VICOF II TRUST v. ESTATE OF LADENHEIM (2024)

ORDER

In September 2023, the Delaware plaintiff VICOF II Trust sued the Florida defendant Estate of Barbara Ladenheim in North Carolina state court, seeking a declaratory judgment that North Carolina law governs whether the plaintiff is entitled to the proceeds of an insurance policy on Ms. Ladenheim's life. The Estate removed the suit to this court and now moves to dismiss for lack of jurisdiction or, in the alternative, in favor of an earlier lawsuit in Delaware involving the same parties and the same issues. Because the event out of which VICOF's claims against the Estate arose did not occur in North Carolina, there is no personal jurisdiction over the Estate. In the alternative, because this lawsuit is an attempt at forum shopping and would entangle this Court in litigation properly proceeding in Delaware, abstention is appropriate.

I. Background

According to the complaint, Barbara Ladenheim, procured a life insurance policy from Jefferson-Pilot Life Insurance Company in 2006. Doc. 3 at ¶ 2. She designated an irrevocable trust as the beneficiary of the policy, and her husband as the beneficiary of the trust. Id. at ¶ 3. The policy defined the irrevocable trust as the owner of the policy. Id.

Ms. Ladenheim was a resident of Florida. Id. at ¶ 9. Jefferson-Pilot was headquartered in Greensboro, North Carolina, id. at ¶ 14, and the irrevocable trust was formed under Delaware law. Doc. 11-5 at ¶ 12.

Within days of the issuance of the policy, Ms. Ladenheim's husband sold his “beneficial interest” in the policy to LPC Holdings I LP, a third-party investor, Doc. 3 at ¶ 18 (alleging policy was issued on November 28, 2006); id. at ¶ 19 (alleging policy was sold to a third party on or around December 14, 2006); Doc. 11-4 at 2 (identifying LPC Holdings I LP as successor beneficiary). The policy eventually ended up in the hands of the plaintiff, VICOF. Doc. 3 at ¶ 4. After Ms. Ladenheim's death, the successor to Jefferson-Pilot paid the proceeds from the policy to VICOF. Id. at ¶ 5.

Upon learning of the policy sometime later, Ms. Ladenheim's estate brought suit in Delaware state court against other entities that previously owned the policy, seeking to require those defendants to pay over the policy proceeds to the Estate. Id. at ¶¶ 6, 27; Doc. 11-12 at ¶¶ 2–3, 48–55. After learning those entities had sold the policy to VICOF, the Estate amended its complaint to add VICOF as a defendant. Doc. 11-13 at p. 2, p. 7 ¶ 18. The Estate brings its Delaware suit under a Delaware statute that allows an estate to recover life insurance benefits if an insurer pays a death benefit under a policy that lacks an insurable interest. Id. at ¶ 3.

After being brought into the Delaware litigation, VICOF sued the Estate in North Carolina Superior Court on September 25, 2023. See Doc. 1-1 at 3. VICOF asks for declaratory relief, including that the life insurance policy and benefits paid under it are governed by North Carolina law and that the Estate has no right to the policy's death benefits. Id. at ¶¶ 7, 40–54. The Estate removed VICOF's suit to federal court, Doc. 1 at 3, and now asks this Court to dismiss the case for lack of personal jurisdiction. Doc. 10 at 1. In the alternative, the Estate asks the Court to abstain in favor of the state court litigation in Delaware. Id.

II. Personal Jurisdiction

A. Overview

When challenged, the plaintiff bears the burden of demonstrating personal jurisdiction. See dmarcian, Inc. v. dmarcian Eur. BV, 60 F.4th 119, 131 (4th Cir. 2023). At the motion to dismiss stage, “the plaintiff must establish personal jurisdiction by a preponderance of the evidence but need only make a prima facie showing.” UMG Recordings, Inc. v. Kurbanov, 963 F.3d 344, 350 (4th Cir. 2020). When considering whether this burden is met, courts must “construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction.” Id. (quoting Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)).

But the “allegations of the complaint are taken as true only if they are not controverted by evidence from the defendant.” Vision Motor Cars, Inc. v. Valor Motor Co., 981 F. Supp. 2d 464, 468 (M.D.N.C. 2013) (citing Wolf v. Richmond Cnty. Hosp. Auth., 745 F.2d 904, 908 (4th Cir. 1984)). If “the defendant has provided evidence, however, that denies facts essential for jurisdiction, the plaintiff must present sufficient evidence to create a factual dispute on each jurisdictional element.” Vogel v. Wolters Kluwer Health, Inc., 630 F. Supp. 2d 585, 594 (M.D.N.C. 2008).

For a court to exercise personal jurisdiction over a nonresident defendant, jurisdiction must be authorized by (1) the long-arm statute of the forum state and (2) the Due Process Clause of the Fourteenth Amendment. Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003); dmarcian, Inc., 60 F.4th at 131. “[T]he North Carolina Supreme Court has emphasized that the two-step process is, in fact, a two-step process, and that jurisdiction under North Carolina's long-arm statute ․ must first be determined.” IHFC Props., LLC v. APA Mktg., Inc., 850 F. Supp. 2d 604, 616 (M.D.N.C. 2012); see also dmarcian, Inc., 60 F.4th at 131–32.

B. Discussion

VICOF contends that this Court has personal jurisdiction over the Estate under the North Carolina long-arm statute providing for personal jurisdiction over a defendant “in any action which arises out of a contract of insurance ․ made anywhere between ․ some third party and the defendant” and “[t]he event out of which the claim arose occurred within this State.” N.C. Gen. Stat. § 1-75.4(10); Doc. 13 at 12. VICOF points to no other provision of the long-arm statute that might apply.

The event out of which VICOF's claims here arise did not take place in North Carolina. VICOF's right to the policy proceeds depends on the transfer of beneficiary rights in the policy from Mr. Ladenheim to others, or, as VICOF phrases it in the complaint, the sale of the beneficial interest in the irrevocable trust. See Doc. 3 at ¶ 4. The trust seems to be a Delaware trust, see Doc. 11-5 at ¶ 12; Doc. 11-13 at ¶ 25, and there is no evidence that anything related to the sale of the beneficial interest to VICOF happened in North Carolina. Nor is there any evidence that anything related to the sale by Mr. Ladenheim to the original purchaser happened in North Carolina. Mr. Ladenheim had a Florida address, see Doc. 11-5 at 11, and his sale to the first buyer was governed by Delaware law. See Doc. 11-4 at ¶ 7.

VICOF also alleges in its complaint that “[t]his action arises out of efforts by the Estate of Barbara Ladenheim ․ to secure windfall benefits on a life insurance policy.” Doc. 3 at ¶ 1. If this is so, it is obvious that the event out of which the claim arose did not occur in North Carolina. All VICOF seeks from this Court is declaratory relief on points of law that are apparently at issue in the Delaware lawsuit, and VICOF, which has already received the life insurance policy proceeds, would have no claim at all if it were not for the dispute with the Estate in Delaware.

Whether one concludes that the event out of which VICOF's claim arose is the sale of beneficial ownership rights in the policy or the filing of the Delaware lawsuit, the event did not occur in North Carolina. Thus, the only provision of the long-arm statute on which VICOF relies does not provide for personal jurisdiction over the Estate.

In the complaint, VICOF also alleged that the “event” out of which its claim arose was the contract of insurance between Jefferson-Pilot and Ms. Ladenheim. Id. at ¶ 12. But VICOF was not involved at all in the formation or issuance of that contract, a point it not only concedes but endorses. See Doc. 13 at 12. Even if one were to find that the original insurance contract was formed in North Carolina, a matter over which the litigants spill much ink, the claims here do not, in any meaningful sense, arise out of the formation of that contract. VICOF's claims, as previously discussed, arise out of the claims made by the Estate under Delaware law or, perhaps, out of the sale of the beneficial interests in the policy. To the extent the Estate's claims against VICOF in the Delaware case are relevant to this question, they arise out of events leading up to the formation of the contract, and those events all occurred in Delaware. VICOF's other convoluted arguments raised later in its brief are equally without merit.

Since VICOF has not shown by a preponderance of the evidence that the event out of which this claim arose occurred in North Carolina, the state's long-arm statute does not authorize personal jurisdiction over the nonresident defendant Estate. See Carefirst of Md., Inc., 334 F.3d at 396. The motion to dismiss will be granted.

III. Abstention

Even if the Court had personal jurisdiction over the Estate, abstention would be appropriate. If the Court jumped into the dispute between these parties, it would unnecessarily entangle itself in matters before the Delaware state court and would condone the forum shopping in which VICOF is obviously engaged.

“Ordinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same parties.” Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491, 495 (1942); Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). Following this guidance, the Fourth Circuit has set out four factors for courts to consider when “deciding whether to hear a declaratory judgment action when a related state-court proceeding exists:”

(1) whether the state has a strong interest in having the issues decided in its courts; (2) whether the state courts could resolve the issues more efficiently than the federal courts; (3) whether the presence of ‘overlapping issues of fact or law’ might create unnecessary ‘entanglement’ between the state and federal courts; and (4) whether the federal action is mere ‘procedural fencing,’ in the sense that the action is merely the product of forum-shopping.

New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 297 (4th Cir. 2005). “This circuit has long recognized the discretion afforded to district courts in determining whether to render declaratory relief.” Id. at 296–97 (internal quotation marks omitted); see also Brillhart, 316 U.S. at 494 (district courts are “under no compulsion” to exercise jurisdiction over declaratory judgment action).

Here, all four factors counsel against exercising discretionary authority to decide the declaratory judgment issues presented by VICOF. It is undisputed that there is litigation proceeding in Delaware state court involving the same parties and the same issues. That lawsuit was filed by the Estate against other entities before VICOF filed this lawsuit, see Doc. 11-12 at 16 (Estate filed suit on July 20, 2023); Doc. 3 at 13 (VICOF filed suit on Sept. 25, 2023), and the Estate promptly took steps to add VICOF as a party to that litigation as soon as it became aware that the original defendants had sold the beneficial interests in the policy to VICOF. Doc. 11-13 at p. 2, p. 7 ¶ 18, p. 21 (Estate filed amended complaint on Oct. 10, 2023).

The irrevocable trust that was the owner of the life insurance policy was formed under Delaware law, and in the application for the insurance policy, it listed a Delaware attorney and his address as the address for the trust. Doc. 11-7 at 5. The trustee of the trust was the same Delaware attorney, id. at 10–12, and the application for insurance was signed by the trustee and Ms. Ladenheim in Delaware. Id. at 10. They also signed the amended application for insurance in Delaware. Doc. 11-11 at 2. The agreement between Mr. Ladenheim and LPC Holdings for the sale of his beneficial interest was governed by Delaware law. See Doc. 11-4 at ¶ 7. VICOF is a Delaware statutory trust, and its trustee is a Delaware trust company. Doc. 3 at ¶ 8. The Estate is a Florida entity, and it appears that both Mr. and Mrs. Ladenheim were Florida residents. Id. at ¶ 9; Doc. 11-5 at 11. Aside from the fact that a North Carolina insurance company issued the policy, this case has nothing to do with North Carolina. On these facts, North Carolina does not have a strong interest in having this dispute between persons and entities in other states resolved here.

Hearing this declaratory judgment action would unnecessarily entangle this Court in litigation properly proceeding in Delaware. See Doc. 11-13. The Delaware courts can more efficiently resolve this dispute over the potential application of a Delaware state law, and there is no reason a Delaware court could not determine whether its state statute or some other state law applies to the matter. This lawsuit is also clear procedural fencing, with the facts indicating forum shopping.

IV. Conclusion

The event out of which VICOF's claims against the Estate arose did not occur in North Carolina, so the cited provision of the state's long-arm statute does not authorize personal jurisdiction over the Florida Estate. In the alternative, even if the Court did have personal jurisdiction over the Estate, the Court would not exercise its discretion to hear this declaratory judgment action when a related state-court action is proceeding and the case is centered on actions and events that occurred in Delaware involving persons and entities with no real connection to North Carolina.

It is ORDERED that the defendant's motion to dismiss the complaint, Doc. 10, is GRANTED. Judgment will be entered separately as time permits.

CATHERINE C. EAGLES, UNITED STATES DISTRICT JUDGE