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Pyle v. New York Life Insurance Co.

March 19, 2008


The opinion of the court was delivered by: Judge Nora Barry Fischer


Antonio Pyle ("Plaintiff") brought this action against New York Life Insurance Company ("Defendant") for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. §§ 201-1, et seq., common law breach of contract, and bad faith pursuant to 42 Pa. C.S.A. § 8371. Before the Court for consideration is a Motion to Dismiss of New York Life Insurance Company [11]. For the foregoing reasons, Defendant's motion is hereby granted.


Plaintiff was insured by Defendant on two separate life insurance policies, with a total death benefit of $100,000. (Docket No. 1, at ¶ 3). Plaintiff's father had purchased these life insurance policies on his son's behalf in 1965 and, prior to 1987, these policies had been completely paid and no further premiums were due. (Docket No. 1, at ¶ 3). Plaintiff alleges that, in 1987, Defendant's agent, Matt Alan Watts, recommended that Plaintiff surrender these policies and apply the cash value to a new policy. (Docket No.1, at ¶ 4). Plaintiff further alleges that Watts represented that Plaintiff would not be required to pay additional premiums on the policy, but that his benefit would increase over time.*fn1 (Docket No.1, at ¶ 4). Relying on the representation of "no further premiums," (see Docket No. 1, at ¶ 7) ("In fact, but for the representation that no further premiums would ever be due on the policies, [Plaintiff] would not have made the exchange, because he had sufficient life insurance through work and had no need for additional life insurance"), Plaintiff completed a life insurance application and Defendant issued a new life insurance policy to Plaintiff at policy number 42-715-811, with a face amount of $100,000, applying the cash values of the previously held insurance policies. (Docket No 1., at ¶ 4-5) ("[N]o additional premiums would be due, yet by the time that [Plaintiff] reached aged 65, the net cash value would reach $122,081 and the net death benefit would reach $223,847"). Plaintiff contends that, based upon these representations, he understood that he had the option to purchase additional coverage; however, he would not be required to make any additional payments to "keep the policy in force." (Docket No. 1, at ¶ 6).*fn2

In November of 2006, however, Plaintiff received a notice of premium due in the amount of $1,067, for policy number 42-715-811, attached to Plaintiff's annual policy statement. (Docket No. 1, at ¶ 10). Under protest, Plaintiff paid this premium. (Docket No. 1, at ¶ 11). This federal action followed.

Complicating the instant action, prior to the filing of this case, Defendant settled a class action lawsuit in Willson v. New York Life Ins. Co., Index No. 94/127804 (Sup.Ct. NY Co. Feb.1, 1996), arising from four consolidated complaints alleging, inter alia, that Defendant engaged in a nationwide scheme to induce class members to purchase life insurance on the basis of alleged misleading sales presentations. In the Willson action, the named plaintiffs brought an action on behalf of the class against Defendant for breach of contract, fraud, negligent misrepresentation, unjust enrichment and violations of New York General Business Law § 349, New York's consumer protection law. Specifically, the Complaint alleged that Defendant had "engaged in a nationwide scheme to induce Class Members to purchase life insurance policies based upon false or misleading sales presentations, policy illustrations, and other marketing or sales materials." On July 28, 1995, the parties executed a Stipulation of Settlement, as amended on November 8, 1995.*fn3 (Docket No. 11-3, Exh. A, pt. 2) ("Stipulation of Settlement") (hereinafter, "Willson Settlement Agreement"). On July 31, 1995, the Supreme Court of New York County entered an Order, certifying a nationwide class for purposes of settlement, ordering that adequate notice of settlement be given to the class and directing the forms and methods of notice as well as requirements for opting out of the class. On November 15, 1995, the New York Court held a fairness hearing as to the proposed settlement.*fn4

Subsequently, on February 1, 1996, the Willson Court entered its "Findings of Facts, Conclusions of Law, and Final Order and Judgment," (see Docket No. 11-2, Exh. A, pt. 1) (hereinafter, "Willson Order"), in which it resolved objections from the class members, which consisted of individuals holding policies during the years 1982-1994 and allowed class members to opt-out of the class at any time prior to February 1, 1996.*fn5 (Willson Order, at ¶ 15). In the Willson Order, the Court set forth the potential relief offered by the Willson Settlement Agreement, including the Alternative Dispute Resolution process, or three types of "no fault" relief: optional premium loans, enhanced value policies, and enhanced value annuities (all of which are described in detail in the settlement agreement) (Willson Order, at ¶¶ 20-28). The Court concluded that the class met all requirements for class certification, including the requirements of adequate notice*fn6 and that the class representatives in the suit "adequately represent the Class." (Willson Order, at ¶29). Of particular significance here, in so holding, the Court found that (1) there were common issues of law and fact among the class members, including, "dividend and interest crediting rate practices and determinations or ... sales and illustration practices, and training and supervision with respect to those practices," (Willson Order, at ¶29)*fn7; and (2) the named class members adequately represented the class insofar as the named class members had "a stake in the outcome of the litigation," and no named representative had "interests antagonistic to that of the Class," (Willson Order, at ¶29). The Court further held that the settlement itself was evidence of the adequacy of representation, opining that "the combination of the individualized ADR Process and the no-fault Class Relief benefits accommodates much better than class actions are usually able to any variations between Class Members." (Willson Order, at ¶29). Furthermore, the Willson Court held that Defendant gave adequate notice of the class action litigation, in compliance with its own July 1995 order. (Willson Order, at ¶45).

The Willson Order certified a settlement class defined as follows: A Settlement Class is hereby finally certified (the "Settlement Class") consisting of all persons or entities (the "Class Members") who had at the earlier of (i) July 25, 1995 and (ii) the time of the policy's termination, an ownership interest in one or more whole life insurance or universal life insurance policies issued by New York Life Insurance Company or New York Life Insurance and Annuity Corporation (referred to as "New York Life") in the United States from January 1, 1982 through December 31, 1994 (the "Class Period"), including A.D. 82 and subsequent Whole Life, Employees Whole Life, Modified Premium Whole Life and Survivorship Whole Life policies ("Universal Life Policies") (referred to collectively as the "Policies"), but does not include persons or entities (unless such persons or entities are Class Members by virtue of their ownership interest in other Policies) (i) who were represented by counsel and who signed a document pursuant to a settlement of a claim or an actual or potential lawsuit that releases either or both defendants from any further claims concerning one or more Policies ... . (Willson Order, at 71) (emphases in original).

The Stipulation of Settlement also set forth the types of claims settled by the agreement. The types of claims settled included those claims "arising from and relating to" the following:

(i) the sale of whole life insurance by what New York Life refers to as the Premium Offset Proposal concept,

(ii) the sale of universal life insurance by means of what New York Life refers to as the Single or Limited Payment Universal Life Concept,

(iii) the establishment and illustration of dividend scales, interest crediting rates and cost of insurance and administrative charges, (iv) the sale of life insurance policies not as insurance but as pension or retirement plans, investment or savings accounts, tuition funding or mortgage protection plans, or other types of investment, savings, thrift or retirement vehicles, (v) the alleged failure to tell policyowners that a substantial part of the premiums paid would not go toward an investment or savings, thrift or retirement vehicle (but would be used to pay commissions, other sales and administrative charges and mortality charges) and the alleged failure to tell policyowners the true rate of return that would be earned and how a life insurance policy compared with other investment vehicles, and (vi) proposals to replace an existing policy or to use an existing policy's cash values by means of surrender, withdrawal/ partial surrender, or loan to purchase or maintain another policy . . . (Willson Settlement Agreement, at 2) (emphasis added). The Willson Order provided that any potential class member who did not wish to be represented by the class representatives must have opted-out in writing within fifteen days of the Settlement hearing. (Willson Order, at ¶ E).

Moreover, the Willson Settlement Agreement also included a release, which provided that: Plaintiffs and all Class Members hereby expressly agree that they shall not now nor hereafter institute, maintain or assert against the Releasees, either directly or indirectly, on their own behalf, on behalf of the Class or any other person, and release and discharge the Releasees from, any and all causes of action, claims, damages ... that have been, could have been, may be or could be alleged or asserted now or in the future by Plaintiffs or any Class Member against the Releasees in the Actions or in any other court action . . . on the basis of, connected with, arising out of, or related to, in whole or in part, the Released Transactions ... . (Willson Settlement Agreement, at 56) (emphases added). The release language continued that said released transactions included, inter alia, "without limitation":

(i) any and all of the acts, omissions, facts, matters, transactions or occurrences that were directly or indirectly alleged, asserted, described, set forth or referred to in the Actions;

(ii) any or all of the acts, omissions, facts, matters, transactions or occurrences, or any oral or written statements or representations allegedly made in connection with or directly or indirectly relating to the Released Transactions, including without limitation any actions, omissions, or oral or written statements or representations relating to:


(l) the use of an existing policy's cash value or cash-surrender value by means of surrender, withdrawal/ partial surrender or loan to purchase or maintain a Policy. (Willson Settlement Agreement, at 57-59) (emphasis in original). Additionally, the release provided that the Willson Plaintiffs and Class Members, as part of the release, acknowledge that they are aware that they may hereafter discover claims presently unknown or unsuspected, or facts in addition to or different from those which they now know or believe to be true with respect to the matters released herein. Nevertheless, it is the intention of Plaintiffs and the Class Members in executing this Release fully, finally and forever to settle and release all such matters, and all claims relating thereto, which exist, hereafter may exist, or might have existed (whether or not previously or currently asserted in any Actions).

(Willson Settlement Agreement, at 61-62). In the release, the class members "expressly agree[d]" that they cannot, after the final date of the settlement, institute an action against Defendant in any court for claims "related to the Released Transactions." (Willson Settlement Agreement ¶ 57-59).*fn8

Furthermore, the Willson Settlement Agreement included a provision which provided that res judicata bars all future claims by class members. Specifically, the Order provided that the Final Order and Judgment "shall forever be binding on, and shall have res judicata and preclusive effect in all pending and future lawsuits maintained by . . . all [sic] settlement Class Members." (Willson Settlement Agreement, at 72-73). The Willson Court also issued an injunction as part of its final Order, enjoining "[a]ll Class Members ... from: (a) filing, commencing or prosecuting any lawsuit ... in any jurisdiction based on or relating to the facts and circumstances underlying the claims and causes of action in this transaction, or to the Released Transactions (as that term is defined in the Settlement Agreement)." (Willson Settlement Agreement, at 72).

Finally, the Willson Court "retain[ed] jurisdiction as to all matters relating to the administration, consummation, enforcement and interpretation of the Settlement Agreement and of this Final Order and Judgment, and for any other necessary purposes." (Willson Order, at 74).

According to Defendant, Plaintiff did not opt out of the class prior to February 1, 1996, nor does Plaintiff's name appear on a list of opt-out policy holders, incorporated as part of the settlement agreement. (Docket No. 14, Exh. B, at 7-93). On June 25, 1996, a New York appellate court affirmed the Willson Order. Subsequently, the United States Supreme Court denied a writ of certiorari.


On March 19, 2007, Plaintiff filed this Complaint. (Docket No.1). Defendant filed the instant motion on June 14, 2007. (Docket No. 11). On July 18, 2007, Plaintiff filed Brief of Antonio D. Pyle in Opposition to New York Life Insurance Company's Motion to Dismiss. (Docket No. 17). On August 1, 2007, Defendant filed its Brief in Support of New York Life Insurance Company's Motion to Dismiss. (Docket No. 18). On August 17, 2007, the Court sua sponte ordered Plaintiff to file a supplemental brief on or before August 31, 2007, as to the applicability of the Pennsylvania Supreme Court's recent decision in Toy v. Metropolitan Life Ins. Co., 928 A.2d 186 (Pa. 2007), which the Defendant cited and relied upon in its reply brief. (Docket No. 19). In addition, the Court ordered Defendant to file a supplement attaching a copy of the notice of class action lawsuit in Willson on or before August 31, 2007. On August 27, 2007, Defendant filed a Supplement of Defendant New York Life Insurance Company to its Motion to Dismiss, in which it attached the following documents (1) the "Notice of Class Action, Proposed Settlement, Settlement Hearing and Right to Appear" pertaining to Willson v. New York Life Ins. Co., Index No. 94-127804 (N.Y. Sup. Ct. Feb. 1, 1996); (2) "Cover Letter for Class Notice"; (3) information entitled "Answers to Questions You May Have About the Proposed Settlement"; and (4) "Publication Notice" to Class Members. (Docket No. 20). Plaintiff filed its Supplemental Brief Regarding Toy v. Metropolitan Life Ins. Co. in response to this Court's Order on August 30, 2007. (Docket No. 21).


Under Bell Atlantic v. Twombly,---U.S.---, 127 S.Ct. 1955 (2007), a complaint must be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6) if the Plaintiff fails to allege "enough facts to state a claim ...

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