AMENDED AND SUPPLEMENTAL MEMORANDUM OPINION
The parties in this case dispute the validity of corporate-owned lifeinsurance policies purchased by employers on the lives of their employeesand former employees. Plaintiffs are Texas citizens suing asrepresentatives of a putative class of individuals, and estates ofindividuals, who worked for Defendant Camelot Music, Inc. ("Camelot") andTrans World Entertainment Corporation ("Trans World") (collectively, the"Camelot Defendants") and Wal-Mart Stores, Inc. ("Wal-Mart"). Thesecompanies, collectively referred to as the "Employer Defendants," arenamed in this action as representatives of a putative class of employerswho purchased corporate-owned life insurance policies ("COLI policies")insuring the lives of Texas citizens. The Employer Defendants purchasedthese life insurance policies from various insurance companies, includingHartford Life Insurance Company ("Hartford") and AIG Life InsuranceCompany ("AIG").
The Court has before it several motions. The Camelot Defendants move todismiss Plaintiffs' claims in their entirety.1 The Camelot Defendantsalso move for summary judgment.2 Plaintiffs have cross-moved forpartial summary judgment against the Camelot Defendants.3Defendant Wal-Mart moves for summary judgment on the claims againstit.4 The Wachovia Bank of Georgia, N.A. ("Wachovia"), astrustee ("Trustee") for Defendant Wal-Mart Stores, Inc. CorporationGrantor Trust ("Wal-Mart Trust"), seeks summary judgment in itsfavor.5 Defendant Hartford also moves for summaryjudgment.6 Defendant AIG moves to dismiss and for summaryjudgment.7 The Courtheard argument on these motions on September 7, 2001 and January 11,2002.8 The parties submitted supplemental materials after the January11 Hearing.9 On March 5, 2002, the Court issued an opinionexhaustively addressing the parties' contentions in the originalmotions.10 The Court granted some aspects of certain parties' motionsand denied others.
Wal-Mart then filed a motion seeking reconsideration of the March 5thOpinion. Plaintiff Sims Estate has responded,11 and that Motion isripe for adjudication. The Court granted Wal-Mart's ReconsiderationMotion on August 2, 2002.12 The Court has reconsidered all theparties' submissions, the entire record, and the applicable authorities,the Court again grants some aspects of certain parties' motions anddenies others. This Amended and Supplemental Memorandum Opinion ("AmendedOpinion") modifies various rulings in the March 5th Opinion as to both theWal-Mart Defendants and the Camelot Defendants. This Amended Opinionsupersedes the Court's March 5th Opinion, which is withdrawn.
I. BACKGROUND FACTS
This case is an uncertified class action that involves a dispute overthe rights to benefits from company-owned life insurance policies.Plaintiffs Scott Mayo, Toribio Rochas, Jr., Tomas Pena, Daniel Garza, andCharles W. Holmes, Jr. are Texas citizens who were employees of DefendantCamelot (collectively, sometimes referred to as the "CamelotPlaintiffs"). Another Plaintiff is the Estate of Douglas Sims ("SimsEstate"), which is represented in this action by Deborah Sims, theindependent executrix of the Sims Estate and a Texas citizen. DouglasSims was a Texas citizen who worked for Defendant Wal-Mart until hisdeath on December 1, 1998.
Defendant Camelot was a Pennsylvania corporation. Camelot was acquiredin December 1997 by Defendant Trans World, a New York corporation withits principal place of business in New York. Defendant Wal-Mart is aDelaware corporation with its principal place of business in Arkansas.Defendant Wal-Mart Stores, Inc. Corporation Grantor Trust ("Wal-MartTrust" or the "Trust") was established by Wal-Mart in Georgia and isrepresented in this action by its trustee, Defendant Wachovia, a bankthat was originally located in Georgia.13 Defendant Hartford is aConnecticut insurance company with its principal place of business inConnecticut. Defendant AIG is a Delaware insurance company with itsprincipal place of business in Delaware.
Camelot employed the Camelot Plaintiffs during the 1980s and 1990s. AllCamelot Plaintiffs ceased their employment with Camelot by 1998. Wal-Martemployed Douglas Sims from 1987 until his death in December 1998.
The subject of this case is the validity of COLI policies, insurancepolicies purchased and owned by the Employer Defendants on the lives oftheir employees. These policies, respectively, list the employers as thesole beneficiaries. As explained by Hartford, the employers borrowedmoney from the insurers to pay the COLI policy premiums.14 Theemployers claimed the interest paid on these loans as tax deductions. Theemployers also earned non-taxable interest through the COLI policies.Upon the death of an insured employee, the employer beneficiary used thedeath benefit it received from the COLI policy to repay the premium loansand cover other expenses, at its option.15
On February 16, 1990, Camelot purchased from Mutual Benefit LifeInsurance Company ("Mutual")16 COLI policies on the lives of all ofits employees whoworked more than twenty hours per week.17 Camelot and/or Trans Worldis the beneficiary of these policies. Plaintiffs allege that Camelotpurchased the policies in secret and did not request permission from itsemployees. The policies remained in effect until after the Court's March5th Memorandum Opinion.18
On or about December 30, 1993, Wal-Mart bought COLI policies fromHartford for its salaried employees and from AIG on the lives of itshourly employees, including Douglas Sims.19 The policies were madeeffective as of December 28, 1993, for administrative convenience.20The Wal-Mart Trust received the proceeds ofthe COLI policies on each insured employee or former employee who diedand remitted the proceeds to Wal-Mart.21
Plaintiffs allege that Wal-Mart purchased these policies in secret andthat Douglas Sims never knowingly consented to the purchase. Wal-Martasserts that it purchased the COLI policies only on employees who weremembers of its employee benefit plans. Wal-Mart contends that it gavenotice to plan members of the company-owned insurance policies on themembers' lives through a written flyer that invited members to opt out ifthey chose. Wal-Mart argues that its flyer served as formal notice of theexistence of the COLI insurance and also constituted Wal-Mart's offer toeach employee to pay a "Special Death Benefit" of $5,000 to $10,000 fromthe COLI policy proceeds to the estates of the employee upon his/herdeath.22 The Special Death Benefit was never paid to the Sims Estatebecause Wal-Mart discontinued that benefit before Sims died.23
Wal-Mart surrendered all its COLI policies in January 2000, after Simsdied.24
It is undisputed that the Insurer Defendants developed the concept andmarketed the COLI policies to employers.25 Plaintiffs contend thatthe COLI policies were a tax avoidance scheme that was challenged byIRS.26 On the other hand, Defendants contend that the COLI policieshad a legitimate use, to fund employee benefit plans and other employerexpenses incurred upon the death of the insured.27
II. THE PARTIES' BASIC CONTENTIONS
Plaintiffs' essential contention is that the COLI policies are contraryto Texas public policy because the Employer Defendants do not have an"insurable interest" in their lives. Plaintiffs seek to certify twoclasses of parties. First, Plaintiffs request certification of aplaintiff class that consists of:
All Texas citizens (or if deceased, the Texas citizen's estate) whose lives are or were insured under a COLI policy issued by AIG Life Insurance Company, Mutual Benefit Life Insurance Company or Hartford Life Insurance Company that purportedly named an employer or former employer as the policy's beneficiary or owner, excluding those who are current officers of the named policy beneficiary or owner (or if deceased, those who were officers of the policy beneficiary at their death) and those who designated the policy's beneficiary.
Complaint, at 11. Second, Plaintiffs request certification of an EmployerDefendant class of:
[C]ompanies that bought insurance policies written by AIG Life Insurance Company, Mutual Benefit Life Insurance Company or Hartford Life Insurance Company, that insure or insured the lives of Texas employees other than corporate officers and name the company as beneficiary or owner.
As their remedy, Plaintiffs seek ownership and all benefits of the COLIpolicies. Specifically, Plaintiffs request a declaration, under28 U.S.C. § 2201, that (i) the Employer Defendants do not now haveand never have had an "insurable interest" in the lives of theiremployees, as insurable interests are defined by Texas law; (ii) that theEmployer Defendants are not the lawful owners of the COLI polices; and(iii) that Plaintiff employees are the "lawful owners" of the COLIpolicies, with all rights of the "owner" as defined in the policies.Plaintiffs seek a final judgment "providing remedies necessary to givethe declarations force and effect," which Plaintiffs define as a finaljudgment (i) placing the polices and all benefits from the policies in aconstructive trust for the benefit of Plaintiffs; (ii) awarding "moneyidentifying the amount held in constructive trust by members of thedefendant-employer class for the benefit of the plaintiffs and members ofthe plaintiff-insured person class"; and (iii) disgorging the "moneyunjustly had and received by members of the defendant-employer classthrough the [COLI] policies in issue." Complaint, at 12-13.
Defendants assert numerous defenses to Plaintiffs' claims. First, allDefendants contend that Plaintiffs' claims are founded upon Texas law,but Georgia law governs this case and Plaintiffs cannot state a cause ofaction under Georgia law. Defendant Wal-Mart also contends thatPlaintiffs' claims are preempted by Employee Retirement Income SecurityAct, 29 U.S.C. § 1001 et seq. ("ERISA"). Defendant AIG (joined byWal-Mart) contends that the claims of Plaintiff Sims Estate aretime-barred since the COLI policy sold to Wal-Mart on Sims's life wascreated in December 1993 and Wal-Mart gave Sims notice of the existenceof the insurance at about that time. Defendant AIG also argues that theSims Estate has failed to state a claim under the insurable interestdoctrine and moves to dismiss these claims. The Camelot Defendantscontend that the Camelot Plaintiffs' claims are not ripe, since thesePlaintiffs all are still living, and their causes of action accrue onlywhen the death benefits under the COLI policies are payable. Finally, theCamelot Defendants contend that the Camelot Plaintiffs' claims are notlegally viable because the Texas insurable interest doctrine does notprovide a remedy to living insureds and does not allow reformation of theinsurance contract. Each of these matters will be addressed in turn.
III. APPLICABLE LEGAL STANDARDS
The parties have filed numerous motions to dismiss and motions forsummary judgment. The Court notified the parties at the January 11, 2002conference that if documents or other evidence outside of the pleadingshad been submitted in connection with a motion to dismiss, the Courtintended to convert the motion, ifappropriate, to a motion for summary judgment. See FED.R.CIV.P. 12(b). TheCourt therefore permitted the parties to make additional submissions.
A. Standard for Motions to Dismiss
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of CivilProcedure is viewed with disfavor and is rarely granted. Kennedy v.Tangipahoa Parish Library Bd. of Control, 224 F.3d 359, 365 (5th Cir.2000). The complaint must be liberally construed in favor of theplaintiff, and all facts pleaded in the complaint must be taken as true.Zephyr Aviation, L.L.C. v. Dailey, 247 F.3d 565, 573 (5th Cir. 2001). Thedistrict court may not dismiss a complaint under Rule 12(b)(6) "unless itappears beyond doubt that the plaintiff can prove no set of facts insupport of his claim which would entitle him to relief." Conley v.Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); SouthernChristian Leadership Conf. v. Supreme Court of Louisiana, 252 F.3d 781,786 (5th Cir. 2001). Thus, the Court must determine whether the complaintstates any valid claim for relief in the light most favorable to theplaintiff and with every doubt resolved in the plaintiff's behalf. Lowreyv. Texas A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997).Furthermore, a plaintiff must plead specific facts, not mere conclusoryallegations or unwarranted deductions of fact, in order to avoiddismissal for failure to state a claim. Collins v. Morgan Stanley DeanWitter, 224 F.3d 496, 498, (5th Cir. 2000).
B. Summary Judgment Standard
In deciding a motion for summary judgment, the Court must determinewhether "the pleadings, depositions, answers to interrogatories, andadmissions on file, together with the affidavits, if any, show that thereis no genuine issue as to any material fact and that the moving party isentitled to judgment as a matter of law." FED.R.CIV.P. 56(c); CelotexCorp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265(1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)(en banc); Boze v. Branstetter, 912 F.2d 801, 804 (5th Cir. 1990).Material facts are those facts "that might affect the outcome of the suitunder the governing law." Smith v. Brenoettsy, 158 F.3d 908, 911 (5thCir. 1998). The facts are to be reviewed with all "justifiableinferences" drawn in favor of the party opposing the motion. Morris v.Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998).However, factual controversies are resolved in favor of the nonmovant"only when there is an actual controversy — that is, when bothparties have submitted evidence of contradictory facts." Laughlin v.Olszewski, 102 F.3d 190, 193 (5th Cir. 1996).
The party moving for summary judgment has the initial burden ofdemonstrating the absence of a material fact issue with respect to thoseissues on which the movant bears the burden of proof at trial. The movantmeets this initial burden by showing that the "evidence in the recordwould not permit the nonmovant to carry its burden of proof at trial."Smith, 158 F.3d at 911.
The burden then shifts to the nonmovant to demonstrate that summaryjudgment is inappropriate. See Morris, 144 F.3d at 380. This isaccomplished by producing "significant probative evidence" that there isan issue of material fact so as to warrant a trial, see TexasManufactured Hous. Ass'n v. Nederland, 101 F.3d 1095, 1099 (5th Cir.1996); Taylor v. Principal Financial Group, Inc., 93 F.3d 155, 161 (5thCir. 1996); Transamerica Ins. Co. v. Avenell, 66 F.3d 715, 718-19 (5thCir. 1995); Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994), and thatis "sufficient to support a jury verdict." Morris, 144 F.3d at 380; Doev. Dallas Indep. School Dist.,153 F.3d 211, 215 (5th Cir. 1998). This burden is not met by merereliance on the allegations or denials in the non-movant's pleadings.E.g., Morris, 144 F.3d at 380. Likewise, "unsubstantiated or conclusoryassertions that a fact issue exists" do not meet this burden. Id.Instead, the nonmoving party must present specific facts which show "theexistence of a `genuine' issue concerning every essential component ofits case." Id. Dispute about a material fact is genuine only if evidenceis such that reasonable a jury could return a verdict for nonmovingparty. Stafford v. True Temper Sports, 123 F.3d 291, 294 (5th Cir. 1997);Hanks v. Transcontinental Gas Pipe Line Corp., 953 F.2d 996, 997 (5thCir. 1992).
In the absence of any proof, the Court will not assume that thenonmovant could or would prove the necessary facts. McCallum Highlands,Ltd. v. Washington Capital Dus, Inc., 66 F.3d 89, 92 (5th Cir.), revisedon other grounds upon denial of reh'g, 70 F.3d 26 (5th Cir. 1995);Little, 37 F.3d at 1075. Rule 56 mandates the entry of summary judgment,after adequate time for discovery and upon motion, against a party whofails to make a sufficient showing of the existence of an elementessential to the party's case, and on which that party will bear theburden at trial. Little, 37 F.3d at 1075.
C. Texas Insurable Interest Doctrine
"[I]t is against the public policy of the State of Texas to allowanyone who has no insurable interest to be the owner of a policy ofinsurance upon the life of a human being." Griffin v. McCoach,123 F.2d 550, 551 (5th Cir. 1941); see Cheeves v. Anders, 87 Tex. 287,28 S.W. 274, 275 (1894); Tamez v. Certain Underwriters at Lloyd's,London, International Accident Facilities, Inc., 999 S.W.2d 12, 16-17(Tex. App. — Houston [14th Dist.] 1999, pet. denied); accord DeLeonv. Lloyd's London, Certain Underwriters, 259 F.3d 344, 350 (5th Cir.2001). Put another way, the "State of Texas has established a fixedpolicy with reference to its own citizens, by and through which it refusesto permit one who has no insurable interest in a living person to be andbecome the beneficiary in an insurance policy written on the life of suchliving person." Cole v. Browning, 187 S.W.2d 588, 593 (Tex. Civ. App.— Ft. Worth 1945, writ ref'd w.o.m.) (citing Cheeves v. Anders,87 Tex. 287, 28 S.W. 274 (1894)). The doctrine has been defined morespecifically to provide that a putative beneficiary only has an insurableinterest in the life of another where the beneficiary is (1) so closelyrelated by blood or affinity that he wants the other to continue tolive, irrespective of the monetary considerations; (2) a creditor; [or](3) one possessing a reasonable expectation of pecuniary benefit oradvantage from the continued life of another. Drane v. Jefferson StandardLife Ins. Co., 139 Tex. 101, 161 S.W.2d 1057, 1058-59 (1942); Tamez, 999S.W.2d at 17; Stillwagoner v. Travelers Ins. Co., 979 S.W.2d 354, 360-61(Tex. App. — Tyler 1998, no pet.); accord DeLeon, 259 F.3d at 350.
Since the mid-1950's, Texas statutory law has permitted an individualto designate his own beneficiary — even if that beneficiaryotherwise lacks an insurable interest under common law. TEX.INS.CODE,art. 3.49-1, §§ 1, 2, 3, 5 (eff. Jan. 1, 2000). Long-standing Texaslaw also allows an employer to obtain death benefit from so-called"key-man" life insurance on an employee crucial to its business. Tamez,999 S.W.2d at 18 n. 4 (citing TEX.INS.CODE, art. 3.49).29
IV. CHOICE OF LAW
Defendants all raise a threshold choice of law issue.30 Defendantsargue that Georgia law — which Defendants contend does notrecognize Plaintiffs' causes of action — governs this dispute.Alternatively, Defendants (led by Wal-Mart) argue that if Georgia law isnot selected, then the law of Arkansas, North Carolina, or Delawareapplies. In any event, Defendants contend that Texas has no materialconnection to the dispute and Texas law does not govern. In response,Plaintiffs argue that Texas state courts would apply the Texas common lawinsurable interest doctrine to Defendants' COLI policies on the lives ofTexas citizens.
A. Applicable Contract Choice of Law Principles
The jurisdiction of this Court is based on diversity of citizenship.28 U.S.C. § 1332.31 In diversity cases, federal courts must applythe conflict of law rules of the state in which they sit. Klaxon v.Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed.1477 (1941); Denman by Denman v. Snapper Div., 131 F.3d 546, 548 (5thCir. 1998). Accordingly, this Court will apply the conflict of lawsprinciples followed by Texas state courts.
The Texas Supreme Court has adopted the "most significant contacts"test of the Restatement (Second) of Conflicts of Laws § 6("Restatement") for determining all choice of law issues.32 Duncanv. Cessna Aircraft Co., 665 S.W.2d 414, 420-21 (Tex. 1984); MinnesotaMining & Mfg. Co. v. Nishika Ltd., 953 S.W.2d 733, 735-36 (Tex.1997); Maxus Exploration Co. v. Moran Bros., Inc., 817 S.W.2d 50, 53(Tex. 1991).
The Restatement provides that a court must follow, "subject toconstitutional restrictions . . . a statutory directive of its own stateon choice of law." RESTATEMENT § 6(1); Maxus Exploration, 817 S.W.2dat 54. Neither Plaintiffs nor Defendants assert that a statutorydirective governs the outcome of the choice of law issue in this case. Inthe absence of a statutory directive, the Court is to consider therelevant choice of law principles in the Restatement. Id.
The Restatement's analysis commences with § 6, which sets forth thepertinent overriding principles applicable in every case:
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied.
RESTATEMENT § 6(2).
A more difficult question is what more specific choice of lawprinciples also should be considered. Defendants insist that contractchoice of law principles should be applied in this case becauseDefendants entered into contracts that are the subject of Plaintiffs'claims. Plaintiffs do not supply any recognized alternative approach tothe choice of law issue.
This case, as pleaded by Plaintiffs, fundamentally involves theapplication — or lack thereof — of Texas's common law oninsurable interests. This doctrine arises in the context of insurancecontracts. The claims in this case are not merely claims to enforce orclaims for breach of insurance contracts, as in typical contract cases.Plaintiffs are not signatories to the COLI policies. Plaintiffs do notclaim that Defendants are liable for breaching the terms of thosecontracts. Plaintiffs do not seek to enforce rights under the terms ofthe COLI policy contracts as written. Plaintiffs did not participate inthe negotiation for the contracts. Plaintiffs did not receive or givedefinitive consideration for their involvement in the contracts.33Defendants nevertheless contend that the resolution of the choice of lawissue is strictly determined by the Texas conflict of law rules relatingto contract actions.34 Defendants, not unexpectedly, view the disputefrom their own perspective. Defendants merely want to enforce theinsurance contracts that they alone signed. Defendants argue essentiallythat the interests of Plaintiffs, the insureds, are immaterial to thechoice of law analysis. Defendants' argument fails to account for thetrue nature of Plaintiffs' claims. Defendants' mischaracterization of theclaims in dispute results in Defendants' misapplication of pertinentchoice of law principles.35
As noted, Plaintiffs' role is not the ordinary participant in theformation of a contract and Plaintiffs' causes of action do not fit thetypical breach of contract rubric. Plaintiffs' claims arise under theTexascommon law insurable interest doctrine with equitable remedies soughtunder unjust enrichment principles. Accordingly, § 6 principles areespecially important in this case. The Court also considers the factorsin a "contract claim" choice of law analysis, adapted to the actualclaims and defenses being asserted,36 because Plaintiffs seekremedies relating to Defendants' insurance contracts, and becausecontract doctrines are the backdrop for many of the parties' contentionson the merits.
In contract cases, Texas courts examine the § 6 principles in lightof the parties specific "contacts" or factors listed in Restatement§ 188. The pertinent contacts under § 188 are:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicile, residence, nationality, place of incorporation and place of business of the parties.
RESTATEMENT § 188(2); Minnesota Mining and Mfg. Co., 953 S.W.2d at735-36; Maxus Exploration, 817 S.W.2d at 53-54; Houston Casualty Co. v.Certain Underwriters at Lloyd's London, 51 F. Supp.2d 789, 797 (S.D.Tex.1999). "These contacts are to be evaluated according to their relativeimportance with respect to the particular issue." RESTATEMENT §188(2). In general, it is not the number of contacts with a particularstate that is determinative. Duncan, 665 S.W.2d at 421. "Some contactsare more important than others because they implicate state policiesunderlying the particular substantive issue." Id.
Ultimately, the "selection of the applicable law depends on thequalitative nature of the particular contacts." Id. Once the factspertaining to the parties' and the dispute's contacts with various statesare established, the Court is to decide the choice of law issue as amatter of law. Id.37
The Court concludes, after the detailed analysis set forth below, thatTexas courts would select Texas law to decide this case. Thus, the Courtwill apply the Texas insurable interest doctrine. The Court also rejectsWal-Mart's contention that the law of the states of Arkansas, NorthCarolina and/or Delaware, states with which at least one of the partiesis connected, should be applied.
B. Analysis of Restatement § 6 Considerations in Insurable Interest Cases
The Court addresses the basic Restatement § 6 principles first, andthen considers the § 188 contacts in context. As noted, theimportance of the § 6 principles is heightened in this case becausePlaintiffs' claims are not typical contract disputes. It cannot beignored that Plaintiffs' relationships with Defendants, the actualcontracting parties, are unique in that Plaintiffs did not participate inthe creation of the COLI contracts and did not meaningfully agree to thepolicies' creation.
1. Relevant Policies of the Forum (Texas)
(a) The Griffin Cases, Other Insurable Interest Decisions and Texas Public Policy
Plaintiffs predominantly argue that the choice of law decision in thiscase is governed by the opinions of the United States Supreme Court inGriffin v. McCoach, 313 U.S. 498, 506, 61 S.Ct. 1023, 85 L.Ed. 1481(1941), and the Fifth Circuit on remand in Griffin v. McCoach,123 F.2d 550, 551 (5th Cir. 1941). The Court concludes that the Griffincases do not dispose of the issue presented by Plaintiffs' claims, butthe opinions provide valuable insight into the insurable interestdoctrine and its importance as law of the State of Texas.
In Griffin, the Supreme Court held that Texas courts have theconstitutional authority to "refuse enforcement of an insurance contractwhere the beneficiaries have no insurable interest on the ground of itsinterference with local law." 313 U.S. at 506, 61 S.Ct. 1023. Thepersonal representatives of Gordon, a deceased Texas citizen, disputed theentitlement of certain named beneficiaries of a life insurance policy onGordon's life.38 Id. at 499-500, 61 S.Ct. 1023. The Supreme Courtstated:
It is "rudimentary" that a state "will not lend the aid of its courts to enforce a contract founded upon a foreign law where to do so would be repugnant to good morals, would lead to disturbance and disorganization of the local municipal law, or, in other words, violate the public policy of the state where the enforcement of the foreign contract is sought."
Id. at 506, 61 S.Ct. 1023 (citation omitted). The Supreme Court held thatit would be constitutionally permissible for a Texas court to refuse theenforcement of a foreign contract that violated local public policyembodied in the Texas insurable interest doctrine. Id. at 507, 61 S.Ct.1023. However, the Court explained that Texas only may apply its publicpolicy to foreign contracts that relate to "anything done or to be donewithin [its] borders." Id. at 507, 61 S.Ct. 1023. The Supreme Court inGriffin did not decide whether Texas courts would apply the Texasinsurable interest doctrine to foreign life insurance contracts on thelives of Texas citizens. Id. at 504, 507, 61 S.Ct. 1023. Instead, thecourt remanded the issue to the Fifth Circuit. Id.
On remand, the Fifth Circuit implicitly concluded that Texas lawapplied,39 and interpreted the effect of the Texas insurable interestdoctrine on the facts before it. Griffin, 123 F.2d at 551. The FifthCircuit held that Texas law required the insurance proceeds to be paid tothe estate of the insured, rather than the contractual beneficiaries'assignees who lacked an insurable interest in the life of the insuredunder Texas law. The Court of Appeals gave two reasons for its holding.First, the insurance proceeds were in the custody of the court.40Id. Second, the Court of Appeals held that "it is against the publicpolicy of the State of Texas to allow anyone who has no insurable interestto be the owner of a policy of insurance upon the life of a human being."Id. The Court further stated that it had "no reason to think that courtsof Texas would permit citizens of other states to speculate upon thedeath of one of its citizens by means of contracts made without the statewhen the same is forbidden within its territorial limits." Id.41
The Griffin decisions accurately reflect Texas precedent on choice oflaw and policy. For example, a Texas court in Manhattan Life Ins. Co. v.Cohen, 139 S.W. 51, 57 (Tex. Civ. App. — San Antonio 1911, writdism'd), held that an assignment of the beneficial interest in lifeinsurance policies on the life of a Texas citizen to one with noinsurable interest was governed by Texas law. The Cohen court emphasizedthe importance of Texas policy by stating that, even if the assignmentwere governed by, and valid under, another state's law, "it may bedoubted whether, on account of its being contrary to the distinctivepolicy of the forum in which the suit was brought, such laws would begiven effect by the courts of Texas." Id.
In Cole v. Browning, another Texas appellate court held that Texas hada legitimate governmental interest in deciding the rights to an insurancepolicy's proceeds when the insured died while he and the named beneficiaryunder the policy were temporarily residing in Texas. 187 S.W.2d 588, 593(Tex. Civ. App. — Fort Worth 1945, writ ref'd w.o.m.).42 Thecourt held that a Texas court will apply Texas insurable interest law toall insurance policies relating to persons residing in Texas, even ifthese individuals are citizens of states with contrary insurable interestlaw. Id. at 594. "A state may prohibit the enjoyment by persons withinits borders of rights acquired elsewhere which violate its laws or publicpolicy." Id. at 594; accord, Bell v. Phillips, 152 F.2d 188, 190 (5thCir. 1945).
(b) Wal-Mart and Other Defendants' Attack on the Current Viability of Texas Insurable Interest Doctrine
In response to Plaintiffs' Griffin arguments, Defendants characterizeTexas policies and the insurable interest doctrine as obsolete. Forexample, Wal-Mart argues that the public policy of Texas is an "oldcommon law rule that has been heavily weakened by statute."43
The State of Texas has retained a commitment to the insurable interestdoctrine although the doctrine has been narrowed over the years by theTexas Legislature. Texas courts have repeatedly refused to follow themajority rule adopted by other states that allows non-creditors andnon-family members to have an insurable interest in another's life.E.g., Drane v. Jefferson Standard Life Ins. Co., 139 Tex. 101,105-06, 161 S.W.2d 1057, 1058-59 (1942) (godson had insurable interest ingodmother's life only because godson had a reasonable expectation ofpecuniary benefit from godmother, who made frequent and substantial giftsto godson during his lifetime); Cheeves, 87 Tex. at 291, 28 S.W. 274(former partner of insured did not have insurable interest after leavingpartnership); Tamez, 999 S.W.2d at 16-17, 19 (employer did not haveinsurable interest in employees); Stillwagoner, 979 S.W.2d at 360-61(employer did not have insurable interest in employee); Cole, 187 S.W.2dat 593 (former wife did not have insurable interest in former husband).See DeLeon, 259 F.3d at 350 (employer did not have insurable interest inemployee's life); Griffin, 123 F.2d at 551 (assignees of insured's formerbusiness partners and life insurance beneficiaries did not have insurableinterest). Texas courts thus have reaffirmed a strong public policyrequiring the beneficiary of an insurance contract to have an insurableinterest in the life of the insured under traditional restrictions,unless the Texas Legislature specifically alters the policy.
Wal-Mart argues that two of the three justices' individual opinions ina recent splintered ruling, Certain Underwriters at Lloyd's London, D.M.v. Smith, 77 S.W.3d 859 (Tex.App. — Houston [14th Dist.] 2002, nopet.), demonstrate that the Texas insurable interest doctrine has beeneviscerated or abandoned, and that earlier case law supporting thedoctrine is no longer representative of Texas courts' views or Texaspublic policy. In Smith, the majority decision adopted the reasoning ofTamez, a ruling by another panel of the same court, and involving thesame defendant employer and the same group accidental injury and deathCOLI policy. In Smith, the justices in the majority were Justice WandaFowler, who wrote a detailed opinion, and Chief Judge Scott Brister, whoissued a concurrence "reluctantly." Chief Justice Brister acknowledgedthat stare decisis applied and that Tamez governed the outcome of thecase.44 As in Tamez, the Smith Defendant was National ConvenienceStores ("NCS"), which was trying to establish that the company had aninsurable interest in the lives of employees insured under a groupaccidental injury and death policy the company had purchased namingitself as the beneficiary and owner.45 Ultimately, the Smith rulingis a reaffirmation that Tamez continues to reflects Texas law on theinsurable interest doctrine to the extent the dispute does not involvecircumstances governed by Texas statutes. The Smith decision was notappealed.
Wal-Mart ignores the obvious fact that the Smith concurrence and thedissent have no precedential value; they represent the individual viewsof two Texas judges. Wal-Mart's argument that the Smith case represents abinding — or even representative — explanation of theinsurable interest doctrine is unfounded. If anything, Smith establishesthat Texas courts continue to apply that doctrine unless specificallydirected by Texas statute that the doctrine does not apply. Wal-Mart'sargument, based on Smith, that Texas courtsfundamentally have abandoned the insurable interest doctrine isunpersuasive.
Wal-Mart contends that the Texas Legislature's enactment of laws toalter the traditional insurable interest doctrine demonstrates that thedoctrine lacks viability. The Legislature's modifications of the commonlaw insurable interest doctrine have been slow and careful. In 1921, theLegislature enacted article 5048 of the Texas Civil Statutes, which wasrecodified in 1951 as article 3.49 of the Texas Insurance Code. Thisprovision provides that a corporation or other business may be named abeneficiary in any life insurance policy, and these beneficiaries, havean insurable interest in the lives of their officers and stockholders.TEX.INS.CODE, art. 3.49 (Vernon 2000). In effect, article 3.49 allows abusiness to benefit from insurance on the lives of individuals that aredeemed most significant to the business. The Legislature explicitlypermitted these rights to apply to existing policies that already haddesignated the enumerated categories of people as beneficiaries.46This provision is significant for what it did not address; article 3.49does not authorize companies and partnerships to be an owner of thepolicy. This statute is inapplicable in this case because Douglas Sims wasnot a stockholder, officer or partner of Wal-Mart.
In 1953, the Legislature enacted article 3.49-1 of the Texas InsuranceCode.47 That statute was amended again in 1999. Contrary to priorcase law,48 the Legislature mandated that insureds of new or existinglife insurance policies could grant — in writing — aninsurable interest to any person or entity by naming them as abeneficiary or owner of the life insurance policy.49 The Legislatureset forth its intentions with respect to its new statute and prior caselaw in two clauses in section 4 of article 3.49-1. Section 4 providedthat "provisions of this Act are cumulative of existing law in Texas,statutory and otherwise, on the question of insurable interest," and this"Act shall be liberally construed to effectuate its purposes, and itsprovisions are not to be limited or restricted by previous declarations orholdings of the Courts of Texas defining the term insurable interests."
In 1999, the Legislature amended article 3.49-1, to add a significantprovision, which was codified as a new section 3 (and renumbered the priorsections 3 and 4 to be sections 4 and 5, respectively).50 Under newsection 3, after January 1, 2000, any adult in Texas may consent inwriting to the "purchase" of, or the "application" for, a group orindividual life insurance policy on that person's life, which insuranceis purchased or applied for by a third party. In addition, the insuredmay, "in such written document consent to or designate" "any person" orentity as the beneficiary or owner of the policy.51 Upon such writtenconsent or designation by the insured, the designated beneficiary and/orowner shall "at all times thereafter have an insurable interest in thelife of the insured." Finally, in 2001, the Legislature voted to repealarticle 3.49-1 effective June 1, 2003, apparently as part of a massiverepeal of the Insurance Code.52
Thus, the Texas Legislature, after gaining some experience with thebroader rights given to Texas insureds in 1953, granted Texas residentsthe right — after January 1, 2000 — to consent in writing tothird parties' acquisition of new group insurance on their lives (Id.art. 3.49-1, § 3), so long as each insured consents to or designatesthe beneficiary and owner. This provision was not made retroactive.53The Legislature thus carefully limited its enlargement of insureds'options. Thus, the new statutorily-based flexibility granted to insuredsdoes not represent, as Wal-Mart suggests, a wholesale rejection oflongstanding Texas public policy and case law.
The Court is also unpersuaded for other reasons by Wal-Mart's newarguments, based on the Smith case, that prior Texas public policy oninsurable interest was abandoned by the Legislature's 1999 amendment toarticle 3.49-1. Defendants' conduct in issue occurred long prior to the1999 amendments, even if the legislation represented a material shift inTexas public policy. Further, the statute since 1953 has provided thatthe "Act" is to be given "liberal construction." This language dictatesthat the statute, as written, be given full ("liberal") effect, not thatthe statutory provisions should be given effect beyond the Legislature'sexpressed intent. The Legislature limited insureds' right to allow athird party to purchase group insurance to insurance applications andpurchases after January 1, 2000.54 The Legislature was aware of theissues presented by theTexas insurable interest doctrine when applied in a corporate contextfrom the 1998 decision in Stillwagoner and other cases that preceded the1999 amendments to article 3.49-1. It is not the role of a federal courtsitting in diversity to ignore longstanding and consistently appliedTexas legal authorities. The Court declines Wal-Mart's invitation, madeunder the guise of interpreting current Texas public policy, to expandrecent legislative enactments beyond their express language.
Accordingly, the Court rejects Defendants' arguments that thetraditional Texas insurable interest doctrine is "obsolete."
(c) Wal-Mart's Contention that Texas Public Policy is Not Implicated
Wal-Mart also argues that Texas public policy on insurable interests isnot implicated in this case because Wal-Mart's purchase of COLI policiesprovided no financial incentive to Wal-Mart to take the lives of itsemployees and thus "the relevant Texas public policy should have nointerest in applying the Texas insurable interest rule to COLI insurancecontracts made in the other 49 states."55 Wal-Mart essentiallyasserts that Wal-Mart had no financial incentive for its insuredemployees to die quickly.
Wal-Mart's argument that Texas public policy is not implicated failsfor two reasons. First, Wal-Mart's argument assumes a favorable ruling onthe merits of this case, i.e., that the Wal-Mart COLI policies do notviolate Texas insurable interest law. Indeed, Wal-Mart cites no authorityfor its singularly outcome determinative approach. The Court mustconsider the nature of the claims Plaintiffs assert in deciding thethreshold choice of law issue. Plaintiffs' claims directly implicate theTexas insurable interest doctrine. The Court need not decide the meritsof the parties' arguments about application of that doctrine in order todecide the choice of law issue.
Second, the parties' evidence does not support Wal-Mart's position thatits COLI policies, as a matter of law, did not create an incentive inWal-Mart for the death of the insureds. Wal-Mart largely relies on asingle paragraph in an affidavit by Lee A. Nystrom, a representative ofthe insurance broker on the Wal-Mart COLI policies, National BenefitsGroup, Inc. ("NBG"). The record establishes that the COLI insurancecontracts involved intricate financial arrangements that included interalia loans by the insurers to the Employer Defendants to pay some or allof the insurance premiums, Employers' income tax considerations, andactuarial analyses.56 The evidence that Wal-Mart and the CamelotDefendants have submitted on the numerous pending motions reveals thatthe factual issue of the net benefits Wal-Mart hoped to obtain is highlycomplex. Nystrom, one of Wal-Mart's insurance brokers, gives onlytentative testimony; he stated that "[i]t is my belief that the COLIpolicies provided no financial incentive for the Trust or Wal-Mart to havethe insureds die sooner rather than later."57 Nothing in the recorddemonstrates that Nystrom was privy to Wal-Mart's proprietary financialmatters. Moreover, Wal-Mart has produced from its own corporate ranks noevidence on the financial effects or mechanics of the policies.Wal-Mart's evidence is patently insufficient to establish that Wal-Martwas financially better off paying premiums to the insurer over many yearswhile the insureds were alive than Wal-Mart would have been if it paidonly one or two years of premiums and received the full death benefitsunder the policies. The oversimplified averments on which Wal-Mart reliesraise more questions than they answer, and are not probative evidencethat the Texas insurable interest doctrine should not apply in the choiceof law determination.58
(d) Texas Insurance Code Article 21.42
Hartford attacks the applicability of the Texas insurable interestdoctrine in a different manner. Hartford argues that article 21.42 of theTexas Insurance Code expresses the state's current policy to limit theextraterritorial application of Texas law. Article 21.42 provides inrelevant part:
Any contract of insurance payable to any citizen or inhabitant of this State by any insurance company or corporation doing business within this State shall be held to be a contract made and entered into under and by virtue of the laws of this State relating to insurance.
Hartford argues that "Article 21.42 is designed to ensure only that Texaslaw will apply to contracts made between Texas citizens and insurancecompanies doing business in Texas, when and only when those contacts aremade in the course of the company's Texas business," and thus the TexasLegislature intended to exclude COLI policies payable to beneficiariesoutside Texas.59 This argument is rejected. First, there is nothingin Article 21.42 to support the inference that the Texas Legislature, inenacting Article 21.42, intended to repeal by implication thelongstanding, prophylactic common law insurable interest doctrine. TheTexas Legislature by Article 21.42 expressed its intent toexpand Texas regulatory authority to foreign entities doing business inTexas, who elect to pay or designate beneficiaries who live in or arecitizens of Texas. There is no basis to conclude that this legislativedecision represents an intention by Texas to abandon silently theinsurable interest doctrine that protects its citizens in a differentcircumstance, namely, when the insured, rather than the beneficiary, isthe Texas resident. The Court therefore rejects Defendants' attempt todiscount the Texas insurable interest doctrine as obsolete or as limitedby Article 21.42.
2. Policies of Other Interested States, and the Relative Interests of the Various States in the Determination of the Insurable Interest Issues
(a) Georgia's Interests in Determination of the Issues
Defendants argue that Georgia has a stronger interest than Texas in theapplication of its public policy. Defendants also posit that enforcementof the Texas policy in this case will infringe Georgia's publicpolicy.60
These contentions are not persuasive. Nothing in the record establishesthat the State of Georgia per se has an interest in enforcing its laws inTexas as to Texas inhabitants. Indeed, Defendants fail to answermeaningfully the question why the Georgia Legislature or Georgia citizenscare if an employer (in or outside of Georgia) is prohibited fromobtaining insurance on the life of its Texas employees. There is noindication that the State of Georgia intended this result when adoptingits insurable interest statutes.
(a) Defendants' analysis, taken to its logical conclusion, is that the state of Georgia unilaterally may authorize any company or person that arbitrarily or artificially creates some connection to that state to abrogate contrary public policy in one or more of the remaining forty-nine states. Under the Employer Defendants' respective theories, in order to impose Georgia's law on other states, an employer need only purchase a COLI policy covering its employees nationwide, while the employer's representatives signing the documents are physically present in Georgia (as Camelot did), or may simply purchase the insurance through a legal entity created solely for the purpose of invoking Georgia law (as Wal-Mart did). Georgia's Legislature has not exhibited any intent to go so far. Moreover, there is no meaningful public policy that has been articulated on behalf of Georgia that would be advanced by condoning Defendants' actions in this choice of law analysis.
In any event, the United States Supreme Court long ago ruled inGriffin, that a Texas court is not obligated to give effect within theState of Texas to the laws of other states if those laws violatefundamental Texas public policy. A "state is not required to enforce alaw obnoxious to its public policy." Griffin, 313 U.S. at 507, 61 S.Ct.1023.
(b) Extraterritorial Enforcement of Texas or Georgia Law under Home Insurance v. Dick
Defendants alternatively argue, relying on Home Insurance Co. v. Dick,281 U.S. 397, 50 S.Ct. 338, 74 L.Ed. 926 (1930), that theextraterritorial application of the Texas insurable interest doctrine inthe case at bar "raises serious Constitutional questions involving dueprocess".61 This argument lacks merit. Home Insurance involved aproperty damage claim for coverage under insurance issued in Mexico by aMexican underwriter of a tugboat that operated outside the UnitedStates. The insurance was owned and negotiated by a person while livingand working in Mexico.62 Neither the insurance contract, thesubject-matter of that contract, nor the parties had any meaningfulcontacts with Texas.63 The Supreme Court ruled that "[a] state may ofcourse prohibit and declare invalid the making of certain contractswithin its borders. Ordinarily, it may prohibit performance within itsborders, even of contracts validly made elsewhere, if they are requiredto be performed within the state and their performance would violate itslaws." Home Insurance, 281 U.S. at 407, 50 S.Ct. 338 (emphasisadded).64 The Home Insurance ruling thus, if anything,supports Plaintiffs' position, not Defendants'.65
In addition, the Supreme Court decided Home Insurance eleven yearsbefore its Griffin decision. In Griffin, as discussed above, the SupremeCourt specifically held that it would be constitutionally permissible forTexas to apply its insurable interest doctrine to a foreign contract. SeeGriffin, 313 U.S. at 507, 61 S.Ct. 1023.
Thus, Defendants have failed to show that Georgia has a strongerinterest in the disputed issues than Texas. Giving Georgia law theextraterritorial effect requested by Defendants would encroach on theTexas Legislature's and Texas courts' prerogatives, while not materiallyadvancing Georgia public policy to protect its own citizens. The Courtalso rejects Defendants' contention that Home Insurance controls thiscase or limits Texas courts' application of the Texas insurable interestdoctrine. Requiring compliance with the Texas insurable interest doctrineis not an improper extraterritorial application of Texas law.
3. The Basic Policies Underlying the Particular Field of Law: Insurance Law
The issues in this case implicate the fundamental purpose of andpolicies underlying life insurance. Under Texas law "the essentialfoundation of a life insurance policy is the life of a human being."Gibralter Colorado Life Co. v. Taylor, 132 Tex. 328, 123 S.W.2d 318, 321(1939). The primary purpose of life insurance is the "protection of thosewho would be pecuniarily damaged by the death of the insured."Hildebrandt v. Ames, 27 Tex. Civ. App. 377, 66 S.W. 128, 131 (Tex. Civ.App. 1901, writ ref'd). Texas courts have held generally that "to permitthose who would not be so damaged to receive the benefit of the policywould be to defeat the purpose and intent of the contract." Id.; accord,Hansen v. Blackmon, 169 S.W.2d 955, 962 (Tex. Civ. App. — El Paso1942), aff'd, 140 Tex. 536, 169 S.W.2d 962 (1943) ("The primary purposeof life insurance is not investment, but protection."). Texas courtsfollow this principle when applying the insurable interest doctrine:
Bluntly expressed, insurable interest . . . is determined by monetary considerations, viewed from the standpoint of the beneficiary. Would [the beneficiary] regard himself as better off from the standpoint of money, would [the beneficiary] enjoy more substantial economic returns should the insured continue to live; or would [the beneficiary] have more, in the form of the proceeds of the policy, should [the insured] die? Therefore, it is said that if the situation is such that [the beneficiary] might be led to conclude that he would profit by [the insured's] death, the policy is void as to him since the public has a controlling concern that no person have an interest in the early death of another, an interest that may give rise to a temptation to destroy [the insured's] life.
Drane, 161 S.W.2d at 1059. Enforcement of the Texas insurable interestdoctrine advances Texas policies underlying insurance law.66
4. Protection of Justified Expectations and the Need for Certainty, Predictability, and Uniformity of Result
Defendants argue that the protection of justified expectations, as wellas the need for certainty, predictability, and uniformity of result,demand enforcement of the COLI policies using Georgia law. Analysis hereagain differs depending on the party's perspective. Defendants stressthat, when they created the COLI policies, they expected that Georgia lawwould apply to those policies. Defendants acknowledge that there are nochoice of law provisions in the COLI policies. Nevertheless, Defendantscontend that the choice of law provisions in the Wal-Mart Trust Agreement("Trust Agreement"), the Wal-Mart Trust's location, and all Defendants'activities in Georgia require that the issues in this case be governedexclusively under Georgia law. Defendants further assert that applicationof Georgia law nationwide would advance the goal of uniformity andpredictability of the result under the COLI policies.
Under the Restatement, reliance by contracting parties on their agreedterms to a contract, including selection of laws, ordinarily is asignificant consideration. RESTATEMENT § 187. The parties' agreedterms, however, do not control in every circumstance under a choice oflaw analysis.67 When a person is integral to a contract, such as theinsured for an insurance policy, but that person plays no active role inthe creation of the contract in issue, there is little reason for thecontracting parties' self-serving expectations to control the choice oflaw determination for the parties' disputes.68 Indeed, when a personis unaware of the contract, the expectations of the signatories to thecontract is substantially less significant in a dispute between asignatory and the nonsignatory. Plaintiffs did not negotiate or agree tothe COLI contract terms, at least some Plaintiffs were not even aware ofthe existence of the insurance at all.69 The Restatement § 6'sgoal of the need for certainty, predictability, and uniformity of resultis not intended to serve as a vehicle for contracting parties to overridethe protection that states' public policies afford to non-signatories tothe contract.
The Court concludes that Defendants' expectation when entering into theCOLI contracts that Georgia law would apply with regard to Texas insuredswas not justified. Defendants admittedly set up the COLI policies inGeorgia and selectedGeorgia law in an attempt to avoid contrary public policies in statessuch as Texas. In doing so, Defendants took the risk that a Texas courtwould decline to apply Georgia law, as prior Texas cases indicated.70
Defendants also fail to demonstrate persuasively how application ofGeorgia law to Texas insureds advances the need for certainty,predictability, and uniformity of result. Defendants provide no meaningfulreason why Texas citizens and residents should not be able to count onenforcement of the longstanding Texas insurable interests doctrine(except as expressly altered after public debate and final enactment ofstatute by the Texas Legislature). The Court rejects Defendants' attemptsin the choice of law context to impose their self-serving expectations onnon-signatories to the insurance contracts in issue under the artificialcircumstances in this case. The goals of certainty, predictability, andof uniformity are served in the case at bar by the consistent applicationof Texas law to Texas citizens, not by the application of Georgia law atDefendants' behest.71
5. Needs of Interstate and International Systems and Ease in the Determination and Application of the Law to be Applied.
Defendants contend that it would serve the interstate system for courtsto permit parties to make contracts involving residents of other states.While the principle of consistency in interstate systems and ease ofdetermination of applicable law clearly have general merit, Defendants'requested application of these concepts isflawed. First, these aspirational goals are not immutable. They are to bebalanced when the contracts in issue flout an established public policyof another state and the contracting parties have attempted to manipulatethe choice of law considerations. See Griffin, 123 F.2d at 551 ("[W]ehave no reason to think that the courts of Texas would permit citizens ofother states to speculate upon the death of one of its citizens by meansof contracts made without the state when the same is forbidden within itsterritorial limits.").
Interstate or international systems are advanced by each jurisdictionhaving easily ascertainable, certain, uniform, and predictable lawgoverning disputes in that jurisdiction. The application of Texas law toinsurance contracts on the lives of Texas residents and citizens is aneasily ascertainable rule that respects each jurisdiction's choices andpriorities. The application of Texas insurable interest law is notdifficult. As set forth above, the doctrine is well established in Texasand has been uniformly applied.72
It is common that, in matters a state has authority to regulate, thestate's courts consistently will apply that state's law to disputesinvolving its citizens. Pearson v. Northeast Airlines Inc., 309 F.2d 553,559 (2d Cir. 1962); see Caton v. Leach Corp., 896 F.2d 939, 943 (5thCir. 1990); Stobaugh v. Norwegian Cruise Line Ltd., 5 S.W.3d 232(Tex.App. — Houston [14th Dist.] 1999) (citing Caton). Defendants'insistence that private contracting parties be able to impose onnon-signatories the state law the contracting parties select, despite theimpact of that law on other state's citizens, undermines the uniformityof Texas law, thereby interfering with goal of promotion of ease ofdetermination and application of the law to be applied. The choice of lawfactors of the needs of interstate system and the ease of determinationof the law to be applied are advanced by application in this case ofTexas, not Georgia law.
C. Application of Texas Contract Choice of Law Principles to Defendants' COLI Contracts
1. Restatement § 188 Principles for Contract Disputes
As discussed above, the choice of law analysis in contract casesfocuses on the parties' contacts with a jurisdiction in the followingrespects:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicile, residence, nationality, place of incorporation and place of business of the parties.
RESTATEMENT § 188(2); Minnesota Mining and Mfg. Co., 953 S.W.2d at735-36; Maxus Exploration, 817 S.W.2d at 53-54; Houston Casualty Co. v.Certain Underwriters at Lloyd's London, 51 F. Supp.2d 789, 797 (S.D.Tex.1999). The choice of law analysis must be performed under § 188(2)for each disputed issue. "Some contacts are more important than othersbecause they implicate state policies underlying the particularsubstantive issue." Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 421(Tex. 1984).73 The comments to theRestatement further teach that "[s]tanding alone, the place ofcontracting is a relatively insignificant contact." RESTATEMENT § 188cmt. e. Ultimately, the selection of the applicable law depends on thequalitative nature of the parties' particular contacts with therespective jurisdictions. Duncan, 665 S.W.2d at 421.
2. Choice of Law Analysis for the Wal-Mart COLI Policies
In this case, the Wal-Mart Defendants contend that the Wal-Mart COLIpolicies have the most significant contacts with the state of Georgia andthat Wal-Mart intended Georgia's law to apply. On reconsideration, theWal-Mart Defendants contend in the alternative that, "if Georgia law doesnot apply, then the law of Arkansas, Delaware, or North Carolina wouldapply to the insurable interest issue because those states have moresignificant contacts than Texas does."74 Wal-Mart contends that allof these states other than Texas "would recognize that Wal-Mart had aninsurable interest in the lives of its employees."75
(a) Features of the Wal-Mart Trust
The Wal-Mart Defendants have demonstrated without contradiction thatthe Wal-Mart Trust was created in Georgia for the sole purpose ofadvancing Wal-Mart's goal of purchasing the COLI policies.76 Choiceof Georgia as the situs of the Trust was for Wal-Mart's administrativeconvenience and to attempt to enjoy Georgia's favorable insurableinterest law.77
The Trust is nothing but an administrative arm of Wal-Mart throughwhich the company hoped to ease its administrative burdens for the COLIpolicies and shield itself from disadvantageous insurable interestdoctrines in several states. The Trust Agreement states that Wal-Mart"will effectuate insurance on the Insureds [Wal-Mart employees] throughthis Trust" and the "Trust is for the sole and exclusive benefit of[Wal-Mart] and Trustee. . . . No other person . . . shall be entitled torely on or enforce any provision of this Trust."78 The TrustAgreement provided that the purposes of the Trust were:
(i) to hold one or more policies of insurance on the life or lives of any or all of the present employees and future employees of the Grantor and its subsidiaries (the "Insureds"); (ii) to receive the proceeds of any such policy as and when such proceeds become payable; and (iii) to pay the Grantor from the cash assets (including the cash value of any insurance policies) of the Trust such amount or amounts as Grantor may from time to time direct.79
It is clear from the face of the Wal-Mart Trust Agreement that theTrust was solely a vehicle through which Wal-Mart directed its investmentin the COLI policies. The Trust Agreement states that Wal-Mart "willeffectuate insurance on the Insureds [i.e., Wal-Mart employees] throughthis Trust."80 The Trust was to purchase and hold COLI policies "atthe direction of [Wal-Mart]."81 Also, the Trust was to receive theproceeds of the policies.82 The Trust was to handle all Trustproperty, including proceeds from the COLI policies, to Wal-Mart atWal-Mart's sole direction.83 The Trust was not responsible for thecollection of life insurance proceeds.84 Instead, the Trustee merelywas to receive, hold, and use whatever benefits were paid by theinsurance companies, at Wal-Mart's direction.85 Wal-Mart itself, notthe Trust, was responsible for notifying the insurers of claims,providing proof of death of an insured, or pursuing collection ofbenefits.86 The Trust Agreement further states: "The Trustee shallnot be responsible for the administration and distribution hereunder ofsuch proceeds until they are actually paid to the Trustee."87
The Wal-Mart Trust Agreement named Wachovia, a bank doing business inGeorgia, as the Trustee and established Georgia as the situs of theWal-Mart Trust.88 Wal-Mart, through the Wal-Mart Trust, directed thepurchase of the COLI policies between December 1993 and sometime in 1995.Raymond H. Sapp, a trust officer of Wachovia who served as the Wal-MartTrust's Trustee and was involved with creation of the Wal-Mart Trust,attests that: (i) Wal-Mart applied for and was issued the COLI policiesin the state of Georgia, (ii) premium payments were made by the Wal-MartTrust by wire transfer from Georgia to the offices of AIG and Hartford,and (iii) none of the COLI policies were made, issued, received, paid, orperformed in Texas.89 Wal-Mart established the Wal-Mart Trust and"structured its COLI program in this way to take advantage of favorableGeorgia law on `insurable interest.'"90
Based on these facts, Wal-Mart and the Insurer Defendants argue thatall of the contacts listed in Restatement § 188 favorthe application of Georgia law.91 After consideration of all theparties' contacts with various states, in light of the contacts' relativeimportance to the insurable interest issue, this Court holds that theRestatement's § 188 factors, to the extent pertinent suggest thatTexas insurance law should apply to Plaintiffs' claims. The detailedanalysis follows.
(b) Place of Contracting
Defendant Wal-Mart contends that its evidence establishes that the COLIpolicies were applied for and issued in Georgia. Wal-Mart argues that manyof the steps in creation of the COLI policies were performed in Georgia,and the place where the last step necessary to making the contract isdispositive. Wal-Mart also contends that "[n]one of the COLI policies itpurchased was made, issued, received, paid for, or performed inTexas."92 Wal-Mart asserts that no "individual healthinformation" was required with respect to any of the insureds beforethe AIG or Hartford COLI policies were issued.93
There is authority for the proposition that the place a contract ismade is deemed to be the place of performance of the final act necessaryto complete the contract to make it binding on the parties. SeeMetropolitan Life Ins. Co. v. Greene, 93 S.W.2d 1241, 1245-46(Tex.Ct.App. — El Paso 1936, no writ).94 The Greene case heldthat group insurance policies issued and delivered in New York were NewYork contracts, as between the employer-purchaser and the insurer, butthe law of the state of delivery of the certificates of insurance (eitherCalifornia or Arizona) would govern a dispute between theemployee-insured and the insurer over coverage. At best, therefore,Wal-Mart's authority establishes that the state whose law applies to adispute between the insurer and the employer that purchases a groupinsurance policy will not necessarily be the same as the state's whoselaw governs a dispute between the employee-insured and the insurer.Moreover, Greene establishes that the particular provisions of theinsurance contracts and the location of the insured are material to thechoice of law determination.
Wal-Mart relies on evidence that representatives of Wal-Mart, AIG,Hartford and the Trust (through Wachovia's employee, Sapp) signedWal-Mart's original AIG and Hartford COLI policy applications and handedthem to AIG and Hartford's agents in Atlanta on December 30, 1993.95Wal-Mart used the standard Georgia-approved form of life insurancepolicy.96 Wal-Mart also asserts that the contract for purchase ofinsurance was "complete" when Sapp signed the Letter of Understanding onbehalf of the Trust on December 30, 1993.97 Wal-Mart also points tothe AIG Letter of Understanding,98 which was signed on December 28,1993 by AIG in an unspecified location, presumably outside Georgia, butwas signed and accepted by Sapp for the Trust on December 30, inAtlanta. Second Sapp. Aff., ¶ 3.99 Wal-Mart further contendsthat the policies were "issued" in Georgia because that is what the AIGLetter of Understanding (setting forth the detailed terms of therelationship between Wal-Mart and AIG) provided,100 because theinitial annual premiums were transmitted by and from the Trust fromAtlanta to either AIG or Hartford, and then "the insurance policies werethen issued by AIG and Hartford and delivered back to the Trust inAtlanta, Georgia, and accepted by the Trust in Atlanta, Georgia."101Wal-Mart contends that "[a]ll subsequent blocks of polices were issuedto and received by the Trust in Atlanta, Georgia."102 Finally, Sappalso explains that the first block of policies (including the one onSims's life) were received and "accepted" by the Trust in Atlanta onMarch 10, 1994.103
Many of these averments are merely legal conclusions (e.g., thepolicies were "issued" and "accepted") that the Court need not and doesnot accept as conclusive. While Wal-Mart provides important evidence thatvarious actions regarding creation of the COLI policies occurred inGeorgia, there also is other important evidence establishing significantcontacts with other states.
For instance, the place that policy premiums were to be paid before theinsurer deemed them "received" is material. While Sapp states that theTrust paid for the policies by wire transfer from Atlanta,104 heimplicitly acknowledges that receipt of these payments by the insurerswas at AIG's office in Delaware and Hartford's office inConnecticut.105 The Sims COLI Policy states that payment underthe contract was not deemed made until received in the insurer'shome office.106
In connection with the place of contracting, if one relies on the verylast step before the insurance contracts became binding on thepurchaser, then that step is the examination during the twenty dayrejection period. During that time, the Trust, Wal-Mart and the broker,were permitted to examine the policies and to return them if desired fora full refund. Sapp avers that the "Trust did not thereafter exercise theright to return the policies within 20 days for a full refund of thepremiums."107 While Sapp's testimony is intended to suggest that thisexamination occurred in Georgia, this testimony is obviously incomplete.Copies of the policies were retained by the Trustee in Georgia and by thebroker, presumably in Minnesota.108 The Trust Agreement required thatall notices be sent to Wal-Mart in Arkansas,109 and thus copies ofthe COLI policies likely were sent there for Wal-Mart's review, sinceWal-Mart was responsible to make all decisions pertaining to theTrust.110 Nothing suggests that any work by NBG, the broker,or Wal-Mart pertaining to the Trust's creation was done in Georgia.Wal-Mart's evidence on this factor thus is inconclusive. Thus, if thetruly last step before a contract is binding is significant in thiscase even though Plaintiffs did not sign the contracts and were notinvolved in their creation, then the Court concludes that the finalacts before the COLI contracts became binding took place in severalstates, of which Georgia was only one. The Court is unpersuaded thelast step before the COLI contracts were accepted as final took placein Georgia.
The COLI policy contains a provision immediately above the contractingparties' signatures that "[n]o policy will take effect unless and until,while the Insured is living, the application is approved, the fullinitial premium is paid, the policy isdelivered and accepted by the owner, and answers and statements in thisapplication continue to be complete and true at the time of such paymentand acceptance."111 This provision requires that the insureds bealive when the insurance became effective, and that they have notdeclined the coverage (by declining the special death benefit).112Wal-Mart or some contracting party was required to make thisdetermination where the insureds were located, as indicated by theEmerick Memorandum directed to the Location Managers, and the attachedDecember 1993 flyer, announcing the special death benefits. Thisverification was to occur after the insurer signed the policy andreceived payment, but before delivery of the policy to the owner.Wal-Mart's argument that the policies did not require any healthevaluation does not ameliorate the concern by the carriers that theinsured be alive on the effective date of the policies. This requirementcould be satisfied only by Wal-Mart checking on its employees at theirplaces of employment, which for Texas employees, was in Texas.
It also is notable that the AIG Letter of Understanding, which was madea part of the Wal-Mart/AIG COLI policy contracts, provides that theparties' agreement to purchase insurance does not take effect unless,inter alia, AIG receives the total first year premium.113 AIGdeclared in various places in the parties' contract documents thatpayments must be received in Delaware at the AIG administrativeoffice.114 This significant contact with Delaware alsoundermines Defendants' arguments that Georgia was the "place ofcontracting."
Wal-Mart's evidence also invites comment on another aspect of theparties' relationships. Each of the § 188 factors must be evaluatedwith reference to the claims and facts of each case. Since Plaintiffsseek rulings on the effect of the insurable interest doctrine, and thereis no dispute as to the meaning of the express terms of the COLIpolices, the place of contracting factor must include consideration ofwhere and when the Wal-Mart employees accepted or, in Wal-Mart's rubric,approved Wal-Mart's inclusion of the employees in, the COLI insuranceprogram.115
Insurance on Sims's life was purchased in the first block of policiessold by AIG to Wal-Mart.116 At the outset of the program, in December1993, Wal-Mart informed its employees then enrolled in the Wal-Mart Planthat the company would pay for a new Special Death Benefit.117 Theflyer was distributed through Wal-Mart "Location Managers" to allemployees, presumably at the employees' workplaces,118 which for Simswas in Texas. Thus, Sims's conversations, his receipt of information (ifany), and his act or decision (if any) not to decline the Special DeathBenefit occurred in Texas. Wal-Mart argues that notification to employeesabout the Special Death Benefit served as notice about, and acceptance orapproval of, Wal-Mart's purchase of COLI policies on the employees'lives. To the extent that Sims made his decision based on the flyerdistributed in late December 1993, Sims did so in Texas.119
Thus, Wal-Mart's argument that the COLI policies were applied for andaccepted in Georgia is a gross oversimplification of the actual events.
Wal-Mart's evidence does not demonstrate that the "place ofcontracting" is a significant § 188 factor in this case. In additionto the fact that important events necessary to the creation of the COLIcontracts occurred in several states, including Texas, the claimsPlaintiffs assert must be considered closely. Plaintiffs' claims presentthe issue of whether Wal-Mart had an insurable interest in Plaintiffs'(or their decedents') lives. Each of the choice of law factors must beevaluated "according to their relative importance with respect to theparticular issue." RESTATEMENT § 188(2). Thus, even if Georgia werefound to be the state with the most numerous contacts under the "place ofcontracting" factor, it is inescapable that these contacts all are basedon the artificial constructs of either the Wal-Mart Trust or a meetingset up by the Camelot Defendants to sign the paperwork in Georgia, eachdone for the express purpose of taking advantage of favorable Georgia lawoninsurable interests, and without any other meaningful connection to thatstate.120 Additionally, the location of these devices occurredwithout any input from the insureds, including Plaintiffs, Texasresidents. In view of the policy considerations involved in thatdoctrine, which must be considered under Restatement § 6, the Courtaccords the "place of contracting" factor (regarding the creation of theCOLI policies per se) little weight in the choice of law analysis in thiscase.
(c) Place of Negotiation
Defendants argue that the "place of negotiation" factor favors theapplication of Georgia law to the Wal-Mart COLI policies. Defendants' soleevidence for this assertion originally was the superficial testimony ofSapp.121 Wal-Mart later submitted additional evidence from Sapp andan affidavit from Nystrom, one of the broker's representatives. Nystromavers that "negotiations related to the COLI policies took place inArkansas and Georgia," and not in Texas.122 Nystrom further statesthat he "was involved in meetings in late 1993" with "Wal-Mart inArkansas and the [Trust] in Georgia relating to the purchase by the Trustof [COLI] policies insuring Wal-Mart employees."123 Nystrom,however, did not sign the policy applications; they were signed byWiner, the person to whom Nystrom reported.124 Wal-Mart also pointsto the use of the Georgia standard form of insurance.125
Wal-Mart again misses the mark. Its evidence does not addressexplicitly the location of all the negotiations, or even the meaningfulones.126 Nystrom simply states vaguely that he "knows of nonegotiation related to the purchase of the COLI policies" other than inArkansas and Georgia.127
Wal-Mart's evidence fails to point to any single state as the statewith significant contacts regarding negotiations of the contracts inissue. One event provides a contact with Texas. Wal-Mart contends inother contexts that Sims approved the purchase of the COLI policy on hislife through his failure to decline the Special Death Benefit in December1993.128 The Court assumes, for the purposes of the pending motions,that Sims received and acted on Wal-Mart's request in the December 1993flyer Wal-Mart distributed through Location Managers at each store. IfWal-Mart's Location Manager handed Wal-Mart's request to Sims anddiscussed it with him, then these acts occurred in Texas. UnderWal-Mart's construction of the events, these actions comprisenegotiations on the COLI contracts, and reflect a potentially significantcontact with Texas as to the Sims Estate's claim.129
Wal-Mart's evidence as to contacts with Georgia (and other states) issignificant for what is not included. Nystrom does not state that heattended all meetings or negotiation sessions. He does not mention howmany meetings that he attended were in Arkansas as compared to Georgia orthe insurers' home offices in Delaware and Connecticut.130 Wal-Martsubmits no affidavit from Winer, president of NBG, who likely wasinvolved in some meetings in light of the enormity of Wal-Mart's COLItransaction. Nystrom's affidavit suggests that NBG's principal place ofbusiness, consistent with the contact information on one of theapplication forms, was in Minnesota.131 Some of the broker'scommunications likely were conducted or initiated from there. Wal-Martsubmits no evidence about the identity of the representatives whonegotiated for the Insurer Defendants, no evidence about the location ofthese people's offices, and no evidence as to when or how the materialterms of the COLI policies, such as the size of the premiums, were agreedto. It is inconceivable that no negotiations took place in the states inwhich the insurers' home offices are located. There is no evidence aboutwho gathered crucial data about the identities of the insureds or how theinformation was amassed for consideration by the Insurer Defendants inconnection with the COLI policies. Even more striking, Wal-Mart does notinclude in any affidavit or other evidence from its own representativesnon-conclusory factual information about the negotiations for the COLIpolicies, even though Wal-Mart is the sole beneficiary of the insurancepolicies in issue and controls all the Trust's activities.132 Nor doesSapp, the Trustee's officer, include any comments about his ownprecontract negotiations. It is inconceivable that detailed analysis andnegotiations among representatives of each of the signatories to the COLIcontract documents did not occur before the final terms were reached.
Accordingly, Wal-Mart's evidence fails to demonstrate that Georgia wasthe primary place of negotiation.133 If anything,the supplemental evidence weakens Wal-Mart's position that Georgia wasthe "place of negotiation" for choice of law purposes.
Wal-Mart, implicitly acknowledging this result, argues in thealternative that the place of negotiation was possibly in variousstates, but not in Texas. This argument does not advance Wal-Mart'scause. Wal-Mart's evidence, when considered with the absence of proof onpertinent subjects, leads the Court to find that the place of negotiationdoes not establish meaningful contacts with any one state.
In any event, to the extent Plaintiffs were not involved in creation ofthe COLI contracts, this factor is not material in the case at bar.Accordingly, Defendants have failed to establish Georgia in particular asthe "place of negotiations" for the Wal-Mart policies. Further, becausethe parties' locations and places of negotiations were so widelydispersed, the Court gives the "place of negotiation" factor no weight inits choice of law analysis.
(d) Place of Performance
Defendants argue that the "place of performance" factor in the §188 choice of law analysis favors application of Georgia law in this caseand, in any event, does not support reliance on Texas law. Defendantscontend that the Wal-Mart Trust was located in Georgia, and that allpremiums were paid from, and policy proceeds were paid to, the Trust inGeorgia.134 Further, Wal-Mart contends that no performance occurredin Texas. Wal-Mart contends that the death of an insured is "merely acondition precedent to payment."135 Defendants' analysis issuperficial and accordingly is not persuasive. The Court finds that theplace of performance is an important factor in the § 188 analysis, andthat the evidence establishes strong contacts with the state of Texas.Moreover, Wal-Mart's putative contacts with Georgia are not significantwhen the realities of the parties' relationships are analyzed.
The Wal-Mart COLI policies issued by AIG require that all requiredwritten notice and requests be sent to the insurer's Delawareoffice.136 Payment of proceeds under those policies occurredonly when "proof is received at our [insured's] administrative office[in Delaware] of [the] Insured's death."137 Nystrom avers thatNBG prepared the Death of Insured Notification Forms in Minnesota forexecution by Wal-Mart and the Trust. Generally, NBG prepared thedeath notices after "receiving notice of an employee's death eitherfrom the Wal-Mart benefits department in Arkansas or throughcomputerized sweeps by NBG of national Social Security Administrationcomputerized records."138 NBG forwarded the notices for theboth the AIG and Hartford policies to a Wal-Mart representative inArkansas for signature. The Hartford forms also were signed by aTrust representative in Georgia for awhile and later in NorthCarolina.139 Some of the Trust's administrative functionswere performed by Wachovia in North Carolina starting in or about1997,140 but "to [Nystrom's] knowledge," none of the forms weresigned in Texas.141 Nystrom states that Wal-Martand the Trust specifically chose one state, Georgia, as the "site for theCOLI policies" in order to "provide administrative and legalpredictability and uniformity for all of the policies."142
Wal-Mart focuses on the fact that the insurers paid all policy proceedsto Georgia to the Trust, which forwarded them to Wal-Mart in Arkansas, orotherwise acted at Wal-Mart's direction.143 Wal-Mart also includestwo conclusory assertions: The "Trust performed under the policies bypaying annual policy premiums on the COLI policies[; and] AIG and Hartfordperformed under the polices by paying death benefits to the Trust."144The Sims AIG policy and proof of Sims's death was handled in thisfashion.145
The Court has considered the fact that the nominal owner of thepolicies, the Trust, was located in Georgia and that all monies relatingto the policies passed through that entity.146 However, it is clearthat all monies paid by the Trust were obtained from Wal-Mart, theWal-Mart Trust's activities were conducted at the express direction ofWal-Mart, all funds received by the Trust were forwarded to Wal-Mart, orhandled at the express direction of Wal-Mart. The Trust was created forthe sole purpose of serving, and in fact served, as a mere conduit inGeorgia for the funds paid by Wal-Mart. The Trust had purely ministerialadministrative functions and its existence was solely for the purpose ofsiting the COLI policies in Georgia. Thus, Defendants establish only thatthere are superficial contacts with Georgia under the § 188 place ofperformance factor.
On the other hand, there is evidence that performance under theWal-Mart COLI policies involved contacts with several other states. Forinstance, all premium payments were "received" by AIG and thus wereeffective only when the payments reached the AIG headquarters inDelaware.147 If an insurance contract specifies that premium paymentsare to be made at the insurance company's home office, the general Texasrule is that the place of performance of the contract is the state inwhich the insurer's home office is located.148 Seiders v. Merchants'Life Ass'n, 93 Tex. 194, 54 S.W. 753, 754 (1900) (holding that place ofperformance of a life insurance contract was the state where premiums weremade payable, even if the contract was made in another state). Accord NewYork Life Ins. Co. v. Baum, 700 F.2d 928, 933 (5th Cir. 1983); seegenerally Hull & Co., Inc. v. Chandler, 889 S.W.2d 513, 517-18(Tex.App. — Houston [14 Dist.], 1994); American National InsuranceCo. v. Huckleberry, 638 F. Supp. 233, 235 (N.D.Tex. 1986).
Another fact is that Wal-Mart, doing business nationwide, andheadquartered in Arkansas, was the named beneficiary of the COLIpolicies.149 The "Company Name to Appear on Policy" was "Wal-MartStores, Inc.," with an Arkansas address. Only the "Billing Address" wasWachovia Bank of Georgia, N.A. in Atlanta. None of these aspects of thecontract support Georgia as the place of performance.
Finally, Wal-Mart discounts a critical component of the performance ofthe COLI polices, establishment of right to payment by the insurer of thebenefits upon death of the insured. It is immaterial whether the proof ofan insured's death is called a "condition precedent" (as Wal-Mart argues)or a material part of performance of the insurance contract. The partiesagreed that the Insurer Defendants must receive definitive proof of deathof an insured before the insurers will pay any policy benefits. Thisproof, for Texas residents, originates in Texas. Whether NBG obtainsnotice of an insured's death from Wal-Mart's benefits department or theSocial Security database, the original source of that information is therecords of the state of Texas. Activities in Texas thus are central toperformance of payment of proceeds under the COLI policies and Georgia hasno connection to this aspect of performance.
Moreover, an incontrovertible corollary relating to performance of theCOLI contracts is that the owner's payment of premiums is due on aninsured only during the life of the insured. To determine the status ofthe Texas resident insured, communication with Texas is necessary.
The Court concludes the place of performance of the contracts is animportant factor in the § 188 analysis in this case. The Court,however, finds that the location of the Wal-Mart Trust and other facts onwhich Wal-Mart relies are not dispositive on this factor. Afterconsidering all the evidence of contacts of the parties regardingperformance of the COLI policies generally and the Sims Policyspecifically, it is apparent that Georgia has only a contrived andsuperficial connection to these insurance policies with respect to the"place of performance." In contrast, Texas has a significant relationshipto "performance of the contract" insofar as creation of the insurancecoverage (the need for the insured to be alive at the inception of thepolicy) and payment of policy benefits (death of the insured) areconcerned. These considerations tip this important factor heavily infavor of Texas.150
(e) Location of the Subject Matter of the Contract
Defendant Wal-Mart asserts that the location of the subject matter ofthe COLI policies favors the application of Georgia law. The InsurerDefendants paid COLI policy proceeds on deceased insureds to the Wal-MartTrust in Georgia, orpossibly in North Carolina (where administration of the Trust wastransferred in 1997). The only contact with Texas for a named partyrelating to Wal-Mart is the place of residence of employee Douglas Sims,a Texas resident. Wal-Mart also contends, apparently focusing solely onits own goals, that the subject matter of the COLI contracts is paymentof insurance proceeds, not the life of the insured. Wal-Mart ignores theexistence of the responsibilities, risks, and rewards to the insurancecarriers and to Wal-Mart during the life of the insureds under the COLIpolicies. Wal-Mart was obligated to pay premium payments to the InsurerDefendants during each insured's life.151 The fact that an insured isalive when the premium is paid is crucial to Defendants. Each COLI policyinvolved different monetary duties depending upon whether the insured wasalive or dead. The evidence of the insured's status is derived throughperiodic scrutiny of Wal-Mart records generated in each insured's homestate. If an insured leaves Wal-Mart's employ, then the task ofdetermining if and when the insured has died becomes more complicated,but contact with the insured's state of residence is required. For Texasresidents, the obligation to pay proceeds arises only as a result of anevent in Texas, the death of an insured.152
It thus is the insured's life that is the subject matter of the COLIpolicy. Since Sims and the other Plaintiffs in this suit are (or were)citizens or residents of Texas, the location of the subject matter of theCOLI policies is Texas. This result is consistent with Texas law. Texascourts have held that the subject matter of a life insurance policy isthe life of the insured. Specifically, a life insurance policy thatlapsed before the insured died cannot be reinstated after the insured'sdeath because the insured's life — the subject matter of the policy— no longer exists. Gibralter Colorado Life Co. v. Taylor,132 Tex. 328, 123 S.W.2d 318, 321 (1939); Baker v. Penn Mut. Life Ins.Co., 617 S.W.2d 814, 815-816 (Tex. Civ. App. — Houston [14th Dist.]1981, n.w.h.). "The essential foundation of a life insurance policy isthe life of a human being." Gibralter, 123 S.W.2d at 321.
The Restatement provides that "[t]he state where the [subject of thecontract] is located will have a natural interest in transactionsaffecting it." RESTATEMENT § 188, cmt. e. Accordingly, the locationof the subject matter of the Sims Policy and the other COLI policiesinsuring the lives of Texas citizens or residents is Texas.
Public policy considerations prompt the Court in this case to give the"subject matter of the contract" factor great significance in the choiceof law analysis. The Texas insurable interest doctrine exists to protectthe lives of Texas citizens. Cheeves, 28 S.W. at 275 ("It is against thepublic policy of this state to allow any one who has no insurable interestto be the owner of a policy of insurance upon the life of a humanbeing."); Griffin v. McCoach, 123 F.2d at 551 ("The [insurable interest]rule in Texas is for the protection of thelives of its citizens."). This Texas public policy is integrallyintertwined with the "subject matter of the contracts" in issue, TheTexas contacts make this factor weigh heavily in favor of Texasapplication of Texas law.
(f) Domicile of the Parties
Defendants argue that the domicile of the parties to the COLI policiesfavors the application of Georgia law, or the law of several states otherthan Texas. In support of this argument, Defendant Wal-Mart asserts thatthe Wal-Mart Trust is located in Georgia.153 However, as discussedabove, the Wal-Mart Trust is an entity entirely controlled and funded byWal-Mart; the Trust exists merely to perform ministerial functions atWal-Mart's direction and to serve Wal-Mart interests in attemptingartificially to obtain the protection of Georgia law as to the COLIpolicies. Accordingly, Wal-Mart's placement of the Wal-Mart Trust inGeorgia (i.e., the Trust's domicile) does not dictate the application ofGeorgia law.
It is undisputed that none of the other parties to the contract aredomiciled, incorporated, or have their principal places of business inGeorgia. The Insurer Defendants are domiciled in Delaware andConnecticut, respectively. Wal-Mart is domiciled in Arkansas. Thedomicile of Wachovia Bank was Georgia and then North Carolina.154 Theinsureds, whom Defendants contend are parties to the COLI contracts, weredomiciled in Texas when the policies were purchased.155
The "domicile of the parties" factor therefore is splintered, makingthat factor inconclusive. Georgia law has no greater interest in theclaims in this suit than the states where the insurers, Wal-Mart or theTexas Plaintiff-insureds are domiciled. Accordingly, Texas has at leastas strong a connection as Georgia to this dispute under this choice oflaw factor.
(g) Conclusion on the Choice of Law Under Restatement § 188 and § 6
Analysis of the Restatement § 188 factors for contract disputesfails to reveal one single state with clearly the "most significantcontacts" to this unique dispute. As between Georgia and Texas, however,Texas has far stronger contacts than Georgia. Texas is the place ofSims's and the other insureds' domiciles, the place of the subject-matterof the COLI policies, and the place of the most significant aspects ofperformance of the contracts. Evidence on the places of contracting andnegotiation demonstrates that several states each have limited contacts.These factors accordingly are entitled to little weight.
Even if Defendants are deemed to have shown that important steps inentering into the COLI contracts occurred in Georgia, or that someunspecified negotiations occurred in Georgia, or that certain steps inperforming the contracts were performed there, these contacts do notjustify application of Georgia law to Plaintiffs' insurable interestclaims against Wal-Mart under all the facts of this case.Defendants contrived the connection to Georgia, which otherwise had norelationship to Defendants, by situating the Trust there and performingcertain acts there on the thousands of COLI policies covering employeesnationwide. To the extent § 188 factors are pertinent, they suggestthat Texas has the most significant contacts with the claims in issue.
The Restatement § 6 factors, which must be considered in allcases, point strongly to Texas as the place with the most significantcontacts. The purpose of insurance, the need for certainty,predictability and uniformity of result, as well as other factors, allpoint to Texas as the state with the most significant interest in theapplication of its law and public policies to this dispute. When the§ 188 factors are considered in light of the § 6 considerations,as the Restatement directs, Texas choice of law principles mandate thatTexas law be applied in this case.
(h) The Fifth Circuit Baum Decisions
Defendants contend that New York Life Ins. Co. v. Baum, 700 F.2d 928(5th Cir. 1983) ("Baum II"), dictates that Georgia law be applied in thiscase because that state has the most contacts to the COLI policies inissue. Baum, however, is inapposite.156 In Baum, the insurer, NewYork Life, filed an interpleader action in a Texas federal court, seekinga declaratory judgment that the policy was void for lack of an insurableinterest, and that no beneficiary should receive the proceeds of thepolicy. New York Life Ins. Co. v. Baum, 617 F.2d 1201, 1203 (5th Cir.1980) ("Baum I"). The district court granted summary judgment to New YorkLife, holding that Louisiana law applied to the life insurance contract,and that under Louisiana law, the contract was void ab initio becauseneither of the contesting beneficiaries had an insurable interest.Id.157 The Fifth Circuitreversed, holding there was a material question of fact as to thecircumstances of the creation of the insurance policy and designation ofbeneficiaries. Id. at 1204-05.
On remand, the district court again held that Louisiana lawcontrolled, and that none of the contestants had an insurable interest inCook's life. Baum, 700 F.2d at 929-30, 934-35. The Fifth Circuit reverseda second time, and directed the district court to pay the proceeds toBaum. Id. at 935. The court of appeals held that Texas contract choice oflaw analysis applied, and that it favored the application of New Yorklaw. Id. at 932.158 Ultimately, on rehearing, the court vacated itsown grant of summary judgment awarding the insurance proceeds to Baum.New York Life Ins. Co. v. Baum ("Baum III"), 707 F.2d 870, 871-72 (5thCir. 1983). The court of appeals adhered to its choice of law rulingreversing the district court on all issues concerning New York Life, butconcluded that there were material fact questions that precluded summaryjudgment for Baum over a Texas shell company controlled by Baum's formerbusiness partners, because there was evidence that Baum may have beenaware of the incorporation of that entity. Id.159
Baum II's holding as to choice of law is not inconsistent with theresult the Court reaches in this case. Baum involved a typical contractdispute. The insurer sought to avoid payment of death benefits to partiesassociated with the two potential beneficiaries of the insurancecontract, who were or claimed to be affiliated in business with theinsured. In Baum, the insured (Cook) was aware of and consented to theowner's (Baum's or Media's) creation of the life insurance policy inconnection with a creditor/debtor relationship among the insured, theowner, and the named beneficiary. See Baum III, 707 F.2d at 872. All thereal parties in interest participated actively in creation of thecontract. The court of appeals employed a traditional contract choice oflaw analysis, which dictated that the places of contracting andperformance were the most significant factors under the facts of thecase.
Resolution of insurable interest cases is highly fact specific. TheBaum circumstances are materially different from Plaintiffs' dispute withDefendants. In the instant case, the insured Plaintiffs were not activeparticipants in creation of the COLI policies. Many Plaintiffs did noteven know the insurance had been created.160 Thus, the place ofcontracting and payment, the central factors for the Fifth Circuit inBaum II, are not dispositivehere.161 Moreover, despite the Baum court's detailed rulings, therewas no analysis of the numerous other factors important to a full choiceof law analysis under the Restatement. Thus, the Baum cases do not serveas a helpful guide to this Court, and those rulings do not alter theCourt's analysis.
3. The Camelot COLI Policies
Hartford and the Camelot Defendants contend that Georgia law applies tothe COLI policies that the Camelot Defendants purchased from Mutual,which Hartford acquired. In support of this contention, DefendantHartford proffers a sparse affidavit of James Van Etten stating that (i)Camelot intended for Georgia to be the situs of its COLI policies, (ii)Camelot intended for Georgia law to govern its COLI policies, (iii)Mutual used forms for the policies authorized for use in Georgia, and(iv) the COLI policies were administered by a third-party administratorin Georgia.162 Hartford further asserts:
No part of the negotiations related to the Wal-Mart or Camelot COLI policies took place in Texas. No insurance policies were delivered in Texas, no premiums were paid from Texas, no beneficiaries were Texas residents, and no policy benefits were paid in Texas.163
Defendant Hartford proffers no other evidence to establish the CamelotCOLI policies' contacts with Georgia. The Camelot Defendants introduce noindependent evidence.164
In response, Plaintiffs have submitted materials from a tax caserelated to the Camelot COLI policies, In re CM Holdings, Inc., 254 B.R. 578(D.Del. 2000).165 Camelot's insurance broker testified in thatproceeding that the COLI policies had closer ties to Ohio thenGeorgia.166Plaintiffs also have provided evidence that some activity related to theadministration of the Camelot COLI policies occurred in Texas, namely,the Camelot Defendants obtained death certificates in Texas when Texasresident insureds died.167
The testimony and evidence in CM Holdings are not probative on thequestion of whether Camelot's COLI policies were issued or delivered inGeorgia. At issue in CM Holdings was whether Camelot's COLI policy schemewas a sham transaction for tax purposes.168 The Delaware districtcourt did not address the choice of law question, nor was the questionrelevant. Plaintiffs were not parties to those proceedings. The issuesbefore that court were materially different from those raised here. Thestatements and testimony on which Plaintiffs rely were not necessary toand did not form any part of the district court's holding in CMHoldings. Thus, neither Plaintiffs nor Defendants have demonstrated thatestoppel should be imposed through application of the Delaware districtcourt's ruling. The Court has broad discretion to determine whethercollateral estoppel should be applied to preclude litigation of anissue. Copeland v. Merrill, Lynch & Co., 47 F.3d 1415, 1423 (5thCir. 1995); J.M. Muniz, Inc. v. Mercantile Texas Credit Corp.,833 F.2d 541, 543 (5th Cir. 1987). Collateral estoppel bars therelitigation of an issue of ultimate fact by the party against whom theissue has been determined by a valid and final judgment. Hibernia Nat'lBank v. United States, 740 F.2d 382, 387 (5th Cir. 1984). While mutualityof parties is not required, collateral estoppel can only be appliedagainst parties who have had a prior full and fair opportunity tolitigate their claims.169 Hardy v. Johns-Manville Sales Corp.,681 F.2d 334, 338 (5th Cir. 1982) (explaining Parklane Hosiery Co. v.Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979)).
The Court engages in an independent choice of law analysis for theCamelot COLI policies and uses the available factual record. The Courtfinds that virtually no factually specific evidence establishesmeaningful contacts between the State of Georgia and Plaintiffs' claimsagainst the Camelot Defendants and Hartford. Nothing in the sampleCamelot COLI insurance policy reveals any connection with the State ofGeorgia. The insurer, Mutual, islisted as having a New Jersey address and other connections to that stateas well as Missouri.170 Premiums paid by the Camelot Defendants werepayable at Mutual's home office in New Jersey.171 Under the heading"Statement of Policy Cost and Benefit Information" the insurance agent islisted with a Florida address.172 Camelot was a Pennsylvaniacorporation that was acquired in December 1997 by Trans World. a New Yorkcorporation with its principal place of business in New York. Hartford isa Connecticut insurance company with its principal place of business inConnecticut.
The Court also concludes that the State of Texas has a substantialinterest and several important contacts with the dispute concerning theCamelot COLI policies. The Court incorporates, to the extent relevant tothe Camelot parties, the foregoing analysis of the Restatement § 6and § 188(2) factors discussed with respect to Wal-Mart. The CamelotDefendants set up a COLI policy administrator in Georgia that serves afunction comparable to the Wal-Mart Trust.173 The choice of lawanalysis on the Camelot Plaintiffs' claims therefore is the same as forthe Wal-Mart parties' contacts with the State of Texas.
The Restatement § 6 and § 188(2) factors as to the Camelot COLIpolicies point to Texas as the state with the most significant contacts tothe dispute. Although Georgia and the states in which the parties (otherthan the insureds) are domiciled may have some interest in the dispute,these states' interests pale by comparison to Texas. The CamelotPlaintiffs are or were Texas residents and/or citizens. Their lives arethe subject matter of the COLI policies. Material aspects of theperformance under those contracts is in Texas. The Texas contacts withthis dispute are stronger than the connection of any other state.
Accordingly, the Court holds that the Camelot Defendants' andHartford's motions for summary judgment are denied insofar as theseparties seek to apply Georgia law to Plaintiffs' claims concerning theCamelot COLI policies. The Court further holds that Texas law shouldapply to the Camelot Plaintiffs' claims against the Camelot Defendants andHartford.
D. Conclusion on Choice of Law
Having considered all the parties' arguments regarding the choice oflaw issue, the Court concludes that Georgia law does not apply. Based onthe available record, this case is governed by Texas law, including itsinsurable interest doctrine.174
V. CONTENTIONS RELATED TO SIMS ESTATE'S CLAIMS
A. ERISA Preemption
Defendant Wal-Mart seeks dismissal of Plaintiff Sims Estate's claim forthe COLI death benefits because the claim relates to an ERISA plan and istherefore preempted by the Employee Retirement Income Security Act,29 U.S.C. § 1001 et seq. ("ERISA").175 Wal-Mart relies on theproposition that its COLI policies formed part of its employee benefitplan ("Wal-Mart Plan"). Plaintiffs respond that the COLI policies areunrelated to any part of the Wal-Mart Plan. Plaintiffs further argue thateven if the COLI policies were related to the Wal-Mart Plan, the SimsEstate's claim is not preempted under the ERISA "savings clause."176Alternatively, Plaintiffs contend that they have insufficient factualinformation on the COLI policies and the Wal-Mart Plan to respond toWal-Mart's ERISA arguments, and move under Rule 56(f) of the FederalRules of Civil Procedure for a continuance to pursue additionaldiscovery.177
Wal-Mart has failed to demonstrate that the Sims Estate's claim forCOLI policy benefits, which became payable after Wal-Mart terminated theSpecial Death Benefit, is related to Wal-Mart's ERISA plan. The SimsEstate's claim therefore is not preempted.
1. Standard for ERISA Preemption
To determine whether a particular plan qualifies as an ERISA plan, theFifth Circuit asks whether the plan "(1) exists; (2) falls within thesafe harbor exclusion established by the Department of Labor; and (3)meets the ERISA requirement of establishment or maintenance by anemployer for the purpose of benefitting the plan participants." McNeilv. Time Ins.Co., 205 F.3d 179, 189 (5th Cir. 2000); Meredith v. Time Ins. Co.,980 F.2d 352, 355 (5th Cir. 1993).178
ERISA preempts "any and all State laws insofar as they now or hereafterrelate to an employee benefit plan." 29 U.S.C. § 1144 (a). TheSupreme Court has held that the term "relate to" should be expansivelyconstrued. FMC Corp. v. Holliday, 498 U.S. 52, 57-58, 111 S.Ct. 403, 112L.Ed.2d 356 (1990) ("The preemption clause is conspicuous for itsbreadth. It establishes as an area of exclusive federal concern thesubject of every state law that `relates to' an employee benefit plangoverned by ERISA.").
Applying these principles, the Fifth Circuit has found generally thatERISA preempts state law claims in two situations: "(1) the claimaddresses areas of exclusive federal concern, such as the right toreceive benefits under the terms of an ERISA plan; and (2) the claimdirectly affects the relationship among the traditional ERISA entities— i.e., the employer, plan administrators, fiduciaries,participants, and beneficiaries." Bullock v. The Equitable Life AssuranceSociety, 259 F.3d 395, 399 (5th Cir. 2001); Cypress Fairbanks Med. Ctr.,Inc. v. Pan-American Life Ins. Co., 110 F.3d 280, 283 (5th Cir. 1997).
However, some state law claims may affect an ERISA plan in a mannerthat is too tenuous, remote, or peripheral to warrant a finding that thelaw "relates to" the plan. Nickel v. Estate of Estes, 122 F.3d 294, 297(5th Cir. 1997). For example, in certain circumstances a plaintiff mayrefer to plan benefits as a measure of damages without invoking ERISApreemption. Rozzell v. Security Serv., Inc., 38 F.3d 819, 822 (5th Cir.1994). In order to determine whether a state law claim is preempted byERISA, the Court must look past the words in the complaint and considerthe substance of the claim alleged. Id. The Fifth Circuit takes afact-sensitive approach when making a preemption determination. E.g.,Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 246 (5thCir. 1990) (examining the "commercial realities" of plaintiffs positionas part of ERISA preemption analysis).
2. Relatedness to Wal-Mart's ERISA Plan
Starting in December 1993, Wal-Mart offered a $5,000 Special DeathBenefit to all employees covered by a Wal-Mart medical plan during 1994to 1995.179 The Special Death Benefits were payable to the samebeneficiary as the employee selected under non-COLI life insurancepolicies that Wal-Mart bought for its employees through the Wal-MartPlan.180 The SpecialDeath Benefits were described in the Summary Plan Descriptions("Summaries") issued by Wal-Mart to its employees for the years 1994 and1995.181 The section regarding the Special Death Benefits in each ofthe Summaries makes no reference to the COLI policies. Instead, each saysthat the "special death benefit is fully paid by Wal-Mart."182Wal-Mart nevertheless asserts, on the basis of the affidavit of TomEmerick, Wal-Mart's Vice President of Benefits, that the Special DeathBenefits were "funded" by the COLI policies.183 Besides Emerick'sconclusory statement, the sole evidence submitted in support of thisassertion is a memorandum dated December 14, 1993 ("Benefits Memorandum")and the accompanying brochure ("flyer") announcing the initiation of theSpecial Death Benefit program in December 1993.184 Neither of thesedocuments was a formal ERISA-mandated document among the "controllingWal-Mart Plan documents."185
The flyer stated that the "new benefit is being implemented because offinancial benefits associated with a Wal-Mart owned life insuranceprogram which is explained in the enclosed [flyer]."186 The flyer alsostated:
Wal-Mart is providing these new death benefits as a result of financial gains from life insurance policies Wal-Mart will purchase which will cover the lives of associates who participate in the group health plan. That Wal-Mart owned life insurance will result in the financial benefits for the corporation. Any net life insurance proceeds payable to Wal-Mart from this life insurance as a result of the death of an active associate will be contributed to the profit sharing plan.187
The flyer established, at best, that the "Wal-Mart owned lifeinsurance" is "payable to Wal-Mart,"188 and that Wal-Mart elected topay the Special Death Benefit as part of the Wal-Mart Plan.189 Thus,there is no documentary evidence that demonstrates that the proceeds ofthe COLI policies per se were paid to beneficiaries of the Wal-MartPlan. At best, Wal-Mart's evidence establishes that Wal-Mart receivedsome of the proceeds from the COLI policies, that Wal-Mart self-fundedthe Wal-Mart Plan,190 and elected to pay from its general revenuesthe Special Death Benefit.191
If the Court, nevertheless, assumes that Wal-Mart's commitment to paythe Special Death Benefit causes the COLI policies to be a part of theWal-Mart Plan, Wal-Mart's ERISA preemption contentions about the SimsEstate's claim still fail. First and foremost, the Sims Estate does notseek recovery of the Special Death Benefits or any other Wal-Mart Planbenefits. The Sims Estate seeks to recover the COLI policy proceeds asthe lawful beneficiary under Texas insurable interest doctrine.192The Sims Estate's claim has no bearing on the Plan or itsadministration.193 The Sims Estate's claim does notrelate to the Wal-Mart's Plan and is not preempted by ERISA.194
This result is bolstered by the cases on which Wal-Mart relies. In Leev. E.I. DuPont de Nemours and Co., 894 F.2d 755 (5th Cir. 1990), theplaintiffs sought "to recover benefits defined by their former employer'sERISA plan, benefits to which they would have become entitled but for analleged misrepresentation by their employer, during their employment, onwhich they relied to their detriment." Lee, 894 F.2d at 757. Plaintiffsalleged state law claims of fraud and negligent misrepresentation forwhich they sought to recover specifically the additional monthlyretirement benefits they would have received if they had retired underthe new retirement program. Id. at 756. The Fifth Circuit held preemptionapplied since the plaintiffs' putative state law fraud claims "relate totheir former employer's pension plan and interfere with the exclusivelyfederal regulatory scheme." Id. at 758.195 The Court of Appeals inLee relied on Cefalu v. B.F. Goodrich Co., 871 F.2d 1290 (5th Cir.1989), also cited by Wal-Mart. In Cefalu, a former employee sued torecover additional plan benefits based on an alleged oral contract. 871F.2d at 1291. The Fifth Circuit held that the plaintiffs' claim wasrelated to an ERISA plan and preempted because plaintiffs damages "wouldconsist of the pension benefits he would have received had he beenemployed [by the successor entity]." Id. at 1294.
The Lee and Cefalu cases are clearly distinguishable from the mattersat bar. In each case, the plaintiffs plainly sought policy benefits towhich they would have been entitled but for their reliance on theirrespective employer's alleged misrepresentations. These were claims torecover benefits under an ERISA plan. In the case at bar, however, theSims Estate seeks to recover nothing under the terms of the Wal-MartPlan. Indeed, the Special Death Benefit is entirely irrelevant to theSims Estate's claim relating to the COLI policy insuring Douglas Sims.The COLI policy was owned and its benefits were payable to Wal-Martthrough the Wal-Mart Trust, not the Wal-Mart plan.
Wal-Mart's arguments regarding ERISA preemption therefore fail. TheSims Estate's claims for the COLI policy benefits are not related to anERISA plan. Therefore, the Court need not reach the parties' argumentsregarding the ERISA savings clause. Wal-Mart's Summary Judgment Motionclaiming ERISA preemption is denied.
B. Statute of Limitations
Defendant AIG argues that the Sims Estate's claim is barred by thestatute of limitations.196 In response, the Sims Estate argues thatits claim is not barredbecause that claim did not accrue until death benefits were paid from theWal-Mart COLI policy on Sims's life. After reviewing the pertinentauthorities,197 the Court concludes that the Sims Estate's claim istimely.
1. Length of Limitations Period
AIG argues that the longest possible limitations period applicable tothe Sims Estate's claim is four years, since the Sims Estate seeks aconstructive trust. AIG argues that the majority rule in Texas is toapply the residual four year limitations period to claims for aconstructive trust. TEX.CIV.PRAC. & REM.CODE, § 16.051 ("Everyaction for which there is no express limitations period, except an actionfor the recovery of real property, must be brought not later than fouryears after the day the cause of action accrues."). The minority rule,according to AIG, is that courts apply the limitations period of theunderlying claim in actions for a constructive trust. Under the latterrule, the limitations period would be either two or four years, dependingon how the Sims state's claim is characterized.198
The Court concludes that the applicable limitations period is fouryears, whether § 16.051 governs or the limitations period governingthe underlying claim applies. All Defendants in this action, includingAIG, which incorporates the other Defendants' arguments by reference,characterize this case as a contract action for choice of law purposes.In Texas, the limitations period for contract actions is four years.TEX.CIV.PRAC. & REM.CODE § 16.004(a)(3) (Vernon Supp. 2001);Morriss v. Enron Oil & Gas Co., 948 S.W.2d 858, 869 (Tex. App.— San Antonio 1997, no writ). Alternatively, Wal-Mart characterizesthis case as one for unjust enrichment in its ERISA preemption argument.The Texas statute of limitations for unjust enrichment action is fouryears. TEX.CIV.PRAC. & REM.CODE, § 16.004(a)(3) (Vernon Supp.2001); Amoco Production Co. v. Smith, 946 S.W.2d 162, 164-65 (Tex.App.— El Paso 1997, no pet.).199
Accordingly, the Court holds that the Sims Estate's claims are subjectto a four year statute of limitations.
2. Accrual of the Sims Estate's Claim
AIG argues that the four year limitations period began when the SimsPolicy was issued in 1993, more than four years before commencement ofthis lawsuit, and thus the Sims Estate's claim, istime-barred. AIG contends that the Sims Estate concedes through itsallegations in the Complaint, that its claims for constructive trustaccrued when the COLI policies were issued. In response, the Sims Estateattempts to distinguish its claim from those of the Camelot Plaintiffs,who are live individual insureds seeking ownership of the COLI policiescurrently in force. The Sims Estate argues that it seeks a constructivetrust on the death benefits of the COLI policy on Sims's life, a cause ofaction that did not accrue until Sims died. Furthermore, the Sims Estateargues that it could not have brought that claim until Sims died sincethe estate did not exist until Sims death.
The Court is persuaded by the Sims Estate's arguments.200 Unlikethe Camelot Plaintiffs (who seek declarations that the EmployerDefendants lack an insurable interest in their lives and that Plaintiffsare the "lawful owners of the . . . COLI policies insuring their lives"while they are alive), the Sims Estate pursues a claim that Wal-Mart hasviolated the Texas insurable interest doctrine and requests both adeclaration of its rights and the equitable remedy that a constructivetrust be imposed on the death benefits AIG paid to the Trust forWal-Mart.201 In order to determine the timeliness of the SimsEstate's case, the Court first must determine when decedent Sims'ssubstantive cause of action alleging violation of Texas law accrued. Thefact that the estate of a deceased individual may seek both a declarationof rights and the additional relief of a constructive trust on deathbenefits does not alter the underpinning of all that plaintiff's claims.If Sims's individual claim that Texas law was violated was time barredwhile he was alive, then his estate's claim on the same theory would alsobe barred. Russell v. Ingersoll-Rand Co., 841 S.W.2d 343, 345 (Tex.1992).
The Court concludes that a claim alleging the absence of Wal-Mart'sinsurable interest in Sim's life accrued each day that the questionedCOLI policy insuring the insured was in force. The "State of Texas hasestablished a fixed policy with reference to its own citizens, by andthrough which it refuses to permit one who has no insurable interest in aliving person to be and become the beneficiary in an insurance policywritten on the life of such living person." Cole, 187 S.W.2d at 593(citing Cheeves, 87 Tex. 287, 28 S.W. 274). The violation of this Texaslegal doctrine is not restricted to the day Wal-Mart contracted for orobtained its interest as the beneficiary of a COLI policy.202 Itwould make no sense to restrict the doctrine in thismanner with respect to an insurable interest claim with solely a requestfor declaratory relief. The insurable interest doctrine is designed toavoid the incentive for murder, an incentive that pertains each day theinsured is alive and the insurance violating the insurable interestdoctrine exists. Thus, the Court concludes that the cause of actioncomplaining of a violation of the Texas insurable interest doctrineaccrues each day a beneficiary who lacks an insurable interest is namedin an insurance contract and the insured is alive.
The Sims Estate filed its claim challenging Wal-Mart's interest in theSims COLI policy within four years of Wal-Mart's termination of thatinsurance policy. Thus, the Sims Estate's claim concerning the Texasinsurable interest doctrine is not time barred to the extent the SimsEstate seeks declaratory relief.203
The Sims Estate's claim for constructive trust requires a slightlydifferent analysis. A plaintiff's claim for relief of a constructivetrust under the insurable interest doctrine due to designation of invalidbeneficiaries accrues only when there is a designation that offends theTexas insurable interest doctrine and the insured dies while theinsurance policy with that designation is in force. A claim under theinsurable interest doctrine for constructive trust cannot accrue prior toan insured's death, as discussed infra in Section VI(B) this Opinion. TheSims Estate filed its claim for violation of the insurable interestdoctrine and sought the relief of a constructive trust within four yearsof Sims's death and within four years of payment of the Sims Policy deathbenefits. Thus, the Sims Estate's request for the remedy of aconstructive trust is also timely.204
C. MG's Motion to Dismiss
1. Overview and Applicable Legal Standards
AIG seeks dismissal of Plaintiff Sims Estate's claim pursuant to Rule12(b)(6) of the Federal Rules of Civil Procedure on the ground that theSims Estate has failed in the Complaint to state a claim against it uponwhich relief may be granted.205 This motion is granted withoutprejudice to Plaintiffs to replead, since there has been no discovery inthis case and the authorities on which the Sims Estate and otherPlaintiffs base their claim require a fact specific analysis. From theComplaint, it appears that the Sims Estate's claim is primarily againstWal-Mart, an Employer Defendant. The Complaint contains no specificallegations of wrongful or inequitable conduct by AIG against Sims or hisestate in particular.
In reviewing a Rule 12(b)(6) motion, the Court must accept as true allwell-pled allegations, resolving all doubts in favor of thecomplainants. Tanglewood East Homeowners v. Charles-Thomas, Inc.,849 F.2d 1568, 1572 (5th Cir. 1988). Motions "to dismiss for failure tostate a claim [are] viewed with disfavor, and [are] rarely granted."Southern Christian Leadership Conference v. Supreme Court of State ofLa., 252 F.3d 781, 786 (5th Cir. 2001) (internal quotation marks andcitations omitted). The Court must construe pleadings in an expansive anddeferential way at this stage of a suit. Id. The Court may dismiss theSims Estate's claim against AIG only if it has shown "beyond doubt thatthe plaintiff can prove no set of facts in support of his claim whichwould entitled him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78S.Ct. 99, 2 L.Ed.2d 80 (1957); Southern Christian Leadership Conf., 252F.3d at 786.
2. Allegations in the Complaint
Plaintiffs allege that Wal-Mart purchased approximately 278,558 COLIpolicies from AIG, pursuant to a "scheme" by which Wal-Mart insured thelives of its employees, including many Texas citizens.206 Plaintiffsallege generally that certain employers "bought COLI policies, not toinsure against the loss of a key employee, which was a lawful andwell-established practice in the insurance industry, but as an investmentand as a means to improperly avoid federal income tax liability."207According to Plaintiffs,
the corporate employer insured the lives of a vast number of its employees without its employees' knowledge or consent. Generally, the corporate employer borrowed money from the insurer to pay the premiums, claiming a tax deduction for the often exorbitant interest it paid. Upon the death of a covered employee, the insurer paid the corporate employer the death benefit, which the corporate employer claimed as tax-free. The corporate employer would then use some of the death benefit to repay the premium loans.208
Plaintiffs further allege that Douglas Sims was employed by Wal-Mart from1987 until 1998, when he died.209 He was insured by one of the COLIpolicies purchased by Wal-Mart from AIG, and he allegedly never consentedto this insurance or to the designation of Wal-Mart as the policybeneficiary.210 Plaintiffs, on behalf of the Sims Estate, allege thatWal-Mart never had an insurable interest in Sims's life,211 but AIGpaid Wal-Mart the death benefits under the COLI policy after Sims'sdeath.212 On the basis of these factual allegations, Plaintiffs claimgenerally that the Employer Defendants hold the COLI policies and alltheir benefits in constructive trust for the benefit of the Texascitizen-insureds,213 that the Employer Defendants have been unjustlyenriched,214 and that the Employers that bought COLI policies haveunclean hands.215
Initially, the Court finds that Plaintiffs have failed in theirComplaint specifically to allege that AIG has committed a wrong againstthe Sims Estate or has been unjustly enriched by the sale of the SimsPolicy to Wal-Mart. Thus, AIG's motion has merit and will be granted.However Plaintiffs are granted leave to amend the Sims Estate's claim,should they insist on doing so. This result is in the interest of justicesince Plaintiffs describe in oral argument one or more theories againstAIG that are not specifically pleaded.216
Leave to amend also is necessary because the Court cannot concludedefinitively, as a matter of law, that the Sims Estate cannot state aclaim on which relief can be granted against AIG. AIG in support of itsMotion to Dismiss argues that the Sims Estate's claim is unsustainablebecause the rule articulated in DeLeon v. Lloyd's London, CertainUnderwriters, 259 F.3d 344, 350-53 (5th Cir. 2001), prohibits doublerecovery from insurers under the insurable interest doctrine. Accordingto AIG, DeLeon stands for the proposition that an insurer is relievedfrom all liability once it pays death benefits to the named beneficiary,and thus the appropriate remedy is for the estate to seek the deathbenefits from the beneficiary through a constructive trust. In addition,AIG argues that the Sims Estate cannot state a claim against it forunjust enrichment and that it was not unjustly enriched at the expense ofthe Sims Estate.
The Sims Estate responds by citing several cases in which Texas courtsallowed a deceased insured's estate to recover death benefits from aninsurer which already had paid death benefits to a beneficiary. SeeManhattan Life Ins. Co. v. Cohen, 139 S.W. 51 (Tex. Civ. App. — SanAntonio 1911, writ ref'd); National Life & Accident Ins. Co. v.French, 144 S.W.2d 653 (Tex.Civ. App. — Amarillo 1940, no writ).While it is highly unlikely that the Sims Estate can prevail on any claimbased on these cases, the Court cannot conclude as a matter oflaw that the Sims Estate has no legal claim against AIG.217
The first of these cases, Cohen, involved unique circumstances thatmade rote application of other Texas authority inappropriate. In Cohen,the estate of the deceased insured sued the insurance company that paiddeath benefits to an assignee who did not have an insurable interest inthe life of the insured.218 The trial court awarded death benefits tothe estate. The court of civil appeals affirmed. In doing so, the appealscourt focused on two facts as justifying an exception to the generalrule: (i) the insurer's knowledge of the estate's claim at the time itpaid the death benefits to Hilsman, and (ii) the indemnity bond given byHilsman to the insurer.219 The court's reliance on the insurer'sindemnification agreement with Hilsman, the original recipient of thebenefits, suggests that the court did not intend the insurer to have tobear the expense of the benefits twice. It is noted that Cohen, which wasdecided long before seminal insurable interest cases in Texas,220 hasbeen cited only once for the proposition on which Plaintiffs attempt torely. Specifically, in Stillwagoner, the Tyler Court of Appeals stated indicta without any analysis: "If the insurance company with knowledge ofthe estate's adverse claim and the reasons therefore pays proceedsbenefits to a beneficiary without an insurable interest this can affordno defense to the action by the estate of the insured for the entireamount due on the policies." Stillwagoner v. Travelers Ins. Co.,979 S.W.2d 354, 358 (Tex.App. — Tyler 1998, no pet.).
Plaintiffs also rely on French, 144 S.W.2d 653 (Tex. Civ. App. —Amarillo 1940, no writ), a case decided in 1940, in which the AmarilloCourt of Civil Appeals affirmed the trial court's holding that an insurerwas liable to a deceased insured's estate for $125 in death benefitsafter the insurer already had paid these benefits to the namedbeneficiary who did not have an insurable interest in the insured's lifeunder Texas law. It appears that the insurer did not have notice of theestate's claim when it originally paid the death benefits. However,significantly, there is no indication that the insurer raised the priorpayment as a defense. Also, in French, thenamed beneficiary paid many of the premiums (which were a meretwenty-five cents per month), and thus had some equitable claim to atleast some of the death benefits.221 Moreover, the French decisionhas not been cited by any Texas or other courts as reliable precedent.
At best, the cited cases demonstrate that Texas courts might, incertain highly unusual situations, when necessary to do equity, hold aninsurer liable for death benefits to the estate of an insured even if theinsurer already has paid the benefits to the named beneficiary.222 Itis far from clear that Plaintiffs can allege the necessary circumstancesin this case. Wal-Mart appears to be financially viable, there is noindication of any indemnification agreement between Wal-Mart and AIG, andthere is no evidence or allegation that AIG knew of the Sims Estate'sclaim to the policy proceeds when it paid them to Wal-Mart.223 Insum, the Sims Estate's claim against AIG rests on an exceedingly slimreed.
Nevertheless, at this early stage in the proceedings, the Court isconstrained to permit an amendment of the Complaint, if the Sims Estateinsists, in light of the fact-sensitive inquiry required by Cohen. It isnot "beyond doubt" that the Sims Estate can prove no set of facts insupport of its claim which would entitle it to relief. Conley v. Gibson,355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); SouthernChristian Leadership Conf. v. Supreme Court of Louisiana, 252 F.3d 781,786 (5th Cir. 2001). Therefore, the Court grants the Sims Estate theopportunity to replead its claim against AIG, subject to the admonishmentthat Plaintiffs are not to reargue matters addressed comprehensively inthis Opinion. See also infra Section VI.B.2.224
The Court has considered AIG's other arguments on this issue and findsthem unpersuasive. Therefore, AIG's motion to dismiss is granted withoutprejudice to Plaintiff Sims Estate's right to replead. If the Sims Estateintends to pursue its claims against AIG, the Sims Estate shall file aThird Amended Complaint within ten (10) business days of entry of thisOpinion.225
VI. CAMELOT-RELATED CONTENTIONS
The Camelot Plaintiffs seek a declaratory judgment that (i) the CamelotDefendants never have had an insurable interest in the lives of theCamelot Plaintiffs, (ii) the Employer Defendants are not the legal ownersof the COLI policies on the Camelot Plaintiffs' lives, and (iii) underTexas law, the employees are the "lawful owners" of the COLI policies,with all rights of the "owner" as defined in the policies. The CamelotPlaintiffs also seek a judicial determination of the value of aconstructive trust and damages arising from Defendants' wrongs.
The Camelot Defendants and Hartford strenuously argue that Plaintiffs'claims are not ripe and thus not justiciable.226For the reasons explained below, the Court holds that the CamelotPlaintiffs' claims are ripe for adjudication.
1. Declaratory Judgment Standards and the Ripeness Doctrine
In support of their request for a declaratory judgment, the CamelotPlaintiffs rely on 28 U.S.C. § 2201 (a), which provides in pertinentpart: "In the case of actual controversy within its jurisdiction . . . anycourt of the United States, upon the filing of an appropriate pleading,may declare the rights and other legal relations of any interested partyseeking such declaration, whether or not further relief is or could besought." Parties may seek declaratory judgment before a completed"injury-in-fact" has occurred. United Transportation Union, 205 F.3d at857.
Nevertheless, to be ripe, a declaratory judgment claim must be basedupon an "actual controversy." Id.; Orix Credit Alliance, Inc. v. Wolfe,212 F.3d 891, 896 (5th Cir. 2000).227 An "actual controversy existswhere `a substantial controversy of sufficient immediacy and reality[exists] between parties having adverse legal interests.'" Id. (citationomitted). "A court should dismiss a case for lack of ripeness when thecase is abstract or hypothetical." New Orleans Public Service, Inc. v.Council of New Orleans, 833 F.2d 583, 586 (5th Cir. 1987); Orix Credit,212 F.3d at 895-96; United Transportation Union v. Foster, 205 F.3d 851,857 (5th Cir. 2000).
"The [ripeness] key considerations are `the fitness of the issues forjudicial decision and the hardship to the parties of withholding courtconsideration.' . . . A case is generally ripe if any remaining questionsare purely legal ones; conversely, a case is not ripe if further factualdevelopment is required." New Orleans Pub. Serv., Inc., 833 F.2d at586-87 (citations omitted) (quoting Abbott Labs. v. Gardner, 387 U.S. 136,149, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967), modified on other grounds byCalifano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977));accord Groome Resources Ltd., L.L. C. v. Parish of Jefferson, 234 F.3d 192,199 (5th Cir. 2000).
2. Defendants' Ripeness Arguments
All the Camelot Plaintiffs are alive. Under the express terms of theCOLI policies, the Employer Defendants are allowed to change the namedbeneficiaries or to surrender the policies while the insureds,Plaintiffs, are alive. The Camelot Defendants and Hartford accordinglyargue that these Plaintiffs' claims are too contingent to be ripe.Defendants argue that there "is no justiciable controversy because any`rights' that [Camelot Plaintiffs'] estates may be entitled to in thefuture depend on events which have not occurred and, in some cases,likely never will occur." Camelot Defendants' Motion to Dismiss, at 12.
The Court must consider each cause of action specifically asserted bythe Camelot Plaintiffs to determine whether there is an actualcontroversy on that claim. Defendants' contentions fail to appreciatethese Plaintiffs' first two fundamental claims for relief, namely, arequest for a declaration that the Employer Defendants now lack (and inthe past, lacked) an insurableinterest in Plaintiffs' lives, and a declaration that the EmployerDefendants are not (and have not been) the lawful owners of the COLIpolicies. The fact that the Employer Defendants may someday decide tosurrender a policy or that these Defendants may change the beneficiariesin the future does not resolve the ripeness issues as to the CamelotPlaintiffs' claims, which challenge present circumstances. As discussedabove, under the Texas insurable interest doctrine, only specifiedcategories of people or entities may own insurance on another's life. Twopublic policy concerns underlie this doctrine: (i) the prevention ofmurder, and (ii) the prevention of improper wagering on human life.E.g., Stillwagoner, 979 S.W.2d at 358. The Camelot Plaintiffs' claimsraise the immediate questions of whether the mere existence of theCamelot COLI policies violates Texas law, and whether the EmployerDefendants are now the legal owners of the COLI policies on Plaintiffs'lives. Plaintiffs' claims thus satisfy the first of the Fifth Circuit'stwo ripeness factors, i.e., that there is an actual controversy that isfit for judicial review. See New Orleans Public Service, 833 F.2d at586-87.
As to the second ripeness factor, the Court finds that each CamelotPlaintiff would suffer hardship cognizable under Texas law, if a rulingin this case were delayed until that Plaintiff died. To withhold decisionin a case would unnecessarily permit the potential violation tocontinue, thereby prolonging the very harms the insurable interestdoctrine was designed to discourage, particularly the wagering on theinsured's life. Thus, determination of the issue of whether the violationexists should not have to wait for the death of the insured. Theinsurable interest doctrine is prophylactic. There is no reason to delaya ruling on the declaratory relief the Camelot Plaintiffs seek.
Defendants' opposition focuses on the 1951 decision of the Dallas Courtof Civil Appeals in Roberts v. Southwestern Life Ins. Co., 244 S.W.2d 302,308 (Tex.Civ. App. — Dallas 1951, writ ref'd n.r.e.). In Roberts,the court held that T.P. Roberts, owner of several insurance policies,was estopped from asserting a right that he claimed under the Texasinsurable interest doctrine to change the beneficiaries in life insurancepolicies without the consent of his former wife, Allene Roberts, one ofthe named beneficiaries on the policies. The Roberts court assumed forits ruling that Allene lacked an insurable interest in T.P.'s life afterentry of their final divorce judgment. The Roberts court reasoned atseveral points in its opinion that T.P. was estopped from disturbing thefinal agreed divorce judgment entered years earlier by a court ofcompetent jurisdiction, both because that judgment was final and becausethe judgment was based on the parties' agreed property settlement.228The court,at the end of the opinion, noted that a determination of insurableinterest in the case was not necessary until T.P. died, because the namedbeneficiaries might predecease T.P., thereby mooting the issues.229Id. at 308-09. The Roberts decision is sui generis. The language on whichDefendants rely was arguably dicta, and certainly was language designedmerely to bolster an already clear and well supported result.
The precedential value of these comments by the Roberts court issharply limited by the unique circumstances before that court. In anyevent, the Roberts ripeness ruling has been severely undermined by theTexas Supreme Court's decision in Empire Life Ins. Co. v. Moody,584 S.W.2d 855 (Tex. 1979).230 In that case, the Supreme Courtdirected the lower courts to determine an insurable interest issue, atthe request of the insured prior to his death.231 The Empire courtthusrecognized that the insurable interest issue was ripe for adjudication.Empire, 584 S.W.2d at 858. The Roberts ruling is limited to the uniquefacts of that case, and is not a persuasive precedent on the ripenessissue presented here.232
The Court concludes that, under Texas law, the Camelot Plaintiffs'insurable interest claims are ripe and justiciable during their lives. Ifthese Plaintiffs' claims are valid, then there is no reason to allowimproper insurance contracts to continue without judicial declaration ofthe parties' rights. The Court therefore holds that there is a presentand actual controversy raised by the Camelot Plaintiffs in this case, andtheir claims are ripe for adjudication.
B. The Merits of Camelot Plaintiffs' Claims for Relief
The Camelot Plaintiffs have moved for summary judgment on their requestfor a declaration that the Camelot Defendants have no insurable interestin their lives.233 The Camelot Defendants and Defendant Hartford movefor summary judgment dismissing the Camelot Plaintiffs claims as a matterof law.234 After careful consideration of the parties' submissions,the record, and the applicable authority, the Court grants the CamelotPlaintiffs' motion. The Court denies in part and grants in part theCamelot Defendants' and Hartford's summary judgment motions on thesematters.
1. Camelot Plaintiffs' Claim for Declaration that Camelot Defendants Lack an Insurable Interest
The Camelot Plaintiffs claim that the Camelot Defendants lack aninsurable interest in the Camelot Plaintiffs' lives. These Plaintiffsargue that Texas law recognizes three forms of insurable interest: thebeneficiary must be (i) related by blood or affinity, (ii) a creditor forthe insured, (iii) or "one having a reasonable expectation of pecuniarybenefit or advantage from the continued life of another." Drane, 161S.W.2d at 1058-59.235 It isundisputed that the first two categories are inapplicable to this case.The Camelot Plaintiffs argue that the third category also does not applyin this case.236
The Camelot Plaintiffs are correct. The Camelot Defendants fail todemonstrate that they presently have any expectation of pecuniarybenefits or advantage from Camelot Plaintiffs apart from the COLIpolicies on these Plaintiffs' lives. Each Camelot Plaintiff's employmentwith the Camelot Defendants terminated in or prior to 1998.237 Thus,at the present time the Camelot Defendants have no relationship with theCamelot Plaintiffs outside the COLI policies.
In response to the Camelot Plaintiffs' motion, Hartford contends thatit needs a continuance under Rule 56(f) of the Federal Rules of CivilProcedure to allow for discovery to determine whether the "key man"concept applies.238 The Court denies this request since Hartford hasfailed to meet its burden to show entitlement to such delay.
"In order to obtain a continuance of a motion for summary judgment fordiscovery purposes, a party must set forth some statement to the courtindicating why additional discovery is necessary and `how additionaldiscovery will create a genuine issue of material fact.'" Canady v.Bossier Parish School Bd., 240 F.3d 437, 445 (5th Cir. 2001) (citingLeatherman v. Tarrant County Narcotics Intelligence and CoordinationUnit, 28 F.3d 1388, 1395 (5th Cir. 1994)); Stearns Airport Equip. Co. v.FMC Corp., 170 F.3d 518, 535 (5th Cir. 1999). A party "may not simplyrely on vague assertions that additional discovery will produce needed,but unspecified facts." Krim v. BancTexas Group, Inc., 989 F.2d 1435,1442 (5th Cir. 1993) (internal citations omitted). Contrary to theselegal requirements, Hartford has provided nothing except a vaguesuggestion that there may be a "key man" issue.
Texas law provides, by statute, that businesses may have an insurableinterest in their personnel significant to the business, i.e., officers,stockholders and partners (in partnerships). TEX.INS.CODE, art. 3.49;see, e.g., Stillwagoner, 979 S.W.2d at 361. Article 3.49 has beeninterpreted narrowly to grant an insurable interest "only to the lives ofofficers and stockholders `to whom the other stockholders lookedprimarily for the success of the business' or `on whose services thecorporation depends for its prosperity, and whose deathwill be the cause of a substantial loss to it.'" Stillwagoner, 979 S.W.2dat 361 (quoting McBride v. Clayton, 140 Tex. 71, 166 S.W.2d 125, 128-29(1942)). The "mere existence of an employer/employee relationship isnever sufficient to give the employer an insurable interest in the lifeof the employee." Id.; see Tamez, 999 S.W.2d at 17-19. See also Drane,161 S.W.2d at 1058-59; accord, DeLeon, 259 F.3d at 350. No insurableinterest exists if the loss arises "from the cessation of ordinaryservice." McBride, 166 S.W.2d at 129 (emphasis in original). In anyevent, once a "key man" leaves the company's employ, the need for "keyman" insurance disappears, unless one of the other bases for insurableinterest exists. See, e.g., Cheeves, 28 S.W. at 276 ("The want of aninsurable interest is just as absolute where it has ceased as where itnever existed, and the inducement to destroy the life insured for gain isjust as strong in the one case as in the other.").
Hartford has failed to identify any specific individual to whom the"key man" concept might apply. Hartford has known the identity of thenamed Plaintiffs for a substantial period of time and has had continuousaccess to its own records on these individuals.239 Hartford issuedinsurance on the lives of 1430 Camelot employees, who were retail storemanagers or district supervisors. There is no indication that any of thenamed Plaintiffs, or any of the insureds, fits the stringent Texas "keyman" requirements. Thus, Hartford has failed to meet its Rule 56(f)burden to entitle it to a continuance or discovery.
The Camelot Defendants and Hartford also fail to meet their nonmovantsummary judgment burden to raise a fact issue that any Camelot Plaintiffis or was a "key man" with the Camelot Defendants.240 Thus, the Courtholds that the Camelot Defendants currently lack, and have lacked in thepast, an insurable interest in the Camelot Plaintiffs' lives.
The Camelot Defendants and Hartford, apparently recognizing the uphillbattle they face in light of Texas law on this point, assert severaldubious arguments. The Court discusses each below.241
Hartford contends, expressly contrary to Texas law,242 thatPlaintiffs lack standing to assert their claims because only insurers maystate a claim for a lack of insurable interest. Hartford urges the Courtto adopt the law of other states, since "Texas law on this subject is theanomaly, not the rule."243 The Court is bound to apply Texas law forthe reasons set forth in detail in prior sections of this Opinion.Accordingly, this argument is rejected.
Hartford further argues that the Camelot Plaintiffs are required underTexas law to show that Defendants have no insurable interest in theirlives both at the time the policy was issued and at the time Plaintiffs'die.244 Hartford's premise is based solely on a misconstruction ofthe two citations it provides. See Insurance Contracts and Coverage, 45TEX.JUR.3D § 217 (1995); Roberts v. Sonthwestern Life Ins. Co.,244 S.W.2d 302, 308 (Tex. Civ. App. — Dallas 1951, writ ref'dn.r.e.)
Hartford relies on the sentence in Roberts that: "In major respects, apolicy of insurance, like a will, speaks at the time of death." Id. at308. The Court has already addressed Roberts above, finding itinapplicable to this case and undermined, if not overruled in thisrespect, by the Texas Supreme Court in Empire Life Ins. Co. v. Moody,584 S.W.2d 855, 858 (Tex. 1979). More importantly for present purposes,the quote on which Hartford relies does not address the issue at bar.Roberts contains nothing to support Hartford's argument.
The Texas treatise cited by Hartford merely sets forth the rule appliedby Texas courts in determining who is entitled to death benefits when thebenefits become payable. This rule is that the "beneficiary must have aninsurable interest both at the time when the policy is issued and whenthe benefits are payable." Insurance Contracts and Coverage, 45TEX.JUR.3D § 217 (1995).245 This well established principle meansthat if the named beneficiary lacks an insurable interest at eithertime, that beneficiary may not retain the death benefits from the lifeinsurance policy. Hartford attempts to create a new rule. Hartfordcontends that the Camelot Plaintiffs, who are alive, cannot show that theCamelot Defendants lack an insurable interest because these Plaintiffscannot negate the existence of an insurable interest at the second of thetwo required points in time, i.e., at Plaintiffs' death. Hartford'sargument amounts to the proposition that the existence or absence of theinsurable interest during the insured's life is immaterial. This argumentfalls of its own weight. First, under black letter Texas law, the absenceof an insurable interest at either pertinent time requires denial of thedeath benefits. In this case, the Camelot Defendants cannot qualify forthe death benefits on the Camelot Plaintiffs since Defendants lacked aninsurable interest when the COLI policies were created.
Second, Hartford's reliance on the cited treatise is misplaced sincethat provision is relevant only to the award of death benefits, which arepayable only after theinsured dies. The Camelot Plaintiffs do not seek payment of deathbenefits at this time. Plaintiffs seek a declaration that the CamelotDefendants do not now have an insurable interest in their lives. Theinquiry about the existence of an insurable interest at an insured'sdeath in the future (and the proper remedy for any violation of the Texasdoctrine) is separate from the determination of a beneficiary's presentinsurable interest on the insured while alive.
Hartford's argument, on close analysis, is essentially a reworkedripeness argument. As the Court held in the preceding section of thisOpinion, the Camelot Plaintiffs' claim for a declaration as to theexistence of a current insurable interest is ripe, and the CamelotPlaintiffs are entitled at this time to seek a ruling in this case as towhether the Camelot Defendants have a legally cognizable insurableinterest.
On the merits, Hartford and the Camelot Defendants have failed to raisea genuine fact issue in response to the Camelot Plaintiffs' motionseeking a declaration that the Camelot Defendants lack an insurableinterest in Plaintiffs' lives. Therefore, the Camelot Plaintiffs' prayerfor a declaration that the Camelot Defendants lack an insurable interestin the Camelot Plaintiffs' lives is granted. The Hartford and CamelotDefendants' motions for summary judgment to dismiss this claim aredenied.246
2. Camelot Plaintiffs' Claim for a Constructive Trust and Ownership of the COLI Policies
In the Complaint, Plaintiffs seek a declaration that they are theowners of all existing COLI policies on their lives.247 Plaintiffsfurther seek a "final judgment concluding that the policies, policybenefits, and any residual or resulting benefits from the policies areheld in a constructive trust by [Defendants]." Complaint, at 12. TheCamelot Defendants and Hartford move to dismiss these claims.248 TheCourt grants these aspects of Defendants' motions.249 These rulingsapply to Camelot Plaintiffs, who all are still alive, where no deathbenefits are due or have been paid under the Camelot COLI policies.
(a) COLI Policy Proceeds Upon a Plaintiff's Death
Courts applying the Texas insurable interest doctrine consistently haveheld, in the event that the beneficiary lacks an insurable interest, thatthe insurance policy is to be enforced as written except that aconstructive trust is imposed in favor of the insured's estate on thedeath benefits that are paid.250 In mostreported cases, the insured has died.251 The insurable interestdoctrine precludes the Camelot Defendants from retaining death benefitsfrom a COLI policy on the life of a Camelot Plaintiff, if the COLI policyis still owned by the Camelot Defendants at the time the CamelotPlaintiff insured dies and if, at that time, the policy designates aCamelot Defendant as the beneficiary. See, e.g., Insurance Contracts andCoverage, 45 TEX.JUR.3D § 217 (1995). However, for the reasonsexplained below, Texas law does not justify imposition of immediateconstructive trusts on contingent death benefits nor justify the grantingto Plaintiffs of other rights under the COLI policies while the insuredsare still alive.
(b) Living Plaintiffs' Available Remedies
The Camelot Plaintiffs, the living insureds under COLI policies, seekto obtain ownership of the insurance policies per se, as well as ajudgment imposing a constructive trust on "the policies, policybenefits, and any residual or resulting benefits from the policies."252Each Plaintiff thus seeks control over the policy on his own life, aswell as all benefits available to the owner under the policy duringPlaintiff's lifetime and thereafter.253 Plaintiffs' request for animmediate constructive trust on the COLI policies would requireDefendants to handle the policies as fiduciaries, giving Plaintiffssubstantial authority over the disposition of the policies and theirproceeds. Establishment of constructive trusts during Plaintiffs' lives,as Plaintiffs request, would be analogous to transfer of ownership of thepolicies toPlaintiffs. Therefore, the Court will address Plaintiffs' claims forownership and for a constructive trust together.
After considering the parties' arguments and the authorities applyingthe insurable interest doctrine, the Court finds no probative support inTexas law for the far-reaching remedies Plaintiffs request. The CamelotPlaintiffs attempt to obtain remedies well beyond relief any Texas courtpreviously has ordered under the insurable interest doctrine incircumstances even remotely similar to those here. The Court declinesthis invitation. Texas courts would not provide for the transfer of legalor beneficial ownership of the COLI policies during the insured'slifetime to remedy a violation of the insurable interest doctrine.
The Fifth Circuit recently addressed the remedies available under theinsurable interest doctrine in DeLeon v. Lloyd's London, CertainUnderwriters, 259 F.3d 344 (5th Cir. 2001). The Court was faced withclaims of a deceased insured's estate, and not, as in the instant case,the claims of living insureds. Nevertheless, the DeLeon opinion isinstructive.
In DeLeon, the estate of a deceased insured brought suit against theinsurer that had issued an "accidental death" life insurance policy tothe insured's employer. Id. at 346. The employer was the beneficiary andowner of the policy. The employer had purchased the policy in lieu ofparticipation in the worker's compensation program. The insured died inthe course of employment, and the insurer paid death benefits to theemployer. The insured's estate sued the employer in state court. Thoseparties settled; the employer compensated the estate in exchange for acomprehensive release from liability. Id. at 347. At the time it settledwith the employer, the estate was unaware of the existence of theemployer-owned accidental death policy. After learning of the policy, theestate sued the insurer and the insurance broker. The insurer asserted athird-party claim against the employer. Ultimately the case proceeded infederal court on only the claims of the estate against the insurer. Id.
The estate in DeLeon sought to reform the insurance contract to nameitself as the lawful beneficiary of the policy.254 259 F.3d at 350.The district court granted summary judgment to the insurer. Id. at 347.The court of appeals held that (i) the employer did not have an insurableinterest in the insured's life and (ii) the employer held the policyproceeds, which the insurer previously had paid to the employer, inconstructive trust for the benefit of the estate. Id. at 349. The courtof appeals, however, refused to reform the insurance contract tosubstitute the estate as beneficiary. Id. at 353.
In reaching its decision, the Fifth Circuit recognized the traditionalremedy under the insurable interest doctrine was to create a constructivetrust on the policy proceeds consisting of the death benefits. Id. at350-51.255 The court of appealsnoted that the purpose of the insurable interest doctrine is not toimpose a penalty on the insurer, and held that the traditional remedy wassufficient to vindicate the insurable interest doctrine. Id. at 351.256
Plaintiffs here seek the transfer of legal and beneficial ownership ofinsurance policies to themselves. This prayer amounts to a request forreformation of the insurance contract, a remedy the DeLeon courtspecifically denied. This Court similarly is refuses to grant reformationof the COLI policy contracts. This extraordinary relief is not necessaryto vindicate the goals of the insurable interest doctrine for livingPlaintiffs. Plaintiffs concede that they cite no cases granting theremedy of assignment to an insured of the ownership of a policy incircumstances remotely analogous to this case. The Court's declarationthat the Camelot Defendants lack an insurable interest in the CamelotPlaintiffs' lives is sufficient to eliminate these Defendants'theoretical incentive to commit murder or to wager on the life of theinsured. The remedial purpose of the insurable interest doctrine issatisfied by the Employer Defendants' knowledge that a constructive truston death benefits will be imposed, if necessary, after an insured'sdeath.
Plaintiffs resist this result, first, by arguing that it logicallyfollows from the insurable interest doctrine that they are the "owners"of the COLI policies. Plaintiffs' argument appears to be that, first,Texas law forbids a person owning a life insurance policy without aninsurable interest in the life of the insured; second, Texas law will notinvalidate the insurance contract itself; and, therefore, the insurednecessarily must become the owner of such a policy that continues toexist.257 Plaintiffs' reasoning is faulty. Plaintiffs assume that theCamelot COLI policies must continue in force as presently written. Thereis no reason, however, under the insurable interest doctrine that a COLIpolicy must continue in its present form. Any step that eliminates theimproper incentives the insurable interest doctrine is designed toaddress is sufficient to satisfy Texas public policy. Subject to thewritten terms of each COLI policy, the owner may elect among variousoptions: change the beneficiary to a person with an insurableinterest258; change the insured so the owner obtains aninsurable interest; surrender the policy; or merely let the policylapse. The choice belongs to the owner of the contract, the CamelotDefendants. This Court sees no reason to interfere with theseDefendants' decisions as to how the COLI policies' violations ofTexas law should be corrected.
Plaintiffs next point out that various Texas courts have stated that"the public policy of this state forbids allowing one to own an insurancepolicy on the life of another in whom he has no insurable interest."E.g., Shoemaker, 48 S.W.2d at 614. These types of comments, however, donot address the relief of imposition of an immediate constructive trustor transfer of ownership, as Plaintiffs seek. These comments simplyestablish that the violation must be cured. These courts give noindication that the insured, while alive, is entitled to a financialbenefit from Defendants in the process of effecting the cure.
Plaintiffs also attempt to generalize from several appellate courtrulings in divorce cases. Plaintiffs contend that "Texas courts have beencalled upon in other similar circumstances to adjust ownership rightsunder insurance policies while the insured person is living."259Plaintiffs contend that the divorce cases provide more pertinent guidancethan the Stillwagoner,260 Tamez,261 and DeLeon262 line ofcases, which Plaintiffs distinguish as involving deceased insureds whodied without awareness of their employers' ownership of COLI policies ontheir lives. Plaintiffs are correct that the Stillwagoner line of casesdoes not specifically address the rights of living insureds, and thedivorce cases do. However, the Court does not find the divorce casespersuasive authority for Plaintiffs' positions. Indeed, these casesimplicitly support the result reached by this Court.
Plaintiffs, in reliance upon divorce cases, posit that Texas courtshave approved practical solutions to solve insurable interestviolations. In these cases, the courts seek to compensate the former wifefor her contribution during her marriage deemed made under communityproperty laws in connection with premium payments for an insurance policyon the life of her husband. See Shoemaker v. Am. Nat'l Ins. Co.,48 S.W.2d 612, 613-14 (Tex.Comm'n App. 1932, jdgm't adopted)263;Berdoll v. Berdoll, 145 S.W.2d 227, 230-31 (Tex.Civ.App. — Austin 1940, writ dism'd).264 After a divorce, one formerspouse has no insurable interest in the other spouse's life. One formerspouse named as the policy beneficiary may not receive death benefitspost-divorce from an insurance policy on the other former spouse. TheBerdoll court held that one of the insurance policies in issue had to besurrendered for its cash value, which was to be paid to the former wife.In Shoemaker, the court granted the beneficiary who lacked an insurableinterest the choice of surrendering the policy and obtaining thesurrender value during the insured's life. Berdoll and Shoemakerdemonstrate that Texas courts will exercise equitable powers to grant abeneficiary without an insurable interest a right to the surrender valueof the policy, essentially to reimburse that beneficiary for costs ormonies deemed paid in connection with the purchase of the policy. E.g.,Shoemaker, 48 S.W.2d at 614. However, this result does not dictate theoutcome for the Camelot Plaintiffs' claims. Texas courts havecharacterized the surrender value as a "debt against the insurancecompany" that does not invoke the insurable interest doctrine. Id. Infact, contrary to Plaintiffs' position, the appeals court in Shoemakerfound that an interest in the surrender value gives its holder aninterest in preserving the life of the insured, at least until the holdercan claim the surrender value. Shoemaker, 48 S.W.2d at 615. Plaintiffs'request for ownership of, or immediate constructive trust on, the CamelotCOLI policies extends much farther than the remedies imposed in the caseson which Plaintiffs rely. Berdoll and Shoemaker therefore do not supportPlaintiffs' requests for relief.
Plaintiffs also argue, this time without any viable legal support, thatTexas law makes no meaningful distinction between ownership of policybenefits after death and the ownership of the policy during life, andthat there is only a "technical distinction" between the remedy availableto the Plaintiffs' estates upon their deaths and COLI policy ownershipduring Plaintiffs' lives. This argument is rejected. In the single casecited by Plaintiffs, Little v. X-Pert Corp., 867 S.W.2d 15 (Tex. 1993),there was no issue of a lack of an insurable interest. Id. at 17.265In fact, thecorporation that owned the policy indisputably had an insurable interestin the life of the insured even after he sold his shares in thecorporation. Id. This case is inapplicable and Plaintiffs' argument isrejected.
Plaintiffs also invoke basic principles of equity to support theirargument for ownership of or an immediate constructive trust on the COLIpolicies. Plaintiffs request that the Court exercise its inherentequitable powers to adjust globally the ownership rights of the COLIpolicies. Plaintiffs contend that they should recover financially fromthese policies (through the transfer of ownership or constructive controlover the policies) because Defendants violated the law and Plaintiffshave been, and continue to be, at risk as insureds. This argument isunavailing. Plaintiffs contributed nothing of value for the COLIpolicies, unlike the former wives in Berdoll and Shoemaker, who under theTexas community property laws were deemed to have paid part of thepremiums for the insurance on their former husbands' lives. Plaintiffspoint to no physical or financial harm to themselves arising from thepolicies. It is the Camelot Plaintiffs who would receive a windfall iftheir requested relief were granted. The Camelot Plaintiffs' requests forownership of or a constructive trust over the COLI policies are denied.
As the last arrow in their quiver, Plaintiffs seek to impose aconstructive trust on all policy benefits, including the surrendervalue,266 because, Defendants allegedly have been unjustly enrichedby the COLI policies. Plaintiffs contend that Defendants exploited themfor the purpose of Defendants' profits. Plaintiffs present no probativelegal authority to support the relief sought. In Texas, a "party mayrecover under the unjust enrichment theory when one person has obtained abenefit from another by fraud, duress, or the taking of an undueadvantage." Heldenfels Bros., Inc. v. City of Corpus Christi,832 S.W.2d 39, 41 (Tex. 1992); Academy Corp. v. Interior Buildout &Turnkey Constr., Inc., 21 S.W.3d 732, 741 (Tex.App. — Houston [14thDist.] 2000, n. pet. h.). "Unjust enrichment, however, is not a properremedy merely because . . . the benefits to the person sought to becharged amount to a windfall." Heldenfels, 832 S.W.2d at 41-42; AcademyCorp., 21 S.W.3d at 741.
Plaintiffs essentially base their request for relief on the conceptthat the Camelot Defendants will experience a "windfall" if they areallowed to retain the surrender value. Plaintiffs also apparently contendthat Hartford will obtain (and may have obtained already) an unjustbenefit because the policies generate premiums andinterest on the loans to cover the premiums. These matters areinsufficient to justify equitable relief that grants Plaintiffs afinancial windfall.
Furthermore, in seeking the surrender value, Plaintiffs essentiallyseek reformation of the insurance contracts so they become the owners.This result has been rejected repeatedly by Texas courts and the FifthCircuit. The Texas insurable interest violation alone does not warrantreformation of the insurance contract. Plaintiffs' alternative relief,the imposition of a constructive trust during Plaintiffs' lives, would dolargely the same thing. As a practical matter, the constructive trust isdesigned either to force the Camelot Defendants to surrender the policiesand pay the Camelot Plaintiffs the surrender value, or to require theseDefendants to maintain the policies until the Camelot Plaintiffs' deathsand then to pay the proceeds to Plaintiffs. The extreme remedy of aconstructive trust over the COLI policies during Plaintiffs' lives is notnecessary to correct the identified violations of Texas law. As notedpreviously, Plaintiffs have not shown they have suffered any financial orphysical losses as a result of Defendants' actions. Hartford entered intoprivate contracts for insurance with the Camelot Defendants. As amongthese parties, the Court will not interfere with these agreements. Theworkings of the premium payments and loans to cover these costs do notdirectly involve Plaintiffs. Therefore, the Court holds that Plaintiffsmay not recover a financial benefit through a contract reformation orconstructive trust that provides Plaintiffs the recovery of the policies'surrender values, per se or net of the related loans.
In sum, the Court is unpersuaded by the merits of Plaintiffs' equitablearguments. The Court therefore exercises its discretion to deny thenovel, extraordinary remedies Plaintiffs request for Defendants'violations of the insurable interest doctrine. Under this doctrine,Plaintiffs' and the Court's only valid concern is to remove the incentivefor Defendants to take Plaintiffs' lives or to improperly wager on them.This goal is accomplished by informing the parties now that the CamelotDefendants lack an insurable interest that allows them to retain COLIpolicy death benefits on Plaintiffs' lives. Defendants may not be innocentplayers in the drama they assisted in setting in motion. However, in theabsence of any actual physical or economic harm suffered as a result ofthe policies, the Court sees no reason to impose unprecedented remedies.
Accordingly, the Court denies the Camelot Plaintiffs' request forownership of the Camelot COLI polices on their lives, and denies thesePlaintiffs' request for constructive trusts over the policies and theresulting rights and benefits. The Court grants Defendants' motions todismiss the Camelot Plaintiffs' prayers for a declaration of ownershipand for imposition of a constructive trust over the COLI policies duringPlaintiffs' lifetimes.267
VII. CONCLUSION AND ORDER
Summary of Rulings. After detailed consideration of the parties' myriadmotions, the voluminous record, and all applicable authorities, the Courtconcludes the following:
The Texas law of insurable interest governs this case. The Court isconvinced that a Texas courts would apply Texas insurable interest law tothe COLI policies on Plaintiffs' lives.
Defendants' arguments for dismissal of the Sims Estate's claim arewithout legal merit. The Sims Estate's claim is not preempted by ERISA,as Wal-Mart has argued, because it does not relate to an ERISA plan.Further, the Sims Estate's claim was timely filed within the applicablefour-year statute of limitations. Defendant AIG's motion for dismissal ofthe Sims Estate's claim against it is granted, but the Sims Estate isgranted leave to replead if it deems necessary.
The Court denies in part and grants in part Defendants' motions todismiss or for summary judgment on the Camelot Plaintiffs' claims. TheCamelot Plaintiffs present a ripe and justiciable controversy. Theinsurable interest doctrine is a prophylactic rule intended to eliminatethe incentive to wager on or take the life of another. The Camelot COLIpolicies on Plaintiffs' lives are still in effect and thus the CamelotPlaintiffs have an actual controversy with the Camelot Defendants.
On the merits of the Camelot Plaintiffs' declaratory judgment claim,the Camelot Defendants lack an insurable interest under Texas law in thedeath benefit from the COLI life insurance policies on Texas Plaintiffs'lives.
The Camelot Plaintiffs' requests for equitable relief are denied.Although the Camelot Defendants cannot retain any death benefits underthe offending COLI policies, Texas law grants the remedy of aconstructive trust on the policy benefits only at the insured's death, ifthe offending policy still exists in its current form at that time. TheCamelot Plaintiffs' request to be declared the owners of the COLIpolicies in lieu of the Camelot Defendants and the Plaintiffs' request forreformation on the policies are unwarranted extensions of Texas law. TheCamelot Defendants remain the owners of the COLI policies. Furthermore,Plaintiffs are not entitled to an immediate constructive trust coveringthe COLI policies on their lives, the death benefits, the surrender valueor any other residual rights under these policies.
Certification for Interlocutory Appeal. The Court finds that itsrulings on Wal-Mart and the Trust's motions for summary judgment [Docs.#19, 58, 113-2]268 on the questions of choice of law and statute oflimitations involve controlling questions of law as to which there issubstantial ground for difference of opinion and that an immediate appealfrom this Opinion may materially advance the ultimate termination of thislitigation. The details of the Court's reasoning will be set forth in aseparate order.
It is therefore
ORDERED that the Motions of Defendants Camelot Music, Inc. and TransWorld Entertainment Corp. to Dismiss the Complaint [Docs. #15, 36] areGRANTED IN PART and DENIED IN PART with prejudice. The CamelotPlaintiffs' claims for ownership of, and for a constructivetrust on, the Camelot COLI policies are DISMISSED. It is further
ORDERED that the Motion of Defendants' Camelot Music, Inc. and TransWorld Entertainment Corporation for Summary Judgment [Doc. #30] isGRANTED in part and DENIED in part, with prejudice. It is further
ORDERED that the Camelot Plaintiffs' Motion for Partial SummaryJudgment [Doc. #17] is GRANTED in part and DENIED in part. The CourtDECLARES pursuant to 28 U.S.C. § 2201 (a) that Defendants CamelotMusic, Inc. and Trans World Entertainment Corporation lack an insurableinterest in the lives of Plaintiffs Scott Mayo, Toribio Rochas, Jr.,Tomas Pena, Daniel Garza, and Charles W. Holmes, Jr. It is further
ORDERED that the Defendant Wal-Mart's Motion for Summary Judgment andBrief in Support [Doc. #19] is DENIED with prejudice. It is further
ORDERED that the Motion for Summary Judgment of Defendant Wal-MartStores, Inc. Corporation Grantor Trust, Through its Trustee, the WachoviaBank of Georgia, N.A. [Doc. #58] is DENIED with prejudice. It isfurther
ORDERED that Hartford Life Insurance Company's Motion for SummaryJudgment [Doc. #24] is GRANTED IN PART and DENIED IN PART withprejudice. It is further
ORDERED that Defendant AIG Life Insurance Company's Motion to Dismissand Memorandum in Support Thereof [Doc. #59] is GRANTED withoutprejudice to Plaintiff Sims Estate's filing a third amended complaintwithin ten (10) days from entry of this Order. It is further
ORDERED that Defendant AIG Life Insurance Company's Motion andMemorandum in Support of Summary Judgment on Plaintiffs' Second AmendedComplaint [Doc. #60] is DENIED with prejudice. It is further
ORDERED that Plaintiffs' requests pursuant to FED.R.CIV.P. 56(f) forcontinuance are DENIED. It is further
ORDERED that Defendant Wal-Mart's Objections to Declaration of Seth J.Chandler [Doc. #56], Defendants Camelot Music, Inc. and Trans WorldEntertainment Corporation Motion to Strike the Declaration of Seth J.Chandler [Doc. #54], and Hartford Life Insurance Company's Objection tothe Declaration of Seth J. Chandler [Doc. #55] each are DENIED. It isfurther
ORDERED that Hartford Life Insurance Company's request for acontinuance pursuant to FED.R.CIV.P 56(f) is DENIED. It is further
ORDERED that Plaintiffs' Motion to Strike, Response to Wal-Mart'sSupplemental Brief in Support of Motions for Summary Judgment,Supplemental Motion for Continuance and Leave to Depose Tom Emerick[Docs. #85, see Doc. #91] is DENIED. It is further
ORDERED that Plaintiffs' Response to Camelot's and Hartford'sSubmissions Concerning Policy Loans, Motion for Continuance and Leave toDepose Christine Repasy or, in the Alternative, to Strike her Affidavit[Doc. #86] is DENIED. It is further
ORDERED that Wal-Mart's Renewed Motion for Summary Judgment [Doc.#113-2] is DENIED.
The Clerk shall provide a copy of this Order to all parties.
1. See Motion of Defendants Camelot Music, Inc. and Trans WorldEntertainment Corp. to Dismiss Complaint [Doc. #15] ("CamelotDefendants' Motion to Dismiss"). The Camelot Defendants have also movedto dismiss the Second Amended Complaint, see Motion of Defendants CamelotMusic, Inc. and Trans World Entertainment Corp. to Dismiss the SecondAmended Class Action Complaint [Doc. #36], and incorporate by referencethe arguments they make in their first motion to dismiss. Defendants alsofiled a Memorandum of Defendants Camelot Music Inc., and Trans WorldEntertainment Corp. in Support of Motion to Dismiss Complaint [Doc. #16]("Camelot Memorandum"). Plaintiffs responded. See Camelot Plaintiffs'Response to Camelot's Motion to Dismiss [Doc. #28]. Defendants replied.See Reply of Defendants Camelot Music and Trans World EntertainmentCorporation in Further Support of Motion to Dismiss Complaint [Doc.#37]. Plaintiffs submitted a sur-reply. See Camelot Plaintiffs' Sur-Replyto Camelot's Motion to Dismiss [Doc. #41].
2. See Motion of Defendants' Camelot Music, Inc and Trans WorldEntertainment Corporation for Summary Judgment [Doc. #30] ("CamelotDefendants' Summary Judgment Motion"). Plaintiffs responded to thismotion. See Plaintiffs' Response to Camelot's Motion for Summary Judgment[Doc. #33]. The Camelot Defendants replied. See Reply of DefendantsCamelot Music, Inc. and Trans World Entertainment Corporation in FurtherSupport of Motion for Summary Judgment [Doc. #45]. Plaintiffs submitteda sur-reply. See Plaintiffs Sur-Reply concerning Camelot Music, Inc. andTrans World Entertainment Corporation's Motion for Summary Judgment[Doc. #50]. In this latter submission, Plaintiffs address issues raisedin several pending motions. The Court will refer to this generally as"Plaintiff's November 2, 2001 Submission."
3. See Camelot Plaintiffs' Motion for Partial Summary Judgment [Doc.#17] ("Camelot Plaintiffs' Summary Judgment Motion"). Defendants respondedin opposition. See Hartford Life Insurance Company's Response to CamelotPlaintiffs' Motion for Partial Summary Judgment [Doc. #39]; Response ofDefendants Camelot Music, Inc., and Trans World Entertainment Corporationto Camelot Plaintiffs' Motion for Partial Summary Judgment [Doc. #40].Plaintiffs replied. See Camelot Plaintiffs' Reply Concerning Their Motionfor Partial Summary Judgment [Doc. #50]. Defendants submittedsur-replies. See Sur-Reply of Defendants Camelot Music, Inc. and TransWorld Entertainment Corporation in Opposition to Camelot Plaintiffs'Motion for Partial Summary Judgment [Doc. #54]; Hartford Life InsuranceCompany's Sur-Reply to Camelot Plaintiffs' Motion for Partial SummaryJudgment and Objections to the Declaration of Seth J. Chandler [Doc.#55].
4. See Defendant Wal-Mart's Motion for Summary Judgment and Brief inSupport [Doc. #19] ("Wal-Mart's Summary Judgment Motion"). Wal-Mart alsosubmitted supporting documents. See Exhibits in Support of DefendantWal-Mart's Motion for Summary Judgment [Doc. #20] ("Wal-Mart'sExhibits"); Supplemental Exhibits in Support of Defendant Wal-Mart'sMotion for Summary Judgment and Brief in Support (Pages Omitted fromOriginal Exhibits 2 and 3) [Doc. #31]; Supplemental Exhibits in Supportof Defendant Wal-Mart's Motion for Summary Judgment and Brief in Support[Doc. #44] ("Wal-Mart's Supplemental Exhibits"); Notice of AdditionalAuthority in Support of the Motions for Summary Judgment of Wal-MartStores, Inc. and Wal-Mart Stores, Inc. Corporation Grantor Trust [Doc.#66]; Affidavit of Tom Emerick [Doc. #23] ("Emerick Aff.") Supp.Affidavit of Tom Emerick [Doc. #49] ("Supp. Emerick Aff."). Plaintiffsresponded. See The Estate of Douglas Sims' Response to Wal-Mart's Motionfor Summary Judgment [Doc. #32]. Wal-Mart replied. See DefendantWal-Mart's Reply to the Estate of Douglas Sims' Response to Wal-Mart'sMotion for Summary Judgment [Doc. #43]. Plaintiffs submitted asur-reply. See Plaintiffs' Sur-Reply Concerning Wal-Mart's Stores, Inc.'sMotion for Summary Judgment [Doc. #50]. Plaintiffs also contend thatsummary judgment is improper since discovery is necessary to determine ifgenuine fact questions exist. See Declaration of Scott M. Clearman inSupport of Request for Denial or Continuance of Summary Judgment(Fed.R.Civ.P.56(f)), ¶¶ 30-36 ("Clearman Decl."). This Rule 56(f)motion is denied as moot.
Wal-Mart also objected to evidence submitted by Plaintiffs. See Defendant Wal-Mart's Objections to Declaration of Seth J. Chandler [Doc. #56]. These objections are denied as moot. The Court has not considered the Declaration in its rulings.
5. See Motion for Summary Judgment of Defendant Wal-Mart Stores, Inc.Corporation Grantor Trust, Through its Trustee, the Wachovia Bank ofGeorgia, N.A. [Doc. #58] ("Wal-Mart Trust's Summary Judgment Motion").Plaintiffs submitted Plaintiffs' Response to Wal-Mart Stores, Inc.Corporation Grantor Trust's Motion for Summary Judgment [Doc. #62].
6. See Hartford Life Insurance Company's Motion for Summary Judgment[Doc. #24] ("Hartford's Summary Judgment Motion"). Plaintiffs respondedin opposition. See Camelot Plaintiffs' Response to Hartford's Motion forSummary Judgment [Doc. #33]. Hartford replied in support of its motion.See Hartford Life Insurance Company's Reply in Support of Motion forSummary Judgment [Doc. #45] ("Hartford's Reply"). Plaintiffs submitted asur-reply. See Plaintiffs' Sur-Reply Concerning Hartford Life InsuranceCompany's Motion for Summary Judgment [Doc. #50].
7. See Defendant AIG Life Insurance Company's Motion to Dismiss andMemorandum in Support Thereof [Doc. #59] ("AIG's Motion to Dismiss");Defendant AIG Life Insurance Company's Motion and Memorandum in Supportof Summary Judgment on Plaintiffs' Second Amended Complaint [Doc. #60]("AIG's Summary Judgment Motion"). Plaintiffs submitted the following inopposition to these motions: The Estate of Douglas Sims' Response to AIGLife Insurance Company's Motion to Dismiss [Doc. #64] ("Sims Estate'sResponse to AIG's Motion to Dismiss") and The Estate of Douglas Sims'Response to AIG Life Insurance Company's Motion for Summary Judgment[Doc. #65]. AIG replied. See Defendant AIG Life Insurance Company'sReply in Further Support of its Motion to Dismiss the Second AmendedComplaint [Doc. #73] ("AIG's Reply in Support of its Motion toDismiss"); Defendant AIG Life Insurance Company's Reply in FurtherSupport of Its Motion for Summary Judgment on the Second AmendedComplaint [Doc. #72].
8. See Transcript of Proceedings of Scheduling Conference, September7, 2001 [Doc. #26] ("Sept. 7, 2001 Transcript"); Transcript of Hearing,January 11, 2002 [Doc. #88] ("Jan. 11, 2002 Transcript").
9. See Letter of Scott Clearman (Plaintiffs' attorney) to Judge Atlas(Jan. 15, 2002) [no Doc. #] Affidavit of Christine Hayer Repasy [Doc.#76] ("Repasy Aff."); Supplemental Memorandum in Further Support of Motionto Dismiss the Complaint by Defendants Camelot Music, Inc. and Trans WordEntertainment Corporation [Doc. #78] ("Camelot Defendants'Supplement"); Wal-Mart's Supplemental Brief in Support of Motions forSummary Judgment [Doc. #79]; Second Supplement Affidavit of Tom Emerick[Doc. #80] ("Second Supp. Emerick Aff."); Plaintiffs' Motion to Strike,Response to Wal-Mart's Supplemental Brief in Support of Motions forSummary Judgment, Supplemental Motion for Continuance and Leave to DeposeTom Emerick [Doc. #85]; Plaintiffs' Response to Camelot's and Hartford'sSubmissions Concerning Policy Loans, Motion for Continuance and Leave toDepose Christine Repasy or, in the Alternative, to Strike Her Affidavit[Doc. #86]; Response of Defendants Camelot Music, Inc. and Trans WorldEntertainment Corporation to Camelot Plaintiffs' Motion for a ContinuancePursuant to FRCP 56(f) [Doc. #87]; Wal-Mart's Response in Opposition toPlaintiffs' Motion to Strike, Plaintiffs' Response to Wal-Mart'sSupplemental Brief in Support of Motion for Summary Judgment, andPlaintiffs' Supplemental Motion for Continuance and Leave to Depose TomEmerick [Doc. #89]; Hartford Life Insurance Company's Opposition toPlaintiffs' Motion for Continuance and Leave to Depose Christine Repasyor to Strike in her Affidavit [Doc. #90]; Reply by Estate of DouglasSims in Support of its Motion to Strike Wal-Mart's Supplemental Brief[Doc. #91].
10. Memorandum Opinion ("March 5th Opinion") [Doc. #92].
11. Wal-Mart Defendants' Motion to Reconsider and Renewed Motion forSummary Judgment ("Reconsideration Motion") [Doc. #113-1 & 113-2];Wal-Mart Defendants' Supplemental Brief in Support of Wal-MartDefendants' Motion to Reconsider and Renewed Motion for Summary Judgment("Wal-Mart's Supplemental Brief") [Doc. #118]; The Sims Estate'sResponse to Wal-Mart's "Motion to Reconsider and Renewed Motion forSummary Judgment" ("Sims Estate's Response") [Doc. #123].
12. Order Granting Wal-Mart Defendants' Motion to Reconsider March 5thRuling [Doc. #136].
13. See Affidavit of Raymond H. Sapp ("Sapp Aff.") (Exhibit B toWal-Mart's Exhibits), at 1, ¶ 1; Second Affidavit of Raymond H. Sapp("Second Sapp Aff.") (on behalf of the Wal-Mart Trust), Exhibit M toWal-Mart Reconsideration Motion, ¶ 9. Wachovia's citizenship (stateof incorporation or principal place of business) is not definitivelyestablished in the record.
14. Sept. 7, 2001 Transcript, at 11-13. Hartford submitted the RepasyAffidavit, which provides additional details on the policy loanarrangement between Hartford and the Camelot Defendants. Repasy atteststhat the surrender value of the Camelot COLI policies will be reduced by"any loan balance" outstanding on the policy. Repasy Aff., ¶ 3(emphasis added); Sept. 7, 2001 Transcript, at 11-13. Plaintiffs move tostrike this affidavit as untimely and improper expert testimony. SeePlaintiffs Response to Camelot's and Hartford's Submissions ConcerningPolicy Loans, Motion for Continuance and Leave to Depose Christine Repasyor, in the Alternative, to Strike her Affidavit [Doc. #86]. This motionis denied. The Repasy Affidavit is not improper expert testimony; itmerely presents the factual framework of the Camelot COLI policy loansand the calculations under the contracts of the policy's surrendervalue.
15. The Internal Revenue Service ("IRS") disputes Defendants Camelotand Wal-Mart's deductions and the tax implications of the COLI policies.See Sept. 7, 2001 Transcript, at 7-8, 40-41.
16. Mutual was one of the major underwriters of COLI policies. VanEtten Aff., ¶ 6. Hartford acquired Mutual's COLI line of business inNovember 1992. Id.
17. The fact that there are COLI policies on the lives of the CamelotPlaintiffs is not disputed. The Camelot Defendants admit that they arethe "sole owner and beneficiary" of COLI policies on the CamelotPlaintiffs' lives. Camelot Memorandum, at 4. Hartford has submitted theRepasy Aff., to describe the terms of the Camelot COLI policy regardingthe effect that outstanding loans have on the policy and the policy'ssurrender value. Repasy Aff., ¶¶ 1-3. However, the specific terms andconditions of the policies are less certain. While no party has providedthe Court with authenticated copies of the actual COLI policies on theCamelot Plaintiffs, a sample policy is attached to the Complaint. SeePlaintiffs' Second Amended Class Action Complaint [Doc. #29]("Complaint"). Plaintiffs allege that Exhibit A to the Complaint is aCOLI policy that Camelot purchased from Mutual. Id. The pages in ExhibitA are not consecutively numbered, but bear Bates stamped nos."DE-CMH00457" through "DE-CMH00491." Exhibit A does not name any CamelotPlaintiff as the insured, but appears to be a specimen policy. SeeExhibit A, at DE-CMH00457; Id. at DE-CMH00489 "Statement of Policy Costand Benefit Information." Exhibit A refers to the name of insured in theapplication pages to "Schedule A," Id. at DE-CMH00488, which appears torefer to Exhibit B to the Complaint, titled "Camelot Enterprises, Inc.MB211 Schedule A Insured Name Sequence," which shows only the names ofthe Camelot Plaintiffs, and is a redacted list of Camelot employeesinsured under the COLI policies.
18. Sept. 7, 2001 Transcript, at 7-8. As counsel for Camelot suggestedmight happen, Camelot surrendered the policies after the Court's initialruling in this case. Counsel for Hartford stated that the policiescontinue to be subject to "tremendous indebtedness" by the EmployerDefendants. Id. at 11-12. The Camelot Defendants describe the loanarrangement regarding their COLI policies in their supplementalsubmission. See Camelot Defendants' Supplement, at 1-3; see also RepasyAff., ¶ 3. As described supra, an Employer Defendant borrowed fromthe COLI policy issuer, an Insurer Defendant, to pay the COLI policypremiums.
19. See Emerick Aff., ¶¶ 7-10, and Exhibit 10; Sapp Aff., Exhibits13 and 14. The Sims Policy (Policy No. 147539) had a face amount of$64,504. See Emerick Affidavit, Exhibit 10 ("Sims Policy"), at 3. Theowner of the policy is listed as the Trust. Id. The Sims Policy refers toanother document, the AIG Letter of Understanding (Exhibit 12 to SappAff.), which is incorporated by reference, and contains terms inter aliaregarding fees and costs of the COLI policies as well as projectionsregarding the growth of the value of the Policy. See Exhibit C to the AIGLetter of Understanding.
20. Wal-Mart has submitted additional evidence since the Court's March5th Opinion, consisting of the Affidavit of Lee Nystrom ("NystromAffidavit") (for the insurance broker), Exhibit L to Wal-MartReconsideration Motion; Second Affidavit of Raymond H. Sapp ("Second SappAffidavit") (on behalf of the Wal-Mart Trust), Exhibit M to Wal-MartReconsideration Motion; the Letter of Understanding between AIG andSapp, Exhibit 12 to Wal-Mart's Reconsideration Motion; the Life InsuranceApplication relating to the Letter of Understanding, Exhibit 13 toWal-Mart's Reconsideration Motion; Life Insurance Application to Hartfordfor COLI policies purchased by Wal-Mart, Exhibit 14 to Wal-Mart'sReconsideration Motion; AIG Policy Delivery Receipt, Exhibit 18 toWal-Mart's Reconsideration Motion; Hartford COLI Policy DeliveryReceipt, Exhibit 19 to Wal-Mart's Reconsideration Motion; and copies ofpertinent provisions of Arkansas, North Carolina and Delaware law oninsurable interests, Exhibits N, O, and P to Wal-Mart ReconsiderationMotion.
21. The COLI policies benefits were paid to the Wal-Mart Trust, whichremitted the funds to Wal-Mart. Emerick Aff., ¶ 10.
22. Emerick Aff., ¶¶ 4-5.
23. Id. ¶¶ 6-7.
24. Nystrom Aff., ¶ 3; Sept. 7, 2001 Transcript, at 6.
25. Affidavit of James Van Etten, ¶¶ 5-6 (Attachment A to Appendixfor Hartford's Summary Judgment Motion) ("Van Etten Aff.") James VanEtten is an Assistant Vice President of Hartford, Id. ¶ 1. Heassisted with the development of the COLI policies at Hartford and atMutual Benefit Life Insurance Company, and managed the COLI polices forDefendants Camelot and Wal-Mart. Id. ¶¶ 2-5.
26. Defendant Hartford concedes that the COLI policies provided taxadvantages to the corporations that purchased them. Van Etten Aff.,¶ 6; Sept. 7, 2001 Transcript, at 11-13. Counsel for DefendantsCamelot and Wal-Mart admit that their clients are currently in disputewith the IRS over the COLI polices. Sept. 7, 2001 Transcript, at 7-8,40-41.
27. Van Etten Aff., ¶¶ 5-6; Emerick Aff., ¶ 5; CamelotMemorandum, at 4. See generally Nystrom Aff., ¶ 10; Affidavit of TomEmerick, executed April 30, 2002 [Doc. #115] (submitted in support ofWal-Mart's Response to the Estate of Douglas Sims' Motion for SummaryJudgment [Doc. #110]).
28. Plaintiffs moved for class certification after the March 5thMemorandum Opinion. That Motion is sub judice.
29. See infra pages 734-37. Defendants contend that Georgia'sinsurable interest law contrasts with the Texas doctrine in variousways. Georgia gives employers an insurable interest in the lives of theiremployees. GA. CODE ANN. § 33-24-3 (1990) ("A corporation has aninsurable interest . . . in the life . . . of any of its directors,officers, or employees . . . or any other person whose death . . . mightcause financial loss to the corporation.")
30. See Camelot Defendants' Summary Judgment Motion; DefendantWal-Mart's Motion for Summary Judgment; Motion for Summary Judgment ofDefendant Wal-Mart Stores, Inc. Corporation Grantor Trust, Through itsTrustee, the Wachovia Bank of Georgia, N.A.; Hartford's Summary JudgmentMotion; AIG's Summary Judgment Motion. See also Wal-Mart'sReconsideration Motion, renewing its arguments on this issue.
31. The Court is satisfied, from its review of the record, thatcomplete diversity exists and that the amount in controversy for eachnamed Plaintiff exceeds $75,000. Defendant Wal-Mart asserts completeERISA preemption, and relies on federal question jurisdiction under28 U.S.C. § 1331. The ERISA contentions are rejected, as explainedinfra in Section V(A).
32. This test does not apply to contract cases in which the partieshave a valid choice of law clause in the contract. Duncan, 665 S.W.2d at421. The COLI policies do not contain a choice of law clause.Accordingly, the Court applies the Restatement's fact-basedanalysis.
33. Wal-Mart contends that it gave its employees a Special DeathBenefit in connection with those employees' participation in the Wal-MartEmployee benefits plan. The Special Death Benefit was offered solely inWal-Mart's discretion, and was a contingent right that in fact wascancelled by Wal-Mart several years later. The Court does not decide ifthis benefit constitutes consideration to the employee, as opposed to agift from Wal-Mart.
34. For example, Defendant Hartford argues that "[b]ecause lifeinsurance policies are contracts, the Court should apply the choice oflaw principles that govern contractual disputes." Hartford's SummaryJudgment Motion, at 8. Defendant Wal-Mart argues that the principles ofthe Restatement (Second) of Conflicts of Laws § 188(2) — thesection dealing with contract disputes — should be applied "whendeciding which state's law should govern the construction of contractualrights." Wal-Mart's Summary Judgment Motion [Doc. #19], at 11.
35. The decision as to what state's law applies must be made for eachdisputed claim separately. It is possible that the state whose lawapplies to the COLI policies in a dispute between the signatories to thepolicy contract max differ from the state whose law applies to issuesregarding a non-signatory's claim about the absence of an insurableinterest.
36. The parties have cited and the Court is aware of no Texasauthority that employs contract choice of law principles in an actionthat involves purely the insurable interest doctrine. This caseaccordingly raises a choice of law issue of first impression. Cf.RESTATEMENT, § 196.
37. Wal-Mart argues in its Reconsideration Motion that the Courtshould not take a summary judgment approach to the choice of law issue.Upon reflection, the Court agrees, and modifies its Memorandum Opinionaccordingly. The facts on which choice-of-law rulings depend must bedetermined by the Court after considering the affidavits, depositions,and other matters submitted by the parties. Nunez v. Hunter Fan Co.,920 F. Supp. 716, 717-18 (S.D.Tex. 1996) (citations omitted); Perez v.Alcoa Fujikura, Ltd., 969 F. Supp. 991, 1003 (W.D.Tex. 1997); see alsoWoodfield v. Bowman, 193 F.3d 354, 358 (5th Cir. 1999) (choice of law isa question of law for the court); Williamson v. Tucker, 645 F.2d 404, 414(5th Cir.) (with jurisdictional issues, court "may hear conflictingwritten and oral evidence and decide for itself the factual issues"),cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981); but seeOrr v. Sasseman, 239 F.2d 182, 186 (5th Cir. 1956) (proper for jury todecide question of where loss of consortium occurred for purposes ofapplying Georgia or Illinois law). The Sims Estate does not responddirectly to this argument, except to request a continuance underFed.R.Civ.P. 56(f), if the Court on the current record is inclined torule in Wal-Mart's favor on the choice of law issue. The Court concludesthat additional evidence is not necessary on the choice of lawquestion.
38. In Griffin, Gordon's personal representatives filed suit in Texasfederal court against the insurance company that issued the lifeinsurance policy. 313 U.S. at 499-500, 61 S.Ct. 1023. The insurancecompany under the federal interpleader statute joined all namedbeneficiaries under the policy and deposited the policy benefits into acourt fund. Id. Thereafter, the insurance company was dismissed from theaction.
The genesis of the insurance policy on Gordon's life was Gordon's business venture with several New York investors (the "syndicate"). Id. As consideration for money lent by the syndicate to Gordon, Gordon agreed to the purchase of a life insurance policy on his life with the syndicate as beneficiary. Id. The syndicate paid the policy premiums. Id. Later, the individual members of the syndicate were made the beneficiaries. Id. At some point, Gordon agreed to release his right to determine the beneficiaries of the policy in exchange for a one-eighth share of the policy proceeds made payable to his wife. Id. Thereafter, the members of the syndicate separately assigned their interests to other individuals not involved with the syndicate. Id. Most of the actions relevant to obtaining the policy occurred in New York or New Jersey, although Gordon lived in Texas. Id. at 501, 61 S.Ct. 1023.
The district court found the policy to be a New York contract. Id. The district court and the Fifth Circuit held that New York law governed, and that the assignees of the syndicate had insurable interests under New York law. Id. at 501-02, 61 S.Ct. 1023. Accordingly, both the district court and court of appeals held that the assignees were entitled to receive their shares of the policy benefits. Id. at 501-03, 61 S.Ct. 1023. The court of appeals, applying federal choice of law principles, held that the application of Texas insurable interest law — under which the assignees did not have an insurable interest — would be an improper extraterritorial application of Texas law to a New York contract. Id. at 502-03, 61 S.Ct. 1023. In an opinion issued the same day as Klaxon v. Stentor, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), the Supreme Court reversed, holding that it would not be unconstitutional for a Texas court to refuse the enforcement of a foreign contract that violated local public policy embodied in the Texas insurable interest doctrine. Id. at 506-07, 61 S.Ct. 1020. The Supreme Court remanded the case and directed the court of appeals to determine whether a Texas court would apply Texas insurable interest law. Id. at 507, 61 S.Ct. 1020.
39. Defendants argue (somewhat presumptuously) that the Fifth Circuitdid not address the choice of law issue, as directed by the SupremeCourt. While the Court of Appeals did not present any analysis, it isclear that the court made a choice of law decision. This Court presumesthat the Court of Appeals followed the directive of the Supreme Courtdespite the absence of any explicit discussion on the threshold choice oflaw issue.
40. The Fifth Circuit does not cite authority to justify this part ofits holding. Defendants attempt to distinguish Griffin because there areno funds on deposit with this Court (or in any court) for any of thePlaintiffs. Other Texas cases establish, however, that the policyproceeds do not have to be located in Texas for the insurable interestdoctrine to apply. The doctrine serves to protect the lives of Texascitizens irrespective of the vagaries of the location of the policyproceeds. See Cheeves, 28 S.W. at 275 (holding that the primaryjustification of insurable interest doctrine was that the public "has aninterest that no inducement shall be offered to one man to take the lifeof another."); Tamez, 999 S.W.2d at 15 ("[I]t is against public policy toenforce a contract which makes it in the interest of a person to bringabout the death of another.") (citing Wilke v. Finn, 39 S.W.2d 836, 838(Tex.Comm.App. 1931)). It would be anomalous to permit insurers tocontrol the choice of law decision after an insured's death simply byplacing the insurance proceeds in a jurisdiction with law contrary toTexas policy.
41. Despite the Supreme Court's holding in Griffin, Defendants arguethat application of the Texas insurable interest doctrine to Defendants'COLI policies on the lives of Texas citizens is an improperextraterritorial application of Texas law. This argument is rejected. TheSupreme Court in Griffin held that Texas courts may constitutionallyapply the Texas insurable interest doctrine to foreign contracts thatinsure the lives of Texas citizens. 313 U.S. at 506, 61 S.Ct. 1023.
42. In Cole, Ruby Browning was the beneficiary of an insurance policyon the life of her former husband, Bryan Watson Browning, and soughtrecovery of the policy proceeds after Bryan's death. Id. at 590. BothRuby and Bryan were temporarily in Texas (for independent reasons) at thetime Bryan died, having each been there for only a few months. See id. at590, 593. Bryan purchased the policy in Indiana and it was deliveredthere by the New York insurance carrier. Id. at 589. In connection withtheir divorce, Ruby and Bryan agreed to release all claims against theother and their property. Id. at 590. After the divorce, Ruby claimed tobe a citizen of Missouri, a jurisdiction in which the law gave her aninsurable interest in Bryan's life. Id. at 590, 591. The Texas court heldthat Texas law would apply, since both Ruby and Bryan were living— albeit temporarily — in Texas, a Texas temporaryadministrator of Bryan's estate had been appointed, the administrator hadbrought suit and completed proper service on Ruby, Ruby and the insurerhad submitted to the Texas courts, the insurance proceeds had been paidinto the court registry, and the parties had agreed to proceed to resolvethe matter only in the Texas court. The court concluded that under Texaslaw, a former wife did not have an insurable interest in the life of herformer husband. Id. at 593-94.
43. Wal-Mart's Reply, at 5.
44. It is noted that the Texas Supreme Court had declined to reviewthe Tamez decision. It also is interesting that the Texas Court ofAppeals issued its ruling on April 25, 2002, five or more days after beingnotified that the parties had settled the dispute and that all thatremained was a hearing to approve the settlement as to a minor. Further,the Smith decisions have not been published formally by the court in theWest Publishing Reports, despite the passage of more than three monthssince the ruling.
45. Coincidentally, Justice Brister was the trial judge who grantedsummary judgment against the Tamez plaintiffs and was reversed by theTexas Fourteenth Court of Appeals.
46. TEX.INS.CODE, art. 3.49.
47. Acts of 1953, 53d Leg., p. 400, ch. 113. Article 3.49-1 wasenacted two years after original passage of the Texas InsuranceCode.
48. American Transitional Care Centers of Texas, Inc. v. Palacios,46 S.W.3d 873, 878 (Tex. 2001) (citing McBride v. Clayton, 140 Tex. 71,166 S.W.2d 125, 128 (1942) ("All statutes are presumed to be enacted bythe legislature with full knowledge of the existing condition of the lawand with reference to it.")); Phillips v. Beaber, 995 S.W.2d 655, 658(Tex. 1999).
49. More specifically, since 1953, article 3.49-1 of the TexasInsurance Code, has provided in pertinent part in section 1, that anyperson may apply for life insurance and designate in writing any otherperson or entity as the beneficiary and/or owner of the policy, and theperson or entity so designated has an enforceable insurable interest underTexas law. Since 1953, Section 2 has provided that a person whose life isinsured under any existing or future life insurance policy may (in themanner and to the extent permitted by the policy) grant an insurableinterest to any person or entity that the insured designates in writingto be the beneficiary of the policy. This section also provides that theinsured also may transfer or assign in writing (in any manner permittedunder the insurance policy) "any such policy or any interest, benefit,right or title therein" to any person or entity of the insured'schoosing. Section 3, which is not relevant to this case, originallyprohibited a person engaged in the "business of burying the dead" fromhaving an insurable interest in the life of any person otherwisepermitted under article 3.49-1. Section 4 in the 1953 version of article3.49-1 addressed court decisions (past and future), as discussed in thetext.
50. TEX.INS.CODE, art. 3.49-1, § 3, as amended by Acts 1999. 76thLeg., ch. 438, § 1.
52. Acts 2001, 77th Leg., ch. 1419, §§ 31(b)(3) (repeal), 33(effective date). The legislative history contains no explanation for therepeal of this provision. It appears, however, to be part of a wholesalerepeal of the Insurance Code.
53. "This Act takes effect September 1, 1999, and applies only to aninsurance policy delivered, issued for delivery, or renewed on or afterJanuary 1, 2000. A policy delivered, issued for delivery, or renewedbefore January 1, 2000, is governed by the law as it existed immediatelybefore the effective date of this Act, and that law is continued ineffect for that purpose." Acts 1999, 76th Leg., ch. 438, § 3. Theparties do not dispute that the 1999 amendment does not apply in this casesince the amendment does not authorize pre-2000 purchases of groupinsurance by third parties.
54. The 1999 amendment to article 3.49-1 also included a provision inwhich the Legislature attempted to put its enactment in context.
Sec. 2. The purpose of this Act is to clarify existing law and practice as it relates to consent to the ownership of, or status as a beneficiary under a life insurance policy. This Act is not intended to alter or modify the meaning of, or law relating to, former Section 4 [stating that the Act was "cumulative of existing law . . . on insurable interest" and "the Act shall be liberally construed"], . . . as that section existed immediately before the effective date of this Act.
Acts 1999, 76th Leg., ch. 438, § 2. The Legislature thus took care toreiterate its prior philosophy regarding the statutory modifications ofthe traditional insurable interest requirements.
55. Reconsideration Motion at 14, and 14-17.
56. See, e.g., Van Etten Aff., ¶ 8; IRS v. CM Holdings, Inc.,No. 97-695 (D.Del. 2000); Repasy Aff., ¶ 3; Sept. 7, 2001Transcript, at 11-13.
57. Nystrom Aff., ¶ 10 (emphasis added). Nystrom's commentsconstitute expert opinions. See FED.R.EV. 702. Wal-Mart fails however tosupply any evidence about Nystrom's qualifications to give an opinion onthe highly sophisticated issue of the COLI policies' net financialbenefit to Wal-Mart, if any. Id.; see Kumho Tire Co. v. Carmichael,526 U.S. 137, 156-57, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999); Daubert v.Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589, 113 S.Ct. 2786, 125L.Ed.2d 469 (1993); Tanner v. Westbrook, 174 F.3d 542, 548 (5th Cir.1999). Nor does Nystrom provide any basis for his opinion. See FED.R.EV.704. Among other things, the testimony must be reliable and relevant.Pipitone v. Biomatrix, 288 F.3d 239, 243-45 (5th Cir. 2002); Rodriguezv. Riddell Sports, Inc., 242 F.3d 567, 580-81 (5th Cir. 2001); Tanner,174 F.3d at 546. Munoz v. Orr, 200 F.3d 291, 301 (5th Cir. 2000)(upholding district court's exclusion of plaintiff's statistical expertin disparate impact case). Nystrom mentions the "Claims StabilizationReserve" ("CSR") aspect of AIG's, Wal-Mart and the Trust's COLI policyfinancial relationship, but his explanation is obviously incomplete onthe Wal-Mart's primary thesis that it lacked incentives the insurableinterest doctrine is designed to address.
58. Wal-Mart also contends that the COLI policies are not a form ofwagering on the lives of the insureds, other than the actuarial risksordinarily taken by the parties to an insurance contract, and thus theCOLI policies do not violate Texas public policy at all. ReconsiderationMotion, at 15 n. 4. This argument is a rationale for overturning theTexas insurable interest doctrine, and assumes implicitly a favorabledetermination of ultimate legal and factual issues in the case. Further,the argument begs the question of whether the COLI policies implicate theinsurable interest doctrine. This argument is rejected.
59. Hartford's Reply, at 11 (emphasis in original). There is nodispute that, on its face, Article 21.42 does not apply in this case.Defendants' COLI policy provisions by design are not "payable" to Texascitizen Plaintiffs. See New York Life Ins. Co. v. Baum, 700 F.2d 928, 933(5th Cir. 1983) (article 21.42 of the Texas Insurance Code has beeninterpreted to apply "when and only when [the life insurance contracts]are made in the course of the [insurance] company's Texas business"(citing Howell v. American Live Stock Ins. Co., 483 F.2d 1354, 1359 (5thCir. 1973) (internal citations omitted))).
60. Wal-Mart argues, for example, that "Georgia has astatutorily-created policy to allow corporations to site COLI policies inGeorgia that would be fully enforceable. Georgia's public policy would bethwarted if Texas' antiquated common law were to control." Wal-Mart'sSummary Judgment Motion [Doc. #19], at 17.
61. Wal-Mart's Reply, at 9.
62. Dick, a citizen of Texas, brought an action in a Texas court on afire insurance policy for property damage to a tugboat issued by aMexican insurance company. Home Insurance, 281 U.S. at 402, 50 S.Ct.338. Because the state court did not have jurisdiction over the Mexicaninsurer, Dick asserted in rem jurisdiction against two Americanreinsurance companies ("garnishees") that reinsured parts of theunderlying policy. Id. The garnishees raised as a defense a provision inthe underlying policy with the Mexican insurer that imposed a one-yearstatute of limitations on actions for the collection of any claim underthe policy. Id. at 403, 50 S.Ct. 338. This provision was consistent withMexican law, but it violated a Texas statute that prohibited agreementsto limit the applicable limitations period to shorter than two years.Id. at 404-05, 50 S.Ct. 338. The trial, appeals, and supreme courts ofTexas held that the Texas law applied and that the action could not bebarred by the one-year limitation bar in the agreement. Id. at 405, 50S.Ct. 338. The United States Supreme Court reversed on the ground thatthe Texas statute deprived the garnishees of property without dueprocess. Id. at 407, 50 S.Ct. 338.
63. The Court focused on the fact that "nothing in any way relating tothe policy sued on or to the contracts of reinsurance [giving rise to theres allegedly subject to garnishment], was ever done or required to bedone in Texas," Id. at 408, 50 S.Ct. 338, and that "[a]t all times herematerial [Dick] was physically present and acting in Mexico [thus outsideTexas,] Texas was therefore without power to affect the terms of thecontracts so made." Id.
64. It is noted that the Supreme Court did not discuss the onlypotential relationships between Texas and the dispute, which were thatTexas technically was Dick's permanent residence (although he was neverpresent there) and that another payee of the policy proceeds "Texas &Gulf Steamship Company" (whose involvement was never explained) had someconnection to that state. Id. at 408, 50 S.Ct. 338.
65. In contrast to Home, the insurance purchased by Defendants at barhad material connections to Texas. Defendants chose to insure the livesof employees who, at the inception of the policies in issue, lived andworked in Texas. At the time the insurance was created, Defendantsneeded, at a minimum, confirmation that the proposed insureds still wereemployed and thus were insurable under the terms of the COLI polices. Theultimate source of this information was Texas. See Certificate ofEmployee Census, ¶¶ 2, 3 (Exhibit B to AIG Letter of Understanding(Second Sapp Aff., Exhibit 12)). Furthermore, as Wal-Mart acknowledges,it was necessary to have contact with the proposed insureds, and Wal-Martdid so at their local places of business. Before the COLI policies werepurchased in December 1993, the Wal-Mart "Location Managers" were requiredto communicate with their local employees to ascertain if the employeeswanted to opt out of the Special Death Benefit, which was offered only ifthe employee agreed not to opt out of the insurance. See Emerick Aff.,¶ 4 and Exhibit 7. The insurable risk was hinged on the life of theinsured, which also involved the insured's physical location (i.e., forTexas insureds was the State of Texas). Furthermore, when insuredsresiding in Texas die, information must be obtained from this state(directly or indirectly). These contacts with Texas concerning thedispute and the disputants are materially different from thecircumstances in Home Insurance.
66. The parties also debate issues regarding the COLI policies'surrender value. Thus, the public policy underlying insurance policies'surrender value is pertinent. Texas courts have protected Texasinhabitants' rights to the surrender value of a life insurance policy, inways different from the doctrines applicable to the death benefits fromthat insurance. In contrast to the primary purpose of insurancegenerally, the surrender value is "a debt against the insurance company,and the insured may assign it for a valuable consideration, and passtitle thereto, and confer upon the assignee the right to collect the debtat its maturity, although such assignee has no insurable interest."Shoemaker v. American Nat'l Ins. Co., 48 S.W.2d 612, 614 (Tex. Comm'nApp. 1932, jdgm't adopted). Texas courts (at least in the context ofinsurable interests) treat the surrender value of an insurance policydifferently from death benefits for the purposes of former spouses. Aformer spouse has an enforceable right to collect the surrender value ofa life insurance policy, at least to the extent that the beneficiary made(or is deemed to have made) contributions towards premium payments forthe insurance. Shoemaker, 48 S.W.2d at 614; Berdoll v. Berdoll,145 S.W.2d 227, 230 (Tex.Civ. App. — Austin 1940, writ dism'd).Thus, for purposes of the choice of law analysis, Texas has a publicpolicy that deserves recognition as to surrender values of insurancecontracts.
67. Cf. Restatement § 188 cmt. b ("Protection of justifiedexpectations plays a less significant role in the choice-of-law processwith respect to issues that involve the nature of the obligations imposedby a contract upon the parties rather than the validity of the contractor of some provision thereof.").
68. Id. The expectations of the signatories to the contract still maybe a factor to consider, but they are not entitled to the same importancevis a vis the non-signatory as they would be in a dispute among thesignatories.
69. The Camelot Plaintiffs had no knowledge of the COLI contracts. TheWal-Mart employees may have been given a form of notice but the receiptand adequacy of the notice is hotly disputed.
70. The risk was known to Wal-Mart. In the Certitication of EmployeeCensus, ¶ 4, to the AIG Letter of Understanding (Second Sapp. Aff.,Exhibit 12), Wachovia acknowledged that "Client [the Wal-Mart Trustand/or Wal-Mart] understands and agrees that AIG Life neither warrantsnor represents that insurable interest exists."
71. Wal-Mart argues in its Reconsideration Motion, in response to theCourt's March 5 Opinion, that because some unspecified number of Wal-Martemployees inevitably move from state to state each year, see NystromAff., ¶ 9, selection of Texas law based "on the residence of theinsured" is flawed because there is no "certainty, predictability anduniformity of result." Wal-Mart references administrative difficultiesfaced in determining the validity in different states of nationwide COLIpolicies. See Reconsideration Motion, at 17-18. Wal-Mart contends that itis simply unworkable to apply different states' laws in the context ofnationwide COLI policies, and that Wal-Mart and the insurers believedthat their approach would result in the application of Georgia laweverywhere. Wal-Mart concludes with the apocryphal statement thatemployers may decide not to purchase COLI policies on Texas residents, orwill cancel them when an employee moves to Texas. Id. The Court has notignored the administrative difficulties Wal-Mart describes; the Courtmerely finds this concern insufficient to justify application of Georgialaw in the face of the strong § 6 factors favoring Texas law in thecurrent dispute. First, as to the future, Texas law is no longer anissue; article 3.49-1 of the Texas Insurance Code was amended in 1999 topermit the employee-insureds to agree (in writing) to their employers'purchase of COLI insurance in the future. Second, Wal-Mart knowingly tookthe risk of being held responsible under Texas law for Texasresident-insureds. Thus, the ruling here should not be a genuinesurprise. Third, Wal-Mart states that only a handful of states any longerrequire the traditional insurable interest. If this is true, then theadministrative difficulties are a red herring. Wal-Mart has not explainedwhy eliminating these states from their COLI program is a problem.Fourth, inequities Wal-Mart suffers, if any, from the application ofTexas law may be addressed in the remedies, if any, that Plaintiffsobtain if they prevail on the merits. Last, there is no inherent rightfor Wal-Mart or any employer to purchase nationwide (or any other) COLIpolicies on the lives of their employees. In sum, Wal-Mart's putativeadministrative inconvenience is insufficient to outweigh the other goalsand policies addressed by the Restatement and choice of lawanalyses.
72. Indeed, it may be for that reason AIG declined to warrant orrepresent that Wal-Mart or the Trust had an insurable interest in theinsureds covered by the COLI policies. See Certification of EmployeeCensus, ¶ 4, to the AIG Letter of Understanding (Second Sapp. Aff.,Exhibit 12)
73. Accord, Minnesota Mining and Mfg. Co. v. Nishika Ltd.,955 S.W.2d 853, 856 (Tex. 1996) ("We evaluate state contacts not by theirnumber, but by their quality."); Gutierrez v. Collins, 583 S.W.2d 312,319 (Tex. 1979) ("[W]e would emphasize that application of the `mostsignificant relationship' analysis should not turn on the number ofcontacts, but more importantly on the qualitative nature of thosecontacts as affected by the policy factors enumerated in Section 6.").See Duncan, 665 S.W.2d at 421 ("[S]election of the applicable law dependson the qualitative nature of the particular contacts.").
74. Wal-Mart Reconsideration Motion, at 6.
76. Emerick Aff., ¶ 8; Trust Agreement, art. 1 (Exhibit 11 toEmerick Aff.).
77. See Nystrom Aff., ¶ 7. Nystrom, a representative of theNational Benefits Group, Inc. ("NBG"), Wal-Mart's insurance broker,adds:
To my knowledge, employers who purchase COLI policies on employees residing nationwide typically purchase all of the policies in a single state. In my experience, I have witnessed other corporations establish trusts in a single state, such as Georgia or Delaware, for the purchase of all of their COLI policies to provide administrative and legal predictability and uniformity for all of the policies.
These vague comments are based on hearsay and largely speculation. To theextent these comments are offered as expert testimony, they fail tosatisfy the standards of Fed.R.Ev. 702 and 704. Nystrom provides noexplanation of his qualifications, the bases of his knowledge, or thefacts on which he relies for his opinions. These comments are entitled tolittle weight.
80. See id.
81. Id. art. 4.1.
82. Id. art. 4.3.
83. Id. art. 5.1.
84. Id. art. 4.3.
85. Id. art. 4.2. All powers of the Trustee were to be exercised onlywith the "written direction" of Wal-Mart. Id. arts. 4.2, 5.1. Otherevidence of Wal-Mart's total control and of the Trust's singular purposeas a tool of Wal-Mart is that the Trust had the power to lend money toWal-Mart, but only as Wal-Mart directed, and the loans could beinterest-free and repayable "at such time or times as selected by[Wal-Mart]." Id. art. 5.2.
86. Id. art. 4.3. The Trust Agreement states: "The Trustee shall haveno duty or obligation to monitor the death of any Insured, to notify theGrantor of any such death or to take any action to collect any proceedsor benefits under any insurance policies on any Insured." Id.
87. Id. Wal-Mart had the authority to request that the Trustee collectpolicy benefits, but only if Wal-Mart indemnified the Trustee for "allliabilities and expenses" related to a collection action. Id.
88. Trust Agreement, arts. 6.1, 7.4 (Exhibit 11 to EmerickAff.).
89. Affidavit of Raymond H. Sapp ("Sapp Aff."), ¶¶ 1-5 (Exhibit Bto Wal-Mart's Exhibits)
90. Wal-Mart's Summary Judgment Motion, at 18.
91. It is noted that the parties have submitted no evidence about thecreation of the Sims Policy in particular. Thus, the Court assumes thatthe evidence pertaining to the Wal-Mart COLI policies applies equally tothe Sims Policy.
92. Sapp Second Aff., ¶ 6; Nystrom Aff., ¶ 5.
93. Nystrom Aff., ¶ 4. Plaintiffs point to inconsistencies inWal-Mart's initial summary judgment evidence and argue, in thealternative, that they need discovery to obtain evidence that raises factissues regarding the place of contracting. Declaration of Scott M.Clearman in Support of Request for Denial or Continuance of SummaryJudgment (FED.R.CIV.P. 56(f) ("Clearman Decl."), ¶¶ 30-36. Thismotion is denied as moot. The Sims Estate reiterates this request in itsresponse to Wal-Mart's Reconsideration Motion. Sims Estate's Response, at6-7.
94. See Lee R. Russ & Thomas F. Segalla, COUCH ON INSURANCE,§ 24.5 (3d ed. 1996).
95. More specifically, Wal-Mart's evidence (submitted with itsReconsideration Motion) reflects that Raymond H. Sapp, a Trust Officerfor Wachovia Bank of Georgia, N.A., which in 1997 merged into WachoviaBank, N.A., assisted Wal-Mart in establishing the Wal-Mart Trust and thepurchase of the COLI policies on the Wal-Mart employees' lives. Sappworked and lived in Atlanta, Georgia. Second Sapp Aff., ¶ 2. Sappavers that the Trust, for which he acted, applied for the COLI policiesfrom AIG and Hartford, while he was in Georgia. Id. ¶ 3. He executedthe AIG application for the first of several blocks of COLI polices inAtlanta, on December 30, 1993. Id. ¶ 3, Exhibit 13; Nystrom Aff.,¶ 4 (The "COLI policies were applied for by the Trust in meetings inAtlanta on December 30, 1993."). He did the same for the Hartford-issuedCOLI policies. Second Sapp Aff., ¶ 3, & Exhibit 14. Sappexplains that additional terms of the AIG COLI policies dated December28, 1993 are set forth in the Letter of Understanding between him, asTrustee of the Wal-Mart Trust, and AIG on December 30, 1993, in Atlanta.Id. ¶ 3, Exhibit 12. These same terms applied to subsequently issuedblocks of COLI polices. Id. Sapp avers that the three people thatexecuted the AIG application (Jane Price as Vice President of Wachoviaand a witness, and Norman Winer for the insurance agent) were in Atlantawhen they signed. Id. ¶ 4; Nystrom Aff., ¶ 4. Sapp explainsthat the same procedure was used for the Hartford application for theCOLI policies. Second Sapp Aff., ¶ 4
96. Nystrom Aff., ¶ 6. Wal-Mart's witnesses state that theyintended the policies to be governed by Georgia law, and that "Wal-Martand the Trust specifically chose Georgia as the site for the COLIpolicies with the expectation and intention that Georgia law would governthose policies." Nystrom Aff., ¶ 7; Emerick Aff., ¶ 5. Sappexplains that he "fully expected that Georgia law would apply to all ofthe AIG and Hartford policies issued to the Trust in Georgia, regardlessof the place of residence of the insureds under the COLI policies."Second Sapp Aff., ¶ 10.
97. Reconsideration Motion, at 7; Second Sapp Aff., ¶ 3.
98. Sapp Aff., Exhibit 12.
99. Wal-Mart also points to conclusory language in the Letter ofUnderstanding that upon the satisfaction of all other conditions and thepayment of the first year premium, "AIG Life agrees to issue, in the stateof Georgia, to Client . . . [t]he Policies for which the Client hasapplied." AIG Letter of Understanding, at 2-3 (Exhibit 12 to EmerickAff.; Exhibit 12 to Second Sapp Aff.). It is noted that "Renewable LevelTerm Insurance Rider," Form 49827 (3/90), an integral part of the COLIpolicies (see Sims Policy), recites that it was "[s]igned for the Companyat Wilmington, Delaware." See Sims COLI Policy, at second page followingpage 15 (Exhibit 10 to Emerick Aff.).
100. Second Sapp Aff., ¶ 5.
101. Id. ¶ 5, Exhibits 18 and 19 (one page receipts acknowledgingphysical receipt and acceptance of the first 197,182 AIG policies and the21,548 Hartford polices in March 1994, respectively). Sapp did notexercise the right to return the policies within 20 days for a fullrefund of premiums. Id.
102. Sapp Second Aff., ¶ 7.
103. Second Sapp Aff., ¶ 5; Emerick Aff., Exhibit 10; seeReconsideration Motion, at 7.
104. Second Sapp. Aff., ¶¶ 2, 5.
106. See Sims COLI Policy, at 4 (Exhibit 10 to Emerick Aff.).
107. Second Sapp Aff., ¶ 5.
108. Nystrom Aff., ¶ 3. Nystrom was an employee of the insurancebroker NBG, and reported to its President, Norman H. Winer, starting atsome unspecified time in 1993. Id. ¶ 3. Nystrom executed hisaffidavit in Minnesota. Id. ¶¶ 1, 5. All NBG's contact information inthe record is listed as in Minnesota. See, e.g., Client MasterInformation Form (Wal-Mart Exhibit A to Exhibit 12), and the AIG LifeInsurance Application (Id., Exhibit 13). There is nothing in the record,despite Wal-Mart's repeated supplementation, that suggests that Nystromofficed anywhere except in Minnesota when the COLI policies were beingarranged and were in effect.
109. See Trust, Schedule A, at 12.
110. See supra pages 42-44 for Trust provisions.
111. Second Sapp Aff., Exhibit 13.
112. Nystrom avers that no individual health information was requiredon any insured, see Nystrom Aff., ¶ 4, although this procedure isonly implied in the second page of the AIG Letter of Understanding.Exhibit 12 to Sapp. Aff.; see also Second Sapp Aff., ¶ 3 (same forlater blocks of policies). The record makes it clear that the insured hadto be part of the Wal-Mart Plan to be insured under the Wal-Mart COLIpolicies. The absence of individualized risk assessment on the insuredsdoes not fully address the issue.
113. See Letter of Understanding, at 2 (Exhibit 12 to SappAff.).
114. See Sims Policy, at 4 (Exhibit 10 to Emerick Aff.).
115. The Camelot Defendants do not suggest that they obtained theiremployees' approval to purchase the COLI policies on their lives. Theargument concerning Sims and Wal-Mart thus is inapplicable to the Camelotparties.
116. See Second Sapp Aff., ¶ 7; Reconsideration Motion, at7.
117. See Emerick Aff., ¶ 4 and Exhibit 7.
118. Id. Emerick's memorandum dated December 14, 1993, announced thespecial death benefit disclosed that the "new benefit is being implementedbecause of financial benefits associated with a Wal-Mart owned lifeinsurance program which is explained in the enclosed FYI." Id. Exhibit 7(cover page). Under "ACTION REQUIRED," Wal-Mart requested that "LocationManagers" distribute "this communication by December 28, 1993, to allassociates who are enrolled in the medical plan at your location fortheir review in order to meet legal notification requirements." Id.(underlining in original; bold italics added). Wal-Mart added: "It isimportant to tell associates that only those who do not wish toparticipate in this benefit need to return the information requested inthe enclosed FYI flyer." The flyer explained that Wal-Mart was offering anew benefit effective January 1, 1994, which was available to all activeemployees "participating in the group health plan." All such employeeswould be automatically covered for additional death benefits, which wereexplained. Wal-Mart then stated: "These new death benefits will beprovided at no additional cost to [employees] and are in addition to anyother life insurance you may have through Wal-Mart. The details . . .will be explained in the Benefits Book. . . . Wal-Mart is providing thesenew death benefits as a result of financial gains from life insurancepolicies Wal-Mart will purchase which will cover the lives of associateswho participate in the group health plan." Id. (second page).
119. Wal-Mart provides no evidence that Sims, in particular,affirmatively approved (or even was informed about) the terms or all thebenefits of the COLI policies. In the event that he did not, Wal-Martalso submits evidence through the Summary Plan Descriptions ("SPDs") forthe Wal-Mart Health and Benefit Plan. The SPDs "constitute the plan textthat define the COLI benefits under the Wal-Mart Plan, and there is noseparate `legal document' that does so." Supp. Emerick Aff., ¶ 3.Wal-Mart's evidence establishes that the company provided notice toemployees through the SPDs in 1994 and 1995 that there was a "SpecialDeath Benefit" of $5,000 payable to an employee's beneficiary upon theemployee's death unless the employee declined the benefit at the time ofenrolling in the "Wal-Mart Associates Health & Welfare Plan"("Wal-Mart Plan"). Emerick Aff., ¶¶ 2, 3, 4 and Exhibits 1 and 2, atF-2, respectively. Wal-Mart did not explain in the SPDs how the benefitwas funded or how it was arranged.
120. Wal-Mart implicitly acknowledges this principle in its Responseto the Sims Estate's Motion for Summary Judgment [Doc. #113] andWal-Mart's Cross Motion for Summary Judgment [Doc. #122]. There,Wal-Mart repeatedly argues that the insured employees had great value toWal-Mart, that Wal-Mart had a financial incentive for the insuredemployees to continue to live, that Wal-Mart had no incentive to harm theemployees and that accordingly Wal-Mart had an insurable interest underTexas law in the lives of its employees. Nowhere does Wal-Mart argue thatthe Trust — the beneficiary and owner of the COLI policies —had any interest in the insureds' lives.
121. Sapp avers that the Wal-Mart COLI policies were "applied for" ina meeting in Atlanta, Georgia, on December 28, 1993. Sapp Aff., ¶3. Plaintiffs again contend that they need discovery to develop aresponse on this factor, if the Court is inclined to find that Georgialaw applies based on Defendants' arguments. See Plaintiffs' Response toHartford's Motion for Summary Judgment, at 1 (adopting Rule 56(f) motionmade in response to other Defendants' Motions); The Estate of DouglasSims's Response to AIG Life Insurance Company's Motion for SummaryJudgment, at 8-10 (discovery needed for choice of law issue). Thesemotions are denied as moot.
122. Reconsideration Motion, at 8. See Nystrom Aff., ¶ 5.
123. Id. ¶ 2.
124. See Exhibits 13 and 14 to Second Sapp Affidavit.
125. See Nystrom Aff., ¶ 6.
126. In the unlikely event that all negotiations regarding policiescovering thousands of insureds took place in this single meeting, Sapp'sown testimony on the application process is somewhat internallyinconsistent. In his affidavit, he attests that he executed, on behalf ofthe Wal-Mart Trust, only the application for the AIG policies on December28, 1993. Id. ¶ 3. He references several times a "first" or "initialblock" of COLI policies, but never details the events as to otherblocks. Sapp did not execute the Hartford COLI policy application untilDecember 30, 1993, two days after the meeting at which he swears thatapplications were submitted for all policies purchased by Wal-Mart. Id.¶¶ 3, 4.
127. Nystrom Aff., ¶ 6.
128. See Emerick Aff., Exhibit 7.
129. Wal-Mart relies heavily on this communication to establish thatWal-Mart gave its employees notice of the existence of the COLIpolicies. The Court does not decide the merits of the legal effect of theDecember 1993 communications.
130. Second Sapp Aff., ¶ 2.
131. See Nystrom Aff., ¶ 3; "Client Master Information Form,Exhibit A" attached to the parties' Letter of Understanding. (Exhibit 12to Sapp Aff.)
132. The Emerick Affidavit, ¶ 8, the only evidence and it isconclusory at best.
133. Wal-Mart supplemental evidence demonstrates, contrary to itsearlier representations to this Court, that some negotiations occurred inArkansas.
134. Second Sapp Aff., ¶ 8.
135. Reconsideration Motion, at 10.
136. See Exhibit 10 to Emerick Aff., at 14.
137. Id. at "Renewable Level Term Insurance Rider" Form 49827 (3/90),Exhibit 10 to Emerick Aff., at page following page 15.
138. Nystrom Aff., ¶ 8.
140. Second Sapp Aff., ¶ 9.
141. Nystrom Aff., ¶ 8. Interestingly, Sapp, the Trust officer incharge of the Trust, did not address this matter in his affidavit.
142. Nystrom Aff., ¶ 7.
143. See supra pages 42-44.
144. Sapp Second Aff., ¶ 8 (emphasis added).
145. Nystrom Aff., ¶ 8.
146. Defendants argue in this vein that the Wal-Mart Trust "purchased"the COLI policies in Georgia. To the extent Defendant Wal-Mart intends torefer here to something other than the location from which it caused theTrust to send payments, the term "purchased" relates to the "place ofcontracting" and not the "place of performance." Thus, this evidence isentitled to no weight as to the "place of performance" factor.
147. See Sims COLI Policy, at 4 (Exhibit 10 to Emerick Aff.).
148. There is logic behind this rule. The legally significant actionin a premium payment does not occur in the state where the insurancepolicy owner writes a check or arranges for a wire transfer. Instead, apolicy owner receives credit for providing consideration, the premiumpayments, for the insurance coverage when the payments successfully reachthe insurance company, as required by the insurance policy.
149. See Client Master Information Form (Exhibit A to the AIG Letterof Understanding (Sapp. Aff., Exhibit 12)).
150. This result is not inconsistent with the Restatement, § 196,which provides:
The validity of a contract for the rendition of services and the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the state where the contract requires that the services, or a major portion of the services, be rendered, unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.
The Court has concluded that the claims asserted by Plaintiffs involve§ 6 factors that strongly involve longstanding policies of Texas andthus make Texas's interest superior to Georgia's and the interests of thestates in which the contracting parties reside.
151. These payments were due at the insurers' home offices, which werenot in Georgia (or Texas) as noted above.
152. Wal-Mart asserts that "a number of Wal-Mart employees insuredunder the COLI policies changed their states of residence between thetime the policies were issued in 1993-1995 and their dates of death."Nystrom Aff., ¶ 9. This conclusory statement is entitled no weight.It is too vague to have any probative value. Wal-Mart has the necessaryinformation within its control. Its failure to produce details on theresidency of insureds suggests that the details would not be helpful toWal-Mart's position. Moreover, the relevance of this assertion is notapparent. If an insured moves out of the State of Texas, then the Texasinsurable interest doctrine does not apply to that person.
153. Second Sapp Aff., ¶ 9.
154. As to the place of business of the Wal-Mart Trust's trustee,Wachovia, Wal-Mart explains that the principal place of the Wachovia Bankof Georgia, N.A. was Atlanta, Georgia; that the bank became WachoviaBank, N.A. in 1997 after a merger with a North Carolina — domiciledbank; that as national associations, these banks did not have a place ofincorporation; that the resulting institution was a wholly ownedsubsidiary of Wachovia Corporation, which was headquartered in bothAtlanta and North Carolina; and that certain Trust administrativefunctions were performed in North Carolina, including the receipt of thelife insurance proceeds after June 1, 1997. Id. ¶¶ 9, 10.
155. If the insureds have moved from the State, then they are nolonger beneficiaries of Texas law.
156. The Baum case generated three decisions by the Fifth CircuitCourt of Appeals. Noel Baum and Bill Cook agreed to form an advertisingjoint venture named "Media Sales & Marketing, Inc." ("Media"), abusiness in which Baum owned the controlling interest, and apparentlyintended to incorporate in Louisiana. Id. In fact, Media was neverformally incorporated. New York Life Ins. Co. v. Baum, 617 F.2d 1201,1202-03 (5th Cir. 1980) ("Baum I"). The venture's principal place ofbusiness was Houston, Texas. Baum lived in Louisiana and Cook in Texas.Baum was to own and control the business during the early stages and Cookand a third person, Cutler, were to buy in later after the business begangenerating income. Id. at 1202. Baum lent considerable sums of money tothe business and arranged a line of credit. Id. To protect hisinvestment, Baum and Cook agreed that Baum could purchase key man lifeinsurance on Cook, providing for Media as the owner and Baum (as apartner) the beneficiary. Id. Baum attempted to do so, but because Baumwas an insurance agent for New York Life Insurance Company, the issuer ofthe policy. New York Life refused to issue the policy with Baum as thenamed beneficiary. Baum therefore changed the beneficiary to Media. Id.The supplementary information policy application form stated that Mediahad been incorporated in Louisiana, although it had not.
Several days thereafter, Cutler and Cook incorporated their own company called "Media Sales and Marketing, Inc." in Texas ("Media Texas"). Id. at 1202. Baum was not involved with Media Texas. Baum later claimed that Cook and Cutler had "cut [him] out completely" of ownership in the business in which he had provided much of the capital. Id. at 1202-03. Media Texas never issued any stock, never produced any income, and was merely a corporate shell. Id. Interestingly, Cook was "gunned down" twenty minutes after expiration of the insurance policy's contestability period. Both Baum and Media Texas filed claims for the policy benefits. Id. at 1203. The value of the policy was far greater than the one year's worth of premium payments received.
157. Specifically, the court held that neither Media nor Media Texaswere in legal existence at the time the contract was made, and sotherefore neither could have an insurable interest. 617 F.2d at1203.
158. According to the court of appeals in Baum II, under Texascontract and choice of law rules, the insurance policy "contract was madein New York, and was to be substantially performed in that state." 700F.2d at 932. The court relied on the insurance policy's contractualprovisions that specified "payments by the [insurer] are payable at [its]Home Office in New York City," and that "[p]remiums are payable . . . tothe [insurer] at its Home Office [in New York]." Id. at 932-33. The courtnoted that "acceptance of the application and the issuance and mailing ofthe policy, acts that were essential to the consummation of thecontract, occurred in New York." Id. The court added that the fact thatthe policy required that it be sent to "an agent for the unconditionaldelivery [to the applicant] does not alter the effect of thetransaction, which was consummated at the New York headquarters of the[insurance] Company." Id.
159. The court did not disturb its conclusion that New York lawapplied.
160. It is clear that the Camelot Plaintiffs had no such knowledge.Wal-Mart relies on putative notice given through a brochure distributedto Wal-Mart employees in December 1993 the "Benefits Brochure." Exhibit 7to the Emerick Affidavit. The Benefits Brochure did not advise theemployees meaningfully of the creation of new insurance on their lives.The brochure's focus and inquiry to the employees pertained to a right toopt out of the $5,000 Special Death Benefit, not a solicitation for theemployee's agreement to the creation of the insurance itself.
161. Moreover, in Baum, the insured/decedent's estate was not acontestant. In Baum, the identity of the beneficiaries named in theinsurance policies was disputed. Here, the issue is completelydifferent; it is the legal effect of the existence of the policies.
162. Van Etten Aff. (Attachment A to Appendix for Hartford's SummaryJudgment Motion), ¶¶ 8-9.
163. Van Etten Aff., ¶ 9.
164. See Camelot Defendants' Summary Judgment Motion [Doc. #30], at 2(incorporating Hartford's submissions by reference).
165. CM Holdings was a Chapter 11 bankruptcy action involvingCamelot's parent company, CM Holdings. 254 B.R. at 582. In the context ofthe bankruptcy proceeding, the IRS contended that Camelot's COLI policyscheme was an improper tax shelter. Id. at 581. The dispute resulted inan adversary proceeding and trial in the United States District Court forthe District of Delaware. Id. at 582. That court held that Camelot wasnot entitled to interest deductions associated with the COLI scheme. Id.at 583. Plaintiffs have submitted the district court's 82-page opinionand the 1799-page trial transcript. The Camelot Defendants do not citemeaningfully to this material.
166. During trial in the tax case, styled IRS v. CM Holdings, Inc.,No. 97-695 (D.Del. 2000), James Campisi, Camelot's insurance broker,testified regarding Camelot's decision on where to locate the COLIpolicies. Campisi stated: "In terms of notification, consent and insurableinterest, Georgia and Ohio were pretty similar," but the company selectedGeorgia because it had more favorable premium tax laws. IRS v. CMHoldings, Inc., Trial Transcript, at 1204-06 (Exhibit B of Appendix toCamelot Plaintiffs' Motion for Summary Judgment). However, Campisi alsotestified that the Camelot COLI policies in fact had significant contactsto Ohio:
[T]he application and the prepayment agreement was signed in Ohio. The first check that was written came from Ohio. That would indicate that the policies were issued in Ohio. The policies were physically delivered to Ohio. And that would indicate that the policies were delivered — were issued in Ohio.
Id. Ultimately, Campisi opined that the COLI policies were issued inOhio, but Georgia law applied for premium tax purposes. Id. Plaintiffsalso cite comments made by the presiding judge in CM Holdings during thetrial which indicate that the COLI policies were not issued in Georgia.Judge Schwartz stated: "the policies probably were never in the State ofGeorgia, but were delivered to corporate headquarters in Ohio." IRS v. CMHoldings, Inc., Trial Transcript at 793 (Exhibit B of Appendix to CamelotPlaintiffs' Motion for Summary Judgment). In rebuttal, the CamelotDefendants argue that if the testimony in CM Holdings shows that Ohio,rather than Georgia, had more significant contacts with the Camelot COLIpolicies, this evidence defeats Plaintiffs' position since Texas law doesnot apply. The Camelot Defendants also contend for this reason thatPlaintiffs fail on the merits of their claims because Ohio law does notrecognize Plaintiffs' cause of action.
167. Id. at 1094-97.
168. Id. at 583.
169. Collateral estoppel traditionally applies when three conditionsare met: (1) the issue under consideration is identical to that litigatedin the prior action; (2) the issue was fully and vigorously litigated inthe prior action; (3) the issue was necessary to support the judgment inthe prior case. Hibernia, 740 F.2d at 387. The Fifth Circuit hasrecognized a fourth requirement for offensive use of collateralestoppel: whether there is any special circumstance that would make itunfair to apply the doctrine. Winters v. Diamond Shamrock Chem. Co.,149 F.3d 387, 391 (5th Cir. 1998). These conditions are not methere.
170. Exhibit A to Complaint, at DE-CMH00457.
171. Id. at DE-CMH00464.
172. Id. at DE-CMH00489.
173. The details of the administrator's role is not established by theparties. The parties have submitted the voluminous records of bankruptcyand tax litigation, but have failed to direct the Court to any specificportions of that record to support their contentions. This Court has noduty to scour this record. Ragas v. Tennessee Gas Pipeline Co.,136 F.3d 455, 458 (5th Cir. 1998). The Camelot Defendants and Hartford,as movants seeking application of Georgia law, have the duty to establishthese facts. The absence of evidence in the record to connect thisdispute to Georgia, through the Camelot administrator or otherwise,constitutes a failure by movants to meet their summary judgment burden todemonstrate as a matter of law that Georgia law should apply in thiscase.
174. All choice of law arguments made by Defendants that have not beenaddressed here have been considered and rejected by the Court.
175. Plaintiffs plead their claims largely without distinguishingamong Plaintiffs or Employer Defendants. By implication, Plaintiffsinclude the claims of the Sims Estate. Pertinent to Plaintiff Sims Estateand the COLI death benefits, the Complaint requests relief under28 U.S.C. § 2201 (a) including:
 A final judgment concluding that the policies, policy benefits, and any residual or resulting benefits from the policies are held in a constructive trust by Wal-Mart, Camelot, Trans World, members of the defendant employer class, Hartford or AIG, as appropriate, for the benefit of the plaintiffs and members of the plaintiff-insured person class;
 A final judgment for money identifying the amount held in constructive trust by members of the defendant-employer class; and
 A final judgment disgorging the money unjustly had and received by members of the defendant-employer class through the life insurance policies at issue.
Complaint, at 12-13. In sum, the Sims Estate seeks an order that the COLIdeath benefits on Sims's life be paid to the Sims Estate.
176. 29 U.S.C. § 1144 (b)(2).
177. See The Estate of Douglas Sims' Response to Wal-Mart's Motion forSummary Judgment [Doc. #32], at 16-34 (seeking discovery on Wal-Mart'sERISA preemption argument). This motion is denied as moot. A continuancefor the purposes Plaintiffs seek is unnecessary. In this regard,Plaintiffs also submitted the Declaration of Seth J. Chandler, apparentlyas an expert opinion in support of their arguments against ERISApreemption. Declaration of Seth J. Chandler (Exhibit A to Plaintiffs'November 2, 2001 Submission) ("Chandler Decl."). Defendants object to theChandler Declaration. See Defendant Wal-Mart's Objection to Declarationof Seth J. Chandler [Doc. #56]; Surreply of Defendants Camelot Music,Inc. and Trans World Entertainment Corporation in Opposition to CamelotPlaintiffs' Motion for Partial Summary Judgment [Docs. #54], at 6;Hartford Life Insurance Company's Surreply in Opposition to the CamelotPlaintiffs' Motion for Partial Summary Judgment and Objection to theDeclaration of Seth J. Chandler [Doc. #55], at 2-5. The Court does notrely on the Chandler Declaration in reaching its decision, and thusDefendants' objections are denied as moot.
178. Under the first step in the Fifth Circuit's test, an ERISA planis said to exist if a court can determine "from the surroundingcircumstances [that] a reasonable person could ascertain the intendedbenefits, beneficiaries, source of financing, and procedures forreceiving benefits." Meredith, 980 F.2d at 355. Under the second step, aplan is exempt from ERISA's purview if "(1) the employer does notcontribute to the plan; (2) participation is voluntary; (3) theemployer's role is limited to collecting premiums and remitting them tothe insurer, and (4) the employer received no profit from the plan." Id.(emphasis in original). The plan must meet all four criteria establishedby the Department of Labor to be exempt. Id. Under the third and finalstep the Fifth Circuit looks to the two primary elements of an employeebenefit plan as defined by the statute: "(1) whether an employerestablished or maintained the plan; and (2) whether the employer intendedto provide benefits to its employees." Id.
179. Emerick Aff., ¶ 4, and Exhibit 7. If the employee died as aresult of an accident, the payment was $10,000. Id.
180. See 1994 Summary Plan Description (Exhibit 1 to Emerick Aff.)("1994 Summary"); 1995 Summary Plan Description (Exhibit 2 to EmerickAff.) ("1995 Summary"). These documents are collectively referred to asthe "Summaries." The non-COLI life insurance policies were purchased byWal-Mart and offered to its employees. These polices are called"company-paid life insurance." as distinct from the COLI ("company-ownedlife insurance") policies in issue before the Court. See Emerick Aff.,¶¶ 3-5. Under the company-paid insurance program, the employeesdesignated the beneficiaries of the insurance proceeds. Id. Thecompany-paid life insurance paid benefits equal to the employee's yearlysalary up to $50,000. Id. Under the COLI policies, Wal-Mart designateditself as the beneficiary of all the insurance on all the employees'lives. Only the COLI polices are alleged to be related to the SpecialDeath Benefits. Wal-Mart described both these types of life insurancepolicies in the same section of the Wal-Mart Plan's Summaries. It is notunlikely that a reader of the Summaries would be confused about thedifferences between these types of insurance and fail to recognize thedistinction between them.
181. The language describing the Special Death Benefits in the 1994and 1995 Summaries is nearly identical. See 1994 Summary, at F-2; 1995Summary, at F-2. Each Summary also states "[a]lthough this special deathbenefit is expected to continue indefinitely. Wal-Mart reserves the rightto change or discontinue these benefits at any time." Id.
182. Summaries, at F-2 (emphasis added). There is nothing in theSummaries or other formal written Wal-Mart Plan documentation before theCourt that requires Wal-Mart to pay a portion of the specific proceeds ofa COLI policy, in particular, to the deceased employee's designatedbeneficiary. or that otherwise commits Wal-Mart to use any specificsource of funds for the Special Death Benefits.
183. Emerick Aff., ¶ 15.
184. Exhibit 7 to Emerick Aff., and ¶¶ 3-5 thereto. Exhibit 7consists of three unnumbered pages. The Court will refer to theseunnumbered pages by their location in the Exhibit.
185. Emerick describes the controlling Wal-Mart Plan documents asbeing "Exhibits 1 through 6" of the Emerick Affidavit. EmerickSupp.Aff., ¶ 13. and states "there were no other legal documentsthat defined COLI benefits under the [1994 or 1995 Summaries]. In fact,the [Summaries] constitute the plan text that define the COLI benefitsunder the Wal-Mart Plan and there is no separate `legal document' thatdoes so." Id.
186. Emerick Aff., Exhibit 7, at first page.
187. Emerick Aff., Exhibit 7, at third page. The flyer also statedthat the "details of this new death benefit will be explained in theBenefits Book" which presumably refers to one of the Summaries. The flyergave Wal-Mart employees an opportunity to opt out of the Special DeathBenefits program. Emerick states that it "was Wal-Mart's intention andpolicy that the Trust not purchase a COLI policy on the life of anyWal-Mart employee who signed the opt-out form." Second Supp. EmerickAff., ¶ 4. Emerick further states: "COLI policies were not purchasedby the Trust on employees who signed the opt-out form, unless anadministrative error occurred whereby a particular COLI policy might havebeen mistakenly purchased by the Trust of which I am aware." Id. It isnot clear if Sims is the only Wal-Mart employee that became eligible forthe Special Death Benefit. His estate makes the only claim for deathbenefits presently before the Court. Plaintiffs move conditionally, ifthis Court denies their Rule 56(f) motion for continuance, to strike theSecond Supplemental Emerick Affidavit or to take Emerick's deposition.See Plaintiffs' Motion to Strike, Response to Wal-Mart's SupplementalBrief in Support of Motions for Summary Judgment, Supplemental Motion forContinuance and Leave to Depose Tom Emerick [Doc. #85]. Plaintiffs arguethat this third Emerick affidavit is untimely. The motion is denied. Theparties were invited at the January 11, 2002 hearing to submitsupplemental materials on the topics addressed by this affidavit.
188. Interestingly, as to the choice of law analysis, there is nomention of the Trust in the flyer (or the Benefits Memorandum).
189. Id. (emphasis added). The parties agree that the flyer'sreference to the Wal-Mart "profit sharing plan" is not a reference to theWal-Mart Plan and is not pertinent to the issues before the Court.January 11, 2000 Transcript, at 8-9, 21-23.
190. Emerick Aff., ¶ 12.
191. Cf., Emerick Aff., Exhibits 1 and 2, at pages F-2,respectively.
192. Wal-Mart, relying upon several federal district court cases,contends that Plaintiffs seek recovery on a claim for violation of publicpolicy and that Texas does not recognize a separate tort for the violationof public policy. Guzman v. El Paso Natural Gas Co., 756 F. Supp. 994,1002 (W.D.Tex. 1990); Andrews Transport, Inc. v. CNA Reinsurance Co.,Ltd., 166 F. Supp.2d 516, 523-24 (N.D.Tex. 2001). Wal-Mart argues thatthe Sims Estate's claim must be one for unjust enrichment. Plaintiffspoint out that they do not allege a tort, and do not seek tort damages.Thus, these cases are not relevant to the ERISA analysis orotherwise.
193. Undoubtedly, one reason the Sims Estate does not seek anybenefits provided by the Wal-Mart Plan is that the Estate recognizes thatit does not qualify for those benefits. The Special Death Benefit programwas closed to new enrollees in 1995, and completely discontinued monthsbefore Sims's death in 1998. See Emerick Aff., ¶ 6.
194. The outcome is logical. ERISA and the Texas insurable interestdoctrine are motivated by substantially different policy concerns.Congress enacted the ERISA statutory scheme as a means of protecting therights of "working men and women from abuses in the administration andinvestment of private retirement plans and employee welfare plans."Hansen v. Continental Ins. Co., 940 F.2d 971, 975-76 (5th Cir. 1991). Bycontrast, the Texas insurable interest doctrine has the following policyconcerns: primarily (i) preventing a person from having an incentive tocommit murder and, arguably, (ii) prohibiting wagers on the life ofanother. Stillwagoner, 979 S.W.2d at 358.
195. The Court of Appeals explained that "the Plaintiffs' action wouldimpose a state-created duty to disclose plan amendments before they areput into effect, a duty which . . . ERISA specifically does not impose."Id. at 758 (emphasis in original).
196. See AIG's Summary Judgment Motion [Doc. #60], at 5-8. Wal-Martand the Wal-Mart Trust have adopted AIG's statute of limitationsargument. See Wal-Mart Trust's Summary Judgment Motion [Doc. #58], at1-2.
197. AIG bases its statute of limitations arguments on Texas law,contending that Texas courts characterize limitations issues asprocedural and thus apply the law of the forum, irrespective of which lawapplies to the merits of the dispute. Whether the limitations issue issubstantive or procedural is academic since the Court has held that Texaslaw governs the merits of this case. Therefore, Texas law will be appliedto the limitations issue.
198. After reviewing the authorities cited by AIG, the Court questionsthe characterization of the majority and minority rules. For example, inBrupbacher v. Raneri, Civ. A. No. 3:98-CV-1174, 2000 WL 665560, *4(N.D.Tex., Mar. 17, 2000), cited by AIG in support of its articulation ofthe "majority rule," the district court looked to the underlying cause ofaction in determining the limitations period. The court stated: "Inactions to establish a constructive trust based on fraud, the four-yearstatute of limitations applies." Id. (emphasis added). The court inBrupbacher did not cite or otherwise refer to the residual statute oflimitations. In Carr v. Weiss, 984 S.W.2d 753, 762 (Tex.App. —Amarillo 1999, pet. denied), also cited by AIG in support of the"majority rule," the court did not hold that constructive trust suits aregoverned automatically by the residual limitations period.
199. Plaintiffs appear to take the position that the limitationsperiod is four years. Plaintiffs' arguments focus on the dates theirclaims accrue.
200. Plaintiffs in the Complaint make no distinction between theclaims of the live Plaintiffs and the Sims's Estate's claim. TheComplaint states:
Under well-established Texas law, when a life insurance policy erroneously names a beneficiary that does not possess an insurable interest in the life of the person insured, the designation is void. By operation of Texas law, the policy remains in place and is owned by the insured person, and upon his death, the benefits are payable to the insured person's estate. The insurer or designated beneficiary will hold the policy or policy benefits, as applicable, in a constructive trust for the insured person or his estate, as applicable, when the designated beneficiary has no insurable interest in the insured person's life.
Complaint, at 9. Under Plaintiffs' theory, Sims could have sued for aconstructive trust from the moment the COLI policy on his life waspurchased.
201. Complaint, at 12. Plaintiffs further seek a final judgment thatthe "policies, policy benefits and any residual or resulting benefitsfrom the policies are held in a constructive trust by [the EmployerDefendants] . . . ." Id.
202. The Court rejects AIG's further argument that the discovery ruleexception to the statute of limitations should be applied. The discoveryrule applies only when the nature of the injury is "inherentlyundiscoverable" and the evidence of the injury is "objectivelyverifiable." See Computer Assoc. Intl, Inc. v. Altai, Inc., 918 S.W.2d 453,456 (1996); In re Coastal Plains, Inc., 179 F.3d 197, 214 (5th Cir.1999). "Under the rule, a cause of action does not accrue until aplaintiff knows or, through the exercise of reasonable care anddiligence, should have known of the wrongful act and resulting injury."Childs v. Haussecker, 974 S.W.2d 31, 37 (Tex. 1998). The Court need notresolve AIG's argument that Sims was placed on notice of the existence ofthe COLI policies through the flyer distributed by Wal-Mart in December1993. First, Plaintiff Sims Estate does not rely on the discovery rule.Second, the evidence on which these Defendants to establish "notice" toSims raises a question of fact as to whether Sims actually received theflyer and whether the information in it gave meaningful notice of thebenefits Wal-Mart would receive from the insurance. Wal-Mart's evidenceestablishes only that "Location Managers" (undefined in the record)received the flyers and were directed to distribute them. There is noevidence that Sims received one. Should the limitations discovery rule beapplicable, pretrial discovery and possibly an evidentiary hearing, wouldbe necessary before the Court could rule on the issue. Third, the partiescite no cases on insurable interests in which the insured's knowledge ofthe offending beneficiary designation was legally significant.
203. The Court does not reach the issue of mootness for suits byothers seeking a declaration after surrender of the policy or removal ofthe designation of an improper beneficiary or owner.
204. No Texas decisions on the insurable interest doctrine haveconsidered the timing of the filing of the suit vis à vis thenaming of a beneficiary that lacks an insurable interest, or visà vis the occurrence of facts that result in a beneficiary lackingan insurable interest. See, e.g., DeLeon, 259 F.3d 344 (administrator ofdeceased employee's estate brought action to recover benefits of COLIpolicies); Cheeves v. Anders, 87 Tex. 287, 28 S.W. 274 (administrator ofinsured's estate brought action against policy beneficiary for deathbenefits); Tamez, 999 S.W.2d 12 (administrators of employees' estatesbrought action to recover benefits of COLI policies). However, the resultreached by this Court is consistent with Texas cases and Texas publicpolicy embodied in its insurable interest doctrine. AIG's approach wouldadd an unnecessary layer of uncertainty to enforcement of theprophylactic Texas insurable interest doctrine. The insured suffers thesame risks and the Texas doctrine is violated irrespective of whether theimproper beneficiary was named with or without the knowledge of theinsured, and irrespective of when the improper relationship was created.The type of relief available, however, may differ depending on when theclaim is asserted.
205. See AIG's Motion to Dismiss [Doc. #59]. At the January 11, 2002Hearing, the Court gave notice that it intended to convert, pursuant toRule 12(b), motions to dismiss to motions for summary judgment, asappropriate. January 11, 2001 Transcript, at 4-5. Although the parties mayhave referred to certain limited matters outside the pleadings inconnection with AIG's motion to dismiss, it is unnecessary andinappropriate to convert AIG's motion for summary judgment at this earlystage since no discovery has occurred as to AIG's alleged payment of theSims Policy death benefits.
206. Complaint, at 6.
207. Id. at 3.
208. Id. at 4.
209. Id. at 7.
210. Id. at 7.
211. Id. at 9.
212. Id. at 7.
213. Id. at 9.
214. Id. at 9-10.
215. Id. at 10.
216. Plaintiffs' Complaint does request relief against the insurersgenerally through a final judgment concluding that the policies, policybenefits and "other residual or resulting benefits from the policies areheld in constructive trust" by "members of the defendant-employer class,Hartford or AIG, as appropriate, for the benefit of the plaintiffs. . . ."Id. at 12. Thus, Plaintiffs' intentions are not clear as to theInsurer Defendants.
217. The Court's rulings infra also undercut the viability of anyclaim by the Sims Estate against AIG, assuming AIG has in fact paid thedeath benefits to Wal-Mart.
218. In Cohen, the insured assigned the benefits of a life insurancepolicy on his life to J.H. Hilsman. 139 S.W. at 52. When the insureddied, both Hilsman and the insured's estate ("estate") filed claims withthe insurer for the death benefits. Id. at 53. Hilsman gave the insureran indemnity bond in exchange for which the insurer paid him the deathbenefits. Id. Before paying the death benefits to Hilsman, the insurerhad notice that the estate claimed that the assignment to Hilsman wasinvalid. Id.
219. The Cohen court conducted a fact-sensitive review of the behaviorof the insurance company before determining whether the company hadengaged in inequitable conduct. Because the court found that theinsurer's "hands are not clean, for they have given to one money to keepwhich it knew was not his, but another's," it directed recovery from theinsurer. Cohen, 139 S.W. at 57. The court focused on the uniquecircumstances of the case, stating:
Since the insurance company took indemnity from Hilsman for the wrong done the [estate], and is now defending this suit in his interest, rather than its own, it must be regarded as standing in his shoes, and it can no more be heard to say that it had the right to pay the money to him than he could, were he before the court defending this action.
220. See, e.g., DeLeon, 259 F.3d 344; Griffin, 123 F.2d at 551;Drane, 161 S.W.2d at 1058-59; Cheeves, 28 S.W. at 275; Tamez, 999 S.W.2dat 16-17; Stillwagoner, 979 S.W.2d at 360-61; Cole, 187 S.W.2d at593.
221. Another equitable factor was the gross inequality of wealth ofthe parties. It appears that the insured's estate likely would have hadno remedy but for this ruling.
222. The Sims Estate also cites McDonald v. McDonald, 632 S.W.2d 636(Tex.App. — Dallas, 1982, writ ref'd n.r.e.), but this case isinapplicable to the facts at bar. In McDonald, the Dallas court ofappeals, reversing the decision of the trial court, held that theinsurance company was liable to the insured's estate after it had paiddeath benefits to the insured's former wife, who was the designatedbeneficiary of the life insurance policy. McDonald, 632 S.W.2d at 637.However, the insurable interest doctrine was not mentioned by the court,and apparently was not raised by the parties. Instead, the court framedthe issue as "whether the divorce decree [between the insured and hisformer wife] divested the wife of her contingent right to the insuranceproceeds on maturity of the policies by the death of the insured." Id. Thedivorce decree, issued shortly before the insured died, expressly awarded"as [the insured's] sole and separate property, specific items,including, any and all insurance, pensions, retirement benefits, andother benefits arising out of [the insured's] employment." Id. Theinsured died before changing the policy beneficiary. Id. at 637-38. Theissue regarding the insurance company's liability to the estate waswhether it had received notice of the estate's claim for policybenefits. Id. at 639. The court found that the insurer had sufficientnotice of the estate's claim to support liability. Id. at 639-40.
223. AIG correctly argues that there is no evidence, or even anycontention, by Plaintiffs that AIG was notified of the Sims Estate'sclaims to the proceeds of Sims Policy "until long after AIG had alreadypaid the benefits due under the policy." Defendant AIG Life InsuranceCompany's Reply in Further Support of its Motion to Dismiss the SecondAmended Complaint [Doc. #73], at 4. The Sims Estate argues in responsethat "AIG knew facts putting it on notice that one other than Wal-Martwas properly entitled to the policy benefits because Wal-Mart had noinsurable interest in its employees' lives." The Estate of Douglas Sims'Response to AIG Life Insurance Company's Motion to Dismiss [Doc. #64],at 6. However, the Complaint is silent on this issue. Plaintiffs neverexpressly allege in the Complaint that any of the Insurer Defendants wereaware that the Employer Defendants lacked an insurable interests inPlaintiffs' lives. The Sims Estate unconvincingly relies on paragraph 38of the Complaint for its argument that AIG had knowledge that Wal-Martwas not entitled to the COLI policy benefits on Sims's life. However,paragraph 38 of the Complaint alleges only that the employers did not haveinsurable interests in Plaintiffs' lives. Paragraph 38 does not expresslyaddress the insurers' knowledge of this fact.
224. This Court is also aware of Texas cases involving requests for aconstructive trust based on unjust enrichment As the parties note, unjustenrichment is an equitable doctrine that requires a fact-intensivedetermination by the Court. Young v. Fontenot, 888 S.W.2d 238, 242-43(Tex.App. — El Paso 1994, writ denied) (The form of a constructivetrust, an equitable remedy to prevent unjust enrichment, is "practicallywithout limit, and its existence depends upon the circumstances.")(emphasis added); Austin Lake Estates, Inc. v. Meyer, 557 S.W.2d 380,382-83 (Tex.Civ. App. — Austin 1977, no writ) ("Constructivetrusts, being remedial in character, have the very broad function ofredressing wrong or unjust enrichment in keeping with basic principles ofequity and justice."); Brupbacher v. Raneri, No. CIV.A. 3:98-CV-1174,2000 WL 665560 at *4 (N.D.Tex. Mar. 17, 2000) ("When the provencircumstances show that the holder of the legal title may not in goodconscience retain the beneficial interest, then equity converts him intoa trustee.") (emphasis added).
The Sims Estate argues that its unjust enrichment claim is based on AIG's participation in the COLI policy "scheme," which allegedly was inequitable because both the Wal-Mart and AIG profited from the policy on Sims's life. In particular, the Sims Estate contends that it seeks whatever money Wal-Mart paid to AIG in satisfaction of loans that AIG made to cover Wal-Mart's premium payments on the Sims Policy. AIG responds that it was not unjustly enriched as a result of these transactions. The Court cannot at this stage of the case make a determination on the particulars of the Sims Estate's claim that AIG was inequitably "enriched" or that the monies it received were "unjust." Nevertheless, the parties are directed to the Court's analysis of similar claims apparently asserted by the Camelot Plaintiffs.
225. Understandably, AIG has not sought dismissal of the Complaint asto the putative claims of other members of the proposed Plaintiff class.Thus, the Court does not determine AIG's status vis à vis theunnamed members of any such class. Such a final determination must awaitresolution of the claims against Employer Defendants, if any, to whom AIGsold COLI policies on the lives of Texas insureds.
226. The Camelot Defendants initially filed a motion to dismiss on theripeness issue. Thereafter, they and Hartford filed motions for summaryjudgment on the matter. See Camelot Defendants' Motion to Dismiss [Doc.#15]; Camelot Defendants' Summary Judgment Motion [Doc. #30]; Hartford'sSummary Judgment Motion [Doc. #24]. At the January 11, 2002 hearing, theCourt converted the motion to dismiss to a motion for summary judgmentsince matters outside the pleadings had been presented by the parties.The Camelot Defendants and Hartford also raise ripeness as an issue intheir oppositions to the Camelot Plaintiffs' Summary Judgment Motion.See Docs. #39, 40, 54 and 55.
227. The court also "must resolve whether it has the `authority' togrant declaratory relief in the case presented." Orix Credit, 212 F.3d at895. This element is not an issue here. Further, "the court has todetermine how to exercise its broad discretion to decide or dismiss adeclaratory judgment action." Id.
228. In Roberts, like many of the insurable interest cases, knowledgeof the facts is pertinent to an understanding of the court's ruling. Inthat case, the issuer of a life insurance policy brought suit for adeclaratory judgment to determine the rights of the living insured, hisformer spouse, and their children in life insurance policies. Roberts,244 S.W.2d at 304. T.P. Roberts purchased several life insurance policieson his life. Id. T.P. and his spouse, Allene Roberts later separated,entered into a property settlement, and divorced. Id. The divorcedecree, based on an agreed property settlement agreement, specified thatAllene be substituted as the beneficiary in all life insurance policieson the life of T.P. Id. The divorce decree also declared that Allene hada continuing insurable interest in the life of T.P. because of the "factthat the premiums heretofore paid on the policies . . . were paid out ofcommunity funds, and for the reason that the parties in said agreementhave bound themselves to pay equally the premium(s) on said policies asthey mature." Id. at 304-05. Four years later, T.P. requested that theinsurance company change the beneficiary to his personal representative,drawing a strong objection from Allene. Id. at 305. The insurance companybrought suit to determine the rights of the parties. Id. T.P. argued thatAllene did not then have an insurable interest in his life and that theproperty settlement was void.
The court assumed for the purpose of discussion that Allene did not have an insurable interest in the life of her former spouse. Id. at 307. The court nevertheless held that T.P.'s proper remedy was to have appealed the divorce decree directly, and not attempt a collateral attack on the judgment four years later. Id. The court concluded that it could not alter the final judgment of the divorce court. Id. at 308. In addition, the Dallas court held that T.P.'s acquiescence and consent to the divorce decree precluded him from arguing that the judgment was defective. Id. It also held that Texas courts refuse to permit him to reform the allegedly illegal agreement after he had intentionally agreed to it. Id.
229. This final rationale by the Roberts court, the one rationale onwhich the Camelot Defendants rely, followed the court's furtherrepetition that T.P. was barred by an estoppel. The court stated:
It follows that [T.P.] Roberts is effectually estopped from asserting any right to change of beneficiaries named in this policies except in accordance with their terms, i.e., by consent of Allene Roberts if living, otherwise by consent of the Daughter Flora; his said rights therein having been made wholly subject to the . . . aforesaid judgment. Further . . ., the questions herein propounded do not require a present determination . . . . `the courts will not render a declaratory judgment as to future rights, but just as in ordinary actions will wait until the event giving rise to the rights has happened, or, in other words, until the rights have become fixed under an existing state of facts.' 16 Am. Jur., sec. 18, p. 292. In major respects, a policy of insurance, like a will, speaks at time of death.
Id. Pursuant to these principles, the court held that it is moreappropriate to determine whether Allene Roberts had an insurable interestin the life of T.P. Roberts by virtue of "her asserted debtor-creditorrelationship" at the time of T.P. Roberts's death. Id. 308-09.
230. No Texas court has adopted the Roberts court's reasoning on theripeness issue except Moody v. Empire Life Ins. Co., 570 S.W.2d 450(Tex. Civ. App. — Eastland 1978), which was reversed by the TexasSupreme Court, as noted in the text that follows.
231. In Empire, an insured, Shearn Moody, Jr., brought a declaratoryjudgment for the purpose of invalidating an assignment of the right to aninsurance policy on his life, contending that the assignee did not havean insurable interest in his life. Id. at 857. Moody, the principalstockholder, chief executive officer, president, and chairman of theboard of Empire Life Insurance Company ("Empire"), assigned to thecompany his life interest in certain trust assets. Id. at 856. Empire wasrequired by accounting rules to obtain a life insurance policy on Moodyto cover the value of his life interest in the trust assets because theincome from the trust would necessarily terminate upon Moody's death.Id. Thereafter, Empire experienced financial difficulties and was placedin receivership. Id. at 857. A deal was made whereby another insurancecompany, Protective Life Insurance Company of Birmingham, Alabama("Protective"), took an assignment of some of Empire's policies inexchange for certain Empire assets, including Moody's trust income andinsurance on Moody's life. Id. at 857-58. Moody later instituted anaction seeking a judicial declaration that Protective had no insurableinterest in his life. Id. at 857.
The trial court held that Protective did have an insurable interest in Moody's life, but the court of civil appeals, sua sponte, in part relying on Roberts, overturned that decision and held that the case was not ripe. Id. at 858. The Supreme Court of Texas reversed the court of appeals, ruled that the case was justiciable. and reinstated the trial court's decision. Id. The Supreme Court recognized that if the assignee, Protective, lacked an insurable interest, then Protective would be left with no income to satisfy the assignor, Empire's, obligations after Moody died, and Protective could not list the value of the Moody trust income as an asset, since Moody's trust payments could cease at any time. Id. at 858-59.
232. It is noted also that the vitality of the Roberts court'sconclusion that the insurable interest issue was not ripe for declaratoryrelief is undercut by the fact that the court disapproved of theinsurable interest doctrine, which it discussed at length in a footnote.244 S.W.2d at 307 n. 2. The court characterized the Texas insurableinterest doctrine as "unsound" in light of certain statutory changes thatwere made to the doctrine which exempted fraternal societies. Id. TheRoberts court's view has not prevailed. Fifty years later, the insurableinterest doctrine remains strong as the law of Texas.
233. See Camelot Plaintiffs' Summary Judgment Motion [Doc. #15].
234. See Camelot Defendants' Motion to Dismiss [Doc. #15]; Hartford'sSummary Judgment Motion [Doc. #24].
235. Courts consistently refer to these categories of insurableinterests. E.g., DeLeon, 259 F.3d at 349-50 (citing Drane, 161 S.W.2d at1058-59); Stillwagoner, 979 S.W.2d at 361 (describing Drane as the "mostcited Texas definition of an insurable interest in another's life");Tamez, 999 S.W.2d at 17 (quoting Drane).
236. The court in Drane described the third category as follows:
Bluntly expressed, insurable interest under [the third] classification, is determined by monetary considerations, viewed from the standpoint of the beneficiary. Would he regard himself as better off from the standpoint of money, would he enjoy more substantial economic returns should the insured continue to live; or would he have more, in the form of the proceeds of the policy should he die.
Drane, 161 S.W.2d at 1059. If the beneficiary "would profit by [theinsured's] death, the policy contract is void as to [the beneficiary]since the public has a controlling concern that no person have aninterest that may give rise to a temptation to destroy [the insured's]life." Id.
237. See Complaint, at 5-6. It is noted that when Trans World boughtCamelot, all Camelot's employees began to work for Trans World, whichoperates retails stores nationwide. Currently, Trans World operates 984stores in 46 states and employs 10,000 people. Camelot Defendants' Motionto Dismiss, at 4. Camelot purchased COLI policies on 1430 of itsemployees. Camelot Defendants' Motion to Dismiss, at 4.
238. See Hartford Life Insurance Company's Response to CamelotPlaintiffs' Motion for Partial Summary Judgment [Doc. #39], at 5-6 n.4. The Camelot Defendants do not join Hartford in this motion.
239. Hartford and the Camelot Defendants appear to have closelycoordinated their defenses to this action, but Hartford fails to explainwhy the requested information, at least on the four Camelot Plaintiffs,was not easily available from the Camelot Defendants. It is noted thatthe Camelot Defendants did not join in this aspect of Hartford'smotions.
240. These Defendants also fail to demonstrate that dismissal of thisclaim is warranted.
241. These Defendants also contend that Georgia law applies to thisaction and that Plaintiffs' claims are not ripe. The Court has alreadyaddressed and rejected these arguments.
242. Hartford cites Tamez, 999 S.W.2d at 15, for the proposition thata majority of state courts have held that only the insurer may raise theissue of insurable interest. Indeed, the court in Tamez explicitlyrejected the rule in other states as "inequitable." Id. ("Once the policyhas issued and the premiums have been paid, it would be inequitable foran insurer, at that late date, to attempt to escape its contract byclaiming the beneficiary had no insurable interest.").
243. Hartford Life Insurance Company's Response to Camelot Plaintiffs'Motion for Partial Summary Judgment [Doc. #39], at 17.
244. Hartford asserts that (i) Plaintiffs have failed to meet theirsummary judgment burden regarding the lack of an insurable interest atthe time the policies were issued, and (ii) that it is impossible to knowwhether Defendants will have an insurable interest in Plaintiffs' liveswhen they die.
245. The prologue to § 217, entitled "National Background,"states:
Generally, an insurable interest at the inception of a contract of life insurance is regarded as sufficient, and it is immaterial that such interest ceases prior to the death of the insured, in the absence of a provision in the contract or a statute to the contrary. . . . In Texas, however, the beneficiary must also have an insurable interest when the benefits are payable.
Insurance Contracts and Coverage, 45 TEX. JUR.3D § 217 (emphasisadded). Hartford's argument simply ignores pertinent parts of thetreatise's analysis. Moreover, there is ample support in Texas law forthe rule as fully explained in the treatise. E.g., Cheeves, 28 S.W. at276 ("The want of insurable interest is just as absolute where it hasceased as where it never existed, and the inducement to destroy the lifeinsured for gain is just as strong in the one case as in the other.");Cole v. Browning, 187 S.W.2d at 594 (divorce decree terminates theinsurable interest that the former spouses had in each other'slives).
246. The implication of the Court's ruling, of course, is that theCamelot Defendants cannot retain death benefits from the COLI policies,should any such benefits be paid to these Defendants at a time that theylack an insurable interest in the life of an insured. The Courtspecifically declines to reach other aspects of the parties' dispute inconnection with death benefits from the COLI policies until the issuesbecome ripe. For instance, no party has sought a ruling on. and thus theCourt does not determine, who should bear responsibility for the policypremiums (if any) paid by the Camelot Defendants to purchase the SimsPolicy. A further issue is whether the insured's estate receives thedeath benefits without reduction for interest charges imposed by Hartfordon the premiums due from the Camelot Defendants.
247. Specifically, Plaintiffs seek declarations both that theDefendants are not the lawful owners of the COLI policies and thatPlaintiffs are the lawful owners.
248. See Camelot Defendants' Motion to Dismiss [Doc. #15]; Hartford'sSummary Judgment Motion [Doc. #24].
249. This holding is distinct from the Court's ruling on the SimsEstate's claim for death benefits received by Wal-Mart.
250. The Texas Supreme Court in Cheeves, 28 S.W. at 275, stated that:
When an insurance company has issued a policy upon the life of a person, payable to one who has no insurable interest in the life insured, or when a policy has been assigned to one having no such interest, the insurance company must nevertheless pay the full amount of the policy, if otherwise liable, because it has so contracted; and it is no concern of the insurer as to who gets the proceeds, except to see that it is paid to the proper parties, under its agreement. It is simply required to perform its contract, and the law will dispose of the money according to the rights of the parties.
Cheeves, 28 S.W. at 275 (emphasis added). In the century that hasfollowed Cheeves, Texas courts have held time and again that theinsurance contract is to be performed as written. E.g., Wilke v. Finn,39 S.W.2d 836, 839 (Tex.Comm'n App. 1931, judgm't adopted) (quotingCheeves, 28 S.W. at 275); Stillwagoner, 979 S.W.2d at 358 ("[A]lthoughthe Texas rule requires the designated beneficiary to have an insurableinterest, it is not essential to the validity of the contract.");DeLeon, 259 F.3d at 353 (holding that insurable interest doctrine doesnot entitle deceased insured's estate to a reformation of the insurancecontract, but a constructive trust on the policy proceeds).
251. In Wilke v. Finn, 39 S.W.2d 836 (Tex. Comm'n App. 1931, judgm'tadopted), the Texas Commission on Appeals discussed the available remedyfor insurable interest cases:
[A] person designated in the policy as the beneficiary, [may be treated], when he has no insurable interest, as an assignee, appointee, or trustee, to receive the proceeds for whoever may be lawfully entitled to enjoy them. The insurer will then be required to pay the sum it has promised to pay, and the money cannot be appropriated by anybody not having a legitimate right to it.
Wilke v. Finn, 39 S.W.2d at 838 (quoting Equitable Life Assur. Soc. v.Hazlewood, 75 Tex. 338, 12 S.W. 621, 625 (1889)). Various recentdecisions, discussed elsewhere in this Opinion, follow theseprinciples.
252. Plaintiffs, by implication, therefore also appear to seekrecovery of the surrender value of the policies should the CamelotDefendants choose to terminate the policies.
253. As a practical matter, the Camelot Plaintiffs' requested reliefis likely to require transfer of ownership of thousands of insurancepolicies to Plaintiff insureds.
254. DeLeon was a case related to, and partly controlled by, Tamez,999 S.W.2d at 16-17, 19, which was a suit brought by otheremployee-insureds against the same employer concerning the sameaccidental life insurance. The Houston court of appeals in Tamez heldthat there was no contractual relationship between the plaintiff estatesand the insurer. Id. at 21. Thus, that court ruled that the Tamezplaintiff estates in Tamez lacked privity with the insurer to seek policybenefits under the terms of the policies. In DeLeon, the Fifth Circuitheld that the rulings in Tamez collaterally estopped the parties fromrelitigating certain issues. Also, in DeLeon, the estate had released theemployer from all further responsibility. Accordingly, the DeLeon estatesought reformation of the insurance contract in the hopes of obtainingpolicy benefits directly from the insurers.
255. "Where an insurer pays the proceeds of a policy to a beneficiaryhaving no insurable interest, Texas courts have consistently held that aconstructive trust is the appropriate remedy." Id. at 350. The court ofappeals explained that the purpose of the rule requiring the insurancecontracts to be enforced as written is to avoid a "windfall to insurersat the expense of lawful beneficiaries." Id. Texas courts "require theinsurer to pay the policy proceeds to the beneficiary named in thepolicy." Id. If the beneficiary does not have an insurable interest, thebeneficiary will hold the proceeds in a constructive trust for thebenefit of the insured's estate. Id. at 350-51.
256. Certain equities in DeLeon supported this result. The estatealready had settled with the employer and had executed a comprehensiverelease from liability. The employer also had received death benefitsunder the policy from the insurer. The Court expressed concern that theinsurer not be subject to double liability on the policy both from thenamed beneficiary and from the insured's estate. Id.
257. Plaintiffs acknowledge that they would have to bear theresponsibilities that ownership entails.
258. Under the analysis in 45 TEX.JUR.3D § 217. it is unclearwhether any person other than one selected by the insured would qualifyas a lawful beneficiary on the existing policies, if a Camelot Plaintiffremains the insured. However, this is a matter the Court need not anddoes not decide at this time.
259. Camelot Plaintiffs' Response to Camelot's Motion to Dismiss[Doc. #28], at 8.
260. In Stillwagoner, a Texas court of appeals addressed the issues ofwhether "the employer [and beneficiary of a life insurance policy] had aninsurable interest in the life of the decedent, and who is entitled toraise the issue of lack of insurable interest." 979 S.W.2d at 356. Thecourt held that the insured's estate had standing to raise the insurableinterest issue and that the employer did not have an insurable interestin the life of the insured. Id. at 360, 363-64. In examining theinsurable interest doctrine, the court emphasized that the insurancecontract is to be performed as written, and the proceeds are paid to thedesignated beneficiary, who holds them in constructive trust. The courtstated: "although the Texas rule requires the designated beneficiary tohave an insurable interest, it is not essential to the validity of thecontract." Id. at 358. "If insurance benefits are paid to a beneficiarywithout an insurable interest, the beneficiary holds the proceeds for thebenefit of those entitled by law to receive them." Id.
261. The Tamez court held that the estates had standing to challengethe existence of an insurable interest and that the defendant employerdid not have an insurable interest in the insured's lives. 999 S.W.2d at14-15.
262. See the discussion of DeLeon, supra, in this Section.
263. In Shoemaker, the insured was still alive. The insured and hiswife purchased an insurance policy on the husband's life during theirmarriage. When the couple divorced, the former wife remained the namedbeneficiary under the policy. The wife died, and the court held that herestate was entitled to the cash surrender value of the life insurancepolicy on her former husband. Shoemaker, 48 S.W.2d at 613-14. The courtdistinguished between the death benefits and the surrender value. Id. at614. The court stated that the former wife did not have a right to thedeath benefits. However, since her former husband was still alive, herestate could claim the surrender value of the policy, which the courtcharacterized as "a debt against the insurance company." Id.
264. In Berdoll, the Texas appeals court adjusted the rights ofmarried persons during divorce proceedings. The court sought to ensurethat each individual to the marriage received a fair portion of thecouple's community property. Shortly before he was married, A.J. Berdollpurchased life insurance policies on his life. Berdoll, 145 S.W.2d at228-29. After his marriage, A.J. named his wife, Annie Berdoll, as thebeneficiary. Id. Thereafter, premiums were paid out of the communityfunds of the couple. Id. It was undisputed that Annie would no longerhave an insurable interest in the life of A.J. after they divorced. Id.at 230. Accordingly, the trial court held, and the appeals courtaffirmed, an adjustment of the rights related to the insurance policiesto reflect Annie's equitable share of the policies value. Id.Specifically, the court ordered that one of the policies be surrenderedand the cash value paid to the former wife. Id.
265. Little is inapposite; the corporation in issue had an insurableinterest. 867 S.W.2d at 17. The issue in Little was one of contractconstruction under very different circumstances from those at bar. InLittle, four married couples, each of which owned twenty-five percent ofthe shares of a corporation, executed a "Buy-Sell" agreement. Id. at 15.The agreement provided that the corporation was to purchase lifeinsurance on the lives of each of the husbands. Id. The corporation wasnamed as the beneficiary and was responsible for making premiumpayments. Id. Upon any of the husband's deaths, the agreement providedthat the surviving spouse would have to choose between retaining hertwenty-five percent ownership interest in the corporation or acceptingthe death benefits from the policy. Id. at 15-16. Paragraph 10 of theagreement provided that if any of the shareholders sold their interestduring their lifetime, the insureds would automatically obtain controlover the life insurance policies on their lives. Id. One of theshareholders, James Little, sold his shares and died shortly thereafter.Id. at 16. Glee Little, James's wife, sought the policy proceeds from thecorporation. Id. The corporation refused and brought suit against Gleefor a declaratory judgment. Id. The parties moved for summary judgment.Id. The trial court granted the corporation's motion and held that thecorporation can retain the proceeds from the policy. and the court ofappeals affirmed. Id. at 16. Glee argued that, pursuant to Paragraph 10 ofthe agreement, her husband's estate was the owner of the policy and wasentitled to the policy benefits from the corporation. Id. The court ofappeals held that, while the husband's estate was the owner underParagraph 10, he was required to take an affirmative step to claim thepolicy benefits. Id. The Supreme Court of Texas. viewing the matter as anissue of contract construction, reversed holding that James's estate wasentitled to the policy benefits. Id. at 18. Under these limitedcircumstances, the Supreme Court held that "it would be an anomaly toconstrue Paragraph 10 as automatically transferring ownership of theinsurance policy but not the proceeds." Id.
266. Plaintiffs apparently seek the total surrender value of the COLIpolicies without deductions for the premiums paid by the CamelotDefendants or the interest on the associated loans.
267. The Court has considered Plaintiffs' remaining argumentsregarding COLI policy ownership and finds them unpersuasive. They arerejected. Furthermore, Defendants have submitted supplemental materialregarding how the COLI policy loans affect the surrender value of theCOLI policies. See Repasy Aff. ¶ 13; Camelot Defendants'Supplement, at 1-3. Because the Court holds that the Plaintiffs are notentitled to the policies' surrender value, the Court need not examinethis evidence.
268. The Court denied Defendant Wal-Mart's Motion for Summary Judgmentand Brief in Support [Doc. #19], the Motion for Summary Judgment ofDefendant Wal-Mart Stores, Inc. Corporation Grantor Trust, Through itsTrustee. the Wachovia Bank of Georgia, N.A. [Doc. #58], and DefendantAIG Life Insurance Company's Motion and Memorandum in Support of SummaryJudgment on Plaintiffs' Second Amended Complaint [Doc. #60], but grantedin part and denied in part Hartford Life Insurance Company's Motion forSummary Judgment [Doc. #24], and granted Defendant AIG Life InsuranceCompany's Motion to Dismiss and Memorandum in Support Thereof [Doc.#59]. The Court also denied Wal-Mart's renewed motion for summaryjudgment [Doc. #113-2].