The Penn Mutual Life Insurance Company v. Blumberg, No. 8:2009cv00578 - Document 95 (D. Md. 2010)
Court Description: MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 8/20/10. (sat, Chambers)
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The Penn Mutual Life Insurance Company v. Blumberg Doc. 95 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : THE PENN MUTUAL LIFE INSURANCE COMPANY : v. : Civil Action No. DKC 09-0578 : JONATHAN S. BERCK, TRUSTEE OF THE MARVIN ROSENBLATT IRREVOCABLE TRUST, et al. : : MEMORANDUM OPINION Presently pending and ready for resolution in this case is Plaintiff s motion counterclaim. to strike (Paper 71).1 or dismiss Defendant Berck s The issues are fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, Plaintiff s motion will be granted. I. Background A. Factual Background This case involves a purported stranger originated life insurance scheme, commonly called a STOLI scheme. Plaintiff The Penn Mutual Life Insurance Company alleges that sometime before February 21, 2007 STOLI plan promoters approached 1 The pending motions to seal filed by Plaintiff and Defendant Finfer (Paper 80 & 87), as well as the motion to disqualify filed by Defendant Finfer (Paper 79), are addressed in separate opinion. Dockets.Justia.com Defendant Marvin Rosenblatt ( Rosenblatt ). (Paper 56 ¶ 18). According to Plaintiff, Rosenblatt agreed with the promoters to apply for a life insurance policy to be issued by Plaintiff; the promoters would later sell the policy (or an interest in the policy) to Rosenblatt an investor subsequently in the secondary obtained a $6 market. million life (Id.). insurance policy (the Policy ) from Plaintiff a few months later. at ¶ 35). (Id. Plaintiff alleges that Rosenblatt then transferred the Policy (or an interest in the Policy) to an investor whom Rosenblatt did not know prior to completing the application. (Id. at ¶ 46). material Plaintiff maintains that three individuals made misrepresentations advance the scheme: and committed fraud in order to Rosenblatt, Defendant Jonathan Berck, the current trustee of the Rosenblatt Trust, and Defendant Robert Finfer, the soliciting agent on the Policy.2 Defendant Berck contends that Plaintiff knew it possessed a potential claim against him at some time before Plaintiff s complaint was brought in this action, but that Plaintiff delayed in bringing payment from the action Defendant until it Berck. received (Paper an 62, annual at premium 17). In particular, Defendant Berck alleges that Plaintiff brought this 2 A detailed background of this case can be found in a previous memorandum opinion, at Paper 54. 2 action on the next business day after accepting Defendant Berck s premium payment, which Defendant Berck also alleges is the final day of the Policy s contestability period. 14). In Berck s circumstances, view, Plaintiff by accepting its waived payment to right (Id. at in these challenge [the Policy], Plaintiff is estopped to challenge [the Policy], and/or Plaintiff has ratified [the Policy]. B. (Id. at 17). Procedural Background Plaintiff filed its original complaint on March 9, 2009, and the case was assigned to United States District Judge Peter Messitte. (Paper 1). On May 13, 2009, Plaintiff filed a two count amended complaint, seeking declaratory judgments. 14). (Paper This court allowed Plaintiff to file a second amended complaint, which it did, on March 23, 2010. (Paper 56). The new complaint added two new defendants, additional facts, and stated an additional cause of action for fraud. complaint, Plaintiff seeks a declaratory In its amended judgment under 28 U.S.C. § 2201 as to its rights and obligations under the Policy and damages. (Paper 56). Defendant second amended complaint, as well as a counterclaim and cross-claims. (Paper 62). Berck Defendant filed Berck s an answer answer to advances the eleven affirmative defenses, including waiver, estoppel, and ratification. 11-12). (Id. at The accompanying counterclaim seeks declarations that 3 Plaintiff (1) has waived its challenge to the Policy, (2) is estopped from challenging the Policy, (3) has ratified the policy, and (4) is, under Maryland law, otherwise barred from challenging the Policy. filed a motion counterclaim. II. to (Id. at 18). strike (Paper 71). or Plaintiff subsequently dismiss Defendant Berck s The motion is now fully briefed. Motion to Strike or Dismiss Plaintiff has moved under Rules 12(b), 12(f), and 8(c)(2) of the Federal Rules of Civil Procedure and styles its motion as a motion to strike or dismiss. (Paper 71). The court will treat Plaintiff s motion as a motion to dismiss. A motion to strike is neither an authorized nor proper way to procure the dismissal of all or a part of . . . a counterclaim. 5C Wright & Miller, Federal Practice & Procedure § 1382 (3d ed. 2004). Whatever the nomenclature, the central issue remains the same: whether the court Berck s counterclaim. can properly entertain Defendant The Declaratory Judgment Act states that [i]n a case of actual controversy within its jurisdiction . . . any court of the United States . . . may declare the rights and other legal declaration, U.S.C. § relations whether 2201(a) or of any not (emphasis interested further added). party relief The is Fourth seeking such sought. 28 Circuit has further explained that a federal court may properly exercise jurisdiction where three criteria are met: 4 (1) the complaint alleges an actual controversy between the parties of sufficient immediacy and reality to warrant issuance of a declaratory judgment; (2) the court possesses an independent basis for the jurisdiction over the parties (e.g., federal question or diversity jurisdiction); and (3) the court does not abuse its discretion in its exercise of jurisdiction. Volvo Equip. N. Am. v. CLM Equip. Co., Inc., 386 F.3d 581, 592 (4th Cir. 2004) (citing 28 U.S.C. § 2201; Cont l Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th Cir. 1994)). There is no dispute that the first and second requirements for the exercise of jurisdiction are met here. Thus, the central issue is whether the court should use its discretion to hear the counterclaim. the normal claims principle within their In the declaratory judgment context, that federal jurisdiction courts yields to should adjudicate considerations practicality and wise judicial administration. of New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 296 (4th Cir. 2005) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995)). Accordingly, the court may, in the exercise of its broad discretion, S.C. Dept. of Health & Envtl. Control v. Commerce & Indus. Ins. Co., 372 F.3d 245, 260 (4th Cir. 2004), decline to exercise its jurisdiction and dismiss the action. Volvo Constr. cautious, Equip., however, as 386 it F.3d at should 5 594. only A court decline to must be exercise jurisdiction where there is a good reason to do so. particular, a court should normally entertain a Id. In declaratory action where the relief sought (i) will serve a useful purpose in clarifying and settling the legal relations in issue, and (ii) will terminate and afford relief from the uncertainty, insecurity, Fuscardo, and 35 Winchester controversy F.3d [C]onsiderations 965 Inc., Homes, at 15 of also significant. giving rise (quoting F.3d 371, federalism, to the proceeding. Nautilus Ins. (4th 375 efficiency, Co. Cir. and v. 1994)). comity are Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co., 139 F.3d 419, 422-23 (4th Cir. 1998). Defendant Berck offers little explanation as to how the counterclaim clarifies the parties obligations, other than to state that the defenses and counterclaim stem from discrete facts and law and that declaratory judgment counterclaims like this one are commonplace. (Paper 81, at 7-9). Despite Defendant Berck s assurances, his counterclaim will not assist in clarifying and settling the legal relations in issue or terminate and afford relief from the uncertainties leading to this dispute. Fuscardo, 35 F.3d at 965 (quotations omitted). Nor does the counterclaim promote judicial efficiency, as it forces twice. the parties For and example, the court Defendant to handle Berck s the second same issues affirmative defense contends that Plaintiff s claims are barred in whole or 6 in part by the doctrine of waiver. (Paper 62, at 11). He also seeks a declaration that Plaintiff has waived its challenge to the Policy. the same. (Paper 62, at 18). The two averments are one and The other requested declarations similarly parallel affirmative defenses. (See Paper 82, at 4). This type of double pleading is not the purpose of a declaratory judgment. Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937) (stating declaratory judgment is meant to afford a speedy and inexpensive method of adjudicating legal disputes . . . and to settle legal rights and remove uncertainty and insecurity from legal relationships without awaiting a violation of the rights or a disturbance of the relationships. ). Federal Rule of Civil Procedure Rule 8(c) also supports the conclusion that the counterclaim should be dismissed. That rule provides: If a party mistakenly designates a defense as a counterclaim, or a counterclaim as a defense, the court must, if justice requires, treat the pleading as though it were correctly designated, and may impose terms for doing so. Rule 8(c)(2). defenses. Rule 8(c). The counterclaims constitute affirmative Indeed, two of the defenses are listed by name in Therefore, the court might normally redesignate the counterclaims as affirmative defenses, but Defendant Berck has 7 already included identical defenses, rending redesignation superfluous. Other courts agree that claims such as Defendant Berck s counterclaim should be dismissed. In Penn Mutual Life Ins. Co. v. 09 Greatbanc Trust Company, No. C 6129, 2010 WL 2928054 (N.D.Ill. July 21, 2010), for instance, the court dismissed two of the defendant s counterclaims for declaratory judgment that mirror[ed] its affirmative defenses. Id. at *5. The court explained that counterclaims that mimic affirmative defenses are no less duplicative [than] counterclaims that mirror the plaintiff s request for declaratory relief. Id. at *5. See also, e.g., Boone v. MountainMade Found., 684 F.Supp.2d 1, 12 (D.D.C. 2010) (listing cases supporting dismissal of duplicative counterclaims); Zytax, Inc v. Green Plains Renewable Energy, Inc., No. H-09-2582, 2010 WL 2219179, at *8 (S.D.Tex. May 28, 2010) (dismissing affirmative declaratory defense); United counterclaim States v. duplicative Zanfei, 353 of F.Supp.2d 962, 965 (N.D.Ill. 2005) (same, and noting that it is well settled that courts may dismiss such claims). may be situations where facially duplicative Although there counterclaims should proceed, Defendant Berck has offered nothing to suggest that that is the case here. 8 III. Conclusion For the foregoing reasons, Plaintiff s motion to strike or dismiss will be granted. A separate Order will follow. /s/ DEBORAH K. CHASANOW United States District Judge 9
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