458 F.Supp.3d 1
D.D.C.2020Background
- Plaintiffs (Krukas, Kushim, Luke) are AARP members who purchased/renewed AARP-branded Medigap (supplemental Medicare) policies insured by UnitedHealthcare; plaintiffs allege AARP received a 4.95% payment (called a “royalty”) withheld from premiums and did not disclose it was effectively a commission.
- AARP entities at issue: AARP, Inc. (membership nonprofit), AARP Services, Inc. (ASI, taxable subsidiary that manages insurance contracts), and AARP Insurance Plan (AARP Trust, the group policyholder that collects premiums and remits them to United).
- Plaintiffs’ First Amended Complaint added Count II: breach of fiduciary duty (claims of nondisclosure and self-dealing to siphon 4.95%).
- Defendants moved to dismiss Count II under Rule 12(b)(6). The court applied the Iqbal/Twombly plausibility standard and dismissed Count II without prejudice.
- Court’s reasoning: plaintiffs failed to plausibly allege a fiduciary relationship as to any defendant — ASI had no direct relationship with plaintiffs; AARP, Inc.’s mass-membership, arm’s-length relationship did not create fiduciary duties; AARP Trust was neither an escrow agent nor did plaintiffs show they were trust beneficiaries (their benefits were incidental).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ASI owed a fiduciary duty to plaintiffs | ASI negotiated/oversaw insurance contracts and received part of the 4.95% fee, implying a fiduciary role | ASI had no direct contact with plaintiffs and performed ordinary business functions | Dismissed: no plausible fiduciary relationship alleged as to ASI |
| Whether AARP, Inc. owed fiduciary duties to members | AARP marketed itself as an unbiased advocate and designed/oversaw Medigap, creating trust/confidence | AARP is a large membership nonprofit; ordinary commercial/member relationship does not create fiduciary duties | Dismissed: arm’s-length, mass-market relationship insufficient to plead fiduciary duty |
| Whether AARP Trust was an escrow/depositor fiduciary | Trust collected premiums and remitted them to United, functioning like an escrow holding plaintiffs’ funds | An escrow requires an agreement conditioning transfer on events/conditions; Trust remitted premiums as due, not as escrow security | Dismissed: Trust not plausibly an escrow agent; no escrow-based fiduciary duty pleaded |
| Whether plaintiffs were beneficiaries of AARP Trust (trustee-beneficiary duty) | Plaintiffs claimed member-insureds had beneficial interest in Trust because it facilitated their policies/payments | Declaration of Trust shows primary purpose to assist AARP and prohibits distributions to member-insureds; plaintiffs’ benefits are incidental | Dismissed: plaintiffs are not plausible trust beneficiaries; incidental benefits insufficient |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: factual allegations must plausibly show liability)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must cross the plausibility threshold)
- Wood v. Moss, 572 U.S. 744 (2014) (Rule 12(b)(6) standard for evaluating complaint)
- Krukas v. AARP, Inc., 376 F. Supp. 3d 1 (D.D.C. 2019) (earlier opinion resolving other challenges to plaintiffs’ original complaint)
- Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928) (classic articulation of fiduciary duty and contrasts with arm’s-length dealings)
- Wagman v. Lee, 457 A.2d 401 (D.C. 1983) (escrow/depositor relationship is fiduciary)
- Ferguson v. Caspar, 359 A.2d 17 (D.C. 1976) (elements/characteristics of an escrow arrangement)
- Geiger v. Crestar Bank, 778 A.2d 1085 (D.C. 2001) (banks generally do not owe fiduciary duties to depositors)
- Jo Ann Howard & Assocs., P.C. v. Cassity, 868 F.3d 637 (8th Cir. 2017) (distinguishing beneficiaries entitled to trust distributions from incidental beneficiaries)