Weather Underground, Incorporated v. Navigation Catalyst Systems, Incorporated et al
Filing
186
APPENDIX re: 178 MOTION for Summary Judgment filed by Epic Media Group, Incorporated. by Epic Media Group, Incorporated (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13) (Delgado, William)
Exhibit 11
Page 1
Slip Copy, 2009 WL 877684 (E.D.Mich.)
(Cite as: 2009 WL 877684 (E.D.Mich.))
Detroit, MI, for Plaintiffs.
Only the Westlaw citation is currently available.
United States District Court,
E.D. Michigan,
Southern Division.
PHOENIX LIFE INSURANCE COMPANY, a New
York corporation, and PHL Variable Insurance
Company, a New York corporation, Plaintiffs,
v.
LaSALLE BANK N.A., LaSalle Bank Corporation,
Frank J. Ellias as Trustee of the Rosen Family Irrevocable Trust dated September 12, 2005, Robert
Rosen, Coventry Capital 1 LLC, Wilmington Trust
Company, CBI Financial LLC, Raider-Dennis
Agency, Inc., and Larry S. Campagna, Defendants.
Nos. 2:07-cv-15324, 2:08-cv-11562.
March 30, 2009.
West KeySummaryConspiracy 91
9
91 Conspiracy
91I Civil Liability
91I(A) Acts Constituting Conspiracy and Liability Therefor
91k9 k. Conspiracy to Defraud. Most
Cited Cases
An insurer's allegation than an insured and a
beneficiary made specific representations in their
applications for a life insurance policy which were
false at the time they were made was sufficient to
state a claim for civil conspiracy. The insurer further alleged that the insured and beneficiary knew
about the misrepresentations, participated in, encouraged or aided and abetted those misrepresentations, that the policies would not have been issued
had the misrepresentations not been made, and that
the insured and beneficiary benefited from the misrepresentations by splitting among themselves several hundred thousand dollars in commissions, paid
by the insurer as a result of the issued policy.
James E. Brenner, Matthew R. Rechtien, Clark Hill,
Jonathan B. Frank, Jackier, Gould,
Hickey, Dykema Gossett, George A.
Googasian Law Firm, Bloomfield
Christine R. Essique, Ellias & Elias,
field, MI, for Defendants.
Joseph H.
Googasian,
Hills, MI,
W. Bloom-
ORDER GRANTING IN PART AND DENYING
IN PART DEFENDANTS' MOTION TO DISMISS (D/Es 17, 20 in 08-cv-11562)
STEPHEN J. MURPHY, III, District Judge.
*1 This is a claim by an insurance company for
a declaratory judgment of rescission against its insured, and a common law tort claim of civil conspiracy to commit fraud against its insured, the alleged transferees of two life insurance policies and
certain persons and entities that allegedly conspired
in the insured's allegedly fraudulent statements. Before the Court is defendants' motion to dismiss all
claims. For the reasons stated below, the Court
grants in part and denies in part defendants' motion
to dismiss.
FACTS
Plaintiffs Phoenix Life Insurance Company
(“Phoenix”) and PHL Variable Insurance Company
(“PHL”) are New York corporations with their
principal places of business in Connecticut. First
Amended Complaint in Case No. 08-11562
(hereinafter “Complaint”) ¶¶ 1-2. Defendant LaSalle Bank N.A. (“LaSalle N.A.”) is an Illinois corporation with its principal place of business in
Illinois, and defendant LaSalle Bank Corporation
(“LaSalle Corporation”) is a Delaware corporation
with its principal place of business in Illinois. Complaint ¶¶ 3-4. Defendant Robert Rosen is a citizen
of Michigan. Complaint ¶ 6. The Rosen Family Irrevocable Trust (“Rosen Trust”) is a trust established under the laws of Michigan. Defendant Frank
J. Ellias is Trustee. Complaint ¶ 5. Defendants Coventry Capital 1 LLC (“Coventry Capital”) and CBI
Financial LLC (“CBI”) (collectively “Coventry”)
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are Delaware corporations with their principal
places of business in Delaware. Complaint ¶¶ 7, 9.
Defendant Wilmington Trust Company has been
voluntarily dismissed from the case.
This suit arises from two Phoenix life insurance policies issued by Phoenix to Rosen and the
Rosen Trust. On March 27, 2006, Robert Rosen applied for the first of the two policies for $5,000,000
in universal life insurance coverage from Phoenix,
with himself as insured and owner, and the Rosen
Trust as beneficiary. Complaint ¶ 15. The application, which was signed by Rosen, contains a clause
that all statements by the applicant are “full, complete, and true to the best knowledge and belief of
the undersigned and have been correctly recorded.”
Id. Rosen also executed a “Statement of Client Intent,” dated the same date as the application, that
contained certain questions to be answered by the
client. Complaint ¶ 16. Question 1 asks whether
“non-recourse premium financing or any other
method [is] being utilized to pay premiums in order
to facilitate a current or future transfer, assignment
or other action with respect to the benefits provided
under the policy being applied for?” Id. Question 2
asks whether there is an intent to finance any of the
premiums. Id. Question 3 asks whether the current
intent is to sell the policy in the future. Id. Question
4 asks whether there has been any inducement to
enter into this transaction. Id. All of these questions
were answered “No.” Id. Question 5, which asks
whether the purchase of the insurance or any element of the financing allows “for an open, free and
competitive settlement of the contract with any
firm” is answered “Yes.” Id. The reason for purchasing the policy is stated to be estate planning.
Id. The Statement of Client Intent is also signed by
Rosen. Id.
*2 On March 30, 2006, Phoenix received a replacement application, changing the owner of the
policy from Rosen to the Rosen Trust. Complaint ¶
17. The replacement application also represents that
the statements within are full, complete and true to
the best of the applicants knowledge and belief and
is dated March 27, 2006 and signed by Rosen and
by the Trustee. Id.
Pursuant to March 27, 2006 application,
Phoenix issued Policy No. 97516049 in the amount
of $5,000,000 with an effective date of April 18,
2006 (the “First Rosen Policy”). On May 5, 2006,
Rosen, as insured, signed a Policy Acceptance
Form that contained a declaration that the “insured
... declares that the statements made in the application remain full, complete and true as of this date.”
Complaint ¶ 20.
On May 12, 2006, the Rosen Trust signed an
Assignment of Life Insurance Policy as Collateral
(the “First Assignment”), assigning the policy to
LaSalle N.A. Complaint ¶ 21 The First Assignment
indicated that the Rosen Trust has borrowed
$342,148.68 from LaSalle. Id. Under the Assignment, LaSalle N.A. is the primary beneficiary of the
policy to the extent of the principle amount of the
loans made to the Rosen Trust plus accrued interest
and other liabilities and has the right to assign the
policy. Id. Default by the Rosen Trust allows LaSalle N.A. to foreclose upon and assign the policy.
Id. Phoenix received the First Assignment two
weeks later. Complaint ¶ 21-22.
On July 24, 2006, Rosen and the Trustee filed a
second application with Phoenix for another
$5,000,00 in universal life insurance coverage.
Complaint ¶ 23. The second application contained
the same representations as did the application for
policy number 97516049. Id. The July 24, 2006 application additionally asked whether “non-recourse
premium financing or any other method [is] being
utilized to pay premiums in order to facilitate a current or future transfer, assignment or other action
with respect to the benefits provided under the
policy being applied for” and whether there is “an
intention that any party, other than the Owner, will
obtain any right, title or interest in any policy issued on the life of the Proposed Life Insured(s) as a
result of this application?” Id. Both questions were
answered “No.” Id. In conjunction with the July 24,
2006 application, Rosen and the Trustee also signed
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a Statement of Client Intent, which contained the
same language as that in the statement relative to
policy No. 97516049 and contained the same responses. Complaint ¶ 24. Pursuant to the July 24,
2006 application, Phoenix issued Policy No.
97528338 in the amount of $5,000,000 (the
“Second Rosen Policy”) with an effective date of
September 26, 2006. Complaint ¶ 25. Rosen and the
Trustee again signed a “Policy Acceptance Form”
dated October 4, 2006, which declared that
“statements made in the application remain full,
complete, and true as of this date.” Complaint ¶ 26.
*3 On or about October 10, 2006, Phoenix received an Assignment of Life Insurance Policy as
Collateral executed by the Trustee in favor of LaSalle N.A. Complaint ¶ 28. Around November 15,
2006 LaSalle N.A. sent a change of ownership and
beneficiary forms to Phoenix. Complaint ¶ 29. The
forms had been executed by the Trustee in favor of
LaSalle N.A. and bear the dates of November 14
and 15, 2006, and refer to LaSalle N.A. as “Policy
Intermediary.” Id.
On February 2, 2007, Phoenix sent letters to
the Trustee and Rosen, expressing concern about
these transactions and asking for an explanation.
Complaint ¶ 30. The letters stated that Phoenix
would not have issued the policies had it been informed that the policies were being obtained as part
of a financing or investor ownership transaction and
that the assignment of one policy and the transfer of
ownership of the other was inconsistent with the
statements made in the statement of client intent
form. Id. The Trust replied that the intent was to
provide for liquidity at Rosen's death and all statements were true. Id.
On August 7, 2007, Phoenix sent a letter to
LaSalle N.A. and the Trustee rescinding and voiding both policies and refunding to LaSalle N.A. the
premiums paid for the policies. Complaint ¶ 33.
The letter states that Phoenix had investigated the
assignments and concluded that both policies were
part of a financing and transfer of ownership transaction that was not disclosed to Phoenix despite
specific questions. Id. The letter goes on to state
that Phoenix would not have issued either policy
had it been informed of the nature of the financing
and third party ownership transaction. Id. Finally,
the letter states that if LaSalle or the Trustee disagree with Phoenix's decision they should advise
Phoenix in writing. Id. Neither LaSalle, Rosen nor
the Trustee have responded to Phoenix's August 7,
2007 letter, and the refund checks remain uncashed.
Complaint ¶ 34.
The complaint asserts based on information
and belief that at the time the policies were issued,
Rosen and the Rosen Trust intended to transfer
ownership of and/or a beneficial interest in the
policies to a person or entity that did not have an
insurable interest in the life of the insured. Complaint ¶ 35. It also asserts based on information and
belief that Rosen, the Rosen Trust, LaSalle N.A.
and LaSalle Corporation “communicated and
reached understandings among themselves to establish a set of transactions meant to evade legal requirements through technicalities.” Complaint ¶ 36.
The complaint goes on to assert that Phoenix has
since learned that Coventry, Wilmington, CBI,
Raider-Dennis and Campagna participated in the
communications and understandings with the other
defendants and participated in or encouraged or
aided and abetted the misrepresentations and concealments of Rosen and the Trustee. Complaint ¶
38. Phoenix and PHL had filed an earlier separate
action against Campagna and Raider-Dennis, Inc.,
the insurance brokers that sold the policies to Rosen
and the Rosen Trust. That case, Phoenix Life Ins.
Co. et al. v. Raider-Dennis Agency, Inc., et al., No.
07-cv-15324, was subsequently consolidated with
this one and is still pending.
*4 The complaint asserts three claims against
defendants. The first count of the complaint seeks a
declaratory judgment that the policies are null, void
and rescinded ab initio. The second count seeks a
declaratory judgment that the policies are rescinded
because no insurable interest arose in the transferees. The third count is a claim of civil conspiracy to
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defraud against all defendants.
Defendants Frank J. Ellias and Robert Rosen
have filed a counterclaim against Phoenix. In their
counterclaim, Ellias and Rosen allege that Phoenix
wrongfully rescinded the policies, that the rescission caused Rosen and the Rosen Trust to default,
requiring the Rosen Trust to relinquish all of its
right, title and interest in the first policy to LaSalle
N.A. under the Note and Security Agreement, and
that they anticipate losing their interest in the
second policy when the policy matures. Based on
these facts, they have counterclaimed against
FN1
Phoenix for breach of contract.
FN1. In its response, PHL has appended
documents and alleged various facts concerning communications between the defendants before and after the issuance of
the policies. The Court will disregard these
facts in deciding the motion to dismiss, because, as the plaintiffs correctly point out,
the plaintiffs may not amend their complaint by means of their response brief. See
Begala v. PNC Bank, Ohio, Nat'l Ass'n,
214 F.3d 776, 784 (6th Cir.2000)
(complaint may not be amended by briefs
in opposition to motion to dismiss).
Defendants Coventry and CBI have filed the
instant motion to dismiss the complaint. The motion has been separately joined by defendants LaSalle Bank, NA, LaSalle Bank Corporation, Raider
Dennis Agency, Inc., Larry S. Campagna, Frank J.
Ellias and Robert Rosen.
JURISDICTION
Jurisdiction is based on diversity of citizenship.
Plaintiffs are New York corporations, having their
principal places of business in Connecticut; defendants are citizens of Illinois, Delaware and
Michigan. The amount in controversy is alleged to
be in excess of $75,000.
STANDARD OF REVIEW
“[W]hen the allegations in a complaint,
however true, could not raise a claim of entitlement
to relief, ‘this basic deficiency should ... be exposed
at the point of minimum expenditure of time and
money by the parties and the court.’ ” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, ----, 127 S.Ct.
1955, 1966, 167 L.Ed.2d 929 (2007) (citations
omitted). Accordingly, Federal Rule of Civil Procedure 12(b)(6) allows a defendant to test whether,
as a matter of law, the plaintiff is entitled to legal
relief even if everything alleged in the complaint is
true. See Minger v. Green, 239 F.3d 793, 797 (6th
Cir.2001) (citations omitted).
In assessing a motion brought pursuant to Rule
12(b)(6), the Court must presume all well-pleaded
factual allegations in the complaint to be true and
draw all reasonable inferences from those allegations in favor of the non-moving party. Mayer v.
Mylod, 988 F.2d 635, 638 (6th Cir.1993). To determine whether Plaintiff has stated a claim, the
Court will examine the complaint and any written
instruments that are attached as exhibits to the
pleading. Fed.R.Civ.P. 12(b)(6) & 10(c). Although
the pleading standard is liberal, bald assertions and
conclusions of law will not enable a complaint to
survive a motion pursuant to Rule 12(b)(6). Leeds
v. Meltz, 85 F.3d 51, 53 (2d Cir.1996). The Court
will not presume the truthfulness of any legal conclusion, opinion, or deduction, even if it is couched
as a factual allegation. Morgan v. Church's Fried
Chicken, 829 F.2d 10, 12 (6th Cir.1987).
*5 This standard requires the claimant only to
put forth “enough facts to raise a reasonable expectation that discovery will reveal evidence of [the requisite elements of the claim].” Bell Atlantic, 127
S.Ct. at 1965. Thus, although “a complaint need not
contain ‘detailed’ factual allegations, its ‘[f]actual
allegations must be enough to raise a right to relief
above the speculative level on the assumption that
all the allegations in the complaint are true.’ “ Ass'n
of Cleveland Fire Fighters v. Cleveland, Ohio, 502
F.3d 545, 548 (6th Cir. Sept.25, 2007) (quoting Bell
Atlantic, 127 S.Ct. at 1965). Therefore, the Court
will grant a motion for dismissal pursuant to Rule
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12(b)(6) only in cases where there are simply not
“enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic, 127 S.Ct. at 1974.
ANALYSIS
Coventry moves to dismiss the complaint on
four grounds. First, Coventry asserts that Phoenix
has impermissibly split its claims by bringing two
separate actions based on the same series of events.
Second, Coventry argues that the claims for declaratory relief are not appropriate as to Coventry and
CBI. Third, Coventry argues that plaintiff's allegations do not constitute grounds for rescission under
Michigan law. Fourth, Coventry argues that
Phoenix's conspiracy claims should be dismissed
because they fail to sufficiently allege an actionable
civil conspiracy. The Court will address each of
these arguments in turn.
The first two arguments are easily dealt with.
First, the claim splitting argument asserted by defendants in their briefs has been mooted by the consolidation of this suit with the earlier suit by
plaintiffs against Raider-Dennis Agency, Inc. and
Larry S. Campagna for damages based upon their
actions in brokering the insurance policies at issue
here. At the oral hearing on this matter counsel for
Coventry conceded that this argument is moot.
Second, plaintiffs concede Coventry and CBI's
second argument, that plaintiffs' claims for declaratory relief should be dismissed because Coventry
and CBI did not purchase and do not own the
policies at issue and therefore there can be no claim
for rescission against them. In their response,
plaintiffs state that the complaint does not state a
claim for declaratory judgment against Coventry
and CBI, but rather only against Rosen, the Rosen
Trust and LaSalle. Thus, the Court will grant Coventry's motion in this regard and dismiss any claims
for declaratory judgment against Coventry and CBI
to the extent any such claims exist.
I. Should Phoenix's Claims For Rescission Be Dismissed?
Despite the fact that plaintiffs concede that
there are no claims for declaratory judgment of res-
cission against Coventry or CBI, Coventry's brief in
support of its motion to dismiss goes on to assert
substantive arguments as to why those claims
should be dismissed as a matter of law against all
defendants. At the hearing on its motion, Coventry
argued that it is seeking to dismiss the declaratory
judgment claims against all the defendants because
those claims are the predicate for the conspiracy
claims that have been asserted against Coventry and
CBI. This seems to be a bit of a logical stretch, but
the defendants Rosen, the Rosen Trust and all LaSalle defendants have separately joined in Coventry's
motion to dismiss, so the Court will address Coventry's arguments on the declaratory judgment
claims.
*6 Coventry argues that Phoenix's declaratory
judgment claims in Count I and II of the complaint
should be dismissed because, first, the complaint
fails to allege grounds for rescission based on fraud
or misrepresentation; and, second, that there are no
facts alleged which would support rescission based
on lack of insurable interest ab initio. The Court
will examine each of these arguments in turn.
A. Should plaintiffs' declaratory judgment claims
for rescission of the two Rosen policies on the basis
of misrepresentations in the policy applications be
dismissed?
Coventry argues that all claims for rescission
based upon alleged misrepresentations in the applications for the two policies should be dismissed
because only material misrepresentations contained
in the application itself may be used to rescind the
policy, and plaintiffs have alleged no misrepresentations in the First Rosen Policy; Coventry further
argues that the only two alleged misrepresentation
in the application for the Second Rosen Policy are
not actionable as a matter of law.
As to the First Rosen Policy, Coventry maintains that plaintiffs' claim for rescission based on
misrepresentation fails because the only alleged
misrepresentations were contained in the Statement
of Customer Intent, which was not part of the application for the First Rosen Policy, and the Cus-
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tomer Acceptance, which was executed after the
policy issued. Coventry argues that Michigan law
precludes plaintiff from relying on statements that
are not contained in the written application or endorsed on or attached to the policy.
Michigan law provides specifically that an insurance company may only seek rescission of an insurance policies on the basis of statements that are
contained in the insurance application itself and
which are “endorsed upon or attached to the policy
when issued.” M.C.L. § 500.4016 provides that:
There shall be a provision that all statements
made by the insured, shall, in the absence of
fraud, be deemed representations and not warranties, and that no such statement shall avoid the
policy unless it is contained in a written application and a copy of such application shall be endorsed upon or attached to the policy when issued.
Furthermore, section 500.2226 of the Insurance
Code provides as follow:
(2) Every policy of life insurance hereafter issued
or delivered within this state by any life insurer
doing business within this state shall contain the
entire contract between the parties and nothing
shall be incorporated therein by reference to any
constitution, bylaws, rules, application, or other
writing unless the same are endorsed upon or attached to the policy when issued.
Phoenix's claims for rescinding the First Rosen
Policy are based solely upon representations made
by Rosen or the Trust in documents that were not
endorsed upon or attached to the policy when issued. Therefore, under the plain language of
M.C.L. §§ 500.2226 and 500.4016, they cannot be
grounds for rescission in Michigan. Whether or not
they were part of the “application process” is irrelevant: if they are not attached to the policy when issued they cannot form the basis for rescission.
*7 Phoenix argues that the complaint still states
a claim for rescission of the First Rosen Policy be-
cause common law has always permitted the avoidance of contracts, including insurance contracts,
procured by fraud, and that the Statement of Client
intent is admissible as evidence to establish fraud in
the procurement of the policy even though it was
not attached to the insurance policy when issued.
The Michigan Supreme Court, however, has
already rejected Phoenix's argument in New York
Life Ins. Co. v. Hamburger, 174 Mich. 254, 257-58,
140 N.W. 510 (1913). Furthermore, Wiedmayer v.
Midland Mutual Life Ins. Co., 414 Mich. 369, 324
N.W.2d 752 (1982), cited by Phoenix in support of
its argument, does not overrule Hamburger. The
Court in Wiedmayer merely concluded the insurer
could invoke a statute to void an insurance policy
despite the absence of an express contractual right
to do so. Id. at 374, 324 N.W.2d 752. The court did
not conclude that allegations of common law fraud
supersede the requirements of section 500.4016. Id.
at 375-76, 324 N.W.2d 752.
Because Michigan law requires a claim for rescission on the grounds of material misrepresentations to be based solely on representations endorsed
on or attached to the policy at issue, the Court will
dismiss Phoenix's claims for rescission of the First
Rosen Policy to the extent that those claims are
based upon the insured's alleged misrepresentations
in the application process for the First Rosen
Policy. The Court will also dismiss any claims for
rescission of the Second Rosen Policy based upon
any alleged misrepresentations that were not actually attached to or endorsed upon the policy when
issued.
As to the Second Rosen Policy, there are two
alleged misrepresentations that were in the application for insurance that was attached to the policy
when issued, and therefore could form the basis for
dismissal in the proper circumstances. As to these
statements, Coventry argues that the asserted misrepresentations are not actionable under Michigan
law because they are not material misrepresentations.
Under Michigan law, rescission is only permit-
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ted when an insured makes a material misrepresentation in the application for insurance. Old Life Ins.
Co. v. Garcia, 411 F.3d 605, 611 (6th Cir.2005),
vacated in part, 418 F.3d 546 (2005) (citing Lake
States Ins. Co. v. Wilson, 231 Mich.App. 327, 586
N.W.2d 113 (Mich.Ct.App.1998)). A misrepresentation in the insurance context is limited to “a statement as to past or present fact.” M.C.L. § 500.2218
(2).
The first alleged misrepresentation in the
second application contained the question “[i]s
there an intention that any party, other than the
Owner, will obtain any right, title or interest in any
policy issued on the life of the Proposed Life Insured(s) as a result of this application?” Amended
Complaint ¶ 23. To this question, the insured
answered “[n]o” and the question and answer are
attached to the policy. Coventry argues first, that
plaintiffs fail to allege that this is a misrepresentation because they fail to allege that Rosen or the
Rosen Trust intended to convey a right, title or interest in the Second Rosen Policy when they completed the application on July 24, 2006, and instead
simply allege that the intent to transfer existed at
the time the Second Rosen Policy issued. The Court
does not find this argument persuasive. While the
complaint alleges in paragraph 35 that Rosen and
the Rosen Trust intended to transfer the policies at
the time they were issued, it also alleges a claim for
rescission based upon material misrepresentations
in the application process (Complaint ¶ 41) and alleges that the representations made in the
“application process” for the First and Second
Rosen Policies were untrue at the time they were
made. (Complaint ¶¶ 49-52). In considering a motion to dismiss, the Court is obliged to read the allegations in a complaint in the light most favorable
to the nonmoving party, and thus, read in this light,
the Court finds the complaint sufficiently alleges
that the intent to transfer existed a the time of the
application. The question asks whether, at the time
of the application, there was a present intention on
the part of the insured to transfer any right, title or
interest in the policy to a third party. The question
does not ask whether the policy will be transferred,
which would be a question about future intent.
*8 Further, Coventry's argument that a collateral assignment is not a “right, title or interest” in the
policy is also not persuasive. A collateral assignment is an interest in the policy, specifically a security interest in the policy proceeds. See Emmons
v. Lake States Ins. Co., 193 Mich.App. 460, 464,
484 N.W.2d 712 (1992). The policies themselves
provide that the interests of an assignee of the owner, including a collateral assignee, takes precedence
over the interest of any beneficiary not irrevocably
named or any contingent owner. First Rosen Policy
§ 18, attached as Exhibit A to Motion for Summary
Judgment; Second Rosen Policy § 18, attached as
Exhibit B to Motion for Summary Judgment. Since
a collateral assignee has rights under the terms of
the policies at issue, the argument that the collateral
assignee has no “interest” in the policies is not persuasive. Further, the question in the application
asks about any “right, title or interest” and is not by
its terms limited to ownership interest as contended
by defendants. In fact, if the question were limited
to ownership interests, the question would have
only asked about title, since such a construction
makes the words “right” and “interest” redundant.
Finally, Rosen and the Trust have counterclaimed
asserting that the plaintiff's actions have caused
LaSalle to foreclose on the First Rosen Policy and,
as a result, LaSalle now owns the policies. This
strongly suggests that at least LaSalle and the Trust
believe that LaSalle received an enforceable interest in the policies. While defendants are correct
that ambiguities are construed in favor of the insured, the construction they urge would read ambiguity into a question where no ambiguity exists.
The insured and the Rosen Trust answered “no” to
the question at issue, and a question of fact therefore exists as to whether the statement was a misrepresentation. Therefore, the Court will deny defendants' motion to dismiss plaintiffs' claim on this
basis.
The second alleged misrepresentation in the ap-
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plication for the Second Rosen Policy is that Rosen
and the Rosen Trust answered “[n]o” to the question “[i]s non-recourse premium financing or any
other method being utilized to pay premiums in order to facilitate a current or future transfer, assignment or other action with respect to the benefits
provided under the policy being applied for?” Complaint ¶ 23. Coventry argues that “on its face, this
question can only be answered in the negative” because the Second Rosen Policy did not issue until
September 26, 2006, more than two months after
the application was submitted. In light of this fact,
Coventry argues that it is not plausible to contend
that premiums were “being paid” at the time of the
application more than two months earlier.
The interpretation of an insurance policy is a
question of law for the Court. Morley v. Automobile Club, 458 Mich. 459, 465, 581 N.W.2d 237
(1998). The terms of a clear and unambiguous provision are not open to construction and must be applied as written. Michigan Mutual Ins. Co. v. Dowell, 204 Mich.App. 81, 87, 514 N.W.2d 185 (1994)
(citing Clevenger v. Allstate Ins. Co., 443 Mich.
646, 654, 505 N.W.2d 553 (1993)). Ambiguous
provisions, however, are “open to construction and
questions of interpretation may well present jury
questions.” Murphy v. Seed-Roberts Agency, Inc.,
79 Mich.App. 1, 8, 261 N.W.2d 198 (1977) (citing
Clark v. Hacker, 345 Mich. 751, 76 N.W.2d 806
(1956)); see also D'Avanzo v. Wise & Marsac.,
P.C., 223 Mich.App. 314, 319-320, 565 N.W.2d
915 (1997) (holding that where there is more than
one reasonable interpretation of a contract provision, the ambiguity creates a question of fact for the
jury). A provision is ambiguous “when its terms are
reasonably and fairly susceptible to multiple understandings and meanings.” Equitable Life Assurance Soc. v. Poe, 143 F.3d 1013, 1016 (6th
Cir.1998) (citations omitted).
*9 The Court finds two canons of construction
to be particularly relevant to interpreting this contract. First, ambiguities in an insurance policy are
to be resolved against the insurer and in favor of the
insured, Clevenger v. Allstate Ins. Co., 443 Mich.
646, 654, 505 N.W.2d 553 (1993); and, when a
contract is ambiguous, the Court may consider extrinsic evidence to explain the ambiguity, Goodwin,
Inc. v. Coe, 392 Mich. 195, 205-06 (1974). Second,
insurance contracts “must be construed as a whole,
and, if possible and practicable, all ... parts are to
be harmonized and each part given force and effect.” Caine v. John Hancock Mutual Life Ins. Co.,
313 F.2d 297, 302 (6th Cir.1963) (citation omitted).
This motion places these two canons at loggerheads with each other. The question of, “[i]s ...
premium financing ... being utilized,” cast as it is in
the present progressive tense, would often be read
to inquire whether premium financing is being used
at the time the question is answered, as Coventry's
proposed construction suggests. This would satisfy
the first canon noted above by favoring the insured.
But it would violate the second canon by essentially
rendering the question meaningless since premiums
are never “being paid” at the time that an application for new insurance is filled out.
On the other hand, it is also common English
usage to cast a question about a person's future intentions in the present progressive. For instance, the
question “are you paying by check?,” when asked
at the beginning of a restaurant dinner, would typically be understood as an inquiry whether the addressee is currently planning on paying by check at
the conclusion of the meal. This is consistent with
Phoenix's construction of the question at issue here
as encompassing a present plan on the part of the
insured [not] to “utilize” premium financing in the
future. This construction would have the advantage
of fulfilling the second canon noted above, by giving effect to otherwise superfluous language. But
the construction would violate the first canon, by
adopting an interpretation that favors the insurer
over another linguistically permissible interpretation that would favor the insured.
Thus, there is no single interpretation of the
premium financing question that would qualify as
the correct one under all the applicable legal rules.
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Under these circumstances, the Court finds that the
question and answer are ambiguous, and therefore
not appropriate for the court to consider on a motion to dismiss. See Zbiciak v. Herald Co., 49 F.
Appx. 501, 504 (6th Cir.2002) (ambiguity in contract creates jury question). Therefore, the Court
denies Coventry's motion to dismiss Phoenix's
claim for rescission on the grounds of misrepresentation as to the question and answer regarding nonrecourse financing in the application for the Second
Rosen Policy
B. Should Count II of the Complaint, Alleging a
Claim For Rescission Based Upon A Lack Of Insurable Interest, Be Dismissed?
*10 Count II of the complaint seeks rescission
of the policies on the grounds that there was no insurable interest when the policies were issued.
Michigan law provides that insurance contracts issued to a party without an insurable interest in the
life of the insured are void. Sun Life Assur. Co. of
Canada v. Allen, 270 Mich. 272, 284, 259 N.W.
FN2
281 (1935).
Under Michigan law, an insurance
policy “founded upon mere hope and expectation
and without some interest in the property, or the life
insured, are objectionable as a species of gambling,
and so have been called wagering policies .. and are
therefore void.” Crossman v. American Ins. Co.,
198 Mich. 304, 308, 164 N.W. 428 (1917). An insurable interest in the context of life insurance is “a
reasonable ground, founded upon the relations of
the parties to each other, either pecuniary or of
blood or affinity, to expect some benefit or advantage from the continuance of the life of the assured.”
Dow Chemical Co. v. U.S., 250 F.Supp.2d 748, 757
(E.D.Mich.2003) (quoting Warnock v. Davis, 104
U.S. 775, 779, 26 L.Ed. 924 (1881)).
FN2. The facts of Sun Life illustrate the
policy concerns behind the insurable interest requirement. Sun Life involved a
partnership that had taken out insurance
policies on two men that were made partners at the same time the partnership took
out the insurance policies on their lives:
The mortality among the partners of
Charles Elson was rather high. Federowitz, a partner, died March 21, 1922, at
the age of thirty-three, of either lobar
pneumonia or delirium tremens, with
$27,500 of life insurance payable to Elson, Goodstein, and Allen, for which application had been made on February 25,
1921. Stanislaus Bogacki, another partner, died at the age of forty-four from a
cause given in his death certificate as
‘fall down stairs in home, fracture of
skull, alcoholism,’ with $15,000 of insurance payable to the firm, the policy
having been issued only three months
after the death of Federowitz. Bogacki
lived less than three years after his
policy was issued. The record is silent as
to Allen and Goodstein; all we know is
they did not appear as witnesses in the
instant case.
Sun Life, 270 Mich. at 282, 259 N.W.
281.
Coventry argues that Count II of the complaint
should be dismissed because there are no facts alleged that support a rescission based on a lack of
insurable interest. Coventry asserts that the only
facts that are alleged in support of a lack of insurable interest are the premium finance transaction itself, which Coventry argues is insufficient as a matter of law. Coventry also argues that the assignment
of life insurance policies to secure creditors has
been deemed valid for over 100 years (citing Warnock v. Davis, 104 U.S. 775, 781, 26 L.Ed. 924
(1881); McDonald v. Birss, 99 Mich. 329, 332, 58
N.W. 359 (1894)) and that a subsequent absolute
assignment of a life insurance policy for consideration to someone who lacks an insurable interest in
the insured is also valid in Michigan. Prudential
Ins. Co. v. Liersch, 122 Mich. 436, 438, 81 N.W.
258 (1899). Coventry also points out that the
plaintiffs themselves provide premium financing to
policy owners. Coventry also points out that premi-
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um financing is expressly permitted under
Michigan law. (citing M.C.L. § 500.1502). Therefore, Coventry argues, there is no legal basis for
plaintiffs claim that the Rosen Trust's assignment of
the policies to LaSalle Bank as collateral for a
FN3
premium finance loan states a cause of action.
FN3. Phoenix argues that before the
policies ever issued, and before Rosen and
the Rosen Trust formally transferred their
legal interests in the policies, they had
already transferred their equitable interest
in the policies to other defendants who
lacked insurable interests in the policies.
Phoenix does not cite any authority for this
proposition, and the Court is aware of no
authority that applies the doctrine of equitable conversion other than in the context of
real estate.
It is clear that Rosen and the Rosen Trust have
an insurable interest in the life of Robert Rosen.
The question before the Court is whether the alleged agreements make the contract between the
plaintiff and the original policy holders, Rosen and
the Trust, merely a cloak for a “wagering contract,”
which would be impermissible.
The seminal case on the effect of an assignment on the validity of an insurance contract is
Warnock v. Davis, 104 U.S. 775, 26 L.Ed. 924
(1881). Warnock involved an insured who purchased life insurance in the amount of $5,000. Id. at
775. The agreement held that nine-tenth's of the
amount due and payable under the policy at the
time of the insured's death would be the absolute
property of the trust company, with the remaining
one-tenth subject to the insured's disposition. Id. at
775-76. In return, the trust company agreed to
maintain the insurance policy at their sole expense.
Id. at 776. The insured died one year later, and the
trust company collected the policy amount and remitted one-tenth of it to the widow of the insured.
Id. at 777. The representative of the estate sued the
trust company for the balance, and the trust company defended on the basis of the assignment
agreement. Id. at 777-78. The plaintiff argued that
the assignment was not valid. Id. at 778. The trial
court granted judgment to the defendant and the
plaintiff appealed. Id.
*11 The Supreme Court reversed, and held that
because the association did not have an insurable
interest in the life of the policy holder, the assignment of the policy was invalid beyond what was required as security for the trust association's payment of the premiums. Id. at 781. The Court held
that, beyond that, the purported assignment was a
wager policy, and invalid. Id. The Court remanded
the case with direction to enter judgment for the
plaintiff for the amount collected from the insurance company, with interest, after deducting the
sums already paid to the widow and the sums advanced by the defendants for premium payments.
Id. at 782-83.
The holding of Warnock was later refined by
the case of Grigsby v. Russell, 222 U.S. 149, 32
S.Ct. 58, 56 L.Ed. 133 (1911). Grigsby involved a
bill of interpleader brought by an insurance company to determine whether the proceeds of a life insurance policy issued to the deceased insured,
Burchard, should be paid to the insured's administrator or to an assignee. Id. at 154. After Burchard
had paid two premiums on his policy and the third
was overdue, he asked Dr. Grigsby to buy the
policy. Id. Burchard sold the policy to Grigsby for
$100 and Grigsby's agreement to pay the premiums
when due. Id. The Sixth Circuit Court of Appeals
held that, under Warnock, the assignment was only
valid to the extent of the money actually given for it
and the premiums subsequently paid. Id.
The Supreme Court reversed, and held that the
concerns underlying the insurable interest rule, that
it prevents a wager on a human life made by a person that has no interest in the continuation of that
life, did not apply in the case of a subsequent assignment. Id. at 155. It distinguished Warnock by
stating that “cases in which a person having an interest lends himself to one without any, as a cloak
to what is, in its inception, a wager, have no simil-
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arity to those where an honest contract is sold in
good faith.” Id. at 156.
Finally, the Michigan case of McDonald v.
Birss, 99 Mich. 329, 58 N.W. 359 (1894) makes it
clear that the assignment of a life insurance policy
to secure creditors is valid, and cannot be voided
for lack of insurable interest.
These cases, despite their age, appear to state
the current law in Michigan. Applying Warnock
and Grimsby shows that a complete assignment of
an insurance policy to LaSalle before or on the
same day as the policy was issued would violate the
insurable interest requirement. Under Grimsby, a
subsequent assignment of the entire proceeds of the
insurance policy would not violate the insurable interest requirement. Under Birss, an assignment of
only a security interest in the policy would not violate the insurable interest requirement, even if that
assignment was done at the same time as or even
before the policy was issued. Finally, it appears that
it would violate the insurable interest requirement
if, at the time the policies issued, the insured intended to transfer the entire proceeds of the insurance
policies to LaSalle, because such an agreement
would be a cloaked “wagering contract” under
Warnock and Grimsby. See Couch on Insurance 3d
§ 36.79 (the consensus is that an assignment is void
if it is made in bad faith in order to circumvent the
law on insurable interest). The test for determining
whether the assignment is valid is the intent of the
parties. Couch on Insurance 3d § 36:87.
*12 Applying this law to the allegations of the
complaint, it appears that the complaint states a valid claim for rescission based on the lack of insurable interest. Reading the allegations of the complaint in the light most favorable to the plaintiff, the
complaint alleges that at the time the policies were
issued the insured agreed to transfer not just a security interest, but actual ownership or the right to
receive the proceeds of one or both of the policies,
to entities that did not have an insurable interest in
Robert Rosen's life, and that at least one policy was
so transferred. If in fact the defendants made such a
contract at or before the time the policies issued,
such an agreement would violate the Michigan law
requiring an insurable interest at the time the
policies were issued. Thus, the Court finds that
these allegations state a claim for rescission for
lack of insurable interest and therefore the Court
will deny defendants' motion to dismiss Count II of
the Complaint.
III. Should Count III Claim for Civil Conspiracy Be
Dismissed?
Count III of the complaint alleges a civil conspiracy on the part of all defendants to defraud
Phoenix into issuing the policies. Coventry has
moved to dismiss this count under Rule 12(b)(6) for
failure to state a claim, and for failure to plead civil
conspiracy with particularity under Rule 9(b) of the
Federal Rules of Civil Procedure.
A civil conspiracy is a combination of two or
more persons to accomplish, by concerted action,
either a criminal or unlawful purpose, or a lawful
purpose by criminal or unlawful means. Temborius
v. Slatkin, 157 Mich.App. 587, 599-600, 403
N.W.2d 821 (1986). A claim for civil conspiracy
must be based on an underlying actionable tort. Advocacy Org. for Patients & Providers v. Auto Club
Ass'n, 257 Mich.App. 365, 384, 670 N.W.2d 569
(2003). The underlying alleged tort in this case is
the fraud that Phoenix claims induced it to issue the
policies.
Fraud claims must be alleged with particularity
under Rule 9(b) of the Federal Rules of Civil Procedure. Although conspiracy is not listed specifically in Rule 9(b) as a fact that must be alleged with
particularity, Coventry argues that conspiracy
claims must also be pled with particularity, citing
Borsellino v. Goldman Sachs Group, Inc., 477 F.3d
502, 509 (7th Cir.2007) and Perry v. Se. Boll
Weevil Eriadication Found., 2005 WL 3051563 at
*8 (6th Cir. Nov.15, 2005).
In order to satisfy the requirements of Rule
9(b) with regard to fraud, a party must “allege the
time, place, and content of the alleged misrepres-
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entation on which he or she relied; the fraudulent
scheme; the fraudulent intent of [the other party];
and the injury resulting from the fraud.” Coffey v.
Foamex L.P., 2 F.3d 157, 161-62 (6th Cir.1993)
(quoting Ballan v. Upjohn Co., 814 F.Supp. 1375,
1385 (W.D.Mich.1992)). The complaint clearly
does this much: the precise statements that plaintiff
claims are fraudulent are recited verbatim in the
complaint, along with an identification of the persons making the statements, and the dates of the
statements. The complaint also alleges that Rosen
and the Trust made the statements with the intent to
defraud, and that the plaintiff was injured because it
would not have issued the policies if the statements
had not been made.
*13 Coventry challenges the sufficiency of the
conspiracy allegations. The following paragraphs
constitute the conspiracy allegations in PHL's complaint:
49. On or before December 19, 2005, more than
four months prior to the March 27, 2006, application for the First Rosen Policy, Rosen and Campagna sought and Coventry offered to arrange
non-recourse premium financing for life insurance policies to be purchased by Rosen and/or the
Rosen Trust.
50. During the application process for the First
Rosen Policy, Phoenix asked whether nonrecourse financing is being utilized to pay premiums in order to facilitate a current or future transfer, assignment or other action with respect to the
benefits provided under the policy being applied
for, or whether there was any intent to do so; both
Rosen and the Trustee answered “No” in writing,
and declared their statements to be complete and
true to the best of their knowledge.
51. During the application process for the Second
Rosen Policy, Phoenix again asked whether nonrecourse financing is being utilized to pay premiums in order to facilitate a current or future transfer, assignment or other action with respect to the
benefits provided under the policy being applied
for, or whether their was any intent to do so; both
Rosen and the Trustee again answered ‘No” in
writing, and declared their statement to be complete and true to the best of their knowledge.
52. Relying on the representations of Rosen and
the Trustee, Phoenix issued the First and Second
Rosen Policies; those representations have turned
out to be false.
53. The defendants knew about the plan to use
non-recourse financing to pay premiums in order
to facilitate a transfer, assignment or other action
with respect to the benefits provided under the
Phoenix policies being applied for and to not disclose the plan to Phoenix; knew about the misrepresentations to Phoenix in furtherance of said
plan; and participated in and/or encouraged and/
or aided and abetted the implementation of said
plan to defendants' mutual advantage and
Phoenix's detriment.
54. Defendants Coventry, Wilmington, CBI,
Raider-Dennis, and Campagna have benefited
from implementation of said plan, among other
ways, through the splitting among themselves of
hundreds of thousands of dollars in commissions
paid by Phoenix relating to issuance of the First
and Second Rosen Policies, commissions
Phoenix would not have paid but for the misrepresentations which led it to issue said Policies.
55. Defendants LaSalle N.A. and LaSalle Corporation have benefited from implementation of said
plan, among other ways, through the making of
loans for the payment of premiums on the First
and Second Rosen Policies, which loans have
been secured by said Policies, and through the assignment and/or transfer of the beneficial interest
in said Policies from defendants Rosen and the
Rosen Trust to LaSalle N.A. and/or LaSalle Corporation.
56. Defendants Rosen and the Rosen Trust have
benefited from implementation of said plan,
among other ways, through the obtainment of in-
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surance policies from Phoenix they would not
have obtained but for their misrepresentation during the application process, and the receipt of financial and other consideration from some or all
of the other defendants.
*14 57. On information and belief, Raider-Dennis
and Campagna have been in communication with
other defendants including, but not necessarily
limited to, Coventry and the Trustee regarding a
strategy to thwart Phoenix's efforts to rescind the
First and Second Rosen Policies and be reimbursed for commissions paid regarding said
Policies.
58. As a result of defendants' conspiracy to defraud, Phoenix has been injured by having paid
some $549,272.90 in commissions on insurance
policies which were issued in reliance upon misrepresentations and thus were void ab initio, and
having incurred and continuing to incur substantial costs and expenses in order to undo the transactions that resulted from defendants' conspiracy
to defraud.
Reviewing the forgoing allegations in the light
most favorable to the plaintiff, it appears that
Phoenix has adequately alleged the time, place and
manner of the allegedly fraudulent statements and
the defendants' alleged participation in them. The
plaintiff alleges that Rosen and the Rosen Trust
made specific representations in their applications
for the policies which were false at the time they
were made. The plaintiff further alleges that the defendants knew about the misrepresentations, they
participated in, encouraged or aided and abetted
those misrepresentations; that the policies would
not have been issued had the misrepresentations not
been made; and that the defendants benefitted from
the misrepresentations by splitting among themselves several hundred thousand dollars in commissions, paid by the plaintiff as a result of the policies
being issued. Therefore, the Court finds that the
complaint adequately states a claim for civil conspiracy as to all defendants.
The cases cited by Coventry do not dictate dismissal under these facts. Instead, as the following
discussion indicates, the cases suggest dismissal is
appropriate where the complaint fails to allege any
facts from which a jury could conclude that a conspiracy existed, which is not the case here.
In Perry v. Se. Boll Weevil Eradication Found.,
2005 WL 3051563 (6th Cir. Nov.15, 2005),
plaintiffs alleged that they were injured by the
spraying of malathion that occurred between July
15, 2000 and December 31, 2001 and that the defendants conspired to do so, but the plaintiffs did
not set forth any additional factual allegations indicating when, where or how the defendants conspired to spray the malathion in a manner damaging
to the plaintiffs. Id . at *8 Therefore, the court
found that they had failed to plead, with particularity, their conspiracy claim. Id.
In Borsellino v. Goldman Sachs Group, Inc.,
477 F.3d 502 (7th Cir.2007), the Seventh Circuit affirmed an order of the district court dismissing
claims of tortious interference with economic advantage, interference with fiduciary relationship
and civil conspiracy for failure to meet the
heightened pleading requirement of Rule 9(b). The
plaintiff, Borsellino, was a partner in a business
that facilitated stock trading through remote access
to the NASDAQ. Id. at 505. His former partners
got together and formed another business for the
purpose of permitting easier remote access through
various locations. Id. at 506. Borsellino claimed
that these former partners acted behind his back and
used partnership resources to create the new venture, and that as a result he had rights in the new
venture, in which Goldman Sachs became partowner. Id. Borsellino sued Goldman Sachs, claiming that it had conspired with the plaintiff's former
business partners to commit deprive him of his
rightful interest in the new business. Id. The complaint alleged that Goldman was aware that Borsellino had an interest in the venture and conspired
with the other partners to wait until the partnership
with Borsellino could be terminated before making
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an investment. Id.
*15 As to the claims of tortious interference
with economic advantage and interference with fiduciary relationship, the Seventh Circuit held that
the allegations that Goldman Sachs conspired with
the partners to cut the plaintiff out of the deal
“made neither economic nor common sense” therefore plaintiff did not plausibly state a claim for a
conspiracy, and the allegation that Goldman Sachs
“accepted the benefits” of a breach of fiduciary
duty failed because the complaint failed to allege
how the breach could benefit Goldman Sachs. Id. at
508-09. As to the claim of civil conspiracy, the
Seventh Circuit held that claim failed because the
complaint failed to state with particularity the circumstances constituting the conspiracy between
Goldman Sachs and the plaintiff's former partners.
Id. at 509. The allegations in the complaint were
merely that Goldman Sachs participated in testing
the partners' system for SEC compliance and did
not invest in the system until the principals had cut
off business ties with the plaintiff. Id. The Seventh
Circuit held that “[t]his fact and a handful of unreasonable inferences are not enough to satisfy
Rule9(b)'s particularity requirements” and affirmed
the dismissal of the civil conspiracy claim against
Goldman Sachs. Id.
Likewise, in Spadafore v. Gardner, 330 F.3d
849 (6th Cir.2003) the Sixth Circuit affirmed summary judgment in a 42 U.S.C. § 1983 claim where
the plaintiffs had “submitted no evidence, circumstantial or otherwise, suggesting that the defendants
had a single plan when they made the allegedly
false statements.” Id.
Finally, the case of Tramontana v. May, 2004
WL 539065 (E.D.Mich. March 16, 2004), cited by
Coventry in support of its argument that dismissal
is appropriate here, actually undermines Coventry's
argument. While the court there did hold that conspiracy claims grounded in fraud must satisfy the
particularity requirements of Rule 9(b), the court in
that case found the allegations sufficient under Rule
9(b) where the complaint alleged that several indi-
viduals and entities “illegally, maliciously, and
wrongfully conspired with with one another with
the intent to and for the illegal purpose of: A.
Fraudulently inducing [the counterplaintiffs] to invest
in
Graminex;
and
B.
Assisting
[counterdefendant] Tramontana in his breaches of
fiduciary duty to [counterplaintiffs]” Tramontana at
*8. The court held that because the “averments of
fraud in this count of the counterclaim refer to the
specific allegations already set forth in Count I alleging fraudulent inducement,” they were pleaded
with sufficient specificity to satisfy Rule 9(b). Id.
Here, as in Tramontana, the precise misrepresentations, the dates the alleged misrepresentations
were made, and the persons who allegedly made the
misrepresentations are all stated with particularity,
while the complaint also sets forth facts from which
a factfinder could find circumstantial evidence of a
conspiracy, including facts showing that the other
defendants were aware of the applications before
they were made and facts that tend to show that the
other defendants, including Coventry, benefited
from the alleged misrepresentations. The cases
cited by defendants do not require anything more.
Specifically, the cases cited by defendants do no require the “time, place, manner” of the actual conspiracy, the dates of meetings and so forth. Thus,
the Court finds that Phoenix's conspiracy claims are
sufficiently specific for purposes of Rule 9(b) of the
Federal Rules of Civil Procedure.
*16 Defendants argue that a claim for civil
conspiracy may not exist in the air; rather, it is necessary to prove a separate actionable tort, and argue that because the plaintiffs have not alleged any
actionable tort theories their claim for civil conspiracy also fails. The Court, however, has found that
the Complaint states a prima facie claim for misrepresentation as to the Second Rosen Policy. Furthermore, while the fact that the alleged misrepresentations are not attached to the policies defeats a claim
for rescission under the Michigan statute, defendants have offered no authority that such misrepresentations cannot form the basis for a separate tort
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action, provided the elements for common law
fraud are otherwise met. The Michigan statute
merely says that fraud is not a basis for avoiding
the policy if the alleged fraudulent statements are
not attached to the policy-it does not say that no
claim can be based on the allegedly fraudulent
statements.
Defendants, citing Bell Atl. Corp., 127 S.Ct. at
1965, argue that plaintiffs' conspiracy claim is not
plausible. Coventry argues that the claim rests on
the premise that LaSalle Bank, in conspiracy with
the other defendants, would extend loans exceeding
$750,000 secured by fraudulently procured life insurance policies and it is not credible to argue that
LaSalle Bank would accept such tainted collateral,
together with potential legal liability, to secure
valuable loans. This argument highlights the distinction between this case and Bell Atlantic, which
also involved a motion to dismiss in the context of
pleading a civil conspiracy, albeit not in the context
of fraud.
In Bell Atlantic, the Court found that the complaint had failed to state a claim for civil conspiracy
under Section 1 of the Sherman Act where the only
facts alleged by the plaintiffs in support of their
conspiracy claim was parallel conduct, and conscious parallelism does not, as a matter of law, violate the Sherman Act absent an agreement between
the defendants. Id. at 1970-71. Further, the Court
found allegations that the defendants engaged in
parallel conduct did not raise an inference of agreement in that case because the defendants had every
economic incentive to act the way they did even
without an agreement to do so. The Court held that
where the complaint fails to plead facts that suggest
a conspiracy, and, under the facts alleged an actual
conspiracy is implausible, the complaint fails to
state a claim for civil conspiracy. Id. at 1974
aged and/or aided and abetted the implementation
of said plan to defendants' mutual advantage and
Phoenix's detriment,” that they benefited from the
issuance of the policies in sharing several hundred
thousand dollars of commissions that would not
have been paid if the policies had not been issued,
and that the policies would not have been issued absent fraud on the part of the insured. These allegations may not be factually supported, but they are
not “implausible” under Bell Atlantic.
*17 The Court has considered the other arguments made by defendants in support of their motion to dismiss Count III, and finds them to be variations of the argument already addressed. It is sufficient to state that the Court has considered each and
every one and finds them to be disposed of by the
reasoning above. Therefore, for the reasons stated
above, the Court will deny defendants' motion to
dismiss Count III of the complaint.
CONCLUSION
For the reasons stated above, the Court
GRANTS IN PART AND DENIES IN PART defendants' motion to dismiss the complaint. Defendant's motion to dismiss as to claims for declaratory
judgment as to defendants Rosen and the Rosen
Trust is GRANTED IN PART AS FOLLOWS:
Plaintiffs' claims for declaratory judgment and rescission in Counts I and II are DISMISSED as to
defendants Coventry and CBI and plaintiffs' claim
for declaratory judgement of rescission in Count I
is DISMISSED as to Rosen and the Rosen Trust as
to the First Rosen Policy. Defendants' motion to
dismiss in all other regards is hereby DENIED.
E.D.Mich.,2009.
Phoenix Life Ins. Co. v. LaSalle Bank N.A.
Slip Copy, 2009 WL 877684 (E.D.Mich.)
END OF DOCUMENT
Here, in contrast to those in Bell Atlantic, the
conspiracy allegations are not implausible. Instead,
the complaint alleges that the defendants communicated among themselves prior to the issuance of
the policies, they “participated in and/or encour-
© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.
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