Taylor v. New York Life Insurance Company

Background

Louise and Phillip Taylor alleged that a 1988 home fire severely and permanently injured their son, Terrence Taylor. A later settlement provided Terrence with lifetime periodic payments funded through an annuity. The settlement agreement included an anti-assignment provision stating that the payments could not be sold, transferred, or otherwise assigned.

The Taylors alleged that, beginning in 2012, Terrence sold his periodic and life-contingent payments in ten factoring transactions. They alleged that New York Life Insurance Company (NYLIC) and New York Life Insurance and Annuity Corporation (NYLIAC) received notice of the transfer petitions, consented to the transactions, and received fees from factoring companies. They also alleged that NYLIC required Terrence to sign stipulations waiving the anti-assignment provision for two transfers. The total payments sold were alleged to be $11,000,000.

The complaint asserted breach of contract against NYLIAC, breach of implied contract against NYLIC, promissory estoppel, tortious interference with contract against NYLIC, and breach of fiduciary duty against NYLIC. The Taylors withdrew the promissory-estoppel claim, conceding that it was not cognizable under Virginia law.

Arguments and legal standard

The defendants’ pre-motion letter was treated as a motion to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The defendants argued that the Taylors lacked standing, that the claims were time barred, and that the complaint failed to state legally sufficient claims. The Taylors argued that they had standing, that their claims were timely, and that their allegations adequately stated the remaining claims.

Under Rule 12(b)(6), a complaint must contain enough factual matter to state a claim that is plausible on its face. The court accepted the complaint’s factual allegations as true for purposes of the motion but did not accept legal conclusions as true.

Breach of contract

The court applied Virginia law to the settlement agreement. It held that the agreement did not expressly require NYLIAC to oppose, investigate, or otherwise scrutinize Terrence’s attempted transfers. The anti-assignment provision did not impose those affirmative duties, even assuming the provision was intended to benefit the Taylors and Terrence rather than NYLIAC. The implied duty of good faith and fair dealing also could not be used to add obligations that the contract did not contain. The court therefore dismissed the breach-of-contract claim.

Breach of implied contract

The court applied New York law to the implied-contract claim. It explained that an implied contract cannot be used when an express agreement governs the subject matter. It also found that the complaint did not allege enough facts to show mutual assent or consideration between NYLIC and the Taylors. The court therefore dismissed the breach-of-implied-contract claim.

Breach of fiduciary duty

The court applied Virginia law to the fiduciary-duty claim. It held that the Taylors’ alleged confidence and trust in NYLIC, standing alone, did not establish a fiduciary relationship. The complaint did not allege that NYLIC provided advice and counsel in business matters involving the required degree of trust, and the relationship appeared to be defined by contract. The court therefore dismissed the breach-of-fiduciary-duty claim.

Tortious interference with contract

The court did not decide whether Virginia or West Virginia law governed this claim because the allegations were insufficient under either state’s law. Although the complaint alleged that NYLIC accepted administrative fees and required Terrence to sign stipulations waiving the anti-assignment provision, it did not provide enough concrete facts showing improper interference. Asking Terrence to sign a stipulation, even without a lawyer, was not by itself enough. The allegation that Terrence believed his signature might be forged appeared only in an equivocal footnote and lacked sufficient detail to support a plausible inference of improper conduct. The court therefore dismissed the tortious-interference claim.

Disposition

Judge Victor Marrero granted the defendants’ motion to dismiss under Rule 12(b)(6) and dismissed the complaint without prejudice. The court did not reach the defendants’ arguments concerning standing or the statute of limitations.