Muller-Paisner v. Tiaa

• Citation: 446 F.Supp.2d 221
• Decision Date: 14 August 2006
• Docket Number: No. 03 Civ. 6265(DAB).,03 Civ. 6265(DAB).
• Parties: Vera MULLER-PAISNER, as Executrix of the Estate of Mary Engel, deceased, Plaintiff, v. TIAA, TIAACREF Enterprises, Inc., Teachers Insurance and Annuity Association, and College Retirement Equities Fund, Defendants.
• Court: U.S. District Court — Southern District of New York

446 F.Supp.2d 221

Vera MULLER-PAISNER, as Executrix of the Estate of Mary Engel, deceased, Plaintiff, v. TIAA, TIAACREF Enterprises, Inc., Teachers Insurance and Annuity Association, and College Retirement Equities Fund, Defendants.

No. 03 Civ. 6265(DAB).

United States District Court, S.D. New York.

August 14, 2006.

COPYRIGHT MATERIAL OMITTED

Max Wild, Law Offices of Max Wild, Goshen, NY, for plaintiff.

MEMORANDUM & ORDER

BATTS, District Judge.

Vera Muller-Paisner ("Plaintiff") brings suit against TIAA, TIAA-CREF Enterprises, Inc., Teachers Insurance and Annuity Association, and College Retirement Equities Fund, collectively known as TIAA-CREF ("TIAA" or "Defendants"). The suit arises out of Defendants' allegedly fraudulent sale of an annuity to Decedent Mary Engel ("Decedent"), which caused substantial losses to Decedent's estate. Plaintiff Executrix of Decedent's estate, who is seeking punitive damages and attorney's fees, asserts the following claims against Defendants: (1) common law fraud; (2) breach of fiduciary duty; (3) negligence; and (4) securities fraud. Defendants move to dismiss the Complaint under Federal Rules of Civil Procedure 12(b)(6) and 9(b) for failure to state a claim and for failure to plead fraud with particularity. Defendants also move to strike Plaintiff's claims for punitive damages and attorney's fees.

For the reasons set forth below, Defendants' motion to dismiss is GRANTED.

I. BACKGROUND

Decedent Mary Engel was a 70-year old college professor who had accumulated approximately $1,342,555 in retirement benefits after 30 years of teaching. (Compl.¶¶ 8, 9.) She died of emphysema on March 10, 2001, approximately six months after she retired. (Compl.¶ 1, 8). Plaintiff Vera Muller-Paisner is the executrix of Decedent's estate. (Compl. at 1.) Defendants, collectively known as TIAA-CREF, are a group of corporations, all of which exist and are organized pursuant to the laws of the State of New York, with a principal place of business in New York. (Compl.¶ 2.) Defendants provide the principal retirement system for the nation's education and research communities, serving approximately 2.5 million people, including Decedent Engel. (Compl.¶ 14.) Plaintiff alleges that Decedent Engel was defrauded when she was induced to purchase a life annuity from Defendants because Defendants misrepresented the fact that the annuity had a guaranteed period and that Decedent would be able to name a beneficiary, and they also failed to inform her of other available retirement options that might have made more sense financially.

According to Plaintiff, Defendants represent that they have an infrastructure "to help people identify the resources that best fit their needs as they pass from one period of life to another." (Compl.¶ 15.) According to Plaintiff, Defendants held themselves out as being willing to and capable of providing investment advice and guidance to the plan participants, and to provide such investment advice, they have established "counseling centers," which participants can call to obtain investment advice and guidance. (Compl.¶ 17.)

On September 27, 1999, Mary Engel executed her last will and testament, which provided for the distribution of her assets at the time of her death, including $50,000 to a friend she later married, and also directed the establishment of a trust to pay $4,000 per month to Plaintiff for life, with the remainder to Decedent's nephew, if he survived Plaintiff, or else to a nonprofit organization. (Compl.¶ 10.) The trust, which was to be funded from Decedent's estate, would have required approximately $700,000. (Compl.¶ 10.) Decedent retired on or about September 1, 2000. At this time, Decedent also apparently was planning to purchase a house, which Decedent brought to Defendants' attention numerous times. (Compl.¶ 35.)

Before Decedent purchased the annuity, she obtained advice from Defendants regarding her retirement options: she wrote numerous letters to Defendants, and had at least six telephone conversations with different counselors. (Compl.¶ 33.) In a letter, dated February 8, 2000, Decedent wrote to Defendants and stated, "I wish to cash in one tenth of my TIAA accumulation that came from previous employment at Harvard University and at the University of Michigan. I am enclosing Transfer Payout Annuity papers from these universities." (Defs.' Notice of Motion, Ex E.) On August 22, 2000, Decedent wrote a letter to Defendants in which she stated in part, "I understand that my accumulation is $1,342,554.81 as of August 21, 2000. I wish to roll into an IRA $100,000 of this. Please include Transfer Payout Annuity in the sum on which you base my monthly check. Please set up single life annuity without a guaranteed period, standard payment method." (Defs.' Notice of Motion, Ex H.) Decedent enclosed with this August 21, 2000 letter completed forms labeled, "Authorization to Begin Retirement Income from Retirement Annuities or Group Retirement Annuities." (Defs.' Notice of Motion, Ex H.) On September 5, 2000, Decedent wrote a letter to Defendants in which she stated, "Confirming: annuitize 100% remaining TIAA-CREF accounts under standard method, 0 year survivorship." (Compl.¶ 37.) The September 5, 2000 letter, which complained of the treatment Decedent had received from the counselors, also stated, "I am ill and cannot come to your offices. My request to you suffers from lack of continuity; I have spoken to many counselors and written and sent materials. Yet nothing of substance appears to happen." (Compl.¶ 37.)

On September 1, 2000, Decedent purchased the annuity in question. (Compl.¶ 11.) The annuity required the payment of nearly all of Decedent's moneys, which totaled approximately $1.2 million, and had no guaranteed refund or pay period. (Compl. at 1, ¶ 11.)

Defendants sent Decedent a booklet entitled, "Your Service Directory," which stated it was prepared for Mary S. Engel. (Compl.¶ 34.) Section I entitled "Summary of Your Annuity Payment Arrangements" states under "Income Option," "Life Annuity with No Guaranteed Period-Under this option, you receive income. Upon your death, all payments stop." (Compl.¶ 34.) According to Plaintiff, sections II and III of the booklet give the impression that after starting to receive annuity benefits, one could elect to change the annuity income sources and income stream and could change the beneficiary. (Compl.¶ 34.)

In a "Record of Conversation" dated August 22, 2000, one of the counselors stated in the "Remarks" section, "Assisted [Engel] with annuity income forms. She is considering a single life annuity. [ ] She doesn't have any beneficiaries, so she is comfortable with the single life annuity." (Defs.' Notice of Motion, Ex. F.) In a "Record of Conversation" dated August 30, 2000, one of the counselors stated in part, "The Participant appeared very hard of hearing. I attempted to offer help with her allocation questions, but she declined. I also attempted to ask if she really wanted to use all of her funds in the conversion of a single life annuity knowing that all payments end with her death with no provision for any beneficiary at all. At her age and the balance involved a full annuity would be against the normal logic. I am not sure that she really understood what I was asking." (Defs.' Notice of Motion, Ex. I; Pl.'s Mem. at 20, n. 4.) In a "Record of Conversation" dated August 31, 2000, one of the counselors stated in part, "I also confirmed again with [Engel] that she wanted to annuitize 100% with no guarantee period in SLO. [Engel] stated that she was a Holocaust survivor and has no family for which she should leave funds. I explained to [Engel] should she annuitize she would not have a lump sum of cash to access if future expenses should arise. I explained she could not accelerate payments. I suggested an alternative that she could partially annuitize and take MD withdrawals from remaining portions but she would have the benefit of accelerating MD payments or taking single sum withdrawals if she needed to. [Engel] did not realize this was an option and said she needed to think about it." (Defs.' Notice of Motion, Ex. I; Pl.'s Mem. at 20, n. 4.)

In a memorandum to the file dated August 31, 2000, a counselor stated, "I spoke to . . . in counseling, who confirmed [Decedent's] retirement options . . . [I] asked that [she] send a ltr confirming her options . . .". (Compl.¶ 37.) Plaintiff claims in the Complaint, "In making such notes to defendants' files and causing Decedent to write such acknowledgments, said Counselors basically wanted to insulate themselves and defendants from legal action because they well recognized that they were causing or at least wrongfully allowing Decedent to make a grossly inappropriate and unsuitable investment and not discharging their legal and moral obligations to help Decedent avoid unsuitable investments and make appropriate choices." (Compl.¶ 39.)

At the time she purchased the annuity, Decedent was suffering from emphysema, which caused her to wheeze and cough virtually uncontrollably, to have difficulty breathing and speaking, and which made her difficult to understand. (Compl.¶ 8.) On August 21, 2000, one of the Defendants' counselors stated in a "Record of Conversation" form used to record telephone contacts with participants that Decedent was "difficult to understand." (Compl.¶ 27.) Plaintiff also claims that the several letters Decedent wrote to Defendants while she was considering her retirement options show Decedent's handwriting was weak and shaky, "strongly suggesting a serious health condition." (Compl.¶ 28.)

On March 10, 2001, Decedent passed away, after receiving six annuity payments. (Compl. at 1-2.) Her last will and testament was admitted to probate in the Court of Probate for the State of Connecticut. (Compl.¶ 1.) After Decedent's death, Plaintiff executrix and Engel's estate attorney requested information from Defendants to ascertain the details of...