In re: AXA Equitable Life Insurance Company

Background

The Brach Family Foundation, Inc. and Allen Dyer, as trustee of the Currie Children Trust, sued AXA Equitable Life Insurance Company over AXA’s 2015 announcement that it would increase the cost of insurance, or “COI,” for certain Athena Universal Life II policies. The plaintiffs alleged breach of contract and violations of New York and California statutes. They contended that AXA’s policy terms limited COI increases and that AXA had misrepresented future policy costs in illustrations.

The plaintiffs moved under Rule 23 of the Federal Rules of Civil Procedure for certification of a nationwide contract class and five statutory subclasses. The court concluded that the proposed groups should instead be organized around two common factual bases: claims arising from the policies themselves and claims arising from alleged misrepresentations in policy illustrations.

Rulings on the Policy-Based Classes

The court certified a nationwide Policy-Based Claims Class under Rule 23(b)(3). The class includes individuals who, on or after March 8, 2016, owned AXA-issued AUL II policies subjected to the challenged COI increase announced on or about October 1, 2015, along with specified heirs, successors, or assigns. AXA, certain related people, and plaintiffs in the related actions were excluded.

The court found that the class had more than 1,400 potential members, that its members could be identified, and that the form policies and common COI decision supported commonality and typicality. It also found that the proposed representatives adequately represented absent class members despite concerns that some statutory claims would not be pursued for every state. The court relied on the limited value of the omitted claims, the small number of individual suits, and its express reservation of certain later claims. It further found that common issues predominated and that a class action was a superior method for resolving the contract claims.

The court denied certification of the California Policy-Based Claims Sub-Class. AXA asserted that some policies resulted from stranger-originated life insurance schemes and that policy owners involved in those schemes had unclean hands, meaning their conduct could bar recovery. The court held that deciding that defense would require individualized inquiries into each policy’s origin, initial owner, purpose, later transfers, and communications. Those individual issues defeated predominance under Rule 23(b)(3).

The court also denied certification of the California Elder Policy-Based Claims Sub-Class. It found that the plaintiffs had not shown that Dyer was a member of the proposed subclass because the record did not establish that a person over age sixty-five paid the premiums for the trust’s policy. The court also questioned whether Dyer, as trustee, had standing under the California Elder Abuse Law even if the Curries paid the premiums. The court expressly reserved absent class members’ rights to later pursue claims under that law.

Rulings on the Illustration-Based Classes

The court certified a nationwide Illustration-Based Claims Class under Rule 23(b)(3). The class includes individuals who, on or after March 8, 2016, owned qualifying AXA-issued AUL II policies without a Lapse Protection Rider that were subjected to the challenged COI increase. AXA, certain related people, and plaintiffs in the related actions were excluded.

In analyzing the New York Insurance Law Section 4226 claims, the court held that reliance is not automatically required. But because the plaintiffs’ theory was that AXA made promises about future policy costs and then imposed costs it had concealed, each claimant had to show that the claimant received or became aware of the alleged misrepresentation, directly or indirectly, and was injured by AXA’s failure to honor it. Personal review of the illustration was not required; indirect receipt or awareness, such as through a financial adviser, could suffice.

The court found that common issues predominated, including whether the illustrations were materially misleading, whether AXA knew of the alleged misrepresentations, and whether AXA failed to abide by them. It accepted the plaintiffs’ proposed damages methodology because it used common formulas, data sources, and methods to calculate alleged COI overcharges. The court also found that a class action was superior to individual litigation.

The court granted certification of the New York Illustration-Based Claims Sub-Class, consisting of members of the nationwide illustration-based class who reside in New York and for whom the plaintiffs sought to assert additional claims under Section 349 of the New York General Business Law. The court rejected AXA’s argument that the Brach Foundation was unsuitable because it was an investor rather than a consumer, explaining that Section 349 focuses on whether the conduct affects the public interest rather than on whether the plaintiff is a consumer.

The court denied certification of the California Illustration-Based Claims Sub-Class because the same unclean-hands defense involving alleged stranger-originated life insurance schemes created individual issues that would predominate over common ones.

Other Orders and Disposition

The court granted the motion to appoint Allen Dyer as class representative of the Policy-Based Claims Class and the Illustration-Based Claims Class. It granted the motion to appoint the Brach Foundation as class representative of the Policy-Based Claims Class, the Illustration-Based Claims Class, and the New York Illustration-Based Claims Class. It also granted the motion to appoint Susman Godfrey L.L.P. as class counsel.

Overall, Judge Jesse M. Furman’s order granted in part and denied in part the motion for class certification. The court required the plaintiffs to submit proposed notice and opt-out procedures within two weeks and to address whether those procedures complied with Rule 23 and due process. It also directed parties seeking continued sealing or redaction of materials filed with the class-certification motion to explain why that treatment was consistent with the presumption of public access.