200 F.R.D. 644 | D. Colo. | 2001
MEMORANDUM OPINION AND ORDER
This matter is before me on the Reliance Defendants’ Motion to Dismiss for Lack of Standing. This action concerns an alleged scheme by Defendants to defraud investors through the sale of viatical settlement con
I. Standard for Decision
A motion to dismiss asserting that the plaintiff does not have standing to maintain the action is a challenge to the Court’s subject matter jurisdiction brought pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. Such a motion may be granted only when “ ‘it appears beyond doubt that the plaintiff could prove no set of facts entitling it to relief.’ ” United States v. Colorado Supreme Court, 87 F.3d 1161, 1164 (10th Cir.1996)(quoting Ash Creek Mining v. Lujan, 969 F.2d 868, 870 (10th Cir.1992)). Although the plaintiff bears the burden of establishing the elements of standing, at this point in the litigation I accept all well-pleaded facts as true and construe all reasonable allegations in the light most favorable to the plaintiff.
In order to determine the Plaintiffs’ standing to bring this action, I must consider both “constitutional limitations on federal-court jurisdiction and prudential limitations on'its exercise.” Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). Constitutional standing requirements are drawn from Article III and require Plaintiffs to allege (1) a concrete and particularized actual or imminent injury (2) that is fairly traceable to Defendants’ conduct (3) which a favorable court decision will redress. Sac & Fox Nation of Missouri v. Pierce, 213 F.3d 566, 573 (10th Cir.2000), cert. denied, — U.S. —, 121 S.Ct. 1078, 148 L.Ed.2d 955 (2001). As potentially relevant here, prudential standing principles generally require a plaintiff to assert his own rights, rather than those belonging to third parties. Id.; see Warth, 422 U.S. at 499, 95 S.Ct. 2197.
II. Plaintiffs’ Standing to Maintain This Action
Neither party incorporated either the standard of review or the legal standards for standing in their arguments on this issue. I have framed their arguments to comport with these governing principles.
A. Constitutional Standing
In their Amended Complaint, the Plaintiff-Investors allege they were injured when they purchased viatical settlement contracts in Defendants’ programs as a result of Defendants’ false and misleading offering
In response to the Reliance Defendants’ challenge to their standing in this action, the Plaintiff-Brokers allege their customers were similarly injured when they purchased Defendants’ viatical settlement contracts, and that Plaintiff-Brokers have constitutional standing to assert their customers’ claims against Defendants because each Plaintiff-Broker has “obtained and/or is obtaining assignment of claims from each individual purchaser” to whom they sold Defendants’ viatical settlement contracts. The specific customers and claims obtained or being obtained by assignment are specified in more than twenty exhibits to the Amended Complaint.
As noted above, for purposes of deciding a motion to dismiss I must take these allegations as true and construe them in the light most favorable to the Plaintiff-Brokers. Under this standard, I find that the Plaintiff-Brokers are assignees of the claims their customers have against the Defendants. As such the Plaintiff-Brokers have standing to prosecute these claims against Defendants. See, e.g., Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 773-74, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000) (“assignee of a claim has standing to assert the injury in fact, suffered by the assignor”); Feeder Line Towing Service, Inc. v. Toledo, Peoria & Western R.R. Co., 539 F.2d 1107, 1110 n. 7 (7th Cir.1976) (assignee has standing to assert assignor’s claim).
The Reliance Defendants note that the Plaintiff-Brokers have yet to produce any assignment contracts and urge that I immediately dismiss all claims for which nó assignment has been made. Given the standard of review on motions to dismiss, I decline to do so. I agree, however, that Plaintiff-Brokers only have standing to prosecute investor claims that have been validly assigned to them and that Defendants are entitled to notice of the specific claims at issue for purposes of discovery and trial preparation. Accordingly, I will order Plaintiff-Brokers to amend their complaint to specify the claims for which they have received assignments and which are therefore at issue in this action when I set this matter for its initial Scheduling Conference.
The Reliance Defendants also ask me to rule at this time that the assignment contracts between the Plaintiff-Brokers and their customers are invalid because the Plaintiff-Brokers are also potentially liable to their customers in connection with their customers’ purchase of these contracts. The Reliance Defendants contend this possible liability creates a conflict of interest between the Plaintiff-Brokers and their customers that renders any assignment contract between them invalid as matter of public policy. I disagree. The Reliance Defendants fail to identify any authority supporting their position that a conflict of interest between parties to an assignment contract renders that contract void. This is perhaps because the weight of authority recognizes that public policy supports the freedom to contract, so that “a party is bound by an agreement fairly and voluntarily entered into, notwithstanding it was unwise or disadvantageous to him.” St. Francis Reg’l Med. Cnt. v. Blue Cross Blue Shield of Kansas, Inc., 810 F.Supp. 1209, 1218 (D.Kan.1992), aff'd, 49 F.3d 1460 (10th Cir.1995); see, e.g., Fru-Con Const. Corp. v. KFX, Inc., 153 F.3d 1150, 1159 (10th Cir.1998). While this freedom to contract does not allow enforcement of an unconscionable contract, there is nothing in the record to date suggesting the assignment agreements are unenforceable on this basis.
B. Prudential Standing.
The federal courts have adopted prudential limits on standing in order “ ‘to avoid deciding questions of broad social import where no individual rights would be vindicated and to limit access to the federal courts to those litigants best suited to assert a particular claim.’ ” Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 804, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985)(quoting Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99-100, 99 S.Ct. 1601, 60 L.Ed.2d 66 (1979)). The Reliance Defendants essentially argue the Plaintiff-Brokers lack standing because they are not the “litigants best suited to assert” the claims of their customers.
'I was initially concerned about this issue. Upon further review, however, I find the Plaintiff-Brokers have prudential standing to assert their customers’ claims pursuant to valid assignment contracts. First, the Reliance Defendants have failed to identify, and I have not found, any instance in which a court denied a litigant standing to pursue a third party’s claim where it had been assigned the claim pursuant to a valid contract.
The Reliance Defendants place great weight on the concurring opinion in Telecommunications Research & Action Ctr. (TRAC) v. Allnet Communication Services, Inc., 806 F.2d 1093 (D.C.Cir.1986), in arguing their position. In TRAC, the D.C. Circuit considered whether the plaintiff association had standing to bring a suit for damages on behalf of its members. The court held it did not because it could not satisfy the well-established three-part test for such associational standing. See id. at 1094-96. In so ruling, the court declined to establish a per se rule that associations never have standing to represent their members when monetary relief is at stake. Id. at 1096. In a concurring opinion, Judge Bork discussed reasons the court might want to adopt such a rule in the future and why a class action by association members would be preferable to finding that the association had standing to represent its members in such a case. Id. at 1098. This discussion is of little relevance in this case,
The Reliance Defendants make a number of other arguments relating to the potential difficulty of proceeding with this case on an individual rather than a class basis. While I do not agree this action as it is currently situated presents all of the evils the Reliance Defendants predict, it is possible class action treatment would be a simpler, more predictable method for deciding the individual investors’ claims against the Defendants. As is their right, those investors who have validly assigned them claims to the Plaintiff-Brokers have chosen a different route. Under these circumstances, the Plaintiff-Brokers have standing to bring these individual claims in this litigation.
For the reasons stated above, the Reliance Defendants’ Motion to Dismiss for Lack of Standing, filed April 12, 2001 as part of Docket No. 35, is DENIED.
. Plaintiffs allege that a viatical settlement contract is the purchase of life insurance policies of terminally ill persons, typically persons with HIV or AIDS. When the person insured under the policy (known as the "viator”) dies, the insurance company pays the benefits to the purchaser of the viatical settlement contract. The purchaser expects to obtain a financial benefit by purchasing the contract at a discount of face value. The discounted purchase price depends on the life expectancy of tire viator, and the purchaser's rate of return depends on the viator’s actual longevity. Am. CompL, VH 1-5.
. The Plaintiff-Investors are Dr. Marshall Gold, Dr. David B. Sacks, David B. Sacks, MD, PC and the Sacks Family Trust. Based on the Amended Complaint, certain of the Plaintiff-Brokers, such as Roger Larson, may also have invested in Defendants’ viatical settlement contracts personally, in addition to selling these contracts to customers.
. As this action proceeds. Plaintiffs will be required to support their standing to bring this action in the same manner as any other matter on which they bear the burden of proof. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Coalition for Sustainable Res., Inc. v. United States Forest Serv., 48 F.Supp.2d 1303, 1310 (D.Wyo.1999).
. Plaintiffs attached to their Sur-Reply to the Reliance Defendants' motion a list of the customers who have reportedly assigned their claims to the Plaintiff-Brokers to date. According to this list, more than half of the 508 customers who purchased viatical settlement contracts from the Plaintiff-Brokers have assigned their claims against Defendants to these plaintiffs.
. Certain claims are also not assignable as a matter of law. See, e.g., Brown v. Gray, 227 F.3d
. As this concern does not apply to the Plaintiff-Investors, they have prudential standing 'to bring this action.
. As noted above, I must accept the Plaintiff-Brokers' allegations of a valid assignment in deciding the Reliance Defendants’ motion to dismiss. This issue may be revisited as this litigation proceeds. See n. 3 supra.