                 United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 16-1793
                        ___________________________

   Richard A. Torti, Sr., As Successor Trustee of the Stuart Family 1997 Trusts

                        lllllllllllllllllllll Plaintiff - Appellant

                                            v.

                      Debra Hoag; Gentry Partners Limited

                             lllllllllllllllllllll Defendants

                  John Hancock Life Insurance Company, USA

                      lllllllllllllllllllll Defendant - Appellee
                                     ____________

                    Appeal from United States District Court
                for the Eastern District of Arkansas - Little Rock
                                 ____________

                            Submitted: January 12, 2017
                              Filed: August 17, 2017
                                  ____________

Before COLLOTON, GRUENDER, and KELLY, Circuit Judges.
                        ____________

KELLY, Circuit Judge.

      Richard A. Torti, as Trustee of the Stuart Family Trusts, brought a lawsuit
against Debra Hoag, Gentry Partners Limited (Gentry) and the John Hancock Life
Insurance Company, USA (Hancock), alleging claims of breach of fiduciary duty,
breach of contract, and negligence.1 After Torti settled with Hoag and Gentry,
Hancock moved pursuant to Federal Rule of Civil Procedure 12(b)(6) for dismissal
of the breach of contract and negligence claims remaining against it. The district
court2 granted Hancock’s motion, dismissing Torti’s second amended complaint
(SAC) with prejudice. Because we agree that Torti failed to plead sufficient facts to
state a plausible claim for breach of contract or negligence, we affirm.3

                                   I. Background

      This is an appeal from the district court’s grant of a motion to dismiss, so we
draw the relevant facts from Torti’s SAC. See Neubauer v. FedEx Corp., 849 F.3d
400, 403 (8th Cir. 2017). We also consider the exhibits attached to the SAC,
including the trust agreement and the Hancock insurance policy. See id. On August
8, 1997, Layton P. Stuart, as trustor, established the Stuart Family 1997 Trusts (the
Trusts) by a written trust agreement. At the time, Stuart was Chief Executive Officer
of One Bank & Trust (One Bank) in Little Rock, Arkansas. Pursuant to the trust
agreement, Michael Heald, the Chief Operating Officer (COO) of One Bank, was
appointed trustee. The trust agreement granted Heald certain powers of
administration, including the authority “to apply for and to own policies of insurance
on the life of the trustor.”




      1
       Hancock is an insurance company with its principal place of business in
Boston, Massachusetts. Hoag is a citizen of Illinois and, and at all relevant times,
was the president of Gentry, a foreign corporation with its principal place of business
in Chicago, Illinois.
      2
       The Honorable J. Leon Holmes, United States District Judge for the Eastern
District of Arkansas.
      3
          We have jurisdiction under 28 U.S.C. § 1291.

                                         -2-
       Heald, as trustee, applied for a $20 million variable life insurance policy on
Stuart’s life, which was issued by Hancock on August 12, 1997. As relevant here,
Paragraph 11 of the policy gave the trustee authority to apply for loans against the
cash value of the policy “on receipt at [the Hancock] Home Office of a completed
form satisfactory to [Hancock] assigning the policy as the only security for the loan.”
Paragraph 24 of the policy allowed the policy to be assigned without the consent of
any revocable beneficiary but stated that Hancock would not be on notice of any
assignment unless it was provided notice “in writing” and “a duplicate of the original
assignment has been filed at [the Hancock] Home Office.” Paragraph 28 of the policy
stated in relevant part:

      The written application for the policy is attached at issue. The entire
      contract between the applicant and [John Hancock] consists of the
      policy and such application. However, additional written applications
      for policy changes . . . may be submitted to [Hancock] after issue and
      such additional applications may become part of the policy. . . . Other
      changes in this policy may be made by agreement between [the Trusts]
      and [Hancock]. Only the President, Vice President, the Secretary, or an
      Assistant Secretary of the Company has authority to waive or agree to
      change in any respect any of the conditions or provisions of the policy,
      or to extend credit or to make an agreement for [Hancock].

Hoag, an insurance broker acting as Hancock’s agent, facilitated the Trusts’ purchase
of the policy. The confirmation page of the policy named the “Stuart Family Trust,
Mike Heald, Trustee” as the owner of the policy with an address of 300 W. Capitol
Avenue, Little Rock, Arkansas, 72201. The premium for the policy was $350,000 per
year for ten years.

       To finance the premiums, Heald, on behalf of the Trusts, entered into a split-
dollar agreement with One Bank, effective August 12, 1997. One Bank agreed to pay
the annual premiums for the life insurance policy, to be reimbursed upon Layton
Stuart’s death out of the insurance proceeds. As consideration for the payment of

                                         -3-
premiums, the Trusts assigned the Hancock policy to One Bank. Paragraph 6 of the
split-dollar agreement prohibited the trustee from “transfer[ing], assign[ing],
encumber[ing] or terminat[ing] the Insurance Policy . . . [d]uring the term of this
Agreement,” including by applying for loans against the cash value of the policy,
which was to “remain available (subject to provisions of the Insurance Policy) to
satisfy the amount payable to [One Bank].” The split-dollar agreement was signed
by Heald on behalf of both parties—as COO of One Bank and as trustee of the Trusts.
In an August 15, 1997, letter to Heald, Hoag acknowledged that the premium for the
policy would be funded via the split-dollar agreement.

       Nearly fourteen years later, on June 2, 2011, Heald retired as trustee and
appointed Hoag as successor trustee. On June 3, 2011, Hoag requested a loan against
the full cash value of the policy on a Hancock “Request for Policy Loan” form, using
the Hancock insurance policy as collateral. The request form identified Hoag as the
trustee and the Trusts as the owner of the policy with an address of 300 W. Capitol
Avenue, Little Rock, Arkansas, 72201. Though the request form provided signature
lines for assignees of the insurance policy (here, One Bank), the form was signed only
by Hoag, as trustee, on behalf of the Trusts.

       On June 7, 2011, Hancock issued a check in the amount of $1,761,000.00
payable to the “Stuart Family Trusts.” The check was sent by FedEx to 300 W.
Capitol Avenue, Little Rock, Arkansas, 72201. Hancock allowed the check to be
paid after it was endorsed by Layton Stuart, who used the proceeds for non-trust
related purposes.

       Hoag resigned as trustee on October 25, 2012, and appointed Torti as successor
trustee. Stuart died on March 24, 2013. In May 2013, Hoag notified Torti that before
Hancock would pay the insurance proceeds, Torti would have to sign a release,
releasing Hancock from any “demands, claims and causes of action . . . relating to or
arising out of the Policy or the payment of any benefits thereunder.” Torti refused

                                         -4-
and Hancock transferred the net death benefits owing under the policy—a sum of
$17,693,837.10—to a segregated account. On June 17, 2013, the United States
Attorney notified the Trusts that the net death benefit proceeds had been seized.

       On June 2, 2014, Torti filed suit against Hoag, Gentry, and Hancock. After the
complaint was amended, Torti’s claims against Hancock were dismissed without
prejudice on October 17, 2014. Hancock was brought back into the lawsuit over a
year later, on December 9, 2015, when Torti filed the SAC. Attached to the SAC
were 13 exhibits, including the split-dollar agreement, the Hancock insurance policy,
and “forms utilized by Hancock . . . in administering the Policy,” which the SAC
alleged “form[ed] a part of the contract of insurance.” These forms were identified
as Exhibits E-1 (instructions for completing a request for a policy loan); E-2 (a blank
request for policy loan form); and E-3 (a checklist to be filled out by a Hancock
employee upon receipt of a loan request) (collectively, “loan forms”). The SAC
alleged breach of contract and negligence against Hancock. The district court granted
Hancock’s motion to dismiss, and this appeal follows.

                                      II. Discussion

       We review the district court’s grant of a motion to dismiss de novo, “accepting
as true all factual allegations in the complaint and drawing all reasonable inferences
in favor of the nonmoving party.” Neubauer, 849 F.3d at 404 (quotation omitted).
“To survive a motion to dismiss for failure to state a claim, the complaint must show
the plaintiff ‘is entitled to relief,’ . . . by alleging ‘sufficient factual matter, accepted
as true, to state a claim to relief that is plausible on its face.’” In re Pre-Filled
Propane Tank Antitrust Litig., 860 F.3d 1059, 1063 (8th Cir. 2017) (en banc)
(quoting Fed. R. Civ. P. 8(a)(2) and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To
avoid dismissal, “[a] plausible claim must plead ‘factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct
alleged.’” Id. (quoting Iqbal, 556 U.S. at 678). But a complaint must allege “more

                                            -5-
than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Courts
“are not bound to accept as true a legal conclusion couched as a factual allegation,”
and “[f]actual allegations must be enough to raise a right to relief above the
speculative level.” Id. (internal quotation omitted).

                             A. Breach of contract claim

       Torti alleges the district court erred in holding that the SAC failed to state a
claim for breach of contract against Hancock. Because our jurisdiction is based on
diversity of citizenship, we apply federal procedural rules but Arkansas substantive
law. See Ashley Cty. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009). Our review
of the district court’s interpretation of Arkansas law is de novo. Hortica-Florists’
Mut. Ins. v. Pittman Nursery Corp., 729 F.3d 846, 852 (8th Cir. 2013).

       In Arkansas, “[i]nsurance policies are to be interpreted like other contracts.”
Agric. Ins. v. Ark. Power & Light Co., 361 S.W.2d 6, 12 (Ark. 1962). “In order to
state a cause of action for breach of contract, the complaint need only assert the
existence of a valid and enforceable contract between the plaintiff and the defendant,
the obligation of defendant thereunder, a violation by the defendant, and damages
resulting to plaintiff from the breach.” Farris v. Conger, 512 S.W.3d 631, 634 (Ark.
2017). When interpreting a contract, courts “must, if possible, ascertain and give
effect to the intention of the parties.” Harris v. Stephens Prod. Co., 832 S.W.2d 837,
840 (Ark. 1992). This is done by looking “to the contract as a whole and the
circumstances surrounding its execution.” First Nat’l Bank of Crossett v. Griffin, 832
S.W.2d 816, 820 (Ark. 1992). Arkansas courts “consider the sense and meaning of
the words used by the parties as they are taken and understood in their plain, ordinary
meaning.” Id. at 819 (quoting Farm Bureau Mut. Ins. v. Milburn, 601 S.W.2d 841,
842 (Ark. 1980)). Finally, courts read different clauses of the contract together,
construing it “so that all of its parts harmonize, if that is at all possible.” Id. (quoting

                                            -6-
Cont’l Cas. Co. v. Davidson, 463 S.W.2d 652, 655 (Ark. 1971)). “A construction that
neutralizes any provision of a contract should never be adopted, if the contract can
be construed to give effect to all provisions.” Tyson Foods, Inc. v. Archer, 147
S.W.3d 681, 686 (Ark. 2004).

       Torti asserts that, in concluding that the loan forms were not part of the
insurance policy between Hancock and the Trusts, the district court failed to read the
policy as a whole. The court relied primarily on two sentences from Section 28:
“The written application for the policy is attached at issue. The entire contract
between the applicant and [Hancock] consists of the policy and such application.”
Torti claims this reliance was in error because Section 28 expressly contemplates that
“additional written applications for policy changes . . . may be submitted to
[Hancock] after issue and such additional applications may become part of the
policy.” In addition, Torti asserts, Section 11 of the policy specifically references the
loan forms by allowing the trustee to borrow money on the cash value of the policy
upon submitting “a completed form satisfactory to [Hancock].” Had the district court
read the contract in its entirety, Torti alleges, it would have concluded the loan forms
are “additional written application[s] for policy changes” because “the loan request
was in writing; the loan request was an application for a loan against the policy; and
the loan technically changed the terms of the policy.”

       Arkansas courts recognize that “[w]hen a contract refers to another writing and
makes the terms of that writing a part of the contract, the two documents become a
single agreement between the parties and must be construed together.” Dye v.
Diamante, 510 S.W.3d 759, 765 (Ark. 2017) (alteration in original) (quoting
Ingersoll-Rand Co. v. El Dorado Chem. Co., 283 S.W.3d 191, 196 (Ark. 2008)). In
order for a separate writing to become part of the contract, however, Arkansas courts
require that the reference in the contract to the other writing “be clear and
unequivocal, and the terms of the incorporated document . . . be known or easily
available to the contracting parties.” Ingersoll-Rand, 283 S.W.3d at 196 (quotation

                                          -7-
omitted). “The document to be incorporated must be described in such terms that its
identity may be ascertained beyond reasonable doubt,” and “it must be clear that the
parties to the agreement had knowledge of and assented to the incorporated terms.”
Id. (internal quotations omitted).

       We agree with the district court that the language of the policy is unambiguous
in describing what the parties intended their contract to be—the policy itself and the
written application for the policy. Not only does Section 28 clearly identify the
written application as part of the policy, but the written application is attached to the
policy. In contrast, Section 11 does not specifically reference any of the loan forms,
and the loan forms are not attached to the policy. Though Torti is correct that Section
28 of the policy contemplates that other documents may become part of the policy,
it also requires that any changes to the policy be approved by specified Hancock
officers. The SAC does not allege that any Hancock officer approved the loan forms
as changes to the policy. Other than asserting that the loan forms are part of the
insurance policy, the SAC fails to allege any facts that allow an inference that the
parties clearly and unequivocally intended the loan forms to become part of their
contract.4 Though “[c]ourts must accept a plaintiff’s factual allegations as true[,]
[they] need not accept a plaintiff’s legal conclusions.” Retro Television Network,
Inc. v. Luken Commc’ns, LLC, 696 F.3d 766, 768–69 (8th Cir. 2012).

       In the district court, Torti offered an alternative argument: that Hancock was
on notice that the policy had previously been assigned to One Bank, and it breached
its obligation to act in good faith by making a loan it knew violated the split-dollar
agreement. The district court concluded that Hancock was not on notice of the

      4
        Torti urges us to find that the policy is at least ambiguous as to whether the
parties intended the loan forms to become part of the contract. But in order for a
separate writing to become part of a contract, Arkansas courts require the reference
in the contract to the other writing “be clear and unequivocal,” not ambiguous.
Ingersoll-Rand, 283 S.W.3d at 196 (quotation omitted).

                                          -8-
collateral assignment because Section 24 of the insurance policy expressly provided
Hancock would not be “on notice of any assignment unless it is in writing, nor will
we be on notice until a duplicate of the original assignment has been filed in our
Home Office.” The district court found that the SAC did not allege that either
condition was satisfied.

       Torti does not dispute this finding on appeal, but instead asserts the SAC
sufficiently alleges that Hancock had actual notice of the split-dollar agreement.
Even if Torti could circumvent the terms of the policy by asserting Hancock had
actual knowledge (as compared to notice under the policy), the breach of contract
claim still fails. The claim is premised on the assumption that the loan forms are part
of the contract: Torti alleges that because Hancock had actual knowledge of the split-
dollar agreement, it acted in breach of its duty to administer the insurance policy “in
a prudent manner consist [sic] with its forms and procedures,” i.e., the loan forms,
which Torti says “expressly provide what is required for a loan request form to be
considered . . . ‘satisfactory.’” Because the loan forms are not part of the insurance
policy, this argument cannot resuscitate the breach of contract claim.5

                                B. Negligence claim

      Torti contends the district court also erred in dismissing his negligence claim
against Hancock. “Under Arkansas law, in order to prevail on a claim of negligence,
the plaintiff must prove that the defendant owed a duty to the plaintiff, that the
defendant breached that duty, and that the breach was the proximate cause of the


      5
       Torti also argues that the SAC alleges sufficient facts to reasonably infer that
Hancock either intended to waive strict compliance with Section 24 of the policy or
should be estopped from asserting failure of strict compliance. Because Torti did not
plead waiver or estoppel in his SAC and did not argue it in district court, we do not
consider this argument on appeal. See Kruger v. Neb., 820 F.3d 295, 306 (8th Cir.
2016).

                                         -9-
plaintiff’s injuries.” Yanmar Co. v. Slater, 386 S.W.3d 439, 449 (Ark. 2012). “The
question of the duty owed to the plaintiff alleging negligence is always one of law.”
Arloe Designs, LLC v. Ark. Capital Corp., 431 S.W.3d 277, 281 (Ark. 2014).

       The district court dismissed Torti’s negligence claim in part because it found
that Hancock did not have a duty to ensure that the loan proceeds reached the correct
recipient.6 On appeal, Torti argues the district court misconstrued the allegations in
the SAC. Torti claims Hancock had a duty to abide by its own policies and guidelines
in processing and approving Hoag’s loan request. According to Torti, “the issue is
the manner and speed in which Hancock processed and approved the loan, and issued
the loan check.” Had Hancock followed its own procedures, Torti contends, it would
have realized that Hoag was requesting an improper loan and that her conduct would
likely result in damages to the Trust.

       Arkansas courts recognize that “[a] duty of care may arise out of a contractual
relationship between two parties.” See Tackett v. Merchant’s Sec. Patrol, 44 S.W.3d
349, 353 (Ark. Ct. App. 2001). But like Torti’s breach of contract claim, his
negligence claim relies on the loan forms—forms that contain Hancock’s alleged
policies, procedures, and guidelines—being part of the insurance contract. As we
have determined, the loan forms were not part of the insurance contract entered into
by the parties. Accordingly, we agree with the district court that Torti’s SAC fails to
state a claim against Hancock for negligent performance of the contract.7

      6
       The court also concluded that, to the extent the SAC alleged Hancock
breached an implied duty of good faith and fair dealing, Arkansas law does not
recognize a separate claim in tort for breach of that duty. See Mountain Home Flight
Serv., Inc. v. Baxter Cty., 758 F.3d 1038, 1043 (8th Cir. 2014). We do not
understand Torti to be challenging this holding.
      7
       Torti alleges that the SAC states a claim against Hancock for aiding and
abetting a tort and a negligence claim based on the allegedly actionable conduct of
Gentry. Because the SAC does not allege these claims and Torti makes this argument

                                         -10-
                                 III. Conclusion

      For the foregoing reasons, we affirm the district court’s dismissal of Torti’s
second amended complaint.
                      ______________________________




for the first time on appeal, we will not consider these issues. See Kruger, 820 F.3d
at 306.

                                        -11-
