Kapoor v. Dybwad

Decision Date15 December 2015
Docket NumberNo. 49A04–1410–CT–492.,49A04–1410–CT–492.
PartiesSeema KAPOOR; Shiv Kapoor ; Performance Support Consulting, LLC; Matt Judson; and Regional Construction Services, Inc., Appellants/Plaintiffs, v. Steve DYBWAD; Cronin Insurance Services, Inc.; Mark Light; Greenwalt CPAs, Inc., f/k/a Greenwalt Sponsel & Co.; Association of Small, Closely–Held Business Enterprises; Washington Trust Bank; Jonigian & Fox, Inc., d/b/a Fox & Fox; and Western Reserve Life Assurance Co. of Ohio, Appellees/Defendants.
CourtIndiana Appellate Court

49 N.E.3d 108

Seema KAPOOR; Shiv Kapoor ; Performance Support Consulting, LLC; Matt Judson; and Regional Construction Services, Inc., Appellants/Plaintiffs
v.
Steve DYBWAD; Cronin Insurance Services, Inc.; Mark Light; Greenwalt CPAs, Inc., f/k/a Greenwalt Sponsel & Co.; Association of Small, Closely–Held Business Enterprises; Washington Trust Bank; Jonigian & Fox, Inc., d/b/a Fox & Fox; and Western Reserve Life Assurance Co. of Ohio, Appellees/Defendants.

No. 49A04–1410–CT–492.

Court of Appeals of Indiana.

Dec. 15, 2015.


49 N.E.3d 114

Karl L. Mulvaney, Joshua J. Burress, Bingham Greenebaum Doll LLP, Indianapolis, IN, Laura Richards Sherry, The Harris Firm, Dallas, TX, Attorneys for Appellants.

Brian P. Nally, Martin T. Galvin, Reminger Co., L.P.A., Cleveland, OH, Attorneys for Appellee Steve Dybwad.

Connie M. Anderson, Lewis Brisbois Bisgaard & Smith LLP, Los Angeles, CA, Kari H. Halbrook, Lewis Brisbois Bisgaard & Smith LLP, Chicago, IL, Attorneys for Appellees Cronin Insurance Services, Inc., and the Association of Small, Closely–Held Business Enterprises.

Michael E. Brown, Crystal G. Rowe, Kightlinger & Gray, LLP, Indianapolis, IN, Thomas F. Falkenberg, Williams, Montgomery & John, Chicago, IL, Attorneys for Appellee Greenwalt CPAs, Inc., f/k/a Greenwalt Sponsel & Co.

Scott B. Cockrum, Patrick Devine, Hinshaw & Culbertson LLP, Schererville, IN, James Harbert, Hinshaw & Culbertson LLP, Chicago, IL, Attorneys for Appellee Jonigian & Fox, Inc., d/b/a Fox & Fox.

Paul D. Vink, Bose McKinney & Evans LLP, Indianapolis, IN, Attorney for Appellee Mark Light.

Michael A. Maurer, pro hac vice, Lukins & Annis, P.S., Spokane, WA, Steven E. Runyan, Kroger Gardis & Regas, LLP, Indianapolis, IN, Attorneys for Appellee Washington Trust Bank.

John R. Carr, III, Michael R. Franceschini, Thomas B. Bricker, Ayers Carr & Sullivan, P.C., Indianapolis, IN, Attorneys for Appellee Western Reserve Life Assurance Co. of Ohio.

BRADFORD, Judge.

Case Summary1

1] Appellants/Plaintiffs Seema Kapoor; Shiv Kapoor; Performance Support Consulting; LLC (collectively, “the Kapoor Plaintiffs”); Matt Judson; and Regional Construction Services, Inc. (collectively, “the Judson Plaintiffs”), appeal from the trial court's grant of a motion to dismiss in favor of Appellees/Defendants Steve Dybwad; Cronin Insurance Services, Inc. (“CIS”); Mark Light; Greenwalt CPAs, Inc., f/k/a Greenwalt Sponsel & Co. (“Greenwalt”); Association of Small, Closely–Held Business Enterprises (“ASBE”); Washington Trust Bank (“WTB”); Jonigian & Fox, Inc., d/b/a Fox & Fox (“Fox & Fox”); and Western Reserve Life Assurance Co. of Ohio (“WRL”). Defendants fulfilled various roles in assisting Plaintiffs to establish welfare benefit programs for the employees of their companies, programs which involved the purchase of cash value life insurance policies. These plans were initially known as the Cronin Insured Secured Program (“Cronin ISP Plan”) and, later, the Cronin Group

[49 N.E.3d 115

Term Life Insurance Program (“Cronin GTLP Plan”). For several years, Plaintiffs made premium payments and deducted the contributions on their tax returns.

2] In 2012 and 2013, the Plaintiffs received deficiency notices from the IRS, indicating that it had disallowed the deductions taken for contributions to the Cronin ISP and GTLP Plans. As a result, Plaintiffs incurred costs for back taxes, penalties, and interest. All Defendants were sued by various Plaintiffs (the Kapoor Plaintiffs, the Judson Plaintiffs, or all Plaintiffs) for fraud, fraud by omission, negligent misrepresentation, negligence, unjust enrichment, money had and received, and constructive fraud. The trial court granted Defendants' motion to dismiss for failure to state a claim under which relief may be granted.

[3] On appeal, Plaintiffs argue that (1) Defendants' alleged misrepresentations are actionable as a matter of law, (2) Plaintiffs' fraud allegations were pled with requisite specificity, (3) Defendants had a duty to Plaintiffs, (4) the economic loss doctrine does not bar their negligence claim against Fox & Fox, (5) Plaintiffs were not required to attach certain “writings” in order to sustain a cause of action against Fox & Fox, (6) the trial court erred in dismissing the Judson Plaintiffs' fraud claim against WRL, and (7) the trial court erred in dismissing the Judson Plaintiffs' negligence claim against Greenwalt.

[4] CIS and ASBE contend that (1) Plaintiffs do not have a viable cause of action because it is inherently unreasonable to rely on predictions regarding future tax consequences and (2) Plaintiffs' fraud claims were not pled with sufficient specificity. Greenwalt argues that the Judson Plaintiffs' (1) negligence claims against them are time-barred, (2) fraud claims were not pled with sufficient specificity, and (3) the constructive fraud claim did not allege the necessary unconscionable advantage. Fox & Fox contends that (1) allegations of fraud against it fail to state a claim, (2) fraud claims were not pled with sufficient specificity, (3) the constructive fraud claim was properly dismissed due to a lack of duty, and (4) the negligence claim was properly dismissed pursuant to the economic loss doctrine and for a lack of duty. WTB contends that (1) Washington state law governs its relationships with various Plaintiffs, (2) it had no legal duty to provide tax or financial advice to Plaintiffs and (3) any claims based on a breach of duty must therefore fail. WRL contends that (1) the Judson Plaintiffs' fraud allegations were not pled with sufficient specificity and (2) the Judson Plaintiffs pled no facts supporting a material misrepresentation. Light contends that all of the Judson Plaintiffs' claims against him fail as a matter of law. Because we conclude that the trial court erred in dismissing several fraud, constructive fraud, and negligence claims against various defendants, we reverse the judgment of the trial court in part and remand for further proceedings.

Facts and Procedural History

I. Background—Section 419(e) Plans

[5] Generally, Title 26, Section 419 of the United States Code provides for the establishment of “welfare benefit funds” by employers for employees, with employer contributions deductible under certain circumstances. Section 419(e) defines the term “welfare benefit fund” as “any fund ... which is part of a plan of an employer, and ... through which the employer provides welfare benefits to employees or their beneficiaries.” “The amount of the deduction allowable ... for any taxable year shall not exceed the welfare benefit fund's qualified cost for the taxable year.” 26 U.S.C § 419(b).

[49 N.E.3d 116

[6] As far back as 1995, the Internal Revenue Service announced its position concerning some arrangements purporting to comply with Section 419, stating that such arrangements involving welfare benefit funds that invested in variable life or universal life insurance contracts on the lives of the employees did not provide the deductions claimed by their promoters. The IRS, inter alia, took the position that arrangements that invested in variable life for universal life contracts may actually be providing deferred compensation, which would not provide for the same tax-deduction opportunities for the employer.2

7] In late 2007, the IRS issued Notices 2007–83 and 2007–84 and Revenue Ruling 2007–65. Notice 2007–83 was entitled “Abusive Trust Arrangements Utilizing Cash Value Life Insurance Policies Purportedly to Provide Welfare Benefits” and informed taxpayers that “the tax benefits claimed for these arrangements are not allowable for federal tax purposes.” Appellant's App. p. 926. Notice 2007–83 also indicated that the IRS intended to challenge the claimed tax benefits related to premiums for cash value life insurance policies. Inter alia, Notice 2007–84 indicated the IRS's intention to challenge “purported welfare plans that, in form, provide post-retirement medical and life insurance to employees on a non-discriminatory basis, but that, in operation, will primarily benefit the owners or other key employees of the businesses.” Appellant's App. p. 934. Revenue Ruling 2007–65 indicated that “if the benefit provided through the fund is life insurance coverage, premiums paid on cash value life insurance policies by the fund are not included in the fund's qualified direct cost whenever the fund is directly or indirectly a beneficiary under the policy” and are therefore not deductible. Appellant's App. p. 950.

II. The Defendants

[8] Lawrence Cronin was an insurance broker who operated CIS. Cronin developed the Cronin ISP Plan and, later, the Cronin GTLP Plan. The Cronin ISP Plan was purportedly set up in compliance with Section 419(e), while the Cronin GTLP Plan was purportedly set up in compliance with U.S. Tax Code Sections 79 and 83. All Plaintiffs bring claims against CIS.

[9] Fox & Fox operated as a third-party administrator of the Cronin ISP and GTLP Plans. Fox & Fox collected money from the Plaintiffs for investment in the Plans and administrative fees, and their invoices instructed the Plaintiffs regarding how much money to deduct as “qualified costs” on their tax returns. All Plaintiffs bring claims against Fox & Fox.

[10] WTB was trustee for the Cronin ISP Plans. WTB acquired a security interest in each policy's proceeds and required covered employees to execute assignments. WTB became the beneficiary...

To continue reading

Request your trial
33 cases
  • Aldrich v. Nat'l Collegiate Athletic Ass'n
    • United States
    • U.S. District Court — Southern District of Indiana
    • September 30, 2021
    ......2019). Whether a fiduciary relationship exists is a question of fact in Indiana. Kapoor v. Dybwad , 49 N.E.3d 108, 129 (Ind. Ct. App. 2015) (quoting Paulson v. Centier Bank , 704 N.E.2d 482, 490 (Ind. Ct. App. 1998) ). Here, Ms. ......
  • Shea v. Gen. Motors LLC
    • United States
    • U.S. District Court — Northern District of Indiana
    • October 14, 2021
    ......Indiana law recognizes a claim for actual fraud and a claim for constructive fraud. See Kapoor v. Dybwad , 49 N.E.3d 108, 124 (Ind. Ct. App. 2015). "The presence or absence of [an intent to deceive] distinguishes actual fraud from constructive ......
  • Troth v. Warfield
    • United States
    • U.S. District Court — Northern District of Indiana
    • October 20, 2020
    ...... reckless ignorance of the falseness (iv) was relied upon by the complaining party and (v) proximately caused the complaining party injury." Kapoor v. Dybwad , 49 N.E.3d 108, 121 (Ind. Ct. App. 2015). The defendants assert that the Troths’ actual fraud counts must be dismissed pursuant to ......
  • D Shea v. Gen. Motors LLC
    • United States
    • U.S. District Court — Northern District of Indiana
    • October 14, 2021
    ...49 N.E.3d 108, 124 (Ind.Ct.App. 2015). “The presence or absence of [an intent to deceive] distinguishes actual fraud from constructive fraud.” Id. The haven't alleged that GM intended to deceive them but rather that GM was aware of the oil consumption defect and had a duty to disclose it to......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT