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Fried Alligator Films, LLC v. New York Life Insurance Co.

United States District Court, N.D. Mississippi, Greenville Division

September 29, 2017




         Before the Court are (1) New York Life Insurance Company's “Motion for Summary Judgment and for Dismissal, ” Doc. #25; (2) Michael Willis' unopposed motion to exceed page limits, Doc. #44; and (3) Fried Alligator Films, LLC and Jerry Tankersley's “Motion to Strike New Legal Arguments and Evidence Raised in Rebuttal to their Memorandum Brief in Opposition to Motion for Summary Judgment and for Dismissal, ” Doc. #47.


         Procedural History

         On July 15, 2016, Fried Alligator Productions, LLC and Jerry Tankersley filed a complaint in the Circuit Court of Leflore County, Mississippi, against New York Life Insurance Company (“NYL”), Michael Willis, and John Does 1-10. Doc. #2. In the complaint, Fried Alligator and Tankersley alleged that the defendants sold them a universal life policy, rather than a custom whole life policy proposed by Tankersley, which was to be used as collateral to finance Fried Alligator's business operations up to $5, 000, 000. The plaintiffs further alleged that the universal life policy could not be used for its intended purpose.

         On August 15, 2016, the defendants removed the state court action to this Court on the basis of diversity jurisdiction.[1] Doc. #1 at ¶¶ 4-7. NYL and Willis answered the complaint on August 30, 2016, and September 6, 2016, respectively. Doc. #10; Doc. #12.

         On October 14, 2016, the plaintiffs, with leave of the Court, filed an amended complaint against the defendants. Doc. #22. In the amended complaint, the plaintiffs assert claims for (1) “Negligence, ” (2) “Breach of Fiduciary Duty, ” (3) “Breach of Contract, ” (4) “Breach of Implied-in-fact Contract, ” (5) “Breach of Duty of Good Faith and Fair Dealing, ” (6) “Misrepresentation, ” (7) “Promissory Estoppel, ” (8) “Equitable Estoppel, ” (9) “Third Party Beneficiary, ” (10) “Vicarious Liability, ” and (11) “Gross Negligence and/or Malicious Conduct.” Willis and NYL answered the amended complaint on October 19, 2016, and October 28, 2016, respectively. Doc. #23; Doc. #24.

         On October 28, 2016, NYL filed a “Motion for Summary Judgment and for Dismissal.” Doc. #25. The same day, Willis filed a “Joinder of Defendant Michael Willis in Defendant New York Life Insurance Company's Motion for Summary Judgment or, in the Alternative, for Dismissal, ” in which he joins NYL's motion and asserts additional grounds for summary judgment as to the plaintiffs' contract-related claims against him. Doc. #27. The plaintiffs filed identical responses and supporting memoranda to NYL's motion and Willis' joinder on January 9, 2017.[2] Doc. #28; Doc. #29; Doc. #30; Doc. #31. The next day, the plaintiffs filed a supplement to their responses, Doc. #33, and an affidavit exhibit, Doc. #33-1.

         On January 27, 2017, NYL moved to exceed by 10 pages the page limit for its reply to plaintiffs' responses. Doc. #42. This Court granted the motion in part, allowing NYL an additional five pages. Doc. #43. In the order, the Court noted that inasmuch as the motion was not a joint motion, the order applied only to NYL and no other defendant. Id. at 1 n.1. Willis then moved for an additional five pages to reply. Doc. #44. On January 31, 2017, NYL filed a reply to plaintiffs' responses, which Willis joined. Doc. #45; Doc. #46.

         On February 9, 2017, the plaintiffs filed a motion to strike certain arguments and evidence raised in NYL's reply and Willis' joinder. Doc. #47. On February 21, 2017, NYL responded to this motion, and Willis joined the response. Doc. #49; Doc. #50. On February 28, 2017, the plaintiffs filed a reply. Doc. #51.


         Procedural Matters

         A. Motion to Strike

         The plaintiffs contend in their motion to strike that NYL's reply raises new arguments and is supported by new evidence not previously relied on by NYL in its motion. The plaintiffs request that any new arguments and evidence not be considered by the Court in evaluating the summary judgment motion or, alternatively, that they be given an opportunity to respond. NYL argues that each argument and piece of evidence responds to arguments the plaintiffs raised in their response.

         A reply and any accompanying brief are generally limited to addressing matters presented in a motion and a response. See AAR, Inc. v. Nunez, 408 F. App'x 828, 830 (5th Cir. 2011) (“Generally, and for obvious reasons, a reply brief is limited to addressing matters presented by appellant's opening brief and by appellee's response brief, and is not the appropriate vehicle for presenting new arguments or legal theories to the court.”) (internal quotation marks omitted). A review of the relevant documents shows that the matters the plaintiffs find objectionable in NYL's reply are responsive to arguments and evidence in the plaintiffs' responses to NYL's motion. Consequently, such matters were not raised for the first time in NYL's reply. Accordingly, the plaintiffs' motion to strike will be denied.

         B. Willis' Motion for Additional Pages

         Willis seeks an additional five pages for his reply in support of NYL's motion, which he joined. As grounds, Willis incorporates by reference the reasons advanced in NYL's motion for additional pages, which this Court granted in part on January 30, 2017. Doc. #44 at 2; Doc. #43.

         For the reasons stated in the January 30 order, Willis' motion for additional pages is granted.



         The defendants seek dismissal of all Fried Alligator's claims on the grounds that Fried Alligator lacks standing to assert claims based on policies on which it is not the insured or a third-party beneficiary, and that Fried Alligator fails to state a claim upon which relief can be granted. Because standing is a jurisdictional requirement, the Court will address Fried Alligator's standing first. See Cole v. Gen. Motors Corp., 484 F.3d 717, 721 (5th Cir. 2007) (“[W]e must resolve the standing question as a threshold matter of jurisdiction.”).

         A. Standard

         “Granting summary judgment is an inappropriate way to effect a dismissal for lack of subject matter jurisdiction.” Bank One Tex. v. United States, 157 F.3d 397, 403 n.12 (5th Cir. 1998). Accordingly, a court should construe a motion for summary judgment predicated on a lack of jurisdiction as a motion to dismiss under Rule 12(b)(1). See Fox v. Leavitt, 572 F.Supp.2d 135, 140 n.5 (D.D.C. 2008) (“Although CMS's motion requests summary judgment[, ] ... the request to dismiss based on … lack of standing is properly treated as a motion to dismiss for lack of jurisdiction under Federal Rule of Civil Procedure 12(b)(1).”). This Court therefore will analyze NYL's standing argument as a motion to dismiss for lack of jurisdiction under Rule 12(b)(1).

         “A motion to dismiss for lack of standing may be either ‘facial' or ‘factual.'” Superior MRI Servs., Inc. v. Alliance Healthcare Servs., Inc., 778 F.3d 502, 504 (5th Cir. 2015). Where, as here, “the defendant submits affidavits, testimony, or other evidentiary materials” in support of the motion, the attack on standing is considered factual. Id. (internal quotation marks omitted). “To defeat a factual attack, a plaintiff must prove the existence of subject-matter jurisdiction by a preponderance of the evidence and is obliged to submit facts through some evidentiary method to sustain his burden of proof.” Id. (internal quotation marks omitted).

         “[S]tanding is perhaps the most important of the jurisdictional doctrines.” United States v. H a y s , 515 U.S. 737, 742 (1995) (internal quotation marks and alterations omitted). To establish standing under Article III, a plaintiff “must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Sayles v. Advanced Recovery Sys., Inc., 865 F.3d 246, 250 (5th Cir. 2017).

         B. Facts Relevant to Standing Issue

         Fried Alligator is a production company “within the entertainment industry.” Doc. #22 at ¶ 9.[3] Tankersley is a member and agent of Fried Alligator. Id. at ¶¶ 8, 10. Since 2013, Tankersley has been the primary financing member of Fried Alligator charged with managing and securing financing for Fried Alligator's prospective entertainment projects. Id. at ¶ 10.

         1. Initial discussions between Tankersley and NYL

         In the summer of 2013, Tankersley began meeting with Anna Muse Moses, an employee of NYL and family friend of Tankersley. Id. at ¶ 11. The meetings later included other NYL representatives, including Taylor Triplett. Id. During these meetings, Tankersley explained to Moses and Triplett that he desired to purchase life insurance or other NYL products that “would be a conduit to enhance financing options available for Fried Alligator's prospective and/or ongoing projects.” Id. at ¶ 12. Tankersley further informed Moses and Triplett that “the building of cash value and/or the use of the product as collateral in conjunction with traditional financing products through banks were paramount concerns vital to the well[-]being and success of Fried Alligator.” Id. Tankersley's explanations and representations “were all made on behalf of Fried Alligator, and for Fried Alligator's business purposes.” Id. Moses, Triplett, and later Willis, “repeatedly affirmed” they understood why Tankersley sought these products for Fried Alligator. Id. at ¶ 13.

         In late 2013, relying on advice of NYL representatives, Tankersley determined that a custom whole life insurance policy would best fit Fried Alligator's needs. Id. at ¶ 14. According to Tankersley, such a policy would build cash value quickly, and could serve as collateral to obtain more financing through traditional means. Id.

         2. Discussions between Tankersley and Willis

         In December of 2013, Tankersley was introduced to Willis at NYL, who “presented himself as an expert and seasoned professional veteran” and changed Tankersley's mind regarding the proper policy. Doc. #22 at ¶¶ 15-16, 18. NYL promoted Willis and encouraged Tankersley to rely on his expert and professional advice. Id. at ¶ 16. Willis belittled the concept of a custom whole life policy, and told Tankersley that “a universal policy was a far superior option to accomplish the purposes of Tankersley and Fried Alligator.” Id. Willis represented that the cash value of the policy “could be used as collateral from day 1” and that “banks would loan Tankersley as much as $5, 000, 000, the face value of the universal life policy, as long as the policy was used as collateral.” Id. Tankersley believed Willis when Willis told him this product would suit his needs and be the best product he could purchase from NYL to accomplish the goals of Tankersley and Fried Alligator. Id. at ¶ 21.

         The universal life policy is dated December 11, 2013, and names “Jerry Deane Tankersley” as the insured. Doc. #26-7 at 31. The insured is listed as the “owner;” [t]he “initial base policy face amount” is “$5, 000, 000.00;” the “planned monthly premium” is “$10, 000;” and the “surrender charge premium” is “$165, 070.29.” Id. at 32, 33, 36. The beneficiaries listed are Suzy Bergner, Cheryl Wells, Teresa Garner, and Joy Campbell. Id. at 53.

         As it turned out, Willis' advice was incorrect. Doc. #22 at ¶ 25. Unlike the custom whole life policy, the universal life product had substantial fees with high surrender charges, was a modified endowment contract with tax consequences, did not as aggressively build cash value, and was not acceptable for collateral with banks. Id. at ¶¶ 17-24. Because of the high surrender values, Tankersley continued to contribute to the universal life product which simultaneously deprived him of the ability to fund Fried Alligator projects, resulting in Fried Alligator's inability to fund at least one project. Id. at ¶¶ 28-31. Had Tankersley received the custom whole life policy, the funds would have been available to fund such project. Id. at ¶ 31.

         3. Attempts to modify policy

         Sometime in 2014, Tankersley realized the policy was useless for his needs. Doc. #22 at ¶ 25. Tankersley informed Moses of his problems with the policy, and Moses reported the situation to NYL. Id. at ¶ 26. NYL met with Tankersley and acknowledged he received bad advice and that “he should be put back in the position he would have been but for the bad advice.” Id. However, due to the surrender fee to swap out the policy and the tax consequences, the policy was not changed. Id. at ¶¶ 27-28. Tankersley continued paying the premiums. Id.

         In late 2014, Tankersley approached NYL again regarding the problems with his policy. Id. at ¶ 33. At some point, an agent recommended that he reapply for a custom whole life policy and file an “errors and omissions claim against Moses.” Id. Tankersley viewed this option as unsatisfactory because “it put the onus on Tankersley to repair the problem … [and i]t also required Tankersley to incur the costs of bringing a claim against Moses, who did nothing wrong ….” Id. In the middle of 2015, NYL tried “to make it right” by converting the universal life policy to a custom whole life policy but left it as a modified endowment contract creating tax issues for Tankersley. Id. at ¶ 34-35.

         The custom whole life policy, dated June 2, 2015, with terminal digits 90, lists “Jerry Deane Tankersley” as the named insured and owner. Doc. #26-8 at 68-70. The monthly premium is $9, 635.77. Id. at 71. The beneficiaries are listed as Joy Campbell, Cheryl Wells, Suzy Bergner, and Teresa Garner. Id. at 83.

         C. Analysis

         1. Breach of contract

         In its factual attack on standing, NYL argues Fried Alligator is neither a party nor third party beneficiary to either contract. Fried Alligator responds that it “is not … seeking to enforce a life insurance policy; it is seeking to hold NYL liable for selling a financial product and insurance policy that did not do what NYL said it would.” Doc. #30 at 14-15. More specifically, Fried Alligator asserts that it, through Tankersley's interactions with NYL, entered into an oral contract with NYL to purchase “an insurance policy which NYL promised would meet its financing needs, [and] the policy's failure to do so constitutes a breach of [that oral] contract.” Id. at 16. Alternatively, Fried Alligator argues it is a third party beneficiary of oral promises between Tankersley and NYL made for Fried Alligator's benefit. Id. at 18-19.

         a. Claims premised on written agreements

         As an initial matter, the failure to raise an argument in response to a motion to dismiss operates as a waiver of such argument. See Jaso v. The Coca Cola Co., 435 F. App'x. 346, 358 n.12 (5th Cir. 2011) (“Jaso has waived this argument on appeal by failing to raise it below in response to Defendants' motion to dismiss.”) (citing Miller v. Nationwide Life Ins. Co., 391 F.3d 698, 701 (5th Cir. 2004)). Accordingly, where a party's standing to enforce a contract is challenged in a motion to dismiss, the failure to address standing in a response justifies dismissal on those grounds. Rutter v. Conseco Life Insur. Co., No. 3:09-cv-680, 2011 WL 2532467, at *5 (S.D.Miss. June 24, 2011).[4]

         Because Fried Alligator asserts that it is not seeking to enforce the written insurance policy between Tankersley and NYL, either as a party or third party beneficiary, the Court deems waived all claims by Fried Alligator based on breach of the written policies.[5] See generally Los Alamos Study Grp. v. U.S. Dep't of Energy, 692 F.3d 1057, 1066 n.2 (10th Cir. 2012) (“[W]e have no duty to investigate grounds for jurisdiction not raised by a party.”) (emphasis omitted). Thus, the Court will consider Fried Alligator's breach of contract claim premised only on any oral agreements between NYL and Fried Alligator, or between Tankersley and NYL.

         b. Existence of oral contract

         Although it is less than clear, it appears Fried Alligator argues that it had an enforceable oral contract with NYL that NYL would offer Tankersley a suitable insurance policy which could be used as future collateral in a loan. See Doc. #30 at 15-16.

         It is basic contract law that a “formation of a contract, either oral or written, requires (1) an offer, (2) acceptance of the offer, and (3) consideration.” Reeves v. Midcontinent Express Pipeline, LLC, 119 So.3d 1097, 1101 (Miss. Ct. App. 2013). Fried Alligator's oral contract argument fails for lack of consideration.

         “Consideration has been defined as (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification or destruction of a legal relation, or (d) a return promise, bargained for and given in exchange for the promise.” Estate of Davis v. O'Neill, 42 So.3d 520, 527 (Miss. 2010) (internal quotation marks omitted). “If an agreement is to be held supported by consideration, that consideration must come from the parties to the agreement.” Daniel v. Snowdoun Ass'n, 513 So.2d 946, 949 (Miss. 1987). Fried Alligator has not alleged that it gave NYL anything in return for the promise that the policy could be immediately used as collateral. Accordingly, the facts fail to establish the existence of an oral contract between Fried Alligator and NYL.

         2. Third-party beneficiary claim based on oral agreement

         Similarly, Fried Alligator has failed to prove by a preponderance of the evidence that it is a third-party beneficiary of an ...

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