Court Opinion

ID: 2675798
Source: CourtListenerOpinion
Date Created: 2014-05-27 18:00:15.211564+00
Date Added: 2024-06-11T12:38:16.096106
License: Public Domain

United States Court of Appeals
                        For the First Circuit

No. 13-2151

RICHARD FEINGOLD, individually and as a representative of a class
                  of similarly situated persons,

                        Plaintiff, Appellant,

                                  v.

           JOHN HANCOCK LIFE INSURANCE COMPANY (USA);
          JOHN HANCOCK LIFE & HEALTH INSURANCE COMPANY,

                        Defendants, Appellees.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

              [Hon. Joseph L. Tauro, U.S. District Judge]

                                Before

                          Lynch, Chief Judge,
                  Selya and Kayatta, Circuit Judges.

     Glenn L. Hara, with whom David M. Oppenheim, George K. Lang,
and Anderson + Wanca were on brief, for appellant.
     Edwin G. Schallert, with whom Susan R. Gittes, Debevoise &
Plimpton LLP, Myles W. McDonough, Ryan B. MacDonald, and Sloane and
Walsh LLP were on brief, for appellees.

                             May 27, 2014
             LYNCH, Chief Judge.      Richard Feingold sued John Hancock

Life Insurance Company and John Hancock Life & Health Insurance

Company (collectively, "Hancock") in a putative class action for

damages said to arise from Hancock's adherence to contractual terms

requiring that Hancock be given notice of the death of its insureds

before death benefits are paid out to beneficiaries. Specifically,

Hancock is said to have an obligation, stemming from a regulatory

agreement between Hancock and several states, to discover such

deaths and notify beneficiaries.        The district court dismissed the

complaint for failure to state a claim.         Feingold v. John Hancock

Life Ins. Co., Civ. No. 13-10185-JLT, 2013 WL 4495126, at *1 (D.

Mass. Aug. 19, 2013).

             On appeal, Feingold primarily argues that the agreement

Hancock   entered    with   several   state   governments   in   June   2011

regarding its handling of unclaimed insurance policy proceeds

imposed new obligations on Hancock as to beneficiaries of its

insureds under state law.      We disagree and so affirm.

                                      I.

A.           Facts

             We recite the facts as alleged in Feingold's complaint

and also consider documents that Feingold has attached to the

complaint.     Yacubian v. United States, ___ F.3d ___, 2014 WL
1688918, at *1 (1st Cir. Apr. 30, 2014); see Fed. R. Civ. P. 10(c).

                                      -2-
          In   approximately     1945,   Feingold's    mother,   Mollie

Feingold, purchased a life insurance policy from Hancock. Feingold

did not know that his mother had purchased this policy, which named

only his late father as a beneficiary.         She died on or about

December 19, 2006.

          Feingold first became aware that Hancock owed his mother

a different type of payment as a policyholder of a mutual insurance

company in late 2010, when he visited an Illinois Treasury website,

called "Cash Dash," listing unclaimed property.1       He was informed

that Hancock owed his mother $459 as a demutualization proceeds

dividend, which he received from Illinois in December 2011.           The

payment resulted from the demutualization of Hancock in 1999-2000.

Under Illinois law, if those funds had remained unclaimed, they

would be escheated to the state two years after the date of

demutualization.   765 Ill. Comp. Stat. 1025/3a(a)(1).

          In   January   2012,   Feingold   informed   Hancock   of   his

mother's death and requested a copy of her life insurance policy.

He said he wanted information regarding the unclaimed dividend

payment he had recovered and information as to whether any life

insurance proceeds were due.     Hancock initially told him that his

mother had not purchased a policy, but shortly thereafter Hancock

     1
       The Illinois State Treasurer renamed Illinois's "Cash Dash"
unclaimed property program to "I-Cash" in 2012. Melissa Hahn, News
Release,    Illinois    State    Treasurer    (July   9,    2012),
http://icash.illinois.gov/pdf/i-cash%20relaunch%20press%20release
%20final.pdf.

                                  -3-
said it had found his mother's policy.        Hancock sent Feingold the

forms he needed to make a death benefit claim but did not provide

any other information.

            After Feingold had completed and submitted Hancock's

forms, he continued to ask Hancock for a copy of his mother's

policy, including a written request for the policy.          On June 1,

2012, Hancock issued Feingold a check for $1,349.71 for death

benefits but did not provide a copy of Mollie Feingold's life

insurance policy.

B.          Global Resolution Agreement

            Several states conducted an audit of Hancock's handling

of "unclaimed property," which includes life insurance proceeds

that have not been claimed by beneficiaries.         These states have

unclaimed   property   laws   under   which   insurance   companies   are

sometimes required to report and remit unclaimed insurance proceeds

to the state.       The criteria governing if and when unclaimed

property must escheat to the state vary from state to state.          As a

result of this audit, Hancock entered into a Global Resolution

Agreement ("GRA") with Illinois and other states in June 2011 to

alter its procedures for handling unclaimed property.          Feingold

attached the GRA to the complaint.

            The express purpose of the GRA is to "set[] forth the

terms and conditions intended to resolve the on-going unclaimed

property audit" of Hancock that Verus Financial LLC was conducting

                                  -4-
on behalf of participating states.            Hancock entered the GRA to

resolve disputes about its obligations under participating states'

unclaimed property laws.       The GRA says that Hancock denies having

violated any of those laws.

            The GRA outlined a process for Hancock to make payments

to participating states based on the results of the unclaimed

property audit. Hancock also agreed to adjust some of its business

practices under the GRA. Neither Feingold nor the other members of

the putative class are parties or signatories to that agreement.

In response to Hancock's motion to dismiss, Feingold argued that

the GRA was the source of Hancock's liability.

C.          Procedural History

            Feingold filed the Class Action Complaint on January 30,

2013, alleging that Hancock owed Feingold and the putative class of

similarly situated beneficiaries damages based on its handling of

unclaimed   benefits   under    its    life    insurance   policies.   The

complaint asserted several causes of action, including conversion,

unjust enrichment, violation of consumer protection laws, and

breach of fiduciary duty.

            On February 26, 2013, Hancock moved to dismiss the

complaint under Fed. R. Civ. P. 12(b)(6).          Attached to the motion

was a copy of Mollie Feingold's application for a life insurance

policy, which Hancock had retained.           The application, dated March

                                      -5-
28, 1945, listed Jack Feingold, identified as Mollie Feingold's

husband, as the only beneficiary.

          Hancock also explained that it did not retain a copy of

Mollie Feingold's actual insurance policy because industry practice

in 1945 was to keep only "a copy of the policy form reflecting the

terms and conditions of the individual's coverage."   As a result,

Hancock attached what it believed to be a copy of Mollie Feingold's

applicable policy form to the motion to dismiss.

          In opposing the motion, Feingold explained that his

common law claims were based on duties Hancock had incurred under

the GRA, specifically the GRA's requirement that Hancock examine

the Social Security Administration's Death Master File ("DMF"), a

public database containing death notices. Feingold argued that had

Hancock examined the DMF as required under the GRA, it would have

learned that Mollie Feingold had died in 2006 and escheated the

unclaimed death benefit under her policy to the state of Illinois.

Although Feingold argued that a breach of the GRA supported his

claim for common law damages, the complaint did not assert a

separate breach-of-contract claim.

          The district court held a hearing on July 25, 2013 and

issued a memorandum and order granting Hancock's motion to dismiss

on August 19, 2013.    The court applied both Massachusetts and

Illinois law to Feingold's claims because it concluded that the

relevant laws of both states were the same and so it did not need

                               -6-
to resolve the choice of law issue.2            Feingold, 2013 WL 4495126, at

*2.

              The   district    court      rejected    Feingold's   theory    of

liability based on an alleged violation of the GRA, explaining that

the GRA was a contract only between Hancock and participating

states.       The district court concluded that Feingold could not

enforce a contract to which he was not a party and "nothing

suggests that [the parties to the contract] intended Feingold as a

third party beneficiary."           Id.

              The district court also considered the life insurance

policy form that Hancock said Mollie Feingold had likely purchased,

because Feingold did not dispute its authenticity and the policy

was central to his claims.          Id.; see Watterson v. Page, 987 F.2d 1,

3 (1st Cir. 1993) (explaining narrow exception in which district

court can consider documents outside of a complaint on a motion to

dismiss without converting the motion to one for summary judgment

if    their   authenticity     is    not   disputed,   they   are   central   to

plaintiffs' claims, or they are "sufficiently referred to in the

complaint"); Alt. Energy, Inc. v. St. Paul Fire & Marine Ins. Co.,

267 F.3d 30, 33 (1st Cir. 2001) (same).                The policy requires a

beneficiary to provide proof of the policyholder's death before

       2
        The district court said Hancock had argued that Illinois
law should control. Feingold's complaint, in contrast, treated
Massachusetts law as governing, but Feingold cited mostly Illinois
cases in opposing Hancock's motion to dismiss.   Feingold, 2013 WL
4495126, at *2.

                                          -7-
Hancock will pay the death benefit.             Feingold, 2013 WL 4495126, at

*2.

             The district court reasoned that Feingold had not stated

an unjust enrichment or conversion claim where Hancock's practice

of waiting for proof of death before paying policy proceeds was

consistent with both Illinois and Massachusetts law and complied

with the insurance contract.             See id. at *4.             The court also

dismissed    Feingold's       breach    of    fiduciary      duty    claim   because

Feingold had not alleged a relationship of trust or the sort of

reliance that made Hancock a plausible fiduciary. Id. This appeal

followed.3

                                        II.

             We review de novo a district court's dismissal of a

complaint under Fed. R. Civ. P. 12(b)(6), García-Catalán v. United

States,   734 F.3d 100,    102    (1st    Cir.    2013),       accepting   all

well-pleaded facts alleged in the complaint as true and drawing

reasonable inferences in Feingold's favor, Rodríguez-Reyes                        v.

Molina-Rodríguez,       711 F.3d 49,    52-53   (1st    Cir.    2013).     The

complaint "must contain sufficient factual matter to state a claim

to relief that is plausible on its face."                    Id. at 53 (quoting

Grajales v. P.R. Ports Auth., 682 F.3d 40, 44 (1st Cir. 2012))

(internal quotation marks omitted).               "Dismissal for failure to

      3
         Feingold does not appeal from the district court's
dismissal of his claims under consumer protection statutes or his
request for declaratory relief.

                                        -8-
state a claim is appropriate 'if the complaint does not set forth

factual allegations, either direct or inferential, respecting each

material      element      necessary    to        sustain    recovery    under     some

actionable legal theory.'"            Lemelson v. U.S. Bank Nat'l Ass'n, 721
F.3d 18,   21    (1st   Cir.   2013)      (quoting       United   States   ex   rel.

Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 384 (1st Cir.

2011)).

              We apply Illinois law, as the parties agree on appeal

that Illinois law governs Feingold's common law claims in this

diversity suit.       See Lluberes v. Uncommon Prods., LLC, 663 F.3d 6,

23 (1st Cir. 2011) (applying substantive law agreed upon by the

parties in diversity suit).

A.            Feingold Fails to State a Plausible Claim Based on an
              Alleged Breach of the GRA

              On appeal, Feingold challenges the district court's

refusal to consider the GRA in assessing the plausibility of his

claims for unjust enrichment, conversion, and breach of fiduciary

duty. He argues that Hancock breached the GRA and that this breach

makes his common law claims plausible because he is a third-party

beneficiary to the GRA.           He also argues, in the alternative, that

Hancock's breach of the GRA supports his common law claims even if

he is not a GRA third-party beneficiary.                      These arguments fail

because Feingold is not a third-party beneficiary to the GRA, and

so     Hancock     owes    Feingold    no    enforceable        duties   under     that

agreement.

                                            -9-
           It is undisputed that Feingold is not a party to the GRA,

a contract between Hancock and several state governments.             So,

under Illinois law, Feingold has authority to enforce the terms of

the GRA only if he is a third-party beneficiary of that contract.

Lake Cnty. Grading Co. v. Vill. of Antioch, 985 N.E.2d 638, 644

(Ill. App. Ct. 2013), appeal allowed, 996 N.E.2d 14 (Ill. 2013).

Under Illinois law, "[t]here is a strong presumption that the

parties to a contract intend that the contract's provisions apply

only to them, and not to third parties."           Id. (emphasis added)

(quoting Martis v. Grinnell Mut. Reins. Co., 905 N.E.2d 920, 924

(Ill. App. Ct. 2009)) (internal quotation marks omitted).            Only

explicit   language   in   the   contract   can   overcome   this   strong

presumption against third-party beneficiaries.           See id.      "The

contract language must show that the contract was made for the

direct, not merely incidental, benefit of the third party."          Id.

           Here, there is no such language in the GRA that could

overcome this strong presumption.     The GRA's express purpose is to

resolve disputes related to state governments' ongoing audit of

Hancock's handling of unclaimed property.         There is no indication

that the GRA was intended directly to benefit anyone other than the

signatory states negotiating Hancock's obligations with respect to

their unclaimed property programs.

           Feingold points only to Hancock's assertion in the GRA

that it has acted in its policyholders' best interest, as well as

                                   -10-
Hancock's obligation under the GRA to attempt to locate life

insurance beneficiaries before escheating unclaimed policy proceeds

to   a   state.    Otherwise,     Feingold       does   not    rely    on   contract

language, as required under Illinois law; rather, he says he is a

third-party beneficiary because the states' unclaimed property

programs at issue in the GRA are themselves intended to help

insurance policy beneficiaries, like himself, locate unclaimed

property.

             At most, Feingold is an incidental, as opposed to direct,

beneficiary of the GRA. This is particularly so given that the GRA

is a contract with state governments.                    The general contract

principle, espoused by the Restatement (Second) of Contracts and

recognized     under   Illinois    law,     is    that       beneficiaries    of   a

government     contract   are     "assumed       to     be    merely    incidental

beneficiaries, and may not enforce the contract absent clear intent

to the contrary."      Bergman v. Water Reclamation Dist. of Greater

Chi., 654 N.E.2d 606, 608 (Ill. App. Ct. 1995); accord Restatement

(Second) of Contracts § 313 (1981).                   This rule reflects that

"[g]overnment contracts often benefit the public, but individual

members of the public are treated as incidental beneficiaries

unless a different intention is manifested."                 Restatement (Second)

of Contracts § 313 cmt. a.          In other words, "[t]he distinction

between an intention to benefit a third party and an intention that

the third party should have the right to enforce that intention is

                                     -11-
emphasized where the promisee is a governmental entity." 8 Murray,

Corbin on Contracts § 45.6 (rev. ed. 2007).    So, as a matter of

law, Feingold is not a third-party beneficiary to the GRA.4

          Feingold cannot circumvent the strong presumption against

third-party beneficiaries in Illinois law and the Restatement by

recasting an alleged violation of the GRA as a common law claim.

Feingold has not pointed to any Illinois cases where a plaintiff

has asserted a claim of unjust enrichment, conversion, or breach of

fiduciary duty based solely on a contract that the plaintiff lacks

authority to enforce.5

          Hancock paid the death benefit to Feingold on June 1,

2012, shortly after it had received the proof of death that was

     4
       Feingold argues he must show only that it is plausible that
insurance policy beneficiaries are third-party beneficiaries of the
GRA on a motion to dismiss.      This argument misapprehends the
plausibility standard.      Whether Feingold is a third-party
beneficiary to the GRA is a question of law resolved by contract
interpretation -- even at this early stage in the proceedings.
Feingold does not point to any facts alleged in the complaint that
impact this legal question. See MacKenzie v. Flagstar Bank, FSB,
738 F.3d 486, 491-92 (1st Cir. 2013) (affirming Rule 12(b)(6)
dismissal of plaintiffs' complaint where, as a matter of law,
plaintiffs were not third-party beneficiaries to a government
contract they sought to enforce).
     5
        Feingold's reliance on Raintree Homes, Inc. v. Village of
Long Grove, 807 N.E.2d 439 (Ill. 2004), is misplaced. That case
addressed a different question of whether an action seeking
declaratory judgment and restitution was time-barred under
Illinois's Tort Immunity Act.     Id. at 447.   The case is also
distinguishable because the plaintiffs there alleged violations of
both statutory and constitutional law. Id. at 442. Unlike this
case, the Raintree Homes plaintiffs did not base their claim on an
alleged violation of a government contract.

                               -12-
required under Mollie Feingold's policy.6            That proof-of-death

notice requirement complies with Illinois law.            See 215 Ill. Comp.

Stat.    5/154.6(i)    (saying   insurer   commits   an    improper      claims

practice if it fails to affirm or deny coverage "after proof of

loss statements have been completed" (emphasis added)); Am. Country

Ins. Co. v. Bruhn, 682 N.E.2d 366, 370 (Ill. App. Ct. 1997) (saying

that insured's duty to provide insurer with notice of a claim is a

"reasonable requirement in an insurance policy").             It is also in

accord    with    Illinois's     unclaimed   property       statute,      which

acknowledges that life insurance proceeds are not payable without

proof of death.       See 765 Ill. Comp. Stat. 1025/3(b).

B.          Feingold's Other Arguments Are Waived             and   Do    Not
            Give Rise to a Claim under Illinois Law

            Feingold has made inconsistent arguments on appeal.

Perhaps recognizing that Feingold has no enforceable rights under

the GRA, Feingold's attorney attempted to change course at oral

argument and argued for the first time that Feingold had alleged a

violation of Illinois's unclaimed property statute, 765 Ill. Comp.

     6
       Feingold has not identified any source outside of the GRA,
whether it be a statute or common law, that requires Hancock
proactively to search public death records for policyholders' names
rather than wait for submission of proof of death in accordance
with its insurance policy provisions.
     On appeal, Hancock asserts that it was the first insurance
company to agree to consult the DMF in a regulatory agreement.
Hancock says that some states, but not Illinois, have enacted
statutes requiring insurance companies to search the DMF, but that
these statutes were passed after Hancock had already agreed to do
so in the GRA in June 2011.

                                    -13-
Stat. 1025/3, that was wholly independent of the GRA.          Illinois's

Unclaimed Property Act governs when insurance companies must remit

"unclaimed funds" to the state of Illinois. Id.          While the parties

offer different interpretations of the statute, we need not resolve

that question of Illinois law because Feingold's new argument does

not help him for at least two reasons.

           First, the argument, not raised in Feingold's initial

brief, is waived.   See United States v. Sacko, 247 F.3d 21, 24 (1st

Cir.   2001).    Second,   Feingold   asserts     that   Hancock   violated

Illinois's Unclaimed Property Act if it knew that Mollie Feingold

had died in 2006 but failed to escheat her policy proceeds to the

state.   Even assuming Feingold is correct that Hancock's knowledge

of Mollie Feingold's death would have triggered its duty to remit

policy proceeds to Illinois, the complaint does not allege that

Hancock had knowledge of Mollie Feingold's death.

           In addition, the payment of $459 was unrelated to any

death benefit under Mollie Feingold's insurance policy.            Feingold

acknowledges that the $459 amount constituted demutualization

proceeds from Hancock's conversion to a publicly-owned company in

1999 and 2000.      A different provision of Illinois's Unclaimed

Property Act required Hancock to escheat those funds if they

remained unclaimed for more than two years after the date of

demutualization.     765   Ill.   Comp.   Stat.   1025/3a(a)(1).       That

provision did not require Hancock to search the DMF as is required

                                  -14-
in the GRA.   Id.   Hancock's compliance with a different section of

the Unclaimed Property Act based on an event unrelated to Mollie

Feingold's death does not state a plausible violation of Illinois

law.

                                 III.

          For the reasons stated, we affirm.

                                 -15-