lphi class action answer to motion to dismiss

8/3/2019 LPHI Class Action Answer to Motion to Dismiss

http://slidepdf.com/reader/full/lphi-class-action-answer-to-motion-to-dismiss 1/28

1828238v1/012370

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

SEAN TURNBOW, WILLIAM and MARY

RICE, ROBERT YOSKOWITZ,FREDERICK VIEIRA, and ANTHONYTAYLOR, on behalf of themselves and all others similarly situated ,

Plaintiffs,

vs.

LIFE PARTNERS INC., LIFE PARTNERSHOLDINGS, INC., BRIAN D. PARDO, and

R. SCOTT PEDEN,

Defendants.

§

§§§§§§§§§§§

§§§

CIVIL ACTION NO.: 3:11-CV-1030-M

(Consolidated with Civil Action Nos. 3:11-cv-1093-M, 3:11-cv-1137-M, 3:11-cv-1152-M, 3:11-cv-1225-M, and 3:11-cv-1325-M)

PLAINTIFFS’ RESPONSE TO DEFENDANTS’

MOTION TO DISMISS AND BRIEF IN SUPPORT

Steven G. Sklaver California Bar No. 237612 (Admitted PHV)Amy T. BrantlyCalifornia Bar No. 210893 (Admitted PHV)

SUSMAN GODFREY L.L.P.

1901 Avenue of the Stars, Suite 950Los Angeles, CA 90067-6029Telephone: (310) 789-3100Facsimile: (310) 789-3150Email: [email protected]

Lewis S. KahnLouisiana Bar No. 23805 (Admitted PHV)Craig J. Geraci, Jr.Alabama Bar No. 3847-C62G (Admitted PHV)

KAHN SWICK & FOTI, LLC206 Covington StreetMadisonville, LA 70447Tel: (504) 455-1400Fax: (504) 455-1498Email: [email protected]

[email protected]

Terrell W. OxfordTexas Bar No. 15390500Jonathan BridgesTexas Bar No. 24028835


901 Main Street, Suite 5100Dallas, Texas 75202Telephone: (214) 754-1900Facsimile: (214) 754-1933Email: [email protected]

[email protected]

Kim E. Miller California Bar No. 178370 (Admitted PHV)

KAHN SWICK & FOTI, LLC

500 5th Avenue, Suite 1810 New York, NY 10110Tel: (212) 696-3730Fax: (504) 455-1498Email: [email protected]

INTERIM CO-LEAD CLASS COUNSEL

Case 3:11-cv-01030-M Document 44 Filed 10/06/11 of 28 PageID 577



1828238v1/012370 ii

TABLE OF CONTENTS

I. INTRODUCTION.......................................................................................................................1

II. STATEMENT OF FACTS ........................................................................................................2

III. LEGAL STANDARDS ............................................................................................................4

IV. ARGUMENT............................................................................................................................6

A. Plaintiffs Have Standing To Assert Their Claims....................................................6

B. Fiduciary Duty Claims.............................................................................................9

1. The Economic Loss Rule Does Not Apply To Plaintiffs’Breach of Fiduciary Duty Claim..................................................................9

2. The Economic Loss Rule, Even If Applied, Does Not ReachThe Remedies That Plaintiffs Are Seeking................................................11

3. Defendants’ Fiduciary Duties Are Not Contractually Limited..................13

4. Defendants’ Argument For Dismissing Count II Is WhollyDependent On Their Prior Arguments.......................................................15

C. Contract Claims .....................................................................................................15

D. California UCL Claims..........................................................................................18

V. CONCLUSION........................................................................................................................21




1828238v1/012370 iii

TABLE OF AUTHORITIES

Cases

Ackerman v. Coca-Cola,

2010 U.S. Dist. LEXIS 73156 (E.D.N.Y. July 21) ........................................................... 19

Aquila Sw. Pipeline, Inc. v. Harmony Exploration, Inc.,48 S.W.3d 225 (Tex. App.—San Antonio 2001, pet. denied) .......................................... 15

Ashcroft v. Iqbal,

129 S. Ct. 1937 (2009)........................................................................................................ 5

Bell Atlantic Corp. v. Twombly,

550 U.S. 544 (2007)............................................................................................................ 5

Blue Shield of Virginia v. McCready,457 U.S. 465 (1982)............................................................................................................ 8

Burrows v. Arce,997 S.W.2d 229 (Tex. 1999)............................................................................................... 7

CCE, Inc., v. PBS&J Constr. Servs., Inc.,2011 Tex. App. LEXIS 809 (Tex. App.—Houston [1st Dist.] Jan. 28, 2011) ................. 12

Chavez v. Blue Sky Natural Beverage Co.,

340 Fed. Appx. 359 (9th Cir. 2009).................................................................................. 20

Classical Vacations, Inc. v. Air France,2003 Tex. App. LEXIS 3160 (Tex. App.—Houston [1st Dist.] Apr. 10, 2003)............... 12

Cole v. General Motors Corp.,484 F.3d 717 (5th Cir. 2007) .............................................................................................. 6

Conley v. Gibson,355 U.S. 41 (U.S. 1957)...................................................................................................... 4

Daugherty v. American Honda Motor Co., Inc.,144 Cal. App. 4th 82, 51 Cal. Rptr. 3d 118 (2006)........................................................... 19

Doe v. Smithkline Beecham Corp.,855 S.W.2d 248 (Tex. Ct. App.—Austin 1993) ............................................................... 10

Duke Energy Intern., L.L.C. v. Napoli,748 F. Supp. 2d 656 (S.D. Tex. 2010) .............................................................................. 18

ERI Consulting Engineers v. Swinnea,

318 S.W.3d 867 (Tex. 2010)............................................................................................... 8




1828238v1/012370 iv

Erickson v. Pardus,551 U.S. 89 (2007).............................................................................................................. 5

Fidelity & Deposit Company of Maryland v. Commercial Casualty Consultants, Inc.,976 F.2d 272 (5th Cir. 1992) ............................................................................................ 10

Fort Worth Indep. Sch. Dist. v. City of Fort Worth,22 S.W.3d 831 (Tex. 2000)............................................................................................... 15

General Star Indem. Co. v. Vesta Fire Ins. Corp.,173 F.3d 946 (5th Cir. 1999) .............................................................................................. 4

Harrison v. Bass Enters. Prod. Co.

888 S.W.2d 532 (Tex. App.—Corpus Christi 1994) ........................................................ 12

In re Soporex, Inc.,446 B.R. 750 (Bankr. N.D. Tex. 2011)............................................................................. 12

Kearns v. Ford Motor Co.,567 F.3d 1120 (9th Cir. 2009) .......................................................................................... 18

Koh v. S.C Johnson & Son, Inc.,2010 U.S. Dist. LEXIS 654 (N.D. Cal. Jan. 5, 2010) ....................................................... 20

Lormand v. US Unwired, Inc.,565 F.3d 228 (5th Cir. 2009) .............................................................................................. 4

Lozano v. AT&T Wireless Servs., Inc.,504 F.3d 718 (9th Cir. 2007) ............................................................................................ 18

Lujan v. Defenders of Wildlife,504 U.S. 555 (1992)............................................................................................................ 6

Martin K. Eby Constr. Co. v. LAN/STV ,2011 Tex. App. LEXIS 6910 (Tex. App.—Dallas Aug. 29, 2011) .................................. 12

Maya v. Centex Corp.,2010 U.S. Dist. LEXIS 44829 (C.D. Cal. March 31, 2010) ............................................... 8

Meadows v. Hartford Life Ins. Co.,

2006 WL 2336913 (S.D. Tex. Aug. 10, 2006) ................................................................... 7

Methodist Hospital of Dallas v. Corporate Communicators, Inc.,806 S.W.2d 879 (Tex. App.—Dallas 1991, writ denied) ................................................. 16

Nalle v. Taco Bell Corp.,914 S.W.2d 685 (Tex. App.—Austin 1996, writ denied) ................................................. 16




1828238v1/012370 v

National Plan Administrators, Inc. v. National Health Insurance Co.,

235 S.W.3d 695 (Tex. 2007)............................................................................................. 14

Nazareth Int’l, Inc. v. J.C. Penney Corp., Inc.,2005 WL 1704793 (N.D. Tex. July 19, 2005).................................................................. 11

Sanus/New York Life Health Plan, Inc. v. Dube-Seybold-Sutherland Mgmt., Inc .,837 S.W.2d 191 (Tex. App.—Houston [1st Dist.] 1992, no pet.) ................................... 10

Southwestern Bell Tel. Co. v. DeLanney,809 S.W.2d 493 (Tex. 1991)............................................................................................... 9

Swierkiewicz v. Sorema N.A.,534 U.S. 506 (2002)............................................................................................................ 4

United States ex rel. Riley v. St. Luke’s Episcopal Hosp.,355 F.3d 370 (5th Cir. 2004) ............................................................................................ 18

Wilner v. Sunset Life Ins. Co.,78 Cal. App. 4th 952, 93 Cal. Rptr. 2d 413 (Ct. App. 2000)............................................ 19

Xerox Corp. v. Genmoora Corp.,888 F.2d 345 (5th Cir. 1989) .............................................................................................. 7

Yarborough v. Fulton,78 S.W.2d 247 (Tex. Civ. App.—El Paso 1935, writ dism’d) ......................................... 16




1828238v1/012370 1

Plaintiffs and putative class representatives Sean T. Turnbow, William Rice, Mary Rice,

Robert Yoskowitz, Frederick Vieira and Anthony Taylor submit this Response to Defendants’

Motion to Dismiss and would show the court as follows:

I. INTRODUCTION

Defendants ask the Court to dismiss this action for a host of reasons, each of which lacks

merit. Importantly, however, Defendants do not deny the most significant allegations in the

Consolidated Class Action Complaint (“Complaint”).1 For instance, they do not deny that

Defendant Life Partners, Inc. (“LPI”) contracted to act as Plaintiffs’ agent. They do not dispute

that, as a result, by operation of law, LPI owed fiduciary duties to Plaintiffs. They do not contest

that LPI has acknowledged these duties. In fact, Defendants attach to their Motion several copies

of the form agency agreements that include this acknowledgement:

PURCHASER has the capacity to understand this transaction and to protect himself with respect thereto. Such representation does not,however, relieve Agent from the responsibility to act at all times in the

interest of PURCHASER and to use its expertise as diligently as

possible.2

Complying with Rule 8’s mandate of a short and plain statement, Plaintiffs allege that LPI

rendered a careless and faithless performance of these duties. Plaintiffs further allege that they

have suffered (and Defendants have unjustly gained) from this careless and faithless

performance.

1 Dkt # 32.2 Appendix In Support Of Defendants’ Motion To Dismiss And Brief In Support [Dkt. #42-1] Ex. 2 at

16 (Vieira agreement), [Dkt. #42-2] Ex. 29 at 24 (Taylor agreement), [Dkt. #42-3] Ex. 54 at 22 (Turnbowagreement), and Ex. 63 at 44 (Yoskowitz agreement) (emphasis added). Although only one of twoversions of the form agency agreements contains the quoted language, the import of the language is itsacknowledgement of the duties that arise by operation of law. The quoted provision does not promisediligence on Plaintiffs’ behalf. Rather, it acknowledges that such a duty exists independently. This duty isnot imposed by a prior contractual provision because no other part of the contract even mentions suchduties. Instead, the quoted provision is precisely what it appears to be—an acknowledgement of the legaleffect of the agency relationship and a clarification that Plaintiffs’ contractual representations do notmodify that legal effect.




1828238v1/012370 2

Rather than attack the central premise of the Complaint, Defendants nip around the

edges. They argue that Plaintiffs lack standing, that the economic loss rule prohibits Plaintiffs’

claims, and that Plaintiffs have failed to adequately plead their causes of action under Rule 8.

Not so. Plaintiffs have standing because they have been injured and, independently, because

Defendants have been unjustly enriched. Plaintiffs claims are not barred by the economic loss

rule because they fall within an exception to the rule and, independently, because they concern

disgorgement rather than exclusively an economic loss to the subject of the contract. Moreover,

Plaintiffs have adequately pleaded each of their claims, and Defendants are well-informed of the

basis of the claims asserted against them. The notice requirements of Rule 8 are more than met.

Defendant’s motion should be denied.

II. STATEMENT OF FACTS

LPI is a business engaged in the secondary market for life insurance known as “life

settlements.” Life settlement transactions involve the sale of a previously issued life insurance

policy to a person who is not the insured. By selling the policy, the insured exchanges the right to

any benefits under the policy for an immediate cash payment.3 The insured also avoids any

future responsibility for premiums. The purchaser, on the other hand, takes an ownership interest

in the policy and/or the benefits, assumes the obligation to pay premiums going forward, and

expects to receive payment of the policy’s death benefit when the insured dies. 4

According to its filings made with the Securities and Exchange Commission, LPI plays a

critical role in life settlement transactions between sellers and purchasers.5 LPI and life

settlement purchasers (the proposed class members here) first enter into a standard, written, pre-

3 Complaint ¶¶ 2-3, 7-8.4 Id .5 Id .




1828238v1/012370 3

printed, form contract that is entitled “Agency Agreement.” As the title states, pursuant to the

Agency Agreement, LPI agrees to “enter into a relationship of principal and agent” with each of

its customers. As agent, then, LPI agrees to “identify and assist” in the purchase of life insurance

policies. LPI’s public filings with the Securities and Exchange Commission likewise confirms:

“We act as a purchasing agent for life settlement purchasers.”6

After LPI, in its capacity as an agent, identifies and assists purchasers in identifying

supposedly attractively priced life settlements, LPI and its customers enter into a second

standard, written, pre-printed, form contract that is entitled “Policy Funding Agreement.”7 In that

agreement, LPI customers purchase a fractional interest in a specified insurance policy. In

exchange they pay a price set by LPI according to a formula that depends on the life expectancy

of the insured.8

Instead of using an appropriate life-expectancy number, however, LPI has exclusively

used life-expectancy calculations of Dr. Donald Cassidy, a Nevada oncologist who has no

actuarial training or experience.9 LPI has compensated Dr. Cassidy at rates well in excess of

market rates, and did so in a manner that incentivized him to underestimate the life

expectancies.10

Underestimate he did. According to breaking investigative reports published by The Wall

Street Journal and The Life Settlements Report, Dr. Cassidy grossly and systematically

underestimated life expectancies and did so for years.11 Further, LPI knew or should have known

that Dr. Cassidy’s life expectancies were way off the mark and yet continued to use them,

6 Id . (quoting 2010 Form 10-K (filed May 12, 2010) at 4).7 Id .8 Id . ¶¶ 10, 35, 37.9 Id . ¶¶ 3, 13.10 Id .11 Id . ¶¶ 12-15, 28-37.




1828238v1/012370 4

continued to use them exclusively, gave Dr. Cassidy a $180,000 per-year pay raise for continuing

to provide them, and did nothing to account for the gross inaccuracy.12 As a result, LPI profited

immensely at the expense of its customers.

III. LEGAL STANDARDS

“[M]otions to dismiss under Rule 12(b)(6) ‘are viewed with disfavor and are rarely

granted.’”13 The Fifth Circuit has stated that “a complaint will be deemed inadequate only if it

fails to (1) provide notice of the circumstances which give rise to the claim, or (2) set forth

sufficient information to outline the elements of the claim or permit inferences to be drawn that

these elements exist.”14 “Given the Federal Rules’ simplified standard for pleading, [a] court

may dismiss a complaint only of it clear that no relief could be granted under any set of facts that

could be proved consistent with the allegations.”15

It is still true that “[t]he Federal Rules reject the approach that pleading is a game of skill

in which one misstep by counsel may be decisive to the outcome and accept the principle that the

purpose of pleading is to facilitate a proper decision on the merits.”16 Thus, on a motion to

dismiss, courts must “accept all factual allegations in the complaint as true” and “draw all

reasonable inferences in the plaintiff’s favor.”17 “When there are well-pleaded factual

allegations, a court should assume their veracity and then determine whether they plausibly give

rise to an entitlement to relief.”18 Accordingly, a claim has “facial plausibility” and, as a result, is

12 Id .; see also id . ¶¶ 61-65.13 Lormand v. US Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009).14 See General Star Indem. Co. v. Vesta Fire Ins. Corp., 173 F.3d 946, 950 (5th Cir. 1999).15 See Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002); cf. Fed. R. Civ. P. 8(a)(2) (requiring only a

“short and plain statement of the claim showing that the pleader is entitled to relief”).16 See Conley v. Gibson, 355 U.S. 41, 48 (U.S. 1957).17 Lormand , 565 F.3d at 232.18 Iqbal , 129 S. Ct. at 1950.




1828238v1/012370 5

sufficiently pleaded for purposes of Rule 12(b)(6) when its “factual content . . . allows the court

to draw the reasonable inference that the defendant is liable for the misconduct alleged.”19

The Supreme Court revisited Rule 8(a) and the allegations required to survive a Rule

12(b)(6) motion to dismiss in Bell Atlantic Corp. v. Twombly,20 and again in Ashcroft v. Iqbal .21

But in doing so, the Court did not disturb the directive that a complaint is adequately pleaded

even if it is apparent “that a recovery is very remote and unlikely.”22 The Court instructed that

“detailed factual allegations” are not required, but instead the complaint need only include

“sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.’” 23 Further,

“[t]he plausibility standard is not akin to a ‘probability requirement.’”

24

And thus, the Court

reaffirmed the strong deference given to a pleading, stating that a claim need only “raise a right

to relief above the speculative level on the assumption that all the allegations in the complaint are

true (even if doubtful in fact).”25 Indeed, a plaintiff even “receives the benefit of imagination, so

long as the hypotheses are consistent with the complaint.”26

Here, the Complaint provides a substantial description of the alleged wrong. It adequately

informs Defendants of the claims brought against them. The

19 Id . at 1949 (citing Twombly, 550 U.S. at 556).20 550 U.S. 544 (2007).21

129 S. Ct. 1937 (2009).22 Twombly, 550 U.S. at 556 (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).23 Iqbal , 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 570); Erickson v. Pardus, 551 U.S. 89, 93

(2007) (“Specific facts are not necessary” to satisfy the requisites of Rule 8(a)(2).); Lormand , 565 F. 3d at232 (same).

24 Iqbal , 129 S. Ct. at 1949.25 Twombly, 550 U.S. at 555-56 (citations and footnote omitted); Lormand , 565 F. 3d at 232.26 Twombly, 550 U.S. at 563.




1828238v1/012370 6

IV. ARGUMENT ATTEMPT TO FEIGN IGNORANCE RINGS HOLLOW. THIS CASE

SHOULD PROCEED TO THE MERITS.

A. Plaintiffs Have Standing To Assert Their Claims

To defeat a standing challenge at this stage is not an onerous task. Plaintiffs need only

allege (1) that they have suffered an injury in fact—an invasion of a legally protected interest

which is (a) concrete and particularized and (b) actual or imminent, not conjectural or

hypothetical, (2) that there is a causal connection between the injury and the conduct complained

of, and (3) that it is likely the injury will be redressed by a favorable decision.27 Even general

allegations are enough according to the Supreme Court’s decision in Lujan v. Defenders of

Wildlife,(1992) which held that, “at the pleading stage, general factual allegations of injury

resulting from the defendant’s conduct may suffice, for on a motion to dismiss we presume that

general allegations embrace those specific facts that are necessary to support the claim.”28

Moreover, “it is sufficient for standing purposes that the plaintiffs seek recovery for an economic

harm that they allege they have suffered.”29

Here, Plaintiffs allege that, as a result of LPI’s utilization of Dr. Cassidy’s inaccurately

short life expectancies on the life settlements that Plaintiffs invested in, they were overcharged

when they purchased those interests. According to the Complaint, life expectancies are

“[i]ntegral to policy pricing to investors.”30 Thus, “a higher life expectancy means a lower

acquisition cost.”31 Due to its use of Dr. Cassidy, LPI “grossly and systematically underestimated

life expectancies in connection with the life settlement transactions” and “overcharged its

27 Cole v. General Motors Corp., 484 F.3d 717, 722 (5th Cir. 2007).28 504 U.S. 555, 560 (1992) (internal quotation omitted).29

Cole, 484 F.3d at 723 (citing Parker v. District of Columbia, 478 F.3d 370, 377 (D.C. Cir. 2007)(“The Supreme Court has made clear that when considering whether a plaintiff has Article III standing, afederal court must assume arguendo the merits of his or her legal claim.”)).

30 Complaint ¶ 10.31 Id .




1828238v1/012370 7

customers for years based on [Dr. Cassidy’s] consistently erroneous assessments.”32 Indeed, Dr.

“Cassidy served as LPI’s one and only ‘independent medical doctor’ who provided LPI with life

expectancies that it, in turn, provided to Purchasers and used to establish the prices it charged

them. 33 “Defendants understood the effect of understating life expectancies,” as is demonstrated

by Life Partners Holding Inc.’s May 15, 2008 Form 10-K, which states, “If we underestimate the

average life expectancies and price our transaction too high”; and “Our purchasers depend on our

ability to predict life expectancies and set appropriate price . . . .”34

These pleadings more than generally allege that Plaintiffs have suffered a concrete,

particularized, actual, traceable, and redressable injury, as each of them purchased life

settlements that were priced based on Dr. Cassidy’s grossly inaccurate life expectancies.35

It is immaterial, for standing purposes, that some Plaintiffs have sold some of their

interests (at a loss) after the news broke concerning the inaccuracy of Dr. Cassidy’s life

expectancies. The injury took place at the time of the purchase. Moreover, because LPI owed

Plaintiffs fiduciary duties, Plaintiffs suffer injury when those duties are breached regardless of

whether they also incur actual damages or only nominal damages.36 Disgorgement is a proper

remedy for breach of fiduciary duty even in the absence of actual damages.37

32 Id . ¶ 12; see also id . ¶ 15 (“Due to the materially improper and inaccurate life expectancy

assessments utilized by LPI, LPI overcharged Class members for their life settlement investments andobligated them to additional post-purchase expenses in the form of premium payments.”).

33 Id . ¶ 29.34 Id . ¶ 35.35

Id . ¶¶ 15, 19-23; cf. Xerox Corp. v. Genmoora Corp., 888 F.2d 345, 351 (5th Cir. 1989) (findinginjury sufficiently alleged where plaintiff alleged trust fund had not been funded, assets had beendepleted, and directors breached fiduciary duties and participated in dissolution of corporate assets andacted against the best interests of the corporation).

36 See Burrows v. Arce, 997 S.W.2d 229, 240 (Tex. 1999) (“The central purpose of the remedy is to protect relationships of trust from an agent’s disloyalty or other misconduct. Appropriate application of the remedy cannot therefore be measured by a principal’s actual damages. An agent’s breach of fiduciaryduty should be deterred even when the principal is not damaged”); Meadows v. Hartford Life Ins. Co.,2006 WL 2336913 at *6 n.9 (S.D. Tex. Aug. 10, 2006) (holding that plaintiff’s claimed injury at the




1828238v1/012370 8

In support of their standing argument, Defendants rely almost exclusively on a California

district court case, Maya v. Centex Corporation.38 Maya, however, is neither on point nor

particularly persuasive. First of all, in Maya, because the plaintiffs sought to recover damages

related to the reduction in value of their properties, the Court noted that any loss or gain

measured against the initial purchase price could not be ascertained until the house was sold, and

thus, the plaintiffs’ claims would not mature until they sold their homes. Here, in contrast,

Defendants contend that Plaintiffs have no standing especially with regard to the interests that

Plaintiffs Vieira and Taylor recently sold. This is more than just peculiar. It is telling with regard

to the lengths to which Defendants must go to find even arguably applicable case law.

Second and more to the point, in Maya, the court expressed concern primarily with the

relationship between the plaintiffs’ alleged harm and a depressed housing market. It concluded

that nothing but speculation linked any harm to the defendant’s conduct.39 Here, in contrast, the

link is particularized and palpable—each transaction is tainted by LPI’s use of a Cassidy life

expectancy on that particular policy.

Third, and most significant here, the plaintiffs in Maya, who were customers of the

defendant mortgage company, brought claims based on conduct of the defendants that was

directed at other non-party home buyers. The central complaint was that, as a result of the

pleading stage was sufficient where plaintiff alleged that that he was injured when defendants knowingly participated in corporation’s breach of fiduciary duty to plaintiff in regard to unauthorized distributionand use of plaintiff’s personal identity information and nominal damages were claimed); Blue Shield of Virginia v. McCready, 457 U.S. 465, 473 n. 10 (1982) (holding that plaintiff had standing in antitrust caseunder the Clayton Act where denying standing would allow defendant to retain a profit that would be

subject to disgorgement and would result in denial of compensation for injuries resulting from unlawfulconduct); cf. Complaint. ¶ 57 (“LPI has received fees that it would not have received if it had used proper life expectancy assessments to sell the policies . . . .”).

37See ERI Consulting Engineers v. Swinnea, 318 S.W.3d 867, 872 (Tex. 2010) (holding that courts

may fashion equitable remedies such as profit disgorgement and fee forfeiture to remedy a breach of fiduciary duty).

38 No. 09-cv-01671, 2010 U.S. Dist. LEXIS 44829 (C.D. Cal. March 31, 2010).39 Id . at *19-22.




1828238v1/012370 9

defendants wrongful conduct, the non-party home buyers could not afford their homes and thus

defaulted, causing “instability,” among other things, in the plaintiffs’ neighborhood. Here, in

contrast, Plaintiffs complain of Defendants’ conduct directed at Plaintiffs themselves, not at

others or at the general public.

These distinctions undermine whatever comparison might otherwise be drawn between

Maya and the instant case. In short, the issues addressed by the California district court in Maya

have little to do with anything at issue in this action. Plaintiffs have standing here because they

are challenging LPI’s performance of its fiduciary, contractual, and statutory obligations to each

of them, as well as the other Defendants’ aiding and abetting.

B. Fiduciary Duty Claims

Defendants’ challenge to the fiduciary claims, Counts I and II,40 is misguided. Their

reliance on the economic loss rule is misplaced, as that rule has no application here. They are

mistaken in their attempt to construe the agency agreements as imposing limitations on LPI’s

fiduciary duties, as no such limitations are stated in the agreements. And their remaining

argument, which concerns only Count II, is wholly dependent on the prior arguments.

1. The Economic Loss Rule Does Not Apply To Plaintiffs’ Breach

of Fiduciary Duty Claim

Plaintiffs wholeheartedly agree with one premise to Defendants’ argument—that Texas

law governs the fiduciary duty claims here. But Plaintiffs disagree with Defendants’ flawed

interpretation of that law and its application. In short, Defendants are wrong in contending that

the Texas Supreme Court’s decision in Southwestern Bell Tel. Co. v. DeLanney,41 counsels in

favor of applying the economic loss rule to bar Plaintiffs’ fiduciary duty claims. In fact, to make

40 Count II asserts a claim for aiding and abetting breach of fiduciary duties.41 809 S.W.2d 493 (Tex. 1991).




1828238v1/012370 10

that argument, Defendants had to selectively quote the court’s opinion in that case. The relevant

passage in DeLanney footnotes an exception to the economic loss rule that applies to contracts

creating special relationships (such as the principal-agent relationship here) that give rise to

duties that are actionable as torts (such as LPI’s fiduciary duties here):

If the defendant’s conduct—such as negligently burning down a house— would give rise to liability independent of the fact that a contract exists between the parties, the plaintiff’s claim may also sound in tort.Conversely, if the defendant’s conduct—such as failing to publish anadvertisement—would give rise to liability only because it breaches the parties’ agreement, the plaintiff’s claim ordinarily sounds only in contract.Of course, some contracts involve special relationships that may give

rise to duties enforceable as torts, such as professional malpractice.42

Texas Courts of Appeal agree.43 As does Professor James E. Wren, who describes the

exception in plain English:

Despite case law applying the economic loss rule to negligence cases, generally,an exception to the economic loss rule exists for those cases in which a fiduciaryrelationship or a special relationship of trust exists between the plaintiff anddefendant . . . . [B]reach of the duties which accompany these specialrelationships can support extra-contractual (i.e. tort) remedies. This is true even

though the relationship and its corresponding duties would not exist but for the

contractual agreement creating the relationship.44

The Fifth Circuit’s 1992 decision in Fidelity & Deposit Company of Maryland v.

Commercial Casualty Consultants, Inc.,45 relied on DeLanney in applying this very rule. The

Court there upheld a jury verdict on Fidelity’s fiduciary claims even though the defendant argued

that the claims sounded exclusively in contract and “flow strictly from the Agency

42 Id . at 494 & n.1 (emphasis added).43 See, e.g., Sanus/New York Life Health Plan, Inc. v. Dube-Seybold-Sutherland Mgmt., Inc., 837

S.W.2d 191, 199 (Tex. App.—Houston [1st Dist.] 1992, no pet.) (“[S]ome contracts do involve specialrelationships that may give rise to duties enforceable as torts.”); Doe v. Smithkline Beecham Corp., 855S.W.2d 248, 257 (Tex. Ct. App.—Austin 1993) (“In order to impose a tort duty upon parties to a contract,the court must find that a special relationship exists between the parties.”).

44 James E. Wren, A Shotgun Wedding and the Economic Loss Rule, Damages in Civil Litigation(2011), http://www.texasbarcle.com/Materials/Events/9796/130317.pdf (emphasis added).

45 976 F.2d 272.




1828238v1/012370 11

Agreement.”46 Affirming the relevant part of the judgment below, the Fifth Circuit held that the

defendants were liable in tort for participating in a breach of fiduciary duty (namely,

commingling of funds) even though the agency agreement at issue specifically prohibited

commingling.47 In doing so, the court restated and followed the plaintiffs’ articulation of the rule

from DeLanney: “[A] party to a contract who seeks redress because another party violated a

contractual obligation is relegated to an action for breach of contract. But if the contract creates a

special relationship imposing a duty, breach of that duty may give rise to an independent tort

action.”48

That is precisely the issue before this Court here. The agency agreement here, like the

agency agreement in the Fidelity & Deposit Company of Maryland case, creates a special

relationship—an agency relationship—imposing fiduciary duties by operation of law. These

fiduciary duties give rise to an independent tort action when breached. Thus, under DeLanney

and Fidelity & Deposit Company of Maryland , the economic loss rule has no application.

2. The Economic Loss Rule, Even If Applied, Does Not Reach

The Remedies That Plaintiffs Are Seeking

In addition to the exception to the economic loss rule addressed above, the Texas

Supreme Court’s DeLanney decision provides a wholly independent basis for rejecting

Defendants’ argument for precluding Plaintiffs’ fiduciary claims here. That additional basis

concerns the nature of Plaintiffs’ injury. The economic loss rule, where it does apply, bars tort

claims in which “the injury is only the economic loss to the subject of the contract itself.”49 It

46 Id . at 276.47 Id . at 274 (“The agreement also required Commercial to segregate and hold as a fiduciary Fidelity’s

premiums and remit those sums promptly to Fidelity.”).48 Id . at 276.49 Nazareth Int’l, Inc. v. J.C. Penney Corp., Inc., 2005 WL 1704793 at *7 (N.D. Tex. July 19, 2005)

(Lynn, J.); see also Jim Walter Homes, Inc. v. Reed , 711 S.W. 2d 617, 618 (Tex. 1986) (explaining that a




1828238v1/012370 12

does not bar tort claims, such as Plaintiffs’ fiduciary duty claims here, which do not seek

expectation or benefit-of-the-bargain damages but rather seek restitution, disgorgement of fees or

profits, or even out-of pocket damages.50

Defendants’ cases— Classical Vacations, Inc. v. Air France,51 and Harrison v. Bass

Enters. Prod. Co.52 — both involve expectation damages. In Classical Vacations, Air France sued

a ticket consolidator that underpaid Air France under an ARC Agent Reporting Agreement. Air

France sought the payment of amounts due under the ARC Agent Agreement as damages for its

breach of fiduciary duty claim. The Court of Appeals vacated the jury award, holding that Air

France only sought damages related to the subject of the contract (expectation damages), and

therefore, its claim sounded solely in contract.53 Harrison, is similar. In Harrison, the plaintiff

sought the payment of royalties due to him under the contract. The Court of Appeals held that the

plaintiff’s claims applied only to the subject of the contract since the “only damages Harrison

claims are unpaid royalties—the subject matter of the contract.”54 Again, expectation damages.

contractual relationship may create duties under both tort and contract law, and depending upon thecircumstances, a party’s conduct may breach duties in tort, in contract, or in both simultaneously).

50 See In re Soporex, Inc., 446 B.R. 750, 784 (Bankr. N.D. Tex. 2011) (“[I]f a plaintiff seeks only benefit-of-the-bargain damages, a plaintiff cannot establish an independent injury distinct from theeconomic losses that would be recoverable on a contract claim and the economic loss rule bars recoveryof the damages sought on the negligent misrepresentation claim.”); CCE, Inc., v. PBS&J Constr. Servs., Inc., No. 01-09-00040-CV, 2011 Tex. App. LEXIS 809 (Tex. App.—Houston [1st Dist.] Jan. 28, 2011)(holding that claim seeking to recover reliance/out-of-pocket damages is not subject to economic lossrule); Martin K. Eby Constr. Co. v. LAN/STV , No. 05-09-00946-CV, 2011 Tex. App. LEXIS 6910 at *26(Tex. App.—Dallas Aug. 29, 2011) (“If a plaintiff asserts a negligent misrepresentation claim, but seeksonly benefit-of-the-bargain damages as opposed to the permissible out-of-pocket damages, the plaintiff cannot establish an independent injury and the economic loss rule bars recovery.”); cf. Complaint ¶¶ 57-

58 (seeking out-of-pocket damages, disgorgement, and restitution). Plaintiffs concede that the Complaintdoes not specify what brand of damages they seek in paragraph 58, but they respectfully submit that Rule8’s notice requirements do not mandate this level of detail.

51 No. 01-01-01137-CV, 2003 Tex. App. LEXIS 3160 (Tex. App.—Houston [1st Dist.] Apr. 10,2003, no pet.).

52 888 S.W.2d 532 (Tex. App.—Corpus Christi 1994).53 Classical Vacations, 2003 Tex. App. LEXIS 3160, at *4-7.54 Harrison, 888 S.W.2d at 536.




1828238v1/012370 13

Here, Plaintiffs are not seeking expectation damages in the guise of a tort claim. Instead,

they seek disgorgement of fees and profits and/or return of the amount that they overpaid as a

result of the inaccurate life-expectancies. Defendants’ attempt to recast the allegations of Count I

in the terminology of expectation damages is unavailing. No where do Plaintiffs ask for damages

equal to the “double-digit” returns that LPI indicated they should expect.

57. LPI has received fees that it would not have received if it had used proper life expectancy assessments to sell the policies, and it has also benefited from any lapsed contracts that it can resell or keep for its ownfinancial gain.

58. Because of LPI’s breaches of fiduciary duty, the Class has beendamaged and is entitled to recover those damages, as well as exemplarydamages, attorney’s fees, prejudgment interest and costs. Further, LPI has been unjustly enriched by its breaches of fiduciary duty, and the Class isentitled to restitution, disgorgement, and other equitable remedies.55

The economic loss rule, even where it applies, does not preclude such claims. Thus, for this

independent reason, Defendants’ motion should be denied.

3. Defendants’ Fiduciary Duties Are Not Contractually Limited

Defendants’ argument that Plaintiffs have failed to plead a breach of fiduciary duties

hinges on a non-sequitur. Just because the duties owed by an agent to a principal “may be altered

by agreement,”56 as Defendants contend, does not mean that in this case, in LPI’s agency

agreements, those duties have been altered. Yet Defendants seem to overlook this obvious error

in logic. Nowhere do they argue or even imply that the agency agreements here state limitations

on LPI’s fiduciary duties. Indeed, the agreements say no such thing. To the contrary, and as

indicated previously, one form agreement says precisely the opposite:

PURCHASER has the capacity to understand this transaction and to protect himself with respect thereto. Such representation does not,

55 Complaint, Count I (breach of fiduciary duties) ¶¶ 57-58. Cf. id . ¶ 9 (not seeking damages butindicating that LPI tells its clients to expect low double-digit returns).

56 Motion at 13 (emphasis added).




1828238v1/012370 14

however, relieve Agent from the responsibility to act at all times in theinterest of PURCHASER and to use its expertise as diligently as possible.57

Further, the decision in National Plan Administrators, Inc. v. National Health Insurance

Company,58 provides no support to Defendants here, and Defendants’ reliance on it is misplaced.

In fact, the agreement at issue in National Plan Administrators illustrates the kinds of duty

limitations that may appear in an agency agreement but are absent here. For example, “the

parties expressly agreed that [the defendant] could take actions that would be in violation of [a

general fiduciary duty],”59 for instance, taking on other insurance clients60 and putting the

interests of another client ahead of the plaintiffs’ interests in marketing their insurance products.

The parties also agreed “that [the defendant] would act as [the plaintiff’s] agent only for specific

purposes.”61 Moreover, the court did not hold that the defendant owed no fiduciary duties to the

plaintiff but only that it did not owe general , all-encompassing fiduciary duties because it was

not plaintiff’s agent for all purposes.62

57 Defendants’ Motion To Dismiss And Brief In Support [Dkt # 42] Ex. 2, App. at 11 (Vieira

agreement), Ex. 29, App. at 67 (Taylor agreement), Ex. 54, App. at 113 (Turnbow agreement), Ex. 63,App. at 135 (Yoskowitz agreement). Although there is a second form agency agreement that lacks thequoted language, it likewise contains no language limiting LPI’s fiduciary duties.

58 235 S.W.3d 695 (Tex. 2007).59 Id . at 703.60 Id . at 702 (noting that agreement provides that “[defendant’s] services are not exclusive to

[plaintiff] and [defendant] will provide services to third parties”).61 Id . at 703.62 Id . (“We need not determine the exact fiduciary duties owed to National Health by NPA because

jury question eight inquired only as to a general duty, which NPA did not owe.”). Notably, the defendantconceded that it owed some fiduciary duties. Id . at 702 (“PA does not contest that it owed a fiduciary dutyto act in National Health’s interest when it processed and paid eligible claims, as it was required to dounder the contract.”).




1828238v1/012370 15

4. Defendants’ Argument For Dismissing Count II Is Wholly

Dependent On Their Prior Arguments

Because Defendants make no attempt to argue any independent basis for dismissing

Count II—the aiding and abetting claim—Plaintiffs need not respond separately other than to

concede that Count II is indeed dependent upon the viability of Count I.

C. Contract Claims

Defendants’ concede that Plaintiffs have adequately alleged the first two elements of their

contract claim: the existence of a valid contract and plaintiffs’ performance. They contest the

other two elements: breach and damages.63 But in doing so, they misstate both the applicable law

and the terms—express and implied—of the agreements.

First, Defendants mistakenly argue that Plaintiffs have failed to identify any express

contractual terms that LPI has breached. To the contrary, in Count III, Plaintiffs allege that LPI

breached the Policy Funding Agreements, which state that LPI will “review applicants to TIPS

(ie. Transferable Insurance Policies)” and “qualify applicants for TIPS based upon underwriting

criteria and other relevant guidelines pursuant to the above-referenced Agency Agreement, and

provide information to purchaser.”64 The referenced agency agreements provide that LPI “shall

identify and assist in the purchase for Purchaser, such life insurance policies and/or related death

benefits selected by Purchaser which comply with the following criteria: . . . (c) Insured must

have an actuarially or medically determined life expectancy of no more than ten (10) years.”65

63 See Aquila Sw. Pipeline, Inc. v. Harmony Exploration, Inc ., 48 S.W.3d 225, 235 (Tex. App.—San

Antonio 2001, pet. denied) (identifying elements of breach-of-contract claim).64 Complaint ¶ 69. The parties also entered into Policy Funding Agreements as part of the purchase

transactions that reference the obligations contained in the Agency Agreements. Instruments pertaining tothe same transaction should be read together to ascertain the parties’ intent, even if the parties executedthe instruments at different times and the instruments do not expressly refer to each other. See Fort Worth

Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex. 2000).65 See, eg., Appendix In Support Of Defendants’ Motion To Dismiss And Brief In Support [Dkt. #42-

1] Ex. 2 at 15.




1828238v1/012370 16

By knowingly and/or carelessly substituting Dr. Cassidy’s unreliable, inaccurately short life

expectancies in place of life expectancies determined by reasonable actuarial or medical

standards, LPI breached these express contractual provisions.

Second, Defendants mistakenly argue that the agreements do not require LPI to perform

its contractual obligations with care, skill, or faithfulness, and that no such terms can be implied

into the agreements. As a matter of law, this is wrong. Although implied covenants may be

disfavored, even the authorities cited by Defendants state that some implied covenants are

necessary to give effect to the parties’ intent and therefore do arise from the contract.66 The

Texas Supreme Court has reaffirmed over the course of many decades that “[a]ccompanying

every contract is a common-law duty to perform with care, skill, reasonable expedience and

faithfulness the thing agreed to be done.”67 This is so because the obligation to use care, skill,

expedience, and faithfulness is “so clearly within the contemplation of the parties that they

deemed it unnecessary to express it.”68

It is frankly unimaginable to think, as Defendants would have it, that the parties here

contemplated that careless, faithless, unskilled, and unreasonable performance would satisfy the

contract. In these and many other circumstances, such performance would be valueless or even

harmful. As a result, consideration would fail and the contract would be deemed illusory and

66A breach of contract occurs when a party fails to perform an act that it has expressly or impliedly promised to perform. Methodist Hospital of Dallas v. Corporate Communicators, Inc., 806 S.W.2d 879(Tex. App.—Dallas 1991, writ denied).

67

DeLanney, 809 S.W.2d at 494 (quoting Montgomery Ward & Co. v. Scharrenbeck , 146 Tex. 153(Tex. 1947); see also Yarborough v. Fulton, 78 S.W.2d 247 (Tex. Civ. App.—El Paso 1935, writ dism’d)(“[O]ne who enters the employ of another impliedly agrees that he has a reasonable amount of skill in thework to be done, and, in case of damage to the employer arising from his unskillfulness or negligence, heis liable. If the facts here are sufficient to show that the bank was the agent of appellant and as such agentfailed to exercise reasonable care, skill, and judgment in arranging the loan of appellants’ money, then the bank would be liable to them for any loss which they may have sustained.”).

68 Methodist Hospital , 806 S.W.2d. at 882 (quoting Nalle v. Taco Bell Corp., 914 S.W.2d 685, 687(Tex. App.—Austin 1996, writ denied)).




1828238v1/012370 17

unenforceable. In this respect, the implied duty is not only contemplated but essential. Further,

the implied duty is plainly contemplated by the express language of the previously quoted form

agreement: “Such representation does not, however, relieve Agent from the responsibility to act

at all times in the interest of PURCHASER and to use its expertise as diligently as possible.”69

In this case, LPI has performed carelessly, faithlessly, unskillfully, and unreasonably.

Indeed, its performance was valueless, or worse. LPI breached its implied obligations by

providing life expectancies that were not determined using reasonable medical or actuarial

standards or procedures, by allowing Dr. Cassidy to determine life expectancies using a method

that consistently results in inaccurate determinations, by failing to statistically or even

empirically establish the validity of the method or requiring Dr. Cassidy to do so, by

compensating Dr. Cassidy with incentives for providing low, not accurate, life expectancies, and

by charging excessive, above-market fees for these services. These allegations are all contained

in the Complaint and expressly incorporated into Count III.70

LPI’s attempts to confuse the issue, contending that Plaintiffs have attempted to state a

cause of action for the implied duty of good faith and fair dealing. This is nothing more than a

straw man. The Complaint makes no such claim.

Third, Defendants mistakenly argue that Plaintiffs fail to provide adequate notice of the

damages they are alleging with the allegations of paragraph 71 of the Complaint. The error here

is that Plaintiffs’ damages allegations are not pigeonholed into a single paragraph of the

Complaint. Plaintiffs also allege damages in paragraph 4 (“a marked up selling price which

LPI—in its sole discretion—sets based upon the inaccurate life expectancy estimates from

69 Defendants’ Motion To Dismiss And Brief In Support [Dkt # 42] Ex. 2, App. at 11 (Vieiraagreement), Ex. 29, App. at 67 (Taylor agreement), Ex. 54, App. at 113 (Turnbow agreement), Ex. 63,App. at 135 (Yoskowitz agreement) (emphasis added).

70 Complaint ¶¶ 11-16, 67.




1828238v1/012370 18

Cassidy”), paragraph 9 (according to Defendant Pardo, based on what LPI tells them, investors

“are expecting 11, 12% return” and “will not be disappointed”), paragraph 10 (outliving life

expectancy “reduces the return on investment and also requires additional premium payments”),

paragraph 12 (“LPI has overcharged its customers for years based upon those consistently

erroneous assessments”), paragraph 13 (“LPI’s pay structure incentivizes Cassidy to be wrong to

the detriment of the class and to the advantage of LPI”), paragraph 14 (Pardo “admit[s] that

LPI’s life expectancies are probably wrong”), paragraph 15 (“LPI overcharged class members to

purchase and obligated them to pay additional premium payments”), and paragraph 16 (“millions

in fees that LPI overcharged”). Plaintiffs respectfully submit that Defendants have notice.

Further, at this stage in the proceedings, the court should not evaluate the merits of an

allegation. Instead, it need only satisfy itself that the plaintiff has adequately pleaded a legally

cognizable claim.71 Plaintiffs have certainly met this very low bar.

D. California UCL Claims

In their final argument, Defendants contend that the Complaint fails to sufficiently

apprise them of the facts concerning their alleged UCL violation of the California Unfair

Competition Law (“UCL”).72 Not so. The UCL protects parties that have been injured by an

“unlawful, unfair or fraudulent business act,”73 and “is violated where a defendant’s act or

practice is (1) unlawful, (2) unfair, (3) fraudulent, or (4) in violation of section 17500 (false or

misleading advertisements).”74 Defendants cannot seriously contend that the Complaint fails to

71 See United States ex rel. Riley v. St. Luke’s Episcopal Hosp., 355 F.3d 370 (5th Cir. 2004); Duke Energy Intern., L.L.C. v. Napoli, 748 F. Supp. 2d 656 (S.D. Tex. 2010).

72 California Business & Professions Code Sec. 17200, et. seq.73 Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009).74 Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 731 (9th Cir. 2007).




1828238v1/012370 19

inform them of what Plaintiffs contend is “unfair” about their conduct. Little wonder that they

have saved this argument for last.

A business practice is “unfair” for the purposes of a claim under the UCL when it

“offends an established public policy or when the practice is immoral, unethical, oppressive,

unscrupulous or substantially injurious to consumers.”75 To prevail, a plaintiff must establish that

“the consumer injury is substantial, is not outweighed by any countervailing benefits to

consumers or to competition, and is not an injury the consumers themselves could reasonably

have avoided.”76 Yet California courts have indicated that a plaintiff may make out a prima facie

case of unfair conduct by merely alleging wrongful conduct on the part of the defendant; the

plaintiff need not speculate at the pleading stage as to the defendant’s countervailing interests.77

The gravamen of the Complaint is that the actions of Defendants are “unfair” within the

meaning of the UCL. In fact, there is little in the 22 pages of pleading that does not complain of

such unfairness. For example, just the first five pages of the Complaint contain these allegations

concerning the unfairness of LPI’s business practices: Plaintiffs “are not informed of any life

expectancy that Defendants may use in determining whether to buy the policy from the Seller.”78

“Instead, LPI only provides what it calls the ‘acquisition price,’ . . . a marked up selling price

which LPI—in its sole discretion—sets based upon the inaccurate life expectancy estimates from

75 Wilner v. Sunset Life Ins. Co., 78 Cal. App. 4th 952, 965, 93 Cal. Rptr. 2d 413 (Ct. App. 2000)(citing State Farm Fire & Cas. Co. v. Superior Court , 45 Cal. App.4th 1093, 1104, 53 Cal. Rptr. 2d 229

(Sup.Ct. 1996)).76 Daugherty v. American Honda Motor Co., Inc., 144 Cal. App. 4th 824, 839, 51 Cal. Rptr. 3d 118

(2006).77 Ackerman v. Coca-Cola, CV-09-0395, 2010 U.S. Dist. LEXIS 73156 (E.D.N.Y. July 21) (“[I]f the

pleading states a prima facie case of harm, . . . the defendant should be made to present its side of thestory.”).

78 Complaint ¶ 4; see also id . ¶ 37 (“Even if LPI had different life expectancy estimates . . . LPI usedonly Cassidy’s assessments for [Plaintiffs].”).




1828238v1/012370 20

Cassidy.”79 “Defendants publicly claim to provide reliable life expectancy assessments.”80 LPI

“grossly and systematically underestimated life expectancies” and “overcharged its customers for

years based on those consistently erroneous assessments.”81 “Defendants negligently disregarded

that the life expectancy assessments they obtain and provide to [Plaintiffs] have been

inaccurate—significantly so.”82 Defendants knew of the inaccuracy but failed to adjust their

“practices to account for this fact or use[] an alternative, reliable source of life expectancy

assessments.”83 LPI relied exclusively on Cassidy despite his lack of actuarial training or

experience yet paid him “at a rate that is well-above the market for similar services from

experienced actuarial firms” and “increased his compensation” dramatically “despite the

consistently inaccurate life expectancy assessments that he provides.”84 “LPI’s pay structure

incentivizes Cassidy to be wrong to the detriment of [Plaintiffs] and to the advantage of LPI.85

With regard to unfairness, this is notice enough.

Defendants also argue that Plaintiffs have failed to allege injury for the same reasons

addressed previously. This is untrue for the reasons previously stated and also because California

courts hold that a plaintiff who fails to receive the benefit bargained for because of a

misrepresentation made by a defendant suffers sufficient injury to state a claim under the UCL.86

Plaintiffs have met the minimal burden of pleading a UCL claim.

79 Id .80 Id . ¶ 11.81 Id . ¶ 12.

82 Id . ¶ 1383 Id .84 Id .85 Id .86 See, e.g., Koh v. S.C Johnson & Son, Inc., No. C-09-00927, 2010 U.S. Dist. LEXIS 654, at *4-5

(N.D. Cal. Jan. 5, 2010) (complaint adequately alleged injury under UCL through claims that plaintiff bought the product at a premium price in reliance on misleading suggestion that it was environmentallyfriendly); Chavez v. Blue Sky Natural Beverage Co., 340 Fed. Appx. 359 (9th Cir. 2009) (injury




1828238v1/012370 21

V. CONCLUSION

For the foregoing reasons, Plaintiffs respectfully request that the Court deny Defendants’

motion to dismiss, or in the alternative, that the Court allow Plaintiffs the right to restate and cure

any deficiencies in their Consolidated Complaint and for such other relief to which they may be

entitled.

DATE: October 6, 2011

sufficiently pleaded where plaintiff purchased product because of misrepresentation that it was fromanother state); see also, Lozano, 504 F.3d at 734 (plaintiff “has properly stated an injury that he did notreceive the full value of his contract with defendant” due to its alleged failure to disclose certain factsabout its billing practices).




1828238v1/012370 22

Steven G. Sklaver California Bar No. 237612 (Admitted PHV)Amy T. BrantlyCalifornia Bar No. 210893 (Admitted PHV)

SUSMAN GODFREY L.L.P.Suite 9501901 Avenue of the StarsLos Angeles, CA 90067-6029Telephone: (310) 789-3100Facsimile: (310) 789-3150Email: [email protected]

Kim E. Miller California Bar No. 178370 (PHV Pending)

KAHN SWICK & FOTI, LLC500 5th Avenue, Suite 1810 New York, NY 10110Tel: (212) 696-3730Fax: (504) 455-1498Email: [email protected]

Bruce K. PackardState Bar No. 15402300W. Craig StokleyState Bar No. 24051392

RINEY PALTER, PLLC5949 Sherry Lane, Suite 1616Dallas, Texas 75225-8009Telephone: 214-461-1200Facsimile: 214-461-1210Email: [email protected]

[email protected]

ADDITIONAL COUNSEL FOR

PLAINTIFFS AND THE CLASS AND

SUBCLASS

Respectfully submitted,

/s/ Jonathan BridgesTerrell W. OxfordTexas State Bar No. 15390500Jonathan BridgesTexas State Bar No. 24028835


901 Main Street, Suite 5100Dallas, Texas 75202Telephone: (214) 754-1900Facsimile: (214) 754-1933Email: [email protected]

[email protected]

Lewis S. KahnLouisiana Bar No. 23805 (PHV Pending)Craig J. Geraci, Jr.Alabama Bar No. 3847-C62G (PHVForthcoming)

KAHN SWICK & FOTI, LLC206 Covington StreetMadisonville, LA 70447Tel: (504) 455-1400Fax: (504) 455-1498Email: [email protected]

[email protected]

INTERIM CO-LEAD CLASS COUNSEL

Stuart H. McCluer

MCCULLEY MCCLUER PLLC

1223 Jackson Avenue East, Suite 200P.O. Box 2294Oxford, Mississippi 38655(662) [email protected]

COUNSEL FOR PLAINTIFF SEAN

TURNBOW




CERTIFICATE OF SERVICE

I hereby certify that on October 6, 2011, I electronically filed the foregoing document viathe CM/ECF electronic filing system and served all counsel of record pursuant to FED. R . CIV. P.5(b)(2)(E).

/s/ Jonathan BridgesJonathan Bridges


lphi class action answer to motion to dismiss

Documents