U.S. v. Peoples Benefit Life Ins.

• Citation: 271 F.3d 411
• Decision Date: 01 August 2001
• Docket Number: Docket Nos. 00-6360,PLAINTIFF-APPELLEE,MOVANTS-APPELLANTS,CLAIMANTS-APPELLEES
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
• Parties: (2nd Cir. 2001) UNITED STATES OF AMERICA,, DEVONSHIRE TECH, JACQUELINE A. JU, BENG TAN, KANE & FISHER GOMBERG, THOMAS BOLAN, JIRO NAKAMURA, YASUKO NAKAMURA, VICTOR C. MOSES, FAUSTO FAUSTI, THURSTON LITTLE, KAETHE SCHUCHTER, GOOD LUCK CORP, FRANKLIN AMERICAN LIFE INSURANCE COMPANY, GEORGE GEORGE DALE, MISSISSIPPI COMMISSIONER OF INSURANCE, INSURANCE COMMISSION, CARROLL CARROLL FISHER, INSURANCE COMMISSIONER AND RECEIVER FARMERS AND RANCHERS LIFE INSURANCE COMPANY, INSURANCE COMMISSION, BRUCE I. WEISER, INTERNATIONAL FINANCIAL SERVICES LIFE INSURANCE COMPANY, MIKE PICKENS, RECEIVERS OF OLD SOUTHWEST LIFE INSURANCE COMPANY,, v. PEOPLES BENEFIT LIFE INS. CO., VETERANS LIFE INSURANCE COMPANY,, PARK AVENUE TRAVEL SVCS., CLAIMANT, ACE CAPITAL RE OVERSEAS LTD., FORMERLY KNOWN AS KRE REINSURANCE LTD., MOVANT, CURRENCY, U.S., $11,014,165.20, CURRENCY, U.S., $160,000.00, CURRENCY, U.S., $42,220.81, CURRENCY, U.S., $600,000.00, CURRENCY, U.S., $25,616.49, CURRENCY, U.S., $44,812.41, CURRENCY, U.S., $1,089.50, CURRENCY, U.S., $747,000,00, CURRENCY, U.S., $1,817.06, CURRENCY, U.S., $10,223.66, CURRENCY, U.S., $636,903.39, CURRENCY, U.S., $28,284.97, CURRENCY, U.S., $167,771.30, CURRENCY, U.S., $950,000.00, CHECK, CHASE MANHATTAN BANK, $30,398.33, CHECK, CHASE MANHATTAN BANK, $1,092.22, LUCKY STAR INVESTMENTS, TURBO COMMANDER AIRCRAFT, MODEL 114TC, 1995, MERCEDES BENZ, 1995, VIN # WDBEA34E3SC225572, MERCEDES BENZ, E430W, 1998, VIN # WDBJF70F4WA664478, MERCEDES BENZ, 600 SEL, 1999, VIN # WDBGA57G7XA432096, MERCEDES BENZ, S500V, 1999, VIN # WDBGA51G9XA430195, MERCEDES BENZ, E320W, 1999, VIN # WDBJF65H4XA865206, MERCEDES BENZ, 1999, VIN # WDBGA57G0XA426950, MERCEDES BENZ, 1999, VIN # WDBGA57G1XA412183, BMW, 540I, 1998, VIN # WBADE632XWBW62956, BMW, 328, 1999, VIN # WBAAM5337XFR02760, BMW, 1999, VIN # BAGG8333XDN74476, CHEVROLET, TAHOE, 1995, VIN # 1GNEK13K5SJ417234, CHEVROLET, TAHOE, LS1500, 1995, VIN # 3GNEK13R0XJ446063, CHEVROLET, CAVALIER, 1995, VIN # 1G1JF12D8S7219638, CHEVROLET,

Page 411

271 F.3d 411 (2nd Cir. 2001)

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, DEVONSHIRE TECH, JACQUELINE A. JU, BENG TAN, KANE & FISHER GOMBERG, THOMAS BOLAN, JIRO NAKAMURA, YASUKO NAKAMURA, VICTOR C. MOSES, FAUSTO FAUSTI, THURSTON LITTLE, KAETHE SCHUCHTER, GOOD LUCK CORP, FRANKLIN AMERICAN LIFE INSURANCE COMPANY, GEORGE GEORGE DALE, MISSISSIPPI COMMISSIONER OF INSURANCE, INSURANCE COMMISSION, CARROLL CARROLL FISHER, INSURANCE COMMISSIONER AND RECEIVER FARMERS AND RANCHERS LIFE INSURANCE COMPANY, INSURANCE COMMISSION, BRUCE I. WEISER, INTERNATIONAL FINANCIAL SERVICES LIFE INSURANCE COMPANY, MIKE PICKENS, RECEIVERS OF OLD SOUTHWEST LIFE INSURANCE COMPANY, CLAIMANTS-APPELLEES, v. PEOPLES BENEFIT LIFE INS. CO., VETERANS LIFE INSURANCE COMPANY, MOVANTS-APPELLANTS, PARK AVENUE TRAVEL SVCS., CLAIMANT, ACE CAPITAL RE OVERSEAS LTD., FORMERLY KNOWN AS KRE REINSURANCE LTD., MOVANT,

CURRENCY, U.S., $11,014,165.20, CURRENCY, U.S., $160,000.00, CURRENCY, U.S., $42,220.81, CURRENCY, U.S., $600,000.00, CURRENCY, U.S., $25,616.49, CURRENCY, U.S., $44,812.41, CURRENCY, U.S., $1,089.50, CURRENCY, U.S., $747,000,00, CURRENCY, U.S., $1,817.06, CURRENCY, U.S., $10,223.66, CURRENCY, U.S., $636,903.39, CURRENCY, U.S., $28,284.97, CURRENCY, U.S., $167,771.30, CURRENCY, U.S., $950,000.00, CHECK, CHASE MANHATTAN BANK, $30,398.33, CHECK, CHASE MANHATTAN BANK, $1,092.22, LUCKY STAR INVESTMENTS, TURBO COMMANDER AIRCRAFT, MODEL 114TC, 1995, MERCEDES BENZ, 1995, VIN # WDBEA34E3SC225572, MERCEDES BENZ, E430W, 1998, VIN # WDBJF70F4WA664478, MERCEDES BENZ, 600 SEL, 1999, VIN # WDBGA57G7XA432096, MERCEDES BENZ, S500V, 1999, VIN # WDBGA51G9XA430195, MERCEDES BENZ, E320W, 1999, VIN # WDBJF65H4XA865206, MERCEDES BENZ, 1999, VIN # WDBGA57G0XA426950, MERCEDES BENZ, 1999, VIN # WDBGA57G1XA412183, BMW, 540I, 1998, VIN # WBADE632XWBW62956, BMW, 328, 1999, VIN # WBAAM5337XFR02760, BMW, 1999, VIN # BAGG8333XDN74476, CHEVROLET, TAHOE, 1995, VIN # 1GNEK13K5SJ417234, CHEVROLET, TAHOE, LS1500, 1995, VIN # 3GNEK13R0XJ446063, CHEVROLET, CAVALIER, 1995, VIN # 1G1JF12D8S7219638, CHEVROLET, CAVALIER, 1998, VIN

# 1G1JF12T0W7152692, CHEVROLET, CAVALIER LS, 1998, VIN # 3GIJF5245WS845159, VOLVO, S70A SR, 1999, VIN # YV1LS55A0X1599258, INFINITY, QX4, 1998, VIN # JNRAR05Y7WW025301, LEXUS, GS400, VIN # JT8BH68X0X0013961, VOLVO, S70A, 1998, VIN # YV1LS5579W2506279, DEFENDANTS.

Docket Nos. 00-6360(L), 00-6361(CON)

August Term, 2001

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: October 26, 2001

Decided: November 20, 2001

Forrest B. Lammiman, Lord, Bissell & Brook, Chicago, Illinois (Cary B. Samowitz, A. Kelly Turner, on the brief) for Appellant.

Douglass J. Schmidt, Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, Missouri (Douglas S. Skalka, on the brief) for Appellee.

Before: Feinberg, Mclaughlin, and F.I. Parker, Circuit Judges.

Per Curiam

Movants-Appellants Peoples Benefit Life Insurance Company and Veterans Life Insurance Company (collectively "Peoples") appeal from the October 31, 2000 ruling of the United States District Court of Connecticut (Burns, J.), denying their motions to intervene pursuant to Rule 24 of the Federal Rules of Civil Procedure ("Rule 24"). It is settled law that this Court has jurisdiction over an order denying intervention. See, e.g., New York News, Inc. v. Kheel, 972 F.2d 482, 485 (2d Cir. 1992) ("Because a district court's order denying intervention is a final order, we have appellate jurisdiction."). We affirm for substantially the same reasons as set forth by the district court. See United States v. One 1995 Turbo Commander Aircraft, Nos. 3:99CV-CV-2590(EBB), 3:99-CV- 2589 (EBB), 2000 WL 1838334 (D.Conn. Oct. 31, 2000). However, we write a brief opinion to explain why Peoples' constructive trust argument fails to support their motions to intervene in this case.

I. BACKGROUND

A. The underlying dispute

Peoples seek to intervene in two civil forfeiture proceedings arising from a complex and fraudulent crime scheme orchestrated by Martin Frankel ("Frankel"). On December 30, 1999, the United States commenced in rem proceedings against various properties (the "Property") believed to be the proceeds of, or traceable to proceeds of, Frankel's money laundering and other crimes. In accordance with the procedures set forth under Rule C(6) of the Supplemental Rules of Civil Procedure, on February 15, 2000, receivers of various insurance companies now in liquidation ("Receivers") filed verified claims and counterclaims in each of these cases, arguing that the Property belonged to the estates of the insurance companies and should not be forfeited to the federal government. In the event that the Receivers successfully claim a portion of the Property, that portion would be dispersed to policy holders and creditors in state receivership proceedings. Peoples did not file verified claims in the forfeiture proceedings, although Peoples did file proofs of claim for their losses in state liquidation proceedings. Instead, Peoples filed motions to intervene in the forfeiture proceedings, contending that the Property may be traceable to $14.7 million stolen by Frankel from Peoples.

B. Peoples' involvement with Frankel

Accepting Peoples' allegations as true for the purpose of deciding its motion to intervene, it appears that the following are the relevant facts:

In approximately 1993, Martin Frankel established the Thunor Trust in Tennessee in order to acquire ownership of insurance companies, including First National Life Insurance Company ("FNLIC") and Franklin American Life Insurance Company ("FALIC").

In June 1998, a broker of blocks of insurance business put Peoples and Veterans in touch with FALIC to explore the possibility of FALIC reinsuring certain blocks of insurance business that were originally underwritten by Peoples.

Peoples rejected the initial proposal because FALIC's financial rating was not high enough to assure regulatory approval. FALIC officials offered as an alternative, a substitute deal with FNLIC, FALIC's highest rated affiliate under the folds of the Thunor Trust. Based on a series of representations regarding FNLIC's financial condition and its statutory financial statements, Peoples entered into a set of agreements with FNLIC.

The agreements entered into included a Master Agreement, a Reinsurance Agreement and an Assumption Agreement. The Agreements were to transfer the initial blocks of insurance business from Peoples to FNLIC, as well as the corresponding $14,689,593 Reserve Fund which accompanied those blocks of insurance business. The Agreements provided that they would not and could not become effective until the Mississippi Commissioner of Insurance approved the Assumption Agreement. The documents also provided that FNLIC would immediately return any portion of the insurance business and the concomitant portion of the Reserve Fund that was not approved for transfer by the appropriate regulatory authorities.

Further, the Agreements failed to become effective because certain conditions set forth in the Agreements did not occur. However, FNLIC did not return the Reserve Fund because Frankel absconded with it. As a consequence, Peoples lost the Reserve Fund but remained liable for all claims and expenses for the corresponding insurance business.

C. District court ruling

In a brief opinion, the district court denied Peoples' motions to intervene. The court concluded that Peoples did not have the requisite interest in the Property to intervene as of right. It suggested that Peoples' interest was too speculative and remote, in the sense that Peoples did not even claim to actually know whether they had a direct interest in the seized assets. See United States v. One 1995 Turbo Commander Aircraft, Nos. 3:99CV-CV-2590(EBB), 3:99-CV-2589 (EBB), 2000 WL 1838334, at *2 (D.Conn. Oct. 31, 2000) (that Peoples lack a legally cognizable interest in the Property "can be recognized by the acknowledgment, oft repeated in their moving papers, that they `may' have an interest in the seized assets").

The court also emphasized that even if Frankel stole the money in the Reserve Fund, it would have been stolen from the insurance companies, FNLIC and FALIC, and not from Peoples. Id. The receivers for both FNLIC and FALIC are parties in the forfeiture proceedings, and, as the court noted, Peoples properly "filed appropriate proofs of claim in the Mississippi and Tennessee receivership actions," where the assets recovered by the receivers of FNLIC and FALIC in the forfeiture proceedings would be dispersed according to state procedures. Thus, the court reasoned that it could not allow Peoples "to `leapfrog' over every other worthy (and sometimes worthier) claimant" to a "limited amount of funds." Id.

The court concluded that the "Receivers in these actions are the appropriate parties to be pursuing these actions against the monies liquidated out of the seizures to date of the Frankel assets" and therefore denied permissive intervention as well.

This appeal followed.

II. DISCUSSION

Peoples raise a narrow issue on appeal: whether the district court abused its discretion in denying its motions to intervene. Peoples challenge the district court's decision arguing first that intervention should have been granted as of right under Rule 24(a) of the Federal Rules of Civil Procedure and second that, in the alternative, permissive intervention should have been granted pursuant to Rule 24(b) of the Federal Rules of Civil Procedure.¹ We do not find that the court abused its discretion in denying Peoples' motions to intervene,² and we affirm for substantially the same reasons as the district court. Our discussion here is limited to Peoples' constructive trust theory. In essence, Peoples claim first that FNLIC held the Reserve Fund in constructive trust for the benefit of Peoples and second that their constructive trust provides a sufficiently direct interest in the Property to permit intervention in the...