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Richard Hirsch, et al v. Schiff Benefits Group

June 21, 2011

RICHARD HIRSCH, ET AL.,
PLAINTIFFS,
v.
SCHIFF BENEFITS GROUP, LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Pratter, J.

MEMORANDUM

INTRODUCTION

The Plaintiffs, Richard and Jo Anne Hirsch, are a married couple from Florida. They allege in a five-count Amended Complaint that the Defendants, the Schiff Benefits Group ("SBG") and its principal Matthew Schiff, misled them in order to induce them to create and invest in a premium-financed insurance trust. The Hirschs assert that this investment turned sour, leaving them with losses in excess of $238,000. Counts I and IV of the Amended Complaint allege breach of contract; Count II alleges professional negligence; Count III alleges several violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("the CPL"), 73 P.S. §201-1, et seq.; and Count V alleges negligent misrepresentation. This is the Hirschs' second bite at the proverbial apple, the Court having dismissed their first Complaint, which presented the same five basic claims, on March 25, 2011.*fn1

SBG and Mr. Schiff have moved to dismiss the Amended Complaint in its entirety. For the reasons set forth below, the Motion to Dismiss will be granted in part and denied in part.

JURISDICTION

This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a).

FACTUAL AND PROCEDURAL

BACKGROUND

The background of this case is set forth in Hirsch v. Schiff Bens. Group, LLC, 2011 U.S. Dist. LEXIS 35588 (E.D. Pa. March 28, 2011).

In short, the Hirschs allege that SBG, a licensed Pennsylvania insurance broker, and Mr. Schiff, its principal, induced them to enter into an investment by guaranteeing them that the value of this investment would increase by the end of five years. This investment worked as follows:

(1) an entity called the Richard L. Hirsch Irrevocable Life Insurance Trust ("the Trust") bought an insurance policy upon the life of Mr. Schiff; (2) the Trust financed its premium payments by borrowing from a lending institution; and (3) the Hirschs personally guaranteed the Trust's debt to this lending institution.

The Hirschs anticipated that after five years, the Trust would be able to sell the policy to some third party -- i.e., transfer the right to collect benefits in the event of Mr. Hirsch's death -- and that the sale price would exceed the Trust's debt to the lender that had financed the premium payments. But Mr. Schiff informed the Hirschs before the end of this five-year period that there would not be a secondary market for the policy, and recommended that they mitigate their losses by terminating the policy and settling the Trust's debt to the lender. They did so, taking a loss of approximately $238,000.

At the core of the Hirschs' case against SBG and Mr. Schiff are two letters that Mr. Schiff sent the Hirschs in December of 2007, before the Trust had purchased the insurance policy. The Court considered the first of these letters, dated December 17 ("the December 17 letter"), in its opinion dismissing the Hirschs original Complaint, concluding that the Complaint did not plead facts sufficient to show that the December 17 letter constituted a contract between SBG and Mr. Schiff. The Amended Complaint relies upon a second letter, dated December 19 ("the December 19 letter"). According to the Hirschs, Mr. Schiff drafted this second letter because the Hirschs were concerned that ...


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