Graebner et al v. James et al

Filing 16

ORDER DENYING DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' COMPLAINT FOR IMPROPER FORUM OR TO TRANSFER by Judge William Alsup [denying 7 Motion to Dismiss]. (whasec, COURT STAFF) (Filed on 6/20/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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For the Northern District of California

United States District Court

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E. BERTITA TRABERT GRAEBNER,
individually and as Trustee of the El Nora L.
Trabert Irrevocable Trust; TALLIE R. TRABERT,
individually and as Trustee of the El Nora L.
Trabert Irrevocable Trust;
T. VERNON TRABERT, individually and as
Trustee of the El Nora L. Trabert Irrevocable
Trust,
Plaintiffs,

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v.
MICHAEL E. JAMES, an individual; MNM
PROPERTIES, LLC, a foreign Limited Liability
Company, WM. PAGE & ASSOCIATES, INC., a
foreign corporation; WILLIAM SCOTT PAGE, an
individual, and DOES 1-50, inclusive,

No. C 12-01694 WHA

ORDER DENYING
DEFENDANTS’ MOTION
TO DISMISS PLAINTIFFS’
COMPLAINT FOR
IMPROPER FORUM
OR TO TRANSFER

Defendants.

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Plaintiffs are the adult children of an elderly mother whose family lawyer talked them

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into investing the family trust in something called “viatical life insurance contracts,” which are

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devices whereby the owner of a life insurance policy sells his or her expectancy in an eventual

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death benefit in order to raise cash to pay for immediate needs such as medical treatment.

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The purchaser pays money up front and eventually gets the death benefit if the policy is kept

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in force. It is somewhat like those store fronts that lend money based on the next paycheck.

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(The contracts at issue herein were not on the life of plaintiffs’ own mother but involved other
insureds.)

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To purchase the investments, the family lawyer made arrangements with a broker in

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Fort Lauderdale, Florida who wound up selling them viatical contracts. Plaintiffs paid several

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hundred thousand dollars to the broker. Paperwork came back indicating that the family trust

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and/or family limited partnership was the new owner of the benefits.

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Trouble was, the people whose lives were insured wound up living longer than expected

keep the insurance contracts in place. When they originally bought the rights, the lawyer and

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the broker gave life expectancy estimates that have proven to be incorrect. The excuse later

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given was that the AIDS-stricken insureds, who had been expected to die sooner, were now

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living longer due to miracle drugs. Also, the lawyer, it turned out, got a secret commission

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For the Northern District of California

so plaintiffs had to start paying yet more money into the investment for premiums in order to

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United States District Court

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from the broker for steering his clients to one broker. All of the above is based on the allegations

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of the complaint and may or may not be true.

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One might ask why anyone, including plaintiffs, would seek to profit from the misfortune

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of AIDS victims and others in desperate need of cash only to complain later when they did not

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die on schedule. That, however, is an issue for later. For now, the issue is whether to transfer

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this case to Florida based on a Florida forum-selection clause in the agreements between

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plaintiffs and the broker.

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The agreements were signed by plaintiffs but not signed by the broker (Exhs. 2, 5).

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Such one-way agreement may be illusory since only one side is arguably bound. Also, the

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lawyer, a defendant herein, signed the agreement containing the forum-selection clause only

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in his capacity as a representative of the broker, not in his capacity as counsel for plaintiffs.

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The broker has since fled from Florida under apparent threat of a fraud investigation by Florida

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authorities.

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For the time being, defendants’ motion to dismiss or, in the alternative, to transfer is
DENIED without prejudice to renewing it after a fair opportunity by both sides for discovery into

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the merits of the case and the circumstances of these contracts and the forum-selection clause.

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If the case is eventually transferred to Florida, then the discovery would be much further along.

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IT IS SO ORDERED.

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Dated: June 20, 2012.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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For the Northern District of California

United States District Court

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