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LOS ANGELES-Two federal judges issued split decisions last month on whether to certify class actions alleging fraud against insurance companies that sold long-term deferred-annuity retirement plans to seniors. The cases are among more than a dozen suits, most of them filed last year, accusing the insurance companies of inappropriately selling annuities to senior customers who had to pay large penalties in order to receive their payments. In a July 14 ruling, U.S. District Judge J. Michael Seabright said that too many independent factors exist in determining whether the annuities are suitable financial products for senior customers of Midland National Life Insurance Co. Yokoyama v. Midland National, No. 05-cv-00303 (D. Hawaii). Robert Phillips, a partner in the Los Angeles and Oakland, Calif., offices of Reed Smith and lead defense counsel for Midland National, said that the ruling in the Yokoyama case addresses a core issue in the other deferred-annuity class actions. “If you look at each of the complaints that addresses the question of sales to seniors, a core allegation is that these products are bad for seniors,” Phillips said. “And there has been no court that has certified a class based upon that theory. In Yokoyama, that’s what the plaintiffs were seeking: to certify a class based upon the fundamental argument that these products are inherently bad for seniors, for people 65 and older. And the court said you can’t certify that class.” Another try K. Bartlett Durand, a lawyer at Honolulu-based Bickerton Saunders Dang & Sullivan who represents the plaintiffs in the Yokoyama case, said that he has filed an amended complaint alleging a separate theory that all long-term deferred-annuity products are inherently bad for investors. That theory is “focused more on what upset us in the first place, which is that we don’t think these are good products at all,” Durand said. Rulings on class certification are currently being issued on many of the suits, filed in the past year, involving long-term deferred annuities. On July 25, U.S. District Judge Irma Gonzalez granted class certification in a deferred-annuities lawsuit against Allianz Life Insurance Co. of North America. Iorio v. Asset Marketing, No. 05-cv-00633 (S.D. Calif.). In that ruling, Gonzalez said that she agreed with the plaintiffs that Allianz Life sales agents used the same language and handed out the same sales brochures to sell the annuities. “We focused on theories and facts that show a common pattern of actionable conduct,” said Robert Gianelli, a partner at Los Angeles-based Gianelli & Morris who brought the case. He said there are 15,000 members in the class. Lawrence Field, a shareholder at Minneapolis-based Leonard, Street and Deinard who represents Allianz, said that he plans to appeal the class certification ruling to the 9th U.S. Circuit Court of Appeals. “She got it wrong,” he said of Gonzalez. “These are sales presentations that involve multiple pieces of paper and multiple oral representations. The notion that you can ignore other pieces of paper and ignore the oral representations in favor of any particular piece of paper or representation doesn’t make sense.” Last year, Gianelli obtained class certification in a separate case in California against American Investors Life Insurance Co., a subsidiary of AmerUs Annuity Group Co. That case eventually settled. In the Yokoyama ruling, Seabright acknowledged that the plaintiffs intended to change their theory on class certification, but declined to rule on that issue in his decision. “The Yokoyama decision is important because it says, at least on a classwide basis, the federal courts are not going to make a determination that these types of products are always bad for seniors,” Phillips said. He said that theory relies too much on individual facts, such as a customer’s net worth or percentage of assets in an annuity. The only reason why the two other cases were certified was that they asserted claims of commonality other than whether the products were suitable for seniors, he said. In those cases, the plaintiffs’ lawyers focused on marketing strategies or disclosure issues that are not exclusive to senior customers.

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