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Metropolitan Life Insurance Co. v. Dena Lawless

United States District Court, D. New Jersey

November 15, 2019

METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff,
v.
DENA LAWLESS, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          ZAHID N. QURAISHI, UNITED STATES MAGISTRATE JUDGE.

         This matter comes before the Court upon Defendants Cari Lawless and William Lawless's Joint Motion to Stay the Proceedings Pending Resolution of the State Court Matters and/or to Decline Jurisdiction ("Motion to Stay"). (See Notice of Mot. to Stay, ECF No. 21.) Thomas Lawless and Cari Lawless's two minor children ("the children") join that Motion. (T.L. and R.L.'s Sept. 20, 2019, Letter ("TRL") 1, ECF No. 27.) Dena Lawless opposes a stay of these proceedings, (Mem. in Opp'n to Mot. to Stay, ECF No. 30), and Metropolitan Life Insurance Company ("MetLife") opposes a stay while it remains a party to the action, (MetLife's Sept. 20, 2019, Letter ("MLL") 1-2, ECF No. 29).

         The parties' initial briefing focused on the exceptional circumstances standard derived from Colorado River Water Conserv. Dist. v. United States, 424 U.S. 800, 817 (1976). In light of NYLife Distributors, Inc. v. Adherence Grp., Inc., 72 F.3d 371, 374 (3d Cir. 1995), in which the Third Circuit "h[e]ld the discretionary standard enunciated in Brillhart [v. Excess Insurance Company of America, 316 U.S. 491 (1942), ] governs a district court's decision to dismiss an action commenced under the interpleader statute during the pendency of parallel state court proceedings," the Court requested the parties provide supplemental briefing on whether the Colorado River or Brillhart standard applies. (Text Order, ECF No. 35.) Cari and William[1] submitted a joint supplemental brief advancing the Brillhart standard, (Supp. Br. in Support of Mot. 2, ECF No. 36), which the children joined, (T.L. and R.L.'s Nov. 4, 2019, Letter 1, ECF No. 38). And Dena submitted a supplemental brief contending the Colorado River standard is more appropriate, but also providing the Court with an analysis under the Brillhart standard. (Supp. Mem. in Opp'n to Stay 3-4, ECF No. 37.) For the reasons set forth below, the Court finds the Brillhart standard applies and that it is inappropriate, at this stage of the proceedings, to stay the case and deprive MetLife of access to expeditious interpleader relief as provided for by Congress when it enacted 28 U.S.C. § 1335. The Motion to Stay shall be denied without prejudice.

         I. ALLEGATIONS AND PROCEDURAL HISTORY

         Thomas Lawless ("the Decedent") died on March 5, 2019, causing three life insurance plans to become payable to their identified beneficiaries. (MetLife's Am. Compl. ¶¶ 30-31, ECF No. 4.) Each life insurance plan was maintained by one of the Decedent's former employers, PricewaterhouseCoopers LLP ("PwC"), KPMG LLP, and Ernst & Young LLP ("E&Y"). (Id. ¶¶ 9, 14, 22.) The KPMG and PwC plans are purportedly governed by the Employee Retirement Income Security Act ("ERISA"). (Id. ¶¶ 16, 24; Mem. in Support of Mot. to Stay 2, ECF No. 21-1.) On June 7, 2018, the designated beneficiary of each plan was changed to Dena, the Decedent's wife. (MetLife's Am. Compl. ¶¶ 2, 12, 20, 28.) Before that, the beneficiary of the PwC plan was William, the Decedent's brother; the beneficiary of the KPMG plan was Cari, the Decedent's ex-wife, and the children as contingent beneficiaries; and the beneficiaries of the E&Y plan were Cari (14%) and the two children (each 43%). (Id. ¶¶ 3-6, 13, 21, 29.) MetLife is the administrator of each policy. (Id. ¶¶ 39-40.) Cari notified MetLife that she was declaring herself a rival beneficiary due to a marital settlement agreement ("MSA") she had with the Decedent that provided he would maintain two life insurance policies, one benefiting her and another benefiting the children. (Id. ¶¶ 34-36.) Cari filed a caveat, (Mem. in Support of Mot. to Stay 7), and on April 10, 2019, Dena filed a complaint in the Superior Court of New Jersey, Chancery Division, Probate Part, seeking to have herself declared an omitted spouse and seeking to be appointed administratrix of the Decedent's estate (herein the "Probate Action"), (Mot. to Stay Ex. A 1, ECF No. 22). MetLife filed this interpleader action, naming Dena, Cari, William, and the children as defendants, in this Court on June 13, 2019, stating it was ready and willing to pay out the benefits under the three plans and asking the Court to allow it to deposit the funds into the Registry of the Court and to determine whom should receive the benefits under the plans. (Compl. ¶¶ 39-41, ECF No. 1; accord Am. Compl.¶¶ 39-41.)

         On August 14, 2019, the children filed an answer and counterclaim in the Probate Action through their guardian ad litem; through their counterclaim, the children challenge various transfers of the Decedent's funds, including both the reassignment of benefits and certain inter vivos gifts, allegedly caused by Dena's undue influence. (Mot. to Stay Ex. B 15, 16-17, ECF No. 21-4.) The same day, Cari moved in her divorce action against the Decedent before the New Jersey Superior Court, Chancery Division, Family Part, seeking to join the Decedent's estate and Dena to (1) recover unreimbursed costs the Decedent owed for expenses incurred by the children, (2) discover all documents concerning the death benefit paid (or to be paid) to Dena under the KPMG plan, (3) recover her marital coverture fraction of the death benefits of the KPMG plan, (4) have the court find the Decedent violated the MSA, and (5) recover the life insurance benefit due under the MSA (herein the "Family Action"). (Mot. to Stay Ex. D 1-3, ECF No. 21-6.) On September 2, 2019, William filed a third-party complaint in the Probate Action challenging the Decedent's assignment of Dena as the beneficiary of the PwC plan. (Mot. to Stay Ex. C 1, 7-8, ECF No. 21-5.)

         Cari and William now move "for an Order staying these proceedings pending resolution of the pending state court matters and/or to decline jurisdiction." (Notice of Mot. to Stay.) The children join that motion. (TRL 1.) MetLife expressed no opinion about where the claims should be heard, but opposes the stay while it is still a party to the action. (MLL 1-2, ECF No. 29.) Dena opposes a stay. (Mem. in Opp'n to Mot. to Stay, ECF No. 30.)

         II. PARTIES' ARGUMENTS

         A. Cari and William's Arguments in Support of a Stay

         Cari and William argue that, even accepting that the MSA is preempted by ERISA, Cari "is still able to pursue her claim for a constructive trust in the Family Part action upon joinder of Dena," and the children "are permitted to assert their claims of undue influence and lack of capacity irrespective of the federal preemption defense." (Mem. in Support of Mot. to Stay 13.) Cari and William assert that the preemption claim is a "red herring." (Id. at 20.) They contend that Dena "will seek to assert the preemption argument to dismiss any claim of right that Cari [] asserts .... At that point, the Court will be left with state law claims of constructive trust, estoppel, undue influence and lack of capacity." (Id. at 21.) Cari and William submit that "[d]eclining jurisdiction . . . would best serve the state courts' interests in comity and would be consistent with longstanding practice of judicial restraint by federal courts as to matters of state law." (Id. (citing Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 357 (1988)).)

         Cari and William also argue a stay should be granted because William's state court claim arises under the PwC plan, which is not governed by ERISA, and the children's claim seeks to void various inter vivos transfers unrelated to the ERISA-governed plans. (Id. at 18.) They contend the actions are parallel and a stay of these proceedings is necessary to avoid piecemeal litigation. (Id. at 19 (citing Moses H. Cone Mem'I Hosp. v. Mercury Constr. Co., 460 U.S. 1, 16 (1983)).) They add that "there is a general principal [sic] that duplicative litigation in the federal court system is to be avoided based on 'considerations of "wise judicial resources and comprehensive disposition of litigation'"" (Id. at 20 (quoting Colorado River Water Conserv. Dist., 424 U.S. at 817).)

         B. The Children's Arguments

         In their letter joining the Motion to Stay, the children emphasize the factors outlined in Akishev v. Kapustin, 23 F.Supp.3d 440, 446 (D.N.J. 2014) ("(1) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party; (2) whether denial of the stay would create a clear case of hardship or inequity for the moving party; (3) whether a stay would simplify the issues and the trial of the case; and (4) whether discovery is complete and/or a trial date has been set.") (quotation marks, citations, and alterations omitted)). (TRL 1.) Beginning with factors two and three, the children claim that

[i]f the Federal matter is not stayed, [they] will have no choice but to litigate, parallel cases, in both Federal and State Courts which will further deplete the probate assets . . . creating a clear case of hardship, result in inequity for [them], complicate the issues in the case, unduly prejudice [them] and result in duplication of efforts and useless attorneys fees and costs.

(Id. at 2.) With respect to factor one, they contend MetLife will not be prejudiced by the stay because it is the parties' intention to relieve it from the case, and Dena will not be prejudiced because she will avoid duplicative attorney's fees and costs. (Id.) Lastly, with respect to factor four, the children highlight that a discovery schedule had been set in the Probate Action, whereas this case is nascent. (Id.)

         C. MetLife's Argument

         "MetLife asserts no preference as to where the action is litigated once [it] is no longer a party, however, it [submits] that the action should remain in federal court until [it] is provided interpleader relief. . . ." (MLL 1.) According to MetLife, all parties agree that it has no interest in the plans, and the parties have engaged in discussions to relieve it from the lawsuit. (Id. at 1-2.) Specifically, MetLife states that it offered to put the money into an escrow account if all parties agreed on the account. (Id. at 2.) Cari, William, and the children agreed, but Dena "doesn't believe that interpleader relief is available under the law if the money is not deposited or a bond is not first posted." (Id.) MetLife disagrees and, due to that issue, the consent order providing it with interpleader relief remains contested by the parties and has yet to be submitted to the Court. (Id.)

         D. ...


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