Monday, July 11, 2016

No. 171: Cost-of-Insurance Increases—Additional Secret Information from AXA Equitable Life Becomes Public

In No. 143 (February 15, 2016) and No. 169 (June 28, 2016), I discussed a cost-of-insurance (COI) class action lawsuit that Brach Family Foundation filed against AXA Equitable Life Insurance Company on February 1, 2016. The complaint alleged breach of contract when AXA singled out certain policyholders for substantial COI increases. The case was assigned to U.S. District Judge Jesse M. Furman. (See Brach Family Foundation v. AXA Equitable Life, U.S. District Court, Southern District of New York, Case No. 1:16-cv-740.)

The Amended Complaint
On May 2, as described in No. 169, a Brach attorney filed an amended complaint with secret information redacted (blacked out). On May 16, as mentioned, Judge Furman ordered the Brach attorney to refile the amended complaint without the redactions. In this follow-up I discuss additional secret information from AXA that has become public.

Opposition to the Motion to Dismiss
On May 27, as indicated in No. 169, an AXA attorney filed a motion to dismiss the amended complaint, together with supporting documents. On June 23, a Brach attorney filed an opposition to the motion to dismiss consisting of a memorandum of law and a declaration by the attorney. Both documents contained redactions. As he did earlier with the amended complaint, the Brach attorney asked Judge Furman for permission to file the documents under seal. The judge allowed the documents to be filed under seal temporarily and said this (citations omitted):
If Defendant believes that the unredacted memorandum, declaration, and exhibits should remain under seal, it shall file a letter no later than June 29, 2016, explaining why the redactions are consistent with the presumption in favor of public access to judicial documents. The Court notes again that "the mere fact that information is subject to a confidentiality agreement between litigants is not a valid basis to overcome the presumption in favor of public access to judicial documents." If Defendant does not file a letter by June 29, 2016, Plaintiff shall file the unredacted memorandum, declaration, and exhibits by June 30, 2016.
On June 30, after obtaining a one-day extension, an AXA attorney submitted a letter to Judge Furman saying: "Defendant does not request continued sealing of the unredacted documents...." On July 1, in view of the AXA attorney's letter, the judge ordered Brach to file the unredacted documents in the public court file. The Brach attorney did so that day.

The Memorandum of Law
The redactions in the memorandum of law were in one paragraph near the end of the 31-page document. Here is that paragraph, in which I show the redactions in boldface type, with italics that are in the original, with brackets that are my insertions, and with some citations omitted:
In the alternative, if for any reason the Court were to adopt AXA's proposed construction (which it should not), pursuant to FRCP 15, leave to amend should be granted. On May 13, 2016, after Plaintiff filed its [amended complaint], AXA produced a document it submitted to the NYDFS [New York Department of Financial Services] entitled "NGE Policy and Implementation Process" which provides that "The following documents AXA's policy on assessing the need for actions with respect to Non-Guaranteed Elements (NGE) for [life insurance] policies and the implementation process for such actions." The COI rate is one such NGE. This document is therefore also part of the "procedures and standards on file" with an insurance regulator that AXA's COI increase violated, even under AXA's proposed construction of that term. AXA's procedures and standards state "[w]e will not make any NGE actions to recoup past losses" and then lists certain documents by which it is clear that "recoup past losses" means that AXA's profit objective must be fixed at issuance and cannot be changed during the lifetime of the product. See NGE Policy [on page] 2 ("we will not make any changes to NGEs for any policies based upon changes in profit objectives"). The [amended complaint] already alleges that AXA has used the [COI] increase to increase its profit objectives on some policies, see, e.g., [amended complaint] ¶¶ 50-52, 74-76, and to the extent those allegations do not already suffice for Rule 8 purposes, leave to amend should be granted so that specific reference to this AXA procedure and standard document just produced by AXA, and breach thereof, should be granted.
The Declaration
The redactions in the declaration as originally filed by the Brach attorney were in four of the six paragraphs of the four-page text of the declaration. Exhibits A and B, which are attached to the declaration, originally were redacted in their entirety.

General Observations
AXA probably decided to allow public court filing of the additional secret material discussed here in order to avoid another defeat on the issue. In other words, AXA probably concluded that Judge Furman likely would order the public court filing of the unredacted material irrespective of what AXA might have said in an effort to keep the material secret.

The latest released material is extremely interesting, especially Exhibit A to the Brach attorney's declaration. The exhibit describes in detail "AXA's policy on assessing the need for actions with respect to Non-Guaranteed Elements [NGE] for [life insurance] policies and the implementation process for such actions." Each page of the exhibit is marked "Trade Secret" and "Highly Confidential." It is significant that such a document is now in the public court file.

Available Material
I am offering a complimentary 53-page PDF consisting of the two pages of the memorandum of law containing redactions, the 31-page unredacted memorandum of law, the two pages of the text of the declaration containing redactions, the four-page unredacted text of the declaration, the 11-page unredacted Exhibit A to the declaration, and the three-page unredacted Exhibit B to the declaration. Email and ask for the July 2016 Brach/AXA package.