Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-03734/USCOURTS-cand-3_14-cv-03734-5/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Contract Dispute

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United States District Court 

Northern District of California 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

GEORGINA R DUGGS, et al., 

Plaintiffs, 

v. 

JAMES EARL EBY, 

Defendant. 

Case No. 14-cv-03734-RS 

ORDER DENYING MOTION TO 

DISMISS AND CONTINUING CASE 

MANAGEMENT CONFERENCE 

Plaintiff Georgina Duggs brings this action both in her individual capacity and as the 

trustee of the Edward & Georgina Living Trust (“the Trust’). Georgina also appears in her 

capacity as the “natural guardian” of her minor children co-plaintiffs, Zane and Gemma. The Trust 

was formerly the named beneficiary of a $1.5 million dollar life insurance policy issued by 

MetLife Investors USA Insurance to Edward L. Duggs, Jr., who was Georgina’s husband and the 

father of Zane and Gemma. Prior to Edward’s death in December of 2013, however, he had 

changed the beneficiary on the MetLife policy to be defendant James Earl Eby, a longtime friend. 

Edward and Eby had also entered into a written contract whereby Eby purchased the MetLife 

policy for the sum of $250,000, with an initial payment of $50,000 and the balance payable over 

time or upon Edward’s death. At the time, Edward was suffering from terminal cancer, and had a 

life expectancy of 6 months to 2.5 years. 

When Edward died a few months later, MetLife paid out the $1.5 million policy benefit to 

Eby. As required by his contract with Edward, Eby paid the remaining $200,000 balance of the 

Case 3:14-cv-03734-RS Document 40 Filed 02/06/15 Page 1 of 3
ORDER DENYING MOTION TO DISMISS

CASE NO. 14-cv-03734-RS

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United States District Court 

Northern District of California 

purchase price into a new trust, to which Zane and Gemma, but not Georgina, are beneficiaries. In 

this suit, Georgina seeks to establish that the transactions through which Eby became the 

beneficiary of the MetLife policy were wrongful, and thereby to recover for the Trust (and 

therefore for herself, Zane, and Gemma, as beneficiaries of the Trust) the $125,000 in death 

benefits retained by Eby. 

At the outset of this litigation, the parties stipulated to an order temporarily restraining Eby 

from disposing of the insurance proceeds in dispute. Plaintiffs’ subsequent application for a 

preliminary injunction, however, was denied on grounds that they had not met their burden to 

show a likelihood of irreparable injury, and the restraining order was lifted. 

Eby now moves to dismiss the complaint, arguing that (1) plaintiffs lack standing, (2) 

plaintiffs’ claims resting on alleged violations of the California Insurance Code sections governing 

“life settlement contracts” fail because the transactions between Eby and Edward fall outside those 

provisions, and (3) plaintiffs’ common law fraud claims “fail on the merits.” The first two 

arguments were addressed and rejected in the order denying the application for a preliminary 

injunction. Although that order specifically noted that its conclusions were reached in the context 

of weighing entitlement to preliminary relief, Eby has pointed to no reason that the legal analysis 

of those particular issues would differ when evaluating this motion to dismiss. Accordingly, 

dismissal for lack of standing or based on the purported inapplicability of the California Insurance 

Code is not warranted. 

Eby’s challenge to the allegations of common law fraud rests in part on his insistence that 

the contract he formed with Edward was not a regulated “life settlement contract.” Eby also 

argues that at least some of the alleged misrepresentations were not made to any of the plaintiffs, 

but to Edward. Whether or not all of the alleged misrepresentations are actionable strictly under 

the label of common law fraud, however, Eby has not shown a basis for dismissing any of the 

counts pleaded in the complaint for failure to state a claim on the merits. Likewise, Eby’s passing 

reference to the specificity standard for pleading fraud under Rule 9(b) does not support dismissal. 

Plaintiffs have adequately described the circumstances they contend amount to fraud, including 

Case 3:14-cv-03734-RS Document 40 Filed 02/06/15 Page 2 of 3
ORDER DENYING MOTION TO DISMISS

CASE NO. 14-cv-03734-RS

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United States District Court 

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the “who, what, where, when, and how” of the charged misconduct. See Vess v. Ciba–Geigy 

Corp. U.S.A., 317 F.3d 1097, 1106 (9th Cir. 2003). 

The motion to dismiss is therefore denied. Plaintiffs’ motion for leave to file a surreply is 

granted, and the proposed surreply they submitted is hereby deemed filed, although it does not 

materially affect the analysis or the conclusions of this order. The Case Management Conference 

is hereby continued to February 19, 2015, at 10:00 a.m., with a joint Case Management Statement 

to be filed one week in advance. 

IT IS SO ORDERED. 

Dated: February 6, 2015 

______________________________________ 

RICHARD SEEBORG 

United States District Judge 

______________________________________

RICHARD SEEBORG

United States District Judge

Case 3:14-cv-03734-RS Document 40 Filed 02/06/15 Page 3 of 3