DeSteph v. Guggenheim Partners, LLC et al

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Thomas DeSteph
v. 	Case No. 19-cv-1164-LM
Guggenheim Partners, LLC
Security Benefit Life Ins. Co.
REPORT AND RECOMMENDATION
Plaintiff Thomas DeSteph has sued the defendants,
Guggenheim Partners, LLC (“Guggenheim”) and Security Benefit
Life Insurance Co. (“SBL”) under a variety of legal theories
related in large part to alleged withholding of commissions due
to DeSteph. 	The complaint (Doc. No. 1) has been referred to the
undersigned magistrate judge for preliminary review, pursuant to
LR 4.3(d) and 28 U.S.C. § 1915(e)(2).
I. 	Preliminary Review Standard
The magistrate judge conducts a preliminary review of
complaints, like the plaintiff’s, which are filed in forma
pauperis. 	See LR 4.3(d). 	The magistrate judge may recommend to
the district judge that one or more claims be dismissed if,
among other things, the court lacks jurisdiction, a defendant is
immune from the relief sought, or the complaint fails to state a
claim upon which relief may be granted. 	See 28 U.S.C. §
1915(e)(2); LR 4.3(d). 	In conducting its preliminary review,
the court construes pro se complaints liberally. 	See Erickson
v. Pardus, 551 U.S. 89, 94 (2007) (per curiam). 	The complaint
must contain “sufficient factual matter, accepted as true, to
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‘state a claim to relief.’” 	Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citation omitted).
II. 	Background1
DeSteph contracted with SBL to market its annuity and life
insurance products in 1979. 	At the time, DeSteph was licensed
to market these products in Connecticut, Massachusetts, Vermont,
New Hampshire and Florida. 	In 1993, DeSteph became a General
Agent with SBL and began selling a wider variety of SBL annuity
products. By 2000, SBL business was faltering and DeSteph
reduced the amount of business he was sending there. 	He still,
however, maintained a book of business with SBL. In 2010,
Guggenheim acquired SBL and business circumstances changed for
the better. 	DeSteph began again marketing SBL products more
aggressively.
In September 2010, SBL changed the relevant agent/agency
contract to reduce commissions on a particular product – the
Choice Annuity, commissions for which were DeSteph’s primary
income between 2010 and 2018. 	He also continued to receive
commissions from premiums paid on older policies. 	SBL, however,
paid those commissions under the newer formula, treating them as
new policies. 	The result was decreased commissions for DeSteph.
1The facts recited herein are taken from plaintiff’s
complaint. 	Only those facts necessary for the court to complete
its preliminary review are included in this report and
recommendation.
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DeSteph semi-retired in 2012, surrendering his New
Hampshire insurance license. 	Although he stopped trying to
recruit new clients, he continued to service his existing book
of business. 	SBL continued to communicate with DeSteph about
clients who needed certain services, such as beneficiary or
address changes, and continued to notify him of new products and
regulations. 	SBL also asked DeSteph to comply with educational
requirements to keep his authority in Massachusetts and
Connecticut valid.
In 2017 DeSteph was asked by SBL personnel to assist
certain SBL policyholders whose business relationship with SBL
dated back to 2012. SBL is withholding his commissions for this
work. 	Also in 2017, DeSteph was asked to assist a client in
Connecticut. 	At first, there was some confusion was to whether
DeSteph was authorized to do business in Connecticut, but SBL
eventually assured him he was. 	DeSteph continued to service
clients on SBL’s behalf into 2018. 	In addition, SBL continued
to send him new product information and requested that he
complete on-line educational tutorials to remain current.
In May 2018, DeSteph submitted to SBL an application for an
existing client in Massachusetts to sign up for a Choice
Annuity. 	SBL, however, refused the application, claiming that
DeSteph was no longer authorized to do business in
Massachusetts. 	Yet only a few weeks earlier, SBL had accepted
two Choice Annuity applications – carrying roughly $120,000 in
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premiums -- 	written by DeSteph in Massachusetts. 	Ultimately,
SBL concluded that DeSteph wasn’t properly authorized and
dismissed him as the writing agent, thereby cutting him off from
commissions on those policies.
SBL subsequently sent letters to policyholders serviced by
DeSteph as far back as 2012 asking them to pick a different
representative. 	SBL also retracted all commissions paid to
DeSteph from 2012 forward, resulting in a deficit on DeSteph's
account, while also withholding commissions then payable in
order to recoup that deficit. 	DeSteph eventually learned that
his licenses to sell annuities in Massachusetts and Connecticut
were valid only through 2014. 	SBL did not notify him that his
authorizations had expired until 2018.
III. 	Claims
DeSteph has sued SBL and Guggenheim, asserting the
following claims: 1) fraud related to his license status; 2)
fraud related to paying his commissions; 3) negligent
misrepresentation related to (1) and (2) above; 4) breach of
contract; 5) violation of the New Hampshire Unfair, Deceptive or
Unreasonable Collection Practices Act, N.H. Rev. Stat. Ann. §
358–C; 6) negligent infliction of emotional distress; 7) unjust
enrichment; and 8) mail and wire fraud.
IV. 	Discussion
Construing his occasionally scattershot complaint
liberally, the crux of DeSteph’s allegations is that SBL and
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Guggenheim unlawfully withheld, reduced or delayed commissions
owed to him. 	He has pleaded sufficient facts to support claims
1-4 above, alleging fraud, negligent misrepresentation and
breach of contract. 	By separate order, the court will direct
service of these claims on the defendants. 	As set forth below,
however, the court recommends dismissal of claims 5-8.
A. 	N.H. Rev. Stat. Ann. § 358-C (Count 5)
In Count 5, DeSteph alleges that the defendants violated
the New Hampshire Unfair, Deceptive, or Unreasonable Collection
Practices Act (“UDUCPA”), N.H. Rev. Stat. Ann. (“RSA”) ch. 358-
C. 	To recover under the UDUCPA, DeSteph must show that: (1) he
has been the object of collection activity arising from a
consumer debt; (2) defendant attempting to collect the debt
qualifies as a debt collector under the Act; and (3) defendant
has engaged in a prohibited act or has failed to perform a
requirement imposed by the Act. 	Moore v. Mortgage Electronic
Registration Systems, Inc., 848 F.Supp.2d 107, 124 (D.N.H.
2012). 	DeSteph’s complaint contains no facts to support any of
these elements. 	In the context of this case, DeSteph is not a
“consumer”. 	See RSA 358-C:1 (defining “consumer” as “a natural
person who seeks or acquires, or is offered property, services
or credit for personal, family or household purposes.”). 	Nor
are the debts he alleges “consumer debts.” 	See RSA 358-C:1, II
(defining “consumer credit transaction” as including consumer
credit sales, consumer loans, consumer leases of personal
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property and transactions pursuant to a seller or lender credit
card . . . .”). 	Finally, RSA 358-C:2 limits application of the
UDUCPA to “debt collectors,” which, in the context of this case,
does not apply to his employer. 	See RSA 358-C:1, VII (defining
“debt collector.”); see also Hermina v. Safeway, Civ. No. WMN-
11-1523, 2012 WL 12759, at *8 (D. Md. Jan. 3, 2012) (construing
Maryland statute with similar language to UDUCPA and concluding
that an employment agreement is not a consumer transaction).
Here, DeSteph’s UDUCPA claim is limited to the payment of
commissions. 	Since he has failed to state facts to support such
a claim, the district judge should dismiss Count 5.
B. 	Infliction of Emotional Distress (Count 6)
In Count 6, DeSteph asserts that the defendants’ conduct
constituted either negligent or intentional infliction of
emotional distress. 	Both claims should be dismissed.
To state a claim for intentional infliction of emotional
distress, a plaintiff must assert facts sufficient to support a
claim that a defendant, “by extreme and outrageous conduct
intentionally causes severe emotional distress to another . . .
.” 	Morancy v. Morancy, 134 N.H. 493, 495, 593 A.2d 1158, 1159
(1991). 	To meet that standard, the accused conduct must have
been “so outrageous in character, and so extreme in degree, as
to go beyond all possible bounds of decency, and to be regarded
as atrocious, and utterly intolerable in a civilized community.”
Mikell v. Sch. Admin. Unit No. 33, 158 N.H. 723, 729 (2009).
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Here, DeSteph’s allegations relating to a dispute over
licensing and commissions do not rise to the required severity
to satisfy New Hampshire law. 	A comparison with the facts in
Mikell v. School Admin. Unit No. 33, 158 N.H. 723, 729 (2009) is
instructive. 	There, the New Hampshire Supreme Court upheld the
trial court’s dismissal of an intentional infliction of
emotional distress claim in a case involving a student who
committed suicide. The Plaintiff alleged that a schoolteacher
falsely reported a disciplinary infraction against a student,
causing emotional distress that resulted in the student’s
suicide. 	Id. at 729. 	The plaintiff claimed that the teacher’s
motive was to cause the student’s expulsion. 	Id. 	The Court
held that while a “teacher falsely reporting misconduct by a
student is a reprehensible act, the circumstances of this case
are simply not beyond all possible bounds of decency.” 	Id. at
730. 	Even as alleged by the plaintiff, nothing about the
defendants’ conduct could even be characterized as
“reprehensible,” a characterization which itself fell short of
the mark in Mikell. 	Cf. Julius v. Wells Fargo Bank, N.A., Civ.
No. 16-cv-516-JL, 2017 WL 1592379, at *6 (D.N.H. Apr. 28, 2017)
(noting that a bank foreclosing on a mortgage does not generally
meet the “extreme and outrageous” standard).
Similarly, DeSteph’s claim for negligent infliction of
emotional distress fails because he has not alleged “serious
mental and emotional harm accompanied by objective physical
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symptoms.” 	Quigley v. Precision Castparts Corp., No. 16-CV-90-
PB, 2016 WL 3906631, at *4 (D.N.H. July 14, 2016). 	The district
judge should therefore dismiss Count 6.
C. Unjust Enrichment (Count 7)
In count 7, DeSteph alleges that the defendants unjustly
enriched themselves by unlawfully withholding commissions from
DeSteph and taking back commissions already paid. 	Unjust
enrichment is an equitable remedy that is available when an
individual receives “a benefit which would be unconscionable for
him to retain.” 	Axenics, Inc. v. Turner Const. Co., 164 N.H.
659, 669 (2013). 	But, “[i]t is a well-established principle
that the court cannot allow recovery under a theory of unjust
enrichment when there is a valid, express contract covering the
subject matter at hand.” 	Id. 	Here, DeSteph’s claims are based
on the defendants’ alleged breach of their express agreements to
pay DeSteph commissions. 	Accordingly, his unjust enrichment
claim is foreclosed, and the district court should dismiss count
7.
D. 	Mail and Wire Fraud (Count 8)
In Count 8, DeSteph alleges that the defendants violated
federal criminal mail and wire fraud statutes, 18 U.S.C. §§ 1341
and 1343. 	It is well-settled, however, that “a private citizen
lacks a judicially cognizable interest in the prosecution or
nonprosecution of another”. 	Linda R.S. v. Richard D., 410 U.S.
614, 619 (1973); see Thompson v. Michels, 574 F. App’x. 196, 197
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(3d Cir. 2014) (per curiam) (noting that federal criminal mail
fraud statues do not provide a private right of action); Jones
v. TD Bank, 468 F. App’x. 93, 94 (3d Cir. 2012) (per curiam)
(same). 	The district judge should therefore dismiss count 8.
V. 	Conclusion
For the foregoing reasons, the district judge should
dismiss counts 5-8 of the complaint. The case will proceed on
plaintiff’s remaining claims, as described herein.
Any objections to this Report and Recommendation must be
filed within fourteen days of receipt of this notice. See Fed.
R. Civ. P. 72(b)(2). The objection period may be extended upon
motion. Failure to file objections within the specified time
waives the right to appeal the district court’s order. 	See
Santos-Santos v. Torres-Centeno, 842 F.3d 163, 168 (1st Cir.
2016).
______________________________
Andrea K. Johnstone
United States Magistrate Judge
March 4, 2020
cc: 	Thomas DeSteph, pro se
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