Opinion
No. CV-18-3075-PHX-JAS (LCK)
04-14-2021
James and Christina Torina, Plaintiffs, v. Massachusetts Mutual Life Insurance Co., Defendant.
REPORT AND RECOMMENDATION
Pending before the Court is Plaintiff/Counterclaim-Defendant James Torina's (Torina) Motion to Dismiss Counterclaim for Unjust Enrichment. (Doc. 90.) Defendant/Counterclaim-Plaintiff Massachusetts Mutual Life Insurance Co. (MassMutual) responded and Torina filed a reply. (Docs. 93, 96.) Pursuant to the Rules of Practice of the Court, this matter was referred to Magistrate Judge Kimmins for Report and Recommendation. The Magistrate Judge recommends the District Court, after its independent review of the record, deny the motion to dismiss.
The motion to dismiss was brought on behalf of both Plaintiffs. (Doc. 90.) However, because the counterclaim is alleged solely against James Torina (Doc. 89 at 7), the Court treats the motion as having been brought by him alone.
FACTUAL AND PROCEDURAL BACKGROUND
MassMutual alleged two counterclaims against Torina, one for fraud and the other for unjust enrichment. (Doc. 89 at 7-10.) Torina's current motion seeks dismissal as to the unjust enrichment counterclaim only. That counterclaim alleges MassMutual began paying Torina benefits in 2010, pursuant to two disability income insurance policies. (Id. at 8 ¶¶ 6-8.) Through April 2017, MassMutual paid Torina approximately $400,000. (Id. ¶ 8.) MassMutual ceased payments after determining Torina did not have a disabling condition that qualified for benefits. (Id. ¶ 9.) MassMutual alleged that Torina was able to, and did, perform his pre-disability occupation during the time he was receiving benefits, while representing to MassMutual that he was not working in any capacity. (Id. ¶¶ 11, 12.) MassMutual alleges that, due to Torina's misrepresentations, he received $400,000 in benefits to which he was not entitled. (Id. at 10 ¶ 26.)
STANDARD OF REVIEW
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)) (internal quotation marks omitted). Dismissal is only appropriate if the complaint's factual allegations, together with all reasonable inferences drawn in the plaintiff's favor, fail to state a plausible claim for relief. Id. at 678; see also Erickson v. Pardus, 551 U.S. 89, 94 (2007) (allegations in the complaint must be construed in the light most favorable to the plaintiff). The Court may grant dismissal of a claim for "(1) lack of a cognizable legal theory or (2) insufficient facts under a cognizable legal claim." Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984) (citing 2A J. Moore, Moore's Federal Practice ¶ 12.08 at 2271 (2d ed. 1982)). Torina's motion to dismiss is based on the absence of a cognizable legal theory.
DISCUSSION
Torina argues that unjust enrichment is not a viable claim under Arizona law because the parties' relationship arises from the insurance policies. His motion is premised on the Arizona Supreme Court's holding that "where there is a specific contract which governs the relationship of the parties, the doctrine of unjust enrichment has no application." Brooks v. Valley Nat. Bank, 548 P.2d 1166, 1171, 113 Ariz. 169, 174 (1976) (citing Ashton Co., Inc., Contr. & Eng. v. State, 454 P.2d 1004, 9 Ariz. App. 564 (1969)). The insurance policies are inarguably relevant to the counterclaims and, as Torina points out (Doc. 90 at 2), his right to benefits and MassMutual's obligation to pay them arise solely from the policies. However, MassMutual contends the insurance policies do not provide a method to recover an overpayment of benefits; Torina did not contest this position in his Reply. Therefore, the Court accepts as true that MassMutual is unable to assert a breach of contract claim to recover the payments made to Torina. Because no contractual provision addresses MassMutual's overpayment allegation or provides a remedy for its claim - that it paid Torina benefits it did not owe - it does not govern the instant dispute and Brooks does not bar MassMutual from bringing an unjust enrichment claim.
Further, as this Court has held several times, to read Brooks as precluding a claim for unjust enrichment any time a contract is involved would be too broad of an interpretation. See Adelman v. Christy, 90 F. Supp. 2d 1034, 1045 (D. Ariz. 2000); Cliffton Equities, Inc. v. Summerlin Asset Mgmt. III, LLC, No. CV-12-08131-PCT-PGR, 2012 WL 6570940, at *1 (D. Ariz. Dec. 17, 2012). "To establish a claim for unjust enrichment, a party must show: (1) an enrichment; (2) an impoverishment; (3) a connection between the enrichment and the impoverishment; (4) the absence of justification for the enrichment and the impoverishment; and (5) the absence of a legal remedy." Trustmark Ins. Co. v. Bank One, Arizona, NA, 48 P.3d 485, 491, 202 Ariz. 535, 541 (Ct. App. 2002) (citing City of Sierra Vista v. Cochise Enter., Inc., 697 P.2d 1125, 1131, 144 Ariz. 375, 381 (Ct. App. 1984)). The Arizona Court of Appeals discussed the relevant language in Brooks and explained that unjust enrichment does not apply when a contract specifically governs the rights of each party because it is a "form of restitutionary relief available upon either 'implied in fact' contract or quasi-contractual grounds." USLife Title Co. of Ariz. v. Gutkin, 732 P.2d 579, 584, 152 Ariz. 349, 354 (Ct. App. 1986). For that reason, if a litigant possesses a remedy based on breach of contract, he is precluded from recovery on unjust enrichment because, as a restitutionary theory, it demands the absence of a legal remedy. Brooks merely encapsulates the unjust enrichment requirement that the litigant have no legal remedy available. If it were revealed subsequently that MassMutual has a winning claim for breach of contract against Torina, the unjust enrichment claim would necessarily fail. See Cliffton Equities, Inc., 2012 WL 6570940, at *2 (denying a motion to dismiss unjust enrichment claim because the record before the court did not establish whether the plaintiff had already received the benefit of its bargain under the contract).
Similarly, the court in Brooks stated that a plaintiff may not pursue unjust enrichment if he has already received the benefit of his contractual bargain. 548 P.2d at 1171, 113 Ariz. at 174; see also Adelman, 90 F. Supp. 2d at 1045. This is true solely by reference to the elements required to establish unjust enrichment. If one party has received what it contracted for from the other party, there would not be the necessary absence of justification for the enrichment and impoverishment necessary to prove unjust enrichment. --------
Despite Brooks, this Court has found that a party may plead unjust enrichment as an alternative theory to a breach of contract claim. See Adelman, 90 F. Supp. 2d at 1045; In re Banner Health Data Breach Litig., No. CV-16-02696-PHX-SRB, 2017 WL 6763548, at *6 (D. Ariz. Dec. 20, 2017); Cliffton Equities, Inc, 2012 WL 6570940, at *1-2; In re Sw. Supermarkets, LLC, 325 B.R. 417, 428-29 (Bankr. D. Ariz. 2005). When it examined this issue in the Trustmark case, the Arizona Court of Appeals did not reject unjust enrichment as a possible alternative theory to breach of contract. However, the court distinguished Adelman and dismissed the unjust enrichment claim in that case because the plaintiff had a contract remedy and was pursuing unjust enrichment, not as an alternative theory, but to avoid contractual limitations. Trustmark Ins. Co., 48 P.3d at 492-93, 202 Ariz. at 542-43. Here, Torina argues that the Adelman exception does not apply because MassMutual has not pled unjust enrichment as an alternative legal theory to breach of contract. However, the company has no contract claim to plead and Torina has not argued that allowing unjust enrichment would circumvent a contractual provision on point. See U.S. Bank Nat'l. Ass'n. v. Casa Grande Reg'l Med. Ctr., No. CV 04-01707-PHX-NVW, 2006 WL 1698288, at *6 (D. Ariz. June 16, 2006) (allowing an alternative claim for unjust enrichment because the contracts did not provide for reimbursement of an overpayment but no express provision prohibited one either); In re Sw. Supermarkets, LLC, 325 B.R. at 428-29 (finding unjust enrichment allowed as an alternative claim in a situation where one party paid more than required under the contract). This Court allows unjust enrichment as an alternative in the event a contract claim fails. See Adelman, 90 F. Supp. 2d at 1045 & n.10 (allowing unjust enrichment in the event plaintiff is found to have breached the contract herself or the contract is deemed invalid); see also In re Banner Health Data Breach Litig., 2017 WL 6763548, at *6 (finding unjust enrichment claim viable because plaintiffs alleged they had not received the benefit of the bargain and the court dismissed the contract claim). It would not be logical to allow an unjust enrichment claim in the alternative but to disallow it because there is no viable contract claim to plead in the first place.
RECOMMENDATION
Based on the foregoing, the Magistrate Judge recommends that the District Court enter an order denying Plaintiff/Counterclaim-Defendant Torina's Motion to Dismiss Counterclaim for Unjust Enrichment (Doc. 90).
Pursuant to Federal Rule of Civil Procedure 72(b)(2), any party may serve and file written objections within fourteen days of being served with a copy of the Report and Recommendation. A party may respond to the other party's objections within fourteen days. No reply brief shall be filed on objections unless leave is granted by the District Court. If objections are not timely filed, they may be deemed waived.
Dated this 14th day of April, 2021.
/s/_________
Honorable Lynnette C. Kimmins
United States Magistrate Judge