Transamerica Life Insurance Company v. Caramadre et al

Filing 94

MOTION to Dismiss and Request for Consideration Or, in the Alternative, For a More Definite Statement With Supporting Memo by Edward Hanrahan. Responses due by 4/25/2011 (Attachments: #1 Exhibit Application, #2 Exhibit Broker-Dealer Agreement)Associated Cases: 1:09-cv-00470-S-DLM et al.(MacFadyen, John)

Transamerica Life Insurance Company v. Caramadre et al

Doc. 94

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND : : : Plaintiff, : v. : : Joseph Caramadre, Raymour Radhakrishnan, Estate : Planning Resources, Inc., Harrison Condit, and : Fortune Financial Services, Inc., : : Defendants. : : : Western Reserve Life Assurance Company Of Ohio, : : Plaintiff, : v. : : Joseph Caramadre, Raymour Radhakrishnan, Estate : Planning Resources, Inc., ADM Associates, LLC, : Edward Hanrahan, The Leaders Group, Inc., and : Charles Buckman, : : Defendants. : : : Western Reserve Life Assurance Company Of Ohio, : : Plaintiff, : v. : : Joseph Caramadre, Raymour Radhakrishnan, Estate : Planning Resources, Inc., DK, LLC, Edward Hanrahan, : The Leaders Group, Inc., and Jason Veveiros, : : Defendants. : : Western Reserve Life Assurance Company Of Ohio,

C.A. No. 09-470 WS

C.A. No. 09-472 WS

C.A. No. 09-473 WS

Dockets.Justia.com

Western Reserve Life Assurance Company Of Ohio, Plaintiff, v. Joseph Caramadre, Raymour Radhakrishnan, Estate Planning Resources, Inc., Natco Products Corp., Edward Hanrahan, and The Leaders Group, Inc. Defendants.

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C.A. No. 09-502 WS

EDWARD HANRAHAN'S MOTION TO DISMISS AND REQUEST FOR RECONSIDERATION, OR, IN THE ALTERNATIVE, FOR A MORE DEFINITE STATEMENT Defendant Edward Hanrahan moves under Fed.R.Civ.P. 12(b)(6) to dismiss plaintiff Western Reserve Life Assurance Co.'s (WRL) Second Amended Complaint in No. 09-472, its Third Amended Complaint in No. 09-473, and its Amended Complaint in No. 09-502, on the ground that these complaints fail to state any claim on which relief can be granted. This Court should dismiss these amended complaints for the reasons stated in the following filings with this Court which defendant incorporates by reference: 1. Memorandum of Law in Support of Defendants Joseph A. Caramadre, Raymour Radhakrishnan, Estate Planning Resources, Inc., DK LLC, and Edward Hanrahan's Motion to Dismiss, and Consolidated Reply Memorandum (filed with this Court on or about November 13, 2009, January 13, 2010, and February 22, 2010); Defendants' Consolidated Initial and Reply Memoranda (filed with this Court on or about October 4, 2010 and December 10, 2010); Edward Hanrahan's Reply Memorandum in Further Support of His Motion to Dismiss and Request for Reconsideration (filed with this Court on or about December 14, 2010). Defendants ADM Associates LLC, Estela Rodrigues, Joseph Caramadre, Raymour Radhakrishnan, Estate Planning Resources, Inc., and Harrison Condit's Consolidated Motion to Dismiss the Newly Amended Complaints and Request for Reconsideration, and supporting memorandum (filed with this Court on or about March 24, 2011). Motion of Defendant DK, LLC for Dismissal of Third Amended Complaint. 2

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WRL has recently amended its complaints to add counts which assert an unspecified violation of WRL's "rules and regulations, applicable state laws, and the ethics code . . . ." (Count XI in No. 09-472, Count XII in No. 09-473, Count VIII in No. 09-502), and a breach of an implied duty of good faith and fair dealings (Count XII in No. 09-472, Count XIII in No. 09473, Count IX in No. 09-502). These claims identify no provision in the referenced materials which would create a disclosure obligation on Mr. Hanrahan which he breached. Consequently, these newly-created claims fail to state a cause of action on which relief can be granted. In the alternative, defendant moves under F.R.Civ.P. 12(e) for a more definite statement of its contract claims. Counts XI and XII of WRL's Second Amended Complaint (No. 09-472); XII and XIII of WRL's Third Amended Complaint (No. 09-473); and VIII and IX of WRL's Amended Complaint (No. 09-502) assert a violation of WRL's "rules and regulations, applicable state laws and the ethics code" without specifying the provision allegedly breached. Defendant files a memorandum of law with accompanying exhibits in support of this motion which addresses specifically WRL's newly added contract claims. Respectfully submitted, EDWARD HANRAHAN By his Attorneys, /s/ John A. MacFadyen John A. MacFadyen (#1209) MACFADYEN, GESCHEIDT & O'BRIEN 101 Dyer Street, 3rd Floor Providence, RI 02903 Tel: [phone] Fax: [phone] [e-mail]

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CERTIFICATION I hereby certify that on the 6th day of April, 2011, notice of this pleading was served on all parties electronically via the Court's ECF system. /s/ John A. MacFadyen

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND : : : Plaintiff, : v. : : Joseph Caramadre, Raymour Radhakrishnan, Estate : Planning Resources, Inc., Harrison Condit, and : Fortune Financial Services, Inc., : : Defendants. : : : Western Reserve Life Assurance Company Of Ohio, : : Plaintiff, : v. : : Joseph Caramadre, Raymour Radhakrishnan, Estate : Planning Resources, Inc., ADM Associates, LLC, : Edward Hanrahan, The Leaders Group, Inc., and : Charles Buckman, : : Defendants. : : : Western Reserve Life Assurance Company Of Ohio, : : Plaintiff, : v. : : Joseph Caramadre, Raymour Radhakrishnan, Estate : Planning Resources, Inc., DK, LLC, Edward Hanrahan, : The Leaders Group, Inc., and Jason Veveiros, : : Defendants. : : Western Reserve Life Assurance Company Of Ohio,

C.A. No. 09-470 WS

C.A. No. 09-472 WS

C.A. No. 09-473 WS

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Western Reserve Life Assurance Company Of Ohio, Plaintiff, v. Joseph Caramadre, Raymour Radhakrishnan, Estate Planning Resources, Inc., Natco Products Corp., Edward Hanrahan, and The Leaders Group, Inc. Defendants.

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C.A. No. 09-502 WS

EDWARD HANRAHAN'S MEMORANDUM IN SUPPORT OF HIS MOTION TO DISMISS AND REQUEST FOR RECONSIDERATION, OR, IN THE ALTERNATIVE, FOR A MORE DEFINITE STATEMENT I. Introduction Defendant Edward Hanrahan has moved under Fed.R.Civ.P. 12(b)(6) to dismiss plaintiff Western Reserve Life Assurance Co.'s (WRL) Second Amended Complaint in No. 09-472, its Third Amended Complaint in No. 09-473, and its Amended Complaint in No. 09-502, on the ground that these complaints fail to state any claim on which relief can be granted. Defendant has delineated his arguments in the following filings with this Court which defendant incorporates by reference: 1. Memorandum of Law in Support of Defendants Joseph A. Caramadre, Raymour Radhakrishnan, Estate Planning Resources, Inc., DK LLC, and Edward Hanrahan's (collectively "defendants") Motion to Dismiss, and Consolidated Reply Memorandum (filed with this Court on or about November 13, 2009, January 13, 2010, and February 22, 2010); Defendants' Consolidated Initial and Reply Memoranda (filed with this Court on or about October 4, 2010 and December 10, 2010); Edward Hanrahan's Reply Memorandum in Further Support of His Motion to Dismiss and Request for Reconsideration (filed with this Court on or about December 14, 2010) (HR Memorandum). Consolidated Memorandum of Law in Support of Defendants ADM Associates LLC, Estela Rodrigues, Joseph Caramadre, Raymour Radhakrishnan, Estate Planning Resources, Inc., and Harrison Condit's Consolidated Motion to Dismiss the Newly Amended Complaints and Request for Reconsideration (filed with this Court on or about March 24, 2011) (Defendants' Consolidated Memorandum).

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WRL's original and ongoing plaint has been that Mr. Hanrahan and others committed two kinds of fraud: fraud in the inducement and fraud in the factum.1 As delineated in these memoranda, these claims fail to state causes of action on which relief could be granted for several reasons: Fraud in the inducement (Nos. 09-472, 09-473 and 09-502): WRL has not stated a claim for fraud in the inducement because it does not assert that the applications filed by Mr. Hanrahan contained any false statements or any partial disclosures which, in context, would be misleading. See HR Memorandum at p. 2-6. Further, because WRL deliberately made Mr. Hanrahan an independent contractor, he had no duty to provide information to WRL other than that specified on the annuity application which WRL required him to use. Id. at 6-8. Fraud in the factum (No. 09-473)2: WRL fails to allege a proper claim for fraud in the factum because it has failed to state any specific facts which establish either that Mr. Hanrahan himself had fraudulent dealings with the annuitant or that he had any knowledge of others' alleged fraudulent dealings. Id. at 8-9.3 Recently, on March 7, 2011, WRL amended its complaints to add two new claims sounding in contract: one asserts an unspecified breach of WRL's "rules and regulations,
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WRL's other claims against Mr. Hanrahan ­ unjust enrichment and civil conspiracy ­ are entirely derivative of these fraud accusations.
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This claim, made only in No. 09-473, is predicated on an accusation that defendants acting en masse overreached the annuitant to obtain a fraudulent signature on the annuity application. The issue is not so much whether such conduct can be inherently fraudulent, but whether the amended complaint in No. 09-473 satisfies Fed.R.Civ.P. 9(b) in alleging specific facts showing Mr. Hanrahan's involvement in the activity. Parenthetically, this kind of fraud ­ not WRL's tenuous claim of fraud in the inducement ­ appears to be the focus of the parallel criminal investigation being conducted by the Office of the United States Attorney.
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In further support of this argument, defendant incorporates the Memorandum of Defendant DK, LLC in Support of Motion for Dismissal of Third Amended Complaint, filed on or about April 4, 2011. 7

applicable state laws, and the ethics code . . . ." (Count XI in No. 09-472, Count XII in No. 09473, Count VIII in No. 09-502), and the other asserts a breach of an implied duty of good faith and fair dealings (Count XII in No. 09-472, Count XIII in No. 09-473, Count IX in No. 09-502). By these amendments, WRL apparently seeks to avoid the duty problems with its previous claims which sound in tort. This effort fails. WRL can identify no provision of any contract which can fairly be construed to require Mr. Hanrahan to supply information to WRL beyond that specified in the annuity application which WRL designed, drafted and required Mr. Hanrahan to use. This memorandum will address the two newly-added counts and incorporates by reference the arguments previously made on WRL's tort claims. II. New Contract Claims WRL now asserts that Mr. Hanrahan filled out and signed a "Representative Licensing Application" (Application) which included an agreement that he would "comply with the rules and regulations of the Company as they may be established from time to time, and the laws of the states in which I am licensed and the regulations of the Department of Insurance of each such state, . . . ." Application, ¶2 attached as Exhibit A and referenced in Count XI, ¶87 in No. 09472; Count XII, ¶98 in No. 09-473; Count VIII, ¶78 in No. 09-502. The new counts also assert that he had agreed to comply with WRL's September 1, 1997 Code of Professional Conduct (Ethics Code). Id.4 The amended complaints do not further specify the contract provision which Mr. Hanrahan allegedly breached.

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The Application included an agreement that the applicant "shall comply with the concepts in the Company's Code of Professional Conduct, . . . ." Exhibit A, ¶7. 8

III.

Failure to State a Claim As the defendant has previously outlined, HR Memorandum at 7-8, WRL deliberately

created an arm's length relationship with its so-called "soliciting agents," Mr. Hanrahan being one. By express contractual provision, he was required to act "as an independent contractor[s], and not as agent[s] or employee[s] of WRL or ISI." Broker-Dealer Supervisory and Service Agreement (attached as Exhibit B), referenced and quoted in No. 09-472, ¶¶59-61; No. 09-473, ¶¶70-72; No. 09-502, ¶¶52-54.5 Indeed, WRL previously sought to prove Mr. Hanrahan's status as a "soliciting agent" by directing the Court to a document entitled "Appointment Agreement." WRL's Consolidated Memorandum in Support of Plaintiffs' Objections to Defendants' Motions to Dismiss and for Reconsideration at p. 20, filed on or about November 17, 2010 and referencing and attaching Appointment Agreement as WRL Exhibit C. This document states without equivocation as follows: "You are an independent contractor and not an employee of the company." ¶2 of WRL's Exhibit C. The amended complaints themselves embrace this designation: "At all times relevant thereto, Hanrahan was an agent or employee of Leaders Group [the broker-dealer, not WRL] and was acting within the scope of his employment or agency relationship." No. 09-472, ¶32; No. 09-473, ¶34; No. 09-502, ¶32. His function was to sell a standardized product of WRL's exclusive design, using standardized documents drafted by WRL. In particular, WRL required that "all applications for Plans be made on application forms supplied by WRL." WRL's Exhibit B, referenced and quoted in No. 09-472, ¶¶59-61; No. 09-473, ¶¶70-72; No. 09-502, ¶¶52-54. Nothing in the language of the Application itself mentions any requirement to provide information to WRL or in any way changes the basic relationship between WRL and its
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A document integral to and referenced in a complaint may be considered on a motion to dismiss. See, Shaw v. Digital Equipment Corp., 82 F.3d 1194, 1220 (1st Cir. 1996). 9

independent contractor "soliciting agent." Consequently, if there is to be some contractual responsibility for the provision of information beyond that sought in the annuity application generated by WRL, then it must come in the form of a specific provision somewhere in the rules and regulations of WRL or in state law. This Court has already held that Rhode Island law does not preclude the sale of annuities where the annuitant is not related to the owner. Opinion and Order at p. 19, filed on or about June 2, 2010. Certainly nothing in state law specifies that annuitant health care information be furnished where the company does not ask for it. And the only document specifically identified by the amended complaints, the Ethics Code, contains no requirement, explicit or implicit, that a soliciting agent, operating in an arm's length relationship with the company, should be required to provide information regarding an annuitant's health care history and relationship to the owner. To the contrary, as outlined in Defendants' Consolidated Memorandum at pp. 9-10, the Ethics Code focuses on the soliciting agent's ethical responsibility to the customer, not to WRL at all. Black letter law requires that for a contract provision to be enforceable "`it must be of sufficient explicitness so that a court can perceive what are the obligations of the parties.'" Navarro-Ayala v. Hernandez-Colon, 951 F.2d 1325, 1341 (1st Cir. 1991), quoting Soar v. National Football League Players Assn., 550 F.2d 1287, 1289-90 (1st Cir. 1977). Accord, McLaughlin v. Stevens, 296 F.Supp. 610, 613 (D.R.I. 1969) (Rhode Island law); 1 Williston on Contracts, § 4:21 p. 634 (4th ed. 2007). Here, WRL fails to assert "sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009), quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). WRL's amended complaints cannot reference any contractual requirement to furnish WRL with

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information it did not request. To the contrary, WRL is seeking relief from the very arm's length relationship it deliberately created. * * * * As for the claims of breach of an implied covenant of good faith, these assertions too must fail. Under Rhode Island law, the covenant is not a substitute for an actual contract. To the contrary, "where there is no contract, there is no duty." Crellin Technologies, Inc. v. Equipmentlease Corp., 18 F.3d 1, 10 (1st Cir. 1994). "In such circumstances, there is nothing from which the covenant can be implied." Id. Accord, e.g., Lifespan/Physicians Professional Services Org., Inc. v. Combined Insurance Co. of America, 345 F.Supp.2d 214, 225 (D.R.I. 2004); Gleason v. Merchants Mutual Insurance Co., 589 F.Supp. 1474, 1477 (D.R.I. 1984). Here, there is no contractual requirement that WRL's soliciting agent furnish it with any information beyond that requested in the annuity application form designed by WRL for the particular product. In that application form, WRL designated the information it had decided to utilize for underwriting this annuity. It certainly could have sought more. Perhaps it should have. But it did not. In a context where WRL, for its own reasons, deliberately created an arm's length relationship with its soliciting agents, thereby eliminating any fiduciary responsibility, it should not be heard to complain when Mr. Hanrahan did precisely what he was required to do: first, to fill out the annuity application accurately and completely; and second, sign the following specific attestation included in the application: I have made reasonable efforts to obtain information concerning the customer's financial status, tax status, investment objectives and other such information used or considered to be reasonable in making the annuity recommendation and find the annuity being applied for appropriate for his/her needs.

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The amended complaints nowhere assert that Mr. Hanrahan deviated from this obligation, which is the very same one, and the only one reiterated in the Ethics Code. IV. More Definite Statement In the alternative, the amended complaints do not specify any contractual language that can be reasonably construed to create an obligation on the part of WRL's soliciting agents to provide information regarding annuitants' health history and relationship to owner when that information is not requested in the annuity application. Consequently, this Court should require WRL to file a more definite statement identifying a specific contract provision which does or suffer the dismissal of its contract claims. V. Conclusion WRL's essential claim here is fraud. It cannot avoid the requirements of pleading and proof on this claim by asserting a breach of contract for the failure to provide information which in retrospect it finds material when no such undertaking was ever agreed to by the parties. As an independent contractor, Mr. Hanrahan had no general fiduciary obligation to provide this information. And he certainly had no contractual responsibility where the Application referenced in the amended complaints includes no such agreement. The amended complaints should be dismissed. Respectfully submitted, EDWARD HANRAHAN By his Attorneys, /s/ John A. MacFadyen John A. MacFadyen (#1209) MACFADYEN, GESCHEIDT & O'BRIEN 101 Dyer Street, 3rd Floor Providence, RI 02903 Tel: [phone] Fax: [phone] [e-mail] 12

CERTIFICATION I hereby certify that on the 6th day of April, 2011, notice of this pleading was served on all parties electronically via the Court's ECF system. /s/ John A. MacFadyen

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