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DAWSON v. J.G. WENTWORTH & CO.

December 3, 1996

ROBERT G. DAWSON, et al., Plaintiffs,
v.
J.G. WENTWORTH & COMPANY, INC., et al., Defendants



The opinion of the court was delivered by: KATZ

 AND NOW, this 3rd day of December, 1996, upon consideration of defendant's Motion for Summary Judgment, and the response thereto, it is hereby ORDERED that the said motion is DENIED.

 I. Factual Background

 This action involves the aftermath of an agreement to purchase deferred personal injury claims. The New Jersey Joint Underwriters Association ("JUA") was formed in 1983 as a state-run auto insurance company for high-risk drivers. Second Amend. Compl. PP 10-11. By 1989, the JUA was $ 3.5 million dollars in debt, as the number of claims exceeded the revenue available. Id. at P 12. In March of 1990, the New Jersey Legislature passed the Fair Automobile Insurance Reform Act of 1990 ("the Act"). The Act did the following: 1) eliminated the JUA and replaced the JUA with an assigned risk plan; 2) replaced the JUA with the Market Transition Fund ("MTF") as the high risk insurance company; and 3) retired the JUA debt. N.J. Stat. Ann. § 17:33B-1 (1994) (Assembly Appropriations Committee Statement).

 The Act on its own did not resolve the JUA's funding crisis, and the New Jersey Insurance Commissioner announced a twelve to eighteen month deferral of payments on settled claims. Second Amend. Compl. P 13. As a result of the deferrals, personal injury claimants and law firms had to wait for a year to a year and a half for payment of settlements, and an ongoing court battle over the state's handling of the JUA funding crisis made traditional financial sources reluctant to buy these deferred claims. Id. P 15.

 Late in 1991, Robert Dawson became aware of the financial benefits of purchasing deferred claims. Def. Mot. for Summ. udg. Ex. A. In 1992, Dawson began to research other companies that had purchased JUA claims and the financing of those claims. Id. Ex. C. In the summer of 1992, Dawson approached J.W. Wentworth and Company ("Wentworth") as a possible financier for his project. d. Ex. A. After some discussion, Dawson and his initial contact at Wentworth, Jim Delaney, agreed to form a business that would purchase deferred JUA claims and that DeLaney would handle the financing for the project and that Dawson would run the day-to-day operations of purchasing the deferred claims. Id. Ex. B. DeLaney and Dawson agreed at the outset that they would share the profits that the business produced. Id. Ex. E. DeLaney convinced his partner at Wentworth, Gary Veloric, that the claims purchasing business had potential, and DeLaney and Veloric began to seek out funding sources. Id. Exs. I, H. DeLaney and Veloric then founded Wentworth MFC, a single purpose partnership for purchasing JUA claims; both DeLaney and Veloric contributed $250,000 of their own money to establish the partnership. Id. Exs. G, H. Dawson was not a partner or a shareholder in Wentworth MFC, instead, he received $60,000 per year for handling the marketing. Id. Exs. A, B.

 Late in 1993, Dawson asked DeLaney if his wife could take over the day-to-day responsibilities of his job; he also stated that he would be available to consult on an as-needed basis. Id. Exs. B, A. Martha Dawson then began to work at Wentworth and received a salary of $ 30,000; Dawson's consulting retainer was added to her paycheck. Id. Exs. A, B. Upon securing the requisite funding, Wentworth MFC began to purchase deferred claims, although DeLaney had purchased some with his own funds at an earlier date. Id. Exs. A, G.

 Wentworth MFC had a slow start in 1994, and although Dawson did some consulting, DeLaney and Veloric hired Michael Goodman as Vice President for Marketing in March of 1994. Id. Ex. G. Given Wentworth MFC's financial woes, DeLaney and Veloric decided that they could no longer afford to pay Dawson, and Jim DeLaney informed Dawson of their decision in April 1994. Id. Exs. A, G. In May 1994, Martha Dawson received a paycheck that did not include the amount for Dawson's consulting retainer. Id. Ex. A. Dawson, who was experiencing financial troubles of his own, asked that his pay be restored, and after a series of conversations, the Dawsons signed a letter releasing all of their claims to the profits of Wentworth or Wentworth MFC in exchange for the payment of the balance of the $ 60,000 they were to receive in 1994. Id. the requisite funding, Wentworth MFC began to purchase deferred claims, although DeLaney had purchased some with his own funds at an earlier date. Id. Exs. A, G.

 Wentworth MFC had a slow start in 1994, and although Dawson did some consulting, DeLaney and Veloric hired Michael Goodman as Vice President for Marketing in March of 1994. Id. Ex. G. Given Wentworth MFC's financial woes, DeLaney and Veloric decided that they could no longer afford to pay Dawson, and Jim DeLaney informed Dawson of their decision in April 1994. Id. Exs. A, G. In May 1994, Martha Dawson received a paycheck that did not include the amount for Dawson's consulting retainer. Id. Ex. A. Dawson, who was experiencing financial troubles of his own, asked that his pay be restored, and after a series of conversations, the Dawsons signed a letter releasing all of their claims to the profits of Wentworth or Wentworth MFC in exchange for the payment of the balance of the $ 60,000 they were to receive in 1994. Id.

 The Dawsons filed for bankruptcy on October 21, 1994, but they did not list their potential cause of action against Wentworth as an asset of the bankruptcy estate. Id. Ex. L. On January 16, 1996, Dawson filed an "Amended Schedule B" with the bankruptcy court and served the Amended Schedule on the Trustee. Pl. Resp. to Mot. For Summ. Judg. Ex. 1, 2. The Dawsons' bankruptcy case was closed in May, 1996, but upon learning of this action in August 1996, the Trustee claimed that he had no record of the amendment and moved the bankruptcy court to reopen the case to allow him to administer this action for the bankruptcy estate. Def. Mot. Ex. N. Dawson and the Trustee have since filed a Second Amended Complaint alleging tort, contract, and fraudulent conveyance claims and requesting the appointment of a receiver.

 Defendants now move for summary judgment and argue the following: 1) plaintiffs are judicially estopped from pursuing this suit; 2) Dawson has no standing because the Trustee is the only entity who can pursue claims on behalf of the estate; 3) Dawson relinquished any claim to the profits of Wentworth MFC due to the signed release, and his assertions with regard to prior agreements and negotiations are barred by the parol evidence rule; 4) Dawson cannot claim economic duress prompted him to sign the Release, as he had the opportunity to consult with a lawyer prior to signing it; 5) the Trustee has not produced enough evidence for his claim of fraudulent transfer to stand; and 6) plaintiffs have failed to provide adequate evidence to support their claim for the appointment of a receiver.

 II. Standard

 Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party has the burden of demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).

 When ruling on a summary judgment motion, the court must construe the evidence and any reasonable inferences drawn therefrom in favor of the non-moving party. Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3d Cir. 1987); Baker v. Lukens Steel Corp., 793 F.2d 509, 511 (3d Cir. 1986). In other words, if the evidence presented by the parties conflicts, the court must accept as true the allegations of the ...


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