PLAINTIFFS’ RESPONSE TO LSW’S NOTICE OF SUPPLEMENTAL AUTHORITY

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) LEVINE & MILLER 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

PLAINTIFFS’ RESPONSE TO LSW’S NOTICE OF SUPPLEMENTAL AUTHORITY

Judge James V. Selna Courtroom: 10C

Case 2:10-cv-09198-JVS -RNB Document 328-1 Filed 09/10/12 Page 2 of 6 Page ID #:14605

PLAINTIFFS’ RESPONSE TO LSW’S NOTICE OF SUPPLEMENTAL AUTHORITY

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

Tucker v. Pacific Bell Mobile Services, 208 Cal. App. 4th 201 (2012) does

not counsel for denial of certification. First, Tucker and the “virtually

indistinguishable” case upon which it relied (Knapp v. AT&T, 195 Cal.App.4th

932, 944 (2011)) involved situations where the “the face of the complaint itself”

revealed that representations in oral conversations and “various written

materials” were “not uniformly made,” and, in fact, the information that plaintiffs

claimed was undisclosed was expressly disclosed “in the same materials that

Plaintiffs cite in support of their misrepresentation claims.” Tucker, 208 Cal. App.

4th at 221. Tucker has no application to Plaintiffs’ volatility and tax defect claims,

as to which LSW does not identify any relevant disclosures, and is distinguishable

from Plaintiffs’ illustration claims because LSW does not dispute that each

subclass member was exposed to deceptive illustrations. Cf. id. at 225 (“nothing

before the Court” showed that deceptive representations were made).

Tucker at most implicates whether the bait and switch aspect of the

Minimum Guaranteed Interest claim should be certified in light of LSW’s

contention that some subclass members received a Buyer’s Guide at or before the

time they applied for the policy, thus arguably raising individual issues. Tucker

does not extend to any alleged oral disclosures as to the Undisclosed Fees,

Minimum Guaranteed Interest, and Current Basis claims because of the Ninth

Circuit’s controlling decision in Yokoyama v. Midland Nat’l Life Ins. Co, 594 F.3d

1087, 1093 (9th Cir. 2008).1 Tucker does not bear on any written disclosures

provided in the policy and the Buyer’s Guide at the time of policy delivery because

all class members received these disclosures, so no individual issues are presented

by the giving of such disclosures at the time of policy delivery. LSW contends,

however, that some subclass members received, at or before the time of policy

application, a Buyer’s Guide that disclosed that the interest guarantee is not a true

1 LSW does not identify any relevant oral disclosures as to the Guaranteed Monthly Administrative Charge reduction claim.

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PLAINTIFFS’ RESPONSE TO LSW’S NOTICE OF SUPPLEMENTAL AUTHORITY

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

annual guarantee, and that this raises individual issues with respect to the bait and

switch claim under the UCL. The Buyer’s Guide does not bear on Plaintiffs’ other

illustration-based claims, and none of the other written marketing documents

potentially provided by agents before policy delivery even arguably corrects the

false impression conveyed by the illustration. See Plaintiffs’ Reply at 11-13 (Dkt.

291); Foster Dec. ¶¶ 5, 15-39 (Dkt. 307).

As to the Minimum Guaranteed Interest bait and switch claim, Tucker is

inapplicable for numerous reasons. First, the Buyer’s Guide does not alert

policyholders that no guaranteed interest is credited to policies that lapse or that the

guaranteed minimum values stated in the illustration are incorrect. Second, LSW

does not contest that all subclass members received an illustration that deceptively

presented the minimum interest guarantee. Third, on the facts in Tucker, the court

rejected a presumption of common reliance under the UCL because the record

there “would not permit it” due to the named plaintiffs’ failure to allege reliance

and because the allegedly undisclosed information was disclosed “in the same

materials that Plaintiffs cite in support of their misrepresentation claims.” Tucker,

208 Cal. App. 4th at 221, 224, 227. Here, in contrast, each of the named plaintiffs

alleges reliance on the deceptive illustration. Fourth, LSW has asserted that it does

not contest reliance. Opp’n at 17:1-10. Finally, LSW has offered no evidence that

any significant number of subclass members received the Buyer’s Guide at or

before the time of application.

Tucker also contains dicta about restitution that is inapposite and contrary to

the law. Tucker’s discussion of restitution is inapposite because it considered a

refund measure of damages whereas this Court has authorized an actual value

measure of damages based on the price at which the policies were sold.2 Thus,

2 The only refund measure advanced by Plaintiffs is the alternative “refund” theory for the Undisclosed Fees and Minimum Guaranteed Interest claims. See Declaration of William Brockett in Support of Motion for Class Certification (Dkt. 228) at ¶¶ 105 & 108.

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PLAINTIFFS’ RESPONSE TO LSW’S NOTICE OF SUPPLEMENTAL AUTHORITY

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

anyone who would not have bought the policy but for the deception (i.e., who

relied or is presumed to have relied) was harmed, and is entitled to restitution,

because they purchased a policy whose actual value is less than what the

policyholder paid for it.

Tucker’s discussion of restitution is contrary to the law because it conflicts

with the California Supreme Court’s decision in In re Tobacco II, 46 Cal. 4th 298,

320 (2009) and the cases upon which that court relied. Id. at 320 (citing Fletcher

v. Security Pac. Nat’l Bank, 23 Cal. 3d. 442, 452 (1979), Committee on Children’s

Television v. General Foods Corp., 35 Cal. 3d 197, 211 (1983) and Bank of the

West v. Sup. Ct., 2 Cal. 4th 1254, 1264 (1992)). Tucker concluded in dicta that

“even if we assume that there were a common misrepresentation as to the number

of conversational minutes in the Defendant’s advertised rate plans, and that the

representations were material, . . . Those who were aware of the rounding up

practice, by disclosure or otherwise, could not be said to be entitled to return of any

amounts paid to the Defendants.” Tucker, 208 Cal. App. 4th at 228-29. But the

Supreme Court in Fletcher held exactly the opposite in the context of Business and

Professions Code Section 17535, which has the same language regarding

restitution as does the UCL. Fletcher, 23 Cal. 3d at 449-54. Fletcher’s holding

that individualized proof of knowledge is not required for restitution was

broadened and adopted in the context of the UCL by subsequent Supreme Court

cases, leading the Court in Tobacco II to find that courts have “ repeatedly and

consistently” held that relief under the UCL is available without individualized

proof of deception, reliance and injury,” and that “to hold that the absent class

members on whose behalf a private UCL action is prosecuted must show on an

individualized basis that they have ‘lost money or property as a result of the unfair

competition’ (§ 17204) would conflict with the language in section 17203

authorizing broader relief—the ‘may have been acquired’ language—and

implicitly overrule a fundamental holding in our previous decisions, including

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PLAINTIFFS’ RESPONSE TO LSW’S NOTICE OF SUPPLEMENTAL AUTHORITY

Case No. CV 10-9198 JVS (RNBx)

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

101 CALIFORNIA STREET, SUITE 2300

SAN FRANCISCO, CALIFORNIA 94111

Fletcher, Bank of the West and Committee on Children's Television.” In re

Tobacco II, 46 Cal. 4th at 320.3

The Tucker court’s dicta would mean that class actions for restitution under

the fraudulent prong could never be certified because the knowledge of each

individual class member would always need to be examined. The Tucker dicta

thus would overrule sub silentio the presumption of classwide knowledge, reliance

and injury established by the Supreme Court in Fletcher and its progeny, including

Tobacco II. 4

Dated: September 10, 2012 KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

By: /s/ Brian P. Brosnahan

3 Lest LSW try to argue that Tobacco II is limited to the issue of standing under Section 17204, it must be observed that the discussion of restitution above was a premise of the Court’s conclusion that individualized proof was not needed for standing. The Court reasoned that because individualized proof was not needed for restitution, it made no sense to require it for standing. 46 Cal. 3d at 320. 4 The cases cited by Tucker do not support its dicta. In In re Vioxx Class Cases, 180 Cal. App. 4th 116, 136 (2009) there was no common reliance and measurement of restitution would have involved individual issues of medical history, patient needs, and drug interaction. In Day v. AT & T Corp., 63 Cal. App. 4th 325, 340 (2998) restitution was barred by the filed rate doctrine.

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