The Executive Life of New York (ELNY) liquidation plan approved in New York is now expected to be implemented in the third quarter of this year, perhaps as early as August, but the plaintiffs’ lawyer says he is not giving up the case, at least on breach of fiduciary duty.
New York’s highest court ruled to not hear the case seeking to prevent the plan or restructuring of the failed life insurance company. This cleared the way for liquidation to begin, including activating the participating insurers in the state guaranty funds, pledging more than $100 million to a special hardship fund, and topping off state guaranty funds and covering “orphan contracts” in states where ELNY was not licensed.
The National Organization of Life & Health Guaranty Funds (NOLGHA) said it is pleased with the decision that all challenges to the liquidation restructuring plan have been removed, and is looking at a third quarter unwinding of the estate.
ELNY was brought under rehabilitation by the New York Insurance Department in 1991 after its parent company in California was seized by regulators there. Some New York regulators said they feared a run on the company even though ELNY was not insolvent at the time. It is believed it slipped into insolvency after more than a decade of caretaking by the New York Liquidation Bureau sometime in 2002.
Edward Stone has warned his clients, the shortfall policyholders who will not get the full amount of their annuities, that benefit reductions will begin to occur soon.
The New York Court of Appeals decision, “while not entirely unexpected, is likely to result in benefit cuts to the shortfall victims of approximately $920 million,” Stone said.
He is going to try and overturn a contempt order against his firm and the firm of Christensen & Jensen for a class action lawsuit filed on Nov. 8, 2012, in Federal Court in New York against the Superintendent of Financial Services Benjamin Lawsky (and his predecessors) in their personal capacity, MetLife and Credit Suisse for breach of fiduciary duty and other causes of action arising out of the alleged mismanagement of the ELNY rehabilitation, and an alleged subsequent cover-up.
On Jan. 25th, 2013, Nassau County presiding judge on the ELNY case, Judge John M. Galasso, held the victims and their attorneys in civil contempt for filing the federal class action lawsuit in the Southern District of New York.
The actual ELNY Restructuring Agreement was signed by Galasso in April 2012.
Stone believes it is a constitutional issue – the state court cannot dismiss a federal complaint — and will take this suit to the Supreme Court, if necessary, but not the appeal itself of the restructuring plan.
Stone’s first stop is the Appellate Division, second Department.
If we get shut down by the Appellate Division, we will appeal to the Court of Appeals, Stone stated.
“We plan to perfect our appeal of the contempt order issued by Judge Galasso in response to the Superintendent’s motion to enforce what he terms ‘anti-suit injunctions.’ We hope that the Appellate Division will uphold United States Supreme Court precedent as articulated in Donovan vs. City of Dallas,” Stone said.