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Cruson v. Jackson Nat'l Life Ins. Co.

United States Court of Appeals for the Fifth Circuit

March 25, 2020, Filed

No. 18-40605

Opinion

STUART KYLE DUNCAN, Circuit Judge:

David Cruson and other Texas residents brought a putative class action lawsuit against Jackson, a life insurance company that sells annuities, claiming Jackson overcharged them by miscalculating early-withdrawal fees in breach of the annuities contracts. The district court certified a nationwide class of similarly-situated investors and determined that Jackson had waived its personal jurisdiction defense as to any non-Texas class members. On interlocutory appeal, we conclude that the district court's order is flawed in the following respects. First, we conclude that Jackson did not waive its [*2]  personal jurisdiction defense as to non-Texas class members. Second, we conclude that the district court erred in its predominance analysis—specifically, by failing to assess how state-law variations may impact adjudication of the breach question and also by failing to consider the individualized evidence relevant to Jackson's affirmative defenses of waiver and ratification. Third, we conclude that the plaintiffs failed to offer a damages model adequate to support class treatment, an issue they virtually conceded at oral argument. We therefore vacate the class certification order and remand for further proceedings.

Jackson National Life Insurance Company, a Michigan corporation, sells variable annuities to customers nationwide through a network of brokers and other intermediaries. Because the annuities are structured as long-term investments, a customer who withdraws money early incurs charges meant to compensate Jackson for up-front costs, such as commissions paid to brokers and enhancements added to the annuities. Different charges, collectively called "surrender charges," are calculated according to a schedule of percentages that decrease with the annuity's age.1 In other words, [*3]  the longer a customer has held an annuity, the lower the surrender charge.

In November 2016, fourteen Texas residents sued Jackson in federal district court for breach of contract, breach of fiduciary duty, and negligent misrepresentation. The plaintiffs—who had all bought Jackson annuities through a Texas broker, Tim Hightower—alleged Jackson had miscalculated their surrender charges in violation of the annuity contracts, resulting in lost income for them and a windfall for Jackson. The plaintiffs also alleged their living and death benefits under the annuities had been improperly reduced due to the inflated surrender charges. They sought compensatory and punitive damages, as well as injunctive relief. They also sought to bring claims on behalf of a nationwide class, consisting of all Jackson customers who had incurred surrender charges.

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2020 U.S. App. LEXIS 9284 *; 954 F.3d 240

DAVID CRUSON; JOHN DENMAN, Plaintiffs - Appellees v. JACKSON NATIONAL LIFE INSURANCE COMPANY, Defendant - Appellant

Prior History:  [*1] Appeal from the United States District Court for the Eastern District of Texas.

Cruson v. Jackson Nat'l Life Ins. Co., 2018 U.S. Dist. LEXIS 98161 (E.D. Tex., June 12, 2018)

CORE TERMS

predominance, district court, personal jurisdiction, damages, calculation, charges, class certification, affirmative defense, waived, class member, variations, surrender, motions, argues, putative class member, annuities, defeat, certification, ratification, merits, form contract, state law, certifying, death benefit, state-law, nationwide class, common issue, contracts, customers, questions

Civil Procedure, Appeals, Standards of Review, Abuse of Discretion, De Novo Review, Questions of Fact & Law, Special Proceedings, Class Actions, Appellate Review, Prerequisites for Class Action, Responses, Defenses, Demurrers & Objections, Waiver & Preservation of Defenses, Class Members, Absent Members, Certification of Classes, In Rem & Personal Jurisdiction, In Personam Actions, Challenges, Prerequisites for Class Action, Predominance, Superiority, Adequacy of Representation, Commonality, Numerosity, Typicality, Evidence, Burdens of Proof, Allocation, Contracts Law, Defenses, Affirmative Defenses