United States District Court, S.D. California
In Re TAC FINANCIAL, INC., Debtor.
ROY H. EDER; REMAR INVESTMENTS, L.P.; MICHAEL RAYMOND FRAGER; FRASER SISSON ASSOCIATES; CENTAURUS FINANCIAL, INC.; RELIASTAR LIFE INSURANCE COMPANY; and DOES 1 through 20, Defendants. CHRISTOPHER R. BARCLAY, TRUSTEE, Plaintiff,
ORDER GRANTING DEFENDANTS REMAR'S AND
FRAGER'S MOTIONS TO WITHDRAW THE REFERENCE
3:15-cv-02681-GPC-NLS [ECF No. 2], 3:16-cv-00139-GPC-NLS [ECF
GONZALO P. CURIEL UNITED STATES DISTRICT JUDGE.
Remar Investments, L.P. ("Remar") and Michael
Frager and FSA Integrated LLC [erroneously sued as Fraser
Sisson Associates] (collectively "Frager" or
"Frager Defendants") filed separate motions to
withdraw the reference. Defendants Remar and Frager seek to
withdraw the reference to the bankruptcy court with respect
to an adversary proceeding commenced by Plaintiff Christopher
R. Barclay, as Chapter 7 Trustee for TAC Financial, Inc. (the
"Trustee") against Remar and others for claims
arising out of the allegedly fraudulent conveyance of a life
insurance policy from TAC Financial, Inc. (the
"Debtor") to Defendant Roy H. Eder and subsequent
transferees, including Remar. Any party wishing to oppose the
motion had until February 19, 2016 with respect to
Remar's motion and February 26, 2016 with respect to
Frager's motion to respond. On February 26, 2016, Trustee
filed a statement of non-opposition to both motions. The
Court deems Defendants' motions suitable for disposition
without oral argument pursuant to Civil Local Rule 7.1(d)(1).
Having reviewed Defendants' motions and the applicable
law, and for the reasons set forth below, the Court GRANTS
Defendants' motions to withdraw the reference.
about February 8, 2013, the Debtor submitted an application
to ReliaStar Life Insurance Company ("ReliaStar")
for a "key man" life insurance policy in the face
amount of $5 million insuring the life of Eder, designating that
the owner of the policy would be Debtor and that the source
of funds to pay the policy premiums would be the Debtor. (AP
Compl. ¶ 22.) The application was signed by and listed
the Debtor's insurance agents/brokers as Michael Frager
and Michael Sisson. (Id. ¶ 23) On or about June
6, 2013, ReliaStar issued its Policy No. AD20577953
("the Policy") to the Debtor. (Id. ¶
25.) The Policy listed "TAC Financial Services" the
owner of the policy (id ¶ 27), insured the life
of Roy Eder and provided for a death benefit of $5 million
(id ¶ 26).
about June 14, 2013, the Debtor faxed to ReliaStar an
Electronic Funds Transfer ("EFT") authorization,
signed by Steve Hong on behalf of the Debtor, which
authorized ReliaStar to debit the Debtor's bank account
to pay the premiums of the Debtor's Policy. (Id.
¶ 28.) Thereafter the monthly premium payments were
made by the Debtor through direct debit of the Debtor's
bank account. (Id.)
December 27, 2013, ReliaStar sent a notice to the Debtor that
the EFT payment for the payment of the monthly premium had
been returned by the Debtor's bank as unpaid due to
insufficient funds. (Id. ¶ 29.) By a letter
dated February 13, 2014, ReliaStar informed the Debtor that
the Policy had lapsed effective February 13, 2014.
(Id.) On or about March 24, 2014, the Debtor
submitted to ReliaStar an application to reinstate the
Debtor's Policy, which was signed by the Debtor through
Eder as the Debtor's CEO and Michael Frager as the
Debtor's agent. (Id. ¶ 31.) By a letter
dated April 3, 2014, ReliaStar informed the Debtor the
application to reinstate had been approved and that a premium
payment was due June 14, 2014. (Id. ¶ 32.)
about June 9, 2014, Eder was diagnosed with brain cancer.
(Id. ¶ 33.) On or about June 9, 2014, the
Debtor made a premium payment to ReliaStar. (Id.
¶ 34.) On June 24, 2014, the Debtor submitted to
ReliaStar a new EFT authorization to debit the Debtor's
bank account to pay the premiums, which was signed by Steve
Hong on behalf of the Debtor. (Id. ¶ 35.)
Thereafter, the monthly premiums were made by the Debtor
through direct debit of the Debtor's bank account.
1, 2014, Michael Frager sent a fax to ReliaStar instructing
ReliaStar to change the beneficiaries under the Debtor's
Policy according to an attached Beneficiary Designation Form,
which was signed by Eder on behalf of Debtor and changed the
beneficiaries of the policy from the Debtor to members of
Eder's family. (Id. ¶¶ 37-38.)
about July 8, 2014, the Division of Neurosurgery at Scripps
Clinic Torrey Pines issued a letter stating that Eder has
been diagnosed with cancer for which prognosis is terminal.
(Id. ¶ 40.) On July 11, 2014, Frager faxed to
ReliaStar a Transfer of Ownership form dated June 27, 2014,
which provided for the transfer of ownership of the
Debtor's Policy from the Debtor to Eder. (Id.
¶ 41.) The Transfer of Ownership form was .
(Id. ¶ 42.) The Debtor continued to pay the
premiums on the Policy after the transfer of ownership.
(Id. ¶ 43.)
October 2, 2014, ReliaStar made a distribution under the
Policy to Eder in the amount of $250, 000.00. (Id.
¶ 44.) On or about December 11, 2014, Eder sold the
Policy to Remar for a purchase price of $1, 950, 000.00.
(Id. ¶ 45.) By a letter from ReliaStar to Remar
dated December 15, 2014, ReliaStar confirmed the change in
ownership of the Policy from Eder to Remar, effective
December 10, 2014. (Id. ¶ 46.)
Debtor filed a voluntary bankruptcy petition on January 15,
2015. (Id. ¶ 15.) On August 11, 2015, the
Trustee filed this adversary proceeding pursuant to Federal
Rule of Bankruptcy Procedure 7069 against Eder, Remar and
others to recover the Debtor's Key Man Life Insurance
Policy or the value of the Debtor's Policy from Remar as
a fraudulent transfer under 11 U.S.C. §§ 548, 550,
and the value of all transfers by Eder to subsequent
transferees of the $1.9 million received by Eder from Remar
for the Policy and the $250, 000 advance received by Eder
from ReliaStar under 11 U.S.C. § 550. (See In re TAC
Financial, Inc., Adv. No. 15-AP-90145-CL7
("AP").) Defendants Remar, Frager and others filed
Answers and timely demands for jury trials. Neither consent
to having the bankruptcy court conduct the jury trial.
December 1, 2015, Remar filed a motion to withdraw the
reference on the basis that Remar is entitled to have this
matter decided by an Article III judge and does not consent
to have the matter decided by a bankruptcy judge and on the
additional ground that other defendants (if not Remar itself)
are entitled to and have preserved their right to trial by a
jury. (Remar Mot., Case No. 15-cv-2681, ECF No. 1.) On
January 20, 2016, Frager also filed a motion to withdraw the
reference on similar grounds. (Frager Mot., Case No.
16-cv-0139, ECF No. 1.) On February 26, 2016, the Trustee
filed a non-opposition to withdrawal of the reference with
respect to its claims against both Remar and Frager.