Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.

 Skip to Content

A Tale of Two Annuities: Exchange of Variable for Fixed Annuity Integral in SLUSA Dismissal
June 15, 2015

After attending an annuity seminar, Robert and Diane Ruud exchanged their variable annuity for a fixed annuity sold by PHL Variable. According to the Ruuds, seminar provider John Friendshuh represented the fixed annuity as superior but did not disclose his commission, causing plaintiffs financial loss due to reduction in annuity value and fee payments. The Ruuds brought a putative class action against Friendshuh and PHL for consumer fraud and deceptive trade practices under Minnesota law, consisting of all senior citizens who exchanged an annuity for a PHL annuity through Friendshuh or other PHL agents.

Defendants asserted that the state law claims were prevented by the Securities Litigation Uniform Standards Act (SLUSA), which disallows class actions alleging a misrepresentation or omission of material facts under state law "in connection with the purchase or sale of a covered security." Plaintiffs countered that the transaction was not made "in connection with… [a] covered security" because only the surrendered, variable annuity was so defined under SLUSA.

The court sided with the defendants, observing that the exchange at issue was not a single, unilateral purchase, but both a purchase and a sale. The court viewed the surrender of the variable annuity as integral to the transaction, noting that many of plaintiffs’ alleged misrepresentations were tied directly to the surrender. Since the surrender of a variable annuity was made "in connection with" the sale of a covered security, SLUSA preempted the class claims.

Read broadly, this case suggests that, where an "exchange" is alleged, SLUSA is likely to impact a significant proportion of classes alleging misrepresentations under state law, since at least some of the class transactions will have involved the surrender of a covered security.
Related Practices
Financial Services Regulatory Securities Litigation and Enforcement
©2024 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.