Fireman's Fund retirees say company-sponsored financial education seminars led to loss of retirement savings. $36.8 million verdict. Marin County.

Summary

Over ten-year period, Fireman's Fund employees were introduced to financial advisors at company-sponsored financial education seminars. The advice of these financial advisors cost plaintiffs their retirement savings. Bench verdict against ING North America Insurance Corp. and Lion Connecticut Holdings, Inc, the parent companies of the now-defunct seminar company.

The Case

Case Name: Beeson, et al., v. Fireman’s Fund Insurance Company, et al.
Court and Case Number: Marin County Superior Court / CIV-092545
Date of Verdict or Judgment: Friday, December 12, 2014
Date Action was Filed: Tuesday, May 26, 2009
Type of Case: Negligence
Judge or Arbitrator(s): Hon. Roy O. Chernus
Plaintiffs:
Linda Beeson, et al. 34 plaintiff families, who are Fireman’s Fund employees and retirees, and their spouses. Mostly aged 60 and older.
Defendants:
ING North America Insurance Corporation and Lion Connecticut Holdings, Inc. (collectively “ING”).
Type of Result: Bench Verdict

The Result

Gross Verdict or Award: $36,817,339
Trial or Arbitration Time: 6.75 months (6 months liability phase of trial, 3 weeks damages phase of trial)
Post Trial Motions & Post-Verdict Settlements: Defendants are appealing both the liability and damages phases per defense counsel.

The Attorneys

Attorney for the Plaintiff:
Lewis, Feinberg, Lee, Renaker & Jackson, P.C. by Jeffrey Lewis, Lindsay Nako, Andrew Lah, and Kirsten Scott, Oakland.

Hornstein Law Office by Val Hornstein and Matthew Harrison, San Francisco.
Attorney for the Defendant:
Foley & Lardner LLP by Lisa Tharpe, Thomas Brown, Alan Ouellette, Kristy Marino, and Jillian Hosseini for ING.

The Experts

Plaintiff's Technical Expert(s):
James Williams, securities, San Rafael.

Kristor Lawson, finances, San Francisco.

Kevin Gahagan, finances, San Francisco.

David Grisham, forensic accounting, San Mateo.

Ian Altman, actuary, San Francisco.
Defendant's Technical Expert(s):
Stephen Behnke, securities, Orinda.

Irving Einhorn, securities, Manhattan Beach.

Peter Klouda, damages, Lake Oswego, OR.

Facts and Background

Facts and Background:
Successful Money Management Seminars, Inc. ("SMMS"), a former subsidiary of defendant ING, created and copyrighted several educational retirement planning programs. SMMS carefully designed its financial education programs and marketed them to financial professionals as a means to convert seminar participants into long-term, loyal clients. The financial professionals would sign up as SMMS licensees. SMMS promised that its carefully tailored programs would lead participants to view its licensees as experts and trusted professionals.

As one of its programs, SMMS developed a worksite division that connected SMMS licensees with companies that agreed to sponsor SMMS programs for their employees and guests. SMMS committed that its licensees would be “experts in the field.”

The SMMS worksite program positioned SMMS to engender trust in its licensees, by arranging for financial professionals to conduct SMMS programs with a symbolic stamp of approval from the employees’ trusted employer.

Through the SMMS worksite program, SMMS financial education seminars were offered to Fireman’s Fund Insurance Company (“Fireman’s Fund”) employees and their families, including plaintiffs, at Fireman’s Fund’s headquarters in Novato, California for nearly ten years, from 1996 to 2004. SMMS provided seminar instructors, including Gary Armitage and Jeff Guidi of AGA Financial (the "Financial Advisors"), to conduct these seminars.

Plaintiffs met the Financial Advisors through the seminar program, and thereafter sought and followed their financial advice. On the advice of the Financial Advisors, plaintiffs invested virtually all of their 401k plan accounts, pensions, and other money in what they believed to be safe investments, but which turned out to be risky, speculative private placements. Most of the investments that the financial advisors recommended to plaintiffs subsequently failed, wiping out much, and in some cases, all of the plaintiffs’ retirement savings.
Plaintiff's Contentions:
Plaintiffs alleged that SMMS was negligent in licensing and promoting the Financial Advisors to provide seminar programs and related financial advice to Fireman’s Fund employees. That SMMS knew and advertised to prospective licensees that a majority of seminar attendees would become long-term, loyal clients and invest with them. As SMMS intended through the design of its programs, plaintiffs became clients of the Financial Advisors as a result of the seminar programs. That SMMS was aware that there were some bad apples among its licensees. Despite this, SMMS failed to adequately vet the Financial Advisors, and failed to conduct any monitoring of the Financial Advisors during the 10 years that they provided seminar programs and investment advice to Fireman’s Fund employees and retirees. That SMMS breached its duty to plaintiffs, and as a result, plaintiffs lost a substantial portion of their retirement savings and suffered other harm.

In addition, multiple plaintiffs suffered other losses, including employment-related losses by being induced by the Financial Advisors to retire early.
Defendant's Contentions:
Defendants contended that, under the applicable law, SMMS owed no duty to plaintiffs. Specifically, SMMS was never provided the names of any of the Fireman’s Fund employees who attended the seminars or who became clients of the Financial Advisors. Because the Financial Advisors were not employees or agents of SMMS, there was no way for SMMS to determine which Fireman’s Fund employees became clients of the Financial Advisors, let alone which clients invested in risky financial products. At all times, SMMS made it clear to the Financial Advisors and to the Plaintiffs through written disclosure that the Financial Advisors were not agents or employees of SMMS and any investment advice they provided after the seminar was concluded would be in their capacity as investment advisors, not as licensees of the SMMS seminar materials. The Financial Advisors offered no financial or investment advice during the seminars themselves.

ING also contended that even if it did owe plaintiffs a duty, there was no breach because SMMS vetted its licensees, and that the element of causation was not met. In particular, the Financial Advisors at no time prior to 2008 had any criminal, regulatory or disciplinary record with any federal or state securities agency. ING further contended that plaintiffs’ claims failed based on statute of limitations arguments, and that plaintiffs were contributorily negligent.

Injuries and Other Damages

$36,817,339 in economic losses, net of offset of prior settlements. The damages for the 34 plaintiff families are as follows:
- +$36,151,947 in investment-related damages.
- +$7,555,522 in non-investment damages (including employment-related losses in being induced by the Financial Advisors to retire early; costs incurred in refinancing homes to invest the equity, on the advice of the Financial Advisors; credit card interest incurred as a result of the investment losses; and bankruptcy fees).
- -$6,890,130 for offsets of prior settlements in this and in other cases.

Demands and Offers

Plaintiff §998 Demand: None.
Defendant §998 Offer: Defendants’ final §998 offers before trial totaled $1,840,000 for the 34 plaintiffs remaining in the case at the time of judgment. (Note: 8 other plaintiffs accepted §998 offers from ING pretrial; 5 others settled with ING during trial.)

Additional Notes

Plaintiffs also previously sued Fireman’s Fund and The Affinity Group, a publishing company that acquired some of SMMS’s products in 2003. Plaintiffs reached confidential settlements with them in August 2012. Fireman’s Fund subsequently brought counterclaims against ING. That litigation is ongoing.