LPHI (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): May 8, 2015

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LIFE PARTNERS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Texas	0-7900	74-2962475
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

 

204 Woodhew Waco, Texas	76712
(Address of principal executive offices)	(Zip Code)

 

Registrant’s telephone number, including area code: (254) 751-7797

___________________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 7.01

Regulation FD Disclosure.

 

On May 12, 2015, the Chapter 11 Trustee of Life Partners Holdings, Inc., H. Thomas Moran II (the “Trustee”), released the statement set forth on Exhibit 99.1 regarding the Supreme Court of Texas Decision in Life Partners, Inc. v. Arnold and Life Partners Holdings, Inc. v. State of Texas, which is incorporated by reference herein.

 

Limitation on Incorporation by Reference:

 

In accordance with general instruction B.2 of Form 8-K, the information in this Item 7.01 is hereby furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section.

 

Item 8.01

Other Items.

 

On Friday, May 8, 2015, the Supreme Court of Texas issued its opinion in No. 14-0122, Life Partners, Inc. v. Arnold and No. 14-0226, Life Partners Holdings, Inc. v. State of Texas, a material summary of which is contained in the statement attached as Exhibit 99.1 and incorporated by reference herein.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits.

 

99.1

Statement on Supreme Court of Texas Decision

 

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

	LIFE PARTNERS HOLDINGS, INC.
Date: May 12, 2015	By:	/s/ Colette Pieper
		Colette Pieper
		President and Chief Executive Officer

 

 

 

 

 

INDEX TO EXHIBITS

 

Item	Exhibit
99.1	Statement on Supreme Court of Texas Decision

 

 

 

 

 

Exhibit 99.1

 

Statement Regarding Supreme Court of Texas

Decision in Life Partners, Inc. v. Arnold and

Life Partners Holdings, Inc. v. State of Texas

 

On Friday, May 8, 2015, the Supreme Court of Texas issued its opinion in No. 14-0122, Life Partners, Inc. v. Arnold and No. 14-0226, Life Partners Holdings, Inc. v. State of Texas. These two cases had been consolidated for purposes of oral argument because they presented the same legal question: whether the life settlement agreements sold by Life Partners Holdings, Inc. and Life Partners, Inc. (collectively “Life Partners”) are “securities” for purposes of the Texas Securities Act (the “Act”).

 

In Life Partners, Inc. v. Arnold, the plaintiffs brought a putative class action seeking rescission and damages based on the argument that Life Partners, Inc. and others¹ violated the Act by selling unregistered securities and misrepresenting to purchasers that they were not securities. In Life Partners Holdings, Inc. v. State of Texas, the State sought injunctive and other relief based on the allegation that Life Partners, Inc., Life Partners Holdings, Inc. and others² were committing fraud in the sale of securities.

 

Thus, in both cases, the issue was whether the life settlement contracts sold by Life Partners and the other defendants are “securities” for purposes of the Act. Specifically, both sets of plaintiffs argued that the life settlement contracts are “investment contracts,” as that term is defined in the Act.

 

The Texas Supreme Court concluded that the life settlement contracts are “investment contracts,” by applying a four-part test derived from federal securities law. The Court held

 

we conclude that an “investment contract” for purposes of the Texas Securities Act means (1) a contract, transaction, or scheme through which a person pays money (2) to participate in a common venture or enterprise (3) with the expectation of receiving profits, (4) under circumstances in which the failure or success of the enterprise, and thus the person’s realization of the expected profits, is at least predominately due to the entrepreneurial or managerial, rather than merely ministerial or clerical, efforts of others, regardless of whether those efforts are made before or after the transaction.

 

 

 

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¹ The “others” include Milkie/Ferguson Investment, Inc.

²  The “others” include Brian D. Pardo, R. Scott Peden, Advance Trust & Life

Escrow Services, L.T.A., and Purchase Escrow Services, LLC.

 

Because there was no dispute about the first three parts of the test, the Court’s analysis focused on whether the realization of expected profits is predominantly due to the entrepreneurial or managerial efforts of others.

 

The Court found that Life Partners engaged in substantial pre-transaction efforts that affected the realization of expected profits. These efforts include identifying the insureds from whom life insurance policies are purchased, evaluating the health of the insured and determining a life expectancy, evaluating the terms of the life insurance policies, and negotiating the purchase price from the life insurance policies. The Court also found that Life Partners’ post-transaction conduct was managerial, not merely ministerial, and that after the purchase, Life Partners exercises complete control and discretion over the investment and the investment’s success. These efforts include holding legal title to the purchased life insurance policies, monitoring the health of the insured, monitoring the payment of the premiums for the policies, and collecting and distributing funds. The Court also found it significant that Life Partners had discretion to optimize premiums, and is the only party that may cash out the policy.

 

The Texas Supreme Court also declined to hold that its ruling should apply only prospectively. The Court reasoned that the decision did not establish a new principle of law because it simply applied the Texas Securities Act, which was enacted in 1957. The Court also noted that since 1977, Texas courts have been instructed to broadly construe the term “investment contract.”

 

The Supreme Court of Texas therefore affirmed the court of appeals’ judgments in each case that the life settlement contracts are securities, and remanded the cases for further proceedings in the trial courts.