Dukes Bridge LLC v. Security Life of Denver Insurance Company, No. 1:2010cv05491 - Document 171 (E.D.N.Y. 2015)
Court Description: MEMORANDUM & ORDER granting in part and denying in part 146 Motion to Dismiss for Failure to State a Claim. For the reasons set forth herein, the motion is GRANTED solely as to Counts III and IV and otherwise DENIED. Ordered by Judge I. Leo Glasser on 6/15/2015. (Carey, Charles)
Download PDF
<![CDATA[
Dukes Bridge LLC v. Security Life of Denver Insurance Company Doc. 171 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ------------------------------------------------------x DUKES BRIDGE LLC, Plaintiff, MEMORAN D U M & ORD ER - against 10 -CV-5491 (ILG) (RML) SECURITY LIFE OF DENVER INSURANCE COMPANY, Defendant-Counterclaim Plaintiff, - against DUKES BRIDGE LLC, RCX I LLC, et al., Counterclaim Defendants. ------------------------------------------------------x GLASSER, Senior United States District J udge: Plaintiff Dukes Bridge LLC (“Dukes Bridge”) brings this action against Security Life of Denver Insurance Com pany (“SLD”) to obtain paym ent of death benefits on a life insurance policy that SLD issued. SLD raises an affirm ative defense of fraud and asserts counterclaim s against Dukes Bridge and num erous other individuals and entities, including Central Strategies, LLC (“CS”), Moshe Schreiber, and Grecia Scibilia (together, the “CS counterclaim defendants”). SLD alleges that Dukes Bridge and the other counterclaim defendants are endeavoring to defraud SLD as part of a “strangeroriginated life insurance,” or “STOLI,” schem e, in which persons with no insurable interest in an individual’s life illegally obtain an interest in a life insurance policy on that individual, essentially betting on his or her dem ise. See AEI Life, LLC v. Lincoln Benefit Life Co., 30 5 F.R.D. 37, 41 (E.D.N.Y. 20 15) (quoting Lincoln Nat’l Life Ins. Co. v. Schwarz, No. 0 9-CV-3361, 20 10 WL 3283550 , at *1 (D.N.J . Aug. 18, 20 10 ), for a detailed description of a “typical STOLI transaction”). Pending before the Court is the CS 1 Dockets.Justia.com counterclaim defendants’ m otion to dism iss SLD’s counterclaim s against them for failure to state a claim . For the following reasons, that m otion is GRANTED solely to the extent that Counterclaim Counts III and IV are dism issed as against the CS counterclaim defendants, and otherwise DENIED. BACKGROU N D Except where otherwise noted, the following facts are taken from the Second Am ended Counterclaim (Dkt. No. 10 9) and are accepted as true for the purpose of deciding this m otion. Because SLD m akes extensive allegations regarding the conduct of m ultiple parties, the Court’s recitation of the facts here is lim ited to those that concern the claim s against the CS counterclaim defendants. SLD is a Colorado com pany that underwrites life insurance policies, including those for ING Life Com panies (“ING”). CS is a New York com pany that m arkets and sells life insurance policies on the secondary m arket. At all tim es relevant to this litigation, Schreiber was an insurance broker and owner of CS. Scibilia was a CS em ployee. SLD asserts, and the CS counterclaim defendants do not dispute, that this court has jurisdiction over the counterclaim s pursuant to 28 U.S.C. § 1332(a)(1), and that venue is proper. In the fall of 20 0 7, CS entered into a series of agreem ents with J oseph Rubin, another insurance broker and proprietor of his own com pany, J oseph Rubin Inc., by which they planned to share between them com m issions to be earned on life insurance policies they procured for a m an nam ed Eugene Merm elstein. Rubin and the CS counterclaim defendants approached the Bollinger Group (“Bollinger”), an agency that facilitates com m unication between brokers and insurance com panies, in early Septem ber of 20 0 7 to discuss obtaining policies on Merm elstein’s life. On Septem ber 15, 20 0 7, Bollinger subm itted a prelim inary inquiry to ING, and ING responded that it 2 would be willing to consider issuing a policy on his life, subject to the subm ission of a form al application that m et all underwriting requirem ents. In October of 20 0 7, a num ber of trusts were created by Merm elstein, nam ing Merm elstein as the grantor and various m em bers of his fam ily as trustees. One of these trusts, the E. Merm elstein Irr Trust A (“Trust A”), nam ed Merm elstein’s daughter, Esther Fried, as both its sole trustee and beneficiary. On or about October 23, 20 0 7, Merm elstein and Fried signed an application for a $ 10 ,0 0 0 ,0 0 0 .0 0 life insurance policy from ING to be underwritten by SLD (the “Policy”). The application nam ed Merm elstein as the proposed life to be insured, Trust A as the beneficiary, and New J ersey as the state from which the application originated and insurance would issue. In support of that application, Merm elstein and Fried affirm ed that Merm elstein’s total net worth was $ 20 ,0 0 0 ,0 0 0 .0 0 and that his annual personal incom e was $ 1,30 0 ,0 0 0 .0 0 . Rubin com pleted a portion of the application, indicating that he was Merm elstein’s insurance agent, and that, to his knowledge, Trust A did not intend to transfer ownership of the Policy or seek financing for its prem ium s. Rubin’s office forwarded Rubin’s portion of the application to Scibilia, who directed Rubin to leave blank a question which asked whether Merm elstein was applying for other life insurance policies, which Rubin did. Scibilia then forwarded the signed application to Bollinger, who in turn forwarded it to SLD. SLD asked for further details about Merm elstein, including inform ation about other insurance he carried (if any) and confirm ation of the health and financial inform ation contained in his application. After receiving this request, Rubin and the CS counterclaim defendants directed J ewel Strader, a co-counterclaim -defendant based in Texas, to prepare an “Inspection Report” that purported to contain the requested 3 inform ation. The Inspection Report provided independent third-party verification of Merm elstein’s health and incom e. It noted, am ong other things, that Merm elstein had no other insurance in force, and that Merm elstein’s accountant had stated that Merm elstein’s annual incom e was over $ 1,0 0 0 ,0 0 0 .0 0 and his total net worth was approxim ately $ 30 ,0 0 0 ,0 0 0 .0 0 . The CS counterclaim defendants and Rubin also told Bollinger that while Merm elstein was applying to two other insurers for coverage, he would only accept the carrier who m ade the best offer. In J anuary of 20 0 8, relying on the above subm issions, SLD approved Merm elstein’s application and issued the $ 10 ,0 0 0 ,0 0 0 .0 0 Policy, which required an initial prem ium of $ 872,30 0 .0 0 . That prem ium was paid by check and wire transfer. The subm issions SLD relied upon in approving the application, however, were fraudulent. Merm elstein’s incom e was not over $ 1,0 0 0 ,0 0 0 .0 0 a year, his net worth was not $ 20 ,0 0 0 ,0 0 0 .0 0 or m ore, the accountant and other com panies referenced in the Inspection Report were fictitious, outside financing had been secured to pay the Policy’s prem ium s, Fried (on behalf of Trust A) had always intended to transfer the Policy to others, and Rubin and the CS counterclaim defendants had obtained or were in the process of obtaining sim ilar life insurance policies on Merm elstein from other com panies. Schreiber was paid $ 252,967.0 0 of the $ 30 5,30 5.0 0 com m ission that Bollinger received from SLD for obtaining the Policy. Had SLD known of the deception described above, it would not have issued the Policy. A com plex web of shell trusts and financing organizations m aking loans to one another paid the prem ium s on the Policy, but SLD claim s the party responsible for m aking these paym ents was Dukes Bridge, the plaintiff in this action. After Merm elstein died in 20 0 9, Dukes Bridge, which had becom e the ultim ate owner of the 4 Policy by virtue of a chain of reassignm ents, requested the Policy’s proceeds. SLD refused to pay, prom pting Dukes Bridge to file this suit on Novem ber 29, 20 10 . See Com pl. (Dkt. No. 1). SLD filed its first answer and counterclaim on J anuary 21, 20 11 (Dkt. No. 9). Discovery, m otion practice, and m ediation ensued. SLD filed its Fourth Am ended Answer and Second Am ended Counterclaim on August 18, 20 14. The CS counterclaim defendants filed this m otion on Novem ber 7, 20 14 (Dkt. No. 146), SLD opposed the m otion on Decem ber 15, 20 14 (Dkt. No. 151), and the CS counterclaim defendants replied on J anuary 21, 20 15 (Dkt. No. 156). Oral argum ent was heard on J une 8, 20 15. LEGAL STAN D ARD To survive a m otion to dism iss under Federal Rule of Civil Procedure 12(b)(6), a com plaint (or, in this case, counterclaim ) m ust contain “sufficient factual m atter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (20 0 9) (quoting Bell Atl. Corp. v. Twom bly, 550 U.S. 544, 570 (20 0 7)). Although detailed factual allegations are not necessary, m ere legal conclusions, “a form ulaic recitation of the elem ents of a cause of action,” or “naked assertions” by the counterclaim plaintiff will not suffice. Id. (internal quotation m arks and citations om itted). The Court m ust accept as true all factual allegations and draw all reasonable inferences in the counterclaim plaintiff’s favor. Matson v. Bd. of Educ. of the City Sch. Dist. of N.Y., 631 F.3d 57, 63 (2d Cir. 20 11). Additionally, when a party alleges fraud or m istake, it m ust “state with particularity the circum stances constituting [such] fraud or m istake” in its pleading. Fed. R. Civ. P. 9(b). To satisfy this particularity requirem ent, a pleading m ust “‘adequately specify the statem ents it claim s were false or m isleading, give particulars as 5 to the respect in which plaintiff contends the statem ents were fraudulent, state when and where the statem ents were m ade, and identify those responsible for the statem ents.’” Lundy v. Catholic Health Sys. of Long Island Inc., 711 F.3d 10 6, 119 (2d Cir. 20 13) (quoting Cosm as v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989)). Rule 9(b), however, does not replace Rule 8(a)(2), “which requires only a ‘short and plain statem ent’ of the claim s for relief.” Ouaknine v. MacFarlane, 897 F.2d 75, 79 (2d Cir. 1990 ). Thus, a claim of fraud satisfies the Federal Rules if it plausibly and succinctly alleges “‘the who, what, when, where, and how’” of the fraud. See In re Initial Pub. Offering Sec. Litig., 241 F. Supp. 2d 281, 327 (S.D.N.Y. 20 0 3) (quoting DiLeo v. Ernst & Young, 90 1 F.2d 624, 627 (7th Cir. 1990 )). D ISCU SSION I. Failu re to State a Claim U n d e r Ru le 8 ( a) ( 2 ) Count I of the Second Am ended Counterclaim , which seeks rescission of the Policy on grounds of fraud, is not asserted against the CS counterclaim defendants. Count II is a com m on law claim for fraud. Count III pleads knowing or negligent m aterial m isrepresentations of fact. Count IV alleges that the counterclaim defendants “lack[ed] [an] insurable interest” in Merm elstein’s life. Count V alleges violations of the New J ersey Insurance Fraud Prevention Act (“NJ IFPA”), N.J . Stat. Ann. § 17:33A-1, et seq., which prohibits, inter alia, m aking a false or m isleading statem ent to an insurance com pany about any m aterial elem ent of an insurance application. Count VI alleges that the counterclaim defendants participated in a civil conspiracy to secure the Policy. SLD argues that New J ersey law applies to all of its claim s because the Policy includes a New J ersey choice-of-law provision. The CS counterclaim defendants allege that New York 6 law, not New J ersey law, applies, and that, regardless of which law applies, Counts II through VI do not state claim s for relief. The Court addresses each argum ent in turn. A. Ch o ice o f Law “A federal court, sitting in diversity, m ust look to the choice-of-law rules of the state in which it sits—here New York—to resolve conflict-of-law questions.” AroChem Int’l, Inc. v. Buirkle, 968 F.2d 266, 269-70 (2d Cir. 1992) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). A rider attached to the Policy contains a New J ersey choice-of-law clause, and such clauses “are entitled to a presum ption of enforceability” in New York. Aguas Lenders Grp. v. Suez, S.A., 585 F.3d 696, 80 0 (2d Cir. 20 0 9). The CS counterclaim defendants assert that they did not sign the Policy and are therefore not bound by its choice-of-law provisions. Furtherm ore, they argue, even if they had signed the Policy, it m erely states that New J ersey law will govern “all legal rights and obligations under the contract applied for” (Dkt. No. 9-2 at 13 (em phasis added)) and “‘under New York law, a contractual choice-of-law provision governs only a cause of action sounding in contract, not one sounding in tort,’ unless the express language of the choice-of-law provision is sufficiently broad as to encom pass the entire relationship between the contracting parties.” H.S.W. Enters., Inc. v. Woo Lae Oak, Inc., 171 F. Supp. 2d 135, 141 n.5 (S.D.N.Y. 20 0 1) (quoting Lazard Freres & Co. v. Protective Life Ins. Co., 10 8 F.3d 1531, 1540 (2d Cir. 1997) (alteration om itted)). At this juncture, the CS counterclaim defendants are estopped from arguing that they cannot be bound to the Policy’s choice-of-law clause by virtue of the fact that they did not sign the Policy because SLD alleges that they derived a direct benefit from it. See Am . S.S. Owners Mut. Prot. & Indem . Ass’n, Inc. v. Am . Boat Co., LLC, No. 11 Civ. 680 4, 20 12 WL 52720 9, at *4 (S.D.N.Y. Feb. 17, 20 12) (collecting cases). They are 7 nevertheless correct that the Policy’s choice-of-law provision is insufficiently broad to encom pass non-contractual claim s. Although it “m akes reference to the law governing the rights [and obligations] of the parties, this phrase plainly refers to the parties’ rights under the [contract] and not to their rights in all contexts.” Refco Grp. Ltd. v. Cantor Fitzgerald, L.P., No. 13 Civ. 1654, 20 14 WL 2610 60 8, at *41 (S.D.N.Y. J une 10 , 20 14) (internal quotation m arks and brackets om itted). The Court m ust therefore conduct a choice-of-law analysis to determ ine what law to apply in evaluating SLD’s counterclaim s.1 “Under New York choice-of-law rules, ‘[t]he first step . . . is to determ ine whether there is an actual conflict between the laws of the jurisdictions involved.’” Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 672 F.3d 155, 157 (2d Cir. 20 12) (per curiam ) (quoting, inter alia, In re Allstate Ins. Co., 81 N.Y.2d 219, 223 (1993)). Counts III (m isrepresentation) and IV (lack of insurable interest) m ust be dism issed regardless of the law applied, for reasons set forth infra. This leaves Count II, which alleges fraud, Count V, which alleges violation of a New J ersey insurance fraud statute with no applicable New York analogue, and Count VI, which alleges civil conspiracy to com m it certain actions that are tortious solely under New J ersey law, as the sources of conflict regarding which state’s law applies to this action.2 When resolving conflicts of law over tort claim s, New York courts conduct an “interest analysis,” which is “a ‘flexible approach intended to give controlling effect to 1 The Court is aware of its prior holding that the Policy’s choice-of-law provision m andated applying New J ersey law to SLD’s NJ IFPA counterclaim against Dukes Bridge (Dkt. No. 69, reported at 20 13 WL 432894 (Feb. 4, 20 13)). With the benefit of additional briefing, the Court reaches the sam e result here using a different rationale. 2 In New York, it was lawful to buy life insurance for one’s self with the intent to transfer it to an entity that had no interest in the insured’s life until May 18, 20 10 , long after the Policy was purchased in this case. See Kram er v. Phoenix Life Ins. Co., 15 N.Y.3d 539, 548 n.5 (20 10 ) (citing N.Y. Ins. Law § 7815). 8 the law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties, has the greatest concern with the specific issue raised in the litigation.’” Finance One Pub. Co. v. Lehm an Bros. Special Fin., Inc., 414 F.3d 325, 337 (2d Cir. 20 0 5) (quoting Cooney v. Osgood Mach., Inc., 81 N.Y.2d 66, 72 (1993)). Where, as here, the conflicting rules involve the appropriate standards of conduct . . . the law of the place of the tort ‘will usually have a predom inant, if not exclusive, concern’ . . . because [of] the locus jurisdiction’s interests in protecting the reasonable expectations of the parties who relied on it to govern their prim ary conduct and in the adm onitory effect that applying its law will have on sim ilar conduct in the future . . . . Schultz v. Boy Scouts of Am ., Inc., 65 N.Y.2d 189, 198 (1985) (quoting Babcock v. J ackson, 12 N.Y.2d 473, 483 (1963)). The CS counterclaim defendants argue that New York law should govern this dispute because the alleged actions they took to orchestrate the sale of the Policy occurred in New York, where Merm elstein lived. SLD, however, correctly points out that a rider attached to the Policy states that “[a]ll com m unications, solicitation, and negotiation [for its] application occurred in the Application State [i.e., New J ersey],” and that the application states it was “signed by the owner/ applicant and the agent in the Application State.” See Dkt. No. 9-2 at 13. In sim ilar circum stances, New York’s Court of Appeals has found that the fraud took place in the state where the insurance policy was purchased, “not in New York, where [the] alleged fraudulent schem e was designed.” In re Grand Theft Auto Video Gam e Consum er Litig., 251 F.R.D. 139, 149 (S.D.N.Y. 20 0 8) (citing Goshen v. Mut. Life Ins. Co., 98 N.Y.2d 314, 325-26 (20 0 2)). Since “[s]tates have a strong interest in protecting consum ers with respect to sales 9 within their borders,” the Court will apply New J ersey law to SLD’s counterclaim s. See id. (internal quotation m arks and citation omitted). B. Frau d ( Co u n t II) To state a claim for com m on law fraud in New J ersey, plaintiffs m ust allege (1) a m aterial m isrepresentation of a presently existing or past fact, (2) the defendant’s knowledge or belief of its falsity, (3) an intention that the recipient of the m isrepresentation will rely on it, (4) reasonable reliance thereon by that recipient, and (5) resulting dam ages. Gennari v. Weichert Co. Realtors, 691 A.2d 350 , 367 (N.J . 1997) (citing J ewish Ctr. of Sussex Cnty. v. Whale, 432 A.2d 521, 524 (N.J . 1981)). SLD has plausibly alleged that the CS counterclaim defendants knowingly provided false inform ation with the intention that SLD would rely on it in issuing the Policy, thereby satisfying all five elem ents of the cause of action.3 The CS counterclaim defendants’ assertions that they cannot be found liable for this fraud because they were not the actual signatories to the docum ents containing the fraudulent inform ation are unavailing. “A plaintiff need not hear the m isrepresentation from the defendant directly for there to be actionable fraud: ‘[W]here false representations are m ade to one person with the intent that they be com m unicated to others for the purpose of inducing the others to rely upon them , they m ay form the basis of an action for fraud by those others.’” Port Liberte Hom eowners Ass’n, Inc. v. Sordoni Constr. Co., 924 A.2d 592, 60 1 (N.J . Super. Ct. App. Div. 20 0 7) (quoting Metric Inv., Inc. v. Patterson, 244 A.2d 311, 314 (N.J . Super. Ct. App. Div. 1968) (alteration per Port Liberte)). 3 As discussed infra, SLD has m ade these allegation s with the specificity that Rule 9(b) requires. 10 C. Mate rial Mis re p re s e n tatio n ( Co u n t III) To the extent that Count III alleges a “knowing” m aterial m isrepresentation of fact, it is duplicative of Count II. See Konover Constr. Corp. v. E. Coast Constr. Servs. Corp., 420 F. Supp. 2d 366, 370 (D.N.J . 20 0 6) (describing the elem ents of intentional m isrepresentation as identical to those of com m on law fraud). As for negligent m aterial m isrepresentation, there is no indication anywhere in the Second Am ended Counterclaim that SLD m ight view the CS counterclaim defendants as negligent. Instead, it describes them , along with the other counterclaim defendants, as “intending from the inception” of their “schem e” to profit from insuring a life in which they had no insurable interest while “work[ing] to conceal . . . facts from [SLD] in order to prom ote and perpetuate their fraud.” See, e.g., 2d Am . Countercl. ¶¶ 114-15, 169. Since there are no facts pleaded that even rem otely support a claim for negligence, the m otion to dism iss Count III as against the CS counterclaim defendants is granted. D . Lack o f In s u rable In te re s t ( Co u n t IV) At oral argum ent on this m otion, SLD agreed to discontinue pursuing Count IV as against the CS counterclaim defendants, and it is dism issed accordingly. E. N JIFPA ( Co u n t V) Since SLD’s com m on law fraud claim survives the m otion to dism iss, its claim under the NJ IFPA also survives “because this type of claim requires m uch less thorough pleading.” Schwarz, 20 10 WL 3283550 , at *16. A plaintiff m ay state an NJ IFPA claim m erely by alleging that a defendant knowingly m ade a m aterial m isrepresentation of fact—the statute “does not require proof of reliance on the false statem ent or resultant dam ages, . . . [or] proof of intent to deceive.” See id. (citations om itted); Liberty Mut. Ins. Co. v. Land, 892 A.2d 1240 , 1247 (N.J . 20 0 6) (noting that “the Act requires 11 plaintiffs alleging [NJ ]IFPA violations to prove fewer elem ents than required for com m on law fraud”). F. Civil Co n s p iracy ( Co u n t VI) “In New J ersey, a civil conspiracy is ‘a com bination of two or m ore persons acting in concert to com m it an unlawful act, or to com m it a lawful act by unlawful m eans, the principal elem ent of which is an agreem ent between the parties to inflict a wrong against or injury upon another, and an overt act that results in dam age.’” Banco Popular N.A. v. Gandi, 876 A.2d 253, 263 (N.J . 20 0 5) (quoting Morgan v. Union Cnty. Bd. of Chosen Freeholders, 633 A.2d 985, 998 (N.J . Super. Ct. App. Div. 1993)). SLD has plainly alleged that the CS counterclaim defendants conspired with Rubin to defraud the insurer. The m otion to dism iss is therefore denied as to Count VI. II. Failu re to Satis fy Ru le 9 ( b) ’s H e igh te n e d Ple ad in g Stan d ard All rem aining counts of the Second Am ended Counterclaim allege fraud, thereby triggering the “particularity” requirem ent of Rule 9(b). Additionally, Counts II and VI allege intent to defraud, and while Rule 9(b) notes that intent m ay be averred generally in a com plaint, “plaintiffs are still required to plead the factual basis which gives rise to a ‘strong inference’ of fraudulent intent.” Wexner v. First Manhattan Co., 90 2 F.2d 169, 172 (2d Cir. 1990 ) (quoting Beck v. Mfrs. Hanover Trust Co., 820 F.2d 46, 50 (2d Cir. 1987)). The CS counterclaim defendants argue that the rem aining counts fail to m eet the above requirem ents because (1) their underlying factual allegations are based largely upon inform ation and belief, (2) the facts pleaded do not give rise to a strong inference of fraudulent intent, and (3) the allegations fail to specify which counterclaim defendant 12 was responsible for each individual alleged m isrepresentation. These argum ents are m eritless, for the reasons set forth below. A. Alle gatio n s Bas e d U p o n In fo rm atio n an d Be lie f Ordinarily, “Rule 9(b) pleadings cannot be based upon inform ation and belief.” DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir. 1987). “[W]here, as here, [however,] m uch of the factual inform ation needed to fill out plaintiff’s com plaint lies peculiarly within the opposing parties’ knowledge, the general rule disfavoring allegations founded upon belief ought not to be rigidly enforced.” Id. at 1248. The Second Am ended Counterclaim sets forth specific factual allegations, such as the CS counterclaim defendants’ m isleading com m unications with Bollinger (2d Am . Countercl. ¶ 156), the fraudulent contents of the insurance application and Inspection Report (id. ¶¶ 169, 193-99), and the com m ission paym ents m ade to and from the CS counterclaim defendants after the sale of the Policy (id. ¶¶ 217-18), and plausibly extrapolates from those allegations the details of the counterclaim defendants’ m ultipart schem e to reap the rewards from fraudulently-obtained life insurance. In other words, there are sufficient facts alleged to support SLD’s assertions m ade upon inform ation and belief in its Second Am ended Counterclaim , especially since the workings of the alleged schem e are known particularly by the counterclaim defendants. B. In fe re n ce o f Frau d u le n t In te n t A strong inference of fraudulent intent m ay be established “either (a) by alleging facts to show that defendants had both m otive and opportunity to com m it fraud, or (b) by alleging facts that constitute strong circum stantial evidence of conscious m isbehavior or recklessness.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994). In this case, to fail to draw if not conclude the inference of intent to defraud would be to 13 pretend that the sequence of false representations alleged were imagined and never m ade, or m ade in jest. The m otion to dism iss Counts II and VI on grounds that such allegations were insufficient to satisfy Rule 9(b) is therefore denied. C. Blan ke t Alle gatio n s Again s t all Co u n te rclaim D e fe n d an ts Finally, the CS counterclaim defendants claim that the language in the counts them selves violates Rule 9(b) because it does not describe which counterclaim defendants are responsible for which allegedly unlawful actions. The pleading as a whole, however, describes each counterclaim defendant’s distinct role in the STOLI schem e: the CS counterclaim defendants coordinated with Rubin to effectuate the sale of the Policy, Strader drafted the fraudulent Inspection Report, Fried co-signed the Policy with her father for Trust A before leaving the trust in the hands of strangers, and Dukes Bridge and its affiliates ultim ately attem pted to claim the benefits. In other words, while the various counterclaim defendants played different parts in the schem e, all of them com m itted fraud. One of the central purposes of Rule 9(b) is to “provide a defendant with fair notice of a plaintiff’s claim ,” and that notice need not take any specific form so long as it is sufficiently particularized. See Acito v. IMCERA Grp., Inc., 47 F.3d 47, 52 (2d Cir. 1995) (internal quotation m arks and citations om itted). Since SLD’s detailed Second Am ended Counterclaim provides such notice, the CS counterclaim defendants’ m otion to dism iss it on Rule 9(b) grounds is denied. 14 CON CLU SION For the foregoing reasons, the CS counterclaim defendants’ m otion to dism iss the Second Am ended Counterclaim as against them is GRANTED solely as to Counts III and IV and otherwise DENIED. SO ORDERED. Dated: Brooklyn, New York J une 15, 20 15 / s/ I. Leo Glasser Senior United States District J udge 15
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
