[00:00:01] Speaker 01:
Good morning, Council.

[00:00:02] Speaker 01:
Good morning, Your Honor.

[00:00:05] Speaker 00:
Good morning, and may it please the Court.

[00:00:08] Speaker 00:
I'm Linda Koberley.

[00:00:09] Speaker 00:
I'm speaking for Lincoln Benefit Life.

[00:00:11] Speaker 00:
And if it's okay with the Court, I'd like to reserve seven minutes for rebuttal, please.

[00:00:16] Speaker 01:
All right, Council, please be reminded that the time shown on the clock is your total time remaining.

[00:00:21] Speaker 01:
Got it.

[00:00:22] Speaker 00:
Thank you.

[00:00:23] Speaker 00:
So, small controls here as well.

[00:00:26] Speaker 00:
Unlike the Sino case, this is a class certification appeal, just like Small was.

[00:00:32] Speaker 00:
And under Small, while we may lose on commonality, we win on typicality, adequacy, and the limits of 23B2.

[00:00:43] Speaker 00:
Now, the panel asked the parties in our case to brief the impact of Small, and we did that.

[00:00:49] Speaker 00:
Our supplemental brief shows that there is no material difference between this case

[00:00:54] Speaker 00:
and small in terms of the Rule 23A or B2 analysis.

[00:01:00] Speaker 00:
The plaintiff's brief, on the other hand, takes the position that small is just wrong.

[00:01:05] Speaker 00:
In effect, she's asking this panel to ignore or overrule a decision of another, and that's not proper.

[00:01:16] Speaker 04:
But your adversary also made the following argument, and I wondered what you thought about this.

[00:01:24] Speaker 04:
Here, the small was influenced.

[00:01:31] Speaker 04:
uh, as the court there repeatedly said by the fact that many people will choose to have their policies lapse voluntarily because they can't pay or they want to take a new policy or with another company or whatever reason.

[00:01:48] Speaker 04:
And therefore the causation question is not an automatic and varies tremendously and so forth.

[00:01:54] Speaker 04:
But here says your adversary,

[00:01:58] Speaker 04:
And I'm quoting from their supplemental brief.

[00:02:06] Speaker 04:
The court expressly limited class relief to a letter giving class members the option to reinstate their policy, obviating concerns about members who do not want their policies, close quote.

[00:02:23] Speaker 04:
What about that?

[00:02:24] Speaker 00:
So it's just not true, Your Honor.

[00:02:27] Speaker 00:
Neither Ms.

[00:02:28] Speaker 00:
Farley nor the court limited the relief in that respect.

[00:02:32] Speaker 00:
Ms.

[00:02:32] Speaker 00:
Farley sought relief saying that the policies remained in force and should be treated as in force.

[00:02:38] Speaker 00:
That's exactly the same relief that was at issue in small.

[00:02:42] Speaker 00:
And if you look at the class certification order, you can see that the district court understood that that was precisely the relief that was being sought on page 15 of the certification order.

[00:02:54] Speaker 00:
The district court explained that the relief sought and the relief that was the basis for a B2 class was that the policies should be treated as in force and that the defendants would be ordered to reinstate.

[00:03:08] Speaker 00:
That's forced reinstatement.

[00:03:10] Speaker 00:
That's exactly the same as in small.

[00:03:12] Speaker 00:
It's effectively specific performance, and it's a contract remedy.

[00:03:17] Speaker 00:
So there is no difference between small and Farley in that respect.

[00:03:21] Speaker 00:
And what they've said, the way they said they limited the relief just isn't true.

[00:03:25] Speaker 00:
But also, requiring the defendants to give an option to reinstate wouldn't obviate the problem anyway, which is their argument in the supplemental brief.

[00:03:36] Speaker 00:
For an intentional laxer,

[00:03:38] Speaker 00:
which Your Honor raised a moment ago, the question isn't whether they want the policy now.

[00:03:45] Speaker 00:
The question is whether they made a choice back then to end their insurance contracts, and they exercised that choice by stopping their premium payments so that they would get the benefit of the 60-day grace period.

[00:04:01] Speaker 00:
If they did that, there is no resulting harm to those intentional lapsers.

[00:04:06] Speaker 00:
And that's what California law requires for a contract remedy, like the remedy sought here.

[00:04:12] Speaker 00:
So even if the remedy in this case was an option to reinstate, it still wouldn't be appropriate for an intentional lapser.

[00:04:21] Speaker 00:
And in any event, this whole concept of an option to reinstate is not appropriate as a basis for a B2 class, because the whole point of B2 is there's no update.

[00:04:35] Speaker 00:
A B2 class must be based on the concept of final relief that is appropriate respecting the class as a whole.

[00:04:45] Speaker 00:
You can't dodge the appropriateness requirement by just saying that if a particular class member doesn't want the relief, they can opt out.

[00:04:53] Speaker 00:
That's fundamentally inconsistent with the kind of class-wide relief that's contemplated under B2.

[00:05:01] Speaker 00:
Also, I'll note that this very same argument was made in small.

[00:05:05] Speaker 00:
Mr. Seminoe, in his oral argument, made precisely this argument in small, and it did not sway the court.

[00:05:12] Speaker 00:
There's only one other basis that this supplemental brief offers for distinguishing this case from small.

[00:05:20] Speaker 00:
It's on, you may recall that the first nine pages of the brief are about small being wrong.

[00:05:26] Speaker 00:
The last page is about distinguishing small.

[00:05:28] Speaker 00:
And the other potential ground for distinguishing is the supplemental brief says there is no adequacy problem here because the court only certified a class of policyholders.

[00:05:41] Speaker 00:
That's not true either.

[00:05:42] Speaker 03:
Council, let me ask you this.

[00:05:44] Speaker 03:
Small obviously is huge in this.

[00:05:46] Speaker 03:
It's interesting when small is big, but in this case it is.

[00:05:50] Speaker 03:
But I would like to ask you, putting aside for a moment, putting small aside, there are obviously four elements to this class certification.

[00:06:01] Speaker 03:
All of them are not governed by small.

[00:06:05] Speaker 03:
What's your position about the remaining aspects of the class?

[00:06:09] Speaker 03:
The district court seemed to find they were all satisfied

[00:06:13] Speaker 03:
What's your argument about the portions of commonality, numerosity, and so on that are required but are not satisfied here from your perspective, putting small aside?

[00:06:25] Speaker 00:
So numerosity is not disputed.

[00:06:28] Speaker 03:
Mm-hmm.

[00:06:28] Speaker 00:
OK.

[00:06:29] Speaker 00:
Commonality, if we're bound by small, then I have to get, which I think we are, then I have to concede that we lose on commonality.

[00:06:37] Speaker 00:
OK.

[00:06:37] Speaker 00:
Because the small court,

[00:06:39] Speaker 00:
held that commonality was satisfied.

[00:06:43] Speaker 00:
So that leaves a couple of other issues, arguments that we made that are additional grounds for reversing the classification order that were not addressed by small.

[00:06:53] Speaker 00:
One of them is, and I'll raise three of them.

[00:06:57] Speaker 00:
First of all, there's the issue of replacement coverage.

[00:07:01] Speaker 00:
What about someone who got replacement coverage like Ms.

[00:07:05] Speaker 00:
Sino did in the first case that you heard?

[00:07:08] Speaker 00:
If someone like her has a claim, it's for damages.

[00:07:13] Speaker 00:
It's not for reinstatement.

[00:07:16] Speaker 00:
And that, the present.

[00:07:19] Speaker 04:
What do you say to the argument that was made in the prior case when I raised that kind of issue that, well, you might want double coverage?

[00:07:29] Speaker 00:
Well, you might factually, but if you didn't want to, that's a factual question, whether you wanted double coverage or not.

[00:07:38] Speaker 00:
Ms.

[00:07:39] Speaker 00:
Sino didn't want double coverage, apparently.

[00:07:42] Speaker 00:
And if someone failed to, you know, this is all a

[00:07:48] Speaker 00:
If you allow a policy to lapse, and that's a way to cancel the policy, and you go on to get replacement coverage, you represent to the next insurer that your first coverage has ended.

[00:08:03] Speaker 00:
And so one very good indication of whether someone wanted duplicative coverage would be whether they made such a representation.

[00:08:14] Speaker 00:
there would be an issue, for example, think about the beneficiaries.

[00:08:18] Speaker 00:
You might have their beneficiaries in this class, as I was going to say a moment ago.

[00:08:22] Speaker 00:
It's just not true that this class is limited to policyholders.

[00:08:25] Speaker 00:
This B2 class also specifically includes beneficiaries of policyholders who are no longer with us.

[00:08:31] Speaker 00:
Well, how are we going to reinstate those policies when the policyholder has died?

[00:08:38] Speaker 00:
We have no idea whether the policyholder would want the beneficiary to be the same today as the one they originally designated.

[00:08:46] Speaker 00:
We will have a hard time

[00:08:48] Speaker 00:
deciphering whether the policyholder who stopped paying did so as a way to intentionally terminate the policy.

[00:08:56] Speaker 00:
And if the beneficiary receives a payout on that policy, it's just a win-win situation.

[00:09:02] Speaker 00:
That would not be an appropriate remedy.

[00:09:06] Speaker 00:
So this issue about replacement coverage is important for a couple of reasons.

[00:09:12] Speaker 00:
First of all, it gets in the way of B2, a single kind of relief under B2 being final and appropriate for everyone.

[00:09:19] Speaker 00:
It's also an adequacy problem, and it's a typicality problem.

[00:09:23] Speaker 00:
And those are issues that Small did not address, additional issues that Small did not need to reach because it found the class to be uncertifiable for other reasons.

[00:09:32] Speaker 00:
There's another issue, and that is there are three different, or three or four more, different kinds of notice violations that are alleged in these cases for our client, or for, sorry, I'm sorry, for my client and the particular plaintiff who is the lead plaintiff in our case.

[00:09:51] Speaker 00:
The only notice violation she complains of is that she didn't receive an annual notice reminding her that she could designate a third party to receive a notice.

[00:10:00] Speaker 00:
When it comes to the statutory arguments, that person, a person in her position is in the weakest possible position.

[00:10:08] Speaker 00:
There's a state law issue to be resolved there at some point, doesn't need to be resolved for purposes of this appeal, but her argument is a little bit different than the rest of the class members.

[00:10:18] Speaker 00:
That too is an adequacy and typicality problem.

[00:10:21] Speaker 00:
And then finally, and we briefed this at length, there's the issue of the inclusion of

[00:10:28] Speaker 00:
incidental monetary damages, or what the plaintiff describes as incidental monetary damages in his B2 class.

[00:10:35] Speaker 00:
The class includes beneficiaries who aren't entitled to notice as a reinstatement.

[00:10:41] Speaker 00:
What they're entitled to, or they're conceivably entitled to, would be the payment of death benefits as damages.

[00:10:47] Speaker 00:
The district court here said that was just incidental because they're a small portion of the class.

[00:10:53] Speaker 03:
But that's not really an answer.

[00:10:57] Speaker 03:
calving on this.

[00:10:58] Speaker 03:
Was there any discussion in the record as to how much money are we talking about potentially in these so-called incidental damages?

[00:11:08] Speaker 03:
Any idea?

[00:11:10] Speaker 03:
Tens of millions of dollars.

[00:11:11] Speaker 03:
Tens of millions.

[00:11:12] Speaker 03:
So we're lots and lots and lots of money.

[00:11:14] Speaker 00:
Lots and lots and lots of money.

[00:11:16] Speaker 00:
And that's just not the right analysis.

[00:11:18] Speaker 00:
And in Dukes, the Supreme Court rejected what was called a predominance analysis for whether damages were incidental to relief under B2.

[00:11:29] Speaker 00:
And the court said, that's not the right way to look at it.

[00:11:32] Speaker 00:
We don't look at whether it's a lot or a little.

[00:11:34] Speaker 00:
We look at whether the nature of the monetary relief

[00:11:39] Speaker 00:
is something that just flows from the declaratory relief, or is it really something else entirely?

[00:11:45] Speaker 00:
And here it's something else entirely.

[00:11:47] Speaker 00:
And so deciding that it only impacts a small portion of the class doesn't enable you to keep the class in place.

[00:11:54] Speaker 03:
I assume that these incidental damages would play an enormous role in the amount of attorney fees that would be granted

[00:12:01] Speaker 03:
for the class to be successful, right?

[00:12:04] Speaker 00:
I think that is a fair assumption.

[00:12:06] Speaker 03:
I know it's a shock, I just say it.

[00:12:11] Speaker 04:
The point you're making about incidental damages, that was in Dukes, the one

[00:12:21] Speaker 04:
respect in which the court was unanimous, if I recall correctly, even though they were hotly divided over commonality.

[00:12:30] Speaker 04:
They were not divided over that at all.

[00:12:32] Speaker 00:
Yes, yes.

[00:12:33] Speaker 00:
And a B2 class is supposed to be all the same.

[00:12:37] Speaker 00:
That's the point.

[00:12:38] Speaker 00:
And we actually care a lot about

[00:12:43] Speaker 00:
the unanimity of a B2 class because of the due process concerns.

[00:12:48] Speaker 00:
I mean, if you certify a B2 class and the class member loses, that can have issue preclusion effect on a future case that they might bring.

[00:12:58] Speaker 00:
The Dukes talked about that.

[00:13:00] Speaker 00:
It's a very important consideration.

[00:13:01] Speaker 00:
So we can't just gloss over

[00:13:03] Speaker 00:
the disparities or differences among the class members and say, oh, it's a B2 class.

[00:13:09] Speaker 00:
We don't care about that.

[00:13:10] Speaker 00:
We actually care a lot about that.

[00:13:12] Speaker 00:
And that's why B2 looks so intently at the relief and whether there really is relief that could be granted across the entire class that would be final and appropriate.

[00:13:24] Speaker 00:
And here, the relief that was sought does not meet that criteria.

[00:13:29] Speaker 00:
I'd like to say one quick word about the certification issue that came up in the first

[00:13:34] Speaker 00:
argument.

[00:13:36] Speaker 00:
The plaintiff here says the court should grant certifications to Esponti because there's no proper request by the plaintiff pending.

[00:13:44] Speaker 00:
That's just not appropriate here for a whole range of reasons, including because resolving the state law question that they want certified wouldn't determine the outcome of this federal Rule 23 appeal.

[00:13:56] Speaker 00:
The small court had no trouble resolving the one state law question

[00:14:02] Speaker 00:
that matters to Rule 23 analysis, which is whether a plaintiff who is seeking relief that is fundamentally contract relief has to prove the elements of a breach of contract.

[00:14:14] Speaker 00:
That's not a hard question.

[00:14:16] Speaker 00:
and the small court had no trouble concluding that the California Supreme Court would say, yes, you have to prove the elements of a breach of contract.

[00:14:24] Speaker 00:
The question that Ms.

[00:14:25] Speaker 00:
Farley wants the court to certify is whether it ensures failure to comply with the statutes means the policy doesn't lapse.

[00:14:35] Speaker 00:
But no matter how that

[00:14:36] Speaker 00:
question of state law comes out, you would still have a problem with the B2 class here because the relief is still not final appropriate relief for the class that includes both intentional and inadvertent lapsers.

[00:14:51] Speaker 00:
You would still have an adequacy problem

[00:14:53] Speaker 00:
with the policy holder trying to represent beneficiaries who have different interests.

[00:14:58] Speaker 00:
You would still have a typicality problem given the presence of intentional lapses in the class.

[00:15:03] Speaker 00:
And you would still have the other problems we've already talked about that the small court didn't even need to reach.

[00:15:09] Speaker 03:
So that gets back to the question I raised earlier, which is putting small aside, I gather your position is there are still so many issues with the B2 certification that the case could be decided without even getting

[00:15:23] Speaker 03:
to the causation issue.

[00:15:24] Speaker 03:
Is that correct?

[00:15:25] Speaker 00:
Absolutely, Your Honor.

[00:15:29] Speaker 00:
And if there are no further questions right now, I'll save the rest of my time.

[00:15:33] Speaker 01:
All right.

[00:15:33] Speaker 01:
Thank you, counsel.

[00:15:37] Speaker 02:
Thank you, Your Honors.

[00:15:38] Speaker 02:
Good morning again.

[00:15:39] Speaker 02:
Ben Cimino, once again, on behalf of the plaintiff.

[00:15:42] Speaker 02:
I want to dive in on, I think, what I regard as the most important question, which is whether or not to certify this to the California Supreme Court.

[00:15:51] Speaker 02:
Judge Rakoff, you mentioned what we're calling the Q3, the Court of Appeal decision.

[00:15:58] Speaker 02:
I don't know why anyone would regard that as clairvoyant on this question.

[00:16:01] Speaker 02:
Number one, the court itself said that they are not addressing this.

[00:16:09] Speaker 04:
The small court, of course, could have certified it to the California court.

[00:16:13] Speaker 04:
They felt that it was not appropriate or not necessary, really.

[00:16:18] Speaker 04:
They felt

[00:16:19] Speaker 04:
rightly or wrongly that they knew where the California court would come out and so they determined it.

[00:16:28] Speaker 04:
Why isn't that just as binding on us as every other aspect of small?

[00:16:35] Speaker 02:
Well, I think that the ability to certify questions is different than following a panel opinion if it's binding, because otherwise, effectively, that would create a system in which federal courts could create a super starry decisis on state law that even state courts couldn't deal with.

[00:16:56] Speaker 03:
I mean, if I were- Why is that, counsel?

[00:17:01] Speaker 03:
Even if we just take what Judge Rakoff said,

[00:17:05] Speaker 03:
We have small determination that there was no certification necessary.

[00:17:09] Speaker 03:
You seem to be saying that if a separate case came along through the California appellate courts went to the California Supreme Court and the California Supreme Court ultimately disagreed.

[00:17:19] Speaker 03:
on that issue that somehow they couldn't do that because of the small case?

[00:17:24] Speaker 03:
Is that what you're saying?

[00:17:25] Speaker 02:
I'm not saying that at all.

[00:17:26] Speaker 02:
I'm just staying with the reality that these cases often get, if not exclusively, get shuffled into federal court because you've got out of state insurers and in state plaintiffs.

[00:17:37] Speaker 02:
And so, these cases are inevitably diversity cases.

[00:17:41] Speaker 02:
They come before you.

[00:17:42] Speaker 02:
And if you're just going to, you know, use small, like a cinder block and jump into the ocean with it around your ankle, it's going to essentially freeze... Wow, that's quite a description.

[00:17:51] Speaker 02:
Do you represent any mafia?

[00:17:56] Speaker 02:
I don't.

[00:17:57] Speaker 02:
I don't.

[00:18:00] Speaker 02:
If we're not only gonna treat small as binding even when the ink hasn't yet dried and yet also go one step further and say, now it also ties our hands and we can never ask the California Supreme Court what it thinks, even if we have doubts about small, then because these cases find their way into federal courts almost invariably, it's a sort of a superstar-y decisis.

[00:18:18] Speaker 01:
And I just think- But counsel, the California court doesn't need us to ask if they are under the impression that we have totally

[00:18:28] Speaker 01:
deviated from their authority.

[00:18:31] Speaker 01:
At any time, the California Supreme Court can take a case that resolves this issue defensively.

[00:18:38] Speaker 01:
They don't have to wait for us to certify to them.

[00:18:41] Speaker 02:
Right, Your Honor, but they would need a case to come through the state system, and my point is that these cases don't do that.

[00:18:47] Speaker 02:
They tend, almost exclusively, if not exclusively, to be removed to federal court.

[00:18:53] Speaker 01:
Well, there's a body of law in the California courts that was cited

[00:19:00] Speaker 02:
I mean, you're right.

[00:19:02] Speaker 02:
Back then, there was.

[00:19:03] Speaker 02:
I think that those cases probably all predate CAFA.

[00:19:08] Speaker 02:
So that's a big issue.

[00:19:10] Speaker 02:
But those cases, actually, I'm glad you brought them up because I think there's a lot of reason to doubt McHugh III on its face.

[00:19:17] Speaker 02:
I mean, number one, it was issued by the same Court of Appeal that got the

[00:19:21] Speaker 02:
It's also an unpublished opinion.

[00:19:26] Speaker 02:
And again, it disavowed any intent to address this issue.

[00:19:29] Speaker 02:
And on this issue, it both giveth and taketh away.

[00:19:33] Speaker 02:
I mean, my friends on the other side celebrate the fact that it affirmed the trial court's decision not to give the instruction that was proposed by the plaintiff.

[00:19:42] Speaker 02:
which is exactly our theory here.

[00:19:44] Speaker 02:
But that wasn't because the court thought it was wrong.

[00:19:47] Speaker 02:
It thought it was just duplicative.

[00:19:48] Speaker 02:
It just thought that, hey, we're already going to read the text of the statutes to the jury.

[00:19:53] Speaker 02:
We don't need to then essentially say the same thing in different words with this special instruction.

[00:19:58] Speaker 02:
I mean, how is that anything but an endorsement of our theory, not the defense?

[00:20:04] Speaker 02:
But to the point that you just mentioned, Your Honor, about these other intermediate court of appeal cases that go back, I think, 80 years or so.

[00:20:12] Speaker 02:
Those cases, I mean, you know, if you want to put McHugh 3 on one side of the scales and those cases on the other, I think it's quite obvious that those cases just completely outweigh McHugh 3.

[00:20:23] Speaker 02:
And, you know, I think in the last argument and in small and even in McHugh 3, there's this sort of like, you know, weak attempt to distinguish those cases because they're home and auto cases.

[00:20:33] Speaker 02:
But that's wrong for a couple of reasons.

[00:20:36] Speaker 02:
Number one,

[00:20:37] Speaker 02:
As a policy matter, I'm not sure why we're drawing distinctions between home and auto policies versus life insurance.

[00:20:44] Speaker 02:
McHugh, too, the Cal Supreme Court's opinion is very, very clear that the long-term nature of life insurance requires at least as much, if not more, anti-lapse protection.

[00:20:53] Speaker 03:
Counsel, you obviously are an expert in insurance law, for which I congratulate you.

[00:20:58] Speaker 03:
I'm sure it's an interesting area.

[00:21:00] Speaker 03:
But the reality is that under our law,

[00:21:06] Speaker 03:
except as provided in Miller v. Gammie, which allows us to overrule or overlook the binding precedent.

[00:21:16] Speaker 03:
Unless you're able to overturn small, the fact that our court did not certify the case to the California Supreme Court, it doesn't matter whether they were right or wrong, we're bound by it.

[00:21:30] Speaker 03:
We're just flat out bound by it.

[00:21:32] Speaker 03:
And even though you disagree, and I understand your reasoning for that, the fact is we can't change that.

[00:21:38] Speaker 03:
We're a three judge panel.

[00:21:40] Speaker 03:
We're bound by the previous public opinion, post opinion.

[00:21:43] Speaker 03:
If you can overturn small, then that changes the ballgame.

[00:21:46] Speaker 03:
But until you do, we're bound by it, are we not?

[00:21:50] Speaker 02:
I think not certainly as to the question of certifying questions to the California Supreme Court.

[00:21:56] Speaker 02:
I'm aware of no authority that would suggest that, I mean, you know, if 10 years passes, are we really stuck with small or can we say- Are you aware of an authority to the contrary that says that we can?

[00:22:10] Speaker 03:
That you can certify- If we have an opinion where we've construed in this case California law,

[00:22:17] Speaker 03:
to mean a certain thing.

[00:22:18] Speaker 03:
It was not certified at the California Supreme Court.

[00:22:21] Speaker 03:
Are you aware of an opinion that says, in your example, 10 years down the road, that we can sue a spotty, certify a question at the California Supreme Court that has already been decided by our court?

[00:22:32] Speaker 03:
Where's that case?

[00:22:34] Speaker 02:
I think so.

[00:22:35] Speaker 02:
I think the, and I may mispronounce it, but the Troster case that we cited on page nine of our supplemental brief stands for that premise.

[00:22:43] Speaker 02:
But it doesn't involve those facts, though, does it?

[00:22:45] Speaker 02:
Well, I don't know about the 10-year gap.

[00:22:48] Speaker 02:
I sort of made that up.

[00:22:49] Speaker 02:
Let me put that aside.

[00:22:50] Speaker 03:
Did you tell us that that case involved one of our panels certifying the question to a state Supreme Court that had already been decided by one of our courts in a published opinion?

[00:23:04] Speaker 02:
Correct.

[00:23:04] Speaker 03:
I believe- What the claim in that case says?

[00:23:06] Speaker 02:
That's how I read that case, Your Honor.

[00:23:08] Speaker 02:
On page 513 of that decision, there was both an unpublished and a published decision on the issue.

[00:23:13] Speaker 02:
And the court said, well, we're going to still certify it.

[00:23:16] Speaker 04:
And I don't- You're talking about poster versus Starbucks?

[00:23:21] Speaker 04:
Is that what you're talking about?

[00:23:22] Speaker 02:
Correct, Your Honor.

[00:23:24] Speaker 04:
So there, if I recall correctly,

[00:23:33] Speaker 04:
The court said, the Ninth Circuit said, quote, a panel of the circuit in an unpublished disposition predicted that the California Supreme Court would decide the doctrine is applicable to such claims.

[00:23:54] Speaker 04:
That, of course, brings up the familiar point that unpublished decisions are not precedential.

[00:24:02] Speaker 04:
whereas small clearly is a published opinion and is presidential.

[00:24:06] Speaker 02:
Right.

[00:24:07] Speaker 02:
Your Honor, and if you keep reading in that portion after it references that unpublished opinion, it mentions at least one published opinion that also addressed the issue.

[00:24:15] Speaker 02:
And it did not stop that panel from certifying the question.

[00:24:22] Speaker 02:
And I'm not sure why we would

[00:24:24] Speaker 02:
Certainly, I'm not aware of any case that says the opposite, that, you know, thou shall not certify if there is a binding published opinion from the circuit.

[00:24:35] Speaker 01:
Well, counsel, when we certify, we are representing to the California Supreme Court that there is some uncertainty about the issue.

[00:24:45] Speaker 01:
And if we have binding precedent, can we certify that there is uncertainty in there of jurisprudence?

[00:24:54] Speaker 02:
I think so.

[00:24:56] Speaker 02:
I mean, I think that you certainly can certify that there's uncertainty among the state courts.

[00:25:02] Speaker 02:
I mean, maybe there's not uncertainty in the federal, but there's uncertainty in the state courts.

[00:25:08] Speaker 02:
And I mean, again, like this is, I understand small exists, but you know, small just makes that uncertainty all the more obvious because now you have two decisions by this conflict directly.

[00:25:21] Speaker 04:
Isn't this more an argument for your

[00:25:25] Speaker 04:
petition for rehearing and bunk.

[00:25:31] Speaker 04:
Rather than asking one panel to in effect deviate, as my colleagues and I seem to agree, from the binding force of another panel, an earlier panel, you always have the remedy of asking the court as a whole.

[00:25:50] Speaker 04:
to take a different view.

[00:25:53] Speaker 04:
And maybe we should hold off deciding this matter until your petition for rehearing embank is resolved.

[00:26:03] Speaker 04:
But I don't see that we're the forum where that argument has any force.

[00:26:09] Speaker 02:
Well, sure.

[00:26:11] Speaker 02:
Yes, of course, a lot of what I'm saying here overlaps with our position on the petition for rehearing and bonk.

[00:26:16] Speaker 02:
But, you know, I mean, these cases were queued up.

[00:26:19] Speaker 02:
They were assigned to different panels, it appears.

[00:26:23] Speaker 02:
And, you know, I assume that was

[00:26:25] Speaker 02:
for a reason.

[00:26:26] Speaker 02:
I mean, I don't know why otherwise the court perhaps should have just consolidated all these cases or coordinated them in front of a single panel if we were just going to say, you know, whoever got there first is going to decide the fate for the rest.

[00:26:38] Speaker 01:
But that's what we do.

[00:26:39] Speaker 01:
Whichever panel has precedent is the senior panel for purposes of deciding the case.

[00:26:47] Speaker 01:
And the other cases, unless the facts are somewhat different, then are bound by that.

[00:26:53] Speaker 01:
So that's how we usually proceed.

[00:26:55] Speaker 01:
There's nothing special about this case that we proceeded in this way.

[00:27:00] Speaker 01:
We do that as a matter of practice.

[00:27:02] Speaker 01:
But let me ask you this.

[00:27:03] Speaker 01:
So you're arguing very sternly for us to certify.

[00:27:07] Speaker 01:
Is that a concession on your part that if we treat small as precedent, you lose?

[00:27:15] Speaker 02:
Um, look, I'll be very, very straightforward with you on that.

[00:27:19] Speaker 02:
I mean, we made that position in our motion to certify in Moriarty and our adjoinder in this case that we think this issue controls.

[00:27:27] Speaker 02:
And when I say this issue, I want to come back to that because I think there was some misdirection by my friend on that.

[00:27:32] Speaker 02:
But yes, I think that small probably is going to back to that cinder block that I mentioned with a couple of caveats and we set them out.

[00:27:39] Speaker 02:
at the end of our supplemental brief, which is we do expressly want to limit the class relief in this case to something that goes out to the class members that says, you know, good news, this policy is reinstatable.

[00:27:55] Speaker 02:
I think my friend said, you know, that's just a fiction.

[00:27:58] Speaker 02:
We made that up.

[00:27:59] Speaker 02:
Not so.

[00:28:00] Speaker 02:
I'm looking at page 48 of the excerpts of record, and it's the transcript from the hearing where we made expressly clear that this is all we want.

[00:28:09] Speaker 02:
and specifically so that nobody who doesn't want a policy has to pay a dime in premium for a policy they don't want.

[00:28:16] Speaker 02:
So that was absolutely what we were seeking when we were seeking class cert, and that's exactly how we framed it.

[00:28:22] Speaker 02:
So I think that is significant because that really does take this what I'm going to call a manufactured issue of these people who wanted to cancel their policies or didn't want their policy anymore.

[00:28:34] Speaker 02:
That completely absolves that.

[00:28:36] Speaker 02:
Also, another thing that may distinguish the court's treatment of this case from small is that this issue of intentional cancellations or intentional lapses has largely been ameliorated by their own evidence.

[00:28:51] Speaker 02:
It was their own deponent, their person most knowledgeable who said,

[00:28:56] Speaker 02:
You know, we do track and record these people who want to terminate their policies and we do have that data and those people are not part of this class.

[00:29:03] Speaker 02:
So there's an evidentiary issue here that is significant relative to small.

[00:29:11] Speaker 02:
But I do want to jump back to this issue that I touched on a moment ago about what the issue that we think needs to be certified is.

[00:29:19] Speaker 02:
We've been pigeonholed into this breach of contract frame.

[00:29:22] Speaker 02:
Do the statutes, I think the argument is, do the statutes do away with the ordinary rules of breach of contract claims?

[00:29:31] Speaker 02:
That is not the issue that we're trying to clarify.

[00:29:33] Speaker 02:
That's the issue that they're, that's the straw man they're putting up.

[00:29:37] Speaker 02:
The question is, do the statutes keep the policies in force when the insurers violate the notice provisions?

[00:29:46] Speaker 02:
If the answer is yes, it completely and radically changes the landscape.

[00:29:50] Speaker 02:
If the answer is no, then we're certainly probably in the world where they want us to be, which is

[00:29:55] Speaker 02:
We have to prove causation, but for the failure to give us the notice, we wouldn't have missed our premium, et cetera.

[00:30:02] Speaker 02:
But that's not how the statutes are.

[00:30:03] Speaker 02:
I mean, they could not have been drafted any more clearly.

[00:30:06] Speaker 02:
And so when you understand that the policy remains in force, it changes the breach of contract analysis, because we're not here to say you breached by not doing the notice.

[00:30:17] Speaker 02:
It's you breached by canceling the policy.

[00:30:20] Speaker 03:
Councilman, with respect, obviously, your case however you wish, but

[00:30:25] Speaker 03:
At least from my part, I think I know your position well about the certification issue and I get your position about deck relief versus breach of contract claim.

[00:30:38] Speaker 03:
Would you address the other elements of a B2 claim?

[00:30:43] Speaker 03:
Your opposing counsel talked about those and argues with some strength that besides the issue of causation,

[00:30:53] Speaker 03:
that you've got a problem with typicality, et cetera.

[00:30:57] Speaker 03:
Would you address those, please?

[00:30:59] Speaker 02:
Sure, Your Honor.

[00:31:00] Speaker 02:
So on the typicality, I mean, I very much disagree with Small's characterization and my friend's characterization that because we, well, let me take a step back even before I attack that.

[00:31:11] Speaker 02:
Number one, I mean, we are a policy owner.

[00:31:15] Speaker 02:
I think it's, and I have the numbers that,

[00:31:18] Speaker 02:
Of this class, we've got 33,000 approximately policies at issue.

[00:31:24] Speaker 02:
Of those, approximately 32,700 are living insurance.

[00:31:28] Speaker 02:
There's only 400 that are with deceased insurance.

[00:31:31] Speaker 02:
So the beneficiary subclass, call it what you will, is really a small piece of this.

[00:31:37] Speaker 02:
We are one of the 32,700.

[00:31:40] Speaker 02:
as a policy holder, my client is.

[00:31:43] Speaker 02:
And so I think if we're really going to have trouble with this other 400 as somehow spoiling the adequacy and typicality analyses, then we can hive those off as a separate subclass.

[00:31:56] Speaker 02:
We can get a representative for that subclass if we need to.

[00:32:00] Speaker 02:
I don't think that that's a reason to flush this whole enterprise on adequacy.

[00:32:05] Speaker 03:
Do you agree with your opposing counsel that tens of millions of dollars are involved in the, in quotes, incidental damages claims?

[00:32:14] Speaker 02:
I think that's probably, I don't know if it's tens of millions.

[00:32:19] Speaker 02:
I honestly don't know what the number is.

[00:32:21] Speaker 02:
It involves millions in some level, right?

[00:32:25] Speaker 02:
Sure, it's a lot of money, but the thing that's left out of that is that this $32,700, that's a lot of money too.

[00:32:36] Speaker 02:
I don't know how many times $400 goes into $32,700, but it's a lot.

[00:32:41] Speaker 02:
If we're going to do a relative analysis on what's the predominant here and what's the ancillary, again,

[00:32:48] Speaker 02:
I don't do math, but 32,700 is a lot more than 400.

[00:32:52] Speaker 02:
So on that piece, I think that's probably a sufficient answer.

[00:32:56] Speaker 02:
But I do want to get back to this adequacy and typicality thing.

[00:33:00] Speaker 02:
I don't know why we're getting so wrapped around the axle that, well, gee, if you're just a policy owner with a living insurance and you're here to say you

[00:33:09] Speaker 02:
didn't do these notices, therefore the policies are back in force, why that somehow makes you not a proper person to represent a subclass of a small number of beneficiaries who are entitled to money as a derivative of that conclusion.

[00:33:24] Speaker 02:
It's sort of like, I mean, I get it if you're, the analogy may be if you're taking someone home from work, dropping them off at their house, if their house is the exit past yours,

[00:33:37] Speaker 02:
then maybe you wouldn't be a good fit to take them home.

[00:33:41] Speaker 02:
But if their exit is the one before yours, I don't see why that wouldn't be a sufficient person to take you home.

[00:33:49] Speaker 02:
And the point is that everybody has to go through this first threshold step.

[00:33:53] Speaker 02:
Both subclasses have to go through the first

[00:33:55] Speaker 02:
threshold step of, did they terminate a policy that they were not allowed to terminate?

[00:34:00] Speaker 02:
So everybody has to pass that exit.

[00:34:02] Speaker 02:
And that's just, I mean, it's sort of a lesser included finding in order to get where we need to go on the beneficiary.

[00:34:09] Speaker 04:
So I don't- So I'm not sure how you square that.

[00:34:13] Speaker 04:
argument with Dukes.

[00:34:15] Speaker 04:
In Dukes, the plaintiff was arguing, we're saying that women should have been promoted to higher positions.

[00:34:25] Speaker 04:
And by the way, it would follow from that, that if they were, they would be entitled to more money, but that's just incidental.

[00:34:32] Speaker 04:
And the Supreme Court totally unanimously rejected that argument and said, no, it's really a disguised B3 class.

[00:34:41] Speaker 02:
Yeah.

[00:34:41] Speaker 02:
So the reason why is because the finding that you were discriminated against really doesn't do anything for you unless it translated into some sort of monetary relief.

[00:34:49] Speaker 02:
But we're talking about insurance coverage.

[00:34:51] Speaker 02:
So the idea that you have your coverage restored does do something for you.

[00:34:55] Speaker 02:
It is significant in and of itself.

[00:34:57] Speaker 02:
It doesn't have to have something beyond that to give it meaning to the people that want it.

[00:35:03] Speaker 02:
And I do want to, your question, your honor, did raise one thing I want to make sure I touched on.

[00:35:08] Speaker 02:
This too is from the small opinion and my friend mentioned it that like, you know, what we're trying to do is antithetical to B2 because B2 is not an opt anything.

[00:35:16] Speaker 02:
And I want to be very clear.

[00:35:18] Speaker 02:
The opt piece is sort of becoming a distraction because it's ameliorating their concern about unintentional people who want to intentionally lapse their policies.

[00:35:30] Speaker 02:
But the relief we are seeking is a declaration that goes out, shout it from the rooftops.

[00:35:34] Speaker 02:
you know drop leaflets from a plane that your policy was wrongfully terminated they did not have the right to terminate your policy and so if it's something you want go get it you have options you have remedies you have recourse go to court do whatever it is that you do but you have a policy that they illegally terminated that's all we're seeking with b2 and that is uniform and goes to everyone and doesn't require opt-ins or opt-outs or opt anything so um

[00:36:00] Speaker 02:
That's an issue that I think is really a molehill that's been made into a mountain.

[00:36:07] Speaker 02:
I guess I see that I'm past my time, but I do want to, again, stress that this court, if it has any doubts whatsoever about small, and I feel like I'm sensing that there might be a little bit, that this court does not pass up the opportunity to certify this question to the California Supreme Court, so we can get an enduring answer to this very important question.

[00:36:28] Speaker 01:
Thank you, counsel.

[00:36:32] Speaker 00:
Thank you, Your Honor.

[00:36:33] Speaker 00:
The small case stands for the proposition that under California law, as it exists today, there's no certification necessary.

[00:36:42] Speaker 00:
The question is not hard.

[00:36:45] Speaker 00:
A plaintiff seeking a contract remedy has to prevail amidst a breach of contract period.

[00:36:50] Speaker 00:
If something changes in California law, if, for example, the California Supreme Court came out with a new decision or a different body of California law,

[00:37:00] Speaker 00:
emerged, then of course a plaintiff could come back to this court and say, now there's a question to be certified.

[00:37:08] Speaker 00:
But until that happens, there is no basis for certification because small is binding.

[00:37:15] Speaker 00:
We talked earlier about why small is binding.

[00:37:18] Speaker 00:
I'm going to refer the court to general order 4.1a that makes the small panel the lead panel on common issues.

[00:37:27] Speaker 00:
And also to two cases, I believe counsel said earlier that Carver is the closest on the binding nature of small.

[00:37:36] Speaker 00:
I'd like to refer the Court to U.S.

[00:37:38] Speaker 00:
v. Eckford, 77, F, 4th, at 1233.

[00:37:45] Speaker 00:
That holds that a panel opinion is binding on subsequent panels unless and until overruled by an in-bank decision.

[00:37:53] Speaker 00:
And that's true even before the mandate issues.

[00:37:56] Speaker 00:
And for that, I'll refer the Court to in-razor Menno Gomez, 868, F, 3rd, at 1052.

[00:38:06] Speaker 00:
beyond that, Your Honor, Council still hasn't explained how resolving the certified question, the question that they seek to certify, which is about whether a policy can lapse after a violation of notice provisions, they still haven't explained how that would solve

[00:38:26] Speaker 00:
the basic Rule 23 problems, you would still have the problem with the B2 relief.

[00:38:32] Speaker 00:
Council just said, well, it would at least be a threshold step, but that's exactly what B2 prohibits.

[00:38:40] Speaker 00:
B2 requires that the relief be final, not a threshold step.

[00:38:45] Speaker 00:
You would still have an adequacy problem with the policyholder trying to represent beneficiaries with different interests.

[00:38:52] Speaker 00:
Council said, well, that shouldn't be a big deal.

[00:38:55] Speaker 00:
But that's exactly what Small held.

[00:38:57] Speaker 00:
And once again, Small's decision on that issue, too, is binding on this panel.

[00:39:03] Speaker 00:
You still have a typicality problem.

[00:39:05] Speaker 00:
given the presence of intentional lapsers in the class.

[00:39:08] Speaker 00:
And you would still have the other problems that I mentioned here that small didn't need to reach and that council didn't address.

[00:39:17] Speaker 00:
And that includes the district court's willingness to certify a B2 class that includes claims for money damages.

[00:39:25] Speaker 00:
There was a

[00:39:27] Speaker 00:
I heard again that council was really just seeking a declaration of an option to reinstate, and that totally solves the problem of intentional lapsers.

[00:39:37] Speaker 00:
But I haven't heard any response to the basic problem that the question for intentional lapsers isn't whether they want the policy now.

[00:39:46] Speaker 00:
It's whether they gave it up on purpose by stopping payment because California law requires a showing of resulting harm.

[00:39:56] Speaker 00:
Council is conflating two different kinds of causation, causation of the lapse and causation of harm.

[00:40:04] Speaker 00:
It's the latter causation of harm that was the basis for the small decision.

[00:40:10] Speaker 00:
And that's what makes the problem of intentional lapsers fatal to this class.

[00:40:16] Speaker 00:
LBL does not trap or have the ability to easily identify

[00:40:22] Speaker 00:
intentional lapsers.

[00:40:24] Speaker 00:
We put in an expert report on this.

[00:40:26] Speaker 00:
Yes, there are certain people who voluntarily surrender their universal life policies and cash them out.

[00:40:32] Speaker 00:
They're not in the class at all.

[00:40:34] Speaker 00:
I agree with that.

[00:40:35] Speaker 00:
There are also people who call up and say, hey, I really don't want this policy anymore.

[00:40:39] Speaker 00:
What do I do?

[00:40:40] Speaker 00:
And LBL would say, you know what you should do?

[00:40:43] Speaker 00:
Just stop paying the premiums because then you get 60 days of free coverage.

[00:40:48] Speaker 00:
under the grace provision.

[00:40:49] Speaker 00:
And that's what they did.

[00:40:51] Speaker 00:
But then there are other people who never called.

[00:40:53] Speaker 00:
There are other people for whom all we have is some circumstantial evidence, maybe, of why they stopped paying.

[00:41:00] Speaker 00:
Otherwise, it requires actually talking to these people.

[00:41:03] Speaker 00:
That's what our experts said.

[00:41:04] Speaker 00:
That's what the record said.

[00:41:06] Speaker 00:
And that's one of many reasons why this order needs to be reversed, Your Honor.

[00:41:11] Speaker 01:
All right.

[00:41:11] Speaker 01:
Thank you, Council.

[00:41:12] Speaker 01:
Thank you to both counsel.

[00:41:14] Speaker 01:
The case just argued is submitted for decision by the court that completes our calendar for the morning.

[00:41:19] Speaker 01:
We are in recess until 930 a.m.

[00:41:22] Speaker 01:
tomorrow morning.

[00:41:24] Speaker 01:
This court for this session stands adjourned.