Ohio National Trailing Commissions Litigation

Reps Who Sold Ohio National GMIB Variable Annuities are “3rd Party Beneficiaries” Between ONL & Broker-Dealers, Judge Says

On June 28, 2019, Federal Magistrate Judge Stephanie Bowman rejected Ohio National Life’s request to dismiss the class action case against it based on ONL’s failure to make promised commission payments for variable annuities that have already been sold.

In most lawsuits, the person or company being sued has three chances to win the case. First, they can file a motion to dismiss early on in the case, asking the judge to throw the case out before the parties even exchange evidence. If that is unsuccessful, a defendant usually takes a second shot at winning by filing what’s called a motion for summary judgment, asking the judge to throw the case out after the parties exchange evidence, but before trial. And, of course, if the case should go all the way to trial, the party being sued can still win at trial.

Latest Development in Ohio National Trailing Commissions Class Action

ONL has now had its first shot at winning the case, and, thankfully for the class of representatives that we represent, it failed. ONL asked the Court to dismiss the case on the theory that its contract was with broker-dealers, not with registered representatives, and so registered representatives could not complain when ONL breached the contract.

We opposed this motion, arguing that the registered representatives are “third-party beneficiaries” of the contracts with ONL. In essence, someone is a third-party beneficiary of a contract when, even though the contract is between two other people, both people who sign the contract know that the third party has a stake in it and will benefit from it.

We argued that because the ONL policies could not be sold without the involvement of registered representatives, because of the specific language in the contract, and because the contract recognized that broker-dealers would pay commissions to representatives after receiving commission from ONL, that registered representatives had the right to sue as third-party beneficiaries. The Court agreed with us, and refused to throw out the case.

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While the case will have to continue to be litigated, this is a monumental victory for the representatives who have been short-changed by ONL’s illegal decision to stop paying commissions on policies already issued.

Not only will the case go forward, but, in our view, this was ONL’s very best chance to prevail. Many cases get thrown out of court at the summary judgment stage, based on the evidence the parties collect over the course of a lawsuit. (Think of a car wreck case that depends on what witnesses say about which driver ran the red light.)

But in this case, the evidence is not likely to change anything. The contracts between ONL and broker-dealers say what they say – nothing about the evidence yet to be exchanged in the lawsuit will likely change that. And the Magistrate Judge has now determined that representatives have the right to sue under those contracts as third-party beneficiaries. We believe it now becomes quite unlikely that ONL can successfully convince the Court to throw the case out somewhere else down the line.

The bottom line: Representatives who are losing money because ONL has unlawfully stopped paying commissions just took a huge step forward to receiving the justice that they deserve.

You can read the full Class Action Complaint and learn more about the Ohio National Trailing Commissions Lawsuit here. To speak with a lawyer about a potential case, call (888) 882-6199.