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July 23, 2001


The opinion of the court was delivered by: Platt, District Judge.


Defendants Metropolitan Life Insurance Company ("MetLife Co.") and MetLife, Inc. move pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the three complaints underlying this action or, in the alternative, for a stay. For the following reasons, these motions are DENIED.


This action arises from MetLife Co.'s conversion from a mutual life insurance company to a stock life insurance company known as MetLife, Inc. through a process known as demutualization. MetLife Co. and MetLife Inc. are the defendants in this action. Plaintiffs, seven participating MetLife Co. policyholders, filed three separate complaints in which they allege that the defendants distributed materials during the demutualization process which were materially misleading. On June 27, 2000, this Court consolidated the three actions.

To become effective, the plan had to be approved by the New York Superintendent of Insurance and by MetLife Co.'s policyholders. Policyholders were informed about the nature of the plan by, among other things, a two-part Policyholder Information Booklet ("PIB"), which MetLife mailed to policyholders. The contents of the PIB, which the plaintiffs call "the Prospectus," are at the heart of this litigation.

After the PIB was distributed, both the policyholders and the Superintendent approved the plan: the policyholders on February 18, 2000, when MetLife Co. reported that ninety-three (93%) percent of the nearly 2.8 million policyholders cast votes favoring demutualization, and the Superintendent on April 4, 2000, after holding a hearing. In approving the plan, the Superintendent specifically found that the plan was fair and equitable to policyholders and reiterated his approval of the policyholder notice documents, including the PIB, because they "contained sufficient information about the proposed reorganization to enable Eligible Policyholders to make an informed decision regarding the Plan. . . ." (Yannett Decl. Ex. C. ¶ 216.)*fn1

On April 4, 2000, the holding company, MetLife, Inc., announced its initial public offering ("IPO") of 202 million shares of common stock to be sold at $14.25 per share. The company also announced private placements of MetLife, Inc. stock. On April 7, 2000, the closing date of the IPO and the private placements, MetLife Co. became a wholly owned subsidiary of MetLife, Inc.

Pursuant to the demutualization plan, upon MetLife Co.'s conversion from a mutual insurance company to a stock corporation, policyholders received compensation, one form of which was the issuance of common stock, which was held in trust. The amount of stock a policyholder received was based on his status as a participating or a nonparticipating policyholder. According to the Complaint filed by Martin Gold, Mary A. DeVito, Michael A. Giannattasio, Kevin L. Hyms and Harry S. Purnell, III, participating policyholders were those policyholders who had both a statutory interest in MetLife Co.'s surplus and a right to vote on matters submitted to policyholder votes such as director elections; nonparticipating policyholders, in contrast, only had the right to vote but not the right to the surplus.*fn2 Under the plan, both types of policyholders received a fixed amount of stock, ten shares, as compensation for the surrender of their membership interests in the mutual life insurance company. Participating policyholders were eligible for additional stock as determined by an actuarial formula which factored the participating policy's past and estimated future contributions to MetLife Co.'s surplus.

Plaintiffs claim that material information on several matters was omitted from the PIB. Although the plaintiffs admit that the PIB provided descriptions of voting rights and rights to participate in the surplus, the plaintiffs claim that it omitted information concerning

(i) . . . the value of those rights; (ii) the value of the rights of a shareholder in a Delaware corporation (without the Trust) and the costs associated with exercising those rights; and (iii) the value of those rights as beneficiaries of the Trust and the costs associated with that organizational structure.

(Gold Compl. ¶ 28.)

The plaintiffs also allege that the PIB was false and misleading because it did not contain facts showing that the distribution of shares of stock to policyholders was unfair. The distribution of stock was allegedly unfair because it overvalued the right to vote: as alleged in the Complaint, the cumulative value of the ten shares distributed to all policyholders in exchange for their membership interests was equal to approximately sixteen (16%) percent of MetLife Co.'s $13.6 billion surplus, which, according to the plaintiffs, was converted into equity upon demutualization. Plaintiffs maintain that as participating policyholders they were entitled to a greater amount of the stock issued in exchange for membership interests because only they had statutory interests in the surplus. In the plaintiffs' words, the PIB violated the Securities Act because it "is false and misleading in that it omits any discussion about the value of the equity [approximately $2 billion] allocated to voting rights of participating and nonparticipating policyholders, or that the value ascribed to voting rights is materially greater than the actual value of those rights." (Gold Compl. ¶ 34.)

Plaintiffs further allege that the PIB omitted material information regarding the differences in the expense of contesting elections in a mutual insurance company and in a stock corporation. It is axiomatic, the plaintiffs claim, that the increased costs of elections will reduce the value of policyholders' interests in MetLife, Inc.*fn3

Plaintiffs filed multiple complaints alleging violations of Section 12(a)(2) of the Securities Act, 15 U.S.C. § 771(a)(2). Defendants now move to dismiss.


1. Rule 12(b)(6) Standard

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