Muller-Paisner ex rel. Estate of Engel v. TIAA , 528 F. App'x 37 ( 2013 )

12-3579-cv
Muller-Paisner ex rel. Estate of Engel v. TIAA
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 20th day of June, two thousand thirteen.
PRESENT: REENA RAGGI,
SUSAN L. CARNEY,
Circuit Judges,
JED S. RAKOFF,
District Judge.*
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VERA MULLER-PAISNER, as Executrix of the Estate of
Mary Engel, Deceased,
Plaintiff-Appellant,
No. 12-3579-cv
v.
TIAA, TEACHERS INSURANCE ANNUITY
ASSOCIATES AND COLLEGE RETIREMENT EQUITY
FUND, TIAA-CREF ENTERPRISES, INCORPORATED,
Defendants-Appellees.
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APPEARING FOR APPELLANT: MAX WILD, Esq., Warwick, New York.
*
Judge Jed S. Rakoff, of the United States District Court for the Southern District of
New York, sitting by designation.
APPEARING FOR APPELLEES: JONATHAN R. HARWOOD (Lisa L.
Shrewsberry, on the brief), Traub Lieberman
Straus & Shrewsberry LLP, Hawthorne,
New York.
Appeal from a judgment of the United States District Court for the Southern District
of New York (Gabriel W. Gorenstein, Magistrate Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment entered on August 13, 2012, is VACATED and the case is
REMANDED for further proceedings.
Plaintiff Vera Muller-Paisner, executrix of the estate of Mary Engel (individually,
“Engel”; as represented by Muller-Paisner, “estate”), appeals from the denial of her summary
judgment motion and the award of summary judgment to defendants TIAA, Teachers
Insurance Annuity Associates and College Retirement Equity Fund, and TIAA-CREF
Enterprises, Inc. (collectively, “TIAA”). The estate asserts claims of breach of fiduciary
duty, negligence, and unjust enrichment arising from Engel’s transfer of over 90% of the
assets in her retirement savings account, or approximately $1.25 million, to a
non-guaranteed, single life variable annuity (“Annuity”) six months before she died from
emphysema.1 See Muller-Paisner v. TIAA, 881 F. Supp. 2d 579, 582 (S.D.N.Y. 2012). We
review decisions on cross-motions for summary judgment de novo, examining each party’s
1
The Annuity provided Engel with variable monthly payments during her life but, as
it allowed for no beneficiary designation or survivorship right, “all payments end[ed] at [her]
death.” Authorization Form, J.A. 140; see also Acknowledgment Form, J.A. 164 (“Under
this option, you receive lifetime income. Upon your death, all payments stop.”).
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motion “on its own merits” and drawing all permissible inferences “against the party whose
motion is under consideration.” Chandok v. Klessig, 632 F.3d 803, 812 (2d Cir. 2011).
Summary judgment is appropriate only if the record reveals “no genuine dispute as to any
material fact” and the movant’s entitlement to judgment as a matter of law. Fed. R. Civ. P.
56(a); see Ramos v. Baldor Specialty Foods, Inc., 687 F.3d 554, 558 (2d Cir. 2012). We
assume the parties’ familiarity with the facts and record of prior proceedings, including our
earlier decision, Muller-Paisner v. TIAA, 289 F. App’x 461, 463 (2d Cir. 2008) (summary
order), which we reference only as necessary to explain our decision to vacate the judgment
in TIAA’s favor and to remand the case for trial.
1. Breach of Fiduciary Duty
a. Fiduciary Status
The district court concluded that the question of a fiduciary duty owed by TIAA to
Engel turned on disputes of fact that could not be resolved as a matter of law in favor of
either party. Assuming arguendo that the estate could prove such a fiduciary duty, the district
court granted summary judgment to TIAA based on its determination that no reasonable jury
could find a breach of duty.
We agree that the existence and extent of any fiduciary duty in this case must be
resolved at trial based on a careful review of the parties’ relationship. See Roni LLC v. Arfa,
18 N.Y.3d 846, 848, 939 N.Y.S.2d 746, 748 (2011) (“Ascertaining the existence of a
fiduciary relationship inevitably requires a fact-specific inquiry.” (internal quotation marks
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omitted)). Because a fiduciary relationship “exists only when a person reposes a high level
of confidence and reliance in another,” People ex rel. Cuomo v. Coventry First LLC,
13 N.Y.3d 108, 115, 886 N.Y.S.2d 671, 675 (2009), for the estate to succeed on its fiduciary
claim, it must demonstrate that Engel placed such trust and confidence in TIAA, relying,
explicitly or implicitly, on TIAA’s knowledge and expertise. Evidence of statements made
by TIAA to induce trust and reliance are relevant to the fiduciary inquiry. See Sergeants
Benevolent Ass’n Annity Fund v. Renck, 19 A.D.3d 107, 110, 796 N.Y.S.2d 77, 79 (1st
Dep’t 2005) (identifying potential fiduciary status where defendants allegedly “held
themselves out as experienced in the field of investment consulting and management,” and
unsophisticated plaintiffs relied on that expertise).
When we review the evidence in the light most favorable to the non-movant on the
parties’ cross-motions for summary judgment, however, we cannot resolve the fiduciary
question as a matter of law for either party. As the district court correctly concluded, this
issue must await resolution at trial.
b. Breach of Duty
i. Duty of Loyalty
The estate submits that the district court erred in concluding that, even if TIAA acted
as a fiduciary, it did not breach any duty of loyalty relating to Engel’s selection of the
Annuity. See Muller-Paisner v. TIAA, 881 F. Supp. 2d at 597 (rejecting notion that
“standards for conduct that apply to a trustee and other fiduciaries who plainly have a duty
of undivided loyalty apply here”). We identify no error.
4
In EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 799 N.Y.S.2d 170 (2005), the
New York Court of Appeals held that when a securities underwriter gives expert advice to
a client, the underwriter assumes a “limited” fiduciary duty to inform the client of “any
material conflicts of interest that render the advice suspect,” id. at 21–22, 799 N.Y.S.2d at
176 (holding that underwriter of initial public offering had fiduciary duty to disclose to issuer
its “compensation arrangements with its [other] customers,” whereby it was to receive
percentage of profits generated in post-offering resales). This limited duty is of no
consequence here because the estate does not allege—much less attempt to prove—that
TIAA withheld from Engel any details of the compensation it would derive from Engel’s
choice of payment options, including the Annuity.
Nor are the estate’s conclusory contentions of self-dealing by TIAA sufficient to
demonstrate disloyalty. By definition, self-dealing occurs where the same party “stands on
both sides of the bargaining table.” 2 Tudor City Place Assocs. v. 2 Tudor City Tenants
Corp., 924 F.2d 1247, 1251 (2d Cir. 1991). As the district court correctly recognized, “the
relationship between Dr. Engel and TIAA was of an entirely different character.”
Muller-Paisner v. TIAA, 881 F. Supp. 2d at 596. TIAA did not sell the Annuity to itself, and
it is not alleged to have controlled Engel’s retirement savings account such that it could
otherwise engage in self-dealing, for example, by trading for its own benefit. The estate’s
assertion that TIAA “extorted” the letter from Engel confirming the Annuity’s election,
Appellant’s Reply Br. 2, so that TIAA could offset losses caused by the recent financial
downturn, is mere speculation unsupported by admissible evidence.
5
Accordingly, summary judgment was properly entered in favor of TIAA on the
estate’s fiduciary claim of breach of the duty of loyalty.
ii. Duty of Care
We reach a different conclusion regarding the estate’s fiduciary claim of breach of the
duty of care insofar as TIAA is alleged negligently to have recommended or facilitated
Engel’s election of the Annuity at issue. See Sergeants Benevolent Ass’n Annuity Fund v.
Renck, 19 A.D.3d at 109–10, 796 N.Y.S.2d at 79 (holding actionable as fiduciary breach
allegedly negligent advice pertaining to fund asset allocation and investment objectives).
The question is not, as TIAA urges, whether Engel received sufficient or accurate
information regarding the payment option she did select. Nor is it whether that choice
proved disadvantageous in retrospect. Cf. In re HSBC Bank USA, N.A., 98 A.D.3d 300,
309, 947 N.Y.S.2d 292, 300 (4th Dep’t 2012) (noting, with respect to fiduciary control over
investments generally, that “test is prudence, not performance, and therefore evidence of
losses following the investment decision does not, by itself, establish imprudence” (quotation
omitted)). Rather, the issue is whether TIAA, given the facts known or available to it,
exercised the level of care in its dealings with Engel consistent with whatever fiduciary duty
it might have assumed.
In granting summary judgment to TIAA, the district court highlighted the lack of
evidence that TIAA had recommended the Annuity. See Muller-Paisner v. TIAA, 881
F. Supp. 2d at 584. The breach inquiry cannot, however, end there. The record evidence,
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viewed in the light most favorable to the estate, would permit a jury to infer that TIAA had
voluntarily assumed a duty to provide clients with advice about the investment products
appropriate to their situations. For example, in its 2001 Annual Report, TIAA publicly
disclosed its “key goal” of building “lasting partnerships” with customers, not only “by
providing the products they will need throughout their lives,” but also “by offering choices
appropriate to their changing situations.” J.A. 340 (emphasis added). That process,
according to TIAA, “means helping people understand their choices and make sound
decisions.” J.A. 342 (emphasis added). Reinforcing these points, in July 2001, a TIAA vice
president told a House of Representatives subcommittee that “[t]he responsibilities of a
‘fiduciary advisor’ are standards that we, at TIAA-CREF, operate under already.” J.A. 406.
See generally Dorking Genetics v. United States, 76 F.3d 1261, 1267 (2d Cir. 1996) (noting
New York’s recognition of liability for “negligence in performance of a duty that would not
exist” absent defendant’s “voluntary undertaking”).
Moreover, the record supports an inference that TIAA counselors exercised some
input into Engel’s choice of a retirement investment option, and that they did so recognizing
that she was ill, that she was having difficulty comprehending their conversations, and that
the Annuity at issue was not a prudent choice in her circumstances. For example, a TIAA
employee who spoke with Engel by telephone on August 30, 2000, noted that he had advised
her that “at her age and [with] the balance [of money] involved,” allocating the bulk of her
savings to the Annuity “would be against the normal logic”—but he was not sure she had
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understood what he was asking her. J.A. 154; see also J.A. 135 (notation in preceding call
summary that Engel “was difficult to understand”).1 The following day, a TIAA employee
noted that Engel had called requesting “help in choosing an allocation” and the employee had
“reviewed investment options and suggested she consider the safety of TIAA traditional.”
J.A. 157. Soon thereafter, in a September 5, 2000 letter to TIAA, Engel appeared to confirm
her election of the Annuity, but revealed that she was “ill and cannot come to your offices.”
J.A. 161. When another TIAA counselor spoke with Engel a few days later, on September
8, 2000, he noted that she “seemed very confused” on the phone. J.A. 287. Indeed, still
another TIAA employee who spoke with Engel on September 14, 2000, expressed even
greater concerns about both the prudence of the Annuity investment and Engel’s ability to
make that choice: “This poor lady could have used some counseling, as she annuitized over
$1 million dollars and chose no guaranteed period, and she sounds frail.” J.A. 283.
While TIAA may urge a jury to construe in its favor this and other
evidence—including call summary statements by Engel that she had no beneficiaries or
1
We concur in the district court’s assessment that the call summaries, made pursuant
to TIAA policy at or near the times of the conversations they recount, are admissible under
the business records hearsay exception. See Fed. R. Evid. 803(6). The estate’s conclusory
argument that the records’ “circumstances of preparation indicate a lack of trustworthiness,”
id., thus defeating their admissibility, is undercut by its own reliance on the summaries to
prove its claims. See United States v. Kaiser, 609 F.3d 556, 576 (2d Cir. 2010) (holding that
questions regarding call notes’ trustworthiness went to weight and not admissibility where
notes otherwise qualified as business records). TIAA’s sworn statement that call-center
employees were required to create the summaries as a part of their job duties also supports
the estate’s use of the records as party-opponent admissions against TIAA. See Fed. R. Evid.
801(d)(2)(D).
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family—we must apply the opposite presumption on a motion for summary judgment. We
conclude that the totality of the evidence, viewed in the light most favorable to the estate,
would permit a reasonable jury to conclude that TIAA had voluntarily assumed a duty to
advise customers such as Engel about investment choices appropriate to their situations, and
that TIAA breached that duty when, knowing that Engel was ill and having difficulty hearing
and understanding what investment counselors were telling her, TIAA sold her an Annuity
that it knew was against “normal logic.” See generally Lerner v. Fleet Bank, N.A., 459 F.3d
273, 288 (2d Cir. 2006) (stating that financial institution, aware of “‘[f]acts sufficient to
cause a reasonably prudent person to suspect’” improper use of account holdings, acquires
duty to investigate (quoting Norwest Mortgage, Inc. v. Dime Sav. Bank of N.Y., 280 A.D.2d
653, 654, 721 N.Y.S.2d 94, 95 (2d Dep’t 2001))); see also N.Y. Comp. Codes R. & Regs. tit.
11, § 224.4(b) (directing insurance provider, before recommending annuity, to “make
reasonable efforts to obtain the consumer’s suitability information”); de Kwiatkowski v.
Bear, Stearns & Co., 306 F.3d 1293, 1306 (2d Cir. 2002) (citing authority holding
noncompliance with professional suitability standards to be evidence of negligence).2
2
The fiduciary claim is thus distinguishable from the estate’s dismissed fraud claims,
which, we held, could not be premised on nondisclosure of TIAA’s opinion that a
non-guaranteed annuity “would not be a good purchase for” Engel given her age and failing
health—information a reasonable retiree would already have known. Muller-Paisner v.
TIAA, 289 F. App’x at 464–65. Similarly, because Engel’s claim is not “based exclusively
on TIAA’s alleged misrepresentations,” Appellees’ Br. 32, we need not consider or decide
whether Engel raises a triable issue that she received or relied on specific disclosures
concerning her retirement payment choices, see Bell v. Pfizer, Inc., 626 F.3d 66, 75 (2d Cir.
2010) (holding that detrimental reliance is element “of fiduciary claim based on a material
9
A breach conclusion finds further support in the testimony of a TIAA manager, who
testified at his deposition that when customers exhibited confusion or a lack of
understanding, as Engel did here, TIAA would endeavor to communicate with them through
an intermediary or to meet with them in person. Neither appears to have occurred here.
Moreover, the estate adduced the opinion of an expert fiduciary that a lay person could have
understood the Annuity provision for payments ceasing at death to mean that monthly
payments would stop, with the remaining invested funds reverting to the annuitant’s estate.
Whatever the merit of that contention generally, in the circumstances of this case, a jury
might accord the opinion some weight in concluding that TIAA’s sale of what it recognized
to be an ill-advised Annuity to a woman who seemed not to be understanding conversations
with their counselors was a breach of TIAA’s assumed fiduciary duty.
In so concluding, we note that the estate must further show that any breach of
fiduciary duty proximately caused damages. See Northbay Constr. Co. v. Bauco Constr.
Corp., 38 A.D.3d 737, 738, 832 N.Y.S.2d 280, 281 (2d Dep’t 2007) (reiterating that
causation, both direct and proximate, is element of claim for fiduciary breach).
Accordingly, we vacate the award of summary judgment in favor of TIAA on the
estate’s claim for breach of the fiduciary duty of care.
misrepresentation or omission”). In any event, a jury finding that TIAA breached a duty to
ensure that Engel comprehended her choice would necessarily imply detrimental reliance.
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2. Remaining Claims
The estate’s negligence claim is reinstated to the extent it overlaps with the fiduciary
duty claim; it is otherwise deemed abandoned due to the estate’s failure to address it on
appeal. See Jackler v. Byrne, 658 F.3d 225, 233 (2d Cir. 2011) (vacating dismissal of claims
addressed in appellate brief while affirming dismissal of unaddressed claims). Moreover,
because the unjust enrichment claim was dismissed for lack of proof of “misconduct
constituting a breach of a fiduciary duty,” Muller-Paisner v. TIAA, 881 F. Supp. 2d at 602,
that claim is reinstated as well. The estate is free to pursue a rescission remedy.
The judgment of the district court is VACATED and the case is REMANDED for
further proceedings consistent with this order.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
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