Miller et al v. Metropolitan Life Insurance Company et al

REPLY MEMORANDUM OF LAW in Support re: 104 MOTION to Dismiss Pursuant to Federal Rule of Civil Procedure 12

S.D.N.Y.March 22, 2019

04745316.17 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------X DALE MILLER et al., Plaintiffs, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant. Case No. 17-cv-7284 (AT) (SN) REPLY MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT’S MOTION TO DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(B) ---------------------------------------------------X REPLY MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT’S MOTION TO DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(B) Lee E. Bains, Jr. Edward Morris Holt MAYNARD, COOPER & GALE, P.C. 1901 Sixth Avenue North 2400 Regions | Harbert Plaza Birmingham, AL 35203 Telephone: 205.254.1000 Facsimile: 205.254.1999 Email: lbains@maynardcooper.com Email: tholt@maynardcooper.com John M. Hintz MAYNARD, COOPER & GALE, P.C. The Fred F. French Building 551 Fifth Avenue - Suite 2000 New York, NY 10176 Telephone: 646.609.9284 Facsimile: 646.609.9281 Email: jhintz@maynardcooper.com Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 1 of 17 04745316.17 i TABLE OF CONTENTS TABLE OF CONTENTS ................................................................................................................. i TABLE OF AUTHORITIES .......................................................................................................... ii I. Plaintiffs’ claims are precluded by SLUSA. ........................................................................1 II. Plaintiffs’ claims are time-barred. ........................................................................................5 III. Even if timely, Plaintiffs’ breach of contract claim (Count I) does not cure its prior deficiencies and should be dismissed. .................................................................................7 IV. Even if timely, Plaintiffs’ Implied Covenant claims (Count II) should be dismissed. ........8 V. Even if timely, Plaintiffs’ Bad Faith claims (Count III) should be dismissed. ....................9 VI. Even if timely, Plaintiffs’ negligence claims (Count IV) should be dismissed. ..................9 VII. Plaintiffs’ Rule 23(b)(1)/Rule 23(b)(2) class action allegations should be dismissed.......10 CONCLUSION ..............................................................................................................................10 CERTIFICATE OF SERVICE ......................................................................................................12 Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 2 of 17 04745316.17 ii TABLE OF AUTHORITIES Page(s) CASES 1050 Tenants Corp. v. Lapidus, 735 N.Y.S.2d 47 (N.Y. App. Div. 2001) ............................................................................ 7 Aryeh v. Canon Bus. Sols., Inc., 292 P.3d 871 (Cal. 2013) .................................................................................................... 6 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .......................................................................................................... 10 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) .......................................................................................................... 10 Body Jewelz, Inc. v. Valley Forge Ins. Co., 241 F. Supp. 3d 1084 (C.D. Cal. 2017) ............................................................................ 10 Clementson v. Countrywide Fin. Corp., 2011 WL 1884715 (D. Colo. Jan. 27, 2011) ....................................................................... 7 Cupersmith v. Piaker & Lyons P.C., 2016 WL 5394712 (N.D.N.Y. Sept. 27, 2016) ................................................................... 6 Elsayed v. Maserati N. Am., Inc., 215 F. Supp. 3d 949 (C.D. Cal. 2016) .............................................................................. 10 Faulkner v. Arista Records LLC, 602 F. Supp. 2d 470 (S.D.N.Y. 2009)................................................................................. 6 Fleming v. Charles Schwab Corp., 878 F.3d 1146 (9th Cir. 2017) ............................................................................................ 2 Freeman Invs., L.P. v. Pac. Life Ins. Co., 704 F.3d 1110 (9th Cir. 2013) ............................................................................................ 2 Gallagher Bd. of Trs. for the Univ. of N. Colo., 54 P.3d 386 (Colo. 2002) .................................................................................................... 6 Gilkyson v. Disney Enters., Inc., 198 Cal. Rptr. 3d 611 (Cal. Ct. App. 2016) ........................................................................ 6 Gurfein v. Ameritrade, Inc., 2006 WL 2959146 (S.D.N.Y. Oct. 13, 2006) ..................................................................... 4 Hampton v. Pac. Invs. Mgmt. Co., 705 F. App’x 558 (9th Cir. 2017) ....................................................................................... 2 In re Herald, 730 F.3d 112 (2d Cir. 2013)............................................................................................ 2, 3 In re Kingate Mgmt. Ltd. Litig., 784 F.3d 128 (2d Cir. 2015)............................................................................................ 2, 4 Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 3 of 17 04745316.17 iii In re LIBOR-Based Fin. Instruments Antitrust Litig., 2015 WL 6243526 (S.D.N.Y. Oct. 20, 2015) ..................................................................... 6 Integrated Storage Consulting Servs., Inc. v. NetApp, Inc., 2013 WL 3974537 (N.D. Cal. July 31, 2013) ..................................................................... 9 Jobim v. Songs of Universal, Inc., 732 F. Supp. 2d 407 (S.D.N.Y. 2010)................................................................................. 6 J’Aire Corp. v. Gregory, 598 P.2d 60 (Cal. 1979) .................................................................................................... 10 Luv N’ Care, LTD v. Goldberg Cohen, LLP, 703 F. App’x 26 (2d Cir. 2017) .......................................................................................... 5 Magna Associates v. Torgrove, 585 F. Supp. 585 (D. Colo. 1984) ....................................................................................... 6 Nasseri v. Wells Fargo Bank, N.A., 147 F. Supp. 3d 937 (N.D. Cal. 2015) ................................................................................ 9 Neff v. N.Y. Life Ins. Co., 180 P.2d 900 (Cal. 1947) .................................................................................................. 10 Norman v. Salomon Smith Barney, Inc., 350 F. Supp. 2d 382 (S.D.N.Y. 2004)............................................................................. 4, 6 Northstar Fin. Advisors, Inc. v. Schwab Invs., 904 F.3d 821 (9th Cir. 2018) .............................................................................................. 2 Patel v. Thomas, 793 P.2d 632 (Colo. App. 1990) ......................................................................................... 6 Pike v. N.Y. Life Ins. Co., 901 N.Y.S.2d 76 (N.Y. App. Div. 2010) ............................................................................ 7 Polk v. Hergert Land & Cattle Co., 5 P.3d 402 (Colo. App. 2000) ......................................................................................... 6, 7 R&W Grand Lodge of Free & Accepted Masons of Penn. v. Meridian Capital Partners, 634 F. App’x 4 (2d Cir. 2015) ........................................................................................ 3, 5 Rayner v. E*Trade Fin. Corp., 899 F.3d 117 (2d Cir. 2018).................................................................................... 1, 2, 3, 4 Romano v. Kazacos, 609 F.3d 512 (2d Cir. 2010)............................................................................................ 2, 3 Salazar v. Thomas, 186 Cal. Rptr. 3d 689 (Cal. Ct. App. 2015) ........................................................................ 7 Slack v. Farmers Ins. Exch., 5 P.3d 280 (Colo. 2000) ...................................................................................................... 9 Smith v. Campbell, 782 F.3d 93 (2d Cir. 2015).................................................................................................. 8 Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 4 of 17 04745316.17 iv Soward v. Deutsche Bank AG, 814 F. Supp. 2d 272 (S.D.N.Y. 2011)................................................................................. 5 Thomas v. Arn, 474 U.S. 140 (1985) ............................................................................................................ 8 Vaca v. Wachovia Mortg. Corp., 129 Cal. Rptr. 3d 354 (Cal. Ct. App. 2011) ........................................................................ 6 Vu v. Prudential Prop. & Cas. Ins. Co., 33 P.3d 487 (Cal. 2001) .................................................................................................... 10 Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) .......................................................................................................... 10 Webster v. N.Y. Life Ins. & Annuity Corp., 386 F. Supp. 2d 438 (S.D.N.Y. 2005)................................................................................. 4 Zweiman v. AXA Equitable Life Ins. Co., 146 F. Supp. 3d 536 (S.D.N.Y. 2015)................................................................................. 4 RULES Federal Rule of Civil Procedure 12(b) ............................................................................................ 1 Federal Rule of Civil Procedure 12(b)(6) ....................................................................................... 3 N.Y. C.P.L.R. 202 ........................................................................................................................... 5 Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 5 of 17 04745316.17 1 Defendant Metropolitan Life Insurance Company (“MetLife”) respectfully submits this reply memorandum of law (“Reply Brief”) in further support of its motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b) (D.E. 104) (“Motion to Dismiss”) and in reply to Plaintiffs’ Opposition Memorandum (D.E. 107) (“Response”).1 I. Plaintiffs’ claims are precluded by SLUSA. Plaintiffs fail to state a claim avoiding SLUSA preclusion that is distinct from the fraudulent conduct they alleged in their first four complaints.2 Plaintiffs now allege breach of contract, breach of an Implied Covenant, Bad Faith and negligence claims. The new claims state the same operative facts and alleged wrongdoing: that MetLife charged Plaintiffs’ cost of insurance rates based upon smoker status that Plaintiffs never knew to disclaim.3 The SAC and earlier complaints indicate that, if MetLife had told Plaintiffs about their smoker-status default, then Plaintiffs would have informed MetLife that they were nonsmokers.4 The Second Circuit has held that a contract or breach of duty claim is barred by SLUSA when the gravamen of the claim is fraud, omission, or use of a manipulative or deceptive device or contrivance by the defendant. Rayner v. E*Trade Fin. Corp., 899 F.3d 117, 120 (2d Cir. 2018). 1 Abbreviations and capitalized terms in this Reply Brief have the same definitions as set forth in the Memorandum of Law in Support of Defendant’s Motion to Dismiss Plaintiffs’ Second Amended Complaint (D.E. 105) (“Brief”). 2 Despite Plaintiffs’ assertion, Response, D.E. 107 at 4-7, every statement in MetLife’s Procedural Background is true. Plaintiffs have filed five federal court complaints in this case. MetLife described that procedural background because Judge Torres concluded, that because the complaints from the lawsuit in California had not been placed before the Magistrate Judge, those earlier complaints would not be considered in deciding to give Plaintiffs an opportunity to amend. Order, D.E. 94 at 9 n.4. After five federal court complaints, it is time to consider it now. 3 The SAC repeatedly refers to MetLife using a GVUL enrollment form-which Plaintiffs’ earlier complaints called a manipulative or fraudulent device-that provided only “From Smoker to Non-Smoker” and “From Non-Smoker to Smoker” options to set the Plaintiffs to a smoker “default” rate. See D.E. 97 ¶¶ 15, 32, 35, 49, 52, 53, 59, 66, 71. The FAC pled that MetLife’s using the GVUL enrollment form was the source of the “scheme to defraud.” See D.E. 73 ¶ 59 (“METLIFE accomplished its scheme [to defraud] by establishing an internal policy of designating as smokers those individuals who left blank the smoker status change section of the GVUL enrollment form . . . .”). 4 Of the SLUSA elements, it is only the alleged false conduct-fraud, omission, or use of a deceptive or manipulative device-that is in debate. The cause and effect for damages are the purchases of the variable policies and surrendering amounts from Plaintiffs’ accounts to pay higher costs of insurance, thus satisfying the “in connection with” requirement. Despite a half-hearted argument otherwise, Plaintiffs do not quarrel with any other element of this Court’s prior SLUSA analysis, and the “in connection with” element is satisfied if the Court finds that false conduct remains the gravamen of Plaintiffs’ claims. R&R, D.E. 86 at 12-14; Order, D.E. 94 at 6-7. Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 6 of 17 04745316.17 2 Plaintiffs fail to address the Second Circuit SLUSA artful pleading case law cited by MetLife.5 Plaintiffs argue that their “prior complaints . . . are irrelevant,”6 and ignore cases holding that earlier complaints are relevant to the artful pleading analysis.7 Plaintiffs’ four earlier complaints alleged misrepresentations or omissions of material fact and manipulative or deceptive devices or contrivances.8 Judge Torres ruled that Plaintiffs had alleged fraud in connection with their purchases of their variable life insurance policies and that the fraud claims were precluded by SLUSA.9 The SAC’s factual allegations track the exact same factual allegations in Plaintiffs’ earlier complaints and are based on the same “underlying ‘realities’” as those earlier complaints.10 Plaintiffs’ fraud claims in the four earlier complaints incorporated by reference all of those same factual allegations that are now incorporated in the claims alleged in the SAC.11 Plaintiffs cannot engage in artful pleading to avoid SLUSA preclusion by camouflaging their allegations or omitting certain allegations.12 Plaintiffs devote two pages to a 2013 Ninth Circuit decision13 while failing to mention the 5 Brief, D.E. 105 at 7-11. 6 Response, D.E. 107 at 12. 7 Brief, D.E. 105 at 8 n.19. 8 Response, D.E. 107 at 11 (conceding the express fraud claims in the FAC); Connally Decl., D.E. 106 at ¶¶ 3-5, Ex. A (chart comparing allegations in Plaintiffs’ four earlier complaints with the allegations in the SAC), Exs. B-E. 9 Order, D.E. 94 at 7. 10 In re Herald, 730 F.3d 112, 119 n.6 (2d Cir. 2013); see also Connally Decl., D.E. 106 at Ex. A; Rayner, 899 F.3d at 120; Romano v. Kazacos, 609 F.3d 512, 519-20, 523 (2d Cir. 2010). 11 Compare Miller I, D.E. 1 ¶ 57 (Ex. B to Connally Decl.), Miller I, D.E. 25 ¶ 56 (Ex. C. to Connally Decl.), D.E. 1 ¶ 57 (Ex. D to Connally Decl.), FAC, D.E. 73 ¶ 58 (Ex. E to Connally Decl.) with SAC, D.E. 97 ¶¶ 47, 55, 62, 70 (Ex. F to Connally Decl.). 12 See Rayner, 899 F.3d at 120; In re Kingate Mgmt. Ltd. Litig., 784 F.3d 128, 149 (2d Cir. 2015); Herald, 730 F.3d at 119; R&R, D.E. 86 at 10; Brief, D.E. 105 at 7-9, 8 nn.16-19. 13 Response, D.E. 107 at 12-14 (citing Freeman Invs., L.P. v. Pac. Life Ins. Co., 704 F.3d 1110 (9th Cir. 2013)). Freeman concerned how the cost of insurance was calculated-a claim that stood alone and was distinct from the fraudulent concealment claims asserted by plaintiffs, that were intended to defeat a statute of limitations defense for a portion of the damages at issue. See Freeman Invs., 704 F.3d at 1115-16. The Second Circuit has not cited the Ninth Circuit’s Freeman decision. What Plaintiffs urge as the approach to SLUSA preclusion for a breach of contract claim, based on the Ninth Circuit’s Freeman decision, differs materially from the Second Circuit’s approach in Romano, Rayner, Herald, Kingate, and Meridian Capital Partners. Further, the Ninth Circuit has recently taken a more expansive view of SLUSA preclusion. More recent Ninth Circuit cases find that SLUSA can preclude class claims alleging breach of contract, breach of fiduciary duty, and breach of the covenant of good faith and fair dealing by the defendant when the operative facts are based upon false conduct. See, e.g., Northstar Fin. Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 7 of 17 04745316.17 3 Second Circuit’s 2018 controlling opinion in Rayner, 899 F.3d 117, discussed extensively in MetLife’s Brief.14 In Rayner, the Second Circuit affirmed the Rule 12(b)(6) dismissal with prejudice of common law claims for breach of fiduciary duty and unjust enrichment based on SLUSA preclusion and explained that “‘[a]llowing plaintiffs to avoid SLUSA by contending they have “contract” claims would render SLUSA ineffectual, because almost all federal securities suits could be recharacterized as contract suits about the securities involved.’” Id. at 120 (alterations adopted) (citation omitted). Plaintiffs fail to discuss the Second Circuit’s Romano decision that affirmed the dismissal of class actions alleging contract and other non- fraud state law claims based on artful pleading and SLUSA preclusion. Romano v. Kazacos, 609 F.3d 512, 516-24 (2d Cir. 2010). Similarly, Plaintiffs fail to discuss the Second Circuit’s Herald decision that affirmed the dismissal of plaintiffs’ class actions alleging breach of duties and unjust enrichment based on artful pleading and SLUSA preclusion. In re Herald, 730 F.3d 112, 117, 119 & n.6 (2d Cir. 2013); id. at 119 n.7 (“[T]he fact that plaintiffs allege claims sounding in negligence, breach of fiduciary duty, and the like does not preclude preclusion under SLUSA.”).15 Plaintiffs also fail to discuss the cases from district courts within the Second Circuit that routinely dismiss class actions alleging various state law claims as precluded by SLUSA.16 Advisors, Inc. v. Schwab Invs., 904 F.3d 821, 827-35 (9th Cir. 2018) (class claims for breach of contract, breach of fiduciary duty, and breach of the covenant of good faith and fair dealing barred by SLUSA preclusion); Fleming v. Charles Schwab Corp., 878 F.3d 1146, 1150, 1152-56, & n.4 (9th Cir. 2017) (affirming dismissal of class claims alleging breach of contract, breach of fiduciary duty, and unjust enrichment based on SLUSA preclusion); id. at 1153 n.4 (“‘[I]f a claim could be pursued under federal securities law, then it is covered by [SLUSA] even if it also could be pursued under state contract or fiduciary law.’”) (citation omitted); Hampton v. Pac. Invs. Mgmt. Co., 705 F. App’x 558, 561 (9th Cir. 2017) (claims for breach of contract and breach of fiduciary duty barred by SLUSA). 14 Brief, D.E. 105 at 6-11. 15 Plaintiffs also fail to discuss the Second Circuit’s 2015 decision that affirmed the Rule 12(b)(6) dismissal of plaintiff’s claims for breach of fiduciary duty, unjust enrichment, and negligence based on SLUSA preclusion and the artful pleading doctrine. R&W Grand Lodge of Free & Accepted Masons of Penn. v. Meridian Capital Partners, 634 F. App’x 4, 6, 8-9, 9 n.2 (2d Cir. 2015). 16 Brief, D.E. 105 at 8 & n.17. Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 8 of 17 04745316.17 4 Plaintiffs cite three distinguishable district court opinions from the mid-2000s17 that predate and obviously fail to consider the Second Circuit’s SLUSA preclusion decisions since 2012 in Rayner, Kingate, Herald, Romano, and Meridian Capital Partners.18 In the R&R recommending the dismissal of the FAC, the Court allowed Plaintiffs to amend to attempt to state a contract claim and breach of the duty of good faith and fair dealing, although it did not pre-judge those claims. Plaintiffs, however, continue to state claims predicated upon the false conduct they originally alleged. The contract claim fails to cite any express provision as a basis for breach of contract, and certainly not one independent of the false conduct earlier alleged. Plaintiffs have failed to state any other claim distinct from or extraneous to the false conduct originally alleged against MetLife in imposing a default smoker rate based upon the enrollment forms it received.19 The SAC alleges a smoker rate applied to pilots who were allegedly duped by the Change Form or otherwise did not know of a need to inform MetLife that they were nonsmokers. There are no allegations that the computations of the rates themselves were unreasonable without reference to the enrollment forms that Plaintiffs have alleged were deceptive. The gravamen of Plaintiffs’ claims remains false conduct.20 17 Response, D.E. 107 at 12, 14-15 (citing Gurfein v. Ameritrade, Inc., No. 04 Civ. 9526, 2006 WL 2959146 (S.D.N.Y. Oct. 13, 2006); Webster v. N.Y. Life Ins. & Annuity Corp., 386 F. Supp. 2d 438 (S.D.N.Y. 2005) (straight breach of contract claim with no prior complaints alleging fraud); Norman v. Salomon Smith Barney, Inc., 350 F. Supp. 2d 382 (S.D.N.Y. 2004) (complaint alleging breaches of fiduciary duties in discretionary accounts with no allegations of fraud in the purchase of securities)). Those three opinions also predate the Supreme Court’s Twombly/Iqbal decisions. 18 Brief, D.E. 105 at 6-11. 19 See Rayner, 899 F.3d at 120-21 (finding SLUSA preclusion despite the fact that plaintiff’s claims of breach of contractual and other duties did “not require a showing of false conduct”); Zweiman v. AXA Equitable Life Ins. Co., 146 F. Supp. 3d 536, 548 (S.D.N.Y. 2015) (finding SLUSA preclusion based upon careful review of original complaint, amended complaint, and contract at issue, in spite of new allegations solely claiming breach of contract). 20 Plaintiffs argue Kingate, but that case supports MetLife’s SLUSA preclusion argument and eviscerates Plaintiffs’ argument that their new claims escape the bar of SLUSA. In Kingate, the Second Circuit analyzed five groupings of the twenty-eight claims. 784 F.3d at 134-35. The first three groups alleged that the defendant managers, consultant, auditors, and administrator engaged in fraud, negligence, or aiding and abetting the fraud of Bernard L. Madoff and his fraudulent funds. Id. at 133 n.4, 134-35. The “Group 4” claims, however, related to separate duties to manage plaintiffs’ investments and provide due diligence, while the “Group 5” claims related to compensation for those services. Id. at 134-35. The Second Circuit found that those Group 4 and 5 claims did not relate to any false conduct of these defendants. Id. at 151-52. Instead, the only allegations of false conduct related to Madoff and his fraudulent Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 9 of 17 04745316.17 5 Unlike cases where the false conduct was alleged against third parties or was extraneous to the breaches of specific duties of a defendant, MetLife’s alleged false conduct is at the heart of the SAC’s allegations. This Court should assess Plaintiffs’ earlier complaints classifying the very same conduct as fraud, omission, or use of a manipulative or deceptive device or contrivance. Even viewing the SAC on its own, it, like the complaint in Rayner, is rife with assertions of omissions by MetLife. Just as in Rayner, the SAC essentially alleges the use of a manipulative or deceptive device-the Change Form that channeled Plaintiffs into a default smoker rate. The SAC remains predicated on alleged false conduct, and SLUSA precludes each claim. II. Plaintiffs’ claims are time-barred. The Parties agree that New York’s borrowing statute, N.Y. C.P.L.R. 202, applies. Plaintiffs’ claims must be timely under the law, including tolling principles, of both New York and Plaintiff’s state of residence.21 Plaintiffs acknowledge that without tolling, their claims are time-barred.22 Plaintiffs argue their claims are saved by either the “continuous accrual” rule or the “continuing violation” doctrine. Plaintiffs do not dispute that they bear the burden of proving these exceptions to the statute of limitations apply.23 Plaintiffs also do not dispute that they bear a Twombly/Iqbal pleading burden to “specifically plead facts that make entitlement to [these equitable exceptions] plausible.”24 Plaintiffs do not meet their burden. The continuous accrual rule does not save Plaintiffs’ time-barred claims. Plaintiffs funds-i.e., false conduct by third parties. Id. Indeed, the Second Circuit analyzed the range of claims generally precluded by SLUSA and found that false conduct alleged against the defendant invoking SLUSA-rather than third parties-and not extraneous to the expressly pled state law causes of action, tainted those express causes of action such that they would be precluded. Id. at 149. 21 Luv N’ Care, LTD v. Goldberg Cohen, LLP, 703 F. App’x 26, 28 (2d Cir. 2017) (“When a nonresident sues on a cause of action accruing outside New York, C.P.L.R. 202 requires the cause of action to be timely under the limitations period of both New York and the jurisdiction where the cause of action accrued.” (emphasis added) (citation and quotation marks omitted)); see also Soward v. Deutsche Bank AG, 814 F. Supp. 2d 272, 278 (S.D.N.Y. 2011) (requiring that tolling provisions be considered). 22 Response, D.E. 107 at 15-16 (recognizing that this civil action was filed long after the expiration of any of the listed statutes of limitation, but arguing that “tolling principles apply in this scenario”). 23 See Brief, D.E. 105 at 15 & n.34. 24 See Brief, D.E. 105 at 15-16; see also id. at 16 n.35. Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 10 of 17 04745316.17 6 argue that under the continuous accrual rule, if a defendant makes a series of breaches of contract, then each breach occurring during the limitations period is actionable.25 Barton has not met his burden that continuous accrual saves his time-barred claims because he cites no supporting Colorado law.26 Miller has not met his burden because, under New York and California law, the continuous accrual rule does not apply to damages incurred during the limitations period as a result of some wrongdoing that occurred outside the limitations period.27 Miller cites only music royalties cases, where defendants were obligated to make recurring royalty payments over a period of years and failed to pay what was required.28 Here, Plaintiffs made premium payments based on one discrete act-MetLife set the “smoker rates . . . as the default” in 2000.29 Thus, Plaintiffs have not proven that continuous accrual applies. The continuing violation doctrine does not save Plaintiffs’ time-barred claims. As to Barton, Colorado has limited the continuing violation doctrine to discrimination cases.30 Plaintiffs cite only a Title VII case,31 which supports only that Colorado applied that doctrine to 25 Response, D.E. 107 at 16 (citing Gilkyson v. Disney Enters., Inc., 198 Cal. Rptr. 3d 611, 614-15 (Cal. Ct. App. 2016)). 26Plaintiffs cite only Magna Associates v. Torgrove, 585 F. Supp. 585, 589 (D. Colo. 1984), which discusses continuous accrual based on non-Colorado authorities, cites no Colorado law, and rejects the doctrine in that case. See D.E. 107 at 16. 27 Cupersmith v. Piaker & Lyons P.C., No. 3:14-cv-01303, 2016 WL 5394712, at *12 (N.D.N.Y. Sept. 27, 2016); In re LIBOR-Based Fin. Instruments Antitrust Litig., No. 11 MDL 2262, 2015 WL 6243526, at *137 (S.D.N.Y. Oct. 20, 2015); Vaca v. Wachovia Mortg. Corp., 129 Cal. Rptr. 3d 354, 359-60 (Cal. Ct. App. 2011); Aryeh v. Canon Bus. Sols., Inc., 292 P.3d 871, 882 (Cal. 2013). Assuming arguendo that continuous accrual applies to Miller’s time- barred claims under both New York and California law, only claims as to payments made within the shorter of the two states’ applicable statute of limitations period would be actionable. See Aryeh, 292 P.3d at 880. 28 Plaintiffs cite Jobim v. Songs of Universal, Inc., 732 F. Supp. 2d 407, 422 (S.D.N.Y. 2010); Faulkner v. Arista Records LLC, 602 F. Supp. 2d 470, 478 (S.D.N.Y. 2009); and Gilkyson, 198 Cal. Rptr. 3d at 614. See D.E. 107 at 16. 29 SAC, D.E. 97 at ¶ 24; see also id. at ¶¶ 35, 36; D.E. 97-3. 30 Brief, D.E. 105 at 16 & n.37 (citing Polk v. Hergert Land & Cattle Co., 5 P.3d 402, 405 (Colo. App. 2000)). 31 Response, D.E. 107 at 16-17 (citing Patel v. Thomas, 793 P.2d 632 (Colo. App. 1990)). Patel was overruled by Gallagher Board of Trustees for the University of Northern Colorado, 54 P.3d 386, 393 (Colo. 2002) (en banc), abrogated on other grounds by Martinez v. Estate of Bleck, 379 P.3d 315, 322 (Colo. 2016). Gallagher held that “the judicially-constructed continuing violation doctrine cannot be used to remedy an untimely filing under the CGIA.” Id. at 393. It explained that it did “not find the reasoning of Patel convincing” and overruled it “to the extent it [wa]s inconsistent with [Gallagher’s] holding.” Id. Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 11 of 17 04745316.17 7 discrimination cases.32 Barton has not met his burden of establishing that the continuing violation doctrine applies in this non-discrimination case, and thus his claims are time-barred. As to Miller, the doctrine does not apply under New York and California law where the claim accrues as the result of a discrete act occurring outside the limitations period, even if that act causes subsequent injuries during the limitations period.33 Plaintiffs claim a discrete act: MetLife set “the smoker rates . . . as the default” when they purchased their GVUL policies in 2000.34 Plaintiffs claim that MetLife “recalculat[ed] their life premiums at smoker rates,”35 but this was not a new breach because the smoker category designation remained the same since 2000. Plaintiffs’ cited case law does not support applying the continuing violation doctrine here,36 and Plaintiffs have not met their burden. III. Even if timely, Plaintiffs’ breach of contract claim (Count I) does not cure its prior deficiencies and should be dismissed. Plaintiffs argue that MetLife breached the policy’s provision stating: “Metlife may use any reasonable method to compute Premiums due under the policy.”37 Plaintiffs do not mention the R&R’s statement that “as MetLife points out, its alleged decision to designate [Plaintiffs] as smokers in the absence of any indication otherwise may be rational.”38 Nor do Plaintiffs address 32 See e.g., Clementson v. Countrywide Fin. Corp., No. 10-cv-01956, 2011 WL 1884715, at *10 (D. Colo. Jan. 27, 2011) (“Colorado law limits the application of the ‘continuing violation’ doctrine to employment discrimination cases.” (citing Polk, 5 P.3d at 405)). 33 Brief, D.E. 105 at 16-17, 16 nn.38-39. 34 SAC, D.E. 97 at ¶ 24; see also id. at ¶ 35 (Metlife “assum[ed] insureds’ smoker status by default at time of enrollment.”); id. at ¶ 36 (alleging MetLife continues to “enforce” “on a recurring monthly basis” a high smoker rate premium); D.E. 97-3. The monthly premiums are thus the “enforcement” of Metlife’s 2000 act of setting the “default rate” as the smoker rate. See Pike v. N.Y. Life Ins. Co., 901 N.Y.S.2d 76, 81 (N.Y. App. Div. 2010) (continuously paying insurance premiums based on a wrong occurring at the time of purchase of the policy did not trigger the continuous wrong doctrine for statute of limitations purposes). 35 Response, D.E. 107 at 2. 36 Plaintiffs cite 1050 Tenants Corp. v. Lapidus, 735 N.Y.S.2d 47 (N.Y. App. Div. 2001), but that case involved a lessee’s ongoing failure to repair the same air conditioning unit, not damages occurring over time from a discrete failure in the past. See D.E. 107 at 17. Plaintiffs also cite Salazar v. Thomas,186 Cal. Rptr. 3d 689 (Cal. Ct. App. 2015), but that case mentions only in passing the continuing violation doctrine and does not apply it. See D.E. at 16. 37 Response, D.E. 107 at 17. 38 R&R, D.E. 86 at 16. Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 12 of 17 04745316.17 8 the R&R’s statement that Plaintiffs have not identified any contractual provision that “MetLife had an explicit contractual duty not to ‘default them to smoker status.’”39 Plaintiffs claim that they have raised “factual questions” as to whether the default to smoker status was reasonable.40 The facts, however, are undisputed: Plaintiffs did not tell MetLife that they were nonsmokers. This was a fact uniquely within Plaintiffs’ knowledge; only Plaintiffs could provide that information to MetLife. MetLife defaulted Plaintiffs to the smoker rate as a result of their silence, a decision quite “rational.” Plaintiffs simply have not identified any breach of contract. IV. Even if timely, Plaintiffs’ Implied Covenant claims (Count II) should be dismissed. This Court cannot address the merits of Plaintiffs’ Implied Covenant claims.41 Judge Torres adopted the R&R’s unchallenged ruling that Plaintiffs can pursue such claims only in tort.42 And Plaintiffs waived “further judicial review” by failing to object. Smith v. Campbell, 782 F.3d 93, 102 (2d Cir. 2015) (citation and quotation marks omitted). Although Smith addressed only waiver of appellate review, a failure to object has consequences beyond appeal. Indeed, it led Judge Torres to review that R&R ruling for clear error.43 Plaintiffs cannot reset this process by amending their complaint.44 On the merits, Plaintiffs’ attempts to distinguish California law fail.45 Plaintiffs contend that their implied-covenant claims can be superfluous only if they “maintain[]” their breach-of- 39 R&R, D.E. 86 at 16 (alteration adopted) (emphasis added) (quoting FAC, D.E. 73 at ¶ 51). 40 Response, D.E. 107 at 17 n.5. 41 See Brief, D.E. 105 at 18-19. 42 Plaintiffs contend that “the R&R did not say California and Colorado law only provide such a cause of action sounding in tort.” Response, D.E. 107 at 18. But the R&R ruled that, “under both Colorado and California law,” this implied covenant gave “rise to a cause of action sounding in tort, not contract, when dealing with an insurance contract.” R&R, D.E. 86 at 17 (emphasis added). It then recommended that Plaintiffs be allowed to pursue a breach of that implied covenant. R&R, D.E. 86 at 18. Plaintiffs requested “leave to amend as stated [in the R&R]” and failed to request leave to bring an additional implied-covenant claim in contract. Plaintiffs’ Objections, D.E. 91 at 9. 43 Order, D.E. 94 at 8, 13 n.8; but cf. id. at 12. 44 Cf. Thomas v. Arn, 474 U.S. 140, 147 (1985) (discussing the “sound considerations of judicial economy” behind the appellate waiver rule). 45 Brief, D.E. 105 at 19-21. Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 13 of 17 04745316.17 9 contract claim.46 But Plaintiffs cite a case where an implied-covenant claim was dismissed as “superfluous” of breach-of-contract claims that were dismissed without prejudice.47 Similarly, their argument that only tortious claims require a “conscious or deliberate act” lacks support.48 Nasseri, which they cite, explained that requirement when it evaluated a contractual claim.49 V. Even if timely, Plaintiffs’ Bad Faith claims (Count III) should be dismissed. Plaintiffs fail to state Bad Faith claims.50 Plaintiffs argue that they have “raise[d] factual questions” as to whether MetLife acted reasonably.51 That argument fails for the same reason as their breach-of-contract claim.52 VI. Even if timely, Plaintiffs’ negligence claims (Count IV) should be dismissed. Plaintiffs fail to address MetLife’s argument that Plaintiffs’ negligence claim is beyond the scope of the permitted amendment allowed by the R&R and Order.53 Plaintiffs also fail to address the cases that hold that Plaintiffs’ negligence claim against their insurer, MetLife, should be dismissed under California and Colorado law.54 Plaintiffs do not question that California’s economic loss rule normally bars negligence claims for economic damages, but erroneously argue that Miller’s negligence claim satisfied a “special relationship” exception.55 Any “special relationship” exception does not apply here. It is limited to instances where the plaintiff lacks 46 Response, D.E. 107 at 19 (emphasis deleted). 47 Response, D.E. 107 at 19; see also Integrated Storage Consulting Servs., Inc. v. NetApp, Inc., No. 5:12-CV- 06209, 2013 WL 3974537, at *8 (N.D. Cal. July 31, 2013). 48 Response, D.E. 107 at 19. 49 Nasseri v. Wells Fargo Bank, N.A., 147 F. Supp. 3d 937, 942-43 (N.D. Cal. 2015). 50 See Brief, D.E. 105 at 20. 51 Response, D.E. 107 at 20. 52 See Section III, supra. 53 Brief, D.E. 105 at 23-24. 54 Brief, D.E. 105 at 23 & n.52. Plaintiffs cite the inapposite Slack v. Farmers Insurance Exchange, 5 P.3d 280 (Colo. 2000). See D.E. 107 at 21. In Slack, the insurance company did not appeal the plaintiff’s jury verdict on multiple tort claims, including negligence, and instead appealed only as to the trial court’s refusal to apportion damages awarded to one of the plaintiffs. Slack, 5 P.3d at 283. The Colorado Supreme Court focused on a Colorado statute addressing pro-rata distribution of civil liability among multiple tortfeasors, rather than holding that a policyholder could sue her car insurance company for negligence in scheduling an appointment with a chiropractor who assaulted her. Id. at 282-88. 55 Response, D.E. 107 at 21-22; see also Brief, D.E. 105 at 23-24 & n.53. Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 14 of 17 04745316.17 10 privity of contract with the defendant and thus has no breach of contract claim.56 VII. Plaintiffs’ Rule 23(b)(1)/Rule 23(b)(2) class action allegations should be dismissed. Plaintiffs fail to address MetLife’s arguments that the Rule 23(b)(1) and 23(b)(2) allegations are fatally flawed because Plaintiffs seek individualized monetary damages and “individualized monetary claims belong in Rule 23(b)(3).”57 They argue that the “SAC contains seventy-four paragraphs worth of allegations,”58 but fail to identify any facts that satisfy Rule 23(b)(1) and 23(b)(2)-the focus of MetLife’s argument.59 Plaintiffs’ Rule 23(b)(1) and 23(b)(2) allegations are “[t]hreadbare recitals . . . supported by mere conclusory statements”60 so this Court is “‘not bound to accept as true a legal conclusion couched as a factual allegation.’”61 CONCLUSION This Court should grant MetLife’s Motion to Dismiss and dismiss Plaintiffs’ claims. Respectfully submitted, /s/ Lee E. Bains, Jr. Lee E. Bains, Jr. 56 See Body Jewelz, Inc. v. Valley Forge Ins. Co., 241 F. Supp. 3d 1084, 1092 (C.D. Cal. 2017); Elsayed v. Maserati N. Am., Inc., 215 F. Supp. 3d 949, 963 (C.D. Cal. 2016). Plaintiffs cite J’Aire Corp. v. Gregory, 598 P.2d 60 (Cal. 1979), which, as recognized by the Body Jewelz and Elsayed courts, involved a third party who did not have a breach of contract claim against the defendant. In J’Aire, there was no insured-insurer relationship. Plaintiffs also cite two California cases that did not hold that: (a) a policyholder could pursue a negligence claim for economic damages against its insurer; or (b) the economic loss rule was inapplicable in the insured-insurer context. Response, D.E. 107 at 21-22 (citing Vu v. Prudential Prop. & Cas. Ins. Co., 33 P.3d 487 (Cal. 2001) (addressing statute of limitations issues in connection with homeowners’ insurance claim for earthquake damage); Neff v. N.Y. Life Ins. Co., 180 P.2d 900 (Cal. 1947) (affirming judgment for insurer based on statute of limitations)). 57 Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 362 (2011); Brief, D.E. 105, at 24-25; R&R, D.E. 86 at 22. 58 Response, D.E. 107 at 22. Plaintiffs acknowledge that they “must plead more than a simple reiteration of the Rule 23 requirements in conclusory allegations and should allege facts demonstrating all the requirements for bringing a class action are fulfilled.” Response, D.E. 107 at 22; see also Brief, D.E. 105 at 24-25. Plaintiffs’ SAC fails to satisfy that standard. 59 R&R, D.E. 86 at 22 (“Thus, to the extent the pilots seek any additional relief under Rule 23(b)(1) or Rule 23(b)(2), their second amended complaint should include the relevant facts that would indicate why that would be appropriate.”). 60 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 61 Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)); Brief, D.E. 105 at 5 & n.9, 24-25. Plaintiffs argue that “[a] court should construe the pleadings liberally at the motion to dismiss stage, making all reasonable inferences in favor of the plaintiffs,” Response, D.E. 107 at 22, but Plaintiffs’ allegations fail to satisfy the controlling Twombly/Iqbal pleading standard. Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 15 of 17 04745316.17 11 Edward Morris Holt MAYNARD, COOPER & GALE, P.C. 1901 Sixth Avenue North 2400 Regions | Harbert Plaza Birmingham, AL 35203 Telephone: 205.254.1000 Facsimile: 205.254.1999 Email: lbains@maynardcooper.com Email: tholt@maynardcooper.com John M. Hintz MAYNARD, COOPER & GALE, P.C. The Fred F. French Building 551 Fifth Avenue - Suite 2000 New York, NY 10176 Telephone: 646.609.9284 Facsimile: 646.609.9281 Email: jhintz@maynardcooper.com Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 16 of 17 04745316.17 12 CERTIFICATE OF SERVICE I hereby certify that on this 22nd day of March 2019, I caused a true and correct copy of the foregoing to be served by email on the following counsel for Plaintiffs: Michael Louis Kelly, Esq. Behram V. Parakh Joshua A. Fields KIRTLAND & PACKARD LLP 2041 Roscrans Avenue - 3rd Floor El Segundo, CA 90245 Phone: (310)-536-1002 Fax: (310)-536-1001 Email: mlk@kirtlandpackard.com Email: bvp@kirtlandpackard.com Email: jf@kirtlandpackard.com Hunter Shkolnik, Esq. Salvatore Charles Badala NAPOLI SHKOLNIK PLLC 360 Lexington Avenue - 11th Floor New York, NY 10017 Phone: (212) 397-1000 Fax: (646) 843-7603 Email: hunter@napolilaw.com Email: sbadala@napolilaw.com /s/ Edward M. Holt Edward M. Holt Case 1:17-cv-07284-AT-SN Document 109 Filed 03/22/19 Page 17 of 17