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Skelton v. Saia

United States District Court, N.D. Alabama, Southern Division

October 6, 2017

LORETTA JOYCE SKELTON, as the Personal Representative of the ESTATE OF RHETA S. SKELTON and as the Trustee of THE RHETA S. SKELTON 2015 REVOCABLE TRUST, Plaintiff,
v.
PAUL LEE SAIA; PAULA SAIA WADE; LINCOLN FINANCIAL ADVISORS CORPORATION; LINCOLN NATIONAL LIFE INSURANCE COMPANY; EVANGELA R. TAYLOR SKELTON, as the Personal Representative of the ESTATE OF BRIAN L. SKELTON, SR., et al., Defendants.

          MEMORANDUM OPINION

          JOHN E. OTT CHIEF UNITED STATES MAGISTRATE JUDGE

         Plaintiff Loretta Joyce Skelton (“Plaintiff”), in her capacity as the Personal Representative of the Estate of Rheta S. Skelton (“Rheta's Estate”) and as the Trustee of the Rheta S. Skelton 2015 Revocable Trust (the “Trust”), filed this action in the Circuit Court of Jefferson County, Alabama, naming Lincoln Financial Advisors Corporation (“Lincoln Financial”), Lincoln National Life Insurance Company (“Lincoln National”), Paul Lee Saia, and Paula Saia Wade as defendants. (Doc. 1-1 at 3-12). She subsequently amended her complaint to add Evangela R. Taylor Skelton, as the Personal Representative of the Estate of Brian L. Skelton, Sr., as a defendant.[1] (Doc. 1-1 at 16-18). Plaintiff's complaint, as amended, asserts claims against all of the defendants for breach of fiduciary duty, conversion, fraudulent misrepresentation, deceit, fraudulent suppression, and civil conspiracy. All of the claims relate to a universal life insurance policy that insured the life of Brian Skelton. Plaintiff contends that Brian should have designated his mother, Rheta Skelton, as the owner and sole beneficiary of the policy, but instead designated himself as the owner and, ultimately, his wife Angel Skelton as the sole beneficiary. Plaintiff alleges that because Rheta was never designated as the owner and sole beneficiary of the policy as she should have been, Rheta's Estate and the Trust were wrongly deprived of the policy proceeds following Brian's death.

         Lincoln National and Lincoln Financial (collectively, the “Lincoln Defendants”) timely removed the case to this Court, asserting diversity jurisdiction pursuant to 28 U.S.C. § 1332. (Doc. 1). The Lincoln Defendants argue that there is complete diversity of citizenship between the parties, notwithstanding that Plaintiff, Saia, Wade, and the Estate of Brian Skelton are all citizens of Alabama.[2]The Lincoln Defendants contend that the citizenship of Saia, Wade, and the Estate of Brian Skelton should be ignored because they were fraudulently joined to evade federal jurisdiction.

         Following removal, Saia and Wade filed a motion to dismiss Plaintiff's claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. 4). The Estate of Brian Skelton filed a separate motion to dismiss pursuant to Rule 12(b)(1) and Rule 12(b)(6). (Doc. 8). The motions to dismiss are substantially similar, except that the Estate of Brian Skelton not only challenges the legal sufficiency of Plaintiff's claims but also challenges Plaintiff's standing to bring claims on behalf of Rheta's Estate.

         Plaintiff has conceded that Wade is due to be dismissed from this case, but otherwise opposes the motions to dismiss. (Docs. 11 & 14). In addition, Plaintiff has filed a motion for leave to amend her complaint to add an unjust enrichment claim against the Estate of Brian Skelton. (Doc. 13). She has also filed a motion to remand the case to Jefferson County Circuit Court, asserting that Saia and the Estate of Brian Skelton were not fraudulently joined and that their citizenship defeats diversity jurisdiction. (Doc. 15).

         All four of the pending motions have been fully briefed and are ripe for decision. For the reasons that follow, Plaintiff's motion to remand and motion to amend will be denied, Saia and Wade's motion to dismiss will be granted, and the Estate of Brian Skelton's motion to dismiss will be granted.

         FACTS[3]

         At all relevant times, Rheta Skelton was the majority shareholder of South Haven Corporation (“South Haven”), a family-owned business that operates South Haven Nursing Home. Her son, Brian Skelton, served as South Haven's President.

         In 1992, Rheta Skelton directed Brian Skelton and Paul Saia, a financial advisor for Lincoln Financial, to procure a “key man” insurance policy in the amount of $1 million insuring Brian's life and naming Rheta as the owner and beneficiary of the policy. Brian promised Rheta that he would purchase such a policy, but instead purchased a policy naming himself as the owner, Rheta as a 50% beneficiary, and his wife, Angel Skelton, as a 50% beneficiary (the “Policy”). Brian purchased the Policy from Lincoln National, with the assistance of Saia and Lincoln Financial. The Policy was a universal life insurance policy that included a cash value account.[4] Rheta was unaware that the Policy did not name her as the owner and sole beneficiary as she had directed.

         South Haven paid all of the premiums on the Policy. In 2009, unbeknownst to Rheta, Brian removed Rheta as a 50% beneficiary under the Policy and made his wife, Angel, the 100% beneficiary. In 2012, Rheta discovered for the first time that Brian had named Angel as a 50% beneficiary when he purchased the Policy in 1992 and had then made Angel the 100% beneficiary in 2009. Rheta demanded that Brian change the Policy to make her, and not Angel, the 100% beneficiary, and Brain promised to do so. At the same time, Plaintiff directed Saia to change the Policy to conform to Rheta's original instructions, and Saia, like Brian, promised to do so. The changes were never made.

         Rheta Skelton died in 2015. Plaintiff alleges that she was named the Personal Representative of Rheta's Estate in Rheta's Will and was also named the Trustee of the Trust.

         Brian Skelton died in 2016. Plaintiff alleges that, because the Policy “never named the correct beneficiary and owner, [Rheta's] Estate and the Trust have been deprived of the proceeds they should have received under the Policy” following Brian's death. (Doc. 1-1 at 8, ¶ 23).

         ANALYSIS

         I. PLAINTIFF'S ...


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