                 FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT


MARY HELEN ELLER,                         No. 12-17119
                             Plaintiff,
                                             D.C. No.
                 and                      4:09-cv-00029-
                                               DCB
PAUL HARRINGTON, individually and
on behalf of all others similarly
situated,
                   Plaintiff-Appellant,

                  v.

EQUITRUST LIFE INSURANCE
COMPANY,
              Defendant-Appellee.
2        HARRINGTON V. EQUITRUST LIFE INS. CO.

MARY HELEN ELLER,                           No. 12-17267
                             Plaintiff,
                                               D.C. No.
                  and                       4:09-cv-00029-
                                                 DCB
PAUL HARRINGTON, individually and
on behalf of all others similarly
situated,                                     OPINION
                    Plaintiff-Appellee,

                   v.

EQUITRUST LIFE INSURANCE
COMPANY,
             Defendant-Appellant.


        Appeal from the United States District Court
                 for the District of Arizona
         David C. Bury, District Judge, Presiding

                 Argued and Submitted
       December 11, 2014—San Francisco, California

                  Filed February 24, 2015

    Before: Diarmuid F. O’Scannlain, Raymond C. Fisher,
           and Andrew D. Hurwitz, Circuit Judges.

                 Opinion by Judge Hurwitz
          HARRINGTON V. EQUITRUST LIFE INS. CO.                       3

                           SUMMARY*


                                RICO

    The panel affirmed the district court’s summary judgment
and vacated its denial of costs in a putative class action
alleging violations of federal and state law in the sale of
annuities.

    Affirming the district court’s grant of summary judgment
in favor of the defendant on a RICO claim, the panel held that
the plaintiff failed to establish any actionable predicate acts
in alleged fraudulent schemes concerning the promise of
premium bonuses, the application of the annuity’s market
value adjustment, or the circumvention of state nonforfeiture
laws. The panel also affirmed the district court’s summary
judgment on state-law claims.

    Vacating the unexplained denial of costs, the panel
remanded to allow the district court either to award costs or
to state its reasons for denying them.


                            COUNSEL

Steve W. Berman (argued), Hagens Berman Sobol Shapiro
LLP, Seattle, Washington; Elaine T. Byszewski, Hagens
Berman Sobol Shapiro LLP, Pasadena, California, for
Plaintiff-Appellant.


  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4        HARRINGTON V. EQUITRUST LIFE INS. CO.

Margaret A. Grignon (argued), Robert D. Phillips, Jr.,
Brandon W. Corbridge, Reed Smith LLP, Los Angeles,
California, for Defendant-Appellee.


                         OPINION

HURWITZ, Circuit Judge:

                      I. Introduction

    This is a putative class action against EquiTrust Life
Insurance Company (“EquiTrust”), alleging violations of
federal and state law in the sale of annuities. The district
court granted EquiTrust’s motion for summary judgment, but,
without explanation, declined to award costs to the prevailing
party. We affirm the summary judgment, but vacate the
denial of costs and remand for the district court either to
award costs or explain its refusal.

                          II. Facts

                      A. The Annuity

    In 2007, Paul Harrington purchased an EquiTrust
MarketPower Bonus Index Annuity (the “Annuity”) from an
insurance agency. The Annuity uses “index accounts” to
generate “index credits” that increase the Annuity’s
accumulation value (the total amount in the account). Index
credits (essentially interest) are calculated based on periodic
           HARRINGTON V. EQUITRUST LIFE INS. CO.                          5

changes in the closing value of the S&P 500.1 EquiTrust has
the express discretion to choose the amount of index credits
awarded (the “index cap”), but the Annuity guarantees a
minimum cap.

    The Annuity permits annual withdrawals of up to 10% of
the accumulation value with no penalty. Larger withdrawals
are subject to: (1) a surrender charge, a specified percentage
of the accumulation value that decreases each year until it
disappears in the fourteenth year; and (2) a market value
adjustment, which increases or decreases the accumulation
value based on interest rates in the market.2 After his 105th
birthday, the annuitant can opt to receive the accumulation
value incrementally for a specified period without any
surrender charges or market value adjustments. When the
annuitant dies, the full accumulation value is available to
beneficiaries.

   Harrington’s initial premium was $432,530.92. The
Annuity included a “10% premium bonus,” under which
EquiTrust added to the accumulation value a sum equal to
10% of the premiums paid during the first year. The


 1
   Harrington had two index accounts. For the 1-year Average Cap Index
Account, index credits are based on a comparison of the percentage
change in the S&P 500 from the previous Annuity contract anniversary
date to the daily average of the S&P 500 over the intervening year. For
the 2-year Average Cap Index Account, the comparison is to the monthly
average over the two-year period between Annuity Anniversaries.
 2
   A full surrender receives the cash surrender value, which is the greater
of (a) the accumulation value less the penalties discussed above; or (b) the
minimum guaranteed contract value, which is “87.5% of Premium Paid
(excluding any Premium Bonus), less any partial withdrawals, plus
interest earned at a rate no lower than 1% and no higher than 3%.”
6              HARRINGTON V. EQUITRUST LIFE INS. CO.

accumulation value of Harrington’s account was thus
immediately increased by 10% ($43,253.10).3

                      B. Procedural Background

    In 2009, Harrington filed this putative class action in the
District of Arizona, alleging that EquiTrust’s marketing of the
Annuity violated the Racketeer Influenced and Corrupt
Organizations (“RICO”) Act, 18 U.S.C. § 1962(c), and
Arizona law. Harrington later filed a motion for class
certification, and EquiTrust filed a motion for summary
judgment. The district court granted EquiTrust’s motion,
denied class certification as moot, and entered judgment for
the defendant. The court, however, declined without
explanation to award costs to the prevailing party. Harrington
timely appealed the judgment, and EquiTrust timely appealed
the denial of costs.

                              III. Discussion

    A RICO claim requires “racketeering activity (known as
predicate acts).” Living Designs, Inc. v. E.I. Dupont de
Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005) (quoting
Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996))
(internal quotation marks omitted). The racketeering
activities alleged by Harrington were violations of 18 U.S.C.
§ 1341 (mail fraud) and 18 U.S.C. § 1343 (wire fraud). See
18 U.S.C. § 1961(1) (identifying violations of these statutes
as racketeering activity).

    Mail and wire fraud can be premised on either a non-
disclosure or an affirmative misrepresentation. See United

    3
        Harrington later withdrew $43,253 without penalty.
         HARRINGTON V. EQUITRUST LIFE INS. CO.                 7

States v. Benny, 786 F.2d 1410, 1418 (9th Cir. 1986). A non-
disclosure, however, can support a fraud charge only “when
there exists an independent duty that has been breached by
the person so charged.” United States v. Dowling, 739 F.2d
1445, 1449 (9th Cir. 1984), rev’d on other grounds, 473 U.S.
207 (1985). “Absent an independent duty, such as a fiduciary
duty or an explicit statutory duty, failure to disclose cannot be
the basis of a [RICO] fraudulent scheme.” Cal. Architectural
Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d
1466, 1472 (9th Cir. 1987) (citing Dowling, 739 F.2d at
1449).

    Harrington’s complaint is based entirely on the language
of the Annuity contract and the EquiTrust marketing
materials; he makes no claim of misrepresentation by the
insurance agency that sold him the Annuity. Harrington
alleges three fraudulent schemes: (1) the promise of premium
bonuses; (2) the application of the Annuity’s market value
adjustment; and (3) the circumvention of state nonforfeiture
laws. The district court found no actionable predicate acts,
and we agree.

                  A. The Premium Bonus

    Harrington claims that the promise in the Annuity of a
“10% premium bonus” was fraudulent because EquiTrust
failed to disclose that it does not invest any additional money
in the market when crediting the bonus to an annuitant’s
account, and eventually “recoups” the bonus by crediting
lower index credits to the Annuity than it might have in an
annuity contract without the bonus feature. Harrington also
argues that the “10% bonus” is illusory, because the ultimate
increase over time in the accumulation value from the bonus
8         HARRINGTON V. EQUITRUST LIFE INS. CO.

might be less than increases that would occur for an annuity
which provided higher returns.

    We begin from the settled premise that a seller generally
has no duty to disclose internal pricing policies or its method
for valuing what it sells. Thus, in Thorman v. American
Seafoods Co., we held that there was no fraudulent
concealment by a fishing company that did not disclose its
methodology for determining wages because, in the absence
of a fiduciary relationship or a statutory duty, the company’s
“silence or passive conduct does not constitute fraudulent
concealment.” 421 F.3d 1090, 1095 (9th Cir. 2005) (quoting
Volk v. D.A. Davidson & Co., 816 F.2d 1406, 1416 (9th Cir.
1987)). Courts in other circuits agree. See, e.g., Langford v.
Rite Aid of Ala., Inc., 231 F.3d 1308, 1313–14 (11th Cir.
2000) (“As a general matter of federal law, retailers are under
no obligation to disclose their pricing structure to
consumers.”); Bonilla v. Volvo Car Corp., 150 F.3d 62, 71
(1st Cir. 1998); Katzman v. Victoria’s Secret Catalogue, 167
F.R.D. 649, 656 (S.D.N.Y. 1996), aff’d, 113 F.3d 1229 (2d
Cir. 1997) (unpublished).

    Harrington does not allege that EquiTrust was a fiduciary
or that some statute required the disclosure of its internal
pricing policies. In the absence of such a relationship, there
is no duty to disclose that the Annuity may provide lower
index credits than might have been available in an alternative
product without the bonus feature. See Cal. Architectural,
818 F.2d at 1472.4


    4
     A number of district courts have reached the same conclusion in
evaluating comparable annuities. See, e.g., Kennedy v. Jackson Nat’l Life
Ins. Co., No. C 07–0371 CW, 2010 WL 4123994, at *11–13 (N.D. Cal.
Oct. 6, 2010); Cirzoveto v. AIG Annuity Ins. Co., 625 F. Supp. 2d 623,
          HARRINGTON V. EQUITRUST LIFE INS. CO.                       9

    Of course, even absent a duty to disclose, a seller can be
liable for affirmatively misrepresenting its product. See
Lustiger v. United States, 386 F.2d 132, 136 (9th Cir. 1967);
see also Benny, 786 F.2d at 1418. Thus, if an annuity
company promises a bonus, but does not deliver as
advertised, there can be actionable misrepresentation.5

    But it is uncontested here that EquiTrust delivered
precisely what it promised. The 10% bonus was accurately
described in the Annuity materials and properly credited to
Harrington’s account. The bonus increased Harrington’s
accumulation value without requiring him to deposit
additional funds, allowing him to withdraw more money
without penalty than otherwise would have been possible.
The promise of a “bonus” was thus not, as Harrington claims,
illusory. See Kennedy v. Jackson Nat’l Life Ins. Co., No. C
07–0371 CW, 2010 WL 4123994, at *11 (N.D. Cal. Oct. 6,
2010) (finding that added liquidity is a bonus). Nor is it clear
that Harrington would have been better off absent the bonus
feature. If the index credits were regularly low, Harrington’s
investment would outperform a non-bonus annuity that



628–31 (W.D. Tenn. 2009); Phillips v. Am. Int’l Grp., Inc., 498 F. Supp.
2d 690, 696–98 (S.D.N.Y. 2007); Delaney v. Am. Express Co., Civ. No.
06–5134 (JAP), 2007 WL 1420766, at *5–6 (D.N.J. May 11, 2007); Sayer
v. Lincoln Nat’l Life Ins. Co., No. 7:05–CV–1423–RDP, 2006 WL
6253201, at *7–10 (N.D. Ala. Oct. 12, 2006).
  5
     See, e.g., In re Nat’l W. Life Ins. Deferred Annuities Litig., No.
05cv1018 AJB (WVG), 2012 WL 440820, at *4–5 (S.D. Cal. Feb. 10,
2012); Negrete v. Allianz Life Ins. Co. of N. Am., Nos. CV 05–6838 CAS
(MANx), CV 05–8908 CAS (MANx), 2011 WL 4852314, at *11–14
(C.D. Cal. Oct. 13, 2011); Iorio v. Allianz Life Ins. Co. of N. Am., No.
05CV633 JLS (CAB), 2008 WL 8929013, at *9–12, *14–16 (S.D. Cal.
July 8, 2008).
10         HARRINGTON V. EQUITRUST LIFE INS. CO.

provided the possibility of higher credits.6 The district court
thus correctly concluded that use of the term “bonus” was not
fraudulent. Compare, e.g., Cirzoveto v. AIG Annuity Ins. Co.,
625 F. Supp. 2d 623, 627 (W.D. Tenn. 2009) (finding no
breach of contract for a “bonus” annuity that offered, and
provided, an increased rate of interest in the first year), with
Iorio v. Allianz Life Ins. Co. of N. Am., No. 05CV633 JLS
(CAB), 2008 WL 8929013, at *11 (S.D. Cal. July 8, 2008)
(finding actionable an affirmative misrepresentation about an
“immediate” bonus that was not available for years).

              B. The Market Value Adjustment

    The Annuity includes a market value adjustment
(“MVA”), a “positive or negative adjustment that may apply
to [an annuity’s accumulation] value upon early withdrawal
or surrender, based on the movement in an external index.”
The MVA takes account of the capital gains or losses
resulting from the sale of securities needed to fund early
withdrawal or surrender requests. EquiTrust’s brochure
provides the precise formula used to calculate the MVA,
explains how to determine the variables in the formula, and
offers examples of its application.7

    Harrington alleges that the brochure fails to explain that
the disclosed constant in the formula, which he refers to as a

  6
   In addition, because the bonus feature in the Annuity locks in value
immediately, it may increase the amount paid to an annuitant’s
beneficiaries more than would an alternative annuity.
  7
    The formula is: [(1+s)/(1+c+.005)]n/12-1, where s is the treasury rate
when the annuity was purchased, c is the treasury rate when the annuity
is surrendered, and n is the number of months until the end of the
fourteen-year surrender-charge period.
            HARRINGTON V. EQUITRUST LIFE INS. CO.           11

“bias,”8 serves to decrease upward adjustments and increase
downward ones. Harrington claims that this omission is
fraudulent because the bias contradicts what he characterizes
as the “stated purpose” of the MVA, increasing the
accumulation value when interest rates are lower and
decreasing it when interest rates are higher.

    The district court correctly rejected this argument.
EquiTrust meticulously explains the MVA and provides
examples of how it operates in various circumstances. See
Kennedy, 2010 WL 4123994, at *10 (“Plaintiff complains
that Defendant defined the other variables in the MVA/EIA
formula, but failed to explain the 0.005 value. This is not
fraud.”). More importantly, even if we assume that
Harrington correctly divines the MVA’s implicit purpose, the
bias does not violate it. Even with the bias, the MVA raises
the accumulation value if interest rates decline and decreases
it when they rise. To be sure, the increase is less and the
decrease greater than it would be without the bias, but
EquiTrust never promised anything different.

                     C. The Nonforfeiture Law

    The model standard nonforfeiture law for individual
deferred annuities (“SNFLIDA”), codified at Ariz. Rev. Stat.
§ 20-1232, has specific regulations for annuities with optional
maturity dates. See id. § 20-1232(G). Whether a maturity
date is optional or fixed is determined by the contract terms.
See id.

   The terms in the Annuity do not comply with SNFLIDA.
The Annuity contract, however, has an explicit fixed maturity

 8
     The “bias” is the .005 in the formula.
12        HARRINGTON V. EQUITRUST LIFE INS. CO.

date. Nonetheless, Harrington argues that the Annuity
effectively has an optional maturity date because EquiTrust’s
internal policy is to consider affording annuitants relief from
the fixed-date terms of their contracts upon request.
Harrington argues that the Annuity therefore violates
SNFLIDA, and is an attempt by EquiTrust to defraud Arizona
regulators.

    The district court correctly rejected this claim.
Harrington offers no authority for the proposition that an
insurer’s willingness to consider providing relief on a case-
by-case basis to its annuitants from the fixed-term provisions
of an annuity contract mutates the annuity into one with an
optional maturity date; indeed, because the internal policy is
only invoked at the annuitant’s request, we can perceive no
reason to so conclude. More significantly, Harrington has no
conceivable injury from the internal policy, as the potential of
relief from the Annuity’s fixed maturity date can only add
value to his annuity. See 18 U.S.C. § 1964(c) (requiring
injury for civil RICO recovery).9




     9
       Because we affirm the district court’s summary judgment on
Harrington’s claims and he was the only putative class representative, we
do not address claims based on the other annuities described in the
complaint. The complaint also alleged violations of Arizona consumer
fraud laws, see Ariz. Rev. Stat. §§ 44-1521 to -1534; id. §§ 20-441 to -
469.01, and common law unjust enrichment. The state law fraud claims
were predicated on the same allegations that underlie the RICO claim, and
fail for the same reasons. The unjust enrichment claim also fails; it is
based on the erroneous theory that the Annuity promised, but did not
actually deliver, a bonus.
         HARRINGTON V. EQUITRUST LIFE INS. CO.              13

                 IV. EquiTrust’s Appeal

    EquiTrust argues that the district court erred by not
awarding it costs as the prevailing party pursuant to Federal
Rule of Civil Procedure 54(d). Although a district court has
the discretion to decline to award costs to a prevailing party,
it must explain a denial. See Ass’n of Mex.-Am. Educators v.
California, 231 F.3d 572, 591–93 (9th Cir. 2000) (en banc).
The court here did not do so. Thus, we vacate the order
denying costs and remand to allow the district court either to
award costs or state its reasons for denying them. See Quan
v. Computer Scis. Corp., 623 F.3d 870, 889 (9th Cir. 2010),
abrogated on other grounds by Fifth Third Bancorp v.
Dudenhoeffer, 134 S. Ct. 2459, 2467 (2014).

                       V. Conclusion

    We AFFIRM the district court’s grant of summary
judgment, VACATE the order denying costs to EquiTrust,
and REMAND to allow the district court to address the issue
of costs.
