Opinion
CIVIL NO.: WDQ-14-0768
02-25-2015
JEFFREY B. COHEN, Plaintiff, v. INS CONSULTANTS, INC., et al., Defendants.
MEMORANDUM OPINION
Jeffery B. Cohen, pro se, sued INS Consultants and 21 others, for claims relating to a Delaware receivership. Pending are 20 motions, including five motions to dismiss the original complaint, a motion to strike the amended complaint, 12 motions to dismiss the amended complaint, a motion by 18 of the defendants for sanctions against Cohen, and Cohen's motion to stay civil proceedings. No hearing is necessary. Local Rule 105.6 (D. Md. 2011). For the following reasons, the motion to strike will be denied; the motions to dismiss the original complaint will be denied as moot; the motions to dismiss the amended complaint will be granted because the Court lacks subject matter jurisdiction; and Cohen's motion to stay will be denied as moot. I. Background
The facts are taken from the proposed amended complaint (ECF No. 44), the parties' filings, and the Delaware state court opinions about the receivership.
On a motion to dismiss, the wellpled allegations in the complaint are accepted as true. Brockington v. Boykins, 637 F.3d 503, 505 (4th Cir. 2011). The Court may consider the pleadings, matters of public record, and documents attached to the motions that are integral to the complaint and whose authenticity is not disputed. See Philips v. Pitt Cnty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009).
An exceedingly detailed factual background of the receivership proceedings is available in the opinion by the Supreme Court of Delaware. Cohen, et al. v. Delaware, ex rel. Stewart, et al., 89 A.3d 65 (Del. 2014) (hereinafter "Cohen").
A. The Employment Agreement and the Cohen Entities Indemnity Insurance Corporation, RRG ("IIC") is a risk retention group founded by Cohen and domiciled in Delaware. See Cohen at 68, 70. IIC "shares its offices with at least seventeen Cohen-affiliated entities, which are intertwined, have complicated financial relationships with each other, and share employees and equipment." See id. at 70. IDG Companies, LLC ("IDG") is an affiliated company owned by Cohen, which acted as IIC's "managing general agent." See id. at 68, 70. Before April 2012, IDG and its employees performed the day-to-day operations of IIC. See id. at 70. In April 2012, IDG stopped performing operational services for IIC, and IDG employees were transferred to IIC. See id.
Under Delaware law, "managing general agent" is "any person, firm, association or corporation who negotiates and binds ceding reinsurance contracts on behalf of an insurer or manages all or part of the insurance business of an insurer (including the management of a separate division, department or underwriting office) and acts as an agent for such insurer . . . ." 18 Del. C. § 1802 (3).
In January 2012, "Cohen executed an employment agreement with himself in which he named himself the 'President/Chief Executive Officer' of several of his entities and established the terms of his employment with" IIC and IDG. ECF No. 41-1 at 6; see ECF No. 1-2 ("Employment Agreement"). "In exchange for his services, Cohen . . . agreed to pay himself: an annual salary of one million, three hundred thousand dollars ($1,300,000.00) for his agency management services; plus an additional amount up to seven hundred thousand dollars ($700,000.00) for his carrier management services, payable to Cohen upon his request; plus an annual bonus of up to 150% of his total salary, based on the 'level which the annual net underwriting income target is . . . [] reached or exceeded.'" ECF No. 41-1 at 6; Employment Agreement at ¶¶ 6.A-6.B. The Employment Agreement was for a ten-year period, during which Cohen could only be terminated "for cause." ECF No. 44 at 13.
Cohen attached the Employment Agreement to his original complaint. Although he refers to the agreement and its terms in the amended complaint, it is not attached as an exhibit.
The agreement also stated that the companies would pay many of Cohen's expenses. See Employment Agreement at ¶¶ 6.C-6.D.
The Employment Agreement defined "for cause" as "upon death of [Cohen]; [u]pon notice from [the Cohen Entities] to [Cohen] in the event of an illness or other disability which has totally and permanently disabled him from performing his duties for six consecutive months as determined in good faith by the Board of Directors; if at any time [Cohen] is found guilty by a court of law of an act of embezzlement; or has failed to perform any of his assigned duties; or the voluntary resignation of [Cohen]." Employment Agreement at ¶ 3; ECF No. 44 at 13.
B. The DOI Investigation and Receivership
In July 2012, the Delaware Department of Insurance ("DOI") "began a routine regulatory examination" of IIC. See Cohen at 70. After the DOI uncovered concerns about IIC's solvency, DOI Commissioner Karen Stewart applied to the Delaware Court of Chancery for a Seizure Order. See Cohen at 71-74. On May 30, 2013, the Delaware Court of Chancery issued a Confidential Seizure and Injunction Order vesting Commissioner Stewart with the title to all IIC property. See id. at 72. The Seizure Order was enrolled in Maryland. See ECF No. 88 at 6.
Defendant Vice Chancellor J. Travis Laster was the judge who oversaw the Chancery proceedings. See ECF No. 74-2 at 9.
On September 10, 2013, the Delaware Court of Chancery amended the Seizure Order after the IIC presented evidence that "Cohen interfered with the Commissioner's investigation and ability to run [IIC] in a variety of ways." See Cohen at 75. On September 13, 2013, three IIC employees became aware of unauthorized activity in their deferred-compensation Fidelity Accounts. See id. at 76-79. Cohen was the only person with access to the accounts, which were held in IDG's name. See id. The stock in the accounts had been sold and converted to cash, and the employees were concerned that Cohen was preparing to withdraw the funds. See id. The employees contacted the Insurance Department, and Commissioner Stewart froze the three accounts before they could be emptied, and the Delaware Court of Chancery ordered sanctions. See id.
In October 2013, Cohen filed suit in Maryland, which violated the amended Seizure Order. See id. at 81-82. On November 1, 2013, the Delaware Court of Chancery ordered additional sanctions. See id.
One of the cases was subsequently removed to federal court. See Cohen v. Bankers Standard Ins. Co., 14-CV-0313 (D. Md.) (Motz, J.). However, it does not affect this litigation.
On November 6, 2013, Commissioner Stewart filed a Petition for the Entry of a Rehabilitation and Injunction Order with consent of IIC's board. See Cohen at 84. On November 7, 2013, the Delaware Court of Chancery entered the Order, placing IIC into receivership and appointing the Commissioner as the receiver. See Cohen at 85-86. On April 10, 2014, after it became clear that attempting to rehabilitate IIC would be futile, the Delaware Court of Chancery issued a Liquidation Order. See ECF No. 74 at 12. "Under the Liquidation Order, the Receiver is required to terminate IIC's insurance business and marshal IIC's assets for liquidation and distribution." See id.
"The Seizure Order, the Rehabilitation Order and the Liquidation Order . . . each authorized the Commissioner to appoint personnel to examine, oversee and manage the day to day operations" of IIC. ECF No. 41-1 at 6. The Commissioner appointed INS Consultants, Inc. and INS Regulatory Insurance Services, Inc. See id.
Defendants Gregg Bealuk and Michael Johnson are officers of these appointees.
Cohen appealed the Court of Chancery's rulings to the Supreme Court of Delaware. See id. Cohen also asserted that the rehabilitation proceedings had deprived him of due process of law. See Cohen at 68-70; 86-87. The Supreme Court of Delaware rejected Cohen's arguments and affirmed the Court of Chancery's rulings. See id. at 70.
C. Procedural History
1. The Original Suits
Between March and April, 2014, Cohen filed three suits in the U.S. District Court for the District of Maryland relating to the receivership. On March 4, 2 014, Cohen sued DOI Commissioner Stewart, DOI Deputy Commissioner Eugene Reed, Jr., Deputy Attorney General ("DAG") W. Harding Drane, Jr., and Deputy Attorney General Jessica Willey (collectively, "the DE State Defendants"). See Cohen v. Stewart, 14-cv-0611 (D. Md.). On March 13, 2014, Cohen initiated this action against 13 defendants. ECF No. 1. On April 1, 2 014, Cohen sued Diane Krause, the managing director of a company that did business with IIC for defamation. See Cohen v. Krause, 14-cv-1004 (D. Md.).
DAG Drane and DAG Willey are the counsel of record for Commissioner Stewart in the proceedings pending against Cohen.
Cohen sued INS Consultants, Inc., INS Regulatory Insurance Services, Inc., Gregg Bealuk, Michael Johnson (collectively, the "INS Defendants"); Entertainment Risk, LLC (a business associated with IIC); David Koehler, Paul Hoffman, Francis Nerney, Sean Wright, Philip Metcalf, Christian Lodowski (collectively, the "IIC Employee Defendants"); Michael Teichman (IIC's attorney during the receivership proceedings); and RMS Insurance Brokerage, LLC (a business associated with IIC). ECF No. 1. RMS Insurance was never served in this case with either the original or amended complaint, and has not entered an appearance. See ECF No. 7.
Cohen alleged that Krause made defamatory comments about Cohen being a "crook" in an email relating to the receivership proceedings. See Cohen v. Krause, 14-cv-1004 (D. Md.) (Dkt. 1).
Cohen faced motions to dismiss and/or for summary judgment in all three cases. On May 29, 2014, Cohen filed an amended complaint in this action. ECF No. 44. The amended complaint added Krause, the DE State Defendants, and five new defendants. See id. On June 17, 2014, Cohen moved to voluntarily dismiss the Stewart and Krause actions. Both cases were closed.
The new defendants were Vice Chancellor Laster, J. Van Lear Dorsey (principal counsel to the Maryland Insurance Administration), Michael Arrington, Jacinto Ayala, and the Princeton Excess and Surplus Lines Insurance Co. ECF No. 44.
2. The Amended Complaint
The amended complaint alleges nine causes of action. Cohen alleges that Commissioner Stewart, Deputy Commissioner Reed, the INS Defendants, and Koehler "willfully conspired, interfered, and violated" Cohen's employment agreement and two leases between Cohen and IIC. ECF No. 44 at 33 (Count I: Breach of Contract). Cohen alleges that Lodowski, Nerney, Wright, and Krause defamed Cohen's character. Id. (Count II: Defamation). Cohen alleges that Arrington, Teichman, Lodowski, Metcalf, and Koehler engaged in deceit and negligent misrepresentation by "knowingly conspire[ing] amongst themselves and intentionally act[ing] to harm [Cohen]." Id. at 34 (Count III). Cohen alleges that Vice Chancellor Laster, Teichman, Arrington, DAG Drane, DAG Willey, Commissioner Stewart, and INS Regulatory Insurance Services violated 42 U.S.C. § 1981, and that Teichman, Arrington, DAG Drane, and DAG Willey violated 42 U.S.C. §§ 1982-83. Id. at 34-35 (Counts IV-V).
Next, Cohen alleges that all of the Defendants violated 42 U.S.C. §§ 1985-86 (Civil Rights Act) and committed RICO violations under 18 U.S.C. § 1962. Id. (Counts VI-VII). Cohen alleges that Van Dorsey, Koehler, DAG Drane, DAG Willey, Commissioner Stewart, Deputy Commissioner Reed, Teichman, and Arrington committed "malicious abuse of process, negligent misrepresentation, and negligent misrepresentation by omission." Id. at 36 (Count VIII). Finally, Cohen alleges that Commissioner Stewart and Deputy Commissioner Reed harmed Cohen through an unconstitutional delegation of their statutory authority. Id. (Count IX). II. Analysis
A. Legal Standards
1. Amending a Complaint
Fed. R. Civ. P. 15(a)(1) allows a party to "amend its pleading once as a matter of course" within "21 days after serving it" or, "if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier." All other amendments may be made "only with the opposing party's written consent or the court's leave." Rule 15(a)(2).
Federal Rule of Civil Procedure 15(a)(2) instructs that leave to amend should be freely given when justice requires. Leave should be denied only when amendment would unduly prejudice the opposing party, amount to futility, or reward the movant's bad faith. Steinburg v. Chesterfield Cnty. Planning Comm'n, 527 F.3d 377, 390 (4th Cir. 2008); Equal Rights Ctr. v. Niles Bolton Associates, 602 F.3d 597, 603 (4th Cir. 2010).
2. Subject Matter Jurisdiction
Federal district courts have "only the jurisdiction authorized them by the United States Constitution and by federal statute." See United States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 347 (4th Cir.2009) (citing Bowles v. Russell, 551 U.S. 205, 212 (2007)). Generally, our subject matter jurisdiction in civil suits is limited to those in which: (1) there is complete diversity of citizenship between the parties; and/or (2) a federal question has been raised. See 28 U.S.C. §§ 1331 (federal question) & 1332 (diversity); see also Rayner v. Smirl, 873 F.2d 60, 63 (4th Cir.1989) (in the absence of diversity jurisdiction, a federal district court may only exercise subject matter jurisdiction if it has been presented with a properly pled federal question).
The plaintiff bears the burden of proving subject matter jurisdiction. Piney Run Pres. Ass'n v. Cnty. Comm'rs of Carroll Cnty., 523 F.3d 453, 459 (4th Cir. 2008). A motion under Federal Rule of Civil Procedure 12(b)(1) should be granted "only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Richmond, Fredericksburg & Potomac R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.1991). If the plaintiff fails to allege any set of facts upon which the court may base jurisdiction, the motion must be granted. See Jadhav, 555 F.3d at 347.
3. Failure to State a Claim
Under Fed. R. Civ. P. 12(b)(6), an action may be dismissed for failure to state a claim upon which relief may be granted. Rule 12(b)(6) tests the legal sufficiency of a complaint, but does not "resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006).
The Court bears in mind that Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief." Migdal v. Rowe Price-Fleming Int'l Inc., 248 F.3d 321, 325-26 (4th Cir. 2001). Although Rule 8's notice-pleading requirements are "not onerous," the plaintiff must allege facts that support each element of the claim advanced. Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 764-65 (4th Cir. 2003). These facts must be sufficient to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
This requires that the plaintiff do more than "plead[] facts that are 'merely consistent with a defendant's liability'"; the facts pled must "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557). The complaint must not only allege but also "show" that the plaintiff is entitled to relief. Id. at 679 (internal quotation marks omitted). "Whe[n] the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not shown-that the pleader is entitled to relief." Id. (internal quotation marks and alteration omitted).
B. Entertainment Risk's Motion to Strike the Amended Complaint
Entertainment Risk argues that the Court should strike the amended complaint because Cohen filed it more than 21 days after Entertainment Risk's motion to dismiss. See ECF No. 87 at 1. Under Federal Rule of Civil Procedure 15(a)(2), leave should be denied only when amendment would unduly prejudice the opposing party, amount to futility, or reward the movant's bad faith. Steinburg v. Chesterfield Cnty. Planning Comm'n, 527 F.3d at 390.
On April 24, 2014, Entertainment Risk filed its Rule 12(b)(6) motion against the original complaint. ECF No. 28. Cohen filed the amended complaint on May 29, 2014. ECF No. 44.
Here, discovery has yet to begin,- however, the Court is concerned that Cohen used the amended pleading to consolidate multiple cases in which there were outstanding motions and filing deadlines. Further, many of Cohen's new claims are meritless. However, because the Court is able to resolve all of the outstanding motions in this case, it will exercise its discretion to permit the amended complaint. Accordingly, the Court will deny Entertainment Risk's motion to strike the amended complaint.
"It is well settled that an amended pleading supersedes the original pleading, and that motions directed at superseded pleadings are to be denied as moot." Blount v. Carlson Hotels, 3:11CV452-MOC-DSC, 2011 WL 6098697, at *1 (W.D.N.C. Dec. 6, 2011) (citing Young v. City of Mount Ranier, 238 F.3d 567, 573 (4th Cir. 2001) ("The general rule . . . is that an amended pleading supersedes the original pleading, rendering the original pleading of no effect.")). Accordingly, the Court will deny the motions to dismiss the original complaint as moot.
C. Cohen's Claims Against DE State Defendants, INS Defendants, and Vice Chancellor Laster Regarding the Receivership Proceedings
Many of Cohen's claims are an attempt to collaterally attack state court proceedings and to interfere with the Delaware receivership. The various Defendants associated with these proceedings argue that the Court does not have jurisdiction over these claims under the Eleventh Amendment, and, even if the Court has jurisdiction, it should abstain. See, e.g., ECF No. 74 at 1.
1. The Eleventh Amendment
The Eleventh Amendment provides that, "[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." U.S. Const. amend. XI. "[T]he essence of the immunity is that the State cannot be sued in federal court at all, even where the claim has merit, and the importance of immunity as an attribute of the States' sovereignty is such that a court should address that issue promptly once the State asserts its immunity." Constantine, 411 F.3d at 4 82 n.4. Further, a state's sovereign immunity extends to individual state officials sued in their official capacities. Lapides v. Bd. Of Regents of the Univ. Sys. of Ga., 535 U.S. 613, 617 (2002).
Although, by its express terms, the Eleventh Amendment applies only to suits brought against a state by "Citizens of another State," the U.S. Supreme Court has held that "an unconsenting State is immune from suits brought in federal courts by her own citizens as well." Gray v. Laws, 51 F.3d 426, 430 (4th Cir. 1995) (internal quotation marks omitted).
There are several exceptions to the Eleventh Amendment bar. Equity in Athletics, Inc. v. Dep't of Educ., 639 F.3d 91, 107 n.13 (4th Cir. 2011). The U.S. Supreme Court has held that the Amendment does not prevent private individuals from bringing suit against state officials for prospective or declaratory relief for ongoing violations of federal law. The Ex parte Young exception is directed at "officers of the state [who] are clothed with some duty in regard to the enforcement of the laws of the state, and who threaten and are about to commence proceedings . . . to enforce against parties affected [by] an unconstitutional act." Id. at 155-56 (emphasis added). Thus, for the exception to apply, there must be a "special relation" between the officer being sued and the challenged statute. Id. at 157. This requirement of "proximity to and responsibility for the challenged state action" is not met when an official merely possesses "[g]eneral authority to enforce the laws of the state. "
See Ex parte Young, 209 U.S. 123 (1908); Litman v. George Mason Univ., 186 F.3d 544, 549-50 (4th Cir. 1999); see also Verizon Md., Inc. v. Pub. Serv. Comm'n of Md., 535 U.S. 635, 645 (2002) (a court examining the Ex parte Young doctrine must conduct "a straightforward inquiry into whether [the] complaint alleges an ongoing violation of federal law and seeks relief properly characterized as prospective" (alteration in original) (internal quotation marks omitted)).
S.C. Wildlife Fed'n v. Limehouse, 549 F.3d 324, 332-33 (4th Cir. 2008) (alteration and emphasis in original) (internal quotation marks omitted).
Here, it does not matter that Cohen has styled his claims against the DE State Defendants, INS Defendants, and Vice Chancellor Laster as against them in their "individual capacities." "[T]he mere incantation of the term 'individual capacity' is not enough to transform an official capacity action into an individual capacity action." Lizzi v. Alexander, 255 F.3d 128, 137 (4th Cir. 2001); overruled on other grounds by Nev. Dep't. of Human Res. v. Hibbs, 538 U.S. 721, 746 (2003). The only fair reading of the amended complaint is that the DE State Defendants, INS Defendants, and Vice Chancellor Laster were acting in their official capacities. Because Delaware has not waived its sovereign immunity, the claims against these Defendants must be dismissed.
Although the INS Defendants are private companies and individuals, they were acting here as an appointee of the Commissioner under the Court of Chancery's orders.
See Lizzi, 255 F.3d at 137; Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 543 (1986). Moreover, Cohen is requesting monetary, not declaratory, relief, which supports the conclusion that he is truly suing these defendants in their official capacities. See Biggs v. Meadows, 66 F.3d 56, 61 (4th Cir. 1995).
See, e.g., Del. Const. art. I § 9.
2. Absolute Judicial Immunity
"It is well-established that judges enjoy judicial immunity from suits arising out of the performance of their judicial functions." Brookings v. Clunk, 389 F.3d 614, 617 (6th Cir. 2004) (citing Pierson v. Ray, 386 U.S. 547, 553-54 (1967) and Mann v. Conlin, 22 F.3d 100, 103 (6th Cir. 1994)). By contrast, a judge is not entitled to judicial immunity for performing "nonjudicial actions" or acting, although in a judicial capacity, "in the complete absence of all jurisdiction." Mireles v. Waco, 502 U.S. 9, 11-12 (1991). "[W]hether an act by a judge is a 'judicial' one relate [s] to the nature of the act itself, i.e., whether it is a function normally performed by a judge, and to the expectations of the parties, i.e., whether they dealt with the judge in his judicial capacity." Stump v. Sparkman, 435 U.S. 349, 362 (1978).
See also 42 U.S.C. § 1983 ("[I]n any action brought against a judicial officer for an act or omission taken in such officer's judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable.").
Here, both factors indicate that Vice Chancellor Laster acted in a judicial capacity when he oversaw the receivership. Further, there are no allegations in the amended complaint which would allow a reasonable jury to conclude that Vice Chancellor Laster exceeded his judicial authority. Accordingly, the claims against Vice Chancellor Laster are barred by absolute judicial immunity.
3. Abstention
The DE State Defendants and INS Defendants also argue that the Court should abstain from exercising jurisdiction in this case under the abstention doctrines in Burford v. Sun Oil Co., 319 U.S. 315 (1943), and Younger v. Harris, 401 U.S. 37 (1971). See ECF No. 88-1 at 20; ECF No. 89-1 at 21.
"Abstention doctrines constitute extraordinary and narrow exceptions to a federal court's duty to exercise the jurisdiction conferred on it." Martin v. Stewart, 499 F.3d 360, 363 (4th Cir. 2007) (quoting Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 728 (1996)) (internal quotation marks omitted). Abstention is not a "license for free-form ad hoc judicial balancing of the totality of state and federal interests in a case." Id. at 364. Rather, the Courts must consider whether a specific abstention doctrine applies. Id.
Under the Burford abstention doctrine, when adequate state review is available, a federal court "should decline to interfere with the proceedings or orders of state administrative agencies" when (1) "there are difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case," or (2) when federal review "would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern." See New Orleans Public Service, Inc. v. Council of City of New Orleans, 491 U.S. 350, 361 (1989) (internal quotation marks omitted).
The Fourth Circuit has recognized that Burford abstention may be appropriate in receivership proceedings. See First Penn-Pacific Life Ins. Co. v. Evans, 304 F.3d 345, 349-50 (4th Cir. 2002). "[T]he liquidation process in particular is one which will be greatly impeded by the involvement of more than one decision-making authority. And it is a critical reason why federal courts have frequently abstained to avoid interfering with state receivership proceedings." See id. (internal citations and quotation marks omitted). Accordingly, the pending receivership proceedings in this case weigh in favor of Burford abstention.
The Younger abstention doctrine does not permit a federal court to exercise its jurisdiction over an action which asks it to interfere in state proceedings when: (1) there are ongoing state proceedings which (2) implicate important state interests, and (3) the federal plaintiff will have an adequate opportunity to raise federal claims in the state proceedings. Moore v. City of Asheville, 396 F.3d 385, 390 (4th Cir 2005) (citing Middlesex Cnty. Ethics Coram. v. Garden State Bar Ass'n, 457 U.S. 423, 432 (1982)). Younger abstention is applicable to criminal and noncriminal judicial proceedings when important state interests are involved. See Martin Marietta Corp. v. Md. Com'n on Human Relations, 38 F.3d 1392, 1397 (4th Cir. 1994).
First, because the IIC Receivership proceedings are pending in Delaware Chancery Court, the first element of the Younger abstention doctrine is met in this case. Second, Delaware has an important state interest in regulating the insurance industry and protecting the interests of policyholders and creditors from delinquent insurers.
See Charleston Area Medical Ctr., Inc. v. Blue Cross & Blue Shield Mut. Of Ohio, Inc., 6 F.3d 243, 250 n.5 (4th Cir. 1993) (complex statutory scheme for the regulation of the state's insurance industry involves policy issues of substantial state interest); Fuller v. Bartlett, 894 F. Supp. 874, 879 (D. Md. 1995) (state's interest in regulating insurance strongly favors Younger abstention).
Third, Cohen has been able to raise constitutional challenges in the Delaware proceedings. See Cohen at 68-70 (Supreme Court of Delaware's opinion addressing Cohen's claim that the proceedings in the Court of Chancery violated his due process rights). In evaluating the adequacy of state proceedings, the plaintiff bears the burden of demonstrating inadequacy. See Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 16 (1987). Cohen has not presented any evidence demonstrating that the Delaware courts are inadequate for addressing his constitutional claims. Accordingly, all the Younger considerations counsel abstention.
D. The Other Federal Claims
1. Cohen's Claims under 42 U.S.C. § 1981, § 1982, § 1985, and § 1986.
Counts IV, V, VI of Cohen's amended complaint fail to state a claim upon which relief can be granted.
42 U.S.C. § 1981 prohibits racial discrimination in the enforcement of contracts. Section 1982 is also limited to racial discrimination. See Lee v. Minnock, 417 F. Supp. 436, 439 (W.D. Pa. 1976). To state a claim for racial conspiracy under § 1985(3), Cohen must allege (1) a conspiracy of two or more persons, (2) motivated by invidiously discriminatory class-based animus, (3) to deprive him of the equal enjoyment of his rights, (4) which results in injury, and (5) as a consequence of an overt act committed by the defendants. A Society Without a Name v. Virginia, 655 F.3d 342, 346 (4th Cir. 2011); Simmons v. Poe, 47 F.3d 1370, 1376 (4th Cir. 1995).
"Moreover, the plaintiff 'must show an agreement or a meeting of the minds by the defendants to violate the plaintiff's constitutional rights.'" A Society Without a Name, 655 F.3d at 346 (quoting Simmons, 47 F.3d at 1377). This is a "relatively stringent" standard. Simmons, 47 F.3d at 1377; see also Lewin v. Cooke, 95 F. Supp. 2d 513, 525 (E.D. Va. 2000) ("Because of the high threshold that a Plaintiff must meet to establish a prima facie case under section 1985, courts often grant motions of dismissal.").
Cohen has failed to allege that the actions of any of the Defendants were motivated by racial or class-based discriminatory animus. Cohen only states that the Defendants somehow formed a vast conspiracy against him because he supported and voted for Commissioner Stewart's opponent in an election. See ECF No. 44 at 22. Cohen has not shown his membership in a protected class under any of these statutes. See, e.g., Duane v. Gov't Emps. Ins. Co., 784 F. Supp. 12091216 (D. Md. 1992). Accordingly, the Court will grant the Defendants' motions to dismiss these counts.
2. Cohen's 42 U.S.C. § 1983 Claim
"To state a claim under 42 U.S.C. § 1983, a plaintiff must allege 'the violation of a right secured by the Constitution or laws of the United States and must show that the alleged deprivation was committed by a person acting under the color of state law." Holland v. Taylor, 604 F. Supp. 2d 692, 698 (D. Del. 2009). Here, not only is the amended complaint devoid of any allegations that Teichman or Arrington acted under color of state law, or that "a causal relation exists" between Cohen's political actions and any actions by Teichman or Arrington. See Suarez Corp. Indus, v. McGraw, 202 F.3d 676, 686 (4th Cir. 2000). Because Cohen has failed to plead any substantive violation of a right secured by the Constitution, his § 1983 claim must be dismissed.
3. The RICO Claims
Cohen's RICO claims lack any merit. "To state a claim for a substantive violation of RICO, the complaint must set forth facts that, if proven, would establish: '(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.'" Swarey v. Desert Capital REIT, Inc., No. DKC 11-3615, 2012 WL 4208057, at *11 (D. Md. Sept. 20, 2012) (quoting Morley v. Cohen, 888 F.2d 1006, 1009 (4th Cir. 1989)).
In relation to his RICO claim, Cohen only states that "[t]he Defendants through their conduct detailed above and below conspired, conducted, and participated, directly and indirectly, in the conduct of the affairs of an enterprise through a pattern of racketeering activity . . . ." ECF No. 44 at 26. Such conclusionary allegations are insufficient to support a RICO claim. An "enterprise" under RICO "includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). "The enterprise is an entity, . . . a group of persons associated together for a common purpose of engaging in a course of conduct . . . [and] is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit." United States v. Turkette, 452 U.S. 576, 583 (1981). Even reading the amended complaint in the light most favorable to Cohen, no reasonable juror could conclude that a RICO enterprise or conspiracy existed. Accordingly, the RICO claims will be dismissed.
E. The State Claims
The only remaining claims in the amended complaint are state law claims only tangentially related to the Delaware receivership. Further, as apparent from the amended complaint, there is not complete diversity of the parties. See SCR No. 44 at 4; Cent. W. Va. Energy Co. v. Mountain State Carbon, LLC, 636 F.3D 101, 103 (4th Cir. 2011). Because the Court does not have jurisdiction over the claims relating to the Delaware receivership, the other federal claims are without merit, and there is no basis for diversity jurisdiction, the Court will not exercise supplemental jurisdiction over the state law claims. See Morrison v. Holding, 539 F. App'x. 272, 273 (4th Cir. 2013) (per curium) ("[B]ecause we conclude that [the plaintiff's] remaining claims are meritless, supplemental jurisdiction over his state law claims is not warranted."); see also United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966) ("[When] federal claims are dismissed before trial, . . . state claims should be dismissed as well.").
In the amended complaint, Cohen asserts the residence and not the state citizenship of many of the Defendants. ECF No. 44 at 4. For the purposes of diversity jurisdiction, citizenship, not residency, controls. See Johnson v. Advance Amer., 549 F.3d 932, 937-38 (4th Cir. 2008); Piney Run Pres. Ass'n v. Cnty. Comm'rs of Carroll Cnty., 523 F.3d 453, 459 (4th Cir. 2008) (plaintiff bears the burden of proving subject matter jurisdiction). It is apparent from the amended complaint that Cohen and multiple defendants are citizens of Maryland. See ECF No. 44 at 4.
F. The Defendants' Motion for Sanctions
Eighteen of the Defendants filed a joint motion for sanctions, arguing that the case should be dismissed because of the evidence that Cohen has threatened some Defendants. ECF No. 75. Because the Court is dismissing the case for lack of subject matter jurisdiction, and the Defendants requested no other relief other than a dismissal, the Court will deny the motion for sanctions as moot.
This information was obtained through Cohen's criminal trial, and the decision of this Court to detain him pending trial. See ECF No. 75 at 5-6.
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G. Cohen's Motion to Stay Civil Proceedings
On September 9, 2014, after the briefing on all the previous motions had lapsed, Cohen filed a motion to stay the proceedings because he is being detained pending his criminal trial. ECF No. 101. On January 20, 2015, Cohen filed correspondence with the Court requesting a scheduling order. ECF No. 112. On January 28, 2015, the INS Defendants wrote to the Court to respond to Cohen's request. ECF No. 113. They noted that Cohen's request for a scheduling order made his motion to stay moot. Id.
In Cohen v. Bankers Standard Insurance Corporation, No. 14-cv-0313 (D. Md.), Judge Motz denied a virtually identical motion by Cohen to stay the proceedings. See ECF No. 110-1. Moreover, the Court has already concluded that the remaining claims should be dismissed for lack of jurisdiction and Cohen filed his motion to stay after responses to the various motions to dismiss were due. The Court's determinations and Cohen's letter render his motion to stay moot. III. Conclusion
For the reasons stated above, the motions to dismiss the amended complaint will be granted because the Court lacks subject matter jurisdiction. All other pending motions will be denied. 2/25/15
Date
/s/_________
William D. Quarles, Jr.
United States District Judge