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Corrado v. Life Investors Insurance Co. of America

United States Court of Appeals, Eighth Circuit

January 2, 2018

Charleen Corrado, Individually and as the Executrix of the Estate of John M. Corrado; Federal City Region, Inc. Plaintiffs-Appellants
v.
Life Investors Insurance Company of America; Seth Miller; Patrick Melchert; Kevin Crist; Frank Neeland, Jr.; Mark Thiel; Andrew Martin Defendants-Appellees

          Submitted: October 18, 2017

         Appeal from United States District Court for the Northern District of Iowa - Cedar Rapids

          Before WOLLMAN, BEAM, and SHEPHERD, Circuit Judges.

          SHEPHERD, CIRCUIT JUDGE.

         In this most recent installment of the litigious history of the Life Investors Owners Participation Trust, Charleen Corrado and Federal City Region, Inc. ("FCR") brought suit against a number of defendants associated with the Trust, alleging breaches of fiduciary duties and conversion. The district court[1] granted summary judgment to the defendants, and Corrado and FCR appeal. We affirm.

         I. Background

         As recounted in our previous opinion, John Corrado and FCR[2] became associated with Life Investors Insurance Company of America ("Life Investors") in 1977.[3] Corrado sold Life Investors's insurance policies on a commission basis, and, as a result, Corrado and FCR were able to maintain accounts in a pension plan established by Life Investors-the Life Investors Owners Participation Trust (the "Trust").

         In 2008, John Corrado[4] and FCR filed a lawsuit in the District of Maryland against Life Investors, the Life Investors Owners Participation Trust and Plan, and its trustees-John Cleavenger, Kevin Crist, Mike Kirby, Frank Kneeland, William Kuennen, R. Joe Smith, and Mark Thiel.[5] In that suit, Corrado and FCR alleged six counts: the first three alleged that the Trustees breached their fiduciary duties; Count IV alleged that Life Investors knowingly participated in the breaches alleged in Counts I through III; Count V alleged that the Trustees failed to provide appropriate documentation to participants; and Count VI alleged that the Trustees unjustifiably refused to allow Corrado to withdraw the money in his account. The Maryland court granted summary judgment to the defendants, and Corrado did not appeal that ruling. Life Investors advanced money to the Trustees to pay for the legal expenses related to the defense of this action.

         During the pendency of the Maryland suit, Life Investors filed a lawsuit against Corrado and FCR in the District of Iowa, alleging that Corrado had breached a settlement agreement between the parties. After the district court granted summary judgment to Life Investors in that case, this court reversed and remanded based on the district court's misapplication of Iowa law. See Life Inv'rs Ins. Co. of Am. v. Fed. City Region, Inc., 687 F.3d 1117 (8th Cir. 2012). After remand, the district court again entered summary judgment in favor of Life Investors, and we affirmed. See Life Inv'rs Ins. Co. of Am. v. Corrado, 804 F.3d 908 (8th Cir. 2015). The final outcome of the Iowa litigation was a $1.3 million judgment in favor of Life Investors against both Corrado and FCR, which FCR satisfied by assigning sufficient funds from its Trust account to Life Investors.

         Life Investors then sent an email to the Trustees informing them of its desire to be reimbursed for the costs advanced in defense of the Maryland lawsuit. This result, Life Investors explained, was authorized by Trust § 11.9, which states as follows:

The Trustees shall have a lien upon the Trust Assets for any costs and attorneys' fees, in the event of any suit or proceeding regarding the Trust to which the Trustees, or any of them, may be parties or a party. If any Participant or beneficiary brings legal action against the Trustees, or any of them, the result of which shall be adverse to the party bringing the suit, or if any disputes arise with respect to the person or persons to whom delivery or payment of any property shall be made by the Trustees, the cost to the Trustees of defending the suit shall be charged, to the extent possible, directly to the account of the Participant whose interest is in issue, and only the excess, if any, shall be included in the expenses of the Trust.

         The Trustees unanimously voted to enforce § 11.9, and they deducted $431, 925.49-the cost of the defense in the Maryland litigation-from the Trust accounts of Corrado and FCR. In turn, the Trustees paid this money to Life Investors as reimbursement of money advanced in defending the Trustees in the Maryland action.

         In July of 2014, Corrado and FCR brought the instant lawsuit in the District of Iowa against the Trustees and Life Investors, alleging that the Trustees' actions in deducting the funds from Corrado's and FCR's Trust accounts constituted breaches of fiduciary duties and conversion. After discovery, both parties moved for summary judgment, and ...


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