567 F.3d 787 (6th Cir. 2009), 08-3342, Wuliger v. Manufacturers Life Ins. Co.

Docket Nº:08-3342.
Citation:567 F.3d 787
Opinion Judge:CLAY, Circuit Judge.
Party Name:William WULIGER, Plaintiff-Appellee, v. MANUFACTURERS LIFE INSURANCE COMPANY (USA), Defendant-Appellant.
Attorney:Charles J. Vinicombe, Drinker, Biddle & Reath, Princeton, New Jersey, for Appellant. William T. Wuliger, Wuliger, Fadel & Beyer, Cleveland, Ohio, for Appellee. Charles J. Vinicombe, Drinker Biddle & Reath LLP, Princeton, New Jersey, Stephen D. Lerner, Pierre H. Bergeron, Squire Sanders & Dempsey ...
Judge Panel:Before: GUY, CLAY, and COOK, Circuit Judges.
Case Date:May 28, 2009
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

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567 F.3d 787 (6th Cir. 2009)

William WULIGER, Plaintiff-Appellee,



No. 08-3342.

United States Court of Appeals, Sixth Circuit

May 28, 2009

Argued: Jan. 22, 2009.

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[Copyrighted Material Omitted]

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Charles J. Vinicombe, Drinker, Biddle & Reath, Princeton, New Jersey, for Appellant.

William T. Wuliger, Wuliger, Fadel & Beyer, Cleveland, Ohio, for Appellee.


Charles J. Vinicombe, Drinker Biddle & Reath LLP, Princeton, New Jersey, Stephen D. Lerner, Pierre H. Bergeron, Squire Sanders & Dempsey LLP, Cincinnati, Ohio, for Appellant.

William T. Wuliger, Wuliger, Fadel & Beyer, Cleveland, Ohio, Amy A. Wuliger-Knee, Montgomery Village, Maryland, Andrew C. Storar,

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Michael W. Sandner, Pickrel, Schaeffer & Ebeling, Dayton, Ohio, for Appellee.

Before: GUY, CLAY, and COOK, Circuit Judges.


CLAY, Circuit Judge.

Plaintiff William Wuliger (the " Receiver" ) filed this diversity suit against Defendant Manufacturers Life Insurance Company (USA) (" MLIC" ) seeking rescission of three insurance policies and the return of premiums paid on them after they were fraudulently procured for the benefit of a viatical investment company in receivership. MLIC now appeals the district court's order granting summary judgment to the Receiver and denying MLIC's motion for summary judgment. For the reasons that follow, we REVERSE the district court's order and REMAND with instructions to grant summary judgment dismissing the action against MLIC.


I. The Liberte Fraud

Liberte Capital Group (" Liberte" ), an Ohio-based " viatical investment company," purchased life insurance policies from " viators" -policyholders who are terminally ill or who are elderly and in poor health-in exchange for paying the viators an up-front lump sum. Liberte persuaded three elderly individuals to purchase life insurance policies from MLIC and immediately assign the policies to Liberte, which would pay the policies' premiums. The viators' purchases of the insurance policies with the intent to re-sell them to Liberte immediately constituted insurance fraud, because the viators never intended to insure their own lives.

Liberte's collusion with the three viators was part of a larger scheme in which Liberte fraudulently procured viators' insurance policies and sold them to almost three thousand investors, who collectively invested almost $100 million in Liberte. Liberte Capital Group, LLC v. Capwill, 148 Fed.Appx. 426, 428 (6th Cir.2005). Liberte contracted with Viatical Escrow Services, LLC (" VES" ), an entity controlled by James A. Capwill (" Capwill" ), to manage the accounts of the insurance policies it purchased from viators; Liberte assigned its ownership and beneficiary rights in the policies to escrow accounts managed by VES. Liberte Capital Group, LLC v. Capwill, 248 Fed.Appx. 650, 651 (6th Cir.2007). Liberte also entered into contracts with independent brokers to locate investors interested in purchasing stakes of the insurance policies assigned to Liberte and held by VES. Once the brokers had identified potential investors and persuaded them to invest, Liberte then sold stakes in the expected proceeds from the viators' policies to the investors. Liberte, through the brokers, promised the investors a share of the payouts upon the viators' death, in exchange for up-front payments to the VES escrow accounts. Liberte then used the payments to VES to pay the premiums on the viators' policies. Liberte's brokers did not disclose to the third-party investors that the investors would be purchasing stakes in fraudulently procured insurance policies.

While Liberte was fraudulently acquiring insurance policies from issuers such as MLIC and was, through its brokers, fraudulently inducing investors to purchase shares of the fraudulently procured policies, VES in turn was defrauding Liberte. Capwill, through an investment vehicle he controlled called Capital Fund Leasing, LLC (" CFL" ), diverted the funds that were supposed to be held in VES' escrow accounts to various securities brokers, who ultimately lost the funds. See id.

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In April 1999, Liberte sued VES, CFL and Capwill in the Northern District of Ohio for defrauding Liberte and losing the money that investors had placed in the escrow accounts in exchange for their stakes in the viators' insurance policies. Id. In July 1999, the district court placed VES and CFL in receivership, and authorized the Receiver 1 to " oversee and to administer the business and assets of VES and CFL ... to take and maintain exclusive and complete custody, control and possession of all the assets belonging to VES and CFL." 2 Id. (internal quotations omitted). At that time, Liberte was considered a creditor of the received entities, because its own fraud had not yet been discovered, and the escrow accounts that were fraudulently managed by VES, CFL, and Capwill included Liberte's proceeds from sales of the viatical policies to investors.

Shortly after Liberte filed suit against VES, CFL and Capwill, the Securities and Exchange Commission (" SEC" ) discovered Liberte's fraud. As a result, the United States charged Liberte's chief executive, J. Richard Jamieson (" Jamieson" ), with buying and re-selling fraudulently obtained insurance policies through Liberte. See United States v. Jamieson, 427 F.3d 394, 399 (6th Cir.2005). In addition to indicting Jamieson, the government initiated a separate forfeiture action against Jamieson and Liberte, also in the Northern District of Ohio, and obtained a court order enjoining Jamieson and Liberte from further defrauding their investors or insurance companies. In October 2000, the district court in the forfeiture action ordered that Liberte's assets were subject to control of the court, and that a receiver would be appointed to dispose of Liberte's remaining assets. In December 2000, Liberte's action against VES, CFL and Capwill was transferred to the district judge in the forfeiture action. With the judge in the forfeiture action now presiding over all of the proceedings at once, the Receiver was authorized to administer the assets of Liberte as well as VES and CFL, and to sue insurance companies to recoup premiums on insurance policies Liberte fraudulently procured, all for the purpose of gathering as much money as possible for Liberte's investors. 3

With the fraudulent schemes of Liberte and VES unraveling, the premium payments on the three policies that the viators had fraudulently purchased from MLIC in collusion with Liberte-premiums that Liberte had been paying from the funds it had channeled from investors into VES-ceased in 2001.

II. The Receiver's Suit Against MLIC

On July 30, 2003, the Receiver initiated this suit against MLIC before the same

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district court presiding over the Liberte-related litigation, seeking rescission of the three fraudulently procured insurance policies and the return of the premiums Liberte had paid through VES before the premium payments lapsed, plus interest. In the complaint, the Receiver sought a declaratory judgment that the policies are void ab initio. The Receiver identified himself in the complaint as " the Receiver for the investors' interests" in both the forfeiture action against Liberte and Liberte's action against the escrow entities. The complaint then referred to the previous orders establishing the receiverships in the United States' action against Jamieson and Liberte, as well as Liberte's action against Capwill, VES and CFL; the complaint " incorporated [the orders] by reference[.]" (Joint Appendix (" J.A." ) at 45.) The Receiver's complaint against MLIC conceded that Liberte " solicited previously uninsured individuals who were terminally ill and/or senior citizens in poor health to engage in ‘ wet ink’ viatical sales," and described this conduct as " a fraud perpetrated by Liberte[.]" (J.A. at 46, 48.) The Receiver claimed that MLIC " has been unjustly enriched through the premium payments made with funds obtained from the investors because it assumed no risk with regard to the polic[ies]." (J.A. at 52-53.) The complaint demanded that the insurance premiums already paid to MLIC " be returned to the Receiver for distribution to the Liberte investors." (J.A. at 53-54.)

On August 23, 2004, MLIC filed a motion for summary judgment seeking to dismiss the action against it, and on September 10, 2004, the Receiver cross-moved for summary judgment seeking relief pursuant to its rescission claim. On February 11, 2008, approximately three and one-half years after the parties filed their motions, the district court granted summary judgment to the Receiver and denied MLIC's motion; the court ordered the rescission of the fraudulent policies and the return of the insurance premiums MLIC had received to date, plus interest. In granting summary judgment to the Receiver, the district court first found that the Receiver had standing to sue MLIC, as the representative of " Liberte and the Capwill entities." (J.A. at 85.) The court noted that Liberte was paying MLIC the insurance premiums of the three fraudulent policies after purchasing the policies from the viators, and stated, " [t]o the extent that the [R]eceiver represents the interests of Liberte and seeks to recover those premiums [from MLIC's policies] on its behalf, the Plaintiff has alleged an injury in fact." (J.A. at 85.) After finding that the Receiver had standing to sue, the district court then found that the insurance policies were void ab initio and subject to rescission, because the viators lacked an insurable interest when they procured the policies. The court also found the Receiver was entitled to a return of the premiums under a theory of unjust enrichment, because " [t]he payment of premiums on a void policy and retention of those premiums by [MLIC] is contrary to the...

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