Feingold v. John Hancock Life Insurance Co , 753 F.3d 55 ( 2014 )

United States Court of Appeals
For the First Circuit
No. 13-2151
RICHARD FEINGOLD, individually and as a representative of a class
of similarly situated persons,
Plaintiff, Appellant,
v.
JOHN HANCOCK LIFE INSURANCE COMPANY (USA);
JOHN HANCOCK LIFE & HEALTH INSURANCE COMPANY,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph L. Tauro, U.S. District Judge]
Before
Lynch, Chief Judge,
Selya and Kayatta, Circuit Judges.
Glenn L. Hara, with whom David M. Oppenheim, George K. Lang,
and Anderson + Wanca were on brief, for appellant.
Edwin G. Schallert, with whom Susan R. Gittes, Debevoise &
Plimpton LLP, Myles W. McDonough, Ryan B. MacDonald, and Sloane and
Walsh LLP were on brief, for appellees.
May 27, 2014
LYNCH, Chief Judge. Richard Feingold sued John Hancock
Life Insurance Company and John Hancock Life & Health Insurance
Company (collectively, "Hancock") in a putative class action for
damages said to arise from Hancock's adherence to contractual terms
requiring that Hancock be given notice of the death of its insureds
before death benefits are paid out to beneficiaries. Specifically,
Hancock is said to have an obligation, stemming from a regulatory
agreement between Hancock and several states, to discover such
deaths and notify beneficiaries. The district court dismissed the
complaint for failure to state a claim. Feingold v. John Hancock
Life Ins. Co., Civ. No. 13-10185-JLT, 2013 WL 4495126, at *1 (D.
Mass. Aug. 19, 2013).
On appeal, Feingold primarily argues that the agreement
Hancock entered with several state governments in June 2011
regarding its handling of unclaimed insurance policy proceeds
imposed new obligations on Hancock as to beneficiaries of its
insureds under state law. We disagree and so affirm.
I.
A. Facts
We recite the facts as alleged in Feingold's complaint
and also consider documents that Feingold has attached to the
complaint. Yacubian v. United States, ___ F.3d ___, 2014 WL
1688918, at *1 (1st Cir. Apr. 30, 2014); see Fed. R. Civ. P. 10(c).
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In approximately 1945, Feingold's mother, Mollie
Feingold, purchased a life insurance policy from Hancock. Feingold
did not know that his mother had purchased this policy, which named
only his late father as a beneficiary. She died on or about
December 19, 2006.
Feingold first became aware that Hancock owed his mother
a different type of payment as a policyholder of a mutual insurance
company in late 2010, when he visited an Illinois Treasury website,
called "Cash Dash," listing unclaimed property.1 He was informed
that Hancock owed his mother $459 as a demutualization proceeds
dividend, which he received from Illinois in December 2011. The
payment resulted from the demutualization of Hancock in 1999-2000.
Under Illinois law, if those funds had remained unclaimed, they
would be escheated to the state two years after the date of
demutualization. 765 Ill. Comp. Stat. 1025/3a(a)(1).
In January 2012, Feingold informed Hancock of his
mother's death and requested a copy of her life insurance policy.
He said he wanted information regarding the unclaimed dividend
payment he had recovered and information as to whether any life
insurance proceeds were due. Hancock initially told him that his
mother had not purchased a policy, but shortly thereafter Hancock
1
The Illinois State Treasurer renamed Illinois's "Cash Dash"
unclaimed property program to "I-Cash" in 2012. Melissa Hahn, News
Release, Illinois State Treasurer (July 9, 2012),
http://icash.illinois.gov/pdf/i-cash%20relaunch%20press%20release
%20final.pdf.
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said it had found his mother's policy. Hancock sent Feingold the
forms he needed to make a death benefit claim but did not provide
any other information.
After Feingold had completed and submitted Hancock's
forms, he continued to ask Hancock for a copy of his mother's
policy, including a written request for the policy. On June 1,
2012, Hancock issued Feingold a check for $1,349.71 for death
benefits but did not provide a copy of Mollie Feingold's life
insurance policy.
B. Global Resolution Agreement
Several states conducted an audit of Hancock's handling
of "unclaimed property," which includes life insurance proceeds
that have not been claimed by beneficiaries. These states have
unclaimed property laws under which insurance companies are
sometimes required to report and remit unclaimed insurance proceeds
to the state. The criteria governing if and when unclaimed
property must escheat to the state vary from state to state. As a
result of this audit, Hancock entered into a Global Resolution
Agreement ("GRA") with Illinois and other states in June 2011 to
alter its procedures for handling unclaimed property. Feingold
attached the GRA to the complaint.
The express purpose of the GRA is to "set[] forth the
terms and conditions intended to resolve the on-going unclaimed
property audit" of Hancock that Verus Financial LLC was conducting
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on behalf of participating states. Hancock entered the GRA to
resolve disputes about its obligations under participating states'
unclaimed property laws. The GRA says that Hancock denies having
violated any of those laws.
The GRA outlined a process for Hancock to make payments
to participating states based on the results of the unclaimed
property audit. Hancock also agreed to adjust some of its business
practices under the GRA. Neither Feingold nor the other members of
the putative class are parties or signatories to that agreement.
In response to Hancock's motion to dismiss, Feingold argued that
the GRA was the source of Hancock's liability.
C. Procedural History
Feingold filed the Class Action Complaint on January 30,
2013, alleging that Hancock owed Feingold and the putative class of
similarly situated beneficiaries damages based on its handling of
unclaimed benefits under its life insurance policies. The
complaint asserted several causes of action, including conversion,
unjust enrichment, violation of consumer protection laws, and
breach of fiduciary duty.
On February 26, 2013, Hancock moved to dismiss the
complaint under Fed. R. Civ. P. 12(b)(6). Attached to the motion
was a copy of Mollie Feingold's application for a life insurance
policy, which Hancock had retained. The application, dated March
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28, 1945, listed Jack Feingold, identified as Mollie Feingold's
husband, as the only beneficiary.
Hancock also explained that it did not retain a copy of
Mollie Feingold's actual insurance policy because industry practice
in 1945 was to keep only "a copy of the policy form reflecting the
terms and conditions of the individual's coverage." As a result,
Hancock attached what it believed to be a copy of Mollie Feingold's
applicable policy form to the motion to dismiss.
In opposing the motion, Feingold explained that his
common law claims were based on duties Hancock had incurred under
the GRA, specifically the GRA's requirement that Hancock examine
the Social Security Administration's Death Master File ("DMF"), a
public database containing death notices. Feingold argued that had
Hancock examined the DMF as required under the GRA, it would have
learned that Mollie Feingold had died in 2006 and escheated the
unclaimed death benefit under her policy to the state of Illinois.
Although Feingold argued that a breach of the GRA supported his
claim for common law damages, the complaint did not assert a
separate breach-of-contract claim.
The district court held a hearing on July 25, 2013 and
issued a memorandum and order granting Hancock's motion to dismiss
on August 19, 2013. The court applied both Massachusetts and
Illinois law to Feingold's claims because it concluded that the
relevant laws of both states were the same and so it did not need
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to resolve the choice of law issue.2 Feingold, 2013 WL 4495126, at
*2.
The district court rejected Feingold's theory of
liability based on an alleged violation of the GRA, explaining that
the GRA was a contract only between Hancock and participating
states. The district court concluded that Feingold could not
enforce a contract to which he was not a party and "nothing
suggests that [the parties to the contract] intended Feingold as a
third party beneficiary." Id.
The district court also considered the life insurance
policy form that Hancock said Mollie Feingold had likely purchased,
because Feingold did not dispute its authenticity and the policy
was central to his claims. Id.; see Watterson v. Page, 987 F.2d 1,
3 (1st Cir. 1993) (explaining narrow exception in which district
court can consider documents outside of a complaint on a motion to
dismiss without converting the motion to one for summary judgment
if their authenticity is not disputed, they are central to
plaintiffs' claims, or they are "sufficiently referred to in the
complaint"); Alt. Energy, Inc. v. St. Paul Fire & Marine Ins. Co.,
267 F.3d 30, 33 (1st Cir. 2001) (same). The policy requires a
beneficiary to provide proof of the policyholder's death before
2
The district court said Hancock had argued that Illinois
law should control. Feingold's complaint, in contrast, treated
Massachusetts law as governing, but Feingold cited mostly Illinois
cases in opposing Hancock's motion to dismiss. Feingold, 2013 WL
4495126, at *2.
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Hancock will pay the death benefit. Feingold, 2013 WL 4495126, at
*2.
The district court reasoned that Feingold had not stated
an unjust enrichment or conversion claim where Hancock's practice
of waiting for proof of death before paying policy proceeds was
consistent with both Illinois and Massachusetts law and complied
with the insurance contract. See id. at *4. The court also
dismissed Feingold's breach of fiduciary duty claim because
Feingold had not alleged a relationship of trust or the sort of
reliance that made Hancock a plausible fiduciary. Id. This appeal
followed.3
II.
We review de novo a district court's dismissal of a
complaint under Fed. R. Civ. P. 12(b)(6), García-Catalán v. United
States, 734 F.3d 100, 102 (1st Cir. 2013), accepting all
well-pleaded facts alleged in the complaint as true and drawing
reasonable inferences in Feingold's favor, Rodríguez-Reyes v.
Molina-Rodríguez, 711 F.3d 49, 52-53 (1st Cir. 2013). The
complaint "must contain sufficient factual matter to state a claim
to relief that is plausible on its face." Id. at 53 (quoting
Grajales v. P.R. Ports Auth., 682 F.3d 40, 44 (1st Cir. 2012))
(internal quotation marks omitted). "Dismissal for failure to
3
Feingold does not appeal from the district court's
dismissal of his claims under consumer protection statutes or his
request for declaratory relief.
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state a claim is appropriate 'if the complaint does not set forth
factual allegations, either direct or inferential, respecting each
material element necessary to sustain recovery under some
actionable legal theory.'" Lemelson v. U.S. Bank Nat'l Ass'n, 721
F.3d 18, 21 (1st Cir. 2013) (quoting United States ex rel.
Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 384 (1st Cir.
2011)).
We apply Illinois law, as the parties agree on appeal
that Illinois law governs Feingold's common law claims in this
diversity suit. See Lluberes v. Uncommon Prods., LLC, 663 F.3d 6,
23 (1st Cir. 2011) (applying substantive law agreed upon by the
parties in diversity suit).
A. Feingold Fails to State a Plausible Claim Based on an
Alleged Breach of the GRA
On appeal, Feingold challenges the district court's
refusal to consider the GRA in assessing the plausibility of his
claims for unjust enrichment, conversion, and breach of fiduciary
duty. He argues that Hancock breached the GRA and that this breach
makes his common law claims plausible because he is a third-party
beneficiary to the GRA. He also argues, in the alternative, that
Hancock's breach of the GRA supports his common law claims even if
he is not a GRA third-party beneficiary. These arguments fail
because Feingold is not a third-party beneficiary to the GRA, and
so Hancock owes Feingold no enforceable duties under that
agreement.
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It is undisputed that Feingold is not a party to the GRA,
a contract between Hancock and several state governments. So,
under Illinois law, Feingold has authority to enforce the terms of
the GRA only if he is a third-party beneficiary of that contract.
Lake Cnty. Grading Co. v. Vill. of Antioch, 985 N.E.2d 638, 644
(Ill. App. Ct. 2013), appeal allowed, 996 N.E.2d 14 (Ill. 2013).
Under Illinois law, "[t]here is a strong presumption that the
parties to a contract intend that the contract's provisions apply
only to them, and not to third parties." Id. (emphasis added)
(quoting Martis v. Grinnell Mut. Reins. Co., 905 N.E.2d 920, 924
(Ill. App. Ct. 2009)) (internal quotation marks omitted). Only
explicit language in the contract can overcome this strong
presumption against third-party beneficiaries. See id. "The
contract language must show that the contract was made for the
direct, not merely incidental, benefit of the third party." Id.
Here, there is no such language in the GRA that could
overcome this strong presumption. The GRA's express purpose is to
resolve disputes related to state governments' ongoing audit of
Hancock's handling of unclaimed property. There is no indication
that the GRA was intended directly to benefit anyone other than the
signatory states negotiating Hancock's obligations with respect to
their unclaimed property programs.
Feingold points only to Hancock's assertion in the GRA
that it has acted in its policyholders' best interest, as well as
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Hancock's obligation under the GRA to attempt to locate life
insurance beneficiaries before escheating unclaimed policy proceeds
to a state. Otherwise, Feingold does not rely on contract
language, as required under Illinois law; rather, he says he is a
third-party beneficiary because the states' unclaimed property
programs at issue in the GRA are themselves intended to help
insurance policy beneficiaries, like himself, locate unclaimed
property.
At most, Feingold is an incidental, as opposed to direct,
beneficiary of the GRA. This is particularly so given that the GRA
is a contract with state governments. The general contract
principle, espoused by the Restatement (Second) of Contracts and
recognized under Illinois law, is that beneficiaries of a
government contract are "assumed to be merely incidental
beneficiaries, and may not enforce the contract absent clear intent
to the contrary." Bergman v. Water Reclamation Dist. of Greater
Chi., 654 N.E.2d 606, 608 (Ill. App. Ct. 1995); accord Restatement
(Second) of Contracts § 313 (1981). This rule reflects that
"[g]overnment contracts often benefit the public, but individual
members of the public are treated as incidental beneficiaries
unless a different intention is manifested." Restatement (Second)
of Contracts § 313 cmt. a. In other words, "[t]he distinction
between an intention to benefit a third party and an intention that
the third party should have the right to enforce that intention is
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emphasized where the promisee is a governmental entity." 8 Murray,
Corbin on Contracts § 45.6 (rev. ed. 2007). So, as a matter of
law, Feingold is not a third-party beneficiary to the GRA.4
Feingold cannot circumvent the strong presumption against
third-party beneficiaries in Illinois law and the Restatement by
recasting an alleged violation of the GRA as a common law claim.
Feingold has not pointed to any Illinois cases where a plaintiff
has asserted a claim of unjust enrichment, conversion, or breach of
fiduciary duty based solely on a contract that the plaintiff lacks
authority to enforce.5
Hancock paid the death benefit to Feingold on June 1,
2012, shortly after it had received the proof of death that was
4
Feingold argues he must show only that it is plausible that
insurance policy beneficiaries are third-party beneficiaries of the
GRA on a motion to dismiss. This argument misapprehends the
plausibility standard. Whether Feingold is a third-party
beneficiary to the GRA is a question of law resolved by contract
interpretation -- even at this early stage in the proceedings.
Feingold does not point to any facts alleged in the complaint that
impact this legal question. See MacKenzie v. Flagstar Bank, FSB,
738 F.3d 486, 491-92 (1st Cir. 2013) (affirming Rule 12(b)(6)
dismissal of plaintiffs' complaint where, as a matter of law,
plaintiffs were not third-party beneficiaries to a government
contract they sought to enforce).
5
Feingold's reliance on Raintree Homes, Inc. v. Village of
Long Grove, 807 N.E.2d 439 (Ill. 2004), is misplaced. That case
addressed a different question of whether an action seeking
declaratory judgment and restitution was time-barred under
Illinois's Tort Immunity Act. Id. at 447. The case is also
distinguishable because the plaintiffs there alleged violations of
both statutory and constitutional law. Id. at 442. Unlike this
case, the Raintree Homes plaintiffs did not base their claim on an
alleged violation of a government contract.
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required under Mollie Feingold's policy.6 That proof-of-death
notice requirement complies with Illinois law. See 215 Ill. Comp.
Stat. 5/154.6(i) (saying insurer commits an improper claims
practice if it fails to affirm or deny coverage "after proof of
loss statements have been completed" (emphasis added)); Am. Country
Ins. Co. v. Bruhn, 682 N.E.2d 366, 370 (Ill. App. Ct. 1997) (saying
that insured's duty to provide insurer with notice of a claim is a
"reasonable requirement in an insurance policy"). It is also in
accord with Illinois's unclaimed property statute, which
acknowledges that life insurance proceeds are not payable without
proof of death. See 765 Ill. Comp. Stat. 1025/3(b).
B. Feingold's Other Arguments Are Waived and Do Not
Give Rise to a Claim under Illinois Law
Feingold has made inconsistent arguments on appeal.
Perhaps recognizing that Feingold has no enforceable rights under
the GRA, Feingold's attorney attempted to change course at oral
argument and argued for the first time that Feingold had alleged a
violation of Illinois's unclaimed property statute, 765 Ill. Comp.
6
Feingold has not identified any source outside of the GRA,
whether it be a statute or common law, that requires Hancock
proactively to search public death records for policyholders' names
rather than wait for submission of proof of death in accordance
with its insurance policy provisions.
On appeal, Hancock asserts that it was the first insurance
company to agree to consult the DMF in a regulatory agreement.
Hancock says that some states, but not Illinois, have enacted
statutes requiring insurance companies to search the DMF, but that
these statutes were passed after Hancock had already agreed to do
so in the GRA in June 2011.
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Stat. 1025/3, that was wholly independent of the GRA. Illinois's
Unclaimed Property Act governs when insurance companies must remit
"unclaimed funds" to the state of Illinois. Id. While the parties
offer different interpretations of the statute, we need not resolve
that question of Illinois law because Feingold's new argument does
not help him for at least two reasons.
First, the argument, not raised in Feingold's initial
brief, is waived. See United States v. Sacko, 247 F.3d 21, 24 (1st
Cir. 2001). Second, Feingold asserts that Hancock violated
Illinois's Unclaimed Property Act if it knew that Mollie Feingold
had died in 2006 but failed to escheat her policy proceeds to the
state. Even assuming Feingold is correct that Hancock's knowledge
of Mollie Feingold's death would have triggered its duty to remit
policy proceeds to Illinois, the complaint does not allege that
Hancock had knowledge of Mollie Feingold's death.
In addition, the payment of $459 was unrelated to any
death benefit under Mollie Feingold's insurance policy. Feingold
acknowledges that the $459 amount constituted demutualization
proceeds from Hancock's conversion to a publicly-owned company in
1999 and 2000. A different provision of Illinois's Unclaimed
Property Act required Hancock to escheat those funds if they
remained unclaimed for more than two years after the date of
demutualization. 765 Ill. Comp. Stat. 1025/3a(a)(1). That
provision did not require Hancock to search the DMF as is required
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in the GRA. Id. Hancock's compliance with a different section of
the Unclaimed Property Act based on an event unrelated to Mollie
Feingold's death does not state a plausible violation of Illinois
law.
III.
For the reasons stated, we affirm.
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