Behrman v. Allstate Ins. Co.

• Decision Date: 07 September 2005
• Docket Number: No. 04-60926CIV.,04-60926CIV.
• Citation: 388 F.Supp.2d 1346
• Parties: Douglas BEHRMAN, Plaintiff, v. ALLSTATE LIFE INSURANCE COMPANY, Allstate Distributors, LLC, Transamerica Occidental Life Insurance Company, Transamerica Securities Sales Corporation, Transamerica Financial Advisors, Inc., and AFSG Securities Corporation, Defendants.
• Court: U.S. District Court — Southern District of Florida

388 F.Supp.2d 1346

Douglas BEHRMAN, Plaintiff, v. ALLSTATE LIFE INSURANCE COMPANY, Allstate Distributors, LLC, Transamerica Occidental Life Insurance Company, Transamerica Securities Sales Corporation, Transamerica Financial Advisors, Inc., and AFSG Securities Corporation, Defendants.

No. 04-60926CIV.

United States District Court, S.D. Florida.

September 7, 2005.

Pat Huddleston, II, Huddleston & Nohr, Marietta, GA, for Plaintiff.

Russell Cornelius Weigel, III, Carlton Fields, Miami, FL, Debra Anne Jenks Dobin & Jenks, Jupiter, FL, Anthony Harris Pelle, for Defendants.

ORDER GRANTING TRANSAMERICA DEFENDANTS' SECOND MOTION TO DISMISS AND GRANTING ALLSTATE DEFENDANTS' SECOND MOTION TO DISMISS

SEITZ, District Judge.

THIS MATTER is before the Court on the Motions to Dismiss Plaintiff's First Amended Complaint filed by Defendants Transamerica Occidental Life Insurance Company and Transamerica Securities Sales Corporation (collectively, the "Transamerica Defendants") [DE-42] and Defendants Allstate Life Insurance Company and Allstate Distributors, Inc. (collectively, the "Allstate Defendants") [DE-43]. On March 23, 2005, this Court granted both Defendants'¹ motions to dismiss Plaintiff's original complaint (the "March 23rd Order"), Counts I-VI and IX-XII being dismissed without prejudice.² Plaintiff filed an amended complaint on April 5, 2005 [DE-38]. The amended complaint alleges very similar counts as those in the original complaint: negligent hiring, training and supervision (Counts I-II), negligent misrepresentation and omission (Counts III-IV), common law fraud in the inducement (Counts V-VI), and breach of contract (Counts VII-VIII). The amended complaint also adds two new counts of civil conspiracy (Counts IX-X) against Allstate Distributors and Transamerica Securities, respectively. Both groups of Defendants move to dismiss the amended complaint on the ground that Plaintiff has not cured any of the defects in his original complaint and still cannot state a claim upon which relief may be granted. Further, Defendants maintain their argument that the economic loss rule bars many of Plaintiff's claims. Upon careful consideration of the Motions, the responses and replies thereto, and the applicable case law, the Court grants the Defendants' Motions to Dismiss and dismisses all of Plaintiff's claims with prejudice.

I. Factual Background

In its March 23rd Order, the Court set forth in detail the facts of this case. The Court hereby incorporates by reference the factual background set forth therein.

II. Standard of Review

Federal Rule of Civil Procedure 12(b)(6) provides that dismissal of a claim is appropriate when "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Blackston v. Ala., 30 F.3d 117, 120 (11th Cir.1994). Ordinarily, to survive a Rule 12(b)(6) motion, a complaint need only provide a short and plain statement of the claim and the grounds upon which it rests. Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). When a complaint alleges fraud, the plaintiff must go beyond mere notice pleading and must state "with particularity" the circumstances constituting fraud. See Fed.R.Civ.P. 9(b). In either situation, a motion to dismiss under Rule 12(b)(6) tests not whether the Plaintiff will ultimately prevail on the merits, but rather whether the Plaintiff has properly stated a claim. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). Therefore at this stage of the proceedings, the Court must accept the Plaintiff's allegations in the Complaint as true, and view those allegations in a favorable light to determine whether the Complaint fails to state a claim for relief. S & Davis Int'l v. Republic of Yemen, 218 F.3d 1292, 1298 (11th Cir.2000).

III. Analysis

A. The Economic Loss Rule Bars Plaintiff's Tort Claims (Negligent Hiring, Training and Supervision; Negligent Misrepresentation and Omission; Fraud in the Inducement; and Civil Conspiracy).³

Defendants reassert their arguments that the economic loss rule bars Plaintiff's tort claims. In its March 23rd Order, the Court gave Plaintiff the opportunity to re-plead his tort claims to show that they were independent from his breach of contract claim.⁴ Plaintiff has not done so. As in his original complaint, Plaintiff alleges throughout his amended complaint that his participation in the Defendants' variable annuity contracts damaged his "nest egg." See generally Am. Compl. ¶¶ 16-23. This is the same injury that Plaintiff alleges in his breach of contract claims. See id. at ¶¶ 305-326. Accordingly, these claims must be dismissed.

The Court agrees with Defendants that Plaintiff attempts to avoid the economic loss rule by pleading claims of fraud in the inducement. Claims for fraudulent inducement can sometimes survive the economic loss rule. See Medalie, 87 F.Supp.2d at 1305. However, this is only the case in situations in which the plaintiff can show that the fraudulent inducement is extraneous to the breach of contract. Id. In Medalie, the court held that because the plaintiff did not allege that the defendant breached a contractual obligation to provide a rate of return higher than money market funds or CDs, plaintiff's fraud in the inducement claim based on material misrepresentations regarding risk and reward of the security instruments in which he invested withstood the economic loss rule. Id. Here, Plaintiff similarly alleges that Defendants' material misrepresentations involved risk and reward: they included guarantees that the variable annuity contracts would not endanger his "nest egg." See Am. Compl. ¶¶ 184-201; 252-69. However, the difference between Plaintiff and the Medalie plaintiff is that the instant breach of contract allegations stem solely from a letter dated March 28, 2002, two years after the dates of the variable annuity contracts, which purports to "guarantee" Plaintiff's principal amount deposited in both the Allstate and Transamerica annuity funds (i.e., Plaintiff's "nest egg"). Plaintiff pleads in the alternative that (1) either the letter, which memorializes an alleged "oral" agreement made prior to the date of the written variable annuity contract, should be considered part of the written variable annuity contract; or (2) that the letter is a "valid and binding subsequent agreement" breached by Defendants. See Am. Compl. ¶¶ 303-26. Because Plaintiff's claims for fraud in the inducement relate to Defendants' alleged breach of the terms of the March 28, 2002 letter, they cannot withstand the operation of the economic loss rule.⁵

The economic loss rule also bars Plaintiff's new tort claim for civil conspiracy against Allstate Distributors and Transamerica Securities. Just as with fraudulent inducement, circumstances exist in which the economic loss rule will not bar a civil conspiracy claim. See Hilliard v. Black, 125 F.Supp.2d 1071, 1082 (N.D.Fla.2000) (civil conspiracy claim not barred by economic loss rule where plaintiff towing company alleged that defendant bank conspired with plaintiff's competitor to delay repairs to defendant's tow truck in order to force plaintiff into insolvency) (internal citations omitted); see also Invo Florida Inc. v. Somerset Venturer, Inc., 751 So.2d 1263, 1266 n. 1, 1268 (3d DCA 2000) ("The elements required for conspiracy to effect fraudulent transfer ... are different from the breach of contract elements," and appellate court reversed summary judgment on civil conspiracy claim since claim was not barred by the economic loss rule). However, here, Plaintiff's claims for civil conspiracy are "inextricably intertwined" with his breach of contract claims, in that they deal with his participation in the annuity contracts and the alleged loss of his "nest egg." Because Plaintiff has not pled an injury separate and apart from the loss of his "nest egg," his claims for civil conspiracy cannot survive.

B. Plaintiff Still Has Not Alleged an Employer-Employee Relationship Necessary to Sustain a Claim for Negligent Hiring, Training, and Supervision.

In addition to the operation of the economic loss rule on Plaintiff's claim for negligent hiring, training, and supervision, this claim fails for another reason: Plaintiff has once again failed to allege an employer-employee relationship between Quigley, the broker who sold him the variable annuity products at issue, and Defendants. In its March 23rd Order, this Court ruled that employment is a necessary predicate to a claim for negligent hiring, training, and supervision. See March 23rd Order at pg. 9-10 (citing Malicki v. Doe, 814 So.2d 347, 364 (Fla.2002) and Garcia v. Duffy, 492 So.2d 435, 438 (Fla. 2d DCA 1986)). The Court noted that Plaintiff alleged in his original complaint that Quigley was an employee of non-party A.G. Edwards & Sons, Inc. See Compl. ¶ 21. In his amended complaint, and as the Transamerica Defendants note, Plaintiff conspicuously makes no reference to Quigley's employment at A.G. Edwards. Rather, he continues to focus on Quigley's agency relationship with the Defendants. As it did in its March 23rd Order, the Court acknowledges Plaintiff's allegations of an agency relationship, but maintains that an essential element of a claim for negligent hiring, training, and supervision is employment. Because Plaintiff has still not alleged an employment relationship between Quigley and Defendants, Plaintiff's claims must be dismissed.

C. Plaintiff's Claims of Fraudulent and Negligent Omission Must Be Dismissed Because Plaintiff Has Still Not Alleged a Fiduciary Relationship With Defendants.

Plaintiff's re-asserted claims of omission center on four particular omissions: (1) Defendants failed to disclose to Plaintiff that Quigley had a "conflict between his personal interest in receiving a five-figure commission and his duty to protect Plaintiff's nest egg" (Am.Compl.¶¶ 63, 107); (2) Defendants failed to disclose to Plaintiff...