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Cohen v. Navarro

United States District Court, D. Delaware

May 8, 2018

JEFFREY COHEN, Plaintiff,
v.
HONORABLE TRINIDAD NAVARRO, Insurance Commissioner of the State of Delaware, in his capacity as Receiver for Indemnity Insurance Corporation, RRG., In Liquidation, Defendant.

          Jeffrey Cohen, FCI Hazelton, Bruceton Mills, West Virginia. Pro Se Plaintiff.

          MEMORANDUM OPINION

          ANDREWS, U.S. DISTRICT JUDGE.

         Plaintiff Jeffrey Cohen, an inmate at FCI Hazelton in Bruceton Mills, West Virginia, filed this combined Rule 60(d) independent action for relief from judgment based on fraud on the court and complaint for damages and declaratory/injunctive relief raising 42 U.S.C. § 1983 claims and supplemental state law claims. (D.I. 1). He appears pro se and has been granted leave to proceed in forma pauperis. (D.I. 6). The Court now proceeds to review and screen the Complaint pursuant to 28 U.S.C. § 1915(e)(2)(B) and § 1915A(a).

         I. BACKGROUND

         Cohen brings this lawsuit against Defendant Trinidad Navarro, the current Insurance Commissioner for the State of Delaware, as the statutory successor to former Insurance Commissioner Karen Weldin Stewart.[1] (D.I. 1 at ¶ 5). Cohen considers both Commissioner Stewart and Commissioner Navarro as the Insurance Commissioner for purposes of this action, but Stewart is not a named defendant. Depending upon the time-frame, in Cohen's view, Defendant can mean either Commissioner Stewart or Commissioner Navarro. As explained in the Complaint:

Stewart was the Insurance Commissioner at all times relevant to this Complaint. As the statutory successor to Stewart, Defendant [i.e., Navarro] is the automatic successor, as the Receiver of Indemnity Insurance Corporation, RRG., in Liquidation. Pursuant to Del. C. § 5911, both Defendant and Stewart are considered the Commissioner of Insurance for the purpose of this action.

(D.I. 1 atp.3).

         It is apparent when reading the Complaint, that "Defendant's" alleged actions were taken by Commissioner Stewart, and Commissioner Navarro is named only because he is Stewart's successor. The Complaint does not indicate whether the claims are raised against Navarro in his individual capacity or official capacity, but states that the action is brought against Commissioner Navarro "in his capacity as Receiver of Indemnity Insurance Corporation, RRG., In Liquidation." (Id. at p.1). Because Cohen proceeds pro se, the Court will address the claims under both capacities.

         Cohen raises claims relating to a Delaware receivership action currently pending in the Court of Chancery of the State of Delaware, In the Matter of the Liquidation of Indemnity Insurance Corporation, RRG, C.A. No. 8601-CB. Indemnity Insurance Corporation, RRG ("IIC") is a risk retention group founded by Cohen and domiciled in Delaware. Cohen v. Stewart, 2014 WL 2574550, at *1 (D. Md. June 5, 2014). IDG Companies, LLC ("IDG") is an affiliated company owned by Cohen. Id.

         After a routine investigation by the Delaware Department of Insurance uncovered concerns about IIC's solvency, Commissioner Stewart sought a seizure order from the Court of Chancery of the State of Delaware. Id. On May 30, 2013, the Court of Chancery entered a confidential seizure and injunction order that vested Commissioner Stewart with title to all IIC property. Id. The Complaint refers to the affidavit of John Tinsley, president and principal of Regulatory Insurance Service, Inc., submitted in support of the May 30, 2013, seizure petition, and relied upon by Defendant through counsel. (D.I. 1 at ¶¶ 23-24, 32(a)-(e)). The Complaint alleges incorrect statements in Tinsley's affidavit that: (1) a note receivable from IDC to IIC was not collectible which resulted in an instant evaporation of $21 million worth of assets on the IIC balance sheet (id. at ¶ 32(a));[2] (2) a $5 million cash account at Susquehanna bank was not an admitted asset of IIC (id. at ¶ 32(b));[3] and (3) IIC's policy holder claims were underreserved in an amount not then determined but later identified as $14 million (id. at ¶ 31 (e)).[4] On June 17, 2013, the seizure order was enrolled in the Circuit Court for Baltimore County in the State of Maryland, State of Delaware v. Indemnity Insurance Corp., RRG, No. 03-C-13006820 (Cir. Ct. Baltimore County, Md). Id.

         On September 13, 2013, three IIC employees became aware of, and concerned about, unauthorized activity in their deferred-compensation accounts. Cohen was the only person with access to the accounts. Id. The employees contacted the Delaware Department of Insurance, and Commissioner Stewart froze the three accounts before they could be emptied. Id. On September 25, 2013, the Court of Chancery issued an order imposing sanctions against Cohen due to actions taken by him during the Court of Chancery proceedings. Cohen v. State ex. rel. Stewart, 89 A.3d 65, 80 (Del. 2014). On October 7, 2013, Cohen filed an expedited motion to modify or, alternatively, for relief from the order imposing sanctions. Id. The Court of Chancery denied the motion without prejudice. Id. at 81. The Court of Chancery entered an additional sanctions order against Cohen on November 1, 2013, following his continued contumacious behavior. Id. at 81-83.

         On November 6, 2013, Commissioner Stewart filed a petition for the entry of a rehabilitation and injunction order with the consent of HC's board. Cohen v. Stewart, 2014 WL 2574550, at *1. On November 7, 2013, the Court of Chancery entered the order, placed IIC into receivership, and appointed Commissioner Stewart as the receiver.[5] Id. Cohen then appealed to the Delaware Supreme Court challenging multiple orders. Cohen v. State ex. rel Stewart, 89 A.3d at 68. "Central to [the] appeal [was] whether the delinquency proceedings [for IIC] violated the constitutional due process rights of [] Jeffrey B. Cohen." Id. Cohen had also filed a filed a motion for emergency relief in the Court of Chancery on December 31, 2013. See C.A. No. 8601 -CB at BL-549.[6] On April 9, 2014, the Delaware Supreme Court affirmed the Court of Chancery's rulings and concluded there were no violations of Cohen's right to due process. Cohen v. State ex. rel Stewart, 89 A.3d at 68-69.

         In the meantime, on July 26, 2013 and January 16, 2014, verified petitions for liquidation were filed in C.A. No. 8601 -CB. (D.I. 1 at ¶ 31). Cohen alleges that the petitions contained false evidence. (Id. at ¶¶ 73-79). He also alleges that false testimony and false facts were presented to the Court of Chancery. (Id. at ¶¶ 46-72). On April 10, 2014, the day after the Delaware Supreme Court had ruled on the Cohen's due process claims, the Court of Chancery entered the liquidation order. Cohen v. Stewart, 2014 WL 2574550, at *1. Cohen alleges that the Court of Chancery granted the liquidation petition based on false averments submitted to the tribunal by the Commissioner and Commissioner's counsel. (D.I. 1 at ¶¶ 73-79). Cohen refers to a statement in the Court of Chancery liquidation and injunction Order with bar date, "[t]he Commissioner has provided the court with evidence sufficient to support the conclusion that IICRRG is insolvent." (Id. at ¶ 79; C.A. No. 8601-CB at BL-786 at p.3). Cohen appealed the order, but it was dismissed after he failed to prosecute the appeal. See Cohen v. State, 100 A.3d 1020, 2014 WL 4384796 (Del. 2014) (table).

         Cohen was indicted and charged with fifteen counts of wire fraud, five counts of aggravated identity theft, two counts of money laundering, five counts of making false statements to an insurance regulator, and four counts of obstructing justice. United States v. Cohen, 2015 WL 4641072 (D. Md. Aug, 3, 2015). On June 5, 2015, he pled guilty to wire fraud, aggravated identity theft, making false statements to an insurance regulator, and obstructing justice. Id. He was sentenced on December 10, 2015, to a term of 240 months imprisonment. See United States v. Cohen, Crim. No. 14-310-GLR (D. Md.) (D.I. 590). Cohen takes exception to a statement made by Stewart in his criminal matter that "she does not personally participate in the delinquency proceedings or the operation of companies in receivership." (D.I. 1 at ¶ 23). The Complaint alleges that Cohen's sentence was based upon the false testimony of Defendant's counsel. (D.I. 1 at ¶ 58). Cohen appealed his conviction and sentence on December 15, 2015. The United States Court of Appeals for the Fourth Circuit dismissed all contentions of error, except for a Sixth Amendment issue and an Apprendi issue, and affirmed the district court's ruling on both issues. See United States v. Cohen, __F.3d__, 2018 WL 1936355 (4th Cir. Apr. 25, 2018).[7]

         On February 15, 2017, Cohen filed a motion for leave to file a third party complaint in another Delaware action, Indemnity Insurance Corporation v. Cohen, C.A. No. 8985-CB (Del. Ch.), an action related to C.A. No. 8601-CB. Court of Chancery C.A. No. 8985-CB raises claims concerning Cohen's alleged misconduct in managing IIC during his tenure as a fiduciary of IIC and the validity of his employment agreement. Id. at BL-106. The proposed third party complaint sought to raise claims pursuant to 42 U.S.C. § 1983 for negligence, conversion, breach of fiduciary duty, fraud, and tortious interference with business relationships against Commissioner Stewart and Tinsley. Id. On April 13, 2017, the Court of Chancery denied the motion on the grounds that Cohen's proposed third party claims were irrelevant to IIC's claims against Cohen and the motion failed to satisfy Court of Chancery Rule 14(a). Id.

         On June 2, 2017, Cohen filed a motion for leave to file a counterclaim against non-parties Tinsley and Michael Johnson, a Regulatory Insurance Services employee, that raised substantially the same claims asserted in the proposed third party complaint. Id. at BL-183. On August 18, 2017, the Court of Chancery denied the motion for the proposed counterclaims against non-parties as a transparent attempt to evade the Court's April 13, 2017 order. Id. The Court of Chancery reiterated that it would not permit any claims against non-parties. Id. Cohen did not appeal.

         During this time, Cohen continued with his filings in C.A. No. 8601-CB. On May 15, 2017, Cohen filed an "independent action for fraud on the court pursuant to Court of Chancery Rule 60, " followed by an August 1, 2017 motion for leave to file an amended complaint to assert the fraud on the court claim as a separate action. See C.A. No. 8601-CB at BL-939, BL-961, BL-970. The motion was denied on August 18, 2017, on the grounds that Cohen is not a party to C.A. No. 8601-CB, and he did not have standing to file a motion or an independent action under Rule 60(b). Id. at BL-970. Cohen did not appeal.

         On September 25, 2017, a little over a month after the Court of Chancery denied the Rule 60 motion in C.A. No. 8601-CB and the motion for leave to file a counterclaim against non-parties in C.A. No. 8985-CB, this Court received Cohen's combined Rule 60(d) independent action for relief from judgment based on fraud on the court and complaint for damages and declaratory/injunctive relief against Navarro. The Complaint asserts jurisdiction pursuant to 28 U.S.C. § 1331 (federal question by reason of 42 U.S.C. § 1983 claims), 28 U.S.C. § 1332 (diversity of citizenship), 28 U.S.C. § 1343 (civil rights and elective franchise), and 28 U.S.C. § 1367 (supplemental jurisdiction). (D.I. 1 at ¶ 2). It contains four counts, as follows: Count I, fraud on the court (id. at ¶¶ 84-89); Count II, negligence/gross negligence (id. at ¶¶ 90-96); Count III, due process violations pursuant to 42 U.S.C. § 1983 (id. at ¶¶ 97-100); and Count IV supervisor liability/negligence under 42 U.S.C. § 1983 (id. at ¶¶ 101-07).

         Cohen alleges Defendant's lawyers, as officers of the court, and certain other individuals, as agents of Defendant, intentionally fabricated evidence and knowingly certified false testimony to deceive the Court of Chancery, the court relied upon the false testimony, and then ruled in favor of Defendant in C.A. No. 8601-CB. (Id. at ¶ 1). Cohen states he has attempted to litigate matters and sought relief in multiple jurisdictions. (Id. at ¶ 80). He alleges Defendant failed to disclose and produce evidence in C.A. No. 8601-CB. (Id. at ¶ 81). Cohen alleges he did not have a full and fair opportunity to litigate the issues regarding the false information relied upon by the Court of Chancery when it deprived him of certain property interests and erred by utilizing false information in its decision. (Id. at ¶ 82). He alleges the fabricated evidence and subornation of false information submitted to the tribunals was done by counsel and, thus, not subject to cross examination. (Id. at ¶ 83). Cohen filed this "action to secure a full and fair opportunity for a meaningful adjudication of the merits." (Id. at ¶ 82).

         Cohen seeks declaratory and injunctive relief, as well as compensatory damages. The declaratory relief sought, includes, but is not limited to, construing evidence relied upon by the Court of Chancery in a different manner from the Court of Chancery; finding Defendant and his attorney submitted false information to the Court of Chancery and other tribunals; finding the Court of Chancery relied upon false information and that the false information deprived Cohen of certain property interests; and finding tribunals were deceived by the acts of Defendant and his attorney. The injunctive relief sought includes enjoining further utilization of the alleged false information submitted by Defendant and his attorney, and for this Court to amend the April 10, 2014 liquidation order issued by the Court of Chancery to provide relief for Cohen from alleged erroneous findings.

         II. LEGAL STANDARDS

         A federal court may properly dismiss an action sua sponte under the screening provisions of 28 U.S.C. § 1915(e)(2)(B) and § 1915A(b) if "the action is frivolous or malicious, fails to state a claim upon which relief may be granted, or seeks monetary relief from a defendant who is immune from such relief." Ball v. Famiglio,726 F.3d 448, 452 (3d Cir. 2013); see also 28 U.S.C. § 1915(e)(2) (in forma pauperis actions); 28 U.S.C. § 1915A (actions in which prisoner seeks redress from a governmental defendant). The Court must accept all factual allegations in a complaint as true and take them in the light most favorable to a pro se plaintiff. Phillips v. County of Allegheny,515 F.3d 224, 229 (3d Cir. 2008); Erickson v. Pardus,551 U.S. 89, 93 (2007). Because Cohen proceeds pro se, his pleading is liberally ...


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