Cunningham v. Pfl Life Ins. Co.
| Decision Date | 07 April 1999 |
| Docket Number | No. C 98-67 MJM.,C 98-67 MJM. |
| Citation | 42 F.Supp.2d 872 |
| Parties | Mark CUNNINGHAM, et al., Individually and On Behalf of All Others Similarly Situated, Plaintiffs, v. PFL LIFE INSURANCE COMPANY, et al., Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
Roger T. Stetson, Michael R. Reck, Belin Lamson McCormick Zumbach Flynn, Des Moines, IA, Judy S. Hoyer, Terry Alan Smiljanich, W. Christian Hoyer, James Hoyer Newcomer Forizs & Smiljanich, PA, Tampa, FL, Ronald R. Parry, Arnzen Parry & Wentz, PSC, Covington, KY, John J. Stoia, Jr., Andrew W. Hutton, Milberg Weiss Bershad Hynes & Lerach LLP, San Diego, CA, Stephen L. Hubbard, Robert W. Biederman, Hubbard & Biederman, LLP, Dallas, TX, for plaintiffs.
Christopher L. Bruns, Patrick M. Roby, Elderkin Law Firm, Cedar Rapids, IA, Lisa Martin, Charles Newman, Bryan Cave, LLP, St. Louis, MO, for defendants.
Before the Court is a resisted motion to dismiss pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. The Defendants, AEGON USA, Inc. ("AEGON"), PFL Life Insurance Company ("PFL"), Banker's United Life Assurance Company ("Banker's"), and Life Investor's Company of America ("Life Investor's") (collectively, "AEGON and its subsidiaries" or "the Defendants") filed the motion to dismiss on December 27, 1997. (Doc. 28.) Plaintiffs Mark Cunningham, Jill Cunningham, Mary McKever, and Linda Boyd, individually and on behalf of all others similarly situated1 ("the Plaintiffs") filed an eight-count complaint in the U.S. District Court for the Middle District of Florida alleging that AEGON and its subsidiaries fraudulently marketed and sold life insurance policies in violation of federal and state law. (Doc. 1.) The Plaintiffs later amended their complaint and added several claims.2 The Plaintiffs maintain that AEGON misrepresented the life insurance policies to potential purchasers, describing the insurance policies as "retirement plans," "savings plans," or "investment plans." (Doc. 13, at ¶ 6.)
AEGON and its subsidiaries moved to dismiss the amended complaint while the case was proceeding in federal court in Florida.3 (Doc. 27.) After the motion to dismiss was filed, Judge Mayberry transferred the case from the Middle District of Florida to the Northern District of Iowa pursuant to 28 U.S.C. § 1404(a) () (Doc. 47, Transfer Order.) The Court heard oral argument on October 27, 1998. Although the parties are conducting discovery on the issue of class certification,4 the Court is now ready to decide the motion to dismiss on the merits.
The Plaintiffs in this putative class action allege that from January 1, 1990 to December 31, 1996, AEGON and its subsidiaries engaged in a "systematic scheme of marketing fraud" in which PFL agents unlawfully induced consumers to purchase certain types of whole life insurance policies. The complaint alleges that AEGON and its subsidiaries intentionally developed a fraudulent marketing and sales scheme in which insurance agents would market and sell insurance policies. The agents would disingenuously describe the product that they were selling as an investment vehicle similar to a mutual fund or an Individual Retirement Account. The complaint alleges that the Defendants intentionally concealed the fact that the Plaintiffs were actually purchasing a life insurance policy.
AEGON and its subsidiaries furthered the fraudulent scheme through telephone marketing, sales materials, agent manuals, training scripts, training videos, direct mailings, and face-to-face sales presentations with prospective purchasers.5 The Plaintiffs maintain that AEGON and its subsidiaries instructed their insurance agents to mischaracterized the life insurance policies in a number of different ways: PFL agents told prospective purchasers that they were selling "retirement plans," "savings plans," "pension plans," "college funding programs" or "college savings plans." The insurance agents referred to payments that the Plaintiffs were required to make as "deposits." AEGON and its subsidiaries specifically instructed the agents to tell prospective policyowners that they were not selling life insurance. Additionally, the insurance agents referred to themselves as "enrollers," "counselors," and "representatives." The Plaintiffs' complaint also exhaustively details the status of investigations by several state insurance agencies into the marketing and sales schemes. Each putative class representative experienced a slightly different marketing and sales approach.
In May 1994, Plaintiff Mary McKever, a citizen of Florida, received an unsolicited visit from a PFL agent, Sandra Cullimore, who claimed to be the president of Collegiate Funding of Florida. (Doc. 13, at ¶ 32.) Agent Cullimore never informed McKever that she was a life insurance agent. Instead, Agent Cullimore described a "College Savings Program" that would cost $100 per month and would provide $1,200 in cash plus interest after one year which could be withdrawn to finance her daughter's education. Agent Cullimore also provided McKever with the names of parties that would provide information on grants and college loans. Agent Cullimore stated that she was not offering McKever life insurance, but rather a college savings plan. Agent Cullimore never discussed the fact that McKever was purchasing a life insurance policy, and McKever was never required to take a physical examination.
PFL did not provide McKever with a copy of the plan until eight months after Agent Cullimore's initial visit. Agent Cullimore instructed McKever to immediately file the plan away in a safe place. When McKever reviewed the plan, she learned that she had purchased a $42,000 flexible premium life insurance life insurance policy. McKever was told that the only way she could withdraw any "college savings" was to borrow against the life insurance policy or surrender the policy and pay substantial surrender charges.
McKever's policy lapsed in May 1995 due to nonpayment. McKever forfeited the $1,000 she believed that she had invested in the College Savings Program. As a result of Agent Cullimore's obfuscation regarding the life insurance, McKever's daughter was forced to delay her college enrollment.
Linda Boyd, a registered nurse and a citizen of Florida, was approached by Brad Ritch in September 1988 to discuss a "Nurses Retirement Plan" underwritten by PFL. (Doc. 13, at ¶ 37.) Agent Rich presented Boyd with a brochure and an illustration detailing the specifies of the plan: PFL would automatically make monthly withdrawals of $50 from Boyd's bank account. After twenty years, Boyd would accumulate $48,000 from which she could make unlimited withdrawals to use as retirement income. Agent Ritch never informed Boyd that the retirement plan involved the purchase of life insurance or that the investment plan was subject to substantial commissions and other service charges.
Another PFL life insurance agent, Larry Heaton, prepared "proposed updates" to the Nurses Retirement Plan in order to increase the amount of automatic withdrawals as Ms. Boyd's salary increased. The updates were actually additional life insurance policies issued in September 1990 and January 1993. Finally, a financial planner informed Boyd that she had not purchased a retirement plan, but rather a series of life insurance policies. As a result of the information, Boyd surrendered her policy in 1995 and incurred surrender charges and lost significant investment income.
In January 1993, Mark and Jill Cunningham, citizens of Missouri, informed a PFL agent that they had an interest in setting money aside in a retirement fund. (Doc. 13, at ¶ 41.) The PFL agent proposed a "retirement plan" or "pension plan" called the "Flexible Asset Builder." The Agent told the Cunninghams that the primary benefit of the Flexible Asset Builder was its investment component. The insurance agent also stated that PFL was very strong financially and had its parent company's (AEGON USA) financial backing. The Cunninghams later discovered that they had unintentionally purchased life insurance and not a "retirement plan" or "pension plan."6
A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts consistent with the allegations of the complaint. Hishon v. King & Spalding, 467 U.S. 69, 71, 104 S.Ct. 2229, 81 L.Ed.2d 59 (U.S.1984). Allegations should be construed in favor of the pleader. Albright v. Oliver, 510 U.S. 266, 114 S.Ct. 807, 810, 127 L.Ed.2d 114 (1994). At the very least, however, the complaint must contain facts which state a claim as a matter of law and the substance of the complaint must not be conclusory. Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th Cir.1995); Municipal Utils. Board v. Alabama Power Co., 925 F.2d 1385, 1390 (11th Cir.1991).
When a case is transferred pursuant to § 1404(a), the transferee court must apply the choice of law rules of the transferor court. See Ferens v. John Deere Co., 494 U.S. 516, 521-22, 110 S.Ct. 1274, 108 L.Ed.2d 443 (1990); Wisland v. Admiral Beverage Corp., 119 F.3d 733, 735-36 (8th Cir.1997). A § 1404(a) transfer entitles litigants to a change in courtrooms not a change of substantive law. 17 James Wm. Moore et al., Moore's Federal Practice § 124.30[2][a] (Matthew Bender 3d ed.). Since the case was originally filed in Florida, this Court must apply Florida's choice of law rules. See Ferens, 494 U.S. at...
To continue reading
Request your trial
-
Bendzak v. Midland Nat. Life Ins. Co.
...the Court will consider only Bendzak's allegations for the purpose of deciding this motion to dismiss. See Cunningham v. PFL Life Ins. Co., 42 F.Supp.2d 872, 878 n. 1 (N.D.Iowa 1999). 2. Despite citing the McCarran-Ferguson Act, Midland does not appear to assert that the Act itself is groun......
-
O'Bryan v. Holy See
...a putative class, courts focus on the application of the forum's choice of law rules to the named plaintiffs. Cunningham v. PFL Life Ins. Co., 42 F.Supp.2d 872, 883 (N.D.Iowa 1999) ("[I]t is important to note that at this point in the litigation, the Court has not certified the Plaintiffs a......
-
O'Bryan v. Holy See
...a putative class, courts focus on the application of the forum's choice of law rules to the named plaintiffs. Cunningham v. PFL Life Ins. Co., 42 F.Supp.2d 872, 883 (N.D.Iowa 1999) ("[I]t is important to note that at this point in the litigation, the Court has not certified the Plaintiffs a......
-
Mass. Mutual v. Superior Court
...Ins. Co. (D.Conn.1999) 189 F.R.D. 209; In re Hartford Sales Practices Litig. (D.Minn. 1999) 192 F.R.D. 592; Cunningham v. PFL Life Ins. Co. (N.D. Iowa 1999) 42 F.Supp.2d 872; Velasquez v. Crown Life Ins. Co. (S.D. Tex. Aug. 10, 1999, No. M-97-064-MDL-1096) 1999 WL 33305652, 1999 U.S. Dist. ......
-
The Economic Loss Doctrine in Alaska and the Design Professional Exception
...Plumbing & Heating Co. v. Jordan, Jones & Goulding, Inc., 463 S.E.2d 85, 88 (S.C. 1995). [33]See Cunningham v. PFL Life Ins. Co., 42 F. Supp. 2d 872, 887 (N.D. Iowa 1999) (holding that the economic loss doctrine did not bar fraud claim); Highland Crusader Offshore Partners, L.P. v. LifeCare......