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Settlement Funding, LLC v. Axa Equitable Life Insurance Co.

March 21, 2011

SETTLEMENT FUNDING, LLC PLAINTIFF - COUNTERCLAIM DEFENDANT,
v.
AXA EQUITABLE LIFE INSURANCE CO.
DEFENDANT - COUNTERCLAIM PLAINTIFF -- THIRD-PARTY PLAINTIFF,
v.
LIFE SETTLEMENT CORPORATION COUNTERCLAIM DEFENDANT, - AND - ALAN RUBENSTEIN, AS TRUSTEE OF THE ESTHER ADLER FAMILY TRUST 20070221 THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge:

OPINION & ORDER

This case centers around a $5 million insurance policy (the "Policy") issued by AXA Equitable Life Insurance Co. ("AXA") on the life of non-party Esther Adler. Familiarity with the background can be gained by reference to this Court's Opinion and Order dated September 30, 2010, 2010 WL 3825735. In brief, plaintiff Settlement Funding ("SF") came to acquire the rights to the Policy benefits, which had originally been payable to the Esther Adler Family Trust 20070221 (the "Trust"). Third-party Defendant Alan Rubenstein was the Trustee of the Trust and was one of the people who facilitated the Trust's procurement of the Policy.

Since Mrs. Adler's death on June 6, 2009, the parties have been at loggerheads. The primary concern understandably is the validity of the Policy. Other bones of contention include a dispute as to whether the Policy was procured through fraud, whether the original beneficiary of the Policy had an insurable interest in Mrs. Adler's life -- a requirement under New York law -- and finally whether any of this matters in light of the Policy's incontestability clause.

A jury trial was held from October 18 -- 25, 2010. The jury found, among other things, that the incontestability clause barred AXA from challenging the Policy's validity. The jury also found for SF on its claim of negligent misrepresentation against AXA. The jury found for Rubenstein on AXA's claim of fraud, and against Rubenstein on AXA's claim of conspiracy to commit fraud. On November 15, 2010, the Court entered judgment for SF against AXA in the amount of $5 million and awarded nominal damages for AXA and against Rubenstein in the amount of $1. AXA and Rubenstein each move separately for judgment as a matter of law and SF moves to correct or amend the judgment. All motions were timely filed. For the reasons that follow, AXA's motion is DENIED, Rubenstein's motion is DENIED, and SF's motion is GRANTED to the extent described below.

I.The motions for judgment as a matter of law

A.Rule 52 is inapplicable

In an action "with an advisory jury" the trial judge must "find the facts specially and state its conclusions of law separately." Fed. R. Civ. P. 52(a). AXA's motion for judgment under Rule 52(a) urges the court to disregard the jury's findings and make independent findings of fact and conclusions of law. However, Rule 52(a) does not govern the case, because AXA has failed to show that the jury's verdict was merely "advisory" and, even if the jury was eligible at one time to act in a merely advisory capacity, that time has passed. SF had a right to a jury trial that cannot be retroactively taken away. Even assuming that some of the claims in this lawsuit were equitable and subject to a bench trial, that does not change the result because independent legal claims were alleged and AXA neither sought a bench trial on the equitable claims nor objected to a jury trial.

1.SF had a right to a jury trial

The Seventh Amendment guarantees the right to a jury where "legal rights [are] to be ascertained and determined, in contradistinction to those where equitable rights alone [are] recognized, and equitable remedies [are] administered." Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 41 (1989). "Where equitable and legal claims are joined in the same action, there is a right to jury trial on the legal claims which must not be infringed either by trying the legal issues as incidental to the equitable ones or by a court trial of a common issue existing between the claims." Starr Int'l Co. v. Am. Int'l Group, Inc., 623 F. Supp. 2d 497, 500 (S.D.N.Y. 2009) (quoting Ross v. Bernhard, 396 U.S. 531, 537-38 (1970)). The Court must first determine whether any of SF's claims entitle it to a jury trial. Id.

The primary claim in this case was a legal one and entitled SF to a jury trial. SF's first cause of action was for recovery of insurance proceeds and the fact is that the award of insurance proceeds was what this action was all about. The parties have argued previously about the provenance of the "recovery of insurance proceeds" cause of action. I conclude that it essentially sounds in contract because "[c]laims under insurance policies are, broadly speaking, contract claims as to which there has been a right to jury trial since 1777." Country-Wide Ins. Co. v. Harnett, 426 F. Supp. 1030, 1034 (S.D.N.Y. 1977). See also Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 210 (2002)("[A] claim for money due and owing under a contract is 'quintessentially an action at law.'"); Kishter v. Principal Life Ins. Co., 186 F. Supp. 2d 438, 444-45 (S.D.N.Y. 2002) ("[I]it is hard to see how a forced payment of life insurance proceeds could be a remedy that was "typically available in equity"). SF's claim sought the monetary award of insurance proceeds and not more. Such a claim entitled SF to a jury. See Murphy v. Am. Home Prods. Corp., 136 A.D.2d 229, 232 (1st Dept. 1988)("If, in fact, a sum of money alone can provide full relief to the plaintiff under the facts alleged, then there is a right to a jury trial.").

AXA's counterclaims for declaratory judgment do not change this result. Declaratory judgment actions have no inherently legal or equitable nature, but take on the character of the underlying dispute. See, e.g., Starr Int'l, 623 F. Supp. 2d at 502. Thus, "to determine whether there is a right to jury trial in a declaratory judgment action, first it is necessary to determine in what kind of an action the issue would have come to the court if there were no declaratory judgment procedure." Starr Int'l, 623 F. Supp. 2d at 503. Here, without a declaratory judgment procedure, AXA's claims would appear as defenses to an action by SF to enforce a contract, because the payout of Policy benefits under the parties' agreement was the heart of this dispute. SF may not be deprived of the right to a jury trial by the mere fact that AXA chose to assert its arguments in the form of counterclaims for declaratory judgment. See Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 504 (1959).

Nor is this result changed by the fact that SF asserted an affirmative defense of equitable estoppel to AXA's counterclaims. It is true that estoppel is "an equitable defense." ProFitness Physical Therapy Ctr. v. Pro-Fit Orthopedic & Sports Physical Therapy P.C., 314 F.3d 62, 66 (2d Cir. 2002). However, to reverse a jury finding that AXA was estopped from challenging the validity of the Policy would be an exercise in futility: the jury's independent finding that AXA was barred by the incontestability provision would still preclude AXA from prevailing.

2.AXA consented to a jury trial

Even where no legal claims are made, a jury's verdict may be binding if the parties have consented to it and the failure to object to a request for jury trial is the equivalent of consent. See Broadnax v. City of New Haven, 415 F.3d 265, 272 (2d Cir. 2005). AXA claims that its motion for judgment as a matter of law during trial amounted to an objection to a trial by jury. However, this is comparing apples and oranges; the position that AXA should prevail as a matter of law is hardly equivalent to an objection to a jury hearing equitable claims. AXA's position would be understandable had it objected to a binding jury prior to trial. It did not. Its ...


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