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U.S. District Judge Carlos Murguia on Wednesday ruled that the lawsuit "contains broad and conclusory language insufficient to give defendants notice of the specific conduct alleged."
Murguia, however, said the plaintiffs could amend the suit to bring it into conformity with the procedural requirements for alleging racketeering and fraud.
The agents' suit alleged that Aleritas Capital Corp., which financed the agents' purchase of their agencies, overstated the value of the agencies and misled the agents about how the franchise relationship with Brooke worked.
The plaintiffs later added six banks as defendants. They alleged that the banks had acquired Aleritas' loans to the agents and directed insurance carriers to send commissions directly to the banks instead of the agents.
In his 17-page ruling, Murguia dismissed the banks from the action, finding the agents' claims against them were conclusory and were not linked to Aleritas.
Brooke, a public company based in Overland Park, at one time oversaw a franchise network of about 900 property and casualty franchises in more than 30 states. Brooke's finances started unraveling last year, and it and two affiliates filed for bankruptcy last year.
In December, The Star disclosed that the FBI was investigating the company.
Brooke's collapse left thousands of insurance agents throughout the country in the lurch and dozens of lenders with soured Brooke loans or securities on their books.
Brooke was sued last fall by the Bank of New York Mellon, alleging that Brooke had misappropriated millions of dollars and then destroyed evidence to conceal its actions.
The company and its affiliates have also been the target of several lawsuits by lenders alleging that Brooke and its founder and longtime chief executive, Robert Orr, diverted funds for their own benefit. Orr filed for personal bankruptcy in December.
To reach Dan Margolies, call 816-234-4481 or send e-mail to dmargolies@kcstar.com.
To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com. Copyright (c) 2009, The Kansas City Star, Mo. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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