In re Gen. American Life Ins. Co. Sales Practices

Decision Date06 December 2004
Docket NumberNo. 03-3510.,No. 03-3517.,No. 03-3516.,03-3510.,03-3516.,03-3517.
PartiesIn re: GENERAL AMERICAN LIFE INSURANCE COMPANY SALES PRACTICES LITIGATION. Charles Kenneth Knouse; Lillian Elizabeth Knouse, husband and wife, Plaintiffs/Appellants, v. General American Life Insurance Company, also known as Genserve, doing business as Genamerica; Metropolitan Life Insurance Company; Ronald L. Gribschaw, Defendants/Appellees. In re: General American Life Insurance Company Sales Practices Litigation. Patricia S. Palashoff, Plaintiff/Appellant, Nicholas P. Palashoff, Plaintiff, General American Life Insurance Company, also known as Genserve, doing business as Genamerica; Metropolitan Life Insurance Company; William Wrenshall & Associates, Inc.; Ronald L. Gribschaw, Defendants/Appellees. In re: General American Life Insurance Company Sales Practices Litigation. Carol Louise BROWN, Plaintiff/Appellant, v. General American Life Insurance Company; also known as Genserve, doing business as Genamerica; Metropolitan Life Insurance Company; William J. Katzbeck; Derrick F. Eaglin, Defendants/Appellees.
CourtU.S. Court of Appeals — Eighth Circuit

Kenneth R. Behrend, argued, Pittsburgh, PA, for appellants.

Ann E. Buckley, argued, St. Louis, MO (Clark H. Cole and Rebeca Navarro-McKelvey, St. Louis, MO, B. John Pendleton, Jr., Neward, NJ, John G. Wall, Pittsburgh, PA, on the brief), for appellees Metro Life and General American.

Alan T. Silko, argued, Pittsburgh, PA, for appellees Gribschaw and Wrenshall.

Anthony C. Sunseri, argued, Wheeling, WV, for appellee Katzbeck.

Before WOLLMAN, RICHARD S. ARNOLD,1 and BYE, Circuit Judges.

WOLLMAN, Circuit Judge.

Plaintiffs in these consolidated cases appeal from the district court's grant of defendants' motions to dismiss in each case. We reverse and remand for further proceedings.

I.
A.

The following facts are taken from the plaintiffs' complaints. Plaintiff insureds originally brought their cases individually, but have now consolidated their appeals. Plaintiffs Charles and Lillian Knouse met with insurance agent Ronald Gribschaw on June 17, 1985. At this meeting, Gribschaw presented the Knouses with illustrations stating that the Knouses could obtain a whole life insurance policy on Mrs. Knouse by paying a one-time advance payment to defendant General American. Gribschaw represented that the policy's premiums would "vanish" after the first payment because the dividends and accrued interest on the policy would be sufficient to cover the annual premiums without any additional out-of-pocket payments from the Knouses. Gribschaw also represented that the Knouses could obtain a similar policy for Mr. Knouse by making a first-year payment followed by annual premium payments for 14 years. Gribschaw represented that the premiums on that policy would also "vanish" after the last annual premium payment. The Knouses then purchased both policies. The Knouses purchased an additional policy in 1987 after similar representations by Gribschaw.

In July 1993, Mrs. Knouse received a telephone call from Gribschaw and a letter from General American indicating that an additional out-of-pocket payment was due on her policy. The letter stated that her premiums had failed to vanish because the vanishing premium concept itself was heavily dependent on dividends, which were not guaranteed. The Knouses later received letters from General American asking for additional payments in 1997 and 2000. The Knouses made payments to General American after each request.

The Knouses received notice of a pending class action against General American in September 2000. The class action — later consolidated with two similar class actions — was filed in February 1996 and included all plaintiffs in these cases as class members. See Henderson v. General American Life Ins. Co. (In re General American Life Ins. Co. Sales Practices Litig.), 268 F.3d 627, 629-30 (8th Cir.2001), vacated, 536 U.S. 919, 122 S.Ct. 2584, 153 L.Ed.2d 773 (2002) (class definition). After opting out of a proposed class action settlement, the Knouses commenced their individual action against defendants General American, Metropolitan Life (General American's parent company), and Gribschaw on January 9, 2001. The Knouses brought claims against defendants for negligence/willful disregard; common law fraud and deceit; violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), Pa. Stat. Ann. tit. 73, § 201-1, et seq.; violation of Pennsylvania's bad faith statute, 42 Pa. Cons.Stat. § 8371; breach of fiduciary duty; and negligent supervision. Their action was then removed to the Western District of Pennsylvania and transferred to the Eastern District of Missouri by the Judicial Panel on Multidistrict Litigation (MDL Panel). The Eastern District of Missouri denied the Knouses' motion to remand the action to Pennsylvania state court on the ground that the non-diverse defendant in the case (Gribschaw) had been fraudulently joined. The district court then granted defendants' motion to dismiss the Knouses' complaint because all of the claims therein were barred by the applicable Pennsylvania statutes of limitations.

B.

Plaintiffs Nicholas and Patricia Palashoff met with Gribschaw on October 10, 1985. Gribschaw again utilized policy illustrations and represented that the Palashoffs could purchase a policy for Mrs. Palashoff with premiums that would vanish after ten years and a policy for Mr. Palashoff with vanishing premiums after 27 years. The Palashoffs then purchased two policies from Gribschaw and agreed to make their premium payments through a monthly automatic withdrawal from their checking account. The Palashoffs continued to make payments through this automatic method at least until the date that they filed their individual action.

The Palashoffs received notice of the pending class action in September 2000 and promptly opted out of the proposed settlement. They instituted their individual action against General American, Metropolitan Life, Gribschaw, and William Wrenshall & Associates, Inc. (Gribschaw's employer) on January 16, 2001, alleging the same six claims as the Knouses. The case was then removed and transferred to the Eastern District of Missouri in the same manner as the Knouses' case. The district court similarly denied the Palashoffs' motion to remand the case and then granted defendants' motion to dismiss on statute of limitations grounds.

C.

Plaintiff Carol Brown met with agents William Katzbeck and Derrick Eaglin on January 4, 1985. The agents showed Brown illustrations predicting that she could obtain a policy on her own life with premiums that would vanish after 20 years of payments as well as a policy on her son's life with premiums that would vanish after 10 years of payments. Brown purchased both policies and agreed to make monthly premium payments through an automatic withdrawal from her checking account. Brown continued to make payments at least through the date that she commenced her individual action.

Although not included in her complaint, it appears that Brown also received notice of the pending class action against General American in September 2000. She opted out of the proposed settlement and filed an individual action against General American, Metropolitan Life, Katzbeck, and Eaglin on January 30, 2001. Brown alleged the same six claims as the Knouse and Palashoff plaintiffs. Brown's case was removed to the Western District of Pennsylvania, which denied her motion to remand. The case was then transferred by the MDL Panel to the Eastern District of Missouri. The district court granted defendants' motion to dismiss and denied Brown's motion for reconsideration.

II.

We have jurisdiction to hear this appeal under 28 U.S.C. § 1291. We review the district court's grant of a motion to dismiss de novo, applying the same standards as the district court. Ballinger v. Culotta, 322 F.3d 546, 548 (8th Cir.2003). We accept the allegations in the plaintiffs' complaints as true and will dismiss the cases only when it appears beyond doubt that the plaintiffs can prove no set of facts that would entitle them to relief. McCormick v. Aircraft Mechs. Fraternal Ass'n, 340 F.3d 642, 644 (8th Cir.2003). We review the district court's denial of a motion to reconsider for abuse of discretion. Davidson & Schaaff, Inc. v. Liberty Nat'l Fire Ins. Co., 69 F.3d 868, 871 (8th Cir.1995).

When a transferee court receives a case from the MDL Panel, the transferee court applies the law of the circuit in which it is located to issues of federal law. Temporomandibular Joint (TMJ) Implant Recipients v. E.I. Du Pont De Nemours and Co. (In re Temporomandibular Joint (TMJ) Implants Prods. Liab. Litig.), 97 F.3d 1050, 1055 (8th Cir.1996). When considering issues of state law, however, the transferee court must apply the state law that would have applied had the cases not been transferred for consolidation. Id. All parties agree that Pennsylvania law, including its statutes of limitations, would have applied in these cases had they not been transferred. See also Larsen v. Mayo Med. Ctr., 218 F.3d 863, 866 (8th Cir.2000) (statutes of limitations are components of a state's substantive law). Because this is a diversity case, we review the district court's interpretation of Pennsylvania law de novo. Davidson & Schaaff, 69 F.3d at 870.

Plaintiffs' claims for negligence/willful disregard, common law fraud and deceit, breach of fiduciary duty, and negligent supervision are governed by Pennsylvania's general two-year tort statute of limitations. See 42 Pa. Cons.Stat. § 5524(7). The applicable limitations periods for plaintiffs' bad faith and UTPCPL claims, however, have not been squarely addressed by either the Pennsylvania General Assembly or the Supreme Court of Pennsylvania. Accordingly, we must predict how the Supreme Court of Pennsylvania would rule on these issues....

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