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Randy Mack and Cheryl Fischbach, As Guardians Ad v. Keith Marquand and Senior Security Estate Plans

September 28, 2011


The opinion of the court was delivered by: Jeffrey L. VIKEN United States District Judge



Plaintiffs ("Macks") filed their complaint in Circuit Court, Seventh Judicial Circuit, Pennington County, South Dakota, asserting a number of claims against the defendants, Keith Marquand, Senior Security Estate Plans, Inc. ("SSEP"), and OM Financial Life Insurance Company ("OM"), jointly and severally, including negligence, undue influence, breach of fiduciary duty, practicing law without a license, selling annuities insurance without a license, breach of professional responsibilities, intentional infliction of emotional distress, unjust enrichment, and negligent supervision. (Docket 1-1). The complaint alleges that defendant Marquand was an employee and agent of defendants SSEP and OM. Id. at ¶ 3. In that capacity, Marquand is alleged to have moved Macks' monies from a number of investments into annuities contracts managed by OM. Id. at ¶ 14. Macks allege those transactions were detrimental to plaintiffs' best financial interests. Id. at ¶ 24. Defendants removed the case to federal district court pursuant to 28 U.S.C. §§ 1441 and 1146 (diversity of citizenship).

Marquand admits he is a shareholder of SSEP. (Docket 8, ¶ 4). While admitting to a business relationship with plaintiffs, Marquand denies any allegations of improper conduct. Id. at ¶ 27.

During the course of discovery, OM filed a motion to stay proceedings. (Docket 20). The basis for the motion to stay was OM's assertion that plaintiffs' claims were adjudicated and discharged as part of a settled action in United States District Court, Central District of California, in litigation captioned Negrete v. Fidelity and Guaranty Life Insurance Company, No. CV-05-6837-CAS-MANx ("Negrete"). Id.

On August 9, 2010, the Honorable Christina A. Snyder, United States District Judge for the Central District of California, conducted a show cause hearing which was attended by counsel for plaintiffs in this South Dakota proceeding. (Docket 31-1). The civil minutes of the hearing reflect the oral findings of the court. Id. Judge Snyder found that Macks owned three annuities which were included in the class action settlement agreement, thus making Macks members of the class. (Docket 31-1, p. 7). Judge Snyder denied Macks' motion to opt out of class member status. Id. at 10.

Judge Snyder's oral order of August 9, 2010, "preliminarily enjoins the Macks . . . from taking any action in their case[ ] presently pending in the District[ ] of South Dakota . . . without first giving notice to this Court." Id. at 13. Judge Snyder finally required Macks on September 13, 2010, to:

SHOW CAUSE why they should not be enjoined from prosecuting, pursuing, or participating in any way in any action, proceeding, hearing, or other matter now pending or subsequently filed in any venue . . . including the Mack . . . litigation now . . . pending in the United States District Court for the District of South Dakota . . . relating to, referring to, or arising out of in any way the Release [sic] Claims . . . in the Settlement Agreement.

Id. Those released claims, as defined in the Settlement Agreement, include:

a. any and all past or present claims, complaints, or causes of action, allegations of liability, damages, restitution, equitable, legal or interest, demands or rights whether known or unknown,

b. that concern, refer or relate to, or arise out of, in whole or in part, the offering of advice in any manner related to the Annuities, or the design, marketing, solicitation and sale of the Annuities, as well as the crediting of interest to policy accounts,

c. including, but not limited to, all claims that were asserted in this Action, or that could have been asserted against OM before any court, arbitration panel, or regulatory or administrative agency based on or related to facts alleged in the complaint filed in this Action, whether or not brought directly, indirectly, on a representative basis, or otherwise including but not limited to, actions brought on behalf of Plaintiff and/or Class Members by any state or federal government officials or agencies.

(Docket 22-5, p. 58).

On August 24, 2010, this court entered an order staying the South Dakota proceedings. (Docket 32). Following completion of the Negrete court proceedings, this court required the parties to submit briefing on two issues. Id. Those issues were:

1. Whether these proceedings should continue against OM; and

2. Whether these proceedings should continue against Marquand and SSEP, separate from and independent of any decision of the Negrete court relating to OM.

Id. at 6.

On September 28, 2010, Judge Snyder entered an order enjoining class members Gerald and Marjorie Mack from pursuing litigation. Negrete at Docket 378. That order was filed on October 26, 2010. See Docket 36. On October 27, 2010, this court entered an order dismissing OM from plaintiffs' complaint and allowing plaintiffs to file a motion to amend complaint. (Docket 37). On November 1, 2010, plaintiffs filed a motion to amend complaint, together with a copy of the proposed amended complaint.*fn1 (Dockets 38 and 39-1).

The amended complaint removed the references to OM and the annuities which were the subject of the Negrete order. (Docket 44-1). Also removed were the OM associated causes of action--Count Five: Selling Annuities Insurance Without License; Count Eight: Unjust Enrichment; Count Eleven: Unfair Trade Practices; and Count Twelve: Interference With a Prospective Business Advantage. Id.

Included in the amended complaint were allegations about Mr. Marquand's financial advice to Gerald Mack and Marjorie Mack (the "elder Macks") and his recommendation to place title to their home in a Revocable Living Trust (the "Macks' home allegations"). Id. at ¶¶ 26-30. Included as a damage allegation was an additional paragraph relating to the Department of Social Services claiming Macks' home as an assessable asset for recovery of Medicaid expenses incurred for Gerald Mack's nursing home care. Id. at ¶ 33. Retained in the amended complaint from the original complaint and renumbered are the following causes of action:

Count One: Negligence;

Count Two: Undue Influence;

Count Three: Breach of Fiduciary Duty;

Count Four: Practicing Law Without a License;

Count Five: Breach of Professional Responsibilities; Count Six: Intentional Infliction of Emotional Distress; ...

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