United States District Court, S.D. Florida
CECILIA M. ALTONAGA UNITED STATES DISTRICT JUDGE.
CAUSE came before the Court on Defendants, Q Capital
Strategies, LLC and Life Settlement Solutions, LLC's
Motion to Dismiss Complaint Pursuant to Rule 12(b)(6) [ECF
No. 14], filed November 22, 2017. The Court has carefully
reviewed the Complaint [ECF No. 1] and its attachments [ECF
Nos. 1-1 to 1-3]; the present Motion; Plaintiff, CDG
International Corp.'s Memorandum of Law in Opposition to
Defendants' Motion to Dismiss [ECF No. 23];
Defendants' Reply [ECF No. 26]; and applicable law. For
the reasons explained below, the Motion is granted in part
and denied in part.
standard governing review of a Rule 12(b)(6) motion is well
established. “To survive a motion to dismiss [under
Rule 12(b)(6)], a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (alteration added)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). Although this pleading standard “does not
require ‘detailed factual allegations, ' . . . it
demands more than an unadorned,
Id. (alteration added) (quoting Twombly,
550 U.S. at 555). Pleadings must contain “more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.”
Twombly, 550 U.S. at 555. Indeed, “only a
complaint that states a plausible claim for relief survives a
motion to dismiss.” Iqbal, 556 U.S. at 679
(citing Twombly, 550 U.S. at 556).
this “plausibility standard, ” a plaintiff must
“plead factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. at 678 (alteration
added) (citing Twombly, 550 U.S. at 556). “The
mere possibility the defendant acted unlawfully is
insufficient to survive a motion to dismiss.”
Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1261
(11th Cir. 2009) (citation omitted), abrogated on other
grounds by Mohamad v. Palestinian Auth., 566 U.S. 449
motion to dismiss, a court construes the complaint in the
light most favorable to the plaintiff and accepts its factual
allegations as true. See Brooks v. Blue Cross & Blue
Shield of Fla., Inc., 116 F.3d 1364, 1369 (11th Cir.
1997) (citing SEC v. ESM Grp., Inc., 835 F.2d 270,
272 (11th Cir. 1988)). Unsupported allegations and
conclusions of law, however, will not benefit from this
favorable reading. See Iqbal, 556 U.S. at 679
(“While legal conclusions can provide the framework of
a complaint, they must be supported by factual
allegations.”); see also Sinaltrainal, 578
F.3d at 1260 (“[U]nwarranted deductions of fact in a
complaint are not admitted as true for the purpose of testing
the sufficiency of [a] plaintiff's allegations.”
(alterations added; internal quotation marks omitted)
(quoting Aldana v. Del Monte Fresh Produce, N.A.,
Inc., 416 F.3d 1242, 1248 (11th Cir. 2005); other
scope of review on a motion to dismiss under Rule 12(b)(6) is
limited to the four corners of the complaint. See Speaker
v. U.S. Dep't of Health and Human Servs. Ctrs. for
Disease Control and Prevention, 623 F.3d 1371, 1379
(11th Cir. 2010) (citation omitted). Where a plaintiff refers
to certain documents in the complaint central to its claim,
those documents are considered part of the pleading for the
purpose of resolving a motion to dismiss. See
Brooks, 116 F.3d at 1369 (citation omitted).
Furthermore, the court “may consider an extrinsic
document if it is (1) central to the plaintiff's claim
and (2) its authenticity is not challenged.”
Speaker, 623 F.3d at 1379 (internal quotation marks
omitted) (quoting SFM Holdings, Ltd. v. Banc of Am.
Secs., LLC, 600 F.3d 1334, 1337 (11th Cir. 2010); other
to the Complaint, Defendants orchestrated a scheme to defraud
Plaintiff into massively overpaying on the purchase price
paid to Defendants to secure life settlement contracts
(“LSCs”) on behalf of Plaintiff. (See
Compl. ¶ 12). Defendants used their position of trust
with Plaintiff and unique expertise to flimflam Plaintiff
into paying more than twice what it should reasonably have
paid to acquire a portfolio of 12 LSCs, while pocketing the
difference between themselves and their co-conspirators and
agents. (See id.). Defendants succeeded by using
misrepresentations, omissions, and half-truths, including the
fraudulent use and manipulation of a series of contracts.
life settlement industry generates a secondary market for
life insurance policies; in this way, a policyholder who no
longer wants a policy can sell it for a lump-sum payment in
exchange for the right to the policy's death benefits.
(See Id. ¶ 13). Persons engaged in the business
of purchasing or transferring policies must generally be
licensed or lawfully permitted to engage in the business.
(See Id. ¶ 14). Those licensed persons are
known as life settlement providers. (See id.).
Defendants are life settlement providers licensed to engage
in these transactions in 20 states, and they hold themselves
out as experts in the life settlement industry. (See
Id. ¶¶ 14-15).
was formed in Nevada on behalf of an Italian investment group
(the “Italians”) and was to serve as the vehicle
for the Italians to purchase a portfolio of life settlement
contracts. (See Id. ¶ 16). The reason the
Italians wanted to so invest is because a bank had advised
them it would issue them a loan based on a favorable
percentage of the face value of the life insurance portfolio
of life settlement policies. (See Id. ¶ 17).
After meeting with the bank and financial consulting firm,
The 8th Sarl, James Meulemans of The 8th lobbied the Italians
so they would purchase LSCs from Defendants. (See
Id. ¶¶ 18-19). Meulemans told them The 8th
would be working with Defendants to secure the best portfolio
of life settlement agreements so the Italians could use the
contracts as collateral to secure the loan from the bank.
(See Id. ¶ 19). These representations were made
to Massimo Giorgilli, Francesca Terrinoni, and Marco Gianni.
February 2015, but before February 17, 2015, the Italians
decided to pursue the acquisition of the LSCs using the
services of The 8th and Defendants. (See Id. ¶
20). On February 17, the Italians incorporated Plaintiff on
instructions from The 8th and Defendants. (See id.).
On February 26, 2015, Plaintiff signed a master contract with
Defendants for the purchase through Defendants of LSCs.
(See Id. ¶ 21; see also Compl. Ex.
[ECF No. 1-1] 1- 11). The master contract contains as exhibits
the format of the future contracts Plaintiff would be signing
with either Defendant for the purchase of future specific
individual life settlement policies. (See
Compl. ¶ 23).
thereafter signed 12 such agreements (“PLSCs”)
with Defendants, eight with Q Capital and four with Life.
(See Id. ¶¶ 23-24; see also
Compl. Exs. 2 & 3). As part of the master contract,
Plaintiff was required to appoint Defendants as its agents to
secure the LSCs that would eventually become the PLSCs.
(See Compl. ¶ 26). This was done
through written Agency Appointments. (See id.).
master contract contained an Attachment C that set forth the
eligibility requirements for the LSCs Defendants were to
secure for Plaintiff. (See Id. ¶ 27; Compl. Ex.
1, 11). In connection with the master contract, on February
26, 2015, Plaintiff also signed a disclosure document titled,
“Client Profile.” (See Compl. ¶ 28;
Compl. Ex. 3 [ECF No. 1-3] 2-17). Between February 17 and
February 26, 2015, Defendants, through their CEO Steven
Shapiro and The 8th, who at all times acted as
Defendants' agent, represented to Plaintiff they would
secure an appropriate portfolio of LSCs for one million
dollars, at the best possible price to Plaintiff.
(See Compl. ¶ 29).
life settlement industry, when representing others as
undisclosed agents for the purchase of LSCs, life settlement
providers generally have agreed upon a top price the client
principal will pay for an LSC. (See Id. ¶ 33).
Assuming the life settlement provider secures the LSC within
the agreed upon price range, it uses the client's money
it is holding in escrow to pay the purchase price to the
seller and associated costs. (See id.). The life
settlement provider makes its money either on a set
commission or in the spread between what it secures the LSC
for at auction and the acquisition price its client's
principal agreed it would pay for the policy. (See
Id. ¶ 34). The life settlement industry depends on:
the integrity and reliability of the information used to
determine the acquisition price for the client's purchase
of the LSC and the particularized skill and expertise of the
person making the decision; as well as the timely (before
completion of the transaction) and accurate disclosure to the
client/principal by the life settlement provider of the
purchase price paid to secure the LSC at auction. (See
Id. ¶ 35).
scheme to defraud Plaintiff centered on making sure Plaintiff
was never provided a copy of any of the underlying LSCs
Defendants secured for Plaintiff's account, despite each
PLSC specifically requiring the Defendants provide Plaintiff
a copy of the LSC before Defendants could access
Plaintiff's escrowed funds to complete the transactions.
(See Id. ¶ 38). Had Plaintiff timely received
copies of the LSCs, it would have seen the acquisition price
it paid Defendants was two to three times the amount
Defendants paid at auction. (See id.).
Defendants' scheme “was elaborate in that they and
The 8th, working together and at the direction of Defendants,
would engage in an elaborate kabuki dance with Plaintiff[, ]
feigning an elaborate non-existent auction process . . . to
cause Plaintiff to continuously jack up the acquisition price
to be paid Defendants for the PLSC well in excess of the
price that Defendants and The 8th knew would be successful at
auction.” (Id. ¶ 39 (alterations added)).
The playacting was repeated for each of the 12 PLSCs
Plaintiff purchased through Defendants (see Id.
¶ 40), resulting in Plaintiff grossly overpaying on each
of 11 PLSCs it purchased through Defendants (see Id.
master contract, Client Profile, PLSCs, and the Agency
Appointment were props to camouflage that Plaintiff was 100
percent reliant on Defendants; that is, Defendants owed
Plaintiff a fiduciary duty not to use their position of trust
with Plaintiff to their benefit at Plaintiff's expense.
(See Id. ¶ 50). This fiduciary relationship
arises from Defendants' expressed expertise in the life
settlement industry; their monopoly of information and flow
of information to Plaintiff; and their access to
Plaintiff's confidential business information and needs,
directly or through The 8th. (See id.).
Notwithstanding any statements in the documents that
Plaintiff was charged with seeking its own independent due
diligence in arriving at a purchase price, Plaintiff relied
solely on Defendants' expertise and flow of information.
(See Id. ¶ 51).
sought to manipulate other provisions of the documents to
insulate themselves from liability for non-compliance with
the contracts and accomplish the overall fraud they were
perpetrating on Plaintiff. (See Id. ¶ 52). For
example, each PLSC calls for a “Verification
Certificate, ” or Plaintiff's certification that
Defendants have complied with their obligations under the
PLSCs, such as Plaintiff receiving from Defendants all
information it was supposed to get to make informed decisions
regarding the purchases. (See Id. ¶ 53; Compl.
Ex. 1, 12-114; Compl. Ex. 2, 1-145). In at least 11 of the
PLSCs, Defendants procured the LSCs after Plaintiff executed
the Verification Certificates - in other words, the LSCs did
not exist at the time Plaintiff is supposed to have signed
off on receiving them. (See Compl. ¶
their contractual obligation to do so, Defendants avoided
providing Plaintiff with the underlying LSCs until May 2017,
when Plaintiff demanded the policies in writing. (See
Id. ¶ 57; Compl. Ex. 3, 68-71). On October 11,
2017, Plaintiff sent Defendants a written demand for
rescission of the 12 PLSCs they tricked Plaintiff into buying
at inflated prices. (See Compl. ¶ 58).
Defendants have refused. (See Id. ¶ 59).
brings four claims for relief. Count 1 is titled
“Rescission, ” and seeks rescission together with
reimbursement of the premium amounts Plaintiff paid on each
of the policies to keep them current. (See Id.
¶¶ 60-64). Count 2 is titled “Fraud, ”
and it demands damages in the amount overpaid for the 12
PLSCs, together with punitive damages. (See Id.
¶¶ 65-67). Count 3 is titled “Breach of
Fiduciary Duty, ” and it similarly seeks damages for
the amounts overpaid as well as punitive damages. (See
Id. ¶¶ 68-70). Count 4 is for “Breach of
Contract, ” and it seeks damages in the amounts
overpaid as a result of Defendants' material breach of
the master contract and PLSCs related to the preparation and
filling out of Verification Certificates for Plaintiff to
sign, without first securing and delivering to Plaintiff the
underlying, executed LSCs. (See Id. ¶¶
move to dismiss all counts of the Complaint on the basis
Plaintiff fails to state plausible claims for relief.
(See generally Mot.). In particular, ...