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Ohio National Life Assurance Corp. v. Davis

United States District Court, N.D. Illinois, Eastern Division

October 24, 2014

OHIO NATIONAL LIFE ASSURANCE CORPORATION, Plaintiff,
v.
DOUGLAS W. DAVIS, INDIVIDUALLY AND AS TRUSTEE OF THE SHIRLEE DAVIS IRREVOCABLE LIFE INSURANCE TRUST, THEODORE R. FLOYD IRREVOCABLE LIFE INSURANCE TRUST, ROBERT S. HARRIS IRREVOCABLE LIFE INSURANCE TRUST, MARY ANN HARRIS IRREVOCABLE LIFE INSURANCE TRUST, AND CHARLES M. BONAPARTE, SR. IRREVOCABLE LIFE INSURANCE TRUST; CHRISTIANA BANK & TRUST COMPANY AS SUCCESSOR TRUSTEE OF THE SHIRLEE DAVIS IRREVOCABLE LIFE INSURANCE TRUST; STEVEN EGBERT AS SUCCESSOR TRUSTEE OF THE CHARLES M. BONAPARTE, SR. IRREVOCABLE LIFE INSURANCE TRUST; MAVASH MORADY; PAUL MORADY; SHIRLEE DAVIS; THOMAS M. TICE; AND THEODORE R. FLOYD, Defendants.

MEMORANDUM OPINION AND ORDER

THOMAS M. DURKIN, District Judge.

Ohio National Life Assurance Corporation brought this action alleging that Douglas Davis, Paul Morady, and Mavash Morady conspired to procure life insurance policies from Ohio National for people in whose lives Davis and the Moradys do not have an insurable interest, i.e., Davis and the Moradys do not have customarily insurable relationships with the insureds (e.g., spousal or familial). R. 76. The Court previously granted Ohio National's motion for summary judgment on its claims of civil conspiracy against Davis and the Moradys, and for fraud and breach of contract against Mavash Morady, and denied Paul Morady's cross motion for summary judgment on those claims. R. 275 ( Ohio Nat'l Life Assurance Corp. v. Davis, 2014 WL 500539 (N.D. Ill. Feb. 7, 2014)). In granting Ohio National's motion, the Court also found that the insurance policies at issue were void ab initio -i.e., never came into existence because Davis and the Moradys procured the polices without an insurable interest in the lives of the insureds-such that Ohio National may keep the premiums paid on the policies, except for those premiums paid by Steven Egbert who purchased one of the policies from Paul Morady. Id.

At the Court's instruction, Ohio National has now filed a motion for judgment on damages. R. 277. Additionally, Paul Morady-who opposed Ohio National's summary judgment motion pro se-has joined with his wife, Mavash Morady, to retain counsel and file a motion to vacate the Court's summary judgment order. The Moradys argue that the Court should vacate its summary judgment order because Ohio National failed to comply with Local Rule 56.2, which required Ohio National to advise the Moradys of the requirements of Federal Rule of Civil Procedure 56 and Local Rule 56.1. R. 289. The Moradys have also opposed Ohio National's motion for judgment on damages. R. 295. Davis filed notices stating that he joins the Moradys' filings. R. 291; R. 299. Egbert requests that the Court enter judgment awarding him the premiums he paid to Ohio National. R. 288. For the following reasons, the Court denies the Moradys' motion to vacate, and enters judgment in favor Ohio National in the amount of $725, 666.56, and in favor of Egbert in the amount of $90, 644.38.

Background

I. Procedural History

Ohio National filed this action more than four years ago on April 16, 2010. R. 2. Paul Morady entered an appearance pro se on February 4, 2011. R. 100. An attorney entered an appearance for Mavash Morady on June 18, 2010, R. 25, but was granted permission to withdraw on December 1, 2011. R. 149.

Even though neither of the Moradys was represented by counsel as of December 1, 2011, their current counsel, Richard Leng, appeared in Court on behalf of the Moradys at a hearing on June 12, 2012. See R. 293; R. 207. Leng, however, did not formally enter an appearance. Id. Instead, Leng sought permission to represent the Moradys for the limited purpose of defending them at their depositions. See R. 293 at 7:15-19. The Court denied this request. Id. The Court set a briefing schedule for dispositive motions at the hearing Leng attended, see id. at 7:20-22, and Ohio National filed its summary judgment motion four months later on October 12, 2012. R. 241.

Despite not having entered an appearance, during the four months between the June 12 hearing and Ohio National's filing of its summary judgment motion on October 12, Leng filed documents on the Moradys' behalf on three separate occasions. See R. 202-03; R. 215; R. 234-35. Leng did not again file any documents or attempt to appear on the Moradys' behalf until appearing for the purpose of filing the Moradys' motion to vacate that is at issue now.

Paul Morady filed a request for an extension to respond to Ohio National's summary judgment motion, which Mavash Morady signed. R. 250. Paul Morady also filed documents in opposition to Ohio National's motion-styled as a cross-motion for summary judgment-including a memorandum of law, a declaration from Davis, and Paul Morady's own declaration. See R. 263. Paul Morady did not file a response to Ohio National's statement of material facts, but he did include a "Statement of Facts" in his memorandum of law. Id. at 4-7. Mavash Morady never responded to Ohio National's motion for summary judgment beyond joining Paul Morady's filings. R. 266. Other than the declaration from Davis that Paul Morady filed, Davis did not file any papers in opposition to Ohio National's motion.

The Court granted Ohio National's motion for summary judgment, "even accepting the facts as Paul Morady states them in his brief." R. 275 at 3 ( Ohio Nat'l, 2014 WL 500539, at *1). The Court held that Paul Morady's account of the relevant events was not contrary to the evidence in the record showing that the original insureds transferred their interests in their life insurance trusts to Paul Morady's company prior to Ohio National issuing the policies, "mak[ing] [it] clear that Davis and the Moradys procured the [policies] with the intent to transfer [them] to Paul Morady, " and then sell them on the secondary market. R. 275 at 14 ( Ohio Nat'l, 2014 WL 500539, at *5). The Court also found that Davis and the Moradys made admissions at their depositions (and in the case of Paul Morady, in his court filings) sufficient to grant summary judgment to Ohio National on its claims of conspiracy against the three defendants, and breach of contract and fraud against Mavash Morady. The Court rejected Paul Morady's defense that his motives were altruistic and legal, because "regardless of any purported altruistic motivations, procuring or encouraging people to buy life insurance to use it as an asset' is illegal in Illinois when the person doing the procuring plans to buy the policy." R. 275 at 21 ( Ohio Nat'l, 2014 WL 500539, at *9).

In support of their motion to vacate, the Moradys filed a document titled "Defendants LR56.1(b)(3) Response to Plaintiff's LR56.1 Statement, " R. 294-1, which responds to the statement of material facts that Ohio National filed in support of its motion for summary judgment. The Moradys describe this document as "defendants proposed Rule 56.1(b) response on liability, " R. 294 at 1, and it is purportedly signed by Davis, although his actual signature does not appear on the document and the document was filed using Leng's electronic filing credentials. This document (R. 294-1) is intended to show that had the Moradys been sufficiently informed of their obligations on summary judgment they would have demonstrated genuine disputes of material fact. This document, however, misstates a number of Ohio National's statements of fact, and admits all but twelve of Ohio National's statements of fact. See id. ¶¶ 7, 27-29, 43, 47, 52, 55, 66, 99-101.

II. Premiums and Damages

At the outset of this litigation, Ohio National deposited with the Clerk of the Court $437, 731.38 in premiums received on the insurance policies at issue in this case, to be held in escrow. R. 32. The Court held that Ohio National may keep any of the premiums paid by Paul Morady, Mavash Morady, or Davis, but ordered Ohio National to return to Egbert any premiums he paid. See R. 275 at 22 ( Ohio Nat'l Life, 2014 WL 500539, at *9). Ohio National and Egbert have agreed that the amount Ohio National must return to Egbert is $90, 644.38. R. 281.

Additionally, the following facts relevant to potential damages in this case are undisputed: (1) Ohio National paid Mavash Morady $120, 127.41 in commissions related to the sale of the insurance policies at issue in this case, R. 294-1 ¶ 104; (2) Ohio National incurred and paid $529, 746 in attorneys' fees pursuing this action, R. 295-1 ¶ 17; and (3) Ohio National paid the following additional amounts of money in pursuing this action: $26, 565 for expert witness fees; $32, 806.42 in deposition costs; $9, 056.11 in costs for document subpoenas and production; $3, 172.11 in costs for service of process; $2, 646.85 in investigation costs; and, $1, 402.66 in other litigation costs, including copying, ...


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