United States District Court, D. Minnesota
Debra J. Thompson, an individual on behalf of herself and on behalf of all other similarly situated persons, Plaintiffs,
Allianz Life Insurance Company of North America, Defendant.
S. Friedman, Esq., Bonnett Fairbourn Friedman & Balint,
Phoenix, Arizona, for Plaintiffs.
T. Regan, Esq., Hellmuth & Johnson, Edina, Minnesota, for
Jeffrey D. Hedlund, Esq, Faegre Baker Daniels LLP,
Minneapolis, Minnesota for Defendant.
Stephen J. Jorden, Esq., Carlton Fields Jorden Burt PA,
Hartford Connecticut, for Defendant.
REPORT AND RECOMMENDATION
E. RAU, United States Magistrate Judge
matter comes before the undersigned on Defendant Allianz Life
Insurance Company of North America's
(“Allianz”) Motion to Dismiss [Doc. No. 18]. This
matter was referred to the undersigned pursuant to 28 U.S.C.
§ 636 and District of Minnesota Local Rule 72.1.
See (Order Dated June 13, 2017) [Doc. No. 30]. For
the reasons stated below, the Court recommends denying
Allianz's Motion to Dismiss.
case involves the question of whether a breach of contract
claim related to a death benefit provision in an annuity
contract is barred by res judicata on the basis of a
prior litigation requesting recession of the annuity contract
under a fraudulent inducement theory. This question is made
more complicated due to the nature of the relationship
between the parties and the nature of the interests at issue.
In particular, the fraudulent inducement action involved the
owner of the annuity contract as an absent class member and
the breach of contract claim in the instant action involves
the named beneficiary of the annuity contract. As a result,
the Court must address whether the timing and nature of the
interests that vested under the annuity contract confer
privity between the parties and whether the fraudulent
inducement claim involved the same factual circumstances as
the breach of contract claim now asserted.
Debra Thompson (“Thompson”) brings the breach of
contract claim under an Allianz MasterDex 10 annuity (the
“Policy”). See generally (Class Action
Compl., “Compl.”) [Doc. No. 1]; see also
(Mem. of Law in Supp. of Def.'s Mot. to Dismiss,
“Mem. in Supp.”) [Doc. No. 20 at 3-4] (defining
the nature of the Policy); (Compl. ¶¶ 20, 23, 25)
(same); (Ex. 17, Attached to Decl. of Stephen J. Jorden in
Supp. of Allianz's Mot. to Dismiss Compl., “Jorden
Decl.”) [Doc. No. 21-1 at 270-98] (the Policy and
associated application). The Policy was purchased by
Thompson's mother, Florence Warburg
(“Warbug”). (Compl. ¶¶ 11, 57). Warburg
was also an absent class member in Mooney v. Allianz Life
Ins. Co., No. 06-cv-545 (ADM/FLN), which addressed the
question of whether policy holders were fraudulently induced
into purchasing these policies. See, e.g., 2010 WL
419962 (D. Minn. Jan. 29, 2010) (Montgomery, J.) [hereinafter
Mooney III]; 2009 WL 511572 (Feb. 26, 2009)
(Montgomery, J.) [hereinafter Mooney II]; 2007 WL
128841 (Jan. 12, 2007) (Montgomery, J.) [hereinafter
Mooney I]; see also (Exs. 1-15, Attached
Jorden Decl. at 1-196) (various submissions and trial
exhibits filed in Mooney); (Pl.'s Suppl. Mem. in
Opp'n to Def.'s Mot. to Dismiss, “Suppl. Mem.
in Opp'n”) [Doc. No. 44 at 5] (stating
“Warburg herself was not a party in Mooney,
but merely an absent class member”).
Mooney, the “Plaintiffs [sought] recovery on
claims of consumer fraud in violation of the Minnesota
Prevention of Consumer Fraud Act (‘MPCFA'), Minn.
Stat. §§ 325F.68-.70.” Mooney I,
2007 WL 128841 at *1. The plaintiffs in Mooney
alleged that they were fraudulently induced into purchasing
the policies because bonuses that were marketed as immediate
actually required multiple years to accrue. Id. at
*3. Mooney “went to trial on September 22,
2009, and a jury returned a verdict on October 12, 2009,
” ultimately finding “that none of the class
members were harmed as a direct result of the
misrepresentation or deceptive practice.” Mooney
III, 2010 WL 419962 at *1 (internal quotation marks
purchased the Policy on December 19, 2006. (Compl.
¶¶ 11, 57). “Ms. Warburg [initially] named
Lawrence Warburg as the primary beneficiary under the
policy.” (Compl. ¶¶ 11, 57); see
also (Ex. 17 at 281-86) (application for the Policy).
Thereafter, Warburg changed beneficiaries on the Policy at
least three times, naming Thompson the lone primary
beneficiary in February 2015. (Id. ¶ 58).
Warburg “passed away on March 8, 2015.”
(Id. ¶¶ 11, 59). Thompson then
“elected to receive the Annuitization Value annuitized
over a period of five years, using the Annuitization Value to
calculate the payout.” (Id.). When Allianz
allegedly “reduce[d] the Annuitization Value by 3%,
” Thompson brought the instant action alleging: (1)
breach of contract under the Policy; and (2) breach of
implied covenant of good faith and fair dealing. See
(id. ¶¶ 59, 81-90).
brought its Motion to Dismiss arguing that Mooney
and res judicata bar Thompson's breach of
contract claims. See generally (Mem. in Supp.).
Allianz asserts that
Thompson's claims here, based on the same [expense
recovery adjustment (“ERA”)] calculation and the
same contract, were litigated vigorously and to conclusion in
Mooney. The court-approved Mooney class
notice described alleged “reductions” caused by
the ERA calculation as one of two theories of alleged
wrongdoing on which the Mooney class's claims
were based. And the ERA calculation was a primary focus of
the Mooney litigation, including the argument and evidence at
(Id. at 1-2). Allianz asserts the res
judicata test in Minnesota that: “(1) the earlier
claim involved the same set of factual circumstances; (2) the
earlier claim involved the same parties or their privies; (3)
there was a final judgment on the merits; and (4) the
estopped party had a full and fair opportunity to litigate
the matter” under Hauschildt v. Beckingham,
686 N.W.2d 829, 840 (Minn. 2004), “is easily satisfied
here.” (Mem. in Supp. at 11) (citations omitted)
(internal quotation marks omitted).
respect to whether Thompson's instant case involves the
same factual circumstances present in Mooney,
Thompson's claims are based on the same factual
circumstances and the conduct that was a focal point of the
Mooney class's claims: Allianz's alleged
wrongful utilization of the ERA calculation. In fact,
Thompson's claims not only rely on the same conduct
litigated in Mooney, they also rely on the identical
alleged promise and the same theory about why the promise was
(Id. at 12).
respect to privity, Allianz claims that “Thompson's
status as a third-party beneficiary to Warburg's contract
alone establishes privity.” (Id. at 20).
Alternatively, Allianz asserts there is privity between
Thompson and Warburg because “Thompson as the primary
beneficiary of her mother's MasterDex 10 policy
‘follows' her mother ‘in ownership or
control' of that annuity.” (Id.).
not surprisingly, asserts that Mooney does not
satisfy the res judicata prongs. See
generally (Pl.'s Mem. of Law in Opp'n to
Def.'s Mot. to Dismiss, “Mem. in Opp'n”)
[Doc. No. 28]. Specifically as it relates to whether the
earlier claim involved the same factual circumstances,
Thompson argues that different factual circumstances are
involved because different evidence supports different claims
and because the claims at issue in the instant action had not
accrued at the time of the Mooney litigation; each
assertion would prevent the satisfaction of the first prong
of the res judicata analysis under Minnesota law.
See (id. at 9-15).
Court heard oral argument on Allianz's Motion to Dismiss.
See (Minute Entry Dated Sept. 11, 2017) [Doc. No.
38]. Supplemental briefing was requested regarding the
question of whether the manner in which “Thompson's
interests under the annuity at issue vested” impacted
the privity determination of the res judicata
analysis. See (Text Only Order Dated Sept. 12, 2017)
[Doc. No. 39].
In its supplemental brief to the Court, Allianz asserts
Thompson was not just a successor-in-interest to, and
third-party beneficiary of, Warburg's annuity contract
(two firmly established categories of privity under Minnesota
res judicata law); her rights and interests in
challenging and seeking recovery for an alleged
“reduction” in the annuity contract's
annuitization value ...