NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557- 1030; SJCReporter@sjc.state.ma.us
SJC-12662
UBS FINANCIAL SERVICES, INC. vs. DONNA M. ALIBERTI.
Suffolk. April 1, 2019. - October 22, 2019.
Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, & Cypher, JJ.
Individual Retirement Account. Trust, Interest of beneficiary. Fiduciary. Contract, Third party beneficiary. Consumer Protection Act, Standing, Trade or commerce, Unfair or deceptive act.
Civil action commenced in the Superior Court Department on August 4, 2015.
Counterclaims were heard by Karen F. Green, J., on a motion for judgment on the pleadings.
After review by the Appeals Court, the Supreme Judicial Court granted leave to obtain further appellate review.
Carmen A. Frattaroli for the defendant. John K. Wells for the plaintiff. Glenn Kaplan, Assistant Attorney General, for the Attorney General, amicus curiae, submitted a brief. David Goldberg & Susan Light, of New York, Robert T. Smith & Mary C. Fleming, of the District of Columbia, Christian Kemnitz, of Illinois, & William C. Pericak, for Securities Industry and Financial Markets Association, amicus curiae, submitted a brief. 2
LOWY, J. On appeal from an order granting judgment on the
pleadings, we are called upon to consider the legal relationship
between the commercial custodian of three nondiscretionary
individual retirement accounts (IRAs) and a named beneficiary of
those accounts upon the death of the original account holder.
Quasi familial conflict following the death of the IRAs'
original account holder sparked a lengthy account beneficiary
dispute between the plaintiff in counterclaim, Donna M.
Aliberti, as a named IRA beneficiary, and the defendant in
counterclaim, UBS Financial Services, Inc. (UBS), as IRA
custodian. Allegedly fueled by a combination of bureaucratic
indifference or incompetence and hypersensitivity to risk
exposure, the feud festered for more than one and one-half years
before resulting in legal action, commenced by UBS filing a
complaint for interpleader.
In counterclaim to UBS's interpleader complaint, Aliberti
asserted claims of breach of contract; breach of fiduciary duty;
violation of the consumer protection statute, G. L. c. 93A, § 9
(c. 93A); and intentional infliction of emotional distress. A
Superior Court judge allowed UBS's motion for judgment on the
pleadings as to all claims, but the Appeals Court reversed on
all counts but intentional infliction of emotional distress.
See UBS Fin. Servs., Inc. v. Aliberti, 94 Mass. App. Ct. 180,
192-193 (2018). More specifically, the Appeals Court concluded 3
that the pleadings stated facially plausible claims that
(1) Aliberti was an intended third-party beneficiary of
contracts governing the IRAs with standing to sue for
contractual breach, (2) UBS committed a breach of fiduciary
duties owed to Aliberti, because IRAs are "trusts" under Federal
tax law, and (3) the challenged conduct by UBS occurred in a
business context and violated c. 93A.1 We granted UBS's
application for further appellate review.
On review, we conclude that there is no plausible claim for
breach of fiduciary duty, but the facts alleged do state a claim
that UBS's conduct violated c. 93A. More specifically, we hold
that the custodian of a nondiscretionary IRA does not owe a
fiduciary duty to a named beneficiary of that IRA, where no
special agreement or circumstances elevate their relationship
above the consumer sphere, which the record here does not
support. We also hold that the interactions between the
commercial custodian of a nondiscretionary IRA and a named
beneficiary of that IRA occur in a business context within the
meaning of c. 93A, and that the injurious conduct of UBS alleged
1 The Appeals Court reversed the judgment on the pleadings entered by the Superior Court as to those counts of the amended counterclaim asserting claims for breach of contract. See UBS Fin. Servs., Inc. v. Aliberti, 94 Mass. App. Ct. 180, 192-193 (2018). UBS did not seek further appellate review of the breach of contract issue, and it is not before us. Those counts were remanded to the Superior Court for further proceedings consistent with the Appeals Court's order. 4
here plausibly constitutes a c. 93A violation. We therefore
affirm the Superior Court judge's decision as to the breach of
fiduciary duty claim and reverse the decision as to the
violation of c. 93A.2
Background. 1. IRA background. This dispute arises from
within that sector of the consumer financial services industry
devoted to the sale, maintenance, and postmortem transfer of
IRAs. IRAs are a widely used type of tax-advantaged account
that provides incentives for individuals to accumulate
retirement savings. See Clark v. Rameker, 573 U.S. 122, 124-
125, 128 (2014); Investment Company Institute, Investment
Company Fact Book 172 (59th ed. 2019), https://www.ici.org/pdf
/2019_factbook.pdf [https://perma.cc/TX83-JFYP].3 Congress first
enacted the legal framework for IRAs in 1974, to make tax-
deferred savings available to workers without access to an
employer-sponsored retirement plan. Congressional Research
Service, Traditional and Roth Individual Retirement Accounts
2 We acknowledge the amicus brief submitted by the Securities Industry and Financial Markets Association in support of UBS with respect to the fiduciary duty question, and the amicus letter submitted by the Attorney General respecting G. L. c. 93A, § 9.
3 According to the Investment Company Institute, about one- third of households in the United States owned an IRA at year- end 2018, with the assets in those IRAs accounting for thirty- three percent of all retirement assets in the United States (or approximately $8.8 trillion). Investment Company Institute, supra at 172-173. 5
(IRAs): A Primer 1 (updated May 11, 2018). While IRAs were
designed to function primarily as tax-advantaged savings
vehicles for the account holder's own future use and benefit,
they have since become an important estate planning vehicle, as
significant balances may remain upon an account holder's death.
The Internal Revenue Service (IRS) contemplates that a typical
account holder will establish an IRA "to provide [both] for his
or her retirement and for the support of his or her
beneficiaries." IRS Form 5305-A (model traditional IRA
custodial account agreement).
Although the income tax treatment of IRA assets is complex
and dictated by Federal law, nearly all other legal aspects of
these accounts are governed by State statutory and common law,
and the contractual terms of account agreements as dictated by
private financial institutions to consumers. See Sterk &
Leslie, Accidental Inheritance: Retirement Accounts and the
Hidden Law of Succession, 89 N.Y.U. L. Rev. 165, 174-175 (2014)
(Sterk & Leslie).4 The procedure for transferring ownership of
4 Unlike "qualified" retirement plans sponsored by employers, IRAs (and those who market and sell them to consumers) are not subject to the strict accountability requirements of tit. I of the Employee Retirement Income Security Act (ERISA), including fiduciary standards for plan advisors (29 U.S.C. § 1104), stringent disclosure requirements (29 U.S.C. § 1021), automatic surviving spouse benefits (29 U.S.C. § 1055[a][2]), and the private right of action granted to beneficiaries for breach of fiduciary duty and other claims (29 U.S.C. § 1132[a][1]). See 29 U.S.C. §§ 1003(a), 1051(6) 6
the IRA upon an account holder's death is among the legal
aspects of an IRA dictated by State law. IRAs are a type of
"nonprobate" asset, meaning that upon the death of the owner,
title passes in accordance with a contractual beneficiary
designation rather than under the provisions of a will. See
G. L. c. 190B, § 6-101 (contract for nonprobate transfer on
death not testamentary, meaning valid without will's
formalities); G. L. c. 167D, § 15 (IRA beneficiary designations
take effect according to contractual terms, "notwithstanding any
purported testamentary disposition allowed by statute, by
operation of law or otherwise to the contrary").
In Massachusetts, as in most other jurisdictions, State law
does not provide regulations or guidelines standardizing or
otherwise governing the form or content of IRA beneficiary
designations, the procedure for amending them, or the default
provisions in the event no beneficiary is designated. Sterk &
Leslie, supra, at 175. Financial intermediaries each use their
own "standard form instruments with fill-in-the-blank
beneficiary designations," Langbein, The Nonprobate Revolution
and the Future of the Law of Succession, 97 Harv. L. Rev. 1108,
(exempting IRAs from coverage under title I of ERISA). Whereas ERISA frequently preempts State law actions with respect to qualified retirement plans, litigation concerning IRAs typically involves State law. See, e.g., Joint Committee on Taxation, Present Law and Analysis Relating to Individual Retirement Arrangements 19 (June 24, 2008). 7
1109 (1986), and typically, the contractual "framework keeps
administrative costs down by limiting the inquiry required of
the account custodian at the time of the accountholder's death."
Sterk & Leslie, supra at 177.
The contractual change in account ownership appears
typically to occur "immediately and automatically" at the moment
of the original account holder's death, yet it is not typical
practice for a beneficiary to "be able to walk in to the IRA
provider's office, present his identification, and get a check
for the entire balance payable to himself." N.B. Choate, Life
and Death Planning for Retirement Benefits 259 (8th ed. 2019).
Rather, many IRA custodians will not accept instructions from a
beneficiary-cum-owner until appropriate documents have been
signed (typically a new account agreement) and, where
applicable, the account has been "retitled" as an inherited IRA
to formalize the change in ownership. Id.
2. Factual background. We present the pertinent facts
from the pleadings and exhibits that were before the motion
judge, in the light most favorable to Aliberti. In 2008,
Patrick Kenney opened three IRAs with UBS. The UBS financial
advisor who assisted Patrick Kenney in establishing the IRAs,
Margaret Kenney, was also his one-time sister-in-law.5 At the
5 We refer to Patrick Kenney and Margaret Kenney by their full names to avoid confusion. 8
time he established the IRAs, Patrick Kenney was involved in a
long-term romantic but nonmarital relationship with Aliberti.
When Patrick Kenney filled out the initial account paperwork, he
designated Aliberti as the sole primary beneficiary of each IRA.6
In establishing the IRAs, Patrick Kenney signed the "UBS
Client Relationship Agreement" (CRA), which named Aliberti as
sole primary beneficiary below the statement, "At your death,
your IRA will be transferred to the beneficiary or beneficiaries
whose name(s) are printed below," followed by the advisory, "You
may change your beneficiary designation at any time by notifying
UBS in writing of the change in a form acceptable to UBS." The
CRA also incorporated terms and conditions of the "UBS IRA
Custodial Agreement" (custodial agreement) and "IRA Disclosure
Statement," two other documents allegedly included in the set of
initial account paperwork mailed to Patrick Kenney for review
and signature.
In November 2013, Patrick Kenney completed two UBS "IRA
Beneficiary Designation Update Forms" (update forms) in
connection with two of the IRAs, one with an approximate balance
of $18,000 and the other with an approximate balance of $31,000
6 Patrick Kenney was a resident of Billerica from the time he established the IRAs until his death. UBS is a Delaware corporation that conducts business in several Massachusetts locations (among others), including in Hyannis, where Margaret Kenney was based. Aliberti lived in Massachusetts throughout the period of time relevant to this case. 9
(collectively, smaller IRAs). Kenney completed the two update
forms in an identical manner, writing in the names of four
individuals with the notation "25%" next to each. Those
individuals are Aliberti, Aliberti's son, Patrick Kenney's
niece, and a friend of Patrick Kenney named Craig Gillespie.
Patrick Kenney completed each of the forms improperly, writing
Gillespie's name on the line designated for a "primary
beneficiary" and each of the three other names on a line
designated for a "contingent beneficiary."
UBS received the two update forms from Patrick Kenney, but
declined to process them because they were not properly
completed. Margaret Kenney arranged for new beneficiary update
forms for each IRA to be sent to Patrick Kenney for completion.
UBS never received any request from Patrick Kenney to update the
beneficiary designation with respect to the third IRA, valued at
approximately $276,000 (larger IRA), and no additional forms
were ever received with respect to the smaller IRAs. Patrick
Kenney died unexpectedly on December 2, 2013.
Approximately two weeks following Patrick Kenney's death,
Aliberti contacted Margaret Kenney about the three IRAs. That
evening, Margaret Kenney sent Aliberti a series of text
messages, beginning with a request for her address, but followed
by attacks on Aliberti's character, including references to her
as "a whore" and "the . . . worst piece of filth I have ever 10
encountered," and ultimately an accusation that Aliberti had
failed to notice errors on Patrick Kenney's death certificate on
account of being "too busy ransacking" and "so eager to grab the
money." Two days later, Margaret Kenney sent Aliberti another
text message stating, "Documents mailed to you today please sign
and return ASAP for distribution."
Near the end of December 2013, UBS received a letter from
Gillespie's attorney, stating the attorney's understanding that
Patrick Kenney had "changed the named beneficiaries on two of
the IRA accounts and that he was in the process of changing
beneficiaries with regard to the third IRA account at the time
of his passing." The letter also stated that Gillespie intended
"to have a court of law resolve the issue of whether or not he
is a named beneficiary of the third IRA account" and asked UBS
not to make any distributions therefrom.7 The letter from
Gillespie's counsel resulted in UBS's classification of the
larger IRA as "disputed" in accordance with internal policy,
which meant that UBS would take no action with regard to the
7 The letter also contended that Massachusetts law "deems a change of beneficiary to have occurred before the completion of a change of beneficiary form in the event that the decedent has expressed an intent to change beneficiaries, has conveyed that intent to the financial services provider and has substantially completed the change of beneficiary process." Even if this argument gave UBS pause, the theory could not apply to the larger IRA without the existence of an update form completed and signed by Patrick Kenney in connection with that account. No such form was ever produced. 11
larger IRA unless one of the following occurred: (1) receipt of
a court order with instructions; (2) Gillespie's withdrawal of
any claim to the funds; or (3) the expiration of all applicable
statutes of limitations, eliminating any related risk for UBS.
During the second week of January 2014, Aliberti telephoned
the UBS client relations department to complain about the text
messages received from Margaret Kenney. During the call, she
stated her belief that she was the sole beneficiary of all three
IRAs, and the UBS "Client Relations Telephone Log Sheet"
generated in connection with that call references the account
numbers of all three IRAs. Aliberti had no further
communication with UBS until February 4, 2014, when she received
an unsigned letter from UBS's "Early Dispute Resolution Group,"
stating that a case manager had been assigned to her complaint
and would respond after review. On February 19, 2014, Aliberti
sent completed beneficiary processing forms for all three IRAs,
a copy of Patrick Kenney's death certificate, and a copy of her
driver's license to UBS.
Five days later, Aliberti telephoned UBS's client relations
department to complain a second time, having received a package
of new account paperwork indicating that Margaret Kenney
remained in control of the IRAs. Aliberti again complained
about Margaret Kenney's previous unprofessional text messages
and demanded assignment of a new UBS financial advisor to 12
administer the IRAs. Near the end of March 2014, UBS removed
Margaret Kenney from oversight of all three IRAs, and Aliberti
received another form letter from UBS stating that the IRAs had
"been updated for Management access only" and that the UBS
client relations department would respond to Aliberti's concerns
"as soon as possible." Shortly thereafter, within five months
of Patrick Kenney's death, UBS liquidated each of the smaller
IRAs, in each instance making four equal distributions of funds
to each of Aliberti, Aliberti's son, Gillespie, and Patrick
Kenney's niece.8 Neither Aliberti nor her son attempted to
return funds to UBS.
After receiving these distributions from the smaller IRAs,
Aliberti retained counsel to communicate with UBS on her behalf.
In early May 2014, Aliberti made a written request, through
counsel, seeking information relating to the IRAs of which
Aliberti was a named beneficiary, UBS's treatment of Aliberti's
complaints, and details of any dispute as to Aliberti's
beneficial interest in one or more of the IRAs.9 This request
8 Although Aliberti pleaded that distributions were made "without notice," the record suggests that she opened a new account at UBS expressly for the purpose of accepting them.
9 The letter from Aliberti's counsel acknowledges an "understanding that [UBS] has indicated that there is a dispute as to [Aliberti]'s beneficial interest in one of more Individual Retirement Accounts held by [Patrick Kenney]" but does not elaborate as to how that indication was made. 13
was sent by certified mail to the UBS personnel who had
previously assured her, first in early February and subsequently
in late March, that a response to her concerns would be
forthcoming. Although Aliberti's request expressly proposed
delivery of materials within seven days, UBS failed to respond.
Aliberti ultimately resorted to service of a keeper of the
records deposition subpoena on UBS. UBS replied, "albeit
late."10
On August 29, 2014, nearly nine months following Patrick
Kenney's death, Aliberti, through counsel, sent a second letter
to the same UBS personnel. This letter contained a written
demand for immediate distribution of the date-of-death balance
of the larger IRA, with appropriate interest and dividends, to
Aliberti; a statement of intent to sue failing delivery of those
funds within ten business days; and a reservation of Aliberti's
rights to contest the distributions made from proceeds of the
smaller IRAs. Although UBS failed to respond or deliver
payment, Aliberti did not file suit.
On April 2, 2015, Aliberti's counsel deposed Margaret
Kenney, who, among other things, admitted to sending Aliberti
the text messages that caused Aliberti to complain to UBS's
10The record contains no further details with respect to the timing or substance of either the subpoena or UBS's response thereto. 14
client relations department. On May 18, 2015, Aliberti's
counsel sent UBS a c. 93A demand letter, enclosing the Margaret
Kenney deposition transcript and exhibits. The allegations
stated in the c. 93A demand letter included the following: UBS
knowingly and willfully failed to provide Aliberti with
information to which she was entitled as the beneficiary of an
account or accounts held by UBS; UBS serially ignored Aliberti's
attempts to communicate for the purpose of requesting
information about and distribution of amounts to which
beneficiary status entitled her; UBS compelled Aliberti to
obtain counsel and issue a subpoena in order to obtain that
information; UBS distributed proceeds of the smaller IRAs
without first addressing Aliberti's stated belief that she was
rightfully the sole designated beneficiary thereof; and UBS
refused to distribute the substantial proceeds of the larger IRA
to her "without lawful excuse or basis."
UBS responded to Aliberti's c. 93A demand letter in writing
on June 15, 2015, denying the legal merit of Aliberti's stated
claims. Further correspondence between the parties in early and
mid-July yielded no resolution. On August 4, 2015, UBS filed a
complaint for interpleader in the Superior Court pursuant to
Mass. R. Civ. P. 22, 365 Mass. 767 (1974), asking the court to
determine ownership of the larger IRA and joining Aliberti and
Gillespie as defendants. Litigation ensued, but by March 10, 15
2016, all parties stipulated to partial dismissal of those
claims by and against Gillespie, resulting in Gillespie's waiver
of any claim to ownership of the proceeds of the larger IRA.
Even after Gillespie, through stipulation, withdrew any
claim to the proceeds of the larger IRA, UBS still delayed
distribution. On June 9, 2016, UBS and Aliberti entered into a
limited stipulation and release whereby UBS would distribute all
proceeds of the larger IRA to Aliberti "promptly and without
delay" in return for her releasing them from liability regarding
any claim for disbursement of the funds in the larger IRA. The
stipulation expressly acknowledged Aliberti's right to pursue
her claims against UBS as stated in her amended counterclaim,
including breach of contract, breach of fiduciary duty, and
violation of c. 93A. By June 16, 2016, when Aliberti filed a
motion to amend her counterclaims against UBS and sought to join
Margaret Kenney as a cross defendant,11 UBS still had not made
any distribution from the larger IRA.
UBS distributed the larger IRA proceeds to Aliberti on
July 1, 2016, approximately two and one-half years following
Patrick Kenney's death. Aliberti continued pursuit of her
counterclaims against UBS, and after several months of further
litigation, UBS filed a motion for judgment on the pleadings as
11The Superior Court judge ultimately denied the motion to join Margaret Kenney as a party to the suit. 16
to those claims. The Superior Court judge granted the motion,
dismissing each of Aliberti's claims. Aliberti appealed. The
Appeals Court reversed in part, finding Aliberti's claims of
breach of contract, breach of fiduciary duty, and violation of
c. 93A to be well pleaded. UBS Fin. Servs., Inc., 94 Mass. App.
Ct. at 192-193. We granted further appellate review to consider
whether the factual allegations as pleaded support plausible
claims for relief as to breach of fiduciary duty and violation
of c. 93A.
Discussion. 1. Standard of review. "We review de novo a
judge's order allowing a motion for judgment on the pleadings
under Mass. R. Civ. P. 12 (c), 365 Mass. 754 (1974)." Champa v.
Weston Pub. Sch., 473 Mass. 86, 90 (2015), quoting Merriam v.
Demoulas Super Mkts., Inc., 464 Mass. 721, 726 (2013). We
accept the truth of all well-pleaded facts alleged by, and "draw
every reasonable inference in favor" of, the nonmoving party,
Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011),
to determine whether there are "factual 'allegations plausibly
suggesting (not merely consistent with)' an entitlement to
relief." Iannacchino v. Ford Motor Co., 451 Mass. 623, 636
(2008), quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557
(2007). See Jaroz v. Palmer, 436 Mass. 526, 530 (2002)
(defendant's "motion under rule 12 [c] is akin to a motion [to 17
dismiss] under Mass. R. Civ. P. 12 [b] [6]," 365 Mass. 754
[1974]).
2. Breach of fiduciary duty. Aliberti contends that UBS
committed a breach of fiduciary duties owed to her as the
designated beneficiary of all three nondiscretionary custodial
IRAs at issue here. To establish a claim of breach of fiduciary
duty under Massachusetts law, "there must be a [fiduciary] duty
owed to the plaintiff by the defendant and injury to the
plaintiff proximately caused by the [defendant's] breach
[thereof].12 Estate of Moulton v. Puopolo, 467 Mass. 478, 492
12We conduct the fiduciary duty analysis in accordance with Massachusetts law, as the parties are in agreement that it should apply. The CRA and the incorporated custodial agreement are both governed by New York law. However, the choice-of-law provisions therein relate only to the interpretation and enforcement of the CRA and the custodial agreement, and the parties' contractual disputes are not before us. Further, "only actual conflicts between the laws of different jurisdictions must be resolved," Kaufman v. Richmond, 442 Mass. 1010, 1012 (2004), and we discern no relevant difference between the fiduciary duty law of New York and Massachusetts. See, e.g., Rut v. Young Adult Inst., Inc., 74 A.D.3d 776, 777 (2010) (elements for fiduciary duty claim under New York law). Thus, application of either State's law would yield the same result here. Cf. Terra Nova Ins. Co. v. Fray-Witzer, 449 Mass. 406, 411-412 (2007) (applying New Jersey law where parties "agree that there is no relevant difference between New Jersey and Massachusetts law and have both employed New Jersey law in their arguments").
In any event, under the particular circumstances of this case the Massachusetts choice-of-law rules indicate that Massachusetts law should apply to our fiduciary duty analysis. See Bushkin Assocs., Inc. v. Raytheon Co., 393 Mass. 622, 631 (1985) (Massachusetts follows "a functional choice-of-law approach that responds to the interests of the parties, the 18
(2014). See Baker v. Wilmer Cutler Pickering Hale & Dorr LLP,
91 Mass. App. Ct. 835, 842 (2017). "A fiduciary relationship is
one founded on the trust and confidence reposed by one party in
the integrity and fidelity of another." Estate of Moulton,
supra.
Fiduciary duties may arise in two ways: (a) as a matter of
law, where parties to the subject relationship are cast in
archetypal roles, "such as trustee and [beneficiary], guardian
and ward, attorney and client," Smith v. Smith, 222 Mass. 102,
106 (1915); or (b) as "determined by the facts established,"
Warsofsky v. Sherman, 326 Mass. 290, 293 (1950), upon "evidence
indicating that one person is in fact dependent on another's
judgment in business affairs or property matters." Markell v.
Sidney B. Pfeifer Found., Inc., 9 Mass. App. Ct. 412, 444
(1978), abrogated on another ground by Cleary v. Cleary, 427
Mass. 286, 292 (1998), citing Hawes v. Lackey, 207 Mass. 424,
431-432 (1911). Because the amended complaint does not
States involved, and the interstate system as a whole"). "The Massachusetts functional approach is explicitly guided by the Restatement (Second) of Conflict of Laws (1971) [(Restatement)]." Clarendon Nat'l Ins. Co. v. Arbella Mut. Ins. Co., 60 Mass. App. Ct. 492, 496 (2004) (Lenk, J.). Section 145 of the Restatement states that "[t]he rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties" as determined by factors laid out in § 6 of the Restatement. 19
adequately plead facts to support the existence of a fiduciary
duty under either theory, the Superior Court judge properly
granted UBS's motion for judgment on the pleadings as to the
counts claiming breach of fiduciary duty.
a. No fiduciary relationship exists by operation of law.
The relationship between the custodian of a nondiscretionary IRA
and a named beneficiary of the IRA is not among those
traditional "familiar and well[-]recognized" relationships
giving rise to fiduciary duties as a matter of law.13 Warsofsky,
326 Mass. at 292. See 1 J. Story, Commentaries on Equity
Jurisprudence as Administered in England and America §§ 308-327
(1836) (discussing fiduciary standards governing certain
relationships, including attorney and client, guardian and ward,
principal and agent, and trustee and beneficiary). More
specifically, the record does not support an allegation that UBS
and Aliberti are bound by the fiduciary ties of trustee and
beneficiary, because no "trust" exists under State law or is
required by Federal law.
The IRAs were not "trusts" under State law, because a
settlor's expressed intent to create a trust is a prerequisite
13A securities account is "nondiscretionary" where "the customer makes the investment decisions and the stockbroker merely receives and executes a customer's orders." Patsos v. First Albany Corp., 433 Mass. 323, 333 (2001). A nondiscretionary IRA is one maintained by a custodian or trustee without investment discretion. 20
to the creation of a Massachusetts trust. See G. L. c. 203E,
§ 402 (2). And there is nothing in the record to suggest that
Patrick Kenney intended to create a trust relationship between
UBS and Aliberti either in 2008, when he first signed the CRA,
or in 2013, when he completed the update forms. See, e.g.,
Tucker v. Soy Capital Bank & Trust Co., 2012 IL App (1st)
103303, ¶ 34 (2012) (no explicit language creating trust in
governing contract).
Federal law does not alter this analysis.14 Although the
terms "trust" and "trustee" permeate the section of the United
States Code governing IRAs, 26 U.S.C. § 408 (I.R.C. § 408), and
the corresponding Department of the Treasury regulations, 26
C.F.R. §§ 1.408-1 et seq., the Federal law does not itself
define "trust," nor does it require an IRA to be a "trust" as
that term may be defined under applicable State law.15 An IRA
14IRAs are created and governed by Section 408 of the United States Internal Revenue Code, 26 U.S.C. § 408 (I.R.C. § 408), which "establish[es] a framework whereby individuals may obtain favorable tax treatment of amounts set aside for retirement in certain circumstances." Sirna vs. Prudential Sec., Inc., U.S. Dist. Ct., Nos. 95 Civ. 8422, 95 Civ. 9016, 96 Civ. 4534 (S.D.N.Y. Feb. 10, 1997). It provides "no implied cause of action against allegedly errant IRA fiduciaries." Grund v. Delaware Charter Guarantee & Trust Co., 788 F. Supp. 2d 226, 235 (S.D.N.Y. 2011), quoting Sirna, supra.
15The Internal Revenue Code defines an IRA as "a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries, but only if the written governing instrument creating the trust meets . . . [certain] requirements." 26 U.S.C. § 408. Notably, the 21
may take the form of either a trust account or a "custodial
account." See 26 U.S.C. § 408(a), (h); 26 C.F.R. § 1.408–2(a).
Where an IRA is created as a custodial account, such as the IRAs
at issue here, it is subject to all the same requirements as an
IRA structured as a trust account, "except for the fact that it
is not a trust" (emphasis added).16 26 U.S.C. § 408(h). See 26
C.F.R. § 1.408-2(d). Unlike fiduciary duties, most of the
obligations imposed on the IRA custodian by Federal law are not
to the benefit of the account holder or beneficiary, but rather
to assist the IRS in preventing the tax incentives intended to
encourage individual retirement savings from giving rise to tax
fraud and abuse.17
b. The facts do not otherwise support creation of
fiduciary duties. "The circumstances which may create a
definition is constrained to uses "[f]or purposes of this section" (i.e., for tax purposes). Id.
16Along with other requirements, the type of organizations that may hold and administer IRA assets is limited to either a bank "or such other person who demonstrates to the satisfaction of the Secretary [of the Treasury] that" the IRA will be administered in accordance with required law. 26 U.S.C. § 408(a)(2). UBS is this latter type of "nonbank" custodian.
17An IRA custodian's various reporting obligations (viz. valuing account assets and accounting for contributions and distributions) ultimately provide the IRS with a means of verifying income tax deductions reported by the individual account holder or beneficiary, and allow the account to maintain its tax-favored status. Joint Committee on Taxation, supra at 20. See 26 C.F.R. § 1.408–5 (detailing certain reporting requirements). 22
fiduciary relationship are so varied and so difficult to foresee
that it is unwise for courts to attempt to make comprehensive
definitions." Cann v. Barry, 293 Mass. 313, 316 (1936). As
such, fiduciary duties may arise wherever "faith, confidence,
and trust" is reposed by one party "in another's judgment and
advice." Doe v. Harbor Sch., Inc., 446 Mass. 245, 252 (2006).
See Cann, supra at 316-317, quoting Tate v. Williamson, L. R. 2
Ch. App. 55, 61 (1886) (fiduciary duty arises "[w]herever two
persons stand in such a relation that, while it continues,
confidence is necessarily reposed by one, and the influence
which naturally grows out of that confidence is possessed by the
other").
The amended counterclaim does not allege that Aliberti ever
"reposed trust and confidence" in UBS's judgment or advice.
Although Aliberti had to rely on UBS's cooperation in order to
realize her ownership interest in the IRAs, this functional
absence of choice did not yield a relationship of "higher" trust
or entitle Aliberti to special treatment. Although there was a
disparity in the parties' positions due to UBS having possession
of the IRA assets and unilaterally dictating the terms upon
which Aliberti could access them, this particular brand of power
imbalance is not uncommon in our modern consumer marketplace and
does not, in and of itself, create a fiduciary duty. There is
nothing in the record to suggest that the relationship between 23
Aliberti and UBS was anything more than a retail consumer
relationship governed by contract.
IRA custodianship is a recognized line of business in the
consumer financial services sector, providing a fairly customary
bundle of contracted-for services.18 One of those services is
transfer of ownership of the IRA or distribution of the proceeds
of its assets to the designated beneficiaries upon the initial
account holder's death. Historically, the grave and solemn
responsibility of distributing a person's assets after death has
been assigned to a fiduciary, such as an executor or trustee,
who "is held to something stricter than the morals of the market
place," Meinhard v. Salmon, 249 N.Y. 458, 464 (1928), and must
account to the probate court. But the nonprobate transfer of
IRA assets is typically contracted for at arms' length, and
performed in the ordinary course of business with no more or
less gravity or solemnity than other customer instructions. The
nonprobate asset transfer that Patrick Kenney contracted for
here is no exception.
The contracts governing the IRAs here do not include
language establishing a relationship of higher trust or
18See, e.g., United States Office of the Comptroller of the Currency, Comptroller's Handbook: Retirement Plan Products and Services 4 (Feb. 2014) ("Typical custody services include settlement, safekeeping, determining the market value of the assets held, and reporting customers' transactions"). 24
confidence, either between the custodian and the account holder
or between the custodian and the designated beneficiary.
Because Aliberti is a designated beneficiary of each IRA, she is
an intended third-party beneficiary of the contracts between
Patrick Kenney and UBS. UBS Fin. Servs., Inc., 94 Mass. App.
Ct. at 187. These agreements, without which Aliberti and UBS
would have no connection, impose a contractual duty on UBS to
transfer the IRA proceeds in accordance with Patrick Kenney's
instructions, but the contract contains no express or implicit
assumption of any fiduciary responsibility. In fact, the
custodial agreement expressly disclaims any fiduciary
obligations.
Whereas there is neither "any common-law fiduciary
obligation, nor any special relationship of trust, confidence,
or reliance," the amended counterclaim fails to state a claim
for breach of fiduciary duty under Massachusetts law. Locator
Servs. Group, Ltd. v. Treasurer & Receiver Gen., 443 Mass. 837,
855 (2005).
3. Violation of G. L. c. 93A. The facts pleaded in the
amended counterclaim support the claim that Aliberti became the
rightful owner of the IRAs upon Patrick Kenney's death, and that
UBS's conduct unfairly impeded her exercise of property rights 25
in violation of c. 93A.19 See G. L. c. 93A, § 9. The enactment
of c. 93A's consumer remedy provision "created new substantive
rights," Commonwealth v. DeCotis, 366 Mass. 234, 244 n.8 (1974),
which now extend to any individual injured by the "unfair or
deceptive acts or practices" of a business operating in the
consumer marketplace. G. L. c. 93A §§ 2, 9. The law seeks "to
improve the commercial relationship between consumers and
business persons and to encourage more equitable behavior in the
marketplace" by "impos[ing] liability on persons seeking to
profit from unfair practices." Herman v. Admit One Ticket
Agency LLC, 454 Mass. 611, 615 (2006), quoting Poznik v.
Massachusetts Med. Professional Ins. Ass'n, 417 Mass. 48, 53
(1994). To establish entitlement to c. 93A relief, the amended
counterclaim must plead sufficient facts to demonstrate
"first, that [UBS] has committed an unfair or deceptive act or practice; second, that the unfair or deceptive act or practice occurred 'in the conduct of any trade or commerce;' third, that [Aliberti] suffered an injury; and fourth, that [UBS]'s unfair or deceptive conduct was a cause of the injury."
Rafferty v Merck & Co., 479 Mass. 141, 161 (2018). We conclude
that it does.
a. The amended counterclaim establishes that Aliberti is a
proper plaintiff. That the connection between UBS and Aliberti
19Although the CRA and custodial agreement include New York choice-of-law provisions, UBS has not challenged the application of Massachusetts consumer protection law in this case. 26
arises from UBS's service contract with another account holder
(Patrick Kenney) does not render Aliberti an improper plaintiff
to assert the c. 93A claim against UBS. We have long held that
"[p]arties need not be in privity for their actions to come
within the reach of c. 93A." Kattar v. Demoulas, 433 Mass. 1,
14-15 (2000). See Ciardi v. F. Hoffmann-La Roche, Ltd., 436
Mass. 53, 60 (2002) (no privity required because c. 93A "allows
any person who has been injured by trade or commerce indirectly
affecting the people of this Commonwealth to bring a cause of
action" [emphasis in original]). We recently held that to
assert a claim under c. 93A, "[i]t suffices that the plaintiff
used the product, even if it was sold to another, and was
injured as a result" (emphasis in original). Rafferty, 479
Mass. at 161. Aliberti's standing to assert the c. 93A claim is
adequately supported here by the allegations that UBS's botched
performance of the IRA transfer services promised to Patrick
Kenney caused financial injury to Aliberti.20
20Although no party addressed the issue of injury in the briefs, the amended counterclaim alleges that UBS's unfair conduct "[c]ompell[ed]" Aliberti "to retain legal counsel and incur substantial expenses." Based upon the facts alleged in the amended counterclaim, any legal fees and costs Aliberti incurred in attempted communication with UBS about the larger IRA and associated dispute are distinct from those later incurred in connection with the c. 93A claim, and may be treated as actual damages. See Siegel v. Berkshire Life Ins. Co., 64 Mass. App. Ct. 698, 703 (2005). 27
b. Trade or commerce. Under c. 93A, the "trade or
commerce" requirement is met when the defendant was operating in
"a business context" at the time of its allegedly unfair or
deceptive activity. Feeney v. Dell Inc., 454 Mass. 192, 212
(2009). This is a fact-specific, multifactor inquiry, requiring
"consideration of the nature of the transaction, the character
of the parties and their activities, and whether the transaction
was motivated by business or personal reasons" (quotation and
citation omitted). Id. See Klairmont v. Gainsboro Restaurant,
Inc., 465 Mass. 165, 176 (2013) (facts permitted fair inference
that "defendants had a profit-seeking motive in constructing and
maintaining the hazardous [structural feature that led to
decedent's injury] in the context of their commercial
enterprise").
That UBS provides custodial IRA services to consumers in
the ordinary course of its business, for profit, and under
standard form contracts it drafts and presents to prospective
customers for signature is fairly inferred from the record, and
at least partially conceded.21 Cf. Quinton v. Gavin, 64 Mass.
21Although many of the technical requirements of an IRA are dictated by the IRS, IRAs are not subject to the much more stringent controls imposed by ERISA. See note 4, supra. This means that the terms governing these accounts are left to State law (which typically does not apply to retirement plans within the ERISA sphere, due to preemption). Because there is a dearth of State law specifically regulating the nonprobate transfer of IRAs, however, the account transfer terms (including default 28
App. Ct. 792, 799 (2005) (trustee subject to c. 93A liability
where services were provided "to members of the public in the
ordinary course of business" and not for private purpose). In
the standard CRA form (as it appeared in 2008), UBS promises the
consumer account holder that the "IRA will be transferred" to a
designated beneficiary or beneficiaries at the account holder's
death. This promise is a critical practical element of the IRA
custodian's contracted-for performance, considering that a large
balance may remain at the account holder's death, or that an
account holder's management of the IRA may have been guided by a
wider estate-planning strategy to maximize the assets
transferred outside of probate. Sterk & Leslie, supra at 175-
176. UBS need not charge a specific fee for this postmortem
asset delivery service for its performance to occur "in a
business context," because that service is part of a bundle of
contracted-for services that UBS performs as IRA custodian in
exchange for periodic fees.
The pleadings here contain sufficient factual allegations
to establish that the interactions between UBS, as IRA
beneficiary provisions and the applicable procedure for changing a named beneficiary) are ultimately left to the discretion and internal policies of the private financial institutions who sell IRAs to consumers. Although these contract terms may have a significant effect on whether a decedent's donative intent is actually realized, consumers typically do not shop around to compare the fine print, so consumer preferences are unlikely to affect market forces. See Sterk & Leslie, supra at 223. 29
custodian, and Aliberti, as the designated beneficiary of the
IRAs following Patrick Kenney's death, occurred in a business
context within the meaning of c. 93A. Furthermore, given the
consumer context in which the nonprobate transfer function of
IRAs occurs, and the public importance of that functionality, we
expressly hold that the interactions between an IRA custodian
and a named beneficiary of the IRA, following the initial
account holder's death, typically occur in a business context
within the meaning of c. 93A.
c. Unfair or deceptive practices. "Chapter 93A does not
define what constitutes an 'unfair or deceptive act or
practice.'" Kattar, 433 Mass. at 13. Instead, we have held
that "unfair or deceptive conduct is best discerned 'from the
circumstances of each case.'" Id. at 14, quoting DeCotis, 366
Mass. at 242. See Duclersaint v. Federal Nat'l Mtge. Ass'n, 427
Mass. 809, 814 (1998) (unfairness of act or practice "is
determined from all the circumstances"). We look to "(1)
whether the practice . . . is within at least the penumbra of
some common-law, statutory, or other established concept of
unfairness; (2) whether it is immoral, unethical, oppressive, or
unscrupulous; [and] (3) whether it causes substantial injury to
consumers (or competitors or other businessmen)." PMP Assocs.,
Inc. v. Globe Newspaper Co., 366 Mass. 593, 596 (1975).
Further, in "evaluat[ing] the equities between the parties," 30
what the parties, respectively, "knew or should have known may
be relevant in determining unfairness." Swanson v. Bankers Life
Co., 389 Mass. 345, 349 (1983).
Viewed in the light most favorable to Aliberti, there is
ample support in the facts alleged that the manner in which UBS
conducted itself with respect to Aliberti was "unfair" within
the meaning of c. 93A. The amended counterclaim alleges that
UBS "(1) denied Aliberti the funds to which she was entitled;
(2) for multiple years; (3) without good reason; (4) until she
was forced to take legal action and incur unnecessary costs and
fees." UBS Fin. Servs., Inc., 94 Mass. App. Ct. at 191. To
this litany may be added UBS employee Margaret Kenney's admitted
dispatch of abusive text messages in response to Aliberti's
inquiry about receipt of IRA distributions; UBS's alleged
failure to supervise the IRAs' administration following Patrick
Kenney's death (including by not removing Margaret Kenney as the
UBS financial advisor until Aliberti had complained twice); and
UBS's decision to file an allegedly unjustified interpleader
complaint following more than one and one-half years of delay
and in light of the foregoing.
The pleadings suggest that there never has been any
legitimate question whether Aliberti was the legally designated
sole beneficiary of the larger IRA. The CRA reflects that from
the time Patrick Kenney opened the larger IRA in 2008, Aliberti 31
was designated as its sole beneficiary upon Patrick Kenney's
death. UBS admits that it never received any form or other
writing from Patrick Kenney with instructions to update the
beneficiary designation on the larger IRA.22 The CRA and
incorporated custodial agreement clearly specify that, to be
effective, any instruction from Patrick Kenney to change the IRA
beneficiary designation not only was required to be in writing
sent to UBS, but also was required to be in a form acceptable to
and accepted by UBS, in its sole discretion.
Nevertheless, as reflected in correspondence from UBS's
counsel attached to the amended counterclaim, UBS designated the
larger IRA "disputed" immediately upon receipt of Gillespie's
letter, and the assets remained frozen for nearly two and one-
22 Even in the light most favorable to Aliberti, the allegations do not support a c. 93A claim as to distributions from the smaller IRAs. Patrick Kenney at least attempted to provide instructions regarding change of IRA beneficiary to UBS by completing and returning the update forms in connection with each of the smaller IRAs; there was no duty to inform Aliberti. Despite its earlier request for written clarification, several months after Patrick Kenney died, UBS appears to have reached a reasonable good faith conclusion as to Kenney's intended beneficiaries, and made distributions accordingly. Whether this violated the relevant contracts is a question for the fact finder, but does not itself implicate c. 93A. See Massachusetts Employers Ins. Exch. v. Propac-Mass, Inc., 420 Mass. 39, 43 (1995), citing Whitinsville Plaza, Inc. v. Kotseas, 378 Mass. 85, 100-101 (1979) ("a breach of contract alone does not amount to an unfair act or practice under G. L. c. 93A, § 2"). Cf. Anton v. Merrill Lynch, 36 S.W.3d 251, 256 (Tex. Ct. App. 2001) (rejecting challenges to IRA beneficiary redesignation based upon IRA provider's purported failure to comply with its own rules). 32
half years. Contrary to the interpretation advanced by
Gillespie's counsel in that letter, see note 7, supra,
Massachusetts courts enforce the statutory directive of G. L.
c. 167D, § 15, that nonprobate transfers shall be made in
accordance with their own contractual terms, even when faced
with a subsequent will provision to the contrary:
"the Legislature appears to have determined that the policy giving effect to testamentary intent should yield to the policy of giving prompt and final effect to the beneficiary designations in retirement plans."
Fitzpatrick v. Small, 29 Mass. App. Ct. 704, 707 (1991)
(applying earlier version of statute).23
It is fair to infer that UBS drafted the contract
provisions that required a writing from Patrick Kenney in a form
meeting UBS approval for a valid change to occur and entitling
UBS to "conclusively rely upon" instructions received from its
23Incidentally, given the New York choice-of-law provisions in the CRA and custodial agreement, UBS reasonably may have expected that New York (rather than Massachusetts) law would apply to any beneficiary designation challenge. New York law also plainly requires that any change of beneficiary designation with respect to nonprobate assets be made in writing and signed by the account holder, and further that it be made in accordance with the rules imposed by the asset's administrator. N.Y. Est. Powers & Trusts Law § 13-3.2(e) (McKinney) ("designation of a beneficiary or payee to receive payment upon death of the person making the designation . . . must be made in writing and signed by the person making the designation" and "made in accordance with the rules prescribed" to govern relevant assets). New York law also provides that the beneficiary's ownership rights shall not be "impaired or defeated by any statute or rule of law governing the transfer of property by will, gift or intestacy." N.Y. Est. Powers & Trusts Law § 13-3.2(a) (McKinney). 33
client. The parties agree that Gillespie never produced any
evidence that Patrick Kenney changed (or even attempted to
change) the beneficiary designation in accordance with that
provision, and never brought suit. Still, the pleadings reflect
that immediately upon designating the larger IRA "disputed" in
late December 2013, UBS decided that its hands were tied due to
heightened risk exposure: it would take no action regarding the
larger IRA unless it received a court order or withdrawal of
Gillespie's claim, or until all applicable statutes of
limitation had expired.
Aliberti has alleged that she was not even notified of any
dispute with respect to the larger IRA until nearly three and
one-half months after UBS received Gillespie's letter. Once the
existence of a dispute was known to Aliberti, UBS allegedly
ignored her requests for additional information about that
dispute, even when those requests were made in writing through
legal counsel retained for that purpose. In the amended
counterclaim, she further contends that only service of a
subpoena succeeded in eliciting any response from UBS. The
perceived unfairness of UBS's policy of inaction with respect to
the "disputed" larger IRA was thus exacerbated by its allegedly
willful failures to communicate with Aliberti, which required
her to retain counsel in order to determine the particulars of 34
the dispute preventing her from exercising ownership rights to
the larger IRA.
The pleadings support that UBS decided it was time to seek
the comfort of a court order and file an interpleader complaint
in the Superior Court, under the following undisputed
circumstances: approximately one year and eight months after
Patrick Kenney's death, the larger IRA remained frozen; Aliberti
remained the only designated beneficiary; and Gillespie had
neither produced evidence to substantiate his claim nor filed
suit. The purpose of interpleader "is to sort out the amounts
and priorities of competing claims to a fund." National Lumber
Co. v. Canton Inst. for Savings, 56 Mass. App. Ct. 186, 188
(2002). UBS's delaying of distribution for more than one and
one-half years before filing an interpleader complaint is
alleged to have been commercially unreasonable and "unfair" for
purposes of c. 93A.
That claim is facially plausible given the supporting
allegations of (1) no legitimate competing claim to ownership of
the larger IRA in the absence of a writing acceptable to UBS,
cf. Equitable Life Assur. Soc'y of the U.S. v. Porter-Englehart,
867 F.2d 79, 89 (1st Cir. 1989) (interpleader inappropriate
where no "potentially conflicting claim" to funds at issue
exists); and (2) the effective refusal of UBS, during the period
between Patrick Kenney's death and its filing of the 35
interpleader complaint, to communicate with Aliberti about
assets that its own records and policies indicated belonged to
her -- until she hired counsel and served a subpoena. See
Brewster Wallcovering Co. v. Blue Mt. Wallcoverings, Inc., 68
Mass. App. Ct. 582, 606 (2007) (facts exacerbating unfairness
included, inter alia, that "[defendant company's] officers and
personnel . . . often took weeks to respond to [plaintiff
customer's] inquiries, and sometimes stopped communicating at
all, with no adequate or even plausible explanations for their
lacks of responsiveness").
Conclusion. For the reasons stated, we affirm the Superior
Court judge's order allowing UBS's motion for judgment on the
pleadings with respect to Aliberti's breach of fiduciary duty
claim and reverse the order as it relates to Aliberti's claim
under G. L. c. 93A. Accordingly, we remand to the Superior
Court for further proceedings consistent with this opinion.
So ordered.