United States District Court, M.D. Pennsylvania
TIMOTHY AND ANN DOLAN, et. al., Plaintiffs,
PHL VARIABLE INSURANCE COMPANY, et. al., Defendants.
Richard Caputo, United States District Judge.
before this Court are four (4) motions to dismiss
Plaintiffs' Amended Complaint (Doc. 56) filed by
Defendants Allianz Life Insurance Company of North America
(“Allianz”) (Doc. 64), North American Company For
Life and Health Insurance (“North American”)
(Doc. 65), PHL Variable Insurance Company (“PHL”)
(Doc. 66), and Forethought Life Insurance Company
(“Forethought”) (Doc. 67) (collectively
“Defendants”). Because the Amended Complaint
fails to comport with Federal Rule of Civil Procedure 9(b)
and fails to adequately plead a claim under the UTPCPL, Count
I of the Amended Complaint will be dismissed without
prejudice. Count II of the Amended Complaint will also be
dismissed without prejudice because Plaintiffs have failed to
adequately plead a fiduciary or confidential relationship
between the parties. Finally, Count III of the Amended
Complaint will be dismissed with prejudice because
Plaintiffs' negligence claims are barred by the economic
facts, as set forth in Plaintiffs' Amended Complaint
(Doc. 56), are as follows: Plaintiffs Timothy and Ann Dolan,
the Estate of Jean Dolan, Raymond and Elizabeth Flannery,
Robert and Linda Gruner, Virginia Hetherington, and Carmen
Fierro (collectively "Plaintiffs") are alleged
victims of a scheme perpetrated by a registered financial
advisor, Joseph S. Hyduk (“Hyduk”), and his
company BNA Financial Services (“BNA”).
aver that Hyduk separately targeted each Plaintiff, held
himself out as an agent of Defendants, and specifically
presented each Plaintiff with investment opportunities with
Defendants. Hyduk explained to Plaintiffs that their purchase
of annuities with Defendants would be a safe investment
option without risk to principal. Further, Hyduk explained to
Plaintiffs that the minimum guaranteed return on these
annuities would be one percent. Plaintiffs allege that to
convince them to purchase annuities issued by Defendants,
Hyduk would often present Plaintiffs with pro forma
statements prepared by Defendants, indicating the projected
returns Plaintiffs would receive on their investment. Those
statements allegedly helped convince Plaintiffs to rollover
their existing investments to products issued by Defendants.
Notably, Plaintiffs do not aver that the pro formas
provided false information.
purchase annuities issued by Defendants, Plaintiffs were
required to complete applications. After having their
applications approved, Plaintiffs, through Hyduk, would
purchase annuities issued by Defendants. These purchases
would be accompanied by rollover forms identifying the
current plan information and the account being transferred.
the purchase of an annuity, Hyduk would manipulate Plaintiffs
into selling their investment for his own gain. Hyduk
profited by having his clients take withdrawals subject to
substantial fees and penalties from their annuities issued by
Defendants. After receiving the refund checks, instead of
purchasing alternative investment products, Hyduk would keep
those funds for his own benefit. Defendants also profited
from Hyduk's actions because they retained fees related
to Plaintiffs early withdrawal.
claim that Hyduk's rate of early withdrawals was
unusually high and should have put Defendants on notice that
Hyduk was not operating according to industry standards or in
the best interest of their customers. The withdrawals
generally occurred within the first few years following the
purchase of Defendants' annuities, thus causing
Plaintiffs to incur substantial surrender fees in connection
with these transactions. It is unclear what industry standard
Plaintiffs rely on and whether defendants were able to deny
potentially fraudulent withdrawal requests.
further allege that Defendants ignored countless “red
flags” that may have suggested that Hyduk was
defrauding his clients. Specifically, Plaintiffs allege that
Defendants ignored numerous transactions where the sale of
annuities by Hyduk's clients resulted in substantial
surrender charges. Defendants also purportedly disregarded
that Hyduk's clients' repeated withdrawal requests
were often unaccompanied by rollover forms authorizing the
transfer of funds to purchase different investments offered
by other financial service providers. According to
Plaintiffs, the volume of transactions in which Hyduk's
victims requested withdrawals in the absence of rollover
forms was atypical and signaled a likelihood of criminal
activity. Yet, despite the absence of rollover information,
Defendants and their respective compliance departments failed
to investigate Hyduk or otherwise question the provision of
services by their authorized agent. Again, it is unclear what
standard is used by Plaintiffs to deem Defendants'
also allege that Hyduk converted the withdrawn funds for his
own use by asking Plaintiffs to endorse checks for the funds
directly to him. Defendants, however, allegedly ignored the
fact that the withdrawal forms were not signed by the annuity
holder, and failed to conduct any due diligence as to the
conduct of Hyduk and the circumstances of these withdrawal
bottom, Plaintiffs allege that, although numerous warning
signs existed, Defendants failed to conduct even minimal due
diligence with respect to Hyduk's operations.
October 16, 2013, Hyduk's company was raided by the
Federal Bureau of Investigation. On August 4, 2014, charges
were filed against Hyduk in this Court.Subsequently,
Hyduk pled guilty to tax evasion and wire fraud. On July 30,
2015, he was sentenced to more than five years in prison In
light of the foregoing events, on November 13, 2015,
Plaintiffs filed a three-count Complaint (Doc. 1) against
Defendants. Plaintiffs' Complaint was dismissed in its
entirety without prejudice on November 22, 2016 due to its
failure to comply with Federal Rules of Civil Procedure 8 and
timely filed an Amended Complaint on December 13, 2016. The
Amended Complaint contains the following claims: (1) Count I
alleging violations of Pennsylvania's Unfair Trade
Practices and Consumer Protection Law (“UTPCPL”);
(2) Count II alleging a breach of fiduciary duties by
Defendants; and (3) Count III alleging negligence. These are
the exact claims contained in Plaintiffs' original
Defendants have moved to dismiss all claims with prejudice.
(Docs. 64-67). These motions have been fully briefed and are
ripe for disposition.
Motion to Dismiss
Rule of Civil Procedure 12(b)(6) provides for the dismissal
of a complaint, in whole or in part, for failure to state a
claim upon which relief can be granted. See Fed. R.
Civ. P. 12(b)(6). When considering a Rule 12(b)(6) motion,
the Court's role is limited to determining if a plaintiff
is entitled to offer evidence in support of their claims.
See Semerenko v. Cendant Corp., 223 F.3d 165, 173
(3d Cir. 2000). The Court does not consider whether a
plaintiff will ultimately prevail. Id. A defendant
bears the burden of establishing that a plaintiff's
complaint fails to state a claim. See Gould Elecs. v.
United States, 220 F.3d 169, 178 (3d Cir. 2000).
pleading that states a claim for relief must contain . . . a
short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed.R.Civ.P. 8(a). The
statement required by Rule 8(a)(2) must give the defendant
fair notice of what the . . . claim is and the grounds upon
which it rests. Erickson v. Pardus, 551 U.S. 89, 93,
127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127
S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Detailed f actual
allegations are not required. Twombly, 550 U.S. at
555, 127 S.Ct. 1955. However, mere conclusory statements will
not do; “a complaint must do more than allege the
plaintiff's entitlement to relief.” Fowler v.
UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009).
Instead, a complaint must “show” this entitlement
by alleging sufficient facts. Id. “While legal
conclusions can provide the framework of a complaint, they
must be supported by factual allegations.” Ashcroft
v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173
L.Ed.2d 868 (2009). As such, “[t]he touchstone of the
pleading standard is plausability.” Bistrian v.
Levi, 696 F.3d 352, 365 (3d Cir. 2012).
inquiry at the motion to dismiss stage is “normally
broken into three parts: (1) identifying the elements of the
claim, (2) reviewing the complaint to strike conclusory
allegations, and then (3) looking at the well-pleaded
components of the complaint and evaluating whether all of the
elements identified in part one of the inquiry are
sufficiently alleged.” Malleus v. George, 641
F.3d 560, 563 (3d Cir. 2011).
is appropriate only if, accepting as true all the facts
alleged in the complaint, a plaintiff has not pleaded
“enough facts to state a claim to relief that is
plausible on its face, ” Twombly, 550 U.S. at
570, 127 S.Ct. 1955, meaning enough factual allegations
“‘to raise a reasonable expectation that
discovery will reveal evidence of'” each necessary
element. Phillips v. County of Allegheny, 515 F.3d
224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S.
at 556, 127 S.Ct. 1955). “The plausibility standard is
not akin to a ‘probability requirement, ' but it
asks for more than a sheer possibility that a defendant has
acted unlawfully.” Iqbal, 556 U.S. at 678, 129
S.Ct. 1937. “When there are well-pleaded factual
allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement
to relief.” Id. at 679, 129 S.Ct.
deciding a motion to dismiss, the Court should consider the
allegations in the complaint. In addition to the allegations
found in the complaint, the court may examine “exhibits
attached to the complaint, matters of public record, ”
and “legal arguments presented in memorandums or briefs
and arguments of counsel.” Mayer, 605 F.3d at
230; Pryor, 288 F.3d at 560. Additionally, the Court
may consider “undisputedly authentic” documents
when the plaintiff's claims are based on the documents
and the defendant has attached copies of the documents to the
motion to dismiss. Am. Corp. Soc. v. Valley Forge Ins.
Co., 424 Fed.App'x. 86 (3d Cir. 2011) (citing
Pension Benefit Gaur. Corp. v. White Consol. Indus.,
998 F.2d 1192, 1196 (3d Cir. 1993)). A Court may also
consider a “document integral or explicitly relied upon
in the complaint.” In Re Burlington Coat
Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)
(Alito, J.). At bottom, documents may be examined by this
Court when ruling on a motion to dismiss when Plaintiff had
proper notice of the existence of the documents. Id.
The Court need not assume the plaintiff can prove facts that
were not alleged in the complaint, see City of Pittsburgh
v. W. Penn Power Co., 147 F.3d 256, 263 & n.13 (3d
Cir. 1998), or credit a complaint's “‘bald
assertions'” or “‘legal
conclusions.'” Morse v. Lower Merion Sch.
Dist., 132 F.3d 902, 906 (3d Cir. 1997) (quoting In
re Burlington Coat Factory Sec. Litig., 114 F.3d 1410,
1429-30 (3d Cir. 1997)).
advance a number of identical arguments seeking dismissal
of the Amended Complaint in its entirety.
The Amended Complaint's Compliance with the Federal Rules
of Civil Procedure
Federal Rule of Civil Procedure 9(b)
first argue that Counts I and II of Plaintiffs' Amended
Complaint should be dismissed for non-compliance with Federal
Rule of Civil Procedure 9(b). Remember, Rule 9(b) was fatal
to Plaintiffs' original complaint. Defendants contend
that many of the ...