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Cohen v. Miceli

United States District Court, D. Delaware

March 19, 2019

JEFFREY COHEN, Plaintiff,
v.
JEFFREY MICELI and JOHN TINSLEY, Defendants.

          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 action as a 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). Plaintiff appears pro se and has been granted leave to proceed in forma pauperis. (D.I. 6). The Court dismissed the original complaint and gave Plaintiff leave to amend. (D.I. 10, 11). An Amended Complaint was filed on May 29, 2018. (D.I. 13). The Court reviews and screens the Amended Complaint pursuant to 28 U.S.C. § 1915(e)(2)(B) and § 1915A(b).

         I. BACKGROUND

         Plaintiff alleges violations of the United States Constitution pursuant to 42 U.S.C. § 1983, and he raises state law claims. The Amended Complaint states jurisdiction is proper pursuant to 28 U.S.C. § 1332 (diversity of citizenship) and 28 U.S.C. § 1343 (civil rights).[1] The original complaint named Delaware's Insurance Commissioner as the sole defendant. The Amended Complaint names two different defendants, Jeffrey Miceli and John Tinsley. Count I alleges violations of Plaintiff's right to procedural due process (D.I. 13 at ¶¶ 58-63); Count II alleges conspiracy (id. at¶¶ 64-65); Count III alleges unjust enrichment (id. at ¶¶ 66-67); and Count IV alleges negligence/gross negligence (id. at ¶¶ 68-74).

         Plaintiff is the founder of Indemnity Insurance Corporation, RRG ("IIC").[2] (D.I. 13 at¶ 3). He owns 39.6 percent of IIC personally, and the remaining interest is owned through Plaintiffs 100 percent ownership interest of RB Entertainment Ventures, LLC ("RBE") which owned 99 percent of IIC. (D.I. 13 at ¶ 15 and n.2). IIC is a risk retention group 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 Plaintiff. Id.

         Miceli is described as a private practice attorney who is "special counsel to and supervising counsel for the Delaware Insurance Commissioner." (D.I. 13 at ¶ 4). He is also described as "a representative of the IIC Receivership who maintains considerable authority on behalf of the State of Delaware," who "operates as the Attorney-in-fact and Attorney-at-law on behalf of IIC and the Receivership." (Id.).

         Tinsley is described as the "owner and President of several private entities that provide regulatory services to various state insurance departments." He and his firms are appointed receivers of IIC. "He maintains considerable authority on behalf of the State of Delaware," and he has been labeled the "Shadow Commissioner" of Delaware. (Id. at ¶ 5). The Court notes that the Delaware Insurance Commissioner describes Tinsley as Special Deputy - Examinations for the Delaware Department of Insurance. See https://Captive.delaware.gov/ (last visited March 18, 2019). It is not clear how current the website is, as it refers to the former Insurance Commissioner.

         "After uncovering evidence that [Plaintiff] had committed fraud in his capacity as [IIC's] CEO and that [IIC] might be insolvent, the Delaware Insurance Commissioner [] petitioned the Court of Chancery for a seizure order." Cohen v. State ex. rel Stewart, 89 A.3d 65, 68 (Del. 2014). On May 30, 2013, the Court of Chancery entered a confidential seizure and injunction order that vested the Commissioner with title to all IIC property. Cohen v. Stewart, 2014 WL 2574550, at *1 (D. Md. June 5, 2014). On November 6, 2013, the Commissioner filed a petition for the entry of a rehabilitation and injunction order with the consent of IIC'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 the Commissioner as the receiver.[3] Id.

         Plaintiff 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. Plaintiff had also filed a motion for emergency relief in the Court of Chancery on December 31, 2013. See C.A. No. 8601 at BL-549.[4] On April 9, 2014, the Delaware Supreme Court affirmed the Court of Chancery's rulings, holding that Plaintiff was given notice of the allegations against him and a fair opportunity to present his side of the dispute, and concluded there were no violations of his 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. See In the Matter of the Rehabilitation of Indemnity Ins. Corp., RRG, 2014 WL 1154057, at *3, *8 (Del. Ch. Mar. 21, 2014). On April 10, 2014, the day after the Delaware Supreme Court ruled on the Plaintiff's due process claims, the Court of Chancery entered the liquidation order. Cohen v. Stewart, 2014 WL 2574550, at *1. Plaintiff 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).

         The Amended Complaint alleges that Defendants, acting under color of state law, orchestrated the liquidation of IIC. The IIC Delaware receivership action is currently pending in the Court of Chancery of the State of Delaware, In the Matter of the 8601. The miscellaneous matter was dismissed on April 5, 2017. Cohen v. Tinsley, 2017 WL 1333370 (E.D. Pa. Apr. 5, 2017). Liquidation of Indemnity Insurance Corporation, RRG, C.A. No. 8601. Plaintiff is not a party to C.A. No. 8601, although he has sought to intervene in the matter. (D.I. 13 at¶ 15). The motion to intervene was recently denied. In the Matter of the Liquidation of Indemnity Ins. Corp., RRG, 2018 WL 6431747 (Del. Ch. Dec. 6, 2018).

         Plaintiff alleges Defendants, acting under color of law, violated his right to a full and fair hearing. (D.I. 13 at IV.C). On August 13, 2013, RB Entertainment Ventures, or RBE, moved to intervene in C.A. No. 8601 and stated that IIC was not insolvent. (Id. at ¶ 16). One week later, the Court of Chancery held a hearing on the motion to intervene. (Id. at ¶ 17). During the hearing, the Court of Chancery stated that a future hearing would litigate the solvency of IIC. (Id.). The Court of Chancery denied the motion to intervene and "confirmed that RBE did 'not contest the substance of particularized and verified allegations.'" (Id. at ¶ 18). Plaintiff alleges the Court's ruling left him with no ability to conduct discovery or assert evidence to challenge the averments of the defendants. (Id.). He argues Defendants convinced the Court of Chancery that evidentiary hearings were not necessary, that Miceli argued to convince the Court of Chancery to block all discovery from Plaintiff, and Defendants' arguments caused the Court of Chancery to rule that he would not have an opportunity to present argument or evidence in C.A. No. 8601. (Id. at¶¶ 19-21).

         Plaintiff alleges that when the Court of Chancery ruled that IIC was insolvent and granted the petition for liquidation, the Court evaporated his property interests without permitting him to challenge the averments related to the financial condition of IIC or his other companies. (Id. at ¶ 22). Plaintiff filed claims against the receivership as a creditor and main stakeholder. (Id. at ¶ 23). He alleges that unnamed counsel for the Receiver asserted on October 18, 2017, that Plaintiff lacked standing to challenge the Receiver's assertions and had no rights to assert against the estate. (Id.).

         The Amended Complaint alleges that Defendants, acting under color of state law, orchestrated the liquidation of IIC for financial gain. (Id. at ¶ IV.A., ¶ 8). Plaintiff alleges Defendants have paid themselves almost $10 million in fees from the cash reserves of his companies, including IIC. (Id. at ¶ 8). The Amended Complaint alleges Tinsley submitted testimony in C.A. No. 8601 to the Court of Chancery that IIC was operating in a "Hazardous Financial Condition," and "Miceli alleged the same averments through testimony." (Id. at ¶¶ 9, 11). Plaintiff alleges that as a result, the Court of Chancery seized and liquidated the assets of most of Plaintiff's companies including IIC and IDG. (Id. at ¶ 12.) The Amended Complaint alleges that Defendants' averments were false and intentionally misrepresented the facts known to them. (Id. at IV.B., ¶ 13).

         Plaintiff alleges that Defendants orchestrated a plan to fictitiously overvalue IIC's claim reserves to thwart an opportunity to successfully save the company. (Id. at IV.D.). Plaintiff alleges that prior to the receivership, IIC's claims were managed successfully, and when IIC was taken over by Defendants for the period ending June 30, 2013, "its actuary reported that $20.3 million was a 'reasonable estimate for the Company's unpaid policyholder claim obligations.'" (Id. at ¶ 26). He alleges that following the $20.3 million opinion, adversarial counsel stated that "IIC was properly reserved at $20 million." (Id. at ¶ 27). Plaintiff alleges that prior to his "banishment," he had entertained an offer dated June 20, 2013 (D.I. 13 at 33) to sell 49 percent of IIC and IDG for $25 million, but after his banishment, Defendants controlled the negotiations and successfully enjoined Plaintiff from communication with the suitor. (Id. at ¶ 28). Plaintiff alleges Defendants knew that the deal would resolve all regulatory concerns and terminate lucrative income streams to them, so they manufactured evidence to create a concern for the suitor regarding 110 claim reserves. (Id. at ¶¶ 29-35). Plaintiff alleges Defendants used the evidence to adjust the figures and to create a new actuarial analysis which they submitted to the Court of Chancery as a reason that IIC was insolvent. (Id. at ¶¶ 35-36). Plaintiff alleges that the new actuarial report resulted in the suitor's withdrawal of its acquisition offer. (Id. at ¶ 37).

         Plaintiff alleges Defendants orchestrated an unlawful reason to support the liquidation of IIC and to avoid any evidentiary hearings into their assertions. (Id. at ¶ IV.E.). Plaintiff alleges, "Defendants coerced [IIC's two] remaining board members to consent to liquidation because the [suitor] deal was quashed, [and used] the authorization [to] submit to the [Court of Chancery] that liquidation was proper and statutorily called for. (Id. at ¶ 38). He alleges that Miceli testified in the Court of Chancery that "consent is to be relied upon," and indicated to the Court that a hearing was not necessary, based upon the consent. (Id. at ¶¶ 42-43).

         Plaintiff alleges that post-deprivation relief is unavailable and inadequate. (Id. at IV.F.). Plaintiff filed appeals in the Delaware Supreme Court, and it affirmed the Court of Chancery's finding and rulings. (Id. at ¶ 45). Plaintiff alleges that the "Court did not take up the issue regarding the violation of [his] due process rights regarding the submission of false information by defendants [and] did [not] make any findings regarding his due process rights to a full and fair hearing or the deprivation of certain property interests caused by the conduct of the defendants." (Id. at ΒΆ 46). He alleges that another appeal he filed was dismissed following his failure to respond to a show cause notice that ...


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