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Stockton v. Canada Life Assurance Co.

August 20, 2008

VIRGINIA STOCKTON, PLAINTIFF,
v.
THE CANADA LIFE ASSURANCE CO. AND LESLIE & ASSOCIATES, DEFENDANTS.



The opinion of the court was delivered by: Jeanne E. Scott, U.S. District Judge

OPINION

This cause is before the Court on Defendants' Motion to Vacate Plaintiff's State Court Default (d/e 13) (Motion to Vacate) and Defendants' Motion to Dismiss the Complaint (d/e 8) (Motion to Dismiss). For the reasons stated below, the Motions are allowed.

FACTS

The Complaint alleges that Plaintiff Virginia Stockton was the sole beneficiary of a $75,000.00 life insurance policy issued by Defendant The Canada Life Assurance Company (Canada Life Assurance) on the life of Norman J. Barnes. Barnes allegedly purchased the policy by submitting an enrollment form provided by his employer Kelly Services to Leslie & Associates Benefit Alliance.*fn1 He submitted his enrollment form after retiring from Kelly Services and indicated his status as a retiree on his form. Barnes purchased the policy under a group policy issued by Canada Life Assurance through Defendant Leslie & Associates, an employee benefit firm. Stockton alleges that Leslie & Associates acted as Canada Life Assurance's agent in this matter.

Leslie & Associates allegedly accepted Barnes' enrollment form and issued a policy to him. He paid the policy premiums, and Leslie & Associates accepted them. Under the policy terms, which were attached to the Complaint, any claims for recovery had to be filed within three years and ninety days after a triggering event. On February 1, 2003, Barnes died. Stockton alleges that Leslie & Associates agents assured her and the funeral home caring for Barnes that the life insurance policy remained in force. After incurring funeral costs, Stockton filed a claim on Barnes' policy, but Defendants refused to make payment.

On December 7, 2007, Plaintiff filed this action in the Circuit Court of the Seventh Judicial Circuit, Morgan County, Illinois. Her Complaint sets forth two counts. She alleges in Count I that Canada Life Assurance's failure to pay the policy proceeds was in bad faith, and in Count II, the same of Leslie & Associates.*fn2 Stockton served Canada Life Assurance on December 17, 2007, and Leslie & Associates on December 18, 2007.

On January 16, 2008, Defendants filed a Notice of Removal (d/e 1) removing this case to federal court based on federal question and diversity jurisdiction. The Clerk's Office docketed the Notice of Removal on the afternoon of January 18, 2008. Earlier that day, in an uncontested hearing in state court, Stockton obtained a default judgment. Because Defendants had never filed an appearance in state court, they received no notice of this hearing; Stockton asserts that she did not know who represented Defendants.

Three days later, Defendants' counsel informed Stockton's attorney that they had removed the case to federal court; Stockton's attorney replied that the state court had already entered a default judgment. The next day, January 22, 2008, Defendants mailed a copy of the Notice of Removal to the state court, which docketed the filing January 23, 2008.

The parties appeared in federal court for a telephone conference before Magistrate Judge Charles H. Evans on January 30, 2008. It appears that no one informed Judge Evans of the state court default judgment. Judge Evans directed Defendants to file proof that the state court had received notice of removal by February 7, 2008; they did so on February 6, 2008. Judge Evans then ordered Stockton to file any objection she had to removal by February 13, 2008. Stockton filed no objection.

On February 27, 2008, Defendants moved to dismiss the Complaint as preempted by the Employee Retirement Income Security Act (ERISA) and time-barred. On March 17, 2008, Stockton filed a Response to, and Motion to Strike, Defendant's Motion to Dismiss the Complaint (d/e 10) (Motion to Strike), in which she argued that under res judicata, the state court default judgment resolved this case.*fn3 This was the first this Court learned of the state court default judgment. The parties apparently discussed the issue of the state court default judgment several times before March 17, 2008. Defendants contend that they believed Stockton, at some point, would move to vacate the default judgment, while Stockton maintains that she never agreed to do so. On April 3, 2008, Defendants filed a Response to Stockton's Motion to Strike in which they asserted that this Court could vacate the default judgment.

The Court subsequently ordered the parties to file any motions relating to the issue of the state court default judgment. Defendants filed a Motion to Vacate Plaintiff's State Court Default, which Stockton opposed in her Response to Defendant's Motion to Vacate Default Judgment (d/e 15).

ANALYSIS

The parties have presented several matters for the Court's consideration. First is the question of whether this Court has subject matter jurisdiction. Under 28 U.S.C. ยง 1331, it does. Second is the issue of the state court's default judgment. This Court has authority to vacate such a judgment, and here, it is appropriate to do so. Third is whether Stockton's claims are time-barred and should be dismissed. Applying the limitations period set ...


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