                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-24-2004

Mohney v. Forney
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-1436




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                                               NOT PRECEDENTIAL

       UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT


                     No. 03-1436


     TIMOTHY A. MOHNEY; GAY N. MOHNEY;
 JEFFREY A. MOHNEY; AMANDA MARIE MOHNEY,
     a minor, by TIMOTHY A. MOHNEY, guardian,
                                  Appellants

                          v.

              PAUL FORNEY;
   METROPOLITAN LIFE INSURANCE COMPANY


      Appeal from the United States District Court
         for the Western District of Pennsylvania
               (D.C. Civil No. 96-cv-00854)
     District Judge: Honorable Donetta W. Ambrose


               Argued February 23, 2004

Before: RENDELL, BARRY and ROSENN, Circuit Judges.

               (Filed: March 24, 2004)


                               Kenneth R. Behrend [ARGUED]
                               BEHREND & ERNSBERGER
                               306 Fourth Avenue
                               Union National Bank Building, Suite 300
                               Pittsburgh, PA 15222
                                  Counsel for Appellants
                                                  William M. Wycoff
                                                  Kevin P. Allen
                                                  THORP, REED & ARMSTRONG
                                                  301 Grant Street
                                                  One Oxford Centre, 14th Floor
                                                  Pittsburgh, PA 15219

                                                  B. John Pendleton, Jr. [ARGUED]
                                                  Robert P. Lesko
                                                  McCARTER & ENGLISH
                                                  100 Mulberry Street
                                                  Four Gateway Center
                                                  Newark, NJ 07101-0652
                                                    Counsel for Appellees




                                OPINION OF THE COURT


RENDELL, Circuit Judge.

       The Metropolitan Life Insurance Company (“MetLife”) through its sales agent,

Paul Forney (collectively, “Defendants”) sold Plaintiff Timothy Mohney whole life

insurance policies on the lives of his two children. The Defendants called these policies

the “Metropolitan 50-50” plan (“50/50 Plan”), “a plan to provide for your personal

savings.” Mohney sued, contending that the Defendants misrepresented the true nature

of his purchase. In essence, Mohney alleged that what he was led to believe were

savings plans were instead simply life insurance policies. The District Court granted the

Defendants’ motion for summary judgment on all of Mohney’s claims. For the reasons

set forth below, we will affirm in part and reverse in part.


                                              2
       The District Court exercised subject matter jurisdiction based on diversity of

citizenship, 28 U.S.C. § 1332, applying the law of Pennsylvania. Our jurisdiction for

review of the District Court’s final order is based on 28 U.S.C. § 1291.

                                             I.

       Mohney, a disabled coal miner with a high school education, and his wife met

with a MetLife’s sales agent, Forney, in the summer of 1992. Mohney testified in his

deposition that he informed Forney of his intention to buy a savings plan for his children

and that he was not interested in purchasing insurance policies. Forney perused a binder

of information on MetLife’s financial products with the Mohneys, including the 50/50

Plan, and explained how these products could help Mohney accumulate savings on

behalf of his children. Indeed, Mohney claimed Forney suggested that after several

years, the yield from the 50/50 Plan could allow Mohney to “enjoy a life out on the golf

course” and support his children’s higher education.

       The promotional binder contained articles extolling MetLife’s financial strength

and recommendations on structuring a personal savings plan. While a few of the sales

materials referred to MetLife as an insurance company, MetLife’s financial products were

described without any reference to insurance, e.g., as “investment plans.” In particular,

MetLife compared the 50/50 Plan to other traditional investment vehicles, such as mutual

funds, money market accounts, IRAs, and CDs. By contrast to those other investment

vehicles, the materials suggested that the 50/50 Plan was the only investment vehicle that



                                             3
guaranteed “self-completion,” i.e., “in case of premature death or disability Metropolitan

will complete the plan.” Mohney understood that this self-completion feature of the

50/50 Plan was effected through life insurance.

       On August 4, 1992, Mohney signed an application for two whole life insurance

policies for his children. Mohney acknowledged in his deposition that he was applying

for life insurance but testified that he believed that insurance was just one component of

the savings plan: “I assumed [the insurance policies] were part of the Savings Plan, that

if [the children] died, they wouldn’t lose that money or whatever. They were part of the

50 50 Savings Plan.” Mohney testified that he did not suspect there was a problem with

the 50/50 Plan until he heard a news report in 1994 concerning litigation against MetLife

for its sales practices. After securing counsel, he filed actions against MetLife and

Forney.

       Mohney sued the Defendants for inter alia common law fraud and deceit; breach of

fiduciary duty; violation of Pennsylvania’s Unfair Trade Practices and Consumer

Protection Law (“UTPCPL”); negligent supervision; breach of contract; bad faith; and,

negligence per se. The Defendants successfully moved the District Court to grant

summary judgment on all of Mohney’s claims.

       Mohney appeals several, but not all, of the claims dismissed on summary

judgment. He appeals the District Court’s decision with respect to the claims of fraud and

deceit; violation of the UTPCPL; negligent supervision; breach of fiduciary duty;



                                             4
collateral estoppel by virtue of the Pennsylvania Insurance Department’s findings of

deceptive marketing practices; and, bad faith.1 We review summary judgment motions de

novo, using the same test applicable in a district court. Mass. Sch. of Law v. ABA, 107

F.3d 1026, 1032 (3d Cir.1997). In deciding a motion for summary judgment, the “test is

whether there is a genuine issue of material fact, and if not, whether the moving party is

entitled to judgment as a matter of law.” Medical Protective Co. v. Watkins, 198 F.3d

100, 103 (3d Cir. 1999). Facts must be viewed in the light most favorable to Mohney as

the non-moving party. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S.

574, 587 (1986).




                                              II.

       We begin our discussion with Mohney’s allegations of fraud and deceit against the

Defendants. In order to prove a claim of fraudulent misrepresentation under

Pennsylvania law, Mohney required clear and convincing evidence of: 1) a

misrepresentation; 2) a fraudulent utterance; 3) an intention by the maker that the

recipient will be induced to act; 4) justifiable reliance on the misrepresentation; and, 5)

damage to the recipient as a proximate result. Tunis Bros. Co., Inc. v. Ford Motor Co.,




  1
   Mohney does not appeal the District Court’s decision that only he, not his wife or
children, had standing to sue Forney. Further, he does not appeal the District Court’s
grant of summary judgment with respect to his claims of breach of contract, negligence
per se, and willful disregard.

                                              5
952 F.2d 715, 731 (3d Cir. 1991). The District Court focused on Mohney’s claim that he

justifiably relied on the Defendants’ representation that he was purchasing a savings

policy.

          In determining whether reliance was justifiable, the Supreme Court of

Pennsylvania has held that “[n]either this Court nor a jury can consider the issue without

considering the relationship of the parties involved and the nature of the transaction.”

Rempel v. Nationwide Life Ins. Co., Inc., 370 A.2d 366, 368 (Pa. 1977); see also

Wittekamp v. Gulf & Western, Inc., 991 F.2d 1137, 1144 (3d Cir. 1993) (observing that

Pennsylvania law on justifiable reliance looks to such factors as the respective

intelligence and experience of the parties). Given the relationship between insured and

insurers, the reasonable expectation of the purchaser will in certain circumstances defeat

even the express language of an insurance policy. See Bensalem Township v. Int’l

Surplus Lines Ins. Co., 38 F.3d 1303, 1308-12 (3d Cir. 1994) (“Thus we are confident

that where the insurer or its agent creates in the insured a reasonable expectation of

coverage that is not supported by the terms of the policy that expectation will prevail over

the language of the policy.”).

          Agreeing with the Defendants, the District Court set forth two reasons for its

conclusion that Mohney did not justifiably rely on any misrepresentation. First, the

District Court observed that Mohney could not have justifiably relied on Forney’s

representations when those representations conflicted with the express terms of the



                                                6
written insurance policies. Second, the Court pointed to Mohney’s own

acknowledgment, in deposition testimony, that he was applying for life insurance.

       The District Court concluded that the policies’ express provisions belied Mohney’s

claimed reliance. The Court noted that these policies were clearly labeled “Whole Life

Policy” and “Life insurance payable when the insured dies.” However, as noted above,

Pennsylvania courts often privilege the insured’s reasonable expectation over potentially

contrary language contained in a policy. See Bensalem, 38 F.3d at 1309. Here, Mohney

contended that he reasonably expected to purchase a savings plan with an insurance

component. To support this contention, Mohney points to the promotional binder which

referred to MetLife’s “investment plans” and the 50/50 Plan in particular as “a plan to

provide for your personal savings.” Indeed, the binder included a chart comparing the

features of the 50/50 Plan to other traditional investment vehicles such as mutual funds

and IRAs. In light of this evidence, we conclude that a genuine issue of material fact

exists as to whether Mohney justifiably expected to purchase a savings plan,

notwithstanding any contrary text in the insurance policies. And, the language cited by

the District Court merely makes clear that Mohney applied for life insurance, which

Mohney believed to be but one component, the self-completing feature, of an overall

savings plan.2 Thus, the express terms of the insurance policies do not warrant the grant


  2
   More broadly, the District Court reasoned that Mohney should have been able to
surmise that he was purchasing only insurance policies. The Court observed that a high
level of sophistication was not “required to discover that the premium payments made

                                             7
of summary judgment.

       The same can be said with respect to the District Court’s emphasis on Mohney’s

deposition testimony, in which he acknowledged he was applying for life insurance. This

admission is consistent with his belief that life insurance was necessary to effectuate the

self-completion component of the savings plan. As set forth in his complaint, Mohney

alleged that “[t]he only mention of the word ‘insurance’ by the Defendant Forney in his

sales presentation to the Plaintiffs was in his representation that these ‘savings plans’

were sheltered by a death benefit, which would complete the plans should [their children]

die before reaching age 65. This insurance, however, was supposedly only an added

bonus to the ‘Retirement Plan.” Pl.’s Compl. ¶ 36. Thus, neither his awareness of

purchasing insurance nor the text of those policies were necessarily inconsistent with

Mohney’s reliance, or render it unjustifiable. Clearly, Mohney understood that insurance

was part of what he was being sold. Yet, the overwhelming focus in the sales

presentation on the savings component presents material issues of fact that are best left

for a jury to decide. Consequently, we will reverse the District Court’s grant of summary

judgment as to Mohney’s fraud and deceit claims.




would be used both to fund insurance coverage, and to set up an accumulation fund which
would earn dividends.” This is a questionable assumption. It is not self-evident that
consumers such as Mohney who are unfamiliar with finance would readily understand the
nature of premiums, accumulation funds, and dividends. This is especially true given the
arguably confusing sales materials that characterize insurance as “savings plans” and
“premiums” as monthly “deposits.”

                                              8
                                              III.

       Mohney further asserted claims under the Unfair Trade Practices and Consumer

Protection Law (“UTPCPL”), 73 Pa.Stat.Ann. §§ 201-1 et seq, which was enacted to

outlaw unfair or deceptive business practices. See Commonwealth v. Monumental

Props., Inc., 329 A.2d 812, 815 (Pa. 1974). In particular, Mohney argued that the

Defendants engaged in unfair or deceptive acts or practices by: 1) “causing likelihood of

confusion or of misunderstanding as to the source, sponsorship, approval or certification

of goods or services” (§ 201-2(4)(ii)); 2) “representing that goods or services have

sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do

not have . . . . ” (§ 201-2(4)(v)); 3) “representing that goods or services are of a particular

standard, quality or grade, or that goods are of a particular style or model, if they are of

another” (§ 201-2(4)(vii)); and, 4) “making solicitations for sales of goods or services

over the telephone without first clearly, affirmatively and expressly stating [the purpose

of the call and nature of the services” (§ 201-2(4)(xvii)).

       The District Court first observed that “an insurer may be held liable under the

[UTPCPL] only if there are fraudulent misrepresentations in order to sell a policy.”

Aetna Cas. & Sur. Co. v. Ericksen, 903 F.Supp. 836, 841 (M.D. Pa. 1995) (citing Pekular

v. Eich, 513 A.2d 427, 433-34 (Pa. Super. 1986)). Therefore, Mohney was required to

prove the five elements of a misrepresentation claim. Having already determined that

Mohney’s reliance was unjustifiable, the District Court struck down these UTPCPL



                                               9
claims. But in light of our discussion and decision above that there remain genuine issues

of material fact as to M ohney’s justifiable reliance, we will reverse the District Court with

respect to the UTPCPL claims, specifically § 201-2(4)(ii), (v), and (vii).

       However, Mohney’s claim relying on § 201-2(4)(xvii) stands on a different

footing. Mohney claimed that the Defendants engaged in fraudulent conduct by violating

§ 201-2(4)(xvii), which sets out requirements for telephone solicitations. However, there

appears to be no evidence that the Mohneys were solicited by telephone. Indeed, it is

undisputed that Forney met with the Mohneys in person. Because we may affirm a

decision on grounds other than those relied upon by the District Court, we will affirm

summary judgment with respect to the § 201-2(4)(xvii).




                                             IV.

       Mohney also alleged that MetLife failed to adequately supervise its employee

Forney. The District Court reasoned that this claim of negligent supervision rested on an

underlying actionable misrepresentation. See Fisher v. Aetna Life Ins. & Annuity Co., 39

F.Supp.2d 508, 511 n.1 (M.D. Pa. 1998) (“If plaintiffs cannot show that any actionable

misrepresentations or omissions occurred, then any negligence by defendant in training or

supervising its agents is irrelevant.”) Having already concluded that Mohney did not

justifiably rely on Forney’s sales presentation, the Court held that there was no actionable

misrepresentation, and hence no viable claim of negligent supervision.



                                             10
       Notwithstanding our holding that Mohney has created a genuine issue of material

fact as to his reliance, we will affirm the District Court on an alternative ground. A valid

negligent supervision claim in Pennsylvania law requires proof that an employee acted

outside of the scope of his employment. See Mullen v. Topper's Salon and Health Spa,

Inc., 99 F.Supp.2d 553, 556 (E.D.Pa. 2000). To the contrary, Mohney avers in his

complaint that Forney was “at all times relevant to this action, acting within the course

and scope of his agency and employment.” Pl.’s Compl. ¶ 4. Therefore, we will affirm

the District Court’s grant of summary judgment as to Mohney’s claim of negligent

supervision.




                                             V.

       We have considered the other challenges leveled by Mohney regarding the claims

he presented and conclude that summary judgment was appropriately entered against him

for the reasons set forth by the District Court. Therefore, we decline to disturb the

District Court’s ruling with respect to Mohney’s claims of breach of fiduciary duty,

collateral estoppel by virtue of the Pennsylvania Insurance Department’s findings, and

bad faith.




                                            VI.

       For the foregoing reasons, the District Court’s judgment will be affirmed in part



                                             11
and reversed in part. Given our disposition that Mohney’s justifiable reliance is a triable

issue of fact, we will reverse the District Court’s order with respect to the claims of fraud

and deceit and violations of UTPCPL, specifically, § 201-2(4)(ii), (v), and (vii), and

affirm with respect to the remainder of the issues in this appeal. Accordingly, we will

remand to the District Court for further proceedings consistent with this opinion.




                                             12
