Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

Lesley and Fogg presented the Benistar 419 Plan to the Ouwingas, their accountant, and their attorney, providing a legal opinion that contributions were tax-deductible and that the Ouwingas could take money out tax-free. The Ouwingas made substantial contributions, which were used to purchase John Hancock life insurance policies. In 2003, Lesley and Fogg told the Ouwingas that the IRS had changed the rules; that the Ouwingas would need to contribute additional money; and that, while this might signal closing of the “loophole,” there was no concern about tax benefits already claimed. In 2006, the Ouwingas decided to transfer out of the Plans. John Hancock again advised that there would be no taxable consequences and that the Plan met IRS requirements for tax deductible treatment. The Ouwingas signed a purported liability release. In 2008, the IRS notified the Ouwingas that it was disallowing deductions, deeming the Plan an “abusive tax shelter.” The Ouwingas filed a class action against Benistar Defendants, John Hancock entities, lawyers, Lesley, and Fogg, alleging conspiracy to defraud (RICO, 18 U.S.C. 1962(c), (d)), negligent misrepresentation, fraudulent misrepresentation, unjust enrichment, breach of fiduciary duty, breach of contract, and violations of consumer protection laws. The district court dismissed. The Sixth Circuit reversed, View "Ouwinga v. Benistar 419 Plan Servs., Inc." on Justia Law

Former Fifth Third employees participated in a defined contribution retirement plan with Fifth Third as trustee. Participants make voluntary contributions and direct the Plan to purchase investments for their individual accounts from preselected options. The options included Fifth Third Stock, two collective funds, or 17 mutual funds. Fifth Third makes matching contributions for eligible participants that are initially invested in the Fifth Third Stock Fund but may be moved later to other investment options. Significant Plan assets were invested in Fifth Third Stock. Plan fiduciaries incorporated by reference Fifth Third’s SEC filings into the Summary Plan Description. Plaintiffs allege that Fifth Third switched from being a conservative lender to a subprime lender, its loan portfolio became increasingly at-risk, and it either failed to disclose or provided misleading disclosures. The price of the stock declined 74 percent. The district court dismissed a complaint under the Employee Retirement Income Security Act, 29 U.S.C. 1001, based on a presumption that the decision to remain invested in employer securities was reasonable. The Sixth Circuit reversed, holding that the complaint plausibly alleged a claim of breach of fiduciary duty and causal connection regarding failure to divest the Plan of Fifth Third Stock and remove that stock as an investment option. View "Dudenhoefer v. Fifth Third Bancorp" on Justia Law

Policyholders claimed that their insurers incorrectly taxed their premiums as a result of the insurers’ failure to correctly identify the taxing jurisdiction in which the insured risks of each policyholder were located. Kentucky authorizes local governments to tax insurance premiums, Ky. Rev. Stat. Ann. 91A.080, and to charge a “reasonable collection fee. Insurers pass the tax on to the insureds along with the collection fee. Plaintiffs’ claims were narrowed to illegal dealing in premiums, negligence, conversion, and a declaration of rights; they sought refunds and injunctive and declarative relief. After rejecting an argument that it lacked jurisdiction because Kentucky law allowed an administrative remedy, the district court bifurcated class certification discovery from merits-based discovery, then subdivided plaintiffs into 10 subclasses, one for each insurer, and severed the subclasses into separate actions. The district court found the class ascertainable and administratively feasible, the Rule 23(a) prerequisites (numerosity, commonality, typicality and adequacy of representation) met, and the Rule 23(b)(3) requirements (that class litigation is superior and common questions predominate over individuals ones) satisfied. After settlements, only five appeals remained. The Sixth Circuit affirmed. View "Dyas v. State Farm Fire & Cas. Ins." on Justia Law

Plaintiffs sought to recover on behalf of themselves and similarly-situated employees and retirees of the City of Cincinnati the current value of the 870,021 shares of Anthem stock that the City received from Anthem’s demutualization. Plaintiffs asserted eight claims for breach of contract and four tort claims against Anthem and three breach of contract claims and four tort claims against the City. The district court certified the class: 2,536 people named as insureds, or former members of a group of insured persons, covered under a health care group policy from June 18 through November 2, 2001. The class included “Class A” members, who had an insurance policy with Anthem prior to its merger with Community in 1995 and “Class B” members who received a health insurance group policy after the merger. The court later dismissed. The Sixth Circuit, exercising jurisdiction under the Class Action Fairness Act of 2005, 28 U.S.C. 1332(d), affirmed. Plaintiffs cannot recover any demutualization compensation; the City was the policyholder before the merger and maintained its policyholder rights post-merger through a grandfather clause, including any rights to demutualization proceeds. The 2001 demutualization process did not disrupt the City’s membership interests or confer any equity rights to Plaintiffs. View "Mell v. Anthem, Inc." on Justia Law

Plaintiffs sued on behalf of a class of similarly-situated participants and beneficiaries of the Keycorp 401(k) Savings Plan, under the Employee Retirement Income Security Act, 29 U.S.C. 1109, 1132, alleging that defendants breached their duties by failing to prudently manage the Plan’s investment in KeyCorp securities; that defendants failed to adequately inform participants about the true risk of investing in KeyCorp stock; that certain defendants breached fiduciary duties by failing to adequately monitor the management and administration of Plan assets; that certain defendants failed to avoid impermissible conflicts of interest; and that certain defendants are liable for the breaches of fiduciary duty committed by their co-fiduciaries. The district court dismissed one plaintiff because she had benefited from the alleged breaches of fiduciary duty, which allowed her to sell the majority of her holdings at an inflated price. The court denied a motion to allow another to intervene as named plaintiff. The Sixth Circuit affirmed.

OneBeacon and AMICO were insurers of the B.F. Goodrich and, among others, were liable for environmental cleanup at the Goodrich plant in Calvert City, Kentucky. AMICO settled with Goodrich, but OneBeacon’s predecessor went to trial. A state court jury found for Goodrich, and OneBeacon was ordered to pay $42 million in compensatory damages and $12 million in attorney fees. The state court also denied OneBeacon's request for settlement credits to reflect amounts paid by other insurers, such as AMICO, through settlements with Goodrich. OneBeacon sought equitable contribution; AMICO removed to federal court. The district court granted AMICO summary judgment. The Sixth Circuit affirmed. Ohio policy favoring settlements provides that a settled policy is exhausted for purposes of equitable contribution; the court declined to address whether Ohio law permits interclass contribution actions or whether the jury finding of bad faith bars equitable relief.

Mortgage Electronic is a third party in a foreclosure action, based on its assignment of a mortgage. The case was remanded from federal to Kentucky state court. Mortgage Electronic sought permission to appeal to the Sixth Circuit (28 U.S.C. 1453(c)). The Class Action Fairness Act of 2005, 28 U.S.C. 1332(d), allows the court to accept an appeal from an order of a district court granting or denying a motion to remand a class action if the application for leave to appeal is timely. The Sixth Circuit granted the petition and affirmed, noting that it has previously held that third-party defendants may not remove an action not under the Act. The Act's reference to "any defendant," in context, does not change the rule: a third-party defendant cannot seek removal of a state court action under the Act.

The named plaintiffs are Ohio residents who purchased front-loading washing machines manufactured by defendant. Within months after their purchases, the plaintiffs noticed the smell of mold or mildew emanating from the machines and from laundry washed in the machines. One plaintiff found mold growing on the sides of the detergent dispenser, another saw mold growing on the rubber door seal, despite allowing the machine doors to stand open. They filed suit, alleging tortious breach of warranty, negligent design, and negligent failure to warn. The district court certified a class comprised of Ohio residents who purchased one of the specified machines in Ohio primarily for personal, family, or household purposes and not for resale (Federal Rule of Civil Procedure 23(a) and (b)(3)). The Sixth Circuit affirmed class certification, with proof of damages reserved for individual determination. Plaintiffs’ proof established numerosity, commonality, typicality, and adequate representation. Common questions predominate over individual ones and class action is a superior method to adjudicate the claims.

The attorney represented more than 400 plaintiffs in a class action related to the diet drug Fen-Phen. Lawyers’ fees were to be limited to 30 percent of the clients' gross recovery. The case settled for almost $200 million. Plaintiffs together received $74 million, 37 percent of the settlement; $20 million was used to establish Kentucky Fund for Healthy Living. The attorney served on the Fund’s board, for which he received $5,350 monthly. The attorney knew that the Kentucky Bar Association was investigating fee division in the case and possible unauthorized practice of law by his paralegal. The attorney subsequently applied to renew his malpractice insurance and answered "no" to questions about possible pending claims and investigations. The policy excluded coverage for dishonest acts and omissions. Members of the class subsequently filed malpractice claims and were awarded $42 million. The insurer sought a declaration that it was entitled to rescind the policy. The district court granted the insurer summary judgment and awarded $233,674.49 for its outlay on defense costs. Class members intervened to protect their ability to recover. The Sixth Circuit affirmed. Disbarment constituted a sufficient "regulatory ruling" under the dishonesty exclusion clause and there were material misrepresentations on the application.

Plaintiff rented a car, drove 64 miles in one day, refilled the fuel tank, and returned the car to the same location from which he rented the car. In addition to rental and other fees that he does not dispute, he was charged a $13.99 fuel service fee that he challenged by filing a putative class action, claiming breach of contract, fraud, and unjust enrichment. Defendant claimed that, because plaintiff drove fewer than 75 miles during the rental period, to avoid the charge he was required to return the car with a full fuel tank and to submit a receipt. The district court dismissed, finding that the contract was not ambiguous. The Sixth Circuit affirmed, citing the voluntary payment doctrine.