Transamerica Life Insurance Company v. Yousef Rabadi et al

Filing 152

ORDER re Cross-Claimant Bill Biltagi's Motion for Summary Judgment 99 ; Cross-Claimants Yousef Rabadi & Intesar Alturk's Motion for Summary Judgment 100 ; Cross-Defendant Brian C. Lysaght & Lysaght Law Group's Motion for Summary Judgment 118 by Judge Ronald S.W. Lew. The Court GRANTS Cross-Claimants' Motions for Summary Judgment [99, 100] and DENIES Cross-Defendants' Motion for Summary Judgment 118 . SEE ORDER FOR COMPLETE DETAILS. (jre)

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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 CENTRAL DISTRICT OF CALIFORNIA 7 8 9 TRANSAMERICA LIFE INSURANCE ) CV 15-07623-RSWL-Ex ) COMPANY, ) 10 ) 11 Plaintiff-in-Interpleader, ) ORDER re Cross-Claimant ) Bill Biltagi’s Motion ) for Summary Judgment 12 v. ) [99]; Cross-Claimants ) Yousef Rabadi & Intesar 13 ) Alturk’s Motion for YOUSEF RABADI, INTESAR ) Summary Judgment [100]; 14 ALTURK, BILL BILTAGI, LYSAGHT LAW GROUP LLP, and ) Cross-Defendant Brian C. ) Lysaght & Lysaght Law 15 DOES 1 through 10, ) Group’s Motion for ) Summary Judgment [118] 16 Defendants-in-Interpleader. ) ) 17 ) ) 18 YOUSEF RABADI, INTESAR ) ALTURK, and BILL BILTAGI, ) 19 ) ) 20 Cross-Claimants, ) ) 21 v. ) ) 22 ) LYSAGHT LAW GROUP LLP and ) 23 BRIAN C. LYSAGHT, ) ) 24 Cross-Defendants. ) 25 Currently before the Court are the following 26 Motions: (1) Cross-Claimant Bill Biltagi’s Motion for 27 Summary Judgment [99]; (2) Cross-Claimant Yousef Rabadi 28 1 1 and Intesar Alturk’s Motion for Summary Judgment [100] 2 (collectively, “Cross-Claimants’ Motions”); (3) and 3 Cross-Defendant Brian C. Lysaght and Lysaght Law 4 Group’s Motion for Summary Judgment or in the 5 Alternative Summary Adjudication (“Cross-Defendants’ 6 Motion”) [118-1]. Having reviewed all papers submitted 7 pertaining to this Motion, the Court NOW FINDS AND 8 RULES AS FOLLOWS: the Court GRANTS Cross-Claimants’ 9 Motions [99, 100]. The Court DENIES Cross-Defendants’ 10 Motion [118]. 11 I. BACKGROUND 12 A. Factual Background 13 1. 14 Cross-Claimants Bill Biltagi, Yousef Rabadi, and Parties and Relevant Non-Parties 15 Intesar Alturk (collectively, “Cross-Claimants”)1 are 16 beneficiaries to a life insurance policy (the “Policy”) 17 Transamerica Life Insurance Company (“Transamerica”) 18 issued on behalf of Victoria Rabadi (the “Insured”) on 19 July 27, 2011. Decl. of Sue Lewis (“Lewis Decl.”) Exs. 20 A at 1; B; ECF No. 84-1; Decl. of Robert Tauler 21 (“Tauler Decl.”) Ex. A at 487, ECF No. 136-1. 22 23 a. Cross-Claimants & Cross-Defendants Cross-Claimant Bill Biltagi was listed on 24 beneficiary transfer papers as the Insured’s “business 25 associate,” and holds a 9% interest in the Policy. 26 27 28 1 Because Cross-Claimant Yousef Rabadi shares the same last name with various other non-parties, the Court will refer to Cross-Claimants—when discussed individually–by their first and last names (i.e. Yousef Rabadi, Intesar Alturk). 2 1 Lewis Decl. Ex. B. He was the owner of the Policy upon 2 the Insured’s death and remains the owner to this day. 3 Tauler Decl. Ex. A, at 489. Yousef Rabadi was 4 identified as the Insured’s son, and later her nephew, 5 on Policy documentation. See id. at 207, 459. 6 a 47% interest in the Policy. Id. at 487. He has Intesar 7 Alturk has a 44% interest in the Policy, and was 8 identified as the Insured’s “business associate.” 9 at 487. Id. She is apparently the mother of Abraham 10 Khader, the Insured’s broker who prepared most of her 11 Policy paperwork. Decl. of Brian Lysaght (“Lysaght 12 Decl.”) Ex. 1, at ¶ 49, ECF No. 107-1. 13 Cross-Defendants Brian C. Lysaght and Lysaght Law 14 Group (collectively, “Cross-Defendants”) are a law firm 15 that entered into a contingency fee agreement with its 16 clients, Josef Rabadi, Reem Rabadi, and Sandra Rabadi 17 (collectively, “State Court Rabadis”) regarding 18 representation in Sandra Rabadi, et al. v. Noura 19 Shoubash, et al., Los Angeles Superior Court Case No. 20 BC 459192 (“State Court Action”). Decl. of Andre 21 Boniadi (“Boniadi Decl.”) Ex. 1, at 7-8, ECF No. 100-3. 22 Cross-Defendants had an attorney’s lien (the “Lien”) on 23 proceeds related to the State Court Action. Id. at 8. 24 Neither Cross-Defendants nor the State Court Rabadis 25 were named as beneficiaries to the Policy at hand. 26 Lewis Decl. ¶ 5, Ex. B. See Cross-Defendants also did not 27 represent the Insured or Yousef Rabadi. See Decl. of 28 Yousef Rabadi (“Rabadi Decl.”) ¶ 9, Ex. 1, ECF No. 1003 1 4. 2 3 b. Non-Parties Abraham Khader (“Khader”), was a licensed life 4 settlement insurance broker who prepared the Insured’s 5 life insurance applications. 6 at 234, 357. See Tauler Decl. Ex. A, Michael Lotta (“Lotta”) was Khader’s 7 attorney in an Orange County state-court case involving 8 Khader’s alleged fraudulent purchase and sale of life 9 insurance contracts, Nouha Hreish et al. v. Abraham 10 Khader, et al., Case No. 30-2013-00649323-CU-FR-CJC 11 (“Orange County Action”). See Decl. of Natasha Riggs 12 (“Riggs Decl.”) Ex. 1 at ¶¶ 17-18, ECF No. 121-1.2 13 Nabil Yousef Rabadi is the Insured’s brother, who 14 was a joint owner of the Policy at one point. 15 Decl. Ex. A, at 395, 489. Tauler Reem Al-Rabadi is Yousef 16 Rabadi’s mother and Nabil Rabadi’s wife, listed as a 17 contingent beneficiary on the Policy. Id. at 488. 18 2. 19 On April 8, 2011, the Insured applied with The Life Insurance Policy 20 Transamerica for a 10-Year Level Term life insurance 21 policy totaling $4,000,000. Id. at 62-65. Her 22 application represented that she had real property 23 holdings of $19 million, a family net worth of $17.9 24 25 26 27 28 2 Khader is also currently the subject of a formal Accusation by the California Insurance Commissioner, filed on November 17, 2016. Lysaght Decl. Ex. 1. The Accusation seeks to revoke Khader’s insurance broker’s license. Id. at ¶ 49. The Accusation also claims that Khader made his mother, Intesar Alturk, a beneficiary to life insurance policies where she had no real interest with the insureds. Id. at ¶ 29. 4 1 million, annual earned income of $80,000, and unearned 2 income of $510,000. Id. at 62-65, 71-74. On July 27, 3 2011, Transamerica insured Victoria Rabadi under life 4 insurance policy number 60160747. Id. at 169. Later 5 in July 2011, Khader requested on the Insured’s behalf 6 an increase in the Policy from $4 million to $5.5 7 million, effective September 21, 2011. Id. at 196, 8 222, 951. 9 On September 21, 2011, Yousef Rabadi—initially 10 listed as the Insured’s “son,” then later her 11 “nephew”—was designated the primary beneficiary. 12 at 209-210. Id. He was a 100% beneficiary at the time. 13 Id. 14 For the first six months, the Policy premium 15 payments were $11,000 per quarter. Id. at 212-214. 16 They increased to $27,475 when Khader converted the 17 Policy from an Increased Term Policy to a Universal 18 Life Policy on January 21, 2012. Id. at 241, 274. 19 Yousef Rabadi sent initial premium payments for both 20 iterations of the Policy. Id. at 2, 198. It is 21 unclear whether the Insured made any premium payments 22 on the Policy. 23 See generally Tauler Decl. Ex. A. Khader initially refused to file a questionnaire 24 that asked questions to ferret out whether the Policy 25 was a Stranger Oriented Life Insurance (“STOLI”) 26 Policy. Id. at 322, 326-29. On April 26, 2012, he 27 finally filled out a questionnaire. 28 Id. at 326-29. On April 9, 2013, the Insured transferred 100% of 5 1 the ownership in the Policy to Nabil Rabadi, her 2 brother and Yousef Rabadi’s father. 3 Id. Id. at 395-96. On October 16, 2013, beneficiary designation and 4 ownership change forms were submitted, changing owners 5 from Nabil Yousef Rabadi (100%) to: (1) Nabil Yousef 6 Rabadi (50%) and (2) Bill Biltagi (50%). 7 12. Id. at 411- Bill Biltagi was identified as the Insured’s 8 “business associate.” Id. at 432. Yousef Rabadi was 9 now identified as the Insured’s “nephew,” not her son. 10 Id. On November 26, 2013, the Insured submitted 11 another beneficiary designation form, introducing 12 Intesar Alturk, Khader’s mother, as a 41% beneficiary. 13 Id. at 459. She was identified as the Insured’s 14 “business associate.” 15 Id. at 459. When Policy benefits became due, the Policy 16 provided life insurance coverage totaling $5,500,000. 17 See Lewis Decl. ¶ 9. Cross-Claimants were designated 18 beneficiaries as follows: Yousef Rabadi (47%), Intesar 19 Alturk (44%), and Bill Biltagi (9%). Id. at Ex. B. 20 3. 21 On April 11, 2011, the State Court Rabadis (Josef, The Attorney’s Lien and State Court Action 22 Reem, and Sandra) filed Sandra Rabadi, et al. v. Noura 23 Shoubash, et al., the State Court Action. Bill 24 Biltagi’s Req. for Judicial Notice (“Biltagi’s RJN”) 25 Ex. 3, ECF No. 99-4. Khader and Intesar Alturk were 26 defendants in the State Court Action. Id. On May 5, 27 2013, the State Court Rabadis retained Cross-Defendants 28 /// 6 1 to represent them in the State Court Action.3 Boniadi 2 Decl. Ex. 1. 3 Cross-Defendants entered into a contingency fee 4 agreement with the State Court Rabadis. Id. The 5 “Legal Fees” section of the contingency fee agreement 6 provided: 7 8 9 10 11 12 Attorney will receive 33% of the net recovery received from any and all defendants, to any or all plaintiffs, in kind or cash, whether by way of verdict, award, or settlement as a result of this litigation engagement. The term "net recovery" means (1) the total of all amounts received by settlement, arbitration award or judgment including any awards of attorneys fees, (2) minus all costs and disbursements actually paid by Clients. Id. at 8. 13 Another section defined the “Attorney’s Lien:” 14 15 16 17 Clients hereby grant Attorney an ATTORNEY’S LIEN on any and all claims or causes of action that are the subject of the representation. The Lien will be for sums due and owing under this agreement and will attach to any recovery obtained, whether by arbitration award, judgment, settlement, or otherwise. 18 Id. at 11-12. 19 20 a. State Court Rabadis’ Meeting with Khader On March 4, 2014, Lotta—Khader’s attorney in the 21 Orange County Action—and Khader allegedly met with the 22 State Court Rabadis unbeknownst to Cross-Defendants. 23 Am. Decl. of Natasha Riggs (“Riggs Am. Decl.”) ¶ 9, ECF 24 No. 124. At that meeting, Khader apparently induced 25 26 27 28 3 The Fourth Amended Complaint in the State Court Action alleged that Khader and Intesar Alturk were members of an enterprise designed to cheat the State Court Rabadis out of money owed them as investors in life insurance policies. Lysaght Decl. ¶ 2, ECF No. 108. 7 1 the State Court Rabadis into dismissing the State Court 2 Action against him and Intesar Alturk in return for 3 future compensation from other life insurance policies. 4 Id. at ¶ 9. On March 6, 2014, Lotta sent Cross- 5 Defendants a letter advising that the State Court 6 Rabadis had settled the case “for no exchange of 7 payment of funds by either party” and enclosed a 8 proposed Request for Dismissal of the Complaint with 9 prejudice. Supp. Decl. of Brian Lysaght (“Lysaght 10 Supp. Decl.”) ¶ 6, Ex. 3, ECF Nos. 108, 108-2. On 11 March 14, 2014, Allen Chau sent Cross-Defendants a 12 letter advising that he was the State Court Rabadis’ 13 new attorney and enclosed substitution of attorney 14 forms. 15 Riggs Decl. Ex. 9, at 7:17-20, ECF No. 121-8. On April 15, 2014, Cross-Defendants filed a Notice 16 of Attorney's Lien in the State Court Action. Decl. of 17 Vivian I. Orlando (“Orlando Decl.”) Ex. 1, ECF No. 8418 2. The Notice of Lien provided: 19 Please take notice that [Cross-Defendants have] a contractual attorney’s lien . . . on all proceeds and compensation of any kind paid to Plaintiffs and Cross-Defendants Josef Rabadi, Reem Rabadi, and/or Sandra Rabadi (“Clients”) in this action, whether in settlement, after trial, or otherwise . . . whether transmitted directly or indirectly by payments to third parties. Said charging lien includes compensation by or on behalf of insurance companies, brokers, life settlement companies . . . . 20 21 22 23 24 25 Id. 26 The State Court Rabadis dismissed their claims 27 against Khader and Intesar Alturk in the State Court 28 Action on May 7, 2014, and the case was ultimately 8 1 dismissed for failure to prosecute on July 1, 2016. 2 Riggs Decl. Ex. 11, ECF No. 121-10. Per Cross- 3 Defendants, the State Court Rabadis invested in 4 Khader’s improper policies, filed a lawsuit against 5 him, then rejoined the enterprise upon dismissing the 6 State Court Action against Khader and Intesar Alturk. 7 Lysaght Supp. Decl. ¶ 17. 8 The Insured died on May 18, 2015. Lewis Decl. Ex. 9 C. Bill Biltagi filed his claim for benefits to the 10 Policy on June 2, 2015, claim number 505200394159, as 11 did the other Cross-Claimants. Lewis Decl. Ex. D; 12 Decl. of Bill Biltagi (“Biltagi Decl.”) ¶ 5, ECF No. 13 99-1. On June 29, 2015, Cross-Defendants advised 14 Transamerica that their Lien applied to up to 30% of 15 the Policy proceeds, triggering the instant 16 Interpleader Action in federal court. Orlando Decl. 17 Ex. 2. 18 B. Procedural Background 19 On September 18, 2015, Transamerica paid the 20 undisputed 70% of the Policy proceeds to 21 Cross-Claimants' client trust account. 22 ECF No. 1. Compl. ¶ 20, Because Transamerica was unable to 23 determine which parties were owed the remaining 30% of 24 the Policy death benefits (“Policy proceeds” or 25 “interpled funds”), totaling $1,653,354.67, it filed a 26 Complaint in Interpleader on September 29, 2015 [1]. 27 The interpled funds are on deposit with the Court as of 28 October 7, 2015 [8]. 9 1 On January 11, 2016, Cross-Defendants filed their 2 Answer to the Complaint-In-Interpleader, asserting 3 various affirmative defenses [15]. On January 13, 4 2016, Cross-Claimants filed their Answer to the 5 Complaint-In-Interpleader [20] and Cross-Claim against 6 Cross-Defendants, (1) for declaratory judgment that 7 Cross-Defendants do not have an enforceable Lien 8 against either Cross-Claimants or the Policy, and 9 seeking a determination of their rights to the Policy 10 proceeds. 11 Cross-Cl. ¶ 9, ECF No. 22.4 Cross-Claimants filed a Motion to Strike Cross- 12 Defendants’ Affirmative Defenses in its Answer to the 13 Complaint-in-Interpleader on February 1, 2016 [28], 14 which the Court granted in part and denied in part 15 [51]. On June 8, 2016, Cross-Defendants filed an 16 Answer to the Cross-Complaint, raising affirmative 17 defenses for unclean hands, illegal STOLI policy, and 18 conspiracy [66] (emphasis added). Cross-Claimants did 19 not file a Motion to Strike this answer. 20 On December 21, 2016, the Court granted 21 Transamerica's Motion to Dismiss, discharging it of all 22 liability regarding the Policy and allowing the case to 23 proceed between Cross-Claimants and Cross-Defendants 24 [97]. 25 26 27 28 4 The second cross-claim was for Intentional Interference with Contractual Relations, which was dismissed on May 17, 2016 in the Court’s Order Granting Cross-Defendants’ Motion to Strike the second cross-claim pursuant to California Code of Civil Procedure § 425.16 (“Anti-SLAPP” Motion”) [59]. 10 1 On February 28, 2017, Cross-Claimants separately 2 filed Motions for Summary Judgment as to the 3 Complaint-In-Interpleader and Cross-Claim for 4 Declaratory Relief [99, 100]. The Court received 5 Cross-Defendants’ Oppositions to the Motions for 6 Summary Judgment on March 7, 2017 and March 8, 2017 7 [106, 109] and Cross-Claimants' joint Reply on March 8 13, 2017 [112, 138]. Cross-Defendants filed their own 9 Motion for Summary Judgment as to their affirmative 10 defenses on March 14, 2017 [118-1]. Cross-Claimants’ 11 separate Oppositions followed on March 21, 2017 [129, 12 133], and Cross-Defendants filed their Reply on March 13 28, 2017 [141]. 14 II. FINDINGS OF FACT 15 1. The Insured was insured under Transamerica Life 16 Insurance Policy number 60160747. 17 Biltagi’s Stmt. of Uncontroverted Facts (“Biltagi’s 18 SUF”) ¶ 1, ECF No. 99-5; Cross-Cls.’ Yousef Rabadi 19 & Intesar Alturk’s Stmt. of Uncontroverted Facts 20 (“Rabadi’s SUF”) ¶ 1, ECF No. 100-1; see Lewis 21 Decl. ¶ 4, Ex. A. 22 2. The Rabadi State Court Action was filed on April 7, 23 2011. 24 (“Cross-Defs.’ SUF”) ¶ 24, ECF No. 120; Biltagi’s 25 RJN Ex. 3, at 1667. 26 3. On June 2, 2015, Bill Biltagi filed his claim for 27 benefits under the Policy, Claim number 28 505200394159. Cross-Cl. Bill Cross-Defs.’ Stmt of Uncontroverted Facts Biltagi’s SUF ¶ 8; Lewis Decl. Ex. 11 1 D, at 57. 2 4. On May 5, 2013, the State Court Rabadis signed a 3 Retainer agreement with Cross-Defendants. 4 Biltagi’s SUF ¶ 11; Rabadi’s SUF ¶ 4; Cross-Defs.’ 5 SUF ¶ 65; Boniadi Decl. Ex. 1. 6 5. On October 1, 2013, change in beneficiary forms 7 submitted to Transamerica changed the Policy owners 8 and beneficiaries as follows: Nabil Yousef Rabadi 9 (50%); Bill Biltagi (50%). Cross-Defs.’ SUF ¶ 66; 10 Tauler Decl. Ex. A, at 411-414. 11 6. Cross-Defendants filed a Notice of Attorney’s Lien 12 in Los Angeles Superior Court Case number BC459192, 13 Sandra Rabadi et al. v. Noura Shoubash, et al. on 14 April 15, 2014. 15 Ex. 1. 16 7. Around May 2014, Cross-Defendants served 17 Transamerica’s counsel with a copy of its Notice of 18 Attorney’s Lien. 19 ¶ 6; Orlando Decl. ¶ 2, Ex. 1. 20 8. Transamerica, the corporation, received a copy of 21 the Notice of Attorney’s Lien on or around May 13, 22 2014. 23 Decl. ¶ 8, Ex. F. 24 9. The Insured died on May 18, 2015, and Cross- 25 Claimants, the Beneficiaries, made claims to the 26 full Policy proceeds. 27 Rabadi’s SUF ¶¶ 7-8; Lewis Decl. Exs. C-D. Biltagi’s SUF ¶ 15; Orlando Decl. Biltagi’s SUF ¶ 17; Rabadi’s SUF Biltagi’s SUF ¶ 18; Rabadi’s SUF ¶ 6; Lewis Biltagi’s SUF ¶¶ 19-20; 28 10. The Insured and Yousef Rabadi have never been 12 1 Cross-Defendants’ clients. 2 Rabadi’s SUF ¶ 11; Rabadi Decl. ¶ 6. 3 Biltagi’s SUF ¶ 26; see III. DISCUSSION 4 A. Legal Standard 5 1. 6 Federal Rule of Civil Procedure 56 states that a Summary Judgment Standard 7 “court shall grant summary judgment” when the movant 8 “shows that there is no genuine dispute as to any 9 material fact and the movant is entitled to judgment as 10 a matter of law.” Fed. R. Civ. P. 56(a). A fact is 11 “material” for purposes of summary judgment if it might 12 affect the outcome of the suit, and a “genuine issue” 13 exists if the evidence is such that a reasonable fact14 finder could return a verdict for the non-moving party. 15 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 16 (1986). The evidence, and any inferences based on 17 underlying facts, must be viewed in the light most 18 favorable to the opposing party. Twentieth Century-Fox 19 Film Corp. v. MCA, Inc., 715 F.2d 1327, 1329 (9th Cir. 20 1983). In ruling on a motion for summary judgment, the 21 court’s function is not to weigh the evidence, but only 22 to determine if a genuine issue of material fact 23 exists. 24 Anderson, 477 U.S. at 255. Under Rule 56, the party moving for summary 25 judgment has the initial burden to show “no genuine 26 dispute as to any material fact.” Fed. R. Civ. P. 27 56(a); see Nissan Fire & Marine Ins. Co. v. Fritz Cos., 28 210 F.3d 1099, 1102-03 (9th Cir. 2000). 13 The burden 1 then shifts to the non-moving party to produce 2 admissible evidence showing a triable issue of fact. 3 Nissan Fire & Marine Ins., 210 F.3d at 1102-03; see 4 Fed. R. Civ. P. 56(a). Summary judgment “is 5 appropriate when the plaintiff fails to make a showing 6 sufficient to establish the existence of an element 7 essential to [their] case, and on which [they] will 8 bear the burden of proof at trial.” Cleveland v. 9 Policy Mgmt. Sys. Corp., 526 U.S. 795, 805–06 (1999); 10 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). 11 The standard “provides that the mere existence of some 12 alleged factual dispute between the parties will not 13 defeat an otherwise properly supported motion for 14 summary judgment; the requirement is that there be no 15 genuine issues of material fact.” Anderson, 477 U.S. 16 at 247-48. 17 B. Analysis 18 1. 19 20 Bill Biltagi’s Request for Judicial Notice is GRANTED A court “may judicially notice a fact that is not 21 subject to reasonable dispute because it: (1) is 22 generally known . . .; or (2) can be accurately and 23 readily determined from sources whose accuracy cannot 24 reasonably be questioned.” Fed. R. Evid. 201(b). A 25 court “must” take judicial notice “if a party requests 26 it and the court is supplied with the necessary 27 information.” 28 Fed. R. Evid. 201(c)(2). Bill Biltagi asks the Court to take judicial notice 14 1 of the following (“Biltagi’s RJN”): (1) Lewis and 2 Orlando Declarations attached to Transamerica’s Motion 3 to Dismiss [84-1, 84-2]; (2) Caption pages of the 4 Complaint and First Amended Complaint and court docket 5 portion of the State Court Action, Sandra Rabadi et al. 6 v. Noura Shoubash, et al., Los Angeles Superior Court 7 case number BC459192. 8 Biltagi’s RJN ¶¶ 1-3, Exs. 1-3. The Court may take judicial notice of previous 9 filings in the same litigation between the same 10 parties, like the Lewis and Orlando Declarations. See 11 Shuttlesworth v. City of Birmingham, 394 U.S. 147, 157 12 (1969). A court may also “take judicial notice of the 13 existence of another court's opinion or of the filing 14 of pleadings in related proceedings; the Court may not, 15 however, accept as true the facts found or alleged in 16 such documents.” Peel v. BrooksAmerica Mortg. Corp., 17 788 F. Supp. 2d 1149, 1158 (C.D. Cal. 2011) (emphasis 18 added)(citations omitted). Because the exhibits 19 contain only the caption page and not the allegations 20 of the complaint, the Court can take judicial notice of 21 the State Court Action documents. Thus, the Court 22 GRANTS Biltagi’s RJN in its entirety [99-4]. 23 24 25 2. Yousef Rabadi & Intesar Alturk’s Request for Judicial Notice is GRANTED Cross-Claimants Yousef Rabadi and Intesar Alturk 26 seek judicial notice of the following (“Rabadi’s RJN”): 27 (1) Transamerica’s Complaint-In-Interpleader filed on 28 September 29, 2015 [1]; (2) the Court’s Order Directing 15 1 Deposit of Interpleader Funds on October 7, 2015 [8]; 2 (3) Cross-Defendants’ Answer to the Complaint-in3 Interpleader, filed on January 11, 2016 [15]; (4) 4 Cross-Claimants’ Answer to the Complaint-in5 Interpleader, filed on January 13, 2016 [20]; (5) Lewis 6 Declaration attached to Transamerica’s Motion to 7 Dismiss, filed on October 18, 2016 [84-1]. Rabadi’s 8 Req. for Jud. Ntc. (“Rabadi’s RJN”) ¶¶ 1-5, Exs. 1-5, 9 ECF No. 100-2. 10 Because “it is well established that a court can 11 take judicial notice of its own files and records under 12 Rule 201,” Gerritsen v. Warner Bros. Entm’t Inc., 112 13 F. Supp. 3d 1011, 1034 (C.D. Cal. 2015), and because 14 the Court already judicially noticed the Lewis 15 Declaration in Biltagi’s RJN, the Court GRANTS Rabadi’s 16 RJN in its entirety [100-2]. 17 18 19 3. Cross-Defendants’ First Request for Judicial Notice is DENIED Cross-Defendants ask the Court to take judicial 20 notice (“Cross-Defendants’ First RJN”) of the minute 21 order in American General Life Insurance Company v. 22 Munshi, et al., 2:08-cv-6439-DDP(RZx), ECF No. 185. 23 Cross-Defs.’ Req. for Jud. Ntc. (“Cross-Defs.’ RJN”)¶ 24 1, Ex. 1, ECF No. 131. 25 The Court can consider Munshi as persuasive 26 authority, but “to the extent [Cross-Defendants] seek 27 to cite that case in support of their arguments, 28 judicial notice is also unnecessary: the Court can, and 16 1 will consider the reasoning of that ruling for whatever 2 persuasive value it may have.” Diversified Capital 3 Inv., Inc. v. Sprint Commc’ns, Inc., No. 4 15-cv-03796-HSG, 2016 WL 2988864, at *5 (N.D. Cal. May 5 24, 2016). The Court thus DENIES Cross-Defendants’ 6 First RJN in its entirety [119]. 7 8 9 4. Cross-Defendants’ Second Request for Judicial Notice is GRANTED in Part and DENIED in Part Cross-Defendants also seek judicial notice of the 10 following: 1) Cross-Claimants’ Rule 26 Initial 11 Disclosures from this case; (2) the California 12 Department of Insurance Amended Accusation against 13 Khader and Alturk, dated November 17, 2016; and (3) the 14 Verdict and Special Findings in United States v. 15 Carpenter, No. 3:13-CR-226-RNC (D. Conn. June 6, 2016). 16 Cross-Defs.’ Sec. Req. for Judicial Notice (“Cross17 Defs.’ Sec. RJN”) ¶¶ 1-3, ECF No. 142. 18 “Discovery items such as requests for discovery and 19 responses to requests for discovery are not proper 20 subjects for judicial notice because they are not 21 ‘self-authenticating’ and thus cannot be verified.” 22 United Safeguard Distributors Ass’n v. Safeguard Bus. 23 Sys., Inc., 145 F. Supp. 3d 932, 942 (C.D. Cal. 2015). 24 Because of this, and because it is unclear for what 25 purpose the initial disclosures are proffered, the 26 Court thus does not take judicial notice of Cross27 Claimants’ Rule 26 Initial Disclosures. 28 A court may “take judicial notice of the existence 17 1 of another court's opinion or of the filing of 2 pleadings in related proceedings; the Court may not, 3 however, accept as true the facts found or alleged in 4 such documents.” Peel, 788 F. Supp. 2d at 1158 5 (emphasis added)(citations omitted). The Court takes 6 judicial notice of the Department of Insurance 7 Accusation for the existence of its filing, but does 8 not rely on the statements therein in its ruling on the 9 instant Motions. 10 The Court can consider Carpenter as persuasive 11 authority, but judicial notice is unnecessary as Cross12 Defendants have already cited to Carpenter in their 13 Reply. Cross-Defs.’ Reply 12:17-18. The Court will 14 consider the reasoning for whatever persuasive value it 15 may have. Diversified Capital, 2016 WL 2988864, at *5. 16 5. 17 Accordingly, the Court GRANTS Cross-Defendants’ 18 Second RJN as to the Department of Insurance 19 Accusation, but DENIES Cross-Defendants’ Second RJN as 20 to the Carpenter case and Cross-Claimants’ Rule 26 21 Initial Disclosures. 22 23 24 25 5. The Parties’ Evidentiary Objections a. Bill Biltagi’s Objection to Roth Declaration Bill Biltagi objects to the Roth Declaration [126] 26 in its entirety. Steven Roth was a disclosed, non- 27 testifying expert in Hreish v. Khader, the Orange 28 County Action against Khader and Intesar Alturk. 18 Decl. 1 of Steven Roth (“Roth Decl.”) ¶ 2, ECF No. 126. Cross- 2 Defendants proffer his declaration to show Khader’s 3 repeated involvement in STOLI policies. 4 Roth Decl. See generally Because the Court does not consider any of 5 the Roth Declaration in reaching its conclusions on 6 Cross-Defendants’ Motion for Summary Judgment,5 it 7 SUSTAINS as MOOT this objection [130]. 8 b. 9 10 Bill Biltagi’s Objection to Riggs Declaration Bill Biltagi objects to the Riggs Declaration in 11 its entirety and the attached exhibits on the grounds 12 of irrelevance, inadequate evidentiary foundation, 13 hearsay, and violation of Federal Rule of Civil 14 Procedure 56(c)(4), among other things. 15 Objs. ¶¶ 10-24, ECF No. 130. Biltagi’s The Riggs Declaration 16 [121] includes exhibits like the Third Amended 17 Complaint in the Orange County Action, Cross18 Defendants’ requests for production and interrogatories 19 in this action, a Status Conference Statement in the 20 State Court Action, depositions in the Orange County 21 Action, and State Bar searches for Lotta. See Riggs 22 Decl. Exs. 1-16. 23 The Court OVERRULES Cross-Claimants’ Objections to 24 25 26 27 28 5 The Roth Declaration and attached exhibits largely concern alleged life insurance and life settlement investment schemes led by Khader, Intesar Alturk, and Bill Biltagi that victimized Plaintiffs in the Orange County Action. Roth Decl. ¶ 4. Because the injured parties and alleged wrongdoing do not directly resolve key claims and affirmative defenses in this Action, the Court does not consider the Roth Declaration in its analysis. 19 1 Paragraph 9 because they are boilerplate and “devoid of 2 any specific argument or analysis as to why any 3 particular exhibit or assertion in a declaration should 4 be excluded,” United States v. HVI Cat Canyon, Inc., - 5 --F. Supp. 3d---, 2016 WL 7011348, at *5 (C.D. Cal. 6 Sept. 30, 2016). The Court SUSTAINS Objections to 7 Paragraphs 10-21 and Objections to Exhibits 1-16 as 8 MOOT, as the Court has not relied on the objected-to 9 evidence [130].6 10 c. Cross-Claimants’ Objections to Third Riggs 11 12 Declaration & Exhibits Cross-Claimants object to the Third Riggs 13 Declaration [143] in its entirety on the following 14 grounds: irrelevant, lacks foundation, conclusory, and 15 that it violates Federal Rule of Civil Procedure 16 56(c)(4). Biltagi’s Objs. to Third Riggs Decl. ¶ 1, 17 ECF No. 146. They also object to Exhibits 17-23 18 attached to the Third Riggs Declaration.7 19 20 21 22 23 24 25 26 27 6 Upon review, the discovery requests and responses in this case do not reveal any new information or documentation beyond what the parties already argue in their moving papers. Some of the exhibits are also largely repetitive of other exhibits and declarations the Court has already considered, that have been judicially noticed, or are not objected to. Finally, some of the exhibits—like Allen Chau’s State Bar of California website profile, allegations that Cross-Claimants’ counsel now represents the State Court Rabadis, or allegations relevant to the parties in the separate Orange County Action—do not clearly advance Cross-Defendants’ affirmative defenses or the Lien’s applicability, and thus were not considered in the Court’s reasoning. 7 These exhibits include Cross-Claimants’ Rule 26 28 disclosures, the California Insurance Department’s November 17, 20 1 The Court SUSTAINS the 2 18 and 20-21 as MOOT Objections to Exhibits 17- [146] because the Court did not 3 consider the substance of these exhibits in its ruling. 4 The Court SUSTAINS Objections to Exhibits 19, 22-23—it 5 is unclear why the Fifth Circuit and District of 6 Connecticut opinions are relevant to the instant facts. 7 To the extent Cross-Defendants wished to analogize 8 these cases to the facts at hand, Cross-Defendants were 9 welcome to cite and analyze them in their moving 10 papers. The Court OVERRULES rote Objections to the 11 entirety of the Riggs Third Declaration. Doe v. 12 Starbucks, Inc., No. SACV 08-0582 AG (CWx), 2009 WL 13 5183773, at *1 (C.D. Cal. Dec. 18, 2009)(“[I]n motions 14 for summary judgment with numerous objections, it is 15 often unnecessary and impractical for a court to 16 methodically scrutinize each objection and give a full 17 analysis of each argument raised.”) 18 19 20 d. Cross-Defendants’ Objections to Biltagi Declaration Cross-Defendants object to specific paragraphs of 21 the Biltagi Declaration on the following grounds: lack 22 23 2016 formal accusation against Khader; United States v. Bazemore, 24 No. 15-10805 (5th Cir. Oct. 5, 2016); the Department of Insurance 25 26 27 28 Commissioner’s Bulletin No. SA-2011-02, dated September 25, 2011; the California Department of Insurance Press Release, June 22, 2012; an escrow agreement between Intesar Alturk and Josef Rabadi, one of the State Court Rabadis, listing Intesar Alturk’s address as the same Tustin, California address where the State Court Rabadis live; and the verdict and special findings in United States v. Carpenter, No. 3:13-CR-226-RN, a District of Connecticut case dated June 6, 2016. 21 1 of foundation, improper legal conclusion and improper 2 lay opinion, lack of foundation, lack of personal 3 knowledge, inadmissible hearsay. See Cross-Defs.’ 4 Objs. to Biltagi Decl. 2:9-7:20, ECF No. 151. 5 Because many of Defendant’s objections are 6 boilerplate and “devoid of any specific argument or 7 analysis as to why any particular exhibit or assertion 8 in a declaration should be excluded,” United States v. 9 HVI Cat Canyon, Inc., ---F. Supp. 3d---, 2016 WL 10 7011348, at *5 (C.D. Cal. Sept. 30, 2016), the Court 11 OVERRULES Cross-Defendants’ Objections to Paragraphs 2, 12 3, 5, 6, 11, 13, and 14. 13 The Court SUSTAINS the Objection to Paragraph 4, as 14 Bill Biltagi’s statement that the Policy was 15 incontestable could be an improper layperson opinion 16 regarding the Policy’s validity under relevant 17 California Insurance law. The Court SUSTAINS as MOOT 18 the Objection to Paragraph 12, as the Court did not 19 rely on this objected-to evidence. 20 21 22 6. Cross-Defendants’ Motion for Summary Judgment is DENIED The Court now turns to the merits of Cross- 23 Defendants’ Motion. The case boils down to this issue: 24 whether a law firm may assert its attorney’s lien—from 25 a contingency fee agreement with clients in a state 26 court action—against life insurance policy proceeds to 27 which its clients are not beneficiaries, whether 28 through the lien’s express terms or through affirmative 22 1 defenses allegedly linking the state-court clients to 2 the policy beneficiaries. 3 Cross-Defendants move for summary judgment as to 4 the affirmative defenses in their Answer to the Cross5 Complaint [66]: illegality, unclean hands, and 6 conspiracy. Cross-Defs.’ Mot. 2:22-24. The Court 7 cannot grant summary judgment as to these defenses. 8 9 a. Policy Illegality Cross-Defendants ask that the Court determine the 10 Policy is illegal for two reasons. First, the Policy 11 violated the California Life Settlement Act (“CLSA”) 12 because the April 11, 2013 ownership transfer from the 13 Insured to Nabil Rabadi was made for a price less than 14 the death benefit, but was not conducted by a licensed 15 life settlement broker. Id. at 2:24-3:3. Second, it 16 was a STOLI policy, illegal in California since July 1, 17 2010. Because the Policy is illegal, Cross-Claimants 18 may not recover as beneficiaries. Cross-Defs.’ Reply 19 7:5-6. 20 Bill Biltagi counters that the STOLI Policy 21 argument is moot, as (1) Transamerica already paid out 22 the Policy proceeds and the two-year contestability 23 period—to challenge or rescind the Policy—lapsed; (2) a 24 life insurance policy is freely assignable as long as 25 the owner has an insurable interest when the Policy was 26 issued; and (3) Cross-Defendants lack standing to 27 attack the Policy’s legality because they are not the 28 insurer, Transamerica. Biltagi’s Opp’n 7:21-25-8:19. 23 1 The Court first addresses Cross-Claimants’ 2 counterarguments. Cross-Claimants’ point—that Cross- 3 Defendants cannot challenge the Policy’s validity, as 4 the contestability window lapsed—is only facially true. 5 Insurance policies in California are incontestable 6 after they have been in issuance for two years, during 7 the lifetime of the insured. Cal. Ins. Code § 10113.5. 8 Here, the policy was issued in 2011 and the Insured 9 died in 2015. 10 lapsed in 2013. The contestability period apparently But the Court recognizes Cross- 11 Defendants’ allegation that Khader disguised STOLI 12 policies through straw buyers and fraudulent 13 applications for at least two years to avoid the 14 contestability window. Cross-Defs.’ Ans. ¶ 15; 15 see also Hartford Life & Annuity Ins. Co. v. Doris 16 Barnes Family 2008 Irrevocable Trust, No. CV 10–7560 17 PSG (DTBx), 2011 WL 759554, at *4 (C.D. Cal. Feb. 22, 18 2011)(“As the Complaint alleges that the Policy was 19 procured through [Defendants'] plan . . . to transfer 20 the beneficial interest in the Policy to third-parties 21 without insurable interests, Plaintiff's claims are not 22 barred by the Policy's incontestability 23 clause.”)(internal quotation marks omitted). 24 Cross-Claimants also argue that the Policy was 25 freely assignable due to Victoria Rabadi, the 26 Insured’s, insurable interest from the outset. 27 Although an individual with an insurable interest may 28 lawfully “have the policy made payable to whomsoever he 24 1 or she pleases, regardless of whether the beneficiary 2 designated has an insurable interest,” Cal. Ins. Code. 3 § 10110.1(b), the Insured and Cross-Claimants’ 4 insurable interest here is suspect. Lincoln Nat’l Life 5 Ins. Co. v. Calhoun, 596 F. Supp. 2d 882, 889 (D.N.J. 6 2009)(“Insureds begin to run afoul of the insurable 7 interest requirement, however, when they intend at the 8 time of the policy’s issuance, to profit by 9 transferring the policy to a stranger with no insurable 10 interest at the expiration of the contestability 11 period.”) 12 13 i. Illegal STOLI Policy The next issue is whether there are no genuine 14 disputes of material fact as to whether this was a 15 STOLI policy. A STOLI policy is a life insurance 16 policy made for the benefit of a third-party investor 17 who "at the time of policy origination, has no 18 insurable interest, under the laws of this state, in 19 the life of the insured." 20 10113.1(w). Cal. Ins. Code. § And "[a]ny device, scheme, or artifice 21 designed to give the appearance of an insurable 22 interest where there is no legitimate insurable 23 interest violates the insurable interest laws." 24 10110.1(e). Id. § Further, STOLI policies are listed under 25 “fraudulent life settlement act[s]” in California 26 Insurance Code section 10113.1(g)(A). 27 Per Cross-Defendants, Khader and Cross-Claimants 28 associated in a widespread STOLI scheme. 25 Cross-Defs.’ 1 Ans. ¶ 12. Khader recruited the Insured, an older 2 woman of modest means, as a “straw buyer” in his STOLI 3 policy scheme. Cross-Defs.’ Mot. 19:5. He 4 misrepresented her net worth in order to issue a high5 value life insurance policy. Id. at 22:10-13. Third 6 parties like Cross-Claimants, who allegedly had no 7 insurable interest in the Insured’s life,8 would then 8 finance the Policy. Cross-Defs.’ Ans. ¶ 15. Khader 9 would then disguise the STOLI policy for at least two10 years, the time window in which Transamerica could have 11 contested the Policy as the insurer. Id. For 12 instance, Khader did not promptly submit a 13 questionnaire that would alert Transamerica as to 14 whether the Policy was a STOLI policy. Cross-Defs.’ 15 Mot. 20:18-20. 16 For support, Cross-Defendants cite a handful of 17 out-of-circuit cases involving garden-variety STOLI 18 policies factually similar to the one at hand. See, 19 e.g., Calhoun, 596 F. Supp. 2d at 889-90 (broker 20 obtained third-party financing for a life insurance 21 policy and immediately assigned the policy to an 22 individual without an insurable interest after the two23 year contestability period); United States v. Bazemore, 24 25 8 Cross-Claimants each apparently lack an insurable interest Bill Biltagi is apparently Khader’s “trusted associate” and co-defendant in the Orange County Action. Cross-Defs.’ Ans. ¶ 17. Intesar Alturk is Khader’s mother, and Yousef Rabadi, “upon information and belief,” has no insurable interest in the proceeds. Id. 26 in Victoria Rabadi’s life. 27 28 26 1 No. 15-10805, at *2 (5th Cir. Oct. 5, 2016)(defendant 2 secured policies for senior citizens of modest means by 3 grossly inflating the applicants’ net worth and falsely 4 stating that the insured would not transfer the policy 5 to third parties); United States v. Binday, 804 F.3d 6 558, 566 (2d Cir. 2015)(STOLI policies involved elderly 7 “straw buyers” with exaggerated net worth, but case 8 affirmed insurance brokers’ mail and wire fraud 9 convictions and only discussed STOLI policies for the 10 “cognizable harm” element of wire fraud conviction). 11 But even if these cases involve STOLI schemes that are 12 at least factually similar, the cases are 13 distinguishable because they do not involve the unique 14 interplay of interpled funds, an attorney’s Lien, and 15 alleged STOLI schemes present here, nor do they advise 16 the Court why Cross-Defendants’ Lien applies. 17 Cross-Defendants’ argument—that there are no 18 genuine disputes regarding the STOLI policy issue—is 19 impeded by this remaining dispute: how the Lien applies 20 to the interpled funds. True, the Court did previously 21 acknowledge that Cross-Defendants’ affirmative defenses 22 would “directly impact . . . the proper recipient of 23 the Policy proceeds,” and if successful, would “reduce 24 or bar Cross-Claimants’ claim to the Policy proceeds.” 25 Order re Mot. to Strike 5:8-13, ECF No. 51. But even 26 if the affirmative defenses showed that Cross-Claimants 27 were improper beneficiaries, this would not guarantee 28 that Cross-Defendants have a stake in the interpled 27 1 funds. To succeed on that assumption, Cross-Defendants 2 must clearly show how the Lien terms apply to the 3 interpled funds, which the Court takes up in infra Part 4 III.B.7.b. 5 The Court is similarly puzzled as to how the 6 Policy’s alleged illegality permits Cross-Defendants’ 7 seemingly unrelated Lien from the State Court Action to 8 attach to the interpled funds. Cross-Defendants claim 9 the Policy is illegal, yet in the same breath demand 10 their share of proceeds from this apparently illegal 11 Policy. It would appear that Cross-Defendants raise 12 the illegality affirmative defense to ferret out the 13 improper beneficiaries. Even if Cross-Defendants are 14 an interested party in law or equity who may dispute 15 the Policy’s validity, Cross-Defendants provide the 16 Court little guidance as to why their Lien should apply 17 once the Policy’s illegality is established. See 3 18 George Couch et al., Couch on Insurance 3d § 41:6 (rev. 19 ed. 2016); but see Couch on Insurance 3d at § 41:5 20 (“The majority of courts . . . [state] that only the 21 insurer can raise the objection of want of an insurable 22 interest.”) 23 24 ii. CLSA Violations Cross-Defendants argue that the April 11, 2013 25 ownership transfer of the Policy–from the Insured to 26 Nabil Rabadi–violated the CLSA, California Insurance 27 Code § 10113.1 et seq, and was therefore void as a 28 matter of law. Cross-Defs.’ Reply 10:14-16. 28 As Cross- 1 Defendants state, “transfers of ownership for a price 2 less than the death benefit [are] illegal if not 3 conducted by a licensed Life Settlement broker.” 4 at 10:25-26. Id. California Insurance Code section 5 10113.2(b)(1), which Cross-Defendants cite, says that 6 “no person may enter into, broker, or solicit life 7 settlements . . . unless that person has been licensed 8 by the commissioner.” Here, Nabil Rabadi was not a 9 licensed broker and it was therefore improper for him 10 to receive the ownership transfer without providing the 11 Insured consideration. This unlawful transfer, Cross- 12 Defendants argue, tainted the subsequent ownership 13 transfers, beneficiary designations, and ultimately, 14 the final iteration of the beneficiary interests. 15 While the CLSA does not have a code section 16 precisely stating that a licensed Life Settlement 17 broker must oversee a transfer for a price less than 18 the death benefit, Cross-Defendants read this illegal 19 transfer into section 10113.2(b)(1), as an act of 20 "broker[ing]" or "solicit[ing]" that only a licensed 21 broker can perform. Cross-Defendants state that 22 Cross-Claimants never produced documentary evidence 23 that the Insured received compensation for the 24 ownership change and Khader, not Nabil Rabadi, was 25 always the insurance agent on the Term Policy, and 26 Increased Policy and Universal Policy. Cross-Defs.’ 27 SUF 19:6-9. 28 Setting aside the stark lack of authority or 29 1 explanation as to this alleged CLSA violation, 2 Cross-Defendants also do not make it clear how and why 3 Nabil Rabadi—and not Khader, the broker who apparently 4 orchestrated much of the Policy paperwork—initiated the 5 ownership transfer. The ownership change forms appear 6 only to be initiated and signed by Nabil Rabadi and the 7 Insured. But the facts presented are too sparse to 8 confidently say there are no genuine disputes as to 9 whether the Policy violated the CLSA. Even were the 10 Court to find that the transfer required a broker and 11 was thus invalid, Cross-Defendants still have not have 12 linked their Lien to the interpled funds. 13 14 15 b. Conspiracy to Commit Fraudulent Life Settlement Acts Per Cross-Defendants, the undisputed facts 16 establish that Cross-Claimants were involved in 17 Khader’s conspiracy to issue fraudulent and illegal 18 STOLI policies, including the Policy at issue. See 19 Cross-Defs.’ Mot. 21:5-7. 20 Section 10113.1(g) of the California Insurance Code 21 defines a “fraudulent life settlement act” as 22 “[p]resenting, causing to be presented, or prepared . . 23 . false material information [regarding] the following 24 . . . [a]n application for the issuance of a life 25 settlement contract or insurance policy . . . payments 26 and changes in ownership or beneficiary made in 27 accordance with the terms of a life settlement contract 28 or insurance policy.” Other fraudulent life settlement 30 1 acts include “entering into stranger-originated life 2 insurance (STOLI).” 3 Id. § 10113.1(g)(1)(B). Cross-Claimants committed fraudulent life 4 settlement acts, Cross-Defendants argue, by presenting 5 false information about the Insured’s net worth on her 6 life insurance application. 7 15. Cross-Defs.’ Mot. 22:10- Moreover, Cross-Claimants “knew” that they were 8 conspiring to present materially false information 9 regarding Policy payments and ownership/beneficiary 10 changes through the following facts: (1) Yousef Rabadi 11 wrote that he was the Insured’s son and then her 12 nephew; (2) Khader’s assistant filled out premium 13 payment checks on Yousef Rabadi’s behalf; and (3) 14 Intesar Alturk pretended she was the Insured’s 15 “business associate,” even though she was Khader’s 16 mother. 17 Id. at 22:17-23:5. Under California law, the elements of civil 18 conspiracy are “the formation and operation of the 19 conspiracy and damage resulting to the plaintiff from 20 an act or acts done in furtherance of a common design.” 21 Gonzales v. Lloyds TSB Bank, PLC, 532 F. Supp. 2d 1200, 22 1208 (C.D. Cal. 2006)(citation omitted). Moreover, 23 aiding and abetting takes place if the defendant “knows 24 the other’s conduct constitutes a breach of duty and 25 gives substantial assistance or encouragement to the 26 other to so act or gives substantial assistance to the 27 other in accomplishing a tortious result.” Am. Gen. 28 Life Ins. Co. v. Khachatourians, No. CV 08–06408 DDP 31 1 (Rzx), 2012 WL 5267683, at *4 (C.D. Cal. Oct. 24, 2 2012). 3 In Khachatourians, the court carried over its fraud 4 analysis to find that there was a triable issue of 5 material fact as to the conspiracy charge. Id. at *3. 6 More specifically, the checks for the initial policy 7 premium payments came from one defendant’s bank 8 accounts specially created to fund the policy payments. 9 Id. And the checks implicitly misrepresented that they 10 complied with the insurance company’s rules that the 11 policy could only be funded by the insured, its 12 employer, or its family. Id. In its analysis granting 13 summary judgment as to the fraud issue, the Court 14 reasoned that defendant falsely and implicitly 15 represented that the funds were not coming from a third 16 party. Id. To a certain extent, Cross-Defendants’ 17 facts are similar to those in Khachatourians, and the 18 Court could agree that Cross-Claimants conspired to 19 make premium payments from improper individuals and 20 designate individuals without an “insurable interest” 21 as owners and beneficiaries. 22 But even if there are facts supporting the overall 23 conspiracy, Cross-Defendants run into the same problem 24 as in their “STOLI policy” argument: bridging the gap 25 as to why—if Khader and Cross-Claimants engaged in a 26 conspiracy—Cross-Defendants’ Lien applies to the 27 interpled funds and precisely how they have a stake in 28 the purportedly ill-gotten Policy proceeds. 32 From what 1 the Court can glean in Cross-Defendants’ moving papers, 2 Khader and Lotta’s forced discharge of Cross3 Defendants—after an improper ex parte meeting with the 4 State Court Rabadis—“welcomed back” the State Court 5 Rabadis into the Khader conspiracy. 6 24:10-15. Cross-Defs.’ Mot. Apparently, the Lien is connected to the 7 Policy proceeds through the “backdoor effort to avoid 8 [Cross-Defendants’] contingency fee,” which in turn 9 facilitated the Khader conspiracy. Id. at 24:17-21. 10 Cross-Defendants theory is that Cross-Claimants and the 11 State Court Rabadis are all part of the same enterprise 12 or conspiracy and colluded to prevent Cross-Defendants 13 from its money owed under the State Court Action Lien. 14 But Cross-Defendants present no concrete evidence 15 substantiating this tenuous connection. Cross- 16 Defendants and the State Court Rabadis were never 17 beneficiaries to the Policy, nor are they parties to 18 this interpleader action. Biltagi Decl. ¶¶ 2, 5. 19 Cross-Claimants were never Cross-Defendants’ clients in 20 the State Court Action with the Lien. Rabadi Decl. ¶ 21 9, Ex. 1 (email from Cross-Defendants to Yousef Rabadi 22 advising that they are not his attorneys). Cross- 23 Defendants evince no agreement between Cross-Claimants 24 and the State Court Rabadis allowing the State Court 25 Rabadis to share in the Policy proceeds, let alone any 26 evidence that the State Court Rabadis were ever paid 27 the interpled funds. Biltagi Decl. ¶ 9. Moreover, 28 Cross-Defendants have no evidence that Cross-Claimants 33 1 and a third-party, like Lotta or Khader, conspired to 2 prevent them from recovering under their Lien. 3 ¶ 10. Id. at Even if the circumstantial evidence suggests the 4 State Court Rabadis are part of the conspiracy, Cross5 Defendants still do not show how the interpled funds 6 are interchangeable with the potential Lien funds. 7 In sum, Cross-Defendants cannot argue that there 8 are no genuine disputes as to validity of their 9 illegality and conspiracy claims, as—even assuming the 10 Policy is invalid and Cross-Claimants are embroiled in 11 a conspiracy, thus barring or reducing Cross-Claimants’ 12 claims to the Policy—a dispute remains whether Cross13 Defendants have standing to raise these affirmative 14 defenses as a third-party, whether through their Lien 15 or otherwise. Thus, the Court DENIES Cross-Defendants’ 16 Motion [118-1]. 17 7. 18 19 The Court GRANTS Cross-Claimants’ Motions for Summary Judgment [99, 100] The Court now considers Cross-Claimants’ Motions 20 for Summary Judgment.9 21 a. 22 23 The Lien’s Validity Has Not Been Established Cross-Claimants argue that Cross-Defendants cannot 24 assert a claim against the interpled funds because 25 26 27 28 9 Cross-Claimants raise nearly parallel arguments against the validity and enforceability of Cross-Defendants’ Lien in their separate Motions for Summary Judgment [99, 100]. As such, the Court treats them interchangeably for the purposes of this analysis. 34 1 Cross-Defendants did not bring an “independent action” 2 against the State Court Rabadis to establish the Lien’s 3 value and enforceability from the outset. 4 Mot. 3:17-21; Biltagi’s Mot. 3:10-12. Rabadi’s Cross-Defendants 5 counter that the interpleader action Transamerica filed 6 constitutes an “independent action” to enforce the 7 Lien. Cross-Defs.’ Opp’n 14:1-2. Cross-Defendants’ 8 Lien is problematic for two reasons: (1) the 9 interpleader action in this case does not constitute an 10 independent action, and (2) the contingency set forth 11 in the Lien did not take place, thus never triggering 12 the Lien. 13 An attorney’s lien is an equitable right to secure 14 attorneys’ fees owed from a judgment or recovery in the 15 lawsuit. 7 Corpus Juris Secundum, Attorney & Client § 16 523 (rev. ed. 2017). “An attorney’s lien is created [] 17 by an attorney fee contract with an express provision 18 regarding the lien . . . .” Mojtahedi v. Vargas, 228 19 Cal. App. 4th 974, 315-16 (Ct. App. 2014). The lien 20 survives even after the attorney is discharged, and the 21 attorney is then entitled to the reasonable value of 22 his services prior to discharge. See Weiss v. Marcus, 23 51 Cal. App. 3d 590, 598 (Ct. App. 1975). To enforce 24 the lien, the attorney must adjudicate the lien’s value 25 and validity in an “independent action” after a 26 judgment or settlement is rendered. Mojtahedi, 228 27 Cal. App. 4th at 316. 28 Shortly after they were discharged, Cross35 1 Defendants filed a Notice of Attorney’s Lien on April 2 15, 2014, which provides: 3 [Cross-Defendants have a lien] on all proceeds and compensation paid to the [State Court Rabadis] in this action, whether in settlement, after trial, or otherwise, whether paid in cash or other means, whether transmitted directly or indirectly by payments to third parties. Said charging lien includes compensation by or on behalf of insurance companies, brokers, life settlement companies and escrow companies. 4 5 6 7 8 As the California Court of Appeals recently held, 9 the independent action need not be a formal complaint; 10 interpleader may suffice. So. Cal. Gas Co. v. 11 Flannery, 5 Cal. App. 5th 476, 496 (Ct. App. 2016). 12 In Flannery, Tepper, a law firm, represented two 13 parties and was eventually substituted out. Id. at 14 481. Tepper’s clients and the Southern California Gas 15 Company separately settled, and the Southern California 16 Gas Company deposited the settlement funds and filed a 17 complaint in interpleader, naming Tepper and his 18 clients as some of the claimants. Id. at 482. After 19 Tepper successfully asserted a motion for attorneys’ 20 fees, his clients (the other claimants) argued that 21 Tepper did not adjudicate a separate action to 22 establish his lien prior to filing the motion for 23 attorneys’ fees. Id. at 494. The Court rejected this 24 argument, holding that the interpleader action 25 satisfied the independent action requirement. Id. 26 Tepper’s answer to the interpleader complaint placed 27 the lien’s enforceability at issue against his former 28 36 1 clients. Id. at 496. The answer and motion for 2 attorneys’ fees, coupled together, were akin to Tepper 3 filing an independent action to enforce his lien. 4 Cross-Defendants claim that, per Flannery, an 5 interpleader action constitutes an independent action 6 to perfect its lien. But the Flannery analysis is more 7 nuanced than Cross-Defendants lead on. The 8 interpleader in Flannery was between the law firm and 9 its clients; here, unlike Flannery, Cross-Defendants’ 10 former clients were not parties to the interpleader 11 action Transamerica instituted. Rabadi’s Reply 5:1-7. 12 The fact that the client was named in the interpleader 13 action was deemed “crucial” in the Flannery analysis. 14 Id. at 496. The interpleader action here, unlike the 15 one in Flannery, concerns whether Cross-Claimants or 16 Cross-Defendants are entitled to the interpled funds; 17 the State Court Rabadis are simply not claimants to the 18 Interpleader Action. It makes little sense for Cross- 19 Defendants to argue that the interpleader will resolve 20 its Lien’s validity as against its clients. Further, 21 resolution of which claimant has rights to the 22 interpled funds here seemingly has no bearing on the 23 validity and applicability of the Lien, which applied 24 to a wholly separate state-court proceeding. 25 The Lien is also unenforceable because the 26 contingency stated in the contingency fee agreement 27 never came to fruition. “[L]iens created in a 28 contingency fee contract” are not enforceable until the 37 1 occurrence of the stated contingency.” 2 Brent, 6 Cal. 3d 784, 792 (1972). Fracasse v. Cross-Claimants 3 argue that because the state-court action was dismissed 4 in July 2016 without a settlement, the contingency fee 5 agreement and the underlying Lien had no proceeds to 6 draw from. The Lien here sought “compensation of any 7 kind paid to . . . Josef Rabadi, Reem Rabadi, and/or 8 Sandra Rabadi (“Clients”) in this action.” 9 Decl. Ex. 1 (emphasis added). Orlando The contingency would 10 not apply until the State Court Rabadis received 11 compensation from their now-dismissed State Court 12 Action. That Lotta and Khader allegedly impeded the 13 contingency from occurring by substituting out Cross14 Defendants and apparently locating an attorney who 15 would dismiss the case, Lysaght Supp. Decl. ¶ 5, does 16 not disturb the undisputed facts that Cross-Defendants 17 did not establish the Lien’s validity. 18 19 20 b. The Lien is Inapplicable to the Interpled Funds Even were the Court to assume that Cross-Defendants 21 established the Lien’s validity, the fact remains that 22 the Lien is inapplicable to the interpled funds. 23 Per Cross-Claimants, the Lien does not apply to the 24 interpled funds unless Cross-Defendants can show the 25 State Court Rabadis would receive the Policy proceeds 26 in the State Court Action. Biltagi’s Mot. at 15:4-8. 27 Cross-Defendants counter that the lack of a direct 28 relationship between Cross-Claimants and the State 38 1 Court Rabadis does not necessarily deny it relief. 2 at 15:1-3. Id. This is because its conspiracy, unclean 3 hands, and illegality affirmative defenses affect the 4 proper recipient of the Policy proceeds. 5 6. Id. at 15:4- But the Court has already decided that Cross- 6 Defendants’ affirmative defenses are useless without a 7 showing that the Lien applies to the interpled funds. 8 See supra Part III.B.6.a-b. Thus, the Court turns to 9 the plain language of the Lien. 10 The Lien terms make it clear that they govern 11 proceeds from the State Court Action. As contemplated 12 in the contingency fee agreement, the Lien applies to 13 “causes of action that are the subject of the 14 representation.” Boniadi Decl. Ex. 1, at 8. The Lien 15 would attach to “any recovery obtained, whether by 16 arbitration, award, judgement, settlement or 17 otherwise.” Id. at 9. And the Notice of Lien sought 18 all proceeds paid to the State Court Rabadis “in this 19 action . . . whether transmitted directly or indirectly 20 by payments to third parties . . . [including] 21 compensation by or on behalf of insurance companies, 22 brokers.” Orlando Decl. Ex. 1. The Notice of Lien 23 mentions compensation from insurance companies or 24 payments to third parties. Id. Even if the State 25 Court Rabadis were paid the Policy proceeds, by Cross26 Claimants, a broker like Khader, or an insurance 27 company like Transamerica, Cross-Defendants still 28 cannot demonstrate that these payments constitute 39 1 “proceeds and compensation” in the State Court Action. 2 The onus is on Cross-Defendants to connect any 3 recovery in the State Court Action to the interpled 4 funds. Cross-Defendants again vaguely argue about the 5 overarching “Khader enterprise.” Khader apparently is 6 the common figure duping the State Court Rabadis and 7 apparently manipulating the current Cross-Claimants 8 into his insurance fraud scheme. Because the State 9 Court Action and this case both encompass Khader’s far10 flung wrongdoing, Cross-Defendants’ logic goes, any 11 wrongful payments from Khader in the State Court 12 Action—whether for cooperating with the case’s 13 dismissal or otherwise—are intertwined with the Policy 14 proceeds. But Cross-Defendants still cannot overcome 15 that the Lien’s terms only apply to the State Court 16 Rabadis, and none of the Cross-Claimants are mentioned. 17 The following disputed facts also apparently link 18 the Lien and its applicants, the State Court Rabadis, 19 to the interpled funds: Intesar Alturk is a member of 20 Khader's illegal enterprise; in 2004, Intesar Alturk 21 extended a line of credit to Josef Rabadi, a State 22 Court Rabadi, totaling $650,000; Intesar Alturk paid 23 Reem Rabadi, another State Court Rabadi, "hundreds of 24 thousands of dollars;" Intesar Alturk transferred over 25 $1.6 million to Josef Rabadi in 2007; and Cross26 Claimants and the State Court Rabadis are from the same 27 family and share the same address. 28 6-8. 40 Cross-Defs.’ SUF ¶¶ 1 Cross-Defendants have made little effort to marshal 2 these facts in such a way that would convince the Court 3 that the Lien from the State Court Action applies here. 4 Intesar Alturk, a Cross-Claimant in this case, 5 purportedly paid Josef Rabadi, one of Cross-Defendants 6 former clients, over $1.6 million in 2005 and 2007. 7 Cross-Defs.’ SUF ¶ 8. These alleged events occurred 8 well over 6-8 years before Cross-Defendants even signed 9 the contingency fee agreement with the State Court 10 Rabadis in May 2013. And vague references to 11 Cross-Claimants' role in Khader's "enterprise" do 12 nothing to bridge the wide gap between the Lien's terms 13 and the interpled funds here. This is not a problem of 14 the Court’s interpretation of the Lien-the Lien is 15 quite explicit about how and to what funds it applies. 16 If Cross-Defendants sought to advocate for a different, 17 plausible interpretation of the Lien, they had a burden 18 to do so in their moving papers. They did not meet 19 this burden. 20 At bottom, Cross-Defendants try to chip away at 21 Cross-Claimants’ rights to the interpled funds by 22 arguing extensively about the illegality and conspiracy 23 affirmative defenses. Cross-Defendants file countless 24 declarations, exhibits, and raise a dizzying array of 25 facts, many of which are repeated allegations from the 26 State Court Action and information gleaned from the 27 Orange County Action. And still, Cross-Defendants 28 never expressly address how the Lien attaches to the 41 1 interpled funds. Cross-Defendants’ argument, in 2 essence, is one of default: if Cross-Claimants are not 3 entitled to the tainted Policy proceeds, then 4 Cross-Defendants, by default, receive them. 5 Opp’n 3:12-18. Biltagi’s No matter how correct Cross-Defendants' 6 affirmative defenses might be in isolation, Cross7 Defendants still cannot get their Lien's validity and 8 applicability off the ground. 9 Cross-Defendants have not created genuine disputes 10 as to whether the Lien is valid and applicable. As 11 such, the Court grants Cross-Claimants’ Motions for 12 Summary Judgment as to the (1) Complaint-In13 Interpleader; and (2) the Cross-Claim seeking a 14 declaratory judgment that the Lien is unenforceable and 15 inapplicable to the interpled funds. 16 17 IV. CONCLUSION Thus, the Court GRANTS Cross-Claimants’ Motions for 18 Summary Judgment [99, 100] and DENIES Cross-Defendants’ 19 Motion for Summary Judgment [118]. 20 21 IT IS SO ORDERED. 22 DATED: April 18, 2017 23 s/ HONORABLE RONALD S.W. LEW Senior U.S. District Judge 24 25 26 27 28 42

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