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Bacchi v. Massachusetts Mutual Life Insurance Co.

United States District Court, D. Massachusetts

March 23, 2016

KAREN L. BACCHI, Plaintiff,



Massachusetts law limits the “surplus” funds that a mutual life insurance company may retain from its “participating business” to “an amount not in excess of twelve percent of its reserve for such business . . . and a margin of the market value of its securities over their book value . . . .” M.G.L. c. 175, § 141. The amount that a mutual life insurance company is permitted to retain is referred to as a “safety fund.” Id. The plaintiff, Karen Bacchi, alleges that the defendant, Massachusetts Mutual Life Insurance Company, manipulated its safety fund calculation in order to improperly retain funds that it otherwise would have been obligated to distribute to policyholders, and a key issue is whether the defendant’s safety fund calculations comply with M.G.L. c. 175, § 141. Pending before the Court is the defendant’s motion to strike substantial portions of the reports of the plaintiff’s three experts. For the reasons explained below, the motion is granted in part and denied in part.

I. Background

A. The Defendant’s Motion

The defendant has moved to strike portions of three of the plaintiff’s expert reports, on the grounds that the reports improperly contain: 1) legal analysis of the statute at issue in this litigation, M.G.L. c. 175, § 141; 2) opinions regarding the state of mind of the legislators who drafted M.G.L c. 175, § 141; and 3) opinions regarding the defendant’s state of mind and intentions. (Dkt. No. 161). The defendant argues that its motion to strike should be granted now to prevent the parties from having to expend resources to take written discovery and depose experts regarding opinions that will ultimately be inadmissible. (Id.)

The plaintiff acknowledges that any expert testimony it might seek to use at trial or at summary judgment must be admissible, and must also comply with the pertinent Federal Rules of Evidence. She argues that it is premature to strike any expert opinion now, however, because she has not yet attempted to offer any portion of the reports for consideration by the Court or a jury. (Dkt. No. 165). She argues further that the motion fails on the merits because: 1) case law limiting expert testimony is concerned with preventing jury confusion and jury confusion is not an issue in this case because most of the evidence would never be submitted to the jury; 2) the expert reports explain industry “custom and practice” and do not invade the province of the court as the expert on the law; 3) opinion regarding the history of a statute is appropriate because historian testimony in general is admissible where relevant; and 4) the experts do not actually offer an opinion regarding anyone else’s state of mind. (Id.)

B. The Expert Reports

1. Professor Tom Baker

Professor Tom Baker is a law school professor, and an expert on the history of insurance regulation. His expert report discusses the legislative history of M.G.L. c. 175, § 141 and includes, among other things, his opinions on the purpose of and legislative intent underlying the law, and his opinion that the defendant “improperly manipulate[d] and inflate[d] its safety fund calculation . . . [in a manner that] conflicts with the historical purpose of and practices regarding safety funds in Massachusetts.” (Dkt. No. 162-1).

2. James W. Lovely

Mr. Lovely is an attorney and an expert on the financial and securities markets, including derivative contracts in particular. His expert report discusses: 1) the characteristics of the defendant’s interest rate and currency derivatives; 2) whether these types of derivatives are considered securities in the financial services industry and under state and federal law; and 3) whether the defendant violated M.G.L. c. 175, § 141 by including interest rate and currency derivatives in its Margin of Market Value calculation. (Dkt. No. 162-2).

3. R. Larry Johnson

Mr. Johnson is a certified public accountant with experience applying Generally Accepted Accounting Principles and statutory accounting principles to the financial statements and financial reports of insurance companies. His expert report calculates the defendant’s “appropriate” safety fund assuming that the plaintiff’s interpretation of M.G.L. c. 175, § 141 is correct. Although it is offered as context for Mr. Johnson’s calculations, the report contains both a summary of the plaintiff’s ...

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