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Clark v. Prudential Ins. Co. of Am.

United States District Court, D. New Jersey

April 18, 2013

BEVERLY CLARK, JESSE J. PAUL, WARREN GOLD, LINDA M. CUSANELLI, CAROLE L. WALCHER, and TERRI L. DROGGEL, on behalf of themselves and all others similarly situated, Plaintiffs,

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Bruce Nagel, Esq., Robert H. Solomon, Esq., NAGEL RICE LLP, Roseland, NJ; Charles N. Freiberg, Esq., Brian P. Brosnahan, Esq., David A. Thomas, Esq., Jacob N. Foster, Esq., KASOWITZ, BENSON, TORRES & FRIEDMAN LLP, San Francisco, CA; Craig A. Miller, Esq., LAW OFFICES OF CRAIG A. MILLER, San Diego, CA, Attorneys for Plaintiffs.

Douglas S. Eakeley, Esq., Natalie J. Kraner, Esq., LOWENSTEIN SANDLER PC, Roseland, NJ; John D. Aldock, Esq., Mark S. Raffman, Esq., Adam M. Chud, Esq., GOODWIN PROCTOR LLP, Washington, D.C., Attorneys for Defendant.


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DICKINSON R. DEBEVOISE, Senior United States District Judge.


This case concerns allegations of deception and bad faith against a health insurance company, The Prudential Insurance Company of America (" Prudential" ). The heart of the complaint is that Prudential stopped selling a certain health insurance policy to new customers (" closing the block" ), knowing that this would result in prohibitive increases in premium rates as sick policyholders remain in the block and healthy policyholders leave, resulting in the sick getting locked-in to the increasingly expensive policy and locked-out of alternative options due to development of a pre-existing condition. Plaintiffs, former policyholders, contend that Prudential had falsely misrepresented to its policyholders that the only reason for increased premiums would be increasing age of the insured and rising medical costs, and failed to disclose that a major reason for the premium increases was the closing of the block and the consequences thereof. On February 5, 2013, the Court rendered a decision denying class certification on multiple

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grounds and granting Prudential's summary judgment in part based on the statute of limitations.

Currently before the Court are three motions filed by Plaintiffs: a motion for reconsideration of the order denying Plaintiffs' motion for class certification; a motion to alter or amend the class certification order with respect to redefining the class and bifurcating liability and damages issues so that the class may be certified solely for purposes of liability; and a motion for reconsideration of the order granting Prudential's motion for summary judgment in part.



In the District of New Jersey, motions for reconsideration are governed by Local Civil Rule 7.1(i) and are considered " extremely limited procedural vehicle(s)." Resorts Int'l, Inc. v. Greate Bay Hotel & Casino, 830 F.Supp. 826, 831 (D.N.J. 1992). As a result, " reconsideration is an extraordinary remedy, that is granted 'very sparingly[.]'" Brackett v. Ashcroft, Civ. No. 03-3988 (WJM), 2003 WL 22303078, at *2 (D.N.J. Oct. 7, 2003) (quoting Interfaith Community Org. v. Honeywell Int'l, Inc., 215 F.Supp.2d 482, 507 (D.N.J. 2002)).

Local Civil Rule 7.1(i) permits a party to seek reconsideration by the Court of matters which the party " believes the Judge or Magistrate Judge has overlooked" when it ruled on the motion. See L. Civ. R. 7.1(i). The movant has the burden of demonstrating either: " (1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court [issued its order]; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice." Max's Seafood Cafe v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) (citing N. River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995)). The Court will grant a motion for reconsideration only where its prior decision has overlooked a factual or legal issue that may alter the disposition of the matter. See Compaction Sys. Corp., 88 F.Supp.2d at 345; see also L. Civ. R. 7.1(i). " The word 'overlooked' is the operative term in the Rule." Bowers v. NCAA, 130 F.Supp.2d 610, 612 (D.N.J. 2001) (citation omitted).

Moreover, L. Civ. R. 7.1(i) does not allow parties to restate arguments which the court has already considered. See G-69 v. Degnan, 748 F.Supp. 274, 275 (D.N.J. 1990). Thus, a difference of opinion with the court's decision should be dealt with through the normal appellate process. See e.g., Bowers, 130 F.Supp.2d at 612 (citations omitted); Florham Park Chevron, Inc. v. Chevron U.S.A., Inc., 680 F.Supp. 159, 162 (D.N.J. 1988); NL Indus., Inc. v. Commercial Union Ins. Co., 935 F.Supp. 513, 516 (D.N.J. 1996) (" Reconsideration motions . . . may not be used to re- litigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment." ). In other words, " [a] motion for reconsideration should not provide the parties with an opportunity for a second bite at the apple." Tischio v. Bontex, Inc., 16 F.Supp.2d 511, 533 (D.N.J. 1998) (citation omitted).


After extensive briefing and oral argument, the Court issued a 107-page opinion concluding that the claims of the proposed 17,000-member class spanning a thirty-year period across four states were not fit for class treatment. (See Opinion, ECF 227, hereinafter " Op." ) The ruling considered hundreds of pages of briefing and analysis, thousands of pages of exhibits,

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oral argument, and supplemental briefing. First, the Court set forth a factual record going to the individual plaintiffs' experiences with the Comprehensive Health Insurance Policy (" CHIP" ), the overall experience of CHIP policyholders over a thirty year period, and the methodology proposed and critiqued by experts in lengthy reports, rebuttals, and certifications as to the ability to establish a reliable common approach to assess damages for the class. The Court then assessed objections to evidence, and examined the original proposal to categorize the class and subclass, and the revised proposal for class categorization. Part Two of the Opinion analyzed the facts in light of the Rule 23 requirements for class certification. Part Three addressed the individual facts of four of the six proposed class representatives with respect to summary judgment based on the statute of limitations. The facts and findings of the Court are set forth in full in the Opinion, and are discussed below with respect to objections raised by Plaintiffs in their motions to reconsider and amend.

The briefs with regard to the motion for reconsideration of the order denying the motion for class certification (hereinafter " MRCC" ) and the motion to alter or amend the class certification order to redefine the class and bifurcate liability from damages (hereinafter " MAC" ), are inter-related and cross-referential, and are addressed jointly first. The motion for reconsideration of the order granting in part Prudential's motion for summary judgment (hereinafter " MRSJ" ) is then addressed in part two of the discussion below.

1. Motion for Reconsideration of the Order denying Class Certification and the Motion to Alter or Amend the Order denying class certification

In the event that the Court does not reverse its Order denying class certification, Plaintiffs propose two types of narrowing of the class certification: 1) limiting class membership to policyholders who maintained CHIP in force until at least 2001; and/or 2) bifurcating the issue of liability and damages so that the class may be certified as to liability, with a separate trial to handle individuals' damages. These two proposals are introduced for the first time, despite the substantial procedural history in this case detailed in the Court's prior opinion, which includes the addition and removal of class representatives, claims, and a revised class categorization proposal.

A. Damages and Bifurcation

Plaintiffs argue that the Court made a clear error of fact in concluding that the damages methodology proposed by Dr. Frech did not satisfy Plaintiffs' burden to propose a common approach to measuring damages. First, Plaintiffs argue that the Court made a clear error of fact in concluding that the damages methodology proposed by Dr. Frech fails to account for individualized factors such as age, gender, geographic location, health status, approvals of premium rate increases by resident state, deductible levels, and addition or removal of dependants because these factors are incorporated in the actual dollar premiums, and the percent excess premiums mathematically cancel out the individual factors. (MRCC Br. at 1-5.) However the Court noted that " Dr. Frech seems to justify his proposal by arguing that these individualized considerations go to the wayside because they are already weighted and included in his actual premium index and the but-for premium index." (Op. at 80.)

The Court went on to determine that Dr. Frech's proposal failed because criticism

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submitted by Mr. Wildsmith " suggests that the formula offered by Dr. Frech is static and does not account for a range of possible changing conditions over time." (Op. at 81.) Indeed, Plaintiffs submit as follows:

[O]ne could argue that [Dr. Frech's calculation] was not an exact apples-to-apples' comparison because the but-for index does not account for aging while the average market premium was for [Ms. Clark's] 2009 age. Mr. Wildsmith correctly noted and adjusted her but-for premium for aging. The result was that the implied but-for premium for her was roughly twice the average market premium.

(MRCC Br. at 6-7.) Plaintiffs attempt to reframe Mr. Wildsmith's critique as a validation of the model because it shows that Dr. Frech's calculation is conservative. Additionally, Plaintiffs summarily argue that Dr. Frech's damages calculation is substantiated because it " factors in the relative richness of CHIP's benefits compared to other policies[, as] one would expect the implied but-for premium for a rich policy to be substantially higher than an average market premium[.]" (Id.) However, the reasonableness check clearly establishes that Dr. Frech's proposed substitutive methodology for an actual yardstick fails because his projected implied but-for premium was two-times larger than the proposed comparative check, and therefore of questionable accuracy and reliability. The Court has not overlooked any factual or legal matter dispositive to the resolution of the case, and the motion for reconsideration on this point is denied.

Additionally, Plaintiffs argue that the Court's approach to damages is " fundamentally wrong on the law because it ignores the well accepted principles that 1) precision in calculation of damages is not required for recovery, and 2) some individualized calculation of damages is frequently required in class cases, yet that rarely defeats class certification where common issues predominate as to liability." (MRCC at 8). Plaintiffs primarily look to the instruction provided by the Third Circuit Court of Appeals in the seventies, Bogosian v. Gulf Oil Corp., 561 F.2d 434, 456 (3d Cir. 1977):

[I]f for any reason the district court were to conclude that there would be problems involved in proving damages which would outweigh the advantages of class certification, it should give appropriate consideration to certification of a class limited to the determination of liability. See Rule 23(c)(4)(A).

Thus, Plaintiffs now assert for the first time, that the " common issues as to liability are divisible from any individual issues of damages, and there are no impediments to bifurcation of liability issues for class treatment." (MCC at 8.) Plaintiffs simply drop a supporting footnote for this assertion with no additional explanation, citing to an environmental tort class challenge, Gates v. Rohm & Haas Co., 655 F.3d 255, 273 (3d Cir. 2011). [1]

In Gates, the Third Circuit Court of Appeals acknowledges this complicated

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area of class action procedure, and advises the trial court to consider a list of factors [2] when deciding whether or not to certify a liability-only class. Id. The Third Circuit Court of Appeals concluded that the trial court did not abuse its discretion by declining to certify a liability-only issue when it " found liability inseverable from other issues that would be left for follow-up proceedings. Nor did the court err in finding no marked division between damages and liability." Id.

Nor is a division between damages and liability present here. In addition to explaining the wide array of reasons why policyholders would have dropped CHIP, (Op. at 77-78), the varied nature and frequency of oral communications with policyholders further " elucidate[d] the fact-specific individual inquiry that will be necessary to determine presence of the fraud." (Id. at 78-79.) Specifically, the Court examined individualized instances which defy commonality when proposed class representatives called Prudential and expressed general concern and disbelief about the nature of the premium increases, and in some cases made an express connection between the premium increases and the block closure. (Id.) The Court later examined these communications in light of the motion for summary judgment as to four of the six proposed class representatives, and found that based on review of the individuals' records, the limitations period had already expired as to two of the four individually considered. (Id. at 99-106.)

Moreover, it is still good law in the Third Circuit that " plaintiffs must establish that the alleged damages are capable of measurement on a class-wide basis using common proof." Behrend v. Comcast Corp., 655 F.3d 182, 200 (3d Cir. 2011) (citing

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Hydrogen Peroxide, 552 F.3d at 311, 325-326; c.f. Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 187 (3d Cir. 2001) (stating that the " Herculean task" of calculating individual damages from hundreds of millions of different transactions " counsels against finding predominance" )); cert. granted, 133 S.Ct. 24, 183 L.Ed.2d 673 (2012); rev'd on other grounds, 133 S.Ct. 572, 184 L.Ed.2d 372 (Nov. 2, 2012). Newton is instructive here, where an actual yardstick of a comparative policy's price is not being offered, an individualized proof produces a damages assessment which is approximately double that calculated by the substitute formula, and individualized considerations surmount. (See Op. at 78-81.)

In Newton, the Third Circuit Court of Appeals considered a securities fraud class challenge brought by thousands of investors against broker-dealers for offering stock trades at the price offered on the central National Best Bid and Offer system (NBBO) rather than investigating alternatives that potentially offered better prices. Critical to the determination of whether class certification was proper, the appeals court noted the individualized proof necessary:

Ascertaining what prices are reasonably available to any particular situation may require a factual inquiry into all of the ...

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