Wisconsin Class Action Against Insurance Company Remanded to State Court Because of State Law Claims – LaPlant v. Northwestern Mut. Life Ins. Co.

Our Chicago class action attorneys note that a class action claim against an insurance company, which the defendant had removed to federal court, fell within an exception to the federal jurisdiction statute, according to a federal district judge in LaPlant v. The Northwestern Mutual Life Insurance Company, No. 11-CV-00910, slip op. (E.D. Wis., Aug. 20, 2012). The court remanded the case to Wisconsin state court under the corporate governance exception to the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d). It held that the plaintiffs’ claims related exclusively to the defendant’s “internal affairs,” based on Wisconsin law.

The defendant issued an annuity insurance policy to the lead plaintiff. As a mutual insurance company, the defendant was “owned cooperatively by its policyholders,” LaPlant, slip op. at 1, and paid dividends to policyholders out of its profits. In 1985, it moved policyholders’ money into a separate fund and began paying dividends based on interest generated by the fund. Id. The amount of the payments received by the policyholders allegedly decreased as a result of this change. Wisconsin law gives policyholders the right to participate in annual profit distributions. Wis. Stat. § 632.62(2).

The lead plaintiff brought a class action lawsuit for breach of contract and breach of fiduciary duty on behalf of a class of policyholders in Wisconsin. The class prevailed at trial, and the lead plaintiff moved to expand the scope of the class to include policyholders in other states. The defendant removed the case to federal court under CAFA, which confers jurisdiction to federal courts over class actions with more than one hundred class members, more than $5 million in controversy, and diversity of citizenship between the defendant and at least one class member. The plaintiff moved to remand the case to Wisconsin state court based on the “corporate governance exception,” which applies when a class action’s claims solely relate (1) “to the internal affairs or governance of a corporation” (2) based on the laws of the state of incorporation. LaPlant, slip op. at 2, citing 28 U.S.C. §§ 1332(d)(9)(B), 1453(d)(2).

The court noted that the plaintiffs were suing in their capacity as owners of the defendant, asserting breaches of the defendant’s fiduciary duty to them. It compared this to a shareholder suit against a corporation, which is generally treated as a matter concerning corporate internal affairs, and ruled that the plaintiffs’ claims meet the “internal affairs” requirement. Id. at 3.

On the question of whether state law governed plaintiffs’ claims, the court applied Wisconsin’s “general choice-of-law principles.” Id. at 4. The defendant, the court noted, is located in Wisconsin, and its decisions related to dividends take place in Wisconsin. The plaintiffs’ injuries, however, occurred elsewhere. The court considered a five-factor test established in Drinkwater v. American Family Mut. Ins. Co., 290 Wis.2d 642, 658 (2006), and found that four factors weighed in favor of Wisconsin law, while the fifth factor was neutral. The four factors were “predictability of results,” “simplification of the judicial task,” “advancement of the forum’s governmental interest,” and “application of the better rule of law.” Id.; LaPlant, slip op. at 5-7.

Class action lawsuits give consumers a way to assert their rights against much larger opponents, even if they lack the resources to bring a claim individually. Lubin Austermuehle’s class action attorneys have represented consumers in the greater Chicago area for decades. They practice throughout the Mid-West region, including Illinois Indiana, Wisconsin and Iowa. Please contact us today online, at (630) 333-0333, or at 630-333-0333 to schedule a confidential consultation with one of our attorneys.

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