The Supreme Court of New York has dismissed most of a lawsuit against Coventry First LLC for alleged price fixing, while Florida regulators settled similar charges against the firm.
A justice in Manhattan dismissed outright 7 of 9 alleged bid-rigging transactions challenged by former New York Attorney General Eliot Spitzer, ruling that none involved sellers, brokers or conduct in New York. In addition to Coventry, the 2 exceptions involved AllSettled Group Inc., a New York life settlement broker, according to the court.
Coventry, Fort Washington, Pa., is in the secondary market for life insurance, buying policies and selling them to investors in the expectation the policies would ultimately pay off more than they cost.
Spitzer, now New York governor, filed a lawsuit against Coventry in October 2006, alleging “secret payments to suppress competitive bids” for life settlements in the state. He also charged the firm with fraud for concealing payments to brokers assisting in the deals.
The lawsuit seeks a restraining order against similar conduct by the defendants, repayment of all gains and payment of restitution and punitive damages.
Justice Helen E. Freedman dismissed 3 charges against Coventry, including fraud, but retained some others, including allegations of rigging bids and abetting a broker in breaching its fiduciary duty to a client.
“Coventry believes the few remaining claims are not based in fact and have no merit,” the company said in a statement. “Coventry is gratified by this ruling and remains confident that it will ultimately prevail going forward.”
The court rejected Spitzer’s claim of fraud, ruling the charge was “too speculative” in that it assumed the sellers might have been able to receive better prices if the bids were not rigged.
Moreover, the court threw out the attorney general’s claims that Coventry was unjustly enriched by purchasing policies at less than fair market prices, ruling that terms of signed contracts governed the issue.
The court set a preliminary hearing on the remaining charges for Oct. 16.
As a result of Spitzer’s lawsuit, the Florida Office of Insurance Regulation in May 2007 issued a cease-and-desist order against Coventry and opened an investigation of its practices in that state. With its consent order dated Sept. 28, the OIR has now settled all issues it had with Coventry, including a market-conduct examination it had opened 2 years ago.