Macomber v. Travelers Property & Cas. Corp.

• Decision Date: 04 April 2006
• Docket Number: No. 17440.,17440.
• Citation: 277 Conn. 617,894 A.2d 240
• Court: Connecticut Supreme Court
• Parties: Lisa MACOMBER et al. v. TRAVELERS PROPERTY AND CASUALTY CORPORATION et al.

Page 240

894 A.2d 240

277 Conn. 617

Lisa MACOMBER et al. v. TRAVELERS PROPERTY AND CASUALTY CORPORATION et al.

No. 17440.

Supreme Court of Connecticut.

Argued December 1, 2005.

Decided April 4, 2006.

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Thomas J. Groark, Jr., and John A. Neuwirth, pro hac vice, New York City, with whom were Michael Shea, Hartford, James K. Robertson, Jr., Waterbury, and, on the brief, Jonathan Margolis, pro hac vice, and Adam Schloss, pro hac vice, New York City, for the appellants (defendants).

Ralph M. Stone, pro hac vice, New York City, with whom were John C. Matulis, Jr., New Britain, and Thomas G. Ciarlone, Jr., pro hac vice, New York City, for the appellee (named plaintiff).

Katherine A. Scanlon and Peter J. Vodola, Hartford, filed a brief for the Connecticut Business and Industry Association, Inc., et al. as amici curiae.

BORDEN, NORCOTT, KATZ, PALMER and VERTEFEUILLE, Js.

BORDEN, J.

The defendants, Travelers Group, Inc., Travelers Property and Casualty Corporation (Travelers Casualty), Travelers Equity Sales, Inc., Travelers Life and Annuity Company, and Solomon Smith Barney Holdings, Inc. (Smith Barney), appeal from the ruling of the trial court, certifying the claims alleged in four counts of the complaint as a class action and certifying the named plaintiff, Lisa Macomber, as the representative of the class.¹ The defendants claim that the trial court abused its discretion in: (1) certifying the case as a class action because individual issues of law and fact overwhelm any issues common to the class; (2) certifying the plaintiff's claims as typical of absent class members and certifying her as an adequate class representative; and (3) ruling that a class action is superior to other methods of adjudication. We agree with certain parts of the defendants' first and second claims, and, accordingly, we reverse the class certification ruling.²

In 1999, Macomber and Kathryn Huaman sued the defendants in an initial complaint consisting of ten substantive counts. After the trial court, Aurigemma, J., struck the entire complaint for failure to allege a legally cognizable injury, the plaintiff appealed to this court. We reversed as to six of the ten counts. See Macomber v. Travelers Property & Casualty Corp., 261 Conn. 620, 653, 804 A.2d 180 (2002). Upon the remand, the plaintiff moved for class certification. After limited discovery and an evidentiary hearing, the trial court, Peck, J., granted class certification as to four of the remaining counts, namely, count three (breach of contract), counts four (CUTPA)³ and five (Connecticut Unfair Insurance Practices Act [CUIPA]),⁴ which were merged into one count, count eight (civil conspiracy), and count ten (unjust enrichment). It is undisputed, however, that the factual allegations underlying all of the counts are inextricably intertwined and, with certain minor exceptions, are essentially the same. This appeal followed.

As noted previously, this is the second time that this court has considered this case. In the first case, the plaintiffs included Macomber and Huaman. Id., at 622, 804 A.2d 180. In general terms, the complaint alleged that the defendants, in utilizing structured settlements to resolve various types of personal injury claims, had engaged routinely in two types of wrongdoing: a rebating scheme; and a shortchanging scheme. Id., at 625, 804 A.2d 180. The rebating scheme was based on the fact that, when the annuities underlying the structured settlements were purchased by Travelers Casualty through brokers, the brokers would rebate a portion of their commissions to Travelers Casualty. The shortchanging scheme was based on the fact that Travelers Casualty, by virtue of the rebating and other arrangements, would spend less on the annuities than the amounts called for in its agreements with the claimants. Id.

Macomber alleged that she had entered a structured settlement in 1990 with Travelers Casualty that was part of the rebating scheme based on undisclosed rebates paid in connection with the annuity used to fund the structured settlement. Huaman alleged that in 1994 she had entered a structured settlement with Travelers Casualty that was part of the shortchanging scheme based on an annuity purchased through the defendant Smith Barney. With specific reference to Smith Barney, the complaint alleged that in January, 1994, Travelers Casualty had entered into an exclusive arrangement with Smith Barney, whereby Travelers Casualty would purchase all annuities through a subsidiary of Smith Barney, and whereby commissions on the annuities would be rebated to Travelers Casualty. Subsequently, the complaint alleged, Smith Barney merged with and became a subsidiary of Travelers Group, Inc.

In that case, we considered whether the plaintiffs had alleged any legally cognizable damages, in the face of the defendants' contentions that the plaintiffs, who had entered into structured settlements, had received the precise income stream for which they had bargained. See id., at 628, 804 A.2d 180. We held that, broadly construed, the plaintiffs' complaint alleged legally cognizable damages because it would permit proof that the defendants had represented to the plaintiffs the costs of their annuities, that the true costs were less than had been represented, and "that, had the true facts been as the defendants represented them to be, the plaintiffs would have been able to negotiate structured settlements that: (1) cost and were therefore worth, more than were in fact negotiated; and (2) would have produced income streams greater than were in fact negotiated. In addition, the complaint would also permit proof that, as a result of the defendants' alleged misrepresentation of both the cost and value of the structured settlements, the plaintiffs paid their attorneys more than they would have, had they known the true cost and value of their annuities." (Emphasis in original.) Id., at 629-30, 804 A.2d 180. Further, we noted that, "[c]ritical to [the plaintiffs'] theory of harm, under either the rebating or short-changing scheme, is their allegation that the `present value' of each of their annuities was represented to be the same as the `cost' of the annuity." Id., at 632, 804 A.2d 180.

We also noted that the plaintiffs had alleged that Travelers Casualty had breached its promise to purchase an annuity for a certain amount and that, by accepting the commission rebates, it had "failed to do as promised." Id., at 635, 804 A.2d 180. Specifically, we stated that the "key to the plaintiffs' argument is that, once Travelers Casualty made a representation as to how much the annuity would cost for it to purchase, Travelers Casualty had a duty to disclose any rebates or other schemes that would reduce the final cost of the annuity to Travelers Casualty." Id.

In this connection, we emphasized that "[a] failure to disclose can be deceptive only if, in light of all the circumstances, there is a duty to disclose.... Olson v. Accessory Controls & Equipment Corp., 254 Conn. 145, 180, 757 A.2d 14 (2000). Regarding the duty to disclose, the general rule is that ... silence ... cannot give rise to an action ... to set aside the transaction as fraudulent. Certainly this is true as to all facts which are open to discovery upon reasonable inquiry.... Duksa v. Middletown, 173 Conn. 124, 127, 376 A.2d 1099 (1977). A duty to disclose will be imposed, however, on a party insofar as he voluntarily makes disclosure. A party who assumes to speak must make a full and fair disclosure as to the matters about which he assumes to speak.... Id. Based on the plaintiffs' allegations that Travelers Casualty made affirmative misrepresentations as to the cost of the annuities, we conclude[d] that, whether Travelers Casualty had a duty to disclose its agreements with various annuity brokers so that the plaintiffs could make an informed decision regarding whether to accept Travelers Casualty's annuity offer, and if so, whether it violated that duty, are questions of mixed fact and law that would require a more detailed factual matrix than is disclosed by the plaintiffs' allegations. Because such a factual basis is not present, these questions cannot be answered satisfactorily on this motion to strike. Although we agree with the trial court that, as a general proposition, an insurer has no duty to disclose its actual cost in purchasing an annuity, in this case, given the plaintiffs' allegations, such a duty may have arisen. Suffice it to say that the allegations are sufficient to withstand the defendants' motion to strike." (Internal quotation marks omitted.) Macomber v. Travelers Property & Casualty Corp., supra, 261 Conn. at 635-36, 804 A.2d 180. Thus, critical to the plaintiffs' theory of recovery on all of the claims was proof of certain representations as to the value and cost of the annuities that imposed a duty on Travelers Casualty to make full disclosure of those values and costs by disclosing the rebating and shortchanging schemes.

Applying this analysis to the complaint, we then concluded that the plaintiffs had alleged cognizable harms as to the following counts of the complaint: count three, for breach of contract; id., at 642, 804 A.2d 180; count four for violation of CUTPA; id., at 642-44, 804 A.2d 180; count five for CUIPA as a form of a CUTPA violation;⁵ id., at 645, 804 A.2d 180; count six for common-law fraud; id., at 645-46, 804 A.2d 180; count seven for negligent misrepresentation; id.; count eight for civil conspiracy; id., at 647-48, 804 A.2d 180; and count ten for unjust enrichment.⁶ Id., at 649-51, 804 A.2d 180. Accordingly, we reversed the judgment in part, and remanded the case for further proceedings as to those remaining counts. Id., at 653, 804 A.2d 180.

Following our remand, Huaman withdrew her claims, leaving Macomber as the sole plaintiff. The plaintiff then moved for class...