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LUCAS v. HACKETT ASSOCS.

August 31, 1998

RICHARD M. LUCAS and MARYANN LUCAS Plaintiffs,
v.
HACKETT ASSOCIATES, INC. Defendant, and ISADORE GROSSMAN; HARCO ENTERPRISES, INC., t/a HARCO FINANCIAL GROUP; WAYNE A. HAWK; HALE ASSOCIATES, INC.; WM. PAGE & ASSOCIATES, INC., t/a PAGE & ASSOCIATES, INC.; MARK FRIED; HUMAN RESOURCE OPTIONS, INC.; HIV TRUST; Defendants and Third-Party Plaintiffs, v. JAMES L. LALIME; JOHN L. KADOW; DAVID MILLER; JAY LUCAS, ESQUIRE; KENNETH LUCAS; ALEX J. MURLAND, ESQUIRE; and CRAIG RAYMOND Third-Party Defendants.



The opinion of the court was delivered by: DUBOIS

MEMORANDUM

 ORDER AND MEMORANDUM

 ORDER

 AND NOW, to wit, this 31st day of August, 1998, upon consideration of the Motion of Settling Defendants and Plaintiffs for a Settlement Bar (Doc. No. 107, filed April 13, 1998), Answer of Third Party Defendant, Alex Murland, Esquire to Motion of Settling Defendants and Plaintiffs for a Settlement Bar (Doc. No. 108, filed April 27, 1998), Reply Memorandum of Settling Defendants in Further Support of the Joint Motion of Plaintiffs and Settling Defendants for a Settlement Bar (Doc. No. 109, filed May 7, 1998), Oral Argument held June 4, 1998, and Letter of Richard A. Levan, dated July 2, 1998, for the reasons set forth in the attached Memorandum, IT IS ORDERED that the Motion of Settling Defendants and Plaintiffs for a Settlement Bar is DENIED WITHOUT PREJUDICE.

 1. Background: This case arises out of the sale of a viatical settlement - a life insurance policy sold by terminally ill patients for less than its full value in order to receive a cash payment before their death. Plaintiffs assert in the Complaint that viatical settlements are securities within the meaning of federal and state securities laws; accordingly, plaintiffs included in their Complaint claims for violations of both state and federal securities laws as well as state tort and contract claims premised on fraudulent misrepresentations and misappropriation of investment funds. Certain of the defendants impleaded Alex Murland who served as an attorney for plaintiffs; plaintiffs thereafter filed an Amended Complaint against Murland alleging the breach of an escrow agreement, breach of a specific term of a legal representation agreement and legal malpractice. These same claims were made the subject of a suit by plaintiffs against Murland in the Court of Common Pleas, Montgomery County Pennsylvania captioned Lucas, et. ux v. Murland, et. al., No. 98-02580

 Defendants Mark Fried, Human Resource Options, Inc., Burtis M. Hackett, Jr., Hackett Associates, Inc., Wayne Hawk, Isidore Grossman, HIV Trust, Hale Associates, Inc., Harco Enterprises, Inc. t/a Harco Financial Group and Wm. Page & Assocates, Inc. t/a Page & Associates, Inc. (the "settling defendants") reached a settlement agreement with plaintiffs. As a condition precedent to the agreement, the settling defendants seek an order from this Court which includes, inter alia, the following provisions:

 
3. Each of the non-settling parties, and any other person or entity who may assert a claim against the settling defendants based upon, relating to, or arising out of the settled claims, this action, a lawsuit pending in the Court of Common Pleas for Montgomery County, Pennsylvania, styled Lucas, et. ux v. Murland, et. al., No. 98-02580 (the "state action"), or the settlement of this action and the state action, are permanently barred, enjoined and restrained from commencing, prosecuting or asserting any such claim or claims for contribution or indemnity or otherwise, against the settling defendants, as claims, cross-claims, counterclaims, or third-party claims in the action, the state action, or in any other court, arbitration, administrative agency or forum, or in any other manner. All such aforementioned claims are hereby extinguished, discharged, satisfied and unenforceable.
 
4. Any non-settling defendant or other person or entity whose claim against a settling defendant is extinguished by the provisions of this order, if adjudicated a joint tortfeasor with such settling defendants, shall be entitled to a credit in the amount of the greater of the amount paid by the settling defendant to plaintiffs in settlement of the settled claims or an amount that corresponds to the settling defendant's proportionate liability for damages awarded against the non-settling defendant or other person or entity in favor of plaintiffs.

 Settling Litigants' Proposed Settlement Order at & 3-4.

 Barring Contribution Claims : Under the Private Securities Litigation Reform Act of 1995 ("PSLRA"), Pub.L. No. 104-67,

 
A covered person who settles any private action at any time before final verdict or judgment shall be discharged form all claims for contribution brought by other persons. Upon entry of the settlement by the court, the court shall enter a bar order constituting the final discharge of all obligations to the plaintiff of the settling covered person arising out of the action. The order shall bar all future claims for contribution arising out of the action - (i) by any person against the settling covered person; and (ii) by the settling covered person against any person, other than a person whose liability has been extinguished by the settlement of the settling covered person.

 15 U.S.C. ' 78u-4(g)(7)(A). Defendants - although they continue to insist a viatical settlement is not a security - assert that they are "covered persons" within the meaning of this statute. "Covered person" is defined as "a defendant in any private action arising under this chapter." Id. at ' 78u-4(g)(10)(C)(i). The Court agrees that defendants are "covered persons" under the PSLRA and therefore concludes that ' 78u-4(g)(7)(A) applies in this case.

 Before proceeding further however, the Court notes that by taking the position that the PSLRA applies to this case and, that as a result, ' 78u-4(g)(7)(A) bars future claims for contribution, the settling defendants will be estopped from contending in the future that viatical settlements are not securities. Judicial estoppel, sometimes described as the doctrine of preclusion of inconsistent positions, is a "judge-made doctrine that seeks to prevent a litigant from asserting a position inconsistent with one that she has previously asserted in the same or in a previous proceeding." Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 358 (3d Cir. 1996) (citations and internal quotations omitted); see also Scarano v. Central R. Co. of New Jersey, 203 F.2d 510, 513 (3d Cir. 1953). In the Third Circuit's latest pronouncement on judicial estoppel, the court stated that:

 
Asserting inconsistent positions does not trigger the application of judicial estoppel unless intentional self-contradiction is used as a means of obtaining unfair advantage. Thus, the doctrine of judicial estoppel does not apply when the prior position was taken because of a good faith mistake rather than as part of a scheme to mislead the court. An inconsistent ...

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