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UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT _________________________________
FILED United States Court of Appeals
December 23, 2019
Elisabeth A. Shumaker Clerk of Court
Plaintiff - Appellee,
SECURITY LIFE OF DENVER INSURANCE COMPANY,
Defendant - Amicus Curiae.
JACKSON NATIONAL LIFE INSURANCE COMPANY,
Movant - Appellant. _________________________________
Appeal from the United States District Court for the District of Colorado
(D.C. No. 1:18-CV-00718-WJM-SKC) _________________________________
Waldemar J. Pflepsen, Jr. (Shaunda Patterson-Strachan, with him on the briefs), Drinker Biddle & Reath, LLP, Washington, DC, appearing for Appellant.
J. Toji Calabro, Stueve Siegel Hanson, LLP, Kansas City, Missouri (Daniel C. Girard, Jordan Elias, and Elizabeth A. Kramer, Girard Sharp, LLP, San Francisco, California; Norman E. Siegel, Stueve Siegel Hanson, LLP, Kansas City, Missouri; and John J. Schirger and Matthew W. Lytle, Miller Schirger, LLC, Kansas City, Missouri, with him on the brief), appearing for Appellee.
Kathryn A. Reilly and Chuan (Cici) Cheng, Wheeler Trigg O'Donnell LLP, Denver, Colorado; Clark C. Johnson and Michael T. Leigh, Kaplan Johnson Abate & Bird LLP, Louisville, Kentucky, for amicus curiae Security Life Insurance Company.
_________________________________ Before BRISCOE, EBEL, and HARTZ, Circuit Judges.
_________________________________ BRISCOE, Circuit Judge.
_________________________________ Plaintiff Robert Barnes filed this putative class action against defendant Security Life of Denver Insurance Company (SLD) alleging that SLD, in the course of administering life insurance policies purchased by Barnes and other similarlysituated class members, breached its contractual duties and committed the tort of conversion by imposing certain administrative costs that were not authorized under the terms of the policies. Jackson National Life Insurance Company (Jackson) moved to intervene, asserting that, as a result of reinsurance agreements entered into by SLD, Jackson was actually the entity responsible for administering Barnes's policy and numerous other policies listed within the putative class. The district court denied Jackson's motion. Jackson now appeals. We have jurisdiction over Jackson's appeal pursuant to 28 U.S.C. ? 1291 "[b]ecause an order denying intervention is final and subject to immediate review if it prevents the applicant from becoming a party to an action . . . ." WildEarth Guardians v. United States Forest Serv., 573 F.3d 992, 994 (10th Cir. 2009) (quotations and brackets omitted). After reviewing the parties' briefs and the record on appeal, we conclude that Jackson has established the requirements for intervention as of right, and accordingly reverse the decision of the district court and remand with directions to grant Jackson's motion to intervene.
I Plaintiff Barnes is a citizen of the State of North Carolina. Defendant SLD is a corporation incorporated under the laws of the State of Colorado, with its principal place of business in Denver, Colorado. In 1984, Barnes, who was then 29 years of age, purchased from Southland Life Insurance Company (Southland) a "Flexible Premium Adjustable Life Insurance Policy" (the Policy), Policy Number 851502124, with an effective date of May 20, 1984, and an initial specified amount of $50,000. Aplt. App., Vol. 1 at 13, 32. In addition to a death benefit, the Policy provides Barnes with "an investment, savings, or interest-bearing component that accumulates value over time (`the Cash Value')." Id. at 14. When Barnes receives an account statement, this component is referred to as "Accumulated Value." Id. The Cash Value on the date the Policy was issued was equal to the amount of the initial net premium. Thereafter, the Cash Value for any given month was, and continues to be, "calculated by: (a) adding a percentage of each monthly premium received to the prior month's Cash Value; (b) subtracting from that amount the amounts of any charges assessed and deducted by [SLD]; and (c) adding to that total one month's interest earned on the difference between the prior month's Cash Value minus the current month's charges assessed and deducted by [SLD]." Id. at 15. The Policy states that the insurer "may assess and deduct only those charges allowed by the Policy," and it in turn "expressly defines the specific charges that [the insurer] may assess and deduct from the Policy's Cash Value." Id. The permissible
deductible costs under the Policy include "the cost of insurance for the policy month," "the sum of the monthly expense charges," and "the cost of any supplemental benefits provided by rider." Id. at 16. Under the terms of the Policy, "[t]he cost of insurance rate is based on the sex, attained age, and rate classification of the Insured." Id. at 17.
On July 1, 2002, Southland entered into an indemnity reinsurance agreement with the Life Insurance Company of Georgia (LOG). Under the terms of that agreement, Southland ceded and transferred certain liabilities arising under a group of its life insurance policies (the Transferred Policies), including Barnes's Policy, to LOG as reinsurer. On that same date, Southland and LOG also entered into an Administrative Services Agreement covering the Transferred Policies. Together, these agreements required LOG to assume certain administrative duties on behalf of Southland, including determining the cost of insurance rates and other administrative charges. LOG also expressly assumed liability arising out of or relating to the manner in which LOG set those rates and charges.
In 2004, Southland merged into Security Life of Denver Insurance Company (SLD). As a result of this merger, SLD became the effective and liable insurer of the Policy. But LOG continued to reinsure and administer the Policy and all of the other Transferred Policies.
On May 25, 2005, SLD and LOG entered into an Amended and Restated Administrative Services Agreement. Under the terms of that amended agreement,
LOG's authorization to perform certain administrative functions relevant to the Transferred Policies continued.
In 2005, Jackson acquired LOG and assumed the administration of the Transferred Policies, including the authority to set non-guaranteed elements, such as the cost of insurance.
On December 22, 2010, SLD and Jackson entered into an Amended and Restated Indemnity Reinsurance Agreement. The purpose of that agreement was, in part, "to make certain changes to the Original Agreement to reflect the results of [the] mergers." Id. at 102. A year later, on December 22, 2011, SLD and Jackson entered into a Second Amended and Restated Indemnity Reinsurance Agreement in order to make certain changes mandated by New York state insurance laws. These agreements expressly continued Jackson's authority to administer the Transferred Policies. Id. at 235 ("the Company [SLD] continues to desire that the Reinsurer [Jackson] perform certain administrative functions on behalf of the Company with respect to the Policies in accordance with the terms of the Administrative Services Agreement entered into by Southland and LOG").
Thus, for many years now, SLD and Jackson have independently administered separate groups of life insurance policies that were originally issued by SLD. There is no indication "that SLD and Jackson made the same subjective, discretionary decisions with respect to policy administration, or that such decisions were supported by identical reasoning and analysis." SLD Br. at 3.
II On March 27, 2018, Barnes initiated this action by filing a complaint against SLD in the United States District Court for the District of Colorado. The complaint asserted subject matter jurisdiction pursuant to 28 U.S.C. ? 1332(d)(2).
Section I of the complaint, titled "NATURE OF ACTION," stated, in pertinent part: "This is a class action for breach of contract and conversion to recover amounts that [SLD] charged Plaintiff and the proposed class in excess of the amounts authorized by the express terms of their life insurance policies." Id. at 11. Section I further stated that "[t]he terms of Plaintiff's life insurance policy provide for a `Cash Value' consisting of monies held in trust by [SLD] for Plaintiff, and [SLD] is contractually bound to deduct from the Cash Value only those charges that are explicitly identified and authorized by the policy's terms," yet, "[d]espite unambiguous language in the policy, . . . [SLD] breaches the policy by deducting charges from Plaintiff's Cash Value in amounts exceeding those specifically permitted by the policy, and those breaches are continuous and ongoing." Id. at 12. More specifically, the complaint alleged that, although SLD was authorized under the Policy "to use only its `expectations as to future mortality experience' when determining Cost of Insurance Rates," SLD actually "used other factors not authorized by the Policy when determining such rates, including without limitation: expense experience, persistency, taxes, profit assumptions, investment earnings, capital and reserve requirement, and other unspecified factors." Id. at 18.
The complaint identified the class as 6