BUCK v. AMERICAN GENERAL LIFE INSURANCE COMPANY

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

DUANE BUCK and ANN BUCK, on

No. 1:17-cv-13278-NLH-KMW

behalf of themselves and all

others similarly situated,

Plaintiffs,

OPINION

v.

AMERICAN GENERAL LIFE

INSURANCE COMPANY,

Defendant.

APPEARANCES:

SCOTT B. GORMAN

GORMAN & GORMAN, ESQS.

LIBERTY VIEW

457 HADDONFIELD ROAD

SUITE 400

CHERRY HILL, NJ 08002-2220

CRAIG S. HILLIARD

STEFANIE LYNN COLELLA-WALSH

MARTIN P. SCHRAMA

STARK & STARK, PC

PRINCETON PIKE CORPORATE CENTER

993 LENOX DRIVE - BUILDING TWO

PO BOX 5315

LAWRENCEVILLE, NJ 08648

Attorneys for Plaintiffs Duane Buck and Ann Buck.

ANDREW P. FISHKIN

ZACHARY WINTHROP SILVERMAN

FISHKIN LUCKS LLP

The Legal Center

One Riverfront Plaza, Suite 410

NEWARK, NJ 07102

Attorneys for Defendant American General Life Insurance

Company.

HILLMAN, District Judge

This case is a putative class action alleging the breach of

universal life insurance policies. Presently before the Court

is the motion of Plaintiffs Duane and Ann Buck to certify two

proposed classes and appoint class representatives and class

counsel, which Defendant American General Life Insurance

(“AGLIC”) has opposed. For the reasons expressed below,

Plaintiffs’ motion will be denied.

BACKGROUND

The Court has previously laid out many of the relevant

facts in its earlier October 31, 2018 Opinion. (ECF No. 25).

However, as many of the facts that were relevant in that Opinion

remain relevant for the purposes of considering the pending

motion for class certification, that Court will re-state those

facts needed for its current analysis, and will add those

additional necessary facts that have been further introduced

through the parties’ briefing on the present motion.

In 1984, Plaintiffs Duane and Ann Buck purchased a

universal life insurance policy (the “Buck Policy”) on the life

of Duane Buck with his wife, Ann Buck, as an additional insured.

The Buck Policy was issued by The Old Line Life Insurance

Company of America, a company later acquired by Defendant AGLIC.

Universal life insurance is a form of permanent life

insurance, also known as flexible premium or adjustable life

insurance. This refers to the fact that a policy is for a term

of years with a set periodic premium, but the premium, benefits,

and beneficiaries may all be modified during the term of years.

Universal life insurance policies have a cash account, from

which any charges or expenses associated with the insurance

policy are deducted; as policyholders pay their set periodic

premium, any amount paid via set premium that exceeds the cost

of the policyholder’s insurance and other expenses remains in

the account, accruing a guaranteed minimum interest. The money

in this account is granted a tax-deferred status.

This type of insurance is meant to give a policyholder

coverage for her entire lifetime, while allowing her to vary

premium payments, adjust death benefits, and build a cash value

while young to offset the higher premiums charged later in life.

In other words, as Plaintiffs explain, this type of policy has

three elements: (1) the premium, payable periodically, (2) the

death benefit, payable to the beneficiary upon death of the

insured, and (3) the cash surrender value, the value the

policyholder receives if the policy is surrendered prior to

death. The cash value built up in the policy receives preferred

tax treatment and may be used to pay the cost of insurance in

place of a premium, to borrow money against the policy, or

merely saved to build cash value.

These types of policies are governed, in part, by the

Internal Revenue Code. Section 7702, codified as part of the

Deficit Reduction Act of 1984 (“DEFRA”), provides an outer limit

for the amount of cash value that may accrue within a policy

while still qualifying for preferred tax treatment. See I.R.C.

§ 7702, et seq. If the cash value exceeds this outer limit, a

policy may lose preferred tax treatment as “life insurance.”

When it appears that an account may be approaching losing its

preferred tax treatment, AGLIC sends the policyholder a DEFRA

violation notice, generally informing her that her ability to

make premium payments has been limited so as to avoid accruing a

greater cash value than permitted under § 7702.

Initially, the Buck Policy provided a $70,000 death benefit

for Duane Buck, a $25,000 rider for Ann Buck, and three $5,000

riders, one for each of the couple’s children. The Policy

guaranteed an interest rate of 4.5%, compounded yearly, for all

premiums paid in excess of cost. The Policy also grants

Plaintiffs the right to effectuate a partial or total surrender

of the Policy at certain points with certain predetermined fees.

AGLIC also provided “Annual Reports” which show the policy’s

current death benefit, current cash value, total amount of

premiums paid, total accumulated growth, and total charges

assessed. As the name suggests, the Policy promises that these

Annual Reports would be sent – at least - on a yearly basis.

Importantly, the Policy also states that “The Disclosure

Statement which was delivered with this policy shows how long

coverage will continue on the basis of current and guaranteed

assumptions. The Annual Report sent to the Owner each year will

update this information.” (ECF No. 8-1, Ex. A at 1). Finally,

the Policy states that if the Bucks pay a set fee and make a

request in writing, AGLIC “will provide an illustration of

future death benefits and cash values. The illustration will be

based on necessary assumptions specified by us and/or the owner.

This includes assumptions as to specified amount, coverage

options and future premium payments.” Id. at 9.

At some point later, Plaintiffs increased Duane Buck’s

death benefit to $100,000 and Ann Buck’s death benefit to

$50,000. In 2008, Plaintiffs requested that AGLIC reduce the

death benefit for both Duane and Ann Buck to $25,000 and that it

eliminate the $15,000 in riders the couple had maintained for

their children. AGLIC complied. In connection with the 2008

decrease in death benefit, the Bucks requested, and AGLIC

provided, a “Supplemental Illustration” (the “Illustration”)

dated September 29, 2008. The Illustration provides

policyholders with projections to help them decide how desired

changes to their policy may affect the ability of their

investment to grow while maintaining preferred tax status.

Plaintiffs allege the Illustrations provided by AGLIC determined

the amount of yearly or monthly premiums they paid. The Bucks

appear to have not paid their premium in 2009, although they

argue that this was the fault of Defendant, and that the

necessary amount of money as defined by the Planned Premium was

withdrawn as a late payment.

On January 7, 2016, AGLIC sent Plaintiffs a letter which

claimed the Policy had been funded to its limit and was at risk

of losing its preferred tax status. Defendant, in this letter,

claimed that it was a combination of the decrease in death

benefits and premium amount which led to this compliance issue.

Plaintiffs allege that the reason the Policy was at risk of

losing its preferred tax status was because Defendant used

faulty compliance procedures and software which failed to

adequately predict the amount of premiums required to keep the

Policy tax compliant throughout its life, and provided them

inaccurate information on this front in both the Illustration

and their Annual Reports.

While AGLIC does not concede that the Bucks are correct as

to the cause of their DEFRA violation, it does acknowledge that

the company has discovered that their Illustration “erroneously

did not account for the” impact the changes to their policy

would have on their tax-deferred status. (See ECF No. 74 at

15). This issue was apparently caused by a “a software

limitation in the relevant illustration system,” which AGLIC has

acknowledged could cause Illustrations provided to policyholders

in certain scenarios to fail to account for certain factors

underlying the DEFRA compliance analysis, and therefore provide

inaccurate information. Id.

AGLIC presented the Bucks with three options that would

allow the Policy to maintain its tax status: (1) increasing the

death benefit (which would have required additional

underwriting), (2) surrendering the Policy, or (3) maintaining

the Policy, allowing annual refunds, and ceasing premium

payments until the cash value of the Policy was exhausted.

AGLIC, in the letter, reserved the right to completely surrender

the Policy if Plaintiffs did not choose one of the three listed

options. Plaintiffs chose none of these options. AGLIC

continued to send letters over the following year, reiterating

the options available and that it reserved the right to

unilaterally surrender the policy if no option was chosen.

On January 13, 2017, AGLIC sent a letter stating (1) the

Policy remained non-compliant, (2) a check would be sent in the

amount of $3,260 representing the amount the Policy was

overfunded, and (3) the cash value of the Policy would be used

to pay premiums until it had been exhausted, at which time

Plaintiffs could resume paying premiums. Finally, on December

11, 2017 AGLIC sent a letter stating Plaintiffs “may pay enough

into the policy each year as necessary to maintain . . .

coverage without building up any excess policy value.”

On December 19, 2017, Plaintiffs filed their complaint in

this Court, including class allegations. Plaintiffs present two

claims for relief: breach of contract and recission. Defendant

then filed both a motion to dismiss and a motion to strike the

class allegations on March 5, 2018. This Court issued an

Opinion and Order granting in part and denying in part the

motion to dismiss and denying the motion to strike class

allegations. In its opinion, the Court held that Plaintiffs

could move forward on certain of their theories of breach of

contract.

Most importantly for the current motion, the Court found

that Plaintiffs had adequately alleged that their Policy

obligated Defendant to send them (1) a yearly Annual Report that

contains certain information regarding the policy’s current

amount, cash value, premiums paid, termination dates, and more,

and (2) an Illustration of Future Benefits and Values whenever

Defendant receives a written request and payment of a service

fee, which would include certain similar information. The

Court, viewing the allegations in the light most favorable to

Plaintiffs, found that they had sufficiently alleged at the

pleadings stage that if the Annual Reports or Illustration

contained misrepresentations or omissions as to the information

the Policy promised to include, that would constitute a breach.

After the parties engaged in extensive discovery,

Plaintiffs then filed a motion to certify two classes on July

29, 2020. (ECF No. 68). Specifically, Plaintiffs seek to

certify both a Damages Class and an Injunction Class, defined in

both their Complaint and their initial moving brief as follows:

Damages Class

[A]ll AGLIC policyholders in the United States, their

beneficiaries or estates, and their successors in interest, who:

a) purchased one or more life insurance products from AGLIC; and

b) were provided with one or more Illustrations and/or Annual

Reports by AGLIC containing one or more statements as to

periodic planned premiums remaining at the same dollar amount,

and the policy remaining in effect, for a specified number of

years; and

c) received notice from AGLIC in a letter, Policy Option Form,

or other similar document (referred to hereinafter as a “DEFRA

Notice”), advising, inter alia:

1) That the policy had exceeded its premium guideline

limit, which had caused the policy to be out of compliance

with current tax guidelines or federal regulations; or

2) That any additional payment of premium at the time of

the DEFRA Notice would cause the policy to be out of

compliance with current tax guidelines or federal

regulations; or

3) That the policy was disqualified, or would be

disqualified, as a contract of life insurance, because of

the payment of premiums which exceeded the maximum amount

of allowable funds that may be paid into a policy; or

4) That such policyholder(s) could not pay premiums, or

could no longer continue the policy on the same terms, as

previously set forth in AGLIC’s previous Illustrations

and/or Annual Report(s); and also made reference to federal

tax regulation(s) or law.

Injunctive Class

All AGLIC Universal Life insurance policyholders in the United

States, their beneficiaries or estates, and their successors in

interest, who are contractually entitled to receive an

Illustration and/or Annual Report from AGLIC.

(ECF No. 68 at 16-17).

Defendants then filed a lengthy brief opposing Plaintiffs

motion to certify these classes. Seemingly in response to

arguments raised by Defendants in their opposition brief,

Plaintiffs’ reply brief refined their class definitions by

clarifying that only policyholders who were “contractually

entitled” to “forward-looking” Annual Reports or Illustrations

would qualify as class members: “the only potential Injunctive

Class members are policyholders who are contractually entitled

to receive a forward-looking AGLIC Illustration and/or Annual

Report. In addition, the only potential Damages Class members

are policyholders who: 1) were contractually entitled to and did

receive a forward-looking AGLIC Illustration and/or Annual

Report; 2) paid their current set Planned Premiums; and 3) still

received a DEFRA Notice.” (ECF No. 83 at 9) (emphasis added).

Noting these changes, Defendant filed a letter requesting

permission to file a sur-reply brief addressing both the

specific impact of those changes on the motion to certify class,

as well as arguments raised by Plaintiffs’ newly introduced

expert. The Court granted both parties permission to file

further sur-replies addressing these additional questions, which

both parties did. (ECF No. 88 and 89).

The Court notes that Plaintiffs claim, both in a letter

addressed to the Court and in their sur-reply, that they have

not in fact changed their class definitions — specifically, they

contend that their class definitions, despite not initially

mentioning “forward-looking” Illustrations or Annual Reports and

not explicitly stating that Damages Class members needed to be

contractually entitled to receive an Illustration or Annual

Report, actually were intended to incorporate the Court’s

explication of Plaintiffs’ breach of contract claims in its

October 31, 2018 Opinion. The Court finds this argument

unavailing. Plaintiffs’ initial Damages Class definition as

proposed in their moving brief, for example, is unchanged from

their complaint, and therefore could not have been intended to

incorporate the Court’s ruling on the motion to dismiss.

However, the Court also recognizes “the ongoing refinement

and give-and-take inherent in class action litigation,

particularly in the formation of a workable class definition.”

Weitzner v. Sanofi Pasteur, Inc., No. 3:11-CV-02198, 2017 WL

3894888, at *9 (M.D. Pa. Sept. 6, 2017) (quoting In the Matter

of: Monumental Life Insurance Co., 365 F.3d 408, 414 (5th Cir.

2004)). Federal Rule of Civil Procedure 23(c)(1) provides a

mechanism for modification of class definition, and as such “[a]

court is not bound by the class definition proposed in the

complaint.” Weisfeld v. Sun Chem. Corp., 84 F. App’x. 257, 259

(3d Cir. 2004) (citing Robidoux v. Celani, 987 F.2d 931, 937 (2d

Cir. 1993)). Importantly, courts have allowed Plaintiffs to

substantially modify proposed class definitions initially set

forth in their Complaint throughout the course of litigation.

See, e.g., Gates v. Rohm & Haas Co., 265 F.R.D. 208, 215 n.10

(E.D. Pa. 2010) (citing Robidoux, 987 F.2d at 937) (noting that

Plaintiffs were permitted to substantially modify the proposed

class definition in their reply brief); see also In re Thalomid

and Revlimid Antitrust Litig., No. 14-6997, 2018 WL 6573118, at

*2 n.1 (D.N.J. Oct. 30, 2018) (analyzing class definitions as

refined and amended in plaintiffs’ reply brief).

Further, as the Court has permitted both parties to file

sur-reply briefs addressing these changes and putting forth

additional arguments regarding the propriety of certification of

the proposed classes as amended, it finds that Defendant has not

been prejudiced by Plaintiffs’ actions in amending their class

definitions in their reply brief. Accordingly, the Court, in

analyzing the present motion to certify class, will incorporate

Plaintiffs’ newly added requirements that class members be

contractually entitled to receive a forward-looking Illustration

or Annual Report.

DISCUSSION

I. Subject Matter Jurisdiction

This Court has jurisdiction over this action under the

Class Action Fairness Act of 2005. See 28 U.S.C. § 1332(d)

(granting United States district courts jurisdiction over

putative class claims, which, in aggregate, exceed $5,000,000

and include one putative class member who is diverse from

defendants). Plaintiffs are individual citizens of New Jersey

and AGLIC is a citizen of Texas having been incorporated there

and maintaining its principal place of business in that state.

Plaintiffs allege damages exceeding the statutory minimum.

II. Legal Standard for Motions to Certify Class

“The class action is ‘an exception to the usual rule that

litigation is conducted by and on behalf of the individual named

parties only.’” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338,

348, 131 S. Ct. 2541, 180 L. Ed. 2d 374 (2011) (quoting Califano

v. Yamasaki, 442 U.S. 682, 700-01, 99 S. Ct. 2545, 61 L. Ed. 2d

176 (1979)). In order to justify a departure from the general

rule that each litigant proceeds with their own action, “a class

representative must be part of the class and possess the same

interest and suffer the same injury as the class members.” Id.

at 348-49 (quoting East Tex. Motor Freight System, Inc. v.

Rodriguez, 431 U.S. 395, 403, 97 S. Ct. 1891, 52 L. Ed. 2d 453

(1977)) (internal quotation marks omitted).

Every putative class action must satisfy the four

requirements of Federal Rule of Civil Procedure 23(a):

numerosity, commonality, typicality, and adequacy. City Select

Auto Sales, Inc. v. BMW Bank of N. Am., Inc., 867 F.3d 434, 438

(3d Cir. 2017) (citing Amchem Prods., Inc. v. Windsor, 521 U.S.

591, 613, 117 S. Ct. 2231, 138 L. Ed. 2d 689 (1997)). In more

detail, Rule 23(a) requires the movant to establish that:

(1) the class is so numerous that joinder of all members is

impracticable;

(2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are

typical of the claims or defenses of the class; and

(4) the representative parties will fairly and adequately

protect the interests of the class.

Fed. R. Civ. P. 23(a); Beneli v. Bca Fin. Servs., 324 F.R.D. 89,

95 (D.N.J. 2018).

The party “seeking class certification bear[s] the burden

of establishing by a preponderance of the evidence that the

requirements of Rule 23(a) have been met.” In re NFL Players

Concussion Injury Litig., 821 F.3d 410, 426 (3d Cir. 2016)

(quoting In re Cmty. Bank of N. Virginia Mortg. Lending

Practices Litig., 795 F.3d 380, 391 (3d Cir. 2015)).

In addition to the Rule 23(a) requirements, a class action

must be maintainable under Rule 23(b)(1), (2), or (3).

Plaintiffs seek certification of two separate classes, a Damages

Class under Rule 23(b)(3) and an Injunctive Class under Rule

23(b)(2). Rule 23(b)(2) requires Plaintiffs to meet the

additional requirement of cohesiveness, meaning that “the relief

sought is appropriate for and will benefit the entire class.”

McNair v. Synapse Group, Inc. 2010 WL 4777483, at *7 (D.N.J.

Nov. 15, 2010).

Rule 23(b)(3), on the other hand, requires Plaintiffs to

meet the additional requirements of predominance and

superiority. City Select, 867 F.3d at 438-39 (citing Amchem,

521 U.S. at 615). Under that subsection, a class must also be

“currently and readily ascertainable based on objective

criteria.” Id. at 439 (quoting Marcus v. BMW of N. Am. LLC, 687

F.3d 583, 593 (3d Cir. 2012)). To satisfy this standard,

Plaintiff must show that “(1) the class is ‘defined with

reference to objective criteria’; and (2) there is ‘a reliable

and administratively feasible mechanism for determining whether

putative class members fall within the class definition.’” Id.

(quoting Byrd v. Aaron’s Inc., 784 F.3d 154, 163 (3d Cir.

2015)); Carrera v. Bayer Corp., 727 F.3d 300, 306 (3d Cir.

2013). The district court must “undertake a rigorous analysis

of the evidence to determine if the standard is met.” Id.

(quoting Carrera, 727 F.3d at 306).

III. Rule 23(a) Analysis

The Court first finds that Plaintiffs have not satisfied

the Rule 23(a) factors by a preponderance of the evidence.

A. Rule 23(a)(1): Numerosity

Rule 23(a)(1) requires that a class be “so numerous that

joinder of all members is impracticable.” In re NFL Players

Concussion Injury Litig., 821 F.3d at 426 (quoting Fed. R. Civ.

P. 23(a)(1)). “There is no magic number of class members needed

for a suit to proceed as a class action.” Id. That said,

numerosity is generally satisfied if there are more than forty

(40) class members. Id. (citing Marcus v. BMW of N. Am., LLC,

687 F.3d at 595; Stewart v. Abraham, 275 F.3d 220, 226-27 (3d

Cir. 2001)).

Here, the numerosity requirement is clearly satisfied.

Plaintiffs note that Defendant’s own estimates as to the number

of individuals that could be in the proposed classes are well

above the standard forty-class-members benchmark. Defendants do

not dispute this assertion, and do not argue that Plaintiffs

have not sufficiently demonstrated numerosity in either of their

opposition briefs. Accordingly, the Court finds that Plaintiffs

have satisfied this requirement.

B. Rule 23(a)(2): Commonality

Rule 23(a)(2) requires that “there [be] questions of law or

fact common to the class.” Fed. R. Civ. P. 23(a)(2). “It is

well established that only one question of law or fact in common

is necessary to satisfy the commonality requirement, despite the

use of the plural ‘questions’ in the language of Rule 23(a)(2).”

In re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 597 n.10

(3d Cir. 2009); Wal-Mart Stores, Inc. v. Dukes, 564 U.S. at 359.

Thus, there is a “low threshold for satisfying this

requirement.” Beneli, 324 F.R.D. at 97 (first citing Newton v.

Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 183

(3d Cir. 2001) and then citing In re Sch. Asbestos Litig., 789

F.2d 996, 1010 (3d Cir. 1986)) (highlighting the low threshold

for commonality). Moreover, this requirement does not mandate

that all putative class members share identical claims. Hassine

v. Jeffes, 846 F.2d 169, 176-77 (3d Cir. 1988). “Even where

individual facts and circumstances do become important to the

resolution, class treatment is not precluded.” Beneli, 324

F.R.D. at 97 (quoting Baby Neal, et al. v. Casey, et al., 43

F.3d 48, 56 (3d Cir. 1994)).

Defendants again do not dispute that Plaintiffs have

sufficiently demonstrated commonality, and the Court easily

finds that they have. The claims of all members of both

classes, as defined in Plaintiffs’ opposition brief, involve the

common question of law of whether Defendant’s alleged failure to

provide accurate information in the Annual Reports and

Illustrations received by the class members constituted a breach

of contract. Accordingly, Plaintiffs have sufficiently met the

low threshold for demonstrating commonality.

C. Rule 23(a)(3): Typicality

While Plaintiffs have satisfied the first two requirements,

the Court finds that they have failed to demonstrate typicality.

“Rule 23(a)(3) requires that the class representatives’ claims

be ‘typical of the claims . . . of the class.’” In re NFL

Players Concussion Injury Litig., 821 F.3d at 427 (quoting Fed.

R. Civ. P. 23(a)(3)). This requirement “ensures the interests

of the class and the class representatives are aligned ‘so that

the latter will work to benefit the entire class through the

pursuit of their own goals.’” Id. at 427-28 (quoting Newton,

259 F.3d at 182-83). Slight factual differences will generally

not preclude a finding of typicality where there is a “strong

similarity of legal theories or where the claim arises from the

same practice or course of conduct.” See In re Prudential Ins.

Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283, 311

(3d Cir. 1998) (internal citations omitted).

“[T]he typicality requirement is satisfied as long as

representatives and the class claims arise from the same event

or practice or course of conduct and are based on the same legal

theory.” Beneli, 324 F.R.D. at 97 (citing Brosious v.

Children’s Place Retail Stores, 189 F.R.D. 138, 146 (D.N.J.

1999); Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912, 923

(3d Cir. 1992) (“Factual differences will not render a claim

atypical if the claim arises from the same event or practice of

course of conduct that gives rise to the claims of the class

members, and it is based on the same legal theory.”).

Specifically, the Third Circuit has viewed the typicality

requirement as stating that “(1) the claims of the class

representative must be generally the same as those of the class

in terms of both (a) the legal theory advanced and (b) the

factual circumstances underlying that theory; (2) the class

representative must not be subject to a defense that is both

inapplicable to many members of the class and likely to become a

major focus of the litigation; and (3) the interests and

incentives of the representative must be sufficiently aligned

with those of the class.” In re Schering, 589 F.3d at 599.

Defendant here has challenged Plaintiffs’ showing of

typicality by arguing that Plaintiffs’ claims are subject to

unique individual defenses that render them not typical of the

claims of all putative class members. On this front, “Defendant

carries the burden to ‘show some degree of likelihood a unique

defense will play a significant role at trial.’” Barr v.

Harrah's Entertainment, Inc., 242 F.R.D. 287, 292 (D.N.J. 2007)

(quoting Beck v. Maximus, Inc., 457 F.3d 291, 300 (3d Cir.

2006)).

Defendant here emphasizes multiple unique defenses they

think demonstrate a lack of typicality. First, Defendant argues

that the Bucks have not in fact been damaged by AGLIC’s alleged

breach of their policy. However, Defendant only briefly waves

at this argument in a short, two-sentence paragraph, apparently

relying for the most part on its attempt to explain in its

brief’s statement of facts why the Bucks have not personally

been damaged. While the Court recognizes that Defendant has

expounded at length on the potential issues many potential class

members might face in showing that they have been damaged, those

questions appear more properly suited for predominance analysis

under Rule 23(b)(3) than they do the analysis of typicality

under Rule 23(a)(3). The Court finds that Defendant has simply

not put forth sufficient evidence at this stage to show that the

Bucks are individually subject to this unique defense themselves

in such a way that it threatens to become the focus of the

litigation.

Second, Defendant argues that the Bucks’ claims are not

typical because any damages they might have suffered were self-

inflicted and caused by their own actions in minimally funding

their policy for years and then materially decreasing coverage

in 2008. But Defendant’s attempt to portray these as on-point

defenses betrays a misunderstanding of Plaintiffs’ argument at

this stage in the litigation. As described above, Plaintiffs

have revised their class definitions to only encompass those

policyholders that followed their planned premiums.

Accordingly, their theory appears to be that, if a policyholder

received an Illustration or Annual Report stating that their

policy would remaining DEFRA compliant if they paid certain

planned premiums and then they simply paid those premiums, then

their actions prior to receiving the Illustration or Annual

Report — which would presumably be factored into the information

provided by AGLIC — should not cause a plan to violate DEFRA in

the future. While the Court makes no decision on the merits of

this argument, it does find given this apparent refinement of

Plaintiffs’ theory of liability, Defendant has again failed to

show that these proposed defenses are likely to become a major

focus in this litigation.

However, Defendant has put forth two separate, but

interrelated defenses that show the atypicality of the Bucks’

claims. First, Defendant points out that after the Bucks

reduced their coverage following the request for the September

29, 2008 Illustration, there were no premium payments made on

their account for the entirety of 2019, requiring a back payment

of the full amount at one time — a fact that Plaintiffs admit. 1

(ECF No. 79 at ¶¶ 52-55; ECF No. 83-3, Ex. A at ¶ 17). As

Defendant’s expert notes, “[e]ven minor differences between

actual and planned premiums — with respect to the timing,

frequency, or amount — can have significant consequences on

funding limits under IRC section 7702.” (ECF No. 88-6 at ¶ 27).

Accordingly, the information and forecasts provided in the

Illustrations AGLIC sends policyholders upon request are

extremely dependent on the policyholder following the prescribed

planned premiums to the letter, and on a multitude of other

factors remaining consistent.

Defendant therefore asserts that the extended period in

which the Bucks did not pay their premiums could well cut the

causal chain between the inaccurate Illustration and any damages

they may have suffered. This argument does make sense:

Plaintiffs’ own expert appears to acknowledge that even small

changes can dramatically impact the potential DEFRA compliance

of a policy, (see ECF No. 89-9, Ex. F at ¶ 27), and since the

1 The Court recognizes that Plaintiffs have introduced evidence

purporting to demonstrate that the blame for any delay in the

payment of their premiums lies at the feet of AGLIC. However,

even if the Bucks are correct and they were to defeat this

defense later in this litigation, the question at this stage is

not whether a unique defense will ultimately prevail — it is

whether the unique defense is substantial enough to raise the

risk that its adjudication will dominate this litigation to the

detriment of the claims and arguments that are common to the

class at large.

extra premium amounts paid and stored in the Buck’s cash account

earn 4.5% interest, paying their premiums late and all at once

could potentially throw off the calculations underlying the 2008

Illustration.

Of course, Plaintiffs would likely counter that these

changes should then have shown up in their Annual Reports,

warning them of potential DEFRA violations in the future.

Defendant, however, has additionally argued that Plaintiffs’

claims are atypical and further subject to unique defenses

regarding whether the Bucks’ Annual Reports could have caused

their alleged damages based on their own failure to read and

understand the reports. As Defendant points out, Duane Buck has

admitted he did not read his Annual Reports. (ECF No. 78-14 at

81:6-8). Ann Buck has also conceded that while she read some

reports, she did not read each Annual Report that the Bucks

received; and, importantly, she explicitly acknowledged that “I

think that we looked at them all, but didn't understand them.

So we didn't look at them close enough, I guess.” (ECF No. 78-

15 at 90:10-23). Given the fact that causation is a central

element of any breach of contract claim, questions regarding the

individual factual circumstances underlying the Bucks’ claim

very well may become central at trial.

While the Court makes no finding on the merits regarding

these defenses at the class certification stage, it does find

that they appear substantial enough to provoke concern that “the

representative's interests might not be aligned with those of

the class, [or] the representative might devote time and effort

to the defense at the expense of issues that are common and

controlling for the class.” Beck, 457 F.3d at 297.

Simply put, Defendant has successfully demonstrated that

Plaintiffs may in fact be subject to unique defenses regarding

their own failure to follow the planned premiums outlined in the

2008 Illustration, and whether they actually read or understood

their Annual Reports to a sufficient degree for those reports to

have caused them damage. As Plaintiffs’ own class definitions

and theory of liability are reliant on the idea that most class

members read and understood their Annual Reports or

Illustrations and then followed them closely, Plaintiffs have

failed to meet their burden to demonstrate that their claims are

typical of the claims of the class they seek to represent.

Class certification therefore must be denied as to both the

Damages Class and the Injunctive Class.

D. Rule 23(a)(4): Adequacy

Had Plaintiffs sufficiently demonstrated typicality, the

Court finds that Duane Buck has met the adequacy requirement of

Rule 23(a)(4). A class may not be certified unless the

representative class members “will fairly and adequately protect

the interests of the class.” Fed. R. Civ. P. 23(a)(4); Beneli,

324 F.R.D. at 98. Rule 23(a)(4)'s adequacy requirement “has two

components designed to ensure that absentees' interests are

fully pursued.” In re Schering, 589 F.3d at 602. “First, the

adequacy inquiry ‘tests the qualifications of the counsel to

represent the class.’” Id. (quoting In re Warfarin Sodium

Antitrust Litig., 391 F.3d 516, 532 (3d Cir. 2004)). Here, no

issue has been raised regarding the adequacy of Plaintiffs’

counsel, and Plaintiffs’ have demonstrated that their counsel

has substantial experience in both class actions and breach of

contract claims in the insurance context and have devoted

significant time and effort to this action. (See generally ECF

No. 68-1, 69-1, and 69-7).

“The second component of the adequacy inquiry seeks ‘to

uncover conflicts of interests between named parties and the

class they seek to represent.’” Id. (quoting In re Warfarin

Sodium Antitrust Litig., 391 F.3d at 532). “The adequacy

inquiry under Rule 23(a)(4) serves to uncover conflicts of

interest between named parties and the class they seek to

represent.” In re NFL Players Concussion Injury Litig., 821

F.3d at 431 (quoting Amchem, 521 U.S. at 625). “The ‘linchpin

of the adequacy requirement is the alignment of interests and

incentives between the representative plaintiffs and the rest of

the class.’” Id. (quoting Dewey v. Volkswagen

Aktiengesellschaft, 681 F.3d 170, 183 (3d Cir. 2012). However,

a class representative must also represent a class capably and

diligently. “[A] minimal degree of knowledge” about the

litigation is adequate. Id. at 430 (quoting New Directions

Treatment Servs. v. City of Reading, 490 F.3d 293, 313 (3d Cir.

2007)) (internal quotation marks omitted).

Here, Defendant raises two central arguments for why it

believes Plaintiffs have failed to demonstrate that the Bucks

are adequate class representatives: (1) Ann Buck is not a member

of the proposed class, and (2) Duane Buck is unfamiliar with

their claims. On the first point, Defendant cites the Court to

the deposition testimony of Ann Buck. There, in response to the

question “Who do you understand is the owner of that policy,”

she replied, “I guess my husband.” (ECF No. 78-15 at 16:17-20).

She then went a step further and explained, in response to being

asked “Why do you think your husband is the owner of the

policy,” that “I think I was listed as a rider and not the

owner, so. But I’m not positive about it.” (Id. at 16:22-

17:3).

Plaintiffs in response argue that the Bucks’ policy

applications make clear that both Duane and Ann are owners of

the policy. They note that the Bucks’ policy states that “The

owner is as shown in the Application unless changed,” (ECF No.

83-18, Ex. 12), and the Application forms submitted by the Bucks

state that “The Proposed Insured shall be the policy owner

unless another owner is named above.” (ECF No. 83-18, Ex. 18).

Plaintiffs then contend that the Applications the Bucks filed

list Duane as the Proposed Insured on one form and Ann as the

Proposed Insured on the other.

The Court’s review of the Application forms attached as

exhibits and cited to by Plaintiffs, however, reveals that both

forms in fact list Duane Buck as the Proposed Insured, include

his signature on the line for the Proposed Insured, and, under

Section 6.D for ADDITIONAL COVERAGES, lists “OIR on Ann Marie

Buck wife 25,000” – meaning that Ann’s coverage was being

provided as an “other insured” rider to the policy owned and

opened by Duane. Id. This fact is only further confirmed by

the copy of the Policy itself that the Bucks attached to their

complaint, which explicitly lists $25,000 of coverage for Ann

Marie Buck as a “RIDER” and “OTHER INSURED” on the policy taken

out by Duane. (See ECF No. 8-1, Ex. A at 20). The documents

cited to by Plaintiffs simply do not support their factual

contention, and instead make clear that the owner and

policyholder of the policy in question here is Duane Buck.

Accordingly, the Court finds that Plaintiffs have failed to

demonstrate by a preponderance of the evidence that Ann Buck is

a member of the classes they seek to have certified and an

adequate representative of those classes.

The remaining question on this factor is then whether the

Duane Buck is familiar enough with the claims in this action to

serve as an adequate class representative. While Defendant is

correct that Duane Buck’s deposition transcript does not appear

to demonstrate a deep, detailed understanding of this

litigation, the Court finds that he is not so unknowledgeable as

to be an inadequate class representative. First, Mr. Buck did

provide an accurate, if highly simplified, explanation of what a

class action is. (ECF No. 78-14 at 21:1-4). Second, contrary

to Defendant’s assertion that he believed his claims were based

on a misrepresentation made in 1984, he responded to a question

to that effect by stating “No, we're misled now. We weren't

misled back then.” Id. at 26:7-14. He further made explicitly

clear that he understood the basis of the Bucks’ claims to be

that they were misled “[t]hat our insurance would last till

around 2040. And now they're saying it's only going to last to

2023” — again, a highly simplified, but generally accurate

description of the most basic, underlying allegation here. Id.

at 22:15-17.

While these answers do not demonstrate a sophisticated

understanding of the complex details involved in this case, they

do not have to. As the Third Circuit has repeatedly made clear,

the real focus of the adequacy requirement is on whether there

is some serious conflict of interest between the proposed

representative and the rest of the class members, and a class

representative need only have a “minimal degree of knowledge.”

New Directions Treatment Servs. v. City of Reading, 490 F.3d

293, 313 (3d Cir. 2007) (quoting Szczubelek v. Cendant Mortgage

Corp., 215 F.R.D. 107, 119 (D.N.J. 2003)). Here, given the fact

that Duane Buck is ably represented by a team of highly

experienced attorneys with substantial practices in both class

actions and insurance-related litigation, the Court will not

find him to be an inadequate representative. See Barr, 242

F.R.D. at 295 (“[A] class representative need not be intimately

familiar with the legal theory behind his claims since he is

represented by adequate counsel.”).

IV. Rule 23(b)(3) Analysis

While the Court’s finding that the named Plaintiffs’ claims

are not typical of the claims of their proposed classes is

sufficient on its own to deny the present motion for

certification, the Court further finds that Plaintiffs’ proposed

Damages Class poses numerous additional difficulties under Rule

23(b)(3). For the sake of thoroughness, the Court will further

address those concerns.

After Rule 23(a) is satisfied, a plaintiff must establish

that the proposed class also satisfies Rule 23(b). For class

certification under Rule 23(b)(3), the Court must find not only

that (1) “questions of law or fact common to class members

predominate over any questions affecting only individual

members,” and (2) that a “class action is superior to other

available methods for fairly and efficiently adjudicating the

controversy,” (Fed. R. Civ. P. 23(b)(3); see Beneli, 324 F.R.D.

at 99), but also that the class is “currently and readily

ascertainable based on objective criteria.” Marcus v. BMW of

North America, LLC, 687 F.3d 583, 593 (3d Cir. 2012). In this

case, the Court finds that both the predominance and

ascertainability elements counsel against class certification,

and therefore declines to address the question of superiority.

A. Predominance

Predominance requires “that questions of law or fact common

to the members of the class predominate over any questions

affecting only individual members.” Fed. R. Civ. P. 23(b)(3).

In determining whether common questions predominate, courts have

focused on the claims of liability alleged against defendants.

See Bogosian v. Gulf Oil Corp., 561 F.2d 434, 456 (3d Cir.

1977). Predominance “tests whether proposed classes are

sufficiently cohesive to warrant adjudication by

representation.” In re NFL Players Concussion Injury Litig.,

821 F.3d at 434 (citation omitted).

As this Court stated in its October 31, 2018 Opinion on

Defendant’s motion to dismiss, in order to properly plead a

breach of contract claim, Plaintiffs must show “(1) the

existence of a valid contract between the parties; (2) failure

of the defendant to perform its obligations under the contract;

and (3) a causal relationship between the breach and the

plaintiff’s alleged damages.” (ECF No. 25 at 12) (quoting

Motamed v. Chubb Corp., 15-cv-7262, 2016 U.S. Dist. LEXIS 33301,

at *11-12 (D.N.J. Mar. 15, 2016)). Defendant’s opposition brief

largely focuses on the predominance factor, devoting a

substantial number of pages to its numerous arguments for why

individual questions would predominate over common questions in

any attempt to determine, on a class-wide basis, whether breach

of contract has been proven.

The Third Circuit has “previously noted that the line

dividing ascertainability from predominance is blurry.” Hayes

v. Wal-Mart Stores, Inc., 725 F.3d 349, 359 (3d Cir. 2013)

(citing Marcus, 687 F.3d at 594 n. 3). While the two concepts

do conceptually overlap, “they remain separate prerequisites to

class certification and serve distinct purposes: the

ascertainability requirement focuses on whether individuals

fitting the class definition may be identified without resort to

mini-trials, whereas the predominance requirement focuses on

whether essential elements of the class's claims can be proven

at trial with common, as opposed to individualized, evidence.”

Id. (internal citations omitted). Here, the Court first finds

that Defendant’s predominance objections based on the potential

need for individualized inquiries regarding the specifics terms

of individual contracts, whether individual policyholders

experienced breach of their policy, and whether such breach

caused any alleged damages “all focus on whether putative class

members fit the class definition” and thus are “better analyzed

under the ascertainability framework than the predominance

framework.” Id.

First, Defendant’s opposition brief argues that

predominance has not been shown because individualized review

would be necessary as to the terms of each potential class

member’s specific policy, so as to analyze and determine whether

incorrect information in an Annual Report or Illustration could

even constitute a breach of that policy’s terms. While this may

initially have been a powerful argument that analysis of

individual evidence would predominate over class-wide evidence,

Plaintiffs’ revision of its class definitions appears to have

resolved this potential issue.

In their reply brief, Plaintiffs’ specified that their

Damages Class would only include those policyholders that were

contractually entitled to receive an Annual Report or

Illustration showing forward-looking information regarding their

policies, under the theory of breach that this Court explained

in detail in its earlier Opinion permitting Plaintiffs’ claims

to move past the pleadings stage. While, as Defendants argue

elsewhere, this new definition may simply create additional

concerns regarding whether the members of the proposed Damages

Class are easily ascertainable, the Court finds that the revised

definition clears up this potential question regarding the

predominance element. Simply put, if each class member, by

definition, was contractually required to have received the

forward-looking information in question in their Annual Reports

or an Illustration, then individual evidence regarding whether

the terms of the class members’ contracts entitled them to such

information should certainly not predominate at trial.

Defendant, in its sur-reply brief, further notes that some

of AGLIC’s policies require Annual Reports or Illustrations to

further include “any other data required by the state in which

the policy is delivered,” and argues that accordingly the Court

would need to further analyze the specific language of the

contract and state law to determine which information was

required to be included. However, Defendant has overcomplicated

the question at the heart of this case: Plaintiffs’ central

argument is that if class members were contractually entitled to

forward-looking Illustrations or Annual Reports, and the

information in those Illustrations or Annual Reports was

inaccurate, that alone is sufficient to demonstrate breach.

While individual state laws could theoretically provide for yet

another potential form of liability for breach for those

policyholders whose policies required incorporation of

additional data under state law, analysis of that issue is

separate and distinct from the theory of liability at the center

of this litigation.

Similarly, Plaintiffs’ revision of their Damages Class

definition to only incorporate those policyholders who “merely”

or “materially” paid their planned premiums as outlined in the

Illustration or Annual Report similarly shifts Defendant’s

arguments regarding breach and causation from being questions of

predominance to being questions of ascertainability. While

Defendant has continued to assert that there are individual

questions as to these factors that predominate over common

questions, it appears they have overcomplicated Plaintiffs’

theory of breach in doing so.

With the Damages Class definition revised to include only

those policyholders who paid their planned premiums and made no

other changes, Plaintiffs’ theory as to how breach and causation

can be shown on a class-wide basis is both interconnected and

simpler than Defendants make it out: if a policyholder (1)

received an Illustration or Annual Report that outlined a

specific planned premium and appeared to forecast that the

policy would continue as expected and not fall into a DEFRA

scenario, and the policyholder (2) did nothing else besides pay

the planned premiums set out in the Illustration or Annual

Report, with no changes made to the policy or coverage, then (3)

the policyholder could not have received a DEFRA notice unless

the information in the Illustration or Annual Report was

inaccurate. (See ECF No. 83-3 at ¶ 33). And, as Plaintiff

notes, an individual policyholder’s actions prior to the

reception of the Illustration or Annual Report are beside the

point — if actions taken prior to when AGLIC generated a

policyholder’s forward-looking information regarding planned

premiums and termination dates may have caused a DEFRA scenario,

then one would assume that the Illustration or Annual Report

would have identified that concern, thereby giving the

policyholder an opportunity to take steps to avoid such a

scenario before it arose and before a DEFRA Notice was

necessary.

Therefore, Defendant’s arguments that individual inquiry on

these fronts will be necessary is not truly a question of

predominance. Rather than undermining Plaintiffs’ ability to

show that essential elements of the class's claims can be proven

at trial with common, as opposed to individualized, evidence,

Defendant’s arguments here call into question whether the Court

will be able to readily ascertain who is a policyholder that

“merely” or “materially” followed the planned premiums as

Plaintiffs’ class definition requires. The Court will address

these concerns in its ascertainability analysis instead.

However, while those questions may be better suited for the

ascertainability analysis, Defendant has raised a genuine

concern regarding whether the damages prong of Plaintiffs’

breach of contract claim can be proven at trial through common,

as opposed to individualized, evidence. Plaintiffs, in their

reply briefs, point out that “individual damages calculations do

not preclude class certification under Rule 23(b)(3),” Neale v.

Volvo Cars of N. Am., LLC, 794 F.3d 353, 375 (3d Cir. 2015), and

appear to focus their counter arguments on the reasons why they

believe they have shown sufficient, valid methods for

calculating individual policyholder’s damages, or for resorting

to rescission in cases where such damages may be impossible to

properly calculate.

However, as the Third Circuit has previously explained,

“when courts speak of ‘damages,’ they are often referring to two

distinct concepts: the ‘fact of damage’ and the measure/amount

of damages.” Harnish v. Widener University School of Law, 833

F.3d 298, 305 (3d Cir. 2016). Plaintiffs’ contention regarding

damages calculations is accurate. But “the putative class must

first demonstrate . . . the fact of damage [] ‘on a common

basis.’” Id. at 306 (quoting Newton, 259 F.3d at 189).

While Defendant has separately raised arguments regarding

the ability to calculate individual damages, Plaintiffs appear

to have largely ignored the question raised as to whether they

can prove such fact of injury for all class members. Breach of

contract claims require the plaintiff to have suffered damage.

Red Roof Franchising, LLC v. Patel, 877 F. Supp. 2d 124, 131

(D.N.J. 2012). The question here then is whether the Damages

Class would be able to prove this element — namely, that class

members were damaged by the allegedly inaccurate information

provided in their Annual Report or Illustration — through the

introduction of evidence at trial that is common to the class,

rather than requiring “individualized evidence [that will] later

overwhelm the case and render it unsuitable for class-wide

adjudication.” Id. at 305.

In determining whether issues that are ‘susceptible to

generalized, class-wide proof’ are ‘more prevalent or

important,’ a district court is called to ‘formulate some

prediction as to how specific issues will play out ... in a

given case.’” Id. at 304 (quoting In re Hydrogen Peroxide

Antitrust Litig., 552 F.3d 305, 311 (3d Cir. 2008)). While a

court’s analysis under this standard may sometimes appear close

to a merits determination, it is not one — the Court’s duty at

this stage is not to make a final determination regarding

whether Plaintiffs can prove any element of their breach of

contract claim, but to assess whether “the plaintiffs' proposed

class-wide theories and evidence would be sufficient to address

the predominant issues in the case,” or if there is a serious

risk that individual issues will ultimately predominate at

trial. Id. at 305.

Here, Defendant argues that Plaintiffs simply cannot show

fact of injury on a class-wide basis. AGLIC’s basic explanation

is simple: many policyholders who have received a DEFRA notice

have not actually suffered damage as a result of receiving a

DEFRA notice. To properly explain and assess the first of

Defendant’s arguments on this front, the Court finds it

necessary at this stage to outline a further dispute between the

parties regarding the specific factual circumstances faced by

different policyholders who have received DEFRA notices.

Defendant and its experts have asserted in this action that

the group of policyholders that have received DEFRA notices

under Plaintiffs’ Damages Class definition can and should be

conceptually split into two separate groups: those who have

received so-called “Temporary” DEFRA Notices and those who have

received “Permanent” DEFRA Notices. According to Lana

Marquette, Vice President and Head of Decision Support for

AGLIC, DEFRA compliance is monitored by keeping track of the

Guideline Premium Limitation (“GPL”), which is “essentially a

legal limitation on the amount of premiums that can be paid into

a universal life policy” based on a series of factors that are

not relevant to this analysis. (ECF No. 79 at ¶ 12).

Marquette, as well as Brian King, Managing Director in the

Insurance and Actuarial Advisory Services Practice of Ernst &

Young LLP’s Financial Services Office, explain that, in general,

a Temporary DEFRA Notice will be sent to a policyholder who

attempts to make a premium payment that would cause their

cumulative premium payment amount to exceed the GPL. In the

Temporary DEFRA scenario, the account remains tax-advantaged

life insurance, but policyholders may be prohibited from

contributing more premiums for a temporary period, and AGLIC

sends the policyholder a letter “stating that the payment cannot

be made and that payments must be temporarily limited, usually

to the next policy anniversary.” (Id. at ¶¶ 14-16; ECF No. 80

at ¶ 51).

A Permanent DEFRA Notice, on the other hand, is generally

sent to a policyholder when “a significant reduction in

coverage” is made, which reduces GPL amount on a yearly basis

until it eventually falls below the cumulative amount of

premiums already paid by the policyholder. (ECF No. 79 at ¶

14). Therefore, for the policy to remain tax-advantaged life

insurance, policyholders are not only restricted from paying

future premiums, but excess premiums in the cash account, if

any, must be refunded to the policyholder each year commensurate

with each decrease in the GPL. (Id. at ¶ 16; ECF No. 80 at ¶¶

54-55). When this occurs, AGLIC “sends the policyholder a

letter advising that payments are permanently limited and

providing the policyholder various options.” (ECF No. 79 at ¶

15).

Plaintiff, unsurprisingly, has disputed this distinction,

referring to AGLIC’s “unavailing” “attempt to create two

fabricated terms in order to create distinction between them.”

(ECF No. 89 at 17). And their own expert has similarly

disagreed with the explanations of Defendant’s experts, stating

that “IRC §7702 does not make any such distinction,” and that “I

contend, a violation is a violation.” (ECF No. 89-9, Ex. F. at

¶¶ 24-25).

At this point, it is worthwhile to re-state the burden of

persuasion present on a motion to certify class: Plaintiffs here

bear the burden of demonstrating, by a preponderance of the

evidence, that common issues predominate in this litigation over

individual issues of specific class members. If Plaintiffs

cannot show under that standard that this distinction either

does not exist, or that, even if it does, the distinction

between Permanent and Temporary DEFRA scenarios does not

necessarily create further individual issues that will need to

be addressed in this litigation that would therefore defeat

predominance, then they have failed to meet their ultimate

burden to certify the Damages Class.

In ruling on Plaintiffs’ motion to certify class, the Court

does not reach any final conclusion at this stage regarding

which party is correct as to Defendant’s proffered distinction

between different members of the Damages Class. However, having

reviewed the parties’ arguments and proffered expert analysis on

this subject, the Court finds that, at the very least, Defendant

has put forth a colorable, persuasive basis for its proposed

distinction, which Plaintiff has failed to rebut by a

preponderance of the evidence.

First, a comparison between the DEFRA notice received by

Plaintiffs, who all parties agree would fall within the

Permanent DEFRA group, and an example of a Temporary DEFRA

notice introduced into the record by Defendant, only supports

the distinction as explained by Defendant. As outlined by

Marquette and King, Plaintiffs’ DEFRA Notice informed them that

their 2008 coverage reduction, combined with their premium

payment history, has caused their policy to exceed its GPL, and

presented Plaintiffs with a series of options for immediate

modifications to their policy to retain tax-advantaged status;

the sample Temporary Notice, on the other hand, informed that

policyholder that they had reached the maximum premium payments

allowed under DEFRA guidelines, and that accordingly additional

payments would not be accepted until their cash value had been

depleted, which was projected to occur in around 18 months.

Compare (ECF No. 8-3) (Plaintiffs’ Permanent DEFRA Notice) with

(ECF No. 78-3, Ex. 38 at AGLIC-BUCK-058624) (example of a

Temporary DEFRA Notice).

Second, and perhaps more importantly, Defendant, through

the reports of Marquette and King, have thoroughly outlined the

basis for their arguments regarding the distinction between

Temporary and Permanent DEFRA scenarios, explaining in great

detail the underlying considerations and calculations that AGLIC

takes into account before sending out the different forms of

DEFRA Notice. Plaintiffs’ expert, on the other hand, only

quibbles generally with Marquette and King’s explanations, or

lack thereof, of certain concepts, and notes that IRC § 7702

does not itself reference any such distinction. In fact, his

direct response to Defendant’s extensive explanation of the

distinction appears to span only two paragraphs, and fails to

persuasively counter the reports of King and Marquette: he does

not truly address their explanations head on, explain exactly

why these distinctions do not exist or why Defendant’s

explanations of their impact are incorrect, or provide any

alternative explanation for the separate forms of DEFRA notices

AGLIC sends to policyholders. Accordingly, the Court will take

into account the distinction between Permanent and Temporary

DEFRA scenarios in analyzing whether Plaintiff has met

sufficiently demonstrated the predominance element of Rule

23(b)(3).

Unsurprisingly, that distinction carries weight in this

analysis. Defendant asserts that many, if not all,

policyholders who have received Temporary DEFRA Notices have not

actually been damaged. While they are temporarily limited from

paying further premiums, those limits are eventually lifted —

and, importantly, “[b]y paying more in premiums sooner than they

otherwise might have, their policies have greater cash value

than had they been funded at lower levels and not received a

Temporary DEFRA Letter.” (ECF No. 88 at 13). In support of

this argument, Defendant has submitted a supplemental report

from King, which walks through the underlying calculations and

makes a persuasive argument for why many such policyholders in

the so-called Temporary DEFRA Scenario would not only not have

suffered damage, but in fact would “have greater cash value” in

their accounts than they would have had otherwise, “which will

generate more interest over the life of the policy.” (ECF No.

88-6 at ¶¶ 12-16).

In response, Plaintiffs’ expert, for the most part, makes

no attempt to dispute or disprove King’s analysis or

calculations, or to show that policyholders in the Temporary

DEFRA scenario have not benefitted financially. He does,

admittedly, argue that this analysis ignores the fact that such

policyholders may suffer due to their “Guaranteed Termination

Dates” changing, which could cause harm through “planning errors

with respect to estate planning, family planning, financial

planning, and the like.” (ECF No. 89-9, Ex. F at ¶ 28).

However, Plaintiffs’ expert not only fails to support this

contention beyond stating that “[i]n my opinion, the additional

premium payments will eventually reflect different Guaranteed

Termination Dates on subsequent annual reports,” he also makes

no attempt to demonstrate how such damage might be shown on a

class-wide basis using common evidence, as opposed to requiring

individual class members to prove damage using individual

evidence.

Defendant notes that even some policyholders who enter the

Permanent DEFRA Scenario may in fact benefit as well. As most

AGLIC policies have a level “death benefit,” the “cash value

remaining in the policy at the time of an insured’s death is not

added to the death benefit” that is paid out by the policy.

(ECF No. 74 at 49). Accordingly, when an insured dies after a

policy enters the Permanent DEFRA Scenario, Defendant argues

that they avoid having paid the premiums they would have

otherwise lost when the death benefit was paid out, because the

DEFRA Notice, and its concurrent restriction on paying further

premiums, stops them from doing so. Based on this line of

thinking, those class members that are beneficiaries or estates

of deceased policyholders may need to demonstrate that they did

not ultimately save money from having entered a DEFRA violation

scenario. Plaintiffs, for their part, do not appear to address

this argument or the potential individualized evidence it may

require at trial.

As the Court has noted repeatedly, Plaintiffs bear the

burden here of demonstrating, by a preponderance of the

evidence, that the Damages Class’s breach of contract claim is

provable via class-wide evidence and a cognizable class-wide

theory of damage. The Court finds that they have failed to do

so, and that Defendant has persuasively shown the serious risk

that individualized evidence and theories of damage might

ultimately overwhelm a class-action trial.

B. Ascertainability

The Court further finds that Plaintiffs motion fails under

the ascertainability prong as well. “Many courts and

commentators have recognized that an essential prerequisite of a

class action, at least with respect to actions under Rule

23(b)(3), is that the class must be currently and readily

ascertainable based on objective criteria.” Grubb v. Green Tree

Servicing, LLC, 2017 U.S. Dist. LEXIS 117465, at *47 (quoting

Marcus v. BMW of N. Am., LLC, 687 F.3d at 592-93) (internal

citations omitted). The Third Circuit, for example, has held

that this requirement serves significant objectives. See id.

“First, it eliminates serious administrative burdens that are

incongruous with the efficiencies expected in a class action by

insisting on the easy identification of class members.” Id. at

*48 (quoting Marcus v. BMW of N. Am., LLC, 687 F.3d at 592-93).

Second, “it protects absent class members by facilitating the

best notice practicable under Rule 23(c)(2) in a Rule 23(b)(3)

action.” Id. (quoting Marcus v. BMW of N. Am., LLC, 687 F.3d at

592-93) (internal citation and quotation marks omitted).

Finally, an ascertainable class “protects defendants by ensuring

that those persons who will be bound by the final judgment are

clearly identifiable.” Id. (quoting Marcus v. BMW of N. Am.,

LLC, 687 F.3d at 592-93).

To demonstrate ascertainability, the Third Circuit requires

a plaintiff to show: (1) the class is defined with reference to

objective criteria, and (2) there is a reliable and

administratively feasible mechanism for determining whether

putative class members fall within the class definition. Id.

(citing Byrd v. Aaron’s Inc., 784 F.3d 154, 163 (3d Cir. 2015)).

A plaintiff need not identify every class member at the class

certification stage but must simply show that “class members can

be identified.” Id. (quoting Byrd, 784 F.3d at 163).

As described above, Plaintiffs here have chosen, through

their revisions to the Damages Class definition in their reply

brief, to exchange potential predominance questions for a host

of ascertainability issues. First, it appears that, given the

inclusion of a “contractually entitled” requirement in

Plaintiffs’ revised class definition, ascertaining which

policyholders qualify as class members may require repeated

review of individual contracts to determine whether they

actively required AGLIC to send Annual Reports or Illustrations

containing the information at the center of this case.

Plaintiffs contend that this is not the case, pointing to

the fact that a high percentage of the policyholders that they

have currently identified as potential class members had

policies with language nearly identical to that of the Buck

Policy. Accordingly, Plaintiffs seem to argue that Defendant is

being disingenuous in implying that it would be difficult to

ascertain class members, because they of course should be able

to easily determine which policyholders have policies based on

the specific Policy Forms already identified.

However, it appears that Plaintiffs have largely missed the

point Defendant has attempted to make. The Court agrees that it

seems unlikely that AGLIC would be incapable of determining

which policyholders’ policies used the same form contract as the

Buck Policy as their base, or that class certification should be

denied simply because it might take genuine manual effort on

AGLIC’s part to compile a comprehensive list. Were the Damages

Class definition confined only to those policyholders with that

specific language in their policy, Plaintiffs might be correct

that ascertainability should not be a true issue.

But that is not the class definition Plaintiffs have put

forth. Instead, the proposed Damages Class would encompass any

and all AGLIC policyholders who were “contractually entitled” to

an Annual Report or Illustration that included specific

“forward-looking” information — regardless of whether the

contractual entitlement was created by the inclusion of the

specific language found in the Buck Policy, or through some

other entirely different contractual formulation or combination

of separate contractual provisions. While Plaintiffs’ breach of

contract claim here has been allowed to proceed past the

pleadings stage, that required the Court to analyze the

specific, separate provisions of the Buck Policy to determine if

they had sufficiently plead that they had a contractual right

that could have been breached. Defendant has pointed out that

the specific form contracts that include the language relied

upon by Plaintiffs here are only 38 of more than one thousand

different Policy Forms utilized at different times by AGLIC and

the dozens of previously separate companies it now comprises.

(See ECF No. 88-1 at ¶¶ 2-8).

And, as the small number of policies currently before the

Court make clear, the terms may vary enough from one policy to

the next so as to make it impossible to ascertain based on only

a quick scan of the specific contract whether it bestowed the

contractual requirements at the core of the Damages Class

definition.

As just one example, Defendant’s Exhibit 7 is a policy

which, from the Court’s review, appears to include language

requiring the provision of a forward-looking Illustration upon

request that is identical to that of the Buck Policy; however,

while the policy does require the provision of an annual report,

its language is different and does not appear to include any

requirement that the report include the types of forward-looking

information Plaintiffs base their claims on here. (ECF No. 75-

11, Ex. 7 at 16-17). Defendant’s Appendix A further

demonstrates the variety to be found in only a small number of

policies introduced into the record at this stage, again making

up a small percentage of the apparently vast universe of

different policy forms that the dozens of previously separate

companies that now comprise AGLIC have offered to customers over

the course of decades. (ECF No. 75-1).

Plaintiffs argue that Defendant should simply be able to

check its records to see, for example, which policyholders had

Illustrations sent to them, and brush off Defendant’s contention

that AGLIC has sent Illustrations and Annual Reports with

forward-looking information even to some policyholders whose

policies did not contractually entitle them to such information.

While Plaintiffs seem to believe such an occurrence to be

extremely unlikely, the Court disagrees; especially in an

industry where many policyholders may be working with an

insurance agent who has a deeper understanding of life insurance

and the types of information useful to consider when deciding

whether to alter your coverage or premium payments — as the

Bucks here did — it seems entirely plausible, if not almost

likely, that even some policyholders who did not have an

explicit contractual right might, through their agent, request

such information in an Illustration and ultimately receive it.

Plaintiffs have put forth no evidence to show that this highly

plausible scenario could not have occurred, nor persuasively

explained how a simple pulling of such records would

sufficiently answer a question that required this Court’s

analysis in its October 31, 2018 Opinion to determine for the

Buck Policy.

Accordingly, to determine whether policyholders with any of

the other 950+ policy forms were similarly “contractually

entitled” to Annual Reports or Illustrations with this specific

information, the Court very well may need to engage in

individualized factual review of the specific policies of those

policyholders, and determine on a repeated basis whether

separate policies actually created such a contractual

entitlement. This form of “file-by-file review” to determine

which policyholders had contractual entitlements that would

render them a potential class member very well could amount to

the type of “‘mini-trial[s]’ and ‘individualized fact-finding’

that undermines ascertainability and makes class treatment

inappropriate.” Coleman v. Commonwealth Land Title Ins. Co.,

318 F.R.D. 275, 292 (E.D. Pa. 2016). Plaintiffs bear the burden

of demonstrating, by a preponderance of the evidence, that the

Court will not find itself in such a situation. The Court finds

that they have failed to do so, and accordingly their Damages

Class cannot be certified.

And this is not the only ascertainability issue as to the

proposed Damages Class. Plaintiffs’ class definition does not

only require that class members have been contractually entitled

to specific forward-looking information in their Illustrations

or Annual Reports; it also requires that they followed the

planned premiums outlined in the Illustration or Annual Reports

they received. However, Plaintiffs’ reply brief and sur-reply

brief make clear that their proposed Class does not truly

comprise all policyholders who paid their premiums — instead,

they mean their class to comprise those policyholders who only

followed the planned premiums in their Illustration or Annual

Report, without making any other changes or taking other actions

that could impact the assumptions underlying the forward-looking

information AGLIC had provided them. As the Court explained in

its predominance analysis, this further restriction of the

proposed class does make some sense: without it, Plaintiffs

would undoubtedly face serious hurdles in proving by a

preponderance of the evidence that a trial would not devolve

into an extensive, wide-ranging attempt to adjudicate the

specific premium payments, coverage reductions, and other policy

changes made by different individual policyholders after the

reception of their Illustration or Annual Report, and the extent

to which those changes might be the true cause of a policy

entering a DEFRA scenario.

But this new constricting of the proposed class definition

raises two other issues. First, it does not appear to provide a

clearly objective and readily applied manner for determining

which potential class members actually meet this requirement.

At different points in their briefing and in their expert

reports, Plaintiffs refer to both policyholders who were “merely

following the Planned Premiums,” (ECF No. 83 at 1), and to

policyholders for whom there was “no subsequent change in the

face amount or riders or benefit options, and no material

deviation in the amount of the payments of planned premiums.”

(ECF No. 83-3, Ex. A at ¶ 33). However, Plaintiffs fail to

clearly define what they mean by “merely” or “material” in this

context.

If the proposed class definition is only meant to include

those individuals who strictly and exactingly followed their

planned premium payment schedule with no other changes, as

implied by Plaintiffs’ expert, then at the very least that

should be somewhat easily determined by a review of AGLIC’s

records. However, as Defendant notes, Plaintiffs must not mean

that to be their class definition, because if so, Duane Buck

himself would not appear to be a class member due to the

extended period in which planned premium payments were not made

on his account — regardless of whether the Bucks or AGLIC was at

fault for those late payments.

And if the Damages Class might include those policyholders

who closely followed their planned premiums but made some

undefined changes or took some other undefined actions,

Plaintiffs have only managed to introduce yet another possible

need for extensive, individualized fact-finding in this

litigation. Relatedly, Plaintiffs’ expert, at one point in his

supplemental report, states his belief that “[i]f any change is

enough to cause a DEFRA violation, then it is definitely a

‘material deviation.’” (ECF No. 89-9, Ex. F at ¶ 27). Rather

than supporting Plaintiffs’ view here, however, this added color

only further underlines the extent of the ascertainability

problem with the Damages Class: requiring proof that a class

member did not make any changes to their coverage or premium

payments that caused a DEFRA violation, in a class that consists

only of members whose policies have violated DEFRA, would

guarantee that the Court and the parties would need to engage in

the exact form of individual fact-finding the ascertainability

requirement is meant to avoid.

Simply put, without a bright, easily applied line between

class members and non-class members, the Court would risk of

being drawn into a process of mini-trials to determine exactly

whether individual policyholders had followed the planned

premium payments outlined in their specific Illustrations or

Annual Reports closely enough to qualify as a member of the

Damages Class. For this reason as well, the Court finds that

Plaintiffs have failed to meet their burden to demonstrate that

the Damages Class is “currently and readily ascertainable based

on objective criteria.” Marcus, 687 F.3d at 593.

CONCLUSION

For the reasons expressed above, Defendant’s motion to

certify class (ECF No. 68) will be denied.

An appropriate Order will follow.

Date: February 25, 2021 /s Noel L. Hillman

At Camden, New Jersey NOEL L. HILLMAN, U.S.D.J.