                            In the

United States Court of Appeals
              For the Seventh Circuit

No. 10-8013

L INCOLN N ATIONAL L IFE INSURANCE C O .,
                                                         Petitioner,
                                v.

P ETER S. B EZICH, individually and on behalf
of a class of others similarly situated,
                                                       Respondent.


                     Petition for Permission to
            Appeal from the United States District Court
      for the Northern District of Indiana, Hammond Division.
        No. 1:09-cv-200-JVB—Joseph Van Bokkelen, Judge.



      S UBMITTED M AY 17, 2010—D ECIDED JUNE 25, 2010




  Before B AUER, P OSNER, and W OOD , Circuit Judges.
  W OOD , Circuit Judge. This petition for permission to
appeal arises out of a class action lawsuit that Peter
Bezich is attempting to pursue in the state courts of
Indiana. Bezich’s complaint asserts that Lincoln National
Life Insurance Company breached the terms of certain
variable life insurance policies it issued. Each month,
Lincoln deducts cost-of-insurance charges from the ac-
2                                               No. 10-8013

counts of its policyholders; the charges, Bezich contends,
are not determined based on expected mortality, as
promised by the policy. Lincoln attempted to remove
the suit to federal court under the Class Action Fairness
Act of 2005 (CAFA), 28 U.S.C. §§ 1332(d), 1453, but the
district court remanded the suit based on CAFA’s excep-
tion to federal jurisdiction for an action “that solely
involves a claim . . . that relates to the rights, duties
(including fiduciary duties), and obligations relating to
or created by or pursuant to any security (as defined
under section 2(a)(1) of the Securities Act of 1933
(15 U.S.C. 77b(a)(1)) and the regulations issued there-
under).” Id. § 1332(d)(9)(C). In this court, Lincoln would
like to challenge the district court’s conclusion that
§ 1332(d)(9)(C) applies. It contends that its petition raises
a “novel and important issue” under CAFA: “whether
contract claims grounded in the traditional insurance
features of variable life insurance policies, as opposed to
those related to their security features, qualify under
the securities exception to CAFA.” Because we agree
with the district court that § 1332(d)(9)(C) applies, and
this also means that we lack appellate jurisdiction, we
dismiss the petition for leave to appeal. See 28 U.S.C.
§ 1453(d)(3). (We note that Lincoln filed a motion for
leave to file a reply to Bezich’s opposition to its petition
and tendered the proposed reply with that motion.
We grant the motion and accept the reply.)
  Policyholders like Bezich hold a single variable life
insurance policy; under the policy, participants may
allocate money between a General Account, which accu-
mulates value from premium payments, and a Separate
No. 10-8013                                              3

Account, an investment account whose value varies
depending on the performance of the investments se-
lected. The Separate Account is registered with the Sec-
urities and Exchange Commission as a unit invest-
ment trust under the Investment Company Act of 1940,
15 U.S.C. §§ 80a-1 to -64. The cost-of-insurance charges
that Bezich is challenging are deducted from the two
accounts in proportion to the amount of money
allocated to each. A participant is not required to invest
in both the Separate Account and the General Account;
indeed, it is possible under the policy to place 100% of
one’s funds in the General Account (though this would
be an odd choice for someone who wanted a variable
life policy to begin with), 100% in the Separate Account,
or to split up the funds as desired. Bezich put all of
his money in the Separate Account.
  Lincoln urges us to accept this appeal because, it says,
no court of appeals has ever considered the application
of CAFA to this type of variable life insurance policy.
Before we may consider the importance of the ques-
tion, however, we must decide whether the appeal
falls within our jurisdiction. The statute providing for
appellate review of district court decisions remanding
to state court actions that have been removed under
CAFA is 28 U.S.C. § 1453(c), (d); as it happens, the lan-
guage that it uses is identical to that governing the
district court’s remand decision in the first instance. Our
discussion will thus necessarily touch on the merits of
Lincoln’s arguments. See Estate of Pew v. Cardarelli, 527
F.3d 25, 31 (2d Cir. 2008) (explaining that “both original
and appellate jurisdiction depend on whether plaintiffs’
allegations fall within CAFA’s exception for claims
4                                                No. 10-8013

that relate to rights, duties and obligations related to or
created by or pursuant to a security”).
   The central question is whether the variable life policy
is a “security” as defined by section 2(a)(1) of the Secu-
rities Act of 1933, 15 U.S.C. § 77b(a)(1). That definition
is broad:
    The term “security” means any note, stock, treasury
    stock, security future, bond, debenture, evidence of
    indebtedness, certificate of interest or participation
    in any profit-sharing agreement, collateral-trust
    certificate, preorganization certificate or subscription,
    transferable share, investment contract, voting-trust
    certificate, certificate of deposit for a security, frac-
    tional undivided interest in oil, gas, or other mineral
    rights, any put, call, straddle, option, or privilege on
    any security, certificate of deposit, or group or index
    of securities (including any interest therein or based
    on the value thereof), or any put, call, straddle, option,
    or privilege entered into on a national securities
    exchange relating to foreign currency, or, in general,
    any interest or instrument commonly known as a
    “security”, or any certificate of interest or participa-
    tion in, temporary or interim certificate for, receipt
    for, guarantee of, or warrant or right to subscribe to
    or purchase, any of the foregoing.
Id. In its petition Lincoln contends that the district court
erred in concluding that the policy is a “security” under
the statute. It points to decisions by this court and others
that have noted, in other contexts, the hybrid nature of
variable life insurance policies. For example, in Roth v.
No. 10-8013                                                5

American Family Mutual Ins. Co., 567 F.3d 884, 886 (7th
Cir. 2009), we explained that variable life insurance
policies “are both securities and insurance contracts.” The
question in Roth, however, was whether an insurance
company was entitled to terminate the contracts of two
of its agents. Had the agents been acting as sellers of
securities, their conduct would have been governed by
an entirely different agency agreement; we found, how-
ever, that they were performing insurance services.
  Lincoln wants to generalize Roth’s willingness to
separate the two aspects of the variable policy into its
component parts. It relies on SEC v. United Benefit Life
Ins. Co., 387 U.S. 202 (1967), in which the Supreme
Court rejected the D.C. Circuit’s conclusion that a
deferred annuity plan, part of which constituted a “secu-
rity” under the Securities Act of 1933 and part of which
involved conventional insurance provisions, had to be
characterized in its entirety for purposes of analyzing
whether it needed to be registered with the SEC. The
Court concluded that because the plan included “[t]wo
entirely distinct promises . . . and their operation is sepa-
rated at a fixed point in time,” the proper method was
to divide the annuity plan into its component parts
and examine the risk allocation in each part. Id. at 207-09.
  We find Lincoln’s reliance on United Benefit mistaken,
for several reasons. First, it is too far removed from
the CAFA definition we have set out above. For CAFA
purposes, we are specifically told to look to the defini-
tion of a “security” in § 2(a)(1), and from that definition
we see that a “security” includes an interest in some-
6                                              No. 10-8013

thing that gives the holder the right to purchase a secu-
rity. Every holder of Lincoln’s variable life policies
enjoys such a right. As the company emphasizes,
someone who at one point has put all of his money in
the General Account may shift funds to the Separate
Account at will. Many—perhaps most—of the class
members already have at least some of their money in
the Separate Account, and Lincoln appears to concede
that those people hold a “security” for CAFA (and
1933 Act) purposes.
   Our understanding of these financial products is con-
sistent with that of the Eleventh Circuit, as reflected in
its opinion in Herndon v. Equitable Variable Life Ins. Co.,
325 F.3d 1252 (11th Cir. 2003). In Herndon, the Eleventh
Circuit held that a variable life insurance policy is a
“covered security” under the Securities Litigation
Uniform Standards Act of 1998 (SLUSA). Although
several circuits had determined that variable annuities
are covered securities under SLUSA, the defendant in
Herndon maintained that the life insurance element of
a variable life insurance policy makes that product dis-
tinct. Id. at 1254. Rejecting that argument, the court of
appeals concluded that the life insurance component of
the policy did not negate the fact that SLUSA’s require-
ments had been met regarding the annuity component. Id.
   We are aware that in Ring v. AXA Financial, Inc., 483
F.3d 95 (2d Cir. 2007), the Second Circuit held that a
children’s term insurance rider attached to a variable
life insurance policy was not a “covered security” under
SLUSA. In its analysis the court “disaggregate[d] [the]
No. 10-8013                                                  7

separate promises” contained in the rider and the
policy to conclude that, although the rider was covered
by the same contract as the policy, which was a covered
security, the rider itself was not such a security. Id. at 100-
01. The defendants argued that Herndon counseled
the opposite conclusion, but the Second Circuit ex-
plained that Herndon involved a single product—a
variable life insurance policy—not “two separate prod-
ucts that are the subject of two separate promises.”
Id. at 101 n.4.
  The present case is more like Herndon. The claims
of the members of the class Bezich wants to represent
concern a single promise—that the cost-of-insurance charge
would be determined in part by expected mortality—and
that promise applies to both the funds they have presently
placed in the Separate Account and those that they have
the right to move to the Separate Account. The policy’s
provision that the charge is taken from both the General
Account and the Separate Account in proportion to the
premiums allocated to each does not alter this. Accord-
ingly, the district court correctly concluded that the
Lincoln policy as a whole is a “security” for CAFA pur-
poses and cannot be viewed as two separate contracts, one
within the statute and the other outside its coverage.
  Lincoln finally argues that the exception to CAFA’s
jurisdiction found in § 1332(d)(9)(C) (and hence the
exception to our appellate jurisdiction) does not apply
because Bezich’s claim does not “solely” involve the
rights, duties, and obligations related to a security, as
required by the statute. If, as we have found, the
8                                                No. 10-8013

variable life policies as a whole meet the definition of a
“security,” then this argument cannot succeed. In addi-
tion, the district court was persuaded by the argument
that the cost-of-insurance charges here are analogous to
the interest-rate claim that the Second Circuit addressed
in Estate of Pew, 527 F.3d at 31-32. That court noted that
the certificates at issue in the case before it created rights
in the holders to a certain rate of interest and to
principal repayment at certain dates. Had the suit chal-
lenged the interest rate, then it would have “related”
to those rights, and the CAFA exception would have ap-
plied. Id. Instead, however, the plaintiff was complaining
about a species of fraud, based on the failure of officers
of the issuer to disclose that the issuer was insolvent at
the time it was marketing the certificates. Id. The latter
claim, the court held, was not one “grounded in the
terms of the security itself,” id. at 32, and thus was not
subject to § 1332(d)(9)(C) and § 1453(d)(3).
  We conclude that Bezich’s claim “relates to the rights,
duties, . . . and obligations relating to or created by or
pursuant to . . . [a] security,” as defined in the 1933 Act,
and thus we have no jurisdiction to entertain its
petition for review of the district court’s order remanding
the case to state court.
                     D ISMISSED FOR W ANT OF JURISDICTION.




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