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Mooney v. AXA Advisors, L.L.C.

United States District Court, S.D. New York

April 10, 2014

MATTHEW MOONEY
v.
AXA ADVISORS, L.L.C., et al

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For Matthew Mooney, Plaintiff: James FX Hiler, Wechsler & Cohen, LLP, New York, NY; Leon Edward Farbman, Phillip Jay Zisook, PRO HAC VICE, Deutsch, Levy & Engel, Chartered, Chicago, IL.

For AXA Advisors, L.L.C., a Delaware limited liability company, AXA Network, L.L.C., a Delaware limited liability company, AXA Equitable Life Insurance Company, a Delaware corporation, AXA Distributors, L.L.C., a Delaware limited liability company, AXA Distibutors Insurance Agency, L.L.C., a Delaware Limited Liability Company, AXA Distributors Insurance Agency of Massachusetts, L.L.C., a Massachusetts limited liability company, Defendants: Maranda E. Fritz, Thompson Hine LLP (NYC), New York, NY.

OPINION

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MEMORANDUM OF LAW RE DEFENDANTS' MOTION TO DISMISS, GRANTING IN PART AND DENYING IN PART

MICHAEL M. BAYLSON, U.S.D.J.

I. Introduction

Plaintiff Matthew Mooney is the former employee of an insurance company and has sued the parent and several of its subsidiaries,[1] asserting antitrust claims under § 1 of the Sherman Act, 15 U.S.C. § 1 (Count I), and New York's Donnelly Act, N.Y. Gen. Bus. § 340 (Count II). Plaintiff also asserts claims for defamation per se (Count III); breach of contract, specifically against AXA Network, LLC (Count IV) and AXA Advisors, LLC (Count V); and a claim for " Trademark Compensation Owed," which is effectively another claim for breach of contract, against AXA Equitable Life Insurance Company and AXA Advisors, LLC (Count VI).

AXA has moved to dismiss Plaintiff's Amended Complaint in its entirety for failure to state a claim. ECF 20.

II. Facts[2]

Mooney has approximately nineteen years of experience working in the sale and servicing of insurance products. Am. Complaint, ECF 15 ¶ 2 (Preliminary Facts). For approximately eighteen years, from roughly 1994 to 2012, Mooney was an agent for AXA (or its predecessors). ECF 15 ¶ 9 (Preliminary Facts). During that time, Mooney entered into a Trademark License Agreement, in which he licensed to AXA a trademark he owned called " SARP." ECF 15 ¶ ¶ 11-13 (Preliminary Facts). SARP, which stands for " Sales Associate Retirement Program," is a retirement plan designed for independent contractors who may otherwise not have access to traditional retirement planning services through their employer. ECF 15 ¶ 11 (Preliminary Facts). The Trademark Licensing Agreement does not specify what consideration Mooney was to receive in exchange for granting the license--instead, the agreement only notes that " Licensor acknowledges receipt of satisfactory compensation in consideration of and full payment for the License."

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ECF 15 Ex. 3 ¶ 2. Mooney alleges that this consideration provision refers to an ongoing arrangement in which AXA Advisors agreed to pay him (1) 1.40% of the value of assets under management on the annuity contracts he sold as a registered AXA representative; (2) one quarter of the 3.25% commissions earned by other AXA agents that utilized the SARP mark; and (3) an additional percentage of his own production equaling a 5% total commission. ECF 15 ¶ ¶ 12, 13 (Preliminary Facts). From 2006 to 2012, Mooney and other AXA agents marketed AXA products using the SARP trademark. ECF 15 ¶ 16 (Preliminary Facts). During that period, AXA compensated Mooney according to the described commission structure. ECF 15 ¶ 22 (Preliminary Facts).

Mooney also entered into an Associate Agreement with AXA Network, LLC and a Representative Agreement with AXA Advisors, LLC. According to the Associate Agreement, Mooney would receive a right to vested commissions, seniority, and other benefits after completing twelve years of continuous service with AXA Network. ECF 15 Ex. 1 § IV.A. By the time Mooney resigned, AXA credited Mooney as having had eighteen years of continuous service as a representative and an associate, notwithstanding a one-year break between June 2002 and June 2003. ECF 15 ¶ 10 (Preliminary Facts). This credit was a condition of Mooney's returning to AXA in June 2003. ECF 15 ¶ 10 (Preliminary Facts).[3]

On May 4, 2012, Mooney resigned his association with AXA. ECF 15 ¶ 20 (Preliminary Facts). After learning of his resignation, William Degnan, President of AXA's American Division, told Mooney that his resignation would be accepted but that Mooney would " feel pain" as a consequence. ECF 15 ¶ 3 (Count III). Mooney claims that AXA then made efforts to disparage and discredit him in the eyes of his clients. ECF 15 ¶ 2 (Count III). Specifically, on or about January 17, 2013, AXA employees Justin Scheef and Greg Emmons met with one of Mooney's clients, Molly Schmittgen, and told her that Mooney " only knew about life insurance," " didn't know anything about investments," " hated helping clients with investing their money," and " invested her in all of the wrong accounts because he didn't know what he was doing." ECF 15 ¶ 4 (Count III).

After accepting his resignation, AXA stopped compensating Mooney under the Trademark License Agreement but continued to use the SARP mark. ECF 15 ¶ 23 (Preliminary Facts). Mooney claims that AXA has breached the Trademark License Agreement by failing to compensate Mooney for its continued use of the mark. ECF 15 ¶ 2 (Count VI).

Mooney then began working for The Leaders Group, Inc. (" Leaders" )--an independent securities broker dealer. ECF 15 ¶ 1 (Count I). Leaders and AXA compete with each other in the sale of variable annuities and variable life insurance products, including AXA-brand annuities and AXA-brand variable life insurance products. ECF 15 ¶ 3 (Count I). Leaders and AXA also compete with one another for experienced insurance agents to sell these products. ECF 15 ¶ 3 (Count I).

To become an AXA broker dealer, Leaders entered into an agreement (the " Broker Dealer Agreement" ) with AXA, which gave Leaders authority to market AXA-brand variable annuity and variable life

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insurance products. ECF 15 ¶ 5 (Count I). A provision of the Broker Dealer Agreement requires that, in the absence of AXA's written authorization, Leaders cannot appoint as an agent or advisor for the sale of AXA-brand products anyone who has previously worked with AXA for a period of twelve months after the termination of their AXA employment. ECF 15 ¶ 7 (Count I).

After hiring Mooney, Leaders and Mooney requested that AXA permit his appointment as an agent to market AXA products through Leaders. AXA denied the request. ECF 15 ¶ 8 (Count I). AXA's refusal prevented Mooney from selling AXA products and restrained Leaders from selling AXA products through Mooney. ECF 15 ¶ 8 (Count I).

In response, Mooney filed this action, claiming that (1) the hiring restriction in the Broker Dealer Agreement is an unreasonable restraint of trade under federal and New York law; (2) the comments made by Justin Scheef and Greg Emmons constitute defamation per se; and (3) AXA and certain of its entities breached the Representative, Associate, and Trademark Licensing Agreements.

III. Jurisdiction and Standard of Review

At this stage in the proceedings, the Court has jurisdiction pursuant to 28 U.S.C. § 1331 because Mooney's Sherman Act claim alleges a cause of action under a federal statute. Mooney also asserts that this Court has jurisdiction under 28 U.S.C. § 1332 because this action is between citizens of different states and the amount in controversy exceeds $75,000.

When deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court " must limit itself to facts stated in the complaint or in documents attached to the complaint as exhibits or incorporated in the complaint by reference." Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir. 1991). The Court must accept as true all well-pleaded allegations in the complaint and view them in the light most favorable to the nonmoving party. Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). A plaintiff need only allege facts to state a claim for relief that is plausible on its face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). To do this, a plaintiff must plead " factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

IV. Sherman Act and Donnelly Act Claims[4]

A. Contentions of the Parties

Mooney's position on his antitrust claims has been something of a moving target. In his Original Complaint, Mooney described the employee restriction in the Broker Dealer Agreement as " unrelated to any legitimate interest of AXA." Original Complaint, ECF 1 ¶ 10 (Count I). This phrasing alludes to the type of restraint that is treated as per se illegal under the antitrust laws. See Newburger, Loeb & Co. v. Gross, 563 F.2d 1057, 1082 (2d Cir. 1977) ( " Restraints on postemployment competition that serve no legitimate purpose at the time they are adopted would be

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per se invalid." ). Aside from this statement, the Original Complaint offered no characterization of what kind of unreasonable restraint AXA had imposed on Leaders.

The Original Complaint had other noticeable omissions. Although it alleged that the contested provision restricted the market for " insurance agents and representatives," ECF 1 ¶ 9 (Count I), it failed to plead (1) any discussion of substitutes or cross-elasticity of demand; (2) AXA's market share in the relevant market; or (3) how the alleged restraint had an anticompetitive effect on the relevant market. AXA's First Motion to Dismiss pointed out these deficiencies. AXA's Motion also went on to note that the Original Complaint only alleged harm to Mooney, not the market as a whole. ECF 11.

Mooney then filed an Amended Complaint, in which he added nineteen additional paragraphs of antitrust-related allegations to the Original Complaint's eleven. ECF 15. These additional allegations, however, do not clarify what market was being harmed by AXA's alleged restraint. At some points, the Amended Complaint seems to allege that the restriction in the Broker Dealer Agreement was a restraint on the insurance product market, ECF 15 ¶ 1 (Preliminary Facts), ¶ ¶ 27, 28 (Count I); at others points, a restraint on the insurance labor market of experienced AXA employees, ECF 15 ¶ 1 (Preliminary Facts), ¶ 29 (Count I).

Additionally, although the Amended Complaint now alleges AXA's market share, it only describes market share in certain insurance product markets, not in the insurance labor market. See ECF 15 ¶ ¶ 12-13, 18-20, 25 (Count I). The Amended Complaint also alleges that the restriction in the Broker Dealer Agreement constituted both an unreasonable vertical agreement as well as an unreasonable horizontal agreement--implicitly suggesting that the restraint was both per se illegal and unreasonable under the Supreme Court's rule-of-reason doctrine. ECF 15 ¶ 28 (Count I).

AXA filed a Motion to Dismiss the Amended Complaint. In its briefing, AXA observed that the Amended Complaint suffers from the same deficiencies as the Original Complaint. AXA argues that Mooney still fails to allege a relevant market because he has not pled any substitutes or explained why no substitutes were available in his proposed market. AXA also indicates that Mooney has not alleged that AXA had sufficient market share to influence the market by imposing the alleged restraint or that the alleged restraint had a direct anticompetitive effect on the market. Finally, AXA again states that Mooney has still only alleged an injury to himself, not an injury to the market as a whole. ECF 20.

The Court held oral argument on AXA's Motion to Dismiss on March 18, 2014. At the hearing, Mooney clarified his position on a variety of issues. First, he indicated that he was not pursuing a per se illegality theory. Second, in response to the Court inquiring about the Amended Complaint's lack of discussion regarding substitutes, Mooney stated that he did not have to allege substitutes because the relevant market was a labor market, not a product market. He also clarified that the alleged labor market was not for experienced insurance agents in general, but for current AXA and former AXA employees.[5] In response to the Court's inquiry about why it should accept a single-brand labor market in light of Second Circuit precedent,

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which generally rejects such a market definition, Mooney cited Bogan v. Hodgkins, 166 F.3d 509 (2d Cir. 1999) for the proposition that pleading a single-brand market can sustain an antitrust claim.[6]

Aside from pointing out the defects regarding market definition, market share, and antitrust injury in Mooney's Amended Complaint, AXA has repeatedly emphasized, both in its briefing and at oral argument, that the restriction in the Broker Dealer Agreement actually promotes competition. AXA points out that the contested provision only restricts intra brand competition--that is, competition among sellers of one particular brand. Restrictions on intra brand competition, AXA notes, support inter brand competition, which has procompetitive benefits because it encourages the sale of competing, non-AXA insurance products and thus strengthens the position of AXA's competitors in the marketplace. ECF 20 at 19-20 (citing Cont'l T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 52 n.19, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977) (noting that interbrand competition, rather than intrabrand competition, is the " primary concern of antitrust law" ); Gatt Commc'ns, Inc. v. PMS Assocs., LLC, 711 F.3d 68, 77 (2d Cir. 2013) (" [I]nhibitions on intrabrand competition . . . lie far from the core [Section] 1 violations that are likely to give rise to antitrust ...


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