Moelis v. Berkshire Life Insurance Co.

(Massachusetts Supreme Judicial Court)

• Opposing Inappropriate Class Actions

The Massachusetts Supreme Judicial Court, in a decision rendered in this case on May 22, agreed with NELF and its co-amicus AIM that the trial court had properly denied certification of both national and state classes.  The case was an attempted nationwide (or, if not, statewide) consumer class action involving allegedly deceptive illustrations developed by Berkshire Life for use by its agents throughout the country in selling so-called “disappearing premium” policies, under which policyholders could choose to use policy dividends to pay future premiums such that premium payments would eventually “disappear.”  NELF had argued in support of Berkshire that the trial court properly denied certification of a national class because the decision of the U.S. Supreme Court in Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), does not permit a jurisdiction such as Massachusetts, which has no provision allowing class members to opt out of the action, to certify a nationwide class.  NELF further argued that, even if Shutts were read to allow non-opt-out jurisdictions to certify national classes provided there is personal jurisdiction over all nonresident class members, class certification was still properly denied because no basis existed in this case for the exercise of jurisdiction under the Massachusetts long-arm statute, G. L. c. 223A.  Finally, NELF argued that there were numerous individual issues presented with respect to whether putative class members in fact misunderstood the operation of these policies and purchased them due to that misunderstanding such that there was no showing that class members were injured at all, let alone “similarly injured,” as required for certification of a state class under the Massachusetts Consumer Protection Act, G. L. c. 93A, § 9(2).  By agreeing with NELF and upholding the trial court’s denial of class certification, the SJC provided important confirmation that Massachusetts courts must have personal jurisdiction over every nonresident member of a putative plaintiff class in order to certify that class.  A contrary determination could have significantly increased the number of nationwide class actions filed in Massachusetts courts.  The Court appears to adopt the alternative reading of the Shutts decision permitting the exercise of jurisdiction over nonresidents despite the absence of any opt-out opportunity provided all nonresident class members have “minimum contacts” with Massachusetts.  Because the Court found that this constitutional standard was not met here, it did not reach NELF’s argument about the need for satisfaction of the state’s long-arm statute.  Similarly, it did not reach NELF’s argument about the absence of “similar injury” for purposes of state class certification because it agreed with the trial court that individual issues with regard to Berkshire’s statute of limitations defenses made class certification inappropriate.  These issues, as well as the argument that the Shutts decision actually precludes Massachusetts courts from ever certifying a nationwide plaintiff class, remain for another day.