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Smith v. National Western Life Insurance Co.

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA


May 11, 2010

FLORENCE SMITH, PLAINTIFF,
v.
NATIONAL WESTERN LIFE INSURANCE COMPANY, DEFENDANT.

The opinion of the court was delivered by: Hon. John E. Jones III

Hon. J. Andrew Smyser

MEMORANDUM

THE BACKGROUND OF THIS MEMORANDUM IS AS FOLLOWS:

This matter is before the Court on the Report and Recommendation ("R&R") of Magistrate Judge J. Andrew Smyser (Doc. 64), filed on March 22, 2010, which recommends that we grant the Defendant's Motion for Summary Judgment. (Doc. 60). Defendant National Western Life Insurance Company ("Defendant") filed objections to the R&R on April 5, 2010. (Docs. 67 and 68). Plaintiff Florence Smith ("Plaintiff" or "Smith") filed objections to the report (Docs. 70 and 71) on April 8, 2010. The Defendant has responded to Plaintiff's objections. (Doc. 75). Accordingly, this matter is ripe for disposition. For the reasons set forth below, the Court will adopt the Magistrate Judge's R&R, grant the Defendant's Motion for Summary Judgment and close this case.

I. PROCEDURAL AND FACTUAL BACKGROUND

On November 21, 2008, Defendant removed the instant case to this Court from the Dauphin County Court of Common Pleas. (Doc. 1). In her Complaint, Plaintiff alleges that in December of 2005, she bought from the Defendant a 20 year Flexible Premium Deferred Annuity. Plaintiff paid $76,366.02 for the product. Plaintiff purchased the product from Defendant as the result of a contact with or visit to her at her residence. Plaintiff was 83 years old at the time she purchased the policy and had been diagnosed with dementia. Plaintiff alleges that she was not given a 3-day "Notice of Cancellation" as required by provisions of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. § 201-7(b)(2). However, the annuity itself offered Plaintiff a 20-day period in which to cancel and have all money refunded. This cancellation provision appeared on page one of the annuity policy, in bold print. Plaintiff further alleges that she did cancel the transaction in writing on April 18, 2008, but that the Defendant has not honored her cancellation.

Plaintiff's Complaint contains three causes of action. In Count I, the Plaintiff states a claim under PUTPCPL, asserting that the Defendant's failure to provide her with a Notice of Cancellation form and failure to honor her written notice of cancellation dated April 18, 2008 was a deceptive act or practice that caused Plaintiff financial harm. Count II asks for the Court to Order the cancellation of the annuity contract.

Count III of the Complaint also states a claim under PUTPCPL, asserting that Lonnie Goodling, the individual who sold her the annuity product, committed an unfair or deceptive act or practice in violation of P.S. § 201-2(4) and 201-3 by misrepresenting the nature of the annuity and by engaging in conduct that was likely to create confusion or misunderstanding in the Plaintiff.

Following full briefing on the Defendant's Motion for Summary Judgment (Doc. 37), Magistrate Judge Smyser issued the instant R&R (Doc. 64), which is presently before the Court for review.

II. STANDARDS OF REVIEW

A. Review of Magistrate Judge's R&R

When objections are filed to the report of a magistrate judge, the district court makes a de novo determination of those portions of the report or specified proposed findings or recommendations to which objections are made. 28 U.S.C. § 636(b)(1); United States v. Raddatz, 447 U.S. 667, 674-75 (1980). The court may accept, reject, or modify, in whole or in part, the magistrate judge's findings or recommendations. Id. Although the standard of review is de novo, 28 U.S.C. § 636(b)(1) permits whatever reliance the district court, in the exercise of sound discretion, chooses to place on a magistrate judge's proposed findings and recommendations. Raddatz, 447 U.S. at 674-75; see also Mathews v. Weber, 423 U.S. 261, 275 (1976); Goney v. Clark, 749 F.2d 5, 7 (3d Cir. 1984).

B. Summary Judgment

Summary judgment is appropriate if the record establishes "that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Initially, the moving party bears the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The movant meets this burden by pointing to an absence of evidence supporting an essential element as to which the non-moving party will bear the burden of proof at trial. Id. at 325. Once the moving party meets its burden, the burden then shifts to the non-moving party to show that there is a genuine issue for trial. Fed. R. Civ. P. 56(e)(2). An issue is "genuine" only if there is a sufficient evidentiary basis for a reasonable jury to find for the non-moving party, and a factual dispute is "material" only if it might affect the outcome of the action under the governing law. Anderson v. Liberty Lobby, Inc, 477 U.S. 242, 248-49 (1986).

In opposing summary judgment, the non-moving party "may not rely merely on allegations of denials in its own pleadings; rather, its response must... set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e)(2). The non-moving party "cannot rely on unsupported allegations, but must go beyond pleadings and provide some evidence that would show that there exists a genuine issue for trial." Jones v. United Parcel Serv., 214 F.3d 402, 407 (3d Cir. 2000). Arguments made in briefs "are not evidence and cannot by themselves create a factual dispute sufficient to defeat a summary judgment motion." Jersey Cent. Power & Light Co. v. Twp. of Lacey, 772 F.2d 1103, 1109-10 (3d Cir. 1985). However, the facts and all reasonable inferences drawn therefrom must be viewed in the light most favorable to the non- moving party. P.N. v. Clementon Bd. of Educ., 442 F.3d 848, 852 (3d Cir. 2006).

Summary judgment should not be granted when there is a disagreement about the facts or the proper inferences that a factfinder could draw from them. Peterson v. Lehigh Valley Dist. Council, 676 F.2d 81, 84 (3d Cir. 1982). Still, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; there must be a genuine issue of material fact to preclude summary judgment." Anderson, 477 U.S. at 247-48.

III. DISCUSSION

A. Summary of the R&R

With respect to Count I and II, Magistrate Judge Smyser concluded that there was no violation of the UTPCPL regarding the right to cancel. Specifically, Magistrate Judge Smyser concluded that the sale of the annuity to Plaintiff was not a "door-to-door" sale, nor was it "goods and services" protected by the UTPCPL, and therefore the required notice of cancellation was not appropriate for the sale.

With respect to Count III, the Magistrate Judge concluded that no reasonable inference could be drawn from the summary judgment record that Goodling acted as the Defendant's agent. Magistrate Judge Smyser concluded that the Defendant is entitled to judgment as a matter of law on this count because Goodling did not act as the agent of the Defendant.

B. Objections to the R&R

Both the Plaintiff and the Defendant have filed objections to the R&R. Plaintiff argues that the Magistrate Judge erred when concluding that there was no violation of the UTPCPL. Plaintiff also argues that there are genuine issues of material fact regarding whether Goodling acted as an agent for the Defendant with respect to the sale of the annuity product to Plaintiff.

The Defendant has lodged a single, limited objection to the R&R. Defendant argues that there is nothing in the record to support any claim by Plaintiff that the actions of Goodling violated the UTPCPL.

We shall discuss the merits of the parties' objections herein.

C. Review of Plaintiff's Objections

Plaintiff's threshold objection to the R&R is to the Magistrate Judge's finding that the Defendant did not violate Section 201-7 of the UTPCPL, which provides protection to consumers with regard to door-to-door transactions, by providing a three (3) business day period for a purchaser to notify the seller in writing of a desire to cancel a sale. 73 P.S. § 201-7(a). However, with respect to annuities, the Pennsylvania Insurance Department has imposed an even more stringent protection for consumers in the form of a twenty (20) day period to cancel these types of purchases. 31 P.S. § 81.6(d).

It is undisputed that the Plaintiff received notice of this twenty (20) day period to cancel the annuity and that she did not cancel the annuity within the twenty (20) day period. Yet, despite the fact that Plaintiff had received the benefit of a longer cancellation period than is required by the UTPCPL, she is seeking to have the annuity cancelled based on her failure to receive a three (3) day notice of cancellation under the UTPCPL. This argument is simply illogical and utterly devoid of merit. Accordingly, we shall adopt the Magistrate Judge's recommendation and grant summary judgment in favor of Defendants on Counts I and II of the Complaint.*fn1

Plaintiff's remaining objection is to the Magistrate Judge's finding that Goodling was not operating as an agent for Defendant during the transaction at issue. Plaintiff rests her argument largely on the fact that Goodling and the Defendant were parties to a Special Producer Agreement. Pursuant to the Special Producer Agreement, Goodling did promise to procure applications for insurance, deliver policies and provide policyholder services subject to the Defendant's Rules and Regulations. Importantly, however, the Special Producer Agreement stated that Goodling was an independent contractor and there was no employer-employee relationship between him and Defendant.

Moreover, Magistrate Judge Smyser concluded that "[t]he fact that Goodling was authorized to sell the defendant's policies does not go far in demonstrating that he should be considered the defendant's agent here rather than a broker." (Doc. 64 at 38). On this point, the Pennsylvania Supreme Court has concluded that when the insured leaves the selection of the insurance company to the broker, barring "some evidence of an authorization, or some fact from which a fair inference of an authorization by the company might be deduced to make an insurance broker the agent of the company," the broker is not the agent of the insurer. Taylor v. Crowe, 282 A.2d 682, 684 (Pa. 1971); see also, Nationwide Mut. Ins. Co. v. Starlight Ballroom Dance Club, Inc., 2004 U.S. Dist. LEXIS 25678 *5 (E.D. Pa. Dec. 21, 2004) ("the general rule of Pennsylvania law is that when an insured enlists an insurance broker to procure insurance without specifying an insurer, the broker is the agent of the insured, not the insurer").

We agree with Magistrate Judge Smyser's conclusion that Goodling was acting as a broker in this matter, and not as an agent. The record establishes that Plaintiff had a relationship with American Family Legal Plan, the parent company of Goodling's employer, Heritage, and that his actions on Heritage's behalf, not Defendant's, gave rise to Plaintiff's meeting with Goodling. There is no evidence that Plaintiff suggested to Goodling that the annuity be purchased from Defendant. The decision to purchase Defendant's product was made by Goodling. Accordingly, because Plaintiff has not presented sufficient evidence for a jury to conclude that Goodling was acting as National Western's agent in the transaction, summary judgment shall be granted in favor of Defendant on Count III.

D. Review of Defendant's Objection

Defendant has lodged a single, limited objection to the R&R. While the foregoing makes it unnecessary to engage in a detailed treatment of the objection, we will offer a limited analysis. Defendant argues that the Magistrate Judge erred by finding that a genuine issue of material fact remained as to whether Goodling engaged in deceptive conduct with respect to the sale of the annuity to Plaintiff. Defendant obviously does not object to the Magistrate Judge's conclusion that summary judgment should be granted on Count III, because Goodling was not an agent of Defendant.

Defendant states that "[b]ecause National Western is not responsible for any of Goodling's alleged misconduct and plaintiff opted not to sue him, any conclusions regarding his potential personal liability are ultimately not material to the Court's analysis in this case. Nonetheless, because plaintiff has attempted to impute Goodling's conduct to it, National Western is forced to file this limited objection." (Doc. 67 at 3).

To be clear, we have adopted Magistrate Judge Smyser's recommendation with regard to the agency issue in this case, and have concluded that Goodling was not an agent of the Defendant. Thus the issue of whether genuine issues of material fact remain as to whether Goodling engaged in deceptive practices is not only an immaterial issue, it is also a moot one. Accordingly, we shall overrule the Defendant's objection on this point.

IV. CONCLUSION

Accordingly, for the reasons set forth above, the objections of the parties are overruled and the R&R shall be adopted in its entirety. An appropriate Order shall issue.


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