Lowe v. Csenge Advisory Grp., 2:19-cv-00980-RJC
| Decision Date | 21 September 2020 |
| Docket Number | 2:19-cv-00980-RJC |
| Parties | MARIE B. LOWE, Plaintiff, v. CSENGE ADVISORY GROUP, ROGER P. BEDILLION, AMERICAN GENERAL LIFE INSURANCE COMPANY, THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, PARK AVENUE SECURITIES LLC, FSC SECURITIES CORPORATION, RELIASTAR LIFE INSURANCE COMPANY, VOYA FINANCIAL SERVICES COMPANY, VOYA FINANCIAL, INC. f/k/a ING U.S., INC., VOYA FINANCIAL PARTNERS, LLC, MARTIN VALENTIC, LIFETIME FINANCIAL GROWTH, LLC, ROBERT W. BAIRD & CO. INC. f/k/a J.J.B. HILLIARD, W.L. LYONS d/b/a HILLIARD LYONS, Defendants. |
| Court | U.S. District Court — Western District of Pennsylvania |
MEMORANDUM OPINION
Before the Court are three Motions to Dismiss filed by six of the fourteen Defendants in this matter. The Motions at issue were filed by Defendants: (1) J.J.B. Hilliard, W.L. Lyons, LLC, and Robert W. Baird and Co. (collectively, "Hilliard") (ECF No. 62); (2) Voya Financial, Inc. f/k/a ING U.S., Inc., Voya Financial Partners, LLC, and Voya Financial Services Company,1(collectively, "Voya") (ECF No. 77); and (3) ReliaStar Life Insurance Company ("ReliaStar") (ECF No. 79).2 The Moving Defendants' Motions individually assert that the claims set forth against the Moving Defendants in the operative First Amended Complaint (the "Complaint") (ECF No. 51) filed by Plaintiff Marie B. Lowe ("Lowe") in this matter should be dismissed for failure to state a claim. Specifically: (1) Hilliard seeks dismissal of Counts X, XI, XVI, and XVII; (2) Voya seeks dismissal of Counts X, XII, and XVII; and (3) ReliaStar seeks dismissal of Counts X, XII, and XVII. These Motions have been fully briefed, and are ripe for disposition.3
This case involves the acquisition of four life insurance policies over the course of approximately fourteen years. Lowe asserts that none of these insurance policies was remotely appropriate for her needs, and that they were acquired for an improper purpose that ultimately resulted in the loss of Lowe's life savings. In this action, Lowe seeks recovery against her longtime friend and investment adviser and/or insurance agent/broker, Roger P. Bedillion ("Bedillion"), who allegedly planned and facilitated the acquisition of each of these insurance policies. Lowe has also sued another insurance agent/broker, Valentic, for his alleged involvement in the acquisition of two of the insurance policies at issue. Lowe also seeks recovery against a number of business entities that had a relationship with Bedillion and/or Valentic, were involved with the issuance of the insurance policies at issue, or both. In the Complaint, Lowe sets forth the following allegations:
Bedillion was a registered investment adviser registered with: (1) Hilliard from June 2002 until January 2004; (2) FSC from October 2006 until April 2018; and (3) Csenge from September 2011 until April 2018. Compl. ¶ 4, ECF No. 51. At the times relevant herein, Hilliard was a full-service wealth management firm. Id. at ¶ 11. ReliaStar is a life insurance company and a subsidiary of Voya. Id. at ¶ 10. Voya Financial, Inc. f/k/a ING US, Inc. is a financial, retirement, investment, and insurance company, and is the parent of Voya Holdings, Inc., which, in turn, is the parent of ReliaStar. Id. at ¶ 12. Voya Financial Partners, LLC is a broker/dealer with approximately 928 registered financial professionals nationwide whose primary clients are individuals. Id. at ¶ 13. Valentic is a registered investment adviser, and was: (1) an agent of Guardian from May 2001 until April 2015; and (2) a registered representative of Park Avenue from April 2005 until April 2015. Id. at ¶ 14. During the timeframe relevant herein, Valentic worked at Lifetime. Id. at ¶ 15. Guardian is a life insurance company, and Park Avenue is an indirect wholly owned subsidiary of Guardian that acts as the broker/dealer for agents of Guardian. Id. at ¶¶ 7-8. Lifetime is a privately-owned wealth management firm that serves as a general agent of Guardian. Id. at ¶ 15. Csenge is a Registered Investment Adviser registered in the Commonwealth of Pennsylvania. Id. at ¶ 5. FSC is a broker/dealer that is registered to do business in Pennsylvania. Id. at ¶ 9. American General is a life insurance company registered to do business in Pennsylvania. Id. at ¶ 6.
Lowe and her late husband, Harold Lowe ("Harold"), met Bedillion in 1979 and began a banking and savings relationship with PNC, Bedillion's employer at that time, through Bedillion. Compl. ¶ 39, ECF No. 51. Lowe and Harold worked with Bedillion until Harold's death in 2001, and, during the entirety of this period, Harold remained committed to pursuing only conservative investment options. Id. at ¶¶ 49-54. In addition to this professional relationship, Lowe and Haroldbecame close personal friends with Bedillion and Bedillion's wife, and the couples travelled together and socialized together. Id. at ¶ 51. During this time period, the Lowes considered Bedillion to be trusted adviser and friend. Id. While Harold was in the hospital in 2001, and briefly before he passed away, Bedillion made arrangements for Harold to create a complicated estate plan involving multiple trusts which essentially gave Bedillion the ability to take control of a significant portion of Lowe's money after Harold's death and to, eventually, advise and promote an investment strategy which would benefit Bedillion. Id. at ¶ 53. At the time that Harold passed away, Lowe's children were adults and employed. Id. at ¶ 55. At that time, Lowe had two paying jobs, owned her house mortgage-free, had accumulated approximately $800,000 in savings, and was the beneficiary of almost $200,000 in life insurance proceeds payable on Harold's passing, which proceeds were placed into a trust in which Lowe was a beneficiary. Id. at ¶ 56.
Following Harold's death, Lowe relied on Bedillion for all matters related to her financial affairs and ceded control of her investments to him. Compl. ¶ 62, ECF No. 51. Bedillion did not provide options to Lowe for her investment strategies; but, rather made decisions on Lowe's behalf, and obtained her signatures to execute on those decisions only when necessary. Id. at ¶ 63. As opposed to the conservative investment approach utilized and preferred by the Lowes prior to Harold's passing, Bedillion proceeded to advise Lowe to participate in unsuitable investment options that involved elements of risk, cost, expense, fluctuation, and a lack of congruity with Lowe's needs and objectives. Id. at ¶ 67.
In 2003, Bedillion promoted a new savings strategy that relied upon life insurance products to Lowe. Compl. ¶ 70, ECF No. 51. Lowe avers that Bedillion, an investment adviser licensed at that time with Hilliard, recommended a strategy that directed Lowe to purchase two variable lifeinsurance policies from ING/ReliaStar, despite Lowe being "a widow who had significant savings, two financially-independent children, no debt, a future teacher's pension, a future military pension, social security, and more importantly, being effectively uninsurable due to her Multiple Sclerosis misdiagnosis."4 Id. at ¶ 71. Bedillion advised Lowe that the purpose of purchasing these life insurance policies was to accumulate significant cash surrender value for future retirement purposes and to provide a death benefit payable to her children upon her death. Id. at ¶ 74. In so advising, Bedillion provided Lowe with false assurances and information regarding a fraudulent and unrealistic rate of return in order to encourage Lowe to utilize the proposed strategy. Id. at ¶ 79-80. Bedillion's proposed strategy required that funds be removed from Lowe's savings every year to pay premiums. Id. at ¶ 78. Bedillion did not provide Lowe with accurate information and/or disclosures regarding this strategy, and, because Lowe was uninsurable, Bedillion was required to apply for two "second to die" life insurance policies, with each including Lowe and one of her two children, Lesa or Larry Lowe. Id. at ¶ 81-82. After Lowe signed the blank applications for the insurance policies, Bedillion completed the applications and made several false representations in doing so. Id. at ¶¶ 88; 96-97; 102-03.
Bedillion, while working at PNC Bank as a licensed representative of Hilliard, and as an agent with ING5 and its distributor/subsidiary ReliaStar, ultimately submitted two applications signed by Lowe, and Larry and Lesa respectively, for life insurance policies with a base face amount of $4,664,000 with an annual premium of $40,000 with respect to Larry and a base face amount of $5,054,000 with an annual premium of $40,000 with respect to Lesa. Compl. ¶¶ 93-94; 100; 129, ECF No. 51. The applications identified Bedillion as an agent of Hilliard. Id. ¶ 101. Lowe's annual income listed on the applications was $68,000, Larry's annual income was listedas $15,000, and Lesa's annual income was represented as being $30,000. Id. at ¶ 91. The purposes listed for the acquisition the theses policies were "family protection" and "retirement planning." Id. at ¶ 97. Bedillion failed to utilize any of the applications' requirements that were intended to protect the consumer during the application process. Id. at ¶ 108.
An ING and ReliaStar representative reached out to Bedillion after receiving the applications for life insurannce and inquired as follows: Id. at ¶ 109. Bedillion, without consulting Lowe, replied to this message with false statements regarding the purpose of the insurance, as well as Lowe's potential sources of income and ability to pay for the insurance. Id. at ¶¶ 110-19. Some of this supplemental information was inconsistent with the information that had already been provided...
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