Rice et al v. Wal-Mart Stores et al CV-02-390-B 09/30/03

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Vicki Rice, et a l .

v. Civil No. 02-390-B Opinion No.

Wal-Mart Stores. Inc.. et a l .

MEMORANDUM AND ORDER

Vicki Rice and Patricia Keenan, the widows of former

employees of Wal-Mart Stores, Inc., have brought this class

action challenging a program in which Wal-Mart purchased

corporate-owned life insurance ("COLI") policies on the lives of

more than a thousand of its rank-and-file employees in New

Hampshire. Plaintiffs characterize Wal-Mart's program as an

illegal investment and tax avoidance scheme which Wal-Mart

implemented by using its employees' names and confidential

medical information without their knowledge or consent.

Plaintiffs have sued Wal-Mart, a trust created by Wal-Mart

to implement the COLI program, and one of the insurers who issued

the policies on behalf of a class of "[a]11 New Hampshire

citizens (or the estates of such citizens) whose lives were insured by COLI policies issued by AIG Life Insurance Company or

Hartford Life Insurance Company to Wal-Mart Stores, Inc." Sec.

Am. Compl. 5 31. They seek to recover any life insurance

benefits that were paid to Wal-Mart under the program, any

premiums paid to the insurer and any damages that class members

suffered as a result of Wal-Mart's use of their names and

confidential medical information.

The defendants have filed motions to dismiss pursuant to

Fed. R. Civ. P. 12 (b) (6) .

I. BACKGROUND1

_____ Michael Rice and Robert Keenan were among more than a

thousand rank-and-file Wal-Mart employees in New Hampshire who

were insured by COLI policies purchased by Wal-Mart during the

1990s. Wal-Mart used the names and confidential medical

information of its employees to purchase the policies without

their knowledge or consent. When an employee insured under a

1 As is reguired by Fed. R. Civ. P. 12(b) (6), the following facts are described in a light most favorable to the nonmoving parties, in this case, the plaintiffs. See Dartmouth Review v. Dartmouth Coll.,

(1st Cir. 1989).

- 2 - COLI policies died, the benefits due under the policy were paid

to Wal-Mart rather than the insured employee's estate.

Rice worked as an employee for Wal-Mart for ten years prior

to his death in 1999. In 1998 and 1999, he worked as a manager

in its Hooksett, Tilton, and Concord, New Hampshire stores.

Keenan died in 1995. For last years of his life, he was a

maintenance worker at Wal-Mart's Somersworth, New Hampshire

store. Wal-Mart received $169,939 in benefits on the policy it

purchased on Rice's life and $381,658 in benefits on the policy

it purchased on Keenan's life.

II. ANALYSIS

_____ Plaintiffs claim that they are entitled to a declaratory

judgment that Wal-Mart lacked an insurable interest in the lives

of any class member.2 They also charge Wal-Mart and the other

2 Plaintiffs initially sought three declarations: (1) Wal- Mart at no time had an insurable interest in the lives of Michael Rice or Robert Keenan or any employee insured by the COLI scheme; (2) the proceeds of the COLI policies are payable to the estates and survivors of the employees insured; and (3) at all relevant times, the plaintiffs and employees insured by the COLI scheme have been the rightful owners of the policies insuring their lives. Sec. Am. Compl. 1 36a-c. They have since abandoned their second and third reguests. See Pis.' Obj. to Hartford Life's Mot. to Dismiss at 17.

- 3 - defendants with: breach of contract, commercial appropriation,

intrusion upon seclusion, breach of fiduciary duty, intentional

infliction of emotional distress, unjust enrichment and civil

conspiracy.

I examine defendants' challenge to each of these claims in

turn.

A. Declaratory Judgment (Count I)

Plaintiffs claim that they are entitled to a declaratory

judgment that Wal-Mart lacked an insurable interest in the lives

of any class member who was insured under the COLI program. I

disagree.

New Hampshire embraces the majority rule that "only the

insurer can raise the object of want of insurable interest."

Couch on Insurance, 3 Couch § 41:5; see Knights of Honor v.

Watson,

(1888); Brown v. Mansur,

(1886).

Because plaintiffs are clearly not insurers, they do not have the

ability to raise such a challenge. As such, they may not obtain

a declaration that Wal-Mart did not have an insurable interest in

the lives of its insured employees. Nor may they, on this basis,

state a claim to any benefits paid to Wal-Mart under the

policies. I thus grant Hartford Life's motion to dismiss as to

- 4 - plaintiffs' request for a declaratory judgment.

B. Breach of Contract Claim (Count II)

Plaintiffs contend that Wal-Mart breached the implied duty

of good faith that is "inherent in the employment relationship"

when it used Robert Keenan and Michael Rice's names and other

confidential information to purchase COLI policies on their

lives. Pis.' Obj. to Def. Wal-Mart's Mot. to Dismiss at 4. Wal-

Mart moves to dismiss arguing that plaintiffs' claim fails as a

matter of law because they have not alleged facts "that even

remotely suggest that Wal-Mart denied Michael Rice or Robert

Keenan an essential benefit of their employment." Def. Wal-

Mart's Mot. to Dismiss at 6 (citing Centronics Corp. v. Genicom

Corp.,

(1989)).

Robert Keenan and Michael Rice were at-will employees, a

fact plaintiffs do not dispute. In exchange for their work, Wal-

Mart promised Keenan and Rice salary and benefits. Sec. Am.

Compl. 5 40. Plaintiffs do not allege that the COLI policies

contravened Wal-Mart's duty to pay their salary or benefits.

Thus, the conduct plaintiffs allege resulted in the breach was

"wholly independent of any obligation [Wal-Mart] may have owed

its at-will employees." Def. Wal-Mart's Mot. to Dismiss at 6.

- 5 - Although Wal-Mart's COLI program may have exposed it to liability

on a tort theory, it did not violate Wal-Mart's contractual

duties to its employees. See Centronics,

; see

also White v. Ransmeier & Spellman,

(D.N.H.

1996). As such, I grant Wal-Mart's motion to dismiss plaintiffs'

breach of contract claim.

C. Commercial Appropriation (Count III)

In Remsberq v. Docusearch, Inc.,

(2003), the New Hampshire Supreme Court recognized a cause of

action for commercial appropriation.

(citing Restatement

(Second) of Torts § 652C cmt. a (1977)). In doing so, however,

the court noted that " [a]ppropriation is not actionable if the

person's name or likeness is published for 'purposes other than

taking advantage of [the person's] reputation, prestige or other

value' associated with the person." Id. at 158 (guoting

Restatement (Second) of Torts § 652C cmt. d ) . Thus, the court

declined to recognize a claim for commercial appropriation

against an information broker who sold the plaintiff's social

security number and business address to a third party because

[a]n investigator who sells personal information sells the information for the value of the information itself, not to take advantage of the person's reputation or

- 6 - prestige. The investigator does not capitalize upon the good will value associated with the information but rather upon the client's willingness to pay for the information. In other words, the benefit derived from the sale in no way relates to the social or commercial standing of the person whose information is sold.

Id.

Remsburg destroys plaintiffs commercial appropriation claim

because Wal-Mart did not exploit either Rice's or Keenan's

reputations or prestige when it purchased COLI policies in their

names. Instead, it merely used their status as employees to

purchase insurance policies on their lives. This is not the kind

of conduct that gives rise to a viable commercial appropriation

claim.

D. Intrusion Upon Seclusion (Count IV)

A viable claim for intrusion upon seclusion reguires that

the intrusion "relate to something secret, secluded or private

pertaining to the plaintiff[s]." Remsburg,

(citing Fischer v. Hooper,

(1999)); see

Hamberger v. Eastman,

(1964). In addition,

defendants' conduct must be such that they "should have realized

that it would be offensive to persons of ordinary sensibilities."

Remsberg,

.

- 7 - Defendants argue that plaintiffs do not state a viable claim

for intrusion upon seclusion because the information obtained was

not "secret, secluded or private." At this stage, however, I

must take the statements plaintiffs aver in their complaint as

true. Plaintiffs have clearly alleged that Wal-Mart obtained and

used "confidential health and other information" concerning both

Rice and Keenan to purchase COLI policies on their lives. Sec.

Am. Compl. 5 51. As such, I reject defendants' challenge to

plaintiffs' intrusion upon seclusion claim on this basis.

Defendants also argue that plaintiffs' claim fails because

plaintiffs' medical information was not confidential because

plaintiffs voluntarily gave Wal-Mart the information in their

personnel files. I disagree. Simply because plaintiffs

voluntarily provided Wal-Mart with confidential information does

not permit Wal-Mart to use that information however it desires

without potentially intruding upon the privacy rights of its

employees. See Remsburg,14 9 N.H. at 156-57 (a fact-finder should

consider a variety of factors in determining whether an intrusion

would be offensive to a person of ordinary sensibilities

including "the degree of intrusion, context, conduct and

circumstances surrounding the intrusion as well as the intruder's motives and objectives, the setting into which he intrudes, and

the expectations of those whose privacy is invaded." (internal

quotation omitted)). Accordingly, I deny Wal-Mart and Wal-Mart

Trust's motion to dismiss as to plaintiffs' claim for intrusion

upon seclusion.

Hartford Life puts forth an additional argument pertaining

exclusively to it which I find persuasive. Citing Karch v.

BavBank,

(2002), Hartford Life argues that because

it received Keenan's and Rice's information from Wal-Mart, it did

not engage in the intrusion itself and it cannot be held liable

for any potential intrusion by Wal-Mart. In Karch, the New

Hampshire Supreme Court held that a passive party who received

private information could not be held liable for intrusion upon

seclusion because the passive party did not engage in the actual

intrusion. See Karch,

. The present case is

controlled by Karch. Accordingly, I dismiss plaintiffs'

intrusion upon seclusion claim as it pertains to defendant

Hartford Life.

E. Breach of Fiduciary Duty (Count VI)

Plaintiffs allege that Wal-Mart owed a fiduciary duty to

Michael Rice and Robert Keenan, "both of whom reposed in Wal-Mart confidential personal and medical information." Sec. Am. Compl.

5 65. Wal-Mart breached that fiduciary duty, plaintiffs argue,

by taking advantage of personal and confidential medical

information to purchase COLI policies. Under New Hampshire law,

a fiduciary relationship exists when "there has been a special

confidence reposed in one who, in eguity and in good conscience,

is bound to act in good faith and with due regard to the

interests of the one reposing the confidence." Lash v. Cheshire

County Sav. Bank,

(1984) (internal guotation

omitted). "A fiduciary relationship does not depend upon some

technical relation created by, or defined in, law." Schneider v.

Plymouth State Coll.,

(1999) (guoting Lash,

) .

Wal-Mart argues, citing Cornwell v. Cornwell,

(1976), that this claim should be dismissed because

plaintiffs have not established that a fiduciary relationship

existed between it and either Michael Rice or Robert Keenan. I

reject this argument. Plaintiffs allege that Michael Rice and

Robert Keenan gave confidential and personal information to Wal-

Mart. They further allege that Wal-Mart was "in the role of a

moral person, reguired to respect the trust Michael Rice and

- 10 - Robert Keenan placed in [ i t ] S e c . Am. Compl. 5 66. Lastly,

plaintiffs clearly state that Wal-Mart abused its relationship by

misusing their personal and confidential information to obtain

the COLI policies. Sec. Am. Compl. 5 67. This is sufficient, if

true, to support a breach of fiduciary duty claim.

Wal-Mart also argues that plaintiffs' breach of fiduciary

duty claim should be dismissed because "plaintiffs have not

alleged any harm or damage as a result of Wal-Mart insuring the

lives of Michael Rice or Robert Keenan." Def. Wal-Mart's Mot. to

Dismiss at 7. I disagree. It is sufficient, at least at this

stage, that plaintiffs allege that Wal-Mart profited when it

breached its fiduciary duty to Robert Keenan and Michael Rice and

that they were injured as a result. See Cornwell,

(commenting on the trend to allow fiduciary duty claim to

prevent unjust enrichment). Accordingly, I deny Wal-Mart's

motion to dismiss plaintiffs' breach of fiduciary duty claim.

F. Intentional Infliction of Emotional Distress (Count IX)

Plaintiffs allege that they were "shocked, outraged and

severely distressed" when they learned that Wal-Mart had

purchased COLI policies on their husbands' lives. Sec. Am.

Compl. 5 83, 85. In order for plaintiffs' intentional infliction

- 11 - of emotional distress claim to survive defendants' motion to

dismiss, they must allege facts sufficient to permit an inference

that defendants "by extreme or outrageous conduct intentionally

or recklessly cause[d] severe emotional distress." Morancv v.

Morancv,

(1991)(citing Restatement (Second)

of Torts § 46 (1965)); Konefal v. Hollis/Brookline Coop. Sch.

Dist.,

(1998). Plaintiffs utterly fail to

allege the kind of intentional or reckless behavior warranting

the imposition of liability. See Konefal,

. As

such, I dismiss plaintiffs' claim for intentional infliction of

emotional distress against all defendants.

G. Unjust Enrichment (Count VII)

Plaintiffs allege that all defendants have been unjustly

enriched as a result of the COLI scheme. Specifically, they

contend that Wal-Mart and Hartford Life "made use of confidential

health information to obtain life insurance benefits and tax

advantages that the defendants knew or should have known were

unlawful, without the knowledge or consent of Michael Rice and

Robert Keenan." Sec. Am. Compl. 5 70. In addition, plaintiffs

aver that by engaging in the COLI scheme to insure the lives of

employees in the absence of an insurable interest, "the

- 12 - defendants unjustly obtained a benefit which it would be

unconscionable to allow them to retain." Sec. Am. Compl. 5 71.

Under New Hampshire common law, "the doctrine of unjust

enrichment is that one shall not be allowed to profit or enrich

himself at the expense of another contrary to equity." Invest

Almaz v. Temple-Inland Forest Prods. Corp.,

(1st

Cir. 2001)(citing Cohen v. Frank Developers,

(1978)). In order for me to find that a defendant was unjustly

enriched, I must determine that "the defendant 'received a

benefit and it would be unconscionable for the defendant to

retain that benefit.'" Invest Almaz,

(quoting

Nat'l Employment Serv. Corp. v. Olsten Staffing Serv., Inc.,

(2000)). Defendants challenge plaintiffs' unjust

enrichment claim by arguing that plaintiffs never conferred any

benefit on any of them that would be unjust for them to retain.

Plaintiffs contend that although they did not confer a benefit on

the defendants, they are liable because they "took the benefit"

from plaintiffs without their knowledge or consent. At this

stage, plaintiffs have sufficiently alleged that the defendants

have "profit[ed] or enrich[ed] [themselves] at the expense of

[plaintiffs]." Cohen,

. As such, I deny Wal-Mart

- 13 - and Wal-Mart Trust's motion to dismiss as to plaintiffs' unjust

enrichment claim.

Hartford Life makes additional arguments in its motion to

dismiss. First, it claims that "there is no support for the

theory that an insurer is liable if the beneficiary of a life

insurance policy lacks an insurable interest in the person whose

life is insured." Hartford Life's Mot. to Dismiss at 15.

Second, it argues that plaintiffs fail to support their assertion

that they knew or should have known that Wal-Mart had no

insurable interest in Michael Rice. I reject Hartford Life's

arguments. First, determining whether Wal-Mart had an insurable

interest in the lives of the insured employees involves a fact-

sensitive inguiry which is not proper at this stage of the

proceedings. Second, plaintiffs do allege that Hartford Life

"knew or should have known" that Wal-Mart lacked an insurable

interest in the lives of its employees. Sec. Am. Compl. 5 70.

This statement is sufficient to link Hartford Life to the

potential unjust enrichment.

For the forgoing reasons, I deny all defendants' motions to

dismiss as to plaintiffs' unjust enrichment claim.

- 14 - H. Civil Conspiracy (Count V)

"A civil conspiracy is a combination of two or more persons

by concerted action to accomplish an unlawful purpose." Jav

Edwards, Inc. v. Baker,

(1987) (internal

quotation omitted). The elements of civil conspiracy are: (1)

two or more persons (including corporations); (2) an unlawful

object to be achieved by lawful or unlawful means or a lawful

object to be achieved by unlawful means; (3) an agreement on the

object or course of action; (4) one or more unlawful overt acts;

(5) damages proximately resulting from the acts.

The

function, under New Hampshire law, of a civil conspiracy claim is

to act as a "device through which vicarious liability for the

underlying tort may be imposed on all who commonly plan . . . the

wrongdoers' acts." Univ. Svs. of N.H. v. U.S. Gypsum Co.,

(D.N.H. 1991).

Plaintiffs allege that, by using confidential medical

information to engage in a COLI scheme, defendants agreed to an

unlawful objective. Sec. Am. Compl. 5 63. Defendants respond by

claiming that plaintiffs' civil conspiracy claim fails because

civil conspiracy is not an independent cause of action and

plaintiffs have failed to properly plead an underlying actionable

- 15 - wrong. See University Svs. of N.H., 765 F.Supp. at 652. Because

I have already determined that plaintiffs have sufficiently

pleaded a cause of action for intrusion upon seclusion against

Wal-Mart, a viable underlying tort claim exists to sustain

plaintiffs' civil conspiracy claim.3

Because I find plaintiffs have sufficiently pleaded the

elements of civil conspiracy, their claim withstands defendants'

motion to dismiss.

III. CONCLUSION

I grant Wal-Mart and Wal-Mart Trust's motion to dismiss, in

part and deny it in part. (Doc. No. 30). I also grant Hartford

Life's motion to dismiss in part and deny it in part. (Doc. No.

31). By way of summary, plaintiffs' claims are now as follows:

3 Wal-Mart also argues that plaintiffs have failed to allege that defendants exercised "some peculiar power of coercion" over them. Carroll v. Xerox Corp.,

(1st Cir. 2002). In Carroll, the First Circuit interpreted Massachusetts' law of civil conspiracy and Wal-Mart fails to point to a single New Hampshire case reguiring a plaintiff to plead "some peculiar power of coercion."

As such, I reject Wal-Mart's argument.

- 16 - Count Wal-Mart, Wal-Mart 'Hartford Life

Trust Count I : Declaratory Wal-Mart did not Granted as modified Relief move to dismiss this by plaintiffs' count clarification. Count II: Breach of Granted Not applicable Contract Count III: Granted Granted Commercial Appropriation Count IV: Intrusion Denied Granted Upon Seclusion Count V: Civil Denied Denied Conspiracy Count V I : Breach of Denied Not applicable Fiduciary Duty Count VII: Unjust Denied Denied Enrichment Count VIII: Unfair Stipulated dismissal Stipulated dismissal Trade Practices Count IX: Granted Granted Intentional Infliction of Emotional Distress

SO ORDERED.

Paul Barbadoro Chief Judge

September 30, 2003

- 17 - cc: David P. Slawsky, Esq. William Pandolph, Esq. Jeffrey Moss, Esq. Paul Fischer, Esq. Paul Hodes, Esq. W. Michael Dunn, Esq. Barry Chasnoff, Esq.

- 18 -