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ADRIAN v. MESIROW FINANCIAL STRUCTURED SETTLEMENTS, LLC

The Adrian v. Mesirow case, summarized below, provides a valuable lesson to plaintiff personal injury attorneys.  The case stands for the proposition that defense hired structured settlement consultants that provide settlement planning advice can’t be held responsible for their advice and only owe a duty to their client, the defendant insurance carrier.  It underscores the importance of having a plaintiff based advisor that can assist the injury victim with all of their settlement planning needs.  The plaintiff does not rely on experts hired by the defense at trial so why would the plaintiff rely upon a settlement planner beholden to the insurance carrier?

Summary of the case

Yanisse Adrian was catastrophically injured and is now a paraplegic as a result of a 1998 shooting that occurred in a Puerto Rico mall.  After the incident, she brought suit to recover for her injuries alleging that a lack of security led to her injuries.  On April 17, 2007, three weeks into trial, the parties settled the case for $5,000,000.  Subsequently, in 2008, Adrian brought suit against Mesirow Financial Structured Settlements, LLC, a structured settlement firm hired by the defendant in the underlying personal lawsuit.  In her suit against Mesirow, Adrian alleged that she only entered into the settlement because of her reliance on numerous representations made to her by Connie Klinger, a structured settlement broker with Mesirow.  Adrian alleged that she relied on Mesirow to advise her regarding Puerto Rico's tax laws and the requirements of Puerto Rico's Treasury Department ("Hacienda"), and that Mesirow made representations to the effect that Adrian would not owe taxes to Puerto Rico (nor would any withholding occur) related to the settlement of her suit if she opted to rely on Mesirow's services. Adrian contended she suffered damages because the payment of her settlement was delayed as a result of the disagreement that ensued regarding the settlement's terms and because she lost her opportunity to finish her trial.  Based on these alleged misrepresentations and the damages allegedly suffered as a result, Adrian brought suit against Mesirow on the following theories (1) negligence; (2) negligent misrepresentation; (3) fraudulent inducement; (4) breach of fiduciary duty; (5) equitable estoppel; and (6) promissory estoppel.

Mesirow filed a motion for summary judgment.  The arguments and the court’s ruling on the arguments are outlined below.   South Carolina law was applied to the claims as that is where the alleged promises made by Klingler took place. 

Negligence, Negligent Misrepresentation and Fraudulent Inducement

Mesirow asserted that Adrian had failed to establish a number of elements required to prove the negligence, negligent misrepresentation and fraudulent inducement claims, namely, that she reasonably relied on representations allegedly made by Klinger, that Klinger owed her a duty of care, that Klinger breached that duty of care, and that Adrian suffered any injury resulting from Klinger's actions.  The court considered each in turn and agreed with Mesirow. 

Reasonable Reliance

According to Mesirow, Adrian couldn’t show that her reliance was reasonable because the alleged misrepresentation regarded a matter of law and regarded matters plaintiff could ascertain independently.  The court agreed stating "[t]here is no liability for casual statements, representations as to matters of law, or matters which plaintiff could ascertain on his own in exercise of due diligence.  The basis of Adrian's negligent misrepresentation and fraud claims is that she relied upon Klinger's statements regarding the tax liability of a structured settlement. Klinger's education, certifications, and years of experience relate to her work in life insurance and structured settlements; they do not pertain to or suggest any expertise or special knowledge in Puerto Rico tax law, or any tax law for that matter. Adrian cites no legal authority to support her contention that a plaintiff may rely upon a defendant's statements if those statements were unqualified by a suggestion to seek outside advice.  Mesirow also argues that Adrian's reliance on Klinger's representations was unreasonable because under South Carolina law a plaintiff has a `duty to use reasonable prudence and diligence in identifying the truth with respect to the representations made to him'."

Duty of Care

Adrian argued that Mesirow owed her fiduciary duties because Mesirow acted as a broker and, under South Carolina law, brokers' relationships with buyers are treated as business relationships which are often viewed as embodying fiduciary duties.  The Court disagreed and said “[t]he case law cited by Adrian, however, does not support applying such an analogy in her case. First, the primary broker-client or broker-buyer relationship here that would come closer to the sort of business relationship alluded to by Adrian's analogy was not between Mesirow and Adrian, but between Mesirow and Fireman's Fund, and perhaps with the other defendants. Second, even though Adrian may have exhibited her trust in Klinger's judgment, and even though Klinger may have intended for Adrian to trust Klinger's judgment, the fact is that Klinger worked for the defense side of the underlying case, and she took direction ultimately from Fireman's Fund; she was not beholden to Adrian.”

Breach of Duty

As to breach, the court noted “[r]egardless of what kind of duty was owed to Adrian by Mesirow, the Court finds that Mesirow did not breach it. Regarding the statements that Klinger allegedly made to Adrian about Mesirow's ability to provide a tax free structure, there is no evidence on the record that Klinger knew her statements to be false. There is evidence, to the contrary, that there may have been confusion or miscommunication about the meaning of the allegedly promised "tax-free structure." Klinger claims that any statement she may have made about a tax free structure referred only to the tax-free nature of the structure's proceeds to Adrian, not to any potential tax withholdings pursuant to Puerto Rico law. Regardless of whether Klinger's statements were miscommunicated or misinterpreted, there simply is nothing on the record to indicate that Klinger made either intentionally false or even negligent statements.”

“Adrian also argues that Klinger breached her duty to Adrian by failing to investigate properly the Puerto Rico tax laws. In theory, the Court agrees that "a duty to exercise reasonable care in giving information exists when the defendant has a pecuniary interest in the transaction," Harrington v. Mikell, 321 S.C. 518, (Ct. App. 1996) (internal quotation and citation omitted). Nevertheless, because Adrian has not cited any case law imposing a duty on a structured settlement broker, or any other kind of broker, to investigate potential unknown investment risk, the Court finds no breach of duty to investigate here.”

Causal Relationship and Injury

As to casual relationship and injury, the court stated “even assuming the claimed injuries as stated are adequate under the law, Adrian has failed to show a sufficient causal relationship between her injuries and Mesirow's actions.”  The court went on to say “[f]or all of the foregoing reasons, because Adrian failed to show that her reliance upon Klinger's statements was reasonable, because she failed to show that Mesirow breached any duty, and because she failed to show that Mesirow's actions were the proximate cause of Adrian's injuries, the Court concludes that Adrian cannot establish all of the required elements for her negligent misrepresentation and fraud claims. For those reasons, Mesirow's motion for summary judgment as to those claims was previously GRANTED, and those claims DISMISSED.”

Claims for Breach of Fiduciary Duty, Promissory Estoppel and Equitable Estoppel

Because to the court’s previous findings, summary judgment was granted in favor of Mesirow and the claims were dismissed. 

Conclusion

Summary judgment was granted in favor of the defendant as to all of the claims  and suit was dismissed with prejudice.