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

Filing 599

ORDER granting in part 571 Motion to Enforce Settlement; granting in part 571 Motion to Enforce Judgment; granting in part 571 Motion for Sanctions (Written Opinion) Signed by Senior Judge David S. Doty on 5/23/2018. (DLO) cc: mailed copies to parties not electronically notified. Modified text on 5/23/2018 (MMP).

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,
v.

ORDER

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 motions to enforce
class-action settlement and judgment and for sanctions by defendant
Ameriprise Financial Services, Inc.1
file,

record,

and

proceedings

Based on a review of the

herein,

and

for

the

following

reasons, the motion is granted in part.

1

Ameriprise was formally known as American Express Financial
Advisors.

BACKGROUND
On May 15, 2001, the court issued a final order and judgment
in this case, the Benacquisto Action, approving the class action
settlement and dismissing the complaint.

See Chen Aff. Ex. 1.

As

part of the final judgment the court permanently enjoined, among
other things,
[a]ll class Members ... from ... filing, commencing,
prosecuting, maintaining, intervening in, participating
in ... any other lawsuit, arbitration, or administrative,
regulatory or other proceeding or order ... based on or
relating to the Claims and Causes of Action, or the facts
and circumstances relating thereto, in the Action and/or
Release Conduct as to that Policy or Annuity.
Id. ¶ 14.

Additionally, under the terms of the settlement, the

class members agreed to release all past and present claims “that
are

based

upon,

related

to,

or

connected

with,

directly

or

indirectly, in whole or in part to the Benacquisto Action or the
“released conduct.” Id. ¶ 13(A)(1). The released conduct includes
representations,

omissions,

and

communications

related

to

or

connected with the sale, administration, servicing, or performance
of issued policies or annuities.

Id. ¶ 13(B)(2).

Charles Fotheringham is a class member who is bound by the
terms of the final judgment and settlement.
4.

See ECF No. 567 at 3-

On June 24, 2015, Fotheringham filed a complaint in New York

state court against defendants RiverSource Life Insurance Company
and Ameriprise Financial Services, Inc.

See Chen Aff. Ex. 2.

He

alleged that, when he bought a life insurance policy in 1997,

2

defendants falsely stated that his monthly premium was $1,200. Id.
¶ 49.

On November 10, 2015, the court enjoined Fotheringham from

pursuing the state court action because it found that his claims
arose

from,

or

were

at

least

related

to,

the

same

misrepresentations in 1997 that were covered by the settlement.
See ECF No. 567 at 5-6. Pursuant to the court’s enforcement order,
the New York state court dismissed the complaint, Chen Aff. Ex. 5,
and the Appellate Division of the New York State Supreme Court
affirmed.

See Fotheringham v. Riversource Life Ins. Co. of N.Y.,

148 A.D.3d 1519 (N.Y. App. Div. 2017).
On December 20, 2017, Fotheringham filed a Statement of Claim
before the Financial Industry Regulatory Authority (FINRA) alleging
that Ameriprise violated various FINRA rules by (1) recommending
unsuitable investment and insurance products; (2) failing to advise
him of the increasing costs of the 1997 life insurance policy; and
(3) failing to establish an adequate supervisory system.

See Chen

Ex. 9.2
Ameriprise now moves to enforce the settlement agreement,
arguing that it precludes the FINRA claims.

2

While Ameriprise’s motion was pending, Fotheringham passed
away. On May 16, 2018, the court substituted Janet Stewart in her
capacity as Executrix of the Estate of Charles R. Fotheringham as
the respondent. Hereinafter, the court will refer to respondent as
the Estate.
3

DISCUSSION
I.

Motion to Enforce Settlement
The Estate argues that the settlement agreement does not

preclude its claims in the FINRA arbitration because those claims
are factually distinct from the claims covered by the settlement.
In support, the Estate points to the settlement agreement, which
states
[n]othing in this Release shall be deemed to alter ...
(ii) a Class Member’s right to assert any claim that
independently arises from acts, facts or circumstances
that occur for the first time after the last day of the
Class Period; ... or (v) a Class Member’s right to assert
any claim peculiar to the Class Member that falls outside
the general categories of claims or conduct described in
the complaints in the Actions or the Release in this
settlement and is based on facts that were not discovered
and could not with reasonable care have been discovered
by the Class Member ....
Chen Aff. Ex. 1 ¶ 13(A)(3).
The Estate contends its claims arise independently from the
released conduct because they are based on Ameriprise’s management
of Fotheringham’s assets, not the insurance policy that was the
subject of the class action.

Additionally, it argues that its

claims are based on Ameriprise’s conduct from 2005 through 2015,
and therefore, occurred for the first time after the date of the
settlement agreement.

The court disagrees.

The Estate’s claims are, at the very least, indirectly related
to representations concerning the 1997 insurance policy.
Statement

of

Claim

alleges

that
4

Ameriprise

(1)

The

recommended

Fotheringham “maintain the [1997] Life Insurance policy,” (2)
falsely “maintained that these costs would be paid for by the
growth in his portfolio,” and (3) continued to recommend that
Fotheringham keep the policy despite the decreasing value of his
portfolio.

Chen Aff. Ex. 9, at 3-4, 9-11.

The claim that

Ameriprise failed to establish an adequate supervisory system is
also based on these allegations.

Because the FINRA claims are

based on representations made regarding the 1997 insurance policy,
they are precluded by the settlement agreement.
Additionally, the Estate’s argument that its claims are based
on Ameriprise’s 2005-2015 conduct is misleading.

Although the

Statement of Claim focuses on 2005-2015 conduct, the alleged
conduct began earlier.
complaint,

later

According to Fotheringham’s state-court

enjoined

by

the

court,

Ameriprise

advised

Fotheringham to purchase the life insurance policy and falsely
represented to him that the premiums would be covered by the
increase in value of his investment assets when Fotheringham
initially purchased the policy in 1997.
44.

Chen Aff. Ex. 2 ¶¶ 35-38,

Indeed, the allegations in the Statement of Claim and the

enjoined state-court complaint are nearly identical, except that
the Statement of Claim gives the false impression that the alleged
conduct did not occur until 2005.
with Chen Aff. Ex. 9, at 3-5.

Compare Chen Aff. Ex 2 ¶¶ 48-54

As a result, the court finds that

the claims in the FINRA arbitration are precluded by the class

5

action settlement.
II.

Sanctions
Ameriprise asks the court to impose sanctions on the Estate

and its counsel for their violation of the court’s enforcement
order by continuing to litigate the state court complaint and by
pursuing the FINRA arbitration.
A court may punish a party by fine or imprisonment for
disobeying its orders.

See Int’l Bhd. of Elec. Workers, Local

Union No. 545 v. Hope Elec. Corp., 293 F.3d 409, 418 (8th Cir.
2002)(“As a general matter, when a litigant refuses to respect the
authority of the court, it is not an abuse of discretion for the
court to hold the litigant in contempt and impose a sanction to
coerce compliance.”).

Such sanctions serve a dual purpose.

They

ensure a party’s compliance with court orders and compensate the
other party for the harm incurred by noncompliance. See Hartman v.
Lyng, 884 F.2d 1103, 1106 (8th Cir. 1989).

The party seeking a

contempt order “bears the burden of proving facts warranting such
relief by clear and convincing evidence.”

Jake’s, Ltd. v. City of

Coates, 356 F.3d 896, 899–900 (8th Cir. 2004).
An attorney may also be subject to sanctions for multiplying
the proceedings in any case “unreasonably and vexatiously.”
U.S.C. § 1927.

28

Sanctions are appropriate under § 1927 when

“attorney conduct, viewed objectively, manifests either intentional
or reckless disregard of the attorney’s duties to the court.”

6

Lee

v. First Lenders Ins. Servs., Inc., 236 F.3d 443, 445 (8th Cir.
2001)(citation omitted).
Here, the court does not find that sanctions are warranted.
Although the Estate and its attorneys continued to litigate the
state court claims after being enjoined by the court, they did so
on the question of whether a federal court has jurisdiction to
enjoin a state-court action, rather than the merits of the claim.
The court does finds that such an argument was nonfrivilous and,
therefore, not sanctionable.

See Fed. R. Civ. P. 11(b).

Whether the Estate and its attorneys should be sanctioned for
pursuing the FINRA arbitration is a closer case.

The allegations

in the enjoined state-court complaint and the FINRA arbitration are
nearly identical, and the Estate’s attempt to distinguish the two
borders on being frivolous.

It is not clear, however, that the

Estate pursued this litigation with the intention of unreasonably
and vexatiously multiplying the litigation.

The Estate and its

attorneys are warned, however, that the court is strongly inclined
to impose sanctions if there is continued litigation regarding the
claims covered under the settlement agreement.

CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.

Defendant’s motion to enforce settlement and sanctions

[ECF No. 571] is granted in part as set forth above; and
7

2.

The Estate shall dismiss the FINRA arbitration within

fourteen days of this order.
LET JUDGMENT BE ENTERED ACCORDINGLY.

Dated: May 23, 2018
s/David S. Doty
David S. Doty, Judge
United States District Court

8