MetLife 2009 Annual Report Download - page 184

In June 2008, the Environmental Protection Agency issued a Notice of Violation (“NOV”) regarding the operations of the Homer City
Generating Station, an electrical generation facility. The NOV alleges, among other things, that the electrical generation facility is being
operated in violation of certain federal and state Clean Air Act requirements. Homer City OL6 LLC, an entity owned by MLIC, is a passive
investor with a noncontrolling interest in the electrical generation facility, which is solely operated by the lessee, EME Homer City Generation
L.P. (“EME Homer”). Homer City OL6 LLC and EME Homer are among the respondents identified in the NOV. EME Homer has been notified of
its obligation to indemnify Homer City OL6 LLC and MLIC for any claims resulting from the NOV and has expressly acknowledged its obligation
to indemnify Homer City OL6 LLC.
Regulatory authorities in a small number of states and FINRA have had investigations or inquiries relating to sales of individual life insurance
policies or annuities or other products by MLIC, MICC, New England Mutual Life Insurance Company, New England Life Insurance Company
and GALIC, and the four Company broker dealers, which are MetLife Securities, Inc. (“MSI”), New England Securities Corporation, Walnut
Street Securities, Inc. and Tower Square Securities, Inc. Over the past several years, these and a number of investigations by other regulatory
authorities were resolved for monetary payments and certain other relief. The Company may continue to resolve investigations in a similar
manner.
MSI is a defendant in two regulatory matters brought by the Illinois Department of Securities. In 2005, MSI received a notice from the Illinois
Department of Securities asserting possible violations of the Illinois Securities Act in connection with alleged failure to disclose portability with
respect to sales of a former affiliate’s mutual funds and representative compensation with respect to proprietary products. A response has
been submitted and in January 2008, MSI received notice of the commencement of an administrative action by the Illinois Department of
Securities. In May 2008, MSI’s motion to dismiss the action was denied. In the second matter, in December 2008 MSI received a Notice of
Hearing from the Illinois Department of Securities based upon a complaint alleging that MSI failed to reasonably supervise one of its former
registered representatives in connection with the sale of variable annuities to Illinois investors. MSI intends to vigorously defend against the
claims in these matters.
On April 14, 2009, MSI received a Wells Notice from FINRA stating that FINRA was considering recommending that a disciplinary action be
brought against MSI. FINRA contended that during the period from March 1999 through December 2006, MSI’s registered representative
supervisory system was not reasonably designed to achieve compliance with National Association of Securities Dealers Conduct Rules
relating to the review of registered representatives’ electronic correspondence, private securities transactions and outside business
activities. In November 2009, the Company and FINRA reached a settlement resolving the matter on behalf of the four Company broker
dealers, which included payment of a penalty. The four Company broker dealers neither admitted nor denied FINRA’s findings.
Demutualization Actions
The Company is a defendant in two lawsuits challenging the fairness of the Plan and the adequacy and accuracy of MLIC’s disclosure to
policyholders regarding the Plan. The plaintiffs in the consolidated state court class action, Fiala, et al. v. Metropolitan Life Ins. Co., et al. (Sup.
Ct., N.Y. County, filed March 17, 2000), sought compensatory relief and punitive damages against MLIC, the Holding Company, and
individual directors. The court certified a litigation class of present and former policyholders on plaintiffs’ claim that defendants violated
section 7312 of the New York Insurance Law. The plaintiffs in the consolidated federal court class action, In re MetLife Demutualization Litig.
(E.D.N.Y., filed April 18, 2000), sought rescission and compensatory damages against MLIC and the Holding Company. Plaintiffs asserted
violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 (“Exchange Act”) in connection with the Plan, claiming that
the Policyholder Information Booklets failed to disclose certain material facts and contained certain material misstatements. The court
certified a litigation class of present and former policyholders. On November 4, and 5, 2009, the courts in these cases issued orders
preliminarily approving a proposed settlement of this litigation and directing the parties to give notice of the proposed settlement to the class.
On December 30, 2009 and February 9, 2010, the courts conducted a hearing jointly to determine the fairness of the proposed settlement,
class counsel’s fee request, and other matters. On December 30, 2009, the federal court issued an order holding that the notice given to the
class members concerning the proposed settlement was adequate under federal law. On February 12, 2010, the federal court approved the
settlement in an order that will become effective upon the state court’s issuance of its order approving the settlement.
Other Litigation
Travelers Ins. Co., et al. v. Banc of America Securities LLC (S.D.N.Y., filed December 13, 2001). On January 6, 2009, after a jury trial,the
district court entered a judgment in favor of The Travelers Insurance Company, now known as MetLife Insurance Company of Connecticut, in
the amount of approximately $42 million in connection with securities and common law claims against the defendant. On May 14, 2009, the
district court issued an opinion and order denying the defendant’s post judgment motion seeking a judgment in its favor or, in the alternative, a
new trial. On June 3, 2009, the defendant filed a notice of appeal from the January 6, 2009 judgment and the May 14, 2009 opinion and order.
As it is possible that the judgment could be affected during appellate practice, and the Company has not collected any portion of the
judgment, the Company has not recognized any award amount in its consolidated financial statements.
Shipley v. St. Paul Fire and Marine Ins. Co. and Metropolitan Property and Casualty Ins. Co. (Ill. Cir. Ct., Madison County, filed February 26
and July 2, 2003). Two putative nationwide class actions have been filed against Metropolitan Property and Casualty Insurance Company in
Illinois. One suit claims breach of contract and fraud due to the alleged underpayment of medical claims arising from the use of a purportedly
biased provider fee pricing system. The second suit currently alleges breach of contract arising from the alleged use of preferred provider
organizations to reduce medical provider fees covered by the medical claims portion of the insurance policy. Motions for class certification
have been filed and briefed in both cases. Simon v. Metropolitan Property and Casualty Ins. Co. (W.D. Okla., filed September 23, 2008), a
third putative nationwide class action lawsuit relating to payment of medical providers, is pending in federal court in Oklahoma. The Company
is vigorously defending against the claims in these matters.
The American Dental Association, et al. v. MetLife Inc., et al. (S.D. Fla., filed May 19, 2003). The American Dental Association and three
individual providers had sued the Holding Company, MLIC and other non-affiliated insurance companies in a putative class action lawsuit. The
plaintiffs purported to represent a nationwide class of in-network providers who alleged that their claims were being wrongfully reduced by
downcoding, bundling, and the improper use and programming of software. The complaint alleged federal racketeering and various state law
F-100 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)