NORMA EZELL, LEONARD WHITLEY, and ERICA BIDDINGS, on behalf of themselves and others similarly situated, Plaintiffs, Appellants,
LEXINGTON INSURANCE COMPANY; AMERICAN INTERNATIONAL GROUP, INC.; AIG ASSURANCE COMPANY; AIG INSURANCE COMPANY; AIG PROPERTY CASUALTY COMPANY; AIG SPECIALTY INSURANCE COMPANY; AMERICAN GENERAL LIFE INSURANCE COMPANY; NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, PA.; AGC LIFE INSURANCE COMPANY; AMERICAN GENERAL ANNUITY SERVICE CORPORATION; AIG CLAIMS, INC., f/k/a AIG Domestic Claims, Inc., Defendants, Appellees.
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS [Hon. Nathaniel M. Gorton, U.S. District Judge]
R. Spiegel, with whom Steve W. Berman was on briefs, for
H. Offenhartz, with whom James L. Hallowell, Nancy E. Hart,
Peter M. Wade, William T. Hogan III, and Nolan J. Mitchell
were on brief, for appellees.
Lynch, Circuit Judge, Souter, [*] Associate Justice, and Kayatta,
SOUTER, ASSOCIATE JUSTICE.
Norma Ezell, Leonard Whitley, and Erica Biddings entered into
structured settlement agreements with Lexington Insurance
Company. By the terms of their settlements, appellants agreed
not to pursue their wrongful death and personal injury claims
against parties insured by Lexington. In exchange, Lexington
agreed that appellants would receive specific periodic
payments from annuities that Lexington would purchase. Years
after these agreements took effect, appellants accused
Lexington and other affiliated insurers of misrepresenting
the amount appellants would receive from the settlements.
Appellants brought this putative class action in federal
court, alleging that Lexington and other insurers made
fraudulent misrepresentations to appellants, actionable at
common law, and engaged in a scheme to defraud appellants in
violation of the Racketeer Influenced and Corrupt
Organizations Act, or RICO, 18 U.S.C. §§ 1961
et seq. Appellants now challenge the District
Court's dismissal of their claims as raised for a second
time under an amended complaint. We affirm.
begin with the language of the relevant settlement documents
that are part of the record on appeal. One settlement
agreement applied to Ezell and Whitley; the other, to
Biddings. Under each, Lexington would purchase annuities from
various life insurance companies, and the proceeds from the
annuities would be remitted to appellants in periodic
installments. As to Ezell and Whitley, a preliminary
memorandum provided that $200, 000 would be
"annuitized" by Lexington for the purpose of
financing periodic payments, Ezell Settlement Memorandum
¶ 2, while a formal agreement indicated the exact amount
Ezell and Whitley would receive each month, Ezell Settlement
Agreement ¶ 2.2. As to Biddings, a formal agreement
indicated that the "total present value" of the
periodic payments would be $1, 642, 000, and it also
specified the exact amount she would receive each month.
Biddings Settlement Agreement ¶ 2.2.
respectively allege that they did not receive the promised
amounts ($200, 000 to be "annuitized" for Ezell and
Whitley, and $1, 642, 000 in "total present value"
for Biddings) because the life insurers that sold the
annuities to Lexington diverted four percent of those amounts
to pay commissions to the brokers who arranged the
transactions with Lexington. Since these commissions were not
disclosed in the settlement agreements or otherwise,
appellants contend that the insurers fraudulently
misrepresented the amount appellants would receive from the
settlements. This allegation is the basis for appellants'
common-law fraud and RICO claims.
problem for appellants is that the settlement documents,
fairly read, did not promise that Ezell and Whitley would
receive $200, 000, or that Biddings would receive $1, 642,
000. Rather, they promised only that $200, 000 would be
"annuitized" for Ezell and Whitley, and that the
"total present value" of the periodic payments to
Biddings would be $1, 642, 000. The amount
"annuitized" to produce a periodic payment stream
plausibly refers to the amount of money spent to purchase
that payment stream, not the amount a beneficiary receives
from it. See American Heritage Dictionary of Business
Terms 19 (2009) (defining "annuitize" as
"[t]o convert a sum of money into a series of
payments"). Similarly, the "total present
value" of a payment stream plausibly refers to its cost,
not to the amount a beneficiary receives. See Black's
Law Dictionary 43 (10th ed. 2014) (defining
"actuarial present value" as the "amount of
money necessary to purchase an annuity that would generate a
particular monthly payment, or whatever periodic payment the
plan provides . . .").
there is no dispute that Lexington paid $200, 000 to purchase
the annuities for Ezell and Whitley, and $1, 642, 000 for the
annuities for Biddings. Although the life insurers that sold
the annuities to Lexington then allegedly used four percent
of these sums to pay commissions to brokers, appellants
conceded in their complaint that it is
"[i]ndustrywide" practice for brokers to be paid
"a standard sales commission of four percent (4%) of the
annuity's cost," Amended Complaint ¶ 31, and
that the commission would be paid by the annuity issuer,
id. ¶¶ 35, 99(b), 100(b), 120(b),
121(b). Assuming that these allegations are true,
as we must at the motion-to-dismiss stage, Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555 (2007), the
four-percent commission payment would have been paid by the
life insurance companies that sold the annuities, and would
have been accounted for as a standard element of the cost of
doing business by the life insurance companies and reflected
in the market prices that Lexington paid. The commission, in
other words, was included in the price of a given annuity in
the marketplace, and the appellants have provided no basis to
infer that liability insurers in Lexington's position
were under any obligation to inform a settlement party of the
items of overhead that it was the annuity industry's
continuing practice to account for in pricing their products.
Because the words "annuitized" and "total
present value" simply committed Lexington to pay the
amounts stated as necessary to produce the periodic payments
specified in the agreements, the annuity companies'
payment of brokers' commissions from out of the money
Lexington paid for the annuities does not belie the facts
that Lexington paid the amounts it quoted and that appellants
received exactly those specific annuity payments the
agreements had promised, payments that the appellants have
not alleged that they failed to receive.
even if there were ambiguities in the terms
"annuitized" or "total present value,"
the specific schedules of periodic payments set out in the
respective settlement agreements would cure them, for those
agreements listed the precise amount appellants could expect
to receive each month throughout a stated period. In so
doing, the agreements concretely defined what $200, 000
"annuitized" and $1, 642, 000 in "total
present value" meant in terms of annuity benefits to be
paid to appellants. Because there is no dispute that
appellants did receive the periodic payment amounts they were
promised in agreements containing no uncorrected
misrepresentations, there is no allegation in the pleadings
that appellants suffered the kind of harm necessary to make
out a case of the statutory or common-law violations claimed.
short, appellants have failed to "state with
particularity the circumstances constituting fraud."
Fed.R.Civ.P. 9(b). Under Rule 9(b), appellants must state
"the who, what, where, and when of the allegedly
[misleading] representation" with particularity.
Kaufman v. CVS Caremark Corp., 836 F.3d 88, 91 (1st
Cir. 2016) (quoting Alt. Sys. Concepts, Inc. v. Synopsys,
Inc., 374 F.3d 23, 29 (1st Cir. 2004)). Here, however,
the basic problem with appellants' complaint is not that
they failed to state some facts "with
particularity." Fed.R.Civ.P. 9(b). Rather, it is that
the facts they have pleaded "with particularity" on
the matters discussed here demonstrate the absence of any
"circumstances constituting fraud." Id.
Accordingly, we affirm the District Court's decision
dismissing the amended complaint with prejudice.