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Vida F. Negrete, As Conservator For Everett E. Ow, An Individual and v. Allianz Life Insurance Company of North America

March 4, 2013


The opinion of the court was delivered by: Christina A. Snyder United States District Judge


In these related class action cases, plaintiffs Vida F. Negrete ("Negrete"), as conservator for Everett Ow ("Ow"), and Carolyn B. Healey ("Healey") (collectively, "plaintiffs"), on behalf of themselves and a nationwide class of an estimated 200,000 senior citizens, allege that defendant Allianz Life Insurance Company of North America, Inc. ("Allianz") conspired with a network of affiliated Field Marketing Organizations ("FMOs") to induce class members to purchase deferred annuities issued by Allianz by means of misleading statements and omissions regarding the value of those annuities.

Negrete filed suit against Allianz on September 19, 2005, alleging the following claims for relief: (1) violation of the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. § 1961, et seq. ("RICO"); (2) elder abuse under Cal. Welf. & Inst. Code §§ 15610 et seq. ("§ 15610"); (3) unlawful, unfair and fraudulent business practices under California's Unfair Competition Law ("the UCL"), Cal. Bus. & Prof. Code §§ 17200, et seq.; (4) false and misleading advertising under Cal. Bus. & Prof. Code §§ 17500, et seq. (the "False Advertising Law" or "FAL"); (5) breach of fiduciary duty; (6) aiding and abetting breach of fiduciary duty; and (7) unjust enrichment and imposition of constructive trust. On December 22, 2005, Healey filed suit against Allianz, alleging similar claims for relief. The Court ordered coordination of the two actions as related cases (collectively, "Negrete"). On November 21, 2006, the Court granted plaintiffs' motion for class certification as to their nationwide RICO claim, as well as a California-only subclass asserting statutory violations, including the UCL. Negrete Dkt. No. 134 ("Class Order").

On March 12, 2010, Allianz moved for summary judgment on the RICO claims of certain Negrete class members which it contended were barred by the doctrine of claim preclusion as a result of the final judgment entered in Allianz's favor on January 29, 2010 in Mooney v. Allianz Life Ins. Co. of N. Am., No. 06-cv-0545 (D. Minn) ("Mooney"). In an order issued August 18, 2010 (the "Claim Preclusion Order"), the Court denied Allianz's motion for summary judgment and granted plaintiffs' cross-motion for partial summary judgment on Allianz's affirmative defense of claim preclusion. Claim Preclusion Order at 24.

On June 10, 2011, Allianz filed a renewed motion for summary judgment on the RICO claims. On October 13, 2011, the Court denied the motion, finding that disputed issues of material fact precluded summary judgment on the required elements of (1) a RICO enterprise; (2) an injury "by reason of" the conduct constituting the alleged RICO violation; and (3) a RICO conspiracy. Dkt. No. 805 ("MSJ Order No. 2").

On May 30, 2012, Allianz filed a motion to decertify the nationwide class, a third motion for summary judgment, and a motion for judgment on the pleadings. Dkt. Nos. 828--830. Plaintiffs filed their oppositions on August 14, 2012, Dkt. Nos. 849--851, and defendant replied on October 15, 2012, Dkt. Nos. 885--887. In an order issued December 27, 2012, the Court denied Allianz's motion to decertify the class in full. Dkt. No. 929. After considering the parties' arguments, the Court finds and concludes as follows.


Because application of the McCarran-Ferguson Act to plaintiffs' RICO claim depends upon the factual allegations that support it, the Court first addresses the gravamen of plaintiffs' claims. The facts of this case are well-known to the parties and detailed in this Court's prior orders; an overview of the pertinent facts is set forth below. See, e.g., Dkt. 805 at 2--4 ("MSJ No. 2"); Dkt. No. 929 at 3--4 ("Class Decertification Order").

Plaintiffs contend that the evidence at trial will establish the following. See Def.'s Ex. 4 (Plaintiff's Contentions of Fact and Law). Allianz was the orchestrator of a scheme to defraud elderly class members by misrepresenting the true value of its deferred annuity products in its marketing materials. In particular, plaintiffs allege that Allianz made three specific misrepresentations as part of a standardized marketing program: that Allianz's annuities carried "no sales charges," offered an "immediate bonus," and would pay "full value" if certain deferral requirements were met. For a number of reasons, plaintiffs contend that these descriptions were false and misleading, because Allianz annuities were in fact burdened by high sales charges; offered a bonus that was illusory and recouped by Allianz over time; and did not provide the stated "annuitization value," as Allianz reduced the account values by an undisclosed haircut, depending on when an individual annuitized. Plaintiffs aver that the three alleged misrepresentations, made as part of Allianz's scheme to defraud elderly purchasers, have caused "direct and quantifiable injury" to the members of the class, because the Allianz "annuities are necessarily worth less as a result of the undisclosed hidden charges" on the date of purchase.

Allianz sold these annuity products through a network of Field Marketing Organizations ("FMOs"), 19 of which are members of the alleged RICO enterprise at the heart of this case. See MSJ No. 2 at 7. Allianz provided training opportunities, solicited feedback regarding its products, set minimum production requirements, and offered marketing advice and generous commissions to FMOs and their agents who sold Allianz products in furtherance of its alleged scheme to defraud. These marketing tactics included Allianz's "Seminar Selling System," a turnkey solution which was allegedly designed to exploit the financial insecurity and fears of senior citizens with respect to other financial investments, while presenting Allianz deferred annuities as the preferred solution.

These FMOs and their sales agents were responsible for providing all prospective purchasers with a sales brochure containing these three alleged misrepresentations of the Allianz annuities, along with a Statement of Understanding ("SOU"). Upon signing the SOU, annuity purchasers acknowledged that they had received and read the relevant sales brochure and the sales agent countersigned, acknowledging that he or she had not made any representations that diverged from the content of the brochure. Plaintiffs maintain that their annuities had measurably lower yields, higher surrender charges, lost principal, and premium overcharges as a result of these three representations, causing them financial harm.


A motion for judgment on the pleadings brought pursuant to Fed. R. Civ. P. 12(c) provides a means of disposing of cases when all material allegations of fact are admitted in the pleadings and only questions of law remain. See McGann v. Ernst & Young, 102 F.3d 390, 392 (9th Cir. 1996). "A judgment on the pleadings is properly granted when, taking all allegations in the pleading as true, the moving party is entitled to judgment as a matter of law." Id. In considering a Rule 12(c) motion, the district court must view the facts presented in the pleadings and the inferences to be drawn from them in the light most favorable to the nonmoving party. NL Indus. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986); In re Century 21-Re/Max Real Estate Adver. Claims Litig., 882 F. Supp. 915, 921 (C.D. Cal. 1994). For purposes of the motion, the moving party concedes the accuracy of the factual allegations of the complaint, but does not admit other assertions that constitute conclusions of law or matters that would not be admissible in evidence at trial. 5C Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, FEDERAL

PRACTICE AND PROCEDURE § 1368 (3d ed. 2004).

Although Rule 12(c) contains no mention of leave to amend, "courts generally have discretion in granting 12(c) motions with leave to amend, particularly in cases where the motion is based on a pleading technicality." In re Dynamic Random Access Memory Antitrust Litig., 516 F. Supp. 2d 1072, 1084 (N.D. Cal. 2007).


Allianz offers two grounds for granting judgment on the pleadings in its favor. First, Allianz contends that the RICO claims of plaintiff Healey, and class members residing in at least sixteen states, are barred by the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq., which "reverse-preempts" federal claims that "impair" state statutes "regulating the business of insurance." Second, Allianz argues that plaintiff Ow's claim of financial elder abuse under the California Elder Abuse and Dependent Adult Civil Protection Act ("Elder Abuse Act"), Cal. Welf. & Instit. Code § 15600 et seq., fails to plead an essential element of his claim-that he has suffered physical harm or pain or mental suffering as a result of the alleged abuse. Each argument is addressed in turn.

A. Reverse-Preemption and the McCarran-Ferguson Act

In pursuit of the notion that "continued regulation and taxation by the several States of the business of insurance is in the public interest," Congress enacted the McCarran-Ferguson Act in 1945 to ensure that "silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States." 15 U.S.C. § 1011; Humana Inc. v. Forsyth, 525 U.S. 299, 306 (1999). A primary motivating concern for both representatives of the insurance industry and Congress in enacting the MFA "was that cooperative ratemaking efforts be exempt from the antitrust laws.'" Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982) (quoting Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 221 (1979)).

At issue here is section 2(b) of the Act, which provides in relevant part that: No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance. . . .

15 U.S.C. § 1102(b). Under this section, state law preempts a federal statute if (1) "the federal law does not specifically relate to insurance"; (2) the purpose of the state enactment is to regulate the business of insurance; and (3) "the application of federal law to the case might invalidate, impair, or supersede the state law." Ojo v. Farmers Group, Inc., 600 F.3d 1201, 1203 (9th Cir. 2010) (per curiam) (en banc).*fn1 As a general rule, "[w]hen federal law is applied in aid or enhancement of state regulation, and does not frustrate any declared ...

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