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Yenchi v. Ameriprise Financial, Inc.

Supreme Court of Pennsylvania

June 20, 2017


          ARGUED: November 1, 2016

         Appeal from the Order of the Superior Court entered September 15, 2015 at No. 753 WDA 2014, vacating the Judgment of the Court of Common Pleas of Allegheny County entered May 5, 2014 at No. GD 01 -006610, and remanding.




         In this discretionary appeal, we must decide whether a fiduciary duty can arise in a consumer transaction for the purchase of a whole life insurance policy based upon the advice of a financial advisor where the consumer purchasing the policy does not cede decision-making control over the purchase to the financial advisor. We conclude that, consistent with our jurisprudence, no fiduciary duty arises in such a situation. Consequently, we reverse the Superior Court's decision to the contrary.

         In 1995, Bryan Holland ("Holland"), a financial advisor for IDS Life Insurance Corporation, made an unsolicited telephone contact, a "cold call, " to Eugene and Ruth Yenchi (the "Yenchis") and asked to meet with them regarding their "financial stuff." At the initial meeting, Mr. Yenchi informed Holland that he had a long-term disability policy, and Holland asked him to bring it with him to their next meeting. At this second meeting, Holland reviewed the disability policy and advised the Yenchis to keep it, as it was a good policy and he could not offer them a comparable product.

         At a subsequent meeting in December 1995, for a fee of $350, Holland presented the Yenchis with a financial management proposal (the "Proposal"). The Proposal contained a notice that it had been prepared by "your American Express financial advisor" (Holland) and that "[a]t your request, your American Express financial advisor can recommend products distributed by American Express Financial Advisors and its affiliates as investment alternatives for existing securities." Complaint, 11/13/2003, Exhibit 1, at 3. The Proposal offered the Yenchis a number of general recommendations, including that they monitor monthly expenses, consolidate their debt, consider various savings plans, consolidate current life insurance policies into one policy, review long-term care coverage, keep accurate records for tax purposes (medical expenses and charitable contributions), transfer 401 (k) funds into mutual funds, and continue estate planning with an attorney and their financial advisor. Id. at 7-8. The Yenchis implemented some of these recommendations, saving money in an investment certificate and opening an IRA account.

         With respect to the consolidation of life insurance policies, the Yenchis provided Holland with relevant information regarding their current policies with Met Life (five held by Mr. Yenchi and two by Ms. Yenchi). In January 1996, Holland proposed a whole life insurance policy for Mr. Yenchi with an initial $115, 000 death benefit. In June 1996, he proposed a similar policy for Mr. Yenchi with an initial $100, 000 death benefit, plus a $25, 000 rider for Ms. Yenchi. Mr. Yenchi purchased the latter policy, cashing out his five Met Life policies to make the initial payment. Because Mr. Yenchi also purchased the rider for Ms. Yenchi, she did not need to cash in her existing life insurance policies for a new one. Instead, in 1997 Ms. Yenchi used the proceeds from her two Met Life policies to purchase a deferred variable annuity. In 1998, Holland proposed that the Yenchis increase their life insurance coverage to $300, 000, but they rejected Holland's advice on this occasion, deciding that they had enough life insurance.

         In 2000, the Yenchis had their portfolio independently reviewed. Through this process, they were advised that the 1996 whole life insurance policy Mr. Yenchi had purchased was underfunded, destined to lapse, and that additional premiums beyond those allegedly represented by Holland, [1] at substantially high rates increasing over time, would have to be paid. They also learned that Ms. Yenchi's 1997 deferred variable annuity would not mature until 2025, when she was eighty-four years old (rather than sixty-five, as had allegedly been represented by Holland).

         In April 2001, the Yenchis initiated suit by writ of summons, naming as defendants American Express Financial Services Corporation, American Express Financial Advisors Corporation, IDS Life Insurance Company, [2] and Holland (collectively, "Appellants"). The Yenchis' complaint, filed in November 2003, asserted claims of negligence/willful disregard, [3] fraudulent misrepresentation, violation of the Uniform Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. §§ 201-1-201-9.3, bad faith, negligent supervision, and breach of fiduciary duty.

         By order dated March 21, 2013, the trial court granted summary judgment to Appellants on all claims relating to the 1997 purchase of the deferred variable annuity, and dismissed the claims for bad faith, negligent supervision and breach of fiduciary duty relating to the 1996 purchase of the whole life insurance policy. Of relevance here, with respect to the breach of fiduciary duty claim, the trial court held that no fiduciary relationship was established between the Yenchis and Holland because the Yenchis continued to make their own investment decisions. Trial Court Memorandum, 7/28/2014, at 3. The trial court cited to its own prior decision in Ihnat v. Pover, 146 P.L.J. 299, 303-10 (1999), in which it held that no fiduciary duty arises between an insurance agent and a policyholder unless the policyholder delegates decision-making control to the insurance agent. In applying its Ihnat decision, the trial court rejected the notion that there was any material difference between an insurance agent and a financial advisor. The trial court further indicated that the Yenchis "knew they were dealing with a representative of American Express who was recommending purchases of American Express investments." Trial Court Memorandum, 7/28/2014, at 4. While the trial court noted that this fact may be relevant to the Yenchis' fraudulent misrepresentation and UTPCPL claims, it did not provide support for a fiduciary duty claim, since "a breach of fiduciary duty claim requires a policyholder to give up control." Id.

         The case proceeded to trial on the Yenchis' fraudulent misrepresentation and UTPCPL claims in connection with the purchase of the 1996 whole life insurance policy. At trial, the jury returned a verdict in favor of Appellants on the fraudulent misrepresentation claim and, based upon the same evidentiary record, the trial court found in Appellants' favor on the UTPCPL claim.[4]

         The Yenchis appealed. Among the issues presented to the Superior Court was the dismissal of the breach of fiduciary duty claim. With respect to this issue, the Superior Court agreed with the Yenchis that the trial court erred in focusing exclusively on the nature of the relationship in question (that of a buyer and seller of insurance) and the Yenchis' retention of decision-making authority over their investments. Yenchi v. Ameriprise Fin., Inc., 123 A.3d 1071, 1080-81 (Pa. Super. 2015). The Superior Court acknowledged that Pennsylvania appellate courts have always considered the existence of a confidential relationship[5] to be dependent upon the facts of each particular case, as it cannot be "reduced to a catalogue of specific circumstances, invariably falling to the left or right of a definitional line." Id. at 1080 (citing In re Estate of Scott, 816 A.2d 883, 885 (Pa. 1974)). As such, the Superior Court held that the trial court's focus on the insurance aspect of the relationship in this case "eliminates wholesale an entire category of commercial relationships without properly accounting for the fact-sensitive inquiry required by our case law." Id. In addition, the Superior Court held that the trial court's insistence that a fiduciary relationship may be established only when one party cedes decision-making control to the other was too rigid, as prior cases have recognized fiduciary relationships upon a showing of an "overmastering influence, " and thus the standard for the establishment of a fiduciary relationship "can be met with evidence less absolute than a complete cession of decision-making authority." Id.

         Judge Lazarus filed a dissenting opinion, indicating that the "relationship created by a commercial, arm's-length transaction" is "not ordinarily confidential by law." Id. at 1085 (Lazarus, J., dissenting) (citing Wisniski v. Brown & Brown Ins. Co., 906 A.2d 571, 578-79 (Pa. Super. 2006)). Judge Lazarus noted that the Yenchis knew and understood that they were developing a relationship with an American Express employee who sold insurance and financial products and provided fee-based financial planning advice. Id. at 1085. Because the Yenchis made each decision to purchase a product from Holland, as indicated by their signatures authorizing the purchases, they never ceded decision-making authority to him. Id. at 1086.

         This Court granted discretionary review to consider whether the Superior Court erred in reversing the decision of the trial court to grant summary judgment in favor of Appellants on the grounds that the Yenchis had not adduced sufficient evidence to establish a prima facie case that a fiduciary relationship existed between the parties. Yenchi v. Ameriprise Fin., Inc., 134 A.3d 51 (Pa. 2016) (per curiam).[6] On this issue, Appellants contend that the Superior Court erred in determining that the Yenchis presented sufficient evidence to create an issue of fact as to whether a fiduciary relationship existed with Holland. Appellants argue that in connection with consumer transactions, fiduciary relationships may exist only if one party cedes decision-making control to the other party. Appellants claim that if, as the Yenchis suggest, a fiduciary relationship may be created any time one party relies upon the superior skill, knowledge or expertise of the other party, then fiduciary relationships would arguably exist in virtually every consumer transaction, including with plumbers, mechanics and salespeople. According to Appellants, no such protections are necessary, since consumers have available to them other tort, contract, and statutory remedies, including, in particular, the UTPCPL.

         The Yenchis, conversely, argue that the Superior Court did not err, as decisions about the existence of fiduciary relationships are fact-intensive inquiries. The Yenchis contend that Appellants held themselves out as experts in financial and retirement planning matters, and that, by contrast, they had only high school educations and no experience working with a financial advisor. This substantial difference of relevant knowledge, the Yenchis insist, created a question of material fact as to whether their relationship with Holland was one so marked by dependence and inequality that it permitted him to take advantage of them. The Yenchis claim that they reasonably believed and trusted that Holland had prepared the Proposal, and later recommended the purchase of the 1996 whole life insurance policy, with their best interests in mind.

         Our scope and standard of review with respect to the grant of a motion for summary judgment is as follows:

'[S]ummary judgment is appropriate only in those cases where the record clearly demonstrates that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.' Atcovitz v. Gulph Mills Tennis Club, Inc., 571 Pa. 580, 812 A.2d 1218, 1221 (2002); Pa. R.C.P. No. 1035.2(1). When considering a motion for summary judgment, the trial court must take all facts of record and reasonable inferences therefrom in a light most favorable to the non-moving party. Toy v. Metropolitan Life Ins. Co., 593 Pa. 20, 928 A.2d 186, 195 (2007). In so doing, the trial court must resolve all doubts as to the existence of a genuine issue of material fact against the moving party, and, thus, may only grant summary judgment "where the right to such judgment is clear and free from all doubt." Id. On appellate review, then
an appellate court may reverse a grant of summary judgment if there has been an error of law or an abuse of discretion. But the issue as to whether there are no genuine issues as to any material fact presents a question of law, and therefore, on that question our standard of review is de novo. This means we need not defer to the determinations made by the lower tribunals.
Weaver v. Lancaster Newspapers, Inc., 592 Pa. 458, 926 A.2d 899, 902-03 (2007) (internal citations omitted). To the extent that this Court must resolve a question of law, we shall review the grant of summary judgment in the context of the entire record. Id. at 903.

Summers v. Certainteed Corp., 997 A.2d 1152, 1159 (Pa. 2010).

         A motion for summary judgment is based on an evidentiary record that entitles the moving party to a judgment as a matter of law. Pa.R.C.P. 1035.2, Note. Pursuant to Rule 1035.2(2), a court must enter judgment in favor of the moving party whenever the non-moving party, with the burden of proof at trial, fails to produce sufficient evidence to create a genuine issue of material fact as to a necessary element of the cause of ...

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