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Helft v. Allmerica Financial Life Insurance and Annuity Co.

March 26, 2009


The opinion of the court was delivered by: Hon. Norman A. Mordue, Chief U.S. District Judge



There are presently two motions before the Court. Defendants Allmerica Financial Life Insurance and Annuity Co. and First Allmerica Life Insurance Co. (together, "Allmerica") move (Dkt. No. 87) for summary judgment dismissing with prejudice plaintiffs' second amended complaint (Dkt. No. 39). The principal issue on the motion is whether two written agreements effected a waiver or modification of certain restrictions in variable life insurance policies issued to plaintiffs by Allmerica. Allmerica also moves (Dkt. No. 89) to preclude plaintiffs' expert report and to preclude plaintiffs' experts from testifying at trial.



The Court first addresses Allmerica's motion (Dkt. No. 87) for summary judgment. The Court assumes the reader's familiarity with the background of the litigation, the relevant facts, the parties' contentions, and the relevant sections of the pertinent documents, all of which are set forth in Helft v. Allmerica Fin. Life Ins. & Annuity Co., 2006 WL 839528 (N.D.N.Y. Mar. 24, 2006). The Court does not repeat them here.

In their initial complaint, plaintiffs asserted claims for breach of contract, based primarily on their contention that Allmerica breached the terms of six variable life insurance policies issued to plaintiffs by imposing restrictions on plaintiffs' transfers of funds within the policies.*fn1 In a Memorandum-Decision and Order filed September 28, 2004 (Dkt. No. 27), this Court granted

defendants' motion to dismiss the complaint, finding that plaintiffs failed to state a cause of action for breach of the policies, because the unambiguous language of the policies gave Allmerica the right to impose the restrictions of which plaintiffs complained. The Court granted plaintiffs' cross motion for leave to amend the complaint.

On March 24, 2006, the Court granted Allmerica's motion (Dkt. No. 30) to dismiss the amended complaint and further granted plaintiffs' motion (Dkt. No. 31) to amend the amended complaint. See Helft, 2006 WL 839528. The second amended complaint claims that two written agreements, signed January 15, 1999 and July 2, 1999, modified and/or waived Allmerica's right to restrict transfers.*fn2 In granting plaintiffs' motion for leave to file a second amended complaint,

the Court held that these two agreements, referred to hereinafter as "trading agreements," were ambiguous regarding their effect on the policies. The Court stated as follows:

Plaintiffs argue that the above letters [i.e., the trading agreements] represent all the limitations defendants placed on their trading activities. Defendants argue that the above letters were intended to address clerical errors arising as a result of plaintiffs' trading activities. While it is obvious that the above letters were intended to address clerical errors, they also refer to other matters, such as when plaintiffs cannot make transactions or transfers. The letters do not indicate what effect they have on the allocation of funds provisions in the policies, whether, for example the letters represent restrictions on plaintiffs' trading activities in addition to those already contained in the policies, or whether the letters constitute the parties' understanding and agreement as to the only restrictions on plaintiffs' right to make transfers. Where the intent of the parties is too ambiguous to be gleaned from the contract alone, the Court should receive evidence that might better clarify that intent. Because plaintiffs have produced writings endorsed by defendants which alter the allocation of funds provisions in several of the policies, the Court cannot say, at this stage of the litigation, that the proposed second amended complaint fails to state a claim on which relief can be granted.

Id. at *10 (internal quotation marks and citation omitted). Thereafter, the parties engaged in extensive discovery.

Allmerica now moves for summary judgment on the ground that the extrinsic evidence is capable of only one reasonable interpretation, that is, that the trading agreements did not modify or waive Allmerica's rights to restrict transfers as set forth in the policies. Plaintiffs contend that there is evidence supporting a finding that the parties intended the trading agreements to contain the only restrictions on plaintiffs' right to make transfers, thus presenting a question of fact for the jury regarding the meaning of the trading agreements.

Applicable Law

In addressing Allmerica's summary judgment motion, the Court notes that summary judgment is appropriate only when there is no genuine issue with regard to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). On a summary judgment motion, the Court views the evidence in the light most favorable to the nonmoving party and draws all inferences and resolves all ambiguities in the non-movant's favor. LaSalle Bank Nat'l Ass'n v. Nomura Asset Capital Corp., 424 F.3d 195, 205 (2d Cir. 2005).

Generally, summary judgment may be granted in a contract dispute only where the contractual language on which movant relies is unambiguous. See Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 232 F.3d 153, 157 (2d Cir. 2000). If there is ambiguity, summary judgment may still be warranted where there is no relevant extrinsic evidence of intent, see Williams & Sons Erectors v. South Carolina Steel, 983 F.2d 1176, 1183-84 (2d Cir.1993), or where the extrinsic evidence is capable of only one interpretation, such that no reasonable person could find to the contrary. See Topps Co. v. Cadbury Stani S.A.I.C., 526 F.3d 63, 68 (2d Cir. 2008) (citing Compagnie Financiere, 232 F.3d at 158).

Extrinsic evidence relevant to the parties' intent may include evidence of the facts and circumstances surrounding the making of the agreement, U.S. Naval Inst. v. Charter Comms., Inc., 875 F.2d 1044, 1048 (2d Cir. 1989) (citing Amusement Bus. Underwriters v. American Int'l Group, 66 N.Y.2d 878, 880-81 (1985), and 67 Wall St. Co. v. Franklin Nat'l Bank, 37 N.Y.2d 245, 248 (1975)); industry custom and practice, Christiania Gen. Ins. Corp. v. Great Am. Ins. Co., 979 F.2d 268, 274 (2d Cir. 1992); drafting history and chronology, This Is Me, Inc. v. Taylor, 157 F.3d 139, 143 (2d Cir.1998); and the parties' course of conduct throughout the life of the contract, Hoyt v. Andreucci, 433 F.3d 320, 332 (2d Cir. 2006) (citing Big Tree Energy Partners v. Bradford, 640 N.Y.S.2d 270, 273 (3d Dep't 1996)), including the parties' statements. See Mellon Bank, N.A. v. United Bank Corp. of N.Y., 31 F.3d 113, 116 (2d Cir. 1994) (stating that borrower's references to its breach of a loan covenant as an "event of default," as well as lender's alleged assurance that breach would not result in acceleration, constitute extrinsic evidence relevant to whether borrower's breach was an event of default warranting loan acceleration under an ambiguous contract). As the Supreme Court has observed: "Generally speaking, the practical interpretation of a contract by the parties to it for any considerable period of time before it comes to be the subject of controversy is deemed of great, if not controlling, influence." Old Colony Trust Co. v. Omaha, 230 U.S. 100, 118 (1913) (quoted in IBJ Schroder Bank & Trust Co. v. Resolution Trust Corp., 26 F.3d 370, 374 (2d Cir. 1994)).


Here, the Court has found the written trading agreements ambiguous as to their effect on the policies' transfer restrictions. See Helft, 2006 WL 839528 at *10. Allmerica contends that the extrinsic evidence is capable of only one reasonable interpretation, that is, that the trading agreements "were intended to memorialize further agreed-upon restrictions on Plaintiffs' trading in order to eliminate or reduce processing errors stemming from Plaintiffs' trade requests." Thus, Allmerica argues, the trading agreements did not modify or waive Allmerica's rights under the policies to restrict transfers. According to Allmerica, the evidence submitted by the parties fully supports this interpretation, with the sole exception of plaintiff Ralph Helft's statements regarding his own "subjective understanding," which, Allmerica argues, does not create an issue of fact, see Faulkner v. National Geographic Soc., 452 F.Supp.2d 369, 378 (S.D.N.Y. 2006), thus enabling the Court to resolve the ambiguity in its favor as a matter of law.

Plaintiffs contend there is ample evidence to create a question of fact regarding the parties' intentions as to the effect of the trading agreements, including statements and conduct by the parties both before and after the trading agreements were signed. In particular, plaintiffs point to evidence that for more than three years before they signed the trading agreements, plaintiffs had placed hundreds of transfers annually within Allmerica's policies; that Allmerica's Vice President, James Bellner, who was authorized to modify the policies, signed the January 15, 1999 trading agreement and proffered the July 2, 1999 trading agreement; that after signing the trading agreements, plaintiffs continued their manner of trading unaltered except for the new restrictions imposed by the trading agreements; and that between August 1999 and January 2001 two of Allmerica's agents and seven of Ralph Helft's clients purchased policies worth hundreds of thousands of dollars accompanied by similar trading agreements (at least five of which were signed by Bellner), whereupon plaintiffs traded on behalf of these purchasers in the same manner as plaintiffs traded within their own policies, that is, placing frequent transfers limited only by the restrictions in the trading agreements.

The Court has reviewed the extensive extrinsic evidence bearing on the parties' intentions regarding the effect of the trading agreements. The Court finds that the evidence -- in particular the circumstances surrounding the signing of the trading agreements and the parties' course of conduct thereafter -- presents a question of fact barring summary judgment.

Specific Performance

The issue of specific performance is reserved until trial.

Jeanne Helft

Plaintiffs lack standing to recover any damages associated with a policy issued to Jeanne Helft, a non-party. Accordingly, any claims based on this policy are dismissed.


Allmerica's motion for summary judgment is granted insofar as it seeks summary judgment dismissing claims stemming from a policy issued to Jeanne Helft and otherwise denied. The Court has considered the other issues raised on the motion and finds they do not warrant relief. In view of the Court's ruling herein, the Court denies defendants' letter request (Dkt. No. 109) to strike plaintiffs' "Statement of Additional Material Facts."



The Court now turns to consider Allmerica's motion (Dkt. No. 89) to preclude the report of plaintiffs' expert, BST Valuation & Litigation Advisors, LLC ("BST"), entitled "Analysis of Economic Loss Incurred by Ralph and John Helft as a Result of Imposed Trading Restrictions" ("BST Report"), submitted on January 28, 2007. Allmerica further seeks to preclude BST's Managing Partner John R. Johnson, Partner Michael J. Raymond, and Manager John D. Ormsbee from offering expert testimony at trial. Allmerica argues that BST lacks the qualifications to form a relevant expert opinion; that BST's model is not based on sufficient facts or data to be reliable; and that BST's opinion uses an unreliable, unproven methodology. For the reasons set forth below, the Court grants Allmerica's motion.

Applicable Law

Rule 702 of the Federal Rules of Evidence ("Rule 702"), which governs the admissibility of expert testimony, provides:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

Thus, under Rule 702, the trial judge must determine whether a witness is qualified to testify on the matters in issue. See, e.g., Zaremba v. General Motors Corp., 360 F.3d 355, 359-60 (2d Cir. 2004); Nora Beverages, Inc. v. Perrier Group of Am., Inc., 164 F.3d 736, 746 (2d Cir. 1998). In addition, the Federal Rules of Evidence, particularly Rule 702, "assign to the trial judge the task of ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 597 (1993). The objective of this "gatekeeping" requirement of Daubert and Rule 702 is "to make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field." Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999).

The BST Report

The Introduction to the BST Report states that plaintiffs retained BST "to assess the economic losses, if any, incurred by them as a result of trading restrictions imposed by" Allmerica. It states that it utilizes numerous sources of information, the "most significant" of which include:

* Copies of the respective life insurance policies and ...

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