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Senior Judge Clarence C. Newcomer of the U.S. District Court for the Eastern District of Pennsylvania will let stand a suit against Independence Blue Cross, an insurance brokerage and a brokerage employee. Plaintiff Bristol Township claims that a health insurance broker improperly received commissions that it never authorized. However, several of Bristol’s claims will be dismissed for inadequate pleadings in its amended complaint in Bristol Township v. Independence Blue Cross. Bristol’s claims arose from insurance broker commissions it paid in connection with the health insurance it provided township employees through IBC for a six-year period ending in 2000. During that time, Eric Vacca was appointed Bristol’s insurance broker. Bristol alleges that Vacca was paid $400,000 in commissions although he “did not negotiate, place, renew, manage, originate, solicit, purchase or sell the health insurance Bristol provided its employees through IBC” during that time. Moreover, the township said, it never authorized the commissions, which it says were buried in the form of higher premiums to the township. The township conceded, however, that it had “no means of calculating the alleged commissions.” The township sued IBC, insurance brokerage David N. Banet and Associates and broker Eric Vacca individually. Banet hired Vacca during the time that IBC alleged he was paid improper commissions. Bristol also said that IBC’s payments to Vacca became illegal after his insurance broker license was suspended on Feb. 19, 1999. Vacca pleaded “guilty or no contest” to charges of conflict of interest, bribery and tampering with public records or information, according to Newcomer’s opinion. Among the claims in Bristol’s complaint were civil conspiracy, breach of contract, breach of fiduciary duty, fraud, negligence, conversion and violation of RICO. Eric Kraeutler, of Philadelphia’s Morgan, Lewis & Bockius, represented Independence Blue Cross; Jeffrey S. Feldman of Montgomery, McCracken, Walker & Rhoads in Cherry Hill, N.J., was counsel to Banet. Vacca’s counsel was Stephen R. Bolden of Philadelphia’s Fell & Spalding. Larry Haft of Newtown, Penn., represented Bristol Township. Both Banet and IBC moved to dismiss the RICO claim. In so doing, Newcomer said that “IBC and Banet … invite this court to commit reversible error.” Both Banet and IBC said that Bristol failed to allege that they both existed as an “enterprise” within the meaning of RICO, and they urged the court to apply the 1981 U.S. Supreme Court decision in U.S. v. Turkette and the 3rd U.S. Circuit Court of Appeals’ 1983 decision in U.S. v. Riccobene. But Newcomer explained why that would be a mistake, citing Seville Indus. Machinery Corp. v. Southmost Machinery Corp., a 1984 3rd Circuit decision in which the court distinguished a RICO pleading requirement from a RICO proof requirement. “ Riccobene and Turkette certainly stand for the proposition that a plaintiff, to recover, must prove that an alleged enterprise possesses the three described attributes. But neither case speaks to what must be pleaded in order to state a cause of action,” the opinion said. Under modern notice pleading rules, nothing more than a “bare allegation” was needed at the early stage of a complaint, Newcomer said. The judge left the RICO claim undisturbed. Motions to dismiss fraud claims against IBC and Banet also were denied. IBC raised the economic loss doctrine, which bars plaintiffs from recovering economic losses in tort when they essentially flow from a contract. Although Newcomer said there is a split of authority in Pennsylvania on whether the doctrine applies to intentional fraud claims, he said it was unnecessary for him to reconcile those opinions. “At this early stage of the litigation, the court is unconvinced that plaintiff has not stated a claim for fraud separate and distinct from its breach of contract claim. [Bristol's] fraud claim involves parties who were not parties to the contract between IBC and Bristol, and IBC’s alleged payment of the commissions were not contemplated in the contract between IBC and Bristol.” IBC alternatively argued that, because there was no confidential relationship between itself and Bristol, it therefore had no duty to tell Bristol that its premiums were inflated to conceal the commissions IBC allegedly paid Vacca. But Newcomer said that the duty to speak can also arise as a consequence of an agreement. Since Bristol was relying on IBC’s invoices when paying its premiums, the judge said, he was unconvinced that Bristol had failed to state a valid claim of fraud. In its motion to dismiss the fraud claim, Banet said Bristol failed to state an allegation for negligent misrepresentation with sufficient particularity under Rule 9(b) of the Federal Rules of Civil Procedure. But Newcomer, again citing the Seville court, denied the motion. According to Seville, focusing on the “particularity language” of the rule is “too narrow an approach and fails to take account of the general simplicity and flexibility contemplated by the rules.” But other claims did fall by the wayside. A claim for an accounting from Banet was dismissed. Newcomer said, “To the extent Bristol seeks an accounting against Banet on equitable grounds, Bristol has an adequate remedy at law: discovery. “To the extent Bristol seeks an accounting at law against Banet … Bristol has failed to allege that Banet was Bristol’s agent. Thus, Bristol has failed to state a claim for accounting against Banet.” Newcomer also granted Banet’s motion to dismiss a breach of contract claim and breach of fiduciary duty claim because Bristol failed to allege either the existence of a contract or a fiduciary relationship with Banet. “Bristol fails to claim that Banet employed Vacca while Vacca still served as Bristol’s broker. To the contrary, Bristol’s amended complaint explains that ‘plaintiff does not have knowledge of the … specific nature of the relationship between Vacca and Banet,’” Newcomer wrote. “Further, Bristol’s amended complaint states that ‘Banet was never appointed or retained by Bristol as its insurance broker.’” And Newcomer dismissed a claim for civil conspiracy against Banet because Bristol failed to allege that the brokerage had acted with malice. The claim for an accounting from IBC withstood dismissal, however. IBC disputed Bristol’s right to an equitable accounting. But the insurer never addressed whether Bristol could state a cause of action for an accounting at law, Newcomer said. Since IBC neither moved to dismiss Bristol’s breach of contract claim, nor did it argue that it was not under a legal obligation to account to Bristol — the claim for an accounting will survive, he said. Claims for conversion against Banet also remained because they were properly pleaded, Newcomer said. “If Bristol’s allegations are true, then Banet has interfered with Bristol’s property, and may be liable for conversion.”

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