Armellini v. Levin

DEBORAH ARMELLINI, et al. Plaintiffs v. SCOTT M. LEVIN, et al. Defendants.

Civil Action No. ELH-19-794

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

January 9, 2020

MEMORANDUM OPINION

This suit concerns a life insurance policy purchased by plaintiffs Deborah Armellini and Armellini Management Company through defendant Scott M. Levin, an alleged agent and/or employee of defendant Worthington Financial Partners, LLC ("Worthington"), a subsidiary of Life Insurance Company of the Southwest. ECF 1 (the "Complaint").¹ Plaintiffs allege that in November 2009, Mr. Levin, a Financial Advisor, induced them to purchase an Indexed Universal Life Insurance Policy (the "Policy") from the Life Insurance Company of the Southwest ("LICS"), and to continue investing in the Policy by misrepresenting the Policy's true features, causing plaintiffs to lose over $250,000.²

The Complaint contains five counts. Count I, lodged against Mr. Levin, alleges a common law claim for conversion. ECF 1, ¶¶ 27-31. In Count II, plaintiffs assert a cause of action against Mr. Levin for breach of fiduciary duty. Id. ¶¶ 32-38. Count III, also lodged against Mr. Levin,alleges fraudulent misrepresentation. Id. ¶¶ 39-45. Count IV asserts a claim against Worthington for breach of fiduciary duty. Id. ¶¶ 46-54. And, in Count V, plaintiffs assert a claim against Worthington for fraudulent misrepresentation. Id. ¶¶ 55-61.

Defendants have jointly moved to dismiss the Complaint, pursuant to Fed. R. Civ. P. 12(b)(6). ECF 21. The motion is supported by a memorandum of law (ECF 21-1) (collectively, the "Motion"), and one exhibit. ECF 21-2. Plaintiffs oppose the Motion (ECF 27), and defendants have replied. ECF 28.

Pursuant to Fed. R. Civ. P. 14(a), defendants filed a third-party complaint against Ms. Armellini's tax advisor, Simcha Baer, a licensed Certified Public Accountant. ECF 23 (the "Third-Party Complaint). According to defendants, to the extent that they are liable, so too is Mr. Baer, because he facilitated the initial meeting between Ms. Armellini and Mr. Levin in November 2009, participated in the planning, and provided investment advice to Ms. Armellini in regard to the Policy. The Third-Party Complaint lodges claims against Mr. Baer for "Implied Indemnity" (Count I) and "Contribution" (Count II).

Mr. Baer has filed a pre-discovery motion to dismiss or, in the alternative, for summary judgment, pursuant to Fed. R. Civ. P. 12(b)(6) and Fed. R. Civ. P. 56. ECF 33 (the "Baer Motion"). An affidavit from Mr. Baer is appended to the Baer Motion. ECF 33-1. Defendants oppose the Baer Motion (ECF 36), which is supported by an affidavit from Mr. Levin. ECF 36-1. Mr. Baer has replied. ECF 39.

No hearing is necessary to resolve the motions See Local Rule 105.6. For the reasons that follow, I shall grant defendants' Motion (ECF 27) in part and deny it in part. And, construing the Baer Motion as one for summary judgment, I shall grant the Baer Motion (ECF 33).

I. Factual Background

A. The Armellini Complaint³

Ms. Armellini met with Mr. Levin on November 24, 2009, to discuss life insurance policies. ECF 1, ¶¶ 13-14. According to plaintiffs, Mr. Levin worked as a "Financial Advisor" for Worthington, a subsidiary of LICS. Id. ¶ 13; see id. ¶ 7. Mr. Levin "advised" Ms. Armellini to purchase the Policy from LICS. Id. ¶ 13. He represented to Ms. Armellini that the Policy was indexed to the stock market. Id. ¶ 16. And, he allegedly "promised" Ms. Armellini that "within 10 years of taking out the policy, the cash value of the policy would be, at least, equal to the total investment." Id. ¶ 17. The same day, Ms. Armellini and Mr. Levin executed an "'Application for Life Insurance,' which included representations made by Mr. Levin and Worthington[.]" Id. ¶ 15.

Based on Mr. Levin's statements, plaintiffs began investing $75,000 per year in the Policy. Id. ¶ 18. In total, they invested over $475,000 in the Policy. Id. ¶ 19.

Plaintiffs allege that Mr. Levin "repeatedly advised [them] that the cash value of the policy would equal Ms. Armellini's contributions" and that, "despite the fact that the cash value of the policy [was] continually declining, all 'was well.'" Id. ¶ 21. Further, on January 5, 2015, Mr. Levin emailed Ms. Armellini, stating that the cash value of the Policy "would be 'at least' equal to the amount of Ms. Armellini's contributions after 10-years from the initial policy investment." Id. ¶ 21.

However, "[t]his promise never came to fruition." Id. ¶ 22. Instead, the Policy's value "plummeted." Id. Plaintiffs allegedly learned in April 2018, that the Policy had only a three percent fixed rate of return, the funds were not invested in stock indices, and the Policy allocated$72,000 of plaintiff's annual investments to premiums. Id. ¶ 23. As a result, "the cash value of the Policy [was] quickly depleted." Id. According to plaintiffs, they lost approximately $250,000 by investing in the Policy. Id. ¶ 24.

B. The Third-Party Action⁴

Mr. Baer was a Certified Public Accountant ("CPA"), whose practice included providing tax advice and form preparation for small businesses. ECF 33-2, ¶ 2.⁵ However, he is not a Certified Financial Planner, nor is he licensed to sell life insurance. Id. ¶¶ 4, 5. Plaintiffs "were long-term clients" of Mr. Baer's. Id. ¶ 3; see ECF 23, ¶¶ 7-9.

According to Mr. Levin, Mr. Baer facilitated a meeting in November 2009 between Ms. Armellini, Mr. Levin, Mr. Baer, and Clifford Kwartner, an agent of NLV,⁶ to discuss investment strategy. ECF 36-2, ¶¶ 6, 8; see also ECF 23, ¶ 13. During the meeting, Mr. Baer and Mr. Levin proposed a plan for Ms. Armellini to purchase the Policy. ECF 36-2, ¶ 8; ECF 23, ¶ 13. Specifically, they proposed that Ms. Armellini "fund $150,000 per year for an initial five-year period into a fixed account," and then "move the funds into an indexed portion of the [P]olicy, where it would remain and continue to grow on a tax-deferred basis." ECF 36-2, ¶ 9; ECF 23, ¶ 14; see ECF 36-2, ¶ 9. Further, Mr. Baer and Mr. Levin proposed that Ms. Armellini purchase a separate Term Life Insurance Policy for an initial five-year period, after which it would beconverted into another Indexed Life Insurance Policy, with tax benefits. ECF 36-2, ¶ 10; ECF 23, ¶ 15.

Mr. Levin states that he presented this proposal to Ms. Armellini only after Mr. Baer "expressed his opinion during the meeting as to the amounts that Ms. Armellini should fund, or would be able to fund, over an initial 5-year period." ECF 36-2, ¶ 11; see ECF 23, ¶ 16. Further, he states that Mr. Baer "specifically recommended, endorsed and approved" the proposed investment strategy. ECF 36-2, ¶ 13; see ECF 23, ¶ 17.

Ms. Armellini, relying on Mr. Baer's recommendation, proceeded to purchase the Policy and Term Life Insurance Policy from Mr. Levin. ECF 36-2, ¶ 14; ECF 23, ¶ 18. But, according to defendants, Ms. Armellini "eventually ceased to fund the policies, allegedly due to a change in circumstances in her business." ECF 36-2, ¶ 15; see ECF 23, ¶ 19.

Mr. Levin paid Mr. Baer a consulting fee of $3,850 on November 30, 2010. ECF 36-2, ¶ 16. And, Mr. Levin states that he believes Mr. Kwartner paid Mr. Baer a consulting fee in the same amount. Id. ¶ 17.

Mr. Baer does not dispute that he attended the meeting in November 2009 with Ms. Armellini and Mr. Levin. But, he denies that he ever advised plaintiffs "regarding the investment aspects of the insurance policies []or make any guarantees regarding returns on the policies." ECF 33-2, ¶ 10. Although Mr. Baer does not indicate whether he received fees for facilitating the meeting, he maintains that he never collected any premiums on the Policy. Id. ¶ 11.

II. Choice of Law

The parties assume, without discussion, that Maryland law applies to this diversity case. In an action based upon diversity of citizenship, a federal court must apply the substantive law of the state in which it sits, including that state's choice of law rules. Klaxon Co. v. Stentor Elect.Mfg. Co., 313 U.S. 487, 496-97 (1941); Colgan Air, Inc. v. Raytheon Aircraft Co., 507 F.3d 270, 275 (4th Cir. 2007); Baker v. Antwerpen Motorcars, Ltd., 807 F. Supp. 2d 386, 389 n.13 (D. Md. 2011).

Maryland is, of course, the forum state. Under Maryland's choice-of-law principles for tort claims, Maryland applies the doctrine of lex loci delecti, i.e., the law of the jurisdiction where the alleged wrong occurred. Lewis v. Waletzky, 422 Md. 647, 657, 31 A.3d 123, 129 (2011); Erie Ins. Exch. v. Heffernan, 399 Md. 598, 620, 925 A.2d 636, 648 (2007); Kortobi v. Kass, 182 Md. App. 424, 443, 957 A.2d 1128, 1139 (2008), aff'd, 410 Md. 168, 978 A.2d 247 (2009).

Defendants are both citizens of Maryland. See ECF 1, ¶¶ 6-7; ECF 14. Mr. Baer is also a citizen of Maryland. ECF 23, ¶ 3; ECF 33-1, ¶ 1. Therefore, it seems likely that the allegedly tortious conduct of defendants and Mr. Baer occurred in Maryland. In any event, all parties rely on Maryland law in their submissions. See ECF 21; ECF 27; ECF 28; ECF 33; ECF 36; ECF 39. And, in a case where the parties have not identified any state law conflicts, the court need not undertake a choice-of-law analysis. See Cleaning Authority, Inc. v. Neubert, 739 F. Supp. 2d 807, 820 (D. Md. 2010) ("'Choice-of-law analysis becomes necessary . . . only if the relevant laws of the different states lead to different outcomes.'" (citation omitted)); see also Vanderhoof-Forschner v. McSweegan, 215 F.3d 1323 (Table) at *2 n.2 (4th Cir. 2000) ("[B]ecause the parties implicitly agree that Maryland law governs their claims, [the Court] need not inquire further into the choice-of-law questions."). Accordingly, I shall apply the substantive law of Maryland.

III. Standards of Review

A. Rule 12(b)(6)

Defendants move to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(6). ECF 21. A defendant may test the legal sufficiency of a complaint by way of a motion to dismiss underRule 12(b)(6). In re Birmingham, 846 F.3d 88, 92 (4th Cir. 2017); Goines v. Valley Cmty. Se...