United States District Court, N.D. Alabama, Eastern Division
KEE GOOSTREE, as representative of the ESTATE OF ALTON H. PADGETT, and JEAN G. PADGETT, Plaintiffs,
v.
LIBERTY NATIONAL LIFE INSURANCE COMPANY and ROBERT D. BICE, Defendants.
MEMORANDUM OPINION
KARON
OWEN BOWDRE CHIEF UNITED STATES DISTRICT JUDGE.
As
Justice Hugo Black said in 1944, “Perhaps no modern
commercial enterprise directly affects so many persons in all
walks of life as does the insurance business. Insurance
touches the home, the family, and the occupation or the
business of almost every person in the United States.”
United States v. S.-E. Underwriters Ass’n, 322
U.S. 533, 540 (1944). Today, insurance still provides the
primary method by which individuals and businesses transfer
the risk of loss to an insurance company that accepts the
risk and distributes the cost of that risk of loss among a
similarly situated group of insureds.
Life is
uncertain. Death is certain. But when death will come
knocking remains uncertain. To provide financially for our
loved ones when death knocks, many people purchase life
insurance policies. Like all insurance contracts, life
insurance presents a gamble.[1] The insurance company bases its
premiums on actuarial tables and gambles that the insured
will live long enough for the company to collect premiums
sufficient to at least cover-and perhaps exceed- the face
amount of the policy. The insured makes a perverse gamble
that he will die before he pays more in premiums
than the face amount of the policy. But whenever the insured
dies, the insured’s beneficiaries receive the face
amount of the insurance, regardless of how much or how little
the insured payed in premiums.
In this
case, Plaintiffs complain that Defendant Liberty National
“won the bet” and collected more in premiums than
the face amount of the policies that Plaintiffs purchased
between 1972 and 2015. This result reflects the nature of the
life insurance gamble. For this, and the other reasons
explained below, the court will GRANT Defendant’s
motion to dismiss all counts. (Doc. 3.)
I.
Background
Mrs.
Jean Padgett and the Estate of Mr. Alton Padgett are the two
named Plaintiffs in this lawsuit. Mr. Padgett died in May
2018 at the age of 88, and Mrs. Padgett is now either 82 or
83 years old. On October 19, 2018, Plaintiffs filed this suit
individually and on behalf of all others similarly situated
against Liberty National and Robert Bice, a Liberty National
insurance agent, in the Circuit Court of Talladega County,
Alabama. On January 11, 2019, Liberty National removed this
case to federal court. Mr. Bice joined in the removal, and
the court dismissed Mr. Bice from the action, finding the
Plaintiffs fraudulently joined him to the suit. (Doc. 35.)
Liberty National, the only remaining Defendant, now brings
this motion to dismiss.
Plaintiffs
generally contend that Liberty National engaged in a
“common scheme of unlawful conduct . . . relating to
the targeting and sale of low face value life insurance
policies to lower income consumers.” (Doc. 1-1 at 8.)
Plaintiffs specifically allege that “Liberty National
targeted consumers who are under-educated and/or
unsophisticated with respect to insurance and related
financial dealings, the language of the policies, and methods
of determining premium payments whereby the premiums paid on
such policies far exceeded the policy’s face
value.” (Id.). The policies require Plaintiffs
to pay premiums that, over time, exceed the death benefit
value pursuant to the policy. According to Plaintiffs, the
policies generated no-risk profits to Liberty National but
provided no economic benefit to Plaintiffs.
The
complaint states that Liberty National, through Mr. Bice,
“knew and understood the Plaintiffs’ age,
employment, financial status, lack of dependents, and station
in life.” (Doc. 1-1 at 11.) For example, Mr. Bice knew
that Mrs. Padgett was retired and receiving social security
since 1998, and Mr. Padgett was earning less than $16, 000
annually through his job at Piggly Wiggly. Mr. Bice
recommended and induced the Padgetts to purchase multiple
insurance policies, for which the premiums collectively
exceeded $14, 000 per year. Mr. Bice continuously represented
to the Padgetts that “such additional insurance was
financially appropriate and beneficial to Plaintiffs,
consistent with Plaintiffs’ profile, needs and
financial situation” despite his knowledge that
“each successive policy would cost more in premiums
than the death benefit payable under the policy.”
(Id. at 11–12.)
Between
1972 and 2015, the Padgetts bought 15 life insurance policies
from Liberty National: nine insured Mr. Padgett’s life;
five insured Mrs. Padgett’s life; and one insured them
jointly. Liberty National gave the Padgetts “free
look” periods on these policies that allowed the
Padgetts to cancel the contracts within ten days of signing.
From 1972 to 2017, the couple had paid a total of more than
$188, 000 in premiums, yet the combined death benefit for all
policies was approximately $45, 000.
Based
on this series of agreements with Liberty National, the
Padgetts bring eight claims: count one is breach of contract;
count two is breach of implied covenant of good faith and
fair dealing; count three alleges conversion; count four
seeks rescission; count five claims unjust enrichment; count
six seeks declaratory and injunctive relief; count seven
alleges negligence; and count eight asserts negligent
training and supervision.
But two
of the purported counts-rescission and declaratory and
injunctive relief- present remedies, not causes of action.
Rescission is an equitable remedy in which a court voids a
contract and restores the parties to the position they were
in before they signed the contract. Clark v. Wilson,
380 So.2d 810, 812 (Ala. 1980). A claim for rescission cannot
stand alone; a plaintiff must first provide a reason why the
court should rescind the contract, such as unconscionability
or fraudulent inducement. See, e.g., Leonard v. Terminix
Int’l Co., L.P., 854 So.2d 529, 534 (Ala. 2002)
(unconscionability); Layne v. Garner, 612 So.2d 404,
408 (Ala. 1992) (unconscionability); Exxon Mobil Corp. v.
Alabama Dep’t of Conservation & Nat. Res., 986
So.2d 1093, 1129 (Ala. 2007) (fraud). Likewise, declaratory
and injunctive relief are “prospective remedies”
a court may grant a plaintiff after the plaintiff
demonstrates at least one independent and meritorious cause
of action. McKinnon v. Talladega Cty., 745 F.2d
1360, 1362 (11th Cir. 1984). So the court need not consider
the remedies sought in counts four and six because the court
ultimately finds no cause of action survives
Defendant’s motion to dismiss.
II.
Standard of Review
A Rule
12(b)(6) motion to dismiss attacks the legal sufficiency of
the complaint. The Federal Rules of Civil Procedure require
that the complaint provide “‘a short and plain
statement of the claim’ that will give the defendant
fair notice of what the plaintiff’s claim is and the
grounds upon which it rests.” Conley v.
Gibson, 355 U.S. 41, 47 (1957) (quoting Fed.R.Civ.P.
8(a)). A plaintiff must provide the grounds for his claims,
but Rule 8 generally does not require “detailed factual
allegations.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (quoting Conley, 355 U.S. at
47). It does, however, “demand[] more than an
unadorned, the-defendant-unlawfully-harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). Pleadings that contain nothing more than “a
formulaic recitation of the elements of a cause of
action” do not meet Rule 8 standards nor do pleadings
suffice that are based merely upon “labels or
conclusions” or “naked assertions” without
supporting factual allegations. Twombly, 550 U.S. at
555, 557.
The
Supreme Court explained that “[t]o 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 (quoting and explaining its decision in
Twombly, 550 U.S. at 570). To be plausible on its
face, the claim must contain enough facts that “allow[]
the court to draw the reasonable inference that the defendant
is liable for the misconduct alleged.” Iqbal,
556 U.S. at 678. Although “[t]he plausibility standard
is not akin to a ‘probability requirement,
’” the complaint must demonstrate “more
than a sheer possibility that a defendant has acted
unlawfully.” Id. “Where a complaint
pleads facts that are merely consistent with a
defendant’s liability, it ‘stops short of the
line between possibility and plausibility of entitlement to
relief.’” Id. (quoting Twombly,
550 U.S. at 557).
The
Supreme Court has identified “two working
principles” for the district court to use in applying
the facial plausibility standard. The first principle is
that, in evaluating motions to dismiss, the court must assume
the veracity of well-pled factual allegations; however, the
court does not have to accept as true legal conclusions even
when “couched as [] factual allegation[s]” or
“threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements.”
Iqbal, 556 U.S. at 678. The second principle is that
“only a complaint that states a plausible claim for
relief survives a motion to dismiss.” Id. at
679. Thus, under prong one, the court determines the factual
allegations that are well-pled and assumes their veracity,
and then proceeds, under prong two, to determine the
claim’s plausibility given the well-pled facts. That
task is “context-specific” and, to survive the
motion, the allegations must permit the court based on its
“judicial experience and common sense . . . to infer
more than the mere possibility of misconduct.”
Id. If the court determines that well-pled facts,
accepted as true, do not state a claim that is plausible, the
claim must be dismissed. Id.
III.
Discussion
As a
preliminary matter, the court notes that several of
Plaintiffs’ claims rely on the existence of a series of
contracts that Plaintiffs did not include with their
complaint. If a district court considers materials not
included alongside the complaint, the court usually must
convert the motion to dismiss into a summary judgment motion.
SFM Holdings, Ltd. v. Banc of Am. Sec., LLC, 600
F.3d 1334, 1337 (11th Cir. 2010). But an exception exists.
“In ruling upon a motion to dismiss, the district court
may consider an extrinsic document if it is (1) central to
the plaintiff’s claim, and (2) its authenticity is not
challenged.” Id. Here, these
contracts-attached to Defendant’s briefing (Doc. 1 ...