Life Partners Creditors' Trust & Alan M. Jacobs v. Am. Safe Retirements, LLC (In re Life Partners Holdings, Inc.)
| Decision Date | 17 November 2017 |
| Docket Number | Case No. 15-40289-RFN-11,Adversary No. 15-04110-rfn |
| Parties | IN RE: LIFE PARTNERS HOLDINGS, INC., Debtor, LIFE PARTNERS CREDITORS' TRUST AND ALAN M. JACOBS, AS TRUSTEE FOR LIFE PARTNERS CREDITORS' TRUST, Plaintiffs, v. AMERICAN SAFE RETIREMENTS, LLC, ET AL., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Came on for consideration the multiple motions1 filed by defendants in the above-captioned action seeking dismissal of the claims made by plaintiffs, Life Partners Creditors' Trust and Alan M. Jacobs, as Trustee for Life Partners Creditors' Trust, in their second amended complaint ("Complaint").2 After having considered such motions, the allegations of the Complaint,plaintiffs' omnibus response to the motions to dismiss,3 the report and recommendation of the bankruptcy judge on October 18, 2017,4 objections to the report and recommendation,5 plaintiffs' responses to the objections of certain defendants,6 and pertinent legal authorities, the court has concluded that all claims asserted by plaintiffs in the Complaint should be dismissed.7
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. 162 at 11-13, ¶¶ 49-59. On those same subjects, the court makes reference to the Motion for Leave to: (1) Substitute Plaintiffs; and (2) Substitute Plaintiff's Counselfiled February 14, 2017, in Adversary No. 15-04110, and its related February 16, 2017, order. Adv. Docs. 159, 160.
The defendants are collectively referred to in the Complaint as "Defendant Master Licensees." Adv. Doc. 162 at 2. They are listed in paragraphs 9-46 of the Complaint.8 Id. at 5-10. But, plaintiffs also say that "[i]n this particular suit, the Defendants are Life Partners' Referring Licensees," which they further describe in a footnote:
Life Partners designated certain licensees as "Master Licensees" who recruited other Licensees, referred to as "Referring Licensees." Life Partners also had a designation of "Sub-Master Licensee" for certain sales agents who, upon information and belief, acted in the same manner and pursuant to the same terms as Master Licensees. The term Master Licensee, as used herein, also includes Sub-Master Licensees. Master Licensees and Referring Licensee are collectively referred to herein as Licensees.
Id. at 4, ¶ 4 & n.1. By these impossibly circular definitions, as noted throughout this memorandum opinion and order, it appears that plaintiffs are asserting claims against persons who are not parties to this action.
Plaintiffs alleged in the Introduction of the Complaint that the "lawsuit seeks to recover commissions paid to the Defendants by the debtors in the above-referenced bankruptcy proceedings" and "damages suffered by investors who assigned their claims tothe Creditors Trust." Id. 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,"9 which are for "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. The assignments of the claims to plaintiffs were alleged to have been accomplished by, or pursuant to, the bankruptcy plan that was confirmed. Id. at 4, ¶ 5.
The dollar amount of the recovery plaintiffs are seeking from each defendant is not alleged in the Complaint. The Complaint does say that all "Referring Licensees" received in excess of $102 million in commissions and caused damages to assigning investors far exceeding those commissions. Id. at 4, ¶ 4. As noted, the same paragraph says that defendants are "Referring Licensees," whereas the preamble to the Complaint refers to defendants collectively as "Master Licensees." Id. at1. And, to add to the confusion, plaintiffs later plead that "the Defendant Licensees received over $48 million in commissions and fees." Id. at 30, ¶ 116. Plaintiffs also seek to impose a constructive trust against defendants. Id. at 53-54, ¶¶ 226-28. Although it is not clear, it appears that the res of the trust is to be the fees and commissions defendants received from debtors. Id., ¶¶ 227-28.
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 the Investor Assigned Claims mentioned above, plaintiffs make constructive trust claims apparently against all defendants (this time described as Master Licensees), and a request for recovery of attorney's fees and costs, again apparently against all defendants (as MasterLicensees), pursuant to the authority of section 24.013 of the Texas Business and Commerce Code.12 Id. at 53-54, ¶¶ 226-30.
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...
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