Antitrust Law Daily Wrap Up, RICO—E.D. La.: Life insurance policy co-owners may proceed with RICO claim against insured, (Aug 27, 2013)

By Tobias J. Gillett, J.D., LL.M.

The co-owners of a life insurance policy on the life of another individual may proceed with a claim under Section 1962(c) of the RICO Act, but not with claims under Sections 1962(a) or 1962(b), against the individual over loans the individual allegedly took out under the policy without the co-owners’ knowledge or authorization, the federal district court in New Orleans has ruled (Richardson v. Cella, August 23, 2013, Fallon, E.).

According to the complaint, Rachele Cella Richardson and Brandy Cella are co-owners of an insurance policy issued by New York Life Insurance Company that insures the life of their father, George A. Cella, III, with Rachele as the sole beneficiary. The daughters alleged that George took out unauthorized loans under the policy, supplying Rachele’s tax identification number and signing Rachele’s and Brandy’s names without their knowledge or permission. Rachele and Brandy further alleged that George acted as an officer for Horizon Security Vault Complex, Inc. and A. Levet Properties Partnership (ALPP). The daughters claimed that ALPP paid premiums under the policy, and that George used Horizon’s “resources, employees, facilities . . . equipment and letterhead” in completing the loan request forms.

In addition, George allegedly received checks payable to Rachele and Brandy at Horizon’s place of business, signed their names without knowledge or permission when endorsing the checks, and deposited the checks in his personal bank account. The checks purportedly devalued the policy, causing harm to Rachele and Brandy.

Rachele and Brandy asserted RICO claims and a variety of state law claims against George, as well as negligence and breach of contract claims against New York Life. George filed a motion to dismiss.

Section 1962(a). The court concluded that Rachele and Brandy failed to state a claim under Section 1962(a) of the RICO Act because they did not allege harm stemming from George investing the proceeds of racketeering activity in an enterprise. Although they alleged that George had used some of the money he obtained from the loans to acquire an interest in or to operate an enterprise, they only alleged harm from George’s racketeering activity itself, not from the investment of its income.

Section 1962(b). The court also found that Rachele and Brandy did not state a claim under Section 1962(b) of the RICO Act because they did not allege any harm to them caused by “George’s alleged maintenance of an interest in the enterprise that is separate from the alleged racketeering activity itself.” The court explained that a plaintiff asserting a claim under Section 1962(b) “must present evidence that he suffered injuries as a result of a defendant’s acquisition or maintenance of an interest in or control of an enterprise through a pattern of racketeering activity.”

Section 1962(c). However, the court determined that Rachele and Brandy did state a claim under Section 1962(c), rejecting George’s contention that they had failed to allege “that a RICO ‘person’ existed that was separate and distinct from the RICO ‘enterprise’ for purposes of establishing a violation of Section 1962(c).” Although George cited “several decisions in which the incidental use of fax machines, telephones, and the like [had] been found insufficient,” the court found that the daughters’ allegations that George used “certain employees, resources, and facilities of companies under his control” to obtain the loans were sufficient on a motion to dismiss. The court observed that “[s]hould discovery reveal that the use of these resources amounted to no more than stamps and stationery, further Motion practice may become necessary.”

The court dismissed the daughters’ claim for contractual fraud under Louisiana law “because there is not allegation of any contract among the parties that [they] could seek to rescind or, for that matter for breach of which they could seek damages,” and found the rest of their state law claims required the resolution of factual issues that rendered the claims unsuitable for summary dismissal.

The case is Civil Action No. 12-1771.

Attorneys: James M. Garner (Sher, Garner, Cahill, Richter, Klein & Hilbert, LLC) for Rachele Cella Richardson. Phillip A. Wittmann (Stone, Pigman, Walther, Wittmann, LLC) for George A. Cella, III. Maura Zivalich Pelleteri (Krebs, Farley & Pelleteri, LLC) for New York Life Insurance Co.

Companies: New York Life Insurance Co.; Horizon Security Vault Complex, Inc.; A. Levet Properties Partnership

Cases: RICO LouisianaNews