Order on Defendants' Motion for Summary Judgment (ING USA ANNUITY AND LIFE INSURANCE COMPANY)

Transcription

1 Gergia State University Cllege f Law Reading Rm Gergia Business Curt Opinins Order n Defendants' Mtin fr Summary Judgment (ING USA ANNUITY AND LIFE INSURANCE COMPANY) Alice D. Bnner Superir Curt f Fultn Cunty Fllw this and additinal wrks at: Institutinal Repsitry Citatin Bnner, Alice D., "Order n Defendants' Mtin fr Summary Judgment (ING USA ANNUITY AND LIFE INSURANCE COMPANY)" (2010). Gergia Business Curt Opinins This Curt Order is brught t yu fr free and pen access by Reading Rm. It has been accepted fr inclusin in Gergia Business Curt Opinins by an authrized administratr f Reading Rm. Fr mre infrmatin, please cntact mbutler@gsu.edu.

2 ING USA ANNUITY AND LIFE INSURANCE COMPANY and ING INVESTMENT MANAGEMENT, LLC, DEPUTYCLERKSUPERIORCQURT FULTON COUNTY, GA Plaintiffs, Civil Actin N CV v. J.P. MORGAN SECURITIES INC. and DAMIAN BERRY, Defendants. ORDER ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (~) '-.J On June 24,2010, Cunsel appeared befre the Curt t present argument n Defendants' Mtin fr Summary Judgment. After hearing the arguments made by cunsel, and reviewing the briefs submitted n the mtin and the recrd in the case, the Curt finds as fllws: Defendant J.P. Mrgan Securities Inc. ("JPMSI") prvided investment banking services t an Australian mining cmpany named Sns f Gwalia Limited ("Gwalia"). Defendant Damian Berry ("Berry") was an emplyee f JPMSI between 1998 and 2002 and was JPMSI's relatinship manager fr Gwalia during that time. Starting in 2000, Gwalia decided t raise capital thrugh the private placement f debt securities. This private placement strategy ccurred ver the curse f tw fferings-the first in the fall f 2000 ("2000 Private Placement") and the secnd in early 2002 ("2002 Private Placement"). 1

3 Plaintiffs lng-usa Annuity and Life Insurance ("lng-usa") and ING Investment Management LLC ("lng-1m") participated in the 2002 Private Placement. ING USA, a life insurance cmpany, ultimately purchased $32 millin f the ntes ffered by Gwalia in the 2002 Private Placement. JPMSI acted as Gwalia's brker fr bth the 2000 Private Placement and the 2002 Private Placement and, amng ther things, assisted Gwalia in preparing a private placement memrandum fr each ffering. In 2004, Gwalia entered int vluntary administratin which is the Australian equivalent f bankruptcy. Plaintiffs allege that during the 2002 Private Placement, Defendants misrepresented and cncealed Gwalia's true financial picture. In particular, Plaintiffs allege that Defendants misrepresented and cncealed: (1) Gwalia's C) investments in derivatives called Indexed Gld Put Optins ("IGPOs"), (2) Gwalia's liquidity crisis fllwing an unauthrized trading spree by Gwalia's directr f finance, and (3) prblems with Gwalia's acquisitin f anther gld mining cmpany, Pacific Mining Crpratin Limited ("Pac Min"). Based n these allegatins, Plaintiffs assert claims fr vilatins f the Gergia Securities Act f 1973 ("GSA"), cmmn law fraud, negligent misrepresentatin, and vilatins f the Gergia RICO Act. Defendants have mved fr summary judgment n all claims against them. A curt shuld grant a mtin fr summary judgment pursuant t O.C.GA when the mving party shws that n genuine issue f material fact remains t be tried and that the undisputed facts, viewed in the light mst (~ 2

4 favrable t the nn-mvant, warrant summary judgment as a matter f law. Lau's Crp., Inc. v. Haskins, 261 Ga. 491, 491 (1991). In supprt f their mtin fr summary judgment, Defendants first argue that Plaintiff lng-1m has nt suffered any damages whatsever. In respnse, Plaintiffs simply argue that Defendants have recycled an arg ument left ver frm their mtin t dismiss in which they questined whether lng-1m was a prper party t this lawsuit. In its Order n Defendants' mtin t dismiss, the Curt held that at that early stage f litigatin, lng-1m shuld nt be "freclsed frm being able t prve recverable damages" but als warned that "issues f specific damages suffered by lng-1m... may be raised again in any mtins fr summary judgment filed by Defendants." Defendants again questin lng-1m's C) invlvement in this lawsuit and argue that Plaintiffs have failed t prduce any evidence t shw that lng-1m has suffered any damage as a result f Defendants' alleged miscnduct. Damage t the plaintiff is an essential element f each f Plaintiffs' claims against Defendants. Yet, in their respnse t Defendants' mtin fr summary judgment, Plaintiffs have failed t prduce any evidence that lng-1m has suffered damage in this case. Accrdingly, summary judgment in favr f Defendants is GRANTED all n claims asserted by lng-1m. Secnd, Defendants argue that they are entitled t summary judgment n Plaintiffs' GSA and cmmn law fraud claims because Plaintiffs lack evidence t shw scienter. Scienter is an essential element f bth a claim under the GSA and fr cmmn law fraud. See Bgle v. Bragg, 248 Ga. App. 632, 634 (2001) and GCA Strategic Investment Fund. Ltd. v. Jseph Charles & Assciates. Inc., 3

5 245 Ga. App. 460, 464 (2000). Except in rare cases where the evidence is "plain and indisputable," determinatin f scienter is an issue f fact fr the jury. Kilry v. Alpharetta Fitness, Inc., 295 Ga. App. 274, 280 (2008). The Curt finds that there is evidence upn which a jury culd find that Defendants acted with scienter in making misrepresentatins r missins regarding (1) the risks invlved in Gwalia's investments in IGPOs including Berry's knwledge f thse risks and his authrizatin f the descriptin used fr the IGPOs, (2) Gwalia's liquidity crisis fllwing an unauthrized trading spree by its directr f finance including the help prvided by Berry in shring up that crisis and (3) Gwalia's acquisitin f PacMin, including Berry's knwledge f prblems with PacMin's peratins. Third, Defendants argue that they are entitled t summary judgment n Plaintiffs' GSA, cmmn law fraud, and negligent misrepresentatin claims because Plaintiffs cannt shw that they reasnably relied n Defendants. T this end, Defendants argue that cautinary language in the 2002 Private Placement memrandum shields them frm liability. Specifically, Defendants argue that the private placement memrandum states, amng ther things, that JPMSI "neither ffer[s] an pinin as t nr assume[s] any respnsibility fr the adequacy, accuracy, r cmpleteness f any infrmatin cntained herein." The Curt finds that this type f standard disclaimer des nt shield Defendants frm liability and des nt preclude Plaintiffs frm shwing reasnable reliance. In re Natinal Century Financial Enterprises, Inc., Investment Litigatin, 541 F.Supp.2d 986,1005 (S.D. Ohi 2007) ("Curts have lng held that general 4

6 disclaimers f accuracy d nt shield sellers wh knwingly make false statements"); In re Prudential Securities Inc. Ltd. Partnerships Litigatin, 930 F. Supp. 68, 72 (1996) ("cautinary language des nt prtect material misrepresentatins r missins when defendants knew they were false when made"); Claytn v. Heartland Resurces. Inc., 2009 WL , *5 (W.O. Ky. 2009) (denying a mtin t dismiss a claim against an attrney wh prepared ffering dcuments in a securities transactin ruling that the attrney was a primary participant in the alleged wrngding and culd nt be shielded frm liability by language in thse dcuments disclaiming their accuracy and cmpleteness when he knwingly made misrepresentatins and missins in thse dcuments). The curt in In re Natinal Century fund that plaintiffs' claims fr fraud and negligent misrepresentatin culd prceed because cautinary language will nt prtect misrepresentatins and missins knwingly made and the dcument itself expressly invited plaintiffs' reliance. Similarly, here, there is evidence upn which a jury culd find knwing missins and misrepresentatins by JPMSI and the cautinary language fllws a paragraph which twice states that the private placement memrandum is t be used t evaluate Plaintiffs' ptential investment. The Curt als finds that misrepresentatins and missins were made in dcuments ther than the private placement memrandum and, therefre, any cautinary language in the private placement memrandum cannt be used t shield Defendants frm liability fr alleged misrepresentatins and missins in ther dcuments. Accrdingly, the Curt finds that the cautinary language in the private 5

7 placement memrandum des nt preclude a shwing f reasnable reliance by Plaintiffs n their GSA, cmmn law fraud, and negligent misrepresentatin claims. Furth Defendants argue that Plaintiffs' wn due diligence prves that they did nt reasnably rely n Defendants. The Curt finds that as accredited investrs, the private placement memrandum called n Plaintiffs t perfrm their wn due diligence, which they did. Gergia curts rutinely reject fraud claims when plaintiffs fail t d adequate due diligence t uncver the fraud. See, e.g., First Unin Natinal Bank f Gergia v. Gurley, 208 Ga. App. 647, 649 (1993). Hwever, the ppsite des nt hld true. In ther wrds, simply because a plaintiff cnducts extensive due diligence, yet fails t detect the alleged fraud, des nt mean that the plaintiff has nt relied n misrepresentatins r missins by the defendant. The Curt finds that the due diligence that Plaintiffs cnducted des nt negate their reliance. Fifth, Defendants argue that Plaintiffs' GSA claim against Berry is time barred. Plaintiffs deny that they are pursuing a GSA claim against Berry and, thus, the Curt finds this pint mt. Sixth, Defendants argue that ING-USA's GSA claim against JPMSI is time barred because lng-usa was nt a party t a tlling agreement entered int n July 18, lng-usa respnds that it was, in fact, a party t that tlling agreement. Cntract cnstructin is a matter f law fr the curt. Livti v. Aycck, 263 Ga. App. 897, 901(2003). The first step in cntract cnstructin is t I~ "lk t the fur crners f the instrument t determine the intentin f the parties 6

8 frm the language emplyed."!.q.,; see als O.C.GA 13-2~3. agreement prvides that: The tlling THIS TOLLING AGREEMENT is made and entered int by and between J.P. Mrgan Securities, Inc., including its parents, affiliates, wners, successrs and assigns (cllectively, "J.P. Mrgan"), and ING Investment Management LLC, fr itself and as agent fr ING USA Annuity and Life Insurance Cmpany, Security Life f Denver Insurance Cmpany and ReliaStar Life Insurance Cmpany, and each f their successr and assigns (cllectively, "ING"). The Curt finds that the express terms f the tlling agreement make clear that it cvers lng-usa. The Curt rejects Defendants' arguments that ING-USA's claim against JPMSI under the GSA is time barred. Seventh, Defendants argue that Plaintiffs' RICO claim fails because Plaintiffs cannt prve racketeering activity. Specifically, Defendants argue that because Plaintiffs cannt prve their GSA claim due t a lack f scienter and justifiable reliance, their RICO claim, which is based n Defendants' tw alleged vilatins f the GSA, must als fail. Fr the reasns stated abve, the Curt finds that there is evidence upn which a jury culd find that Defendants acted with scienter and that Plaintiffs justifiably relied n Defendants. As ING-USA's GSA claims have survived summary judgment, s has its Gergia RICO claim. Eighth, Defendants argue that Plaintiffs have failed t shw that Defendants' actins cnstituted a pattern f racketeering activity. In pertinent part, a pattern f racketeering activity is defined by the Gergia RICO Act as "[e]ngaging in at least tw acts f racketeering activity." O.C.GA (8). (:J While Defendants argue that the tw Private Placements were merely a single transactin cmpleted ver the curse f tw clsings, the Curt disagrees. 7

9 () JPMSI, r is predecessr, was hired n tw separate ccasins, as evidenced by tw different engagement letters, t cnduct the tw separate private placements. The tw private placements each had separate private placement memranda and different investrs. Despite Defendants arguments, the Curt finds that the 2001 Private Placement and the 2002 Private Placement were nt a single transactin. The Curt finds that there is evidence upn which a jury culd find that Defendants vilated the Gergia RICO Act based n tw predicate acts-misrepresentatins and missins in the private placement memranda fr the 2000 Private Placement and the 2002 Private Placement. Finally, Defendants argue that Plaintiffs cannt prve causatin fr any f their claims. In supprt f this argument, Defendants maintain that the nly evidence Plaintiffs have f causatin is a few paragraphs in their expert's reprt which is inadmissible under Gergia's standard fr expert testimny. Prximate cause is generally a jury questin. "Where the prf 'des nt plainly, palpably and indisputably shw a lack f prximate cause,' the issue is fr the jury." Malak v. First Nat. Bank f Atlanta. 195 Ga. App. 105 (1990) (citing DeKalb Cunty Hsp. Auth. v. Thefanidis, 157 Ga. App. 811, 812(2) (1981)). The Curt finds that Plaintiffs, thrugh their expert and by pinting t depsitin testimny by ther witnesses, have prvided evidence sufficient fr a jury t cnclude that Defendants alleged misrepresentatins and missins were a prximate cause f their injury. Defendants' Mtin fr Summary Judgment is GRANTED IN PART and DENIED IN PART. Summary judgment in favr f Defendants is GRANTED n 8

10 all claims asserted by lng-1m. Summary Judgment in favr f Defendants is DENIED n all claims asserted by lng-usa. SO ORDERED this 11th day f August, Ai I LA De 8m lam t?"a, Alice D. Bnner, SENIOR JUDGE Superir Curt f Fultn Cunty Atlanta Judicial Circuit (~ 9

11 I.=> Cpies electrnically t: Jseph Manning, Esq. Simn Maik, Esq. Dnald Lft, Esq. Jasn Eakes, Esq. MORRIS, MANNING & MARTIN LLP 1600 Atlanta Financial Center 3343 Peachtree Rad, NE Atlanta GA j manning@mmmlaw.cm smalk@mmmlaw.cm dlft@mmmlaw.cm jeakes@mmmlaw.cm Cunsel fr Plaintiffs Nrman K. Beck, Esq Rbert Y. Sperling, Esq. Kyle P. DeJng, Esq. James F. Herbisn, Esq. WINSTON & STRAWN, LLP 35 West Wacker Drive Chicag, IL nbeck@winstn.cm rsperling@winstn.cm kdejng@winstn.cm jherbisn@winstn.cm Cunsel fr Defendants Charles K. McKnight, Jr., Esq. Natins Tman & McKnight LLP Prmenade II, Suite Peachtree Street NE Atlanta, Gergia cmcknight@ntmlaw.cm Cunsel fr Defendants Jseph E. Finley, Esq. Lillian N. Caudle, Esq. Jnes Day 1420 Peachtree Street, NEW Suite 800 Atlanta, GA Jfinley@jnesday.cm Lcaudle@jnesday.cm Cunsel fr Defendant Damian Berry 10