Dameware Dev., L.L.C. v. Am. Gen. Life Ins. Co.

Citation688 F.3d 203
Decision Date19 July 2012
Docket NumberNo. 11–20218.,11–20218.
PartiesDAMEWARE DEVELOPMENT, L.L.C.; Dameware Development L.L.C. Defined Benefit Pension Plan and Trust, Plaintiffs–Appellants, v. AMERICAN GENERAL LIFE INSURANCE COMPANY, Defendant–Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

OPINION TEXT STARTS HERE

Joseph F. Bishop, Jr. (argued), Servando C. Garcia, III, Garcia & Bishop, Covington, LA, for PlaintiffsAppellants.

David T. McDowell (argued), Edison, McDowell & Hetherington, L.L.P., Houston, TX, Amy Beth Boyea, Edison, McDowell & Hetherington, L.L.P., Arlington, TX, for DefendantAppellee.

Appeal from the United States District Court for the Southern District of Texas.

Before STEWART, ELROD and SOUTHWICK, Circuit Judges.

CARL E. STEWART, Circuit Judge:

Dameware Development, LLC Defined Benefit Pension Plan and Trust (“Dameware” or the “Plan”)1 bought several life insurance policies (the “policies”) from American General Life Insurance Company (American General). After Damewarewas unable to obtain the tax benefits it hoped would result from purchasing the policies, it sued American General for damages and for rescission of the contract. The district court granted summary judgment to American General. Because we conclude that Dameware has not shown any basis for rescinding the contract nor any contractual duties breached by American General, we AFFIRM the district court's judgment.

I.

In 2003, Joseph Vizzini, Dameware's financial advisor, attended a presentation about the use of American General financial products to establish a pension plan that qualified for favorable tax treatment pursuant to section 412 of the Internal Revenue Code. On Vizzini's advice, Dameware decided to establish such a plan. Accordingly, Vizzini contacted Kimberly Branch, an American General vice president. Branch referred Vizzini to Alan Zeplain, an American General agent, who, Vizzini says, advised Vizzini that, in order to establish a 412(i) Plan funded by American General's financial products, Dameware must select a Third–Party Administrator (“TPA”)2 from American General's list of approved TPAs. Dameware chose B&F Corporate Benefit Services, Inc. (“B&F”), one of the TPAs that American General had approved. On December 16, 2003, B&F sent Zeplain a proposed 412(i) Plan, and Zeplain forwarded it to Vizzini the next day. Dameware signed an administrative services agreement with B&F on December 23, 2003. Dameware intended to fund the Plan, which came to be known as the Dameware Development, LLC Defined Benefit Pension Plan and Trust, with life insurance policies for three employees and annuities from American General.

On January 13, 2004, Dameware submitted applications for life insurance policies to American General on behalf of three employees: Victoria Goodwin, Karla Hatcher, and Robert K. Hatcher. It paid American General $743,510.47 to fund the Plan for 2003 and partially fund the Plan for 2004 on February 20, 2004, and subsequently paid American General an additional $486,274 to fund the Plan for the remainder of 2004. The three insureds acknowledged receipt of the policies on March 24, 2004. The policies themselves contained no information relating to a 412(i) Plan, except that the applications asserted that one basis for purchasing the policies was “tax benefit.” Delivered along with the policies were Disclosure and Acknowledgment Forms. These Disclosure and Acknowledgment Forms included a list of thirteen TPAs, and required the signor to check a box next to the TPA it selected. Each signor selected B&F as TPA. The Disclosure and Acknowledgment Forms contained a number of disclaimers, including the following: that Dameware is not relying on any “representation, warranty or guarantee beyond those contained within the insurance policy contract itself, including any riders or amendments thereto”; that “the TPA indicated herein is responsible for administering the section 412(i) Plan ...”; and that American General Life Insurance Company operates solely in the capacity of a product provider and that any sales presentations, tax consequences, and/or planning concepts that may have been presented by American General Life Insurance Company ... describing the benefits of using life insurance in connection with the Plan cannot be relied upon as tax or legal advice.

Each Disclosure and Acknowledgment Form was signed on March 24 by Dameware, acting through an agent; the covered Dameware employee; and by Vizzini.

While American General immediately began to provide life insurance coverage for the three covered Dameware employees, Dameware never obtained any tax benefits from the life insurance policies or annuities it purchased from American General. In July 2005, Vizzini began contacting B&F to learn what information needed to be submitted to receive tax benefits for 2004, but received no response. Vizzini accordingly contacted American General's Zeplain, who informed Vizzini that American General had terminated its relationship with B&F. Vizzini and Zeplain thereafter contacted Pension Professionals of America, which American General had also approved as a TPA. The Pension Professionals of America worked on Dameware's 412(i) Plan for approximately a year. In April 2006, a representative of Pension Professionals informed Vizzini that B&F's strategy in formulating Dameware's 412(i) Plan had been flawed. Then, in the summer of 2006, a representative from Pension Professionals of America informed Vizzini that the company was no longer acting as a TPA, and that it had not completed Dameware's 412(i) Plan.

Vizzini contacted Zeplain again, and Zeplain provided the names of two more TPAs. Vizzini contacted National Pension Associates, one of the two TPAs Zeplain named, and it agreed to do the work. But it, too, failed to perform the work required to complete a Plan that could be submitted for Dameware's 2006 tax returns.

In December 2006, Dameware advised American General that it no longer wanted to wait to obtain the benefits of a 412(i) Plan. At this point, it had been three years since Dameware had signed an administrative services agreement with the first TPA, and Dameware had paid more than two million dollars to American General for insurance products. Dameware asked American General to return the money it had already paid. American General returned the money Dameware had paid for annuities, but did not return the $1,043,900.83 Dameware had paid in life insurance premiums. When American General failed to return the life insurance premiums, Dameware sued, alleging that its error concerning a cause for entering into the contract had vitiated its consent, and that American General had breached the contract.

The district court granted summary judgment to American General on Dameware's claims, reasoning that American General had no duties to Dameware with respect to the provision of the TPAs. Dameware appeals.

II.

The court reviews a decision rendered on a motion for summary judgment de novo, applying the same standard as the district court. Threadgill v. Prudential Sec. Grp., Inc., 145 F.3d 286, 292 (5th Cir.1998). Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that “there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). When consideringa motion for summary judgment, the court must view all facts and evidence in the light most favorable to the non-moving party. United Fire & Cas. Co. v. Hixson Bros., 453 F.3d 283, 285 (5th Cir.2006).

III.
A.

We first address Dameware's contention that its contract with American General was invalid. The four elements of a valid contract under Louisiana law are the following: (1) the parties must possess the capacity to contract; (2) the parties' mutual consent must be freely given; (3) there must be a certain object for the contract; and (4) the contract must have a lawful purpose. St. Charles Ventures, L.L.C. v. Albertsons, Inc., 265 F.Supp.2d 682, 688–90 (E.D.La.2003) (citing Provenza v. Cent. & Sw. Servs., Inc., 775 So.2d 84, 89 (La.Ct.App.2000)). At issue here is the requirement that both parties have consented to a contract.3

Dameware contends that its consent was vitiated by an error concerning cause. Articles 1949 and 1950 of the Louisiana Civil Code explain what types of error vitiate consent. An error vitiates consent when it “concer [ns] ... a cause without which the obligation would not have been incurred.” La. Civ.Code Ann. art. 1949. A “cause” is “the reason why a party obligates himself.” Id. art. 1967. “Error may concern a cause” when the error

bears on the nature of the contract, or the thing that is the contractual object or a substantial quality of that thing, or the person or the qualities of the other party, or the law, or any other circumstances that the parties regarded, or should in good faith have regarded, as a cause of that obligation.

Id. art. 1950.

Dameware maintains that its cause for entering into the contract was to establish a 412(i) Plan, and that its inability to establish a 412(i) Plan constitutes an error concerning cause. But the contractual language undercuts Dameware's argument. The contract between Dameware and American General focuses almost entirely on American General's provision of life insurance policies. Only one document, the Disclosure and Acknowledgment Form, focuses on the establishment of a 412(i) Plan.4 The Disclosure and Acknowledgment Form does not demonstrate that the establishment of a 412(i) Plan was Dameware's cause for entering into a contract with American General. As we discuss below, the Disclosure and Acknowledgment Form has two primary functions: first, it disclaims any responsibility on the part of American General for establishing a 412(i) Plan; and second, it contains a list of TPAs for Dameware to choose from, and provides that whichever TPA Dameware selects is...

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