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DECLARATION OF BRIAN P. BROSNAHAN IN SUPPORT OF PLAINTIFFS’ MOTION FOR

LEAVE TO FILE SECOND AMENDED COMPLAINT

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP CHARLES N. FREIBERG (SBN 70890) BRIAN P. BROSNAHAN (SBN 112894) JACOB N. FOSTER (SBN 250785) 101 California Street, Suite 2300 San Francisco, California 94111 Telephone: (415) 421-6140 Facsimile: (415) 398-5030

LEVINE & MILLER HARVEY R. LEVINE (SBN 61879) CRAIG A. MILLER (SBN 116030) 550 West C Street, Suite 1810 San Diego, CA 92101-8596 Telephone: (619) 231-9449 Facsimile: (619) 231-8638

Attorneys for Plaintiffs JOYCE WALKER, KIM BRUCE HOWLETT, and MURIEL SPOONER, on behalf of themselves and all others similarly situated

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

JOYCE WALKER, KIM BRUCE HOWLETT, and MURIEL SPOONER, on behalf of themselves and all others similarly situated,

Plaintiffs,

LIFE INSURANCE COMPANY OF THE SOUTHWEST, a Texas corporation,

Defendant.

CLASS ACTION

CASE NO.: CV 10-9198 JVS (RNBx)

Formerly Case No.: 3:10-cv -04852 JSW from Northern District of California

DECLARATION OF BRIAN P. BROSNAHAN IN SUPPORT OF PLAINTIFFS’ MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT

Date: April 16, 2012 Time: 1:30 p.m. Courtroom: 10C

Case 2:10-cv-09198-JVS -RNB Document 165 Filed 03/13/12 Page 1 of 8 Page ID #:6858

DECLARATION OF BRIAN P. BROSNAHAN IN SUPPORT OF PLAINTIFFS’ MOTION FOR

LEAVE TO FILE SECOND AMENDED COMPLAINT

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

1. I am an attorney authorized to practice in the courts of California and

in the United States District Court for the Central District of California. I am a

partner of Kasowitz, Benson, Torres & Friedman, LLP, counsel for Plaintiffs in

these proceedings. I have personal knowledge of the facts stated herein and if

required could and would testify under oath thereto.

2. Attached hereto as Exhibit A is a true and correct copy of Plaintiffs’

proposed Second Amended Complaint.

3. Attached hereto as Exhibit B is a true and correct copy of Plaintiffs’

proposed Second Amended Complaint, with blackline comparison to the operative

First Amended Complaint.

4. Plaintiffs’ proposed SAC is based on information gleaned from

discovery over the last few months. First, LSW did not confirm until February 23

and 24 that its illustrations include in its calculation of Current Basis A and

Current Basis B policy values an annual “Account Value Enhancement” of 1.25%

beginning in the tenth policy year as well as a reduced Monthly Administrative

Charge beginning in the eleventh policy year. Second, Plaintiffs were unable to

confirm that these claims were shared by all class members until LSW responded

to meet and confer correspondence and discovery on February 23 and 24. Third,

Plaintiffs’ work with experts on this issue has been difficult and time consuming,

and it has taken many months for Plaintiffs to analyze LSW’s extremely complex

policy illustrations, identify these additional deceptive practices and work with

experts to identify and quantify their impact. This process has been slowed

because LSW did not (and still has not) produced cost of insurance tables that

would allow efficient reverse engineering of the policy values in the illustrations.

Fourth, it took Plaintiffs months to review over one hundred thousand pages of

documents produced by LSW; that search revealed no documents showing how the

Account Value Enhancement and the reduced Monthly Administrative Charge

could be considered “current” or how these practices could be justified.

Case 2:10-cv-09198-JVS -RNB Document 165 Filed 03/13/12 Page 2 of 8 Page ID #:6859

DECLARATION OF BRIAN P. BROSNAHAN IN SUPPORT OF PLAINTIFFS’ MOTION FOR

LEAVE TO FILE SECOND AMENDED COMPLAINT

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

5. Plaintiffs served their first set of document requests on April 7, 2011,

practically as soon as they were permitted under the Federal Rules. On May 16,

2011, LSW served its responses, in which it objected to a substantial number of

Plaintiffs’ requests. Just four days later, on May 20, 2011, Plaintiffs sent LSW the

first of six meet and confer letters containing detailed explanations of Plaintiffs’

positions and the relevance of the requested documents, and offering to narrow

certain document requests so that LSW would promptly begin producing

documents. But LSW refused to withdraw numerous objections, and those few

documents it agreed to produce were not forthcoming, forcing Plaintiffs to move to

compel. At two separate hearings on Plaintiffs’ motion to compel – on August 30

and September 14, 2011 – Magistrate Judge Block resolved the parties’ substantive

disputes and also established a schedule for LSW’s production of documents.

6. Since LSW effectively delayed producing documents until after

adjudication of Plaintiffs’ motion to compel (as of September 7, LSW had

produced only 4,697 pages), Plaintiffs moved for an extension of the pretrial

scheduling deadlines, which LSW opposed. On November 9, 2011, this Court

granted Plaintiffs’ motion.

7. During the August 30, 2011 discovery hearing, LSW agreed to

produce certain documents explaining the derivation of accumulated and cash

surrender values with respect to the individual Plaintiffs’ policies, as well as “all

data input files from which values used in the calculations of [illustrations] were

drawn, e.g., cost of insurance tables.” The Court ordered LSW to provide this

information within two weeks. Attached hereto as Exhibit C is a true and correct

copy of excerpts of the transcript of the August 30, 2011 hearing.

8. LSW, however, failed to include the data input files that the Court

ordered LSW to provide Plaintiffs, including but not limited to cost of insurance

tables, mortality tables, and the formula for calculating the accumulated values and

cash surrender values. As a result, expert analysis of the policy values displayed in

Case 2:10-cv-09198-JVS -RNB Document 165 Filed 03/13/12 Page 3 of 8 Page ID #:6860

DECLARATION OF BRIAN P. BROSNAHAN IN SUPPORT OF PLAINTIFFS’ MOTION FOR

LEAVE TO FILE SECOND AMENDED COMPLAINT

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

LSW’s illustrations has been time consuming and difficult. LSW’s continued

refusal to provide these files is the subject of a presently pending motion to

compel.

9. LSW’s delays in producing this information required Plaintiffs’

experts to develop a work-around to permit modeling LSW’s illustrations,

including Current Basis A and Current Basis B policy values, to a reasonable

approximation, which they did in January, 2012.

10. While Plaintiffs and their experts were trying to understand the basis

for LSW’s Current Basis A and Current Basis B value calculations, Plaintiffs were

also reviewing the documents that LSW had produced following the motion to

compel. Between October, 2011 and the present, LSW produced over one hundred

thousand pages of documents. In reviewing these documents, Plaintiffs noticed

that no documents explained how a reduced Monthly Administrative Charge and

an annual “Account Value Enhancement” could be considered “current” or how

their inclusion in the “Current Basis” values could be justified.

11. Based on their review of the documents and their work with the

experts, Plaintiffs began to suspect that there was no basis for LSW’s considering

the reduced Monthly Administrative Charge and annual Account Value

Enhancement as part of LSW’s current rates and charges other than a desire to

inflate illustrated policy values. In January, 2012, Plaintiffs’ experts performed an

analysis of the effect of the reduced Monthly Administrative Charge and an annual

“Account Value Enhancement” on the Current Basis A and Current Basis B values,

which demonstrated that these practices have a very substantial impact in inflating

the Current Basis A and Current Basis B values depicted in the illustrations.

Examples of these calculations are set forth in paragraphs 14-16 of the proposed

SAC.

12. On January 24, 2012, Plaintiffs wrote to LSW requesting that LSW

confirm whether “the Current Basis A and Current Basis B values depicted in the

Case 2:10-cv-09198-JVS -RNB Document 165 Filed 03/13/12 Page 4 of 8 Page ID #:6861

DECLARATION OF BRIAN P. BROSNAHAN IN SUPPORT OF PLAINTIFFS’ MOTION FOR

LEAVE TO FILE SECOND AMENDED COMPLAINT

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

illustrations include, and are significantly inflated by, charge levels and account

crediting methodologies that are not “current” in any normal sense of that word.”

Plaintiffs also requested that, if true, “these practices be discontinued immediately

unless LSW provides a legitimate explanation and justification for these practices

within 20 days from the date of this letter.” Attached hereto as Exhibit D is a true

and correct copy of a letter from me to Jonathan Shapiro, dated January 24, 2012.

13. Also on January 24, 2012, Plaintiffs served their Second Set of

Requests for Admission which, inter alia, requested that LSW admit that the

Current Basis A and Current Basis B values in illustrations provided to the named

plaintiffs and all class members were calculated based on a reduced Monthly

Administrative Charge beginning in the eleventh policy year (for both the

SecurePlus Provider and Paragon policies) and an annual “Account Value

Enhancement” beginning in the tenth policy year (for SecurePlus Provider

policies). Attached hereto as Exhibit E is a true and correct copy of Plaintiffs’

Second Set of Requests for Admission, dated January 24, 2012.

14. LSW did not respond to Plaintiffs’ letter. On February 16, Plaintiffs

wrote to LSW again requesting a response. Attached hereto as Exhibit F is a true

and correct copy of a letter from me to Jonathan Shapiro, dated February 16, 2012.

15. On February 23, 2012, LSW responded to Plaintiffs’ requests for

admission by admitting that, in regards to the named plaintiffs’ illustrations, the

Current Basis A and Current Basis B values were calculated using “the Monthly

Administrative Charge and all applicable rates and charges deemed current as of

the date of, and as set forth in, the particular, individualized illustration” and that

(for the Provider policy) they were calculated “using all applicable rates and

charges (including, but not limited to, a 1.25% Account Value Enhancement) as of

the date of, and as set forth in, the particular, individualized illustration.”

Moreover, LSW admitted that this practice applied to the entire class by stating

that the current values “set forth in illustrations generated by ICS Solutions

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DECLARATION OF BRIAN P. BROSNAHAN IN SUPPORT OF PLAINTIFFS’ MOTION FOR

LEAVE TO FILE SECOND AMENDED COMPLAINT

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

software for SecurePlus Paragon and SecurePlus Provider Indexed Universal Life

policies are calculated using the Monthly Administrative Charge and all applicable

rates and charges deemed current as of the date of, and set forth in, a particular,

individualized illustration.” LSW’s response refused to admit or deny that all class

member Provider illustrations included the Account Value Enhancement in the

policy values, indicating that LSW could not identify any class member

illustrations that did not include the Account Value Enhancement. LSW responded

to Plaintiffs’ request for admission that it is “not currently crediting” Account

Value Enhancements to any policyholders in the class and that “no policyholder”

has ever received an Account Value Enhancement by admitting that because “no

policy has yet reached its tenth anniversary, LSW has not yet applied a 1.25%

Account Value Enhancement to the Accumulated Values of any in-force Provider

policies”; LSW made a similar admission concerning the reduced Monthly

Administrative Charge. Attached hereto as Exhibit G is a true and correct copy of

LSW’s Objections and Responses to Plaintiffs’ Second Set of Requests for

Admission, dated February 23, 2012.

16. On February 24, counsel for LSW responded to Plaintiffs’ letter by

stating that “the ‘features’ you identified in your letter concern non-guaranteed

product events anticipated for policyholders who have maintained their policies for

ten years.” LSW did not agree to discontinue the practices in question, nor did it

offer any justification. Attached hereto as Exhibit H is a true and correct copy of a

letter from Mr. Shapiro to me, dated February 24, 2012. I note that Mr. Shapiro’s

February 24, 2012 letter states that “On February 2, 2012, you could not have been

more explicit in your assurance that the Walker plaintiffs have no interest in

amending their First Amended Complaint (because, as you put it, you were more

than happy with the case as it now exists).” This is not an accurate recitation of

my discussion with Mr. Shapiro on February 2, 2012. That conversation was a

meet-and-confer discussion concerning certain discovery that is presently the

Case 2:10-cv-09198-JVS -RNB Document 165 Filed 03/13/12 Page 6 of 8 Page ID #:6863

DECLARATION OF BRIAN P. BROSNAHAN IN SUPPORT OF PLAINTIFFS’ MOTION FOR

LEAVE TO FILE SECOND AMENDED COMPLAINT

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

subject of a motion to compel. In that conversation, Mr. Shapiro stated that part of

the reason his client was concerned with permitting the discovery Plaintiffs had

requested was that LSW was worried that Plaintiffs were simply trying to probe all

aspects of LSW’s business in order to discover new claims because their existing

claims lacked merit. I told Mr. Shapiro that this was not the purpose of the

discovery, that Plaintiffs were very happy with their claims, and that LSW should

be very concerned about the claims. There was no discussion concerning whether

Plaintiffs would seek to amend their First Amended Complaint. In particular, there

was no discussion of the claims that Plaintiffs now seek to add through the

proposed Second Amended Complaint. I gave no “assurance” to Mr. Shapiro that

Plaintiffs would not seek to amend their First Amended Complaint, nor would I

have done so since nine days earlier, on January 24, 2012, I sent Mr. Shapiro my

letter (attached hereto as Exhibit D) as part of a meet-and-confer process that was

preparatory to the instant motion for leave to file the proposed Second Amended

Complaint. Indeed, in my February 6, 2012 letter following up on the February 2

meet and confer call, Plaintiffs responded to a request by LSW that Plaintiffs make

a proposal concerning terms on which Plaintiffs would agree not to propound any

further document requests. My letter proposed that if LSW agreed to produce the

discovery then in dispute as well as the discovery served concurrently with the

proposal, Plaintiffs would agree not to propound new document requests, subject to

certain limited carve-outs. Among the carve-outs included in Plaintiffs’ proposal

was “Documents relevant to any new claims that may hereafter be added to this

litigation.” A true and correct copy of my February 6, 2012 letter to Mr. Shapiro is

attached hereto as Exhibit I.

17. Upon receipt of the letter and discovery responses from LSW on

February 23 and 24 confirming its practices, and the uniform applicability of its

practices to the class as a whole, Plaintiffs prepared and transmitted the proposed

SAC to LSW on Monday, February 27 and requested that LSW stipulate to its

Case 2:10-cv-09198-JVS -RNB Document 165 Filed 03/13/12 Page 7 of 8 Page ID #:6864

DECLARATION OF BRIAN P. BROSNAHAN IN SUPPORT OF PLAINTIFFS’ MOTION FOR

LEAVE TO FILE SECOND AMENDED COMPLAINT

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

filing. Attached hereto as Exhibit J is a true and correct copy of an e-mail from me

to Mr. Shapiro dated February 27, 2012.

18. Pursuant to Central District of California Local Rules 7-3, the parties

had a telephonic conference on February 29. In the conference, LSW refused to

stipulate to the filing of the SAC and indicated that it would oppose Plaintiffs’

motion. Attached hereto as Exhibit K is a true and correct copy of an e-mail from

me to Mr. Shapiro dated March 1, 2012, confirming our conversation.

19. After waiting the ten days required by Local Rule 7-3, Plaintiffs filed

this motion at the earliest permissible date, although Plaintiffs agreed to delay the

hearing date one week to accommodate the schedule of defense counsel,

Mr. Shapiro. Attached hereto as Exhibit L is a true and correct copy of an e-mail

from me to Mr. Shapiro dated March 9, 2012 with an attached email string

showing our discussion regarding scheduling of the motion.

20. Although Plaintiffs first notified LSW about these potential claims on

January 24, 2012, prior to Ms. Walker’s deposition on January 27, 2012, counsel

for LSW chose to ask Ms. Walker no questions on the subject.

DATED: March 12, 2012 KASOWITZ BENSON TORRES & FRIEDMAN LLP

By: /s/ Brian P. Brosnahan Brian T. Brosnahan

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