Abbit v. Ing U.S. Annuity & Life Ins. Co.

• Decision Date: 16 May 2017
• Docket Number: Case No.: 3:13-cv-02310-GPC-WVG.
• Citation: 252 F.Supp.3d 999
• Parties: Ernest O. ABBIT, on behalf of himself and on behalf of all persons similarly situated, Plaintiff, v. ING USA ANNUITY AND LIFE INSURANCE COMPANY, and ING U.S., Inc., Defendants.
• Court: U.S. District Court — Southern District of California

252 F.Supp.3d 999

Ernest O. ABBIT, on behalf of himself and on behalf of all persons similarly situated, Plaintiff,

v.ING USA ANNUITY AND LIFE INSURANCE COMPANY, and ING U.S., Inc., Defendants.

Case No.: 3:13-cv-02310-GPC-WVG.

United States District Court, S.D. California.

Signed May 16, 2017

Andrew W. Hutton, Hutton Law Group, Timothy J. Tatro, Tatro & Zamoyski, LLP, San Diego, CA, for Plaintiff.

Christopher T. Wright, David J. Noonan, Noonan Lance Boyer & Banach LLP, San Diego, CA, Michael T. Leigh, Joseph L. Hamilton, Clark Cunningham Johnson, Clark C. Johnson, Oluwafunmito P. Seton, Stites & Harbison, PLLC, Louisville, KY, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT ON PLAINTIFF'S REMAINING CLAIMS

[ECF No. 130.]

Hon. Gonzalo P. Curiel, United States District Judge

Before the Court is Defendants ING USA Annuity and Life Insurance Company and ING U.S., Inc.'s (collectively, "Defendants" or "ING") Motion for Summary Judgment on the Remaining Claims. (Dkt. No. 130.)¹ Plaintiff Ernest O. Abbit ("Plaintiff" or "Abbit") opposed the motion, (Dkt. No. 141), and Defendants filed a reply, (Dkt. No. 149).

A motion hearing was conducted on April 6, 2017. (Dkt. No. 163.) Andrew Hutton and Timothy Tatro appeared on behalf of Plaintiff. (Id.) Clark Johnson, Michael Leigh, and David Noonan appeared on behalf of Defendants. (Id.)

After the hearing, the Court granted Plaintiff leave to file supplemental evidence, consisting of the deposition testimony of William Bainbridge and an additional expert report by Dr. McCann, and a supplemental brief explaining the relevance of the evidence to the instant motion. (Dkt. No. 164.) The Court also granted Defendantsleave to respond to Plaintiff's supplemental briefing. (Id.) Plaintiff filed the supplemental briefing and evidence, and Defendants responded. (Dkt. Nos. 171, 174, 176, 178.)

Upon consideration of the moving papers, supplemental briefing, oral argument, and the applicable law, the Court GRANTSDefendants' motion for summary judgment on Plaintiff's individual claims.

BACKGROUND

Having previously recited the facts of this case at length, the Court declines to repeat them here. (See, e.g., Dkt. Nos. 59, 117.) While the operative facts are few, the parties' presentations of the facts are substantively enmeshed with their legal theories. A brief review of relevant background suffices.

An annuity is a contract between an insured individual and an insurance company in which the insured pays premiums to the insurance company in exchange for the insurance company's promise to return the deposit via periodic payments. (Dkt. No. 59 at 2.) Annuity contracts typically undergo two primary periods: the "full accumulation period," during which the investor deposits funds with the insurance company, and the "annuitization period," during which the investor withdraws funds in the form of periodic payments. (Id.) Fixed index annuities ("FIAs") are annuities that generally earn interest linked to or derivative of the price movements of an equity index or other index, such as the S&P 500® Index. (Id.) Indexed annuities can also guarantee interest. (Id.) The policy parameters (such as "caps," "participation rates," and "spreads") are periodically declared by the insurance company. (Id.)

Defendants designed the Secure Index Opportunities Plus FIA and submitted the annuity product, Form IU–IA–3050(CA) ("Form 3050"), to the California Department of Insurance ("CDI") for review and approval in 2007. (Dkt. No. 144–1, Plaintiff's Separate Statement of Undisputed Facts ("Pl.'s SSUF") ¶¶ 2–3.) In its submission to the CDI, Defendants represented that the FIA provides for equity-indexed benefits, and that "[t]he Cap, Participation Rate, and Spread will be set such that the annualized option cost for this strategy will be at least 100 bps." (Declaration of Andrew W. Hutton in Support of Plaintiff's Opposition to Defendants' Motion for Summary Judgment ("Hutton Decl.") Ex. B at Oppo. 0075, 0103, Dkt. No. 144–3 at 38, 66.) The CDI approved Defendants' application to sell Form 3050 to California consumers. (Pl.'s SSUF ¶ 9.)

Plaintiff, a retired senior citizen, purchased an ING "Secure Index Opportunities Plus" FIA with a $1,000,000 premium payment on September 28, 2010. (Dkt. No. 117 at 2.) Defendants contributed a 5% bonus of $50,000 to Plaintiff's contract. (Dkt. No. 144–1, Plaintiff's Response to Defendants' Statement of Undisputed Material Facts ("Pl.'s Resp. to Defs.' SSUF") ¶ 1.) Plaintiff currently still holds his contract. (Dkt. No. 130–2, Defendants' Statement of Undisputed Material Facts in Support of Defendants' Motion for Summary Judgment on the Remaining Claims ("Defs.' SSUF") ¶ 2; Pl.'s Resp. to Defs.' SSUF ¶ 2.) At the time of his purchase, and on each of his six contract anniversaries, Plaintiff has elected one or more of the interest-crediting strategies offered pursuant to his FIA. (Declaration of Michael T. Leigh ("Leigh Decl.") Ex. 1 at § 6, Dkt. No. 130–4 at 16–20; Leigh Decl. Exs. 5–11, Dkt. Nos. 130–8–130–14.) Plaintiff's FIA has been credited with $84,863.86 in interest. (Defs.' SSUF ¶ 6; Pl.'s Resp. to Defs.' SSUF ¶ 6.)

Section 5.8 of Plaintiff's FIA contract guarantees that "[t]he reserves and guaranteed values will at no time be less than the minimum required by the laws of the state in which this Contract is issued." (Leigh Decl. Ex. 1, Dkt. No. 130–4 at 16.) Section 6.5 provides definitions applicable to the Monthly Cap Index Strategy, specifies that the "Index Credit" amount "is based on the performance of the applicable Index as measured over the Contract Year," and provides the formula with which index credits under the Monthly Cap strategy are calculated. (Leigh Decl. Ex. 1, Dkt. No. 130–4 at 20.) The contract confers upon Defendants discretion to add interest-crediting strategies as approved by the CDI, and to change the terms and conditions governing the interest-crediting strategies within contract parameters and state law. (Leigh Decl. Ex. 1 § 6, Dkt. No. 130–4 at 16.)

In applying for his FIA, Plaintiff acknowledged that "[a]ny values shown, other than guaranteed minimum values, are not guarantees, promises or warranties." (Hutton Decl. Ex. E at Oppo. 0210, Dkt. No. 144–6 at 9.) Hypothetical interest credit illustrations provided in Plaintiff's FIA application show the possibility of him earning 0% in index credits. (Hutton Decl. Ex. E at Oppo. 0215–18, Dkt. No. 144–6 at 14–17.) Plaintiff also acknowledged the following statement: "You should discuss your retirement planning objectives, anticipated financial needs and risk tolerance with your agent to make sure this annuity meets your current financial needs and objectives." (Hutton Decl. Ex. E at Oppo. 0214, Dkt. No. 144–6 at 13.)

The ING USA sales brochure stated: "Neither your premium, the 5% bonus, nor any previously credited interest can be diminished due to movements in the S&P 500 Index." (Leigh Decl. Ex. 2, Dkt. No. 130–5 at 4.) It also stated: "Since the interest credit is related, in part, to movements in the S&P 500 Index, the amount of interest your annuity will be credited at the end of the contract year cannot be known or predicted prior to the end of the contract year." (Id.) It further stated that "[t]he contract does not directly participate in any stock or equity products." (Leigh Decl. Ex. 2, Dkt. No. 130–5 at 13.) Finally, the brochure provided illustrations showing that a contract holder might not earn any interest in a contract year, (Leigh Decl. Ex. 2, Dkt. No. 130–5 at 5–10), and stated that ING USA promised no specific rate of return, that ING USA could change the pricing parameters of the strategies each contract year, and that the bonus might be recouped over time with, inter alia, lower credited interest rates, participation rates, index caps, and monthly caps, (Leigh Decl. Ex. 2, Dkt. No. 130–5 at 3, 13).

Plaintiff did not communicate with Defendants before or after purchasing his contract. (Leigh Decl. Ex. 3, Abbit Depo. at 43:17–46:7, 65:21–22, Dkt. No. 130–6 at 13–14, 18.) Defendants used independent, third-party marketing organizations to distribute their insurance-based products and annuities; Defendants do not have "company-owned field wholesalers." (Leigh Decl. Ex. 4, Tope Depo. 17:1–18, Dkt. No. 130–7 at 7.) Matthew Copley, who sold Plaintiff his FIA contract, was an "independent" agent. (Dkt. No. 152 at 5.) Copley testified that in the 2009 and 2010 time frame, he sold annuity products from "around ten" different companies. (Leigh Decl. Ex. 14, Copley Depo. 11:6–9, Dkt. No. 130–17 at 5.) While Defendants required Copley to adhere to ING's Business Guidelines and General Advertising Rules, (see, e.g., Hutton Decl. Ex. P at Oppo. 0929–34, Dkt. No. 144–15 at 50–55), Defendants were free to accept or reject Plaintiff's FIA application after Copley submitted it, (Dkt. No. 130–1 at 31 (citing Leigh Decl. Ex. 15, Dkt. No. 130–18)).

Plaintiff filed a First Amended Complaint ("FAC") on March 27, 2014. (Dkt. No. 20.) On November 16, 2015, the Court granted in part and denied in part Plaintiff's motion for class certification. (Dkt. No. 59 at 26.) Specifically, the Court certified the following five claims: (1) a breach of contract claim based on "ING setting the prices of the undisclosed derivatives structure so low that the true values of the contracts were below the minimum values guaranteed," (id.at 15); (2) a UCL claim, flowing from the breach of contract claim, based on "Plaintiff's theory under the Insurance Code ... that ING failed to maintain guaranteed values of the Secure Index FIAs as required by Cal. Ins. Code § 10168.25," (id.at 20); (3) a financial elder abuse claim, also flowing from the breach of contract claim, based on "Plaintiff's theory regarding the failure to maintain guaranteed values of the Secure Index FIAs," (id.at 22); and (4) two securities law claims under California law, based on Plaintiff's "novel theory which would extend the reach of securities law to...