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Class Actions and Predominance: One Court Comments on the Ninth Circuit’s Yokoyama Decision And Whether Reliance Was Required In Claims Involving Suitability

Annuities, Blogs

Two 2010 opinions in class action matters illustrate the role of reliance in claims relating to suitability.  The most recent decision, In Re Countrywide Financial Corp. Mortg. Marketing and Sales, 2010 WL 1691451 (S.D. Cal. Apr. 23, 2010), the court concluded that the class’s claims did not rest on common omissions in a standard document and instead involved individual inquiries into whether class members had knowledge of changes in loan contract terms.  Thus, the Countrywide court concluded that the class action plaintiff failed to satisfy predominance requirements to bring a class action claim.

In contrast, the Countrywide court pointed to an earlier 2010 decision from the Ninth Circuit Court of Appeals, where the court there looked at claims alleging that an insurer marketed annuities through deceptive marketing brochures and failed to inform class members of, among other things, the unsuitability of long-term annuities.  The Countrywide court had this to say about Yokoyama:

[I]n Yokoyama v. Midland National Life Ins. Co., 594 F.3d 1087 (9th Cir. 2010), the Ninth Circuit reversed a denial of class certification under Hawaii’s consumer protection statute, finding that individual issues of reliance did not predominate because the statute allowed a claim for unfair or deceptive acts or practices to be proved through a capacity to deceive.  There, plaintiff Gary Yokoyama purchased annuities through an independent broker and later filed a class action claiming that Midland marketed the annuities through deceptive marketing brochures that failed to inform prospective purchasers, particularly senior citizens, of the true risks and unsuitability of Midland’s long-term annuities, in violation of Hawaii’s Deceptive Practices Act, Haw.Rev.Stat. § 480-2.  The court noted that under Hawaii law a deceptive act or practice is one that “‘is likely to mislead consumers acting reasonably under the circumstances[.]’“  . . .  The court further noted that “the Hawaii Supreme Court has made it clear that reliance is judged by an ‘objective reasonable person standard[,]’ “ . . . and that “ ‘actual deception need not be shown; the capacity to deceive is sufficient.’ “ . . . .  Because Hawaii’s consumer protection statute uses an objective test, the court in Yokoyama concluded that “[t]he jury will not have to determine whether each plaintiff subjectively relied on the omissions, but will instead have to determine only whether those omissions [in Midland’s brochures] were likely to deceive a reasonable person. This does not involve an individualized inquiry.” Id.