MetLife 2004 Annual Report Download - page 82

METLIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Demutualization Actions
Several lawsuits were brought in 2000 challenging the fairness of Metropolitan Life’s plan of reorganization, as amended (the ‘‘plan’’) and the
adequacy and accuracy of Metropolitan Life’s disclosure to policyholders regarding the plan. These actions named as defendants some or all of
Metropolitan Life, MetLife, Inc. (the ‘‘Holding Company’’), the individual directors, the New York Superintendent of Insurance (the ‘‘Superintendent’’) and
the underwriters for MetLife, Inc.’s initial public offering, Goldman Sachs & Company and Credit Suisse First Boston. On February 21, 2003, a trial court
within the commercial part of the New York State court granted the defendants’ motions to dismiss two purported class actions. On April 27, 2004, the
appellate court modified the trial court’s order by reinstating certain claims against Metropolitan Life, the Holding Company and the individual directors.
Plaintiffs in these actions have filed a consolidated amended complaint. Defendants’ motion to dismiss part of the consolidated amended complaint, and
plaintiffs’ motion to certify a litigation class are pending. Another purported class action filed in New York State court in Kings County has been
consolidated with this action. The plaintiffs in the state court class actions seek compensatory relief and punitive damages. Five persons have brought a
proceeding under Article 78 of New York’s Civil Practice Law and Rules challenging the Opinion and Decision of the Superintendent who approved the
plan. In this proceeding, petitioners seek to vacate the Superintendent’s Opinion and Decision and enjoin him from granting final approval of the plan.
Respondents have moved to dismiss the proceeding. In a purported class action against Metropolitan Life and the Holding Company pending in the
United States District Court for the Eastern District of New York, plaintiffs served a second consolidated amended complaint on April 2, 2004. In this
action, plaintiffs assert violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 in connection with the plan, claiming that the
Policyholder Information Booklets failed to disclose certain material facts. They seek rescission and compensatory damages. On June 22, 2004, the
court denied the defendants’ motion to dismiss the claim of violation of the Securities Exchange Act of 1934. The court had previously denied
defendants’ motion to dismiss the claim for violation of the Securities Act of 1933. On December 10, 2004, the court reaffirmed its earlier decision
denying defendants’ motion for summary judgment as premature. Metropolitan Life, the Holding Company and the individual defendants believe they
have meritorious defenses to the plaintiffs’ claims and are contesting vigorously all of the plaintiffs’ claims in these actions.
In 2001, a lawsuit was filed in the Superior Court of Justice, Ontario, Canada on behalf of a proposed class of certain former Canadian policyholders
against the Holding Company, Metropolitan Life, and Metropolitan Life Insurance Company of Canada. Plaintiffs’ allegations concern the way that their
policies were treated in connection with the demutualization of Metropolitan Life; they seek damages, declarations, and other non-pecuniary relief. The
defendants believe they have meritorious defenses to the plaintiffs’ claims and will contest vigorously all of plaintiffs’ claims in this matter.
On April 30, 2004, a lawsuit was filed in New York state court in New York County against the Holding Company and Metropolitan Life on behalf of a
proposed class comprised of the settlement class in the Metropolitan Life sales practices class action settlement approved in December 1999 by the
United States District Court for the Western District of Pennsylvania. In July 2004, the plaintiffs served an amended complaint. The amended complaint
challenges the treatment of the cost of the sales practices settlement in the demutualization of Metropolitan Life and asserts claims of breach of fiduciary
duty, common law fraud, and unjust enrichment. Plaintiffs seek compensatory and punitive damages, as well as attorneys’ fees and costs. The Holding
Company and Metropolitan Life have moved to dismiss the amended complaint. In October 2003, the United States District Court for the Western District
of Pennsylvania dismissed plaintiffs’ similar complaint alleging that the demutualization breached the terms of the 1999 settlement agreement and unjustly
enriched the Holding Company and Metropolitan Life. The Holding Company and Metropolitan Life intend to contest this matter vigorously.
Race-Conscious Underwriting Claims
Insurance departments in a number of states initiated inquiries in 2000 about possible race-conscious underwriting of life insurance. These inquiries
generally have been directed to all life insurers licensed in their respective states, including Metropolitan Life and certain of its affiliates. The New York
Insurance Department concluded its examination of Metropolitan Life concerning possible past race-conscious underwriting practices. On April 28,
2003, the United States District Court for the Southern District of New York approved a class action settlement of a consolidated action against
Metropolitan Life alleging racial discrimination in the marketing, sale, and administration of life insurance policies. Metropolitan Life also entered into
settlement agreements to resolve the regulatory examination.
Twenty lawsuits involving approximately 140 plaintiffs were filed in federal and state court in Alabama, Mississippi and Tennessee alleging federal
and/or state law claims of racial discrimination in connection with the sale, formation, administration or servicing of life insurance policies. Metropolitan Life
resolved the claims of some of these plaintiffs through settlement, and some additional plaintiffs have voluntarily dismissed their claims. Metropolitan Life
resolved claims of some additional persons who opted out of the settlement class referenced in the preceding paragraph but who had not filed suit. The
actions filed in Alabama and Tennessee have been dismissed; one action filed in Mississippi remains pending. In the pending action, Metropolitan Life is
contesting plaintiffs’ claims vigorously.
The Company believes that adequate provision has been made to cover the costs associated with the resolution of these matters.
Other
A putative class action lawsuit is pending in the United States District Court for the District of Columbia, in which plaintiffs allege that they were
denied certain ad hoc pension increases awarded to retirees under the Metropolitan Life retirement plan. The ad hoc pension increases were awarded
only to retirees (i.e., individuals who were entitled to an immediate retirement benefit upon their termination of employment) and not available to individuals
like these plaintiffs whose employment, or whose spouses’ employment, had terminated before they became eligible for an immediate retirement benefit.
The plaintiffs seek to represent a class consisting of former Metropolitan Life employees, or their surviving spouses, who are receiving deferred vested
annuity payments under the retirement plan and who were allegedly eligible to receive the ad hoc pension increases awarded in 1977, 1980, 1989,
1992, 1996 and 2001, as well as increases awarded in earlier years. Metropolitan Life is vigorously defending itself against these allegations.
As previously reported, the SEC is conducting a formal investigation of New England Securities Corporation (‘‘NES’’), a subsidiary of New England
Life Insurance Company (‘‘NELICO’’), in response to NES informing the SEC that certain systems and controls relating to one NES advisory program were
not operating effectively. NES is cooperating fully with the SEC.
Prior to filing the Company’s June 30, 2003 Form 10-Q, MetLife announced a $31 million charge, net of income taxes, resulting from certain
improperly deferred expenses at an affiliate, New England Financial. MetLife notified the SEC about the nature of this charge prior to its announcement.
The SEC is pursuing a formal investigation of the matter and, in December 2004, NELICO received a so-called ‘‘Wells Notice’’ in connection with the SEC
investigation. The Wells Notice provides notice that the SEC staff is considering recommending that the SEC bring a civil action alleging violations of the
U.S. securities laws. Under the SEC’s procedures, a recipient can respond to the SEC staff before the staff makes a formal recommendation regarding
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