BB&T Boli Plan Trust v. Massachusetts Mutual Life Insurance Co.
| Decision Date | 29 April 2016 |
| Docket Number | 09 CVS 4007,15 CVS 2638 |
| Citation | 2016 NCBC 34 |
| Court | Superior Court of North Carolina |
| Parties | BB&T BOLI PLAN TRUST, Plaintiff, v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, Defendant. BB&T BOLI PLAN TRUST, by and through its Trustee, Plaintiff, v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, Defendant. |
Alston & Bird LLP, by Frank A. Hirsch Jr., Matthew P. McGuire, Heather Adams, and Ryan P. Ethridge, for Plaintiff BB&T BOLI Plan Trust.
Skadden, Arps, Slate, Meagher & Flom LLP, by James R. Carroll, Christopher Lisy, and David S. Clancy, and Stevens & Lee, P.C., by E. Thomas Henefer and Julie E. Ravis, and Ellis & Winters LLP, by Matthew W. Sawchak and Jonathan A. Berkelhammer, for Defendant Massachusetts Mutual Life Insurance Company.
LOUIS A. BLEDSOE, III SPECIAL SUPERIOR COURT JUDGE.
{1} THIS MATTER is before the Court upon Defendant Massachusetts Mutual Life Insurance Company's ("Defendant" or "MassMutual") Motion for Determination of Effect of Voluntary Dismissal and For Attorneys' Fees ("Motion to Set Aside Dismissal") in BB&T BOLI Plan Trust v. Massachusetts Mutual Life Insurance Company, No. 09 CVS 4007 (Forsyth County) ("BB&T I") and Defendant's Motion to Dismiss the Complaint ("Motion to Dismiss") (collectively, the "Motions") in BB&T BOLI Plan Trust v. Massachusetts Mutual Life Insurance Company, 15 CVS 2638 (Forsyth County) ("BB&T II").
{2} After considering the parties' briefs in support of and in opposition to the Motions, the appropriate evidence of record, and arguments of counsel at the hearing held on the Motions, the Court hereby DENIES the Motion to Set Aside Voluntary Dismissal and DENIES the Motion to Dismiss.
{3} This matter arises out of protracted litigation between Plaintiff BB&T BOLI Plan Trust ("Plaintiff" or "BB&T Trust") and Defendant MassMutual over Defendant's sale and management of a bank-owned life insurance policy ("BOLI Policy"), which Plaintiff purchased to insure the lives of key employees of BB&T Corporation ("BB&T"), the Plaintiff's grantor.
{4} BB&T Trust purchased the BOLI Policy from MassMutual in August 2006 for over $112 million.[1] (BB&T II Compl. ¶ 2.) BOLI policies are regulated by federal tax laws, and while a policy owner may select the accounts into which the premiums are allocated, the policy owner cannot actively manage those assets once allocated. (BB&T II Compl. ¶ 21.) Rather, the insurer of a BOLI policy is the legal owner of the assets and manages the assets for the benefit of the BOLI purchaser. (BB&T II Compl. ¶ 22.)
{5} Shortly after purchasing the BOLI Policy, BB&T Trust allocated the premiums almost equally between two funds: a BlackRock-managed fund and a Citigroup-managed fund called Falcon (the "Falcon Fund"). (BB&T II Compl. ¶ 3.) The Falcon Fund was a non-traditional hedge fund that offered a potentially higher yield with correspondingly higher risk. (BB&T II Compl. ¶ 4.)
{6} Prior to BB&T Trust's purchase of the BOLI Policy, MassMutual provided BB&T Trust with a Private Placement Memorandum ("PPM") that set out the terms of the BOLI Policy. (BB&T II Compl. ¶ 38.) The PPM also included a "stable value option, " a policy feature by which BB&T Trust could elect to pay additional fees to MassMutual in exchange for increased protection of its premiums. (BB&T II Compl. ¶¶ 42–43.)
{7} A stable value agreement is an agreement between the policy insurer and a third-party stable value provider, usually a major financial services institution. (BB&T II Compl. ¶ 28.) The stable value provider essentially agrees to protect the value of the assets from decreases in market value up to a certain amount, allowing the policy owner to carry the cash value of the BOLI account on its books at par without adjusting for decreases in the market value of the assets, so long as the spread between par value and market value does not exceed the limit set forth in the stable value agreement. (BB&T II Compl. ¶ 29.) BB&T Trust elected to purchase the stable value option, with Bank of America serving as the stable value provider. (BB&T II Compl. ¶¶ 42–43.)
{8} BB&T Trust alleges that the full terms of its agreement with MassMutual, particularly regarding the terms of the stable value agreement ("Stable Value Agreement"), were set forth in a number of documents. The differences in these documents across BB&T I and BB&T II is a point of contention in the Motion to Dismiss.
{9} In BB&T I, BB&T Trust specifically alleged that the parties' contract consisted of: (i) the PPM, which included a summary of the stable value agreement between MassMutual and Bank of America ("SVA Summary"), (BB&T I Am. Compl. ¶¶ 38, 123); (ii) the BOLI Policy, including the Stable Value Endorsement ("SVA Endorsement") attached as an addendum thereto (BB&T I Am. Compl. ¶¶ 41, 44, 123); (iii) an August 16, 2006 letter agreement ("Letter Agreement") by which MassMutual acknowledged the issuance of the BOLI Policy with the Stable Value Agreement (BB&T I Am. Compl. ¶¶ 45, 123); and (iv) "certain other representations, understandings and agreements between the parties, " (BB&T I Am. Compl. ¶ 123.)[2]
{10} In BB&T II, [3] BB&T Trust additionally alleged that the parties' contract included a Negotiated SVA Term Sheet, dated August 11, 2006, by which MassMutual and BB&T Trust allegedly negotiated the substantive terms of the Stable Value Agreement that would apply to the BOLI Policy. (BB&T II Compl. ¶¶ 48, 138.) BB&T Trust also alleged for the first time that MassMutual and Bank of America revised the SVA Summary on September 8, 2006, after the purchase of the BOLI Policy.[4] (BB&T II Compl. ¶ 147.)
{11} BB&T Trust alleges that under the terms of the parties' contract, including the Stable Value Agreement, certain downward changes in the value of the Falcon Fund investment would qualify as "Reallocation Events" under which MassMutual was required to notify BB&T Trust and transfer the premiums out of the Falcon Fund into more stable assets. In BB&T I, BB&T Trust alleged that the SVA Summary defined the Reallocation Events. (BB&T I Am. Compl. ¶¶ 47–48.) In BB&T II, BB&T Trust alleges that the Negotiated SVA Term Sheet defined further Reallocation Events. (BB&T II Compl. ¶¶ 58, 61–63.) BB&T Trust alleges that certain Reallocation Events occurred in the fall of 2007, during which time MassMutual failed to act to protect the Falcon Fund premiums as agreed, resulting in significant losses to BB&T Trust.
{12} BB&T Trust voluntarily dismissed its claims in BB&T I under N.C. R. Civ. P. 41(a)(1) on May 1, 2015 (the "Voluntary Dismissal"), twenty-five days before a scheduled jury trial in the matter was to begin. It filed the BB&T II complaint the same day. BB&T Trust apparently refiled its case in order to plead theories of liability that it was barred from presenting in BB&T I.
{13} On April 15, 2011, BB&T Trust moved for leave to file a second amended complaint. The Court (Murphy, J.) denied BB&T Trust's motion on the grounds of undue delay and undue prejudice, because some of the proposed theories of liability were not explored in the discovery period, which had already closed. Order on Motion to Amend at ¶¶ 12–13, BB&T I (N.C. Super. Ct. Jan. 27, 2012). The Court also stated that some of the proposed allegations "smell[ed] of futility and bad faith" for being inconsistent with deposition testimony of Plaintiff's designated representative. Id.
{14} The Court later denied MassMutual's summary judgment motion, Order on Motion for Summary Judgment, BB&T I (N.C. Super. Ct. Aug. 15, 2013) (Murphy, J.), and the parties began to prepare for trial. In response to concerns raised in pretrial discussions with BB&T Trust, MassMutual moved the Court in limine for an order precluding BB&T Trust from presenting evidence, argument, and testimony relating to the theories of liability that it unsuccessfully sought to plead in its proposed second amended complaint. The Court granted MassMutual's motion in limine, affirming Judge Murphy's Order on the Motion to Amend and barring BB&T Trust from presenting evidence that supported those rejected theories. Order on Defendants' Motion in Limine No. 1 ¶ 20, BB&T I (N.C. Super. Ct. Apr. 14, 2015).
{15} Two weeks after the Court's ruling on Defendants' Motion in Limine No. 1, BB&T Trust voluntarily dismissed its claims in BB&T I and filed a complaint in BB&T II. Shortly thereafter, MassMutual filed the Motion to Set Aside Dismissal in BB&T I and then the Motion to Dismiss in BB&T II. The Motions have been fully briefed and argued. At the Court's invitation, counsel submitted supplementary briefs, which the Court has considered. The Motions are now ripe for resolution.
{16} Defendant's Motion to Set Aside Dismissal requests that the Court deem ineffective and set aside the Voluntary Dismissal. MassMutual argues, and BB&T Trust disputes, that a trial court retains jurisdiction to set aside a Rule 41(a)(1) voluntary dismissal in the limited circumstance where a plaintiff takes a dismissal in bad faith. Brisson v. Santoriello, 351 N.C. 589, 597, 528 S.E.2d 569, 573 (2000). Separate from that argument, MassMutual seeks its attorney's fees related to the Motion to Set Aside Dismissal, because a voluntary dismissal under Rule 41 "does not deprive the court of jurisdiction to consider collateral issues such as sanctions that require consideration after the action has been terminated." Bryson v. Sullivan, 330 N.C. 644, 653, 412 S.E.2d 327, 331 (1992).
{17} N.C. R. Civ. P. 41(a)(1) governs the voluntary dismissal of claims:
Subject to the provisions of Rule 23(c) and of any statute of this State, an action or claim therein may be dismissed by the plaintiff without order of court (i) by filing a...
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