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Ruud v. Friendshuh

United States District Court, District of Minnesota

February 27, 2015

Robert G. Ruud and Diane L. Rudd, on on behalf of themselves and others similarly situated, Plaintiffs,
v.
Anthony John Friendshuh; Cadro Kuhlmann; Heritage Partners, LLC; Legal-Ease, LLC; Dennis Lawrence; and PHL Variable Insurance Company, d/b/a Phoenix, Defendants.

Jeffrey D. Bores, Esq., and Karl L. Cambronne, Esq., Chestnut Cambronne, PA, counsel for Plaintiffs.

Mark E. Czuchry, Esq., Czuchry Law Firm, LLC, counsel for Defendants Anthony John Friendshuh and Heritage Partners, LLC.

Defendants Cadro Kuhlmann, Legal-Ease, LLC, and Dennis Lawrence, pro se.

Hutson B. Smelley, Esq., Rebecca A. Muff, Esq., Thomas F. A. Hetherington, Esq., and Henry M. Helgen, III, Esq., Edison, McDowell & Hetherington LLP, counsel for PHL Variable Insurance Company, d/b/a Phoenix.

MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK United States District Judge

INTRODUCTION

This matter is before the Court on Defendant PHL Variable Insurance Company’s, d/b/a Phoenix (“PHL”), Motion to Dismiss Plaintiffs’ Second Amended Class Action Complaint (Doc. No. 12) and Defendants Anthony John Friendshuh (“Friendshuh”) and Heritage Partners, LLC’s (“Heritage”) Motion to Dismiss Joining in Co-Defendant PHL Variable Insurance Company’s Motion to Dismiss Plaintiffs’ Second Amended Class Action Complaint (Doc. No. 31).[1] The motions relate only to Counts I and II of Plaintiffs’ Second Amended Complaint. (Doc. No. 1-2, Ex. A-13 (Second Am. Compl. (“SAC”)) ¶¶ 53-59.) For the reasons set forth below, the Court grants the motions.

BACKGROUND

I. Factual Background

Plaintiffs Robert G. Ruud (“R. Rudd”) and Diane L. Rudd (“D. Ruud”) (together, “Plaintiffs”) are a retired married couple who live in Deerwood, Minnesota, and are senior citizens. (Id. ¶ 4.) Defendant Friendshuh is President and co-founder of Heritage, which is a business that focuses on selling insurance products, including annuities, and estate planning documents to senior citizens. (Id. ¶¶ 5-6, 11.) Defendant PHL, which does business as Phoenix, is a stock company. (Id. ¶ 8.)

Plaintiffs allege that on or about May 15, 2011, they saw an advertisement in the newspaper for a free dinner if they attended a seminar in Aitkin, Minnesota. (Id. ¶ 12.) Plaintiffs attended the seminar and dinner and, at that time, gave their contact information to Friendshuh. (Id.) After the seminar, Friendshuh contacted Plaintiffs and they met three times over approximately nine hours. (Id.) Plaintiffs ultimately purchased a trust agreement and related documents for approximately $2, 295.[2] (Id. ¶¶ 13-14.)

Plaintiffs further allege that over the course of the meetings between Plaintiffs and Friendshuh, they informed Friendshuh that they owned a Pacific Life annuity (the “Pacific Annuity”) and Friendshuh urged them to exchange the Pacific Annuity for a PHL annuity for a number of financial benefits. (Id. ¶¶ 14, 16, 17.) Friendshuh allegedly told Plaintiffs that their current annuity was risky, had high fees, and had high volatility. (Id. ¶ 17.) Friendshuh allegedly further represented that the new annuity would have a significant value over the Pacific Annuity. (Id. ¶ 14.) Plaintiffs were required to pay a surrender charge when surrendering their Pacific Annuity, but Friendshuh allegedly reassured them that they would enjoy a “superior strategy, ” despite the charge, and that they would get a bonus of sorts. (Id. ¶ 16.) Plaintiffs agreed to the exchange. (Id. ¶ 17.) Plaintiffs allege that Friendshuh never informed them that he would receive a substantial commission by virtue of the exchange. (Id.)

In July 2011, Plaintiffs “surrendered” their Pacific Annuity and signed various documents executing the “surrender” and the transfer of funds to PHL. (Id. ¶ 15.) Then, in exchange for the Pacific Annuity, Plaintiffs ultimately purchased a PHL annuity that was a PHL Personal Income Annuity (the “PHL Annuity”). (See Id. ¶¶ 14, 22; Doc. No. 14 (“Smelley Decl.”) ¶ 2, Ex. A (“PHL Annuity Policy”)[3] at PHLRUUD000003, 000013.) The PHL Annuity included a fixed account and indexed accounts, and Plaintiffs elected to place the premium with the Monthly Point-to-Point Indexed Account – 1 Year S&P 500. (PHL Annuity Policy at PHLRUUD000000, 000013.) Defendant Cadro Kuhlmann was named on the PHL paperwork, but Plaintiffs never met him. (SAC ¶¶ 18-20.) Plaintiffs allege that Friendshuh met with them to explain the contract for the new PHL Annuity, including indicating that the real value of their new annuity was $240, 688.99 ...


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