Moriarty v. American General Life Insurance Company ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 MICHELLE L. MORIARTY, as Case No.: 3:17-cv-1709-BTM- Successor-In-Interest to Heron D. WVG 12 Moriarty, Decedent, on Behalf of 13 the Estate of Heron D. Moriarty, ORDER DENYING PLAINTIFF’S and on Behalf of the Class, MOTION FOR CLASS 14 CERTIFICATION AND DENYING Plaintiff, 15 AMERICAN GENERAL’S v. MOTION TO EXCLUDE CLASS 16 MEMBERS AMERICAN GENERAL LIFE 17 INSURANCE COMPANY, et al., [ECF Nos. 132, 137] 18 Defendants. 19 20 Before the Court is Plaintiff’s motion for class certification (ECF No. 132 21 (“Mot.”)) and Defendant American General Life Insurance Company’s motion to 22 exclude certain people from the class (ECF No. 137). For the reasons discussed 23 below, Plaintiff’s motion for class certification is DENIED WITHOUT PREJUDICE 24 and American General’s motion to exclude is DENIED WITHOUT PREJUDICE. 25 I. BACKGROUND 26 This case centers on whether three California Insurance Code provisions 27 apply to life insurance policies issued prior to the provisions’ enactment. They 28 1 guarantee a 60-day grace period after nonpayment of a premium, Cal. Ins. Code 2 § 10113.71(a), the right to designate someone to receive notices of lapsed 3 payments, id. § 10113.72(a)–(b), and a 30-day notice of a lapsed payment to both 4 the policy owner and aforementioned designee before the policy may be 5 terminated for nonpayment, id. §§ 10113.71(b), 10113.72(c). These code sections 6 went into effect on January 1, 2013. 7 Heron D. Moriarty (“Mr. Moriarty”), the decedent, took out a term life 8 insurance policy with American General in 2012. (ECF No. 18 (“FAC”), ¶ 15.; ECF 9 No. 135 (“Def.’s MSJ”), 2:3–6.) American General did not provide Mr. Moriarty 10 with the right to designate someone other than himself to receive notices of 11 pending lapses in his policy. (FAC ¶ 25.) On March 24, 2016, American General 12 was unable to process Mr. Moriarty’s automatic monthly payment because the 13 associated bank account was closed. (FAC ¶ 27; Def.’s MSJ, 2:23–3:2.) On May 14 22, 2016, American General terminated the policy as of the date of the lapsed 15 payment: March 20, 2016. (Def.’s MSJ, Exh. 13.) Mr. Moriarty passed away on 16 May 31, 2016. (Id. at Exh. 14.) Plaintiff submitted a claim on Mr. Moriarty’s life 17 insurance policy on June 22, 2016. (Id. at Exh. 16.) American General denied the 18 claim on July 6, 2016 because the policy had terminated as of March 20, 2016, 19 which was prior to Mr. Moriarty’s death. (Id. at Exh. 17.) 20 Plaintiff sues on behalf of herself and a purported class of similarly situated 21 individuals, alleging two remaining class action causes of action against American 22 General: (1) declaratory relief, and (2) breach of contract.1 (FAC ¶¶ 64–81.) On 23 October 2, 2020, the Court denied summary judgment for both parties on the 24 25 26 1 Plaintiff also alleged a class action cause of action for violation of California’s Unfair Competition Law (“UCL”), pursuant to Cal. Bus. & Profs. Code §§ 17200, et seq., against both American General and Bayside Insurance 27 Associates, Inc. (FAC ¶¶ 106–117.) On October 2, 2020, the Court dismissed Plaintiff’s UCL restitution claim against American General and reserved Plaintiff’s UCL injunction claim against American General for remand at 28 the end of this case. (ECF No. 184 at 13–14.) On March 27, 2020, the Court dismissed Plaintiff’s UCL claims 1 declaratory relief claim. (ECF No. 184 at 9). The Court also denied summary 2 judgment for both parties on the breach of contract claim for violations of §§ 3 10113.71(b) and 10113.72 and granted summary judgment for American General 4 that it complied with § 10113.71(a)’s 60-day grace period requirement. (Id. at 10.) 5 II. DISCUSSION 6 Plaintiff moves for class certification on her claims for declaratory relief and 7 breach of contract against American General. Plaintiff seeks certification of the 8 following class: 9 All owners, or beneficiaries upon a death of the insured, of Defendant’s individual life insurance policies that were renewed, issued, or 10 delivered by Defendant in California, and in force on January 1, 2013, 11 and which underwent or will undergo lapse or termination for the non- payment of premium without Defendant first providing all of the notices, 12 grace periods, and offers of designation required by Insurance Code 13 Sections 10113.71 and 10113.72. 14 (Mot. 2:12–16.) 15 The party seeking class certification bears the burden of establishing that 16 each of the four requirements of Fed. R. Civ. P. 23(a) and at least one requirement 17 of Rule 23(b) have been met. Willis v. City of Seattle, 943 F.3d 882, 885 (9th Cir. 18 2019). Plaintiff relies on Rule 23(b)(2) and (3). 19 With regard to Rule 23(a)(2)’s requirement that there be “questions of law or 20 fact common to the class,” Plaintiff asserts that the most important legal question 21 in this case is a common one: whether the California Insurance Code provisions 22 at issue “apply to policies issued prior to 2013 but remaining in effect after the start 23 of 2013.” (Mot. 12:9–11.) A federal district court may interpret state law but is 24 “bound by decisions of the state’s highest court.” Ariz. Elec. Power Co-op., Inc. v. 25 Berkeley, 59 F.3d 988, 991 (9th Cir. 1995). “In the absence of such a decision, a 26 federal court must predict how the highest state court would decide the issue” or 27 certify it to the state’s highest court. In re Kirkland, 915 F.2d 1236, 1238 (9th Cir. 28 1990). Here, the state’s highest court is already in the process of deciding this 1 issue. McHugh v. Protective Life Ins., No. S259215 (reviewing whether “the 2 provisions of Insurance Code sections 10113.71 and 10113.72 . . . apply, in whole 3 or in part, to life insurance policies in force as of January 1, 2013, regardless of the 4 original date of issuance of those policies”). This Court must defer to the California 5 Supreme Court’s forthcoming decision in McHugh. Given the central importance 6 of this question, and its potential effect on the existence of any common questions, 7 the Court finds that it is in the interest of judicial economy to deny without prejudice 8 Plaintiff’s motion for class certification without ruling on its merits. 9 However, the Court notes its concerns about the number of factual issues 10 that may need to be tried for each potential class member. For example, in 11 Plaintiff’s case, some of the remaining individual factual issues that will need to be 12 tried include: (1) whether American General properly mailed Mr. Moriarty and 13 Plaintiff a notice of termination letter, and whether Mr. Moriarty or Plaintiff received 14 such a letter, (2) whether American General imposing an effective termination date 15 fewer than 30 days after it mailed the notice of termination letter actually caused 16 damage to Plaintiff, (3) whether Plaintiff had actual notice of a lapsed policy 17 payment, and (4) whether Plaintiff would have been Mr. Moriarty’s § 10113.72 18 designee. Similar individual factual issues will likely be present for each member 19 of the putative class, which the parties estimate to consist of more than 57,000 20 members. (See Mot. 10:20–11:9; Defendant’s Opposition to Motion for Class 21 Certification (“Def.’s Opp.”), 1:8.) The multiple factual issues that may need to be 22 tried for each of the more than 57,000 class members may affect whether the 23 commonality requirement of Rule 23(a)(2) and predominance and superiority 24 requirements of Rule 23(b)(3) can be met. In light of this concern, the Court notes 25 that issue certification under Fed. R. Civ. P. 23(c)(4) may be more appropriate than 26 certifying a class. The California Supreme Court’s forthcoming decision in McHugh 27 will clarify what issues might be certified under Rule 23(c)(4). 28 // 1 III. AMERICAN GENERAL’S MOTION TO EXCLUDE 2 American General moves to exclude from the purported class, any 3 individuals “who were class members in the nationwide class action settlement in 4 McNeil v. American General, et al., No. 3-99-1157 (M.D. Tenn. Sept. 8, 2000) 5 (‘McNeil’).” (ECF No. 137, American General’s Motion to Exclude McNeil Class 6 Members (“Def.’s Motion to Exclude”), 1:1–6.) American General asserts that the 7 McNeil settlement’s class members, which includes individuals who owned 8 American General’s predecessor’s industrial life insurance policies during the time 9 period from January 1, 1982 through September 30, 1999, impermissibly overlap 10 with the purported class in the instant action. (Id. at 3:5–6; Exh. 2 at 14.) 11 American General argues that Plaintiff’s allegations—that American General 12 failed to comply with Cal. Ins. Code §§ 10113.71 and 10113.72—fall within the 13 McNeil settlement’s definition of “Released Transactions,” which include the 14 “operation,” “administration,” and “servicing” of American General’s life insurance 15 policies. (Id. at 4:1–15; Exh. 2 at 54.) Accordingly, American General argues that, 16 under the terms of the settlement, the McNeil class members agreed to resolve 17 any future claims involving the “operation, administration, and servicing” of their 18 industrial life insurance policies, “solely through [the settlement’s] ADR process 19 and ‘in no other Court, tribunal, arbitration, proceeding or forum.’” (Id. at 3:17–21; 20 Exh. 2 at 24.) American General also points to the McNeil court’s issuance of a 21 permanent injunction, which “permanently barred” McNeil class members from 22 “filing, commencing, prosecuting, intervening in, participating in as class members 23 or otherwise, or receiving any benefits or other relief from, any other lawsuit . . . 24 based on or relating to the claims and causes of action, or the facts and 25 circumstances relating thereto, in this Action and/or the Released Transactions . . 26 . as to that Policy.” (Id. at 10:10–19; Exh. 2 at 25-26.) 27 Plaintiff, in opposition, contends that American General’s interpretation of the 28 McNeil settlement is overbroad—particularly because the case involved allegedly 1 discriminatory sales practices against African Americans—and that the McNeil 2 parties “never could have intended to release or otherwise shuttle into arbitration 3 claims in another state, brought against another insurer, which would not exist as 4 a matter of California law for another 13 years.” (ECF No. 149, Plaintiff’s 5 Opposition to American General’s Motion to Exclude (“Plaintiff’s Opp.), 11:21–25; 6 Def.’s Motion to Exclude, Exh. 2 at 34-35.) 7 The Court takes note of the McNeil Court’s retention of jurisdiction, which 8 American General also highlights, in which the McNeil court: 9 expressly retain[ed] jurisdiction as to all matters relating to the administration, consummation, enforcement and interpretation of the 10 Settlement Agreement . . . and for any other necessary purpose, 11 including, without limitation, enforcing the terms and conditions of the Settlement Agreement and resolving any disputes, claims or causes of 12 action that, in whole or in part, are related to or arise out of the 13 Settlement Agreement . . . including, without limitation, whether a person or entity is or is not a Class Member; whether claims or causes 14 of action allegedly related to this Action are or are not barred by the 15 Final Judgment or Release, etc. 16 (Def.’s Motion to Exclude, 11:21–12:6; Exh. 2 at 29.) American General’s Motion 17 to Exclude requires resolution of the following question: Whether any alleged 18 McNeil class members identified by American General would be barred by the 19 settlement from participating in Plaintiff’s class claims against American General? 20 The Court finds that this question falls within the McNeil court’s retained jurisdiction 21 to determine “whether a person or entity is or is not a [McNeil] Class Member” or 22 “whether claims or causes of action allegedly related to [the McNeil] Action are or 23 are not barred.” (See id., Exh. 2 at 29.) American General may move the McNeil 24 court for such a determination. 25 Accordingly, the Court denies American General’s Motion to Exclude McNeil 26 Class Members without prejudice. 27 // 28 // 1 IV. CONCLUSION 2 Based upon the foregoing, Plaintiff's Motion for Class Certification is 3 DENIED WITHOUT PREJUDICE and American General’s Motion to Exclude 4 ||McNeil Class Members is DENIED WITHOUT PREJUDICE. The parties may 5 ||renew these motions after the California Supreme Court renders an opinion in 6 || McHugh or after the McNeil court renders a decision. 7 8 || ITIS SO ORDERED. 9 40 || Dated: November 25, 2020 Honorable Barry Ted Moskowitz 12 United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28