Life Receivables Ireland Limited v. Babcock & Brown Investment Management Partners LP ( 2012 )

Case: 11-12611 Date Filed: 07/25/2012 Page: 1 of 4
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_____________________________
No. 11-12611
_____________________________
D. C. Docket No. 1:07-cv-01541-RWS
LIFE RECEIVABLES IRELAND LIMITED,
Plaintiff-Appellant,
versus
BABCOCK & BROWN INVESTMENT
MANAGEMENT PARTNERS LP,
BABCOCK & BROWN LP,
LIFE SETTLEMENT CORPORATION, d.b.a.
Peachtree Life Settlements, et al.
Defendants-Appellees.
_________________________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________________________
(July 25, 2012)
Before DUBINA, Chief Judge, EDMONDSON, Circuit Judge, and GOLDBERG,*
Judge.
*
Honorable Richard W. Goldberg, United State Court of International Trade Judge, sitting
by designation.
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PER CURIAM:
This case involves the sale between sophisticated parties of an investment
vehicle with returns tied to certain life insurance contracts: contracts insuring the
lives of persons who are not parties to this action. Briefly stated, the vehicle
owned life insurance contracts purchased from people, paid the premiums on the
contracts, and owned rights to the death benefits in the contracts. The investment
vehicle’s return varied depending upon when the insured persons died: the longer
the insured persons lived the lower the vehicle’s return.
After a long diligence process, Plaintiff Life Receivables Ireland Limited
(“Plaintiff”) purchased the investment vehicle for several million dollars in June
2005. The investment vehicle was created and sold by related corporate entities of
Life Settlement Corporation d/b/a Peachtree Life Settlements (“Peachtree”) and
Babcock & Brown LP (“Babcock”) (together, “Defendants”).
In creating the vehicle, Defendants obtained contingent cost insurance
policies (“CCI Policies”) from Goshawk Dedicated Limited (“Goshawk”) that
helped limit the variability of the vehicle’s returns by guaranteeing payment of
death benefits to the vehicle within a certain number of years past each covered
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individual’s actuarial life expectancy, even if that person had not died by then. On
their face, the CCI Policies included an absolute obligation for Goshawk to pay
the contractually-mandated claims. Goshawk’s only opportunity to set-off or
lower its burden under the CCI Policies was to seek indemnification later from
Peachtree through arbitration.
Plaintiff alleges that, during the diligence process -- before the pertinent sale
-- Goshawk met with Peachtree and told Peachtree that Goshawk would refuse its
obligations under the CCI Policies, unless Defendants agreed to a discounted
commutation of Goshawk’s obligations. The Defendants executed no
commutation and disclosed nothing about this meeting to Plaintiff before the sale.
Later, in July 2005, Goshawk did in fact refuse to pay the first policy claim and
disavowed its obligations on the grounds of actuarial fraud.
After settling with Goshawk, Plaintiff brought suit against Defendants
alleging federal securities law violations and violations of Georgia common law
based on Defendants’ failure to disclose Goshawk’s threat. The district court
dismissed the complaint with prejudice based in part on its determination that
Defendants had no duty to disclose the contents of the meeting. Plaintiff appealed.
A defendant is liable for omitting to state a material fact only when we --
after considering several factors -- determine that the defendant had an affirmative
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duty to disclose. See Ziemba v. Cascade Intern., Inc., 256 F.3d 1194, 1206 (11th
Cir. 2001). Even accepting -- as we must -- Plaintiff’s allegations as true, in this
case Defendants were under no duty to disclose -- simply on their own accord --
the contents of the meeting between Peachtree and Goshawk to Plaintiff. In
particular, that Defendants were in no fiduciary relationship -- or in any other
special relationship like accountant or broker -- with the Plaintiff, that Defendants’
failure to speak would not render Defendants’ own prior speech misleading or
deceptive, the arm’s length nature of the sale, the continuing access Plaintiff,
itself, had to Goshawk during the extensive diligence process, and the
sophisticated nature of the parties weigh against a duty to disclose.1 Absent a
duty to disclose, Plaintiff’s case cannot stand. Seeing no reversible error in the
district court’s handling of this case, we affirm the district court’s dismissal of this
action.
AFFIRMED.
1
No duty to disclose under Georgia law exists under these circumstances. In particular,
Plaintiff’s continuing access to Goshawk weighs against finding a duty to disclose under Georgia
law and -- among other things -- clearly distinguishes this case from Williams v. Dresser Indus.,
Inc., 120 F.3d 1163 (11th Cir. 1997).
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