Grove v. Principal Mut. Life Ins. Co., No. 4-97-CV-90224.

CourtUnited States District Courts. 8th Circuit. United States State District Court of Southern District of Iowa
Writing for the CourtPratt
Citation14 F.Supp.2d 1101
PartiesJerry D. GROVE, Kathy M. Grove and Leo Willick, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs, v. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, Defendant.
Docket NumberNo. 4-97-CV-90224.
Decision Date16 March 1998
14 F.Supp.2d 1101
Jerry D. GROVE, Kathy M. Grove and Leo Willick, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs,
v.
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, Defendant.
No. 4-97-CV-90224.
United States District Court, S.D. Iowa, Central Division.
March 16, 1998.

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COPYRIGHT MATERIAL OMITTED

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Roger T. Stetson, Des Moines, IA, for Plaintiffs.

Lawrence P. McLellan, Des Moines, IA, for Defendant.

ORDER

PRATT, District Judge.


This matter comes before the Court on defendant's Motion to Dismiss plaintiffs' Complaint. Defendant filed such motion on June 26, 1997. Plaintiffs filed their Resistance on August 27, 1997 and defendant filed a reply on October 17, 1997. A hearing was held on March 10, 1998. At the outset, the Court would like to commend the attorneys for both parties on their briefs and oral arguments. As Chief Judge Arnold states in United States v. Samuels, 808 F.2d 1298 (8th Cir.1987), "[c]ounsel almost always know a great deal more about their cases than [the court does]." Id. at 1301 (Arnold, J., Concurring). In the instant case, the attorney's communication of such knowledge was particularly helpful and informative.

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I. BACKGROUND

A. General Allegations

The plaintiffs filed a eight count class action complaint1 on April 4, 1997, seeking redress for an allegedly fraudulent scheme and common course of deceptive sales practices perpetrated by the Principal Mutual Life Insurance Company, formerly known as Bankers Life Company, [hereinafter "Principal"]. Plaintiffs claim that Principal agents deceived and induced them and thousands of other policy holders to purchase insurance policies through the use of false and misleading policy illustrations, marketing materials, and sales presentations. At the time they made these representations, plaintiffs allege, Principal knew they were false.

Plaintiffs assert, among other things, that Principal made statements and presented computer generated sales illustrations which depended on deceptive actuarial assumptions and undisclosed material facts. They claim that defendants fraudulently concealed the presently known fact that the assumptions upon which the performance of the "vanishing premium" policies were based could not be supported by Principal's current experience.2 Further, plaintiffs allege that Principal agents concealed and/or misrepresented that premiums would vanish on a date certain.3 Plaintiffs also claim that from 1984 on, Principal knew that the dividend, interest, and investment return assumptions essential to its illustrations could not and were not even projected to be maintained. Nonetheless, they fraudulently used these illustrations to induce plaintiffs and other class members to purchase insurance policies. The policy illustrations also concealed the fact that even if out-of-pocket premiums did "vanish" on the specified date, they may reappear later if some variables were altered.4

Finally, plaintiffs assert that they understood and relied upon the sales presentations as a representation by the Principal agents of how their policies would work.

In the motion to dismiss, Principal argues that as a matter of law plaintiffs' claim should be dismissed on the following basis: (a) the Groves lack standing; (b) plaintiffs' fraud and negligence claims are barred by the applicable statute of limitations; (c) plaintiffs fail to properly state a claim for fraud; (d) plaintiffs cannot recover on their claims for breach of fiduciary duty; (e) plaintiffs have not stated a claim for breach of contract; (f) plaintiffs fail to properly state a claim for negligence and negligent misrepresentation; and (g) plaintiffs' claims for equitable relief fail to state cognizable causes of action.

B. Specific Complaints of the Named Plaintiffs

The Groves claim that in 1992, a Principal agent approached them and induced them to purchase an "Adjustable Life" insurance plan by mischaracterizing it as a retirement plan and/or investment plan which had a premium that would vanish in ten years. The Groves further allege that the Principal agent used a computer-generated policy illustration to confirm his misrepresentations. Relying on the representations of this agent, the Groves

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purchased the Principal policy. They claim further that in 1995, they learned that Principal was taking unauthorized loans from another policy they owned to pay premiums on this policy.

Willick, a long-standing Principal insured owning a $20,000 policy, alleges that in 1984, a Principal insurance agent approached and induced him to purchase a second policy based on misleading and/or inaccurate sales presentations. The agent allegedly stated that Willick's old policy was "no good" because the "dividends were doing nothing." Further, he indicated that the dividends from Willick's 1966 twenty thousand dollar policy would be sufficient to pay the premiums on the second policy for several years. In 1988, the Principal agent again visited Willick and on this occasion stated that "lots of dividends" had accumulated in the new policy and encouraged Willick to use these dividends to increase the face amount of the second policy to $51,105. In 1992, Principal notified Willick that additional out-of-pocket premiums were required. He paid these out-of-pocket premiums for two years and then let his policy lapse.

II. LEGAL STANDARD

In addressing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), this Court "is constrained by a stringent standard .... 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 in support of his claim which would entitle him to relief."5 Fusco v. Xerox Corp., 676 F.2d 332, 334 (8th Cir.1982) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)); see also Morton v. Becker, 793 F.2d 185, 187 (8th Cir.1986). In addition, the allegations of the complaint must be taken as true. Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972). The complaint must be liberally construed in the light most favorable to the plaintiff. Fusco, 676 F.2d at 334. Thus, as a practical matter, a dismissal under Rule 12(b)(6) should be granted "only in the unusual case in which a plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief." Id. (citing Jackson Sawmill Co. v. United States, 580 F.2d 302, 306 (8th Cir. 1978)) [emphasis added].

In Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), the Supreme Court articulated the test as follows:

When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test. Moreover, it is well established that, in passing on a motion to dismiss, whether on the ground of lack of jurisdiction over the subject matter or for failure to state a cause of action, the allegations of the complaint should be construed favorably to the pleader.

Id. at 236, 94 S.Ct. 1683.

III. ANALYSIS

A. Class Certification

The Court notes that this case was filed as a class action but there has been no certification of a class. As a general rule, a court should make a determination of whether the complaint is appropriate for class certification "[a]s soon as practicable after the commencement of [such] an action," Fed. R.Civ.P. 23(c). This determination should generally be made prior to consideration of any dispositive motions. See Rutan v. Republican Party of Illinois, 868 F.2d 943, 947 (7th Cir.) (en banc.), cert. denied, 493 U.S. 807, 110 S.Ct. 48, 107 L.Ed.2d 17 (1989). In the present case, however, the parties have informally informed the Court that they have not yet completed discovery on this issue and thus desired that it not be determined as of

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yet. Thus, the court will consider the motion to dismiss prior to certification.

B. Choice-Of-Law

As a threshold matter, the Court must determine what substantive law governs plaintiff's claims. When jurisdiction is based on diversity of citizenship, a federal district court is bound to apply the choice-of-law rules of the state in which it sits. Simpson v. Liberty Mut. Ins. Co., 28 F.3d 763, 764 (8th Cir.1994) (citing Whirlpool Corp. v. Ritter, 929 F.2d 1318, 1320 (8th Cir.1991)). As jurisdiction in this case is based on diversity, this Court is required to follow Iowa's choice-of-law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941). Iowa has adopted the Second Restatement of Conflicts as its choice-of-law provision. Cole v. State Auto. & Casualty Underwriters, 296 N.W.2d 779, 781 (Iowa 1980).

In contract cases, following the Second Restatement, Iowa applies the law of the state with the most significant relationships or interests in the litigation. Restatement (Second) of Conflicts of Law § 188(1) (1971); Cole, 296 N.W.2d at 781. "The basic premise of the most significant relationships theory is that the court of the forum should apply the policy of the state with the most interest in the litigants and the outcome of the litigation." Fuerste v. Bemis, 156 N.W.2d 831, 834 (Iowa 1968).

For claims of fraud or misrepresentation, Iowa applies the law of the state where the false representations were made and received, unless "with respect to a particular issue, some other state has a more significant relationship to the transaction." Restatement (Second) of Conflicts of Law § 148(1) (1971).

For claims of negligence, Iowa courts have generally opted to follow the law of the state where the claimed tort...

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21 practice notes
  • Charleswell v. Chase Manhattan Bank, N.A., Civil Action No. 01–119.
    • United States
    • United States District Courts. 3th Circuit. District of the Virgin Islands
    • 27 Febrero 2004
    ...stated in their insurance contracts” and that a fiduciary duty can arise from this relationship. Grove v. Principal Mut. Life Ins. Co., 14 F.Supp.2d 1101, 1111 (S.D.Iowa 1998); see also Dornberger v. Metro. Life Ins. Co., 961 F.Supp. 506, 546–47 (S.D.N.Y.1997) (holding that the question of ......
  • Charleswell v. Chase Manhattan Bank, N.A., Civil Action No. 01-119.
    • United States
    • United States District Courts. 3th Circuit. District of the Virgin Islands
    • 27 Febrero 2004
    ...stated in their insurance contracts" and that a fiduciary duty can arise from this relationship. Grove v. Principal Mut. Life Ins. Co., 14 F.Supp.2d 1101, 1111 (S.D.Iowa 1998); see also Dornberger v. Metro. Life Ins. Co., 961 F.Supp. 506, 546-47 (S.D.N.Y.1997) (holding that the question of ......
  • Bendzak v. Midland Nat. Life Ins. Co., No. 4:05-CV-00649.
    • United States
    • United States District Courts. 8th Circuit. United States State District Court of Southern District of Iowa
    • 27 Julio 2006
    ...with an allegation of fraudulent concealment. Bendzak cites this Court's decision in Grove v. Principal Mutual Life Insurance Company, 14 F.Supp.2d 1101 (S.D.Iowa 1998). Unlike the plaintiff in Grove, whose complaint included a claim for breach of fiduciary duty, Bendzak's Complaint does no......
  • Cooper v. Berkshire Life Ins. Co., No. 0154
    • United States
    • Court of Special Appeals of Maryland
    • 14 Noviembre 2002
    ...higher than guaranteed rate and had not been attainable in recent years stated claim for fraud); Grove v. Principal Mut. Life Ins. Co., 14 F.Supp.2d 1101, 1104, 1111 (S.D.Iowa 1998)(viable cause of action stated by claim that insurance company fraudulently concealed the presently known fact......
  • Request a trial to view additional results
21 cases
  • Charleswell v. Chase Manhattan Bank, N.A., Civil Action No. 01–119.
    • United States
    • United States District Courts. 3th Circuit. District of the Virgin Islands
    • 27 Febrero 2004
    ...stated in their insurance contracts” and that a fiduciary duty can arise from this relationship. Grove v. Principal Mut. Life Ins. Co., 14 F.Supp.2d 1101, 1111 (S.D.Iowa 1998); see also Dornberger v. Metro. Life Ins. Co., 961 F.Supp. 506, 546–47 (S.D.N.Y.1997) (holding that the question of ......
  • Charleswell v. Chase Manhattan Bank, N.A., Civil Action No. 01-119.
    • United States
    • United States District Courts. 3th Circuit. District of the Virgin Islands
    • 27 Febrero 2004
    ...stated in their insurance contracts" and that a fiduciary duty can arise from this relationship. Grove v. Principal Mut. Life Ins. Co., 14 F.Supp.2d 1101, 1111 (S.D.Iowa 1998); see also Dornberger v. Metro. Life Ins. Co., 961 F.Supp. 506, 546-47 (S.D.N.Y.1997) (holding that the question of ......
  • Bendzak v. Midland Nat. Life Ins. Co., No. 4:05-CV-00649.
    • United States
    • United States District Courts. 8th Circuit. United States State District Court of Southern District of Iowa
    • 27 Julio 2006
    ...with an allegation of fraudulent concealment. Bendzak cites this Court's decision in Grove v. Principal Mutual Life Insurance Company, 14 F.Supp.2d 1101 (S.D.Iowa 1998). Unlike the plaintiff in Grove, whose complaint included a claim for breach of fiduciary duty, Bendzak's Complaint does no......
  • Cooper v. Berkshire Life Ins. Co., No. 0154
    • United States
    • Court of Special Appeals of Maryland
    • 14 Noviembre 2002
    ...higher than guaranteed rate and had not been attainable in recent years stated claim for fraud); Grove v. Principal Mut. Life Ins. Co., 14 F.Supp.2d 1101, 1104, 1111 (S.D.Iowa 1998)(viable cause of action stated by claim that insurance company fraudulently concealed the presently known fact......
  • Request a trial to view additional results

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