Kerner v. Brighthouse Services, LLCKerner v. Brighthouse Services, LLC
GRANTING DEFENDANT‘S MOTION TO DISMISS AND
GRANTING PLAINTIFFS LEAVE TO AMEND
(Doc. 7)
On October 27, 2025, Allan Kerner and Robert Eddy (collectively, “Plaintiffs“) brought suit against Brighthouse Life Insurance Company (“Defendant“) in the Vermont Superior Court. On November 26, 2025, Defendant removed the action to this court on the basis of diversity jurisdiction. In their Complaint, Plaintiffs assert four claims against Defendant: negligence (Count I), consumer fraud in violation of the Vermont Consumer Fraud Act (the “VCFA“) (Count II), breach of fiduciary duty (Count III), and unconscionable penalty (Count IV).2
On December 3, 2025, Defendant moved to dismiss Plaintiffs’ Complaint. (Doc.
Plaintiffs are represented by Harold B. Stevens, III, Esq. Defendant is represented by Adam Mordecai, Esq.
I. Allegations in the Complaint.
Plaintiffs allege that, on or about July 18, 2007, Plaintiff Kerner entered into a variable annuity contract (“MetLife Contract“) with MetLife Investors USA Insurance Company (“MetLife“), using Plaintiff Eddy as his investment advisor. Approximately ten years later, in or around March 2017, MetLife allegedly “transferred or ‘spun off’ its annuity policies to [Defendant] to create two independent companies. The contracts were shifted to Defendant[] and thereafter ... guaranteed by Defendant[.]” (Doc. 10 at 2, ¶ 8.)
In July 2017, Plaintiffs allege that they requested the Brighthouse Annuity Contract and MetLife Contract to start income from Plaintiff Kerner‘s Individual Retirement Account Annuity (“IRA“) to meet required minimum distributions (“RMD“). Plaintiffs claim that, following a phone call with Defendant “requesting the necessary form to initiate lifetime income payments and satisfy the RMD requirements,” Defendant provided two forms: one for initiating lifetime income (“Variable Annuity Election Form“) and another for setting up RMD payments (“RMD Form“). Id. at ¶ 10. Plaintiffs assert that “[b]oth forms were duly signed and faxed together to Defendant [], without any income amounts specified. Accordingly, Defendant [] calculated all income payments.” Id. at ¶ 11.
Plaintiffs allegedly “recently discovered that Defendant [] made a negligent and unauthorized withdrawal[]” in an amount over the $15,230.16 RMD by $671.77, “which resulted in a penalty[]” and a decrease in Plaintiff Kerner‘s total guaranteed withdrawal amount from “$304,603.25 at 5% ($15,230.16 income per year for life)[] to $209,753.74 at 5% ($10,487.68 [income per year for life]).” Id. at 3, ¶¶ 12-13. Plaintiffs assert that “[t]he cause of the over withdrawal was Defendant[‘s] [] automated RMD program using their inflated RMD figure, which caused the fall in value and penalty.” Id. at ¶ 15.
According to Plaintiffs, the MetLife Contract contains the following penalty
“If a withdrawal results in cumulative withdrawal for the current Contract Year exceeding the Annual Benefit Payment, the Total Guaranteed Withdrawal Amount will be reduced by an amount equal to the difference between the Total Guaranteed Withdrawal Amount after the withdrawal and the Account Value after the withdrawal (if lower).”
Id. at ¶ 18 (internal quotation marks and citation omitted). Plaintiffs claim “[t]his penalty clause changed the income payment by reducing the income base to the account value which is a distinct measuring system of the annuity.” (Doc. 10 at 3, ¶ 19.) Plaintiffs further allege that Defendant “should have sent” Plaintiff Kerner “only one annuity withdrawal form for an IRA contract which would have handled both RMD and lifetime income instead of the two they sent for signature.” Id. at 4, ¶ 22. Plaintiffs note that “[t]he annuity lifetime withdrawal forms at many other annuity companies have a check box next to a statement that states ‘[i]t is not my intention to negatively impact my benefits by requesting this withdrawal. Please modify my request and withdraw the maximum amount available that will not negatively impact my living benefit.‘” Id. at 3-4, ¶ 20.
On or about February 28, 2025, Plaintiff Eddy allegedly notified “Stuart Reff at PKS Investments of the mistake by Defendant [] who confirmed the issue was with Defendant[.]” Id. at 4, ¶ 21. Plaintiffs claim that the penalty incurred “may cause” Plaintiff Kerner “to run out of his monthly funds in [six to seven] years, instead of being income for life.” Id. at ¶ 23. According to Plaintiffs, “[a]s a result of Defendant‘s negligence, consumer fraud[,] and breach of fiduciary duty,” Plaintiff Kerner “has been damaged by a substantial reduction of approximately $95,000.00 more or less[]” and, therefore, “Plaintiffs request a declaratory judgment that Defendant be held liable for the reduction in the value of the annuity income base and treble damages as the court shall deem just[.]” Id. at 5.
II. Conclusions of Law and Analysis.
A. Standard of Review.
To survive a motion to dismiss filed pursuant to
The sufficiency of a complaint under Rule 12(b)(6) is evaluated using a “two-pronged approach[.]” Hayden v. Paterson, 594 F.3d 150, 161 (2d Cir. 2010) (internal quotation marks omitted) (quoting Iqbal, 556 U.S. at 679). First, the court discounts legal conclusions and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements[.]” Iqbal, 556 U.S. at 678. The court is also “not bound to accept as true a legal conclusion couched as a factual allegation[.]” Id. (citation omitted). Second, the court considers whether the factual allegations, taken as true, “plausibly give rise to an entitlement to relief.” Id. at 679. This second step is fact-bound and context-specific, requiring the court “to draw on its judicial experience and common sense.” Id. The court does not “weigh the evidence” or “evaluate the likelihood” that a party will prevail. Christiansen v. Omnicom Grp., Inc., 852 F.3d 195, 201 (2d Cir. 2017).
B. Whether the Court May Consider Plaintiff Kerner‘s Affidavit.
In their opposition to the motion to dismiss, Plaintiffs cite an affidavit of Plaintiff Kerner, but no such affidavit has been filed with the court. Even if one had been filed, Plaintiffs cannot supplement their complaint in this manner in response to a
To their Complaint, Plaintiffs attach as exhibits the MetLife Contract, the Variable Annuity Election Form, and the RMD Form. “In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint.” DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (citation omitted). If there are any contradictions between these documents and Plaintiffs’ allegations, the documents will prevail. See Perry v. NYSARC, Inc., 424 F. App‘x 23, 25 (2d Cir. 2011) (“[T]he court must generally accept as true all of the factual assertions in the complaint. However, there is a narrow exception to this rule for factual assertions that are contradicted ... by documents upon which the pleadings rely[.]“) (internal citation omitted); Mumin v. City of N.Y., 760 F. Supp. 3d 28, 48 (S.D.N.Y. 2024) (“If a document relied on in the complaint contradicts allegations in the complaint, the document, not the allegations, control, and the court need not accept the allegations in the complaint as true.“) (internal quotation marks and citation omitted); see also Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 222 (2d Cir. 2004) (discrediting the complaint‘s allegations that were “belied” by documents attached to the complaint).
D. Whether Plaintiff Eddy Has Standing to His Bring Claims.
Defendant argues that, because Plaintiff Eddy is not a party to the MetLife Contract, “Plaintiff Eddy does not have the standing necessary to pursue any claims against [Defendant].” (Doc. 7-1 at 6.) Article III of the United States Constitution limits the jurisdiction of federal courts to “Cases” and “Controversies.”
“In addition to these core constitutional requirements, litigants must also satisfy prudential standing, which embodies judicially self-imposed limits on the exercise of federal jurisdiction.” Keepers, Inc. v. City of Milford, 807 F.3d 24, 39 (2d Cir. 2015) (internal quotation marks and citation omitted). “The doctrine of ‘prudential standing’ generally bars litigants from asserting the rights of third parties.” Id. at 46. The third-party standing bar “prevents ‘litigants from asserting the rights or legal interests of others simply to obtain relief from injury to themselves.‘” New York State Citizens’ Coal. for Child. v. Poole, 922 F.3d 69, 75 (2d Cir. 2019) (alteration adopted) (quoting Keepers, Inc., 807 F.3d at 40).
In accordance with those principles, “a non-party to [a] contract lacks standing to sue for breach” unless the non-party is a third-party beneficiary of the contract. Rynasko v. New York Univ., 63 F.4th 186, 194 (2d Cir. 2023). Plaintiff Eddy is neither a party to nor a third-party beneficiary of the MetLife Contract between Plaintiff Kerner and Defendant, and Plaintiffs do not contend otherwise. Instead, Plaintiffs assert that Plaintiff Eddy has standing because he “may be liable to [Plaintiff] Kerner for not disclosing the penalty clause in the RMD and for not warning [Plaintiff] Kerner of the withdrawal penalty[,]” which “may adversely impact his reputation as an investment advisor as an
In their Complaint, Plaintiffs also do not allege any facts indicating that Plaintiff Eddy suffered reputational harm from Defendant‘s alleged wrongful acts. As a result, such harm remains unalleged and a speculative possibility in the future. Moreover, it is unclear how such harm could be redressed by this action because Plaintiffs do not seek reputational harm damages.
For the foregoing reasons, the Complaint does not plausibly allege that Plaintiff Eddy has standing to bring suit against Defendant based on speculative, derivative harm that has not been plausibly alleged. Plaintiff Eddy‘s claims are therefore DISMISSED.
E. Whether Plaintiff Kerner‘s Claims Are Time-Barred by Vermont‘s Statute of Limitations.
Under Vermont‘s statute of limitations,5
Generally, “[the] statute of limitations begins to run when a party can sue on a cause of action.” Besaw, Tr. of Revocable Living Tr. of Ernest P. Giroux v. Giroux, 2018 VT 138, ¶ 19, 209 Vt. 388, 395, 205 A.3d 518, 523 (citations omitted). Defendant contends that Plaintiff Kerner‘s causes of action began to accrue in 2017, when Defendant gave him the Variable Annuity Election Form and RMD Form, because that is when “the alleged breach or actionable conduct occurred[.]” (Doc. 7-1 at 9.) However, Plaintiff Kerner argues that the discovery rule applies to his claims because “the penalty incurred was not discovered until February 28, 2023.” (Doc. 22 at 9.)
“The discovery rule postpones the accrual of a cause of action when the potential plaintiff is unaware that he has been injured at the time the wrongful conduct occurred.” Shovah v. Mercure, 44 F. Supp. 3d 504, 509 (D. Vt. 2014). Under the discovery rule, “accrual occurs upon ‘discovery of facts constituting the basis of the cause of action or the existence of facts sufficient to put a person of ordinary intelligence and prudence on inquiry which, if pursued, would lead to the discovery.‘” Sutton, 2022 VT 56, ¶ 81, 217 Vt. at 365, 295 A.3d at 404-05 (citation omitted). “In other words, discovery occurs and
“[T]he discovery rule applies whenever a limitations period does not set forth a determinable fact that triggers accrual.” Pike v. Chuck‘s Willoughby Pub, Inc., 2006 VT 54, ¶ 16, 180 Vt. 25, 32, 904 A.2d 1133, 1138 (citation omitted); see also JLD Props. of St. Albans, LLC v. Patriot Ins. Co., 576 F. Supp. 3d 172, 181 (D. Vt. 2021) (“Where, in context, the coverage triggering event took place on a date certain and the [p]olicy uses this date for the commencement of the limitations period, no discovery rule is necessary.“). “By contrast, where a limitations period simply refers to a set period of time from ‘accrual’ of the action, this requires additional factual inferences to determine the date on which the action accrued—namely, when the plaintiff discovered or should have discovered his or her injury.” Pike, 2006 VT 54, ¶ 16, 180 Vt. at 33, 904 A.2d at 1138 (citation omitted).
“Two common themes run through the cases applying the discovery rule of accrual,” which “is essentially a rule of equity.” The first is that the rule often applies “to types of actions in which it will generally be difficult for plaintiffs to immediately detect or comprehend” the wrongful conduct or the injury caused by that conduct; the second is that “courts have relied on the nature of the relationship between defendant and plaintiff to explain application of the delayed accrual rule,” and then generally applied the rule “to confidential or fiduciary relationships.”
Clarke v. Abate, 2013 VT 52, ¶ 24, 194 Vt. 294, 310, 80 A.3d 578, 587 (internal citation omitted).
Because “Vermont law ... generally applies [the] ‘discovery rule’ to actions under
In his Complaint, Plaintiff Kerner claims he “recently discovered” Defendant‘s alleged mistake and the resulting penalty. (Doc. 10 at 3, ¶ 12.) Although the statements from which he discovered Defendant‘s alleged mistake and the resulting penalty were dated April 1, 2018, and June 30, 2018, it is unclear when Plaintiff Kerner received or viewed those statements. It is also unclear when the surrender charges were applied to Plaintiff Kerner‘s IRA and when the subsequent reduction in the total guaranteed withdrawal amount occurred. As a result, the court cannot determine from the four corners of the Complaint whether Plaintiff Kerner‘s claims are time-barred by the statute of limitations as a matter of law.
For the foregoing reasons, the court DENIES Defendant‘s motion to dismiss on statute of limitations grounds.
F. Whether Plaintiff Kerner‘s Negligence Claim Should Be Dismissed (Count I).
Defendant argues that the economic loss rule bars Plaintiff Kerner‘s negligence claim because his “alleged losses are purely economic in nature.” (Doc. 7-1 at 6.) “Vermont has adopted the economic loss rule, which prohibits recovery under tort for economic losses which are not also accompanied by tangible, physical harm.” Hunt Const. Grp., Inc. v. Brennan Beer Gorman/Architects, P.C., 607 F.3d 10, 14 (2d Cir. 2010) (citing Breslauer v. Fayston Sch. Dist., 659 A.2d 1129, 1132 (Vt. 1995)). “The underlying premise of the economic loss rule is that negligence actions are best suited for ‘resolving claims involving unanticipated physical injury, particularly those arising out of an accident. Contract principles, on the other hand, are generally more appropriate for determining claims for consequential damage that the parties have, or could have, addressed in their agreement.‘” Springfield Hydroelectric Co. v. Copp, 779 A.2d 67, 70 (Vt. 2001) (citation omitted).
Plaintiff Kerner contends that “Defendant‘s reliance on the economic loss rule is misplaced” because he alleges “independent duties and deceptive conduct that are
For the reasons stated above, Plaintiff Kerner‘s negligence claim is DISMISSED because it is barred by the economic loss rule.
G. Whether Plaintiff Kerner‘s Consumer Fraud Claim Should Be Dismissed (Count II).
The VCFA prohibits “unfair or deceptive acts or practices in commerce[.]”
“To establish a ‘deceptive act or practice’ under the VCFA requires three elements: ‘(1) there must be a representation, omission, or practice likely to mislead consumers; (2) the consumer must be interpreting the message reasonably under the circumstances; and (3) the misleading effects must be material, that is, likely to affect the consumer‘s conduct or decision regarding the product.‘”
JLD Props. of St. Albans, LLC v. Patriot Ins. Co., 576 F. Supp. 3d 172, 179 (D. Vt. 2021) (citations omitted). “‘Whether an act is “unfair” is guided by consideration of several factors, including (1) whether the act offends public policy, (2) whether it is immoral, unethical, oppressive or unscrupulous, and (3) whether it causes substantial injury to consumers.‘” Id. (citation omitted).
Because Plaintiff Kerner‘s VCFA claim “sounds in fraud,” he “must state with particularity the circumstances constituting fraud.” City of Hialeah Employees’ Ret. Sys. v. Peloton Interactive, Inc., 153 F.4th 288, 295 (2d Cir. 2025) (internal quotation marks and citations omitted). “Under this heightened pleading standard, ‘plaintiffs must do more than say that the statements ... were false and misleading; they must demonstrate with specificity why and how that is so.‘” Id. (quoting Rombach v. Chang, 355 F.3d 164, 174 (2d Cir. 2004)).
Defendant argues that, even if Plaintiff Kerner “had alleged conduct that could give rise to a VCFA claim, Vermont law would not recognize such a claim against a life insurance company like [Defendant].” (Doc. 7-1 at 13.) To bring a claim under the VCFA, the plaintiff must be a consumer “who contracts for goods or services in reliance upon false or fraudulent representations or practices prohibited by section 2453 ... or who sustains damages or injury as a result of any false or fraudulent representations or practices prohibited by section 2453 ... or prohibited by any rule or regulation made pursuant to section 2453[.]”
“Whether the [VCFA] applies to the insurance industry is an open question.” JLD Props. of St. Albans, LLC, 576 F. Supp. 3d at 179 (internal quotation marks omitted) (quoting R.L. Vallee, Inc. v. Am. Int‘l Specialty Lines Ins. Co., 431 F. Supp. 2d 428, 442 (D. Vt. 2006)). In Wilder v. Aetna Life and Casualty Insurance Co., the Vermont Supreme Court held “the selling of an insurance policy is not a contract for ‘goods or services’ within the meaning of 9 V.S.A. § 2461 allowing for civil penalties.” 433 A.2d 309, 310 (Vt. 1981). Thereafter, in 1985, the Vermont Legislature amended the VCFA‘s definition of “[g]oods” or “services” to include “intangibles” and “services of any kind.”
Defendant‘s argument that the insurance industry is “separately regulated” under the Vermont Insurance Trade Practices Act,
In his opposition to Defendant‘s motion to dismiss, Plaintiff Kerner claims that the RMD Form “permits the contract owner to elect automatic RMD withdrawals but does not disclose that such withdrawals may be subject to surrender charges, nor does it identify circumstances under which surrender charges would apply.” (Doc. 22 at 10-11.) Plaintiff Kerner also argues “the omission of language distinguishing discretionary withdrawals initiated by the policyholder from automatic RMD withdrawals initiated by the insurer‘s system is unconscionable and an unfair practice because it misleads the customer regarding the impact of their withdrawals and does not alert them to the insurer‘s system making withdrawals in the first place.” Id. at 11-12.
On the Variable Annuity Election Form, which was provided for Plaintiff Kerner “to start or change a systematic withdrawal program from [his] annuity contract[,]” Plaintiff Kerner selected “Guaranteed Withdrawal Benefit (GWB) or Lifetime Withdrawal Guarantee (LWG)[.]” (Doc. 10-3 at 1, 3) (emphasis omitted). The RMD Form was provided to Plaintiff Kerner “for [his] convenience in setting up [RMD] payments[,]” (Doc. 10-5 at 1), and, with respect to contracts “with GWB or LWG,” the RMD Form states:
The [RMD] for contracts with the [GWB] or the [LWG] rider may be larger than your [A]nnual Benefit Payment. In order to qualify for the increased RMD payment without the increase being considered an excess withdrawal, after the first contract year, you must enroll in our Automated RMD program only and elect annual payment frequency. You may not be enrolled in any other systematic withdrawal program (SWP). In such case[,] we will increase your Annual Benefit Payment to equal your most recently calculated RMD amount, if such amount is greater than your Annual Benefit Payment. Any cumulative withdrawals you make to satisfy your [RMD] amount outside of the Automated RMD program will be treated as excess withdrawals if they exceed your Annual Benefit Payment, and this can have an adverse impact on the value of the benefit (see the prospectus for details). If you have taken or are considering taking a partial withdrawal from your contract, electing our Automated RMD program may
significantly reduce the value of the GWB or LWG benefit. Prior to requesting our Automated RMD program for your contract[,] you should consult with your representative and discontinue any active SWP program.
(Doc. 10-5 at 1) (emphasis supplied and omitted). This warning is set forth on the first page of the RMD Form, and Plaintiff Kerner signed his name directly below it. Plaintiff Kerner opted into Defendant‘s Automated RMD program, under which Defendant would “calculate [Plaintiff Kerner‘s] RMD amount and distribute the payments[.]” Id. at 2.
With regard to the effect of excessive withdrawals, the MetLife Contract states:
If a withdrawal results in cumulative withdrawals for the current Contract Year exceeding the Annual Benefit Payment, an additional reduction to the Remaining Guaranteed Withdrawal Amount may be made. This additional reduction will be equal to the difference between the Remaining Guaranteed Withdrawal Amount after the withdrawal and the Account Value after the withdrawal (if lower).
***
Your initial Annual Benefit Payment equals the GWB Withdrawal Rate shown on the Contract Schedule multiplied by the initial Total Guaranteed Withdrawal Amount.
Each time the Total Guaranteed Withdrawal Amount is increased or reduced ... , the Annual Benefit Payment will be recalculated to equal the GWB Withdrawal Rate multiplied by the newly recalculated Total Guaranteed Withdrawal Amount.
(Doc. 10-1 at 24.) This information is provided on page 34 of the 46-page MetLife Contract and is written with similar font and in similar font size as the remainder of the contract. Plaintiff Kerner signed his name on the MetLife Contract approximately two pages above and approximately four pages below this section discussing over withdrawals.
Contrary to Plaintiff Kerner‘s argument, the Variable Annuity Form, the RMD Form, and the MetLife Contract made it clear that withdrawals above the RMD amount would result in surrender charges, that Defendant would make automatic RMD withdrawals according to its own calculation, that Plaintiff Kerner should not make additional withdrawals under the Automated RMD program, that cumulative withdrawals exceeding the Annual Benefit Payment would result in surrender charges, and that any
Although Plaintiff Kerner claims “the RMD penalty clause” “was hidden due to the use of two forms[,]” (Doc. 22 at 10), the Complaint does not allege any facts supporting this argument. To the contrary, both the MetLife Contract and the RMD Form clearly state that withdrawals over the course of a contract year which exceeded Plaintiff Kerner‘s Annual Benefit Payment would result in surrender charges.
To contend that certain statements of Defendant‘s “were false and misleading,” Plaintiff Kerner must specify “why and how that is so.” Peloton Interactive, Inc., 153 F.4th at 295 (internal quotation marks and citations omitted). Here, he has failed to do so. Plaintiff Kerner therefore does not allege with particularity that Defendant engaged in a deceptive or unfair trade practice under the VCFA, and his consumer fraud claim is DISMISSED.
H. Whether Plaintiff Kerner‘s Breach of Fiduciary Duty Claim Should Be Dismissed (Count III).
Defendant argues that Plaintiff Kerner‘s breach of fiduciary claim must be dismissed because, “[u]nder Vermont law, a life insurance company like [Defendant] is not in a fiduciary relationship with its contract owners.” (Doc. 7-1 at 15) (citations omitted). In Vermont, “[a] fiduciary relation exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation.” Sutton v. Vermont Reg‘l Ctr., 2019 VT 71, ¶ 75, 212 Vt. 612, 238 A.3d 608, 637 (quoting Restatement (Second) of Torts § 874). “One standing in a fiduciary relation with another is subject to liability to the other for harm resulting from
In some circumstances, Vermont courts have found that insurers owe no fiduciary duties to their insured. See Buote v. Verizon New England, 190 F. Supp. 2d 693, 703 n.10 (D. Vt. 2002) (“An insurer does not owe a fiduciary duty to its insured with regard to a first-party insurance agreement[.]“); Lauzon v. State Farm Mut. Auto. Ins. Co., 674 A.2d 1246, 1248 (Vt. 1995) (“An insurer owes no fiduciary duty to its insured in a claim arising under an uninsured motorist provision.“). The Vermont Supreme Court, however, has never held that a fiduciary relationship cannot arise in the insurance context. Assuming arguendo that Defendant owed Plaintiff Kerner fiduciary duties, there are no plausible allegations that Defendant has breached them.
Plaintiff Kerner next argues his Complaint “allege[s] that Defendant designed, marketed, and administered an annuity with an automatic RMD feature tied to a disproportionate penalty structure while representing the feature as routine, compliant, and cost-neutral[]”6 and that “Defendant‘s omissions and misleading statements breached duties to disclose material information necessary for informed decision-making by the policyholder and his advisor, particularly where automatic withdrawals could trigger surrender charges, market value adjustments, or other punitive consequences outside the policyholder‘s direction.”7 (Doc. 22 at 14-15.) These arguments are contradicted by the documents upon which they rely, and the documents govern. See, e.g., Blue Tree Hotels Inv. (Canada), Ltd., 369 F.3d at 222. Plaintiff Kerner identifies no fraudulent or deceptive language contained therein.
According to Plaintiff Kerner, “[t]aken together, these facts plausibly allege that Defendant breached fiduciary and quasi-fiduciary duties by structuring, concealing, and enforcing an automatic penalty mechanism adverse to [Plaintiff Kerner‘s] interests[.]” (Doc. 22 at 15.) Without more, these allegations remain conclusory and bereft of the
For the reasons stated above, Plaintiff Kerner fails to plausibly plead a breach of fiduciary duty, and this claim is DISMISSED.
I. Whether Plaintiff Kerner‘s Unconscionable Penalty Claim Should Be Dismissed (Count IV).
“Generally, once accepted, parties are bound by the clear and unambiguous terms of their contract. However, a contract may still be set aside if the circumstances of the agreement were unconscionable.” Falcao v. Richardson, 2024 VT 78, ¶ 16, 220 Vt. 310, 316-17, 329 A.3d 208, 212 (alterations adopted) (internal quotation marks and internal citation omitted). “In general, ‘whether a contract is unconscionable may turn on substantive fairness of terms or factors relevant to formation of a contract.‘” Lacroix v. Rysz, 2025 VT 16, ¶ 13, 336 A.3d 321, 326 (citation omitted). “Unconscionability is measured based on the circumstances at the time the agreement is entered.” Id. (emphasis and citations omitted). “[T]he plain language of an unambiguous contract prevails absent a ‘showing of unfairness, undue oppression, or unconscionability[]‘” and “[absent] other evidence of coercion or lack of meaningful choice[.]” Falcao, 2024 VT 78, ¶¶ 17, 20, 220 Vt. at 317-18, 329 A.3d at 213-14 (citation omitted). A contract is not unconscionable where its challenged terms “were not hidden in fine print and were not otherwise substantively unfair or unreasonably [un]favorable[.]” Id. at ¶ 20, 220 Vt. at 318, 329 A.3d at 213 (collecting cases).
Plaintiff Kerner contends that the “penalty clause” was unconscionable because, “[i]f [an] annuity company failed to adequately disclose the RMD penalty clause and its implications, this could support a claim of procedural unconscionability.” (Doc. 22 at 16.)8 He does not, however, allege procedural or substantive unconscionability at the
Without plausible factual allegations alleging substantive or procedural unfairness or deprivation of a meaningful choice, Plaintiff Kerner does not plausibly allege that Defendant‘s “penalty clause” was unconscionable, and the claim is DISMISSED.
J. Whether Plaintiffs Should Be Granted Leave to Amend.
Pursuant to
For the foregoing reasons, the court GRANTS Defendant‘s motion to dismiss, (Doc. 7), and GRANTS Plaintiffs leave to file an Amended Complaint within twenty (20) days of this Opinion and Order consistent with the Federal Rules of Civil Procedure and this court‘s Local Rules.
SO ORDERED.
Dated at Burlington, in the District of Vermont, this 20th day of July, 2026.
Christina Reiss, Chief Judge
United States District Court