United States District Court, D. Maryland
DEBORAH ARMELLINI, et al. Plaintiffs
SCOTT M. LEVIN, et al. Defendants.
L. Hollander United States District Judge
suit concerns a life insurance policy purchased by plaintiffs
Deborah Armellini and Armellini Management Company through
defendant Scott M. Levin, an alleged agent and/or employee of
defendant Worthington Financial Partners, LLC
(“Worthington”), a subsidiary of Life Insurance
Company of the Southwest. ECF 1 (the
“Complaint”). Plaintiffs allege that in November
2009, Mr. Levin, a Financial Advisor, induced them to
purchase an Indexed Universal Life Insurance Policy (the
“Policy”) from the Life Insurance Company of the
Southwest (“LICS”), and to continue investing in
the Policy by misrepresenting the Policy's true features,
causing plaintiffs to lose over $250, 000.
Complaint contains five counts. Count I, lodged against Mr.
Levin, alleges a common law claim for conversion. ECF 1,
¶¶ 27-31. In Count II, plaintiffs assert a cause of
action against Mr. Levin for breach of fiduciary duty.
Id. ¶¶ 32-38. Count III, also lodged
against Mr. Levin, alleges fraudulent misrepresentation.
Id. ¶¶ 39-45. Count IV asserts a claim
against Worthington for breach of fiduciary duty.
Id. ¶¶ 46-54. And, in Count V, plaintiffs
assert a claim against Worthington for fraudulent
misrepresentation. Id. ¶¶ 55-61.
have jointly moved to dismiss the Complaint, pursuant to
Fed.R.Civ.P. 12(b)(6). ECF 21. The motion is supported by a
memorandum of law (ECF 21-1) (collectively, the
“Motion”), and one exhibit. ECF 21-2. Plaintiffs
oppose the Motion (ECF 27), and defendants have replied. ECF
to Fed.R.Civ.P. 14(a), defendants filed a third-party
complaint against Ms. Armellini's tax advisor, Simcha
Baer, a licensed Certified Public Accountant. ECF 23 (the
“Third-Party Complaint). According to defendants, to
the extent that they are liable, so too is Mr. Baer, because
he facilitated the initial meeting between Ms. Armellini and
Mr. Levin in November 2009, participated in the planning, and
provided investment advice to Ms. Armellini in regard to the
Policy. The Third-Party Complaint lodges claims against Mr.
Baer for “Implied Indemnity” (Count I) and
“Contribution” (Count II).
Baer has filed a pre-discovery motion to dismiss or, in the
alternative, for summary judgment, pursuant to Fed.R.Civ.P.
12(b)(6) and Fed.R.Civ.P. 56. ECF 33 (the “Baer
Motion”). An affidavit from Mr. Baer is appended to the
Baer Motion. ECF 33-1. Defendants oppose the Baer Motion (ECF
36), which is supported by an affidavit from Mr. Levin. ECF
36-1. Mr. Baer has replied. ECF 39.
hearing is necessary to resolve the motions See
Local Rule 105.6. For the reasons that follow, I shall grant
defendants' Motion (ECF 27) in part and deny it in part.
And, construing the Baer Motion as one for summary judgment,
I shall grant the Baer Motion (ECF 33).
The Armellini Complaint
Armellini met with Mr. Levin on November 24, 2009, to discuss
life insurance policies. ECF 1, ¶¶ 13-14. According
to plaintiffs, Mr. Levin worked as a “Financial
Advisor” for Worthington, a subsidiary of LICS.
Id. ¶ 13; see Id. ¶ 7. Mr. Levin
“advised” Ms. Armellini to purchase the Policy
from LICS. Id. ¶ 13. He represented to Ms.
Armellini that the Policy was indexed to the stock market.
Id. ¶ 16. And, he allegedly
“promised” Ms. Armellini that “within 10
years of taking out the policy, the cash value of the policy
would be, at least, equal to the total investment.”
Id. ¶ 17. The same day, Ms. Armellini and Mr.
Levin executed an “‘Application for Life
Insurance,' which included representations made by Mr.
Levin and Worthington[.]” Id. ¶ 15.
on Mr. Levin's statements, plaintiffs began investing
$75, 000 per year in the Policy. Id. ¶ 18. In
total, they invested over $475, 000 in the Policy.
Id. ¶ 19.
allege that Mr. Levin “repeatedly advised [them] that
the cash value of the policy would equal Ms. Armellini's
contributions” and that, “despite the fact that
the cash value of the policy [was] continually declining, all
‘was well.'” Id. ¶ 21. Further,
on January 5, 2015, Mr. Levin emailed Ms. Armellini, stating
that the cash value of the Policy “would be ‘at
least' equal to the amount of Ms. Armellini's
contributions after 10-years from the initial policy
investment.” Id. ¶ 21.
“[t]his promise never came to fruition.”
Id. ¶ 22. Instead, the Policy's value
“plummeted.” Id. Plaintiffs allegedly
learned in April 2018, that the Policy had only a three
percent fixed rate of return, the funds were not invested in
stock indices, and the Policy allocated $72, 000 of
plaintiff's annual investments to premiums. Id.
¶ 23. As a result, “the cash value of the Policy
[was] quickly depleted.” Id. According to
plaintiffs, they lost approximately $250, 000 by investing in
the Policy. Id. ¶ 24.
The Third-Party Action
Baer was a Certified Public Accountant (“CPA”),
whose practice included providing tax advice and form
preparation for small businesses. ECF 33-2, ¶
However, he is not a Certified Financial Planner, nor is he
licensed to sell life insurance. Id. ¶¶ 4,
5. Plaintiffs “were long-term clients” of Mr.
Baer's. Id. ¶ 3; see ECF 23,
to Mr. Levin, Mr. Baer facilitated a meeting in November 2009
between Ms. Armellini, Mr. Levin, Mr. Baer, and Clifford
Kwartner, an agent of NLV,  to discuss investment strategy.
ECF 36-2, ¶¶ 6, 8; see also ECF 23, ¶
13. During the meeting, Mr. Baer and Mr. Levin proposed a
plan for Ms. Armellini to purchase the Policy. ECF 36-2,
¶ 8; ECF 23, ¶ 13. Specifically, they proposed that
Ms. Armellini “fund $150, 000 per year for an initial
five-year period into a fixed account, ” and then
“move the funds into an indexed portion of the
[P]olicy, where it would remain and continue to grow on a
tax-deferred basis.” ECF 36-2, ¶ 9; ECF 23, ¶
14; see ECF 36-2, ¶ 9. Further, Mr. Baer and
Mr. Levin proposed that Ms. Armellini purchase a separate
Term Life Insurance Policy for an initial five-year period,
after which it would be converted into another Indexed Life
Insurance Policy, with tax benefits. ECF 36-2, ¶ 10; ECF
23, ¶ 15.
Levin states that he presented this proposal to Ms. Armellini
only after Mr. Baer “expressed his opinion during the
meeting as to the amounts that Ms. Armellini should fund, or
would be able to fund, over an initial 5-year period.”
ECF 36-2, ¶ 11; see ECF 23, ¶ 16. Further,
he states that Mr. Baer “specifically recommended,
endorsed and approved” the proposed investment
strategy. ECF 36-2, ¶ 13; see ECF 23, ¶
Armellini, relying on Mr. Baer's recommendation,
proceeded to purchase the Policy and Term Life Insurance
Policy from Mr. Levin. ECF 36-2, ¶ 14; ECF 23, ¶
18. But, according to defendants, Ms. Armellini
“eventually ceased to fund the policies, allegedly due
to a change in circumstances in her business.” ECF
36-2, ¶ 15; see ECF 23, ¶ 19.
Levin paid Mr. Baer a consulting fee of $3, 850 on November
30, 2010. ECF 36-2, ¶ 16. And, Mr. Levin states that he
believes Mr. Kwartner paid Mr. Baer a consulting fee in the
same amount. Id. ¶ 17.
Baer does not dispute that he attended the meeting in
November 2009 with Ms. Armellini and Mr. Levin. But, he
denies that he ever advised plaintiffs “regarding the
investment aspects of the insurance policies or make any
guarantees regarding returns on the policies.” ECF
33-2, ¶ 10. Although Mr. Baer does not indicate whether
he received fees for facilitating the meeting, he maintains
that he never collected any premiums on the Policy.
Id. ¶ 11.
Choice of Law
parties assume, without discussion, that Maryland law applies
to this diversity case. In an action based upon diversity of
citizenship, a federal court must apply the substantive law
of the state in which it sits, including that state's
choice of law rules. Klaxon Co. v. Stentor Elect. Mfg.
Co., 313 U.S. 487, 496-97 (1941); Colgan Air, Inc.
v. Raytheon Aircraft Co., 507 F.3d 270, 275 (4th Cir.
2007); Baker v. Antwerpen Motorcars, Ltd., 807
F.Supp.2d 386, 389 n.13 (D. Md. 2011).
is, of course, the forum state. Under Maryland's
choice-of-law principles for tort claims, Maryland applies
the doctrine of lex loci delecti, i.e., the
law of the jurisdiction where the alleged wrong occurred.
Lewis v. Waletzky, 422 Md. 647, 657, 31 A.3d 123,
129 (2011); Erie Ins. Exch. v. Heffernan, 399 Md.
598, 620, 925 A.2d 636, 648 (2007); Kortobi v. Kass,
182 Md.App. 424, 443, 957 A.2d 1128, 1139 (2008),
aff'd, 410 Md. 168, 978 A.2d 247 (2009).
are both citizens of Maryland. See ECF 1,
¶¶ 6-7; ECF 14. Mr. Baer is also a citizen of
Maryland. ECF 23, ¶ 3; ECF 33-1, ¶ 1. Therefore, it
seems likely that the allegedly tortious conduct of
defendants and Mr. Baer occurred in Maryland. In any event,
all parties rely on Maryland law in their submissions.
See ECF 21; ECF 27; ECF 28; ECF 33; ECF 36; ECF 39.
And, in a case where the parties have not identified any
state law conflicts, the court need not undertake a
choice-of-law analysis. See Cleaning Authority, Inc. v.
Neubert, 739 F.Supp.2d 807, 820 (D. Md. 2010)
(“‘Choice-of-law analysis becomes necessary . . .
only if the relevant laws of the different states lead to
different outcomes.'” (citation omitted)); see
also Vanderhoof-Forschner v. McSweegan, 215 F.3d 1323
(Table) at *2 n.2 (4th Cir. 2000) (“[B]ecause the
parties implicitly agree that Maryland law governs their
claims, [the Court] need not inquire further into the
choice-of-law questions.”). Accordingly, I shall apply
the substantive law of Maryland.
Standards of Review
move to dismiss the Complaint pursuant to Fed.R.Civ.P.
12(b)(6). ECF 21. A defendant may test the legal sufficiency
of a complaint by way of a motion to dismiss under Rule
12(b)(6). In re Birmingham, 846 F.3d 88, 92 (4th
Cir. 2017); Goines v. Valley Cmty. Servs. Bd., 822
F.3d 159, 165-66 (4th Cir. 2016); McBurney v.
Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010),
aff'd sub nom., McBurney v. Young, 569
U.S. 221 (2013); Edwards v. City of Goldsboro, 178
F.3d 231, 243 (4th Cir. 1999). A Rule 12(b)(6) motion
constitutes an assertion by a defendant that, even if the
facts alleged by a plaintiff are true, the complaint fails as
a matter of law “to state a claim upon which relief can
a complaint states a claim for relief is assessed by
reference to the pleading requirements of Fed.R.Civ.P.
8(a)(2). That rule provides that a complaint must contain a
“short and plain statement of the claim showing that
the pleader is entitled to relief.” The purpose of the
rule is to provide the defendants with “fair
notice” of the claims and the “grounds” for
entitlement to relief. Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555-56 (2007).
survive a motion under Rule 12(b)(6), a complaint must
contain facts sufficient to “state a claim to relief
that is plausible on its face.” Twombly, 550
U.S. at 570; see Ashcroft v. Iqbal, 556 U.S. 662,
684 (2009) (citation omitted) (“Our decision in
Twombly expounded the pleading standard for
‘all civil actions' . . . .”); see also
Paradise Wire & Cable Defined Benefit Pension Plan v.
Weil, 918 F.3d 312, 317 (4th Cir. 2019); Willner v.
Dimon, 849 F.3d 93, 112 (4th Cir. 2017). To be sure, a
plaintiff need not include “detailed factual
allegations” in order to satisfy Rule 8(a)(2).
Twombly, 550 U.S. at 555. Moreover, federal pleading
rules “do not countenance dismissal of a complaint for
imperfect statement of the legal theory supporting the claim
asserted.” Johnson v. City of Shelby, Miss.,
574 U.S. 10, 10 (2014) (per curiam). But, mere
“‘naked assertions' of wrongdoing” are
generally insufficient to state a claim for relief.
Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir.
2009) (citation omitted).
other words, the rule demands more than bald accusations or
mere speculation. Twombly, 550 U.S. at 555; see
Painter's Mill Grille, LLC v. Brown, 716 F.3d 342,
350 (4th Cir. 2013). If a complaint provides no more than
“labels and conclusions” or “a formulaic
recitation of the elements of a cause of action, ” it
is insufficient. Twombly, 550 U.S. at 555.
“[A]n unadorned, the-defendant-unlawfully-harmed-me
accusation” does not state a plausible claim of relief.
Iqbal, 556 U.S. at 678. Rather, to satisfy the
minimal requirements of Rule 8(a)(2), the complaint must set
forth “enough factual matter (taken as true) to
suggest” a cognizable cause of action, “even if .
. . [the] actual proof of those facts is improbable and . . .
recovery is very remote and unlikely.”
Twombly, 550 U.S. at 556 (internal quotation marks
reviewing a Rule 12(b)(6) motion, a court “must accept
as true all of the factual allegations contained in the
complaint” and must “draw all reasonable
inferences [from those facts] in favor of the
plaintiff.” E.I. du Pont de Nemours & Co.,
637 F.3d at 440 (citations omitted); see Semenova v. Md.
Transit Admin., 845 F.3d 564, 567 (4th Cir. 2017);
Houck v. Substitute Tr. Servs., Inc., 791 F.3d 473,
484 (4th Cir. 2015); Kendall v. Balcerzak, 650 F.3d
515, 522 (4th Cir. 2011), cert. denied, 565 U.S. 943
(2011). But, a court is not required to accept legal
conclusions drawn from the facts. See Papasan v.
Allain, 478 U.S. 265, 286 (1986); Glassman v.
Arlington Cty., 628 F.3d 140, 146 (4th Cir. 2010).
“A court decides whether [the pleading] standard is met
by separating the legal conclusions from the factual
allegations, assuming the truth of only the factual
allegations, and then determining whether those allegations
allow the court to reasonably infer” that the plaintiff
is entitled to the legal remedy sought. A Society Without
a Name v. Virginia, 655 F.3d 342, 346 (4th. Cir. 2011),
cert. denied, 566 U.S. 937 (2012).
ordinarily do not “‘resolve contests surrounding
the facts, the merits of a claim, or the applicability of
defenses'” through a Rule 12(b)(6) motion.
Edwards, 178 F.3d at 243 (quoting Republican
Party v. Martin, 980 F.2d 943, 952 (4th Cir. 1992)).
However, “in the relatively rare circumstances where
facts sufficient to rule on an affirmative defense are
alleged in the complaint, the defense may be reached by a
motion to dismiss filed under Rule 12(b)(6).”
Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th
Cir. 2007) (en banc); accord Pressley v. Tupperware Long
Term Disability Plan, 553 F.3d 334, 336 (4th Cir. 2009).
Because Rule 12(b)(6) “is intended [only] to test the
legal adequacy of the complaint, ” Richmond,
Fredericksburg & Potomac R.R. Co. v. Forst, 4 F.3d
244, 250 (4th Cir. 1993), “[t]his principle only
applies . . . if all facts necessary to the affirmative
defense ‘clearly appear[ ] on the face of the
complaint.'” Goodman, 494 F.3d at 464
(quoting Forst, 4 F.3d at 250) (emphasis added in
when a defendant moves to dismiss a complaint under Rule
12(b)(6), courts are limited to considering the sufficiency
of allegations set forth in the complaint and the
‘documents attached or incorporated into the
complaint.'” Zak v. Chelsea Therapeutics
Int'l, Ltd., 780 F.3d 597, 606 (4th Cir. 2015)
(quoting E.I. du Pont de Nemours & Co., 637 F.3d
at 448). Ordinarily, the court “may not consider any
documents that are outside of the complaint, or not expressly
incorporated therein . . . .” Clatterbuck v. City
of Charlottesville, 708 F.3d 549, 557 (4th Cir. 2013);
see Bosiger, 510 F.3d at 450.
under limited circumstances, when resolving a Rule 12(b)(6)
motion, a court may consider documents beyond the complaint
without converting the motion to dismiss to one for summary
judgment. Goldfarb v. Mayor & City Council of
Balt., 791 F.3d 500, 508 (4th Cir. 2015). In particular,
a court may properly consider documents that are
“explicitly incorporated into the complaint by
reference and those attached to the complaint as
exhibits.” Goines, 822 F.3d at 166 (citation
omitted); see also Six v. Generations Fed. Credit
Union, 891 F.3d 508, 512 (4th Cir. 2018); Anand v.
Ocwen Loan Servicing, LLC, 754 F.3d 195, 198 (4th Cir.
2014); U.S. ex rel. Oberg v. Pa. Higher Educ.
Assistance Agency, 745 F.3d 131, 136 (4th Cir. 2014);
Am. Chiropractic Ass'n v. Trigon Healthcare,
Inc., 367 F.3d 212, 234 (4th Cir. 2004), cert.
denied, 543 U.S. 979 (2004); Phillips v. LCI
Int'l Inc., 190 F.3d 609, 618 (4th Cir. 1999).
“before treating the contents of an attached or
incorporated document as true, the district court should
consider the nature of the document and why the plaintiff
attached it.” Goines, 822 F.3d at 167 (citing
N. Ind. Gun & Outdoor Shows, Inc. v. City of S.
Bend, 163 F.3d 449, 455 (7th Cir. 1998)). Notably,
“[w]hen the plaintiff attaches or incorporates a
document upon which his claim is based, or when the complaint
otherwise shows that the plaintiff has adopted the contents
of the document, crediting the document over conflicting
allegations in the complaint is proper.”
Goines, 822 F.3d at 167. Conversely, “where
the plaintiff attaches or incorporates a document for
purposes other than the truthfulness of the document, it is
inappropriate to treat the contents of that document as
may also “consider a document submitted by the movant
that [is] not attached to or expressly incorporated in a
complaint, so long as the document was integral to the
complaint and there is no dispute about the document's
authenticity.” Goines, 822 F.3d at 166
(citations omitted); see also Woods v. City of
Greensboro, 855 F.3d 639, 642 (4th Cir. 2017), cert.
denied, __ U.S. __, 138 S.Ct. 558 (2017);
Oberg, 745 F.3d at 136; Kensington Volunteer
Fire Dep't. v. Montgomery Cty., 684 F.3d 462, 467
(4th Cir. 2012). To be “integral, ” a document
must be one “that by its ‘very existence, and
not the mere information it contains, gives rise to the
legal rights asserted.'” Chesapeake Bay Found.,
Inc. v. Severstal Sparrows Point, LLC, 794 F.Supp.2d
602, 611 (D. Md. 2011) (citation omitted) (emphasis in
original). See also Fed. R. Civ. P. 10(c) (“A
copy of a written instrument that is an exhibit to a pleading
is a part of the pleading for all purposes.”).
addition, “a court may properly take judicial notice of
‘matters of public record' and other information
that, under Federal Rule of Evidence 201, constitute
‘adjudicative facts.'” Goldfarb, 791
F.3d at 508; see also Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 322 (2007); Katyle v.
Penn Nat'l Gaming, Inc., 637 F.3d 462, 466 (4th Cir.
2011), cert. denied, 565 U.S. 825 (2011);
Philips v. Pitt Cty. Mem. Hosp., 572 F.3d 176, 180
(4th Cir. 2009). However, under Fed.R.Evid. 201, a court may
take judicial notice of adjudicative facts only if they are
“not subject to reasonable dispute, ” in that
they are “(1) generally known within the territorial
jurisdiction of the trial court or (2) capable of accurate
and ready determination by resort to sources whose accuracy
cannot reasonably be questioned.”
support of defendants' Motion, defendants filed a copy of
a record of the Maryland Department of Assessments and
Taxation for Worthington. ECF 21-2. This document is publicly
available, and plaintiffs do not challenge its authenticity.
Accordingly, I may take judicial notice of this exhibit.
extent that plaintiffs' suit lodges fraud claims against
Mr. Levin and Worthington, Fed.R.Civ.P. 9(b) is pertinent.
Rule 9(b) states: “In alleging fraud or mistake, a
party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and
other conditions of a person's mind may be alleged
preliminary matter, claims that sound in fraud, whether
rooted in common law or arising under a statute, implicate
the heightened pleading standard of Fed.R.Civ.P. 9(b).
See, e.g., E-Shops Corp. v. U.S. Bank N.A.,
678 F.3d 659, 665 (8th Cir. 2012) (“Rule 9(b)'s
heightened pleading requirement also applies to statutory
fraud claims.”); see also Spaulding v. Wells
Fargo Bank, N.A., 714 F.3d 769, 781 (4th Cir.
2013) (stating that an MCPA claim that “sounds in
fraud is subject to the heightened pleading standards of
Federal Rule of Civil Procedure 9(b)”).
the rule, a claim that sounds in fraud “‘must, at
a minimum, describe the time, place, and contents of the
false representations, as well as the identity of the person
making the misrepresentation and what he obtained
thereby.'” U.S. ex rel. Nathan v. Takeda
Pharms. N.A., Inc., 707 F.3d 451, 455 (4th Cir. 2013)
(citation omitted). In other words, Rule 9(b) requires the
plaintiff to plead “the who, what, when, where, and how
of the alleged fraud” before the parties can proceed to
discovery. U.S. ex rel. Wilson v. Kellogg Brown &
Root, 525 F.3d 370, 379 (4th Cir. 2008) (internal
quotation marks omitted)
9(b) serves several salutary purposes:
First, the rule ensures that the defendant has sufficient
information to formulate a defense by putting it on notice of
the conduct complained of. . . . Second, Rule 9(b) exists to
protect defendants from frivolous suits. A third reason for
the rule is to eliminate fraud actions in which all the facts
are learned after discovery. ...