305 F.R.D. 37
E.D.N.Y2015Background
- LBL issued a life insurance policy to Gabriella Fischer in 2008; the trust named as owner/beneficiary had situs in New York. AEI (a New York LLC) later purchased the policy and claims to be the current owner and beneficiary.
- LBL sued AEI and others in D.N.J. (June 2013), alleging the policy was procured via a STOLI (stranger-owned life insurance) scheme and seeking a declaration the policy was void.
- The New Jersey district court dismissed LBL’s suit without prejudice for lack of subject-matter (diversity) jurisdiction because LBL failed adequately to plead the citizenship of AEI’s LLC members; jurisdictional discovery was denied. The case was terminated April 10, 2014.
- LBL appealed the dismissal to the Third Circuit (argument held; decision pending). No stay of the NJ dismissal was obtained.
- AEI filed a declaratory/breach action in New York state court (Sept. 2014) seeking a declaration the policy is valid and damages for LBL’s alleged breach of the incontestability clause; LBL removed to EDNY. LBL moved to dismiss or stay under the first-to-file rule and related doctrines. The EDNY court denied dismissal or stay.
Issues
| Issue | Plaintiff's Argument (AEI) | Defendant's Argument (LBL) | Held |
|---|---|---|---|
| 1. Does the pending Third Circuit appeal of NJ dismissal prevent EDNY from exercising jurisdiction under the first-to-file rule? | The NJ action was dismissed; AEI may proceed in EDNY and the pending appeal does not change that result. | The appeal means NJ was the first-filed action and EDNY should stay or dismiss under first-to-file. | Court: No. A dismissal for lack of subject-matter jurisdiction means NJ never obtained jurisdiction; first-to-file does not apply and EDNY may proceed. |
| 2. Is the NJ dismissal a ‘final judgment’ that bars parallel proceedings while appeal is pending? | AEI: Dismissal terminated the NJ action; no stay sought; EDNY need not defer. | LBL: Pending appeal of dismissal implicates final-judgment/finality concerns that should stay EDNY. | Court: Final-judgment rule does not require EDNY to defer; a jurisdictional dismissal that left the NJ court without jurisdiction means EDNY is free to proceed. |
| 3. Is venue in EDNY improper given choice-of-law and where events occurred? | AEI: Key events (insured’s residence, trust situs, purchase, witnesses, documents) are in New York; EDNY is convenient and proper. | LBL: Policy contains a New Jersey choice-of-law provision and earlier NJ filing favors New Jersey. | Court: Venue in EDNY is proper; choice-of-law alone does not defeat venue or jurisdiction; the balance of convenience favors EDNY. |
| 4. Should the EDNY action be stayed or dismissed while jurisdictional issues (e.g., diversity, personal jurisdiction) could be re-litigated if Third Circuit reverses? | AEI: Waiting would cause unjustified delay; any future challenges can be raised later. | LBL: Stay or dismissal appropriate to avoid duplicative litigation pending appeal. | Court: Denied stay/dismissal; delay is not justified and EDNY is well positioned to adjudicate the dispute. |
Key Cases Cited
- Fiataruolo v. United States, 8 F.3d 930 (2d Cir. 1993) (final-judgment determination standard)
- Gulf Ins. Co. v. Glasbrenner, 417 F.3d 353 (2d Cir. 2005) (multiple districts may be proper for venue where substantial events occurred)
- Emp’rs Ins. of Wausau v. Fox Entm’t Grp., Inc., 522 F.3d 271 (2d Cir. 2008) (first-to-file rule is a rebuttable presumption)
- N.Y. Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102 (2d Cir. 2010) (first-to-file doctrine principles)
- Cobbledick v. United States, 309 U.S. 323 (U.S. 1940) (policy and purpose of the final-judgment rule)
- Lincoln Benefit Life Co. v. AEI Life, LLC, 13 F.3d 415 (D.N.J. 2014) (district-court dismissal for failure to plead LLC members’ citizenship)