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UBS Financial Services, Inc. v. Aliberti

Appeals Court of Massachusetts, Suffolk

October 4, 2018


          Heard: May 7, 2018.

         Civil action commenced in the Superior Court Department on August 4, 2015.

         The case was heard by Karen F. Green, J., on a motion for judgment on the pleadings.

          Carmen A. Frattaroli for the defendant.

          John K. Wells for the plaintiff.

          Present: Trainor, Ditkoff, & Wendlandt, JJ.

          DITKOFF, J.

         The defendant and plaintiff in counterclaim, Donna M. Aliberti, alleges that she was the sole properly designated beneficiary of three individual retirement accounts (IRAs) owned by Patrick Kenney (Kenney), her former romantic partner, and held by the plaintiff, UBS Financial Services, Inc. (UBS). She alleges that, after Kenney died, UBS distributed funds from two of the IRAs to improper claimants, while ignoring her claims. Even after the only other claimant dropped his claim to the largest IRA, UBS waited more than three months before distributing the uncontested proceeds to Aliberti. She now appeals from a judgment on the pleadings by a Superior Court judge dismissing her amended counterclaim against UBS as to all three IRAs. Concluding that a custodian holding an IRA has duties under New York law, both as a fiduciary and in contract, to a beneficiary of the account, we reverse the judgment for UBS on Aliberti's claims of breach of contract, breach of fiduciary duty, and violation of G. L. c. 93A, § 2. We otherwise affirm the judgment for UBS on Aliberti's amended counterclaim.

         1. Background.

         The essential facts are drawn from the pleadings and the documents attached to the pleadings or incorporated by reference, see State Room, Inc. v. MA-60 State Assocs., L.L.C., 84 Mass.App.Ct. 244, 245, 248 (2013), and we assume the allegations pleaded by Aliberti, as the party opposing judgment on the pleadings, are true. See Merriam v. Demoulas Super Mkts., Inc., 464 Mass. 721, 723 (2013).

         Prior to his death, Kenney owned three IRAs held by UBS: (1) one with an approximate value of $31, 000; (2) one with an approximate value of $18, 000; and (3) one with an approximate value of $276, 000. The IRAs were maintained pursuant to a "UBS Client Relationship Agreement" (client agreement), a contract between UBS and Kenney designating UBS as custodian of the IRAs without discretionary authority. Under the client agreement, UBS obligated itself to transfer any funds to the beneficiary or beneficiaries previously named by Kenney upon Kenney's death.[1]When he opened them in 2008, Kenney named Aliberti the sole beneficiary for all three IRAs. Margaret Kenney, [2] a financial adviser at UBS and the former sister-in-law of Kenney, managed Kenney's IRAs.

         In November, 2013, after Kenney expressed a desire to name additional beneficiaries, UBS sent Kenney beneficiary designation update forms (update forms) for the IRAs. Kenney returned update forms for the two smaller IRAs, but not for the largest. The update forms named Craig Gillespie as the primary beneficiary with Aliberti, Aliberti's son, and Kenney's niece as contingent beneficiaries. Inconsistent with these designations, the forms also dictated that all four beneficiaries were each to receive a twenty-five per cent share of the proceeds. (The update form instructions required that the primary beneficiary shares total one hundred per cent and that the contingent beneficiary shares total one hundred per cent.) UBS requested that Kenney clarify whether all four individuals were intended as primary beneficiaries and sent him another set of update forms to fill out correctly. UBS never received properly completed update forms for the two smaller IRAs. Kenney unexpectedly died on December 2, 2013.

         On December 17, 2013, Aliberti contacted Margaret Kenney concerning the IRAs and requested that all funds be distributed to her as the sole beneficiary. Instead, Margaret Kenney responded with a series of text messages, including, "How big of a whore are you," "You are the most worst piece of filth I have ever encountered," and, "Are you so eager to grab the money. Did you even notice his death certificate is wrong? Oh no you were too busy ransacking."

         On December 23, 2013, UBS received a letter from Gillespie's attorney stating that Gillespie was an intended beneficiary of the largest IRA and that he intended to take legal action to determine the matter. The letter also advised UBS not to make any distribution from that IRA pending resolution of the dispute. Meanwhile, on January 9, 2014, Aliberti complained to UBS about the text messages she received from Margaret Kenney. UBS responded on February 4, 2014, to inform Aliberti her concerns were being reviewed and UBS would follow up with her. When no update came, Aliberti complained again on February 24, 2014, and was assured by UBS an update would be forthcoming. Although Margaret Kenney was removed from the management of the IRAs, Aliberti received no further communication or information from UBS concerning her complaints or the IRAs.

         In March and April of 2014, UBS distributed the proceeds from the two smaller IRAs equally among the four beneficiaries named on the incorrectly completed update forms (including Aliberti). Beyond that, UBS continued to ignore Aliberti's claims to all three IRAs and, in particular, provided no information on the status of the largest IRA where she remained the sole designated beneficiary.

         On May 2, 2014, Aliberti's attorney sent UBS a letter requesting documents related to the disposition of the three IRAs. UBS did not respond at first and produced the requested materials only after a subpoena was issued.[3] Further communications from Aliberti's attorney and Kenney's estate went unheeded by UBS for over one year, until UBS responded on June 15, 2015, to a demand letter from Aliberti's attorney outlining claims against UBS under G. L. c. 93A.

         UBS eventually filed suit in the Superior Court on August 4, 2015, to determine the beneficiaries of the largest IRA by interpleading Gillespie and Aliberti. Gillespie and Aliberti filed answers and asserted counterclaims against UBS. Aliberti also asserted a cross claim against Gillespie. The three-party dispute continued until March 10, 2016, when all claims brought by Gillespie were dismissed with prejudice by agreement of the parties. No competing claims remained on the largest IRA, yet UBS did not distribute the funds to Aliberti until more than three months later, on July 1, 2016.[4]

         Aliberti filed an amended counterclaim against UBS on July 21, 2016. The amended counterclaim alleges multiple counts of breach of contract (counts one, four, and seven), breach of fiduciary duty (counts two, five, and eight), intentional infliction of emotional distress (counts three, six, and nine), and violation of G. L. c. 93A, § 2, against UBS for its conduct in connection with all three IRAs (count ten).[5] UBS filed an amended complaint on September 1, 2016, arguing the distribution mooted Aliberti's claims on the largest IRA and alleging abuse of process and malicious prosecution, based both on Aliberti's initial and amended counterclaim. Then, on October 25, 2016, UBS moved for judgment on the pleadings on Aliberti's amended counterclaim, which was duly opposed by Aliberti. A Superior Court judge granted judgment on the pleadings for UBS on all counts of the amended counterclaim on June 26, 2017, and Aliberti filed a notice of appeal.[6]

         2. Standa ...

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