Dornberger v. Metropolitan Life Ins. Co.
| Decision Date | 27 March 1997 |
| Docket Number | No. 95 Civ. 10374(LBS).,95 Civ. 10374(LBS). |
| Citation | 961 F.Supp. 506 |
| Parties | Sally A. DORNBERGER, on behalf of herself and all other persons similarly situated, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Quinn, Marantis & Rosenberg, L.L.P., White Plains, NY (Timothy C. Quinn, Jr., Bradford D. Conover, of counsel), for Plaintiff.
Proskauer, Rose, Goetz & Mendelsohn, L.L.P., New York City (Bruce E. Fader, of counsel), for MetLife Defendants.
Adler, Pollock & Sheehan, Inc., Providence, RI (John A. Tarantino, Mark O. Denehy, of counsel), for Defendant Vito Vitone.
Folkenflik & McGerity, New York City (Margaret McGerity, of counsel), for Defendant M.S. Peress.
Plaintiff Sally A. Dornberger brings this action on behalf of herself and all others similarly situated1 against Metropolitan Life Insurance Company ("MetLife"), two corporate affiliates of MetLife, and various employees, officers, and directors of MetLife (collectively "Defendants"). Plaintiff alleges violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., as well as several state law claims. Defendants move to dismiss on various grounds. For the reasons set forth below, Defendants' motion is granted in part and denied in part.
The following factual account is taken entirely from Plaintiff's amended complaint and RICO Statement, the contents of which are assumed true for purposes of this motion.
MetLife, a New York-based insurance company, began selling insurance policies in Europe in 1957, pursuant to an agreement with the United States Army and Air Force which allowed MetLife to sell policies to military personnel and their families. RICO Statement ("Stmt.") at 62. Unbeknownst to the military, and in violation of military regulations, MetLife began to solicit American citizens residing in various European nations who were not connected to the military, as well as European nationals. Id. Plaintiff, a British citizen residing in Switzerland, purchased two insurance policies from MetLife, one in 1991 and one in 1993, insuring the life of her husband, Paul G. Dornberger, an American also residing in Switzerland. Am. Compl. ¶ 4. The gravamen of Plaintiff's complaint is that MetLife's European solicitations and the sales which they produced from the 1950's to the 1990's were in violation of the insurance laws of various European nations. Plaintiff alleges that Defendants were aware of this illegality, and in fact took active steps to conceal the illegal sales in order to avoid detection.
The alleged scheme, referred to by Plaintiff as the "Overseas Operation," was carried out through the recruitment and training of European sales representatives. These representatives, unaware of the alleged illegality of MetLife's activities, worked from their homes in Europe where they "blended in" so as to avoid detection by European authorities.2 Id. ¶ 56. Detection was also avoided through multiple relocations of the Overseas Operation's offices, through frequent changes in procedures, and through fraudulent statements in New York State tax returns. Id. ¶¶ 57, 73.
The alleged scheme was carried out through a pattern of fraudulent representations and omissions made by means of telephone marketing, mailings, advertisements, and face-to-face solicitations of prospective purchasers. Id. ¶¶ 60, 67. In the course of these communications, Defendants fraudulently failed to disclose that MetLife's insurance sales in Europe were in violation of European laws and that MetLife had never received the proper authorizations from European regulators to sell insurance. RICO Stmt. at 8. Also, Defendants fraudulently represented that local representatives would be stationed permanently in Europe to provide personal servicing on MetLife policies, with the cost of such servicing included in the premiums to be paid to MetLife. Id. at 6, 89. The permanent service was not provided — MetLife terminated the local representatives in 1994, allegedly in an attempt to avoid detection of MetLife's illegal sales by European authorities. Am. Compl. ¶¶ 98-106. Defendants also fraudulently represented that a 2.6% New York State franchise tax was required to be paid on all policies, and that the premiums paid by overseas purchasers would cover that tax, when in fact the tax was never paid to New York authorities. RICO Stmt. at 7-8. Defendants also fraudulently represented that the policies sold in Europe were "New York Policies" "as good as any such policies available in New York," and that the policies would be covered by the protections of New York insurance law, including the New York State guaranty fund to cover policies in the event of insurer insolvency, when in fact the policies were not covered by the New York guaranty fund. Id. at 6, 8.
MetLife terminated its Overseas Operation in 1994-95, following various occurrences which made the illegality of MetLifes activities apparent. Am. Compl. ¶¶ 87-112. In 1989, a MetLife sales representative was arrested in Switzerland. Id. ¶ 91. Later, British insurance regulators discovered MetLife's illegal sales and instructed MetLife to comply with applicable British regulations. Id. ¶ 88. In 1994, Swiss regulators informed MetLife sales representatives that MetLife's sales in Switzerland were illegal. Id. ¶ 95. MetLife placed several of its European sales representatives on "administrative leave" in 1994, and eventually terminated them. Id. ¶¶ 98-106.
Plaintiff discovered the alleged fraudulent conduct of Defendants in October, 1995, and demanded that MetLife provide confirmation that her policies carried the same protections as all valid and legal insurance policies. Id. ¶ 179. When MetLife failed to provide assurances as to the legality of the policies, the availability of guaranty fund protection, or the availability of local service representatives, Plaintiff ceased paying premiums and her policies lapsed. Id. ¶ 180.
Plaintiff filed this action in December, 1995 on behalf of all persons, excluding New York residents, who purchased polices through MetLife's Overseas Operation from 1957 forward. Plaintiff's complaint as amended asserts various claims, including RICO violations, rescission for illegality, rescission and damages for fraud, breach of contract, breach of fiduciary duty, negligent misrepresentation, and claims under N.Y. Ins. Law §§ 2123, 4224 and 4226 (McKinney 1985 & Supp.1997) and N.Y. Gen. Bus. Law § 349 (McKinney 1988).
In addressing a motion to dismiss we are required to construe any well-pleaded factual allegations in the complaint in favor of the plaintiff and to dismiss the complaint only if "`it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Gagliardi v. Village of Pawling, 18 F.3d 188, 191 (2d Cir.1994) (citation omitted). Our function is not to weigh the evidence that might be presented at trial, but merely to determine whether the complaint itself is legally sufficient. Festa v. Local 3 Int'l Bhd. of Elec. Workers, 905 F.2d 35, 37 (2d Cir. 1990). Our consideration is limited to "the factual allegations in plaintiffs' ... complaint, which are accepted as true, to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiffs' possession or of which plaintiffs had knowledge and relied on in bringing suit." Brass v. American Film Techs., Inc., 987 F.2d 142, 150 (2d Cir.1993). In addition, we may consider the factual allegations in Plaintiff's RICO Statement in supplement to the complaint. McLaughlin v. Anderson, 962 F.2d 187, 189 (2d Cir.1992); Pier Connection, Inc. v. Lakhani, 907 F.Supp. 72, 74 n. 4 (S.D.N.Y.1995).
Defendants move to dismiss Plaintiff's RICO claims on several grounds. First, Defendants contend that application of RICO is barred by the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq. (the "McCarran Act"). Second, Defendants contend that the amended complaint fails to allege a RICO injury within the meaning of 18 U.S.C. § 1964(c). Third, Defendants contend that the amended complaint fails to state a claim for a RICO violation under 18 U.S.C. §§ 1962(a), (b), (c), or (d). Fourth, Defendants contend that the amended complaint fails to plead predicate acts of fraud with particularity as required by Federal Rule of Civil Procedure 9(b). We address each of these contentions in turn.
The McCarran Act provides in pertinent part:
No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance ....
15 U.S.C. § 1012(b). The McCarran Act was intended to permit the states to regulate the business of insurance "free from inadvertent preemption by federal statutes of general applicability." Merchants Home Delivery Serv., Inc. v. Frank B. Hall & Co., Inc., 50 F.3d 1486, 1488-89 (9th Cir.), cert. denied sub nom. ___ U.S. ___, 116 S.Ct. 418, 133 L.Ed.2d 335 (1995). The first section of the McCarran Act makes clear the purpose of Congress:
Congress declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States.
15 U.S.C. § 1011. As stated by the Supreme Court, "[o]bviously, Congress' purpose was broadly to give...
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