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Reassure America Life Insurance Co. v. Warner

November 17, 2010

REASSURE AMERICA LIFE INSURANCE COMPANY F/K/A VALLEY FORGE LIFE INSURANCE COMPANY, PLAINTIFF,
v.
BRUCE WARNER, ET AL., DEFENDANTS,
v.
FEDERAL TRADE COMMISSION, INTERVENOR.



The opinion of the court was delivered by: Jose E. Martinez United States District Judge

ORDER ON MOTIONS FOR SUMMARY JUDGMENT

THIS CAUSE came before the Court upon the motion for summary judgment filed by Defendant Bruce Warner in his capacity as the personal representative of the estate of David R. Shomers ("Shomers Estate") (D.E. No. 103) and the motion for summary judgment filed by Intervenor Federal Trade Commission ("FTC") (D.E. No. 104).

I. Preliminary Matters

A. Admissibility of Verified Answer as Evidence

The first issue before this Court regards the admissibility of David Shomers's "Verified Answer and Affirmative Defenses to Interpleader Complaint and Cross-claim by Shomers and DSG Holding Co. Inc." As discussed below, David Shomers died on December 8, 2009 without being deposed in this case. As the personal representative of the Shomers Estate, Bruce Warner (the "Shomers Estate") seeks to introduce the "Verified Answer and... Cross-claim..." as evidence for the Court to consider in ruling on the motions for summary judgment.

Federal Rule of Civil Procedure 56(c) provides that "[a] party asserting that a fact cannot be or is genuinely disputed must support the assertion by: (A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials." Fed. R. Civ. P. 56(c)(1). Rule 56 also provides that when a motion for summary judgment is filed, "an opposing party may not rely merely on allegations or denials in its own pleading; rather its response must-by affidavits or as otherwise provided in this rule-set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(c)(2). The rule further provides that "[a]n affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Fed. R. Civ. P. 56(c)(4). "A party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence." Fed. R. Civ. P. 56(c)(2). The Eleventh Circuit also explicitly requires that a court ruling on a motion for summary judgment consider only evidence that will be available in an admissible form at trial. Macuba v. Deboer, 193 F.3d 1316, 1322-25 (11th Cir. 1999); McMillian v. Johnson, 88 F.3d 1573, 1584 (11th Cir. 1996).

The Shomers Estate asserts that the verified answer is admissible at trial pursuant to Federal Rule of Evidence 807. Rule 807, the Residual Hearsay Exception, provides:

A statement not specifically covered by Rule 803 or 804 but having equivalent circumstantial guarantees of trustworthiness, is not excluded by the hearsay rule, if the court determines that (A) the statement is offered as evidence of a material fact; (B) the statement is more probative on the point for which it is offered than any other evidence which the proponent can procure through reasonable efforts; and (C) the general purposes of these rules and the interests of justice will best be served by admission of the statement into evidence. However, a statement may not be admitted under this exception unless the proponent of it makes known to the adverse party sufficiently in advance of the trial or hearing to provide the adverse party with a fair opportunity to prepare to meet it, the proponent's intention to offer the statement and the particulars of it, including the name and address of the declarant.

Fed. R. Evid. 807. The Verified Answer as a whole includes a number of matters that are not evidence of material facts, are conclusory legal statements, and can be introduced by other means. These portions of the Verified Answer are clearly not admissible pursuant to the Rule 807. The primary portion*fn1 of the Verified Answer which provides evidence of a material fact which the proponent cannot procure through any other reasonable efforts is the following assertion:

Andreoni [the decedent whose life was insured in the policy at issue in this case] duped Shomers into signing the form of the request for change of beneficiary of the Policy (which Andreoni later altered and forwarded to [Valley Forge Life Insurance Company]) by presenting Shomers an incomplete form, falsely representing that it was required in connection with a pending policy renewal, intimidating him in executing same, and then, when Shomers said he would hold on to the executed form until he obtained clarification from the court appointed Monitor, Andr[e]oni grabbed the form and fled.

Verified Answer ¶ 43. Because of his death, Shomers will not be able to testify to these facts at trial.*fn2

Rule 807 "is to be utilized only rarely, and is not to be taken as a 'broad license for trial judges to admit hearsay statements that do not fall within one of the other exceptions contained in Rules 803 and 804(b).'" In re Terazosin Hydrochloride Antitrust Litigation, No. 99-MDL-1317, 2005 WL 5955699, at *5 (S.D. Fla. Feb. 2, 2005) (quoting United States v. Mathis, 559 F.2d 294, 299 (5th Cir. 1977)*fn3 ). In order to be admitted under Rule 807, there must be a "clear basis of trustworthiness" to support the out-of-court statement. NLRB v. United Sanitation Serv., 737 F.2d 936, 941 (11th Cir. 1984). "[T]he burden is on the party seeking to invoke the residual exception to clearly demonstrate the existence of the requisite guarantees of trustworthiness." Id. (citing United States v. Colson, 662 F.2d 1389, 1392 (11th Cir.1981)).

In this case, the Court is guided by NLRB v. United Sanitation Service, 737 F.2d 936, 941 (11th Cir. 1984). In that case, the Eleventh Circuit considered a sworn statement by a deceased witness that had been admitted pursuant to the residual exception to the hearsay rule. The witness's statement was corroborated in certain details, that corroboration "d[id] not go to the veracity of several key assertions." Id. Moreover, the statements were in the declarant's interest, because they "weighed heavily in direct support of the charge that he had been illegally discharged, a charge that, if successful, potentially would have resulted in reinstatement and an award of back pay." Id. at 940. The Eleventh Circuit ruled that the sworn statement could not be admitted into evidence. Id. at 940-41.

In this case, Shomers's Verified Answer, particularly paragraph 43, weigh heavily in direct support of the charge that Shomers is entitled to the proceeds of the $2,000,000 life insurance policy on Andreoni. The corroborating evidence pointed to by the Shomers Estate does not go to the key assertions in the Verified Answer, specifically regarding the fraud or coercion allegedly used to trick or to force Shomers into signing the change of beneficiary form. Indeed, Shomers seems to assert both that he was tricked into voluntarily signing the form by fraud and that he was coerced into involuntarily signing the form by some unspecified intimidation. Paragraph 43 is internally inconsistent, further undermining its trustworthiness. Accordingly, the Court finds that the Verified Answer is not admissible at trial under Federal Rule of Evidence 807, and the Court will not consider it in ruling on the motions for summary judgment.

B. FTC's Standing

In Federal Trade Commission v. American Entertainment Distributors, Inc. et al., 04-22431-CIV-MARTINEZ, this Court has granted the Stipulated Final Order and Permanent Injunction as to Defendant Miriam Andreoni. Pursuant to that Order, Miriam Andreoni has assigned her rights as a beneficiary to the life insurance policy at issue in this case to the FTC. The Court has also granted the FTC's motion to be substituted in this action. Therefore, the FTC has the same standing to challenge the position of the Shomers Estate as Miriam Andreoni. See Fed. R. Civ. P. 25(c) ("If an interest is transferred, the action may be continued by or against the original party unless the court, on motion, orders the transferee to be substituted in the action or joined with the original party.").

II. Factual and Procedural Background*fn4

DSG Holding Company, Inc. ("DSG") is a Florida corporation which was owned by two shareholders, David Shomers ("Shomers") and Anthony R. Andreoni ("Andreoni"). On October 26, 1990, DSG and its shareholders entered into a Shareholders' Agreement. Pursuant to the agreement, certain redemption (buy/sell) options were provided in favor of DSG and the surviving shareholder in the event of the death of any of the shareholders.

On or about October 1, 1997, an application for an insurance policy (the "policy") on the life of Anthony R. Andreoni was submitted to Valley Force Life Insurance Company ("Valley Force Life") in amount of $2,000,000. The owner and primary beneficiary of the policy, as stated on the application, was "David Shomers, Business Associate/Business Partner."*fn5 Based on the application, policy number TRTU000941 insuring Anthony R. Andreoni was issued in the amount of $2,000,000.

The policy provides that the owner of the policy may change the beneficiary of the policy or assign ownership of the policy by written request to the insurance company. The policy defines "written request" as "a request in writing in a form satisfactory to [the insurer] and recorded at [the insurer's] Administrative Office."

In April 2003, Andreoni, Shomers, and DSG executed a new shareholder's agreement. (D.E. No. 103-11.) This agreement also provided that any deceased shareholder's estate would be obligated to sell his stock to the surviving shareholders or to the corporation, and it provided that the sale would take place after the corporation received the proceeds of "any life insurance policy" on the deceased shareholder. Id. In the agreement, the corporation agreed to maintain life insurance coverage on the lives of the shareholders in amounts at least equal to the value of the shareholder's stock. Id. The agreement provided that the proceeds of the policies should be used to purchase the shares of the deceased shareholder. Id. The shareholders also agreed to cause the policies to be endorsed so that the other shareholders and the corporation must be notified in writing prior to any ...


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