Thelen v. Massachusetts Mut. Life Ins. Co., Civil Action No. DKC 99-18.

• Decision Date: 30 March 2000
• Docket Number: Civil Action No. DKC 99-18.
• Citation: 111 F.Supp.2d 688
• Parties: William G. THELEN, Marlene Koeppel, Lisa Abrams, and Gabrielle Koeppel, individually and on behalf of all others similarly situated v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY.
• Court: U.S. District Court — District of Maryland

111 F.Supp.2d 688

William G. THELEN, Marlene Koeppel, Lisa Abrams, and Gabrielle Koeppel, individually and on behalf of all others similarly situated v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY.

Civil Action No. DKC 99-18.

United States District Court, D. Maryland.

March 30, 2000.

Marc I. Gross, Pomerantz Haudek Block Grossman & Gross LLP, New York City, Seth D. Goldberg, Seth Goldberg, PC, Washington, DC, Martin H. Schreiber, II, Brown, Goldstein & Levy, Baltimore, MD, for Plaintiffs.

Nell B. Strachan, Dino S. Sangiamo, Venable, Baetjer and Howard, LLP, Baltimore, MD, for Defendant.

MEMORANDUM OPINION

CHASANOW, District Judge.

Pending and ready for resolution is a Motion to Dismiss filed by Defendant, Massachusetts Mutual Life Insurance Company (MassMutual).¹ The issues are fully briefed, and no hearing is deemed necessary. Local Rule 105.6. For the reasons that follow, the motion will be GRANTED.

Background

Plaintiffs are William G. Thelen, Marlene Koeppel, Lisa Abrams, and Gabrielle Koeppel. They seek to bring a class action, asserting four causes of action, arising from the purchase from Defendant of various life insurance policies from January 1, 1985 to the present. The amended complaint alleges that MassMutual deceptively marketed policies with "vanishing premiums" by the use of false and misleading illustrations, purporting to show how interest and dividends would be sufficient after a set number of years to cover the premiums.

According to the amended complaint, Mr. Thelen purchased from MassMutual a $100,000 Convertible Whole Life N-Pay policy in 1985.² The policy issued on September 20, 1985. Based on alleged representations and written illustrations provided by a MassMutual agent, he contends that he contracted to pay only $1,367 for eight years, or until 1992. He further alleges that, when inquiries were made on his behalf in 1993 and thereafter, he was falsely reassured that premiums would "vanish" soon. It was not until August 22, 1997, he claims, that he learned that premiums would be due for considerably longer.³

Marlene Koeppel, the mother of Lisa Abrams and Gabrielle Koeppel, purchased from MassMutual, on behalf of her daughters, a whole life policy in January 1990 with a face amount of $250,000. She alleges that she was assured that the premiums on her policy were guaranteed to cease after nine years. The Koeppel plaintiffs assert that they "unexpectedly" have been informed that out of pocket premiums will not vanish as originally illustrated and represented.

The Amended Complaint contains four counts. In Count One, brought under the Massachusetts Consumer Protection Statute, Plaintiffs allege unfair methods of competition and unfair and deceptive practices in the conduct of a business. This claim arises from the illustrations provided in conjunction with the sale of the policies. Count Two, for Negligent Misrepresentation, asserts that MassMutual falsely stated that:

the single prepayment of premiums at the time of purchase of the policy, or the payment of premiums during the initial years of the policies, would be sufficient to fund the policies for the life of the insureds without reducing the death benefit.

At the time of these statements, MassMutual allegedly failed to disclose that dividend rates would be reduced and that the number of cash premium payments would increase, and allegedly made a variety of other misrepresentations. It is alleged that defendant made these misrepresentations and failed to make disclosures with negligent disregard for the fact that it planned gradually to reduce its dividend rates over several years. Count Three alleges Common Law Fraud based on similar alleged misrepresentations, with knowledge that they were incomplete and/or misleading. Finally, Count Four asserts Breach of Contract, contending that MassMutual entered into contracts with Plaintiffs, promising that the stated number of annual cash premium payments would fully fund the policy, that MassMutual breached that promise, as well as the obligation of good faith and fair dealing due to the deceptive practices.

Defendant's motion to dismiss raises several issues: statute of limitations, failure to state any fraud-based claim or lack of particularity, inability to seek economic damages under the economic loss doctrine, failure to state a contract claim based on oral representations that preceded a written agreement, and inapplicability of Massachusetts law. For the reasons that follow, it will only be necessary to address the statute if limitations issue.

Standard of Review

A motion to dismiss pursuant to FED. R.CIV.P. 12(b)(6) ought not be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of [her] claim which would entitle [her] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). When ruling on a motion to dismiss, the court must consider well pled allegations in a complaint as true. Jenkins v. McKeithen, 395 U.S. 411, 421-22, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969). Allegations are to be construed in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). Courts need not, however, assume the truth of legal conclusions couched as factual allegations. See Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986); see also Clegg v. Cult Awareness Network, 18 F.3d 752, 754-755 (9th Cir.1994) (citing Papasan and noting that the court is not required to accept conclusions that doubt reasonably be drawn from the facts alleged).

The purpose of FED.R.CIV.P. 12(b)(6) is to "streamline litigation by dispensing with needless discovery and fact finding." Neitzke v. Williams, 490 U.S. 319, 326-27, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). The Federal Rules do not generally require that a complaint describe alleged wrongdoing with any particularity. FED. R.CIV.P. 8(a)(2); Comet Enterprises Ltd. v. Air-A-Plane Corp., 128 F.3d 855, 860 (4th Cir.1997). Allegations of fraud, however, are to be set forth with particularity, concerning "the circumstances constituting fraud." FED.R.CIV.P. 9(b). However, even as to other allegations, "if a plaintiff chooses to `plead particulars, and they show that he has no claim, then he is out of luck — he has pleaded himself out of court.'" Jefferson v. Ambroz, 90 F.3d 1291, 1296 (7th Cir.1996) (quoting Thomas v. Farley, 31 F.3d 557, 558-559 (7th Cir.1994)); see also Northern Trust Co. v. Peters, 69 F.3d 123, 129 (7th Cir.1995) ("More is not necessarily better under the Federal Rules; a party `can plead himself out of court by unnecessarily alleging facts which ... demonstrate that he has no legal claim.'") (quoting Trevino v. Union Pac. R.R., 916 F.2d 1230, 1234 (7th Cir.1990)).

Statute of Limitations

MassMutual argues that those claims are barred by the applicable three year statute of limitations. While Plaintiffs do not dispute the applicability of a three year statute of limitations for each of the claims,⁴ the parties disagree on (a) when each claim accrued for limitations purposes, (b) whether any conduct by MassMutual tolled the limitations periods, and (c) whether the pendency of other class action complaints tolled the limitations period.

Plaintiffs argue that their claims are timely. Ms. Koeppel contends that her breach of contract claim did not accrue until 1999 when she was informed that she would have to pay premiums beyond the date represented in her illustration. It was not until then, she argues, that a breach occurred. She argues that the tort claims, based on MassMutual's failure to advise her of a plan to reduce its inflated dividend rates, did not accrue until she was put on inquiry notice by learning that her out of pocket premiums would not "vanish" as illustrated. Mr. Thelen, who acquired his policy in 1985, was first informed in May 1993 that he would have to pay additional premiums. He argues that, even if that event triggered the limitations period, it was tolled by the filing of two nationwide class actions within the ensuing three years. Furthermore, he argues that misconduct of MassMutual agents in 1993 constituted fraudulent concealment and also tolled the limitations period. Both plaintiffs contend that they only learned of the basis for their cause of action in January 1999 with the publication of the decision of Judge Walter J. Relihan, Jr. in Russo v. Massachusetts Mut. Life Ins. Co., No. 96-368 (January 6, 1999), which outlined some of the fruits of discovery conducted in that case.

MassMutual counters that the limitations periods began when each plaintiff received the policy, that out of state class action complaints do not toll their claims, either as individuals or on behalf of a class, and that no assurances in 1993 can constitute grounds for tolling.

Under Maryland law, a plaintiff must bring a claim within three years of its accrual, unless the claim could not, despite due diligence, have been discovered, or unless there is a basis for tolling the statute of limitations. Specifically, MD CODE ANN., CTS. & JUD. PROC. § 5-101 (1998) provides:

A civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.

Historically, a claim generally accrued when the wrong was committed, not when it was discovered. Now, however, under Maryland law it is generally said that the claim will not accrue until a plaintiff knows or reasonably should know of the wrong. Poffenberger v. Risser, 290 Md. 631, 431 A.2d 677, 680 (1981).

Accrual of Fraud and Misrepresentation Claims

The alleged misrepresentations underlying Counts One, Two, and Three preceded the purchase of the policies. Each of these claims requires proof of a misrepresentation, intentionally or negligently made, reasonably relied on by Plaintiff, that is false or misleading, resulting in damages. The...