302 F. Supp. 3d 1303
M.D. Fla.2017Background
- Plaintiffs are small business owners who purchased life-insurance policies through Sea Nine-administered VEBA programs; IRS later classified these programs as listed transactions and assessed taxes/penalties.
- Plaintiffs allege American General (insurer) knew the VEBA programs were noncompliant, nevertheless marketed, provided advisor materials, and continued issuing policies through the programs.
- Plaintiffs sued in Florida state court asserting RICO, unfair competition, misleading advertising (§ 817.41), fraud (concealment and common law), FDUTPA, breach of fiduciary duty, constructive fraud, negligent misrepresentation, and aiding & abetting; case removed to federal court.
- The Court previously dismissed Plaintiffs’ RICO and aiding & abetting claims for failure to plead an enterprise distinct from the defendant; Plaintiffs moved for reconsideration.
- American General moved for summary judgment on remaining counts; Court considered contractual non-reliance clauses, insurance-law exemptions, agency/fiduciary issues, and disputed facts about marketing/authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RICO claim (Count I) pleaded an enterprise distinct from American General | Alleged third-party VEBA administrators and agents acted independently and pursued their own interests as an enterprise | Alleged RICO members were agents/employees of American General, not a distinct enterprise | Denied reconsideration; RICO dismissal affirmed (no distinct enterprise) |
| Whether aiding & abetting (Count VI) survives | Aiding & abetting liability arises from American General's knowledge and substantial assistance in wrongdoing (not limited to RICO) | Originally dismissed as tied to RICO; defendant contested scope | Reconsideration granted as to aiding & abetting; dismissal vacated |
| Unfair competition (Count II) | American General’s conduct was deceptive and caused consumer confusion | Plaintiffs do not compete with American General for the same customers | Summary judgment for defendant; Count II dismissed |
| Misleading advertising §817.41 (Count III) | Advertisements about the VEBA programs were misleading and not purely insurance sales | Advertising is exempt when made in connection with sales of insurance under §817.47 | Summary judgment for defendant; Count III dismissed as exempt |
| FDUTPA (Count VII) | Defendant’s conduct was deceptive/unfair trade practice | FDUTPA exempts activities regulated by insurance laws | Summary judgment for defendant; Count VII dismissed under insurance exemption |
| Fraud & Fraud by Concealment (Counts V & IV) | Plaintiffs relied on American General representations/material omissions about tax compliance | Defendant relies on non-reliance/ disclosure documents and that Plaintiffs were to obtain tax advice | Genuine factual disputes (non-reliance not universal; privity/authority issues). Summary judgment denied |
| Breach of fiduciary duty & constructive fraud (Counts VIII & IX) | American General created a special relationship by providing advisor materials, attending marketing meetings, and holding out expertise | Insurer argues no fiduciary relationship in an arm’s-length sale | Fact question for the jury whether a special fiduciary relationship arose; summary judgment denied |
| Negligent misrepresentation (Count X) | Agents made negligent misrepresentations, and American General is vicariously liable through apparent/actual authority | Defendant argues agents lacked authority for alleged statements | disputed issues of agency/apparent authority and prior inconsistent positions by defendant; summary judgment denied |
Key Cases Cited
- Ray v. Spirit Airlines, 836 F.3d 1340 (11th Cir. 2016) (corporate defendant cannot be both the RICO person and the enterprise)
- Global Quest, LLC v. Horizon Yachts, 849 F.3d 1022 (11th Cir. 2017) (contracts must expressly preclude fraud-based challenges to negate fraud claims)
- Anderson v. Liberty Lobby, 477 U.S. 242 (U.S. 1986) (summary judgment: genuine dispute definition)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (movant’s initial burden on summary judgment)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (U.S. 1986) (nonmoving party must present evidence creating genuine issue)
- New Hampshire v. Maine, 532 U.S. 742 (U.S. 2001) (judicial estoppel / consistency in positions)
- Berges v. Infinity Ins., 896 So.2d 665 (Fla. 2004) (insurer owes duty of good faith; fiduciary considerations)
- Almerico v. RLI Ins., 716 So.2d 774 (Fla. 1998) (apparent agency test for insurer liability)
- Gilchrist Timber Co. v. ITT Rayonier, 696 So.2d 334 (Fla. 1997) (adoption of Restatement §552 for negligent misrepresentation)