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Sauls v. Sneed

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

September 13, 2019

BARBARA SAULS, Individually and as Beneficiary of the Estate of Davey Michael Sauls, Plaintiff,
v.
RANKIN SNEED, as Administrator of the Estate of Davey Sauls, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          MADELINE HUGHES HAIKALA UNITED STATES DISTRICT JUDGE

         Developments in this case have created an unusual procedural posture that has prompted a challenge to this Court's subject matter jurisdiction. When she filed her initial complaint in this matter to recover benefits from her late husband's 401(k) account, plaintiff Barbara Sauls asserted only state law claims against five defendants. Two of those defendants are citizens of Alabama. The presence of those forum defendants precluded removal of the action to federal court because a civil action that otherwise might be removed based on diversity jurisdiction “may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b)(2).

         Federal jurisdiction became an option when Ms. Sauls added a new defendant against which she asserted an ERISA claim. That claim gave rise to federal question jurisdiction, and the new defendant, Voya Institutional Plan Services, LLC, removed this case to federal court under 28 U.S.C. § 1331. (Doc. 1, p. 2, ¶ 3). In its removal petition, Voya indicated that it believed that federal diversity jurisdiction also existed under 28 U.S.C. § 1332. (Doc. 1, pp. 2-3, ¶ 4).

         After Ms. Sauls settled with Voya and the Court dismissed Ms. Sauls's ERISA claim, Ms. Sauls asked the Court to remand this case to state court. (Doc. 13). Ms. Sauls contends that in the absence of a federal question, there is no basis for federal jurisdiction in this case. (Doc. 13, p. 1). To resolve the motion to remand, the Court accepts the factual allegations in Ms. Sauls's complaint.

         I. BACKGROUND

         Ms. Sauls seeks benefits from Davey Sauls's 401(k) retirement account. (Doc. 1-1). Ms. Sauls is the widow of Mr. Sauls. Mr. Sauls was an employee of Lockheed Martin Corporation for ten years. During those years, Mr. Sauls accumulated approximately $600, 000 in his 401(k) account. (Doc. 1-1, p. 3, ¶ 9).

         Before Mr. Sauls died, he and Ms. Sauls separated, and Mr. Sauls filed for divorce. (Doc. 1-1, p. 3, ¶ 8). Ms. Sauls moved to Florida, and Mr. Sauls remained in Alabama. (Doc. 1-1, p. 3, ¶ 9). The state court presiding over the divorce proceeding “ordered both parties to preserve all assets regardless of title as they may be considered martial assets.” (Doc. 1-1, p. 3, ¶ 8).

         While the divorce proceedings were pending, Mr. Sauls became seriously ill and was hospitalized. (Doc. 1-1, p. 3, ¶ 10). Lori Marrow, Mr. Sauls's niece, obtained power of attorney from Mr. Sauls. (Doc. 1-1, p. 3, ¶ 10).

         Mr. Sauls decided he wanted to withdraw funds from his pension to help fund his medical costs, so he petitioned the divorce court for access to those funds. (Doc. 1-1, pp. 3, ¶ 11). Settlement discussions concerning the request were not successful, so the order requiring Mr. Sauls and Ms. Sauls to preserve the marital assets remained in place. (Doc. 1-1, pp. 3-4, ¶¶ 12-13).

         After the settlement discussions failed, Ms. Marrow used her power of attorney to obtain from Locktec, Inc. a key to the martial residence. (Doc. 1-1, p. 4, ¶ 14).[1] Ms. Sauls alleges that Ms. Marrow and her husband, David Marrow, “removed martial assets from the home including . . . furniture, tools, and vehicles.” (Doc. 1-1, p. 4, ¶ 15).

         Meanwhile, Ms. Sauls visited Mr. Sauls in the hospital. Mr. Sauls told Ms. Sauls that he needed access to his 401(k) funds to pay for his medical care, and he promised that he “would not remove or change her as the beneficiary of his 401(k)” if she would not block his access to those funds. (Doc. 1-1, p. 4, ¶ 16). Based on Mr. Sauls's promise, after Ms. Sauls's confirmed that Mr. Sauls's condition was terminal, Ms. Sauls “agreed to dismiss the divorce.” (Doc. 1-1, p. 4, ¶ 16). The state court dismissed the divorce case in June 2016. (Doc. 1-1, p. 4, ¶ 17).

         Ms. Sauls alleges that in July of 2016, Ms. Marrow hired a law firm to draft a trust agreement so that Ms. Marrow could move Mr. Sauls's assets to the trust. (Doc. 1-1, p. 4, ¶ 19). According to Ms. Sauls, Mr. Sauls signed the trust while he was in the hospital. Ms. Sauls alleges that medical records indicate that Mr. Sauls was “under the influence of heavy narcotics” when he signed the trust. (Doc. 1-1, p. 4, ¶ 19). Ms. Marrow then changed the beneficiary of Mr. Saul's 401(k) account from Ms. Sauls to the newly formed trust. (Doc. 1-1, p. 5, ¶ 20). Mr. Sauls died a few days later. (Doc. 1-1, p. 5, ¶ 21).

         To gain access to the funds in her husband's 401(k) account, on June 25, 2018, Ms. Sauls sued Rankin Sneed, the administrator of Mr. Sauls's estate, in the Circuit Court of Madison County, Alabama. In addition to Mr. Sneed, Ms. Sauls named as defendants Ms. Marrow, individually and as the trustee of the Living Trust of Davey Michael Sauls; Mr. Marrow; and Locktec. (Doc. 1-1, pp. 2-3). Ms. Sauls asked the state court to set aside the trust, and she asserted claims for damages for promissory fraud; fraudulent misrepresentation, transfer and/or conveyance; trespass, theft and/or conversion; outrage; and negligence. (Doc. 1-1, pp. 5-8).

         On July 9, 2018, Ms. Sauls amended her state court complaint and added Voya Institutional Plan Services, LLC as a defendant. (Doc. 1-2, p. 7, ¶ 50). Ms. Sauls alleged that Voya negligently distributed 401(k) funds to Ms. Marrow, negligently failed to verify whether Ms. Marrow was self-dealing when she withdrew funds from Mr. Sauls's retirement account, and negligently administered the 401(k) plan by “fail[ing] to follow ...


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