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Benfield, Inc. v. Aon Re, Inc.: US District Court :TORT - some claims dismissed for pleading defects; two claims survive summary judgment pre-discovery

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Benfield Inc.,
Plaintiff, MEMORANDUM OPINION
AND ORDER
v. Civil No. 07-2218 ADM/FLN
Aon Re, Inc.,
Defendant.
______________________________________________________________________________
Timothy R. Thornton, Esq., and Robin Caneff Gipson, Esq., Briggs & Morgan, P.A.,
Minneapolis, MN, argued on behalf of the Plaintiff.
Lawrence J. Field, Esq., and Arthur G. Boylan, Esq., Leonard, Street and Deinard, Minneapolis,
MN, argued on behalf of the Defendant.
______________________________________________________________________________
I. INTRODUCTION
On November 2, 2007, the undersigned United States District Judge heard oral argument
on Defendant Aon Re, Inc.s (Aon) Motion to Dismiss [Docket No. 26]. Plaintiff Benfield
Inc. (Benfield) asserts five counts in its Amended Complaint [Docket No. 20]: Count One,
tortious interference with contract; Count Two, tortious interference with prospective business
relations; Count Three, unjust enrichment; Count Four, conversion; and Count Five, unfair
competition. For the reasons set forth herein, Aons motion is granted on Counts One, Two, and
Five. Aons motion to dismiss Counts Three and Four is denied.
1 In considering a motion to dismiss, the pleadings are construed in the light most
favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true.
Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994).
2
II. BACKGROUND1
Benfield is a Delaware corporation with its principal place of business in Bloomington,
Minnesota. Am. Compl. 1. Aon is an Illinois corporation with its principal place of business
in Chicago, Illinois. Id. 2. Benfield and Aon provide risk management services and broker
reinsurance. Id. 1-2. In its capacity as a reinsurance broker, Benfield negotiates reinsurance
contracts (treaties) between an insurer who wants to lay off risk (the cedent) and the
reinsurer to whom the risk is ceded. Id. 5. Benfield engages in significant analysis and
extensive negotiations in preparing the reinsurance proposals for presentation to potential
reinsurers. Id. 6. Once a reinsurer expresses interest in the cedents business, Benfield works
with the parties to negotiate the terms of the treaties. Id. 7. Most of Benfields work ends
upon securing the reinsurance treaty. Id. 8. Benfield is typically compensated by retaining a
commission when the cedent sends the reinsurance payments to Benfield, who then forwards the
balance to the reinsurer. Id. 9.
In 2000 and 2001, Benfield placed five treaties for St. Paul Companies (St. Paul). Id.
11. The estimated value of the brokerage commissions for the treaties was ,400,000. Id. 14.
Before the treaties expired, St. Paul switched reinsurance intermediariesmoving its business
from Benfield to Aon. Id. 12. Benfield concedes that St. Paul was free to change reinsurance
brokers at any time. Id. 18. After switching reinsurance intermediaries, St. Paul began
submitting the reinsurance premiums for all five treaties to Aon. Id. 12. Aon then extracted a
commission. Id. Benfield contends that Aon wrongfully extracted commissions that were
3
earned by Benfield upon placement of the treaties. Benfield filed this suit to collect
commissions it claims were wrongfully retained by Aon.
III. DISCUSSION
A. Motion to Dismiss Standard
Rule 12 of the Federal Rules of Civil Procedure provides that a party may move to
dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P.
12(b)(6). In considering a motion to dismiss, the pleadings are construed in the light most
favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true.
Hamm, 15 F.3d at 112; Ossman v. Diana Corp., 825 F. Supp. 870, 879-80 (D. Minn. 1993). Any
ambiguities concerning the sufficiency of the claims must be resolved in favor of the nonmoving
party. Ossman, 825 F. Supp. at 880. A motion to dismiss should be granted as a practical
matter . . . only in the unusual case in which the plaintiff includes allegations that show on the
face of the complaint that there is some insuperable bar to relief. Frey v. City of Herculaneum,
44 F.3d 667, 671 (8th Cir. 1995).
Under Rule 8(a) of the Federal Rules of Civil Procedure, pleadings shall contain a short
and plain statement of the claim showing that the pleader is entitled to relief. A pleading must
contain enough facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v.
Twombly, 127 S. Ct. 1955, 1974 (2007).
B. Tortious Interference and Unfair Competition
Resolution of the claims in Counts One, Two, and Five does not depend on whether the
commission is earned at placement. These three counts will be addressed first.
4
1. Count OneTortious Interference With Contract
A tortious interference with contractual relationship claim requires proof of: (1) the
existence of a contract; (2) the alleged wrongdoers knowledge of the contract; (3) intentional
procurement of its breach; (4) without justification; and (5) damages. Furley Sales & Assocs.,
Inc. v. N. Am. Auto. Warehouse, Inc., 325 N.W.2d 20, 25 (Minn. 1982).
In Count One of the Amended Complaint, Benfield contends that because it placed St.
Pauls reinsurance treaties, it was entitled to full payment of the brokerage commissions for
those treaties. Am. Compl. 15. Benfield contends that Aon knew Benfield was entitled to the
commissions but intentionally and without justification collected the commissions and refused to
remit payment to Benfield. Id. 16. Benfield contends that because of Aons wrongful conduct,
it was damaged in an amount in excess of ,000. Id. 17.
Aon asserts Count One of Benfields Amended Complaint should be dismissed because
Benfield failed to properly plead the required elements of a tortious interference with contract
claim. Specifically, Aon contends that Benfield failed to allege the existence of a contractual
relationship between itself and St. Paul or between itself and the reinsurers. Aon asserts that if
Benfields claim relates to the treaties between St. Paul and the reinsurers, the claim should be
dismissed because Benfield is not a party to the treaties and thus lacks standing to claim tortious
interference of contract regarding the treaties. Aon also asserts that Benfield failed to plead any
breach and failed to plead that Aons conduct was without justification. Aon asserts that it had a
legitimate economic interest in the treaties and that because it performed work when it took over
as the reinsurance broker, it was entitled to the commissions it extracted from the reinsurance
payments. Aon summarizes its position regarding Count One as follows: Because Benfield
5
does not allege a contract or its breach, and because Aon had a legitimate economic interest in
working for commissions during the Aon Period, Benfields claim for tortious interference with
contract must be dismissed. Def.s Mem. in Supp. of its Mot. to Dismiss [Docket No. 29] at 9.
In opposing Aons motion, Benfield attempts to clarify its pleading by asserting that Aon
interfered with its contractual relationship with St. Paul and its relationship with the reinsurers.
To satisfy the pleading requirements of Rule 8(a) and Twombly, Benfield needed to allege
sufficient facts to state a claim that is plausible on its face. Benfield has pled no facts concerning
the existence of a contractual relationship either between itself and St. Paul or itself and the
reinsurers. Regarding the asserted contractual relationship with St. Paul, Benfield asserts in its
memorandum opposing Aons motion that its relationship arose from the broker of record
letter. Yet there is no mention of that document in its Amended Complaint, nor is the document
part of the record of the case.
Further, even assuming Benfield plead facts making the existence of a contract between it
and St. Paul or the reinsurers plausible, Benfield needed to proffer facts demonstrating that Aon
intentionally procured the breach of a contract. Benfield has set forth no such facts. To the
contrary, given that St. Paul was free to change brokers at any time, it seems more plausible that
Aon did not procure any breach at all. Accordingly, Benfields claim of tortious interference
with contract is dismissed.
2. Count TwoTortious Interference with Prospective Business Relationship
A claim of tortious interference with prospective business relationship requires proof that
the actor intentionally committed a wrongful act that improperly interfered with a prospective
business relationship. United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628, 633 (Minn. 1982)
6
(adopting the Restatement (Second) of Torts 766B (1977)). The interference may consist of
inducing or otherwise causing a third person not to enter into or continue the prospective
relation, or preventing the other from acquiring or continuing the prospective relation.
Restatement (Second) of Torts 766B.
In Count Two, Benfield asserts that brokerage commissions are earned upon placing the
reinsurance treaties. Am. Compl. 19. Benfield asserts that when a cedent changes brokers
before the expiration of a treaty, the placing broker has a reasonable commercial expectation,
[as] well as a contractual entitlement, to the full natural commission associated with the
placement made by that broker prior to the mid-term account move. Id. 20. Benfield
contends that by extracting a commission from the reinsurance payment on the accounts it
placed, Aon interfered with its reasonable prospective business relations regarding the receipt
of the full natural commission on the St. Paul placements. Id. 21.
Aon contends that Count Two of Benfields Amended Complaint fails the pleading
requirements of Rule 8(a) because Benfield failed to plead interference with a business
relationship. Aon also asserts that Benfields claim fails to plead (1) that Aon wrongfully caused
St. Paul to terminate its relationship with St. Paul; (2) that Benfield had a reasonable expectation
of economic advantage given that St. Paul was free to change brokers at any time; (3) that Aon
used wrongful or illegal means to induce St. Paul to change brokers; (4) and that Aons actions
in collecting the commissions and not remitting them to Benfield were without justification.
Benfields Amended Complaint is unclear in identifying a prospective business
relationship wrongfully interfered with. However, in its memorandum, Benfield asserts that Aon
wrongfully interfered with its relationship with the reinsurers. According to Benfield, Aon
7
wrongfully interfered with that relationship when it collected the payments from St. Paul,
deducted its commission, and forwarded the balance to the reinsurers. However, Benfield pled
no facts demonstrating Benfields relationship with the reinsurers. To the contrary, the facts
alleged in its Amended Complaint demonstrate that once Benfield placed a treaty, St. Paul
submitted payment to Benfield, and then Benfield forwarded payment to the reinsurer.
Accordingly, the Amended Complaint cites facts of Benfields relationship with St. Paul. Even
if Benfield had pled facts demonstrating a business relationship with the reinsurers, it has still
failed to plead any fact regarding Aons actions other than Aons collection of the payments and
extraction of its commissions. Benfield has pled no facts relating to any actions Aon may have
taken to procure St. Pauls decision to change brokers and thus there is no basis to determine
whether it is plausible that Aons actions were wrongful and without justification. That Aon
collected the reinsurance payments from St. Paul, deducted a commission, and forwarded the
remaining balance to the reinsurers does not, by itself, demonstrate that Aon acted wrongfully
and without justification. Accordingly, Benfields claim for tortious interference with
prospective business relationship is dismissed.
3. Count FiveUnfair Competition
A claim of unfair competition is based on an underlying tort such as tortious interference
with contract or prospective business relationship. Midwest Sports Mktg., Inc. v. Hillerich &
Bradsby of Can., Ltd., 552 N.W.2d 254, 267 (Minn. Ct. App. 1996). The face of the Amended
Complaint does not reveal the tort on which Benfield bases its claim of unfair competition;
however, in its memorandum Benfield argues the claim is based on the underlying tortious
interference claims. Whether a claim of unfair competition survives a motion to dismiss or
8
motion for summary judgment depends on the resolution of the underlying tort. See Rehab.
Specialists, Inc. v. Koering, 404 N.W.2d 301, 306 (Minn. Ct. App. 1987) (declining to grant
summary judgment on unfair competition claim because of courts decision not to grant
summary judgment as to underlying tort); see also Benfield, Inc., v. Moline, No. 04-3513, 2006
WL 452903, at *13 (D. Minn Feb. 22, 2006) (concluding that because underlying tort claims had
been dismissed, unfair competition claim was dismissed). Having dismissed both claims of
tortious interference, Benfields claim of unfair competition is also dismissed.
C. Unjust Enrichment and Conversion
The resolution of Aons motion to dismiss Benfields claims of unjust enrichment and
conversion, pivots on the point at which a broker earns its commission for the placement of the
reinsurance treaties. In Benfield v. Moline, 2006 WL 452903, District Judge Michael Davis,
evaluated a similar situation on a motion for summary judgment. In that case, Moline collected
the commissions relating to several treaties placed by Benfield after several cedent insurers
changed brokers mid-term. Id. at *14. In evaluating Benfields claims of unjust enrichment and
conversion, the court was required to determine whether broker commissions in the reinsurance
context are earned at placement. Id. at **13-14. Neither party referenced or provided the court
with a contract relating to the commissions and it was unclear whether there was a written
agreement between the reinsurer and placing broker. Id. at *14. Without a contract to guide the
courts determination, Judge Davis compared the reinsurance and insurance industry and
concluded that because they were analogous, the general principles of the insurance industry
applied in the reinsurance context. Without the existence of a contract specifying otherwise,
Judge Davis concluded that the general rule for insurance brokerage commissions applies to the
9
reinsurance industry: generally, reinsurance brokerage commissions are earned at placement; if
the client switches brokers partway through the insurance contract year, the initial broker is still
entitled to those commissions until the treaty renewal period.
District Judge John Tunheim addressed a similar situation but declined to conclude,
based on Judge Davis decision in Benfield v. Moline, that the reinsurance industry is analogous
to the insurance industry such that a general presumption exists that commission is earned at
placement. Guy Carpenter & Co. v. Collins, No. 5-1623, 2006 WL 2502232 (D. Minn. Aug. 29,
2006). Instead, Judge Tunheim concluded that whether the reinsurance industry was similar to
the insurance industry involved a fact question precluding summary judgment.
In the above cited cases, both judges had the benefit of a factual record developed
through discovery. Here the Court is asked to addresses this issue on a motion to dismiss. In its
Amended Complaint, Benfield has pled that it earned the commission at placement and that will
be taken as true for the purposes of evaluating this motion. After discovery the Court will be
better positioned to evaluate whether there is a triable fact issue on the timing of earning
commissions.
D. Count ThreeUnjust Enrichment
To successfully assert a claim of unjust enrichment, a plaintiff must show that the
defendant knowingly received something of value that it was not entitled to and that it would be
unjust for the defendant to retain that benefit. Guiness Import Co. v. Mark VII Distribs., Inc.,
153 F.3d 607, 613 (8th Cir. 1998). An unjust enrichment claim does not lie merely because one
party benefits from anothers efforts or obligations; rather it must be shown that a party was
unjustly enriched in the sense that the term unjustly could mean illegally or unlawfully.
10
Custom Design Studio v. Chloe, Inc., 584 N.W.2d 430, 433 (Minn. App. 1998) (quoting First
Natl Bank of St. Paul v. Ramier, 311 N.W.2d 502, 504 (Minn. 1981)). Unjust may also mean
that it would be morally wrong for the defendant to enrich itself at the expense of the plaintiff.
Gallinger v. N. Star Hosp. Mut. Assur., Ltd., 64 F.3d 422, 426 (8th Cir. 1995).
Aon asserts that Benfields claim of unjust enrichment cannot survive its motion to
dismiss because Benfield pled no facts demonstrating how Aons conduct was unjust. Aon
contends that Benfield failed to set forth any allegation of wrongful, illegal, or morally
reprehensible conduct by Aon. Benfield fails to address Aons arguments regarding the facts
alleged in its Amended Complaint. Rather, Benfield contends that it worked to place the treaties
and thus earned its commission upon placement of those treaties such that Aons retention of the
commissions results in its unjust enrichment.
Assuming for the purposes of this motion that Benfield earned its commission at
placement, then Aons retention of any portion of those commissions might be wrongful and
would unjustly enrich Aon. Accordingly, Benfields claim of unjust enrichment is plausible
on its face and survives Aons motion to dismiss.
E. Count FourConversion
To establish common law conversion the plaintiff must establish it (1) has a property
interest, and (2) that the defendant deprived the plaintiff of that interest. Larson v. Archer-
Daniels-Midland Co., 226 Minn. 315, 32 N.W.2d 649 (1948). A plaintiffs lack of an
enforceable interest in the subject property is a complete defense against conversion. Lassen v.
First Bank Eden Prairie, 514 N.W.2d 831, 838 (Minn. Ct. App. 1994). Wrongfully refusing to
deliver property on demand by the owner constitutes conversion. Molenaar v. United Cattle
11
Co., 553 N.W.2d 424, 430-31 (Minn. Ct. App. 1996).
Aon contends that Count Four should be dismissed because Benfield does not have a
property interest in the full value of the commissions. According to Aon, because the broker
continues to perform work after placement, only a portion of the commission vested at
placement. Aon asserts that because it was justified in retaining the commissions it earned
through the work performed when it replaced Benfield, Benfield has failed to state a claim for
conversion. Benfield asserts that the commissions were earned at placement. Further, it asserts
that whatever work Aon performed may be considered in calculating damages to prevent
Benfield from being unjustly enriched. However, Benfield is entitled to compensation it earned
upon placement.
Taking as true the assertion that Benfield earned the commissions upon placement,
Benfield had a property interest in the commissions. Accordingly, Benfield has set forth a claim
for conversion that is plausible and survives Aons motion to dismiss.
12
IV. CONCLUSION
Based upon the foregoing, and all of the files, records and proceedings herein, IT IS
HEREBY ORDERED:
1. Defendants Motion to Dismiss [Docket No. 26] is GRANTED as to Counts One,
Two, and Five of Plaintiffs Amended Complaint [Docket No. 20];
2. Defendants Motion to Dismiss is DENIED as to Counts Three and Four.
BY THE COURT:
s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: January 8, 2008.
 

 
 
 

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