Life Partners Creditors' Trust & Alan M. Jacobs v. Sundelius (In re Life Partners Holdings, Inc.)
Decision Date | 17 November 2017 |
Docket Number | District Court Case No. 4:16-CV-200-A,Case No. 15-40289-RFN,Adversary No. 15-04087-rfn |
Parties | IN RE: LIFE PARTNERS HOLDINGS, INC., ET AL., Debtors, LIFE PARTNERS CREDITORS' TRUST AND ALAN M. JACOBS, AS TRUSTEE FOR LIFE PARTNERS CREDITORS' TRUST, Plaintiffs, v. JAMES SUNDELIUS, ET AL., Defendants. |
Court | U.S. District Court — Northern District of Texas |
(Jointly Administered)
Came on for consideration multiple motions1 filed by defendants in the above-captioned action seeking dismissal of claims made by plaintiffs, Life Partners Creditors' Trust and Alan M. Jacobs, as Trustee for Life Partners Creditors' Trust, in their third amended complaint ("Complaint").2 After having considered such motions, the allegations of the Complaint,plaintiffs' omnibus response to the motions,3 replies of defendants,4 the report and recommendation regarding such motions issued by the bankruptcy judge on October 19, 2017,5 objections to the report and recommendation,6 plaintiffs' responses to defendants' objections,7 and pertinent legal authorities, the court has concluded that all claims asserted by plaintiffs in the Complaint should be dismissed.8
Plaintiffs are the Life Partners Creditors' Trust and Alan M. Jacobs, as trustee for that trust. The background that led to the creation of the trust, the designation of Alan M. Jacobs as trustee, and the contentions of plaintiffs concerning standing to make the claims they are asserting in this action are described in the Complaint. Adv. Doc. 136 at 6-8, ¶¶ 26-36. On those samesubjects, the court makes reference to the Motion for Leave to: (1) Substitute Plaintiffs; and (2) Substitute Plaintiffs' Counsel filed February 14, 2017, in Adversary No. 15-04087-rfn, and its related February 17, 2017 Order. Adv. Docs. 133 and 134.
The defendants are collectively referred to in the Complaint as "Defendant Licensees." Adv. Doc. 136 at 2. Plaintiffs also say that defendants "are Life Partners' Referring Licensees," but then refer to "all Referring Licensees" as though defendants are a sub-group of them. Id. at 3, ¶ 4. They are listed in paragraphs 9-23 of the Complaint, id. at 4-6.
Plaintiffs alleged in the Introduction of the Complaint that the "lawsuit seeks to recover commissions paid to the Defendants by [Life Partners]" and "damages suffered by investors who assigned their claims to the Creditors Trust." Adv. Doc. 136 at 2, ¶ 1. The claims asserted in the Complaint are characterized as either "Estate Claims," which are for "(1) fraudulent transfers under the Texas Uniform Fraudulent Transfer Act and 11 U.S.C. § 548; (2) breach of contract; and (3) preference claims under 11 U.S.C. § 547 and various disallowance claims under 11 U.S.C. §§ 502 and 510," or "Investor Claims" (or "Investor Assigned Claims"), which are for "(1) negligent misrepresentation; (2) breach of the Texas Securities Act based upon the sale of unregistered securities by unlicensed brokers;(3) for rescission pursuant to the TSA; and (4) for breach of fiduciary duty." Id. at 4, ¶¶ 6-7; 46-48. The assignments of those claims to plaintiffs were alleged to have been accomplished by, or pursuant to, the bankruptcy plan that was confirmed November 1, 2016, and became effective December 9, 2016. Id. at 8, ¶¶ 35-36.
The dollar amount of recovery plaintiffs are seeking from each of the defendants is not alleged in the Complaint unless the "Grand Totals" shown on the Complaint's Exhibit 4 relate to that subject. Adv. Doc. 136-4. The Complaint does say that "all Referring Licensees received in excess of $102 million in commissions." Adv. Doc. 136 at 3, ¶ 4. Confusingly, it also says that "the Defendant Licensees collectively received over $27.6 million in commissions and fees." Id. at 26, ¶ 93. And, in Count 2, it says debtors "made or authorized Transfers totaling over $ 9.9 million to Licensees during the period from 2008 to 2015." Id. at 41, ¶ 142. And, it alleges that plaintiffs should recover "amounts paid to all Licensees and described herein from 2011 to 2015 in an amount of more than $ 9.9 million." Id. at 42, ¶ 153. In addition to seeking recovery of unspecified amounts of monetary damages from defendants, id. at 49, ¶ 205, plaintiffs seek to impose a constructive trust against all licensees. Id. at 48, ¶¶ 200-02. While the allegations lack clarity, apparentlythe res of the trust is to be whatever money each of the defendants received as compensation for sales on behalf of Life Partners of fractional interests in life insurance policies to the thousands of investors that are identified in Exhibit 5 to the Complaint. Id.; Doc. 136-5.
Plaintiffs described the Estate Claims they are asserting as follows:
The "Investor Assigned Claims" alleged by plaintiffs are as follows:
In addition to the Estate Claims and Investor Assigned Claims mentioned above, plaintiffs make constructive trust claims, apparently against all Licensees, and a request for recovery of attorneys' fees and costs, again apparently againstall Licensees, pursuant to the authority of section 24.013 of the Texas Business & Commerce Code.11 Id. at 48-49, ¶¶ 200-04.
The grounds for dismissal most frequently asserted in the motions to dismiss are the failures of plaintiffs to satisfy the pleading standards of Rules 8(a)(2) and 9(b) of the Federal Rules of Civil Procedure. Those grounds are discussed in a general way under this heading.
Rule 7008 of the Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules") makes Rule 8 of the Federal Rules of Civil Procedure applicable to adversary proceedings. Rule 8(a)(2) provides the standard of pleading for a complaint. It requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), "in order to give the defendant fair notice of what the claim is and the grounds upon which it rests," Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) ( ).
Although a complaint need not contain detailed factual allegations, the "showing" contemplated by Rule 8 requires the plaintiff to do more than simply allege legal conclusions or recite the elements of a cause of action. Twombly, 550 U.S. at 555 & n.3. Thus, while a court must accept all of the factual allegations in the complaint as true, it need not credit bare legal conclusions that are unsupported by any factual underpinnings. See Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) ().
Moreover, to survive a motion to dismiss for failure to state a claim, the facts pleaded must allow the court to infer that the plaintiff's right to relief is plausible. Id. To allege a plausible right to relief, the facts pleaded must suggest liability; allegations that are merely consistent with unlawful conduct are insufficient. Twombly, 550 U.S. at 566-69. "Determining whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.
In the testing of the adequacy of allegations under Rule 8(a), any reference by a plaintiff to defendants collectively in a complaint fails to satisfy the pleading standards of Rule 8(a).See Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999); see also Searcy v. Knight (In re Am. Int'l Refinery), 402 B.R. 728, 738 (Bankr. W.D. La. 2008).
Rule 7009 of the Bankruptcy Rules makes Rule 9(b) of the Federal Rules of Civil Procedure applicable to adversary proceedings. Rule 9(b) applies to all cases where the gravamen of the claim is fraud even though the theory supporting the claim is not technically termed fraud. Frith v. Guardian Life Ins. Co....
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