Featured Cases > IFDA: Illinois Funeral Directors Association
What this lawsuit is about Wexler Wallace is proud to be lead counsel in these derivative and class actions aimed at restoring the trust monies that have disappeared from the IFDA Services, Inc. Preneed Trust (the "Trust"). The Trust was designed to hold funds that were deposited by consumers who purchased a preneed contract, which is a form of pre-payment for funeral service. Preneed contracts are often a very useful tool for those individuals that want to plan ahead without burdening their loved ones at the time of need. For many years, funds were deposited by these individuals, and according to those with responsibility for the Trust, the Trust's assets continued to grow. Beginning in the fall of 2007, funeral directors at the 6 plaintiff funeral homes learned that, contrary to what they were told, the Trust was in poor shape. The assets were shrinking and the investments in the Trust were not only inappropriate investments for the goals of the Trust, but the investments were not even what they purported to be. These funeral directors were concerned about the continued viability of the Trust, and had concerns about what sort of wrongdoing caused this serious financial collapse of the Trust, which continued to deteriorate as time passed. After several attempts to get answers went ignored and a series of denials of responsibility by IFDA, these funeral directors filed this lawsuit on January 28, 2009. The first case filed (Calvert Funeral Homes, et al. v. Ninker, et al.) is a derivative action, which means they are pursuing this action on behalf of the Trust and seek to recover the money that was lost because of defendants' unlawful misconduct. Essentially, this lawsuit alleges, among other things, that the investments made in the Trust were not prudent, the Trust funds were mismanaged, and defendants' actions resulted in massive losses in the Trust. If the lawsuit results in a recovery, the recovered funds will not be paid to these six plaintiffs, but will restore funds in the Trust, thereby benefitting Illinois preneed funeral planning customers and Illinois funeral homes that are affected. Further information about derivative lawsuits can be found in the American Law Encyclopedia. Wexler Wallace's clients, along with many other Illinois funeral homes, have pledged to continue compassionately serving their communities by honoring all Preneed Contracts. Indeed, despite the large deficit in the Trust, they are providing such services and merchandise by using their own funds to make up for the deficit in the Preneed Trust. An Amended Complaint was filed in the derivative action on June 12, 2009. To view a copy of the Amended Complaint, click here. For specific allegations in the Plaintiff's Amended Derivative Complaint, click here. To view the current status of the derivative action, click here. For a listing of the parties in the derivative action, click here. UPDATE: August 15th Dept. of Insurance Settlement Deadline Suspended Click here for a copy of the order suspending the settlement deadline, or see below for more information. Illinois Department of Insurance Settles with Merrill Lynch, Funeral Directors Oppose Release of Merrill Lynch Entities & Ed Schainker On May 18, 2009, the Illinois Department of Insurance settled claims it had brought against Merrill Lynch Life Agency, Inc. with regard to its involvement in the collapse of the Preneed Trust for $18 million. While plaintiffs welcome the $18 million to help restore funds lost from the Trust, the Stipulation and Consent Order also stipulates that no one can access the funds recovered for the Trust unless the party meets a variety of conditions and restrictions, most notably signing a release that will likely exculpate all Merrill Lynch entities from wrongdoing. To this end, plaintiffs have filed a Petition for Rehearing and Petition to Intervene in the matter with the Division of Securities, as well as filing a Class Action Complaint for Declaratory Judgment in Cook County Circuit Court. For a copy of the Stipulation and Consent Order issued by the Division of Insurance, click here. For a copy of Plaintiffs' Petition for Rehearing, click here. For a copy of Plaintiffs' Petition to Intervene, click here. For a copy of Plaintiffs' Complaint for Declaratory Judgment, click here. UPDATE: Declaratory Judgment Filed Against State Regulators and Merrill Lynch, DOI Settlement Deadline Suspended On July 7, 2009, plaintiffs filed a Class Action Complaint for Declaratory Judgment in Cook County Circuit Court. Among other things, this complaint alleges that the settlement between the Illinois Department of Insurance and Merrill Lynch is "invalid and unenforceable and an impermissible encroachment on [the] Court's powers to adjudicate matters properly reserved to the judicial branch; and...both the [Department of Insurance] and the Illinois Office the Comptroller have acted and are continuing to act unlawfully outside the scope of their statutory and constitutional authority in attempting to enforce the Consent Order in violation of Plaintiffs' protectable legal interests." This lawsuit seeks a declaration from the Court that the DOI and IOC have acted outside their authority in entering into the settlement with MLLA. On August 13, 2009, the parties agreed to an order extending all settlement deadlines until after this litigation has been resolved. If you are eligible to be a member of this settlement, we understand this order to mean that: You do not need to take any action at this time. You do not need to return the Commitment Document or any other document related to the DOI's Consent Order by August 15, 2009. For a copy of this complaint, click here. For a copy of the letter funeral directors will be receiving from the Department of Insurance, click here. For a copy of the order extending the deadlines, click here. Class Action Filed A class action case with similar allegations as the derivative case was filed by the funeral directors on June 26, 2009. This action seeks to recover damages incurred by plaintiffs as a result of the losses in the tax-exempt portion of the IFDA's Preneed Trust. For a copy of this complaint, click here. Illinois Division of Insurance Revokes Merrill Lynch Financial Advisor's License Also on May 18, 2009, the Illinois Division of Insurance revoked the insurance license of Merrill Lynch financial advisor Edward Schainker. Edward Schainker was IFDA's investment advisor at Merrill Lynch, and recommended the investments that left the Trust in its current deficient state. Because of Mr. Schainker's involvement with the demise of the Preneed Trust, his license to be an Illinois Insurance Producer has been permanently revoked, and he has been assessed a civil penalty of $100,000, the maximum penalty for his actions. For a copy of the Order of Revocation, click here. Secretary of State Proceeding against Edward Schainker of Merrill Lynch Shortly after this lawsuit was filed and Mr. Schainker's role in this fiasco was disclosed, the Division of Securities, acting under the authority of the Secretary of State of Illinois brought formal proceedings against defendant Edward Schainker of Merrill Lynch, Pierce, Fenner & Smith, Inc. For additional information about the Secretary of State's investigation regarding Mr. Schainker, click here. Related Proceeding Brought by Federal Insurance Company Federal Insurance Company has provided business insurance, including coverage for directors and officers, to IFDA since 2005. On March 16, 2009, it filed a lawsuit against IFDA, alleging it should not have to pay the claims associated with both our lawsuit and a lawsuit filed in the Circuit Court of Kane County which alleges similar misconduct by IFDA with relation to the Preneed Trust. (See Dunkle et al v. IFDA Services, et al, Case No. 06 L 682, Kane County, IL for more information.) Plaintiffs have filed a Motion to Intervene in this action. For more information, click here. Legislation The issue of the deficit in IFDA's Preneed Trust has caught the eye of state legislators. For more information about pending and recently passed legislation regarding the IFDA Preneed Trust, click here. News This case, as well as the circumstances surrounding it, has also drawn attention from the press. To view news articles about this case: (including articles from the Chicago Tribune and the State Journal Register) News - February and March 2009 Additional Information For additional information about this case, please contact Ken Wexler, Ed Wallace, or Amber Nesbitt .
If you have already signed the Commitment Document but you would now like to retract your signature, please contact the Comptroller's Office or someone at our office. However, please note that we can not give you any advice on the proper course of action to take as it relates to this issue.
Funeral directors will also be receiving a letter from the Department of Insurance regarding the extension of the settlement deadlines.
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