Cyganowski v. Beechwood Re Ltd. (In re Platinum-Beechwood Litig.)

• Decision Date: 07 October 2019
• Docket Number: 18-cv-12018 (JSR),18-cv-6658 (JSR)
• Parties: IN RE PLATINUM-BEECHWOOD LITIGATION Melanie L. Cyganowski, as Equity Receiver for Platinum Partners Credit Opportunities Master Fund LP, Platinum Partners Credit Opportunities Fund (TE) LLC, Platinum Partners Credit Opportunities Fund LLC, Platinum Partners Credit Opportunities Fund International Ltd., Platinum Partners Credit Opportunities Fund International (A) Ltd., and Platinum Partners Credit Opportunities Fund (BL) LLC, Plaintiff, v. Beechwood Re Ltd. et al., Defendants.
• Court: U.S. District Court — Southern District of New York

427 F.Supp.3d 395

IN RE PLATINUM-BEECHWOOD LITIGATION

Melanie L. Cyganowski, as Equity Receiver for Platinum Partners Credit Opportunities Master Fund LP, Platinum Partners Credit Opportunities Fund (TE) LLC, Platinum Partners Credit Opportunities Fund LLC, Platinum Partners Credit Opportunities Fund International Ltd., Platinum Partners Credit Opportunities Fund International (A) Ltd., and Platinum Partners Credit Opportunities Fund (BL) LLC, Plaintiff,

v.Beechwood Re Ltd. et al., Defendants.

18-cv-6658 (JSR)

18-cv-12018 (JSR)

United States District Court, S.D. New York.

Signed October 7, 2019

OPINION AND ORDER

JED S. RAKOFF, U.S.D.J.

On December 19, 2018, plaintiff Melanie L. Cyganowski filed a multi-count Complaint against numerous defendants. ECF No. 1. On March 27, 2019, defendants Washington National Insurance Company ("WNIC") and Bankers Conseco Life Insurance Company ("BCLIC") filed an Answer, Cross-Claims, and Third-Party Complaint ("WNIC TPC"). ECF No. 75. On March 29, 2019, plaintiff filed a First Amended; Complaint ("FAC"). ECF No. 81. And on May 15, 2019, defendant Senior Health Insurance Company of Pennsylvania ("SHIP") and Fuzion Analytics, Inc. ("Fuzion") filed an Answer, Cross-Claims, and Third-Party Complaint ("SHIP TPC"). ECF No. 195.

With respect to the FAC, five motions to dismiss have been filed. They are the motions of: (1) Beechwood Re Ltd. ("Beechwood Re"), Beechwood Re Investments, LLC ("BRILLC"), B Asset Manager LP ("BAM I"), B Asset Manager II LP ("BAM II"), Beechwood RE Holdings, Inc. ("Beechwood Holdings"), Beechwood Bermuda International, Ltd. ("BBIL"), Beechwood Bermuda Ltd. ("BBL"), BAM Administrative Services LLC ("BAM Administrative"), Mark Feuer, and Scott Taylor, ECF No. 183; (2) CNO Financial Group, Inc. ("CNO") and 40|86 Advisors, Inc. ("40|86 Advisors"), ECF No. 173; (3) PB Investment Holdings, Ltd. ("PBIHL"), ECF No. 205; (4) SHIP and Fuzion, ECF No. 156; and (5) WNIC and BCLIC, ECF No. 168.

With respect to the WNIC TPC, ten motions to dismiss have been filed. They are the motions of: (1) BAM Administrative, BAM I, BBL, BBIL, Beechwood Capital Group LLC ("Beechwood Capital"), Beechwood Holdings, Beechwood Re, Feuer Family Trust, Taylor-Lau Family Trust, Feuer, Dhruv Narain, and Taylor, ECF No. 209; (2) Beechwood Trust Nos. 7-14, ECF No. 189; (3) David Bodner, ECF No. 186; (4) Murray Huberfeld, ECF No. 153; (5) Hokyong (Stewart) Kim, ECF No. 191; (6) Lincoln International LLC ("Lincoln"), ECF No. 181; (7) David Ottensoser, ECF No. 193; (8) PBIHL, ECF No. 200; (9) Daniel Saks, ECF No. 177; and (10) Will Slota, ECF No. 231. Beechwood Re has also moved to compel WNIC and BCLIC to arbitrate their claims against Beechwood Re. ECF No. 209.

With respect to the SHIP TPC, fourteen motions to dismiss were filed prior to the Court's issuing its "bottom-line" ruling on that date. They are the motions of: (1) BAM I, BAM II, BAM Administrative, Beechwood Re, Beechwood Holdings, BBL, BBIL, Feuer Family Trust, Taylor-Lau-Family Trust, B Asset Manager GP LLC ("BAM GP I"), B Asset Manager II GP LLC ("BAM GP II"), MSD Administrative Services LLC ("MSD Administrative"), N Management LLC ("N Management"), Beechwood Global Distribution Trust, Feuer Family 2016 Acq Trust, Taylor-Lau Family 2016 Acq Trust, and Beechwood Capital, ECF No. 284; (2) Beechwood Trust Nos. 7-14, Monsey Equities, LLC, and Beechwood Re Investments, LLC Series C ("BRILLC Series C"), ECF No. 280; (3) Bodner, ECF No. 278; (4) Kevin Cassidy and Michael Nordlicht, ECF No. 282; (5) Elliot Feit, ECF No. 344; (6) Bernard Fuchs, ECF No. 262; (7) Huberfeld, ECF No. 451 in 18-cv-6658; (8) Kim, ECF No. 291; (9) Lawrence Partners, LLC, ECF No. 356; (10) Ottensoser, ECF No. 276; (11) PBIHL, ECF No. 348; (12) Saks, ECF No. 271; (13) Slota, ECF No. 286; and (14) Whitestar LLC, Whitestar LLC II, and Whitestar LLC III, ECF No. 350. (As noted below, a fifteenth motion has now been filed.)

After receiving full briefing from all relevant parties, the Court held oral argument on August 15, 2019. In a "bottom-line" Order issued on August 18, 2019, ECF No. 380, the Court granted the FAC defendants' motions in the following respects:

• BAM Administrative: Counts 1-3 (RICO and RICO conspiracy), Count 4 (Section 10(b) of the Exchange Act and Rule 10b-5), and Count 18 (Unjust Enrichment) were dismissed.

• BAM I, BAM II, Beechwood Holdings, BRILLC, CNO, 40|86 Advisors, Fuzion, Feuer, and Taylor: All claims were dismissed.

• Beechwood Re, BBIL, BBL, and PBIHL: Counts 1-3 (RICO and RICO conspiracy) and Count 4 (Section 10(b) of the Exchange Act and Rule 10b-5) were dismissed.

• SHIP, BCLIC, and WNIC: Counts 1-3 (RICO and RICO conspiracy), Count 4 (Section 10(b) of the Exchange Act and Rule 10b-5), Count 6 (aiding and abetting breach of fiduciary duty), and Count 7 (aiding and abetting fraud) were dismissed.

All of the above dismissals with respect to the FAC were with prejudice. In all other respects, the motions were denied.

In the same "bottom-line" Order, the Court granted WNIC TPC defendants' motions in the following respects:

• Bodner, Huberfeld, Kim, Ottensoser, Feuer Family Trust, Taylor-Lau Family Trust, Beechwood Holdings, BAM I, BAM Administrative, BBL, BBIL, and PBIHL: Counts 1 and 2 (RICO and RICO conspiracy), Count 18 (contribution and indemnity), and Count 19 (unjust enrichment) were dismissed.

• Feuer, Taylor, Beechwood Capital, and Beechwood Trust Nos. 7-14: All claims were dismissed.

• Lincoln: Counts 1 and 2 (RICO and RICO conspiracy), Count 6 (negligent misrepresentation), Count 18 (contribution and indemnity), and Count 19 (unjust enrichment) were dismissed.

• Narain: Counts 1 and 2 (RICO and RICO conspiracy), part of Count 3 (fraudulent inducement part only), Count 18 (contribution and indemnity), and Count 19 (unjust enrichment) were dismissed.

• Saks: Counts 1 and 2 (RICO and RICO conspiracy), part of Count 3 (fraudulent inducement part only), part of Count 7 (aiding and abetting fraudulent inducement part only), Count 18 (contribution and indemnity), and Count 19 (unjust enrichment) were dismissed.

• Slota: Counts 1 and 2 (RICO and RICO conspiracy), Count 3 (fraudulent inducement and fraud), Count 18 (contribution and indemnity), and Count 19 (unjust enrichment) were dismissed.

All of the above dismissals with respect to the WNIC TPC were with prejudice. In all other respects, the motions were denied, except that, with respect to Beechwood Re's motion to dismiss and to compel arbitration, the Court, in light of the Court's Memorandum Order dated July 10, 2019, stated it would hold off decision of that motion until the arbitration panel resolves the dispute as to whether WNIC and BCLIC are precluded from bringing their motion to strike Beechwood Re's motion to dismiss and to compel arbitration. ECF No. 333.

In the same "bottom-line" Order, the Court granted SHIP TPC defendants' motions in the following respects:

• Beechwood Global Distribution Trust, Feuer Family 2016 Acq Trust, and Taylor-Lau Family 2016 Acq Trust: Count 1 (aiding and abetting fraud), Count 2 (aiding and abetting breach of fiduciary duty), Count 5 (civil conspiracy), and Count 7 (unjust enrichment) were dismissed.

• Bodner, Feit; Huberfeld, Kim, Saks, Slota, BAM II, Beechwood Trust Nos. 7-14, BRILLC Series C, Lawrence Partners, LLC, Monsey Equities, LLC, Whitestar LLC, Whitestar LLC II, and Whitestar LLC III: Count 5 (civil conspiracy) and Count 7 (unjust enrichment) were dismissed.

• Cassidy: Count 5 (civil conspiracy) was dismissed.

• Fuchs, Michael Nordlicht, Beechwood Holdings, BBL, PBIHL, BAM Administrative, Beechwood Capital, BAM GP I, BAM GP II, MSD Administrative, N Management, Feuer Family Trust, and Taylor-Lau Family Trust: All claims were dismissed.

• Ottensoser: Count 7 (unjust enrichment) was dismissed.

All of the above dismissals with respect to the SHIP TPC were with prejudice. In all other respects, the motions were denied.

In addition, after third-party defendant David Steinberg was belatedly served with the SHIP TPC, he was given permission to file his motion to dismiss after the Court issued the bottom-line Order on August 18, 2019. ECF No. 387. The Court hereby grants Steinberg's motion to dismiss Count 5 (civil conspiracy) and Count 7 (unjust enrichment) but denies his motion in all other respects.

This Opinion and Order sets forth the reasons for the Court's rulings in the "bottom-line" Order issued on August 18, 2019 and for the Court's rulings regarding Steinberg's motion to dismiss the SHIP TPC.

Background

I. FAC

The following allegations are taken from the FAC and are assumed true for the purposes of assessing the motions to dismiss the FAC.

Parties

Melanie L. Cyganowski is the receiver ("Receiver") for the "PPCO Funds" consisting of the following plaintiff entities: (i) Platinum Partners Credit Opportunities Master Fund LP ("PPCO Master Fund"), (ii) Platinum Partners Credit Opportunities Fund (BL) LLC ("PPCO Blocker Fund"), and (iii) the PPCO Feeder Funds (consisting of Platinum Partners Credit Opportunities Fund (TE) LLC, Platinum Partners Credit Opportunities Fund LLC, Platinum Partners Credit Opportunities Fund International Ltd., and Platinum Partners Credit Opportunities Fund International (A) Ltd.). FAC ¶¶ 25-31, 68-70, 76. Each PPCO Feeder Fund was, through PPCO Blocker Fund, a creditor of PPCO Master Fund. Id. ¶ 75.

Defendants in the FAC consist of the FAC Beechwood Defendants (as defined below), SHIP, Fuzion, BCLIC, WNIC, CNO, 40|86 Advisors, and John Does 1-100. Id. ¶¶ 46-55. Fuzion is affiliated with SHIP and was formed in 2012 to provide administrative and management services to long-term care insurance companies, including SHIP. Id. ¶ 121. CNO is a holding company that owns WNIC, BCLIC, and 40|86 Advisors. Id. ¶ 130-31. WNIC and BCLIC operate CNO's legacy long-term care business lines and are advised by 40|86 Advisors. Id. ¶ 127.

The FAC Beechwood Defendants include the FAC Beechwood Entities (as defined below), Feuer, and Taylor. Id. ¶ 47-49. The...