News Brief

Multi-office, Multidisciplinary Team Wins in Appellate Court

November 8, 2011

Salvatore A. Clemente (Partner-Philadelphia) and Geoffrey Belzer (Associate-Chicago), with help from William H. Behr (Of Counsel-New York) on securities issues and Daniel J. McMahon (Partner-Chicago) on choice-of-law issues, succeeded in getting the 6th Circuit Court of Appeals to uphold the summary judgment decision granted by the United States District for the Northern District of Ohio in a hotly contested matter surrounding the demutualization of Principal Mutual Life Insurance Company in 2001.

In Moriarty v. Principal Financial Group, Inc., et al., USDC, N.D. Ohio Case No. 1:08 CV 2180, 2011 U.S. App. LEXIS 19992, the lead plaintiff was the executor and trustee of an estate that received stock as a result of the demutualization. He sued the defendants, which included Wilson Elser’s client Principal Financial Group, Inc. (PFG), for breach of contract, various state-law statutory violations and fraud.

The case arose after PFG issued nearly 10,000 shares of common stock that came from its demutualization, to the policyholder of the group annuity. The plaintiff alleged that Wilson Elser’s client, PFG, failed to properly inform the policyholder of its demutualization, and as a result, he was informed of the stock issued to the now-deceased policyholder many years later. Although the stock had greatly increased in value since it was originally issued, the plaintiff alleged that the measure of his damages was a "finder's fee" and the reduction in value of the stock from the date the plaintiff was notified of the stock until the date it was sold.

PFG moved to dismiss the plaintiff's multiple esoteric claims, including security and uniform commercial code (UCC) violations. The district court dismissed most of the UCC claims, consumer fraud and negligence and found that the only contract at issue was the demutualization plan.

During discovery and under Wilson Elser's questioning, the lead plaintiff (who was a retired named partner of a plaintiffs’ law firm) admitted that securities are a volatile asset, and that as a trust fiduciary, he immediately would have sold such an asset at the lower value if he had been aware of it

Upon cross-motions for summary judgment on multiple grounds, the Court found in favor of PFG. The judge found that had the plaintiffs been aware of the stock issued, they would have immediately sold it at a lesser price, and thus had suffered no cognizable damages.

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