Oo wornANn nan a ff WO NO

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Jonathan A. Shapiro (257199)

WILMER CUTLER PICKERING HALE AND DORR LLP

950 Page Mill Road

Palo Alto, California 93304

Tel: (650) 858-6101

Fax: (650) 858-6100
jonathan.shapiro @ wilmerhale.com

Andrea J. Robinson (pro hac vice)
Timothy J. Perla (pro hac vice)

WILMER CUTLER PICKERING HALE AND DORR LLP

60 State Street

Boston, Massachusetts 02109
Tel: (617) 526-6000

Fax: (617) 526-5000
andrea.robinson @ wilmerhale.com
timothy.perla@ wilmerhale.com

Attorneys for Defendant Life Insurance
Company of the Southwest

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

SOUTHERN DIVISION

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

Plaintiffs,
VS.
LIFE INSURANCE COMPANY OF THE
SOUTHWEST, a Texas corporation, and
DOES 1-50

Defendant.

Case No.: CV 10-9198-JVS(RNBx)

DEFENDANT LIFE INSURANCE
COMPANY OF THE SOUTHWEST'S
MEMORANDUM IN OPPOSITION TO
PLAINTIFFS’ MOTION FOR
APPROVAL OF CLASS NOTICE

Judge: Hon. James V. Selna
Date: April 8, 2013
Time: 1:50 P.M.

Courtroom: 10C

DEFENDANT LIFE INSURANCE COMPANY OF THE SOUTHWEST’S MEMORANDUM IN OPPOSITION TO
MOTION FOR APPROVAL OF CLASS NOTICE, 10-09198-JVS(RNBx)

Oo wnan nun ff WO NO

NO wo PO WN NO NHN HN ND KN HH HF KF PF Fr Pr OF OR Ph oe
oN DWN rN BP WO NY KF TO UO WAN Dna FW NY KF CO

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TABLE OF CONTENTS
I. ENERO DUC TIN aoc sscaseesontinaeesacarustaasiarebtanneasuagnnieain eee en 1
MAN IT este n ae ceece cee ee seven scan sev cesesaastecees cate tec cans atieatensay teen een taeovexeee seen sane 2
A. — The Court Should Revise Plaintiffs’ Proposed Notice To Render
Te Neitital aiid) ACCURale .0scccascncvnscntstancansxnsatensecacodsdieunndeswadeeeceemnvatennces 2
1. Plaintiffs’ Proposed Notice Contains Redundant and
ATO UMenAliVe: COMME ic. sacesccxvspscaeaeceadecenseteeisaacedpacesnbacawecneubeness 3
2. Plaintiffs’ Proposed Notice Contains Inaccuracies..............:e8 7
ae Plaintiffs’ Proposed Notice Contains Improper Allusions to
Peaai Cie TS CMC seers caceeryneereeg asses speat amar nem onneem ees 11
4. Plaintiffs’ Proposed Notice Should Not Suggest That the
Court is Encouraging Class Members to Sue LSW.................. 12
3. Plaintiffs’ Proposed Notice Should Include Basic
Information About LSW and Its Counsel... ee eeeeeeeeeeeee 13
B. — Sending the Notice is Premature Because the Special Master
Must First Ascertain the Subclass ..cccccssscsoasesssssesseavanacceoveavenaceossseanas. 15
fe © © Gs (Gh. 6 | eee ten ere een re nee an one ene arene er 16

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TABLE OF AUTHORITIES
Page(s)

FEDERAL CASES
Adoma v. Univ. of Phoenix, Inc.,

2010 WL 4054109 (E.D. Cal. Oct. 15, 2010) oo cccccseseseseeseseesesseeeseseeseseeeenees 3,4
Advance Drywall Co. v. U.S. Gypsum Co.,

SOS. 2) 12 5 Oe ai 77) isso ta eavcatusncten tonareatesnaneiaiiae watson eornaeeneet 3
Craft v. Ray’s LLC,

2008 WL 5458947 (S.D. Ind. Dec. 31, 2008)... csecesesesesssseseseetssseeessseseetessses 7
Garcia v. Elite Labor Serv., Ltd.,

1996 WIL 333500122 (ND, AM, Peaby Vs: P99) acccsssiseccatsizvveesheds cectevessedbaeinesteterveatasioecsta 12
Greenstreak Group, Inc. v. P.N.A. Constr. Techs., Inc.,

2008 WL 5504708 (E.D. Mo. Apr. 10, 2008)... ceccccecsesssseseeeseseeseseeteesneeseeneteanenes 4
Hampton Hardware, Inc. v. Cotter & Co.,

156 FR.D. O50) OND, Ve, 1994 ) iss sesccicscasnstasbianats ans aiasnendtanamennumbasnemeats 13
Hoffmann-La Roche Inc. v. Sperling,

NS Wy WON ABD) acatikscccctcata cident andes aouiiuntsacetibed seo daw doses ioen Bandi stotiasstnddGin tien 3:5, 12
In re Potash Antitrust Litig.,

LOL. FF R.D 41 (De Minit, 1999S) isasceccoteisasieiaiandsnanintiiaun i adasamintiveaeuean 8
In re Traffic Executive Ass’n Eastern R.R.,

ZF 2 a Py catia hse sage ccgesacesnsusvesiig ht ode irndan stdcanattindaedarseiveestansancoidaaveonle 3
Krzesniak v. Cendant Corp.,

2007 WL 4468678 (N.D. Cal. Dec. 17, 2007) ...ccccccccccssseseseseeesescseeseeeseesesteneneees 15
Mullane v. Central Hanover Bank & Trust Co.,

SO US BU (SY cotiecseietnsbotiaedoesehcansoe ideas nsassvenlehctsnlianondeteasoveinaddtsasvece ensaeceteaens 4
PHL Variable Ins. Co. v. Abrams,

2012 Wie IOG686 CS,Dy Call: Sane Bs DOT 2) iss casaacssadsdanscesiuaudercsnabaredonassgecaaactatadecsenrns 10

aie
DEFENDANT LIFE INSURANCE COMPANY OF THE SOUTHWEST’S MEMORANDUM IN OPPOSITION TO
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Roberts v. Heim,

130) F RD. 4G ND: Call 1988 ) scsscccsceacsoasascestcteresn Qicciaeeustinias aeieaatenaaviealens 3
Rodriguez v. West Publishing Corp.,

505-F.30: 94s Oth. 2009) ssspctssncnssnnanannarktepsomaidanniauenatianen 3
Schaefer v. Overland Exp. Family of Funds,

169 FR, 124 CS.) © al 1 99G) 05s scsishanastasianiiasieces shave esiendianamentianaaeeaseaaie 3
Smith v. Family Video Movie Club, Inc.,

2012 WIL1252708 (N.D.U, Apr. 1h, 2012) ics decescicassinacdesactrctdssiedte teiceaeieetesits 11, 12
RULES
PRM 2 sores have spas anh astonsuasasgesasoas toranasactactonegaenespebon ar haretanraneanannectaneat enews 1,2, 7, 10

CONSTITUTIONAL PROVISIONS

US. Const, First, Ati ccisciaccictdcieccia ceccccsacacecdecacoscadcesecbaedeesicddiacleddediacceedtaaesddeteeeidedehojacdvstaccuaies 13

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DEFENDANT LIFE INSURANCE COMPANY OF THE SOUTHWEST’S MEMORANDUM IN OPPOSITION TO

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Life Insurance Company of the Southwest (“LS W’’) respectfully submits this

Memorandum in Opposition to Plaintiffs’ Motion for Approval of Class Notice.

I. INTRODUCTION

The parties appear to agree that class members must receive “the best notice that is
practicable under the circumstances” (see Rule 23(c)), in order to afford them an
informed opportunity to decide whether to participate in this litigation. And LSW has
largely accepted Plaintiffs’ proposed form of class notice. However, that proposed
notice has several flaws that render it unbalanced and unclear. Thus, LSW has submitted
a revised proposed notice (Appendix A) and blackline (Appendix B, the “Blackline’”),
together with this memorandum. Broadly speaking, Plaintiffs’ proposed notice is flawed
as follows.

First, Plaintiffs’ proposed notice is neither neutral nor clear. Their notice
repeatedly uses inflammatory terminology — i.e., unnecessarily hyperbolic and
provocative — to refer to LSW’s alleged conduct in ways that imply judicial
endorsement of their claims. It also contains redundant, lengthy passages about
Plaintiffs’ allegations—those allegations do need to be described, but not repeatedly. In
response, LSW has proposed wording changes and simple reorganization to make the
notice shorter, less redundant, and easier to understand.

Second, Plaintiffs’ proposed notice is factually incorrect in a few key respects. It
misstates LSW’s role in illustration creation and the life insurance sales process, does not
correctly describe policy guarantees and conditions for lapse, and misstates the preclusive
effect of this litigation. LSW’s draft corrects these mistakes.

Third, Plaintiffs’ proposed notice contains repeated suggestions that “money and
benefits” will become available, and misstates what relief could ever be awarded.

Policyholders are entitled to understand what relief is at stake, but Plaintiffs have gone

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overboard — the class notice should not be a vehicle for gathering support for litigation
through repeated allusions to financial payouts. LSW’s draft notice balances these
references, and eliminates unnecessary ones.

Fourth, Plaintiffs’ proposed notice implies a judicial endorsement of litigation
against LSW, and does not include any reference to the identity of LSW’s counsel.
LSW’s version of the notice corrects these issues.

Finally, to the extent Plaintiffs request immediate distribution of the notice, their
request is premature because subclass membership has not been ascertained. This Court
has ordered that a special master must ascertain subclass membership. Until that occurs,
the parties and the Court cannot issue the best practicable form of notice, which would be
a notice that informs each recipient of his or her subclass status. In order to ensure that
the notice is not delayed, simultaneously herewith, LSW has filed a motion for
appointment of a special master. LSW’s proposed notice includes bracketed language for
use in cases where a recipient is in the subclass. That form of notice should go out
promptly after the special master has ascertained the subclass.

In short, the Court should approve a form of notice as revised by LSW, and order

that it be sent promptly after the special master ascertains subclass membership.

I. ARGUMENT

A. The Court Should Revise Plaintiffs’ Proposed Notice To Render It
Neutral and Accurate

Rule 23(c)(2)(B) states that the Court must direct to class members “the best notice
that is practicable under the circumstances.” The Rule calls for conciseness, as well as
“plain, easily understood language.” Consistent with this, the Supreme Court requires
that in “oversee[ing] the notice-giving process, courts must be scrupulous to respect

judicial neutrality,” and “must take care to avoid even the appearance of judicial

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endorsement of the merits of the action.” Hoffmann-La Roche Inc. v. Sperling, 493 U.S.
165, 174 (1989). To that end, any class notice must be “sufficiently balanced, accurate,
and informative” to “satisfy due process concerns.” Rodriguez v. West Publishing Corp.,
563 F.3d 948, 963 (9th Cir. 2009); see also In re Traffic Executive Ass’n Eastern R.R.,
627 F.2d 631, 634 (2d Cir. 1980) (class notice must be “scrupulously neutral’); Schaefer
v. Overland Exp. Family of Funds, 169 F.R.D. 124, 131 (S.D. Cal. 1996) (class notice
must be “neutral and objective in tone, and should neither promote nor discourage the
assertion of claims”); Advance Drywall Co. v. U.S. Gypsum Co., 565 F.2d 1123, 1124-25
(9th Cir. 1977) (class notice must present a “fair recital” of the issues). Where one or the
other party proposes an imbalanced or argumentative notice, courts routinely require “a
more balanced and detailed description of the action.” Roberts v. Heim, 130 F.R.D. 416,
422 (N.D. Cal. 1988); see also Adoma v. Univ. of Phoenix, Inc., 2010 WL 4054109, at
*2-3 (E.D. Cal. Oct. 15, 2010) (requiring plaintiffs to revise class notice language that is
“misleading, adversarial and argumentative”).

1. Plaintiffs’ Proposed Notice Contains Redundant and
Argumentative Content

a) Plaintiffs’ Proposed Notice Contains Argumentative
Labels Regarding LSW’s Policies

LSW proposes revisions to remove unnecessary and argumentative language and
labels; that is, adjectives that seem calculated to be provocative but add nothing more

informative. LSW’s draft:

' Plaintiffs cannot override this law by citing the Federal Judicial Center forms. FJC
models must be adapted for each case to create a balanced, accurate, and informative
notice. See Adoma, 2010 WL 4054109, at *2. Indeed, Plaintiffs have only selectively
followed the forms. For instance, the cited FJC model includes five lines summarizing
the claims. Plaintiffs’ proposed notice devotes many pages to describing their claims.

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e Replaces “high risk” of lapse with “risk” of lapse. Blackline at 5.
e Replaces “high risk that the Policy value will decrease substantially” with
“risk that the Policy value will decrease.” Id. at 7.
e Removes the statement that “the Policies are lapse-prone.” Id.
e Removes the assertion that “it is highly unlikely that the policyholder’ will
realize tax benefits. Id.
e Removes the assertion that policyholders must “keep paying LSW’s large
Policy fees until the death of the insured.” Jd.
e Replaces “substantial Policy fees” with “Policy fees.” Jd. at 5.
e Replaces “high fees” with “fees.” Id.
LSW’s proposal, in every instance, is more neutrally worded and accurate. Plaintiffs’
argumentative characterizations have no place in a class notice. Cf Greenstreak Group,
Inc. v. P.N.A. Constr. Techs., Inc., 2008 WL 5504708, at *1 (E.D. Mo. Apr. 10, 2008)
(rejecting “hyperbole such as the use of unnecessary adverbs and adjectives to describe
the positions and conduct of the parties”). The FJC model that Plaintiffs claim to have
followed eschews such language; so too should this notice.

Plaintiffs insist that LSW’s changes “minimize” their claims so as to seem “less
compelling” to class members (Plaintiffs’ Memorandum in Support of Motion for
Approval of Class Notice, Dkt. 404 (“Mem.’’) at 20) — but this misses the purpose of a
class notice. The class notice is not Plaintiffs’ chance to encourage participation in the
class, nor (to use Plaintiffs’ terminology) make a more “compelling” pitch to absent
litigants. It is meant to be a fair, even-handed notice “to apprise interested parties of the
pendency of the action and afford them an opportunity to present their objections.”
Mullane vy. Central Hanover Bank & Trust Co., 339 U.S. 306, 314-15 (1950). Similarly,

Plaintiffs are off-base in protesting that LSW is modifying the notice’s summary of

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“Plaintiffs’ contentions.” Mem. at 19 (emphasis in original). The notice is not meant to
reflect adversarial parties’ competing attempts to sway class members to the truth of their

“contentions.” The whole notice, not just parts of it, must be neutral.”

b) Plaintiffs’ Proposed Notice Contains Argumentative
Description of the Claims

LSW’s proposal replaces Plaintiffs’ argumentative and confusing labels for their
claims with more balanced descriptions. Blackline at 7, 9. In each instance, Plaintiffs
proposed that their labels be preceded by the phrase “This is called...,” as if the label
were of the Court’s own invention. Blackline at 7. This is untrue and creates the
“appearance of judicial endorsement of the merits of the action.” Hoffmann-La Roche,
493 U.S. at 174. Instead, LSW proposes that the description accurately reflect that it is
Plaintiffs who have developed these labels. Blackline at 7.

Next, Plaintiffs propose unbalanced labels for their claims that seem calculated
solely to create undue fear amongst LSW policyholders. Accordingly, LSW’s proposal:

e Replaces “Volatility Defect Claim” with “Volatility Claim.” /d. at 7, 9.

e Replaces “Tax Defect Claim” with “Tax Claim.” Id.

e Replaces “Non Disclosure of Fees and Lapse Accelerators Claim” with
“Undisclosed Fees Claim.” Id.

e Replaces “Failure to Disclose That Interest Is Credited Retrospectively

Claim” with “Minimum Guarantees Claim.” Id.

* Plaintiffs also incorrectly suggest that LSW favors opt outs. Mass opt-outs would just
raise the specter of future litigation. LSW’s only interest is in a fair and balanced notice,
so that any class preclusion cannot later be challenged on sufficiency of notice grounds.
Plaintiffs, on the other hand, have a financial incentive to minimize opt-outs (potentially
increasing any fee award), and thus not to craft a balanced notice.

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e Replaces “Illustrations Do Not Match Policy Re Eleventh Year Reduction in
Fees Claim” with “No Guaranteed Fee Reduction Claim.” /d.
Each of these labels are less argumentative and more balanced. They are also more
consistent with the requirement of “plain, easily understood language” — “‘Re Eleventh
Year Reduction in Fees” is not plain or comprehensible language.

Plaintiffs misleadingly suggest that these labels are “the Court’s terminology for
referring to the” claims. Mem. at 18. But the Court’s class certification ruling made
clear that its use of “Plaintiffs’ terminology” in that order did not “imply factual findings
or legal conclusions,” and were used “only for ease of discussion.” Order Granting in
Part and Denying in Part Plaintiffs’ Motion to Certify a Class, Dkt. 353 (“Class Cert.
Order’) at 4n. 7. The use of shorthand labels amongst the Court and counsel who are
well familiar with the contours and posture of this litigation does not mean that the same
terminology is appropriate for use with lay class members. In the class notice context,
such one-sided descriptions create the undue impression of endorsement and are at odds
with the requirement of scrupulous neutrality.

Plaintiffs’ final resort is speculation that there could be “confusion” if a
policyholder got the notice, went to the website, downloaded and read the Court’s class
certification order, and was unable to match these labels one-to-one with the labels used
by the Court. Mem. at 18. This risk is remote, and in any event, the similar descriptions

of the claims would certainly alleviate any confusion.”

* Plaintiffs suggest that LSW objects to including certain Court orders on any class
website. Mem. at 18. This is untrue. LSW merely believes that exhaustively listing the
contents of the website in a notice is unnecessary and confusing to class members who,
for example, have no idea what a motion for “judgment on the pleadings” 1s.

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c) Plaintiffs’ Proposed Notice Contains Lengthy and
Redundant Summaries of the Parties’ Positions

LSW’s proposal consolidates redundant language that Plaintiffs proposed in a
number of different locations into one section that describes what the lawsuit is about.
Blackline at 5-8. Plaintiffs’ proposal unnecessarily describes the contentions of the
parties once under the heading “What is this lawsuit about,” then provides another, longer
description under the headings “What does this lawsuit complain about” and “How does
LSW answer.” Declaration of Charles Freiberg, Dkt. 404-1 (“Freiberg Dec.”’) Ex. A at 4,
6-7. The result is an unnecessarily long and redundant notice that is at odds with the
requirement for a clear and concise notice. Fed. R. Civ. P. 23(c)(2)(B); see also Craft v.
Ray’s LLC, 2008 WL 5458947, at *1-2 (S.D. Ind. Dec. 31, 2008) (striking redundant
sections of proposed class notice). It is also at odds with the requirements that any class

notice present information in a neutral and balanced way.”
ae Plaintiffs’ Proposed Notice Contains Inaccuracies

a) Plaintiffs’ Proposed Notice Misstates LSW’s Role in
Issuing Policies

LSW’s proposal replaces the statement that policies are “marketed and sold by
LSW” with the statement that policies are “issued by LSW.” Blackline at 5. LSW’s
language is more accurate in describing LSW’s role and more readily understandable by
class members. Policyholders purchased their policies through, and interact with,
independent insurance agents, not LSW. There is a real risk that policyholders will be

confused into thinking that they did not purchase a policy “marketed and sold” by LSW

*LSW agrees that the class notice need not attach an Exclusion Request Form.

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when they had no contact with LSW. Instead, “issued” is the proper terminology for

LSW’s role in the transaction, and one that policyholders can easily understand.

b) Plaintiffs’ Proposed Notice Misstates the Definition of
Policy Lapse
LSW’s proposal strikes the statement that lapse “mean[s] run out of money and
terminate.” Blackline at 5. This is an inaccurate statement of the definition of policy
lapse, and the phrase “‘run out of money” creates a risk that current, in-force
policyholders may inaccurately believe that their policy is losing money. See In re
Potash Antitrust Litig., 161 F.R.D. 411, 412-13 (D. Minn. 1995) (notice with “neutral

content” is essential to avoid “unnecessary disadvantage” to defendants’ business).

c) Plaintiffs’ Proposed Notice Misstates LSW’s Role in
Creating Illustrations

LSW’s proposal replaces “the Policy Illustration documents prepared by LSW and
used by agents and brokers” with “certain illustrations used by agents and brokers.”
Blackline at 7. The reference in the notice to illustrations “prepared by LSW” is
inaccurate and likely to create confusion. Pre-application illustrations are almost always
created by the agent or broker, not LSW. Indeed, those illustrations state, explicitly, that
they are “Prepared” for the insured “By” his or her agent. So, for example, the cover

page of one of Ms. Walker’s illustrations states that it was:

Prepared on December 27, 2007 for
Joyce Ann Schmidtbauer LSO1566700-UDA 3HN
By Jeffrey Stemler

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Second Amended Complaint Ex. A at 1 (emphasis added).” The suggestion that
Plaintiffs’ claims are about illustrations “prepared by LSW” creates a substantial risk that
these policyholders could be confused into thinking that they do not share these claims
because their illustrations were prepared by their agent, not by LSW.

Plaintiffs’ contention that LSW “did, in fact, design and prepare the illustration
documents and software used by its agents” (Mem. at 19) is beside the point. LSW did
create the software that can generate pre-application illustrations, but by and large did no

create the illustrations. Plaintiffs’ wording is, therefore, inaccurate.

d) ‘Plaintiffs’ Proposed Notice Misstates the Guarantees
in LSW Policies

LSW’s proposal replaces “provides no such guarantees” with “guarantees that this
interest increase will happen retrospectively after a period of years.”” Blackline at 7.
Plaintiffs’ proposal implies that there is no guaranteed cash value accumulation under the
policies. Plaintiffs’ version is both incorrect (i.e., there is a guarantee) and unfair to LSW
(i.e., who would be subject to having policyholders misunderstand, en masse, that there

are no guarantees).°

e) Plaintiffs’ Proposed Notice Misstates the Relief That
May Become Available

LSW’s proposal modifies the statement that one form of relief sought by Plaintiffs

is “the option to undo (or ‘rescind’) the Policies and seek refunds of the premiums paid

> Mr. Stemler was one of the independent agents who sold Ms. Walker (nee
Schmidtbauer) her policy.

° Such misunderstanding would be particularly unfortunate because the “vast majority” o
policyholders’ policies are performing well above this guarantee. Declaration of
Stephanie Burmester, Dkt. 261 at {{[ 5-6.

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for the rescinded Policies.” Blackline at 8-9. Specifically, LSW seeks revisions to
indicate that rescission would rescind “insurance coverage under those Policies,” and that
refunds would be limited to “a portion of the premiums paid.” /d. Both additions are
accurate, clear and balanced.

Plaintiffs’ omission of these two details risks misleading class members, who must
decide (based, in part, on the class notice’s description of the relief being sought) whether
to remain in the class or opt out. These policyholders are entitled to know that the
rescission option they may receive is not cost-free — i.e., that “rescinding” a policy
would entail forfeiting the policy’s substantial death benefit protection that they
purchased for themselves — and that they would not be entitled to a complete refund of
premium payments. See Joint Stipulation on Plaintiffs’ Motion to Compel, Dkt. 120 at
77 (acknowledging that rescinding class members may not be able to get a refund of the
cost of death benefit protection they have had while the policy was in force); PHL
Variable Ins. Co. v. Abrams, 2012 WL 10686, at *6 (S.D. Cal. Jan. 3, 2012) (life insurer

may assert setoff to “retain premiums received in a rescission action’’).

f) Plaintiffs’ Proposed Notice Misstates the Preclusive
Effect of This Litigation

LSW’s proposal revises the description of the preclusive effect of a final judgment
in this action. Blackline at 2, 11. Plaintiffs take issue with LSW’s proposal, which
describes the preclusive effect as extending to “any omissions or misrepresentations in
connection with [a class member’s] Policy.” Mem. at 17. However, the Court has
already addressed this issue. In deciding that Plaintiffs’ proposed subclass satisfied the
ascertainability requirement in Rule 23, the Court held that:

A judgment resulting from the claims asserted by the class will necessarily

have ares judicata effect on the claims of the subclass. This is so because
claims asserted by both the class and the subclass are based on material

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omissions in connection with the purchase of the Policies. Thus, although
they differ as to whether they are based on a wholesale omission or a less-
than-full disclosure, both types of claims are premised on the same factual
predicate, and as such, would be barred from re-litigation.

Class Cert. Order at 34-35 (emphasis added). In fact, the Court explicitly rejected the
suggestion that res judicata is limited to claims presented in the action. /d. (citing Hesse
v. Sprint Corp., 598 F.3d 581, 590 (9th Cir. 2010) for the proposition that “the res
judicata effect of a class-action settlement and judgment” extends to “claims that not
presented in the class action’). Shouldn’t class members determining whether to exercise
their opt-out right have the right to know the scope of preclusion if they decide to stay in

the class? Plaintiffs’ proposal does not accomplish this.

3: Plaintiffs’ Proposed Notice Contains Improper Allusions to
Financial Benefit

a) Plaintiffs’ Proposed Notice Should Not Refer to
‘“‘Money or Benefits” in the Introduction

On Page 2 of the Introduction, LSW’s proposal replaces references to “money or
benefits” with “recovery (if any).” Blackline at 2. It is improper for a class notice to
promise or imply the likelihood of a monetary recovery, especially in the introduction.
See Smith vy. Family Video Movie Club, Inc., 2012 WL 1252708, at *1 (N.D. Ill. Apr. 11,
2012) (refusing to adopt proposed notice where “[t]he first page” in a proposed class
notice “emphasizes . . . the possibility of getting money or benefits” and therefore “fails
to make clear that the court is not endorsing either side in this action” and fails to notify
proposed class members “in a neutral manner’). Indeed, Plaintiffs’ proposed notice uses
the phrase “money or benefits” four times on Page 2 alone. Freiberg Dec. Ex. A at 2.
There is no need to refer to monetary recovery here, and in any event it is essential to

note the possibility that there may be no recovery of any kind.

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b) Plaintiffs’ Proposed Notice Should Not Imply That
Class Members Will Get Money After Trial

LSW’s proposal removes what was Plaintiffs’ Heading 21, entitled “Will I get
money after the trial?” Blackline at 16. A class notice should not promise or imply that
policyholders will be monetary relief at any stage. See Family Video Movie Club, 2012
WL 1252708, at *1; Garcia v. Elite Labor Serv., Ltd., 1996 WL 33500122, at *4 (N.D.
Ill. July 11, 1996) (modifying proposed class notice that “promises the potential
recipients too much” because it “states that they will receive money if the judge enters
final judgment in favor of the class’). Strikingly, after beginning with the question “will
I get money after the trial,” Plaintiffs’ proposed text nowhere explicitly answers the
question by informing class members that they may not get money after the trial. See
Blackline at 16.

This language is also unnecessary, as it describes a claims process that is
potentially years away and has no bearing on the information in the notice itself. Id.

There is no need to invite confusion or bias simply to convey irrelevant information.

4. Plaintiffs’ Proposed Notice Should Not Suggest That the
Court is Encouraging Class Members to Sue LSW

LSW’s proposal removes the suggestion that an absent class member “should talk
to [his or her] own lawyer soon, because [his or her] claims may be subject to a time limit
...” Blackline at 11. A class notice “must take care to avoid even the appearance of
judicial endorsement of the merits of the action.” Hoffmann-La Roche, 493 U.S. at 174.
Plaintiffs’ language risks confusion among class members, who may read it as a Court
instruction that they talk to their attorney because they have claims they should assert

swiftly. In any event, this language is unnecessary, as most (maybe all) class members

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who opt out for the purpose of “start[ing] or continu[ing] [his or her] own lawsuit against
LSW” (Blackline at 11) are presumably already in contact with their attorney.’
>. Plaintiffs’ Proposed Notice Should Include Basic
Information About LSW and Its Counsel

Plaintiffs’ Motion also addresses two additions in LSW’s proposal, that present
information about the company, which they claim present “serious ethical concerns.”
Mem. at 23-25. That is nonsense.

First, LSW’s proposal adds language informing policyholders that if they “have
any questions about [their] insurance policy other than about this Notice or this Class
Action, [they] should contact LSW or your insurance agent as usual,” and provides
publicly-available contact information for LSW customer service. Appendix A at 1, 12.
This simply recognizes the fact that many class members have in-force policies with
LSW, and may have routine reasons to contact LSW for information about their policies.
LSW has a First Amendment right to such “business communications” with its
customers. Hampton Hardware, Inc. v. Cotter & Co., 156 F.R.D. 630, 634 (N.D. Tex.
1994).

Plaintiffs’ discussion of this addition in their memorandum is surprising, because
Plaintiffs have already agreed to include this language and this exact language is
reflected in Plaintiffs’ proposed class notice. Accordingly, there should be no dispute

and this language should be included in any notice that goes out.

’ To the extent that the Court feels notice should address the pending Maraldo litigation,
LSW’s proposed notice reflects a simple, straight-forward statement about other pending
putative class actions. Blackline at 11. Plaintiffs’ proposed addition is three paragraph
long and improperly implies that policyholders should prefer participation in this class
over Maraldo. Mem. at 22-23. No Maraldo language is better than Plaintiffs’ language.

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Instead of discussing the content of the notice, Plaintiffs instead request that the
Court issue an order prohibiting LSW from communicating with its policyholders about
“this lawsuit, or any issues directly related thereto.” Mem. at 24-25. LSW has no
intention of communicating with class members about this lawsuit. But Plaintiffs’
wording is broad and amorphous, and simply an invitation to future disputes. What
constitutes an “issue directly related to” this lawsuit — if a policyholder calls LSW and
asks how guarantees are calculated on her policy, would LSW be entitled to answer that
question? LSW is willing to engage with Plaintiffs on reaching a mutually agreeable and
fully workable order.* But the Court should deny Plaintiffs’ ambiguous motion and enter
an agreed-upon order when properly presented by joint stipulation.

Second, Plaintiffs take issue with the inclusion of basic information about LSW’s
counsel in the class notice. LSW’s proposal simply reflects attorney names, a law firm,
an address, and a website — it does not include any contact information, and it
specifically directs class members that “LSW’s counsel do not represent you or any other
Class Members.” Blackline at 14. Such information is routinely included in class
notices, especially where care is taken not to include contact information. See Arevalo v.
D.J.’s Underground, 2010 WL 2639888, at *3-4 (D. Md. June 29, 2010) (collecting

cases). Indeed, the Northern District of California has recognized that including the

* Plaintiffs did not give time for this to happen. They initiated a meet-and-confer process
about this proposed order just hours before filing their motion. When LSW asked for the
text of the proposed order so that it could understand what it was being asked to assent to,
Plaintiffs sent it after business hours at LSW’s Vermont headquarters had ended.

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identity of defense counsel is “‘a matter of basic fairness.” Krzesniak v. Cendant Corp.,

2007 WL 4468678, at *3 (N.D. Cal. Dec. 17, 2007).’

B. — Sending the Notice is Premature Because the Special Master Must
First Ascertain the Subclass

Plaintiffs’ position is also flawed insofar as they demand that the notice go out
immediately. While LSW agrees that the notice should go out as soon as possible, that
cannot occur until subclass membership has been ascertained. As LSW further explains
in its Motion to Appoint a Special Master (incorporated herein by reference), until that
occurs, the Court is not in a position to send out the best practicable notice.

As LSW’s Motion elaborates, LSW has a due process right to have the subclass
ascertained prior to trial. Under circumstances where subclass membership will soon be
known, it makes sense to use that information to craft a class notice that is as informative
as possible. That is, if a notice were to be sent now, it could recite the subclass definition
(recipients of pre-application illustrations), but could do no more. Recipients would be
forced to search their memories of events up to seven years ago (Did I receive an
illustration at all? When? When did I apply for my policy? Etc.) and speculate about the
impact on subclass membership when deciding whether to participate in this lawsuit.
Plainly, a class notice would be better (i.e., more informative, easier to understand) if it
actually informs each recipient about whether he or she is in the subclass. This is
possible if we simply begin the special master process now, and use its fruits when

crafting the notice.

” Although Plaintiffs complain about the length of LSW’s deliberation over its proposed
changes to the notice (Mem. at 2-5), there was no delay — the motion to approve notice
was timely filed and LSW has timely opposed. LSW’s deliberation was lengthy because
it was had to propose extensive edits to Plaintiffs’ one-sided notice to reflect, among
other things, the parties’ obviously differing views over the timing of the special master.

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Unfortunately, LSW has raised this proposal with the Plaintiffs, and they have
refused to accept it. Accordingly, simultaneously herewith, LSW has filed a motion for

appointment of a special master.

It. CONCLUSION

For the foregoing reasons, the Court should deny Plaintiffs’ motion insofar as they
seek immediate distribution of their proposed form of notice, and instead: (1) approve a
form of notice as revised by LSW;; (ii) promptly appoint a special master; and (iii) send
the notice promptly after the subclass has been ascertained and that information has been
used to craft the best practicable notice.

Dated: March 18, 2013 /s/ Jonathan A. Shapiro
Jonathan A. Shapiro

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1 CERTIFICATE OF SERVICE
I am a resident of the Commonwealth of Massachusetts, over the age of eighteen years, and not a
- party to the within action. My business address is Wilmer Cutler Pickering Hale and Dorr LLP, 60 State
g| Street, Boston, Massachusetts 02109. On March 18, 2013 I served the within document(s):
4 DEFENDANT LIFE INSURANCE COMPANY OF SOUTHWEST’S
MEMORANDUM IN OPPOSITION TO PLAINTIFFS’ MOTION FOR
5 APPROVAL OF CLASS NOTICE
6 I placed the document(s) listed above in a sealed envelope with postage thereon fully
7 prepaid, in the United States mail addressed as set forth below.
I personally caused to be hand delivered the document(s) listed above to the person(s)
8 at the address(es) set forth below.
9 I emailed the document(s) listed above to the person(s) at the address(es) set forth
10 below.
11 I electronically filed the document(s) listed above via the CM/ECF system.
12 Charles N. Freiberg
13 Brian P. Brosnahan
Jacob N. Foster
14 Jeanette T. Barzelay
KASOWITZ, BENSON, TORRES & FREIDMAN LLP
15 101 California Street, Suite 2300
San Francisco, CA 94111
16 cfreiberg @kasowitz.com
17 bbrosnahan @ kasowitz.com
jfoster@kasowitz.com
18
Harvey R. Levine
19 Levine & Miller
550 West C Street, Suite 1810
20 San Diego, CA 92101
1 Imsh@ levinelaw.com
22 Craig A. Miller
Law Offices of Craig A. Miller
pe 225 Broadway, Suite 1310
San Diego, CA 92101
24 cmiller@craigmillerlaw.com
2D
/s/ Joel Fleming
26 Joel Fleming
pe | airs
DEFENDANT LIFE INSURANCE COMPANY OF THE SOUTHWEST’S MEMORANDUM IN OPPOSITION TO
28 MOTION FOR APPROVAL OF CLASS NOTICE, 10-CV-09198-JVS (RNBx)