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Chaborek v. Allstate Financial Services, LLC

United States District Court, E.D. Pennsylvania

June 5, 2017



          Gerald Austin McHugh, United States District Judge

         This is a case arising out of a fraudulent “Ponzi” scheme on the part of a now deceased Allstate broker, brought by one of its victims. In addition to suing Allstate, Plaintiff Brian Chaborek has named two Allstate supervisors individually. Allstate takes umbrage at their inclusion as defendants, contending that they were fraudulently joined to defeat diversity. Because Allstate cannot meet the heavy burden imposed on a party claiming fraudulent joinder, this case will be remanded to state court.


         Paul Godlewski was an insurance broker for Allstate, where he was supervised by Megan Gaardsmoe and Kevin Powell. On the side, and for a long time unbeknownst to Allstate, he ran a Ponzi scheme disguised as a venture capital fund called “GEIVC.” He advertised GEIVC on social media and promoted it in numerous televised interviews. When people “invested” with him, he took their money and placed it in a bank account from which he withdrew and spent money at will.

         Godlewski ran GEIVC undetected for a number of years. In 2014, however, the New Jersey Office of the Attorney General began investigating him. In October 2014, prosecutors contacted Allstate “regarding certain of Godlewski's business activities, ” Compl. at 6, and Allstate undertook an investigation of its own. In early 2015, Allstate fired Godlewski and terminated his FINRA registration. On June 9, 2015, Godlewski died while snorkeling in Turks & Caicos.

         Godlewski is alleged to have swindled Plaintiff out of more than $500, 000. Specifically, he induced Plaintiff to make two “investments” in GEIVC: one for $500, 000 in 2010, and another for $10, 738.15 in April 2015. In his dealings with Plaintiff, Godlewski used Allstate's logo, stationery, and office. Moreover, he led Plaintiff to believe that GEIVC was a fund approved and monitored by Allstate.

         In 2014, Godlewski hired Plaintiff as an Allstate agent and stated his intention to sell his insurance practice to Plaintiff when he retired. Late that year, while Allstate was investigating Godlewski, Godlewski convinced Plaintiff to purchase the agency from him. Gaardsmoe and Powell supervised and approved this transaction. Plaintiff alleges that as he and Godlewski were negotiating the specifics of the deal, Allstate fired Godlewski and terminated his FINRA registration. Gaardsmoe and Powell, however, allowed Godlewski to continue to represent himself as an Allstate employee and to use his Allstate email address, telephone number, voicemail, and office in the agency sale.

         The Complaint alleges that Gaardsmoe and Powell also reviewed and approved Plaintiff's financial documents in preparations for the sale. These documents stated that in early 2015, Plaintiff had more than $600, 000 invested in GEIVC. Though they knew by this time that GEIVC was a fraud, Gaardsmoe and Powell did not tell Plaintiff that he had been scammed. Instead, they purportedly told him “that Godlewski had been a model broker-dealer, and suggested that [Plaintiff] accept Godlewski as his ‘mentor' and discuss business problems and dilemmas” with him. Compl. at 8. In April 2015, Plaintiff purchased the Allstate office from Godlewski and made his second ($10, 738.15) investment with GEIVC.

         Plaintiff has not requested rescission of, or damages flowing from, his purchase the Allstate office. Rather, he claims that Allstate, Gaardsmoe, and Powell are liable for making various misstatements that led him to lose approximately $600, 000 in Godlewski's Ponzi scheme.

         Standard of Review

         Under the doctrine of fraudulent joinder, a defendant may remove a non-diverse case if it can establish that all in-state defendants were sued solely to prevent removal to federal court. Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97 (1921). But defendants alleging fraudulent joinder bear a “heavy burden of persuasion, ” Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992) - “if there is even a possibility that a state court would find that the complaint states a cause of action, ” then the case must be remanded. In re Briscoe, 448 F.3d 201, 217 (3d Cir. 2006) (internal quotation marks omitted). To prevail, the defendant must show that there is “no reasonable basis in fact or colorable ground supporting the claim against the joint defendant, or no real intention in good faith to prosecute the action against the defendant or seek a joint judgment.” Brown v. Jevic, 575 F.3d 322, 326 (3d Cir. 2009) (internal quotation marks omitted). The removal statute must be construed narrowly, and “all doubts should be resolved in favor of remand.” Steel Valley Auth. v. Union Switch & Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987).

         My review at this stage is limited: the issue is not whether Plaintiff has stated a claim upon which relief can be granted. A defendant claiming a fraudulent joinder has an even heavier burden to carry than on a motion to dismiss. Batoff, 977 F.2d at 852. As Judge DuBois elegantly stated the rule, fraudulent joinder is “reserved for situations where recovery from the non-diverse defendant is a clear legal impossibility.” Salley v. AMERCO, 2013 WL 3557014 at *3 (E.D. Pa.) (July 15, 2013). I have jurisdiction only to determine whether I have jurisdiction. I will thus look no further into the merits of the case than is necessary to make that determination.


         I. Plaintiff has set forth at least two potentially valid claims against the individualdefend ...

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