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Trustmark Insurance Co. v. Harrington Benefit Services

June 15, 2010

TRUSTMARK INSURANCE COMPANY AND TRUSTMARK LIFE INSURANCE COMPANY, PLAINTIFFS,
v.
HARRINGTON BENEFIT SERVICES, INC. D/B/A FISERV HEALTH -- KANSAS, UNITED MEDICAL RESOURCES, INC., AND UNITED HEALTHCARE, INC., DEFENDANTS.



The opinion of the court was delivered by: Judge Joan B. Gottschall

MEMORANDUM OPINION & ORDER

Plaintiffs Trustmark Insurance Company and Trustmark Life Insurance Company (collectively, "Trustmark") brought this action following the breakdown of its business relationship with defendant Harrington Benefit Services, Inc. ("Harrington"). In its complaint, Trustmark sought recovery from Harrington, United Medical Resources, Inc. ("UMR") and United Healthcare, Inc. ("United") under a variety of contract and tort theories. The defendants answered several counts of the complaint. Presently before the court is defendants' motion to dismiss the remaining counts, specifically Trustmark's claims for breach of fiduciary duty (Count II), inducement to breach fiduciary duty (Count III), and fraud (Count IV).

I. BACKGROUND

According to the complaint, Harrington and Trustmark had a productive business relationship for nearly two decades based on Harrington's sale and administration of Trustmark insurance to groups of insureds, most recently pursuant to a 2003 Administrative Agreement (the "Agreement") between Trustmark and Harrington. (Compl. ¶ 9.) Trustmark allegedly relied on Harrington, as administrator of a Trustmark insurance block, to provide Trustmark with accurate data regarding the rate of insurance claims that Harrington processed and paid so that Trustmark could establish proper premium rates based on historical trends. (Id. ¶ 11.) In 2008, United, through its subsidiary UMR, acquired Harrington and allegedly assured Trustmark that the Harrington-Trustmark relationship would continue without disruption. (Id. ¶ 12.) However, according to Trustmark, Harrington (allegedly even before its acquisition by United) ceased to process claims on a consistent basis, a problem exacerbated by staffing shortages brought about by United-imposed austerity measures. (Id. ¶ 13.) Harrington's alleged failure to process claims in a timely fashion led to a backlog of unprocessed claims, a host of violations of the Agreement, losses to Trustmark based on its inability to set proper premium rates, and numerous violations of state laws. (Id. ¶¶ 14-18.) The parties briefly attempted to resolve their dispute amicably, but Harrington and United allegedly refused to provide Trustmark with documentation regarding claims payment, leading to the instant litigation. (Id. ¶¶ 21-23.)

II. LEGAL STANDARD

Rule 12(b)(6) allows a defendant to seek dismissal of a complaint that fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). In deciding a Rule 12(b)(6) motion, the court must "construe the complaint in the light most favorable to the plaintiff, accepting as true all well-pleaded facts alleged, and drawing all possible inferences in [the plaintiff's] favor." Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008). Legal conclusions, however, are not entitled to any assumption of truth.

Ashcroft v. Iqbal, 556 U.S. ____, 129 S.Ct. 1937, 1940 (2009). The plaintiff generally need not plead particularized facts, but the factual allegations in the complaint must be sufficient to "state a claim to relief that is plausible on its face . . . ." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). As an exception to the general notice pleading standard, a plaintiff pleading fraud must do so with particularity. See Fed. R. Civ. P. 9(b); see also DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990).

III. ANALYSIS

Defendants move to dismiss Trustmark's claims for breach of fiduciary duty against Harrington (Count II), inducement to breach fiduciary duty against UMR and United (Count III), and fraud against Harrington and United (Count IV). The court addresses each claim in turn.

A. Breach of Fiduciary Duty (Count II)

In their motion, defendants assert that Trustmark has not stated a claim against defendant Harrington for breach of fiduciary duty because Trustmark's allegations, even assumed to be true, do not support the existence of a fiduciary relationship, and because Trustmark seeks recovery of purely economic loss, which recovery Illinois law forbids pursuant to the "Moorman" Doctrine. See Moorman Mfg. Co. v. Nat'l Tank Co., 435 N.E.2d 443 (Ill. 1982).

1. Whether Trustmark Alleges a Fiduciary Relationship

Defendants first argue that Harrington's relationship with Trustmark was entirely contractual, and that Harrington undertook no fiduciary duty, whether by contract or otherwise, with respect to Trustmark. "The essence of a fiduciary relationship is that one party is dominated by the other." Pommier v. Peoples Bank Maycrest, 967 F.2d 1115, 1119 (7th Cir. 1992) (citing Illinois law). One party's trust in a putative fiduciary is insufficient, standing alone, to establish a fiduciary relationship; the putative fiduciary must have also gained "influence and superiority" over the other party. Id.; see also Hubbard v. Schumaker, 402 N.E.2d 857, 860 (Ill. App. Ct. 1980).*fn1 Therefore, a fiduciary relationship "arises only if 'one person has reposed trust and confidence in another who thereby gains influence and superiority over the other.'" Burdett v. Miller, 957 F.2d 1375, 1381 (7th Cir. 1992) (citing Seventh Circuit and Illinois case law).*fn2

Trustmark argues that its allegations state a claim for the existence and breach of a fiduciary duty because, according to the complaint: Harrington represented Trustmark to Trustmark's insureds, indicating Trustmark's trust of Harrington; Harrington gained superior information regarding Trustmark's insureds and the status of insurance claims within its purview; and the Agreement stated that Harrington held premiums and charges ...


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