Debevoise & Plimpton LLP has secured a victory for Resolution Life Group following a seven day bench trial before Justice Barry Ostrager of the New York State Supreme Court—Commercial Division, resulting in an award of approximately $75 million in damages and pre-judgment interest. The case stemmed from an attempted 2017 transaction in which Resolution Life, represented by Debevoise, sought to sell its Nebraska-based life insurance company, Lincoln Benefit Life, to Global Bankers Insurance Group (GBIG).
The deal, like all acquisitions in the U.S. insurance industry, required approval of the target company’s state insurance regulator before the deal could close. In the parties’ 2017 stock purchase agreement, GBIG represented that it did not know of any facts or circumstances that would delay prompt regulatory approval of the acquisition.
Justice Ostrager concluded that GBIG’s representation constituted a breach of the stock purchase agreement. In its post-trial brief, Resolution Life argued that GBIG was already under intense regulatory scrutiny by the North Carolina Department of Insurance (NCDOI) and by insurance regulators in Ohio and Michigan because of the nontraditional manner in which GBIG managed and invested the assets of its portfolio of insurance companies. Resolution Life also argued that because of the seriousness of those issues, NCDOI retained two consultants to help it determine whether GBIG’s investment practices and holdings constituted an enterprise risk to its insurance companies’ policyholders and whether the financial condition of GBIG’s owner, Gregory Lindberg, posed a risk to GBIG and its companies.
The Ohio and Michigan insurance regulators had delayed separate pending insurance-company acquisitions several times while the North Carolina reviews and reports were in progress.
Resolution Life further asserted that after the stock purchase agreement had been signed, insurance regulators in Nebraska reviewed the proposed transaction and raised the same issues previously raised by other insurance regulators, including those in North Carolina, Ohio and Michigan. After a protracted review period during which the Nebraska Department of Insurance raised a series of problems with GBIG’s business model, the transaction was ultimately terminated in October 2018.
In a post-trial opinion issued on May 12, 2021, Justice Ostrager found that GBIG had, on the day the stock purchase agreement was signed, made false representations to Resolution Life, failed to disclose its regulatory issues and provided inaccurate and misleading financial statements to Resolution Life, thereby breaching the parties’ agreement.
Justice Ostrager awarded damages as the difference between what GBIG had promised to pay in its winning bid—$585 million—and the next-best bid of $535 million. Justice Ostrager also found that Resolution Life was entitled to out-of-pocket costs caused by GBIG’s breach and pre-judgement interest, for a total of approximately $75 million.
The Debevoise team was led by litigation partners Mark Goodman and Mike Schaper and associate Zach Saltzman, and included associates Alisa Melekhina, David Hotelling, Joshua Pickar, Jonathan Mangel, Omar Debs and Frank Colleluori.