Appendix — Coulter v. Metropolitan Life Insurance
Supreme Court brief1996
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Supreme Court, U.
2) FILED
96 423 SEP 1 219%)
OF THE CLERK
No. gt! ue
IN THE
Supreme Court of the United States
OCTOBER TERM, 1995
RONALD COULTER and ANISSA COULTER, et al.,
Petitioners,
METROPOLITAN LIFE INSURANCE COMPANY,
Respondents.
Petition For a Writ of Certiorari To The
U.S. Court of Appeal for the 11th Circuit
APPENDIX TO PETITION FOR A WRIT OF CERTIORARI
KENNETH W. BEHREND
Behrend and Ernsberger
2400 Grant Building
Pittsburgh, PA 15219
(412) 391-2515
Attorney for Petitioners
.
TABLE OF CONTENTS
PAGE
Extension Letter granting Extension of Time
Oe la
Grilli v. Metropolitan Life Insurance Co.(Horton)
(Order dated July 31, 1996)
Clarification of April 2, 1996 Order...............cc0.0.. 2a
Grilli v. Metropolitan Life Insurance Co.(Horton)
(Opinion dated April 2, 1996) .........cccccccccceccsseseeeees 4a
Second Petition for Rehearing..................ccccccecscsssesesesseeseees 19a
Grilli v. Metropolitan Life Insurance Co.(Horton)
(Order dated May 15, 1996)
(Order denying Petition for Rehearing).................. 44a
ee e__, RRRGR SETSIRE AS EI ona ae RPC Cm RO 46a
Grilli v. Metropolitan Life Insurance Co.(Horton)
(Order dated May 15, 1996)
(Order denying Petition for Rehearing).................. 75a
Grilli v. Metropolitan Life Insurance Co.(Horton)
(Order dated November 8, 1995)
(Order granting permanent injunction).................... 77a
Findings of Fact and Conclusions of Law Regarding Motions
to Intervene and to Dismiss Notices of Intention to Appear
UE Sei visicctettcecinnsacbibaiits bash haldendesinsoepssedibencaslaxenncss 83a
Intervenor's (Pennsylvania Coulter Class’)
Sena UD OU ig 10la
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SUPREME COURT OF THE UNITED STATES
OFFICE OF THE CLERK
WASHINGTON, DC 20543-0001
WILLIAM K. SUTER Area Code 202
CLERK OF THE COUR 479-3011
August 2, 1996
Mr. Kenneth W. Behrend
2400 Grant Building :
Pittsburgh, PA 15219
Re: Ronald Coulter and Anissa Coulter, et al.
v. Metropolitan Life Insurance
Company, Inc., et al.
Application No. A-77
Dear Mr. Behrend:
The application for an extension of time within which to
file a petition for a writ of certiorari in the above-entitled case has
been presented to Justice Kennedy, who on August 2, 1996,
extended the time to and including September 12, 1996.
This letter has been sent to those designated on the
attached notification list.
Sincerely,
WILLIAM K. SUTER, Clerk
By_/s/__
Melissa A. Blalock
Assistant Clerk
2a
GRILLI v. METROPOLITAN LIFE INS. CO., INC.
Peter J. GRILLI, Special Master,
Julio Gonzalez-Roel, et al.; Ronald
Coulter; Anissa Coulter,
Appellants,
Sherry Horton, et al., Plaintiffs-
Appellees,
v.
METROPOLITAN LIVE INSURANCE
COMPANY, INC., Rick Urso,
Defendants,
W. R. Cunningham, et al., Claimants.
Nos. 94-3328 and 94-3468 to 94-3479.
United States Court of Appeals,
Eleventh Circuit.
July 31, 1996.
Appeal from the United States District Court for the
Middle District of Florida (No. 93- EEA TESA), Steven D.
Merryday, Judge.
Before TJOFLAT, Chief Judge, and RONEY and CAMPBELL,*
Senior Circuit Judges.
BY THE COURT:
3a
Appellees’ motion to clarify opinion is GRANTED. This courts
opinion is hereby clarified by inserting the following sentence
between the second and third sentences of the last paragraph of the
opinion: “These attorney's fees and double costs shall be paid by
the appellants. Their liability for such fees and double costs shall
be joint and several.” The opinion shall remain otherwise
unchanged.
*Honorable Levin H. Campbell, Senior U.S. Circuit Judge for the
First Circuit, sitting by designation.
da
GRILLI vy. METROPOLITAN LIFE INS. CO., INC.
Peter J. GRILLI, Special Master,
Julio Gonzalez-Roel, et al.; Ronald
Coulter; Anissa Coulter,
Appellants,
Sherry Horton, et al., Plaintiffs-
Appellees,
Vv.
METROPOLITAN LIFE INSURANCE COMPANY,
INC.; Rick Urso,
Defendants,
W.R. Cunningham, et al., Claimants.
Peter J. GRILLI, Special Master,
Julio Gonzalez-Roel, et al., Intervenors,
Douglas Connor; Roena Connor; Ronald Coulter;
Anissa Coulter; Darrin Johns; Joann Kablach;
Eric Maharg; Terrance McConnell; Deborah Myers;
Terry Palmer; Marjorie Palmer; Brian Rohm;
James Romano; Mary Romano; Albert Darren Wise;
Jeanne Yokel, Appellants,
Sherry Horton, et al., Plaintiffs-
Appellees,
v.
METROPOLITAN LIFE INSURANCE COMPANY,
INC.; Rick Urso,
Sa
Defendants-Appellees,
W.R. Cunningham, et al., Claimants.
Peter J. GRILLI, Special Master,
Julio Gonzalez-Roel, et al., Intervenors,
Edward Beliunas; Paulette Beliu nas;
John Brooks; Stephanie Charles; Shelly
A. Daughenbaugh; Jerilyn Freiwald;
Nina Heathcote; Daniel Heathcote;
Robert W. Hemcher; Kenneth D. Johnson;
Michele R. Johnson; Frieda E. Kamel;
Jerome J. Knorr; Enod S. Knorr; George
Liptak; Ruth Liptak; Kenneth J. Magnes;
Sandra Marie McCue; Mark A. Ondrusek;
Ernestine Peterson; Rori K. Rasel;
Clarence Ridgeway; Emily N. Riehl;
Joan C. Velenta; Robert Dale Wiles;
Catherine Wiles, Appellants,
Sherry Horton, et al., Plaintiffs-
Appellees,
Vv.
METROPOLITAN LIFE INSURANCE COMPANY,
INC.; Rick Urso,
Defendants-Appellees,
W.R. Cunningham, et al., Claimants.
Peter J. GRILLI, Special Master,
Julio Gonzalez-Roel, et al., Intervenors,
6a
Ronald Coulter; Anissa Coulter,
Appellants,
Sherry Horton, et al., Plaintiffs,
v.
METROPOLITAN LIFE INSURANCE COMPANY,
INC., Defendant-
Appellee,
Rick Urso, Defendant,
W.R. Cunningham, et al., Claimants.
Nos. 94-3328, 94-3468, 94-
3469 and 94-3470.
United States Court of Appeals,
Eleventh Circuit.
April 2, 1996.
In class action litigation against life insurer, certain class
members appealed from orders of the United States District Court
for the Middle District of Florida, No. 93-1849-Civ-T-23A, Steven
D. Merryday, J. The Court of Appeals held that: (1) denial of
intervention as of right or permissive intervention was not
erroneous; (2) refusal to allow movants to opt out of settlement
class after deadline was not error; (3) order referring matter to
special master was not appealable; (4) assuming that dismissal
without prejudice of motion to declare movant not member of
settlement class was appealable, court acted within its inherent
power; (5) movants did not have standing to seek injunctive relief
based on defendant's alleged improper communications with other
potential class members; and (6) appeal was frivolous, entitling
appellees to double costs and reasonable attorneys fees.
Ta
Ordered accordingly.
1. Federal Courts 555
Court of Appeals has provisional jurisdiction to review
denial of motion to intervene, although ordinarily not appealable
final order, under Eleventh Circuit's “anomalous rule”; if Court
concludes district court's order was properly granted, its jurisdiction
evaporates because ruling is not final order: if Court finds district
court erred, however, Court retains jurisdiction and reverses ruling.
2. Federal Civil Procedure 182.5, 340
Refusal in class action suit against life insurer to allow
either intervention as of right or permissive intervention to insureds
who had instituted separate suit against same insurer in different
forum, or to allow them to represent all residents of that forum in
suit, was not erroneous where no court had appointed proposed
intervenors as representatives of any class of purchasers of insurer's
products, nor had any court appointed their attorney to represent
anyone with claim against insurer.
3. Federal Civil Procedure 180
Refusal in class action suit to allow class members to “opt
out” of class after deadline was not error; movants failed to meet
“excusable neglect” standard for opting out after deadline where
their failure to act earlier was result of tactical decision. Fed.R
Civ.Proc.Rule 6(b)(2), 28 U.S.C.A.
4. Federal Courts 585.1
Order referring matter to special master is not final
appealable order. 28 U.S.C.A. § 1291.
5. Federal Courts 554.1
Portion of order in class action suit providing for resolution
of class-status issues by special master was not appealable;
movants had sought determination of whether certain persons were
members of settlement class. 28 U.S.C.A. § 1291.
6. Federal Courts 589
Dismissal without prejudice may be treated as appealable
final order.
7. Federal Courts 587
Class action court's denial of motion that court declare that
movant was not member of settlement class was not final
appealable order where motion was denied without prejudice and
court anticipated further proceedings with respect to issues raised
through reference to special master for resolution. 28 U.S.C.A. §
1291.
8. Compromise and Settlement 67
Federal Civil Procedure 1877.1
Denial without prejudice of motion that court declare
movant not to be member of settlement class was reasonable,
especially when coupled with reference of class-status issue to
special master and was within court's inherent power to fashion
efficient and economic solutions.
9. Federal Civil Procedure 2825
Injunction 114(2)
Class members did not have standing to seek injunctive
relief, remedial measures, and sanctions based on defendani's
alleged improper communications with potential class members
where movants were not affected by alleged misconduct and could
ee eT ae
not speak for anyone else.
10. Federal Civil Procedure 2840
Appeals from orders denying intervention in class action
suit, denying class members request to opt out after deadline, deny-
ing without prejudice motion to declare movants not members of
settlement class, and denying injunctive relief and remedial
measures for alleged improper communications that did not affect
moving class members, were frivolous and would result in award
of double costs and reasonable attorneys fees to appellees.
F.R.A.P.Rule 38, 28 U.S.C.A.
Appeals from the United States District Court for the Middle
District of Florida.
Before TJOFLAT, Chief Judge, and RONEY and CAMPBELL *,
Senior Circuit Judges.
*Honorable Levin H. Campbell, Senior U.S. Circuit Judge for
the First Circuit, sitting by designation.
PER CURIAM:
Before us for review in these consolidated appeals are
orders entered by the district court in a class action suit brought on
November 1, 1993, by Sherry Horton and others (“Horton”) against
Metropolitan Life Insurance Company (“MetLife”). Among other
things, these orders denied motions of two class members to
intervene in the case, to have their attomey appointed as co-
counsel for the class, and to extend the deadline for opting out of
the class. We conclude that appellants’ challenges to these orders
are meritless. The orders were necessary to the efficient
disposition of the case, and the district court can hardly be faulted
for entering them.
10a
I.
Horton brought this lawsuit in the United States District
Court for the Middle District of Florida, to recover, under the
federal RICO statute,' damages that she and the members of her
class allegedly suffered at the hands of MetLife agents who sold
them whole life insurance policies on the alleged misrepresentation
that they were retirement and/or savings plans. These sales took
place in several locations, including Pittsburgh, Pennsylvania, and
Tampa, Florida.
On March 25, 1994, approximately four months after
Horton brought her suit, Ronald and Anissa Coulter ("the
Coulters”), represented by attorney Kenneth W. Behrend of
Pittsburgh, sued MetLife in state court in Pittsburgh. They sought
recovery for themselves and the members of the Horton class who
were residents of Pennsylvania.’ A class has not been certified in
that case,’ accordingly, at the present time, the Coulters are
1 Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.
§ 1964 (1994) (as added by the Organized Crime Control Act of
1970, Pub.L. No. 91-452, § 901(a), 84 Stat. 922, 941-47).
Horton also sought recovery under several other theories of
liability, including common law fraud.
2They also sought recovery for themselves and others who had
purchased MetLife products not formally approved by the
Pennsylvania insurance commissioner. The Coulters alleged
that, in selling the products described in their complaint, MetLife
violated several federal and state laws.
4 That is, as of the date of the oral argument of these appeals,
December 5, 1995, a class had not been certified in the
Pennsylvania case.
proceeding in that case alone.
On April 7, 1994, Horton and MetLife reached a settlement
agreement. On April 22, the district court certified a settlement
class, appointed class counsel, preliminarily approved the proposed
settlement and the class notice, and scheduled a fairness hearing for
July 18, 1994. In accordance with the settlement agreement,
thecourt ordered that any who wished to be excluded from the class
opt out by June 13. The court set the same deadline for the filing
of claim forms, which accompanied the class notice.
On May 30, 1994, the Coulters, through Behrend, moved
the district court for leave to intervene as plaintiffs in Horton.
They represented that their claims were “atypical of those in the
Horton class.” The Coulters’ motion requested that the court sever
all Pennsylvania residents from the settlement class so that the
Coulters could seek to represent them in the suit they had brought
in Pittsburgh. Alternatively, the Coulters asked the court to allow
their attorney, Behrend, to represent the members of the Horton
class from Pennsylvania. In moving the court to intervene, the
Coulters did not present the court with a proposed complaint for
filing in the case. In fact, at no time have they sought to litigate
a claim independently and apart from the Horton class in that case.
The fairness hearing was held as scheduled on July 18,
1994. The district court heard the objections of the Coulters and
others to the proposed settlement and to the adequacy of the notice
that had been sent to the class. The court also heard argument on
the Coulters’ motion to intervene. The court denied their motion
in an oral ruling from the bench. The court reduced its ruling to
a written order on October 25, 1994.‘
In that order, the court stated that even though the Coulters,
4
Comprehensive finds of fact and ocnclusions of law
accompanied the order.
12a
as Class members, had a legally protectable interest in the action,
they were not entitled to intervene as of right under Rule 24. See
Fed.R.Civ.P. 24(a). They could protect their interest either by
opting out of the class and litigating separately, or by remaining in
the case (where, in the court's view, they were being adequately
represented by the plaintiffs’ attorneys) and, if they thought the
proposed settlement was unfair, by objecting to it. Turning to the
Coulters’ alternative request that they be granted permissive
intervention under Rule 24(b), the court observed that the
procedures for objecting to the settlement or opting out of the class
already offered the Coulters all the relief they were seeking for
themselves and the Pennsylvania members of the settlement class. °
The Coulters appealed the court's rulings in appeal No. 94-3328.
The court approved the proposed settlement on the same day it
issued a written order denying the Coulters intervention.
After the district court announced from the bench at the
July 18 hearing that it was denying the Coulters’ motion for leave
to intervene, Behrend asked the court to exclude the Coulters from
the settlement class even though the June 13 deadline for opting
out had passed.’ Other parties who let the deadline pass sought the
5 At the same time, the court stated that the Coulters appeared to
lack standing to represent the Pennsylvania members of the
Horton class on any issue. The Pittsburgh court had not
certified a class, had not declared them class members, and had
not approved their attorney's representation of any class.
€ The court's approval of the settlement is not an issue in these
appeals.
7 The Coulters repeated this request in a written application filed
on September 21, 1994.
13a
same relief. The district court denied these requests because (1)
none of the movants had established excusable neglect under
Federal Rule of Civil Procedure 6(b)(2) for failing to move for an
extension of the deadline prior to the deadline date, (2) allowing
the requested opt-outs would severely prejudice MetLife’s rights
under the settlement agreement, and (3) the movants would suffer
litle, if any, prejudice by remaining in the class, since MetLife
would permit them to file late proofs of claim and to participate in
the settlement and obtain full restitution. The Coulters and the
other late movants appeal this ruling in appeal No. 94-3468.
On October 4, 1994, the Coulters, again through Behrend,
filed a “Petition for Injunctive Relief Pursuant to F.R.C.P. 23(d) for
Restraint of Improper Contacts in Violation of Local Rule 4.04,
and for Sanctions.” The petition alleged that two MetLife sales
representatives had engaged in improper communications with
certain potential class members and that MetLife and/or its counsel
were permitting the company to sabotage the class notice. The
Coulters asked the court for permission to conduct discovery, to re-
quire the issuance of a new class notice, to appoint their attomey,
Behrend, as co-counsel for the class, and to award attorney's fees.
Both MetLife and the Horton plaintiffs opposed the motion.
Noting the absence of any evidentiary support for the Coulters’
petition, the district court concluded that the petition “appears to
have been filed for the sole purpose of causing delay, derailing the
proposed class action settlement, and generating legal fees for the
Coulters’ attomey.” The court found the petition “unworthy of
additional consideration, and because the Coulters and their
attorney have consumed already an enormous amount of the
parties’ and the Court's resources,” their request for relief was
l4a
denied.’ The Coulters appeal this ruling in No. 94-3470.
Meanwhile, on September 21, 1994, Edward Beliunas and
others ("Beliunas”), who were also represented by Behrend, moved
the court to declare that they were not members of the settlement
class. The motion was based essentially on counsel's assertion that
Beliunas had not received notice of the lawsuit. At the same time,
however, the motion seemed to question whether Beliunas had
purchased the sort of MetLife product that was involved in Horton
and thus whether Beliunas should have been notified at all.
Because the question of whether a policy holder is a class
member is a fact-specific inquiry determined on a case-by-case
basis, the district court denied Beliunas’ motion without prejudice
and appointed a special master. The court directed that any of the
Beliunas movants who wished to obtain a determination as to
whether he or she was a member of the settlement class should
petition the special master for such determination. The court set
November 22, 1994 as the deadline for filing such petitions. In
appointing a special master for this purpose, the court noted that
the settlement agreement contemplated the use of a special master
to resolve the disputed claims of individual class members. None
of the Beliunas movants accepted the court's invitation to petition
the special master, however. Instead, all appealed, in appeal No.
94-3469.
¥ In rejecting the Coulters’ petition, the court, sua sponte,
admonish[ed] the Coulters and their attorney . . . [to] remain
mindful of the provisions of [Federal Rule of Civil Procedure]
11. Rule 11 precludes the filing of superfluous motions for the
purposes of wasting valuable resources, perpetuating undue
delay, and serving illegitimate self-interests. If applied to the
papers filed by the Coulters and their attorney, Rule 11 might
well trigger relief markedly different in both effect and object
from that which they proposed or contemplated.
15a
Il.
These appeals raise several issues. We address only four
of them, because they are dispositive. These issues, and our
resolution thereof, are as follows.
(1) Whether, in No. 94-3328, the district court (a) erred in
denying the Coulters’ motion for leave to intervene in the action as
a matter of right for the purpose of representing their interests and
those of the Pennsylvania members of the settlement class, or (b)
abused its discretion in denying the Coulters permissive
intervention.
[1] Though a denial of a motion to intervene is generally
not considered an appealable final order, we have provisional juris-
diction to review such an order under the Eleventh Circuit's
“anomalous mule.“ EEOC v. Easter Airlines, Inc., 736 F.2d
635,637 (11th Cir.1984). If we conclude the district court's order
was properly granted, our jurisdiction evaporates because the ruling
is not a final order. If we find the district court erred, however, we
retain jurisdiction and reverse the ruling. Id.
[2] We find no error or abuse of discretion in the ruling.
At the time the district court ruled, neither the Pittsburgh court pre-
siding over the Coulters’ suit against MetLife, or any other court,
had appointed the Coulters as the representatives of any class of
purchasers of MetLife products. Moreover, no court had appointed
Behrend to represent anyone with a claim against MetLife. We
therefore cannot conclude that the district court's denial of
intervention was erroneous.
[3] (2) Whether, in No. 94-3468, the district court abused
its discretion in denying the requests of the Coulters and others to
opt out of the settlement class after the June 13, 1994, deadline had
expired.
Because the Coulters made a tactical decision not to opt
out in time, and the other movants failed to meet the “Excusable
16a
neglect” standard of Rule 6(b)(2), we see no reason for permitting
an opt-out after the expiration of the deadline. Accordingly, we
find no abuse of discretion by the district court.
(3) Whether, in No. 94-3469, the district court's order (a)
denying without prejudice Beliunas’ motion that the court declare
that Beliunas was not a member of the settlement class and (b)
referring that class-status issue to a special master, is an appealable
order and, if so, whether the court's action constituted an abuse of
discretion.
[4,5] An order referring a matter to a special master is not
a final order appealable under 28 U.S.C. § 1291 because it does
not terminate the appellant's claim. See Deckert v. Independence
Shares Corp., 311 U.S. 282, 290-91 & n. 4, 61 S.Ct. 229, 234 &
n. 4, 85 L.Ed. 189 (1940) (order referring issue to master is
17a
interlocutory and not appealable); T i
944 F.2d 804, 806 n. 1 (1Ith Cir.1991) (noting that court had
found order of reference to special master non-final). We hold,
therefore, that the portion of the challenged order providing for the
resolution of class-status issues to a special master is not
appealable; we therefore do not review it.
[6,7] A dismissal without prejudice may be treated as an
appealable final order. See ith, 707
F.2d 1325, 1326-27 n. 1 (11th Cir.1983). We do not believe,
however, that we have a final order before us. The district court
denied a motion without prejudice; it did not dismiss a complaint.
In short, it was an interlocutory order. Moreover, the court
anticipated further proceedings with respect to the issues raised,
and provided a means for Belunias and others to have their class
Status reviewed.
[8] Assuming for the sake of argument that the
disposition is appealable, we conclude that the court's action was
entirely reasonable, especially when coupled with the reference to
the special master. The court simply drew on its inherent power
to fashion an efficient and economic solution to the problem the
movants presented. Clearly, there was no abuse of discretion.”
[9] (4) Whether, in No. 94-3470, the district court abused
its discretion in denying the Coulters’ motion for injunctive relief,
remedial measures, and sanctions based on MetLife’s allegedly
improper communications with potential class members.
We affirm the district court on this issue because the
Coulters lacked standing to seek the requested relief. They
themselves were not affected by the alleged misconduct, and they
could not speak for anyone else. Even if we were to assume that
they had standing, the district court did not abuse its discretion in
9
We note in passing that none of the movants objected to the
reference to the special master or requested the court to fashion
an alternative method for addressing their concerns.
18a
denying the requested relief because the Coulters failed to
demonstrate that the alleged misconduct occurred.
III.
[10] These appeals not only lack merit, they are frivolous.
We therefore exercise our discretion to award the appellees double
costs and reasonable attorney's fees. Those fees shall be
determined with respect to each appellant and appellee by the
district court following the receipt of our mandate. See
Fed.R.App.P. 38; Pelletier v. Zweifel, 921 F.2d 1465, 1523 (11th
Cir.), cert. denied, 502 U.S. 855, 112 S.Ct. 167, 116 L.Ed.2d 131
(1991).
SO ORDERED.
UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
Nos, 94- 4-3468, 94-3469, 94-34
SHERRY HORTON, et al.,
Plaintiffs,
v.
METROPOLITAN LIFE INSURANCE COMPANY,
Defendant-A ppellee,
Ronald and Anissa Coulter, et al.,
Appellants.
Consolidated Appeals from final Order entered
October 25, 1994, in the District Court for the
Middle District of Florida
Civil Action No. 93-1849-CIV-T-23A
SECOND PETITION FOR REHEARING
Kenneth W. Behrend
BEHREND AND ERNSBERGER
2400 Grant Building
Pittsburgh, PA 15219
(412) 291-2515
Attomey for Petitioners
August 1, 1996
20a
TABLE OF CONTENT
Faeee Ue CS oo er as Ces a Oe ii
Second Petition For Rehearing
I. There is a Public Policy to Defer to the States in
Matters of Insurance Regulation..................... 1
II. The Individual States have a Strong Rationale to
Regulate the Fraudulent Conduct of an Insurance
Company Doing Business Within That State............. 3
III. The reading of Georgine v Amchem Products, Inc.,
83 F.3d 610 (3rd cir. 1996) Requires that the
settlement class, herein, be decertified or that the
Horton, members of other than Florida residents be
included only if they opt-in and, then, the law of the
state of their residence governs the disposition of
OE CU ois 5 ho ORES BAe ee EA ee be ee 5
IV. Questionable Federal Question Jurisdiction, Questionable
Opt-Out Provision and Questionable Representation
Should Require Judicial Caution and Forbearance
from Declaring a Settlement Class or Approving ;
an Amicable Appearing Settlement Agreement........... 9
V. The Case and Controversy Requirement of Article III
of the Constitution of the United States Was Not met
a COE GR a ass ks Bele 0c a a ee kee hs wk 10
VI. It is Required by the Due Process Clause of the 5th
Amendment and the 14th Amendment of the Constitution
of the United States that the Horton Class Contain an
Opt-Out Provision That is Clear and Unequivocal both in
| PE OCU TET PELE oe er ea Ee 12
Wie CE oa ks a ee ee eek ne eee 14
2la
TABLE OF CITATIONS
CASES PAGE
Atascaderc State Hospital v. Scanlon, 473 U.S. 234
Wg: CERT ES tei Sesh nag te ek ee 2
BMW of North America v. Gore, 116 S.Ct. 1589 (1996) . . 3,4,5
Georgine v Amchem Products, Inc., 83 F.3d 610
I ON il ae 2,5, 6, 7, 10, 14
Gregory v. Ashcroft, Ill S.Ct. 2395, 501 U.S. 452
ST) ice ce oe vik Kee 2
New York Times Co. v. Sullivan 376 U.S. 254, 84
S.Ct. 710, 11 L.Ed.2d 686 (1964)...................... 4
Insurance Co. Hasli , 111 S.Ct.
Pacific Mutual Life
1032, 499 U.S. I (S.Ct. 3 SARS an gisgen Spe aa 3
Pennhurst State School and Hospital v. Halderman, 465
ME ME Ce ce esas ie ee 2
Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 86 L.Ed.2d
A Ee gi ee 2
San Diego Building Trades Council v. Garmon, 359 U.S.
236, 79 S.Ct. 773, 3 L.Ed.2d 775 1 oo» gar apaing beet aara reais 4
SECOND PETITION FOR REHEARING
AND NOW comes the Petitioners, Ronald Coulter and
Anissa Coulter and the other Appellants, by their attorneys,
Kenneth W. Behrend and the law firm of Behrend and Emsberger,
and bring this Petition because of the decision and the ratio
decidendi of BMW_of North America v Gore, 116 S. Ct. 1589
(1996) (which was decided on May 20, 1996, twenty-one days after
our case was decided) and the decision and the ratio decidendi of
Georgine v Amchem Products, Inc., 83 F.3d 610 (3rd Cir. 1996)
Georgine decided on June 28, 1996. These dates are after the date
of decision of your Honorable Court which was on April 2, 1996
and after the denial for the Petition For Rehearing which was May
15, 1996. These two cases have significant persuasion and
authority to which obeisance should be given. The persuasion and
authority of these cases were overlooked as they were not decided
in time for your consideration. Had they been given consideration,
the results probably would have been different in this case.
23a
I. THERE IS A PUBLIC POLICY TO DEFER TO THE
STATES
IN MATTERS OF INSURANCE REGULATION
The Congress of the United States has passed the
McCarran-Ferguson Act, 59 Stat. 34, which specifically prohibits
the regulation of the business of insurance by the federal
government, and has specifically legislated that the regulation of
insurance lies specifically within the province of the individual
States.
The plain reading of the McCarran-Ferguson Act, clearly
demonstrates that Congress wants the regulation of the business of
insurance to take place in the States, by the States and not by the
federal government, or the federal courts. It may be said that there
is public policy opposed to federal regulation or interference in the
business of insurance. Regulation is left exclusively to the states.
The Supreme Court of the United States has directed
caution and forbearance in general by a federal court, before
overriding state law and state concerns. in viewing the scope of
federal regulation versus state regulation, the Supreme Court of
24a
the United States has found in Gregory v. Ashcroft, infra that:
. “it is incumbent_upon the federal courts to be
certain of Congress’ intent before finding that
federal law overrides” this balance. Atascadero,
supra, at 243. We explained recently: “If Congress
intends to alter the usual constitutional balance
between the States and the Federal Government,’ it
must make its intention to do so ‘unmistakably
clear in the language of the statute.’ Atascadero
State Hospital _v, Scanlon, 473 U.S. 234, 242
(1985); see also Pennhurst State School and
Hospital v. Halderman, 465 U.S. 89, 99 (1984)......
This plain statement rule is nothing more than an
acknowledgement that the States retain substantial
sovereign powers under our constitutional scheme,
powers with which Congress does not readily
interfere.
Gregory v. Ashcroft, 111 S.Ct. 2395, 501 U.S. 452 at 452 (S.Ct.
1991).
Congress has_ specifically restricted the federal
government's, and the federal court's, power to regulate the
business of insurance, via the McCarran-Ferguson Act. It is clear
that the intention of Congress and public policy are that the federal
government should not regulate the business of insurance.
The Horton Court, through the class settlement, is regulating the
business of insurance directly to ignoring the McCarran-Ferguson
Act. The Horton Court is seeking to regulate all the States and
25a
impose the insurance law of Florida on them.
Il. THE INDIVIDUAL STATES HAVE A STRONG
RATIONALE TO REGULATE
THE FRAUDULENT CONDUCT OF AN INSURANCE
COMPANY
DOING BUSINESS WITHIN THAT STATE
In Pacific Mutual Life Insurance Co. v. Haslip, 111 S.Ct.
1032, 499 U.S. 1 (S.Ct. 1991), the Supreme Court found that a
State has a strong interest to protect its citizens from fraudulent
conduct of an employee of an insurance company and the State can
protect its citizens through regulation of insurance by an award of
both compensatory and punitive damages.
Alabama's common-law rule is that a
corporation is liable for both compensatory and
punitive damages for the fraud of its employee
effected within the scope of his employment. We
cannot say that this does not rationally advance the
State’s interest in minimizing fraud. Alabama long
has applied this rule in the insurance context, for
it has determined that an insurer is more likely to
prevent an agent's fraud if given sufficient
financial incentive to do so. See British General
Ins. Co. v. Simpson Sales Co., 265 Ala. 683, 688,
93 So. 2d 763, 768 (1957).
26a
y ip, 499 U.S. 1, at 14; 111
S.Ct. 1032, 499 U.S. 1 (S.Ct. 1991).
Principles of sovereignty and comity forbid a court from
using the laws of an individual state to enact policies for the entire
nation, or to impose an individual state’s policy choice on
neighboring states. BMW _v. GORE, 116 S.Ct. 1589 (1996).
The power of the courts to enforce the State’s right to
regulate any business is limited to the States’ authority within the
boundaries of that State. The Supreme Court has found in BMW
yv. Gore, supra, that a State has the authority to regulate the
commerce of business within the State, but that is where the States’
authority ends. The State cannot regulate the conduct of business
beyond the States’ boundaries.
The award by a court of compensatory and punitive
damages pursuant to state law are a form of State regulation.
We think it follows from these principles
of state sovereignty that a State may not impose
economic sanctions on violators of its laws with
the intent of changing the tortfeasors lawful
conduct in other States. ft.nt. 17..17 State power
may be exercised as much by a jury's application
of a state rule of law in a civil lawsuit as by a
statute. See New York Times Co. v. Sullivan, 376
27a
U.S. 254, 265, 84 S.Ct. 710, 718, 11 L.Ed.2d 686 (1964)("The test
is not the form in which state power has been applied but,
whatever the form, whether such power has in fact been
exercised”); San Diego Building Trades Council v. Garmon, 359
U.S. 236, 247, 79 S.Ct. 773, 780, 3 L.Ed.2d 775 (1959)("regulation
can be as effectively exerted through an award of damages as
through some form of preventative relief”). BMW_v Gore, 116
S.Ct. 1589 (1996).
Based on this finding the Court struck down a punitive
damages award aimed at influencing BMW's nationwide policy.
The Supreme Court stated:
. by attempting to alter BMW’s nationwide
policy, Alabama would be infringing on the policy
choices of other States. To avoid such
encroachment, the economic penalties that a State
such as Alabama inflicts on those who transgress
its laws, whether the penalties take the form of
legislatively authorized fines or judicially imposed
punitive damages, must be supported by the States’
interest in protecting its own consumers and its
own economy. BMW_v. Gore, 116 S.Ct. 1589 .
(1996).
Concems of federalism and judicial restraint counsel that
the federal courts should not legislate to the States what form the
deterrence should take, i.e. the amount of damages, and should they
be only compensatory and not punitive. The Court in Horton by
refusing to review the case as if each individual State had a right
28a
to regulate Metropolitan's conduct and by refusing to consider
punitive damages, even though numerous states authorize them,
essentially took from the States, the ability to regulate the
fraudulent sale of insurance within their boundaries.
lll. A READING OF GEORGINE V, AMCHEM PRODUCTS,
INC,
83 F.3d 610 (3RD CIR. 1996), REQUIRES THAT THE
SETTLEMENT CLASS
BE DECERTIFIED, OR THAT THE CLASS MEMBERS OF
HORTON, OTHER THAN FLORIDA RESIDENTS, BE
INCLUDED ONLY IF THEY OPT-IN AND, THEN, THE
LAW OF THE STATE OF THEIR RESIDENCE MUST
GOVERN THE DISPOSITION OF THEIR CLAIM
Georgine v Amchem Products, Inc., supra, is an asbestos
injury case, involving between 250,000 and 2,000,000 individuals.
A class action was certified by the District Court and the Court
approved a settlement which would extinguish “future claims” of
“exposure only” plaintiffs even though they had not accrued.
The order of certification was vacated.
29a
The decision of the United States Court of Appeals for the
Third Circuit is in almost complete conflict with the opinion here.
The facts of Georgine, supra, and our case are very close to being
congruent.
The Third Circuit Court recognized the efforts of an
extremely able judge and creative lawyers in crafting a 106 page
settlement document. The Court opined:
“The resolution posed in this settlement is
arguably a brilliant partial solution to the scourge
of asbestos that has heretofore defied global
management in any venue. ”
Georgine, supra, page 617.
However, an alarm was sounded by the Third Circuit Court when
it noted:
... against the need for effective resolution of the
asbestos crisis, we must balance the integrity of
the judicial system. Senators have complained that
the use of class actions to resolve mass toxic torts,
particularly those involving future claims,
improperly involves the judiciary in the crafting of
legislative solutions to vexing social problems.
These criticisms are not merely abstract; they are
levied in terms of the fundamentals of the federal
judicial polity; jurisdiction, justiciability, notice
and the requirements of Federal Rule of Civil
Procedure 23. (Emphasis added).
30a
Georgine, supra, page 617.
Based on this concern the Court went on to hold:
.. Wwe will vacate the district courts’ order
certifying the plaintiff class and remand with
directions to decertify the class and vacate the
injunction. We recognize that our decision
undermines the partial solution to the asbestos
litigation crisis. However, in doing so, we avoid
a serious rend in the garment of the federal
judiciary that would result from the Court, even
with the noblest motives, exercising power that it
lacks. We thus leave legislative solutions to
legislative channels.
Georgine, supra, page 618.
As in Georgine v Amchem Products, Inc., 83 F.3d 610 (3rd
Cir. 1996) we are faced with a case that forces “the judicial system
to choose between forging a solution to a major ... problem on the
one hand, and preserving its institutional values on the other.” Our
case which is offering to extend itself from the Tampa Bay area of
Florida across the continent through efforts of imaginative defense
counsel, favorable injunction and a latentl y ambiguous class action
settlement order, involves potentially millions of American families
and life insurance policyholders who had faith that life insurance
was safe from the manipulative greed and unscrupulous
3la
sales practices of an unscrupulous life insurance company.
By now it is sensible to assume that your Honorable Court
has become aware that companies other than the Metropolitan Life
Insurance Companies have admitted to sales scams on their policy
holders, so enormous in scope that they shock even the most
cynical. Because life insurance companies are so exclusively state
creatures, no one has an understanding of how the companies can
be brought before only one court. Because Metropolitan's agents
perpetrated different scams against different groups in different
states, the lumping of them together for dispositive class action
adjudication, clashes with the fundamentals of the federal judicial
polity: jurisdiction, justiciability, notice and the requirements of
Federal Rule of Civil Procedure 23.
Judge Merryday created and employed an innovative way
to dispose of hundreds of thousands and maybe a million, whole
life policyholder claims against Metropolitan Life Insurance
Company. The class action settlement and the injunction issued
against the policyholders, who had been cheated by the company
and its sales agents, could be administered with an economy of
32a
Judicial effort through the direction of the United States District
Court for the Middle District of Florida, Tampa Division.
With respect to our case, there are many policyholders all
over the United States who do not know they have been taken by
a Metropolitan Life Insurance Company scam, and may not know
for many years that they have been cheated by Metropolitan. They
may not learn of their being cheated until some year in the future
when they will get a premium notice, increased, in some multiple
amount. Some policyholders will only learn of the deception when
they retire and are disappointed when their promised expectations
are not met. Others will only realize their injury when some
honest financial planner explains that the policy they have is
inappropriate for the purposes they were advised to purchase it, or
when a tax has to be paid which Metropolitan Life Insurance
Company did not disclose at the time of purchase and,
undoubtedly, other situations, such as how much money was lost
by cashing in a policy to provide a commission for a Metropolitan
Insurance Company agent.
Some policyholders have been cheated by being offered a
33a
document that defies adjectival description. However, some
policyholders were informed that they could have their money they
paid in premiums returned to them, if they could verify in writing
that as part of the scam worked on them, they did not know that
they were purchasing insurance. Many of these whole life
policyholders had taken insurance physical examinations arranged
for by Metropolitan Life Insurance Company and knew they were
to receive life insurance.
The size of the group of Metropolitan Life Insurance
Company policyholders injured during the years of the Florida
sales office nurses’ retirement scam can only be estimated,
Metropolitan Life Insurance has not made a public disclosure.
Between a minimum of two hundred thousand and a maximum of
a million may have purchased insurance through deception. Most
of the estimated policyholders were not even part of the nurses’
scam; they were part of other Metropolitan Life. Insurance
Company scams.
34a
IV. QUESTIONABLE FEDERAL QUESTION JURISDICTION,
A QUESTIONABLE OPT-OUT PROVISION AND
QUESTIONABLE REPRESENTATION, SHOULD REQUIRE
_ JUDICIAL CAUTION AND FORBEARANCE FROM
DECLARING A SETTLEMENT CLASS OR APPROVING
AN AMICABLE APPEARING SETTLEMENT AGREEMENT
Federal question jurisdiction in the Horton case was based
on suspect grounds, that federal regulation of the business of
insurance can be accomplished through the Racketeering Influenced
Corrupt Organization Act (RICO), specifically that RICO applies
to the business of insurance. On the face of the Horton complaint
it was clear that RICO was used to obtain jurisdiction in
contradiction to the mandate of Congress in the McCarran-
Ferguson Act.
The Horton court should have used judicial restraint,
because of the mandate of congress, and should not have
exercisedany jurisdiction, because of the mandate of Congress. It
was an unnecessary impingement on the individual States’ rights to
protect their citizens, and the individual States’ legitimate interest
35a
in punishment and deterrence.
Instead of using judicial restraint, consideration for State
sovereignty and comity, the Horton court through the settlement
order, regulated the business of insurance, not only in Florida, but
for every state in the country. The Horton court found that
settlement proposal in the Horton action, which only provided for
compensatory damages, to be “fair” for every State, and it made no
inquiry into the laws of each individual state, despite the fact that
the settlement would have a preclusive effect on claims filed in
these States. Moreover, no punitive damages were considered,
regardless of every States’ individual interest in the regulation of
insurance and the deterrence of fraud.
This second request for a rehearing in this case is
occasioned by the fact that, after the class certification by the
district court, after the denial of appeals by this Honorable Court,
and. after a request for rehearing was denied by this Honorable
Court, there has been a growing consensus of judicial opinion that
class certification must be carried out as if the case were going to
be litigated, and without taking the settlement into account. See
36a
Georgine v. Amchem, id. at 617, 618.
As the Third Circuit noted in Georgine:
We now hold that because the 23(b)(3)
requirements protect the same interests in fairness
and efficiency as the 23(a) requirements, and
because “[t]here is no language in [Rule 23] that
can be read to authorize separate, liberalized
criteria for settlement classes,“ id. at 799, the
23(b)(3) criteria must also be applied as if the case
were to be litigated. While the better policy may
be to alter the class certification inquiry to take
settlement into account, the current Rule 23 does
not permit such an exception.
V. THE CASE AND CONTROVERSY REQUIREMENT OF
ARTICLE Il
OF THE CONSTITUTION OF THE UNITED STATES
WAS NOT MET IN OUR CASE
The suit on which the class settlement rests is a feigned
suit -- and thus is not a justiciable case or controversy under
Article [Il of the Constitution. To qualify, the plaintiffs and
plaintiffs’ counsel, had to have the implausible intention of
litigating the RICO claim that became the basis of Judge Merryday
accepting jurisdiction. The RICO claim asserted was patently not
sustainable.
37a
The RICO claim was filed, merely to provide a forum to
seek approval of a result that plaintiffs and defendants jointly
pursued. This contention is supported by numerous facts. First: no
opposition pleading was filed to the RICO claim, which on its face
should have been dismissed. Second: no deposition discovery was
taken. Third: the length of time the case existed from filing to
settlement; the complaint was filed on November 1, 1993, the
Second Amended Complaint was on February 14, 1994, (no answer
or motion to dismiss was filed), and only two months after
amending the complaint, on April 12, 1994, the joint motion to
settle was filed. Fourth: the joint motion requesting certification
of the proposed settlement class, preliminarily approving proposed
settlement, approving notice and setting fairness hearing, needs to
be closely reviewed. The attorney's fees and settlement amount
were negotiated simultaneously, Counsel for plaintiffs was to be
paid $2,750,000 to be paid separately from any settlement fund
while the class members could keep their policy, or receive a
refund of a few hundred to a few thousand dollars each, said
refund was already agreed to by Metropolitan via numerous
.-
38a
agreements with various insurance commissions. Fifth: despite the
complexity and enormity of the affect of the settlement upon
hundreds of thousand of policyholders due process rights, the
fairness hearing was accomplished in one day. Sixth: The standard
for class determination and settlement unabashedly was not a
litigation standard, but something less stringent, less demanding
and more relaxed than a litigation standard.
VL. IT IS REQUIRED BY THE DUE PROCESS CLAUSE OF
THE STH AMENDMENT AND THE 14TH AMENDMENT OF
THE CONSTITUTION OF THE UNITED STATES THAT THE
HORTON CLASS CONTAIN AN OPT-OUT PROVISION,
THAT IS CLEAR AND UNEQUIVOCAL
BOTH IN LANGUAGE AND OPERATION.
Due process calls for a Constitutional right to opt-out of
the class. It is Appellants’ assertion that there was not an opt-out
provision created for the Horton class settlement that applied to the
Appellants. A class action settlement, to comply with the due
process clauses of the Fifth and Fourteenth Amendments of the
United States Constitution, must have an opt-out provision.
39a
Phillips Petroleum Co, v. Shutts, 472 U.S. 797, 86 L.Ed.2d 688,
105 S.Ct. 2965.
Appellants assert that while there was an opt-out provision
drafted for the Horton settlement and the creators of the provision,
we believe, though that they had molded an opt-out provision, they
had not succeeded, it was Constitutionally defective.
As an example, Mr. and Mrs. Coulter first learned that they
must act as class members of the Horton class when were told by
the District Court, after the Faimess Hearing, and confirmed by the
Eleventh Circuit Court of Appeals, that they were in the Horton
class.
If the Coulters had received a class notice, (which they
deny receiving), they would have read, in the class notice and
proof of claim form, that if they understood that they were
purchasing life insurance, they did not qualify as class participants
for any money distribution.
The opt-out provision had nothing for the Coulters, once
they were declared part of the Horton class. The Coulters
understood they were buying life insurance and the Court included
40a
them as Horton class members, even though they could not
participate in any proceeds of the class settlement.
For the opt-out provision to be worthy of the name, there
had to be additional time provided; if for some reason, probably
not anticipated by the creators of the provision, it would cause
Metropolitan policyholders to be declared part of the class, when
they were not entitled to receive any proceeds from the class
distribution. The class notice put them into the Horton class
settlement, and the qualifications for receiving any distribution (i.e.
no knowledge that they were purchasing insurance) prevented
sharing in the class distribution.
For the opt-out provision to be anything but
unconstitutional there had to be some provision for people, such as
the Coulters, to opt-out after a determination was made that they
were part of a class and that they could recover nothing from the
class settlement.
CONCLUSION
It is respectfully submitted, if the body of judicial opinion
exemplified by Georgine v. Amchem Products Inc., supra, were to
4la
be applied to this case, this Honorable Court would remand the
case to the district court with instructions to carry out the process
of class certification as if the case were going to be litigated and
to rigorously apply all the stringent requirements of FRCP Rule 23
relating to class certification. In the alternative, this Honorable
Court should declare the Coulters and all who could not verify that
they did not know that they were buying insurance from
Metropolitan Life Insurance Company, not to be Hoyton class
members.
Respectfully submitted,
BEHREND AND ERNSBERGER
Is!
Kenneth W. Behrend, Attorney for
Ronald and Anissa Coulter
42a
CERTIFICATE OF SERVICE
I, Kenneth W. Behrend, hereby certify that a true and
correct copy of the within Second Petition for Rehearing was
mailed to the Court this Ist day of August, 1996, and to the
following by United States mail, first class postage prepaid,
addressed as follows:
W. Christian Hoyer, Esquire
James, Hoyer, Newcomer & Skye, P.A.
Suite 750
4830 West Kennedy Boulevard
Tampa, FL 33609
Ron Parry, Esquire
Amzen, Parry & Wentz
600 Greenup Street
Post Office Box 472
Covington, Kentucky 41012-0472
Dinita L. James, Esquire
Trenam, Simmons, Kemker, Scharf
Barkin, Frye & O'Neill
P.O. Box 1102
Tampa, FL 33601
Loma Schofield, Esquire
Debovoise & Plimpton —
875 Third Avenue
New York, NY 10022
43a
Patrice Smiley Andrews
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
BEHREND AND ERNSBERGER
Is/
Kenneth W. Behrend
44a
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
Nos. 94-3328; 94-3468
94-3469; 94-3470
PETER J. GRILLI,
Special Master,
JULIO GONZALEZ-ROEL, et al.;
RONALD COULTER; ANISSA COULTER,
Appellants,
SHERRY HORTON, et al.,
Plaintiffs-A ppellees,
versus
METROPOLITAN LIFE INSURANCE COMPANY,
INC.; RICK URSO,
Defendants,
W. R. CUNNINGHAM, et al.,
Claimants.
Ae ee oe ened Sens Disneiee Come toe Se
Middle District of Florida
4Sa
ORDER:
Appellants’ Motion for Leave to File a Second Petition
for Rehearing is Denied.
ls/
CHIEF JUDGE
Nos, 94-3328, 94-3468, 94 3469, 94-3470
SHERRY HORTON, et al.,
Plaintiffs,
v.
METROPOLITAN LIFE INSURANCE COMPANY
Defendant-A ppellee
Ronald and Anissa Coulter, et al.,
Appellants.
Consolidated Appeals from final order entered
October 25, 1994, in the District Court for the
Middle District of Florida,
Civil Action No. 93-1849-CIV-T-23A
PETITION FOR REHEARING
Kenneth W. Behrend
Behrend and Emsberger
2400 Grant Building
Pittsburgh, PA 15219
(412) 391-2515
Attorney for Petitioners
April 22, 1996
47a
I. THE IMPOSITION OF SANCTIONS PURSUANT TO
F.R.A.P. 38 WITHOUT PRIOR NOTICE WAS A VIOLATION
OF THE DUE PROCESS CLAUSE OF THE STH AMENDMENT
OF THE UNITED STATES CONSTITUTION ............. l
A. LIMITATIONS ON IMPOSITION OF F.R.A.P. 38
SALTS AGATA RSC POSNER oe ebb bea eee 1
B. INTERVENTION WAS REASONABLE AND
ot RGA ee 8S Pi) ee, a 2
Il. FACTUAL AND LEGAL ERRORS................. 5
A. THE ENTRY OF THE STAY ORDER BY THE U.S.
DISTRICT COURT IN PENNSYLVANIA WAS THE
IMPETUS FOR THE COULTERS’ INTERVENTION
PEON So SU Eh ER er Ua CEN CTE Coe 8 5
B. COULTERS SOUGHT TO PROTECT THEIR RIGHTS
IN THEIR CASE IN PENNSYLVANIA, NOT TO TAKE
CLASS MEMBERS FROM THE HORTON CASE .. .6
C. THIS COURT IN KIRKPATRICK HAS FOUND
THAT THE MAINTENANCE OF A NATIONWIDE
CLASS CAN AFFECT THE STATE CONSTITUTIONAL
RIGHTS OF THE CLAIMANTS, COULTERS
ATTEMPTED TO HAVE A SUBCLASS ESTABLISHED,
OR SEVERANCE OF THOSE PUTATIVE MEMBERS
TO PROTECT THEIR CONSTITUTIONAL RIGHTS . 6
48a
D. THERE WERE TWO DIFFERENT FRAUDULENT
SALES SCHEMES, ONE ORIGINATED IN TAMPA
AND WAS NATIONAL, ONE ORIGINATED IN
PITTSBURGH AND WAS IN PENNSYLVANIA ....7
E. THE DATE TO OPT-OUT WAS JUNE 13, 1994 THE
DATE TO FILE THE CLAIM FORM WAS SEVENTEEN
DAYS LATER: JUNE 30, 1994 ............00. 8
F. COULTERS GAVE NOTICE OF THEIR INTENTION
TO PROCEED ON THEIR OWN (OPT-OUT) BY
VIRTUE OF THEIR OWN LAWSUIT, AS WELL AS
THEY FILED A MOTION TO INTERVENE IN MAY,
BUT WERE NOT HEARD UNTIL JULY, AFTER THE
OPT-OUT DEADLINE EXPIRED .............. 8
G. EVEN THOUGH THE COULTERS PRODUCED
LETTERS FROM METROPOLITAN AGENTS AND
HAD INSUREDS PREPARED TO TESTIFY WHO
WERE CONTACTED, THERE WAS ND EVIDENTIARY
HEARING GRANTED ON THE INJUNCTION ISSUE 9
H. THE ORDER APPOINTING THE SPECIAL
MASTER LIMITED THE AUTHORITY OF THE
MASTER BY RULING ON THE CLAIMANTS .-
AFFIDAVITS SETTING FORTH THAT THEY WERE
INSUFFICIENT TO RECOVER, THUS THE COURT
HAD ALREADY DENIED THE CLAIMS AND THERE
WAS NO REASON TO UTILIZE THE MASTER SINCE
A FINAL ORDER AS TO THERE CLAIMS HAD BEEN
MADE <b cee AC SEAE UL SILI ERT e eye 10
IV, EXCERPTS FROM NEWBERG ON CLASS ACTIONS ..IA
V. CERTIFICATE OF SERVICE 02... cece eee 12
49a
TABLE OF CITATIONS
CASES PAGE
Braley v. Campbell, 832 F.2d 1504, (10th Cir. 1987)
| Sis Gy Cai ap ewe rc sae Danes Ag 2p 2 Pi Soo ae 2
Gagliardi v. McWilliams, 834 F.2d 81, (3rd Cir. 1987)... 2
Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718,
i AUT ig crit) LES RAW EOP ONS 7
McCubbrey v. Boise Cascade Land Co., 71 FWR.D. 62,
Gee AO. Se gc ea sewn Hise, 9
Sanko S.S. Co. v. Galin, 835 F.2d 51, (2nd Cir. i987)... . .2
Schrock v. Altru Nurses Registry, 810 F.2d 658,
Cee NO ne a ee sia a eb was 0 0s 2
Roadway Express, Inc. v. Piper, 447 U.S. 752 (1980). ..... 1
OTHER AUTHORITIES
Newberg on Class Actions, Ist Ed.............. 3,4,5,7,9
Newberg on Class Actions, 3rd Ed............. 3,4,5,7,9
64a
with respect to the issues of the Coulters, the Beliunas and other
putative class members, all citizens of Pennsylvania, being part of
the Horton class action settlement class and, if so, opting out. Our
argument will be in the alternative. Either a national class action
be declared with a subclass for Pennsylvania citizens with
protection of the rights they have as citizens of Pennsylvania. In
the alternative, we ask that the Coulters, the Belunias, and other
putative class members who have made efforts to opt out or have
attempted to be declared not part of this action be declared opted
out.
To do otherwise is to be in violation of the Tenth
Amendment and the due process clauses of the United States
Constitution Fifth and Fourteenth Amendments.
Petitioners also respectfully request an opportunity to be
heard on the F.R.A.P. 38 sanctions issue: demonstrate Petitioners’
petition for intervention and request for injunction were proper and
necessary under the circumstances and comported with respected
authority. Petitioners also respectfully request an opportunity to
remedy the practical procedural problems resulting from the
65a
opinion. It is asked that a hearing be granted to set aside the
sanction order under F.R.A.P. 38; that a hearing be held on the
creation of a national class action with a subclass of the Horton
class called the Coulter class or that the citizens of the State of
Pennsylvania who have mace themselves known as wishing to be
opted out be declared not part of the class.
Respectfully submitted,
BEHREND AND ERNSBERGER
ls
Kenneth W. Behrend
Attorney for Petitioners
IV. APPENDIX
EXCERPTS FROM NEWBERG ON CLASS ACTIONS
ist Edition, § 8156i - Class or Individual Intervention in
Pending Class actions; Class Intervention in Individual Actions
“One seeking to intervene must file the appropriate motion,
under Rule 24. ...”
“From the plaintiff's lawyer's standpoint, there may be
specific strategies that are served in considering whether or not to
intervene in a pending class action, and if so, whether to intervene
individually or in behalf of a class. ...”
“Where a prospective class plaintiff seeks to intervene,
either individually or-on behalf of an intervener’s class, in pending
litigation in which there has not yet been a class ruling, this serves
the important purpose of bolstering the adequacy of representation
for certifying a class. This same objective of enhancing class
certification possibilities, where there may be some doubt
conceming how widespread the legal problem is, or whether
sufficient persons are involved to justify class treatment, may be
67a
achieved by commencing a new class action in one's home district,
paralleling representative litigation already initiated elsewhere. ...”
“Finally, there may be situations where individual actions
are pending, and it becomes important to intervene as a class in
order to preserve the rights of class members and achieve an
advantage already obtained by the pending proceedings. ...”
3rd Edition § 7.31 Conflicting or Overlapping Classes
“When multiple litigation in one or more forums results in the
pendency of overlapping or conflicting class actions, the court
should take prompt steps to reach an initial class determination. If
a plaintiff has filed a class suit in which the putative class sought
may be part of an already existing class in another district, the
court, after determining that a conflict actually exists, my transfer
the case for consolidation, or determine the class on its own. If the
court finds that a class is appropriate, and that the conflict may be
resolved, it should act to do so by establishing subclasses based on
appropriate descriptive characterizations, to protect class members
interests and to facilitate management of the action.
68a
Multiple Class Suits before Different Courts
“When cases bearing similar class allegations and similar
causes of action are pending in different courts, such as different
federal and state courts or different state courts should be kept
informed of class certification proceedings relating to the same
cause of action, and rarely should the same class be certified on the
same cause of action before more than one court, in the absence of
special circumstances.
In determining the superiority of certifying a class in a
particular forum, the court should compare the advantages of a
class suit in the different fora and should weigh considerations of
class scope, tolling of statute of limitations for the benefit of the
class, reconciliation of pending individual suits with the
certification of a class suit without opt-out rights under Rule
23(b)(1) or (2), whether in fact a class suit is pending in another
more favorable forum, certification of a class limited to selected
issues or claims, the state of litigation progress in the competing
suits, and a host of other factors.”
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§9.48 Resolving Overlapping or Conflicting Class Actions
with Subclasses and Other Means
“When multiple litigation has resulted in the pendency of
overlapping or conflicting class actions, the court should take steps
to reach a reasonably prompt initial class determination. If it finds
that a class action is appropriate, it should take appropriate steps to
resolve the overlapping or conflicting class actions. Where class
members share common issues with respect to the general liability
of a defendant but have divergent issues or interests with respect
to the impact and damages suffered or relief requested, the
establishment of subclasses by the court under Rule 23(c)(4) will
facilitate management of the litigation and will preserve maximum
protection of the interests of class members. ...”
“... When subclasses are created, they may be formed on the basis
of geographical scope, or by any other appropriate descriptive
characterization. Alternatively, the court may redefine the class as
alleged in the overlapping complaints in order to establish one
uniform class for the pending actions.”
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§16.06 Intervention by Absent Class Members: Introduction
".... However, intervention may be necessary, in a number of
situations, to avoid mootness or to assure typicality of claims on
behalf of the class. It may also be permitted because “it may be
helpful at trial or in formulating relief..., or because it might
facilitate a subdivision of the class should subclasses become
necessary.
A putative intervenor must satisfy the requirements of Rule
24 before intervening. Limitations may be placed on intervenors.
Under Rule 23(d)(2) there is no absolute right to intervene, and the
court may deny intervention if it would serve no useful purpose.
The court also may deny intervention where the movant has failed
to exhaust administrative remedies or when the scope of the action
would be broadened.”
“... The following sections discuss the purpose and benefits of
intervention before and after class certification as well as after a
denial of certification, the timeliness of intervention, and the role
of intervention in class settlement proceedings.”
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§16.07 Intervention of Right
"Under Rule 24(a), members of a class have a right to
intervene if their interests are not adequately represented by
existing parties. For example, inadequacy may result from the
existence of intervenor interests common to the class but different
from those of the class plaintiff, or from mootness or potential
mootness of the named plaintiff's claim. Rule 23 specifically
contemplates intervention in class suits, and in certain situations
courts may permit intervention even when representation is
adequate.
Parties seeking intervention must have an interest in
litigation. Intervention pursuant to Rule 24(a)(2) may be denied if
disposition of the action cannot as a practical matter impair or
impede the intervenors’ ability to protect their interests.
Intervention in Rule 23(b)(2) actions by class members
may be significant to protect their interest because they cannot opt
out of the suit even if they are inadequately represented. Thus,
intervention avoids “subsequent collateral attacks on the due
process preclusive effect of a judgment...”
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Though application for intervention must be timely under
Rule 24(a)(2), courts have been more flexible when intervention is
of right rather than permissive.
Absent class members may intervene of right to appeal a
class certification denial after final judgment. Intervention has also
been permitted to parties seeking to set aside a consent decree...”
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ERTIFICATE OF VIC
I, Kenneth W. Behrend, hereby certify that a true and
correct copy of the within Petition For Rehearing was mailed to the
Court this 22nd day of April, 1996, and to the following by United
States mail, first class postage prepaid, addressed as follows:
W. Christian Hoyer, Esquire
James, Hoyer, Newcomer & Skye, P.A.
Suite 750
4830 West Kennedy Boulevard
Tampa, FL 33609
Ron Parry, Esquire
Amzen, Parry & Wentz
600 Greenup Street
Post Office Box 472
Covington, Kentucky 4102-0472
Dinita L. James, Esquire
Trenam, Simmons, Kemker, Scharf
Barkin, Frye & O'Neill
P.O. Box 1102
Tampa, FL 33601
Loma Schofield, Esquire
Debovoise & Plimpton
875 Third Avenue
New York, NY 10022
Patrice Smiley Andrews
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
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BEHREND AND ERNSBERGER
By:/s/_
Kenneth W. Behrend
75a
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
Nos. 94-3328; 94-3468
94-3469; 94-3470
PETER J. GRILLI,
Special Master,
JULIO GONZALEZ-ROEL, et al.;
RONALD COULTER; ANISSA COULTER,
Appellants,
SHERRY HORTON, et al.,
Plaintiffs-A ppe llees,
versus
METROPOLITAN LIFE INSURANCE COMPANY,
INC.; RICK URSO,
Defendants,
W.R. CUNNINGHAM, et al.,
Claimants.
On Appeal from the United States District Court for the
Middle District of Florida
BEFORE: TJOFLAT, Chief Judge, RONEY and CAMPBELL*,
t Senior Circuit
Judges.
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PER CURIAM:
The petition(s) for rehearing filed by the Appellants,
Gonzalez-Roel, et al., is Denied
ENTERED FOR THE COURT:
ls
UNITED STATES CIRCUIT JUDGE
*Honorable Levin H. Campbell, Senior U.S. Circuit Judge for
the
First Circuit, sitting by designation.
ORD-41
PPMP De AD ohaeae atc digs LPs eines -
77a
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
SHERRY HORTON, et al.,
Plaintiffs,
VS. CIV. NO. 93-1849-CIV-T-23A
METROPOLITAN LIFE INSURANCE
COMPANY,
Defendant.
ORDER GRANTING PERMANENT INJUNCTION
Before the Court is a motion by defendant Metropolitan
Life Insurance Company (“MetLife”) seeking a permanent
injunction under the All-Writs Act, 28 U.S.C. § 1651(a), against
Charles F. Harrison, Jr., Leroy Wayne McGallager, and Sunny
Eppes Solomon, who have filed individual lawsuits against
MetLife in Alabama. The motion was fully briefed by all
parties and was the subject of a hearing before the Special
Master on July 24, 1995. After the hearing, the parties were
permitted to make additional submissions.
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Based on the foregoing, and on the Court's overall familiarity
with the litigation and settlement of this class action,
IT IS HEREBY ORDERED that:
1. Charles F. Harrison, Jr., Leroy Wayne McGallager,
and Sunny Eppes Solomon (collectively, the “Alabama
plaintiffs”) are hereby determined to be members of the
settlement class previously certified in this action because (1)
they purchased their MetLife whole life insurance policies from
MetLife’s Tampa, Florida sales office between January 1, 1988
and October 31, 1993, or from other MetLife sales offices
between January 1, 1990 and October 31, 1993, during the class
period, (ii) they bought their policies as retirement and/or other
savings plans or vehicles, based in whole or in part on written
materials or other solicitations that allegedly did not fully
disclose that these plans were life insurance products, and (iii)
they did not timely exclude themselves from the settlement class.
2. This Court previously entered an Order and Final
Judgment under Fed. R. Civ. P. 54(b) releasing MetLife and its
officers, directors, employees, agents, representatives, and its
ee i.
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predecessors, successors, parents, subsidiaries, partners, corporate
affiliates, successors in interest and assigns, together with the
respective past, present and future officers, directors, employees,
agents and representatives of any or all of them (collectively,
“MetLife and its Affiliates”), from any and all claims or cause of
action that (i) have been or could have been asserted in this
action or (ii) have been, could have been, may be or could be
alleged by any settlement class member against MetLife and its
Affiliates on the basis of, connected with, arising out of, or
related in whole or in part to any or all of the acts, omissions,
facts, matters, transactions or occurrences that were directly or
indirectly alleged, described or referred to in this action or that
are related to sales solicitations described in the Second
Amended Complaint in this actior. (the “Sales Solicitations”) or
the purchase of Whole Life Policies (defined as policies
designed by MetLife as Whole Life, Life Paid Up at 95 or Life
Paid Up at 98), including without limitation any and all claims
for damages, rescission, equitable and legal relief, attorneys’ fees,
costs or disbursements incurred by any person or entity in
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connection with or related in any manner to this action, the
settlement thereof, the administration of this settlement, the Sales
Solicitations or the purchase of Whole Life Policies; provided,
Pa <
however, that nothing in that prior Order was intended to bar
any action to enforce the parties’ Settlement Agreement in
accordance with its terms.
3. The Court also dismissed all claims of plaintiffs and
settlement class members on the merits and with prejudice, and
it retained jurisdiction to administer the settlement and enforce
its Orders and Judgment.
4. Based on its prior Orders and Judgment, the Court
hereby determines that the Alabama plaintiffs’ claims have been
discharged and dismissed with prejudice and on the merits and
that the Court's rulings are res judicata as to those claims.
5. The Alabama plaintiffs and their agents, attorneys,
successors, representatives, heirs and assigns, and all persons in
active concert or participation with them and any of them, are
hereby permanently enjoined from pursuing in the Alabama
courts, or any forum other than this Court, any claims that were
8la
or could have been raised in this action, and from taking any
further action in the Alabama courts other than filing voluntary
notices of dismissal of their individual actions on the merits and
with prejudice.
6. To implement its previous Order and Judgment
dismissing settlement class members’ claims with prejudice and
on the merits and retaining jurisdiction to enforce the terms of
the settlement, the Court hereby enjoins any and all other
settlement class members and their agents, attorneys, successors,
representatives, heirs and assigns, and all persons in active
concert or participation with them and any of them, from
pursuing in any forum other than this Court any claims that were
or could have been raised in this action.
7. MetLife is hereby ordered to abide by its offer to
grant the Alabama plaintiffs the opportunity to apply for the
same settlement relief provided to eligible settlement class
members, i.¢e., a refund of net premiums plus interest as specified
in the Settlement Agreement, or a MetLife Growth Plus Annuity,
notwithstanding the expiration of the claim-filing period. If the
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Alabama plaintiffs wish to take advantage of this offer, they
must file Proof of Claim Forms in substantially the same form as
those previously approved by the Court, not later than 30 days
from the date of this Order.
8. The injunctions issued in this Order are authorized by
the All-Writs Act, 28 U.S.C. § 1651(a), and the Anti-Injunction
Act, 28 U.S.C. § 2283, because they are necessary to protect
and effectuate this Court's Final Judgment and are necessary in
aid of this Court's continuing jurisdiction.
IT IS SO ORDERED in Chambers in Tampa,
Hillsborough County, Florida this 8th day of November, 1995.
ls
Steven D. Merryday
United States District Judge
83a
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
SHERRY HORTON, et al.,
Plaintiffs,
VS. CIV. No. 93-1849-CIV-T-23A
METROPOLITAN LIFE INSURANCE
COMPANY,
Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
REGARDING MOTIONS TO INTERVENE AND TO DISMISS
NOTICES OF INTENTION TO APPEAR AND OBJECT
Before the Court are the following: (1) a motion to
intervene (Docket No. 64) by Julio Gonzalez-Roel, Kevin P.
McCarron, John C. Garcia, Vincent P. Beilman, III, and John A.
Ferrandes (the “former sales managers”), filed on May 12, 1994;
(2) a motion to intervene (Docket No. 77) by Ronald and Anissa
Coulter (the “Coulters”), filed on May 23, 1994; and (3) a
seth i ieiiiail ANAARNN Sail Weide, Scie Ailiioaet wad
Deborah K. Spamer (Docket No. 106) to dismiss the various
notices of intention to appear and object to the proposed class
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settlement filed by the former sales managers (excluding Mr.
Ferrandes) (Docket No. 58), by Kevin J. Daxon ("Daxon”)
(Docket No. 89), and by Daniel Richard Urso (“Urso”) (Docket
No. 94),
These motions were briefed, and affidavits were
submitted. The Court heard oral argument at the July 18, 1994
hearing on the fairness of the proposed settlement.' Upon
consideration of the papers submitted and arguments made, the
Court denied the intervention motions and determined that
Daxon and Urso do not have standing to object to the proposed
IThe former sales managers moved for leave to file a reply brief
in support of their motion to intervene, and they tendered a
proposed reply brief with the motion. (Docket No. 90.) Leave to
file a reply brief is granted; the reply brief has been considered
by the Court. In addition, plaintiffs moved to supplement their
response to the motion to intervene. (Docket No. 108.) This
motion also is granted, as ordered below, and the supplemental
material has been considered by the Court.
85a
settlement.’ In accordance with and in support of the
determinations made at the hearing, the Court makes the
following findings of fact and conclusions of law.
FINDINGS OF FACT
Factual Background
1. Plaintiffs’ central allegation in this case is that they
and other members of the settlement class purchased whole life
insurance policies issued by Metropolitan Life Insurance
Company (“MetLife”) as retirement and/or other savings plans or
vehicles as a result of written or other sales solicitations that
allegedly did not fully disclose that the product being sold was
life insurance.
2
At the July 18 hearing, counsel for the former sales managers
(except Mr. Ferrandes) did not assert their clients, alleged
standing to raise their previously filed objections. Instead,
counsel spoke only on behalf of Daxon. After the Court's bench
ruling on Daxon’s lack of standing, however, the parties and the
former sales managers stipulated on the record that the former
sales managers were not settlement class members.
86a
2. The complaint in this action was filed in November
1993 and was widely publicized in the press, particularly in the
‘Tampa Bay area.
3. In April 1994, plaintiffs and MetLife agreed to a
proposed settlement of this action and entered into a Settlement
Agreement.
4. On April 22, 1994, this Court issued its Order with
respect to Class Certification, Notice, and Settlement Hearing
(Docket No. 48), certifying a settlement class consisting of:
all persons who purchased a MetLife whole life
insurance policy as a retirement and/or other
savings plan or vehicle, based in whole or in part
on written materials or other solicitations that
allegedly did not fully disclose that these plans
were life insurance products, from
(a) the Rick Urso & Associates sales
office (or its predecessor office) between January
1, 1988 and October 31, 1993, or
(b) any other sales office of MetLife
between January 1, 1990 and October 31, 1993.
5. The April 22 Order also approved forms of
individual and publication notice and a proof of claim form.
The proof of claim form required settlement class members who
87a
sought to make a claim to certify the truth of the following
Statements :
a. I purchased a MetLife whole life insurance
policy that was sold to me as a retirement and/or
savings plan or vehicle.
b. At or prior to the time that I made the purchase,
I received from a MetLife representative a sales
solicitation that did not fully disclose to me that
the product I would receive was a life insurance
policy.
C. I was misled by this sales solicitation, and I did
not understand that I was buying a life insurance
policy at the time I bought it.
(Proof of Claim Form at 1.)
The Coulters
14. The Coulters are the named plaintiffs in an action
originally filed on or about March 25, 1994, in the Court of
Common Pleas of Allegheny County, Pennsylvania, but now
pending after removal in the United States District Court for the
88a
Westem District of Pennsylvania, Civil Action No. 94-0629.
(Their complaint is attached as Exhibit 2 to Docket No. 77.)
15. The Coulters’ Pennsylvania action asserts, inter alia,
claims on behalf of a putative “subclass” of Pennsylvania
residents who allegedly were solicited to purchase MetLife
whole life insurance policies as savings and/or retirement plans.
These allegations are substantially the same as those asserted by
plaintiffs in this action.
16. The Coulters did not file a proposed complaint with
their intervention motion, as required by P2d. R. Civ. P. 24(c).
Instead, they sought to have “all Pennsylvania residents . . .
severed [from this action] and allowed to proceed, with the ~
Coulters as Class Representatives, in Pennsylvania, as a separate
class action” against MetLife. Alternatively, the Coulters asked
“that they be permitted to retain Pennsylvania counsel to protect
their rights under Pennsylvania law.” (Docket No. 77, at 1-2.)
17. The Coulters have not yet moved for class
certification in Pennsylvania. Nor have they sought to have their
attorney appointed as class counsel. MetLife has filed a motion
TT te eA
ah atmegebtiiatets
89a
to dismiss the Coulters’ amended complaint, and that motion is
pending before the federal district court in Pennsylvania.
18. As of June 8, 1994, approximately 800
Pennsylvania settlement class members had filed proofs of claim,
even though the deadline for filing a not until June 30, 1994.
19. The Coulters asserted that, in January or February
1993, they purchased a MetLife whole life insurance policy that
allegedly had been represented as a retirement or savings plan.
(Pennsylvania Complaint {| 30-36.) They also claimed they
purchased the insurance in part on the basis of sales solicitations
that allegedly “failed to disclose that the solicitation was
intended to propose insurance... . 11 (id. 1 31-32.) These
allegations place the Coulters, as individuals, within the
settlement class certified by this Court.
Timing of Intervention Motions
20. Before the former sales managers and the Coulters
filed their intervention motions on May 12 and 23, respectively,
plaintiffs and MetLife had already entered into a settlement
90a
agreement, and this Court had preliminarily approved that
agreement as sufficiently reasonable, adequate and fair to
warrant notice to members of the settlement class. Following
entry of the Court's April 22, 1994 Order granting preliminary
approval, individual notice and claim forms were mailed to
approximately 71,000 potential settlement class members, and
notice was published in newspapers and magazines with a
combined circulation in excess of 7 million. (Docket No. 144,
149.)
CONCLUSIONS OF LAW
Intervention as of Right
21. Absent an express statutory right to intervene.
(which the would-be intervenors do not assert), an applicant may
not intervene as of right under Fed. R. Civ. P. 24(a) (2) unless:
(1) the application to intervene is timely; (2) the
applicant has an interest relating to the property or
transaction which is the subject of the action; (3) the
applicant is so situated that the disposition of the action,
as a practical matter, may impede or impair his ability to
protect that interest; and (4) the applicant's interest will
not be represented adequately by the existing parties to
91a
the suit.
ManaSota-88, Inc. v. Tidwell, 896 F.2d 1318, 1321 (Ith Cir.
1990).
22. An applicant must meet all four criteria to intervene
under Rule 24(a)(2). Id.; accord Washington Elec. Cooip.. Inc.
v. Massachusetts mun. wholesale Else. Co., 922 F.2d 92, 96 (2d
Cir. 1990). The Court has considered each of the four factors as
follows.
h It
42. The Court next considers the four Rule 24(a)(2)
requirements in connection with the Coulters’ motion to
intervene. ,
43. Interest and Impairment of Interest: Because the
Coulters are settlement class members, they have a legally
protectable interest in the subject of this action. This Court's
April 22, 1994 Order, however, allowed the Coulters -- and any
other dissatisfied Pennsylvania residents within the settlement
class -- to opt out of the settlement class and litigate elsewhere if
they chose to do SO. Thus, the Coulters and other Pennsylvania
92a
residents cannot claim that the disposition of this action would
unduly impede or impair their interests if intervention were
denied. See, ¢.g., Roberts v. Heim, [1989] Fed. Sec. L. Rep.
(CCH) | 94,394, at 92,555 (N.D. Cal. Mar. 30, 1989) (denying
intervention to class members because they “can exercise their
right to opt out . . . and thereby avoid being bound by the
judgment”), Alaniz v. Califomia Processors, Inc,, 73 F.R.D. 269,
289 (N.D. Cal. 1976) (same).
44. In the altemative, the Court's order gave the
Coulters the opportunity to remain in this class action and object
to the settlement, and to appear at the fairness hearing
themselves or through their own attorney. See Fed. R. Civ- P.
23(c)(2)(c). The Coulters appeared through their own attomey at
the fairness hearing.
45. As settlement class members, the Coulters already
had the right to opt out of the settlement class or appear through
counsel. Thus, denial of the intervention motion would in no
way prevent them from protecting their rights. See, ¢. g.,
Webcor Elec, Inc. v, Whiting, 101 F.R.D. 461, 466 (D. Del.
93a
1984) (denying intervention to shareholders because they could
object at fairness hearing), Officers for Justice v. Civil Serv.
Comm‘n, 473 F. Supp. 901, 829-30 (N.D. Cal. 1979) (denying
intervention to class members who had opportunity to object at
fairness hearing), affd, 688 F.2d 615 (9th Cir. 1982), cert.
denied, 459 U.S. 1217 (1983); Alaniz v, California Processors,
Inc., 73 F.R.D. 289, 295 (N.D. Cal. 1976), aff'd sub nom. Alaniz
v. Tillie Louis Foods, 572 F.2d 657 (9th Cir.), cert. denied, 439
U.S. 837 (1978).
46. Adequacy of Presentation: The Court also rejects
the Coulters’ argument that plaintiffs cannot or will not
adequately represent their interests. The Coulters’ interests are
the same as those of the settlement class: they all claim to have
been misled by the same types of sales solicitations used to sell
whole life insurance as retirement and/or savings plans or
vehicles.
47. Nor can the Coulters justify their motion by arguing
that their claims are factually and legally distinct from those in
this action and that Rule 23(a)'s requirements of commonality,
94a
typicality and adequacy of representation are not satisfied as to
the putative subclass they allege. These contentions ignore that
the parties have presented the Court with a settlement and that
Rule 23's requirements “may be more easily satisfied in the
settlement context than in the more complex litigation context.”
Dalkon Shield Clai C “i Cas. & Sur, Co. (1
A.H, Robins Co.), 85 B.R. 373, 378 (E.D. Va. 1988), aff'd, 880
F.2d 709 (4th Cir.), cert. denied, 493 U.S. 959 (1989); see also
Bowling v. Pfizer, Inc., 143 F.R.D. 141, 157-58 (S.D. Ohio
1992).
48. Timeliness: The Court questions whether the
Coulters’ intervention motion is timely under the factors
articulated in Reeves, 754 F.2d at 968-69. The Coulters filed
their Pennsylvania action on or about March 2S, 1994; they
therefore knew of their claims before that date. Moreover, in
light of the extensive national publicity that this case and
MetLife's sales solicitations received, the Coulters quite likely
knew or should have known about this action when they filed
their Pennsylvania suit. Yet the Coulters did not move to
95a
intervene here until May 23 -- well after the Court had
preliminarily approved the proposed settlement and individual
notice had been mailed to potential settlement class.
49. The Court need not decide, however, whether the
Coulters’ intervention motion was timely because the motion
fails to satisfy two of the other four Rule 24(a)(2) requirements:
impairment of interest and inadequacy of representation. As
discussed above, a prospective intervenor must meet all four of
those requirements to intervene as of right. ManaSota-88, Inc.,
896 F.2d at 1321; accord Washington Elec. Coop., Inc., 922
F.2d at 96. In addition, denial of intervention would in no way
prejudice the Coulters because (j) they had an opportunity to
exclude themselves from the settlement class or object to the
proposed settlement and (jij) they actually entered an appearance
in this case.
50. The Court therefore concludes that the Coulters
cannot intervene as of right because they have not met Rule
24(a)(2)'s requirements. Moreover, their motion is defective for
several other reasons.
96a
51. Asserted Right to Represent Other Pennsylvania
Residents: The Coulters’ attempt to exclude all Pennsylvania
residents from the settlement class is improper. Just as the
Coulters had the right to participate in or opt Out of the
settlement class, so did every other settlement class member who
resides in Pennsylvania. The Coulters have no authority
unilaterally to make that decision for all other Pennsylvania
settlement class members. See 3 Herbert B. Newberg & Alba
Conte, Newberg on Class Actions § 16.16 at 16-90 (3d ed.
1992) ("The decision to exercise the right of exclusion in a Rule
23(b)(3) action is an individual decision of each class member
and may not be usurped by the class representative or class
counsel”) (emphasis added). The type of group or mass opt-out
that the Coulters seek therefore is improper -- especially where
so many Pennsylvania residents already have filed claim forms
expressing their desire to participate in the proposed settlement.
See, ¢. g..Carlough v. Amchem Prods., Inc., 10 F.3d 189, 203-04
(3d Cir. 1993) (discussing class members’ right to opt out only
on an individual basis, and noting that “a mass opting out...
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clearly would be disruptive to the district court’s ongoing
settlement management”).
52. The Coulters’ attempt to “sever” or exclude ail
Pennsylvania residents from the settlement class also is
particularly inappropriate because the Coulters have not been
determined to be adequate representatives of the absent
Pennsylvania members of the settlement class (or of any other
putative class); nor have their attorneys been found to be
adequate class counsel. The Coulters therefore have no right to
speak for the putative subclass they allege or to force the
putative subclass members’ withdrawal from the settlement class
certified in this action.
53. Due Process: The Coulters’ claim that this Court's
application of Florida law to Pennsylvania residents would
violate due process is unfounded. The Court has not applied
Florida law to Pennsylvania residents’ claims; nor has it
attempted to adjudicate the merits of plaintiffs claims. The only
issue before the Court is the fairness and adequacy of the
settlement -- an issue controlled by federal law governing
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settlement class certification and settlement approval. The Court
therefore does not need to resolve the constitutional limits on the
application of state choice-of law principles. In addition, if the
Coulters and other Pennsylvania residents believed that
Pennsylvania law gave them a greater potential recovery than
would be available to other settlement class members, they could
have excluded themselves from the settlement class.
54. Procedural Defect: Intervention also is denied
because the Coulters did not attach a pleading as required by
Rule 24(c) “setting forth the claim or defense for which
intervention is sought.” The failure to attach a pleading is
especially significant here because the Coulters do not even
attempt to assert a claim or defense; rather, they seek to
intervene so they can “sever” themselves and all other
Pennsylvania residents from the case.
Permissive Intervention
55. Where an applicant may not intervene as of right
under Rule 24(a)(2), the Court nevertheless has discretion to
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permit intervention under Rule 24(b)(2) if the application is
timely and if
an applicant's claim or defense and the main
action have a question of law or fact in common.
.. . In exercising its discretion the court shall
consider whether the intervention will unduly
delay or prejudice the adjudication of the rights
of the original parties.
Fed. R. Civ. P. 24(b)(2); see, e.g., ManaScota-88, Inc., 896 ata
F.2d at 1323.
56. “[I}t is wholly discretionary with the court whether
to allow intervention under Rule 24(b) and even though there is
a common question of law or fact, or the requirements of Rule
24(b) are otherwise satisfied, the court may refuse to allow
intervention.” Worlds, 929 F.2d at 595 (quotations omitted).
The Coulters
64. As discussed above, the Coulters’ intervention
motion might be untimely. But more importantly, the
procedures adopted by the Court for potential class members to
object or exclude themselves from the settlement class already
offer the Coulters all the relief they seek for themselves and
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other Pennsylvania settlement class members. granting
permissive intervention thus would serve no purpose where the
would-be intervenors wish only to “sever” themselves from the
action and already have the right to do so. (As discussed above,
however, the Coulters’ unilateral attempt to “sever” other
Pennsylvania settlement class members is improper.)
In Tampa, Florida, on October 25th, 1994.
Js
STEVEN D. MERRYDAY
UNITED STATES DISTRICT JUDGE
10la’
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
CIVIL ACTION NO. 93-1849-CIV-T-23A
SHERRY HORTON PLAINTIFFS |
732 Cone Street
Toledo, OH 43606 |
JOYCE ARMBRUSTER
Oakwood Drive
Largo, FL 34640
|
VS.
METROPOLITAN LIFE INSURANCE COMPANY
DEFENDANTS
SERVE: Stuart Nagler
An Officer and managing Agent One Madison Avenue
New York, NY 10010
RICK URSO
2826 Morrison Avenue
Tampa, FL 33609
INTERVENOR'S (PENNSYLVANIA COULTER CLASS)
MOTION FOR INTERVENTION
Pursuant to Fed.R.Civ.P. 24, Ronald and Anissa Coulter,
representatives of the class of Pennsylvania residents
(Intervenors) similarly injured by the Metropolitan Life
Insurance Company's (hereinafter MetLife) insurance practices, |
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respectfully requests that all Pennsylvania residents be severed
and allowed to proceed, with the Coulters as Class
Representatives, in Pennsylvania, as a separate class action
against the Metropolitan Life Insurance Company. if the Court
does not permit severance, in the alternative, the aforesaid
Pennsylvania residents encompassed by the Horton Class action
request that they be permitted to retain Pennsylvania counsel to
protect their rights under Pennsylvania law.
1. Ronald and Anissa Coulter are Pennsylvania residents
who purchased a “50/50 Savings Plan” in Pennsylvania from a
MetLife agent based in Butler, Pennsylvania. The 50/50 Savings
Plan” was allegedly a retirement plan with a life insurance
component. In reality, it was whole life, life insurance.
2. The “50/50 Savings Plan”, as it was presented and sold
to consumers in Pennsylvania, was never presented to the
Pennsylvania insurance Department, and accordingly was not
approved by the Pennsylvania Insurance Department.
3. The “50/50 Savings Plan” did not contain disclosure
language to the effect that the plan, because it was comprised
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only of whole life insurance, was not an investment or savings
plan.
4. Disclosure language stating that life insurance is not
an investment or savings plan is required by the Pennsylvania
Insurance Department. 40 Pennsylvania Statute section 277; 40
Pennsylvania Statute section 472.
5. The Pennsylvania Insurance Department specifically
undertook an investigation of MetLife’s sales practices in
Pennsylvania and issued a lengthy and detailed report of its
Metropolitan Life Insurance Company, December 23, 1993, at
pp. 3839; 58; 71-72; 96-97; 155-160 (exhibit 1). The Insurance
Department's effort in this regard is unequivocal evidence of its
concern that Pennsylvania residents be protected from the
fraudulent insurance practices detailed in the Report.’
3
The Coulters respectfully request that this Court take judicial
notice of the Pennsylvania Insurance Department's Report and
will provide a copy of the Report in its entirety if the Court
so desires.
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6. The Coulters, as representatives of all those persons
similarly injured in Pennsylvania, brought a class action suit in
state court, pursuant to statutory and common law of
Pennsylvania (see Amended Coulter Complaint, exhibit 2), on
behalf of Pennsylvania citizens injured by MetLife’s failure to
Vv life i lici Vv
by the Pennsylvania Insurance Department and other fraudulent
insurance practices. (See exhibit 1, at pp. 155-160.)
7. The Pennsylvania Consumer Protection Law allows for a
private cause of action against insurance companies and sets
forth that it is a violation to sell or represent that a good or
service has approval which it does not have.
8. The Coulter Class, complaint also includes a sub-class of
plan with a life insurance component, which is also an alleged
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violation of the Pennsylvania Unfair Trade Practices and
Consumer Protection Law("CPL”). 73 Pennsylvania Statute 201-
2, as well as the Pennsylvania Unfair Insurance Practices Act, 40
Pennsylvania Statute section 277, and is a violation of the
Pennsylvania Bad Faith Insurance Statute, 42 Pennsylvania Code
Statutes Annotated section 8371.
9. Ronald and Anissa Coulter also filed a Class Action
Complaint in the Court of Common Pleas of Allegheny County,
on May 18, 1994, against individual defendants Michael George,
former MetLife Training Director, and Gary Antonino, former
MetLife Regional Vice-President, who formulated the “50/50
Savings Plan” scheme in Pennsylvania. The Class in that case is
comprised of Pennsylvania residents who purchased MetLife life
insurance, which, at the direction of Michael George and Gary
Antonino, was represented by MetLife agents to be a retirement
or savings plan with a life insurance component. This
misrepresentation is an alleged violation of the Pennsylvania
Unfair Trade Practices and Consumer Protection Law, 73
Pennsylvania Statute section 201-2; the Pennsylvania Bad Faith
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Insurance Statute, 42 Pennsylvania Code Statutes Annotated
section 8371; and the Pennsylvania Insurance Department Act,
40 Pennsylvania Statutes section 277. The claims in class action
against Michael George and Gary Antonino are based upon the
identical transactions and occurrences as in the earlier filed class
action.
10. The Coulter Class and sub-class members, all of whom
executed contracts of insurance in Pennsylvania and were injured
in Pennsylvania, are entitled to the application of Pennsylvania
law to their causes of action. Any practice to the contrary is a
denial of due process to the Coulter class and sub-class. Phillips
Petroleum Co. v. Shutts, 472 U.S. 797 (1985). In Phillips
Petroleum, the United States Supreme Court declared that the
application of Kansas law in a class action to claims which did
not arise in Kansas was “sufficiently arbitrary and unfair as to
exceed constitutional limits”. Id. at 822.
11. Representative Coulter is a steel worker. The remainder
of the class is constituted of those who purchased retirement
plans with a life insurance component from MetLife and is not
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limited to any particular profession or occupation.
12. In contrast, the Horton class action represents “primarily
... licensed nurses .. . [and other health care professionals]”
(Horton Class Action Complaint, 4/22/94, at pph. 19), who
purchased MetLife life insurance which they each believed to a
retirement or savings plan as a result of MetLife’s agents’
representations. (Horton Class Action Complaint at pph. 8.)
13. The Coulter class and sub-class seek relief on the basis
of the Pennsylvania CPL, 73 Pennsylvania Statute section 201-1
et seg., the Pennsylvania Bad Faith Insurance Law, 42
Pennsylvania Code Statutes Annotated section 8371, and
Pennsylvania fraud and contract law.
14. The Pennsylvania CPL empowers the Pennsylvania
Attorney General to adopt such rules and regulations as may be
necessary to protect Pennsylvania residents from fraud and unfair
or deceptive business practices. A Pennsylvania purchaser of
goods, such as each member of the Coulter class, also has a
private nght of action under the Pennsylvania CPL.
15. The Coulter Class and sub-class, by virtue of their
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claims for relief pursuant to the Pennsylvania CPL and Bad
Faith Insurance statute, have claims atypical of those of the
Horton class as well as the class of any other state.
16. The Coulter Class became aware of the pending Horton
class action and settlement agreement, and the Horton Class’
attempt to encompass the Coulter Class when several Coulter
Class members received opt-out notices on or about May 5,
1994.
17. The settlement reached between the Horton Class and
MetLife is the product of the claims and defenses available
under Florida law and does not adequately protect or serve the
rights, interests and/or defenses of contracting parties in
Pennsylvania, specifically, the Coulter Class.
18. For example, the Pennsylvania Insurance Department
has already ordered the relief which was ordered in the Horton
Class settlement, Le, restitution of premiums paid ss a result of
MetLife’s fraudulent business practices. See Order of Deputy
Insurance Commissioner for Pennsylvania Insurance
Department,, 2/11/94, (exhibit 3). Enforcing the settlement
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agreement with regard to the Coulter Class is a clear
abridgement of the class, rights to seek additional damages
which are available under Pennsylvania law.
19. Accordingly, the proposed Horton Class Settlement
agreement does not adequately protect the Coulter Class’ rights
and is therefore not in the best interests of the Coulter Class.
20. The Coulter Class has a right to intervene pursuant to
Fed.R.Civ.P. 24 (a) (2), on the grounds that the Horton Class
settlement may impair the Coulter Class from obtaining the relief
to which it is entitled under Pennsylvania statutory and common
law. The Coulter Class requests permissive intervention,
pursuant to Fed.R.Civ.P. 24 (6) (2), because the Coulter Class’
claims share a common question of law or fact with those
advanced by the Horton Class; specifically, the fraudulent sales
practices of MetLife.
21. The Horton Class action is founded upon Federal and
Florida state RICO, breach of fiduciary duty and common law
fraud Claims.
22. The allegations contained in the Horton Complaint and
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Amended Complaint are dissimilar from the Coulter Class’
claims against MetLife. The Horton Complaints purport to
contain allegations common to all class members. However,
they do not represent and/or contradict the Coulter Class, claims
because:
1. the Horton class claims that the MetLife agents in Florida
identified themselves to class members “nurse's representatives”,
Horton Complaint para. 4 (a); whereas Representative Coulter is
a steel worker, and never, in the process of purchasing MetLife
insurance, did he speak with anyone claiming to be a “steel
workers representative”; in addition, the Coulter Class is not
limited to any one profession or group;
2. that MetLife agents never referred to life insurance as
such, but called it an “investment”, Id. at para. 4(d); and that
MetLife agents never disclosed that the product being purchased
was life insurance, Id. at para. 8; in contrast, MetLife Account
Representatives in Pennsylvania stated that the “50/50 plan” had
a life insurance “component”;
3. that MetLife agents perpetrated interstate wire and mail
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fraud on the class; Id. at para. 23 (a) and (b); and that Florida
RICO applies to the claims of the class, Id. at pares. 28-35;
where the Coulter Class, claims are limited to events which
occurred in Pennsylvania;
4. that a Florida agent's (Urso’s) actions are common to all
class members, Id. at para. 40; where the Coulter Class’ claims
are based on the representations and/or omissions made only by
Pennsylvania Account Representatives and officers;
5. erroneously alleges federal RICO in connection with the
class, insurance claims, contradictory to the McCarran-Ferguson
Act which dictates that states should regulate their respective
insurance industries and that federal causes of action are not
applicable, Id. at paras. 20-27; but the Coulter Class has not
alleged MetLife RICO violations in connection with its claims.
23. The requirement of Fed.R.Civ.P. 23 (a) (2) that there be
“questions of law or fact common to the class” is not satisfied
by the Horton Class representative.
24. The requirement of Fed.R.Civ.P. 23 (a) (3) that “the
claims or defenses of the representative parties are typical of the
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claims or defenses of the class” is not satisfied by the Horton
Class representative.
25. The requirement of Fed.R.Civ.P. 23 (a) (4) that “the
representative parties will fairly and adequately protect the
interests of the class” is not satisfied by the Horton Class
representative because the remedies available under Pennsylvania
statutes and common law are not available to the Horton Class
representative.
WHEREFORE, the plaintiffs respectfully request that all
Pennsylvania residents be severed and allowed to proceed, with
the Coulters as Class representatives, in Pennsylvania, as a
separate class action against the Metropolitan Life Insurance
Company. If the Court does not permit severance, in the
alternative the aforesaid Pennsylvania residents encompassed by
the Horton Class action request that they be permitted to retain
Pennsylvania counsel to protect their rights under Pennsylvania
law.
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Respectfully submitted,
{S/
Kenneth R. Behrend
BEHREND & ERNSBERGER
2400 Grant Building
Pittsburgh, PA 15219
phone (412) 391-2515
fax (412) 391-2762
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CERTIFICATE OF SERVICE
I, Kenneth R. Behrend, hereby certify that a true and correct
copy of the within Brief in Support of Plaintiffs, Motion for
intervention was served this 20th day of May, 1994, upon the
following by United States mail, first class postage prepaid
addressed as follows:
W. CHRISTIAN HOYER
JUDY S. HOYER
JAMES, HOYER, NEWCOMER & SKYE, P.A.
4830 W. Kennedy Blvd.
Suite 750
Tampa, FL 33609
METROPOLITAN LIFE
INSURANCE COMPANY
STUART NAGLER
An Officer and
Managing Agent
One Madison Avenue
New York, NY 10010
RICK URSO
2826 Morrison Avenue
Tampa, FL 33609
RON PARRY
ARNZEN, PARRY & WENTZ, P.S/C.
600 Greenup Street Covington, KY 41012
LORNA G. SCHOFIELD
11Sa
DEBEVOISE & PLIMPTON
875 Third Avenue
New York, WY 10022
By_/s/
Kenneth Behrend
PA LD. 37961
BEHREND & ERNSBERGER
2400 Grant Building
Pittsburgh, PA 15219
phone (412) 391-2515
fax (412) 391-2762
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EXHIBIT |
Excessive FIP ratios were noted for MetLife offices
not identified by audit reports.
FINDINGS AND CONCLUSIONS
From analysis of MetLife consumer complaints, audit
reports and FIP reports, it was clear management failed to utilize
or integrate available internal control mechanisms to detect and
control improper replacement activity.
-The impact of improper replacement activity upon complaint
data, i.e. increased complaints, would not be expected to occur
until such time as new policies failed to perform as solicited.
Thus current complaints would not be expected to accurately
mirror improper replacement activity as indicated by FIP ratios
contemporary to complaints.
-MetLife complaint ratios, due to Replacement and
Misrepresentation, of 75.98%, 81.03% and 72.80% in years
1990, 1991 and 1992 (see page 13) should have been cause for
MetLife management to have examined those issues and to have
scrutinized current audit and FIP reports.
-Access of MetLife corporate management to those reporting
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vehicles indicates corporate managements awareness of
replacement and misrepresentation as practices existing within
the marketing strategy.
-other than audit reports, no MetLife corporate directives
specifically identified replacement and misrepresentation issues
requiring correction, within Pennsylvania.
-A December 16, 192 letter by Richard N. Maurer, senior
Vice President, Career Agency Operations of MetLife, directed
to the MetLife field force, entitled “Honesty and Integrity: our
Basis For Doing Business”, reiterated MetLife’s position
requiring honest and ethical business conduct, indicating an
awareness and concer of corporate MetLife as to practices of
the field force.
-Sales representatives informed customers that existing
policies were to be left in place until policy anniversary, and not
immediately surrendered, in order to earn dividends.
-Insureds were instructed to disregard MetLife
annual premium or lapse notices, which were explained by
MetLife sales representatives as computer errors.
ee ee ee ee
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-MetLife checks for values taken from existing policies were
routed through consumer homes in attempts to conceal
replacement activity in conjunction with the sale of a new
policy.
-Policies were not countersigned or dated at delivery in three
(3) of the six (6) cited cases. Where delivered policies had been
countersigned and dated at delivery, two (2) of the three (3)
cases showed untimely delivery.
-FINDINGS AND CONCLUSIONS-
The observed pattern of deceptive solicitations and
concealed replacements by MetLife sales representatives appears
to have been for the purpose of increasing their commissions.
Replacement solicitations were such as to cause policyholders,
directly or indirectly, to believe that by using their existing
policy values to purchase new insurance they were to receive
paid-up policies, ie caveat teblateleaasnan eb e
no additional cost.
Supporting the cover letter which accompanied the delivered
policy were two (2) pages, one captioned “Individual Retirement
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Benefit (1.R.B.) v.s. Individual Retirement Account (I.R.A.)
Certificate of Deposit (C.D.)” and the other captioned
“Metropolitan Investment Program”. The captioned pages
represented the Life to 95 policy as an “investment” and a
“savings” program. It was falsely stated there was no “penalty
for early withdrawal” and that the I.R.B. provided a 119 to 12+
Long Term Rate of Return”. MetLife subsequently informed the
Insurance Department that based upon the current values, as of
December 1992, the policy would require additional premium
payments for eight (8) years in order to reach a point where it
would become self-supporting.
FINDINGS AND CONCLUSIONS
The Unfair Insurance Practices Act, No. 205, Section 5(a)(1)(vi)
defines “Unfair Methods of Competition” and “Unfair or
Deceptive Acts or Practices” as 11... Making, publishing, issuing
or circulating any estimate, illustration, circular, statement, sales
presentation, omission comparison which:” ... Is a
misre presentation for the purpose of inducing or tending to
induce the lapse, forfeiture, exchange, conversion or surrender of
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any insurance policy”.
Section 637 of The Insurance Department Act prohibits
misre presentation of terms of policy and future dividends by
agents, brokers, or solicitors. “No agent or solicitor of any
insurance company, association, or exchange, and no insurance
broker, shall issue, circulate, or use, or cause or permit to be
issued, circulated or used, any written or oral statement or
circular misrepresenting the terms of any policy issued or to be
issued by such company, association, or exchange, or make an
estimate, with intent to deceive, of the future dividends payable
under such policy.,,
The referenced examples clearly demonstrate the noted
pattern of sales practices and procedures used by MetLife sales
representatives in utilizing sales illustrations based upon non-
guaranteed projected values, and in many cases reinforcing the
sales illustration values with cover letters containing misleading
Statements conceming the insurance policy being sold.
approval, and that only the Tax Advantaged Bonus Plan for
Nurses had penetrated into the Pennsylvania marketplace.
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MetLife had allegedly recalled and destroyed all unapproved
issues of the advertising. The MetLife corporate advertising was
found consistent with other questioned advertising, in that it
promoted the sale of whole life policies of insurance through
solicitations promising earings for retirement. While containing
footnoted disclosure information, the various advertising pieces
possessed a capacity, through stating precise earning values, to
deceive consumers as to future earings. Further, sales
solicitation scripts employed by telemarketers clearly avoided the
presentation of the Tax Advantaged Bonus Plan as insurance.
The Tax Advantaged Bonus Plan was found to have evolved
from 1991 to 1993 through the backing of MetLife Senior Vice
President Richard N. Maurer and was, in fact, termed
alternatively “The Maurer Plan”. Charles M. Kavitsky,
Territorial officer In Charge and Vice President, Mideastern
Territory, was found to have coordinated and provided
telemarketing support to MetLife sales representatives J. Joel
Sherman, Richard Antonino, and Ronald Schram in Westem
Pennsylvania for the Tax Advantaged Bonus Plan.
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-FINDINGS AND CONCLUSIONS-
Although the examination could not identify in detail
the full extent of market penetration gained by MetLife
through use of the various retirement/savings/ investment plan
solicitations, testimony of consumers and MetLife agents
contacted during the examination indicated the misleading
solicitation methods were used routinely to solicit Whole Life,
Life to 95, and Life to 98 policies sold by MetLife. It is clear
the various forms of advertising developed and used by MetLife
sales representatives were designed to preclude proper disclosure
of insurance sales to Pennsylvania consumers. It was also noted,
while the focus of the examination was an a six (6) county
Wester Pennsylvania Region, the various marketing schemes
and practices occurred throughout Pennsylvania.
X. FORMS FILING AND APPROVAL
Throughout the course of the examination, it was noted
MetLife policies viewed in consumer homes, policy copies sent
into the Department in response to mail surveys, and specimen
policies provided by MetLife’s Johnstown office differed from
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the corresponding MetLife policy forms which were approved
by, and on file with, the Department.
Whole Life Policy (7-87) and Life to 95 ($7-87): Form
approval was granted by the Department for both policy forms
on June 2, 1987. Departmental approval was granted to MetLife
for replacement of policy pages seven (7) and eight (8) for both
forms on June 12, 1991. The approved replacement pages
provided consumers notice that; “You may ask us to pay
premiums with a combination of yearly dividends, the cash value
to any paid-up additions and/or any dividend accumulations. As
long as these values are great enough, out-of-pocket premiums
need not be paid to keep your policy in force.” All policy forms
57-87 and 7-87 encountered during the examination, issued
subsequent to June 12, 1991, contained the earlier pages which
had been replaced with the pages approved June 12, 1991.
Upon subsequent review by MetLife, it was reported to the
Department a total of seventy thousand five hundred
fifty-seven (70,557) incorrect Whole Life Policy (7-87) forms
and ten thousand three hundred eighty-one (10,381 Life to 95
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(57-87) policy forms had been issued to Pennsylvania
consumers. As a result, these two (2) unapproved policy
versions were issued to a total of eighty thousand nine hundred
thirty-eight (80,938) consumers subsequent to June 12, 1991.
Survivorship Whole Life Policy (2J-90 PA):
Form approval was granted by the Department for this policy
form on October 23, 1990. MetLife had initially submitted a
generic policy form 2J-90 which was disapproved by the
Department. Resubmission was made in the form of 2J-90 PA,
which included revisions to pages one (1) and nine (9), from
what was originally filed under form 2J-90, concerning
Supplemental Insurance Benefit and Split Policy Option. Based
upon the revisions, policy form 2J-90 PA was then approved.
However, all Survivorship Whole Life policies (2J-90 PA) noted
during the examination contained the original page one (1)
contained in policy 2J-90 which was not approved for use in
Pennsylvania.
Upon subsequent review by MetLife, it was reported to the
Department a total of three hundred eighty-three (383)
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unapproved versions of Survivorship Whole Life policy 2J-90
PA, containing the unapproved language on page one (1), had
been issued to Pennsylvania consumers subsequent to October
23, 1990.
Flexible Premium Life Insurance Policy (7UL-90): Form
approval was granted by the Department for this policy form on
August 23, 1990. The initial MetLife submission was
disapproved. Among the points of disapproval was the use of
disclosure language on the Policy Specification page stating “The
Planned Premium shown below may need to be increased to
keep this policy and coverage in force.” The Department
required additional disclosure language “Even if coverage
continues, the amount payable on the final date of policy nay
have little or no value.”, be added to the disclosure language
submitted on the Specification Page in order to be considered for
approval. MetLife subsequently submitted an amended Policy
Specification page with the requested disclosure language, and
Departmental approval was granted August 23, 1990.
All Flexible Premium Life Policies (7UL-90) noted during the
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examination contained the limited, unapproved, disclosure
language on the Policy Specification page and lacked the
disclosure language required to obtain approval of the policy.
This is of serious concem to the Department since it was noted
throughout the examination the Flexible Premium Life Policy
(9UL-90) was the primary policy sold using the “free insurance”
and “paid-up insurance” solicitations. The absence of the
required disclosure notice to policyholders, denied consumers
full and fair disclosure concerning future premium payments and
policy value. The lack of proper disclosure was found to be
particularly serious in terms of damage to consumers in view of
the manner in which the policies were solicited and sold.
Upon subsequent review by MetLife, it was reported to
the Department a total of twenty nine thousand eight hundred
forty-two (29,842) Flexible Premium Life Policies (7UL-90)
were issued to Pennsylvania consumers with unapproved and
incomplete disclosure language. :
Multifunded Flexible Premium Life Policy (7.6FM-90):
Both unisex and sex distinct versions of this policy were granted
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Departmental approval on November 6, 1990. It was noted
throughout the examination policy form 7.6FM-90, as actually
issued to consumers, contained additional unapproved policy
language on pages |, 3, 3.1, and 5.
Upon subsequent review by MetLife, it was reported to
the Department a total of six thousand five hundred forty-two
(6,542) unapproved versions of the Multifunded Flexible
Premium Life Policy (76.FM-90) were issued to Pennsylvania
consumers subsequent to November 6, 1990.
Throughout the course of the examination, all policy
forms noted in consumer homes, as well as duplicate policies
provided by MetLife, at the Department's request, contained non-
guaranteed illustrated value tables bound in with the policy
pages. Since only guaranteed value tables are permitted to be
included in a bound policy, each policy containing the non-
guaranteed illustrated value tables constitutes an unapproved
version of the policy.
Upon subsequent review by MetLife, it was reported to
the Department a total of three hundred eighteen thousand eight
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hundred forty-two (318,842) policies were issued to
Pennsylvania consumers containing unapproved non-guaranteed
illustrated value tables. According to MetLife, this occurred
with all life and annuity policies issued from the Johnstown,
Pennsylvania office since 1988.
- FINDINGS AND CONCLUSIONS -
In summation of the above findings, a total of four
hundred thirty-six thousand five hundred forty-seven (436,547)
unapproved policy forms were issued to Pennsylvania
consumers. Section 354 of the Insurance Company Law (40
P.S.477b) specifically states it shall be unlawful for any
insurance company doing business in the Commonwealth of
Pennsylvania to issue, sell, or dispose of any policy or contract
covering life insurance or annuities until the forms have been
submitted to and formally approved by the Insurance
Commissioner. 7
It should be noted that during the course of the
examination MetLife cooperated fully in providing the Insurance
129a
Department with all requested documents, and beginning
inquiries into the various consumer complaints which surfaced
during the examination in order to determine necessary
corrective action required to make damaged consumers whole.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.