Summary
describing the history of the litigation
Summary of this case from Beavers v. Metropolitan Life Ins. Co.Opinion
111355/98.
Decided November 23, 2005.
Defendant Metropolitan Life Insurance Company (MetLife) moves for summary judgment dismissing plaintiffs' two remaining causes of action, for breach of contract and for violation of General Business Law (GBL) § 349.
This is a class action brought by holders of participating ordinary life insurance policies issued by MetLife prior to 1982 that were in force during the period June 24, 1992 to April 4, 2000, with a subclass of policyholders whose policy was in force from June 24, 1995 to April 4, 2000 who resided in New York (GBL § 349 subclass).
Generally, plaintiffs claim that, as participating policyholders, they were entitled, under their policies, to a distribution of "surplus," in the form of dividends. Surplus is defined as excess premiums paid by participating policyholders, and investment earnings on those premiums (minus expenses and required reserves). Amended Complaint ¶¶ 11-43. Plaintiffs assert that MetLife breached their contracts of insurance by undisclosed manipulation of the surplus, through its allocation of investment return among its various lines of business. This manipulation, plaintiffs assert, resulted in an unfair and inequitable dividend allocation to the plaintiff policyholders which did not reflect the actual earnings potential of the amounts they contributed to the surplus. They claim that MetLife siphoned off assets and earnings to shore up less profitable lines of insurance.
Plaintiffs' claim under GBL § 349 asserts that MetLife engaged in deceptive acts in manipulating the surplus from their policies and allocating it to other lines of business, and specifically deceived them by omitting in their annual dividend statements any indication that there was a reallocation of the surplus.
MetLife now moves for summary judgment, submitting expert affidavits, and documentary evidence, and arguing that it can prove, as a matter of law, that its actions did not breach its contract with plaintiff policyholders, nor were they deceptive in violation of GBL § 349. MetLife also contends that, based on the evidence, all claims are time-barred.
Plaintiffs, in turn, submit their own expert affidavits, opining that MetLife's actions did not comply with generally accepted actuarial standards for the determination of dividends for these policyholders. They also submit documents from MetLife executives, in which, plaintiffs claim, the executives state that there was an unfair and inequitable transfer of earnings and investment income from the ordinary life line of business to other lines of business, thereby reducing dividends refunded to plaintiffs.
BACKGROUND
The following are the undisputed facts gleaned from the parties' Rule 19-a Statements and other evidence submitted.
Plaintiff Joyce Rabouin has been the owner of a participating ordinary life insurance policy issued by MetLife, since 1980. Amended Complaint ¶ 1, Exhibit 4 to Affirmation of Douglas W. Dunham in Support. Plaintiff Mark Quiello has been the owner of such a MetLife policy since 1972, and is a resident of New York. Intervenor's Complaint ¶ 1, Exhibit 5 to Dunham Affirm.
At all relevant times, MetLife was a mutual life insurance company, which type of company is operated solely for the benefit of its policyholders. Defendant's Rule 19-a Statement ¶ 1; Affidavit of Daniel J. McCarthy, dated April 20, 2005, ¶ 4. A mutual insurance company's surplus, which is the excess of the assets over liabilities, is held for the benefit of policyholders. Defendant's Rule 19-a Statement ¶ 2; McCarthy Aff. ¶ 4. The surplus arises from premiums paid by policyholders, increased by investment return earned by the company on those premiums. Defendant's Rule 19-a Statement ¶ 3; McCarthy Aff. ¶ 5. "Divisible" surplus is the amount of surplus that is in excess of the mutual life insurer's safety and business needs. Defendant's Rule 19-a Statement ¶¶ 6-8; McCarthy Aff. ¶¶ 8-9; see also Plaintiffs' Response to MetLife's Statement of Undisputed Facts (Plaintiffs' Response) ¶ 6.
MetLife's board of directors each year determines the amount of surplus that is "divisible." The "divisible" surplus is returned to the policyholders in the form of dividends. Defendant's Rule 19-a Statement ¶ 6; McCarthy Aff. ¶ 8; Plaintiffs' Response ¶ 6. Dividends constitute a return to the policyholders of the portion of their premiums that — in retrospect — was not necessary to cover the obligations that the insurer has in relation to their policies. Defendant's Rule 19-a Statement ¶ 14; McCarthy Aff. ¶ 26; Plaintiffs' Response ¶ 14.
The dividends which classes of policyholders receive are calculated using actuarial standards of practice that apply the Contribution Principle, i.e. the classes of policyholders receive dividends in proportion to their contribution to the company's aggregate divisible surplus. Defendant's Rule 19-a Statement ¶¶ 8-9; McCarthy Aff. ¶¶ 9-10; Plaintiffs' Response ¶¶ 6-8. Actuarial Standard of Practice No. 15, promulgated by the Actuarial Standards Board, establishes that the Contribution Principle is a generally accepted practice for the distribution of dividends among individual life insurance policyholders. Defendant's Rule 19-a Statement ¶ 9; McCarthy Aff. ¶ 10.
The JV-80 Investments
From 1979 through 1984, MetLife made numerous equity investments in commercial real estate through a number of joint ventures, referred to as the JV-80 investments, in which MetLife also provided financing. Affidavit of Michael Madison, dated April 20, 2005, ¶ 8; Defendant's Rule 19-a Statement ¶ 36. It entered into these investments with real estate developers. Madison Aff. ¶ 9. The developer partner generally owned or controlled the land, and often controlled real estate management and leasing companies, which would provide services once construction of a commercial building on the land was complete. Id. In these transactions, MetLife issued mortgages to the joint ventures, and took an equity position in each venture. See Deposition of Joseph Dunn, annexed as Exhibit 9 to Affirmation of Douglas W. Dunham, at 307. The joint venture partner typically had an equity interest in the property, and was responsible for making mortgage payments in proportion to its equity interest in the property. Defendant's Rule 19-a Statement ¶¶ 36-39, 41.
The mortgages issued to the JV-80 investments were fixed rate mortgages, typically with a 15-year duration. The mortgages had "black out" provisions specifying that they could not be prepaid for a number of years; the "black out" provisions typically ended one or two years before maturity. At the end of the "black out" period, the mortgages could be prepaid but with substantial prepayment fees. Id. ¶ 43; Madison Aff. ¶ 11.
The Allocation of Income from the JV-80 Investments and Mortgages
MetLife allocated income from the assets in its general account among its lines of business. Where an insurance company has several lines of business (e.g., Personal Insurance, Pensions, etc), income and expense items are each attributed to a line a business. Defendant's Rule 19-a Statement ¶¶ 48-49. Thus, premiums generated by a line of business, and claims made under policies issued by a line of business, are attributed to that line of business. Id. ¶ 49; McCarthy Aff. ¶ 17. Investment income, expenses, and income taxes are also allocated by the insurance company among its lines of business. Defendant's Rule 19-a Statement ¶ 50.
The mortgage loans and joint venture equity interests in the JV-80 investments were all owned by MetLife's general account. Id. ¶ 51; see Deposition of Stephen E. White, annexed as Exhibit 11 to Affirmation of Douglas W. Dunham, at 40-41, 333, 340-41. MetLife allocated the income from these JV-80 investments among its various lines of business so that most of the equity was allocated to the Personal Insurance line of business, and most of the mortgages were allocated to the Pensions line of business. Dunn Dep. at 309-10.
In 1979, MetLife received approval from the Insurance Department to exclude the Group Pensions line of business from investment in real estate equity and common stocks. McCarthy Aff. ¶ 36 (a) and Exhibit 8 annexed thereto; Dunn Dep. at 307-08. By doing this, other lines of business, such as Personal Insurance, received a proportionately larger allocation of such investment return than that of other investment classes (e.g., mortgages and bonds) for which the Pensions line of business was included in the allocation. Defendant's Rule 19-a Statement ¶ 57; McCarthy Aff. ¶ 36.
In the years immediately following 1979, when doing its annual allocation of income from newly acquired assets, MetLife first allocated the return from real estate equity to the lines that participated in that investment such as Personal Insurance. Defendant's Rule 19-a Statement ¶ 58 and Plaintiff's Response ¶ 58. After the income from equities was allocated, MetLife then allocated the return from the assets that could be allocated to all lines of business, such as mortgages. Id. ¶ 59; see Deposition of John Au, annexed as Exhibit 7 to Dunham Affirm, at 116-127.
With respect to the JV-80 properties, the income from the real estate equity and the income from the mortgages were not allocated proportionately among MetLife's lines of business. Defendant's Rule 19-a Statement ¶¶ 60-61; Plaintiffs' Response ¶ 60. Personal Insurance received a smaller proportion of the income from mortgages, than it received from the equity investments which were not allocable to Pensions. Defendant's Rule 19-a Statement ¶ 59; Au Dep. at 116-120. Changes in earnings allocated to a line of business affects the dividends paid to that line of business. White Dep. at 205-06; Plaintiffs' Exhibits 67, 102.
During the 1979-1984 period, when MetLife made the JV-80 investments, average long-term mortgage rates ranged between 10.3 percent and 14.4 percent, per annum. Madison Aff. ¶ 17. During the 1985-1992 period, mortgage rates declined to between 9.0 percent and 11.8 percent per annum. Id. The Economic Downturn in Early 1990s Results in Restructuring of Certain JV-80 Properties
In the late 1980s, the economy and the commercial real estate markets experienced a severe downturn, which led to the 1990-91 recession and a sharp decline in long-term mortgage rates to approximately 9.7 percent per annum by 1990. Id. ¶ 76; Plaintiffs' Response ¶ 76. Office vacancy rates increased, rents decreased, and the value of office buildings such as the JV-80 properties significantly decreased. Id. ¶ 77; Madison Aff. ¶ 22. The equity portion of the JV-80 investments was losing operating income because of decreasing rents, and the drag on operating income caused by the high interest rates being paid on the JV-80 mortgages. Defendant's Rule 19-a Statement ¶ 80. Some of the developer/partners on these JV-80 properties left the ventures (either by buyout or default) because of the downturn, although some had left at earlier dates, with the result that MetLife became the sole owner of a number of these properties. Id. ¶ 81; Plaintiffs' Response ¶ 81.
In 1991, MetLife officials became seriously concerned about the state of the JV-80 properties, because of their effect on the earnings of the Personal Insurance line. Id. ¶ 83. In May 1991, Stephen White, a MetLife Vice-President and Actuary, wrote to MetLife Executive Vice-President, Robert Crimmins, regarding one of the JV-80 Properties, the First Interstate Bank property. He stated that the allocation of its return by line of business is "troubling," and that the "unusual allocation" was the result of "the equity and mortgage being allocated to the lines of business in different proportions." Plaintiffs' Deposition Exhibit 2; see also Plaintiffs' Deposition Exhibits 65. Mr. White also stated that, as of 1990, Personal Insurance would suffer a $100 million loss, while the other lines of business would see a $174 million gain with respect to this property. Plaintiffs' Deposition Exhibits 2. Mr. White went on to state that there were 94 such properties "which will result in the transfer of $164 million of investment income from [Personal Insurance] to other lines of business." Id.; see also Plaintiffs' Deposition Exhibit 16, at p. 21; Plaintiffs' Deposition Exhibit 171, at 743 (MP2455019070-MP2455019082); Plaintiffs' Deposition Exhibit 94.
At a Chairman's Planning Board Meeting, on July 1, 1991, MetLife executives discussed income allocation issues regarding the JV-80 joint ventures. They determined that no retroactive adjustment to the original income allocation method would be made, but that the allocation method for such ventures in the future would require a "special focus." Plaintiffs' Deposition Exhibits 66.
For two years from June 1991 through June 1993, extensive discussions were held between representatives of the Personal Insurance and Pensions lines of business, and among officers within various departments, and senior management about the JV-80 properties. Defendant's Rule 19-a Statement ¶ 85. The internal discussions covered various topics, including the investment allocation mechanisms which resulted in the disproportionate allocation of income from the joint ventures between lines of business, the economic impact of that disproportionate allocation, proposals to deal with it, consideration of the tax and regulatory impacts of the proposed options, and whether the options were available in the marketplace in arm's length transactions. Id. ¶ 86.
In 1992, MetLife decided to pay off the mortgages on 22 of the JV-80 properties where the joint venture partner had abandoned its investment or was otherwise no longer involved in the investment. Id. ¶ 87. In 1993, MetLife reversed this solution, and instead implemented an approach approved by its Corporate Management Office (the CMO Resolution).
Under the CMO Resolution, MetLife retroactively reversed the mortgage pay-offs on the JV-80 properties which it wholly owned (about 40 properties out of 73 total), discharged Personal Insurance's mortgage obligations, and converted mortgage income interests in the properties into equity income interests. Id. ¶¶ 90-91; see Plaintiffs' Deposition Exhibit 167 at p. 680-81. This resolution created the rebuttable presumption that all joint venture transactions would be restructured where MetLife had become the sole owner of the joint venture property. Defendant's Rule 19-a Statement ¶ 93; Plaintiffs' Response ¶ 93. The 33 properties where the developer/partner remained in the joint venture were not restructured effective January 1, 1993, although some of them were refinanced after the "blackout" period ended. Id. ¶ 96. This CMO Resolution was prospective. See Plaintiffs' Deposition Exhibit 66.
The Pleadings and Prior Proceedings
On June 24, 1998, plaintiff Rabouin commenced this action, asserting claims for breach of contract, breach of fiduciary duty, unfair trade practices under GBL § 349, and an accounting. By decision dated November 9, 1999, this Court dismissed the claims for breach of fiduciary duty and an accounting on the ground that there is no fiduciary relationship between plaintiffs and MetLife. Rabouin v. Metropolitan Life Ins. Co., 182 Misc 2d 632, 634-35 (Sup Ct, NY County 1999), affd 282 AD2d 381 (1st Dept 2001). The third cause of action for violation of GBL § 349 was dismissed because of the expiration of the three-year statute of limitations. CPLR 214 (2). This Court found that all of the acts complained of occurred more than three years prior to the commencement of the action. Id. at 636. With respect to the breach of contract claim, this Court held that the claim was limited by the six-year statute of limitations, measured from the date of the breach, regardless of when the damage is felt. Id. at 638; CPLR 213 (2). The complaint, not yet certified as a class action, only complained of acts from 1989 until the end of 1992. Therefore, this Court held that plaintiff Rabouin could only recover for damages caused by MetLife's acts between June 24, 1992 and December 1992. Plaintiff's argument that this action was an example of continuing contractual breaches was rejected. This Court found that the acts complained of occurred during a discrete period of time, and that it was irrelevant for statute of limitations purposes that plaintiff may continue to be damaged as a result of those acts. Id. at 639. On the merits of that breach of contract claim, while specifically noting its much more limited function on a motion to dismiss under CPLR 3211, the court found that plaintiff had stated a claim, and that the business judgment rule, and the rule of the case Rhine v. New York Life Ins. Co. ( 273 NY 1, 6), did not require a finding that MetLife's alleged redistribution of assets and surplus was prima facie equitable. Rabouin v. Metropolitan Life Ins. Co., supra at 638. The decision was affirmed by the Appellate Division, First Department for the reasons stated by this Court. 282 AD2d 381.
The Amended Complaint:
On December 5, 2000, plaintiffs filed an Amended and Supplemental Class Action Complaint (the Amended Complaint). In the Amended Complaint, plaintiff Rabouin sought to assert identical claims for breach of contract; fraudulent conveyance; violation of GBL § 349; failure to disclose; fraud; money had and received; and breach of fiduciary duty Amended Complaint, Exhibit 4 to Dunham Aff. The breach of fiduciary duty claim was dismissed based on the prior decision. Rabouin v. Metropolitan Life Ins. Co., NYLJ, Jan. 17, 2002, at 21, col 1, affd 307 AD2d 843 (1st Dept 2003). The fraudulent conveyance, fraud and failure to disclose claims were dismissed in part because plaintiff failed to state any damages, beyond those recoverable in the contract claim. Id. The claims for money had and received, unjust enrichment, and constructive trust were also dismissed. As to MetLife's statute of limitations defense and plaintiff's claim of equitable tolling, the Court rejected any equitable estoppel, and held that the breach of contract claim was limited by the applicable statute of limitations to the period from June 24, 1992 through December 1992. Id. The GBL § 349 claim was held "entirely time-barred."
This decision was affirmed, as modified, by the First Department. Rabouin v. Metropolitan Life Ins. Co., 307 AD2d 843 (1st Dept 2003). The Appellate Division modified only to grant MetLife's motion to the further extent of dismissing the GBL § 349 claim in which plaintiff Rabouin, "in her individual capacity, alleges a particular, fact-specific violation of GBL § 349, since plaintiff is concededly without standing [as a Massachusetts resident] to assert a GBL § 349 claim." Id. at 844, citing Goshen v. Mutual Life Ins. Co., 98 NY2d 314 (2002).
The "Intervenor Complaint":
On October 7, 2003, plaintiff Mark Quiello, a New York resident, brought an intervenor complaint, asserting claims for breach of contract, fraudulent conveyances, violation of GBL § 349, failure to disclose, fraud, money had and received, and breach of fiduciary duty (the Intervenor Complaint). This complaint contains the same material factual allegations as the Amended Complaint.
In 2004, plaintiffs moved for class certification. By decision entered November 22, 2004, this Court granted the motion, certifying two classes: a breach of contract class for pre-1982 participating ordinary life insurance policyholders whose policy was in force from June 24, 1992 to April 4, 2000; and a GBL § 349 subclass for pre-1982 policyholders whose policy was in effect from June 24, 1995 to April 4, 2000 and who resided in New York.
The Parties' Arguments
MetLife's Arguments:
MetLife now moves for summary judgment on a number of grounds.
First it argues that, under the business judgment rule, its decisions regarding dividends, surplus, and allocations of income from assets are presumed prima facie equitable, and are protected from judicial scrutiny. It asserts that it was appropriately exercising its business judgment when, in the early 1980s, it invested in the JV-80 ventures, and made the allocations of which plaintiffs are complaining.
It shows that its investment income allocation plan was approved by the Department of Insurance. It claims that, after the severe downturn in the real estate market in the late 1980s and early 1990s, and after certain JV-80 investments began to perform poorly, it again exercised its business judgment and reviewed the effect of these investments, and their allocations, on Personal Insurance, and then undertook a restructuring of investments. In all, MetLife urges that the undisputed facts do not allow any finding by this court that it manipulated the income allocated to Personal Insurance, and fail to provide a basis for an exception to the business judgment rule.
MetLife also contends that, as a matter of law, plaintiffs cannot show any violation of the insurance laws and regulations that would constitute a breach of their insurance contract, or would justify an exception to the business judgment rule. It urges that, the dividends awarded to plaintiffs fully complied with the Contribution Principle.
On the issue of damages, MetLife argues that plaintiffs cannot establish that a different allocation of income from the investments and mortgages would have resulted in higher dividends, and thus plaintiffs will not be able to prove any damages.
MetLife further urges that plaintiffs' breach of contract claims are barred by the statute of limitations, because they can show no conduct by MetLife after June 24, 1992, six years before this action was commenced, that could constitute an independent breach of the policies.
As to the GBL § 349 claim, MetLife asserts that plaintiff Quiello cannot establish the essential elements of the claim, and that the claim is time-barred.
Plaintiffs' Response:
In response, plaintiffs dispute that the business judgment rule insulates MetLife from a breach of contract claim. They argue that the rule does not relieve MetLife of its obligation under the policies simply because its managers held the honest belief that their actions were in the best interest of the corporation. Plaintiffs claim that MetLife has admitted in various memos and documents produced in discovery that it transferred earnings between their lines of business.
Plaintiffs next contend that these shifts and transfers reduced dividends. They submit the affidavit of their expert, Mel Gold, to support the contention that it makes a difference which line of business is credited with the surplus, because the transfer of earnings to another line removes those earnings from Personal Insurance's contribution to divisible surplus and thereby reduces dividends to Personal Insurance policyholders. Affidavit of Mel Gold ¶¶ 6, 8. They assert that MetLife used high interest loans (the JV-80 mortgages), which had high risk-based interest rates, even though there was a zero risk of default because MetLife was on both sides of the transaction. Plaintiffs assert that it is a triable issue whether it was reasonable for MetLife to make disproportionate and inequitable allocations of the debt and equity on the JV-80 projects.
Plaintiffs further contend that while MetLife's expert opines that it was following the Contribution Principle, their expert opines to the contrary, raising another triable issue. Gold Aff. ¶¶ 6-7.
Finally, plaintiffs assert that there is a triable issue as to whether this transfer damaged them. They maintain that while MetLife's expert opines that they were not damaged, their actuarial expert opines that the transfer of earnings distorted plaintiffs' contribution to surplus reducing the dividends refunded to them. Affidavit of Timothy J. Allen, dated August 19, 2005.
As to the statute of limitations on their breach of contract claim, plaintiffs argue that each February when MetLife declared the annual dividends to refund to the pre-1982 policyholders, it breached those policies by depriving them of the amount reflective of the actual earnings potential of the amounts these policies contributed to the surplus.
On the GBL § 349 claim, plaintiffs contend that there is a triable issue as to whether the omissions from the annual dividend statement were misleading. They assert that the statute of limitations on this claim in the Intervenor Complaint was tolled because the claim was included in the original June 24, 1998 complaint, and therefore, MetLife had notice of the claim.
DISCUSSION
The motion for summary judgment is granted, and the complaint is dismissed.
First, the breach of contract claim is dismissed on statute of limitations grounds. The plaintiffs have been certified as a class, which could include non-residents of New York on the breach of contract claim. Under New York's borrowing statute, CPLR 202, the cause of action must be timely under the limitations periods of both New York and the jurisdiction where the cause of action accrued. Global Fin. Corp. v. Triarc Corp., 93 NY2d 525, 528 (1999). As this Court found on the class certification motion, this would require application of periods shorter than New York's in about 30% of the cases. Nevertheless, the class must, at least, be timely under New York's statute of limitations.
The New York statute of limitations on a contract claim is six years. CPLR 213 (2). Generally, the statute of limitations begins to run when a cause of action accrues. Ely-Cruikshank Co. v. Bank of Montreal, 81 NY2d 399, 402 (1993). A contract claim accrues at the time of the breach. Id. The six years runs from the date of the breach, regardless of when the damage is suffered. Id.; see also Welwart v. Dataware Electronics Corp., 277 AD2d 372, 373 (2d Dept 2000). It "begins to run from the time when liability for wrong has arisen even though the injured party may be ignorant of the existence of the wrong or injury." Ely-Cruikshank Co. v. Bank of Montreal, 81 NY2d at 403 (quotation and citation omitted). Knowledge of the wrong is not necessary to start the limitations period running in a contract action. Id.
The original complaint in this action was interposed on June 24, 1998. Therefore, plaintiffs must demonstrate acts in breach of their contracts occurring within six years prior thereto, that is, from June 24, 1992 forward.
Upon review of the Amended and Intervenor Complaints, and the documents and affidavits submitted on this summary judgment motion, it is clear that the breach asserted by plaintiffs is the manipulation of the surplus through the allocation of certain real estate equity investments to the Personal Insurance line of business, and of the real estate mortgages to the Pensions line of business. Discovery has narrowed this down further to the particular real estate investments known as the JV-80 ventures. The acts of MetLife regarding these JV-80 investments and the allocation of income therefrom, all occurred from 1979 through, at the latest, the mid to late 1980s. That is the time period in which MetLife engaged in these real estate ventures, and made the allocations of which plaintiffs complain. All of the purported damages claimed by plaintiffs flow from this conduct. As this Court has previously held, claims based on conduct by MetLife that occurred prior to June 1992 are time-barred, and this holding has been affirmed. Rabouin v. Metropolitan Life Ins. Co., 182 Misc 2d at 638-39, affd 282 AD2d 381; Rabouin v. Metropolitan Life Ins. Co., NYLJ, Jan. 17, 2002, at 21, col 1, affd 307 AD2d 843.
There is nothing in the pleadings, documents, or deposition testimony which reveals acts by MetLife in breach of the contracts occurring post June 24, 1992. The only acts which occurred in 1992, evidenced by internal MetLife memos, are MetLife's recognition that there was an inequitable allocation between Personal Insurance and other lines of business, and its consideration of options to change the allocation. MetLife's 1993 restructuring of the JV-80 ventures, again, was not the breach, but was a change in the original allocations. The fact that some of the original allocations remained after the restructuring was not a new breach which would extend the statute of limitations.
Plaintiffs seek to avoid the statute of limitations by urging that MetLife breached the contract each February when it determined the dividend to be refunded to each participating pre-1982 policyholder. This is merely another attempt to claim that this action is an example of continuing contractual breaches, which theory has already been rejected by this Court. Rabouin v. Metropolitan Life Ins. Co., 182 Misc 2d at 638-39, affd 282 AD2d 381. Again, the acts of which plaintiffs complain, the allocations of income, occurred within a discrete period of time, and the fact that plaintiffs may continue to suffer damages as a result of those acts is not relevant to the statute of limitations determination. See Ely-Cruikshank Co. v. Bank of Montreal, supra, 81 NY2d at 402-03; Amirthmasebi v. Benyamini, 306 AD2d 363 (2d Dept 2003) (subsequent diversions of profit do not extend statute of limitations on contract claim); Welwart v. Dataware Electronics Corp., supra (rejecting plaintiff's contention that claim for breach of contract alleging diversion of profits accrued each time profits were diverted).
Similarly, plaintiffs' claims that MetLife continued to siphon funds from Personal Insurance to Pensions through the JV-80 mortgage payments, and that it reduced dividends in 1992, again, are merely attempts to convert further alleged damages which stem from the original allocations, into breaches of contract. Accordingly, plaintiffs' breach of contract claim is founded on conduct occurring before June 1992, and is time-barred.
Similarly, plaintiffs' GBL § 349 claim is time-barred. A claim under GBL § 349 is to recover upon a liability created or imposed by statute (CPLR 214) and, thus, it is governed by the three-year statute of limitations in CPLR 214 (2). Gaidon v. Guardian Life Ins. Co., 96 NY2d 201, 208 (2001); Cole v. Equitable Life Assur. Soc., 271 AD2d 271 (1st Dept 2000). The statute of limitations period on a cause of action generally accrues when "all of the factual circumstances necessary to establish a right of action have occurred, so that the plaintiff would be entitled to relief." Gaidon v. Guardian Life Ins. Co., supra at 209 (citations omitted). GBL § 349 prohibits deceptive acts or practices in the conduct of a business, and affords a claim to "any person who has been injured by reason of any violation of this section." GBL § 349 (h). Accrual of such a claim, therefore, first occurs when a plaintiff has been injured by a deceptive act or practice violating section 349. Id.
Here, it is important to note that this cause of action has twice been held to be time-barred by this Court, which holdings were upheld on appeal. Rabouin v. Metropolitan Life Ins. Co., 182 Misc 2d at 636, affd 282 AD2d 381; Rabouin v. Metropolitan Life Ins. Co., NYLJ, Jan. 17, 2002, at 21, col 1, affd 307 AD2d 843. The isue now only comes back as a result of the Intervenor Complaint, which contains nearly identical allegations to the Amended Complaint. As in the Amended Complaint, this "new" complaint alleges that MetLife misrepresented that the plaintiffs' premiums would be invested and used solely for their benefit. In their class certification motion and in their present opposition papers, plaintiffs now frame their GBL § 349 claim as based on omissions in the yearly dividend statements. They claim they were injured when they received the dividend statements which failed to inform them that MetLife was transferring monies, through the investment income allocations, to other lines of business. The accrual of this claim, however, first occurs when these plaintiffs were injured by receiving dividends that were less than their contributions to the surplus which occurred long before June 24, 1995, three-years prior to the commencement of this action. Even plaintiffs admit that in 1991 and 1992 they received a notice from MetLife that their dividends were being reduced. Exhibit 5 to Dunham Affirm., Intervenor Complaint ¶¶ 41, 43; Exhibit 4 to Dunham Affirm., Amended Complaint ¶¶ 41, 43. Thus, at the latest, plaintiffs were injured when they received these notices, in 1992, more than three years before this action was commenced in June of 1998.
In any event, plaintiffs' GBL § 349 claim also fails on the ground that they cannot show the essential element of a deceptive act or omission likely to mislead a reasonable consumer. To prevail on a claim under GBL § 349, a plaintiff must demonstrate that defendant has engaged in an act or practice that is deceptive or misleading in a material way, that the deceptive act or practice is consumer-oriented, and that plaintiff has been injured by reason thereof. See Gaidon v. Guardian Life Ins. Co., 94 NY2d 330, 344 (1999); see also Solomon v. Bell Atl. Corp., 9 AD3d 49, 52 (1st Dept 2004).
The GBL § 349 claim asserts affirmative misrepresentations made to the class that their premiums would be used solely for their benefit ( see Exhibit 29 to Dunham Affirm., Quiello Dep. at 168, 173), and omissions in the annual dividend statements received, which failed to inform policyholders that their dividends were decreased because MetLife was transferring surplus to other lines of business. See Plaintiff's Reply Memo. in Support of Class Cert. at 15. MetLife, however, has presented proof, undisputed by plaintiff, that the annual dividend statement is simply a notification of the amount of dividend awarded by MetLife to the policy, and how that amount is applied to the dividend option chosen by the policyholder. See Exhibit 6 to Dunham Aff. MetLife submits proof from its actuarial expert that these dividend statements contained information, in nature and amount, that was consistent with that supplied by other mutual life insurance companies. McCarthy Aff. ¶ 44; see also Reply Affidavit of Daniel J. McCarthy, dated August 24, 2005, ¶ 10. This expert further stated that the information provided was reasonable and proper in nature and amount, and that he was aware of no requirement or industry standard that would have required MetLife to disclose any additional or different information to its policyholders in its annual dividend statements. McCarthy Aff. ¶ 44; McCarthy Reply Aff. ¶ 10. Plaintiffs fail to present any proof to the contrary. This undisputed proof, therefore, demonstrates that the dividend statements simply and appropriately provided information about the amount of the dividend awarded and the manner in which that amount is applied, and, their failure to explain the way MetLife allocated income and arrived at that dividend, did not constitute a deceptive act or practice under GBL § 349. Accordingly, the GBL § 349 claim fails as a matter of law.
Accordingly, the motion for summary judgment is granted.
Settle order with provisions for notice to the class.