Mohney v. Forney , 93 F. App'x 391 ( 2004 )

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
3-24-2004
Mohney v. Forney
Precedential or Non-Precedential: Non-Precedential
Docket No. 03-1436
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 03-1436
TIMOTHY A. MOHNEY; GAY N. MOHNEY;
JEFFREY A. MOHNEY; AMANDA MARIE MOHNEY,
a minor, by TIMOTHY A. MOHNEY, guardian,
Appellants
v.
PAUL FORNEY;
METROPOLITAN LIFE INSURANCE COMPANY
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil No. 96-cv-00854)
District Judge: Honorable Donetta W. Ambrose
Argued February 23, 2004
Before: RENDELL, BARRY and ROSENN, Circuit Judges.
(Filed: March 24, 2004)
Kenneth R. Behrend [ARGUED]
BEHREND & ERNSBERGER
306 Fourth Avenue
Union National Bank Building, Suite 300
Pittsburgh, PA 15222
Counsel for Appellants
William M. Wycoff
Kevin P. Allen
THORP, REED & ARMSTRONG
301 Grant Street
One Oxford Centre, 14th Floor
Pittsburgh, PA 15219
B. John Pendleton, Jr. [ARGUED]
Robert P. Lesko
McCARTER & ENGLISH
100 Mulberry Street
Four Gateway Center
Newark, NJ 07101-0652
Counsel for Appellees
OPINION OF THE COURT
RENDELL, Circuit Judge.
The Metropolitan Life Insurance Company (“MetLife”) through its sales agent,
Paul Forney (collectively, “Defendants”) sold Plaintiff Timothy Mohney whole life
insurance policies on the lives of his two children. The Defendants called these policies
the “Metropolitan 50-50” plan (“50/50 Plan”), “a plan to provide for your personal
savings.” Mohney sued, contending that the Defendants misrepresented the true nature
of his purchase. In essence, Mohney alleged that what he was led to believe were
savings plans were instead simply life insurance policies. The District Court granted the
Defendants’ motion for summary judgment on all of Mohney’s claims. For the reasons
set forth below, we will affirm in part and reverse in part.
2
The District Court exercised subject matter jurisdiction based on diversity of
citizenship, 28 U.S.C. § 1332, applying the law of Pennsylvania. Our jurisdiction for
review of the District Court’s final order is based on 28 U.S.C. § 1291.
I.
Mohney, a disabled coal miner with a high school education, and his wife met
with a MetLife’s sales agent, Forney, in the summer of 1992. Mohney testified in his
deposition that he informed Forney of his intention to buy a savings plan for his children
and that he was not interested in purchasing insurance policies. Forney perused a binder
of information on MetLife’s financial products with the Mohneys, including the 50/50
Plan, and explained how these products could help Mohney accumulate savings on
behalf of his children. Indeed, Mohney claimed Forney suggested that after several
years, the yield from the 50/50 Plan could allow Mohney to “enjoy a life out on the golf
course” and support his children’s higher education.
The promotional binder contained articles extolling MetLife’s financial strength
and recommendations on structuring a personal savings plan. While a few of the sales
materials referred to MetLife as an insurance company, MetLife’s financial products were
described without any reference to insurance, e.g., as “investment plans.” In particular,
MetLife compared the 50/50 Plan to other traditional investment vehicles, such as mutual
funds, money market accounts, IRAs, and CDs. By contrast to those other investment
vehicles, the materials suggested that the 50/50 Plan was the only investment vehicle that
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guaranteed “self-completion,” i.e., “in case of premature death or disability Metropolitan
will complete the plan.” Mohney understood that this self-completion feature of the
50/50 Plan was effected through life insurance.
On August 4, 1992, Mohney signed an application for two whole life insurance
policies for his children. Mohney acknowledged in his deposition that he was applying
for life insurance but testified that he believed that insurance was just one component of
the savings plan: “I assumed [the insurance policies] were part of the Savings Plan, that
if [the children] died, they wouldn’t lose that money or whatever. They were part of the
50 50 Savings Plan.” Mohney testified that he did not suspect there was a problem with
the 50/50 Plan until he heard a news report in 1994 concerning litigation against MetLife
for its sales practices. After securing counsel, he filed actions against MetLife and
Forney.
Mohney sued the Defendants for inter alia common law fraud and deceit; breach of
fiduciary duty; violation of Pennsylvania’s Unfair Trade Practices and Consumer
Protection Law (“UTPCPL”); negligent supervision; breach of contract; bad faith; and,
negligence per se. The Defendants successfully moved the District Court to grant
summary judgment on all of Mohney’s claims.
Mohney appeals several, but not all, of the claims dismissed on summary
judgment. He appeals the District Court’s decision with respect to the claims of fraud and
deceit; violation of the UTPCPL; negligent supervision; breach of fiduciary duty;
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collateral estoppel by virtue of the Pennsylvania Insurance Department’s findings of
deceptive marketing practices; and, bad faith.1 We review summary judgment motions de
novo, using the same test applicable in a district court. Mass. Sch. of Law v. ABA, 107
F.3d 1026, 1032 (3d Cir.1997). In deciding a motion for summary judgment, the “test is
whether there is a genuine issue of material fact, and if not, whether the moving party is
entitled to judgment as a matter of law.” Medical Protective Co. v. Watkins, 198 F.3d
100, 103 (3d Cir. 1999). Facts must be viewed in the light most favorable to Mohney as
the non-moving party. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986).
II.
We begin our discussion with Mohney’s allegations of fraud and deceit against the
Defendants. In order to prove a claim of fraudulent misrepresentation under
Pennsylvania law, Mohney required clear and convincing evidence of: 1) a
misrepresentation; 2) a fraudulent utterance; 3) an intention by the maker that the
recipient will be induced to act; 4) justifiable reliance on the misrepresentation; and, 5)
damage to the recipient as a proximate result. Tunis Bros. Co., Inc. v. Ford Motor Co.,
1
Mohney does not appeal the District Court’s decision that only he, not his wife or
children, had standing to sue Forney. Further, he does not appeal the District Court’s
grant of summary judgment with respect to his claims of breach of contract, negligence
per se, and willful disregard.
5
952 F.2d 715, 731 (3d Cir. 1991). The District Court focused on Mohney’s claim that he
justifiably relied on the Defendants’ representation that he was purchasing a savings
policy.
In determining whether reliance was justifiable, the Supreme Court of
Pennsylvania has held that “[n]either this Court nor a jury can consider the issue without
considering the relationship of the parties involved and the nature of the transaction.”
Rempel v. Nationwide Life Ins. Co., Inc., 370 A.2d 366, 368 (Pa. 1977); see also
Wittekamp v. Gulf & Western, Inc., 991 F.2d 1137, 1144 (3d Cir. 1993) (observing that
Pennsylvania law on justifiable reliance looks to such factors as the respective
intelligence and experience of the parties). Given the relationship between insured and
insurers, the reasonable expectation of the purchaser will in certain circumstances defeat
even the express language of an insurance policy. See Bensalem Township v. Int’l
Surplus Lines Ins. Co., 38 F.3d 1303, 1308-12 (3d Cir. 1994) (“Thus we are confident
that where the insurer or its agent creates in the insured a reasonable expectation of
coverage that is not supported by the terms of the policy that expectation will prevail over
the language of the policy.”).
Agreeing with the Defendants, the District Court set forth two reasons for its
conclusion that Mohney did not justifiably rely on any misrepresentation. First, the
District Court observed that Mohney could not have justifiably relied on Forney’s
representations when those representations conflicted with the express terms of the
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written insurance policies. Second, the Court pointed to Mohney’s own
acknowledgment, in deposition testimony, that he was applying for life insurance.
The District Court concluded that the policies’ express provisions belied Mohney’s
claimed reliance. The Court noted that these policies were clearly labeled “Whole Life
Policy” and “Life insurance payable when the insured dies.” However, as noted above,
Pennsylvania courts often privilege the insured’s reasonable expectation over potentially
contrary language contained in a policy. See Bensalem, 38 F.3d at 1309. Here, Mohney
contended that he reasonably expected to purchase a savings plan with an insurance
component. To support this contention, Mohney points to the promotional binder which
referred to MetLife’s “investment plans” and the 50/50 Plan in particular as “a plan to
provide for your personal savings.” Indeed, the binder included a chart comparing the
features of the 50/50 Plan to other traditional investment vehicles such as mutual funds
and IRAs. In light of this evidence, we conclude that a genuine issue of material fact
exists as to whether Mohney justifiably expected to purchase a savings plan,
notwithstanding any contrary text in the insurance policies. And, the language cited by
the District Court merely makes clear that Mohney applied for life insurance, which
Mohney believed to be but one component, the self-completing feature, of an overall
savings plan.2 Thus, the express terms of the insurance policies do not warrant the grant
2
More broadly, the District Court reasoned that Mohney should have been able to
surmise that he was purchasing only insurance policies. The Court observed that a high
level of sophistication was not “required to discover that the premium payments made
7
of summary judgment.
The same can be said with respect to the District Court’s emphasis on Mohney’s
deposition testimony, in which he acknowledged he was applying for life insurance. This
admission is consistent with his belief that life insurance was necessary to effectuate the
self-completion component of the savings plan. As set forth in his complaint, Mohney
alleged that “[t]he only mention of the word ‘insurance’ by the Defendant Forney in his
sales presentation to the Plaintiffs was in his representation that these ‘savings plans’
were sheltered by a death benefit, which would complete the plans should [their children]
die before reaching age 65. This insurance, however, was supposedly only an added
bonus to the ‘Retirement Plan.” Pl.’s Compl. ¶ 36. Thus, neither his awareness of
purchasing insurance nor the text of those policies were necessarily inconsistent with
Mohney’s reliance, or render it unjustifiable. Clearly, Mohney understood that insurance
was part of what he was being sold. Yet, the overwhelming focus in the sales
presentation on the savings component presents material issues of fact that are best left
for a jury to decide. Consequently, we will reverse the District Court’s grant of summary
judgment as to Mohney’s fraud and deceit claims.
would be used both to fund insurance coverage, and to set up an accumulation fund which
would earn dividends.” This is a questionable assumption. It is not self-evident that
consumers such as Mohney who are unfamiliar with finance would readily understand the
nature of premiums, accumulation funds, and dividends. This is especially true given the
arguably confusing sales materials that characterize insurance as “savings plans” and
“premiums” as monthly “deposits.”
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III.
Mohney further asserted claims under the Unfair Trade Practices and Consumer
Protection Law (“UTPCPL”), 73 Pa.Stat.Ann. §§ 201-1 et seq, which was enacted to
outlaw unfair or deceptive business practices. See Commonwealth v. Monumental
Props., Inc., 329 A.2d 812, 815 (Pa. 1974). In particular, Mohney argued that the
Defendants engaged in unfair or deceptive acts or practices by: 1) “causing likelihood of
confusion or of misunderstanding as to the source, sponsorship, approval or certification
of goods or services” (§ 201-2(4)(ii)); 2) “representing that goods or services have
sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do
not have . . . . ” (§ 201-2(4)(v)); 3) “representing that goods or services are of a particular
standard, quality or grade, or that goods are of a particular style or model, if they are of
another” (§ 201-2(4)(vii)); and, 4) “making solicitations for sales of goods or services
over the telephone without first clearly, affirmatively and expressly stating [the purpose
of the call and nature of the services” (§ 201-2(4)(xvii)).
The District Court first observed that “an insurer may be held liable under the
[UTPCPL] only if there are fraudulent misrepresentations in order to sell a policy.”
Aetna Cas. & Sur. Co. v. Ericksen, 903 F.Supp. 836, 841 (M.D. Pa. 1995) (citing Pekular
v. Eich, 513 A.2d 427, 433-34 (Pa. Super. 1986)). Therefore, Mohney was required to
prove the five elements of a misrepresentation claim. Having already determined that
Mohney’s reliance was unjustifiable, the District Court struck down these UTPCPL
9
claims. But in light of our discussion and decision above that there remain genuine issues
of material fact as to M ohney’s justifiable reliance, we will reverse the District Court with
respect to the UTPCPL claims, specifically § 201-2(4)(ii), (v), and (vii).
However, Mohney’s claim relying on § 201-2(4)(xvii) stands on a different
footing. Mohney claimed that the Defendants engaged in fraudulent conduct by violating
§ 201-2(4)(xvii), which sets out requirements for telephone solicitations. However, there
appears to be no evidence that the Mohneys were solicited by telephone. Indeed, it is
undisputed that Forney met with the Mohneys in person. Because we may affirm a
decision on grounds other than those relied upon by the District Court, we will affirm
summary judgment with respect to the § 201-2(4)(xvii).
IV.
Mohney also alleged that MetLife failed to adequately supervise its employee
Forney. The District Court reasoned that this claim of negligent supervision rested on an
underlying actionable misrepresentation. See Fisher v. Aetna Life Ins. & Annuity Co., 39
F.Supp.2d 508, 511 n.1 (M.D. Pa. 1998) (“If plaintiffs cannot show that any actionable
misrepresentations or omissions occurred, then any negligence by defendant in training or
supervising its agents is irrelevant.”) Having already concluded that Mohney did not
justifiably rely on Forney’s sales presentation, the Court held that there was no actionable
misrepresentation, and hence no viable claim of negligent supervision.
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Notwithstanding our holding that Mohney has created a genuine issue of material
fact as to his reliance, we will affirm the District Court on an alternative ground. A valid
negligent supervision claim in Pennsylvania law requires proof that an employee acted
outside of the scope of his employment. See Mullen v. Topper's Salon and Health Spa,
Inc., 99 F.Supp.2d 553, 556 (E.D.Pa. 2000). To the contrary, Mohney avers in his
complaint that Forney was “at all times relevant to this action, acting within the course
and scope of his agency and employment.” Pl.’s Compl. ¶ 4. Therefore, we will affirm
the District Court’s grant of summary judgment as to Mohney’s claim of negligent
supervision.
V.
We have considered the other challenges leveled by Mohney regarding the claims
he presented and conclude that summary judgment was appropriately entered against him
for the reasons set forth by the District Court. Therefore, we decline to disturb the
District Court’s ruling with respect to Mohney’s claims of breach of fiduciary duty,
collateral estoppel by virtue of the Pennsylvania Insurance Department’s findings, and
bad faith.
VI.
For the foregoing reasons, the District Court’s judgment will be affirmed in part
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and reversed in part. Given our disposition that Mohney’s justifiable reliance is a triable
issue of fact, we will reverse the District Court’s order with respect to the claims of fraud
and deceit and violations of UTPCPL, specifically, § 201-2(4)(ii), (v), and (vii), and
affirm with respect to the remainder of the issues in this appeal. Accordingly, we will
remand to the District Court for further proceedings consistent with this opinion.
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