The Original Complaint in the Skochin Case
On January 18 three individuals filed a class action lawsuit against Genworth and GLIC. The plaintiffs were Pennsylvania residents Jerome and Susan Skochin, and Maryland resident Larry Huber. They purchased their policies in 2003 and 2004 from General Electric Capital Assurance Company, a predecessor of Genworth and GLIC.
The lawsuit was assigned to Senior U.S. District Judge Robert E. Payne. President George H. W. Bush nominated him in November 1991. The Senate confirmed him in May 1992. He assumed senior status in May 2007.
The lawsuit is one of many involving premium increases imposed on the owners of LTC insurance policies. It is important because, unlike other cases, the plaintiffs do not challenge the premium increases. Rather, they allege that the defendants failed to disclose critical information to policyholders to assist them in making decisions about their policies. In other words, the lawsuit is a disclosure (or nondisclosure) case rather than a premium increase case. The first paragraph of the introductory section of the original complaint explains the point this way:
The lawsuit was assigned to Senior U.S. District Judge Robert E. Payne. President George H. W. Bush nominated him in November 1991. The Senate confirmed him in May 1992. He assumed senior status in May 2007.
The lawsuit is one of many involving premium increases imposed on the owners of LTC insurance policies. It is important because, unlike other cases, the plaintiffs do not challenge the premium increases. Rather, they allege that the defendants failed to disclose critical information to policyholders to assist them in making decisions about their policies. In other words, the lawsuit is a disclosure (or nondisclosure) case rather than a premium increase case. The first paragraph of the introductory section of the original complaint explains the point this way:
Plaintiffs and the Class Members each have PCS Series III Long Term Care Insurance policies provided by Genworth. Since 2012, Genworth has steadily and substantially increased the premiums on these policies. This case does not challenge Genworth's right to increase these premiums, or the need for premium increases given changes in certain of Genworth's actuarial assumptions. Nor does this case ask the Court to reconstitute any of the premium rates or otherwise substitute its judgment for that of any insurance regulator in approving the increased rates. Rather, this case seeks to remedy the harm caused to Plaintiffs and the Class from Genworth's partial disclosures of material information when communicating the premium increases, and the omission of material information necessary to make those partial disclosures adequate. Without this material information, Plaintiffs and the Class could not make informed decisions in response to the premium increases and ultimately made policy option renewal elections they never would have made had the Company adequately disclosed the staggering scope and magnitude of its internal rate increase action plans in the first place.
The original complaint included four claims for relief. Count 1 was for breach of the implied covenant of good faith and fair dealing. Count 2 was for fraudulent inducement. Count 3 was for fraudulent omission. Count 4 was for violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (Pennsylvania CPL).
On March 12 the defendants filed a motion to dismiss the complaint. On April 24 the judge held a pretrial conference. The next day he issued a scheduling order, and denied the defendants' motion to dismiss.
The Amended Complaint in the Skochin Case
On March 12 the defendants filed a motion to dismiss the complaint. On April 24 the judge held a pretrial conference. The next day he issued a scheduling order, and denied the defendants' motion to dismiss.
The Amended Complaint in the Skochin Case
On April 29 the plaintiffs filed an amended complaint. It included the same introductory paragraph quoted above from the original complaint. The amended complaint included four claims for relief. Count 1 was for breach of contract. Count 2 was for fraudulent inducement. Count 3 was for fraudulent omission. Count 4 was for violation of the Pennsylvania CPL.
On May 13 the defendants filed a motion to dismiss the amended complaint. On June 28 the judge ordered the defendants to complete production of documents by July 19. On July 3 the plaintiffs filed a stipulation of dismissal of Genworth, leaving GLIC as the only defendant.
On July 31 Genworth filed its 10-Q report for the second quarter of 2019 with the Securities and Exchange Commission (SEC). In it Genworth described the Skochin case. (The description is in the complimentary package offered at the end of this post.) The next description of the Skochin case will be in the 10-Q report to be filed around the end of October.
On August 7 the judge set November 14 for a class certification hearing, and March 3, 2020 as the date for the jury trial to begin. On August 29 the judge issued a memorandum opinion and an order. He granted GLIC's motion to dismiss Count 1 (breach of contract) in the amended complaint, and denied the motion to dismiss the other three counts in the amended complaint. He ordered the plaintiffs to file a second amended complaint by September 20, and GLIC to file its answer by October 4. (The memorandum and the order are in the complimentary package offered at the end of this post.)
The Second Amended Complaint in the Skochin Case
On September 20 the plaintiffs filed a second amended complaint. It includes the same introductory paragraph quoted above from the original complaint. The second amended complaint includes two claims for relief. Count 1 is for fraudulent inducement by omission. Count 2 is for violation of the Pennsylvania CPL. The plaintiffs say in a footnote that they have omitted Count 1 (for breach of contract) that was in the amended complaint, but have not waived or abandoned that claim and reserve all rights to appeal its dismissal. In their discussion of Count 1 in the second amended complaint, the plaintiffs describe the allegedly material information Genworth withheld from the plaintiffs:
The Genworth/China Oceanwide Merger Agreement
On October 21, 2016, Genworth and China Oceanwide entered into a merger agreement. Since then the parties have entered into twelve "waiver agreements," under each of which the parties extended the "end date" for completion of the agreement. The parties entered into their most recent waiver agreement on August 12, 2019, when they extended the end date to December 31, 2019. Genworth disclosed the latest waiver agreement in an 8-K (material event) report filed with the SEC. I discussed the waiver agreements in the previously mentioned post No. 311.
The Genworth 2019 Annual Meeting of Shareholders
On September 12, 2019, Genworth announced in an 8-K report and in a press release that it will hold its annual meeting of shareholders in Richmond on December 12, 2019, if the proposed merger with China Oceanwide has not been completed. Genworth scheduled the meeting to remain in compliance with New York Stock Exchange listing standards, which require each listed issuer to hold an annual meeting of shareholders not later than one year after the end of the issuer's most recently completed fiscal year. Should the merger agreement be completed by December 12, 2019, the 2019 annual meeting will not be held.
General Observations
The Eastern District of Virginia has a reputation as the fastest federal civil trial court in the U.S., and the Skochin lawsuit is moving quickly. As indicated at the beginning of this post, I think the case is important. I decided to report now on developments through the plaintiffs' filing of their second amended complaint on September 20. It will be interesting to see GLIC's October 4 response to the second amended complaint, what happens in the class certification process, what happens at the trial, whether there is an appeal, and whether the case is settled along the way. I plan to report further developments when I consider it appropriate to do so.
Available Material
I am offering a complimentary 92-page PDF consisting of the July 31 Genworth 10-Q description of the Skochin case (1 page), the judge's August 29 memorandum (30 pages), the judge's August 29 order (2 pages), and the plaintiffs' September 20 second amended complaint (59 pages). Email jmbelth@gmail.com and ask for the September 2019 package relating to Genworth and LTC.
On May 13 the defendants filed a motion to dismiss the amended complaint. On June 28 the judge ordered the defendants to complete production of documents by July 19. On July 3 the plaintiffs filed a stipulation of dismissal of Genworth, leaving GLIC as the only defendant.
On July 31 Genworth filed its 10-Q report for the second quarter of 2019 with the Securities and Exchange Commission (SEC). In it Genworth described the Skochin case. (The description is in the complimentary package offered at the end of this post.) The next description of the Skochin case will be in the 10-Q report to be filed around the end of October.
On August 7 the judge set November 14 for a class certification hearing, and March 3, 2020 as the date for the jury trial to begin. On August 29 the judge issued a memorandum opinion and an order. He granted GLIC's motion to dismiss Count 1 (breach of contract) in the amended complaint, and denied the motion to dismiss the other three counts in the amended complaint. He ordered the plaintiffs to file a second amended complaint by September 20, and GLIC to file its answer by October 4. (The memorandum and the order are in the complimentary package offered at the end of this post.)
The Second Amended Complaint in the Skochin Case
On September 20 the plaintiffs filed a second amended complaint. It includes the same introductory paragraph quoted above from the original complaint. The second amended complaint includes two claims for relief. Count 1 is for fraudulent inducement by omission. Count 2 is for violation of the Pennsylvania CPL. The plaintiffs say in a footnote that they have omitted Count 1 (for breach of contract) that was in the amended complaint, but have not waived or abandoned that claim and reserve all rights to appeal its dismissal. In their discussion of Count 1 in the second amended complaint, the plaintiffs describe the allegedly material information Genworth withheld from the plaintiffs:
While Genworth informed policyholders that future increases were "likely" and defined the word "likely" to mean "if [Genworth's] claims experience warrants an increase," it withheld from them material information about the frequency and amount of future increases it had already planned to seek, including the fact that Genworth knew with certainty at the time those statements were made that its claims experience already warranted additional increases and that Genworth would be seeking (or had already sought) additional future rate increases.The plaintiffs go on to say that other LTC insurance companies provide information about future rate increase requests. In that discussion the plaintiffs cited John Hancock as an example. (The second amended complaint is in the complimentary package offered at the end of this post.)
The Genworth/China Oceanwide Merger Agreement
On October 21, 2016, Genworth and China Oceanwide entered into a merger agreement. Since then the parties have entered into twelve "waiver agreements," under each of which the parties extended the "end date" for completion of the agreement. The parties entered into their most recent waiver agreement on August 12, 2019, when they extended the end date to December 31, 2019. Genworth disclosed the latest waiver agreement in an 8-K (material event) report filed with the SEC. I discussed the waiver agreements in the previously mentioned post No. 311.
The Genworth 2019 Annual Meeting of Shareholders
On September 12, 2019, Genworth announced in an 8-K report and in a press release that it will hold its annual meeting of shareholders in Richmond on December 12, 2019, if the proposed merger with China Oceanwide has not been completed. Genworth scheduled the meeting to remain in compliance with New York Stock Exchange listing standards, which require each listed issuer to hold an annual meeting of shareholders not later than one year after the end of the issuer's most recently completed fiscal year. Should the merger agreement be completed by December 12, 2019, the 2019 annual meeting will not be held.
General Observations
The Eastern District of Virginia has a reputation as the fastest federal civil trial court in the U.S., and the Skochin lawsuit is moving quickly. As indicated at the beginning of this post, I think the case is important. I decided to report now on developments through the plaintiffs' filing of their second amended complaint on September 20. It will be interesting to see GLIC's October 4 response to the second amended complaint, what happens in the class certification process, what happens at the trial, whether there is an appeal, and whether the case is settled along the way. I plan to report further developments when I consider it appropriate to do so.
Available Material
I am offering a complimentary 92-page PDF consisting of the July 31 Genworth 10-Q description of the Skochin case (1 page), the judge's August 29 memorandum (30 pages), the judge's August 29 order (2 pages), and the plaintiffs' September 20 second amended complaint (59 pages). Email jmbelth@gmail.com and ask for the September 2019 package relating to Genworth and LTC.
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Email: jmbelth@gmail.com
Blog: www.josephmbelth.com