Aronstein ex rel. Situated v. Mass. Mut. Life Ins. Co.

• Decision Date: 22 April 2016
• Docket Number: Civil No. 15-12864-MGM
• Parties: JESSE ARONSTEIN, Individually and on Behalf of All Others Similarly Situated Plaintiff, v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY and C.M. LIFE INSURANCE COMPANY, Defendants.
• Court: U.S. District Court — District of Massachusetts

JESSE ARONSTEIN, Individually and onBehalf of All Others Similarly Situated Plaintiff, v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANYand C.M. LIFE INSURANCE COMPANY, Defendants.

Civil No. 15-12864-MGM

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

April 22, 2016

MEMORANDUM AND ORDER REGARDING DEFENDANTS' MOTION TO DISMISS

(Dkt. No. 25)

MASTROIANNI, U.S.D.J.

I. INTRODUCTION

Jesse Aronstein ("Plaintiff") has filed a putative class action against Massachusetts Mutual Life Insurance Co. ("MassMutual") and C.M. Life Insurance Co. ("C.M. Life" and, collectively with MassMutual, "Defendants"). The case arises out of Defendants' sale of an annuity to Plaintiff and all other purchasers of that annuity. Plaintiff alleges unjust enrichment (Count I), fraudulent misrepresentation (Count II), and violation of Chapter 93A of the Massachusetts General Laws ("Chapter 93A") (Count III). Defendants have filed a motion to dismiss. For the reasons set forth below, Defendants' motion is allowed with respect to Counts I and III and denied with respect to Count II.

II. JURISDICTION

Plaintiff is a resident of New York. Defendant MassMutual is domiciled in Massachusetts, and Defendant C.M. Life is domiciled in Connecticut. Plaintiff asserts that the court has subject matter jurisdiction over this putative class action pursuant to 28 U.S.C. § 1332(d)(2)(A) because Plaintiff and numerous class members are citizens of states different from Defendants and because the aggregate amount in controversy exceeds $5,000,000. Defendants do not challenge this assertion.

III. FACTS AS ALLEGED BY PLAINTIFF

In January 2004, Plaintiff received written marketing materials from Defendants regarding a fixed deferred annuity (the "Annuity"). (Dkt. No. 11, Am. Compl. ¶ 14.) The marketing materials represented that the interest for the Annuity "will be credited at a . . . rate [that] will never be less than 3%." (Id. ¶ 14.) On or about January 7, 2004, Plaintiff purchased the Annuity for $25,000. (Id. ¶¶ 2, 15.) Plaintiff subsequently received a "Contract/Certificate Package" for the Annuity, which contained a cover page, an 18-page certificate, and a single-page endorsement. (Id. ¶ 16.) The certificate defined the "Minimum Guaranteed Interest Rate" as 3%. It also provided that the interest rate "will never be less than the Minimum Guaranteed Interest Rate." (Id. ¶¶ 18-19.) The endorsement, however, stated that "the Minimum Guaranteed Interest Rate has been changed to 1.5%." (Id. ¶ 20.) This contradicted both the certificate and the marketing materials for the Annuity. (Id. ¶ 21.) The endorsement was signed by representatives of MassMutual, but not by Plaintiff. (Id. ¶ 20.) The first page of the certificate stated Plaintiff had the right to examine and return the certificate for any reason within 10 days for a full refund. (Id., Ex. C.) In early 2004, Defendants sent Plaintiff a transaction confirmation, which confirmed Plaintiff's initial purchase payment at a credited interest rate of 4%. (Id. ¶ 22.)

From 2004 through 2015, Plaintiff received periodic statements regarding the Annuity. The statements contained numerous pieces of information related to the Annuity, but they did not disclose the interest rate paid for a given period. (Id. ¶ 23.) In or around January 2015, Plaintiff received the annual statement for 2014. Although it did not set forth the interest rate, Plaintiff calculated the interest rate for 2014 and determined that the interest earned reflected a rate of onlyabout 2%. (Id. ¶ 24.) Prompted by this discovery, Plaintiff examined the annual statements for previous years and discovered that the interest rate had been less than 3% (but higher than 1.5%) for every year since 2011. (Id. ¶ 25.) On January 23, 2015, Plaintiff contacted MassMutual and requested that the Minimum Guaranteed Interest Rate be restored to 3% and his account be credited for the shortfall. (Id. ¶ 26.) On February 18, 2015, MassMutual sent Plaintiff a letter denying his request. The letter relied upon the endorsement setting the Minimum Guaranteed Interest Rate at 1.5% and admitted the interest rate on the Annuity had been below 3% (but above 1.5%) every year since 2011. (Id. ¶¶ 27-28.)

Defendants did remove the language guaranteeing an interest rate of 3% from their marketing materials, but not before Plaintiff and thousands of other consumers had purchased the Annuity. (Id. ¶ 29.) Plaintiff contends that Defendants "worked in concert to falsely advertise and sell the Annuity." (Id. ¶ 30.) Plaintiff seeks to represent a class consisting of all purchasers of the Annuity who have been paid or credited with an interest rate below 3%, and Plaintiff sets forth the requisite allegations for maintaining a class action. (Id. ¶¶ 31, 33-43.) On June 30, 2015, Plaintiff initiated this action. (Dkt. No. 1.)

IV. STANDARD OF REVIEW

To survive a 12(b)(6) motion to dismiss, a complaint must allege facts that "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual allegations in the complaint must "nudge[] [the] claims across the line from conceivable to plausible." Id. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "Determining whether a complaint states a plausible claim for relief" is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. Courts are not required to accept as trueallegations in a complaint that are legal conclusions. Id. at 678. However, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. at 679. Therefore, in assessing a claim's plausibility, the court must construe the complaint in the plaintiff's favor, accept all non-conclusory allegations as true, and draw any reasonable inferences in favor of the plaintiff. See San Gerónimo Caribe Project, Inc. v. Acevedo-Vilá, 687 F.3d 465, 471 (1st Cir. 2012).

V. DISCUSSION

Plaintiff brings three claims. Count I is a claim for unjust enrichment based on Defendants' alleged misconduct in marketing and selling the Annuity at a Minimum Guaranteed Interest Rate and then reducing that rate. Count II is a claim for fraudulent misrepresentation based on Defendants' marketing and sale of the Annuity. Count III claims unfair or deceptive trade practices in violation of Chapter 93A; this claim is also predicated upon alleged violations of FTC and Massachusetts Attorney General regulations.

In support of their motion to dismiss, Defendants argue that each of Plaintiff's claims is barred by the applicable statute of limitations. In addition to the statute of limitations argument that applies to all claims, Defendants argue that Count I fails to state a claim because an unjust enrichment claim cannot proceed when the matter is governed by a valid contract. Defendants also argue that Count III should be dismissed because the substantive law of New York, and not Massachusetts's Chapter 93A, applies to Plaintiff's claims.

A. Unjust Enrichment (Count I)

Leaving aside the question of the statute of limitations, Defendants argue Count I should be dismissed because an unjust enrichment claim cannot be maintained when it is rooted in a valid and enforceable contract. When the subject matter of a claim is governed by a contract, there is no cause of action for unjust enrichment. See IDT Corp. v. Morgan Stanley Dean Witter & Co., 907 N.E.2d 268,274 (N.Y. 2009). Unjust enrichment is a quasi-contract claim designed to prevent injustice in the absence of an actual agreement between the parties. See id. A plaintiff may not recover under an unjust enrichment theory "[w]here the parties executed a valid and enforceable written contract governing [the] particular subject matter." Id.

Plaintiff argues that the subject matter of his claim is Defendants' "misleading advertising and deceitful marketing," which is not "governed by the contract." (Dkt. No. 30, Pl. Mem. Opp. Mot. to Dismiss, at 4.) This argument is unpersuasive. If this were the case, then any unjust enrichment claim could be maintained despite the existence of a contract by pleading that the contract does not regulate improper behavior. Plaintiff cites a case in which unjust enrichment claims based on insurance commissions were allowed to proceed when the mortgage between the parties did not contemplate the payment of commissions, see Lass v. Bank of Am., N.A., 695 F.3d 129, 140-41 (1st Cir. 2012), as well as a case in which an unjust enrichment claim was able to proceed when the parties' contract did not address how to resolve a dispute over the refund of management fees, see Whitman & Co. v. Longview Partners (Guernsey) Ltd., --- F. Supp. 3d ---, 2015 WL 6043573 (D. Mass. Oct. 15, 2015). These cases are distinguishable because they involved disputes over how to distribute payments that were not contemplated by the parties' contracts, whereas the instant claim centers on an alleged violation of the parties' contractual agreement via Defendants' unilateral alteration of the contract's terms. It may be plausible to assert that a contract does not govern unforeseen monetary distributions, but it is not plausible to claim that a contract does not contemplate the violation of its own terms.

Plaintiff also argues that the claim should be allowed to proceed because he has the right "to plead alternative and even inconsistent legal theories, such as breach of contract and unjust enrichment, even if [he] only can recover under one of these theories." Vieira v. First Am. Title Ins. Co., 668 F. Supp. 2d 282, 295 (D. Mass. 2009). That is certainly true, but it does not mean thatPlaintiff's pleading is successful in this case. Plaintiff did not bring a...