Troth v. Warfield

• Decision Date: 20 October 2020
• Docket Number: Case No. 3:19-CV-1106-JD-MGG
• Citation: Troth v. Warfield, 495 F.Supp.3d 729 (N.D. Ind. 2020)
• Parties: David TROTH and Jari Troth, Plaintiffs, v. Seth WARFIELD, et al., Defendants.
• Court: U.S. District Court — Northern District of Indiana

495 F.Supp.3d 729

David TROTH and Jari Troth, Plaintiffs,

v.Seth WARFIELD, et al., Defendants.

Case No. 3:19-CV-1106-JD-MGG

United States District Court, N.D. Indiana, South Bend Division.

Signed October 20, 2020

Joseph R. May, Joe May Law LLC, Hebron, IN, for Plaintiffs.

Michael A. Kreppein, James R. Williams, Wilson Elser Moskowitz Edelman & Dicker LLP, Merrillville, IN, for DefendantSeth Warfield.

Alexander M. Beeman, Anthony L. Holton, Reminger Co., LPA, Indianapolis, IN, for DefendantsGary Aiello, Capital Keystone Group Inc.

Kristopher N. Kazmierczak, Katz Korin Cunningham PC, Indianapolis, IN, Jason A. Richardson, McDowell Hetherington LLP, Houston, TX, for DefendantPHL Variable Insurance Company.

PHL Variable Insurance Company, Houston, TX, pro se.

OPINION AND ORDER

JON E. DEGUILIO, Chief Judge

In 2017, David Troth was interested in retiring from his job.David and his wife Jari approached Seth Warfield, seeking guidance on retirement plans.The Troths followed Mr. Warfield's advice and Mr. Troth retired in late 2017.Upon receiving his first benefits check, the Troths discovered Mr. Warfield's advice was faulty and Mr. Troth was now receiving significantly less benefits than anticipated under the plan.The Troths have brought a complaint alleging a host of claims against Mr. Warfield, his supervisor, Gary Aiello, and several related insurance companies.Mr. Warfield, Mr. Aiello, and Capital Keystone Group, Inc.(doing business as MyFedBenefits) now move to dismiss certain claims,¹ arguing the Troths have failed to state claims upon which relief can be granted.For the following reasons, the Court grants their motion only in part.

I.FACTUAL BACKGROUND

Mr. Troth served in the United States Navy for ten years and retired from service in 1992.Two years later, Mr. Troth began working for the United States Postal Service.In 2017, Mr. Troth was contemplating the possibility of retiring from the postal service.The Troths began meeting with Seth Warfield sometime in March 2017 to discuss the logistics of Mr. Troth's retirement.In their meetings with Mr. Warfield, Mr. Troth emphasized that his retirement was contingent on his military service being recognized for purposes of receiving Social Security benefits.Mr. Warfield assured Mr. Troth his military service would be recognized.He further represented that Mr. Troth would be able to work after retirement with no penalty.

Mr. Warfield thereafter prepared a financial profile which the Troths allege contained false information.That financial profile was shown to several insurance companies and Mr. Warfield's supervisor, Gary Aiello, to perform a suitability review and determine the best retirement plan to accomplish Mr. Troth's expressed goals.Based on that financial profile, a retirement plan was developed.The plan recommended Mr. Troth transfer his entire thrift savings plan funds into an annuity owned by the defendants.²The plan recommended the Troths surrender their life insurance policies because the retirement plan had rendered them unnecessary.Mr. Warfield told the Troths it was a "no-brainer" for Mr. Troth to immediately retire.Based on this advice, Mr. Troth cancelled his life insurance benefits provided by Veterans Affairs and transferred his entire thrift savings plan into the retirement plan.The Troths also transferred or sold real estate as advised by Mr. Warfield and the plan.

Mr. Troth retired from the postal service on December 29, 2017.When Mr. Troth received his first retirement benefits in March 2018, his benefits were significantly less than what Mr. Warfield had represented they would be.Mr. Troth also discovered that he would be penalized if he earned over a certain annual income post retirement.The timing of his retirement also impacted Mrs. Troth's income and earning capacity.When the Troths approached Mr. Warfield about these developments, he reassured the Troths that this was a mistake by the Federal Employment Retirement Service (FERS) and that they had nothing to worry about.The Troths then contacted FERS and were informed that there was no mistake and that Mr. Troth's benefits would remain the same.

The Troths then met with Mr. Warfield's supervisor, Gary Aiello.Mr. Aiello informed the Troths that Mr. Troth's military service did not count towards retirement.Mr. Aiello informed the Troths that he had not reviewed the plan, but that a team of Mr. Warfield's superiors should have identified the error.The Troths requested an immediate return of the funds transferred from the thrift savings plan.Mr. Aiello urged the Troths to keep the funds in the plan; however, the Troths withdrew their funds from the retirement plan.

The Troths allege all defendants received a commission as a result of the retirement plan.They also allege Mr. Warfield was not licensed to advertise, sell, or give advice on the products and policies contained in the retirement plan.They brought this suit in state court on November 1, 2019, which the defendants subsequently removed on the basis of diversity jurisdiction.The Troths later filed an amended complaint, which is the operative complaint now at issue.[DE 20].

II.STANDARD OF REVIEW

In reviewing a motion to dismiss for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6), the Court construes the complaint in the light most favorable to the plaintiff, accepts the factual allegations as true, and draws all reasonable inferences in the plaintiff's favor.Reynolds v. CB Sports Bar, Inc. , 623 F.3d 1143, 1146(7th Cir.2010).A complaint must contain only a "short and plain statement of the claim showing that the pleader is entitled to relief."Fed. R. Civ. P. 8(a)(2).That statement must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face, Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868(2009), and raise a right to relief above the speculative level.Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929(2007).However, a plaintiff's claim need only be plausible, not probable.Indep. Trust Corp. v. Stewart Info. Servs. Corp. , 665 F.3d 930, 935(7th Cir.2012).Evaluating whether a plaintiff's claim is sufficiently plausible to survive a motion to dismiss is " ‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.’ "McCauley v. City of Chicago , 671 F.3d 611, 616(7th Cir.2011)(quotingIqbal , 556 U.S. at 678, 129 S.Ct. 1937 ).

III.DISCUSSION

The sufficiency of the Troths’ lengthy amended complaint (43 pages) and numerous legal claims contained therein are now being challenged by the defendants.After reviewing the parties’ arguments, the Court finds that the complaint is a mixed bag.There are claims that are wholly or partially sufficient and others that must be dismissed in their entirety.

A.Negligence Per Se (Count II)

The Troths allege in Count II that Mr. Warfield committed several prohibited acts enumerated in Ind. Code § 27-1-15.6-12(b), part of the insurance producer code.They labeled this count as a claim of negligence per se ; however, they are not tied to that label and can assert alternative legal theories.SeeHall v. Nalco Co. , 534 F.3d 644, 649 n.3(7th Cir.2008)(" ‘[a] complaint need not identify a legal theory, and specifying an incorrect theory is not fatal’ to a plaintiff's claim");Reiner v. Dandurand , 33 F. Supp. 3d 1018, 1032(N.D. Ind2014)(pleading in the alternative is permissible pursuant to Federal Rule of Civil Procedure 8).

In their motion to dismiss, the defendants argue that the Troths’ claim of negligence per se under section 27-1-15.6-12(section 12) must be dismissed because it does not provide a private cause of action.In response, the Troths maintain that Count II, as written, supports both a traditional negligence per se claim and a separate cause of action: "Plaintiffs rely on I.C. § 27-1-15.6 et seq. to support the negligence per se claim and a private right of action against Warfield."[DE 34at 3].Indiana courts have addressed the difference between "(1) a negligence-per-se claim, in which a plaintiff argues that the defendant's violation of a statute or ordinance suffices to prove breach of an existing common-law duty of reasonable care, and (2) a private-right-of-action claim, in which a plaintiff asserts that a statute or ordinance, itself, created an enforceable duty."Stachowski v. Estate of Radman , 95 N.E.3d 542, 543(Ind. Ct. App.2018).For the reasons discussed below, the Troths are precluded from relying on § 27-1-15.6 as a private right of action against Mr. Warfield but may proceed based on the traditional negligence per se claim.[DE 34at 3].

1.Traditional Negligence Per Se

"Under that doctrine [of negligence per se], the unexcused violation of a statute or ordinance constitutes negligence per se if the provision (1)‘protect[s] the class of persons in which the plaintiff is included’ and (2)‘protect[s] against the type of harm which has occurred as a result of the violation.’ "Stachowski , 95 N.E.3d at 544(quotingCity of Fort Wayne v. Parrish , 32 N.E.3d 275, 277(Ind. Ct. App.2015) ).The doctrine asks the Court"adopt the standard of conduct set forth in a statute ... as the standard of conduct required under that preexisting duty[.]"Id.;see alsoCook v. Whitsell-Sherman , 796 N.E.2d 271, 276(Ind.2003)("Under negligence per se, the law accepts the legislative judgment that acts in violation of the statute constitute unreasonable conduct.").But the violation of the statute does not create or satisfy the duty element of negligence.Seeid. at 544-45;accordVale Park Animal Hosp., LLC v. Project 64, LLC , ––– F.Supp.3d ––––, ––––, 2020 WL 1139413, at *2(N.D. Ind.Mar. 9, 2020).Instead, the doctrine of negligence per se adopts the "standard of conduct set forth in a statute or ordinance ... as the...