Larry Dockery v. Stephen Heretick

• Court: Court of Appeals for the Third Circuit
• Decided: October 26, 2022
• Docket: 21-2753
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

_______________

No. 21-2753 _______________

LARRY G. DOCKERY, on behalf of himself and all others similarly situated, Appellant

v.

STEPHEN E. HERETICK; 321 HENDERSON RECEIVABLES LLC; J.G. WENTWORTH ORIGINATIONS LLC; SENECA ONE FINANCE, INC.; STRUCTURED SETTLEMENT PURCHASER JOHN DOE INC. 1-100

NEW YORK LIFE INSURANCE COMPANY; METLIFE INSURANCE COMPANY, Nominal Defendants _______________

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil No. 2:17-cv-04114) District Judge: Honorable Chad F. Kenney _______________

Submitted Under Third Circuit L.A.R. 34.1(a): September 22, 2022

Before: CHAGARES, Chief Judge, 1MCKEE, and PORTER, Circuit Judges.

(Filed: October 26, 2022)

1 Judge McKee assumed senior status on October 21, 2022. ______________

OPINION ______________

PORTER, Circuit Judge.

After a workplace accident, Larry Dockery became the beneficiary of a structured

settlement. Dockery received a lump-sum payment, as well as a structured annuity to be

paid out over the next forty-five years. He chose to sell some of those annuity payments

to Appellees in exchange for cash. Now, Dockery claims that his attorneys suffered from

a conflict of interest, and that Appellees therefore lied when they claimed that Dockery

received independent professional advice. Dockery’s motion to compel additional

discovery was untimely, and his RICO claim and attempt to certify a class are meritless.

We will affirm the District Court.

I

Beneficiaries of structured settlement annuities may wish to receive some or all of

their funds before they are due to be disbursed. Some choose to sell all or part of their

annuity for a lump sum. Appellees 321 Henderson Receivables, LLC, J.G. Wentworth

Originations LLC, and Structured Settlement Purchaser John Doe Inc. 1-100, are

companies that purchase payment streams from annuity recipients.

In 2002, Congress passed the Victims of Terrorism Tax Relief Act of 2001, which

imposed a forty percent tax on purchasers of future annuity payments. 26 U.S.C. § 5891.

 This disposition is not an opinion of the full Court and, under I.O.P. 5.7, is not binding precedent. 2 Purchasers can avoid this tax by receiving judicial approval of the sale through a

“qualified order” in the state court where the seller is domiciled. A “qualified order” must

contain judicial findings that the transaction (1) does not violate applicable law or

administrative authority and (2) is in the best interests of the payee, taking into account

the welfare and support of the payee’s dependents.” See 26 U.S.C. § 5891(b)(2)(A). Like

most states, Virginia adopted a statute governing the “qualified order” process. Most

relevant here, Virginia requires that a court find “[t]he payee has been advised in writing

by the transferee to seek independent professional advice regarding the transfer and has

either received such advice or knowingly waived [it] in writing.” Va. Code § 59.1-476(2).

So Appellees required all purchasers nationwide to hire an attorney to review the

transaction and sign a letter confirming they had provided advice. The purchase

agreements in this case stated that the seller “must retain the services of an attorney and

deliver an opinion of [that] attorney about the sale of assigned assets to us in a form

acceptable to us.” App. 75. These letters were referred to as “Estoppel Letters,” and the

attorneys who delivered them were called “Estoppel Lawyers.” App. 7.

When Dockery sold part of his annuity to Appellees, he executed an affidavit

stating that “[i]t is my belief, and my representation to the Court, that this transfer lies in

my best interests, together with that of my family.” App. 76. Dockery’s lawyer in the

state court proceedings, Michael Shull, delivered an Estoppel Letter detailing his

involvement in the sale. Attorney Shull’s letter stated that he “acted as independent legal

counsel to the Seller . . . and has provided legal, accounting and tax advice.” App. 76–77.

The Estoppel Letters were filed with Dockery’s purchase agreement in the Portsmouth,

3 Virginia Circuit Court, which approved the transaction after a hearing, as required by

statute Virginia law. Va. Code § 59.1-477.

After that transaction, Dockery continued to sell off portions of his structured

settlement to Wentworth. App. 202–31, 1209–31. In each application for the sale of his

annuity payments, Dockery acknowledged that he had “received legal, tax and

accounting advice from independent practitioners, or [had] waived to obtain such legal,

tax and accounting advice.” App. 1614. Dockery’s various Estoppel Lawyers continued

to file Estoppel Letters, stating among other things that “Dockery has assured me that he

has read and fully understands this purchase agreement and any consequences thereafter,

and that this is what he desires to do.” App. 78.

For each of these transactions, Appellees made representations in the Portsmouth

court that Dockery “has been advised in writing by the transferee to seek independent

professional advice and has received such advice reflected in the letter of his legal

counsel.” App. 88 (emphasis added). Dockery now argues that the Appellees knowingly

lied to the Portsmouth court because they knew that his attorneys were not

“independent,” and thus could not give “independent professional advice.” Specifically,

Dockery alleged that the Estoppel Lawyers were paid on a contingent basis, that the

Estoppel Letters were crafted by the Appellees, and that the Appellees picked the

Estoppel Lawyers by repeatedly referring clients to them. Dockery asserted claims for

violations of or conspiracy to violate the Racketeer Influenced and Corrupt Organizations

Act, unjust enrichment, and breach of fiduciary duty. He sought to certify a class of

similarly situated plaintiffs who had been allegedly defrauded by Appellees through its

4 use of conflicted Estoppel Lawyers. The District Court denied Dockery’s motion to

compel discovery and motion for class certification, and it granted summary judgment in

favor of Appellees. Dockery timely appealed.

II2

A

We review the District Court’s denial of a discovery motion for abuse of

discretion. See Petrucelli v. Bohringer & Ratzinger, 46 F.3d 1298, 1310 (3d Cir. 1995).

Here, the parties agreed that discovery would close on April 30, 2021. Nonetheless,

Dockery filed a motion to compel additional discovery on June 18, 2021. Thus, the

motion to compel was filed after the discovery deadline, and the District Court did not

abuse its discretion in denying this untimely motion. See Pittman v. Experian Info. Sols.,

Inc., 901 F.3d 619, 643 (6th Cir. 2018) (“In general, a district court does not abuse its

discretion by denying an untimely motion to compel that violated unambiguous discovery

deadlines. . . .”). We will affirm the District Court’s denial of Dockery’s motion to

compel.

B

Next, we review the District Court’s class certification order for abuse of

discretion. See In re Lamictil Direct Purchaser Antitrust Litig., 957 F.3d 184, 190 (3d

Cir. 2020). The District Court denied class certification on four independent grounds.

2 The District Court had jurisdiction under 28 U.S.C. § 1331 and 18 U.S.C. § 1964(a). We have jurisdiction under 28 U.S.C. § 1291. 5 Specifically, the District Court held that Dockery failed to carry his class certification

burden as to ascertainability, predominance, superiority, and adequacy.

Federal Rule of Civil Procedure 23 governs class action certification. The party

seeking certification bears the burden of showing that Rule 23’s requirements are met. In

re Hydrogen Peroxide Antitrust Lit., 552 F.3d 305, 311 (3d Cir. 2008). Dockery’s

proposed class included sellers of structured settlement agreements who satisfied certain

criteria. See App. 21. Because Dockery asked the District Court to certify a class under

Rule 23(b)(3), he was required to establish by a preponderance of the evidence that (1)

membership in the proposed class is ascertainable with an objective criterion; (2) the core

Rule 23(a) requirements are met; and (3) class-wide issues predominate over individual

issues and a class action is the superior method of adjudicating the case. See Marcus v.

BMW of N. Am., LLC, 687 F.3d 583, 590–93 (3d Cir. 2012). The District Court correctly

determined that Dockery met none of those requirements.

On appeal, Dockery contests the District Court’s holdings as to ascertainability

and adequacy. This Court reviews both conclusions for an abuse of discretion. In re

Lamictil Direct Purchaser Antitrust Litig., 957 F.3d at 190.

The District Court found that Dockery failed to prove the proposed class was

ascertainable. It determined there was insufficient common evidence for one criterion of

the proposed class—namely, that the lawyers for the proposed plaintiffs were paid on a

contingent basis. Dockery asserts that the Court ignored his theory of liability based on

conflicts of interests between potential class members and the Estoppel Lawyers. He

misunderstands the District Court’s analysis. His failure to identify common proof that all

6 potential class members had entered a contingency fee agreement with their respective

counsel renders the class unascertainable, even if he could otherwise show a conflict of

interest by common proof. But the District Court believed that it “could remove the ‘on a

contingency basis’ provision” and the class would be ascertainable. App. 30. As a result,

it did not end its inquiry and analyzed the remaining Rule 23(b)(3) requirements. The

District Court did not abuse its discretion when it assumed that Dockery would agree to

amend the class definition before analyzing the Rule 23 factors.

Nor did the District Court abuse its discretion when it determined that Dockery

was an inadequate representative. District courts may consider whether named plaintiffs’

claims may fail because of a statute-of-limitations defense when deciding if the named

plaintiffs “can adequately represent absent class members whose claims do not suffer

from timeliness problems.” In re Cmty. Bank of N. Va., 622 F.3d 275, 295 (3d Cir. 2010);

see also China Agritech, Inc. v. Resh, 138 S.Ct. 1800 (2018) (“A would-be class

representative who commences suit after expiration of the limitation period, however, can

hardly qualify as diligent in asserting claims and pursuing relief.”). Here, the District

Court found that Dockery faces a potential bar to his claim that is not common to all class

members. Namely, he must overcome a statute-of-limitations defense while “some

putative class members could potentially succeed in bringing a timely claim based on

their lawyer/client interactions.” App. 70. For this reason, the District Court concluded

that Dockery risks the viability of other potential members’ claims. That was not an

abuse of discretion.

7 Even if Dockery were correct on ascertainability and adequacy, he has forfeited

any argument as to predominance and superiority by failing to brief the issue before this

Court. See Gorum v. Sessoms, 561 F.3d 179, 185 n.3 (3d Cir. 2009) (abandonment of

issues forfeits them on appeal); see also Barna v. Bd. of Sch. Dirs. of Panther Valley Sch.

Dist., 877 F.3d 136, 147 (3d Cir. 2017) (“[W]e will not reach a forfeited issue in civil

cases absent truly ‘exceptional circumstances.’ ” (quoting Brown v. Philip Morris Inc.,

250 F.3d 789, 799 (3d Cir. 2001))). Because the District Court ruled against Dockery on

every element of class certification, his forfeiture is fatal to his claim. See, e.g.,

Applewhite v. Reichhold Chemicals., Inc., 67 F.3d 571, 573, 573 n.6 (5th Cir. 1995)

(affirming denial of class certification when “plaintiffs’ brief fail[ed] to address the

requirements of Rule 23(b)(3)”). So we will affirm the District Court’s denial of class

certification.3

C

Finally, we turn to the District Court’s summary judgment order. We “review

grants of summary judgment de novo.” Fraternal Ord. of Police, Lodge 1 v. City of

3 Even if we were to consider the District Court’s 23(b)(3) holdings, Dockery would have to demonstrate that predominance was satisfied by demonstrating that “each element of the alleged RICO violation involves common questions of law and fact [and is] capable of proof by evidence common to the class.” Reyes v. Netdeposit, LLC, 802 F.3d 469, 489 (3d Cir. 2015). He would then have to demonstrate that a class action would be superior to individual actions in resolving the underlying claims. See Fed. R. Civ. P. 23(b). But the District Court identified numerous grounds for finding a lack of superiority when it determined that “individual inquiries are necessary at minimum to determine the predicate act of mail fraud, the enterprise element, and the timeliness of the class’s claims for every class member.” App. 62. We agree and hold that the District Court did not abuse its discretion. 8 Camden, 842 F.3d 231, 238 (3d Cir. 2016). A grant of summary judgment must be

upheld when “there is no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). For the following reasons,

we will affirm the District Court’s grant of summary judgment.

Dockery premises his evidence of mail fraud solely on alleged misrepresentations

in the Portsmouth court. Specifically, Dockery claims that this statement to the

Portsmouth court was false: “[1] That the transferor/payee has been advised in writing by

the transferee to seek independent professional advice regarding the transfer and [2] has

received such advice reflected in the letter of his legal counsel which is attached hereto.”

App. 88. The Virginia statute at issue expressly defines “independent professional

advice” as “advice of an attorney, certified public accountant, actuary, or other licensed

professional advisor.” Va. Code § 59.1-475. There is no doubt that Dockery was “advised

in writing to receive independent professional advice,” as required by statute. He received

this advice in his purchase agreements. See, e.g., App. 1388 (signed purchase agreements

stating “You acknowledge that We advised You to obtain independent professional tax

advice . . . . You acknowledge that We advised You must obtain independent legal advice

. . . .”). He also received this advice in Wentworth’s disclosures. See App. 90 (“You

should consult your own counsel, accountant, or financial advisor . . . .”). We agree with

the District Court that it was not a misrepresentation to state that Dockery was advised in

writing to receive independent professional advice.

Dockery also alleges that Appellees lied to the Portsmouth court when they

represented that he had in fact received that independent professional advice. Dockery

9 contends that, although he “had received help filling out the paperwork for his

transactions” from various lawyers, the “lawyers were not independent at all.” Appellant

Br. at 4, 40. He alleges that Appellees had created a system in which lawyers were,

among other things, recommended by the Appellees, given form letters by the Appellees,

and ultimately paid from the proceeds of the annuity sale.4 Thus, he avers, these

“Estoppel Lawyers” were given a financial motive to rubber stamp the form letters to

receive repeat business and profit from the sale of annuity payments, even when the sales

of such payments were not in the interest of the payees.

These allegations are troubling. For instance, one Estoppel Lawyer “believed that

the terms of the transaction were exploitative but did not include that belief in his

Estoppel Letter.” App. 81. But as the District Court noted, Dockery did receive

“independent professional advice” as defined by the relevant statute. Despite Dockery’s

otherwise plausible argument that the advice he received was not “independent,” the

Virginia legislature expressly defined the phrase to mean “the advice of an attorney,

certified public accountant, actuary, or other licensed professional advisor.” Va. Code

§ 59.1-475. “When a statute includes an explicit definition, we must follow that

definition, even if it varies from a term’s ordinary meaning.” Tanzin v. Tanvir, 141 S. Ct.

486, 490 (2020) (internal quotation marks omitted).5 So the relevant question is not

4 While many of these facts were generally alleged for purposes of class certification, Dockery denied that his Estoppel Lawyers were referred by JG Wentworth. App. 1799– 1800. 5 Dockery’s statutory interpretation argument turns on the surplusage canon. He says that the word “independent” must carry some meaning. But while semantic canons are valuable tools in interpreting the definition of words in their ordinary usage, “[s]tatutory 10 whether the Estoppel Lawyers were independent of Appellees but whether Dockery

received “the advice of an attorney, certified public accountant, actuary, or other licensed

professional advisor.” He undoubtedly did. And while we remain deeply troubled by

Dockery’s allegations and the risk of exploitation inherent in Appellees’ attorney referral

system, it is ultimately the place of the legislature, not the judiciary, to update Va. Code

§ 59.1-475 to address those machinations. We will affirm the District Court’s grant of

summary judgment.

* * *

We will affirm the District Court’s order denying Dockery’s untimely motion to

compel. Because the District Court did not abuse its discretion in finding that Dockery

failed to prove ascertainability and adequacy, and because Dockery forfeited any

arguments as to superiority and issue predominance, we will affirm the District Court’s

denial of class certification. Because the District Court did not err in construing Va. Code

§ 59.1-475, we will affirm the District Court’s grant of summary judgment.

definitions control the meaning of statutory words.” Burgess v. United States, 553 U.S. 124, 130 (2008) (quoting Lawson v. Suwannee Fruit & S.S. Co., 336 U.S. 198, 201 (1949)). Virginia Code § 59.1-475 is, no doubt, inartfully drafted. And statutorily defined terms, like legal terms of art, have “been known to rankle nonlawyers when they encounter it.” A. Scalia & B. Garner, Reading Law: The Interpretation of Legal Texts 73. But that does not make the District Court’s interpretation of the underlying statute erroneous. 11