[00:00:12] Speaker 02:
This is a breach of contract case and as such it's vital to focus on the theory of breach and whether that is both factually and legally viable individually and class-wide.

[00:00:28] Speaker 02:
And there are three simple links in the logic chain here on the theory of breach.

[00:00:45] Speaker 02:
members, it is alleged.

[00:00:47] Speaker 02:
Therefore, under the statutes, the policies did not lapse.

[00:00:52] Speaker 02:
They remained in force as a protective measure and as an incentive for compliance.

[00:00:56] Speaker 02:
So those were in force when Mr. Poe passed away.

[00:01:00] Speaker 02:
And that triggered the insurer's duty to perform under the policy and pay death benefits.

[00:01:07] Speaker 02:
And so in that respect,

[00:01:14] Speaker 02:
the room, the small decision.

[00:01:16] Speaker 02:
That was not an issue in small.

[00:01:20] Speaker 02:
Small is just a different case.

[00:01:22] Speaker 02:
It's about whether, in two critical respects, whether the argument there, the theory, was that the breach was the violations of the statutes and did that cause harm?

[00:01:35] Speaker 02:
Like say if you word search the word violation,

[00:02:15] Speaker 02:
Sometimes we can't really tell what a decision.

[00:02:56] Speaker 02:
premium.

[00:03:39] Speaker 04:
or small, all of those people have a claim as opposed to the subset of those people who can show that compliance with the statute would have caused them to pay the premiums and retain the policy.

[00:04:19] Speaker 04:
and I was terminated for non-payment.

[00:04:21] Speaker 04:
If that's all you say, Small says that's insufficient, right?

[00:04:51] Speaker 02:
potentially canceled in writing.

[00:04:54] Speaker 02:
Now, that's not exactly the same as intentional lapsers, but another point of the record that I think is important, Northwestern Mutual put in all these communications with these very people.

[00:05:07] Speaker 02:
And there's nothing in there showing that anybody

[00:05:28] Speaker 02:
with this kind of record.

[00:06:17] Speaker 04:
The small says it doesn't.

[00:06:19] Speaker 02:
Doesn't that do it?

[00:06:20] Speaker 02:
Well, it says that on a theory of violation only, that people who intentionally lapsed on the record in that case cannot show that the violations caused them harm.

[00:06:32] Speaker 02:
And again, that is not the theory of breach here.

[00:06:34] Speaker 02:
It's the failure to pay the death benefits.

[00:06:37] Speaker 02:
So that's... They didn't pay the benefits because they thought the policy had lapsed.

[00:06:47] Speaker 02:
the statutes and so the policies were made in force or law.

[00:06:52] Speaker 02:
Those are the anti-lapse provisions that are also familiar in other California cases.

[00:07:01] Speaker 01:
This is a very confusing case.

[00:07:04] Speaker 01:
You are representing the plaintiffs, correct?

[00:07:16] Speaker 01:
the denial of class certification?

[00:07:19] Speaker 01:
Correct, Your Honor.

[00:07:24] Speaker 01:
And the court eventually granted you summary judgment?

[00:07:33] Speaker 01:
Correct.

[00:07:33] Speaker 01:
And you're arguing on appeal that the class certification denial was wrong because all of the plaintiffs

[00:07:59] Speaker 01:
the district court's judgment granting you summary judgment?

[00:08:12] Speaker 02:
Well, I think it's proper because, again, if the court accepts the premise that this case just involves a different breach of contract, then small was the ballot.

[00:08:30] Speaker 02:
disagrees with the theory of breach that this case has always been about.

[00:08:34] Speaker 01:
Well, I guess I'm just not quite sure I am understanding why the breach is different here.

[00:08:40] Speaker 02:
Well, the violation of the statutes, the statutes are incorporated into the contract as a matter of law, right, under insurance principles.

[00:08:48] Speaker 02:
So the violation of the statutes is part of the contract.

[00:08:58] Speaker 02:
And that was the theory that the plaintiffs were arguing in small, right?

[00:09:02] Speaker 02:
Correct.

[00:09:03] Speaker 02:
Part of it, yeah.

[00:09:04] Speaker 02:
But just violations of the statutes only.

[00:09:08] Speaker 02:
And not that the breach occurred due to the failure to pay death benefits, which is the insurer's, of course, principal obligation under a life insurance policy.

[00:09:18] Speaker 01:
I see.

[00:09:18] Speaker 01:
So you're distinguishing on the grounds that here the breach was the failure to pay the benefits.

[00:09:32] Speaker 02:
that opinion without addressing the theory that I'm describing to you now.

[00:09:37] Speaker 02:
So in that respect, it does not control the outcome of this case.

[00:09:44] Speaker 04:
Do you have a theory of why or how the – I mean, let me put it this way.

[00:09:52] Speaker 04:
The district court's analysis in the class certification order and its analysis in the summary judgment order strictly is very difficult to reconcile.

[00:10:07] Speaker 04:
Did the district court give a theory?

[00:10:11] Speaker 02:
I think everybody here can agree, at least on that much.

[00:10:14] Speaker 02:
Those two things are at odds.

[00:10:17] Speaker 02:
But did the district court ever recognize that there was an inconsistency?

[00:11:02] Speaker 02:
It's the anti-lapse provision.

[00:11:05] Speaker 02:
And by that I mean that if the notices aren't sent, if Mr. Poe didn't receive the right to designate a third party such as his wife, Sherry Poe, to receive notices and pay premium, then the statute remains, the policies remain enforced by virtue of that provision.

[00:11:22] Speaker 02:
And that's as a matter of law.

[00:11:25] Speaker 02:
And I have another major point.

[00:11:27] Speaker 02:
I haven't heard a good response from the other side on what's wrong with that.

[00:11:31] Speaker 02:
I mean, the statute's very clear.

[00:11:37] Speaker 02:
and therefore trigger the insurer's obligations.

[00:11:41] Speaker 04:
You wanted to reserve some time?

[00:11:43] Speaker 04:
Yes, please.

[00:11:45] Speaker 04:
Thank you.

[00:11:50] Speaker 03:
Mr. O'Driscoll.

[00:11:51] Speaker 03:
Yes, good morning.

[00:11:52] Speaker 03:
Your Honor, it's Tim O'Driscoll for the Northwestern Mutual Life Insurance Company.

[00:11:57] Speaker 03:
Small is indeed a dispositive of this appeal and cross-appeal.

[00:12:30] Speaker 03:
That's correct, Your Honor.

[00:13:04] Speaker 03:
the cordon small also.

[00:13:47] Speaker 03:
then that was the cause of the harm.

[00:13:50] Speaker 03:
It didn't matter whether a notice was sent under the statutes or not.

[00:14:15] Speaker 03:
is an individualized inquiry that cannot be determined on a class basis.

[00:14:21] Speaker 01:
Well the plaintiff says this case is different because here they're claiming that the failure to pay was the breach, not the failure to comply with the statute.

[00:14:29] Speaker 01:
So what is your response to that?

[00:14:31] Speaker 03:
Well the small court said that that was incorrect.

[00:14:39] Speaker 03:
plaintiff and the small district court and this plaintiff in this case.

[00:15:08] Speaker 01:
small as well as here.

[00:15:09] Speaker 01:
Is that what you're saying?

[00:15:10] Speaker 03:
Yes, that was the district court adopted.

[00:15:13] Speaker 03:
That was the basis of the district court's decision relying on Thomas.

[00:15:16] Speaker 00:
What do you say to your friend on the other side's argument that here the class excludes individuals who, I mean, in fact that your client is able to determine which people never, you know, didn't intentionally lapse by

[00:16:11] Speaker 03:
that I'll talk about in a minute, but the small court expressly said that.

[00:16:16] Speaker 03:
So the information as to whether a termination is intentional or not is not always or even usually going to be in the possession of the insurer.

[00:16:27] Speaker 03:
Under small, that is for the plaintiff to prove.

[00:17:23] Speaker 03:
the court's subsequent grant of summary judgment.

[00:17:27] Speaker 03:
So that is before this court, and that needs to be reversed or vacated because the chronology was this, Your Honor.

[00:17:35] Speaker 03:
The district court in this case, correctly, as Small actually mentioned, the district court's decision on class certification and the motion for reconsideration thereof several times in this

[00:18:06] Speaker 03:
The reason was not stated at that time to answer your honor's previous question, but it was actually addressed by the district court judge subsequently in an opinion called Lee vs. Great American Life Insurance Company.

[00:18:20] Speaker 03:
And in that opinion, same judge, Judge Garnett, she briefly alluded to that worse to the effect that she had decided that the district compliance view

[00:19:00] Speaker 03:
And but with respect to the Lee decision by the district court judge in this case, that was entered last August, I believe.

[00:19:25] Speaker 03:
and how the Lee decision, like the Poe decision, had adopted the strict compliance theory and stated at length the reasons why it was incorrect for the district court judge to do that in Lee.

[00:19:42] Speaker 01:
Okay, and the summary judgment in favor of the plaintiff here, did you ask for reconsideration of that?

[00:19:50] Speaker 03:
I know, Your Honor, what happened on the summary judgment motion was

[00:20:10] Speaker 03:
And, um...

[00:20:44] Speaker 04:
because the district court, well, adopted the wrong theory at that time.

[00:21:39] Speaker 03:
with respect to evidence of intent.

[00:21:44] Speaker 03:
It is, of course, the plaintiff's burden, as this Court held in small, to show that the policyholder did not intentionally lapse, and that's why a class cannot be certified.

[00:21:54] Speaker 03:
Setting that aside, and of course, during all these proceedings, plaintiff has said nothing about intent of Ms.

[00:22:03] Speaker 03:
Poe or of

[00:22:09] Speaker 03:
because of district compliance theory.

[00:22:11] Speaker 03:
Having said that, Northwestern Mutual did adduce very significant evidence of policy owner intent.

[00:22:20] Speaker 03:
And this is set forth, it was set forth in the district court record and it's set forth in the record on appeal.

[00:22:47] Speaker 03:
based upon her experience and her review of some of the policy files and some portions of the policy files, there was clear evidence of intentional lapse with respect to a number of these fugitive class members.

[00:23:01] Speaker 03:
Obviously, if these fugitive class members wanted to file an individual claim, there would be a trial on that and causation.

[00:23:08] Speaker 03:
What kind of evidence is that?

[00:23:09] Speaker 03:
Oh, the evidence, Your Honor, was quite extensive.

[00:23:11] Speaker 03:
It was the declaration.

[00:23:13] Speaker 03:
I just mentioned the record cites to that.

[00:23:16] Speaker 03:
there was supporting documentation.

[00:23:53] Speaker 03:
For example, just for example, these are requests to terminate, specific requests to terminate, communications regarding an intent to terminate in the near future or surrender or to replace the policy.

[00:24:19] Speaker 03:
level term period.

[00:24:21] Speaker 03:
This is a phenomenon that the small court specifically recognized in its case and used as an example of indicia, of intentional

[00:24:48] Speaker 03:
but the reason the policyholder would do that is because they no longer, they did not want to pay the increased premium.

[00:24:55] Speaker 03:
We had many policyholders, this is again, misevidence, who negotiated final dividend checks from the policies.

[00:25:01] Speaker 03:
They received final dividend checks and they negotiated it.

[00:25:04] Speaker 03:
Obviously, they were intentionally allowing these policies to lapse.

[00:25:09] Speaker 03:
We have indications of divorces going on and these policyholders no longer wanted to benefit the beneficiaries.

[00:25:16] Speaker 03:
Your name, that happens.

[00:25:28] Speaker 03:
policies from Northwestern Mutual at around the same time that they terminated these policies.

[00:25:34] Speaker 03:
So those are just some examples from some of these policies.

[00:25:39] Speaker 03:
Plaintiff has never said anything about this evidence.

[00:25:41] Speaker 03:
And so in addition, one more thing I would just say about that is that in the record as well, at two SER supplement excerpts of record,

[00:26:05] Speaker 03:
years after the termination date.

[00:26:07] Speaker 03:
It seems very common sense, I would say, if a policy has been terminated for between two and eight years, the policy owner has gone from not paying premiums for years to paying premiums for years.

[00:27:12] Speaker 02:
and it's not a detailed analysis.

[00:27:14] Speaker 02:
In theory, in this case, the breach of contract three that I've explained was Granville and Thomas from the start and shaped around it, and it was ultimately, again, not decided in small.

[00:27:26] Speaker 02:
It was not addressed.

[00:27:29] Speaker 02:
Certification to the California

[00:28:24] Speaker 01:
that was not involved in small.