Metropolitan Life Insurance Company v. Phelps et al

BRIEF in Support re Motion to Dismiss Counterclaims of Gary Phelps

W.D. Pa.August 18, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff, v. GARY PHELPS, Administrator of the Estate of Mary Barbara Phelps; and FREDERICK T. FINELLO, Defendants. Case No. 2:16-cv-00514-TFM MEMORANDUM IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS OF GARY PHELPS COMES NOW Plaintiff/Defendant-in-Counterclaim Metropolitan Life Insurance Company (“MetLife”), by and through its attorneys, and submits the following Memorandum in Support of Motion to Dismiss Counterclaims of Defendant/Counter-claimant, Gary Phelps, as Administrator of the Estate of Mary Barbara Phelps (the “Estate” or “Counter-claimant”). STATEMENT OF FACTS A Life Insurance Policy was issued by MetLife on November 15, 1976 for $10,000 on the life of the insured, Mary Barbara Finello Phelps (sometimes referred to hereinafter as the “Insured” or “Decedent”). At the time the policy was issued, the primary owner and beneficiary was insured’s father Frederick T. Finello (“Finello”) and the contingent owner and beneficiary was Mary Lou Finello (insured’s mother). See Complaint in Interpleader at Paragraph 6. The Policy is attached to the Complaint in Interpleader at Exhibit A. Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 1 of 21 2 Another Life Insurance Policy was issued by MetLife on November 1, 1989 for $100,000 on the life of the insured, Mary Barbara Finello Phelps. At the time the policy was issued, the primary owner and beneficiary was Finello and the contingent owner and beneficiary was Mary Lou Finello. See Complaint in Interpleader at Paragraph 7. The Policy is attached to the Complaint in Interpleader at Exhibit B. On October 21, 2009, MetLife received a request to change the ownership on both policies from Finello to the Insured. See Complaint in Interpleader at Paragraph 8. The Transfer of Interest to Insured forms are attached to the Complaint in Interpleader at Exhibits C and D. The ownership changes were recorded for both policies on October 28, 2009. Id. To validate the change in the policies’ ownership, confirmation letters were mailed by MetLife to the Insured and to Finello on October 28, 2009, confirming the ownership change on these policies. See Complaint in Interpleader at Paragraph 9 and Exhibits E, F, G and H thereto. MetLife did not receive any response from Finello concerning the letters confirming the change in ownership of the policies to the Insured. See Complaint in Interpleader at Paragraph 10. As a result of the change in ownership of the policies to the Insured, her estate became the beneficiary under the policies. See Complaint in Interpleader at Paragraph 11. Exhibits E and F to the Complaint in Interpleader. Insured died on April 11, 2013. See Complaint in Interpleader at Paragraph 12. A copy of her obituary is attached to the Complaint in Interpleader at Exhibit I. Shortly after the Insured’s death, Finello sought payment of the proceeds of the policies, contending that he was the beneficiary. MetLife informed Finello that his daughter’s estate was the beneficiary of the policies and requested information to process a claim. See Complaint in Interpleader at Paragraph 13. A copy of MetLife’s letter is attached to the Complaint in Interpleader at Exhibit J. Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 2 of 21 3 MetLife suspended the claim process when it did not receive the requested information from Finello after repeated requests. See Complaint in Interpleader at Paragraph 14. A copy of MetLife’s letter is attached to the Complaint in Interpleader at Exhibit K. Finello later contended that he was unaware of the change in ownership forms, claiming that his wife, Mary Lou Finello, must have signed the change in ownership forms. See Complaint in Interpleader at Paragraph 15. A copy of Finello’s letter is attached to the Complaint in Interpleader at Exhibit L. Mrs. Mary Lou Finello passed away a few months after the Insured died. See Complaint in Interpleader at Paragraph 16. The witness to the change in ownership forms for the Insured’s policies, Randy C. Martini, came forward on December 12, 2014 and stated that, despite having signed the form as a witness, he did not see Finello sign the forms but signed as a witness at Mrs. Finello’s request. See Complaint in Interpleader at Paragraph 17. A copy of Mr. Martini’s letter is attached to the Complaint in Interpleader at Exhibit M. MetLife advised Finello that it could not ignore the change in ownership forms without an agreement between him and the Estate as to the disposition of the policy proceeds. See Complaint in Interpleader at Paragraph 18. A copy of MetLife’s letter is attached to the Complaint in Interpleader at Exhibit N. MetLife indicated that it would consider an interpleader action if the parties could not reach an agreement. Id. MetLife was advised that Gary Phelps was appointed Administrator of the Estate by a grant of letters dated April 5, 2016 issued by the Allegheny County Department of Court Records, Wills/Orphans’ Court Division. See Complaint in Interpleader at Paragraph 19 and Exhibit O thereto. Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 3 of 21 4 MetLife cannot determine the proper beneficiary of the policy proceeds at issue without risking exposure to multiple liabilities. See Complaint in Interpleader at Paragraph 21. If it were determined that the 2009 change in ownership designations were valid, the policy proceeds would be payable in full to the Estate. See Complaint in Interpleader at Paragraph 22. If it were determined that the 2009 change in ownership forms were not valid, the policy proceeds would be payable to Finello. See Complaint in Interpleader at Paragraph 23. The policy proceeds are approximately $150,000. See Complaint in Interpleader at Paragraph 24. As a mere stakeholder, MetLife has no interest in the policy proceeds. MetLife therefore respectfully requested that this Court determine how said policy proceeds should be paid. See Complaint in Interpleader at Paragraph 25. MetLife is ready, willing and able to pay the policy proceeds, in accordance with the terms of the policies, in such amounts and to whichever Defendant the Court shall designate. See Complaint in Interpleader at Paragraph 26. MetLife will deposit into the registry of the Court the policy proceeds, plus an applicable interest due and owing under the terms of the policies, for disbursement in accordance with the Judgment of this Court. See Complaint in Interpleader at Paragraph 27. The Estate filed an Answer to the Complaint in Interpleader and also filed Counterclaims against MetLife, arguing that interpleader was inappropriate and asserting claims against MetLife for breach of contract, promissory estoppel/detrimental reliance and negligence. The Estate’s counterclaims are without merit and should be dismissed. STANDARD OF REVIEW A complaint may be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) if it does not allege “enough facts to state a claim to relief that is plausible on its face.” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 4 of 21 5 544, 570 (2007)). Under Connelly v. Gibson, 355 U.S. 41, 45-46 (1957), courts had allowed the dismissal of a claim only if “no set of facts” could support it; but under the more stringent Twombly standard, to survive a Rule 12(b)(6) challenge a claim now requires “more than labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555. In order to satisfy the Fed. R. Civ. P. 8(a)(2) requirement of a “short and plain statement of the claim showing that the pleader is entitled to relief,” a plaintiff’s factual allegations must be sufficient “to raise a right to relief above the speculative level.” Ayers v. Osram Sylvania, Inc., No. 07-1780, 2008 WL 4425270, at *2 (M.D. Pa. Sept. 24, 2008) (citing Twombly, 550 U.S. at 555). In deciding a Rule 12(b)(6) motion, all well-pled factual allegations are accepted as true and all inferences are construed in the light most favorable to the non-moving party. Umland v. Planco Find Servs., 542 F.3d 59, 64 (3d Cir. 2008) (citing Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006)). However, a court will not accept bald assertions, unwarranted inferences or sweeping legal conclusions as factual allegations. Maio v. Aetna, 221 F.3d 472, 482 (3d Cir. 2000). In ruling on a motion to dismiss, courts generally consider only the allegations of the complaint, attached exhibits, and matters of public record. Pension Benefit Guar. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993). ARGUMENT I. MetLife is Entitled to Interpleader Protection. Rule 22 of the Federal Rules of Civil Procedure provides in pertinent part that “[p]ersons with claims that may expose a plaintiff to double or multiple liability may be joined as defendants and required to interplead.” Fed.R.Civ.P. 22(a)(1). The purpose of the interpleader device is to allow “a party who fears being exposed to the vexation of defending multiple claims Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 5 of 21 6 to a limited fund or property that is under his control a procedure to settle the controversy and satisfy his obligation in a single proceeding.” Prudential Ins. Co. of Am. v. Hovis, 553 F.3d 258, 262 (3d Cir. 2009) (citing 7 Charles Allen Wright & Arthur R. Miller, Federal Practice & Procedure § 1704 (3d ed.2001), at 540-41 (“Wright & Miller”)). Accordingly, interpleader allows a stakeholder who “admits it is liable to one of the claimants, but fears the prospect of multiple liability[,] ... to file suit, deposit the property with the court, and withdraw from the proceedings.” Hovis, 553 F.3d at 262 (citing Metro Life Ins. Co., v. Price, 501 F.3d 271, 275 (3d Cir. 2007). Consequently, “[t]he competing claimants are left to litigate between themselves,” while the stakeholder is discharged from any further liability with respect to the subject of the dispute. Id. A Plaintiff can maintain the action “even though he believes that one of the claims is valid and the other, or others, without merit.” Bierman v. Marcus, 246 F.2d 200, 202 (3d Cir. 1957). It is the general rule that a party seeking interpleader must be free from blame in causing the controversy, and where he stands as a wrongdoer with respect to the subject matter of the suit ... he cannot have relief by interpleader.” Farmers Irrigating Ditch & Reservoir Co. v. Kane, 845 F.2d 229, 232 (10th Cir. 1988)). The Estate does not dispute that, at the time MetLife filed the instant interpleader action, it was faced with a competing claim for life insurance proceeds by Finello. (See Doc. 12, ¶58). Yet, the Estate seeks to prevent MetLife from obtaining interpleader relief, contrary to well-established law. In Hovis, the court was faced with the argument that Prudential failed to process a request to change the owner and beneficiary of the policy in a timely manner and thus, created the circumstances in which there were competing claims to the proceeds. See Hovis, 553 F.3d at 263. The court rejected this argument, finding every indication that there was a genuine Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 6 of 21 7 dispute over the entitlement to the insurance proceeds, and Prudential was not to blame for its existence. Id. Moreover, the court noted: the rule that bars a party from obtaining interpleader relief when it caused the underlying controversy is not geared toward the kind of situation that Hovis alleges occurred here (i.e., one in which the stakeholder's own errors are responsible for the ownership dispute). Id. at 264. Rather, as the Hovis court explained, the general rule is “meant to prevent a tortfeasor, facing claims from multiple parties, from using the interpleader device to cap its liability.” Id. (citing Farmers Irrigating Ditch, 845 F.2d at 232) (“Our attention has not been directed to any case where a tortfeasor in a multi-claim tort can admit liability, tender into court a minimal amount of money with the representation that such is all he has, force the claimants to prorate the amount deposited, and then obtain an order discharging him from any further liability for his tort.”). There are no facts pled or existing to suggest that MetLife has any interest in the proceeds or that it is attempting to use the interpleader action to limit its liability. To the contrary, MetLife has no interest in the proceeds of the policies and stands ready, willing and able to pay, in accordance with the terms of the policies, and has simply asked the Court to determine to whom the policy proceeds, plus any applicable interest, should be paid due to competing claims to which MetLife has become subjected. See Complaint in Interpleader at Paragraph 26 The undisputed facts confirm that MetLife is an innocent stakeholder. Pursuant to Policy Number 761143459A, Any designation or change of an Owner, Contingent Owner, Beneficiary, or Contingent Beneficiary will not be binding upon the Company unless made in writing and filed at the Home Office. Such designation or change will then be effective as of the date it was signed, except that it will not apply with respect to any payment made by the Company before it was filed. If required by the Company, the policy must be presented for endorsement of any such designation or change. Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 7 of 21 8 Exhibit A, p. 4. Similarly, Policy 893132129 PR provides: You may change the owner, contingent owner, beneficiary or contingent beneficiary of this policy by written notice or assignment of the policy. No change is binding on us until it is recorded at our Home or Head Office. Once recorded, the change binds us as of the date you signed it. Exhibit B, p. 27. The Estate claims that the it “became the [only] beneficiary under the policies” as of on or about October 21, 2009, (Doc. 12, ¶52) (citing Complaint in Interpleader at Paragraph11 and Exhibits E, F, G, and H of Plaintiff’s Complaint), which is when MetLife received a written request to change the ownership on both policies from Finello to the Insured. See Complaint in Interpleader at Paragraph 8. The Transfer of Interest to Insured forms each provide one signature box for each owner’s signature and show the signature of one owner and one witness, as required. See Exhibits C and D. The Estate does not dispute the authenticity of the signatures or the validity of the changes in ownership recorded for each Policy on October 28, 2009, as is required under the policies. See Exhibits A and B. To the contrary, the Estate averred “that the attached writing(s) speaks insofar as Defendant Finello was aware of, consented to, and/or expressly or impliedly authorized another (his wife) to execute or process the writings referenced therein.” (Doc. 12, ¶15). To validate the change in the policies’ ownership, four confirmation letters were mailed by MetLife to the insured and to Finello to confirm the ownership change on these policies. See Exhibits E, F, G and H. The Estate does not deny that the insured received the letters (see Doc. 12, ¶66) and also asserts that there is no evidence to suggest that Defendant Finello ever sent Plaintiff a notice that his address had changed and/or that he did not or could not receive mail at the above listed address. (Doc. 12, ¶ 32). Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 8 of 21 9 It was not until after the Insured’s death, approximately three and one-half years later, that Finello submitted a claim for life insurance proceeds and challenged the ownership change, advising MetLife that he was unaware of the change and that his wife, who had also passed away, must have signed the ownership forms. (Doc. 6, ¶¶12, 13, 15, 16). See Exhibits I and L. It was at only this time when the witness to the change in ownership forms, Randy C. Martini, came forward and stated that, contrary to the purpose of his signature on the forms, he did not see Mr. Finello sign the forms but signed as a witness at Mrs. Finello’s request. (Doc. 6, ¶17). See Exhibit M. Furthermore, the Estate admits that MetLife’s duty of care, if any, did not arise until after MetLife advised Insured in writing that she was the owner and her future estate was the future beneficiary of certain life insurance policies. (See Doc. 12, ¶72). As a result, any actions taken by MetLife in processing the change in ownership occurred before MetLife could have owed any contractual duty to the Insured, and could not form the basis of any claim for negligence with regard to safeguarding the proceeds of the policy by verifying the authenticity of the signature on the beneficiary change form. Unlike Finello, the Estate has made no allegation that MetLife was a wrongdoer, at fault for the existence of the controversy, simply by virtue of accepting and recording the written requests for beneficiary changes, pursuant to the terms of the policies. Indeed, the Estate’s bare allegations of breach of duty of care with respect to MetLife’s alleged negligence (failing to properly confirm and/or investigate the authenticity and intent of Defendant Finello’s execution of the transfer document(s) at issue herein (Doc. 12, ¶75), failing to implement safeguards and/or otherwise protect her from the alleged unauthorized execution of documents or alleged actions by Defendant Finello and/or MetLife’s alleged inability to confirm the validity and intent of Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 9 of 21 10 documents allegedly not executed by Defendant Finello (Doc. 12, ¶76) and failing to promptly pay any and all proceeds of any insurance policies at issue here to Defendant Estate (Doc. 12, ¶74)) are wholly inadequate under the heightened pleading standards of Iqbal and Twombly to raise a plausible claim that MetLife is responsible for causing the competing claims. Moreover, they are contradicted by the very fact that the Estate would not have been a potential beneficiary were it not for MetLife’s acceptance of the change form in accordance with the terms of the policies, which provide the mechanism for the beneficiary change, and MetLife’s efforts to confirm the ownership changes (without any challenge from Finello). Thus, the Estate has alleged no damages beyond its purported right to the proceeds of the policy and the assertion of a duty on the part of MetLife to reach a decision in its favor regarding payment of said proceeds. (See Doc. 12, ¶). The validity of the change in ownership designations is the precise issue before the Court on MetLife’s Interpleader Complaint, and is a purely contractual issue. See Complaint in Interpleader at Paragraphs 22-23 and 25.1 Interpleader is an appropriate vehicle for MetLife to protect itself from competing claims, and there are no concrete facts asserted or existing to suggest that MetLife is not an innocent stakeholder. Therefore, the Court should allow the Interpleader action to proceed. II. Interpleader Protection Extends to The Estate’s Counterclaims, All of Which Should Be Dismissed. While “interpleader was never intended ... to be an all-purpose ‘bill of peace’ ”, it would be “counter to the very idea behind the interpleader remedy” to allow counterclaims to proceed 1 See also Price, 501 F.3d 271 at 275 (holding that interpleader allows a stakeholder to withdraw after depositing funds, and “[t]he competing claimants are left to litigate between themselves,” while the stakeholder is discharged from any further liability with respect to the subject of the dispute); Hovis, 553 F.3d at 262. Accord, New York Life Ins. Co. v. Shuster, 373 So. 2d 916, 918 (Fla. 1979) (permitting insurer to file claim for interpleader to resolve competing claims to policy proceeds upon insurer being notified of a claim of forgery related to the validity of the insured’s signature on an enrollment card). Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 10 of 21 11 when not “truly independent” of the dispute underlying the interpleader action. Hovis. 553 F.3d at 264-65 (citing State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 535, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967). But see Lee v. W. Coast Life Ins., 688 F.3d 1004, 1013-14 (9th Cir.2012) (holding that interpleader does not shield stakeholder from claimant's negligence counterclaim based on alleged creation of conflict over interpleaded property). That is, it would violate the foundation of interpleader that “where a stakeholder is allowed to bring an interpleader action, rather than choosing between adverse claimants, its failure to choose between the adverse claimants (rather than bringing an interpleader action) cannot itself be a breach of a legal duty.” Id. at 265. See also Lexington Ins. Co. v. Jacobs Indus. Maint. Co., LLC, 435 F. App'x 144, 148 (3d Cir. 2011). The Estate raises the following three counterclaims against MetLife, in an attempt to disguise the claim to the life insurance proceeds as an independent claim: 1) Counterclaim I - Breach of Contract; 2) Counterclaim II - Promissory Estoppel/Detrimental Reliance; and 3) Counterclaim III - Negligence (in the alternative). These counterclaims all simply repackage the Estate’s claim to the insurance proceeds under the contract, and are therefore not proper counterclaims in an interpleader action. See J.G. Wentworth Originations, LLC v. Mobley, No. 11-CV-1406, 2012 WL 4922862, at *7 (D. Md. Oct. 12, 2012) (examining the holdings of Hovis and Lee and finding that claim for promissory estoppel/detrimental reliance was premised on the resolution of the interpleader action in favor of another claimant, and required, as relief, specific enforcement of the “promise” of entitlement to the annuity payments). Interpreting Hovis, the court in Amethyst Int'l, Inc. v. Duchess, No. CIV.A. 13-04287 FLW, 2014 WL 683670, at *8 (D.N.J. Feb. 20, 2014) held that each of the counterclaims, involving allegations of misconduct or bad faith, was primarily a claim to the interpleaded funds, Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 11 of 21 12 and even were that not the case, while each claim ostensibly alleged bad faith, none were truly independent of the decision to resolve the ownership dispute over the proceeds by means of interpleader. The court reasoned that there was no logical distinction between the allegation that the insurer wrongfully added a co-loss payee and the matter which interpleader was designed to resolve-which claimant was entitled to the proceeds. Amethyst, 2014 WL 683670. Here, as in Hovis, each of the Estate’s counterclaims concern MetLife’s failure to resolve its investigation in the Estate’s favor and pay out the insurance proceeds to the Estate, plain and simple. See Hovis, 553 F.3d at 265. The Estate’s allegations are all premised on the position that MetLife should have chosen to pay the Estate as the sole beneficiary, despite MetLife’s potential liability to and the completing claim from Finello. In Counterclaim I for breach of contract, the Estate alleges that a contractual relationship existed between MetLife and the Insured, and by virtue of the contract, payment of policy proceeds would be made to the Estate upon the death of the Insured. (See Doc. 12, ¶¶53-55) The Estate alleges that MetLife breached its contract with the Insured by failing and/or refusing to pay the Estate the proceeds of the policies at issue, notwithstanding MetLife’s alleged liability to Finello. (Doc. 12, ¶¶57-58). Similarly, in its Counterclaim II for promissory estoppel/detrimental reliance, the Estate alleges that, in receiving confirmation of transaction on October 28, 2009, the Insured relied upon MetLife’s promises to pay the Estate. (Doc. 12, ¶¶63-64). The Estate also asserts the conclusory allegation that, the Insured may have purchased other life insurance protection for her family if not for MetLife’s promises to provide her with insurance protection in the form of the policies at issue herein. (Doc. 12, ¶65). The Estate further contends that the Insured reasonably Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 12 of 21 13 relied on MetLife’s promises. (Doc. 12, ¶66). The Estate seeks enforcement of the terms of the contract through payment of the proceeds of the policies at issue. (Doc. 12, ¶69). These counterclaims for promissory estoppel/detrimental reliance and breach of contract expressly allege breach of a duty under the contracts. Therefore, they cannot be independent of the issue that the interpleader action was brought to settle - who is entitled to the proceeds of the policies. See Allstate Life Ins. Co. v. McBrearty, No. 3:11-CV-1860, 2013 WL 2291888, at *8 (M.D. Pa. May 24, 2013) (granting judgment as a matter of law on counterclaim for breach of contract raised in response to interpleader complaint). Likewise, the Estate’s Counterclaim III for negligence is premised upon the same assertions and the same breaches alleged in support of the breach of contract and promissory estoppel/detrimental reliance counterclaims. The Estate cannot prevail on its alternative negligence claim. A claim for negligence under Pennsylvania law contains four elements: (1) a duty or obligation recognized by the law, requiring the actor to conform to a certain standard of conduct for the protection of others against unreasonable risks; (2) a failure to conform to the standard required; (3) a causal connection between the conduct and the resulting injury; and (4) actual loss or damage resulting in harm to the interests of another. In re TMI, 67 F.3d 1103, 1117 (3d Cir.1995) (citations omitted). The Estate again claims that MetLife formed a duty of care with the Insured, upon advising her that she was the owner and her future estate the beneficiary of the Policies. (Doc. 12, ¶72). Per the Estate’s allegations, a duty of care allegedly arose under the contracts upon confirmation of the change in ownership being sent to the Insured. Yet, the Estate claims that this duty of care was breached by alleged actions taken by MetLife prior to the existence of the alleged duty of care, including failure to properly confirm and/or investigate the authenticity Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 13 of 21 14 and intent of Defendant Finello’s execution of the transfer document(s) at issue herein (Doc. 12, ¶75) and failing to implement safeguards and/or otherwise protect her from the alleged unauthorized execution of documents or alleged actions by Defendant Finello and/or MetLife’s alleged inability to confirm the validity and intent of documents allegedly not executed by Defendant Finello. (Doc. 12, ¶76). The Estate also alleges the duty of care under the contracts was breached by MetLife’s failure to promptly pay any and all proceeds of any insurance policies at issue here to Defendant Estate. (Doc. 12, ¶74). The Estate expressly alleges that the negligence claim is raised in the alternative, and the remedy the Estate seeks remains the same as the relief sought in Counterclaims I and II - the total proceeds of the policies at issue. (Doc. 12, ¶80). The only duties alleged by the Estate are claimed to arise under the contracts. Generally, under Pennsylvania law, there is no common law tort for breach of fiduciary duty against an insurer. See e.g. Levin v. Transamerica Occidental Life Ins. Co., No. CIV. A. 05-5172, 2008 WL 3895897, at *5 (E.D. Pa. Aug. 21, 2008); Wood. v. All-State Ins. Co., 1996 WL 637832 at *2 (E.D.Pa.1996). A fiduciary relationship between an insurer and the owner of a Policy only arises in limited circumstances. See Connecticut Indem. Co. v. Markman, 1993 WL 304056 at *5 (E.D.Pa.1993) (holding that an insurance company may form a fiduciary relationship when it “asserts a stated right under the Policy to handle all claims against the insured.”); Benefit Trust Life Ins. Co. v. Union Nat'l Bank of Pittsburgh, 776 F.2d 1174, 1177 (3d Cir.1985) (finding that life insurance companies generally have no fiduciary obligation to beneficiaries of life insurance policies as their relationship is solely a matter of contract). The Estate offers no authority to support the imposition of a legal or contractual duty on MetLife to investigate the authenticity of a signature on a change of ownership form or to Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 14 of 21 15 implement additional safeguards to prevent unauthorized execution of documents. Under Pennsylvania law, provisions regarding procedures for changes in ownership or beneficiaries, which the Estate suggests were inadequate here, have been held to be procedural in nature and written into the contract only for the company's benefit. See Breckline v. Metro. Life Ins. Co., 406 Pa. 573, 577, 178 A.2d 748, 750 (1962). See also Provident Mutual Life Insurance Co. v. Ehrlich, 508 F.2d 129, 134 (3d Cir. 1975) (“A change-of-beneficiary clause in a policy is for the benefit or protection of only the insurer.”). It is also noteworthy that there are no facts alleged to suggest that MetLife should have been aware that the change was improper at the time the forms were received. The policies do not provide for personal verification of signature and MetLife’s research did not find any Pennsylvania case law requiring personal verification of the kind suggested by the Estate. However, it is instructive that other states do not require personal verification of signatures requesting change in beneficiary.2 Of course, absent the duty claimed by the Estate, there can be no legal basis for any of the counterclaims it asserts. In re TMI, supra. The clear terms of the policy require MetLife to effectuate the beneficiary change upon receipt and filing of the written requests. The undisputed facts show that MetLife made four 2 See e.g. Fortis Benefits Ins. Co. v. Pinkley, 926 So. 2d 981, 987 (Ala. 2005) (“the insurer is not under any duty to determine whether the change of beneficiary was procured or induced by improper means where it has no reason to believe or know that such was the case.”) (citations omitted); Schwartz v. Guardian Life Ins. Co. of Am., 73 So. 3d 798, 808 (Fla. Dist. Ct. App. 2011) (following Fortis and stating “[w]e see no logical reason to treat situations in which a change of beneficiary, or change in the owner of the policy, is obtained by a forgery differently from situations where the change occurs as a result of undue influence or incompetency.”); Pabon Lugo v. MONY Life Ins. Co. of Am., 465 F. Supp. 2d 123, 130 (D.P.R. 2006); McNabb v. Kentucky Central Life Insurance Co., 631 S.W.2d 253, 255 (Tx.App.1982); Blaylock v. Allstate Ins. Co., No. 1:CV-06-1456, 2008 WL 80056, at *15 (M.D. Pa. Jan. 7, 2008) (holding that the defendant correctly argued that it had no duty to investigate in response to production of a rejection form, where it was alleged that the signature on the form was a forgery, stating that an insurer should not have the burden of proving that the signature is valid in these circumstances, that is, when the insured presents her mere denial that the signature is hers); Taylor v. U.S. Office of Pers. Mgmt., No. CIV. 14-00107 SOM/BM, 2015 WL 3649796, at *4 (D. Haw. June 10, 2015) (The plaintiff failed to demonstrate that MetLife was under any duty to investigate or analyze the authenticity of the beneficiary designation form where the plaintiff offered no statutory or case authority to suggest that MetLife was obligated to take the actions it allegedly failed to take to verify the veracity and authenticity of the a change of beneficiary form.). Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 15 of 21 16 attempts to confirm the ownership changes. By the Estate’s own allegations, the crux of its counterclaims is that MetLife chose not to make a decision to pay the Estate the life insurance proceeds, notwithstanding Finello’s competing claim to the same. The Estate asserts the same allegations of duties under the contract as those in support of its tort counterclaim for negligence. There is no logical distinction between the Estate’s allegation seeking enforcement of the terms of the contract through payment of the proceeds of the policies at issue (Doc. 12, ¶69) and its (alternative) negligence claim, seeking payment of the proceeds at issue (Doc. 12, ¶74). Even if a duty of care existed, as the Estate alleges - which it does not - the Estate’s attempt to manufacture an independent claim for negligence must fail because what the Estate seeks is simply to be paid the proceeds of the policies. The validity of the Transfer of Interest to Insured forms is relevant to determining to whom the proceeds should be paid, which is what MetLife has asked the Court to do by filing this interpleader action. Regardless of the validity of the Transfer of Interest forms and the thoroughness of MetLife’s investigation or lack thereof, it was MetLife’s receipt of the forms requesting a change in ownership that gave rise to competing claims for the proceeds of the policies, not MetLife’s decision to accept the forms. The Estate’s counterclaims clearly relate to MetLife’s duties under the contracts rather than a separate social duty existing outside the contract. None of the Estate’s claims are truly independent of the question of who was entitled to the insurance proceeds, which is the issue the interpleader action was brought to settle. See Hovis, 553 F.3d at 264. Therefore, the Estate’s counterclaims should be dismissed. III. The Estate’s Counterclaims I, II and III Are Barred by the Gist of the Action Doctrine and Economic Loss Doctrines and Are Insufficiently Pled. Under Pennsylvania law, the gist of action doctrine maintains the conceptual distinction between contract law and tort law.” EQT Prod. Co. v. Terra Servs., LLC, No. CV 14-1053, 2016 Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 16 of 21 17 WL 1435448, at *5 (W.D. Pa. Apr. 12, 2016) (quoting Gadley v. Ellis, No. CIV.A. 3:13-17, 2015 WL 2345619, at *6 (W.D.Pa. May 15, 2015)). The doctrine seeks to prevent plaintiffs from repackaging breach of contract claims as tort claims. Id. The Supreme Court of Pennsylvania recently clarified the appropriate analytical framework for applying the gist of action doctrine. See Bruno v. Erie Ins. Co., 106 A.3d 48 (Pa. 2014). In Bruno, the court established that whether a claim sounds in contract or tort is dependent upon “the nature of the duty alleged to have been breached.” 106 A.3d at 68. A duty is either “one created by the parties by the terms of the[ ] contract-i.e., a specific promise to do something that a party would not ordinarily have been obligated to do” or “a broader social duty owed to all individuals...[and] exist[ing] regardless of the contract.” Id. “In this regard, the substance of the allegations comprising a claim in a plaintiff's complaint are of paramount importance, and, thus, the mere labeling by the plaintiff of a claim as being in tort ... is not controlling.” Id. at 69. Where, as here, the parties' obligations are defined by the terms of a contract and not by duties imposed by social policies, a plaintiff may assert only a contract claim. Bruno, 106 A.3d at 68; see also eToll, Inc. v. Elias/Savion Adver., 811 A.2d 10, 14 (Pa. Super. 2002)). In order to state a tort claim where there is a contract, the wrong complained of must be the gist of the action with the contract only incidental. Bruno, 106 A.3d at 66 (quoting Bash v. Bell Tel. Co. of Pa., 601 A.2d 825, 829 (Pa. Super. 1992)). Put simply, consistent with Bruno and its predecessors, to determine whether an action is barred by the gist of the action doctrine, we must examine the factual allegations and ask, “[w]hat's this case really about?” Pediatrix Screening, Inc. v. TeleChem Int'l, Inc., 602 F.3d 541, 550 (3d Cir. 2010) (“As a practical matter, the doctrine precludes plaintiffs from re-casting ordinary breach of contract claims into tort claims.”) Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 17 of 21 18 The Estate is mistaken in trying to establish claims for negligence and promissory estoppel/detrimental reliance based on MetLife’s alleged contractual duty of care. See Myerski v. First Acceptance Ins. Co., Inc., No. 3:16-CV-488, 2016 WL 3227266, at *9-10 (M.D. Pa. June 13, 2016) (negligence claim dismissed pursuant to gist of the action doctrine where the duty allegedly breached did not exist outside the contract) (citing Diamon v. Penn Mutual Ins. Co., 372 A.2d 1218, 1226 (Pa. Super. 1997) (insurer's promise to exercise reasonable care in investigating claim was necessary to ensure that the insurer refrains from doing anything that would destroy or injure the insured's right to receive the fruits of the contract and “[t]he duty of good faith and due care in investigating the insured's claim thus implied in the contract is an express condition of the contract.”); Toscano v. Nat'l Auto. Dealers Ass'n, No. CIV.A. 14-763, 2015 WL 1312068, at *6 (E.D. Pa. Mar. 24, 2015) (negligence and breach of fiduciary duty claims barred by gist of the action and economic loss doctrines, where alleged breaches were based on the parties’ contractual relationship). A review of the Estate’s negligence and promissory estoppel/detrimental reliance claims and the facts of this case confirm that, pursuant to Diamon and Bruno, the duty or duties allegedly breached (Doc. 12, ¶¶ 74-76) are created by the parties by the terms of their contract. Unlike Bruno, in which the Brunos alleged Erie's agents acted negligently entirely beyond the scope of their contractual payment duties, the Estate in the instant case has not alleged that MetLife violated an independent social duty entirely beyond the scope of its contractual duty, nor can it. As discussed supra, the heart of all of the Estate’s counterclaims is a right to the proceeds of the insurance policies at issue - a claim for breach of contract. The duties the Estate identifies in its counterclaims relate solely to MetLife’s performance of its contractual duties to use Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 18 of 21 19 reasonable care in making beneficiary changes and payments under the insurance policies at issue (actions which occurred prior to any potential existence of a duty to the Estate), rather than a general duty of care owed to all the public. MetLife’s negligent acts and omissions (as alleged by the Estate) inevitably lead back to the factual core of the Estate’s breach of contract claim - i.e., that MetLife failed to deliver on its contractual promise to pay proceeds. See INS. Co. of Greater N.Y. v. Fire Fighter Sales & Serv. Co., 312 F.R.D. 394, 404-05 (W.D. Pa. 2015). The Estate’s attempt to frame purely contractual issues, related to interpretation of the changes of ownership provisions under the policies and the right to payment of the proceeds of the policy, as separate duties that exist outside the confines of the contract must fail. In addition to being barred by the gist of the action doctrine, the Estate’s counterclaims alleging promissory estoppel/detrimental reliance and negligence are also barred by the economic loss doctrine. Under Pennsylvania law, “[t]he Economic Loss Doctrine provides that no cause of action exists for negligence that results solely in economic damages unaccompanied by physical or property damage.” Sovereign Bank v. BJ's Wholesale Club, Inc., 533 F.3d 162, 175 (3d Cir.2008) (quoting Adams v. Copper Beach Townhome Comts., L.P., 816 A.2d 301, 305 (Pa.Super.Ct.2003)); see also Excavation Technologies, Inc. v. Columbia Gas Co. of Pa., 604 Pa. 50, 985 A.2d 840, 841 n. 3 (2009). More broadly, the economic loss doctrine “prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract.” Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 618 (3d Cir. 1995). The Third Circuit has held that the economic loss doctrine applies to claims for negligence, negligent misrepresentation, and intentional fraud.” Stillwagon v. Innsbrook Golf & Marina, LLC, No. 111338, 2013 WL 1180312, at *11, n. 22 (W.D.Pa. Mar. 20, 2013) (citing Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir.2002)). The Estate’s counterclaims in this Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 19 of 21 20 case sound solely in contract, and it has not alleged any physical or property damage or any intentional conduct or misfeasance. The Estate’s loss of insurance proceeds flows directly from the contract. Therefore, it is prohibited from also recovering in tort under the economic loss doctrine. Counterclaims I-III must be dismissed because they are inadequately pled under the Twombly-Iqbal standard and are nothing more than repackaged claims for the insurance policy proceeds, which are the subject of MetLife’s Interpleader Complaint. CONCLUSION For all of the above reasons, MetLife requests that the Court grant its Motion to Dismiss Counterclaims, permit MetLife to deposit the funds with the Court and dismiss MetLife from the proceedings. Dated: August 18, 2016 Respectfully Submitted, /s/ Peter D. Post Peter D. Post, Esquire peter.post@ogletreedeakins.com OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C. One PPG Place, Suite 1900 Pittsburgh, PA 15222 Ph. (412) 394-3343 Fax: (412) 232-1799 Attorney for Metropolitan Life Insurance Company Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 20 of 21 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff, v. GARY PHELPS, Administrator of the Estate of Mary Barbara Phelps; and FREDERICK T. FINELLO, Defendants. Case No. 2:16-cv-00514-TFM CERTIFICATE OF SERVICE I hereby certify that on this 18th day of August, 2016, I electronically filed the foregoing Memorandum In Support Of Motion To Dismiss Counterclaims Of Gary Phelps with the Clerk of the Court using the CM/ECF system, which sent notification of such filing to the following counsel for Plaintiff: Richard S. Richman, Esquire R. Hagen Starz, Esquire ALLIED LEGAL PARTNERS 220 Grant Street, 3rd Floor, Pittsburgh, PA 15219 robrichman@hotmail.com (Ph. 412.533.3330) Attorney for Frederick T. Finello Matthew A. Bole, Esquire WELCH, GOLD, SIEGEL & FIFFIK 1240 Lawyers Building 428 Forbes Avenue Pittsburgh, PA 15219 Attorney for Gary W. Phelps as Administrator of the Estate of Mary B. Phelps /s/ Peter D. Post Peter D. Post, Esquire OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C. Attorney for Metropolitan Life Insurance Company Case 2:16-cv-00514-TFM Document 17 Filed 08/18/16 Page 21 of 21