Negrete v. Allianz Life Insurance Co. of North America

926 F. Supp. 2d 1143 (2013) United States District Court for the Central District of California 2013-02-25

civil; certified nationwide class of senior annuity purchasers v. insurer; defendant's third motion for summary judgment on the RICO claims (person/enterprise distinctness, causation, release, parol evidence); denied except as to claims released by a prior class settlement (result: mixed)

Facts

  1. 1 Culpable person (§ 1961(3)) distinct from the enterprise under (c) satisfied triable
    Stated otherwise, the enterprise must be either “formally or practically separable from the person.”
  2. 1 Culpable person (§ 1961(3)) distinct from the enterprise under (c) satisfied triable
    According to plaintiffs, the Senior Annuity Enterprise consists of Allianz, the 13 FMOs in which Allianz holds ownership interests, and the 6 FMOs who have served as board members of the Market Advisory Committee (“MAC”).
  3. 1 Culpable person (§ 1961(3)) distinct from the enterprise under (c) satisfied triable
    The degree of control Allianz exercises over the FMOs it does not own is defined by contract, PSGI ¶ 61, and Allianz and these FMOs do not share executives, employees, or co-mingle operating funds, and the FMOs handle payment of their operating expenses and employees.
  4. 1 Culpable person (§ 1961(3)) distinct from the enterprise under (c) satisfied triable
    In addition, these FMOs sell various securities products offered by other insurance companies, including non-annuity products, and some of the FMOs also provide unrelated services like tax consulting, stock advice, and brokerage services.
  5. 1 Culpable person (§ 1961(3)) distinct from the enterprise under (c) satisfied triable
    Unlike situations where a single corporate defendant is alleged to have “conspirefd] with himself,” River City, 960 F.2d at 1461, Allianz is alleged to have conspired with 19 formally-separate corporate entities (the enterprise) in furtherance of its alleged scheme to defraud.
  6. 1 Culpable person (§ 1961(3)) distinct from the enterprise under (c) satisfied triable
    This formal separation is alone sufficient to support a finding of distinctiveness.
  7. 1 Culpable person (§ 1961(3)) distinct from the enterprise under (c) satisfied triable
    Quite simply, there is nothing inconsistent between a finding that Allianz has exerted some control over the FMOs at issue on the one hand, with a finding that the level of control that Allianz has exerted does not render the alleged enterprise indistinguishable from Allianz itself on the other.
  8. 1 Culpable person (§ 1961(3)) distinct from the enterprise under (c) satisfied triable
    And whether Allianz-owned or not, none of the FMOs are pled as RICO persons in this case.
  9. 1 Culpable person (§ 1961(3)) distinct from the enterprise under (c) satisfied triable
    For all of the foregoing reasons, the Court finds that disputed issues of fact preclude a grant of summary judgment in Allianz’s favor on the issue of distinctiveness.
  10. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact satisfied triable
    On October 13, 2011, 2011 WL 4852314, the Court denied the motion, finding that disputed issues of material fact precluded summary judgment on the required elements of (1) a RICO enterprise; (2) an injury “by reason of’ the conduct constituting the alleged RICO violation; and (3) a RICO conspiracy.
  11. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact satisfied triable
    Under Boyle, an association-in-fact enterprise must have “a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose.”
  12. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact satisfied triable
    In the late 1990s, Allianz — and LifeUSA Holding Inc., which merged with Allianz in 1999— began acquiring ownership interests in certain FMOs under the banner of “Project Procure.”
  13. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact satisfied triable
    Moreover, this Court has previously found that the MAC Board members have demonstrated a “high degree of coordinated conduct with respect to targeted sales to seniors.”
  14. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact satisfied triable
    While the evidence supports plaintiffs’ contention that all of the FMOs work with Allianz with a view towards selling as many annuity products as possible in the senior market, this common purpose and other evidence of coordination does not make the FMOs and Allianz indistinguishable.
  15. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) satisfied triable
    This also includes the allegedly excessive commissions and lucrative incentive programs that Allianz created for all FMOs and their agents, see PSGI ¶¶ 133, 135, which purportedly furthered the enterprise’s “common purpose” of increasing the sales of Allianz products in the senior market
  16. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) satisfied triable
    Allianz cannot unilaterally redefine the alleged enterprise’s affairs based upon an exceedingly narrow conception of Allianz’s “operation or management” of the 19 FMO members of the enterprise, while ignoring plaintiffs’ evidence that Allianz undertook all of these actions in furtherance of the enterprise’s affairs — and not simply its own.
  17. 13 But-for and proximate causation ("by reason of", 18 U.S.C. § 1964(c)) satisfied triable
    And the “by reason of’ language of section 1964 requires a plaintiff to prove “but for” causation, proximate causation, and a concrete financial loss to a protectable business or property interest.
  18. 13 But-for and proximate causation ("by reason of", 18 U.S.C. § 1964(c)) satisfied triable
    Because class members that purchased their annuity from non-enterprise FMOs still had to sign the “Allianzmandated” SOU, they suffered an injury by reason of Allianz’s operation of the enterprise.
  19. 13 But-for and proximate causation ("by reason of", 18 U.S.C. § 1964(c)) satisfied triable
    A RICO defendant’s conduct cannot be so neatly divided into “enterprise activities” and “non-enterprise activities,” with only the former supporting liability under RICO.
  20. 13 But-for and proximate causation ("by reason of", 18 U.S.C. § 1964(c)) satisfied triable
    Thus, Allianz’s development of the annuity products, design and dissemination of the marketing materials and SOUs, creation and utilization of the MAC Board to further its marketing efforts, and leadership of the enterprise are all “enterprise activities” that were undertaken in furtherance of an alleged scheme to defraud financial products purchasers.
  21. 13 But-for and proximate causation ("by reason of", 18 U.S.C. § 1964(c)) satisfied triable
    Because all of Allianz’s actions appear to have been in furtherance of the alleged enterprise’s unlawful scheme — and not a frolic and detour by Allianz alone — a reasonable jury could find that all of the class members were directly injured by the enterprise’s affairs.
  22. 19 Parol evidence rule raised to bar extrinsic evidence of fraudulent misrepresentations not law
    Generally, the parol evidence rule does not act to bar extrinsic evidence related to a fraud claim rather than a breach of contract claim.
  23. 19 Parol evidence rule raised to bar extrinsic evidence of fraudulent misrepresentations not law
    Because plaintiffs bring RICO claims grounded in fraud — not claims for breach of contract — evidence related to their claims is plainly not barred by the parol evidence rule.