Estate of Jack Carmel v. The GIII Accumulation Trust

Filing 54

REPORT AND RECOMMENDATION re 46 Defendants' Renewed Motion to Compel Arbitration. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing consists solely of the Objections (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 2/2/2023. Signed by Judge Jennifer L. Hall on 1/19/2023. (ceg)

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
ESTATE OF JACK CARMEL, by its
Personal Representative, Gary Warlen,
Plaintiff,
C.A. No. 21-658-MN-JLH

v.
THE GIII ACCUMULATION TRUST and
WELLS FARGO BANK, N.A., as Securities
Intermediary,
Defendants.

REPORT AND RECOMMENDATION
Pending before the Court is Defendants’ Renewed Motion to Compel Arbitration. (D.I.
46.) The motion is fully briefed (D.I. 47, 48, 49, 50), and I heard oral argument on November 10,
2022. (Tr. __.) For the reasons set forth below, I recommend that Defendants’ Motion be
GRANTED and the case stayed pending arbitration.
I.

BACKGROUND
Jack Carmel died in 2018. During his life, he was a successful businessman. He was the

founder and CEO of an aluminum business that he later sold, and then the co-founder and CEO of
a lucrative accounts receivable factoring business. (D.I. 48, Ex. 3 at 31–34.)
In April 2006, Carmel applied for and received a $7 million life insurance policy with
Massachusetts Mutual Life Insurance Company (the “Policy”). (Id., Ex. 5.) In the policy
application, Carmel represented that his “Annual Earned Income” was $2.875 million and that his
“Financial Net Worth” was over $45 million. (Id.) He listed the “Jack Carmel 2006-1 Insurance
Trust” as the owner and beneficiary of the Policy. (Id.) Carmel also represented that he was not

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applying for the Policy to benefit a life settlement company 1 and that he did not have any plans to
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sell the Policy. (Id.)
Carmel sold the Policy a few months later. In July 2006, he executed an “Exclusive Rights
Agreement” with a life settlement company called Simba Life Plans, LLC (“Simba”) to market the
Policy for sale. 2 (Id., Ex. 6.) Simba’s efforts resulted in a Beneficial Interest Purchase Agreement
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(“BIPA”), pursuant to which the beneficial interest in the Jack Carmel 2006-1 Insurance Trust (the
Policy’s beneficiary) was sold to Defendant The GIII Accumulation Trust (“GIII”) for $543,542.
(Id., Ex. 1 at 1.)
The copy of the BIPA in the record presently before the Court was in the possession of
GIII. (Id. ¶ 4, Ex. 1.) It is a lengthy document, containing six Articles, including purchase, sale,
and closing details, the parties’ representations, warranties, acknowledgements, and covenants,
indemnification and damages provisions, and a variety of miscellaneous provisions, including an
arbitration provision. (Id., Ex. 1.) The cover page states that the BIPA is “DATED AS OF October
19, 2006,” but the date fields were not completed in the preamble and several other places.
Carmel’s undated signature appears on an unnumbered page towards the end of the document, and

1

The life settlement market is the secondary market for life insurance. “This secondary
market allows policy holders who no longer need life insurance to receive necessary cash during
their lifetimes. The market provides a favorable alternative to allowing a policy to lapse, or
receiving only the cash surrender value.” PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Tr., ex
rel. Christiana Bank & Tr. Co., 28 A.3d 1059, 1069 (Del. 2011). While the secondary market for
life insurance is legal, market demand for high value policies has resulted in the creation of policies
for the benefit of those who have no relationship to the insured. Such policies, commonly referred
to as stranger originated life insurance (“STOLI”) policies, “lack an insurable interest and are thus
an illegal wager on human life.” Id. at 1069–70.
2

Simba is a now-infamous purveyor of STOLI policies that have spawned a proliferation
of litigation in federal and state courts. See Wells Fargo Bank, N.A. v. Estate of Malkin, 278 A.3d
53, 57 (Del. 2022) (“Simba’s business model has, unfortunately, become well known in both
Florida and Delaware.” (citing cases)).
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his signature appears again on the next page, which is dated October 12, 2006. 3 The Trust Officer
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for the Jack Carmel Family Trust and a Wells Fargo Delaware Trust Company Vice President also
signed that page on behalf of GIII. (Id.)
Section 6.10 of the BIPA is an arbitration provision. It provides, in its entirety, as follows:
Arbitration. THE PARTIES HEREBY AGREE THAT ANY
QUESTIONS OR CONTROVERSIES ARISING UNDER THIS
AGREEMENT SHALL BE SUBMITTED TO ARBITRATION
CONDUCTED BEFORE THE AMERICAN ARBITRATION
ASSOCIATION (THE “AAA”). SUCH ARBITRATION WILL
BE CONDUCTED UNDER THE RULES OF THE AAA AND
THE LAWS OF THE STATE OF DELAWARE. EACH PARTY
HERETO UNDERSTANDS THAT CLAIMS SUBMITTED TO
ARBITRATION ARE NOT HEARD BY A JURY AND ARE NOT
SUBJECT TO THE NORMAL RULES GOVERNING THE
COURTS. EACH PARTY HERETO FURTHER AGREES THAT
NO CLAIM MAY BE BROUGHT AS A CLASS ACTION, AND
THAT NO PARTY HERETO SHALL HAVE THE RIGHT TO
ACT, NOR SHALL THEY ATTEMPT TO ACT, AS A CLASS
REPRESENTATIVE OR PARTICIPATE AS A MEMBER OF A
CLASS OF CLAIMANTS WITH RESPECT TO ANY CLAIM
ARISING UNDER THIS AGREEMENT.
(Id., Ex. 1 at 15–16.) Section 6.7 provides that the BIPA is “binding upon and will inure to the
benefit of the parties and their respective successors and permitted assigns.” (Id. at 15.)
The BIPA has a table of contents that lists an additional ten exhibits and one schedule.
Several of the listed exhibits are attached to the copy of the BIPA in the record, and they are filled
out with Carmel’s information. (Id., Ex. 1.) For example, Exhibit C contains “Backup Contact
Sheet[s]” for Carmel, his family members, doctor, and attorney. (Id.) Other exhibits listed in the
table of contents are incomplete, and some are missing entirely. However, the record separately
contains a “Form of Verification Provider Certificate,” dated October 19, 2006, in which a Wells

3

9.)

The parties don’t dispute that those pages were, in fact, signed by Carmel. (D.I. 48, Ex.
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Fargo Assistant Vice President verified that “all Eligible Participant Closing Documents and
Service Provider Closing Documents required to be delivered prior to the Acquisition date are in
the possession of the Verification Provider[.]” (Id., Ex. 11.) Accompanying that document are
many of the completed exhibits missing from the BIPA, such as an Authorization for Disclosure
of Protected Health Information and an Irrevocable Durable Limited Power of Attorney. (Id., Ex.
12–17.) Those documents appear to have been completed and signed by Carmel, and they were
notarized by Carmel’s longtime personal attorney, Lawrence Weiner. (Id.; id., Ex. 3 at 29, 38–
39.) All are dated September 12, 2006. (Id., Ex. 12–17.)
In October 2006, GIII sent a check in the amount of $539,542 to Jack Carmel, which he
deposited. 4 (Id., Ex. 21; id., Ex. 9 at 5.) Later that year, Carmel reported as income on his tax
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returns a short-term gain of $543,542. (Id., Ex. 23; id., Ex. 3 at 115–118.)
After Carmel died in May 2018, the $7 million death benefit was paid to Defendant Wells
Fargo, N.A. (“Wells Fargo”), the securities intermediary for the Policy. The record does not reflect
who currently has the funds.
On May 6, 2021, Carmel’s estate—acting through its personal representative, Gary Warlen
(the “Estate”)—initiated this action against Defendants GIII and Wells Fargo. The Estate seeks to
recover the $7 million death benefit payment under 18 Del. C. § 2704(b), which, as explained
below, permits an individual’s executor to maintain an action to recover death benefit payments
made under an insurance policy that lacks an insurable interest.
On July 23, 2021, Defendants moved to compel arbitration pursuant to the arbitration
provision in the BIPA. (D.I. 16.) The Estate opposed. It argued, among other things, that Carmel

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$539,542 represents the $543,542 purchase price in the BIPA less $4,000 in trustee fees
paid directly to Christiana Bank and Trust. (D.I. 48, Ex. 19.)
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had never agreed to the BIPA. In accordance with the Third Circuit’s guidance in Guidotti v. Legal
Helpers Debt Resolution, L.L.C., 716 F.3d 764 (3d Cir. 2013), the Court denied Defendants’
motion to compel arbitration without prejudice to renew after the parties had an opportunity to
conduct limited discovery on the narrow factual issue of whether Carmel agreed to arbitrate with
GIII. (D.I. 33; see also D.I. 27; D.I. 32.)
On June 30, 2022, Defendants filed a renewed motion to compel arbitration. (D.I. 46.)
II.

LEGAL STANDARDS
“The Federal Arbitration Act reflects the ‘national policy favoring arbitration and places

arbitration agreements on equal footing with all other contracts.’” In re Remicade (Direct
Purchaser) Antitrust Litig., 938 F.3d 515, 519 (3d Cir. 2019) (quoting Buckeye Check Cashing,
Inc. v. Cardegna, 546 U.S. 440, 443 (2006)). Its primary substantive provision says that “[a]
written provision in . . . a contract evidencing a transaction involving commerce to settle by
arbitration a controversy . . . arising out of such contract . . . shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
9 U.S.C. § 2. It requires that the Court, “upon being satisfied that [an] issue involved in [a] suit or
proceeding is referable to arbitration” under an arbitration agreement, “shall on application of one
of the parties stay the trial of the action until such arbitration has been had in accordance with the
terms of the agreement . . . .” 9 U.S.C. § 3. It also authorizes courts to issue orders compelling
arbitration when one party has failed to comply with an arbitration agreement. 9 U.S.C. § 4; Prima
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967).
To determine whether an issue in a suit or proceeding is “referable to arbitration” within
the meaning of § 2, courts “must consider two ‘gateway’ questions: (1) ‘whether the parties have
a valid arbitration agreement at all’ (i.e., its enforceability), and (2) ‘whether a concededly binding

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arbitration clause applies to a certain type of controversy’ (i.e., its scope).” Remicade, 938 F.3d at
519 (quoting Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1416–17 (2019)). Even where an
arbitration provision contains a clause delegating the issue of arbitrability to the arbitrators, “courts
retain the primary power to decide questions of whether the parties mutually assented to a contract
containing or incorporating a delegation provision.” MZM Constr. Co., Inc. v. New Jersey
Building Laborers Statewide Benefit Funds, 974 F.3d 386, 402 (3d Cir. 2020).
The Third Circuit has explained the procedure for determining whether the parties formed
an agreement to arbitrate as follows:
Under our decision in Guidotti, when it is clear on the face of the
complaint that a validly formed and enforceable arbitration
agreement exists and a party’s claim is subject to that agreement, a
district court must compel arbitration under a Rule 12(b)(6) pleading
standard “without discovery’s delay.” 716 F.3d at 776 (quotation
marks and citation omitted). But if the complaint states a claim or
the parties come forward with facts that put the formation of the
arbitration agreement in issue, the court may authorize “limited
discovery” to resolve that narrow issue for purposes of deciding
whether to submit the matter to arbitration. Id. After discovery, the
court may consider the question anew, using a summary judgment
standard under Rule 56. Id. If a genuine issue of material fact
remains, the court must proceed summarily to trial on “the making
of the arbitration agreement.” Id. (citing 9 U.S.C. § 4).
MZM, 974 F.3d at 406.
III.

DISCUSSION
Because GIII’s argument for arbitration relies on the BIPA, I first consider whether Carmel

agreed to the BIPA in the first place. If he did not, Defendants’ motion to compel arbitration must
be denied. If he did, I must next consider whether Carmel’s agreement to arbitrate is binding on
the Estate with respect to its claim against Defendant GIII under 18 Del. C. § 2704(b). If the
arbitration agreement does not apply to the Estate’s claim, Defendants’ motion to compel

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arbitration must be denied. If it does, I must also consider whether Defendant Wells Fargo, a nonsignatory to the BIPA, may also invoke the arbitration agreement. I take each in turn.
A.

Carmel agreed to arbitrate claims arising under the BIPA.

The first issue the Court must resolve is whether the BIPA, which contains the arbitration
provision at issue, was validly formed. Carmel’s Estate contends that Carmel never agreed to it.
The parties had the opportunity to take discovery on the issue of mutual assent and the
parties’ briefing refers to outside-the-complaint evidence. Under Guidotti, the Court must now
consider the issue under the summary judgment standard. Under Rule 56, Defendants—the parties
seeking to compel arbitration—have the initial duty to present evidence that would allow a trier of
fact to find that the parties mutually assented to the BIPA. Boykin v. Family Dollar Stores of
Mich., LLC, 3 F.4th 832, 839 (6th Cir. 2021); United States v. Donovan, 661 F.3d 174, 184–85 (3d
Cir. 2011) (“The initial burden is on the party seeking summary judgment to point to the evidence
‘which it believes demonstrate[s] the absence of a genuine issue of material fact.’” (quoting
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986))). The burden then shifts to the non-moving
party—here, the Estate—who must point to specific facts in the record that would allow a rational
trier of fact to find that Carmel did not intend to be bound by the BIPA. Boykin, 3 F.4th at 839;
Guidotti, 716 F.3d at 773 (“[T]he non-moving party must ‘go beyond the pleadings and by her
own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate
specific facts showing that there is a genuine issue for trial.’” (quoting Celotex, 477 U.S. at 322)).
Delaware law applies to the question of whether the parties intended to be bound by the
BIPA (i.e., the “container” contract). MZM, 974 F.3d at 402. That question assesses the parties’
intent as to the contract as a whole, rather than analyzing whether the parties possessed the requisite
intent to be bound to each particular term. Eagle Force Holdings, LLC v. Campbell, 187 A.3d

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1209, 1229 (Del. 2018). “[W]here the putative contract is in the form of a signed writing, that
document generally offers the most powerful and persuasive evidence of the parties’ intent to be
bound.” Id. at 1230.
Defendants have pointed to more than enough evidence to demonstrate that Carmel
intended to be bound by the BIPA. Most importantly, GIII has produced an executed copy of the
BIPA signed by all parties, including Carmel. (D.I. 48, Ex. 1.) Defendants also presented
uncontroverted circumstantial evidence of Carmel’s intent to be bound. Carmel was a wealthy,
knowledgeable businessman with significant experience with financial transactions. He was
represented by a cadre of professional advisors, including his personal attorney. The record
reflects that all documentation required by the BIPA was compiled, signed by Carmel, notarized
by his personal attorney, and sent to the verification agent. In addition, the Estate produced in
discovery a prior version of the BIPA (with a lower purchase price) found in Carmel’s attorney’s
files, strongly suggesting that Carmel’s attorney reviewed the documents and advised Carmel in
connection with the transaction. That prior version was also signed by Carmel and included the
same arbitration provision. (Id., Ex. 10; id., Ex. 3 at 70–71.)
Carmel’s actions after signing the BIPA also evince his intent to be bound.

The

uncontroverted evidence establishes that GIII paid Carmel in accordance with the terms of the
BIPA, and Carmel accepted the payment and accounted for it on his tax returns. See, e.g., Carlson
v. Hallinan, 925 A.2d 506, 525 (Del. Ch. 2006) (“Plaintiffs also proved intent to be bound by the
agreement by providing credible evidence that the parties acted in accordance with its terms.”).
So the burden now shifts to the Estate to point to evidence sufficient to raise a genuine
dispute over whether Carmel intended to be bound by the BIPA. The Estate has failed to carry its
burden.

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The Estate points to the fact that the copy of the BIPA in the record before the Court has
inconsistent formatting, such as page numbers that do not match the table of contents, a lack of
page numbers and document footers on the signature pages, differences in tone suggesting
photocopying of the signature pages, and dates that are blank or missing. According to the Estate,
those inconsistencies are evidence that Carmel signed blank signature pages that were later inserted
into the BIPA.
I agree with the Estate that the evidence suggests that the parties signed their respective
signature pages separately, which were then scanned and compiled into the final document. But
that is common practice today, and it is not enough, by itself, to raise a triable issue of fact as to
whether Carmel intended to be bound by the agreement. While it is true that the signature pages
are missing a document footer stamped on the rest of the pages of the agreement, the BIPA
exhibits—signed by Carmel and notarized by his attorney—contain the footer. As for the
inconsistencies between the table of contents and page numbers, they appear to be a mere
formatting error, as there is no allegation or suggestion, for example, that the misaligned page
numbers are the result of someone inserting additional contract language after the document was
signed. See Estate of Malkin by Guarnero v. Sail Funding Tr. II, No. 15-62092, 2016 WL
8729959, at *5 (S.D. Fla. Feb. 2, 2016) (holding that minor page number discrepancies and a faxed
signature page were insufficient to create a genuine issue of fact as to whether the parties mutually
assented to an agreement containing an arbitration provision). Indeed, Carmel’s attorney had a
prior version of the BIPA with the same arbitration provision in his files.
Viewing all the evidence in the light most favorable to the Estate, it suggests, at best, that
Carmel, advised by his attorney, might have signed the signature pages without having personally
reviewed the BIPA. But a party doesn’t have to read a contract in order to form a contract. Graham

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v. State Farm Mut. Auto. Ins Co., 565 A.2d 908, 913 (Del. 1989) (“A party to a contract cannot
silently accept its benefits and then object to its perceived disadvantages, nor can a party’s failure
to read a contract justify its avoidance.”). The Estate cites no case for the proposition that a
knowledgeable contracting party can avoid a contract that his attorney reviewed, he signed, and
he fully performed merely by asserting that he didn’t read it. And that is not the law. 5
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In short, Defendants submitted evidence of a written contract containing an arbitration
provision, and the Estate failed to point to evidence sufficient to raise a genuine dispute regarding
the parties’ intent to be bound to that contract. 6
5F

5

As the United States Supreme Court explained over a century ago:
It will not do for a man to enter into a contract, and, when called
upon to respond to its obligations, to say that he did not read it when
he signed it, or did not know what it contained. If this were
permitted, contracts would not be worth the paper on which they are
written. But such is not the law. A contractor must stand by the
words of his contract; and, if he will not read what he signs, he alone
is responsible for the omission.
Upton, Assignee v. Tribilcock, 91 U.S. 45, 50 (1875).
The Estate suggests that Carmel was the victim of fraud in the execution. The parties agree
that the Estate bears the burden of producing evidence that Carmel was the victim of fraud in the
execution. (Tr. 6–7, 62.) But the Estate’s brief does not point to any evidence suggesting fraud in
the execution. Nothing in the record suggests that Carmel was lied to or prevented from reading
the BIPA. (D.I. 48, Ex. 3 at 129–130.)
The Estate also contended for the first time at oral argument that Carmel’s attorney, Larry
Weiner, was involved in many STOLI insurance transactions and that he may not have truly been
acting on Carmel’s behalf. (Tr. 52–54.) Even if that argument weren’t waived, there is no
evidence in the record to support it. The uncontroverted evidence of record shows that Mr. Weiner
was Carmel’s personal attorney for over 20 years and represented Carmel in a variety of matters.
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Even if there were a genuine dispute regarding whether the BIPA was validly formed, the
next step would not be to deny the motion to compel arbitration (as the Estate seems to suggest),
but instead to hold a trial on the question of contract formation. Guidotti, 716 F.3d at 776.
Although the Estate generally requested a jury trial in its complaint, it did not make a subsequent
request for a jury trial on the specific issue of the formation of an agreement to arbitrate. It has
thus waived any right to a jury trial on that issue. See Burch v. P.J. Cheese, Inc., 861 F.3d 1338,
1349–50 (11th Cir. 2017) (“[I]t is undisputed that Burch’s only jury demand came in the form of
a general demand in his complaint. Because Burch failed to demand a jury trial on the specific
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B.

The Estate is bound by Carmel’s agreement to arbitrate.

As noted above, the BIPA purports to be “binding upon and will inure to the benefit of the
parties and their respective successors and permitted assigns.” (D.I. 48, Ex. 1 at 15.) The Estate
contends that, even if Carmel would have been bound by his agreement to arbitrate any disputes
he had with GIII arising under the BIPA, his agreement is not binding on his Estate for purposes
of its claim against GIII under 18 Del. C. § 2704(b).
The parties agree that Delaware law governs this issue and so do I. (Tr. 19–20, 32, 63–
64.) The parties also agree, and so do I, that, in general, an estate seeking to bring a claim that
belonged to the decedent will stand in the shoes of the decedent and will be bound by his
agreements (and will also be subject to defenses that could have been raised against the decedent).
See Shields Dev. Co. v. Shields, No. 5530, 1981 WL 7636, at *5 (Del. Ch. Dec. 8, 1981) (explaining
that an estate “stands in the place of” the decedent and consequentially is “bound by the legitimate
family decisions in which [the decedent] participated for his own benefit”). Accordingly, I don’t
think anyone would dispute, for example, that if the Estate wanted to pursue a breach of contract
claim against GIII for failing to perform its obligations to Carmel under the BIPA, the Estate would
have to pursue that claim in arbitration.

issue related to the making of the arbitration agreement, he waived his right to a jury trial on that
issue.”). In any event, the Estate represented at oral argument that it was not seeking a jury trial
on the issue of contract formation. (Tr. 55.)
As explained above, a trial is unnecessary here because the Estate has failed to raise a
genuine dispute over the issue of contract formation. But even if the Court held a bench trial, it
would still reach the same result. That is because the parties are not asking the Court to decide
which pieces of evidence to credit—the documents in the record are what they are, and the parties
have not submitted conflicting testimony. In other words, the hard evidence is not in dispute. The
parties dispute only the inferences to be drawn from the evidence. If presented the same evidence
at a bench trial, the Court would find that Carmel intended to be bound by the BIPA.
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The Estate contends, however, that a claim under 18 Del. C. § 2704(b) is not a claim that
belonged to the decedent and is therefore not subject to agreements made by (and defenses
applicable to) the decedent. To understand its argument, it is necessary to examine the text of the
statute. It provides:
(b) If the beneficiary, assignee or other payee under any contract
[without an insurable interest] receives from the insurer any benefits
thereunder accruing upon the death, disablement or injury of the
individual insured, the individual insured or his or her executor or
administrator, as the case may be, may maintain an action to recover
such benefits from the person so receiving them.
18 Del. C. § 2704(b). Pertinent here, it says that if a death benefit is paid under an insurance policy
that lacks an insurable interest, the estate of the insured may bring an action to recover the death
benefit from the recipient. The Estate points out that, unlike a contract or negligence claim that
belongs to the decedent and survives the decedent’s death, the Estate’s claim under § 2704(b)
accrued only upon Carmel’s death. The Estate contends that its claim thus only belonged to it, not
to Carmel itself, and is therefore not subject to Carmel’s agreement to arbitrate.
The Estate analogizes its claim under § 2704(b) to a claim brought under Delaware’s
wrongful death statute, which provides a cause of action “for the benefit of the spouse, parent,
child and siblings of the deceased person.” 10 Del. C. § 3724(a). The Estate points out that at
least one Delaware court has held that a wrongful death plaintiff is not bound by an agreement to
arbitrate made by the decedent. See Skinner v. Peninsula Healthcare Servs., LLC, No. N20C-09178, 2021 WL 778324, at *5–6 (Del. Super. Ct. Mar. 1, 2021) (“Since a wrongful death action is
an independent and direct claim by the decedent’s relatives, the wrongful death beneficiaries in
this case are not bound by the arbitration agreement simply because it was signed on behalf of the
decedent.”). The Estate argues that, because a § 2704(b) claim similarly provides a cause of action

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that does not accrue to the decedent, it likewise should not be subject to an arbitration agreement
made by the decedent before his death.
This is a close question. Neither party cited a case addressing whether a decedent’s
agreement to arbitrate binds the decedent’s Estate to arbitrate a claim for death benefits under 18
Del. C. § 2704(b). But I am persuaded that Delaware law would view this as a circumstance in
which the Estate is bound by the decedent’s agreement to arbitrate, for a couple of reasons. First,
the § 2704(b) cause of action is unlike the wrongful death cause of action in that it does not provide
a claim to a particular enumerated class of individuals (spouses, parents, etc.). Rather, § 2704(b)
allows an insured’s executor or administrator to pursue a claim on behalf of the estate, which
suggests that the claim is derived from a right held by the decedent himself. Cf. 10 Del. C. § 3701
(providing that causes of action survive to the executors and administrators of the person to which
the cause of action accrued).
Second, the Delaware statute codifies the common law rule that the assignment of a policy
that lacks an insurable interest is invalid and that, in such circumstances, the purported assignee is
deemed to hold the policy for the benefit of the insured himself, a right which then passes to the
insured’s estate when he dies. Warnock v. Davis, 104 U.S. 775, 782 (1881); Malkin, 278 A.3d at
61 (citing Warnock). That likewise suggests that the estate’s claim is derivative of that of the
insured.
The Estate contends that depriving it of a judicial forum on this issue would defeat the
public policy behind § 2704(b), which is to deter wagering on human life. But sending the dispute
to arbitration does not prevent the Estate from vindicating its statutory remedy; it merely changes
the forum. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)
(“By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded

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by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.”). And
the Estate has cited no authority that would permit the Court to hold that § 2704(b) claims are not
subject to valid arbitration agreements.
In sum, I reject the Estate’s argument that it is not bound by Carmel’s agreement to arbitrate
claims arising under the BIPA. The Estate must pursue its § 2704(b) claim against GIII in
arbitration.
C.

As GIII’s agent, Wells Fargo may invoke the BIPA’s arbitration provision.

The Estate next contends that, even if the BIPA requires it to arbitrate its claim against
GIII, the Estate is not required to litigate its claim against Wells Fargo, a non-signatory.
Defendants respond that the Estate is suing Wells Fargo “solely in its capacity as a securities
intermediary” for GIII (D.I. 7, ¶ 3) and that, in such capacity, Wells Fargo is merely acting as an
agent for GIII and is therefore entitled to enforce the arbitration agreement. I agree with
Defendants.
The question of whether a non-signatory securities intermediary acting as an agent can
invoke an agreement’s arbitration provision against a signatory is governed by state law. See
Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630–32 (2009). Under Delaware law, it is “wellsettled” that “nonsignatory agents may invoke a valid arbitration agreement entered into by their
principal.” Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212, 224 (3d Cir. 2007); BuzzFeed,
Inc. v. Anderson, No. 2022-0357, 2022 WL 15627216, at *9 (Del. Ch. Oct. 28, 2022) (citing
Tracinda).
The Estate does not dispute that Wells Fargo was acting as GIII’s agent with respect to the
Policy and that Wells Fargo is being sued only in that capacity. (See D.I. 7 (Amended Compl.)
¶ 3 (“Wells Fargo Bank is being named solely in its capacity as Securities Intermediary.”).) Cf.

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Malkin, 278 A.3d at 58 n.8 (citing 6 Del. C. § 8–102(a)(14)) (explaining that a securities
intermediary is “a person, including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that capacity”); Sun Life Assurance
Company of Canada v. Wells Fargo Bank, NA, No. 14-5789, 2016 WL 6824367, at *1 (D.N.J.
Nov. 17, 2016) (explaining that a securities intermediary’s role is “to act as a custodian,
verification agent, and escrow agent of a life insurance policy”). Accordingly, Wells Fargo may
invoke the arbitration provision. 7
6F

D.

The Estate must present the rest of its arguments against arbitration to the
arbitrator.

The Estate launches a barrage of additional arguments in an attempt to avoid arbitration.
None are persuasive.
The Estate suggests that, because the parties’ agreement was likely part of an illegal STOLI
agreement, and thus void ab initio, Defendants cannot enforce the arbitration agreement in the
BIPA. That is wrong. See Buckeye, 546 U.S. at 446–49 (enforcing arbitration provision contained
in contract that was alleged to be void ab initio under state law). As the Third Circuit recently
explained in Zirpoli v. Midland Funding, LLC, that result
may seem counterintuitive as it means that a court must defer to an
arbitrator even where the agreement containing the arbitration
clause is, itself, void or illegal. However, the Supreme Court has
clearly rejected that argument, reasoning that the ultimate illegality
7

The Estate contended for the first time at oral argument that to invoke a contractual
provision under an agency theory, the non-signatory must have been acting as an agent for the
principal at the time the contract was executed. This argument was not made in the briefing and
is therefore waived. Even if it weren’t, I would reject it. The Estate has not cited any authority
for the proposition that a non-signatory can invoke a principal’s contractual provision under an
agency theory only if the non-signatory was acting in that exact capacity at the time the contract
was executed.
Defendants alternatively argue that Wells Fargo may invoke the BIPA’s arbitration clause
under a theory of equitable estoppel. Because I conclude that Wells Fargo may invoke the BIPA
under an agency theory, I don’t need to assess the equitable estoppel theory.
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of a contract does not automatically negate the parties’ agreement
that an arbitrator should resolve disputes arising from the contract.
48 F.4th 136, 145 (3d Cir. 2022).
The Estate next contends that Defendants lack “Article III standing” to enforce the BIPA’s
arbitration provision. Even if I agreed with that argument, 8 it is an argument that the Estate must
7F

raise with the arbitrator, as the parties to the BIPA clearly and unmistakably agreed to delegate
questions of arbitrability to the arbitrator. Richardson v. Coverall N. Am., Inc., 811 F. App’x 100,
103 (3d Cir. 2020) (holding that an agreement’s incorporation of the AAA rules “constitutes clear
and unmistakable evidence that the parties agreed to delegate arbitrability”); see also Henry
Schein, Inc. v. Archer and White Sales, Inc., 139 S. Ct. 524, 529–30 (2019) (“[I]f a valid agreement
exists, and if the agreement delegates the arbitrability issue to an arbitrator, a court may not decide
the arbitrability issue.”); Env. Barrier Co., LLC v. Slurry Systems, Inc., 540 F.3d 598, 605 (7th Cir.
2008) (“[C]ourts have not hesitated to hold that standing is a matter for the arbitrator to resolve
. . . .” (collecting cases)).
The Estate also contends that (for various reasons) the BIPA has terminated and, thus, no
one has any rights under it. Like the prior argument, that raises a question of arbitrability that must
be resolved by the arbitrator.
Finally, to the extent the Estate contends that its claims against Defendants do not “arise
under” the BIPA, it must likewise raise that arbitrability question with the arbitrator.

8

See Lloyd v. HOVENSA, LLC, 369 F.3d 263, 272 (3d Cir. 2004) (explaining that the
doctrine of Article III constitutional standing is not the same thing as the standing required to
compel arbitration).
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IV.

CONCLUSION
For the reasons set forth above, I recommend that Defendants’ Renewed Motion to Compel

Arbitration (D.I. 46) be GRANTED. This action should be stayed while the arbitration proceeds.
9 U.S.C. § 3; Lloyd, 369 F.3d at 269–71.
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(1)(B), (C),
Federal Rule of Civil Procedure 72(b)(1), and District of Delaware Local Rule 72.1. Any
objections to the Report and Recommendation shall be filed within fourteen days and limited to
ten pages. Any response shall be filed within fourteen days thereafter and limited to ten pages.
The failure of a party to object to legal conclusions may result in the loss of the right to de novo
review in the district court. The parties are directed to the Court’s “Standing Order for Objections
Filed Under Fed. R. Civ. P. 72,” dated March 7, 2022, a copy of which can be found on the Court’s
website.

Dated: January 19, 2023

___________________________________
The Honorable Jennifer L. Hall
UNITED STATES MAGISTRATE JUDGE

17