Judge Thomas Griesa
As holder of a variable universal life insurance policy (VUL), International DAD Trust (Trust) possessed a degree of investment activity. Through trustee Cayman National Trust Co. Ltd., it sued Tremont, originally in Texas. The Trust claimed that in reliance on misrepresentations about due diligence that Tremont performed on its fund managers, it was induced to invest more than $4 million in Tremont funds. Some $1.5 million therefrom was lost through Bernard Madoff’s Ponzi scheme. Applying Texas law, district court denied dismissal of the Trust’s lawsuit alleging breach of fiduciary duty, violation of §33A(2) of the Texas Securities Act, and negligent misrepresentation. The complaint alleged that Tremont representatives told Trust representatives Tremont was a "fund of funds" and would select the best investments for the Trust’s assets based on Tremont’s industry expertise and due diligence. That is the role of an investment advisora fiduciary under Texas law. The court also found the Trust adequately pleaded §33A’s violation. In doing so the court concluded under Texas law, a VUL policy holder is a "buyer" under the Texas Securities Act. Although "circuitous," the Trust’s assertions sufficiently alleged misrepresentation.
