Investment in Viatical Deal Leads to Lawsuit Lifespans Last Longer Than Expected

Investment in Viatical Deal Leads to Lawsuit Lifespans Last Longer Than Expected

A dispute over an investment in viaticals will be litigated in New York, rather than California, a federal court decided last week.

And in deciding to transfer the matter to the federal court for the Southern District of New York, the court in Amberger v. Legacy Capital Corp., Case No. 16-cv-05622-JSC, 2017 U.S. Dist. LEXIS 8392 (N.D. Calif. Jan. 20, 2017), also shed some light on what happens when an investment in viaticals goes bad – due to the fact that the viators are still alive, close to two decades after the investment was first made.

In describing the dispute, the Court said the following:

Plaintiff Christopher Amberger, a California resident, entered into an investment contract with Legacy Capital Corporation, a New York corporation, through its agent Josh Brackett, in November of 1998. . . .  Pursuant to the contract, Plaintiff provided Legacy Capital Corporation with $20,000 for investment in two viatical settlement contracts. . . .  A viatical settlement is a transaction in which a terminally ill insured sells the benefits of his life insurance policy to a third party in return for a lump-sum cash payment equal to a percentage of the policy’s face value. . . .  Legacy Capital Corporation acquires these life insurance policies and “solicit[s] investors to pool together to purchase fractional shares in the policies.” . . .  Both viators (holders of the life insurance policies) for the settlement contracts Plaintiff invested in are still alive and Plaintiff has yet to receive a return on his investment. . . .  In October 2015 his interest in the two polices was cancelled. . . .

A year later, Plaintiff filed this action against Legacy Capital Corporation and its alter egos Legacy Benefits Corporation, and Legacy Benefits, LLC (collectively “Legacy”), as well as Mills, Potoczak & Company, the successor to Wesley, Mills & Company who was the escrow agent under the investment contract. . . .  Plaintiff alleges violations of (1) California’s Consumer Legal Remedies Act (‘CLRA’); (2) fraud; (3) breach of fiduciary duty; (4) violation of the California Securities Act2; and (5) declaratory relief.  Defendants thereafter moved to transfer venue to the Southern District of New York under Section 1404(a) based on the forum selection clause in the parties’ investment contract. . . .

Again, the crux of the dispute hinges on the fact that the individuals whose lives were the subject of the viaticals have lived longer than expected.

The full opinion is available here.

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