FILED
NOT FOR PUBLICATION
MAR 03 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JOYCE WALKER; KIM BRUCE No. 15-55809
HOWLETT; MURIEL SPOONER, on
behalf of themselves and all others D.C. No.
similarly situated, 2:10-cv-09198-JVS-RNB
Plaintiffs-Appellants,
MEMORANDUM*
v.
LIFE INSURANCE COMPANY OF THE
SOUTHWEST, a Texas corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
James V. Selna, District Judge, Presiding
Argued and Submitted February 7, 2017
Pasadena, California
Before: SCHROEDER, PREGERSON, and MURGUIA, Circuit Judges.
This is an appeal from a judgment against the Plaintiffs seeking to represent
a class of more than 40,000 purchasers of indexed universal life insurance policies
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
issued by the Defendant Life Insurance Company of the Southwest (“LSW”).
Plaintiffs alleged multiple claims of fraud as well as misrepresentation and
violations of California statutes. The court ruled as a matter of law that Plaintiffs
could not predicate California Unfair Competition Law (“UCL”) claims on
California’s Illustration statute, § 10509.950, et seq., because the statute lacks a
private cause of action. The district judge tried the common law claims to a jury,
which resulted in a defense verdict, and tried the UCL claims to the court, resulting
in a ruling in favor of LSW. We conclude that the district court erred in its
interpretation of California law with respect to the UCL claims based on violations
of the Illustration statute, but affirm with respect to all other issues raised on
appeal.
1. It is true that the Illustration statute lacks an express private cause of
action, but in California, UCL claims are not barred in the circumstances before us.
The California Supreme Court has held that private UCL claims are barred only
when the underlying statute either actually bars private rights of action or provides
a “safe harbor” that renders the alleged conduct lawful. Cel-Tech Commc’ns, Inc.
v. Los Angeles Cellular Tel. Co, 973 P.2d 527, 542 (Cal. 1999); see also Rose v.
Bank of Am., N.A., 304 P.3d 181, 186 (Cal. 2013) (holding that even the abolition
of a private right of action in an underlying statute “does not amount to a bar
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against UCL claims” premised on that statute). The Illustration statute contains no
safe harbor, nor does it contain any bar to all private rights of action. Further, the
Illustration statute’s reference to California Insurance Code § 790.06 is not
sufficient to demonstrate that the California legislature intended to bar a private
right of action. Accordingly, the district court’s judgment on those claims must be
reversed.
2. Plaintiffs also brought a number of “bait and switch” claims on the
basis of differences between the illustrations and the actual insurance policies.
After the bench trial, the district court ruled that the illustrations were neither
deceptive nor unfair in depicting policy charges, interest calculation methods or,
reduction of administrative charges. Although the evidence showed the presale
illustrations did not include information about the policy charges and interest
calculation methods, it also showed that this information was provided in the
policies themselves. Further, when Plaintiffs received the policies they were
provided with a ten-day grace period allowing them to cancel the policy for any
reason. The record further reflects that there were individual presentations to each
of the Plaintiffs in which charges were discussed. The evidence supports the
district court’s finding that the illustrations of the policy charges and interest rates
were not unfair or deceptive.
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With respect to administrative charges, Plaintiffs focus on the illustrations’
depiction of the monthly charge being reduced or disappearing after ten years.
Although LSW may not have made any express disclaimer or guarantee of the
charges’ reduction or disappearance, there is no indication that this depiction was a
“substantial factor” that influenced the Plaintiffs’ decision to purchase their
policies. See In re 10 Tobacco II Cases, 207 P.3d 20, 39 (Cal. 2009).
The district court’s class decertification order with respect to the bait and
switch claims must also be affirmed. This is because the claims have no merit.
Any claimed inaccuracy in the district court’s analysis is immaterial.
3. Plaintiffs also brought a number of claims in relation to alleged
defects in the illustrations’ treatment of the effects of stock market volatility and
expected tax benefits. Plaintiffs failed to show that the illustrations were defective
in regard to the potential for lapse as a result of market volatility, especially
considering the illustrations’ clear disclaimers that Plaintiffs should not expect
consistent market performance. Further, the district court did not abuse its
discretion in excluding three pieces of evidence Plaintiffs’ proffered in support of
these claims.
Plaintiffs also argue that LSW violated the UCL by failing to disclose the
results of its “stochastic” simulations (a.k.a. Monte Carlo simulations),
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mathematical analyses used to predict future policy performance such as the
likelihood of lapse. The district court may well have been incorrect in holding that
the Illustration statute absolutely bars insurers from disclosing stochastic
simulation results. The statute appears to bar only illustrations limited to above-
average depictions and does not appear to bar the depictions of average
performance that incorporate above- and below-average data points, as portrayed
in stochastic simulations. The critical point is, however, that even though LSW
could have shown such simulations in its illustrations, it was not required to do so,
and hence there was no violation of the UCL in LSW’s choice not to show such
simulations.
We therefore affirm the district court’s judgment on all claims other than the
UCL claims premised on the Illustration statute. As to those claims, we reverse the
judgment and remand for further proceedings, including consideration of whether
any class action may be maintained with respect to those claims.
AFFIRMED in part, REVERSED in part, and REMANDED. Plaintiffs’
request for judicial notice is GRANTED. Each party is to bear its own costs.
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