United States District Court, N.D. Texas, Fort Worth Division
MEMORANDUM OPINION AND ORDER
MCBRYDE, UNITED STATES DISTRICT JUDGE.
for consideration multiple motions filed by defendants in the
above-captioned action seeking dismissal of claims made by
plaintiffs. Life Partners Creditors' Trust and Alan M.
Jacobs, as Trustee for Life Partners Creditors' Trust, in
their amended complaint
("Complaint"). After having considered such motions,
the allegations of the Complaint, plaintiffs' omnibus
responses to the motions,  replies of defendants,  the report and
recommendation regarding such motions issued by the
bankruptcy judge on November 27, 2017,  plaintiffs'
objections to the report and recommendation,  the response to
plaintiffs' objections,  and pertinent legal authorities,
the court has concluded that all claims asserted by
plaintiffs in the Complaint should be
dismissed. The court has also considered
plaintiffs' "renewed" motion for leave to file
second amended complaint and the response thereto and finds
that the motion should be denied.
of the Parties and the Nature of the Claims
are the Life Partners Creditors' Trust and Alan M.
Jacobs, as trustee for that trust. The background that led to
the creation of the trust, the designation of Alan M. Jacobs
as trustee, and the contentions of plaintiffs concerning
standing to make the claims they are asserting in this action
are described in the Complaint. Adv. Doc. 350 at 8-10,
¶¶ 12-22. On those same subjects, the court makes
reference to the Motion for Leave to: (1) Substitute
Plaintiffs; and (2) Substitute Plaintiffs' Counsel filed
February 14, 2017, in Adversary No. 16-04022-rfn, and its
related February 16, 2017 Order. Adv. Docs. 341 and 345.
defendants are collectively referred to in the Complaint as
"Defendant Licensees." Adv. Doc. 350 at 8.
Plaintiffs also say that defendants "are Life
Partners' Referring Licensees, " but then refer to
"all Referring Licensees" as though defendants are
a sub-group of them. Id. at 5, ¶ 4. They are
listed in paragraph 9 of the Complaint, Id. at 6-8,
¶ 9/ and in the Complaint's Exhibit 1, id.
at 6, n.2 and Adv. Doc. 350-1. The defendants thus named and
listed are 164 in number. Adv. Doc. 350-1 at 25.
alleged in the Introduction of the Complaint that the
"lawsuit seeks to recover commissions paid to the
Defendants by [Life Partners]" and "damages
suffered by investors who assigned their claims to the
Creditors Trust." Adv. Doc. 3 50 at 4, ¶ 1. The
claims asserted in the Complaint are characterized as either
"Estate Claims, " which are for "(1)
fraudulent transfers under the Texas Uniform Fraudulent
Transfer Act and 11 U.S.C. § 548; (2) breach of
contract; and (3) preference claims under 11 U.S.C. §
547 and various disallowance claims under 11 U.S.C.
§§ 5 02 and 510, " or "Investor
Claims" (or "Investor Assigned Claims"), which
are for "(1) negligent misrepresentation; (2) breach of
the Texas Securities Act based upon the sale of unregistered
securities by unlicensed brokers; (3) for rescission pursuant
to the TSA; and (4) for breach of fiduciary duty."
Id. at 5-6, ¶¶ 5-7; 50-52. The assignments
of those claims to plaintiffs were alleged to have been
accomplished by, or pursuant to, the bankruptcy plan that was
confirmed November 1, 2016, and became effective December 9,
2016. Id. at 10, ¶¶ 21-22.
dollar amount of recovery plaintiffs are seeking from each of
the defendants is not alleged in the Complaint unless the
"Grand Totals" shown on the Complaint's Exhibit
5 relate to that subject. Adv. Doc. 350-5. The Complaint does
say that "all Referring Licensees received in excess of
$102 million in commissions." Adv. Doc. 350 at 5, ¶
4. Confusingly, it also says that "the Defendant
Licensees collectively received over $12 million in
commissions and fees." Id. at 29,
¶79-In addition to seeking recovery of
unspecified amounts of monetary damages from defendants,
id. at 54, ¶ 191, plaintiffs seek to impose a
constructive trust against all licensees. Id. at
52-53, ¶¶ 187-88. While the allegations lack
clarity, apparently the res of the trust is to be
whatever money each of the defendants received as
compensation for sales on behalf of Life Partners of
fractional interests in life insurance policies to the
thousands of investors that are identified in Exhibit 6 to
the Complaint. Id., at 53; Adv. Doc. 350-6.
described the Estate Claims they are asserting as follows:
Count l asserts actual fraudulent transfer claims against all
Licensees shown on Exhibit 5 to the Complaint based on
section 24.005(a) (1) of the Texas Business & Commerce
Code through 11 U.S.C. § 544. Adv. Doc. 350 at 42-45,
Count 2 asserts constructive fraudulent transfer claims based
on section 24.005(a)(2) of the Texas Business & Commerce
Code through 11 U.S.C. § 544, again brought against all
Licensees shown on Exhibit 5. Id. at 45-46,
Count 3 asserts actual fraudulent transfers against certain
Licensees as contemplated by 11 U.S.C. § 548(a)(1)(A).
Id. at 46-47 ¶¶ 140-44.
Count 4 asserts constructive fraudulent transfer claims
against certain Licensees as contemplated by 11 U.S.C. §
548(a) (1) (B) . Id. at 47-48, ¶¶ 145-52.
Count 5 asserts preference claims brought pursuant to 11
U.S.C. § 547 against certain Licensees shown on Exhibit
5. Id. at 48, ¶¶ 153-59.
Count 6 asserts claims against all Licensees for recovery of
all avoided transfers as authorized by 11 U.S.C. § 550.
Id. at 48, ¶¶ 160-62.
Count 7 asserts breach of contract claims against all
Licensees. Id. at 49-50, ¶¶ 163-68. The
court's understanding is that the breach of contract
claims have been abandoned by plaintiffs, Doc. 2 0 at 9,
¶ 6; Doc. 50 at 9, ¶ 6.
Count 8 asserts equitable subordination claims by which
plaintiffs seek to cause all claims of all Licensees to be
equitably subordinated as contemplated by 11 U.S.C. §
510(c). Adv. Doc. 350 at 50, ¶¶ 169-72.
Count 9 seeks disallowance of all claims of all Licensees
pursuant to the authority of 11 U.S.C. § 502(d). IcL at
50, ¶¶ 173-74.
"Investor Assigned Claims" alleged by plaintiffs
are as follows:
Count 10 asserts negligent misrepresentation claims against
certain Licensees. Id. at 50-51, ¶¶
Count 11 asserts claims against certain Licensees for breach
of the Texas Securities Act. Id. at 51-52,
Count 12 asserts claims of breach of fiduciary duty against
certain Licensees. Id. at 52, ...