Court Opinion

ID: 9385849
Source: CourtListenerOpinion
Date Created: 2023-04-10 15:00:27.144758+00
Date Added: 2024-06-11T17:17:47.515141
License: Public Domain

22-1533-cv
Salaman Oberlander v. American General Life Insurance Co. et al.

                           UNITED STATES COURT OF APPEALS
                               FOR THE SECOND CIRCUIT

                                         SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST
CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.

        At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
10th day of April, two thousand twenty-three.

Present:
            DEBRA ANN LIVINGSTON,
                  Chief Judge,
            ROSEMARY S. POOLER,
            ROBERT D. SACK,
                  Circuit Judges.
_____________________________________

SALAMAN OBERLANDER, INDIVIDUALLY AND AS
TRUSTEE OF THE ADER I TRUST DATED DECEMBER
11, 2014,

                         Plaintiff-Appellant,

                 v.                                                          22-1533-cv

AMERICAN GENERAL LIFE INSURANCE COMPANY,
MARC FROHLICH AND FROHLICH FINANCIAL GROUP,
LLC,

                  Defendants-Appellees.
_____________________________________

For Plaintiff-Appellant:                                           Baruch S. Gottesman, Law Office of
                                                                   Baruch S. Gottesman, Esq., Fresh
                                                                   Meadows, NY
For Defendants-Appellees Marc Frohlich and                         Christina M. Rieker, Winget, Spadafora &
Frohlich Financial Group, LLC:                            Schwartzberg, LLP, New York, NY
For Defendant-Appellee American General Life              Andrew P. Fishkin & Zachary W.
Insurance Company:                                        Silverman, Fishkin Lucks LLP, New York,
                                                          NY

       Appeal from a judgment of the United States District Court for the Eastern District of New

York (Glasser, J.).

       UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is VACATED and REMANDED.

       Plaintiff-Appellant Salaman Oberlander, for himself and as trustee of the Ader I Trust dated

December 11, 2014 (the “Trust”), appeals from the June 17, 2022 judgment of the United States

District Court for the Eastern District of New York (Glasser, J.) dismissing his complaint against

Defendants-Appellees Marc Frohlich and Frohlich Financial Group, LLC (collectively, the

“Frohlich Defendants”) and American General Life Insurance Company (“AGLIC”).            On appeal,

Oberlander argues that the district court erred in (1) dismissing the complaint in its entirety for

failure to state a claim and (2) denying leave to amend his complaint.   For the following reasons,

we vacate the order and judgment below and remand for further proceedings.          We assume the

parties’ familiarity with the underlying facts, the procedural history of the case, and the issues on

appeal, which we reference here only as necessary to explain our decision.

                                          *      *       *

       We review de novo a district court’s dismissal under Federal Rule of Civil Procedure

12(b)(6). Cornelio v. Connecticut, 32 F.4th 160, 168 (2d Cir. 2022).        “We consider the legal

sufficiency of the complaint, taking its factual allegations to be true and drawing all reasonable

inferences in the plaintiff’s favor.” Harris v. Mills, 572 F.3d 66, 71 (2d Cir. 2009). “We review

a district court’s denial of leave to amend for abuse of discretion, unless the denial was based on

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an interpretation of law, such as futility, in which case we review the legal conclusion de novo.”

Empire Merchs., LLC v. Reliable Churchill LLLP, 902 F.3d 132, 139 (2d Cir. 2018) (citation

omitted).

       The proceedings here arise from a dispute regarding a life insurance policy (the “Policy”)

issued on March 5, 2015, by AGLIC to Oberlander’s mother, Pearl Oberlander, for $15,000,000

with a monthly premium of $87,346.45.         The Policy was in effect until it lapsed for non-payment

on August 8, 2016.    On September 23, 2019, Oberlander filed suit in the Supreme Court of the

State of New York asserting several causes of action including fraud, breach of contract, breach

of fiduciary duty, and negligence, and alleging that the Frohlich Defendants, acting as AGLIC’s

agents, induced Oberlander to procure the Policy on behalf of his mother by fraudulently promising

to obtain third-party financing that would cover all “out-of-pocket” costs associated with the

monthly premium payments.       After removing the case to federal court, the Frohlich Defendants

and AGLIC each moved to dismiss the complaint pursuant to Rule 12(b)(6) on several independent

grounds.

       The district court granted the motions and dismissed the complaint in full.     In its opinion,

the court stated that, although the complaint “suffers from a host of defects,” the court “need not

delve into a detailed analysis of each claim because they all suffer from the same problem:

[Oberlander and the Trust] have not alleged that they suffered any damages.”          App’x 316–17.

The district court’s explanation was brief.     Noting that Oberlander and the Trust “had the choice

to not accept the insurance policy” after “third-party financing was not arranged in March 2015,”

the court reasoned that:

       [Oberlander and the Trust] voluntarily continued to choose to pay the policy
       premiums. By doing so, they received a benefit in the form of insurance coverage.
       Much like a disgruntled diner who seeks a full refund after finishing his meal

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       because the soup was cold, [Oberlander and the Trust] are seeking to recover after
       the fact the cost of the benefit they voluntarily chose to accept.

Id. at 317.    Asserting that “the law does not recognize as damages the money a plaintiff

voluntarily chooses to pay in exchange for a benefit that is received as promised,” the district court

concluded that the complaint failed to allege cognizable damages under New York law.          Id.

       But, as Oberlander argues on appeal, this conclusion rested on a mischaracterization of the

complaint and the damages sought therein.      Contrary to the district court’s characterization, the

complaint does not allege that Oberlander and the Trust received the “benefit . . . as promised”

from the appellees. Id. Rather, the complaint alleges that the Frohlich Defendants breached

their agreement to procure third-party funding that would have ensured that neither Oberlander

nor the Trust would need to pay “out of their pocket” for the Policy’s monthly premium.        App’x

21.   Because the Frohlich Defendants failed to deliver on the agreement to obtain such financing,

Oberlander had to seek out other, less favorable—and ultimately non-viable—sources of premium

funding, subjecting him to liability for those loans and other damages.     As these liabilities were

“caused by and are directly traceable to” the Frohlich Defendants’ alleged breach, they constitute

cognizable damages under New York law for those claims sounding in contract.        Bausch & Lomb,

Inc. v. Bressler, 977 F.2d 720, 731 (2d Cir. 1992) (internal quotation marks omitted).

       Additionally, Oberlander alleges that neither he nor the Trust would have paid the monthly

premiums but for the Frohlich Defendants’ misrepresentation that the premium funding would be

procured, implying that the benefit associated with the Policy was not sufficient to justify its cost

absent the promised funding arrangement.          This difference in value, if proved, represents

recoverable “pecuniary loss” under New York law for the claims sounding in fraud. Cont’l Cas.

                                                  4
Co. v. PricewaterhouseCoopers, LLP, 15 N.Y.3d 264, 271 (2010). 1           The district court discounted

these allegations by assuming that by the time Oberlander paid the monthly premiums it was

already clear that the promised funding would not materialize.          But the fact that the allegedly

promised funding had not yet been arranged when Oberlander paid the premiums does not imply

that he knew that no such funding was forthcoming; to the contrary, the complaint specifically

alleges that Oberlander borrowed the funds in reliance on the Frohlich Defendant’s

representations, suggesting that the loans were obtained to cover the premium on a temporary basis

before the promised premium funding was delivered.           On a motion to dismiss we must “draw[]

all reasonable inferences in the plaintiff’s favor.”      Harris, 572 F.3d at 71.      Accordingly, the

district court’s assumption that Oberlander did not act in reliance on the alleged misrepresentations

in obtaining the alternative funding was erroneous.

        Beyond the issue of damages, the Frohlich Defendants and AGLIC raise several alternative

independent grounds for dismissing each of Oberlander’s causes of action, noting in particular that

the district court indicated its view that the complaint “suffers from a host of fatal defects,”

including “a failure to satisfy Fed. R. Civ. P. 9(b), a failure to allege reasonable reliance or any

common law or fiduciary duty, and being barred by the statute of frauds and the statute of

limitations.” App’x 316 & n. 2.       But the district court did not explain its conclusions with regard

to any of these alternative grounds. And though we may affirm dismissal on any theory supported

by the record, “it is our distinctly preferred practice to remand such issues for consideration by the

district court in the first instance.”   Schonfeld v. Hilliard, 218 F.3d 164, 184 (2d Cir. 2000).

“This is particularly appropriate when, as here, such theories have been briefed and argued only

1
  A separate issue is whether the measure of such damages is too speculative to support a cause of action.
See Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 279 (2d Cir. 1992). But because neither
the Frohlich Defendants nor AGLIC raised this issue below, we do not consider it here.

                                                    5
cursorily in this Court.”   Id.   We therefore vacate and remand to allow the district court to

address these and any other appropriate alternative grounds for dismissal in the first instance.

Finally, because we vacate and remand the district court’s judgment, we do not reach the issue of

whether the court abused its discretion in denying Oberlander leave to amend the complaint.

                                            *       *      *

       Accordingly, the judgment of the district court is VACATED, and the case is

REMANDED for further proceedings consistent with this order.

       .

                                                        FOR THE COURT:
                                                        Catherine O’Hagan Wolfe, Clerk of Court

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