Benacquisto, et al v. American Express Fin, et al

Filing 520

ORDER granting in part consistent with this order 500 Motion to Enforce Settlement (Written Opinion). Signed by Senior Judge David S. Doty on 7/14/2014. (PJM)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 00-1980(DSD)
Lesa Benacquisto, Daniel
Benacquisto, Richard Thoresen,
Elizabeth Thoresen, Arnold
Mork, Isabella Mork, Ronald
Melchert and Susan Melchert, on
behalf of themselves and all
others similarly situated,
Plaintiffs,
ORDER

v.
American Express Financial
Corporation, American Express
Financial Advisors, American
Centurion Life Assurance
Company, American Enterprise
Life Insurance Company,
American Partners Life
Insurance Company, IDS Life
Insurance Company and IDS Life
Insurance Company of New York,
Defendants.

This matter is before the court upon the motion to enforce
settlement

by

(Ameriprise).1

defendant
Based

on

Ameriprise
a

review

Financial
of

the

Services,

file,

record

Inc.
and

proceedings herein, and for the following reasons, the court grants
the motion in part.

1

Ameriprise Financial Services, Inc. is the successor in
interest to American Express Financial Corporation.

BACKGROUND
This

arbitration

dispute

arises

out

of

the

purchase

of

Flexible Adjustable Whole Life Insurance Policy number 90904979565
(Policy), which insured unnamed class member Pauline Duncavage.
See Lake Aff. ¶ 2.

Duncavage purchased the Policy in 1995.

Duncavage’s sons, David, Thomas and Daniel Duncavage, were listed
as the Policy owners (Owners).

See Willcuts Aff. Ex. A, at 3, 8.

The Owners received notice of the class action (Notice), which
included the procedure for opting out of the action.
Aff. Ex. 1, at ¶ 5; see also Lake Aff. ¶ 2.

See Sheeley

The Owners did not opt

out of the class during the relevant period.

Lake Aff. ¶ 10.

On

May 15, 2001, the court issued an order certifying the class,
approving the proposed class settlement (Benacquisto Settlement),
dismissing

the

complaint

and

entering

final

judgment

consolidated class action (Benacquisto Action).

in

the

See ECF No. 94.

The Benacquisto Settlement included a broad release and waiver
provision and covered the period of January 1, 1985, to February
29, 2000 (Class Period).

See Sheeley Aff. Ex. 3, at ¶ 13(A); id.

Ex. 6, at ¶¶ II(25)-(26), XII(A). In exchange for their release of
all covered claims in the Benacquisto Settlement, Duncavage and
other

class

insurance.

members

received

free

accidental

death

benefit

See id. Ex. 6, at ¶ V(A).

On September 30, 2013, Duncavage submitted an arbitration
claim against Ameriprise to the Financial Industry Regulatory

2

Authority (FINRA) (FINRA Action), alleging breach of contract,
negligence

and

breach

of fiduciary

duty

related

to

omissions of financial advisors Herbert and Kurt Wischow.
Ex. 2, at 7-9.

acts and
See id.

Thereafter, Ameriprise signed a modified agreement

to arbitrate Duncavage’s claims that expressly excluded any claims
covered by the Benacquisto Settlement.
at 2.
bar

See Willcutts Aff. Ex. F,

Ameriprise moves for an order to enforce the settlement and
arbitration

of

the

claims

related

to

the

Benacquisto

Settlement. In response, the court issued a briefing schedule, and
Duncavage responded.

See ECF No. 510.

DISCUSSION
In the Benacquisto Action, the court permanently enjoined
class members who did not opt out of the settlement from bringing
any subsequent action based on the policies and annuities that were
the subject of the litigation.

See Sheeley Aff. Ex. 1, at ¶ 14.

Moreover, the court expressly retained jurisdiction over “all
matters relating to the administration, consummation, enforcement
and interpretation of the Settlement Agreement and [the] Order and
Judgment.”

Id.

¶

19.

Specifically,

the

court

reserved

jurisdiction to determine whether subsequent claims were barred by
the order.

Id. ¶ 19(a).

The court possesses the authority to

issue injunctions to enforce its final order.

Thompson v. Edward

D. Jones & Co., 992 F.2d 187, 189 (8th Cir. 1993).

3

The

Benacquisto

Minnesota law.

Settlement

is

interpreted

See Sheeley Aff. Ex. 6, at ¶ XVII(I).

according

to

A settlement

agreement is a contract and is subject to contractual rules of
interpretation and enforcement.
740, 744 (Minn. 1965).

See Theis v. Theis, 135 N.W.2d

The primary purpose of construing a

contract is to give effect to the parties’ intent.

River Valley

Truck Ctr., Inc. v. Interstate Cos., 704 N.W.2d 154, 163 (Minn.
2005). The court construes the contract as a whole and attempts to
harmonize all clauses.

Id.

Similarly, phrases and sentences are

not to be read separately or “out of context” with the rest of the
agreement.

Id. (citation and internal quotation marks omitted).

The court should avoid an interpretation that renders a provision
within the contract meaningless.

Id.

In the instant action, Ameriprise argues that the release of
claims

as

set

forth

in

the

Benacquisto

Settlement

Duncavage from pursuing her arbitration claims.

precludes

Duncavage argues

she should be permitted to proceed with the FINRA Action because
(1) Ameriprise agreed to arbitrate her claims in its initial
uniform submission agreement and (2) even if Ameriprise did not
agree to arbitrate her claims, they are nonetheless outside the
scope of the Benacquisto Settlement.
A.

Arbitration Agreement

Duncavage first argues that Ameriprise agreed to arbitrate
her claims by submitting an initial uniform submission agreement

4

that failed to reserve jurisdiction for the court. An agreement to
arbitrate is “valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract.”

9 U.S.C. § 2.

As such, a uniform submission agreement

to arbitrate is a valid and binding contract that effectively
modifies earlier agreements.

See Dean Witter Reynolds, Inc. v.

Fleury, 138 F.3d 1339, 1342 (11th Cir. 1998).

Thus, the court must

stay proceedings before it and permit arbitration notwithstanding
the Benacquisto Settlement if the dispute falls within the scope of
a valid arbitration agreement. Houlihan v. Offerman & Co., 31 F.3d
692, 694-95 (8th Cir. 1994); see also 9 U.S.C. §§ 3 & 4.

The court

remains mindful that “questions of arbitrability must be addressed
with a healthy regard for the federal policy favoring arbitration.”
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24
(1983).
Duncavage

argues

that

Ameriprise’s

initial

agreement

to

arbitrate precludes it from seeking an order to enforce settlement
relating

to

the

issues

presented

to

the

arbitration

panel.

Ameriprise responds - and Duncavage does not dispute - that the
initial

uniform

submission

agreement

was

filed

in

error

and

expressly related to a different matter involving non-party Matthew
J. Pajestka.

See Supp. Sheeley Aff. Ex. 6, at 1.

5

Thus, the

initial uniform submission agreement was not an agreement between
Ameriprise and Duncavage and is not binding on Ameriprise with
regard to the FINRA Action.
Moreover, upon recognition of the error, Ameriprise submitted
a modified uniform submission agreement expressly providing that
the claims barred by the Benacquisto Settlement were not submitted
to arbitration.

See Willcutts Aff. Ex. F, at 2.

Duncavage points

to no authority suggesting that such a modified uniform submission
agreement is invalid.

See, e.g., J.P. Morgan Sec. of Tex., Inc.

(F/K/A Chase Sec. of Tex., Inc) v. Rea, No. 03-04396, 2003 WL
22951925,

N.A.S.D.

(2003)

(permitting

uniform submission agreement).

submission

of

modified

Further, the court has previously

recognized the validity of a modified uniform submission agreement.
See, e.g., ECF No. 379, at 2.

As a result, the modified submission

agreement is valid and enforceable.

Thus, the claims related to

the Benacquisto Settlement are not arbitrable and remain within the
court’s jurisdiction.
B.

Preclusion by the Settlement Agreement

Dunvacage

next

argues

that

the

FINRA

Action

should

nevertheless be allowed to proceed because her claims are outside
the scope of the Benacquisto Settlement.

Pursuant to the “Release

and Waiver” provision of the Benacquisto Settlement, class members
agreed to release all past or present claims “that are based upon,
related to, or connected with, directly or indirectly, in whole or

6

in part ... the allegations, facts or subjects set forth or
otherwise raised in” the Benacquisto Action or the “released
conduct” therein.

Sheeley Aff. Ex. 1, at ¶ 13(A)(1).

The released

conduct specifically includes:
[A]ny and all direct or indirect acts,
representations, omissions, suggestions, or
communications ... related to or connected in
any way with the ... administration, servicing
... or performance of the Policies ...,
including,
without
limitation,
acts,
representations, omissions, suggestions or
communications in connection with ... (iii)
the suitability of any purchases, sales or
replacements of any Policy ...; (x) the costs,
commissions,
terms
or
benefits
or
disadvantages of any Policy ... compared to
any other life insurance policy, annuity or
investment; (xi) the comparison or lack of
comparison of any Policy ... to any other
product;
(xii)
the
preparation
by
any
financial advisor acting for the Company of
any financial plan or the provision of
financial or investment advice insofar as it
resulted
in
the
sale,
modification
or
maintenance of any Policy ...; and (xiv) the
administration or servicing of any Policy ...
after its purchase.
Id. ¶ 13(B)(2).

It is undisputed that the Policy was purchased

during the Class Period.

Duncavage argues, however, that the

claims asserted in the FINRA Action were not released because
(1) the Policy was not covered by the Benacquisto Settlement and
(2) some omissions alleged in the FINRA Action occurred after the
close of the Class Period.

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1.

Policy Type

Duncavage argues that she can maintain the FINRA Action
because the Policy was not a “cash value life insurance policy”
covered by the Benacquisto Settlement.

Id. Ex. 1, at ¶ 3.

Notice

of the class action, however, was mailed to all owners of covered
policies, including the Owners of the Policy. The Notice expressly
provided that recipients have “received this Notice because records
indicate that you ... have or had ownership interest in a cash
value

life

insurance

Benacquisto Action.

policy”

that

Id. Ex. 3, at 3.

was

the

subject

of

the

The court has previously

observed that the Notice in the Benacquisto Action “was reasonably
calculated to apprise class members of their rights and the binding
effect of the settlement.”

ECF No. 454, at 5.

As a result, the

Notice is sufficient to demonstrate that the Policy was covered by
the Benacquisto Settlement.
Duncavage argues, however, that Kurt Wischow told her that
“the class action did not cover [her] insurance policy, such that
[she] could ignore it.”

Duncavage Aff. ¶ 2.

As a result,

Duncavage contends, Ameriprise should be estopped from asserting
that the FINRA Action is barred by the Benacquisto Settlement. The
court disagrees.
Under Minnesota law, “[a] party seeking to invoke the doctrine
of equitable estoppel has the burden of proving three elements:
(1) that promises or inducements were made; (2) that it reasonably

8

relied upon the promises; and, (3) that it will be harmed if
estoppel is not applied.”

Hydra-Mac, Inc. v. Onan Corp., 450

N.W.2d 913, 919 (Minn. 1990) (citation omitted).

As an initial

matter, Duncavage does not allege that such a statement was made
after the Class Period, such that it would be excluded from the
Benacquisto Settlement.

See Sheeley Aff. Ex. 1, at ¶ 13(B)(2)

(releasing “any and all ... representations ... that are related to
or connected in any way with the ... administration ... of the
Policies” made during the Class Period).

Further, Duncavage was

the insured, but not the owner, of the Policy, and she does not
argue that she, rather than the Owners, was in a position to rely
upon any such representation.
Moreover, reliance on such a statement was unreasonable as a
matter of law.

Kurt Wischow is not a lawyer.

“When perplexed by

terms in a legal document, a prudent investor does not ring up
another layman.

He calls a lawyer.”

In re VMS Ltd. P’ship Sec.

Litig., 26 F.3d 50, 52 (7th Cir. 1994).

Indeed, when Wischow’s

alleged statement directly contradicted the plain language of the
Notice, Duncavage did not pursue the matter with her own attorney.
See Wischow Aff. ¶ 5.

Although the issue of reasonableness is at

times a question of fact for the jury, reliance is unreasonable as
a matter of law when oral statements are directly contradicted by
a written expression of an agreement.

See Clements Auto Co. v.

Serv. Bureau Corp., 444 F.2d 169, 179 (8th Cir. 1971); Gen. Corp.

9

v. Gen. Motors Corp., 184 F. Supp. 231, 236-39 (D. Minn. 1960).
Such is the case here.

Because any reliance on the alleged

statement was unreasonable, it does not provide a basis to release
Duncavage from the Benacquisto Settlement.

As a result, the

alleged statement by Wischow does not estop Ameriprise from arguing
that the Policy is covered by the Benacquisto Settlement.
2.

Omissions

Finally, Duncavage argues that she may persist in her FINRA
claims because they concern, in part, omissions of Kurt Wischow
that occurred after the end of the Class Period.2

Specifically,

Duncavage argues that Kurt Wischow failed to inform her of changes
in estate law exemptions that occurred between 2002 and 2012.
Here, Duncavage alleges that “[d]espite an increase in the
estate tax exemption over the years (from $1 million in 2002 to $5
million in 2012) and a reduction in the rate of return of the life
policy from 7.1% to 4%, Kurt Wischow never provided [her] with any
updated in-force policy illustrations or any other type of analysis

2

The Statement of Claims in the FINRA action largely relates
to actions or omissions of Herbert and Kurt Wischow during the
Class Period.
See Sheeley Aff. Ex. 2, at 4-9.
As already
explained, the court finds that Ameriprise did not agree to
arbitration of the FINRA claims and it is not estopped from arguing
that the Policy was covered by the Benacquisto Settlement. Thus,
such claims are barred by the Benacquisto Settlement. See id. Ex.
1, at ¶¶ 13(A)(1), 13(B)(2). Indeed, it appears that Duncavage
concedes that such claims arising during the Class Period are
barred. See Mem. Opp’n 9 (noting that “some of the Duncavage are
outside the scope of the [Benacquisto] Settlement” (emphasis
added)). As a result, the court considers only alleged conduct
arising after the Class Period.
10

showing the advantages or disadvantages of continuing to maintain
the policy.”
breadth

of

Sheeley Aff. Ex. 2, at 7.
the

released

conduct,

the

Indeed, despite the

Benacquisto

Settlement

explicitly reserved a class member’s right to assert various
claims, including those that “independently arise[] from acts,
facts or circumstances that occur for the first time after the last
day of the Class Period.”

Sheeley Aff. Ex. 1, at ¶ 13(A)(3).

Such

changes in the estate tax exemption from 2002 to 2012 constitute
circumstances “that occur[red] for the first time after the last
day of the Class Period,” February 29, 2000, such that Duncavage
retained her right to assert such independently-arising claims. As
a result, Duncavage may persist only in her FINRA claims concerning
omissions related to changes in the estate tax exemption from 2002
to 2012.

CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that
defendant’s motion to enforce settlement [ECF No. 500] is granted
in part, consistent with this order.
Dated:

July 14, 2014
s/David S. Doty
David S. Doty, Judge
United States District Court

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