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ELRAD v. UNITED LIFE AND ACC. INS. CO.

October 29, 1985

HAIM ELRAD, PLAINTIFF,
v.
UNITED LIFE AND ACCIDENT INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Aspen, District Judge:

MEMORANDUM OPINION AND ORDER

Dr. Haim Elrad ("Elrad") sued United Life and Accident Insurance Co. ("United"), alleging misrepresentation in connection with United's sale to him of a life insurance policy. The case was originally filed in Illinois state court, but United removed to this Court under 28 U.S.C. § 1441(b), basing jurisdiction on diversity of citizenship. Once here, United promptly moved to dismiss the case, while Elrad moved to remand the case to state court. For the following reasons, United's motion is granted and Elrad's is denied.

Facts

The allegations of the complaint, viewed in the light most favorable to Elrad and assumed to be true, state the following. On October 12, 1981,*fn1 Robert Smith, acting as United's agent, sold a life insurance policy to Elrad. Smith allegedly induced Elrad to buy the policy by falsely representing that the policy was a "whole-life" rather than "term" policy, and that he could deduct from his federal income tax interest he would incur to finance a loan to pay for the policy. Relying on those misrepresentations, Elrad borrowed money from Professional Funding Corp. to pay for the premiums.

Elrad claims that the interest is not lawfully tax deductible, and that the policy is a term rather than whole-life one. He seeks recovery under three state law theories. Count I alleges a violation of Ill.Rev.Stat. ch. 73, § 761, a provision of the Illinois Insurance Code prohibiting misrepresentations as to the terms or benefits of a policy.*fn2 Count II rests on §§ 1-203 and 2-302 of the Uniform Commercial Code ("UCC"), Ill.Rev.Stat. ch. 26, §§ 1-203, 2-302 (1983), which respectively prescribe good faith in performing contracts subject to the UCC and proscribe unconscionable clauses in contracts governed by the UCC. Count III alleges violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill.Rev.Stat. ch. 121 1/2, ¶ 262 (1983), and the Uniform Deceptive Trade Practices Act, Ill.Rev.Stat. ch. 121 1/2, ¶ 312 (1983). None of these theories can defeat United's motion to dismiss.

The Petition for Removal

As a threshold matter, we must rule on Elrad's opposition to United's petition to remove this case from state court. Elrad does not dispute that diversity jurisdiction is proper from the face of his complaint: he is a citizen of Illinois while United is incorporated in and has its principal place of business in New Hampshire. Moreover, the amount in controversy exceeds $10,000, and United has complied with the non-jurisdictional requirements for removal set forth in 28 U.S.C. § 1446.

Elrad's argument is that the case was not "providently" removed under 28 U.S.C. § 1447(c). He points out there were related state court cases involving the same subject matter, and that judicial economy compels that the cases be tried together. In one state case, Professional Funding Corp. sued Elrad for not paying on the insurance funding agreement. Elrad counterclaimed and also brought in United and its alleged agent Smith as third-party defendants. But the state court dismissed the third-party claim against United, suggesting that Elrad refile the complaint and move to consolidate it with the first suit. Elrad refiled, but United removed the case here before Elrad could file his motion to consolidate.

At the outset, we observe that the term "provident" in § 1447(c) is not a broad invitation to this Court to decline jurisdiction simply for reasons of economy. It simply refers to basic non-jurisdictional requirements such as the posting of a bond. It is now well established that a district court cannot remand an otherwise properly removed case for discretionary or policy reasons. See Thermitron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 343-44, 96 S.Ct. 584, 589-90, 46 L.Ed.2d 542 (1976); Ryan v. State Bd. of Elections of State of Ill., 661 F.2d 1130, 1133 (7th Cir. 1981). Since this case satisfies the jurisdictional and non-jurisdictional requirements of §§ 1441 and 1446, respectively, there is no basis for remanding this case.*fn3 Thus, the motion to remand is denied. Having so ruled, we may now turn our attention to United's attack on the complaint.

Count I: No Private Right of Action

United is correct that no private right of action exists for a violation of Ill.Rev.Stat. ch. 73, § 761. Section 761(5) provides that any company who violates that section "shall be guilty of a business offense and shall be required to pay a penalty of [between $100 and $1,000], to be recovered in the name of the People of the State of Illinois by the State's Attorney of the county in which the violation occurs. . . ." At least one Illinois court has held that in enacting this section the Illinois legislature pre-empted the remedies for violations of § 761, foreclosing a private right of action. See Glazewski v. Allstate Ins. Co., 126 Ill.App.3d 401, 410-11, 81 Ill.Dec. 349, 466 N.E.2d 1151, 1157-58 (1st Dist. 1984), aff'd in part, rev'd in part on other grounds, 108 Ill.2d 243, 91 Ill.Dec. 628, 483 N.E.2d 1263 (1985). Elrad has not attempted to distinguish Glazewski or otherwise address this challenge to Count I. Accordingly, we follow Glazewski and grant United's motion to dismiss Count I.*fn4

Count II: UCC Does Not Apply

We must also reject Elrad's claim that United's alleged misrepresentations are subject to the UCC. He has cited no authority to support his novel assertion. He claims that United's conduct was unconscionable under Section 2-302 of the Code, but Article II applies only to the sale of goods. See Ill.Rev.Stat. ch. 26, ¶ 2-102 (1983). We disagree with Elrad's strained argument that a sale of life insurance is somehow the sale of a "good." See ¶ 2-105 (defining "good"). He also claims that United's conduct violated the "obligation of good faith" imposed by ¶ 1-203 of the UCC. But of course ¶ 1-203 applies only to a "contract or duty within" the UCC, and Elrad has not shown how his insurance contract is within the Code. While an insurance contract is a "commercial transaction," not all commercial transactions fall within the Code. Indeed,

  [t]he . . . Code does not apply to the sale of realty
  (except fixtures), yet these are undeniably
  commercial matters. The Code does not apply to the
  formation, performance, ...

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