THE STATE OF NEW HAMPSHIRE

HILLSBOROUGH, SS. SOUTHERN DISTRICT

C.A. NO. 04-C-255

FREDRICK AMOCHE, JON VALLIERE, and DIANE DAUPHINAIS; on behalf of themselves and all others similarly situated;

) ) )

) PLAINTIFFS’ MEMORANDUM IN SUPPORT OF MOTION FOR AN

ORDER SPECIFYING THE PROPER MEASURE AND

CALCULATION OF DAMAGES INCLUDING PREJUDGMENT

INTEREST

Plaintiffs; ) ) v. ) ) GUARANTEE TRUST LIFE INSURANCE COMPANY;

) )

) Defendant. ) )

Plaintiffs Frederick Amoche, Jon Valliere, and Diane Dauphinais, hereby submit this

memorandum in support of their Motion for an Order Specifying the Proper Measure and

Calculation of Damages Including Prejudgment Interest

The Court has entered its Order granting summary judgment to the plaintiffs and class

members on their breach of contract claim. Plaintiffs now seek an order establishing that each

class member is entitled to compensatory damages, and to prejudgment interest thereon, pursuant

to the law of the state wherein his or her transaction occurred.

.

When plaintiffs and thousands of other consumers across the country purchased cars and

had the financing arranged through the car dealerships, their loan papers already contained

charges for Guarantee Trust Life Insurance Company (GTL”)’s “single premium” (i.e., paid-in-

advance) credit life and credit disability insurance for lengthy coverage terms. Since the entire

insurance premium was deducted from their loan proceeds, state law—as well as GTL’s own

insurance contracts—required GTL to refund unearned premiums to those borrowers who paid

INTRODUCTION

2

off their car loans prior to the expiration of their prepaid coverage terms. However, GTL

disregarded its legal and contractual obligations and failed to make refunds of unearned

premiums to plaintiffs and countless thousands of other consumers. GTL continues to

wrongfully retain the unearned premiums that rightfully belong to these consumers.

GTL continues to make the plaintiffs and class members engage in protracted,

contentious and costly litigation to recover monies that GTL knows full well belong to them. As

class representatives, these plaintiffs have had to endure six years of obfuscation and delay at the

hands of GTL, including a series of frivolous motions and briefs unsupported by citations to

competent legal authority, an improvident removal to federal court and a futile appeal to the First

Circuit. Moreover, they have had to subpoena their own finance companies to obtain payoff

dates, since GTL has insisted that each of its insureds provide proof of the early payoff.

Moreover, even when presented with individualized proof, GTL has still refused to make

the refunds. Instead, it has raised technical evidentiary objections in its ongoing campaign to

keep money that does not belong to it. It will not make a single refund until it is satisfied that it

has received documentary proof of the early loan payoff in a form that is admissible in a Court of

Law under applicable Rules of Evidence. So, it has been six years, and still no refunds.1

I. GTL’S LIABILITY TO ALL CONSUMERS LATER DETERMINED TO BE CLASS MEMBERS HAS ALREADY BEEN DETERMINED.

In 2006, plaintiffs sought, and received, an order that defendant is liable to them and all

consumers later determined to be class members, on their breach of contract claim, for its failure

to refund their unearned premiums to them when they paid off their motor vehicle loans early. In

relevant part, this Order reads:

1 Of course, GTL’s contracts do not require its insureds to submit documentation sufficient to withstand

3

When viewing the contract with the corrected term, “credit insurer,” the Court concludes that the defendant has breached its standard COI with the named plaintiffs and the class members. GTL, the credit insurer, promised that it would refund unearned premiums to insured debtors who prepaid their loan indebtedness in full prior to the scheduled termination date. The named plaintiffs and class members have done so. The named plaintiffs have not yet received a refund of their unearned premiums. Further, because a class member would not qualify as such if he or she already received a refund of his or her unearned premiums, the class members also have not received their refunds. Therefore, GTL has breached its contracts with the named plaintiffs and the class members.

A copy of the Court’s Order on Summary Judgment Motions (“Classwide PSJ Order” below) is

attached hereto as Exhibit A.

Then, in 2009, the plaintiffs sought, and received, a modification of the class definition,

such that consumers in four additional states could be included within it. In its order modifying

the class definition by including the four additional states (albeit as to just three particular

creditors), the Court found that certification of the multistate class was warranted, in part,

because no conflicts exist between the relevant law of New Hampshire, on the one hand, and the

analogous laws of Maine, Connecticut, Ohio, and Michigan, on the other hand, as to the

substantive law pertaining to whether GTL’s alleged breach of contract for failing to refund

unearned premiums, and that GTL’s contracts were substantially identical in the five states. Id.

A copy of the Court’s Order [on Proposed Modification to Class Definition] (“Order Modifying

Class Definition”) is attached hereto as Exhibit B.

this level of legal scrutiny.

4

Finally, in late 2009, plaintiffs moved for an order extending the partial summary

judgment ruling to all consumers whose transactions occurred not only in New Hampshire, but

also in Maine, Connecticut, Ohio and Michigan, who are later determined to be class members.2

II. EACH CLASS MEMBERS’ ENTITLEMENT TO DAMAGES, INCLUDING PREJUDGMENT INTEREST, IS GOVERNED BY THE LAW OF THE STATE WHEREIN HIS OR HER TRANSACTION OCCURRED.

The damages inquiry, as to each class member, is governed by the laws of the state in

which that class member’s transaction occurred. This is because the law of damages is

substantive. Carota v. Johns Manville Corp., 893 F.2d 448, 450 (1st Cir. 1990) (“The law of

damages . . . is substantive since it prescribes what, if any, money a plaintiff will receive as

compensation for injury. Barbier v. Shearson Lehman Hutton Inc., 948 F.2d 117, 122 (2nd Cir.

1991) (“the measure of damages is a matter of state substantive law”). Damages are an element

of plaintiff’s case”); Henderson v. Nat’l Fid. Life Ins. Co., 257 F.2d 917, 919 (10th Cir. 1958)

(“The measure of damages for breach of contract is undoubtedly substantive

2 Plaintiffs’ Motion for Partial Summary Judgment as to Class Members Whose Transactions Occurred in ME, CT, OH, and MI is pending before this Court. Plaintiffs respectfully request the Court rule on that

law”). Here, since

the Court has decided that the laws of the states in which the transactions occurred shall govern

the parties’ substantive rights, it necessarily follows that the laws of these respective states will

likewise govern the damages inquiry. Chesapeake & Ohio Rail-way Co. v. Kelly, 241 U.S. 485,

491 (1916) (“The question of the proper measure of damages is inseparably connected with the

right of action”); Harlan Feeders v. Grand Lab., 881 F. Supp. 1400 (N.D. Iowa 1995) (applying

Iowa law) (since damages constitute a matter of substantive law, damages are governed by the

law of the state that has been selected, by application of the conflict-of-laws rules, to govern the

parties’ substantive rights). “Under virtually all American choice-of-law regimes, . . . the same

state’s law that governs whether a cause of action exists (and what its elements are) will also

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govern the measure of damages.” Caleb Nelson, The Persistence of General Law, 106 Colum. L.

Rev. 503, 544 (2006), citing Anthony J. Bellia Jr., Federal Regulation of State Court

Procedures, 110 Yale L.J. 947, 984 (2001) (“As a matter of conflicts law, the measure of

damages ... is governed by the law under which the right of action arose . . .”). See generally,

Leflar, McDougal & Felix, American Conflicts Law 346-48 (1986) (measure of damages is

substantive issue).3

A. Under The Law Of Each Of The Four Affected States, The Class Members Are Entitled To Compensatory Damages In The Amounts Of The Unearned Premiums That Defendant Wrongfully Withheld From Them.

In each of the additional states (and in all states, period), an aggrieved consumer who

proves breach of contract is entitled to his or her actual, or compensatory, damages. City of

Hartford v. International Assn. of Firefighters, Local 76, 49 Conn. App. 805, 815, 717 A.2d 258,

cert. denied, 247 Conn. 920, 722 A.2d 809 (1998) (“In an action for breach of contract, the

general rule is that the award of damages is designed to place the injured party, so far as can be

done by money, in the same position as that he would have been in had the contract been

performed. Such damages are known as compensatory damages”) [internal citations omitted];

Lee v. Scotia Prince Cruises, Ltd., 2003 ME 78, *4 (Me. 2003) (“As a general rule, the purpose

of an award of compensatory damages for a breach of contract is to place the plaintiff in the same

position that he or she would have enjoyed had there been no breach. An injured party is entitled

to recover for all losses actually suffered as a result of the breach”) [internal citations omitted];

Henderson v. Rosewicz, 2002 Ohio 1266, *10 (Ohio Ct. App., 2002) (“[A] party alleging a

breach of contract is entitled to compensatory damages . . . which will compensate for actual

motion first, as this motion is predicated upon the allowance of that motion. 3 Again, this argument presumes the Court chooses to apply the substantive laws of the respective states, as requested by plaintiffs, in its resolution of the plaintiffs’ pending Motion for Partial Summary Judgment as

6

losses so that the aggrieved party will be placed in as good a position as he would have been in

had the contract been performed”) [internal citations omitted]; Kewin v. Mass. Mut. Life Ins.

Co., 409 Mich. 401, 295 N.W.2d 50, 52-53 (Mich. 1980) (“[C]ompensatory damages recoverable

for breach of contract

1. Maine Computes Unearned Premium Refunds By The “Rule of Anticipation”.

are the losses sustained or the gains negated that arise naturally from the

breach or were contemplated by the parties at contract formation”) (citing Hadley v. Baxendale,

156 Eng. Rep. 145 (1854) and 5 CORBIN ON CONTRACTS §1007).

In Maine, the “Rule of Anticipation” is used to calculate premium refunds for single

premium credit life, and for credit accident and health, coverage. CMR 02-031-220 §11(D)(2)

(Exhibit __) (Emphasis added).

2. Connecticut Computes Unearned Premium Refunds By The “Rule of 78s”.

In Connecticut, the “Rule of 78s” is used to calculate premium refunds for single

premium credit life, and for credit accident and health, coverage where, as here, the credit insurer

has not obtained a rate deviation. State of Connecticut, Department of Insurance, Bulletin

Number C-3, available at http://www.ct.gov/cid/lib/cid/BullC3.pdf, visited February 17, 2010.

(Exhibit __ is a copy of the bulletin obtained from the website) (Emphasis added).

3. Ohio Computes Unearned Premium Refunds By The “Rule of Anticipation”.

In Ohio, the “Rule of Anticipation” is used to calculate premium refunds for single

premium credit life, and credit accident and health, coverage. OAC Ann. 3901-1-14(D)(3)(d)

(Exhibit ___) (Emphasis added).

to Class Members Whose Transactions Occurred in ME, CT, OH, and MI.

7

4. Michigan Computes Unearned Premium Refunds By The “Rule of 78s”.

In Michigan, the “Rule of 78s” is used to calculate premium refunds for single premium

credit life, and for credit accident and health, coverage. MICH. ADMIN. CODE R 550.213 Rule

13(1)(b) (Exhibit __) (Emphasis added).

B. Under The Relevant Law Of Each Of The Four Affected States, The Class Members Should Be Awarded Prejudgment Interest.

As shown below, those consumers who are later identified as class members and whose

transactions occurred in Maine, Ohio or Michigan are entitled to prejudgment interest as a matter

of law, during the periods and at the interest rates tabulated below. The Court, in its discretion,

should award prejudgment interest to those consumers who are later identified as class members

and whose transactions occurred in Connecticut.

1. Maine’s Prejudgment Interest Law: 3% Per Annum Over The One-Year US Treasury Bill, Measured From The Date Complaint Was Filed.

The Maine class members are entitled to prejudgment interest measured from February

13, 2009 (the date upon which the operative amended complaint was field), and computed at the

statutory rate which is based on the US Treasury Bill index. “Maine statutory law entitles

prevailing civil plaintiffs to prejudgment interest as a matter of right. 14 M.R.S. P 1602-B.”

EnQueue, Inc. v. Data Mgmt. Group, 566 F. Supp. 2d 13, 23 (D. Me. 2008). Section 1602-B

reads, in relevant part:

3. OTHER CIVIL ACTIONS; RATE. In civil actions other than those set forth in subsections 1 and 2, prejudgment interest is allowed at the one-year United States Treasury bill rate plus 3%.

A. For purposes of this subsection, “one-year United States Treasury bill rate” means the weekly average one-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the last full week of the calendar year immediately prior to the year in which prejudgment interest begins to accrue.

. . . .

8

5. ACCRUAL; SUSPENSION; WAIVER. Prejudgment interest accrues . . . from the date on which the complaint is filed.

14 M.R.S. P 1602-B. Thus, Maine consumers determined to be class members are entitled to

prejudgment interest computed as follows:

TIME PERIOD

RATE per

annum February 17, 2009–December 31, 2009 3.40% January 1, 2010–December 31, 2010 3.41%

See, Prejudgment Interest Rates, Maine Judicial Branch Website, available at

http://www.courts.state.me.us/citizen_info/legal_prof/2010%20CHART-Pre-Jdmt%20Int.pdf

2. Connecticut’s Prejudgment Interest Law: 10% Per Annum, Measured From The Date The Money Is Due Until The Money Is Paid, As A Discretionary Element of Damages.

, visited

February 17, 2010. (Exhibit __ is a copy of the pdf table obtained from the website).

The Connecticut class members should be awarded prejudgment interest measured from

their loan payoff dates and computed at ten percent (10%) per annum. In Tang v. Bou-

Fakhreddine, 75 Conn. App. 334 (Conn. App. Ct. 2003), the Connecticut appellate court

explained why that state’s prejudgment interest statute anticipates an award of prejudgment

interest in precisely such a case as this one:

The allowance of prejudgment interest as an element of damages is an equitable determination and a matter lying within the discretion of the trial court.

General Statutes §37-3a provides in relevant part that “interest at the rate of ten per cent a year, and no more, may be recovered and allowed in civil actions . . . as damages for the detention of money after it becomes payable. . . .” “Prejudgment interest is awarded in the discretion of the trial court to compensate the prevailing party for a delay in obtaining money that rightfully belongs to him. . . . The detention of the money must be determined to have been wrongful. . . . Its detention can only be wrongful, however, from and after the date on which the court, in its discretion, determines that the money was due and payable.” (Citations omitted; internal quotation marks omitted.)

9

Northrop v. Allstate Ins. Co., 247 Conn. 242, 254-55, 720 A.2d 879 (1998).

Prejudgment interest pursuant to §37-3a is appropriate only where the essence of the action itself involves the wrongful withholding of money due and payable to the plaintiff. The prejudgment interest statute does not apply when the essence of the action is the recovery of damages to compensate a plaintiff for injury, damage or costs incurred as a result of a defendant’s negligence. It ordinarily does not apply to contract actions in which the plaintiff is not seeking the recovery of liquidated damages or the recovery of money advanced under a contract and wrongfully withheld after a breach of that contract. The prejudgment interest statute does not apply to such actions because they do not advance claims based on the wrongful withholding of money, but rather seek damages to compensate for losses incurred as a result of a defendant’s negligence. Moreover, such damages are not considered due and payable until after a judgment in favor of the plaintiff has been rendered.

Id., at 346-349. [Emphasis added] See also, Lauder v. Peck, 11 Conn. App. 161, 166 (Conn.

App. Ct. 1987) (In affirming the trial court’s decision, the appellate court stated that

“prejudgment interest on money wrongfully withheld

Because the essence of this action itself involved GTL’s wrongful withholding of money

due and payable to the plaintiffs and class members, the Court should, in its discretion, make an

award of prejudgment interest under Connecticut General Statutes §37-3a, accruing as of the

respective loan payoff dates at ten percent (10%) per annum.

from the owner is a proper, albeit

discretionary, element of a plaintiff damages”).

The Court, in its discretion, should award Connecticut consumers determined to be class

members prejudgment interest computed as follows:

TIME PERIOD

RATE per

annum February 17, 2003–judgment date 10%

10

3. Ohio’s Prejudgment Interest Law: 3% Per Annum Over The “Federal Shor t Term Rate” Defined Each Year By The Ohio Tax Commissioner , Measured From The Date The Money Came Due Until The Date The Money Is Paid.

The Ohio class members are entitled to prejudgment interest measured from the dates of

their respective early loan payoffs at the statutory rate. In Lyons v. Advantage Contrs., LLC.,

2006 U.S. Dist. LEXIS 55747 (D. Ohio 2006), Ohio’s federal district court explained that:

Under Ohio Revised Code §1343.03, a plaintiff that recovers under a breach of contract claim is entitled to the accrual of prejudgment interest from the date the money is due until the date the money is paid. Royal Elec. Constr. Corp. v. Ohio State Univ., 73 Ohio St.3d 110, 117, 1995 Ohio 131, 652 N.E.2d 687 (1995) (“[T]o make the aggrieved party whole, the party should be compensated for lapse of time between the accrual of the claim and judgment”); accord, The Scotts Co. v. Central Garden & Pet Co., 256 F.Supp.2d 734, 743 (S.D. Ohio 2003). As of June 2, 2004, the rate the interest accrues is the rate stated in the contract, or, if no rate is indicated, the rate defined in Ohio Revised §5703.47. Ohio Revised Code §1343.03(A).

Id., **10-11.

ORC Ann. 1343.03(A) reads, in full:

§ 1343.03. Interest when rate not stipulated

(A) In cases other than those provided for in sections 1343.01 and 1343.02 of the Revised Code, when money becomes due and payable upon any bond, bill, note, or other instrument of writing, upon any book account, upon any settlement between parties, upon all verbal contracts entered into, and upon all judgments, decrees, and orders of any judicial tribunal for the payment of money arising out of tortious conduct or a contract or other transaction, the creditor is entitled to interest at the rate per annum determined pursuant to section 5703.47 of the Revised Code, unless a written contract provides a different rate of interest in relation to the money that becomes due and payable, in which case the creditor is entitled to interest at the rate provided in that contract. Notification of the interest rate per annum shall be provided pursuant to sections 319.19, 1901.313 [1901.31.3], 1907.202 [1907.20.2], 2303.25, and 5703.47 of the Revised Code.

. . . .

Id.

ORC Ann. 5703.47 reads, in full:

11

§ 5703.47. Federal short-term rate defined; computation of statutory interest rate for following year; notice to county auditors.

(A) As used in this section, “federal short-term rate” means the rate of the average market yield on outstanding marketable obligations of the United States with remaining periods to maturity of three years or less, as determined under section 1274 of the “Internal Revenue Code of 1986,” 100 Stat. 2085, 26 U.S.C. 1274, for July of the current year.

(B) On the fifteenth day of October of each year, the tax commissioner shall determine the federal short-term rate. For purposes of any section of the Revised Code requiring interest to be computed at the rate per annum required by this section, the rate determined by the commissioner under this section, rounded to the nearest whole number per cent, plus three per cent shall be the interest rate per annum used in making the computation for interest that accrues during the following calendar year. For the purposes of sections 5719.041 [5719.04.1] and 5731.23 of the Revised Code, references to the “federal short-term rate” are references to the federal short-term rate as determined by the tax commissioner under this section rounded to the nearest whole number per cent.

(C) Within ten days after the interest rate per annum is determined under this section, the tax commissioner shall notify the auditor of each county in writing of that rate of interest.

Id. Finally, prior to June 2, 2004, Ohio Revised Code §1343.03(A) read, in relevant part:

[W]hen money becomes due and payable upon any ... note ... the creditor is entitled to interest at the rate of ten per cent per annum, and no more, unless a written contract provides a different rate of interest in relation to the money that becomes due and payable, in which case the creditor is entitled to interest at the rate provided in that contract.

See, id. [Exhibit __ is a copy of the first few pages of current §1343.03; the annotation therein

titled “EFFECTS OF AMENDMENTS” described the prior version of it (emphasis added)]; see

also, Terry v. Dowdell, CASE NO. 3:04CV00067 (W.D. Va. 2004) (magistrate’s report and

recommendation containing findings and rulings as to former and current statutory language)

(Exhibit __).

Thus, Ohio consumers determined to be class members are entitled to prejudgment interest

computed as follows:

12

TIME PERIOD

RATE per

annum January 1, 2000–June 1, 2004 10% June 2, 2004–December 31, 2004 4% January 1, 2005–December 31, 2005 5% January 1, 2006–December 31, 2006 6% January 1, 2007–December 31, 2007 8% January 1, 2008–December 31, 2008 5% January 1, 2009–December 31, 2009 5% January 1, 2010–December 31, 2010 4%

See, Ohio Department of Taxation Interest Rate Certification letter, for each year from 2004

through 2009 (Exhibit C comprises this compilation); Terry v. Dowdell, supra [Exhibit __]

(recommending that prejudgment interest accrues at 10% per annum up until June 2, 2004).

4. Michigan’s Prejudgment Interest Law.

The Michigan class members are entitled to prejudgment interest measured from

February 13, 2009, and computed at the statutory rate. As their federal district court explained in

Baum Research & Dev. Co. v. Univ. of Mass. at Lowell, 2009 U.S. Dist. LEXIS 113592 (D.

Mich. 2009):

Under Michigan law, “[i]nterest is allowed on a money judgment recovered in a civil action, as provided in” Michigan Compiled Laws § 600.6013. Michigan courts have indicated that “[a]n award of interest is mandatory in all cases in which [Mich. Comp. Laws § 600.6013] applies.” . . . [P]rejudgment interest is awarded “from the date of filing the complaint” and is “calculated on the entire amount of the money judgment, including attorney fees and other costs.” Mich. Comp. Laws § 600.6013(8). Interest under this subsection is “calculated at 6-month intervals from the date of filing the complaint at a rate of interest equal to 1% plus the average interest rate paid at auctions of 5-year United States treasury notes during the 6 months immediately preceding July 1 and January 1, as certified by the state treasurer, and compounded annually.” Mich. Comp. Laws §600.6013(8).

Id., at 5-6. [Internal citations omitted]

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Thus, Michigan consumers determined to be class members are entitled to prejudgment

interest computed as follows:

TIME PERIOD

RATE per

annum February 17, 2009–June 30, 2009 3.695% July 1, 2009–December 31, 2009 3.101% January 1, 2010–June 30, 2010 3.480% July 1, 2010–December 31, 2010 TBD

See, Interest Rates For Money Judgments Under MCL 600.6013, Michigan Judicial Branch

Website, available at http://courts.michigan.gov/scao/resources/other/interest.pdf

CONCLUSION

, visited February 17,

2010. (Exhibit __ is a copy of the pdf table obtained from the website).

All of the consumers later determined to be class members in the additional states of

Maine, Connecticut, Ohio and Michigan, should be awarded compensatory damages in the

amounts of their unearned premiums, together with prejudgment interest computed in accordance

with the above tables.

Respectfully submitted, _______________________ Edward K. O’Brien O’Brien Law Firm, PC One Sundial Avenue, 5th

Manchester, NH 03103 Floor

(603) 672-3800 Charles G. Douglas, III Jason R.L. Major Douglas, Leonard and Garvey, PC 6 Loudon Road Concord, NH 03301 (603) 224-1988

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Dated: May 12, 2009

Certificate Of Service I hereby certify that on this day I served a true copy of the above document upon all counsel of record by email and first-class mail delivered to the following:

Christopher Cole Sheehan Phinney Bass & Green

1000 Elm Street Manchester, NH 03105

Francis A. Citera Greenberg Traurig, LLP 77 West Wacker Drive

Suite 2500 Chicago, IL 60601

____________________ DATE: May 12, 2009 EDWARD K. O’BRIEN