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

• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
• Writing for the Court: JESSE M. FURMAN, United States District Judge:
• Parties: IN RE AXA EQUITABLE LIFE INSURANCE COMPANY COI LITIGATION This Document Also Relates to 18-CV-2111
• Docket Number: 16-CV-740 (JMF)
• Decision Date: 29 July 2022

IN RE AXA EQUITABLE LIFE INSURANCE COMPANY COI LITIGATION This Document Also Relates to 18-CV-2111

No. 16-CV-740 (JMF)

United States District Court, S.D. New York

July 29, 2022

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

In this litigation, familiarity with which is presumed, life insurance policyholders bring claims against Defendant AXA Equitable Life Insurance Company (“AXA”)^[1] arising from an increase in the “cost of insurance” or “COI” - a monthly charge deducted from the value of a policyholder's account - on a subset of universal life insurance policies. Plaintiffs principally allege that the increase in COI violated the terms of their insurance policies and that AXA issued policy illustrations, or documents depicting the performance of a given policy under various assumptions, that were false or misleading. Two years ago, the Court granted Plaintiffs' motion for class certification and certified (1) a nationwide Policy-Based Claims Class consisting of “all individuals who, on or after March 8, 2016, owned AUL II policies that were issued by AXA and subjected to the COI rate increase announced by AXA on or about October 1, 2015”; (2) a nationwide Illustration-Based Claims Class based on New York Insurance Law Section 4226 (“Section 4226”), consisting of “all individuals who, on or after March 8, 2016, owned an AUL

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II policy unaccompanied by a Lapse Protection Rider that was issued by AXA and subjected to the COI rate increase announced by AXA on or about October 1, 2015”; and (3) a New York Illustration-Based Claims Sub-Class, based on New York's General Business Law Section 349 (“Section 349”), consisting of “all members of the Illustration-Based Claims Class who reside in New York.” See In re AXA Equitable Life Ins. Co. COI Litig., No. 16-CV-740 (JMF), 2020 WL 4694172, at *8, *15-16 (S.D.N.Y. Aug. 13, 2020) (ECF No. 403) (“Class Cert. Op.”).^[2] In a lengthy opinion filed a few months ago, the Court resolved cross-motions for summary judgment and related motions to preclude the testimony of certain experts, largely (although not entirely) denying them all. See In re AXA Equitable Life Ins. Co. COI Litig., No. 16-CV-740 (JMF), 2022 WL 976266 (S.D.N.Y. Mar. 31, 2022) (ECF No. 596) (“SJ Op.”).

AXA now seeks to revisit several of the Court's rulings. Most significantly, AXA moves for reconsideration of the Court's holding in its recent opinion that Wells Fargo, the Registered Owner of many of the life insurance policies at issue, has standing to pursue the illustrationbased claims. See SJ Op., 2022 WL 976266, at *17. In particular, AXA argues that the Court erred in concluding that Wells Fargo has standing to pursue illustration-based claims because there has been no valid assignment of the beneficial owners' illustration-based claims and Wells Fargo, acting as a securities intermediary, was not itself injured by the illustrations. See ECF No. 609 (“Def.'s Mem.”); ECF No. 630 (“Def.'s Reply”). Class Plaintiffs and Individual Plaintiffs LSH Co. and Wells Fargo, N.A. (together, the “LSH Plaintiffs”) oppose AXA's motion. See ECF No. 629 (“Pls.' Opp'n”). Upon reflection, the Court concludes that AXA is correct and that Wells Fargo lacks standing to bring the illustration-based claims. See Henslee v. Union Planters Nat. Bank & Tr. Co., 335 U.S. 595, 600 (1949) (Frankfurter, J., dissenting) (“Wisdom too often

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never comes, and so one ought not to reject it merely because it comes late.”). Accordingly, and for the reasons discussed below, AXA's motion for reconsideration on that score is GRANTED, and the illustration-based claims brought by Wells Fargo as securities intermediary are dismissed for lack of Article III standing.

AXA also seeks to revisit several aspects of the Court's class certification opinion and related rulings. First and foremost, AXA argues that because Wells Fargo lacks standing and is the Registered Owner of a substantial number of policies in the certified Illustration-Based Claims Class, the class should be decertified. Def.'s Mem. 12. Second, AXA independently argues that the New York Illustration-Based Claims Sub-Class must be decertified because it fails to meet the numerosity requirement of Rule 23(a)(1) of the Federal Rules of Civil Procedure - whether or not Wells Fargo remains a class member. Id. at 22. Finally, AXA moves for leave to pursue discovery of absent class members concerning the individual issues raised by their illustration-based claims. Id. at 23. The Court shares some views on these requests, but ultimately reserves judgment pending further briefing in light of the Court's new decision on standing.

DISCUSSION

A. Motion for Reconsideration

The Court begins with the core issue: AXA's motion for reconsideration of the Court's decision regarding Wells Fargo's standing. “The decision to grant or deny a motion for reconsideration is within the sound discretion of the district court.” In re Optimal U.S. Litig., 813 F.Supp.2d 383, 387 n.6 (S.D.N.Y. 2011). The standards governing motions for reconsideration under Rule 59(e) of the Federal Rules of Civil Procedure and Local Civil Rule 6.3 are the same and are meant to “ensure the finality of decisions and to prevent the practice of a

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losing party examining a decision and then plugging the gaps of a lost motion with additional matters.” Medisim Ltd. v. BestMed LLC, No. 10-CV-2463 (SAS), 2012 WL 1450420, at *1 (S.D.N.Y. Apr. 23, 2012). The primary grounds justifying reconsideration are an “intervening change in controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.” Terra Sec. ASA Konkursbo v. Citigroup, Inc., 820 F.Supp.2d 558, 560 (S.D.N.Y. 2011) (quoting Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992)). That is, reconsideration will generally be denied unless “the moving party can point to controlling decisions or data that the court overlooked - matters, in other words, that might reasonably be expected to alter the conclusion reached by the court.” Medisim, 2012 WL 1450420, at *1. Ultimately, however, “[a] district court has broad discretion in determining whether to grant a motion [for reconsideration].” Baker v. Dorfman, 239 F.3d 415, 427 (2d Cir. 2000); accord Yang v. An Ju Home, Inc., No. 19-CV-5616 (JPO), 2021 WL 1044160, at *1 (S.D.N.Y. Feb. 2, 2021).

AXA seeks reconsideration on the ground that the Court erred in concluding that Wells Fargo has standing to pursue the illustration-based claims because (1) Plaintiffs have not shown a valid assignment of any claims to Wells Fargo and (2) Wells Fargo cannot demonstrate its own injury traceable to the illustrations. Def.'s Mem. 2. Admittedly, it is questionable whether AXA meets the “strict” standard for reconsideration because it does not really identify any “controlling decisions or data that the court overlooked.” Cho v. Blackberry Ltd., 991 F.3d 155, 170 (2d Cir. 2021). That said, the Court will revisit the merits of the issue for two reasons. First, “Article III standing is jurisdictional, so it is not subject to waiver and may be challenged at any stage in the litigation.” City of Providence, R.I. v. Bats Glob. Markets, Inc., No. 14-CV-2811 (JMF), 2022 WL 902402, at *15 (S.D.N.Y. Mar. 28, 2022) (internal quotation marks and citations omitted).

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Indeed, it is well established that a court has an obligation to inquire, if need be sua sponte, “whenever a doubt arises as to the existence of federal jurisdiction.” Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 278 (1977). Second, the issue of Wells Fargo's standing to pursue the illustration-based claims was addressed only cursorily in the parties' summary judgment briefing. In fact, although AXA now argues that Wells Fargo's lack of standing is a critical issue that requires decertification of the entire Illustration-Based Claims Class, it devoted just two pages to the issue in its fifty-nine-page motion for summary judgment on the class claims. See ECF No. 463, at 34-35. The issue received even less attention in AXA's fifty-page motion for summary judgment as to LSH Plaintiffs' claims - a mere paragraph. See ECF No. 467, at 30-31. For these reasons, the Court concludes that revisiting the issue of Wells Fargo's standing is appropriate.

Turning to the merits of the issue, the Court concludes that Wells Fargo lacks standing to sue for the illustration-based claims. As an initial matter, Plaintiffs do not, and cannot, contend that Wells Fargo has standing based on an assignment of the beneficial owners' claims. See Pls.' Opp'n 9 (LSH Plaintiffs conceding that “the operative agreements do not contain an explicit claim assignment”); id. at 14-15 (Class Plaintiffs explaining that “Wells Fargo, as the policy owner and securities intermediary, does not require an ‘assignment' to bring claims related to overcharges on the policies it owns”); id. at 20 (“[T]he standing of Wells Fargo, and similar owners, does not depend on an ‘assignment.'”). Instead, Class Plaintiffs and the LSH Plaintiffs argue that Wells Fargo has standing for another reason - although, notably, the two sets of Plaintiffs do not seem to agree as to what that reason is. On the one hand, Class Plaintiffs assert that Wells Fargo suffered its own injury that is sufficient to confer standing. See id. at 13. On the other hand, the LSH Plaintiffs insist that Wells Fargo has standing because it may rely on the

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injuries of LSH Co. and other beneficial owners. See id. at 7-8. Neither theory withstands close scrutiny.

The Court begins with Class Plaintiffs' theory that Wells Fargo was itself injured. Class Plaintiffs base that theory, in the first instance, on the fact that Wells Fargo was “the holder of the policy account” from which the excess fees were allegedly deducted. Id. at 13 (emphasis omitted). But “while ownership and possession generally may provide...