Opinion
CV 21-03239 TJH (SKx)
2021-12-15
ESTATE OF Joseph H. DAHER, Plaintiff, v. LSH CO., et al., Defendants.
Andrew Mark Hutchison, Cozen O'Connor, San Francisco, CA, Brian D. Burack, Pro Hac Vice, Gregory J. Star, Pro Hac Vice, Cozen O'Connor, Philadelphia, PA, for Plaintiff. Daniel Dubin, Elizabeth A. Sperling, Alston and Bird LLP, Los Angeles, CA, Alexander A. Ingoglia, Pro Hac Vice, Courtney E. Quiros, Pro Hac Vice, Theodore J. Sawicki, Pro Hac Vice, Alston and Bird LLP, Atlanta, GA, for Defendant LSH CO. Tyler Anders, Jonathan Peter Hersey, K and L Gates LLP, Irvine, CA, for Defendant Wells Fargo Bank, N.A.
Andrew Mark Hutchison, Cozen O'Connor, San Francisco, CA, Brian D. Burack, Pro Hac Vice, Gregory J. Star, Pro Hac Vice, Cozen O'Connor, Philadelphia, PA, for Plaintiff.
Daniel Dubin, Elizabeth A. Sperling, Alston and Bird LLP, Los Angeles, CA, Alexander A. Ingoglia, Pro Hac Vice, Courtney E. Quiros, Pro Hac Vice, Theodore J. Sawicki, Pro Hac Vice, Alston and Bird LLP, Atlanta, GA, for Defendant LSH CO.
Tyler Anders, Jonathan Peter Hersey, K and L Gates LLP, Irvine, CA, for Defendant Wells Fargo Bank, N.A.
Order
Terry J. Hatter, Jr., Senior United States District Judge
The Court has considered Defendant LSH Co.’s ["LSH"] motion to dismiss for lack of personal jurisdiction, and Defendant Wells Fargo Bank, N.A.’s ["Wells Fargo"] motion to dismiss for failure to state a claim upon which relief can be granted, along with the moving and opposing papers.
The following facts are alleged in the complaint or contained in documents attached to the complaint.
On March 20, 2006, the Joseph Daher Insurance Trust ["the Trust"] was created and executed in Delaware. The Trust's settlor was Joseph H. Daher ["Daher"], who, at the time, was an 80-year-old resident of Los Angeles County. Delaware-based Wilmington Trust Company ["Wilmington"] was the trustee of the Trust. Daher's daughter, Christine Ann Daher ["Christine"], was the co-trustee of the Trust and its beneficial owner. Christine is, also, the personal representative of Plaintiff Estate of Joseph H. Daher ["the Estate"]. As a Delaware trust, the Trust is governed by Delaware law.
On February 25, 2006, the Trust obtained a $5 million life insurance policy ["the Policy"] from American General Life Insurance Company ["American General"] on the life of Daher. It is not clear to the Court how the Trust obtained the Policy approximately one month before the Trust was created. Regardless, on March 21, 2006, Daher, Christine and Wilmington executed a Supplement to Trust Agreement which, inter alia , confirmed that the Policy was part of the Trust's estate.
Allegedly, a family of business entities, collectively referred to in the complaint as Coventry, controlled the procurement of the Policy and directed the creation of the Trust. The complaint is silent as to the relationship among Daher, Christine and Coventry, and whether Daher and Christine received any financial benefit for their participation in the procurement of the Policy.
The Policy's annual premium was approximately $263,000.00. To pay the Policy's initial annual premium, Wilmington created a sub-trust under the Trust and, then, the sub-trust obtained a nonrecourse loan.
On September 29, 2008, after the Policy's two-year contestable period lapsed and one day before the premium loan became due, the Trust sold the Policy to QL Investment Trust Alpha Series ["the QL Trust"], a Delaware trust based in Los Angeles. The QL Trust, then, transferred nominal ownership of the Policy to Wells Fargo as the securities intermediary. With Wells Fargo as the Policy's securities intermediary, the Policy remained in the name of Wells Fargo as it was bought and sold by various investors.
On February 14, 2012, LSH purchased the Policy as part of a bulk purchase of life insurance policies. LSH purchased the Policy from FCOF LS L.L.C., a member of a group of Delaware companies collectively referred to in the complaint as Fortress. CMG Life Services, Inc., a Florida corporation, facilitated the purchase.
LSH is a Luxembourg public limited liability company with its principal place of business in the Grand Duchy of Luxembourg. According to the complaint, LSH is a subsidiary of Alberta Investment Management Corporation ["AIMCo"], a multinational investment corporation based in Canada. AIMCo, allegedly, established LSH to hold AIMCo's portfolio of life insurance policies.
After LSH purchased the Policy, it paid the Policy's annual premiums through its agents, including Wells Fargo.
At some point, LSH became aware that the Policy insured a California resident. Beginning in 2012, LSH, through its agents, contacted Daher, or his family, at least four times a year to monitor his health and whereabouts.
Beginning in 2017, Preston Ventures, L.L.C. ["Preston"], based in Aliso Viejo, California, exercised significant influence over LSH's management of its life insurance policies. Allegedly, Preston made some or all of LSH's decisions as to when and how much LSH would pay towards the Policy's annual premiums. Additionally, LSH consulted with Preston regarding the Policy's value and Daher's life expectancy.
On December 8, 2017, Daher died. LSH, through Preston, obtained Daher's death certificate from Los Angeles County. The complaint is ambiguous as to who – LSH, Wells Fargo or Preston – submitted the death certificate to American General and claimed the Policy's death benefit on behalf of LSH. Regardless, Wells Fargo received the death benefit from American General in or around February, 2018, and, then, assigned some or all of the funds to either LSH or LSH II Co. ["LSH II"], another Luxembourg-based company alleged by the Estate to be LSH's predecessor in interest. LSH noted, in its opposition brief, that LSH and LSH II merged in 2018, and that it would refer to the two entities collectively as LSH. The complaint, also, referred to both companies as LSH. The Court will do so, here, as well.
On March 13, 2020, the Estate sued LSH and Wells Fargo in the District of Delaware to recover the Policy's death benefit. See Est. of Daher v. LSH CO ["Est. of Daher I"] , No. CV-20-360-LPS-JLH, 2021 WL 184394, at *1 (D. Del. Jan. 19, 2021). The complaint, in Est. of Daher I , alleged that the Policy was an illegal stranger-oriented life insurance policy ["STOLI"].
STOLI policies are, typically, obtained by a third party, rather than the insured person, for the benefit of investors who have no insurable relationship to the insured person. See Est. of Daher I , 2021 WL 184394, at *1. Under Delaware law, a life insurance policy obtained by an insured person may, nevertheless, be deemed a STOLI policy if the insured person served as an instrumentality of a third party. PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Tr., ex rel. Christiana Bank & Tr. Co. , 28 A.3d 1059, 1074 (Del. 2011). Under Delaware law, STOLI policies are void ab initio , as a matter of public policy, because they are considered to be illegal wagers on human life. Price Dawe , 28 A.3d 1059 at 1068, 1070. The Delaware Supreme Court concluded that the prohibition "serv[es] the substantive goal of preventing speculation on human life," a goal rooted in Delaware's constitutional prohibition against gambling and its distaste for STOLI policies’ "tendency to create a desire for ... the early death of the assured." Price Dawe , 28 A.3d 1059 at 1069, 1070-71, 1074.
On April 20, 2020, the Estate voluntarily dismissed Wells Fargo from Est. of Daher I. On June 16, 2020, LSH filed a motion to dismiss Est. of Daher I for lack of personal jurisdiction. On March 17, 2021, the District of Delaware dismissed the Estate's claims against LSH, concluding that it lacked personal jurisdiction over LSH because LSH took no actions in Delaware – it was merely a downstream purchaser of a Delaware insurance policy that was originally obtained by others. Est. of Daher I , 2021 WL 184394 at *6-*7. The District of Delaware concluded that Delaware's strong interest in enforcing its ban of STOLI policies was not enough to support the exercise of personal jurisdiction over LSH. Est. of Daher I , 2021 WL 184394 at *8.
On April 14, 2021, the Estate filed this diversity action against LSH and Wells Fargo. The Estate realleged the same claims, here, that it alleged in Estate of Daher I. The Estate's primary claim is based on 18 Del. § 2704(b), which entitles the insured, or his estate, to recover the death benefit paid out by an insurance company for a STOLI policy. In the alternative, the Estate alleged a claim for unjust enrichment, based on the theory that LSH lacked an insurable interest in Daher's life and, consequently, LSH's and Wells Fargo's receipt of the Policy's death benefit enriched them to the detriment of the Estate, in violation of § 2704(b) and Delaware public policy.
LSH, now, moves to dismiss, pursuant to Fed. R. Civ. P. 12(b)(2), for lack of personal jurisdiction, and Wells Fargo moves to dismiss, pursuant to Fed. R. Civ. P. 12(b)(c), for failure to state a claim upon which relief can be granted.
As discussed below, (1) the Court lacks personal jurisdiction over LSH; (2) the Estate's statutory claim against Wells Fargo cannot be dismissed, at this time, because of a factual issue regarding the statute of limitations; (3) the Estate's alternative claim against Wells Fargo for unjust enrichment is barred by Delaware law; and (4) the Court will defer ruling on whether Wells Fargo is entitled to immunity based on its role as a securities intermediary pending a determination by the Delaware Supreme Court in Wells Fargo, N.A. v. Est. of Malkin , No. 172, 2021 (Del. 2021, accepted June 3, 2021).
LSH's Motion to Dismiss for Lack of Personal Jurisdiction
To withstand this motion to dismiss for lack of personal jurisdiction, the Estate must establish a prima facie case that the Court has personal jurisdiction over LSH. See Brayton Purcell L.L.P. v. Recordon & Recordon , 606 F.3d 1124, 1127 (9th Cir. 2010). In considering whether the Estate has established a prima facie case, the Court's review is limited to the complaint and any declarations filed in connection with the motion to dismiss. See Dole Food Co., Inc. v. Watts , 303 F.3d 1104, 1108 (9th Cir. 2002). Further, the Court must accept the complaint's uncontroverted factual allegations as true, may draw reasonable inferences in favor of the Estate, and must resolve any factual conflicts in favor of the Estate. See Harris Rutsky & Co. Ins. Services, Inc. v. Bell & Clements Ltd. , 328 F.3d 1122, 1129 (9th Cir. 2003).
Here, LSH's motion included a declaration from Irina Danaila Gladek, one of its directors. Gladek's declaration did not contradict the facts alleged in the complaint other than her assertion that LSH did not have any agents in California. However, that assertion is a legal conclusion beyond the proper scope of a declaration. Gladeck, also, declared that LSH does not derive substantial business revenue from California and that LSH did not take any actions in California related to this case.
The Court's exercise of personal jurisdiction is subject to California's long-arm statute, which is coextensive with federal due process. Schwarzenegger v. Fred Martin Motor Co. , 374 F.3d 797, 800-801 (9th Cir. 2004). Personal jurisdiction may be general or specific. Schwarzenegger , 374 F.3d at 802. In its opposition brief, the Estate argued only that the Court has specific personal jurisdiction over LSH.
Specific jurisdiction, based on federal due process, exists when a defendant has sufficient minimum contacts with the forum state that are related to the lawsuit. Int'l Shoe Co. v. Wash. , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Specifically, the Court must determine whether: (1) The defendant purposefully directed its activities at the forum state, or, purposefully availed itself of the privilege of doing business in the forum state; (2) The case arose out of, or relates to, the defendant's forum-related activities; and (3) The exercise of personal jurisdiction would be reasonable. Schwarzenegger , 374 F.3d at 802. If the Estate meets its initial burden to satisfy the first two prongs, the burden will, then, shift to LSH to establish a compelling case as to the third prong. See Schwarzenegger , 374 F.3d at 802.
When considering the first prong, courts must look for purposeful availment in contract cases and purposeful direction in tort cases. See Axiom Foods, Inc. v. Acerchem Int'l, Inc. , 874 F.3d 1064, 1069 (9th Cir. 2017). Because this case is not based on the breach of a contract, the Court must look for purposeful direction. Where a defendant's allegedly tortious conduct occurs outside of the forum state, but has effects inside the forum state, courts must use the effects test to determine whether purposeful direction occurred. AMA Multimedia, L.L.C. v. Wanat , 970 F.3d 1201, 1208 (9th Cir. 2020). Alternatively, where a defendant enters the forum state and performs a tortious act there, the act will satisfy the entire purposeful direction prong without need for further inquiry. Freestream Aircraft (Bermuda) Ltd. v. Aero L. Grp. , 905 F.3d 597, 604 (9th Cir. 2018).
The Estate, here, did not allege that LSH, itself, performed acts in California. Rather, the Estate argued that actions taken by LSH's agents should be imputed to LSH.
The Supreme Court, in Daimler AG v. Bauman , 571 U.S. 117, 136, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014), held that, generally, an agent's contacts with the forum state cannot be imputed to the principal to establish general jurisdiction over the principal. Williams v. Yamaha Motor Co. , 851 F.3d 1015, 1023 (9th Cir. 2017). However, neither the Supreme Court nor the Ninth Circuit has resolved whether an agent's contacts with the forum state can be imputed to the principal to establish specific jurisdiction over the principal. Williams , 851 F.3d at 1024-25. Nevertheless, in Williams , the Ninth Circuit concluded that if an agent's contacts could be imputed to the principal, the plaintiff must, at a minimum, plead sufficient facts to show that the principal had the right to substantially control the purported agent. Williams , 851 F.3d at 1024-25. Here, the Estate alleged that LSH acted through agents, including Preston, but there were no allegations as to whether LSH either exercised control over its agents or had the right to substantially control its agents. Indeed, the complaint alleged that Preston "had (and continues to have) significant influence over LSH ," emphasis added, and that Preston "made some or all of the decisions regarding when and how much premium to pay on the Policy." Those allegations support a conclusion that the agent controlled the principal, rather than the principal controlling the agent – the exact opposite of the Ninth Circuit's reasoning in Williams. Consequently, the Court cannot impute Preston's actions to LSH.
Thus, the Court is limited to considering LSH's actions that occurred outside of California. Accordingly, the effects test to determine purposeful direction requires the Court to consider whether: (1) LSH committed an intentional act outside of California; (2) That was expressly aimed at California; and (3) That caused harm in California that LSH knew was likely to be suffered in California. See Axiom , 874 F.3d at 1069.
The first prong of the effects test is satisfied by the allegation of an act "denoting an external manifestation of the actor's will ... not includ[ing] any of its results, even the most direct, immediate, and intended." Morrill v. Scott Fin. Corp. , 873 F.3d 1136, 1142 (9th Cir. 2017). In its opposition brief, the Estate argued that the following actions gave rise to specific jurisdiction: (1) LSH purchased the Policy with knowledge that Daher lived in California; (2) LSH regularly contacted Daher, through agents, including Preston, to monitor his health and whereabouts; (3) LSH consulted heavily with Preston regarding its investments; (4) LSH, through its agent, requested and received Daher's death certificate from Los Angeles County; and (5) LSH, either through agents or on its own, submitted a death claim to American General with assistance from Preston and, then, received the Policy's death benefit via Wells Fargo. Those allegations are sufficient to establish that LSH committed intentional acts.
The second prong of the effects test requires the Court to determine whether LSH's suit-related conduct was expressly aimed at California such that it created a substantial connection with California. See Axiom , 874 F.3d at 1069. It is not enough that a defendant "engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state." Axiom , 874 F.3d at 1069. "[T]he plaintiff cannot be the only link between the defendant and the forum." Ayla, L.L.C. v. Alya Skin Pty. Ltd. , 11 F.4th 972, 980 (9th Cir. 2021). Rather, "something more – conduct directly targeting the forum – is required to confer personal jurisdiction." Ayla , 11 F.4th at 980.
Even if the Court were to impute Preston's actions to LSH, the Estate failed to establish that LSH created a substantial connection with California. In Morrill , the plaintiff, an Arizona attorney, argued that the out-of-state defendants created a substantial connection with Arizona by engaging in abusive behavior aimed at Arizona via litigation in Nevada. Morrill , 873 F.3d at 1140-41. The Morrill defendants called Arizona and sent emails, letters, and documents to Arizona; filed a separate Arizona lawsuit to obtain a subpoena and, then, appeared in that Arizona action; used briefs from the Arizona subpoena case in the Nevada case; and served the complaint for another Nevada lawsuit on the plaintiff in Arizona. Morrill , 873 F.3d at 1142-43. The Ninth Circuit, in determining whether a substantial connection to Arizona existed, considered, first, whether the defendants had created their own contacts with Arizona, and, second, whether the defendants had created contacts with Arizona other than those it had with the plaintiff. Morrill , 873 F.3d at 1143. The Ninth Circuit concluded that the defendants’ Arizona contacts were merely ancillary to the driving force for the defendants’ actions – the Nevada litigation – and arose "from the fortuity of where the plaintiff resides." Morrill , 873 F.3d at 1146, 1148.
It was similarly fortuitous, here, that Daher was a California resident and that LSH had to take certain actions in California to claim the Policy's death benefit. The Estate alleged that LSH, as the downstream purchaser of multiple life insurance policies, acquired the Policy knowing that it covered a California resident. The fact that LSH happened to purchase a life insurance policy on a California resident was a "random, fortuitous, or attenuated" contact that is "insufficient to create the requisite connection with the forum." See Morrill , 873 F.3d at 1142.
Likewise, LSH's alleged communications with Daher and his family, its monitoring of Daher's health and whereabouts, its retrieval of Daher's death certificate, and its consultations with Preston are insufficient to create a substantial connection to California. As in Morrill , LSH's alleged actions were ancillary to LSH's bulk purchase of life insurance policies, the maintenance of those policies through the payment of premiums, and the redemption of their death benefits. Indeed, LSH's alleged actions involved California because of the fortuity of Daher's residence in California, not because they were expressly aimed at California. See Morrill , 873 F.3d at 1148. Finally, it is, similarly, fortuitous that Preston is based in California absent an allegation that LSH consulted with Preston because Preston was located in California. See Morrill , 873 F.3d at 1148.
Accordingly, the Estate failed to establish a prima facie case that LSH expressly aimed its actions at California. See Morrill , 873 F.3d at 1145. Therefore, the Estate failed to establish the second prong of the effects test.
Assuming, arguendo , that the second prong of the effects test were satisfied, the third prong requires a showing that LSH knew that its actions would likely cause harm in California. See Morrill , 873 F.3d at 1144. The only harm alleged by the Estate was the destruction of its right to the Policy's death benefit when LSH claimed it.
Interestingly, it was LSH's collection of the Policy's death benefit that gave rise to the Estate's alleged harm. Had American General discovered that the Policy was a STOLI policy before it paid the death benefit to LSH, American General, likely, would have sought to have the policy judicially declared void ab initio , as is typically the case with STOLI policies. See, e.g., Sun Life Assurance Co. Canada v. U.S. Bank Nat'l Ass'n , 369 F. Supp. 3d 601, 608 (D. Del. 2019). Had the policy been declared void ab initio , the Estate would have no right of recovery against LSH.
Regardless, the purpose of 18 Del. § 2704 and related statutes is to prevent speculation on human life, rather than to vindicate any harm to an insured or his estate. See Price Dawe , 28 A.3d 1059 at 1074. Section 2704(b) codified Delaware's preference that an insured's estate – rather than a third party – should enjoy a STOLI policy's death benefit. In other words, § 2704(b) created a negative incentive to dissuade others from investing in STOLI policies, rather than a method to vindicate any actual harm suffered by insureds or their estates. Consequently, the Estate is seeking to recover, here, the Policy's death benefit because Delaware considers STOLI policies to be contrary to public policy, not because Daher or the Estate was harmed.
Thus, neither Daher nor his Estate suffered harm in California, or anywhere else, in relation to the Policy. Therefore, the Estate failed to establish the third element of the effects test.
Consequently, the Estate failed to establish a prima facie case that the Court has specific personal jurisdiction over LSH.
Wells Fargo's Motion to Dismiss for Failure to State a Claim
To sufficiently state a claim, a plaintiff must allege enough facts so that the requested relief is plausible on its face and that the defendant receives notice of the basis for the claim. Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). While the factual allegations need not be detailed, they must go beyond labels and conclusions and raise a right to relief above the speculative level. Twombly , 550 U.S. at 555, 127 S.Ct. 1955. Further, the Court must accept all allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. See Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
Wells Fargo argued that the Estate failed to state a claim because: (1) Under California law, only an insurer has standing to challenge a life insurance policy; (2) The Estate's claims are time barred; (3) The unjust enrichment claim is not sufficiently pled; and (4) As the securities intermediary, Wells Fargo is not liable to the Estate.
Choice of Law
Wells Fargo argued that California law, rather than Delaware law, should govern this case, and that California law bars the Estate's claims. The Policy does not contain a choice of law clause.
Generally, when a case is based on diversity jurisdiction, the Court must look to California law – the forum state – when making a choice of law determination. Nguyen v. Barnes & Noble Inc. , 763 F.3d 1171, 1175 (9th Cir. 2014). In the life insurance context, California courts have, generally, adopted Restatement (Second) of Conflict of Laws § 192, which pertains to life insurance policies. Mosier v. Phoenix Life Ins. Co. , No. CV 12-227-PSG-EX, 2012 WL 12888671, at *2 (C.D. Cal. Aug. 7, 2012). Section 192 requires courts to apply the substantive laws of the state where the insured is domiciled when there is a dispute between the parties to a life insurance contract, unless another state has a more significant relationship to the transaction and the parties.
Here, the Estate did not sue the insurance company that issued the Policy, and is not seeking a determination of its rights or the insurance company's obligations under the terms of the Policy. Rather, the Estate is suing defendants who were not parties to the Policy, for the purpose of having the Policy declared void based on § 2704(b). As stated above, the Estate's claims sound in tort rather than in contract. Thus, the claims fall outside the scope of Restatement (Second) of Conflict of Laws § 192.
Because § 192 is not applicable, here, the Court must apply California's governmental interest test to determine whether it should apply California substantive law or Delaware substantive law to resolve this case. See Kearney v. Salomon Smith Barney, Inc. , 39 Cal. 4th 95, 100, 45 Cal.Rptr.3d 730, 137 P.3d 914 (2006). In applying California's governmental interest test, the Court must: (1) Determine whether the relevant laws of California and Delaware are different; (2) Examine each state's interest in the application of its laws, if the laws are different, to determine if there is a true conflict; and (3) Determine, if there is a true conflict, which state's interest would be more impaired if its law were not applied. Kearney , 39 Cal. 4th at 107-08, 45 Cal.Rptr.3d 730, 137 P.3d 914. Here, California and Delaware substantive law are clearly different. Indeed, Wells Fargo's argument is that California law does not empower an estate to sue to invalidate a STOLI policy. However, that means that there is no conflict between the states’ interests. Delaware's interest is in rendering STOLI policies unprofitable by empowering estates to recover death benefits, as provided for in § 2704(b). California has no corollary policy. Indeed, under California law, an insured's estate has no right to sue to invalidate an insurance policy for lack of an insurable interest. Jenkins v. Hill , 35 Cal. App. 2d 521, 524, 96 P.2d 168 (Cal. Ct. App. 1939). While California has a general interest in protecting its insureds, that interest is not implicated, here, because the purpose of the Estate's claims is not to vindicate the rights of Daher, but, rather, to enforce a Delaware public policy that has no equivalent in California.
"When one of two states related to a case has a legitimate interest in the application of its law and policy and the other has none, there is no real problem; clearly the law of the interested state should be applied." Hurtado v. Superior Ct. , 11 Cal. 3d 574, 580, 114 Cal.Rptr. 106, 110, 522 P.2d 666, 670 (1974).
Thus, the Court must apply Delaware substantive law, here. Accordingly, Wells Fargo's argument that the Estate's § 2704(b) claim must be dismissed because it is not cognizable under California law is unavailing.
Statute of Limitations
If a claim appears to be time barred based on the allegations in a complaint, the claim can be dismissed for failure to state a claim. Von Saher v. Norton Simon Museum of Art at Pasadena , 592 F.3d 954, 969 (9th Cir. 2010). However, if the plaintiff can prove a set of facts that would establish that a claim is timely, the issue cannot be decided on a motion to dismiss. Supermail Cargo, Inc. v. United States , 68 F.3d 1204, 1207 (9th Cir. 1995).
Under Delaware law, the statute of limitations for claims arising under a statute, and for unjust enrichment, is three years. 10 Del. Code § 8106(a) ; Wal-Mart Stores, Inc. v. AIG Life Ins. Co. , 860 A.2d 312, 319 (Del. 2004). The Estate's claims are based on its entitlement to the Policy's death benefit. That entitlement was created by § 2704(b), and was triggered when Wells Fargo received the Policy's death benefit. See Wal-Mart , 860 A.2d at 319.
The Estate's complaint did not allege a specific date that Wells Fargo received the Policy's death benefit. Rather, the complaint alleged that "Wells Fargo received the death benefit in or about February 2018," emphasis added, and that "[o]n information and belief, in or around February of 2018, American General paid the Policy's death benefit to Wells Fargo[,]" emphasis added. In its opposition brief, the Estate argued that it did not allege a specific date because it did not, and does not, know when, exactly, Wells Fargo received the Policy's death benefit.
If Wells Fargo, indeed, received the death benefit in February, 2018, the Estate's claims, here, would be barred because this action was filed on April 14, 2021 – more than three years later. However, at this juncture, the Estate could still prove that its claims were timely if it can establish that Wells Fargo received the Policy's death benefit on or after April 14, 2018.
Consequently, the Court cannot dismiss the Estate's claims based on the statute of limitations at this time. See Supermail , 68 F.3d at 1207.
Unjust Enrichment Claim
The Estate's unjust enrichment claim is premised on its allegation that "LSH's and/or Wells Fargo's acceptance and retention of the Policy's death benefit has enriched LSH and/or Wells Fargo, to the detriment of the Estate." The complaint, however, did not specify the detriment that the Estate suffered.
Under Fed. R. Civ. Proc. 8, a plaintiff sufficiently states a claim if it has alleged enough facts to put the defendants on notice of the grounds for the claim; under notice pleading standards, a plaintiff need not allege facts to satisfy every element of a claim. Twombly , 550 U.S. at 555, 127 S.Ct. 1955. If a claim fails solely due to the plaintiff's failure to plead the right facts, the Court can only dismiss the claim without prejudice. Eminence Cap., L.L.C. v. Aspeon, Inc. , 316 F.3d 1048, 1052 (9th Cir. 2003). However, if a claim fails due to a legal issue that additional factual allegations cannot possibly remedy, thereby, making any amendment futile, the Court must dismiss that claim with prejudice. Seismic Reservoir 2020, Inc. v. Paulsson , 785 F.3d 330, 335-36 (9th Cir. 2015).
Under Delaware law, an impoverishment, or detriment, is an essential element of an unjust enrichment claim. See Nemec v. Shrader , 991 A.2d 1120, 1130 (Del. 2010). The Delaware Supreme Court has explained that a plaintiff need not have suffered an actual financial loss to have been impoverished, but it must have, at a minimum, been deprived of a benefit unjustifiably conferred upon the defendant. Nemec , 991 A.2d at 1130 n.37.
The Estate's unjust enrichment claim is based on its alleged entitlement to the Policy's death benefit and the Defendants’, alleged, interference with that entitlement when they were paid the Policy's death benefit. Without § 2704(b), the Estate has no entitlement to the death benefit. The Estate did not allege any independent injury or harm that would entitle it, otherwise, to recover the death benefit. In its opposition brief to Wells Fargo's motion to dismiss, the Estate argued that Daher "provided his insurability" to Wells Fargo. However, the Estate failed to explain how the provision of that abstract benefit impoverished Daher or the Estate, or how it was, or could have been, conferred upon Wells Fargo. See Nemec , 991 A.2d at 1130.
Because of the fatal relationship between the Estate's § 2704(b) claim and its unjust enrichment claim, the unjust enrichment claim cannot be successful. If the Estate's § 2704(b) claim fails, it would have no right to the Policy's death benefit, and, therefore, will have suffered no impoverishment, thereby, resulting in the consequent failure of its unjust enrichment claim. If, on the other hand, the Estate's § 2704(b) claim succeeds, its unjust enrichment claim must fail because the unjust enrichment claim can exist only in the absence of a valid legal remedy – the Estate's § 2704(b) claim. See Nemec , 991 A.2d at 1130.
When the Southern District of Florida considered the same issue in a factually and legally similar case, it reached the opposite conclusion. See Est. of Malkin v. Wells Fargo Bank, N.A. , No. 17-23136-CIV, 2019 WL 176178, at *4 (S.D. Fla. Jan. 11, 2019). The Southern District of Florida concluded that the estate in its case did, in fact, suffer an impoverishment, because of Wells Fargo's "unjustified retention of money to which the Estate is entitled." Est. of Malkin , 2019 WL 176178 at *4. The Southern District of Florida did not analyze the nature of that entitlement, or the fatal relationship between the § 2704(b) and unjust enrichment claims.
Here, the Estate failed to state a claim for unjust enrichment, and any potential amendment would, also, be futile because of the fatal relationship. Consequently, the Estate's unjust enrichment claim must be dismissed with prejudice. See Eminence Cap. , 316 F.3d at 1052.
Securities Intermediary Statutory Defense Finally, Wells Fargo argued that, because it was merely the securities intermediary for LSH, it is immune from liability pursuant to the Uniform Commercial Code, as adopted by Delaware in 6 Del. Code § 8-115. Section 8-115 provides that "[a] securities intermediary that has transferred a financial asset pursuant to an effective entitlement order ... is not liable to a person having an adverse claim to the financial asset[.]" However, § 8-115 conflicts with § 2704(b), which makes any payee of a STOLI policy's death benefit liable to the insured or his estate. Here, Wells Fargo was, allegedly, a payee of the Policy's death benefit.
In Est. of Malkin , the Southern District of Florida held that § 2704(b), which was enacted after Delaware adopted § 8-115, superceded § 8-115 because of Delaware's strong disfavor of STOLI policies and Delaware's public policy that no one, other than the insured or his estate, should benefit from a STOLI policy. Est. of Malkin v. Wells Fargo Bank, N.A. , 379 F. Supp. 3d 1263, 1279, 1280 (S.D. Fla. 2019). Accordingly, the Southern District of Florida held that if Wells Fargo, as the securities intermediary, retained any of the death benefits from the STOLI policy at issue, then Wells Fargo was a payee under § 2704(b) and, potentially, subject to liability under that statute. Est. of Malkin , 379 F. Supp. 3d at 1279-80. Because there was a factual dispute as to whether Wells Fargo retained any of the death benefits, the court could not make a summary judgment determination as to Wells Fargo's liability. Est. of Malkin , 379 F. Supp. 3d at 1280.
Wells Fargo appealed the supremacy question to the Eleventh Circuit, which certified the following question to the Delaware Supreme Court:
If an insurance contract is void under [§ 2704] and [ Price Dawe ], is the party being sued under § 2704(b), as a third-party purchaser of the contract and holder of the proceeds, entitled to ... a securities intermediary defense under [ § 8-115 ]?
Est. of Malkin v. Wells Fargo Bank, N.A. , 998 F.3d 1186, 1202 (11th Cir. 2021). The Delaware Supreme Court accepted the certified question, and a determination is pending. See Wells Fargo, N.A. v. Est. of Malkin , No. 172, 2021 (Del. 2021, accepted June 3, 2021).
Because the certified question could resolve whether Wells Fargo is entitled to dismissal of the Estate's § 2704(b) claim against it, here, the Court will stay this case, in the interest of judicial economy, pending a determination of the certified question from the Delaware Supreme Court. See Leyva v. Certified Grocers of Cal., Ltd. , 593 F.2d 857, 863 (9th Cir. 1979).
Accordingly,
It is Ordered that Plaintiff's claims against Defendant LSH Co. be, and hereby are, Dismissed for lack of personal jurisdiction.
It is further Ordered that Plainitff's unjust enrichment claim against Wells Fargo be, and hereby is, Dismissed with prejudice.
It is further Ordered that the remainder of this case be, and hereby is, Stayed pending the Delaware Supreme Court's determination of the certified question presented in Wells Fargo, N.A. v. Est. of Malkin , No. 172, 2021 (Del. 2021, accepted June 3, 2021).
It is further Ordered that Plaintiff and Wells Fargo shall file a joint status report within thirty days of the Delaware Supreme Court's determination of the certified question or in six months, whichever is sooner.