Life Partners Creditors’ Trust v. Cowley

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This case arose from the Chapter 11 bankruptcies of Life Partners Holdings, LPI, and LPI Financial Services (collectively, the LP Entities). The LP Entities operated an investment business through which they defrauded investors and violated securities laws by using a multi-level marketing structure to sell their life insurance investments and contracting with individuals and entities they called "Licensees" to refer potential investors in exchange for sales commissions. The district court granted the Licensees' motions to dismiss all of the creditors' trust's claims and declined to allow repleading. Count 1 alleged actual fraudulent transfer under the Texas Business & Commerce Code, Count 2 alleged constructive fraudulent transfer under the Texas Business & Commerce Code, Count 3 alleged actual fraudulent transfer under 11 U.S.C. 548(a)(1)(A), Count 4 alleged constructive fraudulent transfer under 11 U.S.C. 548(a)(1)(B), Count 5 alleged preferences under 11 U.S.C. 547, Count 6 alleged recovery of avoided transfers under 11 U.S.C. 550, County 7 alleged breach of contract, Count 8 alleged equitable subordination of the Licensees' claims against the LP Entities' bankruptcy estates; Count 9 alleged disallowance of the Licensees' claims, Count 10 alleged negligent misrepresentation, Count 11 alleged breach of the Texas Securities Act, and Count 12 alleged breach of fiduciary duties. The Fifth Circuit affirmed as to Counts 5, 8, 11, and 12, but reversed the dismissal of Counts 1-4, 6, 9, and 10, holding that these claims were adequately pleaded. Accordingly, the court remanded for further proceedings. View "Life Partners Creditors' Trust v. Cowley" on Justia Law