Judge Says No to ‘Get Cash Now’ Founders

     (CN) – A Delaware judge dismissed a suit filed by the co-founders of the J.G. Wentworth companies, holding the pair who once urged consumers to “get cash now” rather than wait on settlements or other payouts, are not entitled to the millions they sought.
     Chancellor Andre Bouchard, of Delaware’s Chancery Court, granted defendants’ motion to dismiss the claims of J.G. Wentworth co-founders Gary Veloric and Michael Goodman, who sued after a purported change of control of the companies in 2011 or 2013.
     J.G. Wentworth, a financial services firm headquartered in Radnor, Pa., specializes in buying structured settlements and fixed annuity payments so consumers can “get cash now.”
     Their irreverent and often humorous TV commercials have featured a Wagnerian Opera singer and a Polynesian-themed “Kash Kahuna.” The tagline in their commercials is usually delivered by a staid “Mr. Wentworth,” stating “It’s your money, use it when you need it!”
     Veloric and Goodman sold the J.G. Wentworth operating companies in 2005 to a private equity firm, remained senior executives of the companies, and also bought a minority interest in a limited liability company that owns and operates J.G. Wentworth’s various concerns.
     Two years later the companies sought to maximize their investment through a private offering “separating the to-be-offered equity interests from the value of the companies’ favorable tax treatment.”
     Through that private offering, the corporate structure was changed and the contract which is the subject of plaintiffs’ complaint, called a Tax Receivable Agreement (TRA), was entered into by the parties.
     Under the terms of the TRA, plaintiffs would receive “annual Tax Benefit Payments starting in 2018, unless a Change of Control occurs before then,” according to Bouchard’s opinion.
     If such a change of control occurs, plaintiffs would “stand to be paid significantly more (a defined amount Plaintiffs estimate to be approximately $35 million rather than a percentage of actual tax savings, which could be zero),” Bouchard continued.
     Even though the J.G. Wentworth Corporate Family filed for Chapter 11 bankruptcy in 2009, their insolvency did not trigger a “change in control” as defined in the TRA, although the corporate structure once again changed, Bouchard said.
     But Veloric and Goodman argued in their amended complaint that a series of mergers in 2011 and 2013 did effect a “change in control” because the “ultimate parent” of the newly formed company was a signatory to the TRA.
     The pair sued on numerous grounds, including anticipatory repudiation of contract, breach of the implied covenant of good faith and fair dealing, aiding and abetting, and breach of fiduciary duty asserted derivatively against defendants. The success or failure of plaintiffs’ complaint hinges upon the interpretation of “ultimate parent.”
     Despite a dispute between the parties over the meaning of “ultimate parent” in the TRA, that “does not mean that the term is ambiguous,” Bouchard said. “I conclude that ‘ultimate parent’ is not reasonably susceptible to more than one meaning. In my opinion, where one entity controls another, even without a majority or controlling interest, they can be said to be in a parent-subsidiary relationship. Thus, for purposes of the TRA, the parent (if there is one) of an entity is whatever entity that control it.”
     Bouchard also agreed with the defendants’ contention “that the only reasonable interpretation of ‘ultimate’ is that of ‘last’ or ‘final.’ Plaintiffs have not offered a competing, reasonable interpretation.”
     As for the plaintiffs’ anticipatory repudiation of contract claim, Bouchard found that “alleged remarks by defendants … are far from the type of unequivocal and unconditional statements that, even at the pleadings stage, are necessary to state a claim for anticipatory repudiation.”
     In the end Bouchard concluded the plaintiffs had failed to state of claim on any of their allegations related to the mergers or corporate restructures.
     “I do not find there to be a ‘reasonably conceivable set of circumstance’ in which the plaintiffs could recover,” Bouchard wrote. “I do not need to accept as true any ‘conclusory allegations unsupported by specific facts,’ nor must I draw any ‘unreasonable inferences in the plaintiffs favor.’
     The failure to plead an element of a claim warrants dismissal under Rule 12(b)(6),” he concluded.

%d bloggers like this: