Garner v. Pillar Life Settlement Fund I, L.P. (In the Matter of Life Partners, Inc.)

Case Type:
Case Status:
16-11436 (5th Circuit, Nov 29,2017) Not Published
The appeal was dismissed as moot because the appellants failed to appeal the bankruptcy court's order confirming a Chapter 11 plan. The plan incorporated a Settlement Agreement that extinguished all claims against the debtor. Since the appellants had no claims against the debtor/reorganized debtor, they had no claims that the federal courts could address.
Procedural context:
Following the US district's court approval of a settlement of two class action lawsuits for violation of state blue sky and federal securities laws, the bankruptcy court affirmed the debtors' Chapter 11 plan. The plan extinguished all claims against the relevant debtor. The appellants. plaintiffs in another securities lawsuit, appealed the district court's order that certified the classes and approved the Settlement Agreement. The appellants did not appeal the bankruptcy court's confirmation of the debtor's Chapter 11 plan that effectuated the Settlement Agreement.
The debtor, Life Partners, Inc. (LPI), purchased life insurance policies in exchange for viatical, or life, settlements (life settlements). LPI, in turn, sold fractional interests in life settlements. LPI never registered the investments as securities under Texas blue sky or federal securities laws. This resulted in blue sky litigation in Texas state court. LPI's parent filed a Chapter 11 case, a Chapter 11 trustee was appointed, and LPI was placed into bankruptcy. An adversary proceeding was commenced in the consolidated bankruptcy case seeking a declaration that the investor-class members were the beneficial owners of the life settlements and that the life settlements were not part of the bankruptcy estate. The state court plaintiffs also filed an adversary proceeding, asserting Texas blue sky law claims. The two adversary proceedings were consolidated, and reference to the litigation was withdrawn. A settlement was announced, and a third group of purchasers of life interests filed a new adversary proceeding seeking a declaratory judgment that the plaintiffs, not the estate, owned the life settlements. The district court ultimately certified the classes that were proposed by the first two classes of life settlement purchasers, and referred the settlement to the bankruptcy court. The bankruptcy court overruled the objections of the third class of plaintiffs, and issued a report recommending that the district court approve the settlement, The district court then adopted the bankruptcy court's proposed findings of fact and conclusions of law for the settlement. The bankruptcy court then confirmed LPI's Chapter 11 plan, which effectuated the Settlement Agreement. The most relevant feature of the Settlement Agreement is that it extinguished all claims against LPI, The third set of plaintiffs, the appellants, did not appeal the bankruptcy court's confirmation of the Chapter 11 plan that effectuated the Settlement Agreement.

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