Axa Equitable Life Ins. Co. v. Infinity Financial Grp., LLC

Citation608 F.Supp.2d 1330
Decision Date31 March 2009
Docket NumberCase No. 08-80611-CIV.
PartiesAXA EQUITABLE LIFE INSURANCE CO., Plaintiff, v. INFINITY FINANCIAL GROUP, LLC, et al., Defendants.
CourtU.S. District Court — Southern District of Florida

Gary John Guzzi, Akerman Senterfitt, Miami, FL, John N. Bolus, Michael D. Mulvaney, Christopher C. Frost, Maynard Cooper & Gale, Birmingham, AL, for Plaintiff.

Ira Gutt, Behar, Gutt & Glazer, P.A., Aventura, FL, Lawrence Phillip Ingram, Jessica Kirkwood Alley, Ryan C. Hasanbasic, Phelps Dunbar, Tampa, FL, for Defendants Infinity Financial Group, LLC, Steven Brasner, Infinity Wealth Advisors, LLC, Infinity Boynton Beach, LLC, Infinity Wealth and Investments, LLC, Infinity Wealth and Insurance LLC, Infinity Wealth and Tax LLC, and Infinity Wealth and Marketing LLC.

Charles Germain Geitner, Broad & Cassel, Tampa, FL, Kelly B. Holbrook, Broad & Cassel, Tampa, FL, Zachary Adam Harrington, Broad & Cassel, Tampa, FL, for Defendants Kevin H. Bechtel, Gary Richardson, and Life Brokerage Equity Group, Inc.

Mitchell Reid Bloomberg, Natalie Jessica Carlos, Neil Preseton Linden, Adorno & Yoss LLP, Miami, FL, for Defendant The Harlan Altman Insurance Trust Dated September 1, 2006, Kristine M. Neuhauser, The Carol Sciolino 2006 Life Insurance Trust dated December 19, 2006, and NatCity Trust Company of Delaware.

Jonathan Galler, Matthew Henry Triggs, Proskauer Rose, Boca Raton, FL, for Defendant The Geoffrey Glass 2007-1 Insurance Trust dated Jan. 1, 2007, The Walter Glass 2006 Insurance Trust dated September. 1, 2006, and The Geoffrey Glass 2007-2 Insurance Trust dated January 1, 2007.

Stephanie Reed Traband, Jones Walker, Miami, FL, for Defendant Harlan Altman.

James D. Sallah, Sallah & Cox LLC, Joshua Arnold Katz, Klein & Sallah LLC, Boca Raton, FL, for Defendant Carol Sciolino.

Geoffrey Glass, Chicago, IL, pro se.

Walter Glass, Chicago, IL, pro se.

Scott Barry Newman, Holland & Knight, West Palm Beach, FL, for Defendant Greatbanc Trust Company.

ORDER ADOPTING-IN-PART MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION

DANIEL T.K. HURLEY, District Judge.

THIS CAUSE is before the court upon the motions of two groups of defendants (the Infinity Defendants1 and the LBEG Defendants2) to compel arbitration and stay the litigation pending the outcome of that arbitration [DE #54, 59] and the report and recommendation of the United States Magistrate Judge, recommending that defendants' motions be granted [DE # 126]. Plaintiff filed an objection to the magistrate judge's report and recommendation [DE # 130].

Pursuant to Fed.R.Civ.P. 72(b), "The district judge . . . shall make a de novo determination upon the record, or after additional evidence, of any portion of the magistrate judge's disposition to which specific written objection has been made in accordance with this rule." The rule requires that objections be filed within ten days of service of the report and recommendation, and that the objecting party arrange for transcription of sufficient portions of the record. Fed.R.Civ.P. 72(b). The district judge may then "accept, reject or modify the recommended decision, receive further evidence, or recommit the matter to the magistrate judge with instructions." Id. Portions of the report and recommendation that are not specifically objected to are subject to the clear error standard. The identical requirements are set forth in 28 U.S.C. § 636(b)(1).

The defendants seeking to compel arbitration and to stay the litigation are insurance brokers and related entities; the named insured and several trusts are also defendants in the litigation. Plaintiff does not object to the magistrate judge's conclusion that arbitration should be compelled; the objection takes issue only with the magistrate judge's recommendation that the entire litigation, including resolution of plaintiff's non-arbitrable claims against other defendants, be stayed pending the outcome of arbitration.

The Eleventh Circuit explained the law regarding stays in cases involving both arbitrable and non-arbitrable claims in Klay v. All Defendants, 389 F.3d 1191 (11th Cir.2004):

For arbitrable issues, the language of [9 U.S.C. § 3] indicates that the stay is mandatory. When confronted with litigants advancing both arbitrable and nonarbitrable claims, however, courts have discretion to stay nonarbitrable claims. In this instance, courts generally refuse to stay proceedings of nonarbitrable claims when it is feasible to proceed with the litigation. Crucial to this determination is whether arbitrable claims predominate or whether the outcome of the nonarbitrable claims will depend upon the arbitrator's decision.

Id. at 1203-04. Here, it appears that it is entirely feasible to proceed with parallel litigation against the insured and trust defendants while arbitration is pending with respect to the broker defendants. The non-arbitrable claims are essentially for rescission of the insurance policies for misrepresentations allegedly made on the applications, and for lack of an insurable interest at the time the policies were issued. It appears much more likely that the claims against the brokers for fraud, negligence, and disgorgement of commissions are dependent on a finding that the policies are subject to rescission, than the other way around. In other words, the policies may be subject to rescission regardless of whether the brokers are liable for fraud or negligence; but the status of the policies may bear significantly on the brokers' liability. For this reason, it would be inefficient to stay the outcome of the non-arbitrable rescission claims pending arbitration of the claims against the brokers.

Nor do the arbitrable claims predominate over the non-arbitrable claims. They are easily severable, and parallel litigation and arbitration appears both feasible and preferable to a stay. Accordingly, it is hereby ORDERED and ADJUDGED:

1. Plaintiff Axa Equitable Life Insurance Company's objection to the report and recommendation of the magistrate judge [DE # 130] is SUSTAINED.

2. The report and recommendation of the magistrate judge [DE # 126] is ADOPTED IN PART and, to the extent that it comports with the provisions of this order, is incorporated herein by reference.

3. Defendants' motions to compel arbitration and stay the litigation [DE #54, 59] are GRANTED IN PART and DENIED IN PART as follows:

a. The motions to compel arbitration are GRANTED. Pursuant to 9 U.S.C. § 3, the litigation of all claims against defendants Steven Brasner, Infinity Financial Group, LLC, Infinity Wealth Advisors, LLC, Infinity Boynton Beach, LLC Infinity Wealth & Insurance, LLC, Gary Richardson, Kevin H. Bechtel, and Life Brokerage Equity Group, Inc. are STAYED.

b. The motions are DENIED to the extent they seek a stay of the claims asserted by plaintiff against other defendants, and not subject to the arbitration ordered herein.

OMNIBUS REPORT AND RECOMMENDATION AS TO MOTIONS TO COMPEL ARBITRATION AND STAY PROCEEDINGS FILED BY STEVEN BRASNER AND RELATED DEFENDANTS, AND DEFENDANTS LIFE BROKERAGE EQUITY GROUP, GARY RICHARDSON, AND KEVIN H. BECHTEL (DEs 54, 59)

JAMES M. HOPKINS, United States Magistrate Judge.

THIS CAUSE is before the Court upon Order referring two separate motions to compel arbitration and stay proceedings for a Report and Recommendation. (DE 54, 55, 59, 74). This Court has before it (1) a Motion to Compel Arbitration and Stay Proceedings Pending Arbitration filed by Defendants Steven Brasner ("Brasner") and a group of Defendants referred to as the "Related Defendants;"1 (2) a Motion to Compel Arbitration and for an Order Staying these Proceedings Pending the Conclusion of Arbitration filed by Defendants Life Brokerage Equity Group, Inc. ("LBEG"), Gary Richardson ("Richardson"), and Kevin H. Bechtel ("Bechtel"), (3) responses in opposition filed by Plaintiff; (4) replies filed by the respective Defendants; and, (5) an objection to both motions to compel arbitration filed by a collective group of Defendants referred to as the "Delaware Trust Defendants."2 (DEs 54, 59, 60, 82, 88, 89, 93). The matters are now ripe for review. For the reasons that follow, this Court RECOMMENDS that the District Court GRANT the Motions to Compel Arbitration, and GRANT the Motions to Stay. (DEs 54, 59).

BACKGROUND

In the original and first amended complaints, Plaintiff, AXA Equitable Life Insurance Company ("AXA"), seeks to rescind five (5) insurance agreements3 which were allegedly procured by Defendants through improper and fraudulent means. (DE 1, pg. 2; DE 50, pg. 2). According to the complaint and amended complaint, AXA issued policies between July of 2006 and February of 2007 insuring the lives of Defendants Harlan Altman, Geoffrey Glass, Walter Glass, and Carol Sciolino ("the insureds"). (DE 1, pg. 2). Although the policies, valued at approximately seventy-three million dollars ($73,000,000.00), were obtained upon facially valid applications, such policies are alleged to be part of a scheme perpetrated by (a) the insureds; (b) Defendant Life Brokerage Equity Group ("LBEG"); (c) a group of brokers including Defendants Gary Richardson ("Richardson") and Kevlin H. Bechtel ("Bechtel"), led by Defendant Steven Brasner ("Brasner"); and, (d) Defendants Kristine M. Neuhauser, Walter Glass and their respective trust companies (the "Trusts"). (DE 1, pg. 2; DE 50, pg. 2). As part of the scheme, Defendants purportedly devised a plan to recruit elderly persons to pose as applicants and owners of large insurance policies. (DE 1, pg. 2; DE 50, pg. 2). After the policies issued, ownership of the policies allegedly changed to the brokers, the insurance trusts, the trustees, and their unnamed investors in an effort to avoid the insurable interest requirements of state law so that the policies could be resold to third-party investors looking to wager on the lives of the insureds. (DE 1, pgs. 2-3; DE 50, pgs. 2-3). Plaintiff seeks declaratory relief, rescission of the policies, and disgorgement of...

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