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Ritchie Capital Management, L.L.C. v. Coventry First LLC

February 29, 2008

RITCHIE CAPITAL MANAGEMENT, L.L.C., RITCHIE RISK-LINKED STRATEGIES TRADING : (IRELAND), LIMITED, RITCHIE RISK-LINKED STRATEGIES TRADING (IRELAND) II, LIMITED, WALKERS SPV LIMITED, AS TRUSTEE FOR RITCHIE RISK-LINKED LIFE STRATEGIES TRUST I AND RITCHIE LIFE STRATEGIES MASTER TRUST, AND RITCHIE RISK-LINKED STRATEGIES TRADING, LTD., PLAINTIFFS,
v.
COVENTRY FIRST LLC, THE COVENTRY GROUP, INC., MONTGOMERY CAPITAL, INC., LST I LLC, ALAN BUERGER, CONSTANCE BUERGER, REID S. BUERGER, ANTONIO MUNIZ, ALEX SELDIN, NEAL JACOBS, EILEEN SHOVLIN, AND JIM DODARO, DEFENDANTS.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

By Opinion dated July 17, 2007, defendants' motion to dismiss plaintiffs' complaint was granted as to all counts. See Ritchie Capital Mgmt., L.L.C. v. Coventry First LLC, No. 07 Civ. 3494, 2007 WL 2044656 (DLC) (S.D.N.Y. July 17, 2007) (the "July 2007 Opinion"). This Court sua sponte granted plaintiffs leave to amend as to their RICO claims under 18 U.S.C. §§ 1962(c) and (d). Plaintiffs submitted a proposed second amended complaint ("SAC"), and defendants now move to dismiss the repleaded RICO claims.*fn1 This Opinion addresses plaintiffs' August 24, 2007 motion for reconsideration of the July 2007 Opinion as well as defendants' September 21, 2007 motion to dismiss the RICO claims contained in the proposed SAC. For the following reasons, plaintiffs' motion for reconsideration is denied and defendants' motion to dismiss is granted.

BACKGROUND

As described in the July 2007 Opinion, this action arises out of a contract dispute between two sophisticated players in the life settlements industry, a secondary market for life insurance policies. The July 2007 Opinion is incorporated by reference. The four corporate defendants, to which the plaintiffs refer collectively as "Coventry," created, and remain leaders in the industry. In the course of its business, Coventry purchases life insurance policies and either holds them, paying the applicable premiums and eventually collecting the death benefits, or sells them to third parties.

In brief, one or more of the plaintiffs contributed the bulk of the financing that was used to purchase life insurance policies based on an analysis conducted by the defendants. After the policies were transferred to certain of the plaintiffs, two of the plaintiffs provided the money to pay the monthly premiums on the policies, and the defendants arranged for those payments to be sent to the issuing life insurance companies. The parties executed two agreements that included warranties made by the defendants concerning, inter alia, the lawfulness of their acquisition of the insurance policies from the policyholders.

Both the original complaint and the proposed SAC turn on allegations that the defendants defrauded the insureds whose policies they purchased by bribing brokers not to act on higher bids for the policies placed by Coventry's competitors. The gravamen of each of the complaints is that the defendants concealed their fraudulent conduct from the plaintiffs, and also repeatedly misrepresented an investigation of the fraud being conducted by the Attorney General of the State of New York ("Attorney General"). Plaintiffs allege that defendants repeatedly represented that Coventry was not engaged in precisely the conduct targeted by the Attorney General's investigation, and that the plaintiffs first learned of defendants' scheme when the Attorney General sued Coventry in October 2006.

Plaintiffs' theory of damages is that the value of the policies purchased by Ritchie Risk-Linked Strategies Trading (Ireland), Limited ("Ritchie I") and Ritchie Risk-Linked Strategies Trading (Ireland) II, Limited ("Ritchie II") diminished substantially due to the Attorney General's action against defendants. Specifically, plaintiffs contend that disclosure of the Attorney General's action led Moody's rating service to withdraw its rating on several of the policies purchased by plaintiffs, thereby interfering with the resale value of those policies. As a consequence, not only were Ritchie I and II harmed, but also the plaintiffs that own or are beneficially interested in Ritchie I and II were harmed.

The original complaint, filed on May 7, 2007, contained seven causes of action: three RICO claims pleaded against all of the defendants; a fraud claim and a fraudulent inducement claim pleaded against Coventry, and certain individual defendants; and breach of fiduciary duty and breach of contract claims pleaded against Coventry. Defendants moved to dismiss the original complaint and the July 2007 Opinion granted their motion. Plaintiffs were granted leave to replead the RICO claims brought under Sections 1962(c) and (d) because, on the basis of the original complaint, it was "impossible to assess whether the complaint states a claim without having a more definite statement of the claim. As currently formulated, these two claims fail to give the defendants fair notice." July 2007 Opinion, at *10. The July 2007 Opinion also ruled that the original complaint had not adequately pleaded personal jurisdiction for the RICO claims, but granted plaintiffs leave to replead the issue.

On August 24, 2007, plaintiffs filed a motion for reconsideration of the July 2007 Opinion, and also sought leave to file the proposed SAC, which repleaded certain claims pursuant to the directive contained in the July 2007 Opinion.*fn2

Defendants moved on September 21 to dismiss RICO counts I and II of the SAC, which are the claims repleaded under §§ 1962(c) and (d).

DISCUSSION

I. Plaintiffs' Motion to Reconsider the July 17 Opinion

The standard for a motion for reconsideration is strict, and "reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked -- matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Trans., Inc., 70 F.3d 255, 257 (2d Cir. 1995). Reconsideration "should not be granted where the moving party seeks solely to relitigate an issue already decided," nor may the moving party "advance new facts, issues or arguments not previously presented to the Court." Shamis v. Ambassador Factors Corp., 187 F.R.D. 148, 151 (S.D.N.Y. 1999). The decision to grant or deny the motion is within the sound discretion of the district court. See Devlin v. Transp. Commc'n Int'l Union, 175 F.3d 121, 132 (2d Cir. 1999).

In their motion for reconsideration the plaintiffs seek reinstatement of their claims for breach of fiduciary duty, fraud, and fraudulent inducement, acknowledging that the allegations in their original complaint "could have been more clearly drawn." Their proposed SAC includes repleaded versions of these claims, but the motion for reconsideration must be addressed to the submissions before the Court at the time the July 2007 Opinion was issued. That includes the pleading to which the motion to dismiss was addressed and the arguments made and authorities cited by the plaintiffs in opposition to that motion. That customary standard is particularly appropriate here because the plaintiffs never asked for leave to amend in connection with the underlying motion practice, and the Court sua sponte gave them permission to replead only two RICO claims and the breach of contract claim. As the Second Circuit has recognized, plaintiffs are generally "not entitled to an ...


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