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Annuities Sales Dispute Counts Invariably Fail, Court Rules: Mineweaser v. Prudential Ins. Co. of America
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By David C. Franceski, Jr.

*Absent such disparity in position that an inferior party places complete trust in and seeks no counsel except that of the superior party, a confidential or fiduciary relationship does not exist merely because one party relies on and pays for the specialized skill or expertise of another. **The Court lacks subject matter jurisdiction over claims subject to arbitration.

Mineweaser vs. Prudential Ins. Co. of America, No. 16-1172 (W.D. Pa., 10/4/16).

The Pleadings

Pro se plaintiff, a purchaser of two annuities, brought claims for negligence, breach of fiduciary duty, fraud, misrepresentation and “injunctive relief” against defendant Prudential, the annuity issuer and employer of the securities broker who recommended the products, with respect to the sale of the annuities, and against defendant Charles Schwab, for negligent handling of a medallion guarantee on plaintiff’s request to liquidate and withdraw proceeds from the annuities. Defendants moved to dismiss for failure to state a claim under F.R.C.P. 12(b)(6) and for lack of subject matter jurisdiction under F.R.C.P. 12(b)(1).

The Court grants the motions and dismisses all eight counts of the Amended Complaint. Though “less stringent standards” apply when considering a pro se complaint, the pleading must still meet Twombly plausibility standards, as applied to the specific nature of the claims presented, and on a challenge to subject matter jurisdiction, “no presumptive truthfulness attaches to plaintiff’s allegations.”

Fiduciary Duty?

First, the Court declines to find that defendants were plaintiff’s fiduciaries, dismissing plaintiff’s claim for breach of fiduciary duty arising from defendants’ alleged failures to inform plaintiff of early withdrawal penalties, surrender charges and the tax implications of the annuity income, as well as the annuities’ “dramatic underperformance.” Under Pennsylvania law, a fiduciary relationship does not exist merely because one party relies on the specialized skill or expertise of the other. It requires a confidential or other relationship characterized by “overmastering influence” on one side and “weakness, dependence, or trust, justifiably reposed” on the other. A confidential relationship is one of “actual closeness,” “substantial disparity” and “actual reliance” on the position of trust. Though the Court will not say that the arm’s length purchase of an insurance product may never involve a fiduciary relationship, in this case, it does not. Nor does the amended complaint adequately allege any breach in the management of Plaintiff’s assets.

Timeliness and Ripeness

The Court also finds plaintiff’s negligence, fraud and breach of fiduciary duty claims barred by the applicable two-year statute of limitations, because the terms of the annuity about which plaintiff claims he was unaware were available to him at the time of purchase, and the Court finds plaintiff’s claim for “injunctive relief” deficient because it is not an independent cause of action.

Moving on to broker-dealer defendant Charles Schwab, in a novel application of the parties’ pre-dispute mandatory arbitration agreement, the Court concludes that, because plaintiff did not first submit his claims to arbitration, they are not “ripe for resolution” by the courts and, therefore, the Court lacks subject matter jurisdiction to hear them.

(D. Franceski: In a footnote of some significance, the Court also finds that plaintiff’s negligence claim is barred by Pennsylvania’s economic loss doctrine, which precludes claims for purely economic loss where neither physical injury nor damage to tangible personal property is claimed.)

(SLC Ref. No. 2016-42-08)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA)from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis.

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