ARONSTEIN v. Massachusetts Mutual Life Insurance Co. et al

Filing 45

Judge Mark G. Mastroianni: MEMORANDUM AND ORDER entered For the reasons set forth in the attached Order, 25 Defendants Motion to Dismiss is ALLOWED with respect to Counts I and III and DENIED with respect to Count II. (Montes, Mariliz)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
JESSE ARONSTEIN, Individually and on
Behalf of All Others Similarly Situated
Plaintiff,
v.
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY and C.M. LIFE
INSURANCE COMPANY,
Defendants.

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Civil No. 15-12864-MGM

MEMORANDUM AND ORDER REGARDING
DEFENDANTS’ MOTION TO DISMISS
(Dkt. No. 25)
April 22, 2016
MASTROIANNI, U.S.D.J.
I.

INTRODUCTION

Jesse Aronstein (“Plaintiff”) has filed a putative class action against Massachusetts Mutual
Life Insurance Co. (“MassMutual”) and C.M. Life Insurance Co. (“C.M. Life” and, collectively with
MassMutual, “Defendants”). The case arises out of Defendants’ sale of an annuity to Plaintiff and all
other purchasers of that annuity. Plaintiff alleges unjust enrichment (Count I), fraudulent
misrepresentation (Count II), and violation of Chapter 93A of the Massachusetts General Laws
(“Chapter 93A”) (Count III). Defendants have filed a motion to dismiss. For the reasons set forth
below, Defendants’ motion is allowed with respect to Counts I and III and denied with respect to
Count II.
II.

JURISDICTION

Plaintiff is a resident of New York. Defendant MassMutual is domiciled in Massachusetts,
and Defendant C.M. Life is domiciled in Connecticut. Plaintiff asserts that the court has subject

matter jurisdiction over this putative class action pursuant to 28 U.S.C. § 1332(d)(2)(A) because
Plaintiff and numerous class members are citizens of states different from Defendants and because
the aggregate amount in controversy exceeds $5,000,000. Defendants do not challenge this assertion.
III.

FACTS AS ALLEGED BY PLAINTIFF

In January 2004, Plaintiff received written marketing materials from Defendants regarding a
fixed deferred annuity (the “Annuity”). (Dkt. No. 11, Am. Compl. ¶ 14.) The marketing materials
represented that the interest for the Annuity “will be credited at a . . . rate [that] will never be less
than 3%.” (Id. ¶ 14.) On or about January 7, 2004, Plaintiff purchased the Annuity for $25,000. (Id.
¶¶ 2, 15.) Plaintiff subsequently received a “Contract/Certificate Package” for the Annuity, which
contained a cover page, an 18-page certificate, and a single-page endorsement. (Id. ¶ 16.) The
certificate defined the “Minimum Guaranteed Interest Rate” as 3%. It also provided that the interest
rate “will never be less than the Minimum Guaranteed Interest Rate.” (Id. ¶¶ 18-19.) The
endorsement, however, stated that “the Minimum Guaranteed Interest Rate has been changed to
1.5%.” (Id. ¶ 20.) This contradicted both the certificate and the marketing materials for the Annuity.
(Id. ¶ 21.) The endorsement was signed by representatives of MassMutual, but not by Plaintiff. (Id. ¶
20.) The first page of the certificate stated Plaintiff had the right to examine and return the
certificate for any reason within 10 days for a full refund. (Id., Ex. C.) In early 2004, Defendants sent
Plaintiff a transaction confirmation, which confirmed Plaintiff’s initial purchase payment at a
credited interest rate of 4%. (Id. ¶ 22.)
From 2004 through 2015, Plaintiff received periodic statements regarding the Annuity. The
statements contained numerous pieces of information related to the Annuity, but they did not
disclose the interest rate paid for a given period. (Id. ¶ 23.) In or around January 2015, Plaintiff
received the annual statement for 2014. Although it did not set forth the interest rate, Plaintiff
calculated the interest rate for 2014 and determined that the interest earned reflected a rate of only

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about 2%. (Id. ¶ 24.) Prompted by this discovery, Plaintiff examined the annual statements for
previous years and discovered that the interest rate had been less than 3% (but higher than 1.5%) for
every year since 2011. (Id. ¶ 25.) On January 23, 2015, Plaintiff contacted MassMutual and requested
that the Minimum Guaranteed Interest Rate be restored to 3% and his account be credited for the
shortfall. (Id. ¶ 26.) On February 18, 2015, MassMutual sent Plaintiff a letter denying his request.
The letter relied upon the endorsement setting the Minimum Guaranteed Interest Rate at 1.5% and
admitted the interest rate on the Annuity had been below 3% (but above 1.5%) every year since
2011. (Id. ¶¶ 27-28.)
Defendants did remove the language guaranteeing an interest rate of 3% from their
marketing materials, but not before Plaintiff and thousands of other consumers had purchased the
Annuity. (Id. ¶ 29.) Plaintiff contends that Defendants “worked in concert to falsely advertise and
sell the Annuity.” (Id. ¶ 30.) Plaintiff seeks to represent a class consisting of all purchasers of the
Annuity who have been paid or credited with an interest rate below 3%, and Plaintiff sets forth the
requisite allegations for maintaining a class action. (Id. ¶¶ 31, 33-43.) On June 30, 2015, Plaintiff
initiated this action. (Dkt. No. 1.)
IV.

STANDARD OF REVIEW

To survive a 12(b)(6) motion to dismiss, a complaint must allege facts that “raise a right to
relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the
factual allegations in the complaint must “nudge[] [the] claims across the line from conceivable to
plausible.” Id. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “Determining whether a complaint states a
plausible claim for relief” is a “context-specific task that requires the reviewing court to draw on its
judicial experience and common sense.” Id. at 679. Courts are not required to accept as true

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allegations in a complaint that are legal conclusions. Id. at 678. However, “[w]hen there are wellpleaded factual allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement to relief.” Id. at 679. Therefore, in assessing a claim’s plausibility,
the court must construe the complaint in the plaintiff’s favor, accept all non-conclusory allegations
as true, and draw any reasonable inferences in favor of the plaintiff. See San Gerónimo Caribe Project,
Inc. v. Acevedo-Vilá, 687 F.3d 465, 471 (1st Cir. 2012).
V.

DISCUSSION

Plaintiff brings three claims. Count I is a claim for unjust enrichment based on Defendants’
alleged misconduct in marketing and selling the Annuity at a Minimum Guaranteed Interest Rate
and then reducing that rate. Count II is a claim for fraudulent misrepresentation based on
Defendants’ marketing and sale of the Annuity. Count III claims unfair or deceptive trade practices
in violation of Chapter 93A; this claim is also predicated upon alleged violations of FTC and
Massachusetts Attorney General regulations.
In support of their motion to dismiss, Defendants argue that each of Plaintiff’s claims is
barred by the applicable statute of limitations. In addition to the statute of limitations argument that
applies to all claims, Defendants argue that Count I fails to state a claim because an unjust
enrichment claim cannot proceed when the matter is governed by a valid contract. Defendants also
argue that Count III should be dismissed because the substantive law of New York, and not
Massachusetts’s Chapter 93A, applies to Plaintiff’s claims.
A.

Unjust Enrichment (Count I)

Leaving aside the question of the statute of limitations, Defendants argue Count I should be
dismissed because an unjust enrichment claim cannot be maintained when it is rooted in a valid and
enforceable contract. When the subject matter of a claim is governed by a contract, there is no cause
of action for unjust enrichment. See IDT Corp. v. Morgan Stanley Dean Witter & Co., 907 N.E.2d 268,

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274 (N.Y. 2009). Unjust enrichment is a quasi-contract claim designed to prevent injustice in the
absence of an actual agreement between the parties. See id. A plaintiff may not recover under an
unjust enrichment theory “[w]here the parties executed a valid and enforceable written contract
governing [the] particular subject matter.” Id.
Plaintiff argues that the subject matter of his claim is Defendants’ “misleading advertising
and deceitful marketing,” which is not “governed by the contract.” (Dkt. No. 30, Pl. Mem. Opp.
Mot. to Dismiss, at 4.) This argument is unpersuasive. If this were the case, then any unjust
enrichment claim could be maintained despite the existence of a contract by pleading that the
contract does not regulate improper behavior. Plaintiff cites a case in which unjust enrichment
claims based on insurance commissions were allowed to proceed when the mortgage between the
parties did not contemplate the payment of commissions, see Lass v. Bank of Am., N.A., 695 F.3d
129, 140-41 (1st Cir. 2012), as well as a case in which an unjust enrichment claim was able to
proceed when the parties’ contract did not address how to resolve a dispute over the refund of
management fees, see Whitman & Co. v. Longview Partners (Guernsey) Ltd., --- F. Supp. 3d ---, 2015 WL
6043573 (D. Mass. Oct. 15, 2015). These cases are distinguishable because they involved disputes
over how to distribute payments that were not contemplated by the parties’ contracts, whereas the
instant claim centers on an alleged violation of the parties’ contractual agreement via Defendants’
unilateral alteration of the contract’s terms. It may be plausible to assert that a contract does not
govern unforeseen monetary distributions, but it is not plausible to claim that a contract does not
contemplate the violation of its own terms.
Plaintiff also argues that the claim should be allowed to proceed because he has the right “to
plead alternative and even inconsistent legal theories, such as breach of contract and unjust
enrichment, even if [he] only can recover under one of these theories.” Vieira v. First Am. Title Ins.
Co., 668 F. Supp. 2d 282, 295 (D. Mass. 2009). That is certainly true, but it does not mean that

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Plaintiff’s pleading is successful in this case. Plaintiff did not bring a claim for breach of contract,
and because there is a valid and enforceable contract, Plaintiff’s unjust enrichment claim must fail.
Count I is therefore dismissed.
B.

Fraudulent Misrepresentation (Count II)

The parties disagree over whether the Massachusetts or New York statute of limitations
should apply to Count II, but this dispute proves immaterial. Massachusetts applies a three-year
statute of limitations to fraud claims. Mass. Gen. Laws ch. 260, § 2A. Massachusetts employs the
“discovery rule” that tolls the time a claim accrues until the plaintiff “knew or reasonably should
have known that [the plaintiff] may have been harmed by the conduct of another,” Bowen v. Eli Lilly
& Co., 557 N.E.2d 739, 741 (Mass. 1990), and the discovery rule applies to fraud claims, see
McEneaney v. Chestnut Hill Realty Corp., 650 N.E.2d 93, 97 (Mass. App. Ct. 1995). New York also
applies the discovery rule. Under New York law, an action for fraud must be commenced within
“the greater of” (1) six years after “the cause of action accrued,” or (2) two years after the plaintiff
“discovered the fraud, or could with reasonable diligence have discovered it.” N.Y. C.P.L.R. §
213(8).
Thus, Plaintiff receives the benefit of the discovery rule under the laws of both states, with
Massachusetts law giving him three years from the date of reasonable discovery and New York law
giving him two years from that date. 1 If Plaintiff reasonably should have discovered the alleged fraud
in either January 2004 (when he received the endorsement) or January 2012 (when the annual
statement for 2011 made it possible to calculate that the interest rate had dipped below 3%), then his

The first prong of the New York standard is of no help to Plaintiff, because his cause of action accrued
under that prong when he purchased the Annuity in 2004. See Certain Underwriters at Lloyd’s v. Milberg LLP,
2009 WL 3241489, at *5 (S.D.N.Y. Sept. 30, 2009) (“When the plaintiff alleges fraud in the inducement to
purchase an insurance policy, the six-year limitations period begins to run on the date the policy is
purchased.” (citing Goldberg v. Mfrs. Life Ins. Co., 672 N.Y.S.2d 39, 43 (N.Y. App. Div. 1998))). Plaintiff’s
action would therefore be untimely because it was commenced more than six years after this date.
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June 2015 complaint is untimely under the laws of both states. Conversely, if Plaintiff should not
reasonably have discovered the alleged fraud until January 2015 (when he actually calculated the
interest rate for past years), then his June 2015 complaint is timely under the laws of both states.
Therefore, the differences between the laws of Massachusetts and New York are immaterial, and the
dispositive question is simply when he reasonably should have discovered the purported fraud. If it
was in January 2004 or January 2012, his claim is untimely under the laws of both states, but if it was
in January 2015, his claim is timely under the laws of both states.
The general rule is that “factual disputes concerning when a plaintiff knew or should have
known of his cause of action are to be resolved by the jury.” Riley v. Presnell, 565 N.E.2d 780, 787
(Mass. 1991); see also Menke v. Glass, 898 F. Supp. 227, 233 (S.D.N.Y. 1995) (“[T]he determination of
whether a plaintiff has exercised sufficient diligence is normally a question of fact for the jury to
decide.”). Read in conjunction with the standard of review for a motion to dismiss, this sets a high
bar for a defendant seeking fix the date of a reasonable discovery as a matter of law at the motion to
dismiss stage. Cf. Blackstone Realty LLC v. FDIC, 244 F.3d 193, 197 (1st Cir. 2001) (to succeed at
motion to dismiss stage, defendant’s assertion of affirmative defense “must ‘leave no doubt’ that the
plaintiff’s action is barred” (quoting LaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 508 (1st Cir.
1998))); Topps Co. v. Cadbury Stani S.A.I.C., 380 F. Supp. 2d 250, 258 (S.D.N.Y. 2005) (even at
summary judgment stage, where a defendant’s burden is lighter, “a defendant seeking summary
judgment based on plaintiff’s failure to timely discover fraud faces considerable hurdles”).
The case of Genovesi v. Nelson, 5 N.E.3d 571 (Mass. App. Ct. 2014), presents similar facts in
the same procedural context as the instant case. Asked to determine when the plaintiff reasonably
should have discovered the alleged fraud perpetrated by his financial advisor, the court held that
“the reasonableness of his actions in the circumstances is a question of fact that is not appropriately
resolved on a motion to dismiss.” Id. at 575; see also First Choice Armor & Equip., Inc. v. Toyobo Am.,

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Inc., 717 F. Supp. 2d 156, 160 (D. Mass. 2010) (“Ascertaining reasonable diligence is generally a ‘factdominated enterprise’ and, in most circumstances, a determination of ‘when a plaintiff knew or
should have known of its cause of action is one that . . . will be decided by the trier of fact.’”
(quoting Borden v. Paul Revere Life Ins. Co., 935 F.2d 370, 376 (1st Cir. 1991) and Taygeta Corp. v. Varian
Assocs., Inc., 763 N.E.2d 1053, 1063 (Mass. 2002))); Vilsack v. Meyer, 96 A.D.3d 827, 828 (N.Y. App.
Div. 2012) (“Ordinarily, an inquiry into when a plaintiff should have discovered an alleged fraud
presents a mixed question of law and fact.”).
Taking Plaintiff’s allegations to be true and drawing all reasonable inferences in his favor, the
court cannot, as a matter of law, determine that Plaintiff should reasonably have discovered the
discrepancy in interest rates earlier than he actually did in January 2015. Ambiguous documentation
leads to a factual question regarding the discoverability of a claim. See Foisy v. Royal Maccabees Life Ins.
Co., 356 F.3d 141, 146 (1st Cir. 2004). Here, the ambiguity of the representations and materials
allegedly provided by Defendants is the most important fact leading to the court’s conclusion. The
marketing materials Plaintiff received prior to his purchase of the Annuity, as well as the certificate
provided following his purchase, stated the Minimum Guaranteed Interest Rate would be 3%. The
endorsement attached to the certificate did state that the Minimum Guaranteed Interest Rate had
been changed to 1.5%, but this flew in the face of Defendants’ marketing materials and the rest of
the documentation, and the practical effect of this change would have been difficult to notice, given
that the actual interest rate stayed above 3% for the next several years.
It is plausible that a reasonable person would have viewed the single sheet of paper mixed in
with the rest of the documentation as ambiguous in light of the marketing materials, the rest of the
documentation, and the actual performance of the Annuity. The clash between the marketing
materials and certificate package, on the one hand, and the single sheet of paper containing the
endorsement, on the other hand, created an ambiguity that was entirely of Defendants’ making. This

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ambiguity was not necessarily resolved by the brief nature of the endorsement, because the
endorsement remained at odds with the rest of the documentation and Defendants’ marketing
materials. See id. (“[The defendant], however, confuses brevity with clarity. It is the policy’s
ambiguity—unmitigated by the relatively short length—that made [the plaintiff’s] claim
unknowable.”). This ambiguity was perpetuated by the fact that the Annuity’s interest rate stayed
above 3% for many years, and when it finally dipped below 3% in 2011, it only fell to 2.8%. This
relatively small difference, combined with the fact that the annual statements did not explicitly state
the interest rate and instead required consumers to calculate it themselves, renders the court unable
to find as a matter of law that Plaintiff should have discovered the discrepancy at a certain time.
The marketing materials, documentation, and actual performance of the Annuity obscured
the actual Minimum Guaranteed Interest Rate, and, as in Foisy, the ambiguous nature of the Annuity
distinguishes this suit from cases like Fay v. Aetna Life Ins. & Annuity Co., 307 F. Supp. 2d 284 (D.
Mass. 2004) and Loguidice v. Metro. Life Ins. Co., 336 F.3d 1 (1st Cir. 2003). A further distinction is that
these cases, as well as others cited by Defendants in favor of determining the reasonableness of
Plaintiff’s actions as a matter of law, were decided on summary judgment after an evidentiary record
bearing on the question of reasonableness had been developed. See Fay, 307 F. Supp. 2d at 294;
Loguidice, 336 F.3d at 2. The court’s own research has revealed that other cases supporting
Defendants’ position were decided at the summary judgment stage, rather than pursuant to a motion
to dismiss. See Patsos v. First Albany Corp., 741 N.E.2d 841, 846 (Mass. 2001); Quigley v. Unum Life Ins.
Co., 688 F. Supp. 80, 81 (D. Mass. 1988).
“When, as here, the parties press different events as triggering accrual, the factual inquiry
focuses on which was the first event reasonably likely to put the plaintiff on notice that the
defendant’s conduct had caused him injury.” Szymanski v. Bos. Mut. Life Ins. Co., 778 N.E.2d 16, 20
(Mass. App. Ct. 2002). “‘The issue . . . is not whether, as a matter of law, reasonable consumers

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would be misled in a material way, but whether that prospect is enough to create a question of fact.’”
Id. at 26 (quoting Gaidon v. Guardian Life Ins. Co. of Am., 725 N.E.2d 598, 604 (N.Y. 1999)). It may
well be that discovery reveals, or a jury decides, that Plaintiff should reasonably have discovered the
interest rate discrepancy in 2004 or 2012, but given the ambiguity introduced by Defendants’ own
documentation, it is also plausible that a factfinder could determine that it would not have been
reasonable for Plaintiff to discover the effect of Defendants’ craftiness until 2015. Given the general
rule in favor of jury determinations of reasonableness and the standard of review, and drawing all
reasonable inferences in Plaintiff’s favor, the court cannot properly decide the reasonableness of
Plaintiff’s actions at the motion to dismiss stage. The court “conclude[s] that the triggering event
cannot be pinpointed as matter of law, but poses a question of fact” that is properly left to the
discovery process and, possibly, a jury. Id. at 20. As such, the motion to dismiss Count II is denied.
C.

Chapter 93A (Count III)

Defendants argue Count III should be dismissed because New York’s consumer protection
laws, and not Chapter 93A, apply to Plaintiff’s claims. In a choice of law analysis, “[t]he first step is
to determine if there is a difference in the substantive laws of the two jurisdictions.” Mear v. Sun Life
Assurance Co. of Can. (U.S.), 2008 WL 245217, at *4 (D. Mass. Jan. 24, 2008). There are clear
differences between the New York and Massachusetts statutes. The two statutes set different
standards for what qualifies as actionable conduct. Compare Schlessinger v. Valspar Corp., 991 N.E.2d
190, 193 (N.Y. 2013) (using relatively high New York standard of practices “that tend[] to deceive
consumers”) with St. Paul Fire & Marine Ins. Co. v. Ellis & Ellis, 262 F.3d 53, 66 (1st Cir. 2001)
(noting more lenient Massachusetts standard relating to any action that falls within the “‘established
concept of unfairness’” (quoting Commercial Union Ins. Co. v. Seven Provinces Ins. Co., 217 F.3d 33, 40
(1st Cir. 2000))). Additionally, potential damages are very different under each statute. In New York,
any trebling of damages is capped at $1,000. See N.Y. Gen. Bus. Law § 349(h). In contrast, under

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Chapter 93A, the court may award treble damages with no upper limit. See Mass. Gen. Laws ch. 93A,
§ 9(3A).
When making a choice of law analysis, Massachusetts courts apply “a functional approach
that responds to the interests of the parties to determine which law applies.” Mear, 2008 WL 245217,
at *4. A variety of factors that help determine which state’s law to apply: “(a) the place where the
injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicile,
residence, nationality, place of incorporation and place of business of the parties, and (d) the place
where the relationship, if any, between the parties is centered.” Cornwell Entm’t, Inc. v. Anchin, Block
& Anchin LLP, 2013 WL 2367849, at *2 (D. Mass. May 28, 2013) (quoting Restatement (Second) of
Conflict of Laws § 145 (1971)). These contacts should be evaluated according to their relative
importance with respect to the particular issue. See id.
As Defendants point out, Plaintiff lives in New York, Plaintiff bought and received the
Annuity in New York, New York law controls the regulation of the Annuity, and New York has an
interest in protecting consumers within its borders, such as Plaintiff. On the other hand, as Plaintiff
points out, MassMutual is domiciled in Massachusetts, MassMutual is alleged to have designed and
distributed the allegedly fraudulent advertising from Massachusetts, and Massachusetts has an
interest in preventing fraud from emanating from its borders. Application of these factors is a factspecific inquiry in which both sides often have arguable points in their favor. Based on these
particular facts, the court finds that the balance of the factors points to the application of New York
consumer protection law, with the most important fact being that Plaintiff is a consumer in New
York. Accordingly, New York consumer protection law provides the more appropriate shield to
protect Plaintiff, and Count III is dismissed because Chapter 93A does not apply.

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VI.

CONCLUSION

For the reasons set forth above, Defendants’ motion to dismiss (Dkt. No. 25) is
ALLOWED with respect to Counts I and III and DENIED with respect to Count II.
It is So Ordered.
_/s/ Mark G. Mastroianni________
MARK G. MASTROIANNI
United States District Judge

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