Class Action Unjust Enrichment Claim Properly Dismissed because even assuming Defendant Violated Insurance Licensing Statute Plaintiffs Received Value for Services Provided by Qwest so Granting Plaintiffs Restitution “would Effect an Injustice” Tenth Circuit Holds
Plaintiffs filed a putative class action against Qwest Wireless, LLC, Qwest Services Corporation, and Qwest Communications International, Inc. (Qwest) alleging that defendants “acted as an unlicensed seller of insurance in violation of the laws of Arizona and 13 other states where it markets and sells handset insurance to its wireless customers.” The class action complaint alleged unjust enrichment in Qwest’s “receipt of sales commissions in violation of the licensing statutes,” and sought recovery of “the portion of the handset-insurance premium that compensates Qwest for its sales efforts.” Van Zanen v. Qwest Wireless, L.L.C., 522 F.3d 1127, 1128-29 (10th Cir. 2008). Specifically, the class action alleged that plaintiffs purchased “handset insurance” from Qwest, and that Qwest sells such insurance to customers even though “[it] is not licensed to sell or solicit insurance in any of the 14 states in which it operates, markets and sells the handset insurance to its customers.” Id., at 1129. Defense attorneys moved to dismiss the class action; the district court granted the motion, holding that no private right of action exists under Arizona law for violations of the insurance licensing statute. Id. The Tenth Circuit affirmed because “violation of a licensing statute, without more, is generally insufficient to support an unjust-enrichment claim against one who has performed as promised.” Id.
Plaintiffs filed their class action complaint in Colorado federal court “alleging that Qwest’s sales of the handset insurance violate the licensing laws of Arizona and 13 other states.” Van Zanen, at 1129. The class action advanced “implied statutory causes of action and common-law unjust enrichment,” and sought injunctive and declaratory relief and disgorgement of Qwest’s share of the insurance premiums charged to its customers, id. “The parties agreed that Arizona law governed [plaintiffs’] statutory claim on their own behalf.” However, Arizona law provides only that the director of insurance may issue a cease and desist order, and file suit to enjoin, any violation of the licensing statute. Id. (citations omitted). The district court (1) concluded that no private right of action exists under Arizona’s licensing statute, and (2) plaintiffs failed to state a claim for unjust enrichment because they had not suffered “detriment, expense, or impoverishment” but instead had “obtained a valuable product for which they bargained and which they intend to keep.” The district court dismissed the class action complaint in its entirety because plaintiffs failed to state any claims that they could pursue on their own behalf. Id.
The parties agreed that Colorado law governed the dispute, and the Tenth Circuit stated that the sole question on appeal was whether the class action adequately pleaded a claim of unjust enrichment. Van Zanen, at 1130. This requires that the class action allege “‘(1) at plaintiff’s expense (2) defendant received a benefit (3) under circumstances that would make it unjust for defendant to retain the benefit without paying.’” Id. (citation omitted). According to plaintiffs, the class action complaint satisfied this test because it alleged that they paid a sales commission to Qwest that it retained unjustly because “Qwest is prohibited by law from accepting a sales commission.” Id. The Circuit Court held that plaintiffs’ argument fundamentally misperceived the district court’s ruling, explaining at page 1130 that the lower court based its decision on the fact that plaintiffs ‘received value for their money and that in the absence of any unfair detriment, there is no injustice to prevent.”
The central issue, then, was “whether a violation of the Arizona insurance-licensing statute by itself is sufficient to establish that Qwest’s retention of the sales commission is unjust.” Van Zanen, at 1130. Because the Colorado Supreme Court had not addressed whether a licensing violation may form the basis of an unjust-enrichment claim, the Circuit Court sought out to predict how it would rule on that issue. Id. The Court concluded that “granting restitution” to plaintiffs “would effect an injustice” because it would permit them “to retain a benefit without paying for it.” Id., at 1131 (italics in original). Accordingly, it found that the Colorado Supreme Court would not permit the unjust enrichment claim to stand on the insurance-licensing statute violation, id., at 1131-32. Accordingly, it affirmed the district court order dismissing the class action complaint, id., at 1133.