that the state law
might impose liability based upon the facts involved.”
Junk v. Terminix Int'l Co., 628 F.3d 439, 446
(8th Cir. 2010). “Where applicable state precedent
precludes the existence of a cause of action against a
defendant, joinder is fraudulent . . . . However if there is
a ‘colorable' cause of action-that is, if the state
law might impose liability on the resident defendant
under the facts alleged-then there is no ...