"received something other than that for which he bargained.").
We conclude that Plaintiff has adequately pled injury for purposes of rescission on the basis of fraud. Plaintiff alleges that Defendants made material misrepresentations and omissions concerning the legality of the policies, the New York franchise tax, provision of permanent local service representatives, and guaranty fund protection. Plaintiff alleges that the policies which she received differed from what she expected, in that they were not issued in compliance with European law, the New York franchise tax was not paid, permanent local representatives were not provided, and there was no assurance of guaranty fund protection. Plaintiff alleges that she ceased paying premiums when MetLife refused to provide her with assurances as to the legality of her policies and the availability of guaranty fund protection and local representatives--thus, an inference arises that Plaintiff would not have purchased her policies if she were aware of the true facts. See, e.g., D'Angelo, 453 N.Y.S.2d at 503-04 (holding that automobile purchaser was entitled to rescind upon defendant's misrepresentation that automobile was "new" when in fact it was not); Krinsky, 298 N.Y.S. at 37-38 (holding that purchaser of mortgage certificate was entitled to rescind upon defendant's misrepresentation as to maturity date--court noted that "there is a material difference between what plaintiff bargained for and what she received."); Ressler v. Samphimor Holding Corp., 201 A.D. 344, 194 N.Y.S. 363, 367-69 (App. Div. 1922) (holding that realty purchaser could rescind upon defendant's misrepresentation as to amount of income which realty would generate).
We also conclude that Plaintiff has adequately pled pecuniary loss so as to state a claim for damages on the basis of fraud. The requirement of pecuniary loss in this regard is similar to the requirement of pecuniary loss under RICO, which is discussed above. We adopt that discussion here, and conclude that Plaintiff has alleged financial loss at least with respect to the New York franchise tax and the local service representatives. As discussed in the RICO context, these represent current financial losses because Plaintiff alleges that she paid a part of her premiums toward these items but did not receive what she paid for--the tax was not paid, and permanent servicing was not provided. See Hellenic Lines, 523 F. Supp. at 248 (indicating that payment for services not rendered constitutes pecuniary loss).
c. Pleading fraud with particularity
Finally, we reject Defendants' contention that Plaintiff has failed to plead fraud with particularity. We adopt our discussion of this issue from the RICO portion of the Opinion, supra.
We thus conclude that Plaintiff has stated a claim for damages and rescission on the basis of fraud.
5. Breach of contract
Defendants seek dismissal of Plaintiff's breach of contract claim to the extent that it asserts alleged promises to provide permanent local service representatives and guaranty fund protection.
Defendants contend that these alleged promises were not contained in Plaintiff's insurance policies. Defendants thus maintain that Plaintiff's breach of contract claim is barred by N.Y. Ins. Law § 3204(a)(1) (McKinney 1985), which provides that "every policy of life, accident or health insurance . . . delivered or issued for delivery in this state, shall contain the entire contract between the parties, and nothing shall be incorporated therein by reference to any writing, unless a copy thereof is endorsed upon or attached to the policy or contract when issued." Defendants also contend that Plaintiff's breach of contract claim is barred by a merger clause in the policies themselves, and by the statute of frauds.
The merger clause provides that "this policy includes any riders and, with the application attached when the policy is issued, makes up the entire contract."
See Roffer Decl. Dated Feb. 7, 1996 Ex. 2. Plaintiff seeks to avoid the effects of this clause by contending that the promises on which her breach of contract claim is based were present within the policies themselves. As to the permanent local representatives, Plaintiff contends that the cover letters which were attached to her policies contained an express promise of personal service. However, the cover letters simply state that MetLife has provided "quality products and personalized service for more than 100 years," and that "we promise to provide you and your family with the kind of quality service we know you expect--now and in the future." See Am. Compl. Ex. I. We can conclude as a matter of law that this reference does not rise to the level of a promise to provide permanent local representative service in the future. As to guaranty fund protection, Plaintiff points out that a page of her policies labelled "policy specifications" contains the initials "NY" at the bottom. See Am. Compl. Ex. I. Plaintiff reads these initials to constitute a promise that Plaintiff's policies would include the protections provided by New York law, including the guaranty fund. However, again, we can conclude as a matter of law that this reference does not rise to the level of such a promise.
Accordingly, we dismiss Plaintiff's breach of contract claims as they relate to the promise of permanent local representatives or guaranty fund protection.
6. Fiduciary duty and negligent misrepresentation
Defendants contend that Plaintiff has failed to state a claim for breach of fiduciary duty, arguing that there is no such duty running from an insurer to an insured. Defendants raise this same argument as grounds for dismissal of Plaintiff's negligent misrepresentation claim. See Stewart, 976 F.2d at 90 (stating that a plaintiff may recover for negligent misrepresentation only where the defendant owes a fiduciary duty).
Defendants cite several cases of ancient vintage, all of which state that the relationship between an insurance company and a policyholder is an ordinary contractual one lacking the elements of trust and confidence which a fiduciary relationship requires. See Equitable Life Assurance Soc'y of the United States v. Brown, 213 U.S. 25, 46, 53 L. Ed. 682, 29 S. Ct. 404 (1909) (citing New York case law which holds that there is no fiduciary relationship between insurer and insured); Uhlman v. New York Life Ins. Co., 109 N.Y. 421, 17 N.E. 363, 364-65 (N.Y. 1888) (stating that "the relation between the policy-holder and the company was one of contract, measured by the terms of the policy."); Silverman v. Pittsburgh Life & Trust Co., 176 A.D. 743, 163 N.Y.S. 1011, 1013 (App. Div. 1917) (holding that there is no fiduciary relationship between insurer and insured); New York Hotel Trades Council v. Prudential Ins. Co. of America, 1 Misc. 2d 245, 144 N.Y.S.2d 303, 308 (Sup. Ct. 1955) (stating that "the contracts of insurance do not create any relation between the parties involving or giving rise to any fiduciary obligations. Except as required by statute, insurance companies deal with insureds at arm's length."), aff'd, 1 A.D.2d 952, 151 N.Y.S.2d 612 (App. Div. 1956). Defendants also cite two opinions of more recent vintage which follow these older decisions. See Moll v. U.S. Life Title Ins. Co. of N.Y., 654 F. Supp. 1012, 1028-29 (S.D.N.Y. 1987); Rochester Radiology Assocs. v. Aetna Life Ins. Co., 616 F. Supp. 985, 988 (W.D.N.Y. 1985).
However, a recent decision of the Eastern District of New York concluded that a jury should be permitted to inquire into the nature of the relationship between an insurer and its insureds to assess whether a relationship of trust and confidence existed. See United States v. Brennan, 938 F. Supp. 1111, 1120-21 (E.D.N.Y. 1996). Brennan did not cite any of the aforementioned cases rejecting the existence of a fiduciary relationship in the insurance context. Rather, Brennan followed a line of cases holding that an insurer owes a fiduciary duty to its insured when the insurer is representing the insured in litigation involving third parties. See Hartford Accident and Indem. Co. v. Michigan Mut. Ins. Co., 93 A.D.2d 337, 462 N.Y.S.2d 175, 178 (App. Div. 1983), aff'd, 61 N.Y.2d 569, 463 N.E.2d 608, 475 N.Y.S.2d 267 (N.Y. 1984). The basis for the fiduciary obligation is quite clear in the litigation context, for the insurer is undertaking to represent the insured's interests. Whether the recognition of a fiduciary obligation in the litigation context opens the door to the recognition of such an obligation in other contexts is not eminently clear. However, at least one New York decision has recognized the possibility of a broader fiduciary relationship. See Meagher v. Metropolitan Life Ins. Co., 119 Misc. 2d 615, 463 N.Y.S.2d 727 (Sup. Ct. 1983). Meagher involved a situation quite analogous to the one before us. The plaintiff executor alleged that an agent of the defendant insurance company had fraudulently induced the deceased to purchase a policy. 463 N.Y.S.2d at 728. The court held that the plaintiff stated a claim for constructive fraud based on a confidential relationship, concluding that the agent occupied such a superior bargaining position over the elderly purchaser as to permit an inference that a relationship of trust existed. Id. The court did not cite or discuss any prior case law refusing to recognize a fiduciary duty between insurer and insured.
We cannot ignore the decisions cited by Defendant which indicate that the relationship between insurer and insured is merely arm's-length. However, we also cannot ignore Meagher, which recognizes that, under the right circumstances, the relationship between insurer and insured may be imbued with elements of trust and confidence which render the relationship more than a mere arm's-length association. Plaintiff here alleges several facts from which the existence of a relationship of trust and confidence can be inferred. Plaintiff alleges that MetLife reached out to Americans in Europe, including Paul Dornberger, Plaintiff's husband. These Americans were likely concerned with taxes and the relationship between American law and foreign law. Plaintiff alleges that MetLife sought out these Americans through an advertising campaign aimed at assuaging their concerns and promising personalized service to handle questions and problems. See Am. Compl. P 64 and Ex. H; RICO Stmt. at 37-38. Such indications of a relationship closer than arm's-length were apparently absent in the aforementioned decisions which refused to recognize a fiduciary relationship between insurers and insureds. See Moll, 654 F. Supp. at 1028 (concluding that insureds failed to plead facts showing any relationship of trust or confidence with insurer). In light of Meagher, we believe that New York courts do not follow a per se rule prohibiting the recognition of a fiduciary relationship in the insurance context--rather, New York courts will permit a jury to assess the circumstances of the relationship to determine if it is one of trust and confidence.
Defendants also contend that Plaintiff cannot maintain a negligent misrepresentation claim because such a claim would be redundant of Plaintiff's contract claim. The case law is clear that "a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated." Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 516 N.E.2d 190, 193, 521 N.Y.S.2d 653 (N.Y. 1987). However, where the plaintiff alleges the breach of a duty separate from the duties owed under the contract itself, a tort claim may lie. See 516 N.E.2d at 194 (stating that the duty upon which a tort claim is based "must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract."). Plaintiff's negligent misrepresentation claim does not merely seek to hold Defendants to the promises made in the insurance policies. Rather, as discussed, Plaintiff alleges facts which indicate the existence of a confidential relationship broader than the policies themselves--a relationship which was violated through the use of misrepresentations to induce Plaintiff to purchase policies. See RKB Enters., Inc. v. Ernst & Young, 182 A.D.2d 971, 582 N.Y.S.2d 814, 816 (App. Div. 1992) (indicating that a negligent misrepresentation claim would lie between contracting parties if plaintiff alleged facts establishing a fiduciary relationship); see also Kimmell v. Schaefer, 224 A.D.2d 217, 637 N.Y.S.2d 147, 149 (App. Div.) (holding that investor established negligent misrepresentation claim based on misrepresentations which induced investor to purchase), aff'd, 657 N.E.2d 450 (N.Y. 1996).
Accordingly, we reject Defendants' request for dismissal of the fiduciary duty and negligent misrepresentation claims.
7. Statutory claims
Defendants seek dismissal of Plaintiff's claims under N.Y. Ins. Law §§ 2123, 4224, and 4226 and N.Y. Gen. Bus. Law § 349.
As an initial matter, § 2123, whose language refers to "agent[s] or representative[s] of any insurer," applies only to agents or brokers, not to insurers. See Buccino v. Continental Assurance Co., 578 F. Supp. 1518, 1526 (S.D.N.Y. 1983); Standard Sec. Life Ins. Co. of N.Y. v. Bedell, 113 Misc. 2d 259, 448 N.Y.S.2d 995, 996 (Sup. Ct. 1982); Slote v. Equitable Life Assurance Soc'y of the United States, 78 Misc. 2d 462, 356 N.Y.S.2d 812, 813 (Sup. Ct. 1974). Rather, § 4226, which explicitly applies to "insurer[s]" and which contains substantially the same prohibitions as § 2123, is applicable to insurers. Hence, Plaintiff's § 2123 claim is dismissed.
As to § 4224,
which is aimed at discrimination between individuals of the same class and life expectancy, Defendants argue that this statute is limited to discrimination against members of "small, insular minority groups" and is therefore inapplicable to Plaintiff. Defendants cite no authority for this proposition, other than two opinions which considered § 4224 in the context of insular minority groups. See Silver v. Equitable Life Assurance Soc'y of the United States, 563 N.Y.S.2d 78 (App. Div. 1990) (mental retardation); Health Ins. Ass'n of America v. Corcoran, 154 A.D.2d 61, 551 N.Y.S.2d 615 (App. Div. 1990) (HIV status). Neither of these decisions purport to limit § 4224 in the manner which Defendants suggest. Our independent research has not disclosed any authority so limiting the statute. Quite the contrary, § 4224 has been applied without any indication that the insured is a member of a discrete minority group. See, e.g., Metropolitan Life Ins. Co. v. Trilling, 194 A.D. 178, 184 N.Y.S. 898, 902 (App. Div. 1920) (holding that statutory precursor to § 4224 was violated where insured was permitted to pay a different premium than others in his age group).
As to § 4226,
Defendants contend that this statute applies only to misrepresentations regarding dividends or the financial condition of an insurer or comparisons between insurers, and that none of the misrepresentations alleged by Plaintiff are of this type. However, a plain reading of § 4226 does not bear out this contention. It is true that subsections (a)(2), (a)(3), and (a)(4) of § 4226 refer specifically to misrepresentations as to dividends, surplus, and financial condition, and that subsection (a)(5) refers specifically to comparisons between insurance policies. However, subsection (a)(1) is far broader, covering "any illustration, circular, statement or memorandum misrepresenting the terms, benefits or advantages of any of its policies or contracts." This language is certainly broad enough to encompass misrepresentations of the type alleged by Plaintiff.
Finally, Defendants contend that Plaintiff's claims under §§ 4224, 4226, and 349 are time-barred with respect to the policy which was purchased more than three years prior to the filing of the original complaint.
Defendants contend that the applicable statute of limitation is the three-year period of N.Y. C.P.L.R. § 214(2) (McKinney 1990), which applies to actions "to recover upon a liability, penalty or forfeiture created or imposed by statute."
Case law does not provide an easy answer. Buccino, supra, appears to be the sole reported case dealing with the applicable statute of limitation for claims under § 4226 of the Insurance Law. See Buccino, 578 F. Supp. at 1526 (applying § 214(2)'s three-year period). We have been directed to no case law dealing with the applicable limitations period for claims under § 4224 of the Insurance Law. As to § 349 of the General Business Law, the authorities are in conflict. One court has held that claims under § 349 are governed by § 214(2)'s three-year limitations period. See Domon v. Warsitz, 1993 U.S. Dist. LEXIS 6043, No. 92- CV-721S, 1993 WL 152079, at *5 (W.D.N.Y. Apr. 26, 1993). Another has held that the applicable statute of limitation is the three-year period under N.Y. C.P.L.R. § 214(4) (McKinney 1990), which applies to claims for injury to property. See Construction Tech., Inc. v. Lockformer Co., 704 F. Supp. 1212, 1223 (S.D.N.Y. 1989). Most recently, a third court has held that the applicable period is N.Y. C.P.L.R. § 213(8) (McKinney 1990), which provides a six-year period for claims based on fraud. See Ediciones Quiroga v. Fall River Music, Inc., 1995 U.S. Dist. LEXIS 2641, at *16, No. 93 Civ. 3914 (RPP), 1995 WL 103842, at *7 (S.D.N.Y. Mar. 7, 1995).
We are inclined to follow the reasoning of the Ediciones court, and we therefore conclude that the applicable limitations period for Plaintiff's claims under §§ 4224, 4226 and 349 is the six-year period for claims based on fraud.
The Ediciones court relied on a line of district court decisions holding that claims under § 43(a) of the Lanham Act should be governed by the six-year period applicable to fraud claims. See Gordon and Breach Science Publishers v. American Inst. of Physics, 859 F. Supp. 1521, 1528-29 (S.D.N.Y. 1994); Pepsico, Inc. v. Dunlop Tire & Rubber Corp., 578 F. Supp. 196, 198-99 (S.D.N.Y. 1984). These cases reasoned that the Lanham Act is aimed at deception and false representations, and thus Lanham Act claims are most analogous to fraud claims. See Gordon and Breach, 859 F. Supp. at 1528-29; Pepsico, 578 F. Supp. at 198-99. Ediciones reasoned that § 349 of the General Business Law, which prohibits "deceptive acts or practices," is similarly aimed at deception, and hence claims under § 349 are most analogous to fraud claims. Ediciones, 1995 U.S. Dist. LEXIS 2641, 1995 WL 103842, at *7. The Second Circuit has recently adopted the reasoning of Gordon and Breach and Pepsico, holding that the proper statute of limitation for Lanham Act claims is the six-year period provided under N.Y. C.P.L.R. § 213(8). See Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 191-92 (2d Cir. 1996).
We agree with the Ediciones court that claims under § 349, like Lanham Act claims, are substantially similar to fraud claims. Plaintiff's claims under §§ 4224 and 4226 of the Insurance Law are also based on alleged fraudulent activities on the part of Defendants. Accordingly, we conclude that the proper limitations period for Plaintiff's claims under these statutes is the six-year period applicable to fraud claims under New York law. Because Plaintiff's policies were purchased within six years of the filing of the original complaint in this action, Plaintiff's claims are not time-barred.
D. Personal Jurisdiction
Defendants contend that Plaintiff has failed to allege facts supporting the existence of personal jurisdiction as to ten of the individual defendants.
Plaintiff contends that personal jurisdiction over all individual Defendants is established by means of the nationwide service provision for RICO claims, set forth in 18 U.S.C. § 1965.
The district courts of this Circuit have split as to the proper interpretation of § 1965. Some have held that § 1965 automatically bestows a jurisdictional reach encompassing the entire United States, provided that each individual defendant has minimum contacts with the United States. See, e.g., Ginsburg v. Faragalli, 776 F. Supp. 806, 808 (S.D.N.Y. 1991). Other courts have read § 1965 more narrowly, holding that the jurisdictional reach of a district court may extend nationwide only where such reach is necessary to satisfy the "ends of justice" language of § 1965(b). See, e.g., PT United Can Co. v. Crown Cork & Seal Co., 1997 U.S. Dist. LEXIS 692, at *7-9, No. 96 Civ. 3669 (JGK), 1997 WL 31194, at *2-4 (S.D.N.Y. Jan. 28, 1997).
We need not take sides in this conflict, for we conclude that the "ends of justice" require that our jurisdictional reach extend nationwide in this action. Though some of the individual Defendants in this case reside outside New York, Plaintiff alleges that all were connected to a vast fraudulent scheme emanating from MetLife's headquarters in New York. See Michaels v. Wildenstein & Co., Inc., 1995 U.S. Dist. LEXIS 7424, at *7-8, No. 93 Civ. 8179 (MGC), 1995 WL 326497, at *3 (S.D.N.Y. May 31, 1995) (holding that "ends of justice" standard was met where individual defendants located outside New York were alleged to have "conspired with a New York art gallery and its officials to defraud [plaintiff].").
For the foregoing reasons, Defendants' motion to dismiss is granted in part and denied in part. We dismiss Plaintiff's claims under 18 U.S.C. §§ 1962(a) and (b). We dismiss Plaintiff's rescission claims to the extent that a full premium refund is sought, but conclude that Plaintiff has stated rescission claims for a partial refund, with allowance to be made for the value of insurance coverage received by the Plaintiff. We dismiss Plaintiff's breach of contract claim to the extent that it is based on alleged promises to provide permanent local service representatives or guaranty fund protection. We dismiss Plaintiff's claim under N.Y. Ins. Law § 2123. We deny Defendants' motion to dismiss for forum non conveniens and Defendants' motion to dismiss for lack of personal jurisdiction.
The Court will schedule a pretrial conference approximately twenty days after the filing of this Opinion to discuss the further progress of this litigation.
Dated: March 26, 1997
New York, New York
Leonard B. Sand