Opinion
CV-21-82-GF-BMM
2022-04-08
Roy B. VOLK, Plaintiff, v. NEW YORK LIFE INSURANCE COMPANY and Does 1-10, Defendants.
Dennis P. Conner, Gregory Gerard Pinski, James Robert Conner, Keith D. Marr, Conner & Marr, PLLP, Great Falls, MT, Jason T. Holden, Katie Rose Ranta, Jean E. Faure, Faure Holden Attorneys at Law PC, Great Falls, MT, for Plaintiff. Peter F. Habein, John W. Harkins, IV, Crowley Fleck PLLP, Billings, MT, for Defendant New York Life Insurance Company.
Dennis P. Conner, Gregory Gerard Pinski, James Robert Conner, Keith D. Marr, Conner & Marr, PLLP, Great Falls, MT, Jason T. Holden, Katie Rose Ranta, Jean E. Faure, Faure Holden Attorneys at Law PC, Great Falls, MT, for Plaintiff.
Peter F. Habein, John W. Harkins, IV, Crowley Fleck PLLP, Billings, MT, for Defendant New York Life Insurance Company.
ORDER
Brian Morris, Chief District Judge
INTRODUCTION
Defendant New York Life Insurance Company ("NYLIC") has filed a Motion to Dismiss Plaintiff Roy B. Volk's ("Roy Jr.") Complaint (Doc. 1) pursuant to Fed. R. Civ. P. 12(b)(6). (Doc. 5). The Court held a hearing on the matter on December 14, 2021. For the following reasons, the Motion is GRANTED in part, and DENIED in part. BACKGROUND
Roy Jr. is the son of Roy C. Volk ("Roy Sr.") and Pamela Volk. (Doc. 1 at ¶ 7). Roy Sr. and Pamela divorced in December of 2011. Id. Roy Sr. and Pamela executed a marital settlement agreement in which Roy Sr. agreed to execute a will naming his son, Roy Jr., as the beneficiary of his entire estate. Id. at ¶ 8.
Roy Sr. had two term life insurance policies through New York Life worth $1,000,000 and $1,500,000 at the time of the divorce. Id. at ¶ 9. Roy Sr. disclosed only the $1,000,000 policy in the marital settlement agreement. Id. Both policies listed Pamela as the beneficiary before the divorce. Id. at 10.
Roy Sr. changed the beneficiary of the NYLIC policies to his sister, Valerie Goeser ("Goeser"), during the pendency of the divorce. Id. at 13. Roy Jr. contends that the beneficiary change to Goeser facilitated by NYLIC violated the automatic "economic restraining order" imposed by Mont. Code Ann. § 40-4-121(3). Id. at 11-12. The parties discovered the beneficiary designation to Goeser after Roy Sr. died unexpectedly on April 20, 2012. Id. at 14.
Pamela has filed previous claims in Montana State District Court on behalf of Roy Jr. who was a minor at the time. The Montana Supreme Court set aside Roy Sr.’s improper removal of Pamela as a life insurance beneficiary. Volk v. Goeser , 382 Mont. 382, 367 P.3d 378, 391 (2016). The Montana Supreme Court determined that Goeser had been unjustly enriched from the life insurance proceeds and imposed a constructive trust for the life insurance proceeds in favor of Roy Jr. Id.
Roy Jr. now brings this action pursuant to Mont. Code Ann. § 40-4-121(3)(b) against NYLIC for improperly changing Roy Sr.’s life insurance beneficiary to the detriment of Roy Jr. (Doc. 1 at ¶ 11). Roy Jr. also asserts claims of negligence and declaratory judgment under 28 U.S.C. § 2001, et seq. , asking that the Court declare invalid the beneficiary designation change.
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of a complaint under the plausibility pleading standard of Rule 8(a)(2). See Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001). Dismissal proves appropriate under Rule 12(b)(6) where the complaint fails to state a claim upon which relief can be granted. Mendiondo v. Centinela Hospital Med. Ctr. , 521 F.3d 1097, 1104 (9th Cir. 2008). A court may dismiss a complaint "based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1988).
The Court will accept the plaintiff's allegations "as true" and "construe them in light most favorable to plaintiffs" when deciding a motion to dismiss. Kopeikin v. Moonlight Basin Management, LLC , 981 F. Supp. 2d 936, 939 (D. Mont. 2013) (citations omitted). The complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face to survive a Rule 12(b)(6) motion. Ashcroft v. Iqbal , 556 U.S. 662, 129 S. Ct. 1937, 173 L.Ed.2d 868 (2009). A claim remains plausible on its face when "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678, 129 S. Ct. 1937. The plausibility standard does not require probability, but "asks for more than sheer possibility that defendant has acted unlawfully." Id. A court sitting in diversity jurisdiction applies the substantive law of the forum state." Her Majesty Queen in Right of Province of British Columbia v. Gilbertson , 597 F.2d 1161, 1163 (9th Cir. 1979).
ANALYSIS
I. Whether collateral estoppel bars Roy Jr.’s claims.
Federal courts must give state court judgements the same preclusive effect "that the judgment would be given by the courts of the state in which the judgment was rendered." Leonard v. Doyle , 2013 WL 4875033, *4 (D. Mont. Sept. 11, 2013). Collateral estoppel prevents a party from relitigating the same issue decided in a prior judgment. Baltrusch v. Baltrusch , 331 Mont. 281, 130 P.3d 1267, 1273-74 (2006). Collateral estoppel in Montana applies in the following circumstances: "(1) the identical issue raised was previously decided in a prior adjudication; (2) a final judgment on the merits was issued in the prior adjudication; (3) the party against whom the plea is asserted was a party or in privity with a party to the prior adjudication; and (4) the party against whom preclusion is now asserted was afforded a full and fair opportunity to litigate the issue." Poplar Elem. Sch. Dist. No. 9 v. Froid Elem. Sch. Dist. No. 65 , 401 Mont. 152, 471 P.3d 57, 66 (2020).
NYLIC argues that the Montana Supreme Court decision in Volk , 367 P.3d 378, prevents Roy Jr. from bringing his present claims. (Doc. 6 at 9-13). The Montana Supreme Court faced the issue of "[w]hether the District Court erred when it granted summary judgment to [Goeser], and denied the imposition of a constructive trust on life insurance proceeds in favor of RBV, a minor child." Id. at 381. The Montana Supreme Court set aside Roy Sr.’s improper removal of Pamela as beneficiary and determined that Goeser had been unjustly enriched. Id. at 387-88, 391. The Montana Supreme Court imposed a constructive trust as the proper remedy. Id. The Montana Supreme Court relied on the automatic restraining order in Mont. Code Ann. § 40-4-121(3)(b) to determine that the beneficiary change violated the statute. Id. at 387. The Montana Supreme Court did not address the question of whether NYLIC had breached its duty.
Roy Jr. now alleges that NYLIC, and through its agents, breached its duties of "loyalty, honesty, integrity, good faith, full-disclosure, and avoidance of self-dealing and conflicts." (Doc. 1 at ¶ 14). Roy Jr. further alleges that NYLIC breached its duty of reasonable care to "hire, supervise, control, and retain agents," and by violating § 40-4-121(3)(b) ’s automatic temporary restraining order. Id. at ¶¶ 15-17. Roy Jr. never raised these allegations in the state court action. To the extent that Roy Jr.’s claims fall outside a determination of the validity of the beneficiary designation, the issues differ between the two proceedings.
NYLIC insists that Roy Jr. had the opportunity, and was obligated, to bring claims against it in Volk . The use of defensive collateral estoppel "gives a plaintiff a strong incentive to join all potential defendants in the first action if possible." Collins v. D.R. Horton, Inc. , 505 F.3d 874, 881 (9th Cir. 2007). The claims against NYLIC did not ripen, however, until the Montana Supreme Court ruled in Volk that Goeser had been unjustly enriched by the improper beneficiary change. A potential negligence claim arose for Roy Jr. only after the beneficiary designation to Goeser had been deemed improper. Roy Jr.’s negligence claims survive collateral estoppel.
II. Whether the statute of limitations bars Roy Jr.’s claims.
NYLIC argues that the statute of limitations bars Roy Jr.’s claims. Roy Jr. asserts in his Complaint (Doc. 1) claims for negligence and declaratory judgment that NYLIC's beneficiary designation violated Mont. Code Ann. § 40-4-121(3)(b). Id. at ¶¶ 14-19. Montana's statute of limitation for negligence claims is three years. Mont. Code Ann. § 27-2-204(2). Montana's statute of limitations for a statutory violation is two years. Mont. Code Ann. § 27-2-211(1)(c).
NYLIC insists the statute of limitations began running on December 21, 2011, the date on which Pamela and Roy Sr.’s divorce became final. (Doc. 6 at 13). The statute of limitations tolls, however, on a minor's claims until the minor reaches age eighteen. Mont. Code Ann. § 27-2-401(1). Plaintiffs seeking to toll the statute of limitations must include an allegation of minority in the pleadings. Wasco Products, Inc. v. Southwall Technologies, Inc. , 435 F.3d 989, 991 (9th Cir. 2006). NYLIC has stipulated in its reply brief, however, for purposes of this motion that Roy Jr.’s birthdate was in October 2000. (Doc. 13 at 14). Accordingly, the statute of limitations began running in October 2018. Roy Jr. filed this suit on July 19, 2021, "two years, eight months, and twenty-eight days after his [eighteenth] birthday." (Doc. 1; Doc. 11 at 8). Roy Jr.’s claims for negligence have been filed within the three-year timeframe set forth by the statute of limitations. Roy Jr.’s declaratory judgment claim, on the other hand, falls outside the two-year statute of limitations timeframe for a statutory violation. Mont. Code Ann. § 27-2-211(1)(c).
III. Whether Mont. Code Ann. § 72-2-814(7) protects NYLIC's payment.
NYLIC asserts that it remains immune from suit under Mont. Code Ann. § 72-2-814(7). The statute provides that a payor is not liable for having made a payment to a beneficiary in an instrument affected by a divorce, or for having taken another action in good faith in reliance on the instrument, "before the payor or other third party received written notice of the divorce." Id. A payor has no duty to "inquire to the continued marital relationship between the decedent and a beneficiary" or to "seek any evidence" of the marital relationship. Id.
Roy Jr. alleges in his Complaint that NYLIC knew of Roy Sr.’s pending divorce, nonetheless changed the beneficiary of the life insurance policy to Goeser, and eventually paid Goeser the proceeds. (Doc. 1 at ¶¶ 12-15, 18). NYLIC insists that the failure of Roy Jr. or Goeser to provide written notice of the devise immunizes it from suit. (Doc. 6 at 15). NYLIC further argues that it had no duty to seek such information regarding Roy Sr.’s mental status. (Doc. 6 at 15). It remains unclear what kind of notice NYLIC may have had of Roy Sr.’s mental status. Any evidence of notice that would provide immunity to NYLIC under Mont. Code Ann. § 72-2-814(7) can be developed through discovery. Until that point, Roy Jr.’s negligence claims remain plausible. Ashcroft , 556 U.S. at 678, 129 S.Ct. 1937.
IV. Whether NYLIC violated Mont. Code Ann. § 40-4-121(3)(b).
Mont. Code Ann. § 40-4-121(3)(b) imposes a temporary economic restraining order on parties in divorce proceedings during the pendency of a divorce. The temporary restraining order restrains "both parties from cashing, borrowing against, canceling, transferring, disposing of, or changing the beneficiaries of any insurance or other coverage, including life, health, automobile, and disability coverage held for the benefit of a party or a child of a party for whom support may be ordered." Mont. Code Ann. § 40-4-121(3)(b) (emphasis added). A plain reading of the statute indicates that the temporary restraining order applies only to the parties of the divorce. Roy Jr. concedes that he does not allege that NYLIC violated this statute or that the statute provides him a direct cause of action against NYLIC. (Doc. 11 at 10). Roy Jr. claims instead to cite the statute in the Complaint to establish that NYLIC had a duty to know the law and breached that duty. Id. Specifically, Roy Jr. attempts to show that NYLIC knew of the divorce, that NYLIC knew or should have known that a beneficiary change at the time would be unlawful, and that NYLIC still assisted in the beneficiary change. Id. Based on Roy Jr.’s concessions and § 40-4-121(3)(b) ’s lack of applicability to NYLIC, the Court concludes that § 40-4-121(3)(b) fails to provide Roy Jr. a statutory cause of action.
V. Whether an actual, present, and justiciable controversy exists to support a declaratory judgment claim.
Roy Jr. alleges in his Complaint that he is entitled to a "declaratory judgment under 28 U.S.C. § 2201, et seq. , that Defendant's beneficiary designation change is invalid." (Doc. 1 at ¶ 20). Section 2201(a) gives federal courts the power to "declare the rights and other legal relations" to parties seeking a declaration in a "case of actual controversy within its jurisdiction." The threshold question for courts in awarding declaratory relief is "whether there is an actual case or controversy within its jurisdiction." Mitchell v. First Call Bail and Surety, Inc. , 425 F.Supp.3d 1256, 1260 (D. Mont. 2019). For purposes of determining whether a declaratory judgment action presents a justiciable case or controversy, courts examine "whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Shell Gulf of Mexico Ins. v. Center for Biological Diversity, Inc. , 771 F.3d 632, 635 (9th Cir. 2014).
The Montana Supreme Court determined, as described above, that Roy Sr.’s beneficiary changes to the life insurance policies were improper and that the designations were to be returned to the "status quo" as they were before the dissolution of Pamela and Roy Sr.’s marriage. Volk , 367 P.3d at 387-88. Pamela was deemed the rightful beneficiary of the life insurance proceeds "in order to promote the fairness and equity the statute intended to provide and the agreements that Roy [Sr.] made to support his children." Id. The Montana Supreme Court determined that Goeser had been unjustly enriched from the payment of the life insurance proceeds and imposed a constructive trust on the proceeds of the two policies in favor of Roy Jr. Id. at 390-91.
NYLIC argues that no present controversy exists as to the validity of the designation change after the Montana Supreme Court's ruling in Volk , 367 P.3d 378. (Doc. 6 at 18). Roy Jr. asks this Court to invalidate the beneficiary designation on the life insurance policies. The Montana Supreme Court already has granted him this relief in Volk , 367 P.3d at 387-88, when it determined that the beneficiary changes to the policies had been improper, reestablished Pamela as the rightful beneficiary, and imposed a constructive trust to Roy Jr. for the proceeds of the policies. No actual case or controversy remains regarding the validity of the beneficiary designation change. A declaratory judgment of such nature by this Court would be "superfluous" and "serve[s] no useful purpose." See Exxon Shipping Co. v. Airport Depot Diner, Inc. , 120 F.3d 166, 168-169 (9th Cir. 1997). VI. Whether NYLIC owed a duty to Roy Jr.
NYLIC argues that Roy Jr.’s Complaint (Doc. 1) lacks sufficient facts to support his conclusory allegations that NYLIC owed him a duty. (Doc. 6 at 21). The existence and scope of a legal duty represents a question of law. Mid Continent Cas. Co. v. Engelke , 337 F.Supp.3d 933, 946 (D. Mont. 2018). The Court has an obligation to accept the factual allegations in the pleadings as true for a motion to dismiss. Kopeikin , 981 F. Supp. 2d at 939. The Court need not accept legal conclusions as true. Commonwealth Edison Co. v. State , 189 Mont. 191, 215, 615 P.2d 847, 860 (Mont. 1980).
NYLIC contends that the Roy Jr. fails to allege any facts to suggest that a relationship existed between the two parties to establish a duty of care. (Doc. 6 at 22). No dispute exists that NYLIC owed a duty to Roy Sr. as the insured. Further, as determined by the Montana Supreme Court, Pamela has been restored as beneficiary of policy. The Montana Supreme Court placed the funds from any proceed payouts in a constructive trust for Roy Jr. in accordance with Roy Sr.’s wishes. As noted by NYLIC, Roy Jr. was not insured by NYLIC and was not the listed beneficiary of the policy at any time, including after the ruling in Volk . Accordingly, the critical question that remains is whether NYLIC, as the life insurance agent, owed a duty to Roy Jr., as an intended beneficiary of Roy Sr.’s estate and constructive trust owner over the life insurance policy proceeds.
NYLIC points to federal case law to demonstrate that it owed no duty to Roy Jr. In Luis v. Metropolitan Life Ins. Co. , 142 F.Supp.3d 873 (N.D. Cal. 2015), a surviving spouse brought suit against MetLife after the proceeds of her husband's life insurance policy were distributed to a third party. MetLife had either misrepresented that she was a beneficiary or failed to inform her that she was not a beneficiary. Id. at 883. The court determined that, because the surviving spouse was never the insured or listed as the beneficiary on the policy, MetLife owed her no duty. Id. The court considered the wife a "stranger to the life insurance policy." Id.
Luis differs factually from the circumstances here. No dispute exists that the life insurance policy ever listed Roy Jr. as the direct beneficiary. NYLIC has made no misrepresentation to Roy Jr. that he ever was listed on the policy. Roy Sr.’s long-term intent, as demonstrated in the marital settlement agreement, was to provide his entire estate to Roy Jr. (Doc. 1 at ¶ 8). The Montana Supreme Court's imposition of a constructive trust in Roy Jr.’s name for the proceeds of the insurance policy indicates that he was not merely a "stranger" to the policy. Luis , 142 F.Supp.3d at 883.
NYLIC also cites to the decision of the Montana Supreme Court case in Harrison v. Lovas , 356 Mont. 380, 234 P.3d 76 (2010), to support its claim of no duty. In that case, a married couple attempted to make amendments to a trust for their children. Id. at 77. The couple met with an attorney to discuss changes to the trust that would have given three of the couple's children additional assets at the expense of the other two. Id. In order to make these changes, the attorney requested that the couple provide her with additional information. Id. The couple died before providing the attorney with the requested documents and the trust remained unchanged. Id. The three children who would have benefited from the change filed suit against the attorney for malpractice. Id. The Montana Supreme Court ruled that the plaintiff's claim rested entirely on "potential unexecuted amendment" and that plaintiffs had "no legal entitlement to" a revised beneficiary status. Id. at 78. The attorney owed no duty to plaintiffs without such status or an attorney-client relationship. Id.
NYLIC argues that Roy Jr. had "hope for, but no legal entitlement to" status as a beneficiary because Roy Jr.’s status is premised on "potential, unexecuted" change of beneficiary. Id. ; (Doc. 6 at 25). This case differs. NYLIC's conduct was not merely a "potential, unexecuted" change of beneficiary. Harrison , 234 P.3d at 78. NYLIC did change the policy beneficiary and the Montana Supreme Court awarded Roy Jr. the constructive trust of the proceeds.
In Watkins Trust v. Lacosta , 321 Mont. 432, 92 P.3d 620 (2004), a non-client beneficiary of an estate alleged that trust documents had been improperly prepared. The nonparty beneficiary claimed that the attorney owed a duty. Id. at 625-26. The Montana Supreme Court concluded that the question of whether the named beneficiary had standing to bring the legal malpractice action presented a "factual issue that must be determined at trial, thus precluding summary judgment." Id. at 626. The case at hand seems analogous to Watkins . The policy never named Roy Jr. as beneficiary. The Montana Supreme Court already has determined that the proceeds nonetheless pass to Roy Jr. through constructive trust. Roy Jr. cannot be said to have "no legal entitlement to" the revised beneficiary status that would excuse NYLIC from owing any duty to him.
Roy Jr. provides case law to support his claim that insurance companies owe a duty of care to intended beneficiaries. See, e.g., United Olympic Life Ins. Co. v. Gunther , 19 F.3d 1441 (9th Cir. 1994) ; Pitts v. Farm Bureau Life Ins. Co. , 818 N.W.2d 91 (Iowa 2012) ; Vestal v. Pontillo , 183 A.D.3d 1146, 124 N.Y.S.3d 441, 446 (2020) ; Khalaf v. Bankers & Shippers Ins. Co. , 404 Mich. 134, 273 N.W.2d 811 (1978). The Montana Supreme Court never used the term "intended beneficiary" in Volk when it awarded the constructive trust to Roy Jr. It remains plausible based on the Volk ruling and the marital settlement agreement that Roy Jr., in fact, qualified as an intended beneficiary. The Court cannot conclude that NYLIC owed no duty to Roy Jr. Accordingly, the Court has not been persuaded at this juncture to dismiss Roy Jr.’s claims for NYLIC's alleged lack of a legal duty.
ORDER
Accordingly, IT IS ORDERED that the motion (Doc. 5) is GRANTED in part , and DENIED in part .
1. Mont. Code Ann. § 40-4-121(3)(b) fails to provide Roy Jr. a statutory cause of action.
2. Roy Jr.’s claim for declaratory judgment is DISMISSED. The statute of limitations bars Roy Jr.’s claim for a statutory violation pursuant to Mont. Code Ann. § 27-2-211(1)(c). No case or controversy remains for Roy Jr.’s claim for declaratory judgment after the Montana Supreme Court decision in Volk v. Goeser , 382 Mont. 382, 367 P.3d 378, 391 (Mont. 2016).