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Michael S. Rulle Family Dynasty Trust v. AGL Life Assurance Co.

September 8, 2010

THE MICHAEL S. RULLE FAMILY DYNASTY TRUST, PLAINTIFF,
v.
AGL LIFE ASSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Schiller, J.

MEMORANDUM

The Michael S. Rulle Family Dynasty Trust ("Rulle Trust") is the contract holder of a life insurance policy ("the Policy") issued by Defendant AGL Life Assurance Company ("AGL") on which Michael S. Rulle is the named insured.The value of Plaintiff's account decreased significantly when Plaintiff's premiums ultimately ended up in the hands of Bernard Madoff. The Amended Complaint alleged violations of federal and state securities laws, breach of contract, breach of fiduciary duty, negligence, negligent misrepresentation, unjust enrichment, and breach of the implied covenant of good faith and fair dealing. In a Memorandum dated July 7, 2010, the Court dismissed a number of claims against AGL for failure to state a claim. However, the Parties disputed whether Alaska or Pennsylvania law applied to a number of claims. The Court ordered additional briefing to properly determine if: (1) the law of Alaska and Pennsylvania differ with respect to Plaintiff's negligence, breach of fiduciary duty, and unjust enrichment claims; and (2) assuming the laws differ, which state's law should apply to each of these claims. The Court will now dismiss the remainder of Plaintiff's Amended Complaint for failure to state a claim.*fn1

I. DISCUSSION

A. Choice of Law

Because this Court is exercising diversity jurisdiction over the claims, the Court must apply the choice of law rules of the forum state, Pennsylvania. See Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Pennsylvania choice of law rules require courts to apply a flexible three-step test combining the "governmental interest analysis" with the Restatement (Second) of Conflicts approach. Garcia v. Plaza Oldsmobile Ltd., 421 F.3d 216, 219-20 (3d Cir. 2005).First, a court must decide whether there is an actual or real conflict between the potentially applicable laws. See Hammersmith v. TIG Ins. Co., 480 F.3d 220, 230 (3d Cir. 2007) (citing Air Prods. & Chems., Inc. v. Eaton Metal Prods. Co., 272 F. Supp. 2d 482, 490 n.9 (E.D. Pa. 2003)). If the result would be the same regardless of which jurisdiction's law applied, no conflict exists and a choice of law analysis is unnecessary. Id. If, however, there are relevant differences between the laws, then the court should examine the governmental policies underlying each law, and classify the conflict as "true," "false," or "unprovided-for." Id. A false conflict exists if "only one jurisdiction's governmental interests would be impaired by the application of the other jurisdiction's laws." LeJeune v. Bliss-Salem, Inc., 85 F.3d 1069, 1071 (3d Cir. 1996). An "unprovided-for" case exists if neither state's interests would be impaired if its laws were not applied. Garcia, 421 F.3d at 220. Only if a true conflict exists does the court turn to the third step and conduct a more extensive choice of law analysis. Hammersmith, 480 F.3d at 230 (citing Cipolla v. Shaposka, 267 A.2d 854, 856 (Pa. 1970)). A true conflict exists if "both jurisdictions' interests would be impaired by the application of the other's laws." Id. If a true conflict exists, the court must decide which state has the "greater interest in the application of its law." Id. at 231 (quoting Cipolla, 267 A.2d at 856).

When faced with a choice of law analysis on a tort claim, the relevant factors to consider include the place of injury, the location where the injury-causing conduct occurred, the domicile, residence, nationality, place of incorporation and place of business of the parties, and the place where the relationship between the parties is centered. Taylor v. Mooney Aircraft Corp., 265 F. App'x 87, 91 n.4 (3d Cir. 2008).

Because the Court finds that Plaintiff's claims would fail under both Alaska and Pennsylvania law, no conflict of law exists and a choice of law analysis is unnecessary.

B. Unjust Enrichment

The elements of an unjust enrichment claim under Alaska and law are: (1) a benefit conferred upon the defendant by the plaintiff; (2) appreciation by the defendant of such benefit; and (3) acceptance and retention by the defendant of such benefit under such circumstances that it would be inequitable for him to retain it without paying the value thereof. Alaska Sales & Serv., Inc. v. Millet, 735 P.2d 743, 746 (Alaska 1987). Under Alaska law, however, unjust enrichment does not depend on any actual contract or agreement between the parties, either objective or subjective. Darling v. Standard Alaska Prod. Co., 818 P.2d 677, 679 (Alaska 1991).

The elements of unjust enrichment under Pennsylvania law are the same as those under Alaska law. Cf. Sovereign Bank v. B.J.'s Wholesale Club, Inc., 533 F.3d 162, 180 (3d Cir. 2008) (citing Limbach Co. v. City of Philadelphia, 905 A.2d 567, 575 (Pa. Commw. Ct. 2006)).Under Pennsylvania law, however, it is well established that "the doctrine of unjust enrichment is inapplicable when the relationship between parties is founded upon a written agreement or express contract." Wilson Area Sch. Dist. v. Skepton, 895 A.2d 1250, 1254 (Pa. 2006); Third Nat'l Bank & Trust Co. of Scranton v. Lehigh Valley Coal Co., 44 A.2d 571, 574 (Pa. 1945). The doctrine of unjust enrichment applies only to situations where there is no legal contract. Wingert v. T.W. Phillips Gas & Oil Co., 157 A.2d 92, 94 (Pa. 1959). Here, it is undisputed that the relationship between the parties is founded upon a written contract. Thus, under Pennsylvania law, Plaintiff is not entitled to any remedy under the doctrine of unjust enrichment and its claim fails as a matter of law.

The unjust enrichment claims also fails on the merits under both Alaska and Pennsylvania law. The claim stems from AGL benefitting financially "from its unlawful acts as it collected improper management fees based upon the Policy's net asset values." (Am. Compl. ¶ 119.) Plaintiff does not further elaborate on these "improper management fees." As this Court held in its previous Memorandum, AGL committed no "unlawful acts" nor did it breach its contract by incorrectly valuing Plaintiff's account. Thus, Plaintiff is unable to point to any benefit it conferred on Defendant that it would be inequitable for AGL to retain.

B. Breach of Fiduciary Duty

Plaintiff's breach of fiduciary duty claim rests upon whether a fiduciary relationship existed between it and AGL. See Health Robotics, LLC v. Bennett, Civ. A. No. 09-627, 2009 WL 5033966, at *2 (E.D. Pa. Dec. 22, 2009) ("In order to state a claim for breach of fiduciary duty, a plaintiff must show, first, that a fiduciary relationship existed between the parties.") (citing Basile v. H & R Block, Inc., 761 A.2d 1115, 1119-22 (Pa. 2000)). Under Pennsylvania law, a fiduciary relationship does not rest on a specific association between the parties. See Vicki M. v. Ne. Educ. Intermediate Unit, 689 F. Supp. 2d 721, 739 (M.D. Pa. 2009) (citing Leedom v. Palmer, 117 A. 410, 411 (Pa. 1922)). Rather, a fiduciary relationship exists upon a showing that the parties have "reposed a special confidence in each another to the extent that the parties do not deal with each other on equal terms." Brandow Chrysler Jeep Co. v. Datascan Techs., 511 F. Supp. 2d 529, 538-39 (E.D. Pa. 2007) (quoting In re Clark's Estate, 359 A.2d 777, 781 (Pa. 1976)). "The special confidence required of the parties can be satisfied by 'an overmastering dominance on one side, or weakness, dependence or justifiable trust, on the other.'" Id. at 539 (quoting Clark's Estate, 359 A.2d at 781). Pennsylvania law is clear that a fiduciary relationship does not exist merely because one party relies on the superior skill of another. See eToll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10, 22-23 (Pa. Super. Ct. 2002). "[T]he critical question is whether the relationship goes beyond mere reliance on superior skill, and into a relationship characterized by 'overmastering influence' on one side or 'weakness, dependence, or trust, justifiably reposed' on the other side." eToll, 811 A.2d at 23 (quoting Basile, 777 A.2d at 101) (emphasis in original). "A confidential relationship is marked by such a disparity in position that the inferior party places complete trust in the superior party's advice and seeks no other counsel, so as to give rise to a potential abuse of power." Id. (citing Basile, 777 A.2d at 102).

Plaintiff asserts a number of bases for its assertion that a fiduciary relationship existed between the Rulle Trust and AGL. First, Plaintiff claims that every insurance policy gives rise to a fiduciary duty under Alaska law. (Pl.'s Mem. of Law in Accordance with the Court's Order [Pl.'s Supplemental Mem.] at 5.) As this Court stated in its previous Memorandum, this case does not involve an insurance dispute and the policy reasons ...


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