from the United States District Court for the District of
Colorado, D.C. No. 1:18-CV-00718-WJM-SKC
Waldemar J. Pflepsen, Jr. (Shaunda Patterson-Strachan, with
him on the briefs), Drinker Biddle & Reath, LLP,
Washington, DC, appearing for Appellant.
Toji Calabro, Stueve Siegel Hanson, LLP, Kansas City,
Missouri (Daniel C. Girard, Jordan Elias, and Elizabeth A.
Kramer, Girard Sharp, LLP, San Francisco, California; Norman
E. Siegel, Stueve Siegel Hanson, LLP, Kansas City, Missouri;
and John J. Schirger and Matthew W. Lytle, Miller Schirger,
LLC, Kansas City, Missouri, with him on the brief), appearing
Kathryn A. Reilly and Chuan (Cici) Cheng, Wheeler Trigg
O'Donnell LLP, Denver, Colorado; Clark C. Johnson and
Michael T. Leigh, Kaplan Johnson Abate & Bird LLP,
Louisville, Kentucky, for amicus curiae Security Life
BRISCOE, EBEL, and HARTZ, Circuit Judges.
BRISCOE, CIRCUIT JUDGE
Robert Barnes filed this putative class action against
defendant Security Life of Denver Insurance Company (SLD)
alleging that SLD, in the course of administering life
insurance policies purchased by Barnes and other
similarly-situated class members, breached its contractual
duties and committed the tort of conversion by imposing
certain administrative costs that were not authorized under
the terms of the policies. Jackson National Life Insurance
Company (Jackson) moved to intervene, asserting that, as a
result of reinsurance agreements entered into by SLD, Jackson
was actually the entity responsible for administering
Barnes's policy and numerous other policies listed within
the putative class. The district court denied Jackson's
motion. Jackson now appeals.
jurisdiction over Jackson's appeal pursuant to 28 U.S.C.
§ 1291 "[b]ecause an order denying intervention is
final and subject to immediate review if it prevents the
applicant from becoming a party to an action . . . ."
WildEarth Guardians v. United States Forest Serv.,
573 F.3d 992, 994 (10th Cir. 2009) (quotations and brackets
omitted). After reviewing the parties' briefs and the
record on appeal, we conclude that Jackson has established
the requirements for intervention as of right, and
accordingly reverse the decision of the district court and
remand with directions to grant Jackson's motion to
Barnes is a citizen of the State of North Carolina. Defendant
SLD is a corporation incorporated under the laws of the State
of Colorado, with its principal place of business in Denver,
1984, Barnes, who was then 29 years of age, purchased from
Southland Life Insurance Company (Southland) a "Flexible
Premium Adjustable Life Insurance Policy" (the Policy),
Policy Number 851502124, with an effective date of May 20,
1984, and an initial specified amount of $50, 000. Aplt.
App., Vol. 1 at 13, 32. In addition to a death benefit, the
Policy provides Barnes with "an investment, savings, or
interest-bearing component that accumulates value over time
('the Cash Value')." Id. at 14. When
Barnes receives an account statement, this component is
referred to as "Accumulated Value." Id.
Cash Value on the date the Policy was issued was equal to the
amount of the initial net premium. Thereafter, the Cash Value
for any given month was, and continues to be,
"calculated by: (a) adding a percentage of each monthly
premium received to the prior month's Cash Value; (b)
subtracting from that amount the amounts of any charges
assessed and deducted by [SLD]; and (c) adding to that total
one month's interest earned on the difference between the
prior month's Cash Value minus the current month's
charges assessed and deducted by [SLD]." Id. at
Policy states that the insurer "may assess and deduct
only those charges allowed by the Policy," and it in
turn "expressly defines the specific charges that [the
insurer] may assess and deduct from the Policy's Cash
Value." Id. The permissible deductible costs
under the Policy include "the cost of insurance for the
policy month," "the sum of the monthly expense
charges," and "the cost of any supplemental
benefits provided by rider." Id. at 16. Under
the terms of the Policy, "[t]he cost of insurance rate
is based on the sex, attained age, and rate classification of
the Insured." Id. at 17.
1, 2002, Southland entered into an indemnity reinsurance
agreement with the Life Insurance Company of Georgia (LOG).
Under the terms of that agreement, Southland ceded and
transferred certain liabilities arising under a group of its
life insurance policies (the Transferred Policies), including
Barnes's Policy, to LOG as reinsurer. On that same date,
Southland and LOG also entered into an Administrative
Services Agreement covering the Transferred Policies.
Together, these agreements required LOG to assume certain
administrative duties on behalf of Southland, including
determining the cost of insurance rates and other
administrative charges. LOG also expressly assumed liability
arising out of or relating to the manner in which LOG set
those rates and charges.
2004, Southland merged into Security Life of Denver Insurance
Company (SLD). As a result of this merger, SLD became the
effective and liable insurer of the Policy. But LOG continued
to reinsure and administer the Policy and all of the other
25, 2005, SLD and LOG entered into an Amended and Restated
Administrative Services Agreement. Under the terms of that
amended agreement, LOG's authorization to perform certain
administrative functions relevant to the Transferred Policies
2005, Jackson acquired LOG and assumed the administration of
the Transferred Policies, including the authority to set
non-guaranteed elements, such as the cost of insurance.
December 22, 2010, SLD and Jackson entered into an Amended
and Restated Indemnity Reinsurance Agreement. The purpose of
that agreement was, in part, "to make certain changes to
the Original Agreement to reflect the results of [the]
mergers." Id. at 102. A year later, on December
22, 2011, SLD and Jackson entered into a Second Amended and
Restated Indemnity Reinsurance Agreement in order to make
certain changes mandated by New York state insurance laws.
These agreements expressly continued Jackson's authority
to administer the Transferred Policies. Id. at 235
("the Company [SLD] continues to desire that the
Reinsurer [Jackson] perform certain administrative functions
on behalf of the Company with respect to the Policies in
accordance with the terms of the Administrative Services
Agreement entered into by Southland and LOG").
for many years now, SLD and Jackson have independently
administered separate groups of life insurance policies that
were originally issued by SLD. There is no indication
"that SLD and Jackson made the same subjective,
discretionary decisions with respect to policy
administration, or that such decisions were supported by
identical reasoning and analysis." SLD Br. at 3.
March 27, 2018, Barnes initiated this action by filing a
complaint against SLD in the United States District Court for
the District of Colorado. The complaint asserted subject
matter jurisdiction pursuant to 28 U.S.C. § 1332(d)(2).
I of the complaint, titled "NATURE OF ACTION,"
stated, in pertinent part: "This is a class action for
breach of contract and conversion to recover amounts that
[SLD] charged Plaintiff and the proposed class in excess of
the amounts authorized by the express terms of their life
insurance policies." Id. at 11. Section I
further stated that "[t]he terms of Plaintiff's life
insurance policy provide for a 'Cash Value'
consisting of monies held in trust by [SLD] for Plaintiff,
and [SLD] is contractually bound to deduct from the Cash
Value only those charges that are explicitly identified and
authorized by the policy's terms," yet,
"[d]espite unambiguous language in the policy, . . .
[SLD] breaches the policy by deducting charges from
Plaintiff's Cash Value in amounts exceeding those
specifically permitted by the policy, and those breaches are
continuous and ongoing." Id. at 12. More
specifically, the complaint alleged that, although SLD was
authorized under the Policy "to use only its
'expectations as to future mortality experience' when
determining Cost of Insurance Rates," SLD actually
"used other factors not authorized by the Policy when
determining such rates, including without limitation: expense
experience, persistency, taxes, profit assumptions,
investment earnings, capital and reserve requirement, and
other unspecified factors." Id. at 18.
complaint identified the class as
[a]ll persons who own or owned a life insurance policy issued
or administered by [SLD], or its predecessors in interest,
the terms of which provide or provided for: 1) an insurance
or cost of insurance charge or deduction calculated using a
rate that is determined based on [SLD]'s expectations as
to future mortality experience; 2) additional but separate
policy charges, deductions, or expenses; 3) an investment,
interest-bearing, or savings component; and 4) a death
Id. at 20.
I through III of the complaint asserted distinct breach of
contract claims. Count I alleged, in pertinent part, that,
"[b]y including unauthorized and undisclosed factors in
the monthly Cost of Insurance Rates, [SLD] deducts amounts in
excess of those contractually authorized under the terms of
the [p]olicies" owned by the class members. Id.
at 23. Count II alleged, in pertinent part, that, "[b]y
including unauthorized expense factors in monthly Cost of
Insurance Rates, [SLD] impermissibly deducts expense charges
from the Cash Values of Plaintiff and the class in amounts in
excess of the fixed and maximum expense charges expressly
authorized by their policies." Id. at 24. Count
III alleged, in pertinent part, that SLD's "failure
to lower" the monthly Cost of Insurance Rates for the
policies owned by the class members, "even though its
expectations of future mortality experience improved[, ]
constitutes a breach of the [p]olicies." Id.
IV of the complaint asserted a claim for conversion.
Id. at 25. It alleged that "Plaintiff and the
class had a property interest in the funds [SLD] deducted
from the Cash Values in excess of the amounts permitted by
the terms of the Policies" and that, "[b]y
deducting Cost of Insurance charges and expense charges in
unauthorized amounts from the Cash Values of Plaintiff and
the class, [SLD] assumed and exercised ownership over, and
misappropriated or misapplied, specific funds held in trust
for the benefit of Plaintiff and the class, without
authorization or consent and in hostility to the rights of
Plaintiff and class members." Id. Lastly, Count
V of the complaint asserted a claim for declaratory and
August 1, 2018, Jackson filed a motion for leave to intervene
in the proceedings. Jackson argued that it should be allowed
to intervene as of right because it has an interest related
to the property or transaction that is the subject of
plaintiff's action. Jackson explained that, "as the
entity that currently administers and reinsures the
[plaintiff's] Policy, [it] has a direct, substantial, and
legally protectable interest in defending the manner in which
the Policy has been administered by it." Id. at
69. In other words, Jackson stated that, "[a]s
administrator, [it] has responsibility for certain
administrative functions, including the authority to set the
[cost of insurance] rates and other charges at issue" in
this lawsuit. Id. at 69-70. Jackson in turn asserted
that its interest might be impaired or impeded if
intervention was not permitted. Jackson noted, for example,
that the complaint effectively "challenges
current activities and decision making by Jackson
and seeks declaratory and injunctive relief that seek to
mandate that Jackson make material changes to its
administrative practices, specifically, its administration
and management of the relevant policies, including the
ongoing determination of the policy rates and charges at
issue." Id. at 70 (emphasis in original).
Jackson noted that "[f]or Plaintiff to obtain this
prospective relief would require Jackson to stop collecting
charges and expenses in the amounts it determines
are contractually permissible, because Jackson is the entity
currently responsible for administering the
[plaintiff's] Policy." Id. at 71 (emphasis
in original). Jackson argued that it "would [also] be
ultimately responsible for damages awarded to Plaintiff and
the putative class for the past amounts [it] collected . . .
." Id. Lastly, Jackson argued that SLD could
not adequately represent Jackson's interest. Jackson
emphasized that there were "two groups of policies
implicated here [by the complaint's class definition]-
those Jackson administered and those it did not," and it
noted that, as a result of this, "the manner in which
the charges and expenses at issue have been administered for
the two groups of policies . . . would have varied, and
likely significantly so as different entities were
independently responsible for the actions alleged in the
Complaint . . . ." Id. Thus, Jackson argued,
"there is a distinct possibility that [its] and
SLD's interests and defense strategies may diverge in
this litigation." Id.
also argued that it met the requirements for permissive
intervention. Jackson noted that it sought "to intervene
to defend its conduct with regard to the administration of
the reinsured policies" and that its "defense [wa]s
central to the essence of this case, which will turn on
questions about how Jackson (or LOG before it) administered
the Policy and whether those acts constitute a breach of the
Policy terms." Id. at 72. Jackson further
argued that its "presence in this case w[ould] add value
to this litigation" because it "holds documents and
controls witnesses that bear on the administration of the
rates and charges for Plaintiff's Policy and other
Jackson-administered Southland policies challenged in this
litigation." Id. at 73.
opposed Jackson's motion for leave to intervene. From a
factual perspective, Barnes asserted that he "never
entered into a contract with Jackson," and that
"SLD remain[ed] the insurer obligated to pay any
insurance claims arising under his policy." Id.
at 107-08. Barnes also asserted that the reinsurance
agreement afforded Jackson "the right to 'assume the
defense and control' of the litigation," as well as
the right to approve any settlement entered into between SLD
and Barnes. Id. at 111. In addition, Barnes noted
that the reinsurance agreement required "Jackson . . .
to cooperate with any litigation against SLD relating to the
policies subject to the reinsurance agreement, including by
producing documents and witnesses for deposition."
his legal arguments, Barnes argued that Jackson's
"interest, if any, relate[d] only to a subset of
policies within the putative class period, and only for a
portion of the time relevant here." Id. at 112.
Barnes argued that he "should not be required to
litigate separately against Jackson . . . when Jackson . . .
can direct the defense of [his] claims and its interests in
avoiding liability under the form policy language are
derivative of-and thus adequately represented by-SLD."
Id. In terms of Jackson's purported interest in
the action, Barnes argued that Jackson's "assumption
of liability would give it an indirect derivative
interest, at most, in the outcome of [his] claims."
Id. at 113. Barnes also argued that Jackson's
"objectives in this litigation would be no different
from SLD's" because "[b]oth entities . . .
[we]re interested in successfully defending Plaintiff's
claim of breach of a form contract, and hence in obtaining a
ruling that the policy's provisions permitted SLD
(whether acting through Jackson . . . or otherwise) to make
the deductions it did." Id. at 117.
October 29, 2018, Jackson filed a motion for leave to file a
supplemental brief in support of its motion for leave to
intervene. Jackson noted in its motion for leave "that
recent [factual] developments in the litigation,"
specifically a September 18, 2018 "Discovery
Hearing" before the magistrate judge, "further
confirm[ed] that intervention . . . [wa]s appropriate."
Id. at 314. Those "discovery
developments," Jackson asserted, "reveal[ed] that .
. . Jackson, not having been served with either party or
non-party discovery, nevertheless [wa]s placed in an
untenable position of being without an appropriate forum in
which to fully protect its interest as the current parties
proceed[ed] to make discovery demands on it."
Id. at 315. "For example," Jackson noted,
it "lack[ed] appropriate standing under the Federal
Rules of Civil Procedure" to dispute the parties'
"contract interpretation" regarding Jackson's
discovery obligations. Id.
November 21, 2018, the district court issued a written order
denying Jackson's motion to intervene and denying as moot
Jackson's motion to supplement. At the outset of its
order, the district court recounted the relevant factual
history and noted, in pertinent part, that "[i]n 2005,
Jackson acquired LOG and assumed responsibility for the
administration and reinsurance of the Barnes Policy and
others." Id. at 362. The district court in turn
concluded that "[t]he administrative services and
reinsurance agreement" that Jackson inherited from LOG
"address[ed] SLD and Jackson's rights and
obligations when faced with litigation over the
Jackson-administered policies." Id. The
district court proceeded to describe those rights and
obligations. "Generally," the district court noted,
"Jackson 'shall sue or defend, at its own expense
and in the name of [SLD] when necessary . . . any action
brought upon a Policy.'" Id. (quoting ECF
No. 42-5 at 14, § 2.3(c)). "However, SLD retains
'the exclusive right to exercise control of and direction
over any claim or litigation involving Retained
Liabilities.'" Id. "When SLD makes a
timely notice of a third-party claim, Jackson may 'assume
the defense and control' of the litigation and may, under
certain circumstances, settle litigation without the consent
of SLD." Id. at 362-363 (quoting ECF No. 42-6
at 42, § 1). "Importantly, however, SLD cannot
settle litigation without Jackson's prior written
consent," and "[i]f Jackson exercises its right to
assume defense and control of the claim, SLD has the right
(but not the obligation) to reasonably participate in (but
not control) the defense of claims with its own counsel and
at its own expense." Id. at 363.
district court in turn noted that "[o]n April 26, 2018,
SLD sent a notice of claim to Jackson informing Jackson of
Barnes' claim implicating life insurance policies for
which Jackson had assumed responsibility." Id.
The district court further noted that, "[o]n May 7,
2018, Jackson responded to SLD's letter acknowledging its
responsibility to indemnify SLD with respect to the Barnes
district court then proceeded to analyze Jackson's
request to intervene as of right, concluding that
"Jackson . . . fail[ed] to establish inadequate
representation, thus foreclosing intervention as of
right." Id. at 366. The district court
explained that "[t]wo facts persuade[d] [it] that
Jackson's interests [we]re already adequately protected
by SLD." Id. at 367. "First," the
district court stated, "Jackson and SLD have identical
interests in the litigation: defending the cost of insurance
coverage, as well as the administration of the subject
policies, including the Barnes Policy, from 1984 to
present." Id. Second, the district court noted
that "Jackson ha[d] failed to show that its interests
would be inadequately represented [by SLD] absent
intervention," and that, in fact, "Jackson has a
contractual right to control this litigation."
Id. at 368 (emphasis in original). Although the
district court acknowledged "Jackson['s]
conten[tion] that SLD ha[d] prevented it from exercising its
contractual right to direct and control the litigation,"
the district court concluded that Jackson's remedy was to
"assert a separate breach of contract claim in an
independent action against SLD," or to "possibly
assert breach of contract as a defense if SLD [wa]s
ultimately held liable in this litigation." Id.
Jackson's request for permissive intervention, the
district court concluded "that Jackson ha[d] not shown
that permissive intervention would contribute to the just
resolution of this lawsuit." Id. The district
court acknowledged that "Jackson's control of
documents and witnesses [wa]s admittedly complicated by its
ambiguous status (neither third party nor defendant)."
Id. "However," the district court stated,
"Jackson ha[d] not adequately addressed why party status
[wa]s preferable for the purposes of discovery, particularly
in light of the availability to Barnes of the issuance of
third-party subpoenas, as well as Jackson's contractual
obligations during litigation under the reinsurance and
administrative service contracts." Id.
December 20, 2018, Jackson filed a notice of appeal from the
district court's ...