Goostree v. Liberty National Life Insurance Co.

          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 ...