Garamendi v. Sdi Vendome S.A.

• Citation: 276 F.Supp.2d 1030
• Decision Date: 04 August 2003
• Docket Number: No. CV 02-5983 AHM(CWx).,CV 02-5983 AHM(CWx).
• Parties: John GARAMENDI, as Insurance Commissioner of the State of California and as Conservator, Rehabilitator and Liquidator of the Estate of Executive Life Insurance Company, Plaintiff, v. SDI VENDOME S.A., et al., Defendants.
• Court: U.S. District Court — Central District of California

276 F.Supp.2d 1030

John GARAMENDI, as Insurance Commissioner of the State of California and as Conservator, Rehabilitator and Liquidator of the Estate of Executive Life Insurance Company, Plaintiff, v. SDI VENDOME S.A., et al., Defendants.

No. CV 02-5983 AHM(CWx).

United States District Court, C.D. California.

August 4, 2003.

COPYRIGHT MATERIAL OMITTED

Cedric C. Chao, Gloria Young Eun Lee, Morrison & Foerster, San Francisco, CA, Harry J. Levine, Steven J. Green, California Dept. of Insurance, San Francisco, CA, George B. Newhouse, Jr., Thelen, Reid & Priest, Los Angeles, CA, Gary L. Fontana, Kathryn E. McQueen, Karl D. Belgum, Jennifer Robin McGlone, Thelen, Reid & Priest, San Francisco, CA, for Plaintiff.

Jerome H. Friedberg, Stephan, Oringher, Richman & Theodora, Los Angeles, CA, for SDI Vendome, S.A. and Alain Mallart.

Robert S. Warren, Stephen R. Smerek, Gibson, Dunn & Crutcher, Los Angeles, CA, Robert L. Weigel, Marshall R. King, Michael G. Honeymar, Jr., Gibson, Dunn & Crutcher, New York City, for Financiere du Pacifique, SNC.

Marc Marmaro, Matthew David Hinks, Katherine J. Kunberger, Jeffer, Mangels, Butler & Marmaro, Los Angeles, CA, Martin Flumenbaum, Paul, Weiss, Rifkind, Wharton & Garrison, New York City, Jonathan H. Anschell, White, O'Connor, Curry & Avanzado, Los Angeles, CA, for Fimilac, S.A. and Marc Ladriet De Lacharriere

ORDER GRANTING DEFENDANT LACHARRIERE'S MOTION FOR SUMMARY JUDGMENT

MATZ, District Judge.

This matter is before the Court on Defendant Marc Ladreit de Lacharriere's Motion for Summary Judgment. For the reasons that follow, Lacharriere's Motion is GRANTED.

INTRODUCTION

This action is another chapter in the ongoing saga of the Executive Life Insurance Company ("ELIC" or "Executive Life"), a California insurance company that collapsed more than ten years ago. In 1995, the California Court of Appeal summarized ELIC's dramatic fall as follows:

ELIC, a California-based life insurance company, had in the 1980's issued conventional life insurance policies and annuities and also innovative annuity-like products known as Guaranteed Investment Contracts (GICs). These included contracts funding (1) pension and profit sharing plans (Pension-GICs), (2) bond liability of municipalities (Muni-GICs), and (3) structured settlements reached in tort cases; as well as single premium immediate annuities certain (SPIAs) and single premium deferred annuities (SPDAs).

As required by law, ELIC established reserves representing its future liabilities on these contracts. The reserves were funded by investments, primarily in high yield fixed income securities with no, or very low, credit ratings. By 1991 the market in these high-risk bonds had crashed. A large proportion of the bonds in ELIC's portfolio were in default, and the remainder had suffered serious declines in value so that ELIC reserves were grossly inadequate. The reserves faced a further serious deterioration because of the equivalent of a "run on the bank." Policyholders whose contracts permitted were cashing out their contracts with ELIC, requiring ELIC to dispose of its better investments to raise necessary cash.

In re Executive Life Ins. Co., 32 Cal. App.4th 344, 355-56, 38 Cal.Rptr.2d 453 (1995).

In April 1991, the California Insurance Commissioner (then and now, John Garamendi) stepped in, seized ELIC's assets and placed the insolvent company in conservatorship. Lacharriere's Statement of Undisputed Facts and Conclusions of Law ("SUF") ¶ A; Commissioner's Statement of Genuine Issues of Material Fact ("SGI") at 4-5 (Lacharriere's ¶ A not listed among Commissioner's disputed facts). See also Compl. ¶ 14. The Commissioner crafted a rehabilitation plan for Executive Life and, after a lengthy bidding process, authorized the transfer of ELIC's junk bond portfolio to Altus Finance S.A. ("Altus") in March 1992 and transferred ELIC's insurance assets to a company called Aurora in September 1993. SUF ¶ A; SGI at 4-5. See also Compl. ¶ 34, ¶ 36.

Shares in the newly formed Aurora were held by a holding company called New California Life Holdings, Inc. ("New California"), which was in turn owned and controlled by a group of European investors led by MAAF Assurances ("MAAF") and including Financiere du Pacifique S.N.C. ("Finapaci"). See SUF ¶ A; SGI at 4-5; Third Amended Compl. in Garamendi v. Altus Finance S.A., et al., Case No. CV99-389 (C.D.Cal.) ¶ 30 (attached as Exh. 7 to the Decl. of Martin Flumenbaum) (hereinafter "Altus TAC"). At the time Finapaci was owned by Fimalac S.A., a French investment company owned and controlled by Defendant French investor Marc Ladreit de Lacharriere. SUF ¶ A; SGI at 4-5. Compl. ¶¶ 5-7.

According to the complaint in this and a related case, Garamendi v. Altus, supra, the various members of the MAAF-led investor group emerged victorious in the ELIC bidding process only because of a massive fraud they perpetrated against the Commissioner. Compl. ¶¶ 14-37. Although members of the investor group, including Lacharriere and his company, Finapaci,¹ held themselves out during the bidding process as "independent" investors, they had (at least according to the Commissioner) already entered into secret "contracts de portage"² with Altus and Credit Lyonnais by which they promised to "act as fronts or `porteurs' for Altus and Credit Lyonnais with the understanding that any interest that they acquired in Aurora . . . would be held solely for the benefit of Altus and Credit Lyonnais." Compl. ¶ 20. In Altus, the Commissioner has alleged that these secret fronting arrangements were designed to avoid California and federal laws that prohibited Altus and Credit Lyonnais from owning or controlling ELIC or its successor insurance company, Aurora. Altus TAC ¶ 30.

PROCEDURAL BACKGROUND

The Commissioner sued many of the companies, corporate officers and investors who were involved in the alleged ELIC fraud in Altus, the related action filed by the Commissioner in February 1999 and removed to this Court in March 1999. The Commissioner did not file this very similar case, which names additional members of the MAAF-led investor group as defendants, until July 31, 2002. Although this case is relatively recent compared to Altus, it already has generated significant motion practice. The following claims against Lacharriere survived Defendants' initial motions to dismiss: fraud by intentional misrepresentation, fraud by negligent misrepresentation, fraud by suppression of facts, constructive fraud and fraud by conspiracy.

Lacharriere now moves for summary judgment on all claims against him. He contends that the Commissioner's claims are barred by the applicable statute of limitations.

MOTION STANDARDS

Federal Rule of Civil Procedure 56(c) provides for summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." The moving party bears the initial burden of demonstrating the absence of a "genuine issue of material fact for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The burden then shifts to the nonmoving party to establish, beyond the pleadings, that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

"When the party moving for summary judgment would bear the burden of proof at trial, it must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial. In such a case, the moving party has the initial burden of establishing the absence of a genuine issue of fact on each issue material to its case." C.A.R. Transportation Brokerage Co., Inc. v. Darden Restaurants, Inc., 213 F.3d 474, 480 (9th Cir.2000) (citations omitted). In contrast, when the non-moving party bears the burden of proving the claim or defense, the moving party can meet its burden by pointing out the absence of evidence from the non-moving party. The moving party need not disprove the other party's case. See Celotex, 477 U.S. at 325, 106 S.Ct. 2548. Thus, "[s]ummary judgment for a defendant is appropriate when the plaintiff `fails to make a showing sufficient to establish the existence of an element essential to [his] case, and on which [he] will bear the burden of proof at trial.'" Cleveland v. Policy Management Sys. Corp., 526 U.S. 795, 805-06, 119 S.Ct. 1597, 143 L.Ed.2d 966 (1999) (citing Celotex, 477 U.S. at 322, 106 S.Ct. 2548).

When the moving party meets its burden, the "adverse party may not rest upon the mere allegations or denials of the adverse party's pleadings, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ.P. 56(e). Summary judgment will be entered against the non-moving party if that party does not present such specific facts. Id. Only admissible evidence may be considered in deciding a motion for summary judgment. Beyene v. Coleman Sec. Serv., Inc., 854 F.2d 1179, 1181 (9th Cir.1988).

"[I]n ruling on a motion for summary judgment, the nonmoving party's evidence `is to be believed, and all justifiable inferences are to be drawn in [that party's] favor.'" Hunt v. Cromartie, 526 U.S. 541, 552, 119 S.Ct. 1545, 143 L.Ed.2d 731 (1999) (quoting Anderson, 477 U.S. at 255, 106 S.Ct. 2505). But the non-moving party must come forward with more than "the mere existence of a scintilla of evidence." Anderson, 477 U.S. at 252, 106 S.Ct. 2505. Thus, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation omitted).

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