Warfield v. Alani

569 F.3d 1015 (9th Cir. 2009)

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Nature of the Case

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Facts

Dillie promised his investors 'a gift for your lifetime and beyond.' Dillie created a charitable gift annuity, sold through the Dillie-controlled Mid-America Foundation (Foundation). The Foundation sold its charitable gift annuities through financial planners, insurance agents, and others, including Ds in this lawsuit. The investors were assured that they would receive a lifetime stream of income, with the money remaining at their death directed to a charity designated by them. The Foundation raised $55 million from the sale of more than 400 charitable gift annuities. It was simply a Ponzi scheme. The Foundation used the investors' funds to make annuity payments to earlier annuitants, commission payments to facilitators, and payments to Dillie and others for personal expenses (including Dillie's gambling expenses). The Foundation quickly became insolvent. The scheme collapsed in 2001. The Securities and Exchange Commission filed a civil complaint against Dillie. P was appointed as Receiver. P filed the instant complaint seeking the return of commissions paid to agents by the Foundation for the sale of the charitable gift annuities. P alleged breach of fiduciary duty, constructive fraud in confidential relationship, negligence, and gross negligence, common law fraud, federal and state security fraud, actual and constructive fraudulent transfer, conversion, and unjust enrichment. The jury found for P on the federal and state securities law, constructive fraud, negligence per se, and unjust enrichment claims and Ds on the general negligence, conversion, and fraudulent transfer claims. Ds were ordered to pay damages ranging from $1,900 to $ 109,900 per person. Ds appealed.