The opinion of the court was delivered by: Dickinson R. Debevoise, Ussdj
Plaintiffs, the insured and beneficiary on a policy issued by Prudential Life Insurance Company of America, have initiated this lawsuit against Prudential *fn1 on behalf of themselves and others similarly situated. *fn2 Plaintiffs claim that Prudential's plan of reorganization breached the terms of a settlement agreement the company reached in 1997 resolving a lawsuit unrelated to its reorganization. Prudential, moving to dismiss the Complaint, argues that the Court does not have jurisdiction to hear Plaintiffs' claim and that - even if it did - Plaintiffs fail to state a claim upon which relief can be granted. The court concludes that it lacks jurisdiction to decide Plaintiffs' claim. Even if it did not lack jurisdiction, however, the claim would fail on the merits.
In February of 1995, Prudential policyholders and former agents filed lawsuits in federal and state courts around the country, alleging that Prudential had engaged in deceptive sales practices. The cases were consolidated, and, in October of 1996, resolved when the parties entered into an MDL Settlement ("Settlement Agreement").
In the Settlement Agreement, Prudential agreed to make available to Plaintiffs two alternative types of relief: Alternative Dispute Resolution ("ADR") Relief and Basic Claim Relief. (DA 713). In addition, Prudential promised to pay for many of the costs and expenses associated with the lawsuit, including their own and Plaintiffs' attorneys' fees and the costs of administering the ADR process ("Costs & Expenses"). *fn3 Prudential kept that promise and made the payments.
On March 17, 1997, the court approved the Settlement Agreement, concluding that it was "fair, reasonable, and adequate." In re The Prudential Insurance Company of America Sales Practices Litigation, 962 F.Supp. 450, 468 (D.N.J. 1997). *fn4 In his Final Order and Judgment, Judge Wolin included a provision by which the court "retain[ed] exclusive jurisdiction as to all matters relating to administration, consummation, enforcement and interpretation of the Stipulation of Settlement and of this Final Order and Judgment, and for any other necessary purpose." Id. at 566. The Court of Appeals has twice affirmed the Court's authority to enforce the Settlement. In re The Prudential Insurance Company of America Sales Practices Litigation, 314 F.3d 99, 105 (3d Cir. 2002); In re Prudential Insurance Company of America Sales Practice Litigation, 261 F.3d 355, 367-370 (3d Cir. 2001) (both affirming that the court had the authority to enjoin lawsuits maintained on or behalf of class members).
Prudential's Reorganization Plan
Several years after the Settlement Agreement was approved, Prudential publicly announced its intention to convert from a mutual life insurance company (one owned by policyholders) to a stock life insurance company (one owned by shareholders). (DA 122). On December 15, 2000, Prudential's Board of Directors unanimously approved and adopted a plan to effect that conversion ("Plan").
Under the terms of the Plan, each policyholder would surrender her membership interest in Prudential. In exchange, those policyholders deemed eligible *fn5 would receive consideration comprised of (1) a "fixed component" of eight shares in Prudential, and (2) a "variable component" of stock, cash or policy credits in an amount that Prudential would calculate based on estimates of the historical and projected future contributions of the policyholder's eligible policies to Prudential's surplus. (DA 132).
The complex actuarial formula Prudential used to calculate the variable component ("the Formula") required that Prudential add certain payments it had made over the years that were unrelated to the policies (for example, for Y2K preparation) back into the "surplus" before dividing that surplus among policyholders. *fn6 The Costs & Expenses were not among these payments.
The Plan acknowledged that commitments Prudential made under the Settlement Agreement would need to be taken into account in calculating the amount of demutualization consideration due to certain policyholders that had been parties to it. *fn7
State Agency Approval of the Reorganization Plan
N. J. Stat. Ann. Chapter 17C-4 ("Conversion Law") requires ...