Celedonia Yue v. Conseco Life Insurance Company

Filing 5

Filed (ECF) Respondent Celedonia X. Yue answer to 23f petition. Date of service: 01/21/2010. [7203602] (ASF)

In the

UNITED STATES COURT OF APPEALS
for the

Ninth Circuit
_____________________________

CELEDONIA X. YUE, M.D.,
on behalf of the class of others similarly situated
and on behalf of the General Public,
Plaintiffs-Appellees,
v.

CONSECO LIFE INSURANCE COMPANY,
successor to Philadelphia Life Insurance Company
and formerly known as Massachusetts General Life Insurance Company,
Defendant-Appellant.
________________________________
Appeal from a Decision of the United States District Court for the Central District of California,
No. 08-CV-01506 • Honorable A. Howard Matz

PLAINTIFFS-APPELLEES RESPONDS TO
DEFENDANT-APPELLANT’S PETITION FOR
PERMISSION TO APPEAL PURSUANT TO
FED.R.CIV.P. 23(F)

Andrew S. Friedman, Esq.
Francis J. Balint, Jr., Esq.
BONNETT, FAIRBOURN, FRIEDMAN
& BALINT, P.C.
2901 North Central Ave., Suite 1000
Phoenix, Arizona 85012
Telephone: [phone]
Facsimile: [phone]

Timothy P. Dillon, Esq.
LAW OFFICES OF
TIMOTHY P. DILLON
361 Forest Ave., Suite 205
Laguna Beach, California 92651
Telephone: [phone]
Facsimile: [phone]

TABLE OF CONTENTS
I.

ISSUE PRESENTED.....................................................................................1

II.

INTRODUCTION .........................................................................................1

III.

STATEMENT OF THE CASE......................................................................2

IV.

ARGUMENT.................................................................................................5
A.

Judge Matz’s Decision to Certify under Rule 23(b)(2)
Is a Sound Exercise of Discretion........................................................5

B.

Conseco’s Contentions of “Manifest Error” Are Themselves
Meritless ..............................................................................................6
1.

Yue Is An Adequate Representative..........................................6
a

Yue’s Claim Is Ripe ........................................................6

b.

Yue’s Claims Are Not Time-Barred..............................14

2.

3.

V.

Shutts Does Not Preclude Certification of the
Nationwide Class.....................................................................16
The Discovery Rule Does Not Preclude Class
Certification.............................................................................19

CONCLUSION............................................................................................20

i

TABLE OF AUTHORITIES
Cases
Aetna Life Ins. of Hartford v. Haworth,
300 U.S. 227 (1937)........................................................................................ 7, 9
April Enterprises, Inc. v. KTTV,
147 Cal. App. 3d 805 (1983)............................................................................. 15
Atlantic Mut. Ins. Co. v. Brotech Corp.,
857 F. Supp. 423 (E.D. Pa. 1994) ..................................................................... 18
Bates v. United Parcel Serv., Inc.,
511 F.3d 974 (9th Cir. 2007) ............................................................................ 13
Bernardele v. Bonorino,
608 F. Supp. 2d 1313 (S.D. Fla. 2009) ............................................................. 10
Bova v. City of Medford,
564 F.3d 1093 (9th Cir. 2009)..................................................................... 10, 12
Broberg v. Guardian Life Ins. Co. of Am.,
171 Cal. App. 4th 912 (2009) ........................................................................... 15
Chamberlan v. Ford Motor Co.,
402 F.3d 952 (9th Cir. 2005) .................................................................................................... 1

Cipollone v. Liggett Group, Inc.,
505 U.S. 504 (1992).......................................................................................... 18
County of Santa Clara v. Atlantic Richfield Co.,
137 Cal. App. 4th 292 (2006) ........................................................................... 14
Davies v. Krasna,
14 Cal. 3d 502 (1975) ....................................................................................... 14
Ericsson GE Mobile Commc’ns., Inc. v. Motorola Commc’ns. & Elecs., Inc.,
120 F.3d 216 (11th Cir. 1997)........................................................................... 18

ii

Forbush v. J.C. Penny Co., Inc.,
994 F.2d 1101 (5th Cir. 1993)............................................................................. 6
Garver v. Brace,
47 Cal. App. 4th 995 (1996) ............................................................................. 14
Gryczman v. 4550 Pico Partners, Ltd.,
107 Cal. App. 4th 1 (2003) ............................................................................... 16
In re Conseco Life Ins. Co. Cost of Ins. Litig.,
2005 WL 5678790 (C.D. Cal. Apr. 27, 2005)..................................................... 5
In re Conseco Life Ins. Co. Cost of Ins. Litig.,
2005 WL 5678842 (C.D. Cal. Apr. 26, 2005)............................................... 5, 19
In re Energy Sys. Equip. Leasing Sec. Litig.,
642 F. Supp. 718 (E.D.N.Y. 1986) ................................................................... 20
In re General Motors Corp. Dex-Cool Prods. Liab. Litig.,
241 F.R.D. 305 (S.D. Ill. 2007)......................................................................... 13
In re Tobacco II Cases,
207 P.3d 20 (Cal. 2009) .................................................................................... 13
Indianer v. Franklin Life Ins. Co.,
113 F.R.D. 595 (S.D. Fla. 1986) ....................................................................... 18
Karl Storz Endoscopy-America, Inc. v. Surgical Technologies., Inc.,
285 F.3d 848 (9th Cir. 2002) ............................................................................ 15
Klay v. Humana, Inc., 382 F.3d 1241 (11th Cir. 2004).......................................... 19
Leszczynski v. Allianz Ins., 176 F.R.D. 659 (S.D. Fla. 1997)................................. 18
Lincoln Nat’l Life Ins. Co. v. Gordon R A. Fishman Irrevocable Life Trust,
638 F. Supp. 2d 1170 (C.D. Cal. 2009) .............................................................. 10
Maryland Casualty Co. v. Pacific Coal & Oil Co.,
312 U.S. 270 (1941) ......................................................................................... 7, 8
Massachusetts Mut. Life Ins. Co. v. Superior Ct.,
iii

97 Cal. App. 4th 1282 (2002) ............................................................................. 15
MedImmune, Inc. v. Genentech, Inc.,
549 U.S. 118 (2007) ............................................................................................. 7
Micron Tech., Inc. v. Mosaid Techs., Inc.,
518 F.3d 897 (9th Cir. 2008) ............................................................................ 7, 9
Phillips Petroleum Co. v. Shutts,
472 U.S. 797 (1985) ........................................................................................... 17
Platt Elec. Supply, Inc. v. EOFF Elec., Inc.,
522 F.3d 1049 (9th Cir. 2008) ............................................................................ 14
Principal Life Insurance Co. v. Robinson,
394 F.3d 665 (9th Cir. 2005) .............................................................................. 8
Probe v. State Teachers’ Ret. Sys.,
780 F.2d 776 (9th Cir. 1986) .............................................................................. 5
Rodriguez v. Hayes,
--- F.3d ---, 2010 WL 6394 (9th Cir. 2010)................................................... 6, 13
Romano v. Rockwell International, Inc.,
14 Cal. 4th 479 (1996) ...................................................................................... 14
Singer v. AT&T Corp.,
185 F.R.D. 681 (S.D. Fla. 1998) ....................................................................... 18
Walters v. Reno,
145 F.3d 1032 (9th Cir. 1998)....................................................................... 6, 13
Washington Mut. Bank v. Superior Ct.,
24 Cal. 4th 906 (2001)........................................................................................ 18
Waste Mgmt. Holdings, Inc. v. Mowbray,
208 F.3d 288 (1st Cir. 2000)............................................................................... 20
Zinser v. Accufix Research Inst., Inc.,
253 F.3d 1180 (9th Cir. 2001)........................................................................... 17
iv

Other Authorities
7AA Charles Alan Wright, Arthur R. Miller, & M. K. Kane, Federal Practice and
Procedure, § 1775, at 50 (3d ed. 2005) .............................................................. 13
Alba Conte & Herbert Newberg, Newberg on Class Actions § 2:5, at 75 (4th ed.
2002)................................................................................................................... 13
J. Alan Jensen & Stephen R. Leimberg, Stranger-Owned Life Insurance: A
Point/Counterpoint Discussion, 33 Am. C. Tr. & Est. Couns. J. 110, 110 (2007)
............................................................................................................................ 11
Restatement (Second) of Contracts § 211(2), 119 (1981) ......................................18
Rules
Fed. R. Civ. P. 23..................................................................................................... 6
Rule 23(a) ................................................................................................................4
Rule 23(a)(4).................................................................................................... 12, 14
Rule 23(b)(2)................................................................................................... passim
Rule 23(b)(3)...................................................................................................... 5, 19
Rule 23(f)........................................................................................................... 1, 19

v

I.

ISSUE PRESENTED

Whether interlocutory review should be granted when the District Court in
its discretion certified under Rule 23(b)(2) a national class of life insurance
policyholders for a breach of contract claim and a California class of policyholders
for a California UCL claim, where (a) the defendant insurer engaged in conduct
“generally applicable to the class” by adopting a cost of insurance rate increase on
all such policyholders in alleged contravention of standardized policy language,
and (b) the relief sought is exclusively declaratory and injunctive to prevent those
increased charges from being deducted from policyholders’ accounts.
II.

INTRODUCTION

Petitioner Conseco Life Insurance Co. (“Conseco”) in its “Petition for
Permission to Appeal Pursuant to Fed. R. Civ. P. 23(f)” (“Pet.”) does not show that
this case presents the “rare occurrence” in which interlocutory review is
appropriate under Rule 23(f) due to “manifest error.” Chamberlan v. Ford Motor
Co., 402 F.3d 952, 958 (9th Cir. 2005). To the contrary, the Honorable A. Howard
Matz rigorously and carefully applied Rule 23(b)(2)’s requirements to a discrete
set of facts, completely consistent with controlling precedent. Order of December
7, 2009 (ER 229-240) (“Cert. Order”). As Judge Matz correctly found, the “key
legal question” – whether the specific language of a standardized life insurance
policy permits Conseco to dramatically increase the cost of insurance rates for all

1

its policyholders – presents an overriding common issue eminently suitable for
class-wide declaratory resolution under Rule 23(b)(2). If Conseco is allowed to
actually collect the increased COI charges, beginning in 2011 for those
policyholders in their 21st year, Class members will experience a 200% increase in
their cost of insurance rates – a devastating tripling of their cost of insurance
charges that Conseco estimates will cause a massive “shock lapses” of 25% of all
policies. (ER 311). Conseco’s own Appointed Actuary testified that the increase
Deleted: .

at issue “fundamentally violated” all of the policies. (ER 321). Indeed, it is
difficult to envision a clearer example of a case properly certified under Rule
23(b)(2) than this one seeking solely declaratory and injunctive relief to interpret
an identical contract term contained in every class member’s life insurance policy
contract.
Moreover, policyholders can ill-afford a time consuming interlocutory
appeal in this case. As Judge Matz recognized, “Plaintiff most decide now whether
to continue funding her policy at the current rate, to increase her monthly
payments, or to seek alternative life insurance coverage.” Order of December 8,
2008, at 6-13 (ER 64-76) (“Dismissal Order”) (emphasis in original).
III.

STATEMENT OF THE CASE

Conseco issued universal life insurance policies nationwide (“the Policies”),
all containing the same, standard provision already adjudicated in Rosenbaum v.

2

Philadelphia Life Insurance Co., Case No. 93-0834 MRP (Ex) (C.D. Cal.) to
permit Conseco to increase the Policies’ “cost of insurance” (“COI”) rate only “to
account for a change . . . in future mortality experience.” In late 2002, Conseco
implemented a massive COI rate increase as of each Policy’s twenty-first
anniversary of issuance (the “COI Increase”). Conseco did so even though the
relevant mortality experience had actually improved rather than deteriorated and
Conseco improperly used factors other than “mortality experience” to compute the
challenged increase. Because the earliest Policies were issued in 1990, Conseco
will begin deducting the actual increased COI charges based on the COI Increase
in 2011, less than one year from now.
Conseco did not, however, give notice of its decision to impose the COI
Increase. Plaintiff-Respondent Celedonia X. Yue (“Yue”) only learned in 2007,
from her insurance brokers, of a large COI increase in year 21 of her policy.1
Shortly thereafter, Yue filed this lawsuit to halt the COI Increase, asserting claims
for declaratory judgment, breach of contract and violation of California’s Unfair
1

   Conseco misstates the record regarding possible knowledge of the COI
Increase. Pet. at 3, 17-18. Yue testified that in 2007 she learned from her
insurance brokers that they “believed there would be a very large change in year
21” of the policy and thereafter contacted counsel. (ER at 161-62). Significantly,
Yue did not know how her brokers learned of the increase. (ER at 160:7-10).
Even Conseco does not contend that it gave notice of COI Increase to
policyholders. In the absence of notice, the Appointed Actuary of Conseco
testified that class members would be unable to discover the COI Increase from
their annual statements. (ER 116-118); see also Cert. Order at 7-8. 

3

Competition Law (“UCL”).
Conseco moved to dismiss Yue’s claims, arguing that they were
insufficiently ripe. The District Court denied Conseco’s motion, finding Yue’s
claims to be sufficiently concrete and particularized under the Federal Declaratory
Judgment Act (“DJA”) to satisfy the constitutional “case or controversy”
requirement. Dismissal Order at 6-13. Judge Matz concluded that Yue need not
wait until 2011 to litigate the legitimacy of the COI Increase because she now
faced “important and difficult decisions” and “it would impose a hardship on
Plaintiff if the Court were to decide that this matter is not ripe for adjudication.”
Id. at 8.
Expressly disavowing any demand for money damages (since the COI
Increase had not yet been collected), Yue sought certification of her claims for
declaratory and injunctive relief under Rule 23(b)(2). Yue sought a nation-wide
class as to her common law contract claim and a California class as to her UCL
claim. Judge Matz certified both classes, finding that all of the requirements of
Rule 23(a) were satisfied and that, under Rule 23(b)(2), Conseco had allegedly
acted “on grounds that apply generally to the class[es], so that final injunctive or
corresponding declaratory relief is appropriate respecting the class[es] as a whole.”
Cert. Order at 8 (quoting Rule 23(b)(2)).
In previous MDL litigation based on an earlier attempt by Conseco to

4

increase COI charges in violation of the policy restrictions, Judge Matz similarly
certified nationwide and California policyholder classes under Rule 23(b)(2). In re
Conseco Life Ins. Co. Cost of Ins. Litig., 2005 WL 5678842 (C.D. Cal. Apr. 26,
2005); In re Conseco Life Ins. Co. Cost of Ins. Litig., 2005 WL 5678790 (C.D. Cal.
Apr. 27, 2005); see also Cert. Order at 5. On June 21, 2005, the Ninth Circuit
denied Conseco’s petition for Rule 23(f) review of these decisions. In re Conseco
Life, #05-80040, Dkt. #6 (June 21, 2005). Nevertheless, Conseco again seeks
review of Judge Matz’ discretionary decision to certify the two policyholder
classes, making some of the very same arguments already deemed unworthy of
interlocutory review by this Court.
IV.

ARGUMENT
A.

Judge Matz’s Decision to Certify under Rule 23(b)(2) Is a Sound
Exercise of Discretion.

The across-the-board character of the COI Increase indisputably affects all
policyholders in both classes certified by Judge Matz, rendering certification under
Rule 23(b)(2) entirely appropriate. Probe v. State Teachers’ Ret. Sys., 780 F.2d
776, 781 (9th Cir. 1986). The Ninth Circuit has refused to read any special
requirement of “predominance” or “cohesiveness” into Rule 23(b)(2): “Although
common issues must predominate for class certification under Rule 23(b)(3), no
such requirement exists under Rule 23(b)(2). It is sufficient if class members
complain of a pattern or practice that is generally applicable to the class as a
5

whole.” Walters v. Reno, 145 F.3d 1032, 1047 (9th Cir. 1998); accord Rodriguez
v. Hayes, --- F.3d ---, 2010 WL 6394, at *14 (9th Cir. 2010) (‘“[Q]uestions of
manageability and judicial economy are . . . irrelevant to 23(b)(2) class actions.”’)
(quoting Forbush v. J.C. Penny Co., Inc., 994 F.2d 1101, 1105 (5th Cir. 1993)).
Even if some special showing of cohesiveness were required for Rule 23(b)(2)
certification, it would be readily satisfied here, as the shared need for an immediate
declaration of Conseco’s contractual authority to impose the now-imminent COI
Increase plainly aligns all the Policyholders. See Fed. R. Civ. P. 23 advisory
committee’s note to the 1966 amendment (“Action . . . is directed to a class within
the meaning of [Rule 23(b)(2)] even if it has taken effect or is threatened only as to
one or a few members of the class, provided it is based on grounds which have
general application to the class.”).
B.

Conseco’s Contentions of “Manifest Error” Are Themselves
Meritless.
1.

Yue Is An Adequate Representative.

Conseco argues that Yue is not an adequate representative, asserting
inconsistently that her claims are both premature and time-barred. Pet. at 11-18.
Neither argument has merit.
a.

Yue’s Claim Is Ripe.

The DJA authorizes a federal court to ‘“declare the rights and other legal
relations of any interested party seeking such declaration, whether or not further
6

relief is or could be sought.”’ MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118,
126 (2007) (internal citation omitted); Micron Tech., Inc. v. Mosaid Techs., Inc.,
518 F.3d 897, 901 (9th Cir. 2008). Subject matter jurisdiction under the DJA
extends to an “actual controversy” within the court’s jurisdiction, Maryland
Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 272 (1941), and is
coextensive with the “case or controversy” standard embodied in Article III of the
Constitution. See MedImmune, 549 U.S. at 126-127; Aetna Life Ins. of Hartford v.
Haworth, 300 U.S. 227, 239-40 (1937).
To satisfy the Constitutional requirement, the dispute need only be a “real
and substantial controversy admitting of specific relief through a decree of
conclusive character, as distinguished from an opinion advising what the law
would be upon a hypothetical state of facts.” Aetna, 300 U.S. at 241. ‘“Basically,
the question in each case is whether the facts alleged, under all the circumstances,
show that there is [1] a substantial controversy, [2] between parties having adverse
legal interests, [3] of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment.”’ MedImmune, 549 U.S. at 127 (quoting Maryland Cas.
Co., 312 U.S. at 273); accord Micron Tech., 518 F.3d at 901.
All three elements of the constitutional standard are readily satisfied here.
First, there is certainly a “substantial controversy” as to the interpretation of the
Policy regarding the COI Increase. Second, that controversy is plainly between

7

parties with directly “adverse legal interests”: Conseco claims that it has authority
under the standardized contract language to increase the COI charges and Yue
disagrees. And third, the controversy is of “sufficient immediacy and reality” to
allow meaningful, non-advisory relief by the Court to redress Yue’s alleged injury:
an order precluding Conseco from applying the COI Increase to Yue’s Policy.
Judge Matz correctly recognized that Conseco’s contractual authority to increase
the COI rate is undeniably of immediate concern to Yue and the other
Policyholders, who need to know their rights under the Policies given Conseco’s
imposition of the “dramatic, sudden, and unexpectedly large” COI Increase. Cert.
Order at 3; Dismissal Order at 8.
Highly instructive Ninth Circuit precedent is Principal Life Insurance Co. v.
Robinson, 394 F.3d 665 (9th Cir. 2005). There, through a ninety-nine year ground
lease entered into in 1978, the plaintiff held a partial interest in a long-term lease
which was subject to rent recalculation in the thirty-first and sixty-first years of the
lease term (i.e., 2008 and 2038). Id. at 668. The plaintiff tenant and the defendant
owner disagreed on the factors to be considered in recalculating the future rent. Id.
Because the uncertainty of the future recalculation impacted the present value of
the lease, the plaintiff in 2000 brought suit under the DJA, seeking a declaratory
judgment adopting its interpretation of the rent recalculation provision. Id. at 66869. Although it acknowledged that the only potential harm to the owner was

8

“possible financial uncertainty and loss,” the Ninth Circuit held that such harm
was, in the context of a private party contract action, “sufficiently immediate to
warrant the issuance of a declaratory judgment,” because the plaintiff was “unable
accurately to estimate the value of the interest” and could not determine how rent
would ultimately be recalculated. Id. at 671-72. Indeed, in distinguishing cases
involving administrative actions, the Ninth Circuit stated that “possible financial
uncertainty and loss” faced prospectively by a private party is “precisely the type
of case for which declaratory relief is appropriate.” Id. at 671.2
Here, as in Principal and Aetna, the dispute at hand is sufficiently definite
and concrete, not hypothetical or abstract. The COI Increase has already directly
affected the present value of the Policy, in which Yue holds an alienable property
interest. As Judge Matz held “Conseco’s alleged decision to increase the cost of
insurance charges means that the life insurance policy is worth less to Plaintiff than
it was previously.” Dismissal Order at 12. In addition, Yue does not know

2

Similarly, in Aetna an insurer sought a declaratory judgment that the insured
was not relieved of his duty to continue paying insurance premiums and that, since
the insured had stopped making payments, the insurance policy had lapsed. 300
U.S. at 238. The insured claimed he was disabled and therefore relieved of making
insurance premium payments. Id. The Supreme Court held that the case presented
a controversy under Article III because the parties had taken adverse positions with
regard to their rights and obligations under the insurance policy. Id. at 242. “The
dispute is definite and concrete, not hypothetical or abstract” as “the parties had
taken adverse positions with respect to their existing obligations.” Id.

9

whether she should abandon the Policy or at what level to continue to fund the
Policy without an adjudication respecting the COI Increase. Id. at 8. The conflict
over proper interpretation of Conseco’s contractual authority is thus sufficiently
“concrete” to establish her Article III standing to seek declaratory and injunctive
relief. Id. at 7-9.
Conseco’s newfound reliance on Bova v. City of Medford, 564 F.3d 1093
(9th Cir. 2009) is misplaced on several levels.3 Unlike Principal, Bova did not
involve a determination of the respective responsibilities under a private contract
creating alienable property rights. Yue and the other Class members own life
insurance policies with a present value that, like other tangible property, is
assignable.4

For example, there is a burgeoning market for “life settlement”

transactions through which life insurance policy owners may receive a cash
payment in exchange for assigning the right to receive the policy benefits upon
death.5 The present value of a permanent life insurance policy is based on the cost

3

Conseco did not cite the May 2009 Bova opinion in its July 2009 Memorandum
in Opposition to Class Certification (ER 79-84), or otherwise give Judge Matz the
opportunity to consider it.
4

See Lincoln Nat’l Life Ins. Co. v. Gordon R A. Fishman Irrevocable Life Trust,
638 F. Supp. 2d 1170, 1177 (C.D. Cal. 2009) (“[O]nce purchased, a policy is freely
alienable and may pass by transfer, will or succession to any person . . .”).

5

“A Life Settlement refers to the sale of an existing life insurance policy by the
beneficiaries of the policy . . . in exchange for an immediate cash settlement.”
Bernardele v. Bonorino, 608 F. Supp. 2d 1313, 1316 (S.D. Fla. 2009).
10

of future premiums discounted by the probability of death (mortality); the higher
the scheduled premiums, the lower the present value.6
This is not, then, a case like Bova, wherein the Court concluded that the
“alleged injury . . . has not yet occurred”; here, the COI Increase has already
diminished the present value of the Policies. The District Court acknowledged this
concrete, present injury in rejecting Conseco’s ripeness argument on the motion to
dismiss. Dismissal Order at 8 (“[T]he Complaint alleges an immediate and certain
impact on [Yue] and members of the putative class” as a result of the COI
Increase).
In addition, unlike Bova, Yue and the Class members (who do not even
know of the COI Increase) are currently making premium payments each year and
need to know now whether to increase funding to maintain their existing life
insurance coverage. Dismissal Order at 8. Premiums being paid by Plaintiff Yue
and the other Class members will be forfeited if the Policies lapse as a result of the
COI Increase. By contrast, the plaintiff in Bova was not required to pay for
retirement benefits from his own pocket or otherwise decide whether to continue

6

J. Alan Jensen & Stephen R. Leimberg, Stranger-Owned Life Insurance: A
Point/Counterpoint Discussion, 33 AM. C. TR. & EST. COUNS. J. 110, 110 (2007)
(“The buyers are investors who believe that the continued premiums required
keeping the policy in force, plus the purchase price paid to the insured or owner,
will be less than the ultimate death benefit, thereby providing an acceptable return
on the investment.”).
11

making such payments in the face of a cost increase.
Moreover, in Bova, the record before the Court reflected the significant
likelihood that the challenged policy would be rescinded before the plaintiff
sustained injuries, by legislative action or the outcome of related litigation on
behalf of already-retired employees. 564 F.3d at 1095, 1097. Here, there is no
significant prospect that Conseco will decide to reverse the COI Increase before
Yue must pay it, nor is there any other litigation challenging the COI Increase.
Dismissal Order at 8 (“Conseco has given not even a sliver of a reason to believe
that if the allegations are true – as the Court is required to assume they are – it does
not intend to increase cost of insurance rates later on.”).
Conseco’s argument, if accepted, would mean that declaratory relief is never
available to determine the respective rights of contracting parties, even where one
party has announced its intention to repudiate its obligations, because the
breaching party might decide to change its mind. Conseco’s argument likewise
would mean that injunctive relief is not available to prevent damages from a
violation of rights, but only after the economic damages have commenced (at
which time, of course, Conseco would presumably argue that injunctive relief is
impermissible because a legal damages remedy is available).
Conseco also mistakenly argues that, to satisfy adequacy under Rule
23(a)(4), Yue must furthermore prove the individual Article III standing of each

12

and every member of the class. That is not the law in the Ninth Circuit, nor
generally elsewhere. Alba Conte & Herbert Newberg, Newberg on Class Actions
§2:5, at 75 (4th ed. 2002) (and authorities cited therein) (“The presence of
individual standing is sufficient to confer the right to assert issues that are common
to the class, speaking from the perspective of any standing requirements.”).7 This
is especially true in the context of a proposed Rule 23(b)(2) class seeking only
declaratory and injunctive relief. Bates v. United Parcel Serv., Inc., 511 F.3d 974,
985 (9th Cir. 2007) (in class action where only liability and injunctive relief was
sought, “standing is satisfied where at least one named plaintiff met the
requirements”); Rodriguez, 2010 WL 6394, at *14 (Rule 23(b)(2) “does not require
us to examine the viability or basis of class members’ claims for declaratory and
injunctive relief, but only to look at whether class members seek uniform relief
from a practice applicable to all of them”).8 In any event, Yue and her fellow
Policyholders all stand in the same shoes with respect to the question of Conseco’s
7

“‘[S]tanding in a class action is assessed solely with respect to class
representatives, not unnamed members of the class.’” In re Tobacco II Cases, 207
P.3d 20, 34 (Cal. 2009) (quoting In re General Motors Corp. Dex-Cool Prods.
Liab. Litig., 241 F.R.D. 305, 310 (S.D. Ill. 2007)).
8

See Walters, 145 F.3d at 1047 (“Even if some class members have not been
injured by the challenged practice, a class may nevertheless be appropriate.”); see
generally, 7AA Charles Alan Wright, Arthur R. Miller, & M. K. Kane, Federal
Practice and Procedure, § 1775, at 50 (3d ed. 2005) (“All the class members need
not be aggrieved by or desire to challenge the defendant's conduct in order for
some of them to seek relief under Rule 23(b)(2).” (citing, among other authorities,
Walters, 145 F.3d at 1047)).  
13

contractual authority.

If Yue’s claim for declaratory and injunctive relief is

sufficiently ripe under Article III (and it is), then so too are those of all Class
members.
b.

Yue’s Claims Are Not Time-barred.

Conseco simultaneously contends that Plaintiff Yue is an inadequate class
representative because her claims are supposedly time-barred.

Pet. at 14-18.

Notably, Conseco did not seek summary judgment on this ground; instead, it made
the argument for the first time in challenging adequate representation under Rule
23(a)(4).

In response, Yue presented at least three independent arguments

supporting the timeliness of her claim under California law: the “continuous
contract” doctrine,9 the lack of damages triggering the limitations period,10 and the
application of the discovery rule.
Of the three grounds, Conseco’s Petition challenges only the application of
the discovery rule. First, Conseco argues that the discovery rule is inapplicable to
9

Yue’s claim is timely under the “continuous contract” analysis of Romano v.
Rockwell International, Inc., 14 Cal. 4th 479, 488-89 (1996).

10

Under California law, the statute of limitations is not triggered by wrongful
conduct that produces no immediate harm or only nominal damages. Davies v.
Krasna, 14 Cal. 3d 502, 513-14 (1975); Garver v. Brace, 47 Cal. App. 4th 995,
999-1000 (1996). The limitations period begins only when plaintiff suffers
appreciable and actual harm of a type that is recoverable as damages on that type
of cause of action. County of Santa Clara v. Atlantic Richfield Co., 137 Cal. App.
4th 292, 317 (2006); see also Platt Elec. Supply, Inc. v. EOFF Elec., Inc., 522 F.3d
1049, 1054 (9th Cir. 2008) (quoting Atlantic Richfield).
14

the UCL claim, citing Karl Storz Endoscopy-America, Inc. v. Surgical
Technologies., Inc., 285 F.3d 848, 857 (9th Cir. 2002) (assessing then-state of
California law). But recent California authority is to the contrary. See Broberg v.
Guardian Life Ins. Co. of Am., 171 Cal. App. 4th 912, 920-21 (2009) (application
of discovery rule precluded dismissal of UCL claim on limitations grounds);
accord Massachusetts Mut. Life Ins. Co. v. Superior Ct., 97 Cal. App. 4th 1282,
1295 (2002) (discovery rule “probably” applies to a UCL claim). It makes no
sense to grant interlocutory review in this case simply to bring Karl Storz into
accord with more recent statements of California law, particularly when the
discovery rule and the other two doctrines unquestionably apply to the breach of
contract claim that also underlies Yue’s request for declaratory relief.
Nor did Judge Matz otherwise misapply California’s discovery rule, and
certainly not as a matter of law. Cert. Order at 7-8 (“Here, the injury and the act
causing the injury were both nigh to impossible for Plaintiff to detect in October
2002.”). In April Enterprises, Inc. v. KTTV, 147 Cal. App. 3d 805 (1983), the
court extended the discovery rule to encompass the plaintiff's breach of contract
cause of action, noting: “plaintiffs should not suffer where circumstances prevent
them from knowing they have been harmed,” and “defendants should not be
allowed to knowingly profit from their injuree’s ignorance.” 147 Cal. App. 3d at
831. The court further found it unreasonable to expect a contracting party “to

15

continually monitor whether the other party is performing some act inconsistent
with one of many possible terms in a contract . . . especially . . . when the
breaching party can commit the offending act secretly, within the privacy of its
own offices.” Id. at 832; see also Gryczman v. 4550 Pico Partners, Ltd., 107 Cal.
App. 4th 1, 6 (2003) (reaffirming the principles set forth in April Enterprises and
reiterating that the delayed discovery rule “applies when the injury or the act
causing the injury is ‘difficult’ for the plaintiff to detect, not impossible”).
Here, there are certainly disputed common issues as to Conseco’s alleged
efforts to hamper discovery of the COI Increase, if not to conceal it altogether.
(Indeed, Conseco itself actually argues that Class members lack standing because
they don’t know about the Increase! Pet. at 14.) And not even Conseco argues
that Policyholder somehow knew that Conseco was imposing the COI Increase for
reasons other than those permitted by the Policy contract over the objections of its
own Appointed Actuary. Cert. Order at 3.
2.

Shutts Does Not Preclude Certification of the Nationwide
Class.

Consistent with Rodriguez and Walters, Judge Matz did not view the
predominance or manageability considerations emphasized by Conseco’s choiceof-law argument as pertinent to certification under Rule 23(b)(2). Cert. Order at 9-

16

11.11 Furthermore, Conseco failed to show any material divergence in state law on
the central issue of contract interpretation to be resolved on a class-wide basis:
Conseco’s contractual authority to increase COI rates under the standardized terms
of the uniform Policy contract. Id. at 10.12 Moreover, although Conseco now
argues that it is constitutionally entitled to choice-of-law analysis under Rule
23(a)’s commonality requirement, Pet. at 7 n.4, Conseco did not contest
commonality below. Cert. Order at 6.
In any event, under both the due process clause and California’s choice-oflaw rules, the law of the forum state may be applied in a multi-state action where
that law does not materially differ with the law of the other implicated
jurisdictions. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 816 (1985) (“There
can be no injury in applying [the forum state’s] law if it is not in conflict with that

11

The certified Class claims do not present manageability problems of the sort
that would require the submission of a trial management plan. Contrast Zinser v.
Accufix Research Inst., Inc., 253 F.3d 1180, 1183, 1189 (9th Cir. 2001) (a
“products liability action involving pacemakers” in which differing law of
numerous states applied, movant must demonstrate a “suitable and realistic plan”
for trial of the class claims) (emphasis added). Unlike Zinser, this case is not
complicated by individually triable tort, causation, past and future damages,
punitive damages or other issues requiring elaborate sets of potentially confusing
jury instructions.

12

As Judge Matz noted, “[n]or does Defendant dispute that the key legal question
of whether the cost of insurance rate increases would be permitted under the
uniform language of the policy is common to all members of the class.” Cert.
Order at 6.
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of any other jurisdiction connected to this suit.”); Washington Mut. Bank v.
Superior Ct., 24 Cal.4th 906, 920 (2001) (“[I]f the relevant laws of each state are
identical, there is no problem and the trial court may find California law applicable
to class claims.”). Conseco had the burden to demonstrate material differences in
potentially applicable state law.

Wash. Mut. Bank, 24 Cal.4th at 919 (under

California choice of law rules, foreign law proponent bears burden of establishing
true conflict).
Common law contract principles governing the interpretation of a
standardized contract are not so varied to preclude class certification.13 Indeed, if
anything, a uniform interpretation of the form contact across all Policyholders is
preferred. Restatement (Second) of Contracts § 211(2), 119 (1981) (“[A form
contract] is interpreted wherever reasonable as treating alike all those similarly
13

See Leszczynski v. Allianz Ins., 176 F.R.D. 659, 671-672 (S.D. Fla. 1997)
(certifying nationwide class claiming breach of insurance contract because it is “a
pure and simple question of contract interpretation which should not vary from
state to state”); Indianer v. Franklin Life Ins. Co., 113 F.R.D. 595, 607 (S.D. Fla.
1986) (“Whether the contract’s loan interest provision has been breached is a pure
and simple question of contract interpretation which should not vary from state to
state.”), overruled in part on other grounds by Ericsson GE Mobile Commc’ns.,
Inc. v. Motorola Commc’ns. & Elecs., Inc., 120 F.3d 216, 219 n.12 (11th Cir.
1997); Singer v. AT&T Corp., 185 F.R.D. 681, 691-92 (S.D. Fla. 1998) (“[B]reach
of contract” is a “universally recognized cause[] of action . . . materially the same
throughout the United States”); see also Cipollone v. Liggett Group, Inc., 505 U.S.
504, 529 (1992) (plurality opinion) (contract law is not at its core “diverse,
nonuniform, and confusing”); Atlantic Mut. Ins. Co. v. Brotech Corp., 857 F. Supp.
423, 429 (E.D. Pa. 1994) (referring to the “virtually universal principles of
insurance contract interpretation”), aff’d mem., 60 F.3d 813 (3d Cir. 1995).  

18

situated, without regard to their knowledge or understanding of the standard terms
of the writing.”).
In Klay v. Humana, Inc., 382 F.3d 1241 (11th Cir. 2004), for example, the
Eleventh Circuit found the plaintiffs’ burden to demonstrate the uniformity in state
law satisfied where the singular question of contract law raised by the plaintiffs
was whether a breach had occurred. 382 F.3d at 1262 (“A breach is a breach is a
breach, whether you are on the sunny shores of California or enjoying a sweet
autumn breeze in New Jersey.”). State law governing contract interpretation is no
less uniform here than in Klay, or for that matter than in the earlier MDL 1610 case
in which Judge Matz rejected the argument that variations in state contract law
precluded the national, class-wide adjudication of its contractual authority to
increase COI charges in what was, if anything, a more complicated setting
involving policies that had already lapsed as a result of the increase. In re Conseco
Life Ins. Co. Cost of Ins. Litig., 2005 WL 5678842, at *9. Conseco’s Rule 23(f)
petition for interlocutory review was denied in MDL 1610, just as it should be
denied in the present, far-less-complicated circumstances.
3.

The Discovery Rule Does Not Preclude Class Certification.

Even in the context of Rule 23(b)(3) classes, “[c]ourts have been nearly
unanimous . . . in holding that possible differences in the application of a statute of
limitations to individual class members . . . does not preclude certification of a

19

class action.” In re Energy Sys. Equip. Leasing Sec. Litig., 642 F. Supp. 718, 752
(E.D.N.Y. 1986). “As long as a sufficient constellation of common issues binds
class members together, variations in the sources and application of statutes of
limitations will not automatically foreclose class certification under Rule
23(b)(3).” Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 296 (1st Cir.
2000). This rationale applies all the more so under Rule 23(b)(2), particularly
where rather than a “constellation of common issues” we have a single star: the
overarching issue of Conseco’s contractual authority to impose the COI Increase.
Moreover, at best, the discovery rule focuses on Conseco’s common conduct
in not giving notice of the COI Increase. As noted by Judge Matz, “an objective
determination of when the class members should have discovered the increase in
cost of insurance rates – based on a disclosure or the lack thereof by Defendant –
seems readily amenable to class treatment.” Cert. Order at 11.
V.

CONCLUSION
There is no “truly manifest” error. Conseco’s Petition should be denied.
Respectfully submitted,
BONNETT, FAIRBOURN, FRIEDMAN
& BALINT, P.C.
s/Francis J. Balint, Jr.
Francis J. Balint, Jr.
Attorneys for Plaintiffs-Appellees

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CERTIFICATE OF COMPLIANCE
This brief complies with the page number limitation of Rule 5 of the Federal
Rules of Appellate Procedure because it does not exceed twenty pages, excluding
portions of the brief exempted by Rule 5(c).
This brief complies with Federal Rules of Appellate Procedure 32(c)(2), as it
meets the typeface requirements of 32(a)(5) and the type style required by Rule
32(a)(6) because it has been prepared in a proportionally spaced typeface using
Microsoft Word 2003 in Times New Roman 14-point font, which is a
proportionally spaced, serif-based font.
Dated: January ___, 2010

BONNETT, FAIRBOURN, FRIEDMAN
& BALINT, P.C.
s/Francis J. Balint, Jr.
Francis J. Balint, Jr.
Attorneys for Plaintiff-Appellees

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