Order on Plaintiffs' Motion for Partial 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 Plaintiffs' Mtin fr Partial 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 Plaintiffs' Mtin fr Partial 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 1. 7 () IN THE SUPERIOR COURT OF FULTON COUNT STATE OF GEORGIA DEPUTY CLERK SUPERIOR COURT FULTON COUNTY. GA COP~ ING USA ANNUITY AND L1FE INSURANCE COMPANY and ING, INVESTMENT MANAGEMENT, LLC, Plaintiffs, Civil Actin N CV v. J.P. MORGAN SECURITIES INC. and DAMIAN BERRY, Defendants. ORDER ON PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT On June 24, 2010, Cunsel appeared befre the Curt t present argument n Plaintiffs' Mtin fr Partial 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 service~ 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 JPMSl'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 t- 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 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. Plaintiffs have mved fr (1) summary judgment n their claims under the GSA (2) partial summary judgment against JPMSI n all elements f their cmmn law fraud and negligent misrepresentatin claims except the amunt f recverable damages, and (3) partial summary judgment against JPMSI and (~ 2

4 Berry n all elements f their claim under the Gergia RICO Act except the amunt f recverable damages. A curt shuld grant a mtin fr summary judgment pursuant t O.C.G.A 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 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 n their claim under the GSA, Plaintiffs argue that they seek the rescissin remedy prvided by the GSA. The GSA prvides that (J It shall be unlawful fr any persn... in cnnectin with the ffer t sell, sale, ffer t purchase, r purchase f any security, directly r indirectly: (A) t emply a devise, scheme, r artifice t defraud; (B) t make an untrue statement f a material fact r mit t state a material fact necessary in rder t make the statement made, in the light f the circumstances under which they are made, nt misleading; r (C) t engage in an act, practice, r curse f business that perates r wuld perate as a fraud r deceit upn a persn. Frmer O.C.G.A (a) (a) The GSA further prvides that any persn wh vilates O.C.G.A. shall be liable t the persn buying such security; and such buyer may sue in any curt f cmpetent jurisdictin t recver the cnsideratin paid in cash (r the fair value theref at the time the cnsideratin was paid if such cnsideratin was nt paid in cash) fr the security with interest theren frm the date f payment dwn t the date f repayment as cmputed in paragraph (1) f subsectin (d) f this Cde sectin (less the amunt f any incme received theren), tgether with all taxable curt csts and reasnable attrney's fees, upn the tender, where practicable, f 3

5 the security at any time befre the entry f judgment, r fr damages if he n lnger wns the security. Frmer O.C.GA (a). Plaintiffs argue that they are pursuing the rescissin remedy prvided by O.C.GA because lng-usa still wns the securities in dispute. Based n that premise, Plaintiffs argue that they shuld nt be required t shw causatin because causatin is nly an essential element f claims seeking damages, nt claims seeking rescissin. The Curt finds that Plaintiffs' argument is untenable because they seek a remedy they have n legal right t pursue. Under Gergia law, rescissin is nly available in a suit between the parties t a cntract. Sfet v. Rberts, 185 Ga. App. 451, 452 (1988) (because n privity f cntract existed between the parties t the law suit, it was prper fr the trial curt t dismiss that prtin f appellant's cmplaint which sught rescissin). Here, Plaintiffs entered int an agreement with Gwalia t buy securities and JPMSI was the brker fr that agreement, nt a party t it., Accrdingly, the Curt finds that Plaintiffs may nt elect the rescissin remedy prvided by the GSA, and must pursue nly the damages remedy. The Gergia Curt f Appeals has made clear that the essential elements f a claim brught under O.C.GA are the same as thse f its federal cunterpart, sectin 10(b) f the Securities Act f 1934, namely: "(1) a misstatement r missin, (2) f a material fact, (3) made with scienter, (4) n which plaintiff relied, (5) that prximately caused his injury." GCA Strategic r:j Investment Fund, Ltd. v. Jseph Charles & Assciates. Inc., 245 Ga. App. 460, 464 (2000). The Curt finds that questins f fact, including whether Defendants' 4

6 alleged misrepresentatins and missins prximately caused Plaintiffs' injury, preclude the grant f summary judgment n Plaintiffs' GSA claim. Next Plaintiffs argue that they are entitled t summary judgment as t liability n their claims fr cmmn law fraud and negligent misrepresentatin. Under Gergia law, "fraud has five elements: (1) false representatin by a defendant; (2) scienter; (3) intentin t induce the plaintiff t act r refrain frm acting; (4) justifiable reliance by the plaintiff; and (5) damage t the plaintiff." Bgle v. Bragg, 248 Ga. App. 632, 634 (2001). Negligent misrepresentatin has three elements: "(1) the defendant's negligent supply f false infrmatin t freseeable persns, knwn r unknwn; (2) such persns' reasnable reliance upn that false infrmatin; and (3) ecnmic injury prximately resulting frm such reliance." Hardaway C. v. Parsns, Brinckerhff. Quade & Duglas, 267 Ga. 424, 426 (1997). The Curt again finds that questins f fact, especially as t scienter n Plaintiffs' fraud claim and reasnable reliance and causatin n bth claims, preclude summary judgment n Plaintiffs' claims fr fraud and negligent misrepresentatin. Finally, Plaintiffs argue that they are entitled t summary judgment as t liability n their claims under the Gergia RICO Act. In pertinent part, the Gergia RICO Act makes it unlawful t "acquire r maintain, directly r indirectly, any interest in r cntrl f any enterprise, real prperty, r persnal prperty f any nature, including mney" thrugh a "pattern f racketeering activity." O.C.G.A A pattern f racketeering activity is defined by the Act in pertinent part as "[e]ngaging in at least tw acts f racketeering activity." 5

7 , O.C.G.A (8). While Defendants argue that the tw Private Placements were merely a single transactin cmpleted ver the curse f tw clsings, the Curt disagrees. JPMSI, r its 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 bth the 2000 Private Placement and the 2002 Private.. ~ Placement. Hwever, questins f fact as t Defendants' liability preclude summary judgment n Plaintiffs' Gergia RICO claim. Plaintiffs' Mtin fr Partial Summary Judgment is DENIED. SO ORDERED this 11th day f August, Alice D. Bnner, SENIOR JUDGE Superir Curt f Fultn Cunty Atlanta Judicial Circuit C) 6

8 Cpies 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 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 7