Volk v. N.Y. Life Ins. Co.

• Decision Date: 08 April 2022
• Docket Number: CV-21-82-GF-BMM
• Citation: 598 F.Supp.3d 979
• Parties: Roy B. VOLK, Plaintiff, v. NEW YORK LIFE INSURANCE COMPANY and Does 1-10, Defendants.
• Court: U.S. District Court — District of Montana

598 F.Supp.3d 979

Roy B. VOLK, Plaintiff,

v.NEW YORK LIFE INSURANCE COMPANY and Does 1-10, Defendants.

CV-21-82-GF-BMM

United States District Court, D. Montana, Great Falls Division.

Signed April 8, 2022

Dennis P. Conner, Gregory Gerard Pinski, James Robert Conner, Keith D. Marr, Conner & Marr, PLLP, Great Falls, MT, Jason T. Holden, Katie Rose Ranta, Jean E. Faure, Faure Holden Attorneys at Law PC, Great Falls, MT, for Plaintiff.

Peter F. Habein, John W. Harkins, IV, Crowley Fleck PLLP, Billings, MT, for Defendant New York Life Insurance Company.

ORDER

Brian Morris, Chief District Judge

INTRODUCTION

Defendant New York Life Insurance Company ("NYLIC") has filed a Motion to Dismiss Plaintiff Roy B. Volk's ("Roy Jr.") Complaint (Doc. 1) pursuant to Fed. R. Civ. P. 12(b)(6). (Doc. 5). The Court held a hearing on the matter on December 14, 2021. For the following reasons, the Motion is GRANTED in part, and DENIED in part.

BACKGROUND

Roy Jr. is the son of Roy C. Volk ("Roy Sr.") and Pamela Volk. (Doc. 1 at ¶ 7). Roy Sr. and Pamela divorced in December of 2011. Id. Roy Sr. and Pamela executed a marital settlement agreement in which Roy Sr. agreed to execute a will naming his son, Roy Jr., as the beneficiary of his entire estate. Id. at ¶ 8.

Roy Sr. had two term life insurance policies through New York Life worth $1,000,000 and $1,500,000 at the time of the divorce. Id. at ¶ 9. Roy Sr. disclosed only the $1,000,000 policy in the marital settlement agreement. Id. Both policies listed Pamela as the beneficiary before the divorce. Id. at 10.

Roy Sr. changed the beneficiary of the NYLIC policies to his sister, Valerie Goeser ("Goeser"), during the pendency of the divorce. Id. at 13. Roy Jr. contends that the beneficiary change to Goeser facilitated by NYLIC violated the automatic "economic restraining order" imposed by Mont. Code Ann. § 40-4-121(3). Id. at 11-12. The parties discovered the beneficiary designation to Goeser after Roy Sr. died unexpectedly on April 20, 2012. Id. at 14.

Pamela has filed previous claims in Montana State District Court on behalf of Roy Jr. who was a minor at the time. The Montana Supreme Court set aside Roy Sr.’s improper removal of Pamela as a life insurance beneficiary. Volk v. Goeser , 382 Mont. 382, 367 P.3d 378, 391 (2016). The Montana Supreme Court determined that Goeser had been unjustly enriched from the life insurance proceeds and imposed a constructive trust for the life insurance proceeds in favor of Roy Jr. Id.

Roy Jr. now brings this action pursuant to Mont. Code Ann. § 40-4-121(3)(b) against NYLIC for improperly changing Roy Sr.’s life insurance beneficiary to the detriment of Roy Jr. (Doc. 1 at ¶ 11). Roy Jr. also asserts claims of negligence and declaratory judgment under 28 U.S.C. § 2001, et seq. , asking that the Court declare invalid the beneficiary designation change.

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of a complaint under the plausibility pleading standard of Rule 8(a)(2). See Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001). Dismissal proves appropriate under Rule 12(b)(6) where the complaint fails to state a claim upon which relief can be granted. Mendiondo v. Centinela Hospital Med. Ctr. , 521 F.3d 1097, 1104 (9th Cir. 2008). A court may dismiss a complaint "based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1988).

The Court will accept the plaintiff's allegations "as true" and "construe them in light most favorable to plaintiffs" when deciding a motion to dismiss. Kopeikin v. Moonlight Basin Management, LLC , 981 F. Supp. 2d 936, 939 (D. Mont. 2013) (citations omitted). The complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face to survive a Rule 12(b)(6) motion. Ashcroft v. Iqbal , 556 U.S. 662, 129 S. Ct. 1937, 173 L.Ed.2d 868 (2009). A claim remains plausible on its face when "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678, 129 S. Ct. 1937. The plausibility standard does not require probability, but "asks for more than sheer possibility that defendant has acted unlawfully." Id. A court sitting in diversity jurisdiction applies the substantive law of the forum state." Her Majesty Queen in Right of Province of British Columbia v. Gilbertson , 597 F.2d 1161, 1163 (9th Cir. 1979).

ANALYSIS

I. Whether collateral estoppel bars Roy Jr.’s claims.

Federal courts must give state court judgements the same preclusive effect "that the judgment would be given by the courts of the state in which the judgment was rendered." Leonard v. Doyle , 2013 WL 4875033, *4 (D. Mont. Sept. 11, 2013). Collateral estoppel prevents a party from relitigating the same issue decided in a prior judgment. Baltrusch v. Baltrusch , 331 Mont. 281, 130 P.3d 1267, 1273-74 (2006). Collateral estoppel in Montana applies in the following circumstances: "(1) the identical issue raised was previously decided in a prior adjudication; (2) a final judgment on the merits was issued in the prior adjudication; (3) the party against whom the plea is asserted was a party or in privity with a party to the prior adjudication; and (4) the party against whom preclusion is now asserted was afforded a full and fair opportunity to litigate the issue." Poplar Elem. Sch. Dist. No. 9 v. Froid Elem. Sch. Dist. No. 65 , 401 Mont. 152, 471 P.3d 57, 66 (2020).

NYLIC argues that the Montana Supreme Court decision in Volk , 367 P.3d 378, prevents Roy Jr. from bringing his present claims. (Doc. 6 at 9-13). The Montana Supreme Court faced the issue of "[w]hether the District Court erred when it granted summary judgment to [Goeser], and denied the imposition of a constructive trust on life insurance proceeds in favor of RBV, a minor child." Id. at 381. The Montana Supreme Court set aside Roy Sr.’s improper removal of Pamela as beneficiary and determined that Goeser had been unjustly enriched. Id. at 387-88, 391. The Montana Supreme Court imposed a constructive trust as the proper remedy. Id. The Montana Supreme Court relied on the automatic restraining order in Mont. Code Ann. § 40-4-121(3)(b) to determine that the beneficiary change violated the statute. Id. at 387. The Montana Supreme Court did not address the question of whether NYLIC had breached its duty.

Roy Jr. now alleges that NYLIC, and through its agents, breached its duties of "loyalty, honesty, integrity, good faith, full-disclosure, and avoidance of self-dealing and conflicts." (Doc. 1 at ¶ 14). Roy Jr. further alleges that NYLIC breached its duty of reasonable care to "hire, supervise, control, and retain agents," and by violating § 40-4-121(3)(b) ’s automatic temporary restraining order. Id. at ¶¶ 15-17. Roy Jr. never raised these allegations in the state court action. To the extent that Roy Jr.’s claims fall outside a determination of the validity of the beneficiary designation, the issues differ between the two proceedings.

NYLIC insists that Roy Jr. had the opportunity, and was obligated, to bring claims against it in Volk . The use of defensive collateral estoppel "gives a plaintiff a strong incentive to join all potential defendants in the first action if possible." Collins v. D.R. Horton, Inc. , 505 F.3d 874, 881 (9th Cir. 2007). The claims against NYLIC did not ripen, however, until the Montana Supreme Court ruled in Volk that Goeser had been unjustly enriched by the improper beneficiary change. A potential negligence claim arose for Roy Jr. only after the beneficiary designation to Goeser had been deemed improper. Roy Jr.’s negligence claims survive collateral estoppel.

II. Whether the statute of limitations bars Roy Jr.’s claims.

NYLIC argues that the statute of limitations bars Roy Jr.’s claims. Roy Jr. asserts in his Complaint (Doc. 1) claims for negligence and declaratory judgment that NYLIC's beneficiary designation violated Mont. Code Ann. § 40-4-121(3)(b). Id. at ¶¶ 14-19. Montana's statute of limitation for negligence claims is three years. Mont. Code Ann. § 27-2-204(2). Montana's statute of limitations for a statutory violation is two years. Mont. Code Ann. § 27-2-211(1)(c).

NYLIC insists the statute of limitations began running on December 21, 2011, the date on which Pamela and Roy Sr.’s divorce became final. (Doc. 6 at 13). The statute of limitations tolls, however, on a minor's claims until the minor reaches age eighteen. Mont. Code Ann. § 27-2-401(1). Plaintiffs seeking to toll the statute of limitations must include an allegation of minority in the pleadings. Wasco Products, Inc. v. Southwall Technologies, Inc. , 435 F.3d 989, 991 (9th Cir. 2006). NYLIC has stipulated in its reply brief, however, for purposes of this motion that Roy Jr.’s birthdate was in October 2000. (Doc. 13 at 14). Accordingly, the statute of limitations began running in October 2018. Roy Jr. filed this suit on July 19, 2021, "two years, eight months, and twenty-eight days after his [eighteenth] birthday." (Doc. 1; Doc. 11 at 8). Roy Jr.’s claims for negligence have been filed within the three-year timeframe set forth by the statute of limitations. Roy Jr.’s declaratory judgment claim, on the other hand, falls outside the two-year statute of limitations timeframe for a statutory violation. Mont. Code Ann. § 27-2-211(1)(c).

III. Whether Mont. Code Ann. § 72-2-814(7) protects NYLIC's payment.

NYLIC asserts that it remains immune from suit under Mont. Code Ann. § 72-2-814(7). The statute provides that a payor is not liable for having made a payment to a beneficiary in an instrument affected by a divorce, or for having taken another action in good faith in reliance on the instrument, "before the payor or other third party received written notice of the divorce." Id. A payor has no duty...