Hardy v. Transamerica Life Insurance Co.

          MEMORANDUM OPINION

          ABDUL K. KALLON UNITED STATES DISTRICT JUDGE

         Ronald Hardy filed this lawsuit against Transamerica Life Insurance Company, alleging breach of contract claims individually and on behalf of all others similarly situated in two proposed classes, the Certificate Value Class and Enhancement Endorsement Class. Doc. 11. Hardy subsequently dismissed, without prejudice, his enhancement endorsement class claim (Count II). Doc. 18 at 15, n. 5. As such, the only remaining claim is the certificate value class claim (Count I). As to this claim, Hardy maintains that Transamerica mismanaged the account values of his life insurance policy and charged an undisclosed administrative fee affecting his potential interest earnings. Doc. 11 at 5-15. Before the court is Transamerica's Motion to Dismiss, in which it contends that Hardy's claim is barred by Alabama's Rule of Repose, or alternatively, Alabama's six year statute of limitations for contract claims. Doc. 15. The motion, which is fully briefed and ripe for review, docs. 15, 18, 19, is due to be granted on the alternative statute of limitations grounds.

         I. STANDARD OF REVIEW

         Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” “[T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action” are insufficient. Iqbal, 556 U.S. at 678 (citations and internal quotation marks omitted). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Id. (citing Twombly, 550 U.S. at 557).

         Federal Rule of Civil Procedure 12(b)(6) permits dismissal when a complaint fails to state a claim upon which relief can be granted. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (citations omitted) (internal quotation marks omitted). A complaint states a facially plausible claim for relief “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation omitted). The complaint must establish “more than a sheer possibility that a defendant has acted unlawfully.” Id.; see also Twombly., 550 U.S. at 555 (“Factual allegations must be enough to raise a right to relief above the speculative level.”). Ultimately, this inquiry is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

         II. FACTUAL BACKGROUND^[1]

         In September 1988, Pacific Fidelity and/or General Services, predecessor companies to Transamerica, issued Hardy a certificate of life insurance under a “split dollar arrangement” with a value amount of $550, 000. Doc. 11 at 3. In 1995, the insurers notified Hardy that his arrangement no longer qualified and purportedly “orchestrated a plan to terminate” this “split dollar” plan, resulting in a value amount loss of $182, 000. Id. at 11-12. In addition, Transamerica also purportedly reduced the policy's interest earnings to pay administrative charges. Id. at 9-10; doc. 18 at 16. Allegedly, Transamerica charged an unauthorized “asset management fee” and attempted to disguise it as an additional “administrative charge.” Doc. 1 at 8-9. Thus, the administrative charges were “withdrawn on a monthly basis from the Account Values, ” and Transamerica deducted the charges before the interest earnings rate was applied to the account value. Doc. 11 at 9. Hardy maintains that he discovered this conduct 21 years later when, in response to a notice in 2016 that his death benefits would terminate in four years and that his premium would increase substantially if he wanted to maintain the benefit, Hardy “engaged counsel who undertook investigation of [Hardy's] claims and through the course of that investigation the claims asserted [in this lawsuit] were discovered.” Id. at 14.

         III. DISCUSSION

         Transamerica argues that the lawsuit is barred by Alabama's statute of repose or, alternatively, the statute of limitations. The court reviews each contention below.

         A. Applicable Law and the Rule of Repose

         Although the Master Policy is “governed by the laws of the jurisdiction where it is delivered, ” and “Missouri” is listed as the “State of Delivery, ” doc. 11-1 at 3, Transamerica contends that Alabama law, which has a 20-year rule of repose, should govern this dispute. Because Hardy's alleged claims accrued more than 20 years ago, Transamerica maintains that this lawsuit is barred by Alabama's Rule of Repose, and that applying Missouri law would be contrary to Alabama's public policy favoring a rule of repose. Hardy counters that Missouri law, which does not have a repose rule, applies. The court agrees with Hardy.

         Generally, “[w]hen the parties to a contract have chosen the law of a particular state to apply, that selected state's law ordinarily will govern the contract dispute in a court in Alabama, notwithstanding the fact that the contract may have been formed in a different state.” DJR Assocs., LLC v. Hammonds, 241 F.Supp.3d 1208, 1220 (N.D. Ala. 2017) (citing Lifestar Response of Ala., Inc. v. Admiral Ins. Co., 17 So.3d 200 (Ala. 2009)). The only exception is if the selected state law is contrary to the fundamental public policy of Alabama. Cherry, Bekaert & Holland v. Brown, 582 So.2d 502, 507 (Ala. 1991) (citing Restatement Second of Conflict of Laws, §§ 187 and 188). At issue here is Transamerica's contention that applying Missouri law would violate the “long-settled public policy in Alabama” reflected in the rule of repose.^[2] Doc. 15 at 5-6. Transamerica's contention is unavailing, in part, as it is based on cases that are inapposite to Hardy's breach of contract claims and that do not analyze contracts in which a choice of law clause is at issue.^[3] More fundamentally, Transamerica “cite[s] no case in which the Alabama Supreme Court has held that another state's statute of repose, or any other foreign statute, violates public policy to the extent that it is unenforceable.” Terrell v. Damon Motor Coach Corp, No. 6:12-CV-02390-LSC, 2013 WL 6145534, at *6 (N.D. Ala. Nov. 20, 2013) (noting that “neither [Tennessee's statute of repose] nor any other Alabama precedent suggests that Alabama courts would not apply a sister state's statute of repose”). Therefore, in the absence of a case holding that Alabama's rule of repose trumps the laws of other states, the court joins its sister courts in finding that applying the parties' choice of law provision would not result in a fundamental violation of Alabama public policy, ^[4]and finds that Hardy's claims are not barred by Alabama's rule of repose.

         B. Statute of Limitations ^[5]

         Transamerica next contends that Hardy's claim accrued as far back as 1996, based on the account statement Hardy received after the “split dollar” plan was terminated, and that Hardy's claims are barred by Alabama's six-year statute of limitations for contract disputes. See docs. 15 at 11-14; 15-1 at 2. Hardy maintains that the laws of Missouri, ^[6] as the chosen state of delivery of the Master Policy, should govern the applicable statute of limitations. Doc. 18 at 7. Under Missouri law, “the cause of action shall not be deemed to accrue when the wrong is done or the technical breach of contract or duty occurs, but when the damage resulting therefrom is sustained and is capable of ascertainment.” Id. “Capable of ascertainment” is defined as when “the evidence [is] such to place a reasonably prudent person on notice of a potentially actionable injury, ” and the “objective” test is viewed from the standpoint of a “reasonable person in [plaintiff's] situation.” Powel v. Chaminade Coll. Preparatory, Inc., 197 S.W.3d 576, 582-586 (Mo. ...