# Wells Fargo Bank, National Association v. Transamerica Life Insurance Company

> District Court, C.D. California · February 12, 2020

URL: https://www.frixlaw.com/law-library/cases/10633958

## Case

- **Court:** District Court, C.D. California
- **Decided:** February 12, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10633958

## Opinion text

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY

ee eee CHRISTINA ASNYDER
Catherine Jeang Not Present N/A
Deputy Clerk Court Reporter / Recorder Tape No.
Attorneys Present for Plaintiffs: Attorneys Present for Defendants:
Not Present Not Present
Proceedings: (IN CHAMBERS) - DEFENDANT’S MOTION TO DISMISS
PLAINTIFF’S FIRST AMENDED COMPLAINT (Dkt. [ 23 ], filed
October 28, 2019)
I. INTRODUCTION
Plaintiff Wells Fargo Bank, National Association (“Wells Fargo”) filed this action
against defendant Transamerica Life Insurance Company on August 5, 2019. Dkt. 1.
Wells Fargo alleges that Transamerica wrongfully increased the monthly deduction rates
(‘MDRs”) of certain universal life insurance policies in violation of the terms of the
policies and various states’ laws. Id.
Transamerica filed the operative first amended complaint on October 28, 2019. Dkt.
22 (“FAC”). The FAC asserts claims for: (1) breach of contract: (2) contractual breach of
the implied covenant of good faith and fair dealing; (3) violation of the Pennsylvania
Insurance Bad Faith Statute (“Section 8371”); (4) violation of California’s Unfair
Competition Law (“UCL”): (5) violation of the Connecticut Unfair Trade Practices Act
(“CUTPA”):; (6) conversion; and (7) declaratory relief. See generally id.
Transamerica filed a motion to dismiss the FAC on November 22, 2019. Dkt. 23-1
(“Mot.”). Wells Fargo filed an opposition on December 20, 2019. Dkt. 24 (“Opp.”).
Transamerica filed a reply on January 10, 2020. Dkt. 26 (“Reply”).
The Court held a hearing on January 23, 2020. Having carefully considered the
parties’ arguments, the Court finds and concludes as follows.
II. BACKGROUND
Transamerica is an Iowa corporation with its principal place of business in Iowa.
FAC 46. Wells Fargo alleges that Transamerica is authorized to do (and does substantial)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
business in California. FAC § 6. At issue in this case are certain universal life insurance
policies that Transamerica issued between 1990 and 2005. Id. 4 1.
Wells Fargo is a national banking association that maintains its principal place of
business in South Dakota. FAC § 5. Wells Fargo acts as the securities intermediary for 15
Transamerica universal life insurance policies. Id. 1. These policies range in face amount
from $400,000.00 to $35.5 million and were issued in California, Arizona, Connecticut,
Florida, Illinois, Michigan, Pennsylvania, and Texas. Id. { 11. Wells Fargo alleges that
all 15 policies “are contracts of adhesion in that they are form policies drafted by
Transamerica, . . . [all 15 [p]olicies are substantially similar and are subject to the same or
similar material terms and conditions.” Id. § 20.
Transamerica’s life insurance policies contain two components: (1) a “mortality”
component, for which Transamerica charges a cost to cover the risk of the insured’s death
(“the cost of insurance’); and (2) a “cash value” component, where premiums paid in
excess of the cost of insurance and other charges accumulate (“the Accumulation Value”)
and earn interest. FAC 412. Transamerica’s policies “unbundle” these two components
“to allow policyholders to choose whether to pay just enough premiums to cover the risk
of death (i.e., pay solely for the life insurance) or pay more (subject to certain limitations)
and build up a cash value that earns tax-deferred interest.” Id. Transamerica deducts funds
from the accounts through MDRs to cover the cost of insurance and other charges. Id. §
13. If the balance of a particular universal life insurance policy is insufficient to cover
these monthly charges, then the policy will enter a grace period and lapse unless additional
payments are made. Id.
Transamerica’s universal life insurance policies include both guaranteed and non-
guaranteed elements. FAC § 17. Guaranteed elements—including the guaranteed
minimum interest rate on which interest on the Accumulation Values accrue—are fixed
and determined at a specific time, such as when a given policy is issued. Id. Transamerica,
however, may adjust non-guaranteed elements, such as the MDRs, consistent with the
universal life insurance policy’s terms. Id.
Wells Fargo’s policies state that Transamerica “will determine the Monthly
Deduction Rate for each policy month at the beginning of that policy month,” or, in the
case of | policy, at the beginning of each year. FAC § 18. Wells Fargo alleges that at least
some of its policies provide that “[a|ny change in the Monthly Deduction Rates will be
prospective and will be subject to our expectations as to future cost factors. Such cost

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
factors may include, but are not limited to: mortality; expenses; interest; persistency; and
any applicable federal, state and local taxes.” FAC 4 18. Moreover, Wells Fargo’s policies
indicate that Transamerica “does not distribute past surplus or recover past losses by
changing the Monthly Deduction Rates.” Id, § 19 (internal alterations omitted). According
to Wells Fargo, then, the policies’ terms limit Transamerica’s ability to raise MDRs in two
critical aspects, such that: “(a) changes can only be based on Transamerica’s expectations
as to future cost factors; and (b) changes must be prospective in nature only (i.e.,
Transamerica cannot change rates to recover past losses (or distribute past surplus)).” Id.
21.
Wells Fargo alleges that Transamerica raised the MDRs on 10 of Wells Fargo’s
policies in 2016 and 2017 and on 5 of Wells Fargo’s policies in 2018. FAC § 23.
According to Wells Fargo, “Transamerica has never explained the methodology used to
determine each policy’s increase. However, recent calculations estimate that, on average,
Transamerica has increased the Monthly Deduction Rate on the Policies by between 10%
and 269%.” Id. Wells Fargo therefore contends that Transamerica’s MDR increases
“constitute| | express breaches of the [p]olicies,” as well as “breaches of both common law
and codified implied covenant of good faith and fair dealing and a violation of” various
states’ laws. Id. 4. Wells Fargo asserts that the purpose of these increases 1s to “force
Wells Fargo either to (a) pay exorbitant premiums that Transamerica knows would no
longer justify the ultimate death benefits or (b) lapse or surrender their policies, thereby
forfeiting the premiums paid by Wells Fargo . . . over the last decades.” Id. 4 56.
i. LEGAL STANDARDS
A. Rule 12(b)(2)
When a defendant moves to dismiss for lack of personal jurisdiction pursuant to
Federal Rule of Civil Procedure 12(b)(2), the “plaintiff bears the burden of establishing
that jurisdiction is proper.” Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008)
(citation omitted). Where, as here, the defendant’s motion is based on written materials
rather than an evidentiary hearing, “the plaintiff need only make a prima facie showing of
jurisdictional facts to withstand the motion to dismiss.” Brayton Purcell LLP v. Recordon
& Recordon, 606 F.3d 1124, 1127 (9th Cir. 2010) (quoting Pebble Beach Co. v. Caddy,
453 F.3d 1151, 1154 (9th Cir. 2006)). The plaintiff cannot simply rely on the “bare
allegations” of its complaint; however, uncontroverted allegations in the complaint must
be taken as true, and “[c]onflicts between parties over statements contained in affidavits

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
must be resolved in the plaintiff's favor.” Schwarzenegger v. Fred Martin Motor Co., 374
F.3d 797, 800 (9th Cir. 2004).
Generally, personal jurisdiction exists if: (1) it 1s permitted by the forum state’s long-
arm statute; and (2) the “exercise of that jurisdiction does not violate federal due process.”
Pebble Beach, 453 F.3d at 1154-55. “California’s long-arm statute is co-extensive with
federal standards, so a federal court may exercise personal jurisdiction if doing so comports
with federal constitutional due process.” Boschetto, 539 F.3d at 1015. “For a court to
exercise personal jurisdiction over a nonresident defendant, that defendant must have at
least ‘minimum contacts’ with the relevant forum such that the exercise of jurisdiction
“does not offend traditional notions of fair play and substantial justice.’” Schwarzenegger,
374 F.3d at 801 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
Depending on the nature of the contacts between the defendant and the forum state,
personal jurisdiction is characterized as either general or specific.
1. General Jurisdiction
“A court may assert general jurisdiction over foreign (sister-state or foreign-country)
corporations to hear any and all claims against them when their affiliations with the State
are so ‘continuous and systematic’ as to render them essentially at home in the forum
State.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)
(quoting International Shoe, 326 U.S. at 317). A corporation’s place of incorporation and
principal place of business are the paradigmatic bases for general jurisdiction. Daimler
AG v. Bauman, 571 US. 117, 137 (2014). Otherwise, “[t]he standard is met only by
“continuous corporate operations within a state [that are] thought so substantial and of such
a nature as to justify suit against [the defendant] on causes of action arising from dealings
entirely distinct from those activities.’” King v. Am. Family Mut. Ins. Co., 632 F.3d 570,
579 (9th Cir. 2011) (quoting International Shoe, 326 U.S. at 318). The standard for general
jurisdiction “is an exacting standard, as it should be, because a finding of general
jurisdiction permits a defendant to be haled into court in the forum state to answer for any
of its activities anywhere in the world.” Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d
1218, 1224 (9th Cir. 2011).

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
2. Specific Jurisdiction
A court may assert specific jurisdiction over a claim for relief that arises out of a
defendant’s forum-related activities. Rano v. Sipa Press, Inc., 987 F.2d 580, 588 (9th Cir.
1993). The test for specific personal jurisdiction has three parts:
(1) The defendant must perform an act or consummate a transaction within
the forum, purposefully availing himself of the privilege of conducting
activities in the forum and invoking the benefits and protections of its laws;
(2) The claim must arise out of or result from the defendant’s forum-related
activities; and
(3) Exercise of jurisdiction must be reasonable.
Id.; see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475—76 (1985). The plaintiff
bears the burden of satisfying the first two prongs, and if either is not satisfied, personal
jurisdiction is not established. Schwarzenegger, 374 F.3d at 802.
In contracts cases, courts conduct a “purposeful availment” analysis to determine the
first prong of the specific jurisdiction test. Id. Because a contract is “ordinarily but an
intermediate step serving to tie up prior business negotiations with future consequences
which themselves are the real object of the business transaction,” a court must evaluate
four factors to determine whether purposeful availment has occurred: (1) prior
negotiations, (2) contemplated future consequences, (3) the terms of the contract, and (4)
the parties’ actual course of dealing. Burger King, 471 U.S. at 478-79. A single contract
for the sale of goods to a plaintiff in the forum state may be sufficient for specific
jurisdiction over a defendant, but only where the contract creates a “substantial connection”
with the forum state. Boschetto, 539 F.3d at 1017. “The foreseeability of causing injury
in another state is not a sufficient basis on which to exercise jurisdiction,” without more.
Gray & Co. v. Firstenberg Mach. Co., Inc., 913 F.2d 758, 760 (9th Cir. 1990).
If the plaintiff establishes the first two prongs regarding purposeful availment and
the defendant’s forum-related activities, then it is the defendant’s burden to “present a
compelling case” that the third prong, reasonableness, has not been satisfied.
Schwarzenegger, 374 F.3d at 802 (quoting Burger King, 471 U.S. at 477). The third prong
requires the Court to balance seven factors: (1) the extent of the defendant’s purposeful

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
availment, (2) the burden on the defendant, (3) conflicts of law between the forum state
and the defendant’s state, (4) the forum’s interest in adjudicating the dispute, (5) judicial
efficiency, (6) the plaintiffs interest in convenient and effective relief, and (7) the existence
of an alternative forum. Roth v. Garcia Marquez, 942 F.2d 617, 623 (9th Cir. 1991).
B. Rule 12(b)(6)
A motion pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal
sufficiency of the claims asserted in a complaint. Under this Rule, a district court properly
dismisses a claim if “there is a ‘lack of a cognizable legal theory or the absence of sufficient
facts alleged under a cognizable legal theory.”” Conservation Force v. Salazar, 646 F.3d
1240, 1242 (9th Cir. 2011) (quoting Balisteri v. Pacifica Police Dep’t, 901 F.2d 696, 699
(9th Cir. 1988)). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds’ of his
“entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555 (2007) (internal citations omitted). “Factual allegations must be enough to
raise a right to relief above the speculative level.” Id. (internal citations omitted).
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all
material allegations in the complaint, as well as all reasonable inferences to be drawn from
them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be read in
the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266
F.3d 979, 988 (9th Cir. 2001). However, “a court considering a motion to dismiss can
choose to begin by identifying pleadings that, because they are no more than conclusions,
are not entitled to the assumption of truth. While legal conclusions can provide the
framework of a complaint, they must be supported by factual allegations.” Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009); see Moss v. United States Secret Service, 572 F.3d 962,
969 (9th Cir. 2009) (“[F]or a complaint to survive a motion to dismiss, the non-conclusory
“factual content,’ and reasonable inferences from that content, must be plausibly suggestive
of a claim entitling the plaintiff to relief.”). Ultimately, “[d]etermining whether a
complaint states a plausible claim for relief will . . . be a context-specific task that requires
the reviewing court to draw on its judicial experience and common sense.” Igbal, 556 U.S.
at 679.
Unless a court converts a Rule 12(b)(6) motion into a motion for summary judgment,
a court cannot consider material outside of the complaint (e.g., facts presented in briefs,

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
affidavits, or discovery materials). In re American Cont’! Corp./Lincoln Sav. & Loan Sec.
Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on other grounds sub nom Lexecon, Inc.
v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court may, however,
consider exhibits submitted with or alleged in the complaint and matters that may be
judicially noticed pursuant to Federal Rule of Evidence 201. In re Silicon Graphics Inc.
Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999); Lee v. City of Los Angeles, 250 F.3d 668,
689 (9th Cir. 2001).
As a general rule, leave to amend a complaint which has been dismissed should be
freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when “the
court determines that the allegation of other facts consistent with the challenged pleading
could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co.,
806 F.2d 1393, 1401 (9th Cir. 1986): see Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.
2000).
IV. DISCUSSION
A. Personal Jurisdiction
Transamerica first moves to dismiss Wells Fargo’s claims on the grounds that the
Court cannot exercise personal jurisdiction over Transamerica. Mot. at 12. According to
Transamerica, Wells Fargo’s “allegations are insufficient to establish general or specific
jurisdiction, and the FAC should be dismissed]|.|” Id. Wells Fargo does not contend that
the Court may exercise general jurisdiction over Transamerica. Opp. at 8 n.3. The Court
therefore proceeds to determine whether the Court may exercise specific personal
jurisdiction over Transamerica.
1. Purposeful Availment
The first prong of the specific jurisdiction analysis requires that a non-resident
defendant “purposefully avail [itself] of the privileges of conducting activities in the forum,
thereby invoking the benefits and protections of its laws|.]” In re W. States Wholesale Nat.
Gas Antitrust Litig., 715 F.3d 716, 741-42 (9th Cir. 2013) (internal citation omitted). For
a case sounding in contract, “[a] showing that a defendant purposefully availed [itself] . . .
typically consists of evidence of the defendant’s actions in the forum, such as executing or
performing a contract there.” Schwarzenegger, 374 F.3d at 802. “For tort-based claims,
the Ninth Circuit has stated that a court may exercise personal jurisdiction over a defendant
whose only contact with the forum state is the purposeful direction of a foreign act having

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
effect in the forum state.” Healthcare Ally Mgmt. of California, LLC v. Med. Mut. of
Ohio, No. 2:14-cv-09428-SJO-JEM, 2015 WL 12746216, at *5 (C.D. Cal. Jan. 26, 2015).
Wells Fargo alleges that, notwithstanding Transamerica’s Iowa citizenship,
Transamerica has purposely availed itself of the privileges of this forum. For example,
Wells Fargo alleges that Transamerica previously maintained an office in Los Angeles,
California; Transamerica housed its actuarial department in its Los Angeles office;
Transamerica registered with the California Secretary of State’s Office; and Transamerica
maintains a registered agent for service of process in Los Angeles, California. FAC 4 7.
In at least three other cases challenging Transamerica’s allegedly impermissible MDR
increases, the Court has found similar factors sufficient to conclude that Transamerica has
purposely availed itself of the privileges of doing business in California. See Brighton
Trustees v. Transamerica Life Ins. Co., No. 2:19-cv-04210-CAS-GJS, 2019 WL 6315541,
at *7 (C.D. Cal. Aug. 28, 2019); Hamra v. Transamerica Life Ins. Co., No. 2:18-cv-06262-
CAS-GJS, 2019 WL 468803, at *5 (C.D. Cal. Feb. 6, 2019); Feller v. Transamerica Life
Ins. Co., No. 2:16-cv-01378-CAS-AJW, 2017 WL 6453262, at *5 (C.D. Cal. Dec. 11,
2017).
Accordingly, the Court finds that Wells Fargo has made an adequate showing under
the purposeful availment prong sufficient to support the Court’s exercise of specific
personal jurisdiction over Transamerica.
2. Forum-Related Activities
The second prong of the specific personal jurisdiction analysis requires that
plaintiffs’ claims arise out of, or relate to, Transamerica’s forum-related activities. Picot
v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (anternal citation omitted). The Ninth
Circuit applies a “but for” test to determine whether claims relate to forum-related
activities. Monster Energy Co. v. Vital Pharm., Inc., No. 5:18-cv-01882-JGB-SHK, 2019
WL 2619666, at *7 (C.D. Cal. May 20, 2019) (citing Ballard v. Savage, 65 F.3d 1495,
1500 (9th Cir. 1995)). Under this test, the question is: but for Transamerica’s conduct in
California, would plaintiffs’ claims have arisen? As the Court has previously observed,
“any event in the causal chain leading to the plaintiff's injury 1s sufficiently related to the
claim to support the exercise of specific jurisdiction.” Feller, 2017 WL 6453262, at *6
(citing Dubose v. Bristol-Myers Squibb Co., No. 17-cv-00244-JST, 2017 WL 2775034, at
*3 (N.D. Cal. June 27, 2017)).

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
Transamerica contends that Wells Fargo cannot make the required showing of a
nexus between its claims and Transamerica’s contacts. Mot. at 14. That is because,
according to Transamerica, Wells Fargo “allege[s] no specific connection between the
conduct that allegedly harmed [it]|—the decisions to increase MDRs and subsequent
implementation of the increases—and California.” Id. Transamerica’s argument on this
basis 1s unavailing.
Here, Wells Fargo has presented a causal chain sufficient to establish a nexus
between its claims and Transamerica’s California contacts. Wells Fargo alleges that:
“Transamerica designated its Los Angeles office as either its home office or marketing
office in all of the Policies; Transamerica’s Los Angeles office housed its actuarial
department and priced most, if not all, the Policies; Transamerica’s Los Angeles employees
drafted the Policy forms, including language in dispute in this matter; Transamerica’s
office designed, prepared, issued, marketed, and received payments for most, if not all, of
the Policies; . . . Transamerica’s Los Angeles employees developed and evaluated the
Monthly Deduction Rate increases at issue here; and a Policy that is the subject of this
dispute was issued in California.” FAC § 8.These allegations are sufficient to establish, at
this juncture, that but-for Transamerica’s conduct in California, including the work of
Transamerica’s Los Angeles employees, Wells Fargo’s claims would not have arisen. See
LSH CO v. Transamerica Life Ins. Co., No. 2:18-cv-09711-SJO-KS, 2019 WL 3064422,
at *6 (C.D. Cal. Mar. 20, 2019) (finding sufficient nexus between plaintiffs’ claims related
to MDR increases and Transamerica’s contacts with California where fifteen of twenty-
two policies identified Los Angeles as Transamerica’s home office and remaining seven
identified Los Angeles as Transamerica’s marketing office); Feller, 2017 WL 6453262, at
*6 (finding sufficient nexus based, in part, on similar allegations regarding involvement of
former Los Angeles-based employees in Transamerica’s MDR increases).
Accordingly, the Court finds that there is “an affiliation between the forum and the
underlying controversy” sufficient to allow the Court to exercise specific personal
jurisdiction over Transamerica. Bristol-Myers Squibb Co. v. Superior Court of California,
San Francisco Cty., 137 S. Ct. 1773, 1780 (2017): accord Brighton Trustees, 2019 WL
6315541, at *8 (finding that plaintiffs challenging Transamerica’s MDR increases had
satisfied nexus requirement so as to allow the Court to exercise specific personal
jurisdiction over Transamerica).

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
3. Reasonableness
Wells Fargo has established the first two prongs regarding purposeful availment and
Transamerica’s forum-related activities. Therefore, it is Transamerica’s burden to “present
a compelling case that the exercise of jurisdiction would not be reasonable.”
Schwarzenegger, 374 F. 3d at 802 (quoting Burger King, 471 U.S. at 477). The third prong
requires the Court to balance several factors: (1) the extent of the defendant’s purposeful
availment; (2) the burden on the defendant; (3) conflicts of law between the forum state
and the defendant’s state: (4) the forum’s interest in adjudicating the dispute; (5) judicial
efficiency; (6) the plaintiff's interest in convenient and effective relief; and (7) the
existence of an alternative forum. Roth, 942 F.2d at 623.
Transamerica does not contend that exercising specific personal jurisdiction in the
Central District would not “comport with fair play and substantial justice.” See Mot. at
12-13; Reply at 1. This alone defeats Transamerica’s specific personal jurisdiction
challenge in light of plaintiffs’ prima facie showing regarding the first two prongs. See
LSH CO, 2019 WL 3064422, at *7 (finding that it would be reasonable to exercise specific
personal jurisdiction over Transamerica in the Central District in case challenging
Transamerica’s MDR increases because “Plaintiffs have met their burden of proving the
first two prongs of specific jurisdiction and Defendant does not contest the third.”); accord
Galaxia Elecs. Co. v. Luxmax, U.S.A., No. 2:16-cv-05144-JAK-GJS, 2017 WL 2903182,
at *10 (C.D. Cal. May 10, 2017) (denying motion to dismiss for lack of personal
jurisdiction where plaintiffs made prima facie showing under “the first two prongs of the
test for personal jurisdiction . . . [and] Defendants have made no such arguments” that
exercise of jurisdiction would not be reasonable).
Accordingly, the Court concludes that Transamerica has sufficient contacts with the
forum district, and litigating in the Central District of California, where a number of other
actions remain pending involving Transamerica and its purported MDR increases, would
not impose a considerable burden. See Hamra, 2019 WL 468803, at *6 (finding it would
be reasonable to exercise specific personal jurisdiction over Transamerica in the Central
District); Feller, 2017 WL 6453262, at *8 (same); Brighton Trustees, 2019 WL 6315541,
at *9 (same). The exercise of specific personal jurisdiction over Transamerica with respect
to Wells Fargo’s claims is proper under the Due Process Clause, and the Court DENIES
Transamerica’s motion to dismiss for lack of personal jurisdiction.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
B. Failure to State a Claim
1. Breach of Contract Claim
Wells Fargo’s breach of contract claim alleges that Transamerica materially
breached the policies’ terms in four respects: (1) by increasing the MDRs for reasons other
than changes to its future cost expectations; (2) by increasing the MDRs in an attempt to
circumvent the guaranteed minimum crediting rate; (3) by increasing the MDRs in an
attempt to recoup past losses and recover for shortfalls in expected revenues; and (4) by
imposing excessive cost of insurance rates, including by failing to lower these rates. FAC
{| 66(a)-(d). Transamerica moves to dismiss Wells Fargo’s claim, in part, insofar as it 1s
premised on Wells Fargo’s allegations that Transamerica increased the MDRs in an attempt
to circumvent the guaranteed minimum crediting rate. Mot. at 14.
To state a claim for breach of contract under California law, a party must plead: “(1)
the existence of the contract , (2) plaintiff's performance or excuse for nonperformance,
(3) defendant’s breach, and (4) the resulting damages to the plaintiff.” Oasis W_ Realty,
LLC v. Goldman, 51 Cal. 4th 811, 821 (2011) (internal citation omitted). At the pleading
stage, “|w|hen reviewing whether a plaintiff has properly stated a cause of action for breach
of contract, we must determine whether the alleged agreement is ‘reasonably susceptible’
to the meaning ascribed to it in the complaint.” Hervey v. Mercury Casualty Co., 185 Cal.
App. 4th 954, 964 (2010) (emphasis added) (citation omitted). “So long as the pleading
does not place a clearly erroneous construction upon the provisions of the contract, in
passing upon the sufficiency of the complaint, we must accept as correct plaintiff's
allegations as to the meaning of the agreement.” Marzec v. California Pub. Employees
Ret. Sys., 236 Cal. App. 4th 889, 909 (2015) (citing Aragon—Haas v. Family Security Ins.
Services, Inc., 231 Cal. App. 3d 232, 239 (1991)). Where the terms of the policy are
unambiguous, the Court will not infer a limitation on defendants which 1s not supported by
the language of the policy. See Croskey et al., Cal. Practice Guide: Insurance Litigation
(The Rutter Group 2015) 4 4:11 (“Clear and explicit’ policy language governs.”’) (quoting
Powerine Oil Co., Inc. v. Supt. Ct., 37 Cal. 4th 377, 390 (2005)).
Here, Wells Fargo alleges that Transamerica “has breached the Policies materially
.. . [including by] [i]ncreasing the Monthly Deduction Rate in an attempt to circumvent
the guaranteed minimum crediting rate[.]” FAC 66(b). Wells Fargo elsewhere equates
“crediting rate” with “interest rate.” See FAC § 59 (“If Transamerica was crediting
policyholder accounts with an interest rate higher than the 4% minimum guaranteed rate,

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
it could compensate for any reduction in interest it earns on policy accounts due to lower
interest rates by reducing the (non-guaranteed) crediting rate.” Wells Fargo further alleges
that “Transamerica is trying to do indirectly what it cannot do directly: it is using Monthly
Deduction Rates to achieve an interest crediting rate that is lower than the guaranteed
minimum interest crediting rate, which violates the Policies.” FAC 4 59.
The Court previously dismissed a breach of contract claim, similarly premised on
Transamerica’s alleged attempt to circumvent the guaranteed minimum interest rate, in
Brighton Trustees. There, institutional investor plaintiffs alleged that “Transamerica
materially breached the policies by increasing the Monthly Deduction Rates in an attempt
to circumvent the guaranteed minimum interest rate.” Brighton Trustees, 2019 WL
6315541, at *10 (anternal citations, quotation marks, and alterations omitted). The
investors contended that by increasing the MDRs by as much as 100%, “Transamerica has
used an increase in MDRs to do indirectly what it cannot do directly: it is using the Monthly
Deduction Rates to achieve an interest crediting rate that is lower than the guaranteed
minimum interest crediting rate, which violates the [investors’| Policies.” Brighton
Trustees, 2019 WL 6315541, at *10.
Wells Fargo cites to the Court’s previous decision in Feller for the proposition that
“af certain interest rate accruals are ‘guaranteed,’ a plausible reading of the policies is that
defendants may not directly offset them by increasing the MDR based on its interest
obligations.” Opp. at 10 (citing Feller v. Transamerica Life Ins. Co., No. 2:16-cv-01378-
CAS-AJW, 2016 WL 6602561, at *10 (C.D. Cal. Nov. 8, 2016)). Wells Fargo concedes,
however, that “the Court only applied this reasoning in Feller to policies that did not list
‘interest’ as a cost factor|.|” Id.
Wells Fargo attaches an exemplar policy to the FAC, and Wells Fargo alleges that
the exemplar policy provides that in setting MDRs, Transamerica may consider cost factors
“includ[ing] . . . mortality; expenses; interest; persistency; and any applicable federal state,
and local taxes.” FAC {| 18 (emphasis added). In at least four other cases involving
Transamerica’s MDR increases, the Court has already concluded that policies which
include this language cannot give rise to a breach of contract claim premised on a purported
attempt to circumvent minimum guaranteed interest rates. See EFG Bank AG, Cayman
Branch v. Transamerica Life Ins. Co., No. 2:16-cv-08104-CAS-AJW, 2017 WL 3017596,
at *7 (C.D. Cal. July 10, 2017) (‘the Court concludes that the Policies that list ‘interest’
among permissible “cost factors’ are not reasonably susceptible to an interpretation that
would preclude Transamerica from considering its interest obligations while setting

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
MDRs.”); accord Brighton Trustees, 2019 WL 6315541, at *10; Feller, 2016 WL 6602561,
at *10; Thompson v. Transamerica Life Ins. Co., No. 2:18-cv-05422-CAS-GJS, 2018 WL
6790561, at *8 (C.D. Cal. Dec. 26, 2018).
Following the hearing, the parties submitted a joint statement to the Court on
February 10, 2020, clarifying that all fifteen policies at issue in this case “permit
Transamerica to consider ‘interest’ in setting MDRS.” Dkt. 28 at 2. Accordingly, the
Court DISMISSES Wells Fargo’s breach of contract claim, as alleged in §] 66(b) of the
FAC, without prejudice.
2. Section 8371 Claim
With respect to Wells Fargo’s policy that was issued in Pennsylvania, Wells Fargo
alleges that “Transamerica’s conduct constitutes bad faith breaches” in several respects,
including by: (1) “[clharging excessive Monthly Deduction Rates that deprived Wells
Fargo of the benefit of its actual policy account values;” (2) “[b]asing Monthly Deduction
Rates on considerations of interest income earned on policy accounts rather than mortality
profits:” and (3) “[u]Jsing its discretion over Monthly Deduction Rates to circumvent
contractual requirements for the guaranteed minimum crediting rate[.]” FAC § 85.
According to Wells Fargo, these breaches violate Section 8371, Pennsylvania’s insurance
bad faith statute, and give rise “to an award of punitive damages and court costs and
attorney fees against Transamerica.” Id. § 88.
“There is no common law remedy in Pennsylvania for a claim of bad faith against
insurers.” Hanover Ins. Co. v. Ryan, 619 F. Supp. 2d 127, 140 (E.D. Pa. 2007). Instead,
a statutory remedy exists whereby a court, after finding an insurer has acted in bad faith
towards an insured, may take all of the following actions: (1) award interest on the amount
of the claim from the date the claim was made by the insured in an amount equal to the
prime rate of interest plus 3%; (2) award punitive damages against the insurer; and (3)
assess court costs and attorney fees against the insurer. 42 Pa. Stat. and Cons. Stat. § 8371.
“Section 8371 does not define the specific acts that would establish “bad faith toward the
insured,’ but courts have subsequently determined several actions to constitute bad faith,
including: (1) a frivolous or unfounded refusal to pay; (2) a failure to investigate into the
facts; or (3) a failure to communicate with the insured.” Hanover Ins. Co., 619 F. Supp.
2d at 140. “Section 8371 is broadly construed to effectuate the purpose of the statute.”
Meyer v. Cuna Mut. Grp., No. 03-cv-602, 2007 WL 2907276, at *12 (W.D. Pa. Sept. 28,
2007). Thus, “Pennsylvania courts . . . have not strictly limited statutory bad faith to the

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
literal denial of benefits.” Hilston v. Am. Gen. Life Ins. Co., 14-cv-7269, 2015 WL
2232986, at *4 (E.D. Pa. May 12, 2015).
Transamerica relies on Rancosky v. Washington Nat'l Ins. Co., 642 Pa. 153 (2017)
for the proposition that “[s]ince [Wells Fargo] does not allege a coverage dispute as
required by Rancosky, its Section 8371 claim fails.” Reply at 5 (emphasis added).
However, in Rancosky, the Supreme Court of Pennsylvania addressed the burden of proof
required to prevail on a bad faith claim where the bad faith claim was premised on a denial
of benefits. See Rancosky, 642 Pa. 156 (“Critically, when read in a vacuum, the plain
language of Section 8371 provides little guidance in answering the discrete legal question
raised herein, namely, the level of proof required to prevail in a bad faith claim.”)
(emphasis added). Even after Supreme Court of Pennsylvania’s 2017 decision in
Rancosky, courts have continued to recognize that Section 8371 extends beyond the
context of denial of benefits. See, e.g., Williams v. Liberty Mut. Ins., No. 17-cv-3862,
2018 WL 2332019, at *3 (E.D. Pa. May 23, 2018) (“Section 8371 is not restricted to an
insurer’s bad faith in denying a claim. An action for bad faith may extend to the insurer’s
investigative practices.”); accord Rosenthal v. Am. States Ins. Co., No. 1:18-cv-01755,
2019 WL 1354141, at *3 (M.D. Pa. Mar. 26, 2019) (“a plaintiff may also successfully
assert an action for an insurer’s bad faith in investigating a claim, such as a failure to
conduct a reasonable investigation based upon available information, and failure to
communicate with the claimant.”’).
Having determined that Wells Fargo’s bad faith claim does not fail simply because
Wells Fargo does not allege a denial of benefits, the Court must determine whether the
FAC states a claim pursuant to Pennsylvania law. The Court finds instructive two cases
interpreting Pennsylvania’s bad faith insurance statute. In Jacoby v. AXA Equitable Life
Ins. Co., a policyholder brought suit against an insurer regarding the insurer’s “Vanishing
Premium Policy,” which the policyholder alleged “meant that after nine annual payments,
the dividends earned would be used to pay all future premiums.” No. 13-cv-6511, 2014
WL 7058224, at *1 (E.D. Pa. Dec. 15, 2014). The policyholder alleged that one of the
insurer’s employees notified the policyholder by letter that after the policyholder had paid
the ninth payment, “no further premiums were due.” Id. However, the insurer
subsequently notified the policyholder “that the policy had been converted to a term policy
after the tenth premium payment was not paid,” that “the term policy expired,” and the
insurer “thereafter refused to reinstate the [p|olicy.” Id. With respect to the policyholder’s
bad faith claim, the court noted that the policyholder’s “allegations principally concern [the
insurer’s] conduct in connection with its discharge of obligations under the [p]olicy after

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
purchase by the [i|nsured, which still may be an appropriate foundation for a bad faith
claim.” Jacoby, 2014 WL 7058224, at *4 (emphasis in original). Accordingly, the court
denied the insurer’s motion dismiss, concluding that the court “cannot dismiss [the
policyholder’s] bad faith claim at this early stage” and that “[flacts revealed in discovery
will inform . . . whether [the insurer] acted reasonably in discharging its obligations under
the [p]olicy.” Id.
In W. Chester Univ. Found. v. MetLife Ins. Co. of Connecticut, a purchaser of two
variable life insurance policies brought suit against the insurer, alleging that the insurer had
fraudulently represented that investments made using the purchaser’s initial out of pocket
premiums would yield returns sufficient to cover all future payments. 259 F. Supp. 3d 211,
214 (E.D. Pa. 2017). The purchaser alleged that it had relied on these representations in
purchasing the insurer’s policies, but that the insurer had “developed a vanishing premium
scheme for flexible premium variable life insurance policies and advanced the scheme
through misleading and false representations.” Id. The purchaser asserted a bad faith claim
pursuant to Section 8371 on the basis that the insurer “intentionally reduced its investment
return projections in order to conceal the risks associated with its vanishing premium
scheme and to secure additional premium payments on the [p]olicies.” Id. at 224. The
court noted that the purchaser “alleges that for years after the [p]olicies were sold, [the
insurer] manipulated its investment return projections to conceal the true nature of its
vanishing premium scheme.” Id. (emphasis in original). Thus, “[b]ecause the reach of §
8371 is broader that [the insurer] argues,” the court “[wa]s unwilling to dismiss [the
purchaser’s] bad faith claim at the pleading stage.” Id. The court determined that
“lwlhether the deceptive conduct alleged . . . arose in the context of [the insurer’s]
discharge of its obligations under the [p]olicies will become more apparent through fact
discovery. Because [the purchaser’s] bad faith claim satisfies the pleading standard, and
because it is not yet clear that [the insurer’s] claim is barred as a matter of law,” the court
concluded that dismissal of the bad faith claim was not appropriate at the pleading stage.
Id.
“Bad faith claims are fact specific and depend on the conduct of the insurer vis a vis
the insured.” Gold v. State Farm Fire & Cas. Co., 880 F. Supp. 2d 587, 598 (E.D. Pa.
2012). Because the Court cannot say, at this juncture, that Wells Fargo’s claim is barred
as a matter of law, consistent with Jacoby and W. Chester Univ. Found., the Court
concludes that Wells Fargo’s bad faith claim is more appropriately resolved on a motion
for summary judgment. Accordingly, the Court DENIES Transamerica’s motion to
dismiss Wells Fargo’s Section 8371 claim.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
3. CUTPA Claim
With respect to its policies issued in Connecticut, Wells Fargo asserts a CUTPA
claim against Transamerica. FAC 96-104. Wells Fargo relies on Transamerica’s
alleged violation of a different statute, the Connecticut Unfair Insurance Practices Act
(“CUIPA”), Conn. Gen. Stat. § 38a-815 et seq., as the basis for Wells Fargo’s CUTPA
claim. FAC § 98.
CUTPA prohibits the use of “unfair methods of competition and unfair or deceptive
acts or practices in the conduct of any trade or commerce.” Conn. Gen. Stat. § 42-110b(a).
“CUIPA defines ‘unfair methods of competition’ as applied to the insurance trade.” Tucker
v. Am. Int’] Grp., Inc., 179 F. Supp. 3d 224, 229 (D. Conn. 2016). However, “CUIPA does
not provide a private right of action.” Tyll v. Stanley Black & Decker Life Ins. Program,
403 F. Supp. 3d 27, 38 (D. Conn. 2019). As such, a “plaintiff may assert a private cause
of action based on a substantive violation of CUIPA through CUTPA’s enforcement
provision.” Karas v. Liberty Ins. Corp., 33 F. Supp. 3d 110, 117 (D. Conn. 2014). “To
succeed on such a CUTPA claim, a plaintiff must show that the defendant engaged in an
act prohibited by CUIPA’s substantive provisions, and that the act proximately caused the
harm alleged.” Belz v. Peerless Ins. Co., 46 F. Supp. 3d 157, 165 (D. Conn. 2014).
“Misrepresentations and false advertising of insurance policies” constitute “unfair methods
of competition and unfair and deceptive acts or practices” that violate CUIPA. Conn. Gen.
Stat. § 38a-816(1).
Transamerica seeks dismissal of Wells Fargo’s CUTPA claim on two bases: (1)
Wells Fargo does not allege that a CUTPA violation “occurred in Connecticut”; and (2)
Wells Fargo does not plausibly allege CUIPA violation, as is required to serve as the
“borrowed” law for the purposes of Wells Fargo’s CUTPA claim. Mot. at 18. The Court
addresses each of Transamerica’s contentions in turn.
a. Nexus to Connecticut
As a preliminary matter, Transamerica argues that Wells Fargo’s CUTPA claim
“fails because [Wells Fargo] does not allege that the claim is based on any conduct in
Connecticut.” Mot. at 19. That is because, according to Transamerica, “CUTPA claims
must be based on conduct that occurred within the State of Connecticut or [on a] violation
[that] is tied to a form of trade or commerce intimately associated with Connecticut, or if,
where Connecticut choice of law principles are applicable, those principles dictate
application of Connecticut law.” Id.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
“TT |he plain language of CUTPA is directed at unfair competition taking place” in
Connecticut. Victor G. Reiling Assocs. & Design Innovation, Inc. v. Fisher-Price, Inc.,
406 F. Supp. 2d 175, 200 (D. Conn. 2005). In Connecticut Gen. Life Ins. Co. v. True View
Surgery Ctr. One, LP, another district court dismissed the plaintiff insurer’s CUTPA claim
because of a lack of nexus to Connecticut. 128 F. Supp. 3d 501, 513 (D. Conn. 2015).
There, Cigna, a Connecticut-based insurer, asserted a CUTPA claim against surgical
centers that were “out-of-network providers with whom Cigna has no contractual
relationship.” Id. at 505-06. Cigna alleged that the Texas-based surgical centers engaged
in an overbilling scheme, submitting inflated requests for rembursement with respect to
services that the surgical centers provided to Cigna’s insured at the centers’ Texas facilities,
pursuant to insurance policies that Cigna issued in Texas. Id. at 513. The surgical centers
argued that “the commercial relationship between defendants and their customers occurs
exclusively in Texas, and the sole contact with Connecticut is based on the coincidence
that the patients’ Texas insurance policies are administered by a company headquartered
in Connecticut.” Id. In response, Cigna contended that “the thousands of fraudulent
claims, related appeals, and other correspondence defendants directed to Cigna in
Connecticut demonstrates sufficient contact with Connecticut to state a CUTPA claim.”
Id. The court determined these allegations were insufficient to satisfy CUTPA’s
Connecticut-nexus requirement because “the allegations levied against the surgical centers
are based on their actions of inducing Cigna plan members to obtain treatment at their
facilities in Texas and rendering medical services at discounted rates to those plan members
at the facilities in Texas.” Id. Thus, “[w]hile Cigna received fraudulent bills at its
Connecticut headquarters, the alleged activity of the surgical centers that gives rise to a
potential CUTPA claim does not fall within the purview of a plain language reading of
[CUTPA].” Id.
Here, Wells Fargo alleges that “Transamerica’s Los Angeles employees developed
and evaluated the Monthly Deduction Rate increases at issue here[.|” FAC § 7. To some
extent, then, it appears that the conduct that is the subject of Wells Fargo’s claim occurred
outside Connecticut. On the other hand, Wells Fargo alleges that Transamerica issued the
three policies that are the subject of Wells Fargo’s CUTPA claim in Connecticut. Id. § 74.
Wells Fargo further argues that “Transamerica referenced the ‘original illustrations
provided at issue’ in its letter, which was in Connecticut for the Connecticut Policies; and
Wells Fargo’s predecessors-in-interest—the policy holders who received the Connecticut
Policies and corresponding illustrations issued in Connecticut—assigned their rights to
Wells Fargo.” Opp. at 17. Whether a sufficient nexus to Connecticut exists is a matter

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
more appropriately decided on a motion for summary judgment. At the pleading stage,
however, Wells Fargo’s allegations that Transamerica issued the three relevant policies in
satisfy CUTPA’s nexus requirement. See Conn. Gen. Stat. § 42-110a(4) (“‘Trade’ and
‘commerce’ means the advertising, the sale or rent or lease, the offering for sale or rent or
lease, or the distribution of any services and any property, tangible or intangible, real,
personal or mixed, and any other article, commodity, or thing of value in this state.”)
(emphases added).
b. CUIPA Through CUTPA Claim
Having determined that Wells Fargo has satisfied CUTPA’s nexus requirement, the
Court turns to the merits of Wells Fargo’s CUTPA claim. Here, Wells Fargo asserts a
CUTPA claim, based on Transamerica’s alleged violation of CUIPA, premised on
Transamerica’s purported misrepresentations and false advertising related to
Transamerica’s universal life insurance policies. The parties dispute what 1s required to
adequately allege “misrepresentations and false advertising” for CUIPA purposes.
According to Transamerica, “Connecticut and federal courts . . . have consistently
required a plaintiff alleging a CUIPA § 38a-816(1) violation through CUTPA to plead all
four [common law] negligent misrepresentation elements.” Reply at 7-8. Transamerica
relies on the Supreme Court of Connecticut’s opinion in Nazami v. Patrons Mut. Ins. Co.,
280 Conn. 619 (2006). There, the Supreme Court of Connecticut recognized “that CUTPA
affords a private cause of action to individuals . . . [and] that individuals may bring an
action under CUTPA for violations of CUIPA.” Id. at 625. The Court held that “[i}]n order
to sustain a CUIPA cause of action under CUTPA, a plaintiff must allege conduct that is
proscribed by CUIPA.” Id. Looking to Section 38a-816(1), the CUIPA provision which
prohibits “misrepresentations and false advertising,” the Court concluded that “the plaintiff
has failed to allege facts that constitute a misrepresentation under that statute.” Nazami,
280 Conn. at 625. That is because, “[t|raditionally, an action for negligent
misrepresentation requires the plaintiff to establish (1) that the defendant made a
misrepresentation of fact (2) that the defendant knew or should have known was false, and
(3) that the plaintiff reasonably relied on the misrepresentation, and (4) suffered pecuniary
harm as a result.” Id. at 626.
In response, Wells Fargo argues that “the Connecticut Supreme Court in Nazami did
not articulate a different CUTPA pleading requirement].|” Opp. at 16. Contrary to Wells
Fargo’s assertion, however, it appears that courts construing Section 38a-816(1) have

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘O’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
looked to the four negligent misrepresentation elements to determine whether, for CUIPA
purposes, sufficient “misrepresentations and false advertising” have been alleged. See,
e.g.. Ensign Yachts, Inc v. Arrigoni, No. 3:09-cv-209 (VLB), 2010 WL 918107, at *15 (D.
Conn. Mar. 11, 2010) (“In order to succeed on a ‘CUIPA through CUTPA’ claim under
this section, the plaintiff must allege and prove the four established elements of a negligent
misrepresentation claim].|”) (internal citation omitted).
The Court need not resolve the parties’ dispute at this juncture. To the extent that
Connecticut law requires Wells Fargo to satisfy the four negligent misrepresentation
elements in order to state a “CUIPA through CUTPA” claim based on “misrepresentations
and false advertising,” Wells Fargo does so here. For example, Wells Fargo alleges that
three of its policies were issued in Connecticut, and Transamerica’s policies allow
Transamerica to adjust the MDR subject to cost factors including: “mortality; expenses;
interest; persistency; and any applicable federal, state and local taxes.” FAC {J 18, 74.
Wells Fargo further alleges that all the policies at issue in this case provide that
Transamerica “does not distribute past surplus or recover past losses by changing the
Monthly Deduction Rates.” Id. 4 19 (internal alterations omitted). After Transamerica
began raising MDRs, Wells Fargo alleges that “Transamerica purported to justify these
increases by citing ‘current expectations regarding our future costs of providing this
coverage.”” Id. § 25. According to Wells Fargo, after other policyholders requested that
Transamerica identify the specific cost factors it relied upon in increasing the MDRs,
“Transamerica finally identified mortality . . . As expressly permitted by the Policy,
Transamerica increased the Monthly Deduction Rates as a result of this cost factor.” Id. §
28 (internal citation omitted). Despite these representations, however, Wells Fargo alleges
inter alia that “Transamerica implemented its Monthly Deduction Rate increases to recoup
lost profit expectations and boost its profit margins, rather than in response to projections
of future cost factors.” Id. | 30. Wells Fargo alleges that Transamerica represented to
policyholders, like Wells Fargo, that it would not raise MDRs in an attempt to recoup past
losses; that Transamerica increased the MDRs increases based on mortality and interest
considerations; and that, despite these representations, Transamerica did, in fact, raise
MDRs to recoup past losses. Therefore, Wells Fargo adequately alleges a
misrepresentation of fact.
Moreover, Wells Fargo’s allegations are sufficient to establish, at the pleading stage,
that Transamerica knew, or should have known, that these representations were false.
Relying in part on statistics from the National Center for Health Statistics, Wells Fargo
alleges that “mortality rates have improved steadily each year since the Policies were

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
issued.” FAC § 35. Wells Fargo further alleges that, consistent with this empirical
evidence and in contrast with Transamerica’s representations to policyholders that changes
in mortality rates informed the MDR increases, “Transamerica regularly informed
regulators through its filings that it had not observed a negative change in its mortality
experience.” Id. 42 (emphasis added). Accordingly, taken as true, these allegations
demonstrate that Transamerica “knew or should have known” that Transamerica’s
representations to policyholders were false.
To the extent that a “CUIPA through CUTPA” claim must satisfy the elements for
negligent misrepresentation, Wells Fargo’s allegations also satisfy the “detrimental
reliance” and “pecuniary harm” elements. Wells Fargo alleges that each of the
Accumulation Values of its Transamerica policies “functions as an investment vehicle and
is where excess premiums accumulate and earn . . . tax-deferred interest.” FAC 4 12.
Moreover, Wells Fargo contends that “the right to fund one’s policy as one chooses is an
expressly permitted right and benefit of the policies, including Wells Fargo’s Policies.” Id.
These allegations plausibly raise an inference that the ultimate entitlement holder of
Wells Fargo’s policies acquired the policies based on Transamerica’s representations as
reflected in the policies’ terms. Moreover, Wells Fargo asserts that “|a]s a direct and
proximate cause of the foregoing unfair methods of competition and unfair and deceptive
acts or practices with the respect to the Connecticut Policies, Wells Fargo has suffered and
will suffer an ascertainable loss of money or property.” Id. { 100. Elsewhere in the FAC,
Wells Fargo points to “the funds Transamerica deducted from its Accumulation Values in
excess of the amounts permitted by the terms of the Policies due to Transamerica’s
wrongful increases in Monthly Deduction Rates” as an example of the harm it has suffered
due to Transamerica’s alleged misconduct. See Id. § 106.
In accordance with the foregoing, the Court DENIES Transamerica’s motion to
dismiss Wells Fargo’s CUTPA claim.
4. Conversion Claim
Wells Fargo also asserts a claim for conversion against Transamerica. FAC □□ 105—
11. The gravamen of Wells Fargo’s conversion claim is that Wells Fargo “had a financial
interest in the funds that Transamerica deducted from its Accumulation Values in excess
of the amounts permitted by the terms of the Policies based upon the MDR increase. And
by increasing the MDR, Transamerica also interfered with that financial interest by making
Monthly Deductions in authorized amounts from the Accumulation Values.” Opp. at 18.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
California law recognizes “the tort of conversion . . . as the wrongful exercise of dominion
over personal property of another.” Voris v. Lampert, 7 Cal. Sth 1141, 1150 (2019)
(internal citation and quotation mark omitted). To establish a claim for conversion, a
plaintiff must establish the following elements: “(a) plaintiff's ownership or right to
possession of personal property, (b) defendant’s disposition of property in a manner
inconsistent with plaintiffs property rights, and (c) resulting damages.” Id. Transamerica
seeks dismissal of Wells Fargo’s conversion claim because, according to Transamerica,
Wells Fargo “does not allege an immediate nght of possession to the Accumulation Value
or any identifiable sum of money[.]”! Mot. at 21.
a. Identifiable Sum of Money
Pursuant to California law, “money cannot be the subject of an action for conversion
unless a specific sum capable of identification is involved.” Voris, 7 Cal. 5th at 1151.
There is no requirement, however, that “each coin or bill be earmarked.” Id. Based on
these requirements, Transamerica contends that dismissal of plaintiffs’ conversion claim 1s
proper “[b]ecause [p]laintiffs do not allege an immediate right of possession to an
identifiable sum of money]|.]” Mot. at 18 (emphasis added). Based on these requirements,
Transamerica contends that dismissal of Wells Fargo’s conversion claim is proper
“Tb]ecause [Wells Fargo] does not allege an immediate right of possession to . . . any
identifiable sum of money|.]” Mot. at 21 (emphasis added).
Here, Wells Fargo alleges that “it had a property interest in the funds Transamerica
deducted from its Accumulation Values in excess of the amounts permitted by the terms
of the Policies due to Transamerica’s wrongful increases in Monthly Deduction Rates.”
FAC § 106. Wells Fargo identifies each of the 15 policies at issue in this case by policy
number. See Dkt. 22-1, Exhibit 1. That is sufficient, at this juncture, to withstand a motion
to dismiss. See Lennard v. Yeung, No. 2:10-cv-09322-MMM-AGR, 2011 WL 13217784,
at *16 (C.D. Cal. June 7, 2011) (“[A]t this stage, plaintiffs need only describe the property
allegedly converted sufficiently that defendants can answer and develop a defense.”).

Transamerica does not appear to argue that the allegations in Wells Fargo’s FAC
fail to satisfy the “disposition of property” and “resulting damages” elements.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
b. Immediate Right to Possession
Transamerica next seeks dismissal of Wells Fargo’s conversion claim on the grounds
that the “FAC does not allege that [Wells Fargo] had a right of immediate possession of its
Policies’ Accumulation Values|.]” Reply at 9. Inresponse, Wells Fargo contends that “the
Policies, in fact, provide Wells Fargo with an immediate financial interest in its
Accumulation Values, albeit a limited one, by permitting Wells Fargo to choose to either
maintain a balance and accrue the guaranteed minimum interest or use that balance to pay
for the Policies’ premiums and expenses.” Opp. at 18 (emphasis added). According to
Wells Fargo, its “rights to the Accumulation Value balance may not be unfettered, [but]
they certainly exist and may be enforced immediately within the Policies’ limitations.” Id.
In Brighton Trustees, institutional investor plaintiffs asserted a claim for conversion
against Transamerica based on allegations that “Transamerica committed conversion by
deducting funds from plaintiffs’ Accumulation Values without permission.” 2019 WL
5784925, at *8 (internal alterations omitted). The investors’ then-operative complaint
alleged that “the Accumulation Value is paid out only upon the death of the insured, and a
policyholder cannot withdraw the Accumulation Value, except by terminating the policy
or reducing the death benefit by the same amount.” Id. at *10 (emphasis in original)
(internal alterations omitted). The Court dismissed the investors’ conversion claim without
prejudice because the investors “ha[d] not adequately alleged a ‘right to immediate
possession’ of the funds that form the basis for [the investors’] conversion claim.” Id.
Here, Wells Fargo relies on Welco Elecs., Inc. v. Mora, 223 Cal. App. 4th 202, 210
(2014), for the proposition that “there may be an action for conversion, not only of the
intangible rights represented by special instruments which give control, such as an
insurance policy, but also of such rights alone, as in the case of the corporate stock apart
from the certificate.” Opp. at 18 (internal alterations omitted). According to Wells Fargo,
then, “[b]y drawing upon the Accumulation Value for its unlawful MDR increases, . . .
Transamerica deprives Wells Fargo from using its Accumulation Value” to “choose to
either maintain a balance and accrue the guaranteed minimum interest or use that balance
to pay for the Policies’ premiums and expenses.” Opp. at 18.
Wells Fargo’s reliance on Welco, however, is misplaced. There, the Court of Appeal
determined that “Defendant wrongfully caused a charge to plaintiff's credit card account
by having a specific sum of money paid through defendant’s credit card terminal into
defendant’s bank account. Plaintiff had a property right in its credit card account because

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
plaintiff's interest was specific, plaintiff had control over its credit card account, and
plaintiff had an exclusive claim to the balance in the account.” Welco, 223 Cal. App. 4th
at 211 (emphasis added). To prevail on a claim for conversion, a plaintiff must establish
actual possession, or ownership with the right to immediate possession, of the thing
allegedly being converted. See □□ □□ Bailey, 197 F.3d 997, 1000 (9th Cir. 1999). Welco is
therefore inapposite because it 1s a case involving actual possession—in contrast, Wells
Fargo lacks actual possession because the funds that form the basis of Wells Fargo’s
conversion claim are “specific funds placed in the custody of Transamerica for the benefit
of Wells Fargo|.|” FAC 4 107.
Moreover, in Welco, the California Court of Appeal held that the fact that “the taking
was something that affected plaintiff's mghts with a third party does not mean that there
has not been a conversion of intangible property . . . [because] there can be a conversion of
intangible rights represented by special instruments such as a bank checkbook, insurance
policy, or stock certificate, all of which involve a taking by the defendant of the plaintiff's
property rights exercised through a third party.” Welco, 223 Cal. App. 4th at 212. In other
words, the Court of Appeal merely determined that the alleged misappropriation of credit
card information, which the Court of Appeal likened to “intangible property,” gave rise to
a claim for conversion where the information was used to wrongfully access the plaintiff's
funds. Here, the Court has already determined that Wells Fargo has sufficiently alleged a
cognizable property interest in the Accumulation Values sufficient to state a claim for
conversion. Accordingly, Welco is inapt.
Because Wells Fargo does not allege that it has actual possession of its
Accumulation Values or the funds in the Accumulation Values, Wells Fargo must allege
ownership with a right to immediate possession. See In re Bailey, 197 F.3d at 1000; accord
Yakima Co. v. Lincoln Gen. Ins. Co., 583 F. App’x 744, 747 (9th Cir. 2014) (“The district
court properly dismissed Yakima’s conversion cause of action because at the time of the
alleged conversion, Yakima did not have an immediate right to possession of the funds in
dispute.”) (emphasis added). The FAC is devoid of any allegations that Wells Fargo has a
right to immediate possession of the funds that form the basis for its conversion claim. As
such, the Court GRANTS Transamerica’s motion to dismiss Wells Fargo’s conversion
claim without prejudice.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘Oo’
No. 2:19-cv-06791-CAS(GJSx) Date February 12, 2020
Title WELLS FARGO BANK, NATIONAL ASSOCIATION v.
TRANSAMERICA LIFE INSURANCE COMPANY
V. CONCLUSION
In accordance with the foregoing:
1. The Court DENIES Transamerica’s motion to dismiss for lack of personal
jurisdiction;
2. The Court DISMISSES Wells Fargo’s breach of contract claim, as alleged in
{| 66(b) of the FAC, without prejudice;
3. The Court DENIES Transamerica’s motion to dismiss Wells Fargo’s Section
8371 claim;
4. The Court DENIES Transamerica’s motion to dismiss Wells Fargo’s CUTPA
claim:
5. The Court DISMISSES Wells Fargo’s conversion claim without prejudice.
Wells Fargo shall file a second amended complaint within thirty (30) days.
IT IS SO ORDERED.
__ _
Initials of Preparer CM)

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10633958. Public record. Not legal advice.