Harrington v. EquiTrust Life Ins. Co.

A seller has no duty to disclose internal pricing policies or the method for valuing what it sells absent a fiduciary or statutory duty; if a court, rightly within its discretion, chooses to deny awards to a prevailing party, then it must explain its reasoning.

Paul Harrington filed a class action against EquiTrust Life Insurance Company (“EquiTrust”) pursuant to the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c), (“RICO”) claiming EquiTrust’s marketing of its MarketPower Bonus Index Annuity (the “Annuity”) violated 18 U.S.C. § 1341 (mail fraud) and 18 U.S.C. § 1343 (wire fraud). The Annuity generates “index credits” through “index accounts” to increase its accumulation value by accounting for changes in the closing value of the S&P500. The Annuity guarantees a minimum cap of index credits awarded and annually permits withdrawals of 10% of its accumulation value with no penalty. In particular, Harrington claimed EquiTrusts’s promise of premium bonuses, application of the Annuity’s market value adjustment, and circumvention of state nonforfeiture laws violated RICO requirements on racketeering activity. On appeal, the Ninth Circuit first found that because a seller has no duty to disclose internal pricing policies or its method for valuing its product or service, EquiTrust did not commit fraudulent concealment in terms of the premium bonus. The panel did not fully reach the issue of fraudulent misrepresentation because there was a factual dispute about the promise of a bonus and whether it caused Harrington damages. Second, Harrington claimed the constant of the formula for determining the market value adjustment was not disclosed and was fraudulent because EquiTrust’s bias in the formula contradicts the stated purpose for the adjustment. Because EquiTrust put forth sufficient evidence that there was no bias, the panel affirmed the district court’s dismissal of this claim. Third, the panel agreed with the district court’s dismissal of Harrington’s claims about the nonforfeiture law because there was no proof to support it. Finally, the panel vacated the judgment because the district court did not explain why it chose to deny awards to the prevailing party, EquiTrust. AFFIRMED, VACATED, and REMANDED.