Johnson v. Bankers Life & Cas. Co.

Decision Date20 September 2013
Docket NumberNo. 13–cv–144–wmc.,13–cv–144–wmc.
Citation973 F.Supp.2d 950
PartiesHeather JOHNSON, Plaintiff, v. BANKERS LIFE AND CASUALTY COMPANY, Defendant.
CourtU.S. District Court — Western District of Wisconsin

OPINION TEXT STARTS HERE

Michael Patrick Crooks, Peterson, Johnson & Murray, S.C., Madison, WI, Maria D. Sanders, Peterson, Johnson, & Murray, Milwaukee, WI, for Plaintiff.

Adam Jay Kaiser, John Michael Aerni, Winston & Strawn, LLP, Jeffrey J. Amato, Winston & Strawn, New York, NY, Barbara A. Neider, Stafford Rosenbaum LLP, Madison, WI, Bianca Michelle Forde, Winston & Strawn, New York, NY, for Defendant.

OPINION & ORDER

WILLIAM M. CONLEY, District Judge.

Defendant Bankers Life and Casualty Company (Bankers), through its authorized agents, sold an individual retirement annuity to plaintiff Heather Johnson and her now-deceased husband. Plaintiff alleges that she and her husband purchased this annuity, which replaced an existing annuity purchased from another company, because it contained an “annuity income preservation amendment rider” which Bankers represented would keep both the annuity and income from the annuity from affecting their “Medicaid eligibility and spend down provisions/requirements.” When this proved to be untrue following her husband's death, Mrs. Johnson brought this putative class action lawsuit against Bankers for breach of fiduciary duty, negligent and intentional misrepresentation, civil theft pursuant to Wis. Stat. §§ 895.446 and 943.20, and violation of Wisconsin Organized Crime Control Act (“WOCCA”), Wis. Stat. § 946.83.

Before the court is defendant's motion to dismiss all of plaintiff's claims. (Dkt. # 25.) For the reasons that follow, the court finds (1) Johnson has standing pursuant to Article III to pursue her claims; (2) the complaint fails to allege a fiduciary relationship; (3) the complaint alleges a misrepresentation with sufficient specificity to form the basis of negligent and intentional misrepresentation claims and a civil theft claim; and (4) the complaint fails to allege an enterprise separate from defendant to plead a WOCCA claim. Accordingly, the court will grant defendant's motion to dismiss plaintiff's breach of fiduciary duty and WOCCA claims and deny it in all other respects.

ALLEGATIONS OF FACT 1

In April 2005, Heather and Gary Johnson sold their primary residence and purchased an annuity from Security Benefit Life Insurance Company in the amount of approximately $144,000. Sometime after that, the Johnsons were contacted by one of Bankers' agents, Craig Chapp, asking them to meet with him to discuss an annuity his company was offering to senior citizens that would protect certain assets during retirement.

In November or December 2005, the Johnsons met with Chapp at their condominium. During that meeting, they informed Chapp of certain health issues Mr. Johnson was experiencing. Chapp allegedly then advised the Johnsons that they should take advantage of a new product offered by Bankers that would protect their assets even if Mr. Johnson had to enter into a nursing home.” (Am. Compl. (dkt. # 22) ¶ 10.) The Amended complaint further alleges that

Chapp fraudulently represented that the annuity included a rider entitled ‘annuity income preservation amendment rider,’ which, Mr. Chapp represented, would protect and/or exclude the assets and/or income of the deferred annuities from Medicaid eligibility and spend down provisions/requirements, thereby allowing them to take full advantage of the Medicaid and/or other governmental aid and benefits for which they were to be eligible without having to use the assets of the annuity to pay expenses otherwise covered by Medicaid.

( Id. at ¶ 11.)

Some two years after their meeting with Chapp, the Johnsons decided to liquidate their previously-purchased annuity, resulting in significant penalties, and purchase the Bankers' annuity in the reduced amount of $132,683.72. This annuity was issued in Mr. Johnson's name with Mrs. Johnson named as the intended beneficiary on January 30, 2008. ( Id. at ¶ 14; Ex. A (dkt. # 22–1).) Heather Johnson alleges that she and her husband made the decision to purchase the Bankers annuity “primarily based upon the representations made to them by Mr. Chapp.” ( Id. at ¶ 13.)

On page nine of the twenty page annuity document, which is attached to the complaint, appears the following language:

TAX AND LEGAL CONSEQUENCES

This rider may have tax consequences or affect eligibility for Medicaid or other government benefits. Consult a tax advisor or attorney to assess the impact of this rider on Your specific situation.

( Id., Ex. A (dkt. # 22–1) p. 9.)

Mr. Johnson passed away in August 2008. Following his death, Heather Johnson “learned that the representations made by Mr. Chapp concerning the annuity income preservation amendment rider were false and that the annuity would not protect and/or exclude the assets and/or income of the deferred annuities from Medicaid eligibility and spend down provisions/requirements.” ( Id. at ¶ 15.)

Heather Johnson seeks to represent a class of Wisconsin residents who, based upon representations by Chapp or another Bankers' agent, purchased Bankers annuities that include the annuity income preservation amendment rider. Plaintiff alleges the following causes of action: (1) breach of fiduciary duty; (2) negligent misrepresentation; (3) intentional misrepresentation; (4) civil theft under Wis. Stat. §§ 895.446 and 943.20; and (5) violation of WOCCA.

PRELIMINARY MATTER

Defendant also moves for submission of material outside of the pleadings, attaching two documents to a declaration of defendant's counsel: (1) a purported check from Security Benefit Life Insurance to Bankers Life and Casualty, dated January 18, 2008; and (2) a purported check from Bankers Life and Casualty Company to Heather Johnson, dated September 22, 2008. (Def.'s Mot. to Submit Material Outside of Pleadings (dkt. # 27); Declaration of Adam J. Kaiser, Exs. A, B (dkt. 28–1, 28–2).) In addition to plaintiff's complaint, the court may consider documents to which the complaint had referred, which are “concededly authentic” and “central to” the plaintiff's claim. Hecker v. Deere & Co., 556 F.3d 575, 582 (7th Cir.2009).2

In her amended complaint described above, plaintiff alleges that she and her husband liquidated their previously-purchased annuity and purchased the Bankers' annuity in the amount of $132,683.72. (Am. Compl. (dkt. # 2) ¶¶ 12, 14.) Further, plaintiff's damages request is at least in part related to alleged penalties paid to Security Benefit in cashing in the previously-purchased annuity. Accordingly, the court finds that the check from Security Benefit Life Insurance Company to the defendant in the same amount as in the complaint is sufficient to meet the requirements for considering documents outside of the pleadings.

As for the second check—the one issued by Bankers to plaintiff—the complaint does not allege that defendant issued Johnson a check or otherwise refer to payment under the policy. More importantly, the issuance of the check is not “central to” plaintiff's claims, which concern alleged misrepresentations and at the point of sale; nor is the check even material to the present motion to dismiss. The court will, therefore, grant defendant's motion to consider the check from Security Benefit to Bankers (dkt. # 28–1), but deny defendant's motion to submit the check paid by Bankers to Heather Johnson (dkt. # 28–2).

OPINION

Bankers moves to dismiss this claim, arguing that (1) Johnson as a third-party beneficiary lacks standing to pursue the present action; (2) plaintiff's breach of fiduciary duty claim fails as a matter of law because Bankers has no independent duty to potential purchasers and was not in a position of trust because of the disclaimer described above; (3) plaintiff's breach of fiduciary duty claim is barred by the statute of limitations; (4) the negligent and intentional misrepresentation claims and civil theft claim all fail because they are premised on a representation about the law and/or a future event; (5) plaintiff's misrepresentation and civil theft claims fail as a matter of law because she cannot establish reasonable reliance due to the presence of the so-called “disclaimer” in the policy; and (6) plaintiff fails to state a WOCCA claim for several reasons, most notably because the defendant is the same entity as the alleged “enterprise.” The court will review each in turn, starting, as it must, with jurisdiction, including defendant's challenge to this court's subject matter jurisdiction.

I. Jurisdiction

As an preliminary matter, this court appears to have jurisdiction over the putative class action pursuant to the Class Action Fairness Act of 2005 (“CAFA”) 28 U.S.C. § 1332(d). First, the complaint and notice of removal contain allegations sufficient to demonstrate that there is complete diversity, thus meeting the minimal diversity requirement of CAFA. See28 U.S.C. § 1332(d)(2)(A) (providing diversity under CAFA is met if “any member of a class of plaintiffs is a citizen of a state different from any defendant).3 Second, plaintiff alleges that the putative class “is estimated to contain hundreds of individuals” (Compl. (dkt. # 1–1) ¶ 13), and defendant represents that plaintiffs' estimate is conservative (Not. of Removal (dkt. # 1) ¶ 16). See28 U.S.C. § 1332(d)(5)(B) (requiring a putative class of at least 100 members). Third, Bankers has credibly estimated that the amount in controversy exceeds $29.5 million (Not. of Removal (dkt. # 1) ¶¶ 19–21), easily satisfying the $5 million CAFA threshold. See28 U.S.C. § 1332(d)(6) ([T]he claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs.”). Fourth, the court finds that the discretionary and mandatory exceptions to jurisdiction under CAFA do not apply because Bankers is not a citizen of the State of Wisconsin. See28 U.S.C. §§ 1332(d)(3), 13...

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