Phx. Cos. v. Concentrix Ins. Admin. Solutions Corp.

554 F.Supp.3d 568

The PHOENIX COMPANIES, INC., now known as The Nassau Companies of New York, Plaintiff,

v.CONCENTRIX INSURANCE ADMINISTRATION SOLUTIONS CORPORATION, Defendant.

Concentrix Insurance Administration Solutions Corporation, Counter-Claimant,

v.The Phoenix Companies, Inc., now known as The Nassau Companies of New York; PricewaterhouseCoopers Advisory Services LLC; and Roes 1 Through 10, Counter-Defendants.

20 Civ. 1738 (KPF)

United States District Court, S.D. New York.

Signed June 22, 2021

Filed August 12, 2021

Bryan Frank Lewis, Annemarie Susan Jones, Lewis Johs Avallone Aviles, LLP, Islandia, NY, for Plaintiff/Counter-Defendant The Phoenix Companies, Inc.

Michael J. Crowley, Brian Patrick Morrissey, Connell Foley LLP, New York City, NY, for Counter-Claimant.

Michael J. Crowley, Brian Patrick Morrissey, Connell Foley LLP, New York City, NY, Cherie J. Edson, Sharon C. Collier, Severson & Werson, San Francisco, CA, for Defendant.

REDACTED OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:

In 2016, Plaintiff Phoenix Companies, Inc., now known as the Nassau Companies of New York ("Phoenix"), engaged the consulting firm PricewaterhouseCoopers Advisory Services LLC ("PwC") to assist in selecting a third-party administrator for a project referred to as "Project Vista." Following a vendor selection process and due diligence period, Phoenix selected Defendant Concentrix Insurance Administration Solutions Corporation ("CIS") to serve as its third-party administrator, and on December 23, 2016, Phoenix and CIS memorialized their agreement with the execution of a Master Services Agreement (the "MSA").

Project Vista did not proceed smoothly, and Phoenix subsequently brought the instant action against CIS for breach of contract, alleging that CIS had made false representations about the timeframe for the completion of Project Vista, and had concealed material facts about its ability to meet certain deadlines set forth in the MSA. CIS then filed counterclaims against Phoenix, ultimately alleging breach of contract, breach of the covenant of good faith and fair dealing, negligent misrepresentation, negligence, and fraud in the inducement. In particular, CIS alleged that (i) Phoenix made misrepresentations to induce CIS to enter into the MSA; (ii) Phoenix later misled CIS to believe that Phoenix would not terminate its ongoing projects with CIS; and (iii) Phoenix failed to adhere to its obligations under the MSA. Separately, CIS designated as additional counter-claimants PwC and ten unnamed PWC employees (collectively, the "PwC Defendants"), and ultimately alleged negligent misrepresentation by PwC and negligence by all of the PwC Defendants. In this regard, CIS alleged that PwC had made misrepresentations about Phoenix's products and business requirements, and had administered a flawed vendor selection process with an inadequate due diligence period.

Phoenix has moved for partial dismissal of CIS's Amended Counterclaim under Federal Rule of Civil Procedure 12(b)(6), seeking to dismiss CIS's counterclaims for breach of the covenant of good faith and fair dealing, negligent misrepresentation, negligence, and fraud in the inducement — in other words, everything but breach of contract. PwC has also moved to dismiss both counterclaims brought against it. For the reasons that follow, the Court grants in part and denies in part Phoenix's motion, and grants in its entirety PwC's motion.

BACKGROUND¹

A. Factual Background

1. Project Vista and the Vendor Selection Process

The Court accepts as true for purposes of these motions the well-pleaded allegations of CIS's Amended Counterclaim. In early 2016, Phoenix engaged PwC to assist with the issuance of a Request for Information ("RFI") to potential vendors, with the objective of selecting a third-party administrator to helm a project referred to as "Project Vista." (Am. Countercl. ¶ 8). PwC was tasked with administering the vendor selection process for Project Vista, at the conclusion of which process Phoenix would select a vendor who could transition and ultimately administer certain of Phoenix's life insurance and annuity contracts on an outsourced basis. (Id. ).

As part of its engagement with Phoenix, PwC managed the potential vendors’ participation in a due diligence period. (Am. Countercl. ¶ 11). CIS, a company with experience serving as a third-party administrator in the U.S. life insurance and annuities markets, participated in the vendor selection process for Project Vista. (Id. at ¶¶ 1, 11). CIS's due diligence period began on June 12, 2016, and concluded with an oral presentation before Phoenix on August 17, 2016. (Id. at ¶ 11). CIS alleges that during the due diligence process, as potential vendors prepared proposals and responses to Phoenix's RFI, it relied upon PwC as their "primary source of information." (Id. at ¶ 14). Over 50,000 pages of documents were provided to CIS for its review during this period, including an "outline structure qualified as representative of Phoenix's products." (Id. at ¶¶ 16-17). While the outline lacked a warranty "that it was 100% accurate or complete," PwC representatives submitted that the outline was sufficient "to allow [CIS] to obtain an accurate estimate." (Id. at ¶ 17).

CIS alleges that during the due diligence period, PwC's representations about Phoenix's products and business requirements were "insufficient and inaccurate." (Am. Countercl. ¶ 22). Among other things, PwC represented that Phoenix's products were "largely standard and typical in the industry," when in fact the products were "unique and more complex than represented and more than any bidder could reasonably determine during the due diligence period, which would impact [the products’] transition to [CIS's] system, require significant modifications and impact cost and pricing for [CIS's] proposal to Phoenix[.]" (Id. at ¶ 18). CIS asserts that PwC made the following representations to it:

[i] annuities containing numerous bonus features was identified as a large effort; however, after completing the detailed requirements sessions after the in-depth analysis phase after the MSA was executed, [CIS] discovered that the number of variations exceeded what was expected increasing efforts required;

[ii] "Model" Index methods were represented to be a group of funds where [CIS] could leverage existing functionality of its GIAS platform but during the detailed requirement sessions after the MSA was executed, it was discovered there was linking of different riders, restrictions on money movements, and other functions that were not identified, increasing the efforts associated with the [modification];

[iii] Accelerated Death Benefits was represented to be a significant [modification] however, during the detailed requirement sessions after the MSA was executed, [CIS] discovered the impacts to fund reduction order, the ability of the owner to select a % by policy, or the effect on various policy values, increased the effort associated with the [modification]; and

[iv] the Healthy Measure Rewards COI discount program was explained to [CIS] to be so difficult to qualify that [CIS] would not have to deal with it, however, this turned out to be incorrect information and resulted in a significant [modification].

(Id. at ¶ 20). CIS further alleges that PwC knew that these representations were false, and knew that CIS would rely upon them in developing its proposal for Project Vista. (Id. at ¶ 19). According to CIS, it is presently unable to identify which PwC representatives made these misrepresentations, "because the key [CIS] employees involved in the communications with PwC are no longer employed by [CIS] and have not been reachable despite diligent and reasonable efforts." (Id. at ¶ 21). CIS alleges "[b]ased upon information and belief" that the PwC representatives are known to PwC. (Id. ).

CIS alleges that Phoenix was also familiar with the complexities of its own products and with the modifications to its own systems over the years, but that during the due diligence period, neither Phoenix nor PwC provided samples of Phoenix's products or an explanation of the products and features. (Am. Countercl. ¶ 23). Moreover, CIS was not allowed access to Phoenix's systems to test their compatibility with CIS's system, and was informed by PwC Manager Robert Sharp that "demos were not needed prior to signing the contract." (Id. at ¶¶ 24, 26). From this, CIS concludes:

The vendor selection process managed by PwC was flawed. PwC's process did not allow sufficient time for review of documents, not all documents were made available to [CIS], representations of the complexities of Phoenix's products were neither highlighted nor provided, and [CIS] was not allowed to implement and run some transactions to demonstrate how [CIS's] system could work.

(Id. at ¶ 25).

2. The August 18, 2016 Meeting and the MSA

The day after CIS made its oral presentation to Phoenix, on August 18, 2016, certain CIS employees, including CIS President Chris Caldwell, met with Phoenix's Chief Executive Officer Phil Gass and Chief Information Officer Richard Dan McCoach at a restaurant in Hartford, Connecticut. (Am. Countercl. ¶ 32). At the meeting, Gass and McCoach represented to Caldwell that Phoenix "did not know what their own policies involved," and that Phoenix thus needed the vendor in charge of Project Vista to "get the details required" and "to be flexible and deal with surprises accordingly." (Id. at ¶ 33). CIS alleges that it understood these statements to mean that Project Vista would include an "analysis phase" during which CIS could "analyze Phoenix's products, determine the requirements needed, and develop the modifications necessary to transition the services onto [CIS's] platform." (Id. at ¶ 34).

CIS was subsequently awarded the contract for Project Vista, and the parties entered into the MSA on December 23, 2016. (Am. Countercl. ¶ 37; see also MSA). The MSA included a "Transition Plan" that set forth schedules for the...