IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 16-11436

In the Matter of: LIFE PARTNERS, INCORPORATED

 Debtor

PHILIP M. GARNER, and all other similarly situated; CHRISTINE 

DUNCAN; STEVE SOUTH, as Trustee for, and on behalf of South Living 

Trust; MICHAEL ARNOLD; JANET ARNOLD; DOCTOR JOHN S. FERRIS; 

REORGANIZED LIFE PARTNERS, INCORPORATED, formerly known as 

Life Partners, Incorporated, ET AL

 Appellees

v.

PILLAR LIFE SETTLEMENT FUND I, L.P., PILLAR II LIFE 

SETTLEMENT FUND, L.P., PILLAR 3 LIFE SETTLEMENT FUND, L.P., 

PILLAR 4 LIFE SETTLEMENT FUND, L.P., PILLAR 5 LIFE 

SETTLEMENT FUND, L.P., ET AL 

 Appellants

Appeal from the United States District Court

for the Northern District of Texas

USDC No. 4:16-CV-212

United States Court of Appeals

Fifth Circuit

FILED

November 29, 2017

Lyle W. Cayce

Clerk

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Before BARKSDALE, DENNIS, and CLEMENT, Circuit Judges.

PER CURIAM:*

This appeal arises from the approval of a bankruptcy proceeding’s

Settlement Agreement and class certifications. While this appeal was pending, 

the bankruptcy court entered a chapter 11 confirmation order, effectuating the 

Settlement Agreement. For the following reasons, the Pillar Funds’s appeal is 

dismissed as moot. 

I

Life Partners, Inc. (“LPI”) was a wholly-owned subsidiary of Life 

Partners Holdings, Inc. (“LPHI”). LPI acquired, marketed, and sold investment 

products known as “viatical settlements” or “life settlements.” LPI created a 

life settlement by contracting with the holder of a life insurance policy 

(“insured”) to purchase his interest in the policy. The insured would make LPI 

the owner of the policy in exchange for a lump-sum cash payment that was less 

than the policy’s death benefit. In essence, a life settlement is an arrangement 

where an insured—often diagnosed with a terminal illness—sells her policy for 

less than its full value to benefit from the proceeds while alive. 

LPI then marketed and sold to investors a percentage of the life 

settlements (“fractional interests”). LPI did not register the investments as 

securities under the Texas or federal securities laws. Michael Arnold, Janet 

Arnold, Dr. John S. Ferris, Christine Duncan, and Steven South as Trustee for 

and on behalf of South Living Trust (collectively, “Arnold Plaintiffs”) filed a 

class action against LPI in Texas state court (“Arnold State Court Action”), 

alleging that LPI sold unregistered securities in violation of the Texas 

 

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

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Securities Act (“TSA”). The Arnold Plaintiffs sought rescission as well as 

attorneys’ fees, costs, and interest. The trial court concluded that life 

settlements were not securities and dismissed the suit. The Dallas Court of 

Appeals reversed, holding that life settlements were securities as a matter of 

law. Arnold v. Life Partners, Inc., 416 S.W.3d 577, 588 (Tex. App.–Dall. 2013).

The Texas Supreme Court unanimously affirmed—life settlements are 

securities under the TSA. See Life Partners, Inc. v. Arnold, 464 S.W.3d 660, 

682–83 (Tex. 2015). 

LPHI voluntarily commenced chapter 11 bankruptcy while the Arnold 

State Court Action was pending in the Texas Supreme Court. The bankruptcy 

court affirmed the U.S. Trustee’s appointment of H. Thomas Moran as the 

chapter 11 trustee (“Trustee”). The Trustee filed petitions for chapter 11 

bankruptcy for LPI and another Life Partners company, which were the 

operating subsidiaries of LPHI. The bankruptcy court then consolidated these 

proceedings (collectively, “Bankruptcy Cases”). It also lifted the automatic stay 

so the Texas Supreme Court could render its decision in the Arnold State Court 

Action.

Philip M. Garner, Duncan, and South (collectively, “Garner Plaintiffs”) 

filed an adversary proceeding in the Bankruptcy Cases on behalf of a class of 

LPI investors, seeking a declaration that: (1) the class members were the 

beneficial owners of the life settlements; and (2) the life settlements were not 

part of LPI’s bankruptcy estate (“Garner Class Adversary”). The parties and 

the district court referred to the dispute regarding the ownership of the life 

settlements as the “Ownership Issue.” The resolution of the Ownership Issue 

was complicated by the fact that most investors purchased fractional interests 

in life settlements from LPI, rather than whole life insurance policies.

The Arnold Plaintiffs filed a second adversary proceeding in the 

Bankruptcy Cases (“Arnold Class Adversary”). The Arnold Plaintiffs asserted 

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claims under the TSA on behalf of a class of LPI investors for rescission of their 

purchases of life settlements. They also sought attorneys’ fees, costs, and 

interest. The Garner Plaintiffs and the Arnold Plaintiffs (collectively, “Named 

Plaintiffs”) later moved to consolidate the Garner Class Adversary and the 

Arnold Class Adversary, which the bankruptcy court granted (“Consolidated 

Class Adversary”). The district court then withdrew the automatic reference to 

the bankruptcy court, and the Consolidated Class Adversary was filed in 

district court.

The Trustee, the Official Committee of Unsecured Creditors 

(“Committee”), and the Named Plaintiffs announced the general terms of a 

settlement to resolve the Consolidated Class Adversary. After the parties 

announced the settlement, Pillar Life Settlement Fund I, L.P., Pillar II Life 

Settlement Fund, L.P., Pillar 3 Life Settlement Fund, L.P., Pillar 4 Life 

Settlement Fund, L.P., Pillar 5 Life Settlement Fund, L.P., Evergreen Lifeplan 

Fund L.P., Evergreen II Lifeplan Fund L.P., Evergreen III Fund LLC, and 

Black Diamond Lifeplan Fund L.P. (collectively, “Pillar Funds”) filed their own 

adversary proceeding in the Bankruptcy Cases, seeking to settle the 

Ownership Issue (“Pillar Adversary”). The bankruptcy court abated the Pillar 

Adversary.

The Trustee, the Committee, and the Named Plaintiffs then finalized 

and filed a settlement agreement (“Settlement Agreement”) to resolve the 

Consolidated Class Adversary. The Settlement Agreement sought certification 

for two settlement classes: (1) the ownership settlement subclass; and (2) the 

rescission settlement subclass. Both settlement classes were defined as 

[a]ll persons or entities . . . who purchased and hold, as of the 

Plan Effective Date, securities issued or sold by LPI . . . related 

to viatical settlements or life settlements, regardless of how the 

investments were denominated . . . and who are Current 

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Position Holders under the Plan, regardless of whether or not a 

claim was filed by a class member.

LPI and all affiliated entities, Linda Robinson-Pardo, Paget Holdings Ltd., and 

“investors whose only investments relate to Pre-Petition Abandoned Interests 

under the Plan” were excluded from the settlement classes. “Qualified Plan 

Holders” and “all persons and entities listed on Appendix A” to the Settlement 

Agreement were additionally excluded from the rescission settlement subclass.

In the Settlement Agreement, LPI agreed to waive any claims to 

beneficial ownership in the life settlement securities held by settlement class 

members who elected to retain their fractional interests. LPI also agreed to 

seek to reorganize in bankruptcy consistent with the Settlement Agreement 

and to an injunction prohibiting future sales of unregistered securities. In 

exchange, the Settlement Agreement provided settlement class members three 

options: (1) Continuing Position Holder Election; (2) Position Holder Trust 

Election; and (3) Creditors’ Trust Election.

First, a class member who chose the Continuing Position Holder Election 

would retain 95 percent of its fractional interest in life settlements in exchange 

for a five percent contribution to the Position Holder Trust. He would be 

obligated to continue paying policy premiums. Second, a class member who 

chose the Position Holder Trust Election would assign his interest to the 

Position Holder Trust in exchange for a corresponding interest in the Position 

Holder Trust and relief from his obligation to pay policy premiums and fees.

Third, a class member who chose the Creditors’ Trust Election would rescind 

the purchase of his life settlements in exchange for a corresponding interest in 

the Creditors’ Trust—a post-confirmation litigation trust—and relief from his 

obligation to pay policy premiums and fees. Under the Settlement Agreement, 

a class member who did not select an option would be treated as if he chose the 

Continuing Position Holder Election.

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The parties sought and received preliminary approval of the Settlement 

Agreement from both the bankruptcy court and the district court. The parties 

served class notice on all settlement class members. The parties then jointly 

moved for class certification, for final approval of the Settlement Agreement, 

and to appoint class counsel and representatives. The Pillar Funds objected to 

class certification and to the Settlement Agreement. The district court referred 

the matter to the bankruptcy court to conduct a hearing. The bankruptcy court 

held a hearing, reviewed the Pillar Funds’s objections, and issued a report 

recommending that the district court certify the settlement classes and grant 

final approval of the Settlement Agreement. 

The district court certified the settlement classes, holding that they met 

the requirements for certification under Federal Rule of Civil Procedure 23(a) 

and (b)(2). It concluded that the Settlement Agreement was “fair, reasonable, 

and adequate.” The district court adopted the bankruptcy court’s findings of 

fact and conclusions of law, granted the parties’ joint motion for final approval 

of the Settlement Agreement, and entered judgment approving the Settlement 

Agreement. 

The Pillar Funds appeal the district court’s order certifying the classes 

approving the Settlement Agreement. The Pillar Funds argue that the district 

court erred by certifying the class actions pursuant to Rule 23(b)(2) and 

approving the Settlement Agreement. Reorganized Life Partners Inc., Eduardo 

S. Espinosa, and Alan M. Jacobs (collectively, “New LPI”), as well as the 

Named Plaintiffs, oppose the Pillar Funds’s appeal. Importantly, they did not 

seek a stay of the reorganization plan, and the bankruptcy court entered a 

chapter 11 confirmation order while this appeal was pending. The Pillar Funds 

did not appeal the bankruptcy court’s confirmation order. As conceded by the 

Pillar Funds, the plan has been substantially consummated. 

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II

This court reviews a district court’s ruling regarding class certification 

for abuse of discretion. Union Asset Mgmt. Holding A.G. v. Dell, Inc., 669 F.3d 

632, 638 (5th Cir. 2012) (citing Ordonez Orosco v. Napolitano, 598 F.3d 222, 

225 (5th Cir. 2010)). “We review de novo whether the district court applied the 

correct legal standards.” M.D. ex rel. Stukenberg v. Perry, 675 F.3d 832, 836 

(5th Cir. 2012) (quoting Maldonado v. Ochsner Clinic Found., 493 F.3d 521, 

523 (5th Cir. 2007)). This court reviews a district court’s approval of a class 

settlement for abuse of discretion. Parker v. Anderson, 667 F.2d 1204, 1209 

(5th Cir. 1982). 

III

The Named Plaintiffs argue that the Pillar Funds’s appeal is moot under 

Article III because “[t]he bankruptcy court’s confirmation order extinguished 

all claims against LPI.” “An actual case or controversy must exist at every 

stage in the judicial process.” Motient Corp. v. Dondero, 529 F.3d 532, 537 (5th 

Cir. 2008). A claim becomes moot if “the issues presented are no longer live or 

the parties lack a legally cognizable interest in the outcome.” Id. (quoting 

Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi 

Negara, 335 F.3d 357, 365 (5th Cir. 2003)). “[I]f an event occurs while a case is 

pending on appeal that makes it impossible for the court to grant ‘any effectual 

relief whatever’ to a prevailing party, the appeal must be dismissed.” Church 

of Scientology of Cal. v. United States, 506 U.S. 9, 12 (1992) (quoting Mills v. 

Green, 159 U.S. 651, 653 (1895)). 

The Pillar Funds concede that they did not appeal the bankruptcy 

court’s confirmation order. The question is thus whether the confirmation 

order “makes it impossible for the court to grant ‘any effectual relief whatever’” 

to the Pillar Funds. Church of Scientology, 506 U.S. at 12. The Pillar Funds 

argue only that the Settlement Agreement provides for rescission if the district 

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court’s order approving the Settlement Agreement “is modified or set aside on 

appeal.” The Pillar Funds do not address the effect of the confirmation order 

on their ownership claims. 

The rescission provision of the Settlement Agreement states that, if the 

district court’s order approving the Settlement Agreement 

is modified or set aside on appeal . . . then the Party or Parties 

adversely affected by or who opposed such refusal to provide or 

affirm the requested relief, modification, vacation, or appeal 

shall each, in their sole discretion, have the option to rescind 

this Settlement Agreement in its entirety by written notice to 

the Court.

Neither the Named Plaintiffs nor New LPI addresses the rescission provision 

in their briefs on appeal. But the Pillar Funds also fail to grapple with the 

actual text of the rescission provision. First, the right to rescind is limited to 

“Parties adversely affected by” the modification of the Settlement Agreement 

“or who opposed such refusal to . . . affirm the requested relief.” The Pillar 

Funds do not meet that requirement. Second, the rescission provision allows 

such parties to “have the option to rescind this Settlement Agreement in its 

entirety by written notice to the Court.” The Pillar Funds argue that they are 

not seeking to set aside the Settlement Agreement in its entirety, but rather 

are just requesting the right to opt out of the Settlement Agreement.

But even if the rescission provision allowed the Pillar Funds to rescind 

the Settlement Agreement if it is “modified or set aside on appeal,” it does not—

and cannot—authorize an appeal if this court does not have jurisdiction to hear 

the appeal. Because the confirmation order incorporated and implemented the 

Settlement Agreement, the Pillar Funds’s claims were nullified when the 

bankruptcy court entered the confirmation order. The Pillar Funds concededly 

failed to appeal the bankruptcy court’s confirmation order. “A timely notice of 

appeal is necessary to the exercise of appellate jurisdiction.” United States v. 

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Truesdale, 211 F.3d 898, 902 (5th Cir. 2000) (quoting United States v. Cooper, 

135 F.3d 960, 961 (5th Cir. 1998)). As such, the court cannot grant any effectual 

relief to the Pillar Funds’s appeal of only the Settlement Agreement. 

IV

Because the Pillar Funds’s appeal is moot, the court need not reach the 

other issues raised on appeal. 

Accordingly, this appeal is DISMISSED as MOOT.

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