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September 29, 1999


The opinion of the court was delivered by: Joyner, District Judge.


This case is now before the Court upon motion of the defendant, LifeUSA Holding, Inc. for the entry of summary judgment in its favor as to all counts of the plaintiffs' complaint. For the reasons which follow, the motion is denied.

History of the Case

This case, which was instituted in December 1997, arose out of the plaintiffs' purchase of "Accumulator"*fn1 annuity products from defendant LifeUSA Holding, Inc. and its subsidiaries and divisions.*fn2 Essentially, it is the plaintiffs' contention that the manner in which the defendant marketed, promoted and sold the accumulator annuities to them was fraudulent in that they were not properly apprised of, inter alia, the terms and conditions governing the manner in which their funds would earn interest, how they could withdraw their funds, what would happen in the event of withdrawal, or the annuities' true interest rates and yields. According to the plaintiffs, "LifeUSA created and implemented a purposeful scheme to deceive and mislead them and the class of LifeUSA annuity purchasers through:

  (a) inducing agents to sell LifeUSA annuities, as
  opposed to other annuity policies, with
  representations of the highest commissions, equity
  ownership in LifeUSA, producer perks and wire
  transfer of commissions within twenty-four hours of
  obtaining the purchaser's funds and before the
  purchasers received their LifeUSA "fine print"
  (b) training agents through standardized and uniform
  misrepresentations and nondisclosures that, inter
  alia, the agents' clients, through LifeUSA, would be
  paid substantial interest bonuses, "current" interest
  rates, and obtain "fully insured" and "safe" economic
  gain greater than the gains offered in the stock
  market or Certificates of Deposit;
  (c) concealing and failing to disclose the true terms
  of the LifeUSA Accumulator annuity from the
  purchasers, who are given no written materials from
  LifeUSA and provided with only an application and the
  uniform representations of LifeUSA agents based upon
  LifeUSA's standardized misrepresentations and
  material omissions taught to the agents;
  (d) immediately rewarding the agents with "producer
  perks" within 24 hours of sale and then later sending
  fine print annuity contracts which are misleading and
  (e) disguising the interest rates paid to LifeUSA
  purchasers in quarterly accountings by comparing the
  Accumulator annuity favorably with Bank Certificates
  of Deposit and then misrepresenting the "yield" as
  the "interest rate," thus purposefully creating a
  false impression that the represented "compounded
  daily" interest rate is much higher, when in fact,
  the interest rate is less than the represented
  "interest rate" and then,
  (f) eliminating any ability for the purchaser to gain
  the misrepresented benefits of their annuity policy
  upon withdrawal because when a purchaser attempts to
  obtain the benefits they must accept . . . a lump sum
  of principal and interest with a "penalty" . . . of
  approximately 5% . . . ., periodic

  principal and interest payments over a minimum of
  five years with the balance being paid a "compounded
  daily" interest rate of less than three percent . .
  ., periodic interest only payments for a minimum of
  five years with the entire principal remaining with
  LifeUSA earning a current interest rate unilaterally
  defined by LifeUSA. . . . or death benefits to the
  purchaser's estate which . . . must select from the
  aforementioned three options."

Plaintiffs here fall into two categories: (1) those who, like Drew Krapf and Esther Rosenblum, purchased Accumulator annuity policies between August 1, 1989 and October 1, 1997 ("the class period") and have not, to date, withdrawn any funds such that their principal and interest remains with the defendant company; and (2) those like Joseph Benevento, Rita Baskin, Edward Maze and Bruce Compaine who also purchased their Accumulator annuities during the class period but elected to withdraw their funds through the minimum five-year payout period.

By way of the pending motion, Defendant contends that it is entitled to judgment in its favor as a matter of law as to all of the plaintiffs and all of their claims for relief. Specifically, Defendant urges this Court to find that (1) the plaintiffs have insufficient evidence to sustain their causes of action for negligent and fraudulent misrepresentation, unjust enrichment, injunctive relief, negligence and breach of the duty of good faith and fair dealing and, (2) the plaintiffs' claims are barred by the applicable statutes of limitations and, in the case of plaintiffs Baskin, Maze and Compaine, barred by Florida's and New Jersey's Economic Loss Rules. Alternatively, Defendant contends that the negligence and negligent misrepresentation claims of Messrs. Benevento, Krapf, Maze and Compaine and Mrs. Rosenblum are barred by the doctrine of contributory negligence and, in the case of Plaintiffs Benevento, Krapf and Rosenblum, by their failure to have sustained any out-of-pocket losses. We shall address each of these arguments in turn.

Standards Governing Motions for Summary Judgment

  The standards for determining whether summary judgment is
properly entered in cases pending before the district courts are
governed by Fed.R.Civ.P. 56. Subsection (c) of that rule states,
in pertinent part,

   . . The judgment sought shall be rendered
  forthwith if the pleadings, depositions, answers to
  interrogatories, and admissions on file, together
  with the affidavits, if any, show that there is no
  genuine issue as to any material fact and that the
  moving party is entitled to a judgment as a matter of
  law. A summary judgment, interlocutory in character,
  may be rendered on the issue of liability alone
  although there is a genuine issue as to the amount of

In this way, a motion for summary judgment requires the court to look beyond the bare allegations of the pleadings to determine if they have sufficient factual support to warrant their consideration at trial. Liberty Lobby, Inc. v. Dow Jones & Co., 838 F.2d 1287 (D.C.Cir. 1988), cert. denied, 488 U.S. 825, 109 S.Ct. 75, 102 L.Ed.2d 51 (1988). See Also: Aries Realty, Inc. v. AGS Columbia Associates, 751 F. Supp. 444 (S.D.N.Y. 1990).

As a general rule, the party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In considering a summary judgment motion, the court must view the facts in the light most favorable to the party opposing the motion and all reasonable inferences from the facts must be drawn in favor of that party as well. U.S. v. Kensington Hospital, 760 F. Supp. 1120 (E.D.Pa. 1991); Schillachi v. Flying Dutchman Motorcycle Club, 751 F. Supp. 1169 (E.D.Pa. 1990).

When, however, "a motion for summary judgment is made and supported [by affidavits or otherwise], an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response . . . must set forth specific facts showing that there is a genuine issue for trial.' If the adverse party does not so respond, summary judgment, if appropriate may be entered against [it]." Fed.R.Civ.P. 56(e).

A material fact has been defined as one which might affect the outcome of the suit under relevant substantive law. Boykin v. Bloomsburg University of Pennsylvania, 893 F. Supp. 378, 393 (M.D.Pa. 1995) citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute about a material fact is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id., citing Anderson, 477 U.S. at 248, 106 S.Ct. at 2510.


A. Which state's law governs?

At the outset, we are presented with the question of which state's law should be applied to this case. Defendant asserts that this case must be evaluated in the context of the laws of the plaintiffs' respective home jurisdictions. Plaintiffs Benevento, Krapf and Rosenblum are residents of Pennsylvania. Plaintiffs Compaine and Maze, in turn, are residents of New Jersey and Plaintiff Baskin is a Florida resident. Defendant would therefore have this Court consider the plaintiffs' claims under Pennsylvania, New Jersey and Florida law. Plaintiffs, on the other hand, argue that the law of the Defendant's home state, Minnesota, should be applied.

It is now well-settled that in diversity actions, a federal court must apply the choice of law rules of the state in which it sits. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941); United Services Automobile Ass'n. v. Evangelista, 698 F. Supp. 85, 86 (E.D.Pa. 1988). Pennsylvania has adopted a choice of law/conflicts methodology which combines the approaches of both the Second Restatement (contacts establishing significant relationships) and "interest" analysis (qualitative appraisal of the relevant state's policies with respect to the controversy). Carrick v. Zurich-American Insurance Group, 14 F.3d 907, 909 (3rd Cir. 1994) quoting Lacey v. Cessna Aircraft Co., 932 F.2d 170, 187 (3rd Cir. 1991); Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796 (1964). Pennsylvania's choice of law analysis has therefore been said to entail two steps: first, the court must look to see whether a false conflict exists. LeJeune v. BlissSalem, Inc., 85 F.3d 1069, 1071 (3rd Cir. 1996). See Also: Hughes v. Prudential Lines, Inc., 425 Pa. Super. 262, 624 A.2d 1063, 1066, n. 2 (1993). Then, if there is no false conflict, the court must determine which state has the greater interest in the application of its law. Id., citing, inter alia, Cipolla v. Shaposka, 439 Pa. 563, 565, 267 A.2d 854 (1970). A false conflict exists when two jurisdictions have applicable law but applying the law of one jurisdiction would not result in impairing the governmental interests of the other. Teti v. Huron Insurance Co., 914 F. Supp. 1132, 1134 (E.D.Pa. 1996).

Here, both Plaintiffs and Defendant evidently agree that no false conflict is present as neither party makes any argument whatsoever as to whether the interests of Pennsylvania, Minnesota, New Jersey or Florida would be impaired by application of the law of any of the other jurisdictions. Accordingly, we shall assume that the conflict is genuine and turn now to examine the contacts and interests of the competing jurisdictions.

In this case, the evidence shows that while the defendant is licensed to do business in other states, including Pennsylvania, it was incorporated and maintains its principal place of business in Minnesota. Plaintiffs argue that the annuity and the advertising and marketing materials used to sell the policies, were designed in Minnesota but that they received their Accumulator Annuity policies in their home states of Pennsylvania, New Jersey and Florida. The sales agents who sold the annuities to the plaintiffs operated, and from all appearances, themselves reside within the plaintiffs' home states. Viewing these facts in the context of the above-referenced factors, we therefore find that the contracting, negotiation and performance of the contract all took place in the state(s) in which the plaintiffs reside and that it is therefore the states in which the plaintiffs are domiciled which have the greater interest(s) in the outcome of this lawsuit. Compagnie des Bauxites de Guinee v. Argonaut-Midwest Insurance Company, 880 F.2d 685, 689 (3rd Cir. 1989). We therefore conclude that the laws of Pennsylvania, New Jersey and Florida should be applied to evaluate the plaintiffs' claims here.

B. The "Independence" of LifeUSA's Agents.

LifeUSA next asserts that it cannot be held liable for the misrepresentations and non-disclosures allegedly made by the agents who sold the plaintiffs their annuity policies because those sales people were acting as the ...

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