Life Partners lawsuits against Texas-based ‘life settlements’ provider still ongoing

Posted
by John Chapman

As we have previously reported, the insurance investment company Life Partners, Inc. and its parent company, Life Partners Holdings, are facing a lawsuit filed by the Texas state attorney general alleging that the company misled investors and violated state securities laws.

In the Texas lawsuit against Life Partners, Attorney General Abbott accused the companies of selling life settlement policies to investors with fraudulent life expectancy calculations. According to the lawsuit filed by the State of Texas: “The companies rely upon one life expectancy at purchase and then provide investors with a significantly shorter and artificial life expectancy in order to generate contrived and inflated revenue.”

Last fall, the trial court overseeing the case ruled that the life settlement transactions are not “securities” under the Texas law and denied the state attorney general’s request to put the company into receivership. The State appealed to Austin’s Third Circuit Court of Appeals which has just put the question on hold for now by issuing the following opinion:

The State of Texas has filed an unopposed motion to dismiss its interlocutory appeal, explaining that the trial court recently signed a final judgment from which the State intends to appeal. The issues in the appeal from the final judgment will be identical to those presented by this appeal, and the State asserts that once the final judgment “is final for purposes of appeal, this interlocutory appeal will be rendered moot.” The State asks that we abate this interlocutory appeal, apparently so that it may be consolidated with and into the appeal from the final judgment. We grant the motion and abate the appeal. See Tex.R.App. P. 42.1(a). The State is ordered to provide a status update on or before May 3, 2013.

State of Texas v. Life Parnters Holdinfs, Inc.; Life Partners, Inc.; Brian D. Pardo; R. Scott Peden; Advance Trust & Life Escrow Services, LTA; and Purchase Escrow Services, LLC, No. 03–12–00695–CV (Tex. App.—Austin Feb. 6, 2013).

Other Litigation Against Life Partners

According to the Form 10-K filed with S.E.C .for the fiscal year ended February 29, 2012 by Life Partners Holdings, Inc., other litigation against the company includes the following:

On January 3, 2012, Life Partners and certain of its directors and officers were sued by the SEC in the U.S. District Court for the Western District of Texas, Waco Division, in Securities and Exchange Commission v. Life Partners Holdings, Inc., Brian D. Pardo, R. Scott Peden and David M. Martin, Civil Action No.: 6:12-CV-00002. The suit alleges that Life Partners, its Chairman and CEO Brian Pardo, General Counsel Scott Peden, and Chief Financial Officer David Martin had knowledge of, but failed to disclose to our shareholders, the alleged underestimation of the life expectancies of settlors of viatical and life settlement policies. The suit further claims that Life Partners prematurely recognized revenues from the sale of the settlements and that we understated the impairment of our investments in policies. The suit also claims that Pardo and Peden sold shares while possessing inside information, which was the alleged knowledge of the purported underestimation of life expectancies and the impact on our revenues from the purported underestimation. In addition, the suit alleges that the defendants misled its auditors about its revenue recognition policy. The suit contains claims for violations of various Federal securities statutes and regulations, including violations of the antifraud provisions of the Securities Act of 1933 and the Securities and Exchange Act of 1934, and rules under those acts, and seeks various forms of relief, including injunctive relief, disgorgement, and civil penalties.

In February and March of 2011, six putative securities class action complaints were filed in the U.S. District Court for the Western District of Texas, Waco Division. The first-filed of these is styled Gerald A. Taylor, Individually and On Behalf of All Others Similarly Situated v. Life Partners Holdings, Inc., Brian D. Pardo, Nina Piper, David M. Martin, and R. Scott Peden, Civil Action No.: 2:11-CV-0027-AM The case was transferred to the Del Rio Division of the Western District.

On July 5, 2011, these actions were consolidated into the case styled Selma Stone, et al. v. Life Partners Holdings, Inc., Brian D. Pardo, R. Scott Peden, and David M. Martin, Civil Action No. DR-11-CV-16-AM. The consolidated complaint was filed on August 15, 2011, asserting claims of securities fraud under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and for control person liability under Section 20(a). The plaintiffs seek damages and an award of costs on behalf of a class of shareholders who purchased or otherwise acquired our common stock between May 26, 2006, and June 17, 2011.

Life Partners, its directors, and certain present and former officers have also been named as defendants in a shareholder derivative suits, which are based generally on the same alleged facts as the above-described putative class action suits.

On March 7, 2011, a putative class action complaint was filed in the U.S. District Court for the Central District of California, Eastern Division, styled William and Mary Rice, et al. v. Life Partners, Inc. and Life Partners Holdings, Inc., Civil Action No. ECDV 11-00390 VAP (OPx). On May 27, 2011, by agreement of the parties, the Rice case was transferred to the Northern District of Texas, Dallas Division.

On April 4, 2011, a putative class action suit was filed in the U.S. District Court for the Northern District of California, San Jose Division, styled Frederick Vieira, et al. v. Life Partners, Inc., No. 5:11-CV-01630-PSG. On June 3, 2011, pursuant to agreement of the parties, the Vieira suit was also transferred to the Northern District of Texas, Dallas Division.

Thereafter, several substantially similar putative class action suits were filed in the Northern District of Texas, Dallas Division, including Robert Yoskowitz, et. al. v. Life Partners, Inc., No. 3:11-CV-01152-N, Sean T. Turnbow and Masako H. Turnbow, et al. v. Life Partners, Inc. and Life Partners Holdings, Inc., Civil Action No. 3:11-cv-01030-M, William Bell, et al. v. Life Partners, Inc. and Life Partners Holdings, Inc., Civil Action No. 3:11-CV-1325-M, and Michael Jackman v. Life Partners Holdings, Inc., et. al. , Civil Action No. 3:11-CV-01093-M.

The aforementioned suits were consolidated on June 23, 2011 and on July 11, 2011, the court granted a motion to intervene, joining two additional suits that were filed in the U.S. District Court for the Western District of Texas, Del Rio Division, styled Bryan Springston, et al. v. Life Partners, Inc., et al., Civil Action Number 2:11-CV-00029-AM and Y. Patterson, et al. v. Life Partners, Inc., Civil Action No. 2:11-CV-000030-AM. The cases were consolidated under the style Turnbow et al. v. Life Partners, Inc., Life Partners Holdings, Inc., Brian D. Pardo, and R. Scott Peden , Civil Action No. 3:11-CV-1030-M.

On August 25, 2011, plaintiffs filed their consolidated class action complaint (“ complaint ”), alleging claims of breach of fiduciary duty against Life Partners, Inc. (“ LPI ”), aiding and abetting breach of fiduciary duty against Pardo, Peden and us, breach of contract against LPI, and violation of California Unfair Competition Law by LPI, Pardo and Peden. All of plaintiffs’ claims arise out of the alleged provision of underestimated life expectancies by Dr. Donald Cassidy to LPI and LPI’s use thereof in the facilitation of life settlement transactions in which plaintiffs acquired interests.

On March 11, 2011, a putative class action suit was filed in the 191st Judicial District Court of Dallas County, Texas, styled Helen Z. McDermott, Individually and on Behalf of all Others Similarly Situated v. Life Partners, Inc. , Cause No. 11-02966. McDermott asserts claims for breach of contract and breach of fiduciary duty regarding Life Partners’ handling of a particular life settlement.

On April 8, 2011, a putative class action complaint was filed in the 40th Judicial District Court of Ellis County, Texas, styled John Willingham, individually and on behalf of all other Texas citizens similarly situated, v. Life Partners, Inc. , Cause No. 82640 (MR). On July 27, 2011, by agreement of the parties, the Willingham case was transferred to the 101st Judicial District Court of Dallas County under Cause No. DC-11-10639. Plaintiff asserts claims of breach of fiduciary duty and breach of contract. All of plaintiff’s claims are based upon the alleged overpayment of premiums to the insurance company, that is, the alleged failure to engage in “premium optimization” on behalf of all Texas residents that purchased an interest in a life settlement facilitated by LPI.

On November 8, 2011, a putative class action was filed, which is styled Marilyn Steuben, on behalf of herself and all other California citizens similarly situated v. Life Partners, Inc., Superior Court of the State of California for the County of Los Angeles Court, Case No. BC472953. This suit is virtually identical to the Willingham case, other than it asserts a claim under California’s Unfair Competition law. This suit alleges that LPI breached duties to Plaintiff and putative class based upon the failure to “optimize” premiums.

Heygood Orr & Pearson

Our firm is currently pursuing both individual and class action claims on behalf of several clients against Life Partners. For example, we filed and are pursuing the McDermott, Willingham and Steuben lawsuits mentioned above. As we have previously noted, the trial court granted our motion for class certification in McDermott. Life Partners’ attempt to appeal the district court decision granting our motion to remand the Steuben case back to state court was rejected.

If you or someone you know has been aggrieved by wrongful conduct on the part of Life Partners or are owed additional sums of money after investing with Life Partners, then you may need a sophisticated and knowledgeable law firm such as Heygood, Orr & Pearson to represent you. For more information and a case evaluation that will help determine your legal rights, please contact us by calling toll-free at 1-877-446-9001, or by filling out the free case evaluation form located on this page.