Ubs Fin. Servs., Inc. v. Aliberti, SJC-12662

CourtUnited States State Supreme Judicial Court of Massachusetts
Citation483 Mass. 396,133 N.E.3d 277
Docket NumberSJC-12662
Decision Date22 October 2019

483 Mass. 396
133 N.E.3d 277



Supreme Judicial Court of Massachusetts, Suffolk..

Argued April 1, 2019
Decided October 22, 2019

Carmen A. Frattaroli, Salem, for the defendant.

John K. Wells, Boston, for the plaintiff.

Glenn Kaplan, Assistant Attorney General, for the Attorney General, amicus curiae, submitted a brief.

David Goldberg & Susan Light, of New York, Robert T. Smith & Mary C. Fleming, of the District of Columbia, Christian Kemnitz, of Illinois, & William C. Pericak, for Securities Industry and Financial Markets Association, amicus curiae, submitted a brief.

Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, & Cypher, JJ.


483 Mass. 397
133 N.E.3d 282

On appeal from an order granting judgment on the pleadings, we are called upon to consider the legal relationship between the commercial custodian of three nondiscretionary individual retirement accounts (IRAs) and a named beneficiary of those accounts upon the death of the original account holder. Quasi familial conflict following the death of the IRAs' original account holder sparked a lengthy account beneficiary dispute between the plaintiff in counterclaim, Donna M. Aliberti, as a named IRA beneficiary, and the defendant in counterclaim, UBS Financial Services, Inc. (UBS), as IRA custodian. Allegedly fueled by a combination of bureaucratic indifference or incompetence and hypersensitivity to risk exposure, the feud festered for more than one and one-half years before resulting in legal action, commenced by UBS filing a complaint for interpleader.

In counterclaim to UBS's interpleader complaint, Aliberti asserted claims of breach of contract; breach of fiduciary duty; violation of the consumer protection statute, G. L. c. 93A, § 9 (c. 93A); and intentional infliction of emotional distress. A Superior Court judge allowed UBS's motion for judgment on the pleadings as to all claims, but the Appeals Court reversed on all counts but intentional infliction of emotional distress. See UBS Fin. Servs., Inc. v. Aliberti, 94 Mass. App. Ct. 180, 192-193, 113 N.E.3d 335 (2018). More specifically, the Appeals Court concluded that the pleadings stated facially plausible claims that (1) Aliberti was an intended third-party beneficiary of contracts governing the IRAs with standing to sue for contractual breach, (2) UBS committed a breach of fiduciary duties owed to Aliberti, because IRAs are "trusts" under Federal tax law, and (3) the challenged conduct by UBS occurred in a business context and violated c. 93A.1 We granted UBS's application for further appellate review.

On review, we conclude that there is no plausible claim for breach of fiduciary duty, but the facts alleged do state a claim that

483 Mass. 398

UBS's conduct violated c. 93A. More specifically, we hold that the custodian of a nondiscretionary IRA does not owe a fiduciary duty to a named beneficiary of that IRA, where no special agreement or circumstances elevate their relationship above the consumer sphere, which the record here does not support. We also hold that the interactions between the commercial custodian of a nondiscretionary IRA and a named beneficiary of that IRA occur in a business context within the meaning of c. 93A, and that the injurious conduct of UBS alleged here plausibly constitutes a c. 93A violation. We therefore affirm the Superior Court judge's decision as to the breach of fiduciary duty claim and reverse the decision as to the violation of c. 93A.2

133 N.E.3d 283

Background. 1. IRA background. This dispute arises from within that sector of the consumer financial services industry devoted to the sale, maintenance, and postmortem transfer of IRAs. IRAs are a widely used type of tax-advantaged account that provides incentives for individuals to accumulate retirement savings. See Clark v. Rameker, 573 U.S. 122, 124-125, 128, 134 S.Ct. 2242, 189 L.Ed.2d 157 (2014) ; Investment Company Institute, Investment Company Fact Book 172 (59th ed. 2019), [].3 Congress first enacted the legal framework for IRAs in 1974, to make tax-deferred savings available to workers without access to an employer-sponsored retirement plan. Congressional Research Service, Traditional and Roth Individual Retirement Accounts (IRAs): A Primer 1 (updated May 11, 2018). While IRAs were designed to function primarily as tax-advantaged savings vehicles for the account holder's own future use and benefit, they have since become an important estate planning vehicle, as significant balances may remain upon an account holder's death. The Internal Revenue Service (IRS) contemplates that a typical account holder will establish an IRA "to provide [both] for his or her retirement and for the support of his or her beneficiaries." IRS Form 5305-A (model traditional IRA custodial account agreement).

483 Mass. 399

Although the income tax treatment of IRA assets is complex and dictated by Federal law, nearly all other legal aspects of these accounts are governed by State statutory and common law, and the contractual terms of account agreements as dictated by private financial institutions to consumers. See Sterk & Leslie, Accidental Inheritance: Retirement Accounts and the Hidden Law of Succession, 89 N.Y.U. L. Rev. 165, 174-175 (2014) (Sterk & Leslie).4 The procedure for transferring ownership of the IRA upon an account holder's death is among the legal aspects of an IRA dictated by State law. IRAs are a type of "nonprobate" asset, meaning that upon the death of the owner, title passes in accordance with a contractual beneficiary designation rather than under the provisions of a will. See G. L. c. 190B, § 6-101 (contract for nonprobate transfer on death not testamentary, meaning valid without will's formalities); G. L. c. 167D, § 15 (IRA beneficiary designations take effect according to contractual terms, "notwithstanding any purported testamentary disposition allowed by statute, by operation of law or otherwise to the contrary").

In Massachusetts, as in most other jurisdictions, State law does not provide regulations

133 N.E.3d 284

or guidelines standardizing or otherwise governing the form or content of IRA beneficiary designations, the procedure for amending them, or the default provisions in the event no beneficiary is designated. Sterk & Leslie, supra, at 175. Financial intermediaries each use their own "standard form instruments with fill-in-the-blank beneficiary designations," Langbein, The Nonprobate Revolution and the Future of the Law of Succession, 97 Harv. L. Rev. 1108, 1109 (1986), and typically, the contractual "framework keeps administrative costs down by limiting the inquiry required of the account custodian at the time of the accountholder's death." Sterk & Leslie, supra at 177.

483 Mass. 400

The contractual change in account ownership appears typically to occur "immediately and automatically" at the moment of the original account holder's death, yet it is not typical practice for a beneficiary to "be able to walk in to the IRA provider's office, present his identification, and get a check for the entire balance payable to himself." N.B. Choate, Life and Death Planning for Retirement Benefits 259 (8th ed. 2019). Rather, many IRA custodians will not accept instructions from a beneficiary-cum-owner until appropriate documents have been signed (typically a new account agreement) and, where applicable, the account has been "retitled" as an inherited IRA to formalize the change in ownership. Id.

2. Factual background. We present the pertinent facts from the pleadings and exhibits that were before the motion judge, in the light most favorable to Aliberti. In 2008, Patrick Kenney opened three IRAs with UBS. The UBS financial advisor who assisted Patrick Kenney in establishing the IRAs, Margaret Kenney, was also his one-time sister-in-law.5 At the time he established the IRAs, Patrick Kenney was involved in a long-term romantic but nonmarital relationship with Aliberti. When Patrick Kenney filled out the initial account paperwork, he designated Aliberti as the sole primary beneficiary of each IRA.6

In establishing the IRAs, Patrick Kenney signed the "UBS Client Relationship Agreement" (CRA), which named Aliberti as sole primary beneficiary below the statement, "At your death, your IRA will be transferred to the beneficiary or beneficiaries whose name(s) are printed below," followed by the advisory, "You may change your beneficiary designation at any time by notifying UBS in writing of the change in a form acceptable to UBS." The CRA also incorporated terms and conditions of the "UBS IRA Custodial Agreement" (custodial agreement) and "IRA Disclosure Statement," two other documents allegedly included in the set of initial account paperwork mailed to Patrick Kenney for review and signature.

In November 2013, Patrick Kenney completed two UBS "IRA Beneficiary Designation Update Forms" (update forms) in connection


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