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Why the Ohio National Annuity Legal Debacle May Resolve Faster Than You Think

By Miriam Rozen January 15, 2019

If a prediction made by Next Financial’s outside lawyer proves accurate, the rash of lawsuits filed against Ohio National Financial will be resolved quickly.

Since November 1, 2018, broker-dealers and advisors, including Next Financial, have filed at least nine lawsuits against the insurer, alleging Ohio National violated its contractual obligations with its unexpected decision to stop paying trailing commissions on its variable annuity contracts.

“I don’t think we need a lot of discovery. I think the court can do it from a contract construction. This can be teed up pretty quickly,” says Andrew Harvin, a partner in Houston’s Doyle, Restrepo, Harvin & Robbins, who represents Next Financial. The broker-dealer was among the first to file a lawsuit against Ohio National. Initially, Next Financial filed its claims in Texas state court but last month the case was removed to a Houston federal court.

So far, none of the plaintiffs, which include UBS, RBC Capital Markets, and LaSalle Street Financial, have begun working cooperatively, such as engaging in joint discovery requests, Harvin says. “There is no consensus on strategy that I know of. I have not been in touch with other plaintiff counsel,” Harvin says.

For its part, Ohio National declined to comment on pending litigation, according to a spokesperson.

The company, however, recently sent a message directly to holders of its variable annuities, under the heading: “Recent changes that may affect your financial professional’s compensation.”

In the message, Ohio National states it “will no longer pay ongoing compensation to certain broker-dealers.”

As a result, the letter says that if its recipients continue holding their variable annuities, their financial professionals could be influenced by their own compensation status when they recommend whether replacement annuities offered by Ohio National are a preferred option. The subtext seems clear: your advisor is conflicted.

The Ohio National message, however, closes with the pledge that it will continue to provide financial professionals with the information they need to service the variable annuities.

“That letter highlights what a horrible mess this is,” says David Meyer, a lawyer at Columbus, Ohio’s Meyer Wilson Co. Meyer represents Lance Browning, an LPL-registered representative, who has filed a proposed class-action lawsuit against Ohio National on behalf of himself and other advisors. Browning stands to lose $90,000 a year in trailing commissions because of Ohio National’s abrupt cancellation, Meyer says.

Ohio National’s direct letter to annuity holders has led to other financial advisors and broker-dealers’ registered representatives calling Meyer to find out their legal options, the plaintiff lawyer says. The FAs tell Meyer their clients are confused about what they should do, he says.

Like Next Financial’s counsel, Meyer also says reams of document production and years of litigation are unnecessary to resolve the cases against Ohio National. “This might be resolved on summary judgment,” Meyer says.

In general, Meyer’s client and the broker-dealer plaintiffs are asking the courts to declare that their interpretation of Ohio National’s contract obligations is correct. Therefore, they ask the courts to rule the insurer is violating its contracts unless it keeps paying the annuities’ trailing commissions as long as the holders continue to own the instruments.