In re AXA Equitable Life Ins. Co. COI Litig., 16-CV-740 (JMF)

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: JESSE M. FURMAN UNITED STATES DISTRICT JUDGE
• Parties: IN RE AXA EQUITABLE LIFE INSURANCE COMPANY COI LITIGATION
• Docket Number: 16-CV-740 (JMF)
• Decision Date: 31 March 2022

IN RE AXA EQUITABLE LIFE INSURANCE COMPANY COI LITIGATION

No. 16-CV-740 (JMF)

United States District Court, S.D. New York

March 31, 2022

OPINION AND ORDER

JESSE M. FURMAN UNITED STATES DISTRICT JUDGE

INTRODUCTION .......................................................................................................................... 2

BACKGROUND ............................................................................................................................ 4

A. Factual Background.......................................................................................................... 4

B. Procedural Background .................................................................................................... 9

CROSS-MOTIONS FOR SUMMARY JUDGMENT ................................................................. 12

A. Legal Standards .............................................................................................................. 12

B. Breach-of-Contract Claims ............................................................................................ 14

1. Choice of Law ............................................................................................................ 14

2. Contractual Standing .................................................................................................. 15

3. Definition of “Given Class” ....................................................................................... 19

4. Reasonableness of Mortality Assumptions................................................................. 24

5. Procedures and Standards on File ............................................................................... 32

6. Minimum Interest Rate ............................................................................................... 33

7. Burden to Establish Damages ..................................................................................... 34

8. Appropriate Remedy for Croft Plaintiffs' Breach-of-Contract Claims ...................... 37

C. Illustration-Based Claims ............................................................................................... 39

1. Standing ...................................................................................................................... 39

2. Section 4226 Claims ................................................................................................... 42

a. Whether the AUL II Illustrations Constituted Misrepresentations ............................. 43

b. Whether Any Misrepresentation Was “Knowing” ..................................................... 50

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c. The Choice of Law Applicable to Currie Plaintiffs' Section 4226 Claim.................. 52

d. Claims on Behalf of Predecessors-in-Interest ............................................................ 56

3. Section 349 Claims ..................................................................................................... 57

4. Common Law Fraud Claims ....................................................................................... 59

5. Currie Plaintiffs' California Law Claims ................................................................... 63

a. The CUCL Claims ...................................................................................................... 63

b. The Elder Abuse Law Claims ..................................................................................... 66

MOTION TO STRIKE ................................................................................................................. 70

MOTIONS TO EXCLUDE EXPERT TESTIMONY .................................................................. 73

A. Legal Standards ................................................................................................................. 73

B. Plaintiffs' Motion to Exclude............................................................................................ 75

1. Timothy Pfeifer........................................................................................................... 75

2. Glen Hubbard ............................................................................................................. 80

3. Mary Jo Hudson and Howard Mills ........................................................................... 81

C. AXA's Motion to Exclude Expert Testimony .................................................................. 83

CONCLUSION ............................................................................................................................. 85

INTRODUCTION

In these lawsuits - a class action^[1] and related individual actions^[2] - life insurance policyholders bring claims against Defendant AXA Equitable Life Insurance Company

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(“AXA”)^[3] arising from an increase in the charges associated with certain life insurance policies. Specifically, they arise from a 2016 increase in the “cost of insurance” or “COI” - a monthly charge deducted from the value of a policyholder's account - on a subset of Athena Universal Life II (“AUL II”) universal life insurance policies. Plaintiffs principally allege that the increase in COI violated the terms of their insurance policies. They also allege that AXA issued policy illustrations, or documents depicting the performance of a given policy under various assumptions, that were false or misleading because the illustrations failed to disclose the likelihood of a future increase in COI based on AXA's mortality experience and changing assumptions as to future mortality since AUL II's initial pricing in 2004.

AXA now moves for summary judgment on all claims, and Plaintiffs in the related individual actions (“Individual Plaintiffs”) cross-move for partial summary judgment on their breach-of-contract claims. Both sides also move to exclude the reports and testimony of various expert witnesses, and Individual Plaintiffs move to strike, on the basis of judicial estoppel, a portion of AXA's Rule 56.1 statement of material undisputed facts and the evidence cited therein. For the reasons that follow, the Court denies AXA's motions for summary judgment nearly in their entirety. The exceptions are for (1) one set of Individual Plaintiffs' breach-of-contract claims regarding the guaranteed minimum interested rate; (2) the claims of registered owners in the class related to the illustration-based claims who purchased policies after the COI Increase; (3) another set of Individual Plaintiffs' illustration-based Section 349 claims; and (4) Class Plaintiffs' and a set of Individual Plaintiffs' claims based on the interests of prior

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policyholders, as to which AXA's motion for summary judgment is granted. The Court also denies Individual Plaintiffs' partial motion for summary judgment as to their breach-of-contract claims. Finally, with limited exceptions, the Court denies the parties' motions to exclude expert testimony and Individual Plaintiffs' motion to strike.

BACKGROUND

The following facts - drawn from the admissible materials that the parties submitted in connection with these motions - are either undisputed or, where noted, described in the light most favorable to the relevant non-moving party. See, e.g., Costello v. City of Burlington, 632 F.3d 41, 45 (2d Cir. 2011). The Court assumes general familiarity with its many prior opinions in this case and, thus, recounts the relevant facts only briefly.^[4]

A. Factual Background

Plaintiffs are registered and beneficial owners of AUL II policies, which are flexible premium universal life insurance policies that AXA issued between 2004 and 2008. See ECF No. 1-1 (“Doe Policy”), at 1; ECF No. 457-42 (“Brown Rpt.”), ¶¶ 20, 42; ECF No. 457-36 (“Pfeifer Rpt.”), ¶¶ 31, 44.^[5] AUL II policies have both an insurance component and a savings

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component, and their premiums are flexible, as opposed to fixed. Doe Policy 1-2; Brown Rpt. ¶ 20; Pfeifer Rpt. ¶¶ 32-33. That means that AUL II policyholders make premium payments into an interest-bearing Policy Account from which AXA, in turn, deducts COI and other charges. Doe Policy at 1-2, 7-9; Brown Rpt. ¶¶ 20, 28-29; Pfeifer Rpt. ¶¶ 32-33. After making an initial premium payment, the policyholder can generally decide when and how much to pay in premiums, within certain limits. Doe Policy 1-3, 7; Brown Rpt. ¶ 20; Pfeifer Rpt. ¶¶ 32-33. As long as the Policy Account contains sufficient funds to cover the monthly deductions, the policy remains in force, and the policyholder earns interest on any remaining funds. Doe Policy 1-3, 7; Brown Rpt. ¶¶ 20, 28-29; Pfeifer Rpt. ¶¶ 32-33. Upon the insured's death, the policy beneficiary receives a Death Benefit in an amount determined based on the face amount of the policy, among other factors. See Doe Policy 2, 5-6.

Typically, the COI is the most significant expense associated with an AUL II policy. Brown Rpt. ¶¶ 23, 53, 207. It is largely determined by multiplying the monthly COI rate by the net amount at risk, or the difference between the Death Benefit and the amount in the Policy Account, divided by $1, 000. Doe Policy 8; Brown Rpt. ¶¶ 28-29. Significantly, the COI rate scale is a non-guaranteed element of an AUL II policy, meaning that AXA is entitled to change it, subject to certain restrictions. Doe Policy 9; Brown Rpt. ¶ 22; Pfeifer Rpt. ¶¶ 24, 34, 43. Among these restrictions, COI rates can never exceed a contractually guaranteed maximum rate scale, and any changes in COI rates must comply with a clause in the policy titled “Changes in Policy Cost Factors.” Doe Policy 4, 9; Brown Rpt. ¶¶ 30-31; Pfeifer Rpt. ¶ 35. A representative version of that clause provides:

Changes in policy cost factors (interest rates we credit cost of insurance deductions and expense charges) will be on a basis that is equitable to all policyholders of a given class,

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