Van Zanen v. Qwest Wireless, L.L.C.

• Decision Date: 18 April 2008
• Docket Number: No. 07-1219.,07-1219.
• Citation: 522 F.3d 1127
• Parties: Patrick VAN ZANEN; Vicki Van Zanen, Plaintiffs-Appellants, v. QWEST WIRELESS, L.L.C., a Delaware corporation; Qwest Services Corporation, a Colorado corporation; Qwest Communications International, Inc., a Delaware corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

522 F.3d 1127

Patrick VAN ZANEN; Vicki Van Zanen, Plaintiffs-Appellants, v. QWEST WIRELESS, L.L.C., a Delaware corporation; Qwest Services Corporation, a Colorado corporation; Qwest Communications International, Inc., a Delaware corporation, Defendants-Appellees.

No. 07-1219.

United States Court of Appeals, Tenth Circuit.

April 18, 2008.

Jerry C. Bonnett (Francis J. Balint, Jr. and Kathryn A. Jann with him on the briefs), of Bonnett, Fairbourn, Friedman & Balint, P.C., Phoenix, AZ, for Plaintiffs-Appellants.

Christopher J. Koenigs (Michael B. Carroll with him on the brief), of Sherman & Howard, L.L.C., Denver, Colorado, for Defendants-Appellees.

Before HARTZ, McKAY and KELLY, Circuit Judges.

HARTZ, Circuit Judge.

Plaintiffs Patrick and Vicki Van Zanen appeal the dismissal of their claim for unjust enrichment against Qwest Wireless, LLC; Qwest Services Corporation; and Qwest Communications International, Inc. (collectively, Qwest). The Van Zanens, who are Arizona residents, allege that Qwest has acted as an unlicensed seller of insurance in violation of the laws of Arizona and 13 other states where it markets and sells handset insurance to its wireless customers. They assert that Qwest has been unjustly enriched by its receipt of sales commissions in violation of the licensing statutes and seek to recover the portion of the handset-insurance premium that compensates Qwest for its sales efforts. The district court, after determining that the Arizona licensing statute provides no private right of action, ruled that the Van Zanens had not stated a claim for unjust enrichment on their own behalf. Because violation of a licensing statute, without more, is generally insufficient to support an unjust-enrichment claim against one who has performed as promised, we affirm the dismissal.

I. BACKGROUND

On review of a dismissal for failure to state a claim, we accept the allegations of the complaint as true. Sutton v. Utah State Sch. for Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir.1999). According to the complaint, the Van Zanens purchased handset insurance from Qwest in May 2005 and had continued to subscribe to it until the complaint was filed. Qwest, which is not licensed to sell or solicit insurance in any of the 14 states in which it operates, markets and sells the handset insurance to its customers. The insurance policy itself is administered and underwritten by a third party, lock/line, LLC. Customers are billed for the insurance through Qwest, and Qwest retains a portion of the monthly payments as compensation for its sales efforts.

In December 2006 the Van Zanens filed suit in the United States District Court for the District of Colorado, alleging that Qwest's sales of the handset insurance violate the licensing laws of Arizona and 13 other states. They sought certification of the suit as a class action. Pleading implied statutory causes of action and common-law unjust enrichment, they prayed for an injunction against Qwest, a declaration that Qwest's conduct is unlawful, the imposition of a constructive trust on Qwest's share of the insurance payments, and disgorgement of that share.

The parties agreed that Arizona law governed the Van Zanens' statutory claim on their own behalf. Section 282 of the Arizona insurance code prohibits selling, soliciting, or negotiating insurance without a license. Ariz.Rev.Stat. Ann. § 20-282 (2001). Section 298 of that code prohibits receiving commissions without a license. Id. § 20-298(B). The only remedy explicitly provided by the statute is administrative recourse: if the director of insurance believes that a violation is occurring or is about to occur, the director may order the violator to cease and desist or may file a complaint to enjoin the violation. See id. § 20-292.

The district court first examined the Arizona licensing statute and decided that it implies no private right of action. Van Zanen v. Qwest Wireless, L.L.C., No. 06-cr-02546-LTB-PAC, 2007 WL 1160010, at *2-5 (D.Colo. April 19, 2007). Turning to the unjust-enrichment claim, the court held that the Van Zanens had not stated a claim for unjust enrichment because they had suffered "no detriment, expense, or impoverishment." Id. at *6. Rather, the court said, the Van Zanens "obtained a Valuable product for which they bargained and which they intend to keep." Id. Because the Van Zanens had failed to state any proper claims on their own behalf, the court dismissed the class-action claims as well. Id. The Van Zanens appeal only the ruling on unjust enrichment.

II. DISCUSSION

We review de novo the dismissal of a complaint on a Rule 12(b)(6) motion for failure to state a claim. Sutton, 173 F.3d at 1236. We will affirm the dismissal only if the complaint "lacks `enough facts to state a claim to relief that is plausible on its face.'" Trentadue v. Integrity Comm., 501 F.3d 1215, 1236 (10th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007)). The service contract between Qwest and its customers provides that Colorado law governs disputes, and the parties agree that we must apply Colorado law to the unjust-enrichment claim.

The sole question on appeal is whether the Van Zanens have stated a claim for unjust enrichment. Under Colorado law, to establish a claim of unjust enrichment a plaintiff must show that "(1) at plaintiff's expense (2) defendant received a benefit (3) under circumstances that would make it unjust for defendant to retain the benefit without paying." DCB Constr. Co., Inc. v. Cent. City Dev. Co., 965 P.2d 115, 119-120 (Colo.1998). As explained by the Colorado Supreme Court, unjust enrichment is "a judicially created remedy designed to avoid benefit to one to the unfair detriment of another." Salzman v. Bachrach, 996 P.2d 1263, 1265 (Colo.2000). "The concept of unjust enrichment centers attention on the prevention of injustice." Ninth Dist. Prod. Credit Ass'n v. Ed Duggan, Inc., 821 P.2d 788, 795 (Colo.1991) (en banc) (internal quotation marks omitted).

The Van Zanens assert that they have satisfied the elements of an unjust-enrichment claim because (1) they paid a sales commission to Qwest, (2) which Qwest has retained, (3) which is unjust because Qwest is prohibited by law from accepting a sales commission. The district court erred, they contend, in ruling that they have suffered no "detriment, expense, or impoverishment," Van Zanen, 2007 WL 1160010, at *6; they state that the payment for the sales commission was an expense. We agree that the Van Zanens incurred an expense, but we think that they have misconceived the district court's decision. The clear import of the decision is not that the Van Zanens failed to incur an expense; rather, it is that the Van Zanens received value for their money and that in the absence of any unfair detriment, there is no injustice to prevent. In other words, the third element of their claim—unjustness—is missing.¹

We therefore turn to whether a violation of the Arizona insurance-licensing statute by itself is sufficient to establish that Qwest's retention of the sales commission is unjust. The parties have not cited, nor have we found, any case in which the Colorado Supreme Court has addressed whether a licensing violation of this type may form the basis of an unjust-enrichment claim. Thus, we must predict how that court would rule. See Rash v. J.V. Intermediate, Ltd., 498 F.3d 1201, 1206 (10th Cir.2007) ("Where the state's highest court has not addressed the issue presented, the federal court must determine what decision the state court would make if faced with the same facts and issue." (internal quotation marks omitted)). To assist us in making this prediction, we examine the views expressed by other courts and authoritative sources.

When an unlicensed person has been paid by the plaintiff but has not yet performed, the plaintiff can often recover the payment. See 2 George E. Palmer, The Law of Restitution § 8.3(b), at 186 (1978). But the general rule is to the contrary when the plaintiff has received the promised services. "When services contracted for have been performed by an unlicensed person, courts nearly always have denied restitution of payments made for such services." Id. at 184. See generally Maurice T. Brunner, Annotation, Recovery Back of Money Paid to Unlicensed Persons Required by Law to Have Occupational or Business License or Permit to Make Contract, 74 A.L.R.3d 637, § 3[a]-[b] (1976) (collecting cases).

Various rationales have been offered for this rule. They include: (1) that recognizing a claim for unjust enrichment would provide a remedy not intended by the licensing statute, see Comet Theatre Enters., Inc., v. Cartwright, 195 F.2d 80, 81 (9th Cir.1952); Main v. Taggares, 8 Wash. App. 6, 504 P.2d 309, 312-13 (Wash.Ct. App.1972); (2) that restitution would itself be inequitable by affording a windfall to the plaintiff, see Gallagher v. Leary, 164 Vt. 633, 674 A.2d 787, 788 (Vt.1996); (3) that a plaintiff has adequate remedies at law if performance by the unlicensed person is substandard, see Bentivegna v. Powers Steel & Wire Prods., Inc., 206 Ariz. 581, 81 P.3d 1040, 1047 (Ariz.Ct.App.2003); and (4) that a party who has rendered performance under a contract is not unjustly enriched because it has not retained a benefit without paying for it, see Reg'l Props., Inc., v. Fin. & Real Estate Consulting Co., 678 F.2d 552, 564 (5th Cir. 1982); Comet Theatre, 195 F.2d at 83; CitaraManis v. Hallowell, 328 Md. 142, 613 A.2d 964, 972 (Md.1992); Bowlerama, Inc. v. Woodside Realty Co., 752 P.2d 1377, 1382, 1383-84 (Wyo.1988).

The majority view is echoed in current scholarship that has been tentatively approved by the American Law Institute. Addressing agreements that are "illegal or otherwise unenforceable for reasons of public policy," the Tentative Draft of the Restatement (Third) of Restitution and Unjust Enrichment states: "There is no unjust enrichment if the claimant receives...