Jo Ann Howard & Assocs., P.C. v. Cassity

Decision Date03 July 2019
Docket NumberCase No. 4:09CV01252 ERW
Citation395 F.Supp.3d 1022
Parties JO ANN HOWARD & ASSOCIATES, P.C. et al., Plaintiff(s), v. J. Douglas CASSITY, et al., Defendant(s).
CourtU.S. District Court — Eastern District of Missouri

Anthony L. Giacomini, Clare S. Pennington, Pro Hac Vice, Daniel M. Reilly, Pro Hac Vice, Farrell A. Carfield, Pro Hac Vice, John M. McHugh, Larry S. Pozner, Pro Hac Vice, Michael P. Robertson, Pro Hac Vice, Robert Joseph Kelly, Pro Hac Vice, Reilly Pozner, LLP, Sean Connelly, Connelly Law LLC, Denver, CO, Maurice B. Graham, Gray And Ritter, P.C., St. Louis, MO, for Plaintiff(s).

Firmin A. Puricelli, Puricelli and Associates, LLC, Clayton, MO, for Forever Enterprises, Inc.

Caitlin Eagen O'Connell, Edward L. Dowd, Jr., Elizabeth C. Carver, Gabriel E. Gore, James F. Bennett, Jeffrey R. Hoops, Megan S. Heinsz, Meghan E. Ball, James G. Martin, Dowd Bennett, LLP, Clayton, MO, for National City Bank and PNC Bank, N.A.



This matter comes before the Court following a four-week bench trial. The above-captioned cause of action was filed for violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 - 1968, violations of the Lanham Act, 15 U.S.C. §§ 1051 - 1141n, state law claims concerning intentional and negligent fraudulent misrepresentations, negligence and gross negligence, breach of fiduciary duties, and violations of the Texas Receivership Act, Tex. Ins. Code §§ 443.202 - 443.205. Plaintiffs'1 claims against the remaining Defendants PNC Bank, N.A. ("PNC") and National City Bank, N.A. ("NCB") (collectively "Defendants"), the only remaining defendants, allege Defendants breached their duties of trust owed to the beneficiaries of various pre-need funeral trusts. In March 2015, this matter proceeded to a jury trial pursuant to negligence and breach of fiduciary duty theories and the jury determined Defendants were liable to Plaintiffs for $355.5 million in compensatory damages and $35,550,000 in punitive damages.

Both Plaintiffs and Defendants appealed the Court's decisions. The Eighth Circuit affirmed, in part, and reversed, in part, the Court's rulings. Jo Ann Howard & Assoc., P.C. v. Cassity , 868 F.3d 637 (8th Cir. 2017). The Eighth Circuit concluded Defendants' claims arise under trust law rather than tort law. Id . at 645. Consequently, the Eighth Circuit held the claim is properly tried to the Court. Id . at 649.

The Eighth Circuit affirmed the Court's determination the funeral homes and consumers, as well as NPS, were the beneficiaries of the Trusts. Id . at 646. It also affirmed the Court's striking of Defendants' authorization and in pari delicto defenses. Id . at 647. As to Defendants' investment advisor defense, the Eighth Circuit held "PNC is not relieved of liability unless Allegiant ensured that Wulf was investing trust assets within the authority of a reasonably prudent trustee." Id . at 648. The Eighth Circuit concluded:

In summary, we affirm the judgment in part, reverse in part, and remand for further proceedings. We conclude that [Plaintiffs] brought a trust-law claim in equity that should have been tried to the court. The beneficiaries of the preneed trusts were NPS, Missouri consumers, and the funeral homes that were to provide services for the consumers. The measure of damages for the trust claim is defined by § 205 of the Restatement (Second) of Trusts... Although the case was tried to a jury on a tort-law theory, we do no dictate that the case be retried in its entirety. The district court is familiar with the evidence and may proceed based on the existing trial record as it sees fit, with receipt of additional evidence as the court deems appropriate.

Id . at 651-652.

Having considered the pleadings, trial and deposition testimony, and exhibits, the Court hereby makes and enters the following findings of fact and conclusions of law in accordance with Rule 52 of the Federal Rules of Civil Procedure.


1. Jo Ann Howard and Associates, P.C. is the duly appointed and designated Special Deputy Receiver ("SDR") for National Prearranged Services ("NPS"), Lincoln Memorial Life Insurance Company ("Lincoln") and Memorial Services Life Insurance Company ("Memorial"), which were placed into receivership by the Texas Department of Insurance on May 14, 2008, and are currently in the process of being liquidated. Joint Stipulation of Undisputed Facts ("JSF"), ECF No. 2745.

2. The SDR is authorized to deal with the property, business, and claims for or against NPS, Lincoln, and Memorial pursuant to the provisions of the Insurer Receivership Act , Texas Insurance Code Chapter 443. JSF.

3. Plaintiffs Missouri Life and Health Insurance Guaranty Association, Texas Life and Health Insurance Guaranty Association, Illinois Life and Health Insurance Guaranty Association, Kansas Life and Health Insurance Guaranty Association, Oklahoma Life and Health Insurance Guaranty Association, Kentucky Life and Health Insurance Guaranty Association, and the Arkansas Life and Health Insurance Guaranty Association are statutory entities created by their respective state legislatures to provide protection to their respective states' resident policyholders in the event of an insolvency of a member insurance company. JSF.

4. Plaintiff National Organization of Life and Health Insurance Guaranty Associations ("NOLHGA") is a Virginia nonstock corporation. It is a voluntary association of its members, which are all of the life and health insurance guaranty associations of the states of the United States of America and the District of Columbia. NOLHGA is a plaintiff in this action as the assignee of claims for collection purposes only from the following state life and health insurance guaranty associations: Arizona, California, Colorado, District of Columbia, Georgia, Idaho, Indiana, Iowa, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oregon, Rhode Island, South Dakota, Tennessee, Utah, Washington, West Virginia, Wisconsin, and Wyoming. Each state life and health insurance guaranty association is a statutory entity created by their respective state legislatures to provide protection to their respective states' resident policyholders in the event of an insolvency of a member insurance company. JSF.

5. PNC is a nationally chartered bank with its headquarters in Pittsburgh, Pennsylvania and its designated main office in Delaware. PNC is the successor-in-interest to NCB, National City Bank of the Midwest, and Allegiant Bank2 as a result of various mergers. JSF.

6. Allegiant Trust Company, a division of Allegiant Bank, served as the trustee for NPS Pre-Need Trust I between August 24, 1998, and May 14, 2004 ("Trust I"); Pre-Need Trust II between August 14, 1998, and May 14, 2004 ("Trust II"); Pre-Need Trust III between August 28, 1998, and May 14, 2004 ("Trust III"); Pre-Need Trust IV between August 11, 1998, and May 14, 2004 ("Trust IV"); Pre-Need Trust V between March 25, 1999, and May 14, 2004 ("Trust V"); as trustee of the Mt. Washington Forever Pre-Need Trust between April 13, 2000, and May 14, 2004 ("MTW Trust"); and as the trustee of the Mason Securities Association d/b/a Funeral and Cremation Society of America Pre-Need Trust between February 19, 1998, and May 14, 2004 ("CSA Trust") (collectively "the Trusts"). JSF.

7. Allegiant Bank was merged with and into National City Bank of the Midwest, effective as of July 31, 2004. National City Bank of the Midwest, in turn, was merged with and into National City Bank, effective July 22, 2006. Finally, National City Bank was merged with and into PNC effective in November 2009. JSF.

8. NPS started in 1979 and was owned and controlled by the Cassity family, whose members were Doug, Rhonda, Tyler, and Brent Cassity. JSF.

9. NPS sold preneed funeral contracts. Under a preneed funeral contract, a consumer would arrange and pay for a funeral before the time of need. There were advantages to prearranging a funeral, including relieving loved ones of having to make decisions at the time of death and freezing the price of the funeral to the price at the time of prearrangement. JSF.

10. NPS became the largest preneed seller in Missouri. As part of its marketing to funeral homes to sell NPS preneed contracts, NPS would stress the funds received would be held in trust. JSF.

11. Doug Cassity and Randy Sutton controlled the finances of NPS. JSF. Randy Sutton was president and/or Chief Financial Officer of NPS. Mr. Sutton was also President of Lincoln. JSF. During Allegiant's tenure, Brent Cassity was the Chief Operating Officer and President of Marketing at NPS. JSF. Angie Hall was an employee of NPS who reported to Mr. Sutton. JSF.

12. The Cassity family purchased Lincoln to own and control the insurance company used for issuing life insurance policies to back the preneed funeral contracts sold by NPS. JSF. Doug Cassity and Randy Sutton, in addition to controlling NPS's operations, also controlled the operations of Lincoln. JSF.

13. Practically all life insurance policies issued by Lincoln were issued to fund the preneed funeral contracts sold by NPS. Likewise, the vast majority of the NPS Preneed Trusts' assets during Allegiant's period as trustee were in the form of life insurance policies issued by Lincoln. JSF.

14. NPS and Lincoln were part of a network of companies each owned and controlled by the Cassity family. These companies included Memorial, Lincoln Memorial Services, National Heritage Enterprises, Forever Enterprises, Forever Network, and numerous subsidiary funeral homes and cemeteries such as Hollywood Forever. Ex. P-2372, 56:10-57:3, 58:2-25, 59:8-60:9; BT Vol. VI, 54:5-17; Ex. P-12.

15. Lincoln Memorial Services was Doug Cassity's private investment company, and was an entirely different entity than Lincoln Memorial Life Insurance Company. BT Vol. VI, 54:18-55:3; Ex. P-2372, 60:1-9.


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