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Lincoln Benefit Life Co. v. Wilmington Trust, N.A.

Superior Court of Delaware

July 31, 2018

LINCOLN BENEFIT LIFE COMPANY, Plaintiff,
v.
WILMINGTON TRUST, N.A., as Securities Intermediary, Defendant.

          Submitted: May 18, 2018

          Upon Defendant Wilmington Trust, N.A.'s Motion to Dismiss or Stay the Action, GRANTED in part and DENIED in part.

          Joseph C. Schoell, Esquire, Drinker Biddle & Reath LLP, Wilmington, Delaware; Jason P. Gosselin, Esquire, Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania, Attorneys for Plaintiff Lincoln Benefit Life Company

          Steven L. Caponi, Esquire, K & L Gates LLP, Wilmington, Delaware; Jesus E. Cuza, Esquire, Monica V. Castro, Esquire, Holland & Knight LLP, Miami, Florida, Monica V. Castro, Esquire, Attorneys for Defendant Wilmington Trust, N.A.

          Eric M. Davis, Judge cc: File&ServeXpress

         I. INTRODUCTION

         This is a declaratory judgment action assigned to the Complex Commercial Litigation Division of the Court. The action arises out of a life insurance policy ("the Policy") issued by Plaintiff Lincoln Benefit Life Company ("Lincoln Benefit") to Ruben Matz in 2007. Through a series of transactions that followed the initial purchase, Defendant Wilmington Trust, N.A. as Securities Intermediary ("Wilmington Trust"), became the owner and beneficiary of the Policy. When Mr. Matz passed away in 2017, Wilmington Trust submitted proof of his death to Lincoln Benefit. Wilmington Trust then filed a declaratory judgment action in a federal district court in Florida (the "Florida Action"), seeking a determination that Lincoln Benefit must pay the death benefits to Wilmington Trust under the Policy. Three months later, Lincoln Benefit filed an action in the Superior Court of Delaware (the "Delaware Action") seeking declaratory judgment that the Policy was void at the time of signing.

         Now before the Court is Wilmington Trust's Motion to Dismiss or Stay the Delaware Action (the "Motion") for forum non conveniens. Lincoln Benefit opposes the Motion. Applying the McWane analysis, this Court finds, in its discretion, that the factors support a stay of the Delaware Action in favor of the Florida Action. Therefore, Wilmington Trust's Motion to Dismiss or Stay is GRANTED IN PART AND DENIED IN PART.

         II. BACKGROUND

         Lincoln Benefit, is a life insurance company incorporated in Nebraska, with its principal place of business in Nebraska. Wilmington Trust is a national banking association incorporated under the laws of the United States, with its principal place of business in Delaware. In March 2007, Lincoln Benefit received an application for a $10 million insurance policy on the life of Mr. Matz. Mr. Matz was resident of Florida.[1] According to the application, the Ruben Matz Insurance Trust (the "Matz Trust"), located in Delaware, was the proposed owner and intended beneficiary of the Policy.[2] Three people signed the application: Mr. Matz (the insured); Alan Halpern (trustee of the Matz Trust); and Ernest Madera (the producer).[3] The application contained a representation that it was signed in Wilmington, Delaware, but Ernest Madera testified by affidavit that he and Ruben Matz signed the application in Florida, where they both reside.[4]

         As part of the Policy application, the signatories also signed a Premium Funding Intent Form, attesting that:

There was no intent to transfer ownership of the policy to a third party, such as a settlement company or an investor group.
There was no intent that the policy would be owned by an entity for investment purposes.
There would be no funds other than the insured's own funds used to pay the premium of the policy.
The purpose of the policy was financial planning and estate planning.[5]

         On April 13, 2007, Lincoln Benefit issued the Policy.[6] The application was attached to the Policy and became part of the insurance contract. The Policy contained a provision titled, "Conformity with State Law."[7] This provision states that the Policy "is subject to the laws of the state where the application was signed."[8] The Policy subsequently changed ownership multiple times. In December 2012, Wilmington Trust, as securities intermediary, became the owner and beneficiary of the Policy.[9]

         Mr. Matz died on September 22, 2017.[10] Wilmington Trust submitted the death certificate to Lincoln Benefit on October 5, 2017, requesting that Lincoln Benefit pay the Policy proceeds.[11] The next day, October 6, Wilmington Trust filed a declaratory judgment action in the United States District Court for the Southern District of Florida (the "Florida Court"), [12]seeking a declaration that Wilmington Trust is entitled to the proceeds of the Policy.[13]

         Then, on January 9, 2018, Lincoln Benefit filed its own complaint against Wilmington Trust in this Court, seeking: (1) a declaration that the Policy is void ab initio because it was part of a stranger originated life insurance ("STOLI") scheme, and STOLI policies are contrary to Delaware law; and (2) a determination that "it would be unjust to permit [the ultimate beneficiary] to recoup any premiums paid on the policy."[14] On March 8, 2018, Wilmington Trust filed the Motion to Dismiss or Stay the Delaware Action that is now before this Court. Lincoln Benefit opposes the Motion.

         Lincoln Benefit moved to dismiss the Florida Action for lack of personal jurisdiction (the "Florida Motion").[15] The Florida Court heard the Florida Motion on June 15, 2018, ruling from the bench and denying the Florida Motion. Wilmington Trust filed a motion for summary judgment and that motion remains pending before the Florida Court.

         III. PARTIES' CONTENTIONS

         A. Wilmington Trust's Motion

         Wilmington Trust argues that the Court should dismiss or stay the Delaware Action for forum non conveniens, applying the well-settled factors set forth in McWane.[16] Wilmington Trust claims that the McWane factors weigh in favor of dismissal or a stay because: (1) the Florida Action was filed first in time; (2) this case involves the same parties and issues as the Florida Action; and (3) the Federal District Court in Florida is capable of prompt and complete justice. Wilmington Trust also contends that even if the Court were to analyze the Motion under Cryo-Maid, [17] the factors weigh overwhelmingly in favor of the Florida Action.[18]

         B. Lincoln Benefit's Opposition

         Lincoln Benefit opposes the Motion, arguing that the Court should summarily strike or deny Wilmington Trust's Motion as untimely because it was filed twenty-one days past the deadline. Alternatively, Lincoln Benefit claims that the Court should deny Wilmington Trust's Motion because neither a McWane or Cryo-Maid analysis warrants dismissal or a stay of the Delaware action.

         IV. DISCUSSION

         A. The Motion Will Not Be Summarily Denied.

         Lincoln Benefit argues that the Court should strike or summarily deny Wilmington Trust's Motion because it was untimely. Delaware Superior Court Civil Rule 107(f) provides that the Court may, in its discretion, summarily deny a motion for untimeliness.[19] However, Delaware courts recognize that public policy favors determining legal issues on their merits.[20]

         Here, Wilmington Trust filed the Motion twenty-one days after the deadline to respond to the Complaint. Although this may have delayed the proceeding by a matter of days, Lincoln Benefit was not prejudiced. Indeed, Lincoln Benefit does not even argue that it suffered prejudice. Lincoln Benefit concedes that Wilmington Trust's late response to the Complaint was due to confusion over which law firm was supposed to represent Wilmington Trust in this matter. While this is not good cause for the delay, in context, it shows that Wilmington Trust was not grossly inadvertent or engaging in delay tactics. Because Lincoln Benefit was ...


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