Gail Thompson v. Transamerica Life Insurance Company

Filing 82

MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: RE DEFENDANT TRANSAMERICAS MOTION TO DISMISS denying 45 . The Court DENIES defendants motion to dismiss plaintiffs claims based on the TransUltra 115 Policy for lack of standing. The Court DENIE S as moot defendants motion to dismiss plaintiff Lois Thompson for lack of standing. The Court DENIES defendants motion to dismiss for lack of personal jurisdiction. The Court DENIES defendants motion to dismiss for improper venue. The Court DISMISSE S plaintiffs breach of contract claim to the extent it is based on Transamericas alleged consideration of its interest obligations in setting an MDR. The Court otherwise DENIES defendants motion to dismiss plaintiffs breach of contract claim.The Cour t DENIES defendants motion to dismiss plaintiffs claim for breach ofthe implied covenant of good faith and fair dealing. The Court DENIES defendants motion to dismiss plaintiffs claim for tortious breach of the implied covenant of good faith and fair dealing. The Court DENIES defendants motion to dismiss plaintiffs UCL claim. The Court DENIES defendants motion to dismiss plaintiffs claim for declaratory relief. The Court DENIES defendants motion to dismiss plaintiffs claim for elder abuse to the extent her claim is based on wrongful use. The Court DISMISSES plaintiffs elder abuse claim to the extent it is based on fraud. (lc) .Modified on 12/26/2018. (lc).

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

Present: The Honorable

CHRISTINA A. SNYDER

Catherine Jeang
Deputy Clerk

Not Present
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

I.

(IN CHAMBERS) - DEFENDANT TRANSAMERICA’S MOTION
TO DISMISS (Filed September 19, 2018, dkt. [45])

INTRODUCTION

On June 18, 2018, plaintiff Gail Thompson, as an individual and as power of
attorney for Lois Thompson, filed a class action complaint against Transamerica Life
Insurance Company (“Transamerica”) challenging monthly deduction rate (“MDR”)
increases for Transamerica TransUltra 115 and TransSurvivor 115 universal life policies
(collectively, the “Policies”). Dkt. 1 (“Compl.”). Specifically, the Complaint alleges
claims for: (1) breach of contract; (2) contract breach of the implied covenant of good
faith and fair dealing; (3) tortious breach of the duty of good faith and fair dealing; (4)
violation of California’s Unfair Competition Law (“UCL”), pursuant to Cal. Bus. & Prof.
Code §§ 17200, et seq.; (5) declaratory relief; and (6) elder abuse pursuant to Cal. Welf.
& Inst. Code § 15610, et seq. Id.
On September 19, 2018, Transamerica moved to dismiss this action for lack of
personal jurisdiction and improper venue, and to dismiss plaintiff Lois Thompson and
plaintiffs’ claims with respect to TransUltra 115 Policies for lack of standing. Dkt. 45-1
(“Mot.”). Transamerica also moved to dismiss each of plaintiffs’ claims for failure to
state a claim under Federal Rule of Civil Procedure 12(b)(6). Id. On October 18, 2018,
the Court granted the parties’ stipulation to conduct limited jurisdictional discovery. Dkt.
50. Plaintiffs filed an opposition on November 19, 2018. Dkt. 59-2 (“Opp’n”).
Transamerica filed a reply on December 10, 2018. Dkt. 72 (“Reply”). On December 14,
2018, plaintiffs voluntarily dismissed Lois Thompson’s claims under Federal Rule of
Civil Procedure 41(a)(1). Dkt. 79.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

The Court held a hearing on December 17, 2018. Having carefully considered the
parties’ arguments, the Court finds and concludes as follows.
II.

BACKGROUND
A.

Background on Universal Life Policies

Unlike whole life insurance policies that require fixed monthly premium payments,
the premiums required for universal life policies are flexible and need only be sufficient
to cover the monthly cost of insurance charges. Id. ¶ 21. Premium payments are
deposited in an accumulation account from which monthly deduction and expense
charges are deducted. Id. The accumulation account is credited with monthly interest at
a non-guaranteed declared rate, but not less than the guaranteed interest rate specified in
the policy contract. Id. Universal life insurance policies allow policyholders to modify
the amount and frequency of premium payments as long as their policy contains
sufficient cash value to cover monthly deductions. Id.
B.

Plaintiff’s Life Insurance Policy

On or about July 1, 2000, Transamerica issued a TransSurvivor 115 universal life
insurance policy to joint insureds Lois Thompson and her husband, Emory Thompson,
with a face amount of $500,000. Compl. ¶ 10. Plaintiff Gail Thompson is the owner and
primary beneficiary of the TransSurvivor 115 policy. Id. The policy was issued from
Transamerica’s Los Angeles, California office. Id., Ex. A, Thompson TransSurvivor 115
Policy (“Policy”).
C.

The Terms of Transamerica’s TransSurvivor 115 and TransUltra
115 Life Insurance Policies

The TransSurvivor 115 product is a joint life universal policy, and the TransUltra
115 product is a single life universal policy (collectively, “Policies”). Compl. ¶ 27. The
Policies are flexible-premium, universal life policies that permit the policy owner to
determine the premium payment amounts after the expiration of an initial 5-year period
during which specified minimum premium payments are required. Id. Policyholders can
adjust both the amount and frequency of their premium payments so long as the Policy
accumulation value is sufficient to cover the monthly deduction charges due under the
Policies. Id. ¶ 28. The Policies generally include a surrender period and mature at age
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

115. Id. Under the uniform provisions of the Policies, an “Accumulation Value” is
established for each Policy, into which the policyholder’s premium payments are
deposited. Id. at 29. The accumulation account earns interest at a declared interest rate
not less than the guaranteed interest rate of 4% specified in the Policy. Id.
At the end of each month, Transamerica withdraws a monthly deduction from the
account. Id. ¶ 30. The monthly deduction is determined by adding: (a) the application of
a “Monthly Deduction Rate” (“MDR”) to the difference between the death benefit and
the accumulation value at the beginning of the year; (b) the monthly deduction for any
policy riders; and (c) a policy fee. Id. The MDR is the most costly and important
component of the monthly deduction charge. Id. ¶ 31.
The Policies included an option for consumers to purchase a “No-Lapse
Endorsement.” Id. ¶ 32. Under the No-Lapse Endorsement, Transamerica promised to
provide guaranteed coverage ensuring that the Policy would remain in effect even if the
Policy’s accumulation value was insufficient to cover the required monthly deductions
withdrawn from the accumulation account. Id. ¶ 3. In order for the No-Lapse
Endorsement to apply, the policyholder must pay a specified premium, for a specified
period extending to age 100. Id. ¶ 32. If the policyholder fails to timely pay the specified
premium in any month, then the no-lapse guarantee terminates, in which event the Policy
will lapse unless there is sufficient account value and/or additional premiums are paid to
cover the current monthly deduction charges. Id.
D.

Transamerica’s Increase to the Monthly Deduction Rate

The Policies contain the same provisions that constrain Transamerica’s discretion
to set or increase the MDRs in several different ways. Id. ¶ 38.
First, the Policies contain the following contractual provisions limiting
Transmerica’s ability to increase the MDRs (the “Cost Factor Provision”):
Any change in the monthly deduction rates will be prospective and will be
subject to our expectations as to future cost factors. Such cost factors may
include but are not limited to: mortality; expenses; interest; persistency; and
any applicable federal, state and local taxes.
Id. ¶ 39. Second, the Policies with No-Lapse Endorsements contain the following
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

additional contractual limitation on Transamerica’s ability to increase the MDRs (the
“Non-Recoupment Provision”):
We do not distribute past surplus or recover past losses by changing the
monthly deduction rates.
Id. ¶ 40. Thus, plaintiff contends that, under the Policies, Transamerica may not increase
MDRs to recoup past losses, to avoid future losses, to make the Policies more profitable
than assumed at issuance, to avoid its obligations to pay guaranteed interest, or to avoid,
subsidize, or defray the costs associated with its own no-lapse guarantees. Id. ¶ 43. Nor
may Transamerica increase the MDRs when there is no reasonable expectation of future
adverse changes in legitimate cost factors. Id.
Beginning in August of 2017, Transamerica announced the 2017 MDR Increases.
Id. ¶ 45. Certain Policies were subject to a level rate increase of between 47% and 58%,
while others were subject to a 39% increase on the next anniversary date, followed by
another 39% increase in each of the two years, compounded each year. Id. ¶ 46. In the
notices Transamerica provided to plaintiff and policyholders, Transamerica stated that the
increases are “in addition to the customary increases that are associated with age” and
that the increases are attributable to Transamerica’s “current expectations about our
future costs to provide this coverage.” Id. ¶ 47. However, plaintiff alleges that the 2017
MDR Increases impermissibly operate to recoup losses in violation of the NonRecoupment Provision, are not attributable to Transamerica’s true expectations about
future cost factors allowable under the Cost Factor Provision, and were adopted by
Transamerica in bad faith as a pretext to avoid its own obligations under the Policies and
the No-Lapse Endorsement by causing elderly policyholders to lapse or surrender their
Policies. Id.
III.

LEGAL STANDARD
A.

Rule 12(b)(1)

A motion to dismiss an action pursuant to Fed. R. Civ. P. 12(b)(1) raises the
objection that the federal court has no subject matter jurisdiction over the action. This
defect may exist despite the formal sufficiency of the allegations in the complaint. T.B.
Harms Co. v. Eliscu, 226 F. Supp. 337, 338 (S.D.N.Y. 1964), aff’d 339 F.2d 823 (2d Cir.
1964). When considering a Rule 12(b)(1) motion challenging the substance of
jurisdictional allegations, the Court is not restricted to the face of the pleadings, but may
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

review any evidence, such as declarations and testimony, to resolve any factual disputes
concerning the existence of jurisdiction. See McCarthy v. United States, 850 F.2d 558,
560 (9th Cir. 1988).
B.

Rule 12(b)(2)

When a defendant moves to dismiss for lack of personal jurisdiction under Federal
Rule of Civil Procedure 12(b)(2), the “plaintiff bears the burden of establishing that
jurisdiction is proper.” Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008)
(citation omitted). Where, as here, the defendant’s motion is based on written materials
rather than an evidentiary hearing, “the plaintiff need only make a prima facie showing of
jurisdictional facts to withstand the motion to dismiss.” Brayton Purcell LLP v.
Recordon & Recordon, 606 F.3d 1124, 1127 (9th Cir. 2010) (quoting Pebble Beach Co.
v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). The plaintiff cannot simply rely on the
“bare allegations” of its complaint; however, uncontroverted allegations in the complaint
must be taken as true, and “[c]onflicts between parties over statements contained in
affidavits must be resolved in the plaintiff’s favor.” Schwarzenegger v. Fred Martin
Motor Co., 374 F.3d 797, 800 (9th Cir. 2004).
Generally, personal jurisdiction exists if (1) it is permitted by the forum state’s
long-arm statute and (2) the “exercise of that jurisdiction does not violate federal due
process.” Pebble Beach, 453 F.3d at 1154–55. “California’s long-arm statute is coextensive with federal standards, so a federal court may exercise personal jurisdiction if
doing so comports with federal constitutional due process.” Boschetto, 539 F.3d at 1015.
“For a court to exercise personal jurisdiction over a nonresident defendant, that defendant
must have at least ‘minimum contacts’ with the relevant forum such that the exercise of
jurisdiction ‘does not offend traditional notions of fair play and substantial justice.’”
Schwarzenegger, 374 F.3d at 801 (quoting International Shoe Co. v. Washington, 326
U.S. 310, 316 (1945)).
C.

Rule 12(b)(3)

Pursuant to Rule12(b)(3), a defendant may move to dismiss a complaint for
improper venue. If an action is filed in the “wrong division or district” a court may
dismiss the action or, “if it be in the interest of justice” transfer the action to an
appropriate district or division. 28 U.S.C. § 1406(a). In federal courts, the determination
of where venue is appropriate “is governed entirely by statute.” Zumba Fitness, LLC v.
Brage, No. CV 11-5361-GHK (CWx), 2011 WL 4732812 (C.D. Cal. Oct. 6, 2011) (citing
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

Leroy v. Great W. United Corp., 443 U.S. 173, 181 (1979)). When deciding a motion to
dismiss for improper venue, unlike a Rule 12(b)(6) motion, the court need not accept the
pleadings as true and may consider facts outside the pleadings. See R.A. Argueta v.
Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). Once a defendant raises an
objection to venue, the plaintiff bears the burden of establishing that the selected venue is
proper. Rio Properties, Inc. v. Rio Intern. Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002).
To defeat a motion to dismiss for improper venue, the plaintiff need only make a prima
facie showing of proper venue.
D.

Rule 12(b)(6)

A motion pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal
sufficiency of the claims asserted in a complaint. Under this Rule, a district court
properly dismisses a claim if “there is a ‘lack of a cognizable legal theory or the absence
of sufficient facts alleged under a cognizable legal theory.’” Conservation Force v.
Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (quoting Balisteri v. Pacifica Police Dep’t,
901 F.2d 696, 699 (9th Cir. 1988)). “While a complaint attacked by a Rule 12(b)(6)
motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to
provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do.”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted).
“Factual allegations must be enough to raise a right to relief above the speculative level.”
Id. (internal citations omitted).
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all
material allegations in the complaint, as well as all reasonable inferences to be drawn
from them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be
read in the light most favorable to the nonmoving party. Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001). However, “a court considering a motion to
dismiss can choose to begin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth. While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.”
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); see Moss v. United States Secret Service,
572 F.3d 962, 969 (9th Cir. 2009) (“[F]or a complaint to survive a motion to dismiss, the
non-conclusory ‘factual content,’ and reasonable inferences from that content, must be
plausibly suggestive of a claim entitling the plaintiff to relief.”). Ultimately,
“[d]etermining whether a complaint states a plausible claim for relief will . . . be a
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

context-specific task that requires the reviewing court to draw on its judicial experience
and common sense.” Iqbal, 556 U.S. at 679.
Unless a court converts a Rule 12(b)(6) motion into a motion for summary
judgment, a court cannot consider material outside of the complaint (e.g., facts presented
in briefs, affidavits, or discovery materials). In re American Cont’l Corp./Lincoln Sav. &
Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on other grounds sub nom
Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court
may, however, consider exhibits submitted with or alleged in the complaint and matters
that may be judicially noticed pursuant to Federal Rule of Evidence 201. In re Silicon
Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999); Lee v. City of Los Angeles,
250 F.3d 668, 689 (9th Cir. 2001).
As a general rule, leave to amend a complaint which has been dismissed should be
freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when “the
court determines that the allegation of other facts consistent with the challenged pleading
could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture
Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th
Cir. 2000).
IV.

DISCUSSION
A.

Standing

Transamerica contends that plaintiff Gail Thompson lacks standing to bring claims
on behalf of persons owning TransUltra 115 Policies because Thompson owns a
TransSurvivor 115 Policy. Mot. at 11. Plaintiff responds that the TransSurvivor and
TransUltra Policies contain the same constraints on Transamerica’s ability to increase the
MDRs, and that the scope of the putative plaintiff class remains to be determined in
accordance with Federal Rule of Civil Procedure 23. Opp’n at 3. The parties essentially
disagree about whether the disjuncture between plaintiff’s claim and the claims of absent
class members is a standing issue or a class certification issue. The Ninth Circuit’s
decision in Melendres v. Arpaio, 784 F.3d 1254 (9th Cir. 2014), controls and supports
plaintiff’s position. In Melendres, the Ninth Circuit explained the difference between a
“standing approach” and a “class certification approach” to resolve the dissimilarities
between the claims of named and unnamed plaintiffs:

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

The “standing approach” treats dissimilarities between the claims of named
and unnamed plaintiffs as affecting the “standing” of the named plaintiff to
represent the class. In other words, if there is a disjuncture between the
injuries suffered by named and unnamed plaintiffs, courts applying the
standing approach would say the disjuncture deprived the named plaintiff of
standing to obtain relief for the unnamed class members. The “class
certification approach,” on the other hand, holds that once the named plaintiff
demonstrates her individual standing to bring a claim, the standing inquiry is
concluded, and the court proceeds to consider whether the Rule 23(a)
prerequisites for class certification have been met.
Id. at 1261–62 (internal quotation marks and citations omitted). After this discussion, the
Ninth Circuit adopted the class certification approach and explained that “representative
parties who have a direct and substantial interest have standing,” and “the question
whether they may be allowed to present claims on behalf of others who have similar, but
not identical, interests depends not on standing, but on an assessment of typicality and
adequacy of representation.” Id. at 1262 (quoting 7AA Charles Alan Wright Et al.,
Federal Practice & Procedure § 1785.1 (3d ed.)). The Ninth Circuit specifically noted
that under the class certification approach, “any issues regarding the relationship between
the class representative and the passive class members—such as dissimilarity in injuries
suffered—are relevant only to class certification, not to standing.” Id. at 1262 (internal
citations and quotation marks omitted).
Several district courts in the Ninth Circuit have since relied on Melendres to
dismiss challenges to a plaintiff’s standing to bring claims on behalf of absent class
members concerning different products or investments. See, e.g., In re Volkswagen
“Clean Diesel” Mktg., Sales Practices, & Products Liab. Litig., MDL No. 2672
CRB(JSC), 2017 WL 3058563, at *4 (N.D. Cal. July 19, 2017) (explaining that
Melendres foreclosed the defendants’ argument that plaintiffs lacked standing to bring
claims on behalf of persons or entities who purchased bonds in different tranches or
offerings); Johnson v. Providence Health & Servs., No. C17-1779-JCC, 2018 WL
1427421, at *4 (W.D. Wash. March 22, 2018) (finding that the plaintiff was only
required to establish standing with respect to the mutual fund that she invested in, and
that the defendants’ argument that the plaintiff did not have standing to assert claims
based on mutual funds that she did not personally invest in “deal more with the issue of
[the plaintiff’s] adequacy as the named-plaintiff”); Johnson v. Fujitsu Tech. and Bus. of
Am., Inc., 250 F. Supp. 3d 460, 465 (N.D. Cal. 2017) (declining to determine whether the
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

plaintiffs had standing in an ERISA retirement plan case to bring claims on behalf of
putative class members who invested in options that the plaintiffs did not invest in
because the defendants did not dispute that plaintiffs had standing to bring their own
claims under ERISA); Stotz v. Mophie Inc., No. CV 16-8898-GW(FFMx), 2017 WL
1106104, at *5–6 (C.D. Cal. Feb. 27, 2017) (“whether Plaintiffs may be allowed to
present claims on behalf of others in the class who have purchased similar, but not
identical, products will therefore be determined . . . at the motion for class certification
stage”).
To the extent that Melendres may still require at least some threshold showing of
similarity between the claims of the named plaintiff and claims on behalf of absent class
members for purposes of determining standing, plaintiff easily meets this threshold. See
Min Sook Shin v. Umeken, U.S.A., Inc., No. SACV 17-00315-CJC(SSx), 2017 WL
6885378, *4 n.3 (C.D. Cal. June 1, 2017) (holding that “Melendres is consistent with
district court cases requiring a threshold showing of similarity to find that the named
plaintiff has standing to assert claims based on products the named plaintiff did not
encounter”). Plaintiff alleges that the TransSurvivor 115 and TransUltra 115 Policies are
both universal life products with secondary guarantee benefits that permit the policy
owner to determine the premium payment amounts after the expiration of an initial 5-year
period. Compl. ¶¶ 27, 50. Transamerica allegedly used comparable interest assumptions
in pricing both policies because they “were part of the same product line priced during
the same interest rate environment, supported by the same classes of assets with similar
durations.” Id. ¶ 69. Both Policies contain identical limitations on Transamerica’s
discretion in increasing the MDRs. Id. ¶¶ 39–44. Plaintiff alleges that Transamerica
breached those identical terms and provisions by increasing the MDRs to recoup past
losses. Id. ¶¶ 53, 113. Although the policies and MDR increases may differ in some
respects, these differences do not impact plaintiff’s standing now but they may be
relevant at the class certification stage.
Transamerica strongly resists this conclusion and argues that a breach of contract
case requires a different analysis because a plaintiff can never have standing to sue on
behalf of a contract that she is not a party to. See Reply at 3. However, the cases cited
by Transamerica are inapposite as they either concern an individual action, pre-date
Melendres or otherwise do not apply Melendres because they are from another circuit, or
concern an entirely different issue of whether a plaintiff can bring claims on behalf of a
class against a different defendant based on a contract to which the plaintiff is not a party.
See id. Transamerica has not provided any compelling reason for this Court to apply a
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

more stringent standing analysis to plaintiff’s claims on behalf of absent class members
merely because she asserts breach of contract claims.
Accordingly, Transamerica’s motion to dismiss plaintiff’s claims based on the
TransUltra 115 Policy is DENIED.
Transamerica also contends that plaintiff Lois Thompson lacks standing to bring
her claims because she is neither an owner of or a beneficiary under the Policy. Plaintiffs
filed a voluntary dismissal of Lois Thompson’s claims. Dkt. 79. Accordingly,
Transamerica’s motion to dismiss Lois Thompson for lack of standing is DENIED as
moot.
B.

Personal Jurisdiction

Transamerica contends that the Court lacks personal jurisdiction over the claims of
putative class members who are not citizens of California because the MDR increases at
issue arise out of conduct occurring outside of California. Transamerica relies on the
holding in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco
County, 137 S. Ct. 1773, 1781 (2017), which held that each plaintiff in a mass-tort action
must establish that its claim is properly advanced in the forum state, to argue that the
Court must also demonstrate specific jurisdiction with respect to each non-resident class
member. Mot. at 14. Both parties cite district court decisions either extending, or
declining to extend, Bristol-Myers to the claims of putative class members in a class
action. The Court finds the authorities cited by plaintiff to be persuasive. See, e.g.,
Gasser v. Kiss My Face, LLC, No. 17-cv-01675-JSC, 2018 WL 4538729, at *2 (N.D.
Cal. Sept. 21, 2018) (“It is undisputed that the Court has personal jurisdiction of the
named plaintiffs from California and New York . . . the Court does not understand how it
can lack personal jurisdiction of persons who are not yet . . . parties to this action, that is,
the putative class members.”); In re Morning Song Bird Food Litig., No. 12cv01592
JAH-AGS, 2018 WL 1382746, at *5 (S.D. Cal. Mar. 19, 2018) (“While the claims of the
non-resident named plaintiffs were pertinent to the issue of specific jurisdiction in
Bristol-Myers, ‘claims of unnamed class members are irrelevant to the question of
specific jurisdiction.’”) (citation omitted); Fitzhenry-Russell v. Dr. Pepper Snapple Grp.,
Inc., No. 17-cv-00564 NC, 2017 WL 4224723, at *5 (N.D. Cal. Sept. 22, 2017)
(declining to extend the holding in Bristol-Myers to class actions).
Accordingly, the Court declines to extend Bristol-Myers to this case. As
Transamerica does not dispute that this Court may exercise personal jurisdiction over
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

plaintiff, the Court DENIES Transamerica’s motion to dismiss for lack of personal
jurisdiction.
C.

Venue

Under the general venue statute, 28 U.S.C. § 1391, a civil action may be brought in
any of the following:
(1) a judicial district in which any defendant resides, if all defendants are
residents of the State in which the district is located;
(2) a judicial district in which a substantial part of the events or omissions
giving rise to the claim occurred, or a substantial part of property that is the
subject of the action is situated; or
(3) if there is no district in which an action may otherwise be brought as
provided in this section, any judicial district in which any defendant is subject
to the court’s personal jurisdiction with respect to such action.
28 U.S.C. § 1391(b). For venue purposes, corporations (and other entities that can sue or
be sued in their own names) are “deemed to reside . . . in any judicial district in which
such defendant is subject to the court’s personal jurisdiction with respect to the civil
action in question.” 28 U.S.C. § 1391(c)(2). Moreover, in states with multiple districts
such as California, a corporate defendant is deemed to “reside” in any district in which its
“contacts” would subject it to personal jurisdiction at the time an action is commenced, if
that district were a separate state; or, if there is no such district, in whichever district it
has the “most significant” contacts. 28 U.S.C. § 1391(d).
Transamerica argues that venue is not proper in the Central District because
plaintiff resides in the Southern District and the events giving rise to her claims occurred
outside of California and primarily in Iowa. Mot. at 15. Plaintiff argues that because
Transamerica did not contest that the Court has personal jurisdiction over it with respect
to her claims, it is therefore subject to personal jurisdiction in the Central District for
purposes of venue. Opp’n at 15. Transamerica does not respond to this argument in its
reply.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

Case No.
Title

Transamerica waived its personal jurisdiction defense with respect to Thompson’s
claim because it omitted this defense in its motion to dismiss. See Fed. R. Civ. P. 12(h)
and (g) (“A party waives any defense listed in Rule 12(b)(2)-(5) by . . . omitting it from a
[Rule 12] motion” and cannot “make another motion under this rule raising a defense or
objection that was available to the party but omitted from its earlier [Rule 12] motion.”).
And “[i]f an entity defendant waives its right to object to personal jurisdiction, it has ipso
factor consented to venue . . . It is, after all, ‘subject to personal jurisdiction with respect
to the civil action in question.’” 14 D Wright & Miller, Fed. Prac. & Proc. Juris. § 3811.1
(4th ed.). See also AT&T Corp. v. Teliax, Inc., No. 16-cv-01914-WHO, 2016 WL
4241910, at *2 (N.D. Cal. Aug. 11, 2016) (“[B]ecause [defendant] did not contest
personal jurisdiction, it is therefore ‘subject to personal jurisdiction’ in this district for the
purposes of establishing venue”). The Court thus finds that venue is proper under §
1391(d) because Transamerica consented to venue by waiving its objection to personal
jurisdiction.
Accordingly, the Court DENIES Transamerica’s motion to dismiss for improper
venue.
D.

Failure to State a Claim
i.

Breach of Contract

To state a claim for breach of contract under California law, a party must plead the
existence of a contract, his or her performance of the contract or excuse for
nonperformance, the defendant's breach, and resulting damage. Vaccarino v.
MidlandNat. Life Ins., Co., 2011 WL 5593883, at *7 (C.D. Cal. Nov. 14, 2011) (citing
Wall St. Network, Ltd. v. N.Y. Times Co., 164 Cal. App. 4th 1171, 1178 (2008)).
Plaintiff alleges that Transamerica breached its policy contracts by increasing the MDR
to avoid its obligation to pay credited interest and no-lapse obligations to plaintiff and to

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

recoup past losses. Plaintiff’s breach of contract claim is based on violations of the “Cost
Factor Provision”1 and “Non-Recoupment Provision.”2
Transamerica first argues that plaintiff cannot state a claim based on the allegation
that Transamerica increased the MDR to avoid paying guaranteed interest because the
plain language of the relevant provisions specifically allows Transamerica to consider
interest when changing the MDR. Mot. at 16. To the extent plaintiff interprets these
contracts to preclude consideration of interest costs in setting the MDR, the Court
concludes that the Policy is not reasonably susceptible to plaintiff’s interpretation.
Accordingly, consistent with the Court’s ruling in the Feller action, see Feller v.
Transamerica Life Insurance Company, No. 2:16-cv-01378-CAS(AJWx), 2016 WL
6602561 (C.D. Cal. Nov. 8, 2016), plaintiff has failed to state a claim for liability based
upon Transamerica’s alleged consideration of its interest obligations in setting an MDR.
Transamerica then argues that plaintiff’s breach of contract claim must be
dismissed because plaintiff relies on an “actuarial meaning” rather than the plain meaning
of the relevant provisions. At the pleading stage, “[w]hen reviewing whether a plaintiff
has properly stated a cause of action for breach of contract, we must determine whether
the alleged agreement is ‘reasonably susceptible’ to the meaning ascribed to it in the
complaint.” Hervey v. Mercury Casualty Co., 185 Cal. App. 4th 954, 964 (2010)
(emphasis added) (citation omitted). “So long as the pleading does not place a clearly
erroneous construction upon the provisions of the contract, in passing upon the
sufficiency of the complaint, we must accept as correct plaintiff's allegations as to the
meaning of the agreement.” Marzec v. California Pub. Employees Ret. Sys., 236 Cal.
App. 4th 889, 909 (2015) (citing Aragon–Haas v. Family Security Ins. Services, Inc., 231
Cal. App. 3d 232, 239 (1991)). Where the terms of the policy are unambiguous, the
Court will not infer a limitation on defendants which is not supported by the language of
the policy. See Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter
1

This refers to the language: “Any change in the monthly deduction rates will be
prospective and will be subject to our expectations as to future cost factors. Such cost
factors may include but are not limited to: mortality; expenses; interest; persistency; and
any applicable federal, state and local taxes.” Compl. ¶ 39.
2

This refers to the language: “We do not distribute past surplus or recover past
losses by changing the monthly deduction rates.” Compl. ¶ 40.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

Group 2015) (“Croskey”) ¶ 4:11 (“Clear and explicit’ policy language governs.”)
(quoting Powerine Oil Co., Inc. v. Supt. Ct., 37 Cal. 4th 377, 390 (2005)).
The provisions at issue here appear to be susceptible to plaintiff’s interpretation
that Transamerica may not increase MDRs to recoup past losses, to avoid future losses, to
make the Policies more profitable than assumed at issuances, or to avoid, subsidize, or
defray the costs associated with its own no-lapse guarantees, and that Transamerica may
not increase MDRs when there is no reasonable expectation of future adverse changes in
legitimate cost factors. See Compl. ¶ 43. Plaintiff alleges that the MDR increases
breached the Policies’ MDR provisions because they were not based on Transamerica’s
actual expectations as to future cost factors but were rather based on a number of
impermissible factors. Compl. ¶¶ 6, 43–44, 47, 58, 60–61, 67, 70–77.
Accordingly, with the exception of the claim dismissed above, plaintiff has stated a
claim for breach of contract based upon Transamerica’s alleged attempt to avoid its
obligation to pay its no-lapse obligations to plaintiff and to recoup past losses. In light of
the foregoing, Transamerica’s motion to dismiss plaintiff’s breach of contract claim is
DENIED.
ii.

Contractual Breach of the Implied Covenant of Good Faith and
Fair Dealing

Plaintiff’s second claim for relief asserts that defendant violated the implied
covenant of good faith and fair dealing by exercising its discretion over MDR changes in
bad faith. Compl. ¶ 121. Transamerica argues that this claim fails for lack of causation
because plaintiff does not allege she relied on the April 5, 2018 notice letter and because
the Policy specifically permits MDR changes based on future cost factors.
“Every contract imposes upon each party a duty of good faith and fair dealing in
its performance and its enforcement.” Carma Developers (Cal.), Inc. v. Marathon Dev.
Cal., Inc., 2 Cal. 4th 342, 371-72 (1992). “[W]here a contract confers on one party a
discretionary power affecting the rights of the other, a duty is imposed to exercise that
discretion in good faith and in accordance with fair dealing.” McNeary–Calloway v. JP
Morgan Chase Bank, N.A., 863 F.Supp.2d 928, 956 (N.D.Cal.2012) (quoting Perdue v.
Crocker Nat'l Bank, 38 Cal.3d 913, 923, 216 Cal.Rptr. 345, 702 P.2d 503 (1985)).
Nonetheless, the covenant of good faith may not “prohibit a party from doing that which
is expressly permitted by an agreement.” Carma, 2 Cal. 4th at 374. “In short, [the
covenant of good faith and fair dealing] is an implied-in-law term of the contract.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

Therefore, its breach will always result in a breach of the contract, although a breach of a
consensual . . . contract term will not necessarily constitute a breach of the covenant.”
Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1393–94, 272 Cal.
Rptr. 387, 399 (Ct. App. 1990), as modified on denial of reh'g (Oct. 31, 2001).
“California law requires that a claim for breach of the implied covenant of good faith and
fair dealing ‘go beyond the statement of a mere contract breach’ and not ‘rel[y] on the
same alleged acts [or] simply seek the same damages or other relief already claimed in a
companion contract cause of action.’” Env't Furniture, Inc. v. Bina, 2010 WL 5060381, at
*3 (C.D.Cal. Dec. 6, 2010) (quoting Careau & Co. v. Sec. Pac., 222 Cal.App.3d 1371,
1395, 272 Cal.Rptr. 387 (1990)). To allege a separate claim for breach of the covenant of
good faith and fair dealing, plaintiff must allege bad faith conduct, “which unfairly
frustrates the agreed common purposes and disappoints the reasonable expectations of the
other party thereby depriving that party of the benefits of the agreement.” Careau, 222
Cal. App. 3d at 1395.
Transamerica’s arguments fail because plaintiff adequately alleges that defendant
breached the covenant of good faith and fair dealing by relying on impermissible factors
to increase the MDRs in bad faith. Moreover, plaintiff has adequately pleaded that
Transamerica’s bad faith conduct caused her harm by depriving her of the benefits of her
policy, including the true accumulation value of her account and the guaranteed
minimum interest rate on that account. Compl. ¶¶ 5, 26, 82, 87, 89, 113, 130.
Transamerica also argues that plaintiff cannot state a claim for breach of the
implied covenant because the No-Lapse Endorsement prevents a lapse even if the
accumulation value is zero. Mot. at 6, 18. Transamerica appears to be arguing that
plaintiff cannot state that she was deprived of the benefit of the agreement due to the NoLapse Endorsement. Transamerica’s argument is unavailing because plaintiff’s harm is
not limited only to a possible lapse, but also the decrease in accumulation value and
interest.
In light of the foregoing, defendant’s motion to dismiss plaintiff’s claim for breach
of the implied covenant of good faith and fair dealing is DENIED.
iii.

Tortious Breach of Duty of Good Faith and Fair Dealing

Compensation for the breach of the covenant of good faith and fair dealing “has
almost always been limited to contract rather than tort remedies.” Foley v. Interactive
Data Corp., 47 Cal. 3d 654, 683 (1988). One exception to that rule arises in breach of
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

covenant cases involving insurance policies. Cates Constr., Inc. v. Talbot Partners, 21
Cal. 4th 28, 43 (1999). Tort recovery in the insurance context is justified by a variety of
policy reasons. For one, “unlike most other contracts for goods or services, an insurance
policy is characterized by elements of adhesion, public interest and fiduciary
responsibility.” Id. Insurance policies are also generally “not purchased for profit or
advantage; rather, they are obtained for peace of mind and security in the event of an
accident or other catastrophe.” Id. And “[u]nlike other parties in contract who typically
seek recourse in the marketplace in the event of a breach, an insured will not be able to
find another insurance company willing to pay for a loss already incurred.” Id.; Griffin
Dewatering Corp. v. Northern Ins. Co. of New York, 176 Cal. App. 4th 172, 195 (2006)
(“It is important to recognize the reason for the possibility of tort, and perhaps even
punitive damages on top of regular tort damages, for an insurance company's
unreasonable breach of an insurance contract. Insurance contracts are unique in that, if
the insurer breaches them, the insured suffers a loss (often a catastrophic loss) that
cannot, by definition, be compensated by obtaining another contract.”).
Courts have generally limited tort remedies in the insurance context to cases
involving insurers who have withheld benefits due under an insurance policy. See, e.g.,
Benavides v. State Farm Gen. Ins. Co., 136 Cal. App. 4th 1241, 1250 (2006) (“an insured
cannot maintain a claim for tortious breach of the implied covenant of good faith and fair
dealing absent a covered loss”); Progressive West Ins. Co. v. Yolo County Superior
Court, 135 Cal. App. 4th 263, 279 (2005) (“[T]he essence of the tort of the implied
covenant of good faith and fair dealing is focused on the prompt payment of benefits due
under the insurance policy, there is no cause of action for breach of the covenant . . .
when no benefits are due.”); Brizuela v. Calfarm Ins. Co., 116 Cal. App. 4th 578, 592
(2004) (“The gravamen of a claim for breach of the covenant of good faith and fair
dealing, which sounds in both contract and tort, is the insured’s refusal, without proper
cause, to compensate the insured for a loss covered by the policy.”); Adams v. United of
Omaha Life Ins. Co., No. 12-CV-969 (JST), 2013 WL 12114060, at *4 (C.D. Cal. Aug.
14, 2013) (“In order to state a claim for breach of the implied covenant of good faith and
fair dealing by an insurer, [a] plaintiff must allege that the insurer withheld payment of an
insured’s claim.”) (internal quotation marks and citation omitted); U.S. Bank Nat. Ass’n
v. PHL Variable Ins. Co., No. 2:11-CV-09517 (ODW), 2012 WL 1525012, at *2 (C.D.
Cal. Apr. 26, 2012) (“To establish tort liability against an insurer for breach of the
covenant, a plaintiff must show . . . benefits due under the policy were withheld . . .”).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

As plaintiff notes in her opposition, this Court previously sustained similar claims
for tortious breach at the pleading stage in Feller, 2016 WL 6602561, DCD Partners,
LLC v. Transamerica Life Ins. Co., No. 2:15-cv-03238-CAS(VBKx), 2015 WL 5050513
(C.D. Cal. Aug. 24, 2015), and EFG Bank AG, Cayman Branch v. Transamerica Life Ins.
Co., No. 2:16-cv-08104-CAS(AJWx), 2017 WL 3017596 (C.D. Cal. July 10, 2017).
Opp’n at 22. In these cases, the Court found that the plaintiffs stated plausible claims for
tortious breach based on allegations that Transamerica’s MDR increases deprived them
of benefits in the form of the accumulation value and monthly accrual of guaranteed
interest upon the accumulated value in their accounts.
However, since these cases were decided, caselaw has developed differentiating
benefits arising under the insurance component from benefits arising under the savings
component of a universal life insurance policy. In EFG Bank AG, Cayman Branch v.
AXA Equitable Life Ins. Co., 309 F. Supp. 3d 89 (S.D.N.Y. 2018), the court analyzed a
similar claim for tortious breach and, while acknowledging it was a close question, held
that a reduction in policy account values and guaranteed interest rates relates “solely to
the distinct savings component of the policies.” Id. at 96 (internal quotation marks and
citation omitted). The court declined to extend the tort exception to the claim in that case
because it did not arise from “the relationship between Plaintiffs as insureds and [the
defendant] as insurer.” Id.
In light of this reasoning, plaintiff’s claim for tortious breach of the covenant of
implied good faith and fair dealing does not appear to be viable to the extent this claim is
based on the allegation that Transamerica has withheld the benefits of the value of her
accumulation account and the amount of interest credited on her accumulation account.
See Compl. ¶ 130. Plaintiff’s claim does not fall neatly within the caselaw extending the
tort remedy to the insurance context because she does not allege that there has been a
covered loss requiring the payment of any insurance benefits, namely the death benefit,
under the Policy.
However, plaintiff’s allegations raise the question of whether tort remedies should
be extended to a breach of the covenant of good faith and fair dealing when an insurer
raises premiums in bad faith for the purpose of inducing elderly insureds to forfeit their
life insurance policies, even though death benefits are not currently due under those
policies. Cases that have extended the tort remedy outside the context of claims-related
misconduct are instructive. In Spindle v. Travelers Ins. Companies, 66 Cal. App. 3d 951
(1977), a California Court of Appeal held that tort damages were available for the
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

cancellation of an insurance policy for the improper motive of pressuring insureds to
consent to a large increase in premiums. There, the court explained:
Conspiratorial conduct on the part of insurers to avoid the contractual liability
they undertake is not countenanced in California, and the evolvement of the
doctrine of the implied covenant of good faith and fair dealing is an expression
of public policy in our state. We hold that this same doctrine is applicable to
subject an insurer to liability to its insured for cancelling a malpractice
insurance policy in accordance with permissible terms of the cancellation
provisions of the policy, if the reasons for such cancellation are such as to
make the cancellation a violation of the implied covenant of good faith and
fair dealing. Plaintiff's amended complaint, therefore, has stated a cause of
action against defendants.
Id. at 959 (citation omitted). And in Helfand v. National Union Fire Ins. Co., 10 Cal.
App. 4th 869 (1992), the California Court of Appeal upheld tort damages for an insurer’s
bad faith conduct in canceling a policy to avoid the payment of claims expected to come
due in the final year. The court explained that insured’s loss was imminent and
unavoidable at the time of cancellation, id. at 317, and analogized to a similar case, Home
Ins. Co. of New York v. Heck, 65 Ill. 111 (1872), which asked, “Of what avail would it
be, to take a policy against fire, to permit its cancellation when the fire is approaching?”
id. at 114.
Here, plaintiff has alleged that Transamerica breached the terms of the Policies
when increasing the MDRs, and that Transamerica increased the MDRs to cause policy
lapses or surrenders before death benefits become due. Compl. ¶ 82. Policyholders have
held these Policies for more than twenty years, were provided with illustrations using
then-existing MDRs that did not provide any advance warning of a dramatic increase in
MDRs, and are now unable to obtain alternative life insurance coverage due to their
advanced age. Compl. ¶¶ 89–91. The Court concludes that the same policy justifications
that subject an insurer to tort liability for claims-related misconduct are applicable in this
case for the following reasons.
First, Transamerica’s ability to charge excessive premiums cannot be disciplined
by the marketplace because new life insurance policies cannot be purchased on the lives
of the insureds due to their advanced age. Second, it is inconsequential that death
benefits are not currently due under the Policies, because they will unavoidably become
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

due, and the policyholders and insureds allegedly have nowhere else to turn to obtain the
“peace of mind and security” that they bargained for when they purchased the Policies.
Finally, “[c]onspiratorial conduct on the part of insurers to avoid the contractual liability
they undertake is not countenanced in California.” See Spindle, 66 Cal. App. 3d at 959.
The Court concludes that extending the tort remedy to this context is justified to deter
insurers from unreasonably increasing premiums to induce early surrender or lapses of
life insurance policies held by people who cannot turn to the market and obtain another
policy due to the advanced age of the insureds.
The Court recognizes that California Supreme Court declined to extend tort
remedies in a case wherein the insurer had, in bad faith, retroactively billed an insured for
an excessive premium. Jonathan Neil & Assocs., Inc. v. Jones, 33 Cal. 4th 917 (2004).
There, the California Supreme Court explained that the tort remedy did not apply
because: (1) an insurer’s ability to charge excessive premiums is generally disciplined by
competition in the marketplace; (2) the billing dispute did not deny the insured the
benefits of the policy in the form of security against losses and third party liability; (3)
the dispute did not require the insured to prosecute the insurer in order to enforce its
rights; and (4) other traditional tort liabilities may be available to insureds who are
wrongfully billed a retroactive premium. Id. at 939. The California Supreme Court’s
reasons for declining to extend the tort remedy in that case do not apply here. Moreover,
the California Supreme Court explicitly left open the question of whether the cancellation
of an insurance contract for improper motives could ever give rise to tort damages, and
did not explicitly foreclose the possibility that a tort remedy may apply to a claim
concerning impermissible premium increases that are intended to result in policy lapses
or surrenders. Id. at 941.
Accordingly, the Court DENIES Transamerica’s motion to dismiss plaintiff’s
tortious breach claim.
iv.

Unfair Competition

To state a claim for violation of the UCL, a plaintiff must allege an “unlawful,
unfair, or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. “Because
[the UCL] is written in the disjunctive, it establishes three varieties of unfair
competition—acts or practices which are unlawful, or unfair, or fraudulent.” Boschma v.
Home Loan Ctr., Inc., 198 Cal. App. 4th 230, 252 (Cal. Ct. App. 2011) (internal
quotation marks and citation omitted).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

Plaintiff alleges that Transamerica violated the unfair prong of the UCL by:
(a) Marketing and selling the Policies on the premise that they were a solid
and good life insurance product that would provide a certain death benefit
for a certain cost and duration and subsequently taking steps to prevent
Policyholders from receiving the promised benefits from those Policies
by suddenly, massively, and unlawfully increasing the cost of the Policies
through the 2017 MDR Increases.
(b) Imposing the 2017 MDR Increases even though Transamerica’s expected
future mortality has improved and is better than the mortality upon which
the original MDR schedule is based -- in order to increase premiums,
recoup past losses, and/or force its insureds to surrender (cancel) their
Policies, all of which was, and is, contrary to, and precluded by, the
express terms of the Policies. The Monthly Deduction charges were
increased effective on policy anniversary dates after August 1, 2017, so
that Transamerica could reduce the size of an unprofitable block of life
insurance policies, to eliminate long-anticipated losses on the Policies,
and to cause many of the Policyholders to surrender their Policies.
Transamerica breached its duties under the Policies by improperly
increasing the MDRs in order to recoup past losses and gain or retain an
unfair competitive advantage over other life insurers.
(c) After the sale of the Policies, continuing to send annual reports, policy
servicing statements, illustrations and other documents and
correspondence to Plaintiffs and the Class Members without disclosing
that there would be sudden, dramatic, and cost prohibitive increases in
the Monthly Deduction charges effective August 1, 2017.
(d) Failing to provide any meaningful advance warning that it intended to
massively and suddenly increase the Monthly Deduction charges
effective August 1, 2017, through the 2017 MDR Increases.
(e) Ultimately providing a false and misleading explanation to Plaintiffs and
the Class Members of the grounds for the 2017 MDR Increases.
Compl. ¶ 135.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

To state a claim under the “unfair” prong, a plaintiff must prove that a “business
practice ... violates established public policy” or is “immoral, unethical, oppressive or
unscrupulous and causes injury to consumers which outweighs its benefits.” Eisen v.
Porsche Cars North America, Inc., 2012 WL 841019, *5 (C.D. Cal. Feb. 22, 2012) (citing
McKell v. Washington Mut., Inc., 142 Cal. App. 4th 1457, 1473 (2006)). Transamerica
argues that plaintiff’s UCL claim sounds in fraud to the extent it is based on
misrepresentations and omissions, and therefore plaintiff must meet the pleading
requirements of Rule 9(b). See Mot. at 20. Plaintiff, however, specifically alleges that
her claim arises under the “unfair” prong of the UCL. And at oral argument, plaintiff’s
counsel explicitly stipulated that plaintiff is not bringing any claims under the UCL based
on fraud. The Court finds that, fairly read, plaintiff’s alleged UCL violations are all
based on the theory that Transamerica raised the MDR in an unconscionable manner and
are sufficient to state a claim under the “unfair” prong of the UCL. Although plaintiff
alleges that Transamerica failed to notify plaintiff of the MDR increase and then provided
a false explanation for the grounds of the MDR increase, plaintiff does not allege that
Transamerica made these misrepresentations or omissions for the purpose of inducing
action by the plaintiff.
Second, Transamerica argues that the No-Lapse Endorsement precludes plaintiff
from experiencing any actionable harm. Mot. at 20–21. Transamerica’s argument fails
because plaintiff’s alleged harm is at least partly based on the MDR increase’s effect on
the cash value of the Policy. Next, Transamerica argues that violation (b) fails because a
company’s pursuit of profits, in and of itself, is not an unfair business practice. Mot. at
22. This argument fails because plaintiff sufficiently alleges that Transamerica’s
motivations were improper and thus these issues are better decided on a more developed
factual record.
Transamerica also argues that plaintiff’s UCL claim fails because she has an
adequate remedy at law. Mot. at 20. Plaintiff responds that the risk of ongoing current
and future harm from the new MDR increases is a harm that breach of contract damages
alone cannot address. Opp’n at 26. The Court declines to find, at this stage, that plaintiff
has an adequate remedy at law.
Accordingly, the Court DENIES Transamerica’s motion to dismiss plaintiff’s
UCL claim.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY
v.

Declaratory Relief

Plaintiff seeks a declaration that the “2017 MDR Increases are unlawful and in
material breach of the Policies’ terms . . .” Compl. ¶ 144. Transamerica argues that
plaintiff’s declaratory relief claim is duplicative of plaintiff’s breach of contract claim as
both require the Court to interpret the relevant language and determine if the MDR
increases violated the Policies. Mot. at 24.
“The existence of another adequate remedy does not preclude a judgment for
declaratory relief in cases where it is appropriate.” Fed. R. Civ. Proc. 57. Moreover,
declaratory relief is proper “where a breach of contract claim will not settle all of the
contractual issues concerning which plaintiff seeks declaratory relief.” StreamCast
Networks, Inc. v. IBIS LLC., 2006 WL 5720345, at *4 (C.D. Cal. May 2, 2006). It is
unclear at this juncture whether resolution of plaintiff’s breach of contract claim would
necessarily resolve the parties’ prospective rights under the Policies. To the extent
declaratory relief may overlap with plaintiff’s other requests for relief, plaintiff may be
required to make an election of remedies if she prevails on multiple claims.
Accordingly, Transamerica’s motion to dismiss plaintiff’s declaratory relief claim
is DENIED.
vi.

Elder Abuse

Plaintiff’s final claim for relief alleges elder abuse in violation of California’s
Welfare and Institutions Code §§ 15610, et seq. Plaintiff alleges that, by increasing the
MDR on policies held by the elderly, Transamerica “took, depleted, appropriated and/or
retained Plaintiffs’ and the Class members’ personal property in bad faith for a wrongful
use and/or with the intent to defraud.” Compl. ¶ 148.
California’s elder abuse laws make additional damages available to a prevailing
plaintiff who proves abuse of an elder, or a person age 65 years or older. The Act defines
various acts as “abuse of an elder,” including “[p]hysical abuse, neglect, financial abuse,
abandonment, isolation, abduction, or other treatment with resulting physical harm or
pain or mental suffering.” Cal. Welf. & Instit. Code § 15610.07(a). Each of these types
of elder abuse is further defined elsewhere in the Act.
At issue here is alleged “financial abuse,” which occurs when a person or entity
“takes, secretes, appropriates, obtains, or retains real or personal property of an elder or
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

dependent adult for a wrongful use or with intent to defraud, or both.” Id. §
15610.30(a)(1). The taking or retaining of property for “wrongful use” is further defined
as a taking of property where the person or entity “knew or should have known that this
conduct is likely to be harmful to the elder.” Id. § 15610.30(b). And “taking” is defined
as depriving an elder of any real or personal property by a number of means, including
“by means of an agreement.” Id. § 15610.30(c).
Transamerica argues that, in order to state an elder abuse claim, plaintiff must
sufficiently allege a breach of contract claim, or a claims handling violation that is
traditionally considered bad faith in the insurance context. The case Transamerica relies
on for this proposition, Paslay v. State Farm Gen. Ins. Co., 248 Cal. App. 4th 658 (2016),
does not impose such requirements. The Court finds that plaintiff has adequately alleged
elder abuse with respect to Transamerica’s alleged taking of plaintiff’s property for a
wrongful use.
Transamerica also contends that plaintiff must meet Rule 9(b)’s heightened
pleading requirements to the extent her elder abuse claim is grounded in fraud. Id. (citing
Trapp v. Chase Home Fin., LLC, No. 5:09-cv-01178-DEW-PJW, 2010 WL 4703864, at
*5 (C.D. Cal. Nov. 12, 2010)). See also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097,
1105 (9th Cir. 2003) (“where fraud is not an essential element of a claim, only allegations
(‘averments’) of fraudulent conduct must satisfy the heightened pleading requirements of
Rule 9(b)”). Plaintiff contends that she made no averments of fraud in her complaint, but
the complaint does, in fact, include some averments of fraud. See Compl. ¶ 148 (By
imposing the MDR Increase, Transamerica took plaintiff’s personal property “with the
intent to defraud”); id. ¶ 149 (“Transamerica is guilty of . . . fraud”). Plaintiff does not
allege with particularity how she was defrauded, or what omission or misrepresentation
she relied on. Accordingly, plaintiff fails to state an elder abuse claim based on fraud.
Defendant’s motion to dismiss plaintiff’s elder abuse claim is DENIED to the
extent her claim is based on wrongful use. The Court DISMISSES plaintiff’s elder
abuse claim to the extent it is based on fraud.
V.

CONCLUSION

The Court DENIES defendant’s motion to dismiss plaintiff’s claims based on the
TransUltra 115 Policy for lack of standing.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
Title

CIVIL MINUTES – GENERAL
‘O’
2:18-cv-05422-CAS-GJSx
Date December 26, 2018
GAIL THOMPSON v. TRANSAMERICA LIFE INSURANCE
COMPANY

The Court DENIES as moot defendant’s motion to dismiss plaintiff Lois
Thompson for lack of standing.
The Court DENIES defendant’s motion to dismiss for lack of personal
jurisdiction.
The Court DENIES defendant’s motion to dismiss for improper venue.
The Court DISMISSES plaintiff’s breach of contract claim to the extent it is based
on Transamerica’s alleged consideration of its interest obligations in setting an MDR.
The Court otherwise DENIES defendant’s motion to dismiss plaintiff’s breach of
contract claim.
The Court DENIES defendant’s motion to dismiss plaintiff’s claim for breach of
the implied covenant of good faith and fair dealing.
The Court DENIES defendant’s motion to dismiss plaintiff’s claim for tortious
breach of the implied covenant of good faith and fair dealing.
The Court DENIES defendant’s motion to dismiss plaintiff’s UCL claim.
The Court DENIES defendant’s motion to dismiss plaintiff’s claim for declaratory
relief.
The Court DENIES defendant’s motion to dismiss plaintiff’s claim for elder abuse to
the extent her claim is based on wrongful use. The Court DISMISSES plaintiff’s elder
abuse claim to the extent it is based on fraud.
IT IS SO ORDERED.
00
Initials of Preparer

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:
CMJ

00

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