Paine v. Jefferson National Life Insurance Company et al

Filing 96

RECOMMENDED DISPOSITION recommending that the District Court grant 53 , 59 , 62 Defendants' Motions for Summary Judgment; recommending the District Court deny 42 Plaintiff's Motion to File Amended Complaint; recommending the Court deny 44 Plaintiff's Motion to Compel, 45 Defendant Jefferson's Motion to Compel, and 57 Defendant Jefferson's Motion to Exclude Testimony of Plaintiff's Expert; and recommending the Court deny as moot 60 Defendant Protective's Motion to Exclude Testimony of Plaintiff's Expert. Objections to R&R due by 10/16/2008. Signed by Magistrate Judge Beth Deere on 10/02/08. (hph)

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IN THE UNITED STATES DISTRICT COURT E A S T E R N DISTRICT OF ARKANSAS E A S T E R N DIVISION W .T . PAINE v. No. 2:07CV00124 JLH-BD PLAINTIFF J E F F E R S O N NATIONAL LIFE I N S U R A N C E COMPANY f/k/a CONSECO V A R IA B L E LIFE INSURANCE COMPANY; a n d PROTECTIVE LIFE INSURANCE COMPANY DEFENDANTS R E C O M M E N D E D DISPOSITION I. P r o c e d u r e s for Filing Objections: T h e following recommended disposition has been sent to Chief United States D istric t Judge J. Leon Holmes. Any party may serve and file written objections to this re c o m m e n d a tio n . Objections should be specific and should include the factual or legal b a sis for the objection. If the objection is to a factual finding, specifically identify that f in d in g and the evidence that supports your objection. Your objections must be received in the office of the United States District Court Clerk no later than eleven (11) days from th e date you receive the Recommended Disposition. Failure to file timely objections may re su lt in a waiver of the right to appeal questions of fact. II. B a c k gro u n d : O n January 7, 1988, Plaintiff W.T. Paine, M.D. purchased fifteen (15) life in s u ra n c e policies from Union Life Insurance Company ("Union Life") for one hundred th o u s a n d dollars ($100,000.00) each, for a total of one million, five hundred thousand d o lla rs ($1,500,000.00). This case involves thirteen of those Union Life policies (the " P o l ic ie s " ).1 All of the Policies are identical in their terms and conditions. T h ro u g h a series of mergers, stock purchases, and name changes, Union Life b e c am e Conseco Variable Insurance Company ("Conseco") which in June, 2003, changed its name to Jefferson National Life Insurance Company ("Jefferson"). On March 29, 2 0 0 2 , Protective Life Insurance Company ("Protective") entered into a Coinsurance A g r e e m e n t with Conseco to assume "Contractual Liability" for certain insurance policies, in c lu d in g the Policies at issue in this case. A June, 2003, letter to Plaintiff advised him of C o n s e c o 's name change to Jefferson and that the Policies would be administered by P r o t e c ti v e .2 W h e n Plaintiff was considering purchasing the Policies in 1988 he met with Ben B e c k er, who sold Union Life policies in and around Helena, Arkansas. Becker arranged f o r Plaintiff and his full-time business manager, Don Thomas, to meet Anthony W. F a k o u ri, an employee of Union Life. At the meeting, Mr. Fakouri told Plaintiff about the p o licie s. Specifically, Mr. Fakouri told Plaintiff that the policies earned interest at a g u a ra n te e d minimum rate of 6% per year, and that the insured could borrow against the in ter e st earnings on the policies. By using a "zero-net-cost loan," Plaintiff could avoid At issue are policies numbered: 01UE284235, 01UE284236, 01UE284237, 0 1 U E 2 8 4 2 3 8 , 01UE284239, 01UE284240, 01UE284241, 01UE284242, 01UE284243, 0 1 U E 2 8 4 2 4 4 , 01UE284249, 01UE284251, and 01UE284276. T h ro u g h o u t the remainder of this Recommended Disposition, the Court will refer to both Conseco and Jefferson as "Jefferson." 2 2 1 ta x liability on the interest earnings. Mr. Fakouri explained that by borrowing only the g u a r a n te e d 6% earnings on the policies, there would be no effect on the guaranteed cash v a lu e or the guaranteed death benefit set forth in the policy. Plaintiff purchased the P o lic ie s in 1988 and read the Policies when he received them. (docket entry #55-3 3 at pp. 4 , 11) The Policies provide: T h is policy is a legal contract between y o u and us R E A D YOUR POLICY CAREFULLY W e will pay the proceeds of this policy to the owner on the maturity date if th e insured is living on that date. Upon our receipt at our Home Office of d u e proof that the insured died before the maturity date and while this p o lic y was in force, we will pay to the beneficiary, the death benefit, less a n y indebtedness, as specified in the Death Benefit provision. (#5 5 -2 at p. 1) (bold in original). T h e Policies define the terms "proceeds" and "indebtedness" as follows: P R O C E E D S . Proceeds means the amount payable on the maturity date, on th e surrender of this policy prior to the maturity date, or upon the death of th e insured. T h e proceeds payable on death will be the death benefit less any in d e b t e d n e s s . If the policy is surrendered, the proceeds will be the cash s u rre n d e r value. On the maturity date, the proceeds will be the cash value le s s any indebtedness. *** The exhibits the parties have filed with the Court using its CM/ECF system were a ss ig n e d a unique number and page number which appears as a header on the top of each p a g e of the document. Throughout this Recommended Disposition, the Court will refer to all documents by their header number. 3 3 I N D E B T E D N E S S . Indebtedness means all existing loans on this policy p lu s earned interest which has either accrued or been added. (# 5 5 -2 at pp. 7, 10) (bold in original). The Policies include a merger clause which provides, "[t]he entire contract consists o f this policy and the application, a copy of which is attached." (#55-2 at p. 7) They also in c lu d e a provision that states, "[t]he only way your policy may be changed is by written ag ree m en t. . . . No agents or other person has our permission to tell you that one or more o f its terms or provision do not apply to you." (#55-2 at p. 7) Plaintiff had the right to c a n ce l the Policies and receive a full refund of his premium payments any time within one yea r after he received them. (#55-2 at p.1) The Policies earned 8.5% interest for the first year, greater than the guaranteed m in im u m 6%. In 1989, Mr. Fakouri submitted a request, on Plaintiff's behalf, for an in te re st-o n ly loan on the Policies, and Plaintiff began receiving loan checks. The loan re q u e st form that Plaintiff signed when he requested the loan contained the following la n g u a g e : "BY SIGNING BELOW, OWNER OF POLICY ACKNOWLEDGES THAT A N Y LOAN REQUESTED IS A FIRST LIEN ON THE POLICY WHICH SHALL BE D E D U C T E D FROM ANY BENEFITS OR NONFORFEITURE VALUES." (#55-10 at p . 2) In December 1990, Plaintiff wrote a letter to Jefferson requesting information a b o u t his Policies. He stated, "[o]n a recent status report I noticed that you state that the 4 d e a th benefit on the policies will be reduced by any unpaid loans. My rough calculations s h o w that I have borrowed approximately $311,250 from my policies. Does this mean th a t my current death benefit is calculated as follows?" (#55-13 at p. 1) Plaintiff went on to write, "[t]aking it a step further, if I continue to borrow $120,000 per year out of my 15 p o lic ie s this would put my total loan valued in 10 years at approximately $1,511,250. . . ." (#55-13 at p. 1) On January 9, 1991, Ann Bowman, a Senior Analyst with Jefferson, sent Plaintiff a le tte r responding to his questions. (#55-14) Ms. Bowman enclosed pages five and six of o n e of Plaintiff's Policies with her letter and set forth an example for calculating the d e a th benefit. She wrote, "[i]f a loan is taken the death benefit will be reduced by the a m o u n t of the outstanding loan at death." (#55-14) Ms. Bowman went on to write, "if th e loan balance is equal to or less than the interest earned, the death benefit would never b e less than the total premiums paid. If, however, the loan balance exceeded the interest e a rn e d , the death benefit could possibly be less than the premium paid." (#55-14) In January 1994, Jefferson began exercising its right under the Policies to deduct th e cost of insurance each month from the cash value of the Policies.4 (#55-2 at pp. 5, 6, The Policies provide that, "the monthly deduction for a policy month is the cost of in s u ra n c e for the policy month." (#55-2 at p. 9) The cost of insurance is calculated using a formula set forth in the Policies. (#55-2 at p. 9) The Policies provided that the cost of in s u ra n c e could not exceed rates shown on the Policy Information page. (#55-2 at pp. 5, 6 , and 9) 5 4 a n d 9) The cost of insurance was reflected on Plaintiff's annual statements. (#55-15, pp. 1 -40 ) In 1997, Plaintiff requested the amount required to pay off loans secured by three o f his Policies. Jefferson's response to the inquiry concerned Plaintiff, because he th o u g h t he was being charged excessive interest. Plaintiff requested an investigation, and Je f f e rso n found an error in the interest calculation on his Policies. (#55-16) As a result o f the calculation error, in December, 1997, Jefferson sent Plaintiff a letter explaining th e ir error and enclosed a "Loan Recalculation" page showing cumulative loan balances f o r each policy. (#55-16) In December, 2000, Plaintiff surrendered two of the fifteen policies he originally h a d purchased.5 Plaintiff signed a "request to surrender" form indicating he understood th a t the net cash value he would receive upon surrender of each policy would be c a lc u la te d by deducting any outstanding loan balance and applicable surrender charges f r o m the gross cash value of the policy. (#55-4) Upon surrendering the two policies, P la in tif f received net cash value checks for $81,661.32 and $82,519.44. (#55-18 at p.2) In 2002, Plaintiff's monthly loan checks stopped without explanation. On S e p te m b e r 1, 2002, Plaintiff's counsel sent a letter to counsel for Jefferson threatening litig a tio n because "past payments [to Plaintiff] are [being] treated by Conseco as policy lo a n s." (#55-19 at pp. 1-2) On September 25, 2002, Plaintiff's counsel followed up with 5 Plaintiff surrendered policy numbers 15UE284185 and 15UE284234. 6 a n o th e r letter arguing that Plaintiff's policy values had been calculated improperly. (#552 0 at pp. 1-2) She wrote: A s you are aware, there still remains a significant dispute as to the a c co u n tin g on the 13 remaining policies. Dr. Paine's receipt and cashing of th e check does not alter his position that he has guaranteed death benefits of $ 1 5 4 ,4 7 8 per policy, for a total sum of $2,008,214. The monthly payments, w h ic h have always equaled the guaranteed interest sum of 6%, should not b e charged against the policies' cash value and pursuant to the policy, the ca sh value after 14 years should be at least $132,158.47 per policy, for a to ta l sum in excess of $1,700,000. (# 5 5 -2 0 at p. 1) P ro te c tiv e began administration of the Policies on July 1, 2003. (#61 at p. 3) On Ju ly 10, 2003, Protective sent Plaintiff a letter confirming that it had processed his " re q u e st for a loan" and mailed him a check. The letter went on to explain that, "the in te re st charged on your loan may be greater than the interest earned on your cash value s e c u rin g the loan." (# 7 3 -2 at p. 16) The $6,500 check dated July 7, 2003, that Plaintiff re c e iv e d included Protective's standard endorsement that read in part, "[I]f this check is f o r a loan(s), it is subject to the terms of the policy(s) identified on this check's stub. By e n d o rs in g this check, each payee assigns the policy(s) as of the date of this check to: P r o te c tiv e Life Insurance Company as security for said loan(s) and interest thereon." After receiving the check, Plaintiff advised Protective that he would not accept the check w ith the endorsement and requested that they send him an "interest earnings" check w ith o u t the endorsement. (#82 at p. 7, 38) Protective refused to remove the 7 e n d o rs e m e n t but continued to send Plaintiff checks which he did not cash. (#82 at p. 7, 3 9 ) III. P r o c e d u r a l History: P la in tif f filed this lawsuit in the Circuit Court of Phillips County, Arkansas on A u g u s t 17, 2007. The case was removed to the District Court on September 21, 2007. Soon after removing the case, Plaintiff filed an Amended Complaint raising the following c la im s : (1) breach of contract; (2) deceptive trade practices in violation of Ark. Code A n n . 23-66-206; (3) intentional infliction of emotional distress/outrage; and (4) a tto rn e y's fees and 12% penalty damage. Plaintiff has a pending motion to file a second a m e n d e d complaint. Plaintiff raises the following claims in his proposed second a m e n d e d complaint: (1) declaratory judgment; (2) breach of contract; (3) deceptive acts o r practices in violation of Ark. Code Ann. 23-66-206; (4) bad faith; (5) fraudulent m is re p re s e n ta tio n ; (6) enhanced penalties under Ark. Code Ann. 4-88-201, et seq.; and (7 ) attorney's fees and 12% penalty. T h e District Court has referred (#65 and #86) the following motions to this Court: Plaintiff's Motion to file Amended Complaint (#42); Plaintiff's Motion to Compel (#44); D e f en d a n t Jefferson's Motion to Compel (#45); Defendant Jefferson's Motion for S u m m a ry Judgment (#53); Defendant Jefferson's Motion to Exclude Testimony of P la in tif f 's Expert (#57); Defendant Protective's Motion for Joinder and Adoption of Je f f e rso n 's Motion for Summary Judgment (#59); Defendant Protective's Motion to 8 E x c lu d e Testimony of Plaintiff's Expert (#60); and Defendant Protective's Motion for S u m m a ry Judgment (#62). For the reasons set forth below, the Court recommends that th e District Court GRANT Defendants' Motions for Summary Judgment, DENY P la in tif f 's Motion to file Second Amended Complaint, and DISMISS all other pending m o tio n s as moot. IV . D efe n d a n ts' Motions for Summary Judgment: A. S ta n d ar d Summary judgment is appropriate when the evidence, viewed in the light most f a v o ra b le to the nonmoving party, presents no genuine issue of material fact. FED. R. C IV. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty L o b b y , Inc., 477 U.S. 242, 246 (1986). "[T]he mere existence of some alleged factual d is p u te between the parties will not defeat an otherwise properly supported motion for s u m m a ry judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48 (emphasis omitted). If the opposing party fails to carry that b u rd e n or fails to establish the existence of an essential element of its case on which that p a rty will bear the burden of proof at trial, summary judgment should be granted. See C e lo te x , 477 U.S. at 322. A genuine issue of material fact exists only if there is sufficient e v id e n c e for a jury to return a verdict for the nonmoving party. Anderson, 477 U.S. at 249. 9 B. B r e a ch of Contract 1. S ta tu te of Limitations D e f e n d a n ts argue that Plaintiff's breach of contract claim is barred by the statute o f limitations. Because Plaintiff's breach of contract claim is based on the written in su ra n c e Policies he purchased from Defendants in January 1988, the applicable statute o f limitations for Plaintiff's breach of contract claim is five years. See ARK. CODE ANN. 16-56-111 (Lexis 2005). When the statute of limitations is raised as a defense, the defendant has the burden o f affirmatively pleading the defense. First Pyramid Life Ins. Co. v. Stoltz, 311 Ark. 313, 3 1 7 , 843 S.W.2d 842 (1992), cert. denied, 510 U.S. 908, 114 S.Ct. 290, 126 L.Ed.2d 239 (1 9 9 3 ). When it is clear from the face of the complaint, however, that the action is b a rre d , the burden shifts to the plaintiff to prove by a preponderance of the evidence that th e statute of limitations was, in fact, tolled. Id. at 317-18. D e f e n d a n ts assert that Plaintiff's breach of contract claim is based on his c o n te n tio n that Defendants began miscalculating the value of the Policies, and thus D e f en d a n t's claim the cause of action accrued when Plaintiff began borrowing money a g a in s t the Policies in February of 1989. (#54 at p. 19) Plaintiff, on the other hand, a rg u e s that the claim did not accrue until he knew of the breach on January 25, 2006, w h e n "Jefferson acknowledge[d] ownership of the Policies" in a letter written to the A rka n sas Insurance Department. (#80 at p. 10) 10 P la in tif f 's argument is contrary to Arkansas law which provides that, absent f ra u d u len t concealment, a cause of action accrues and the statute of limitations begins to ru n the moment the right to commence an action comes into existence, not when the c a u s e of action is discovered. Shelter Mut. Ins. Co. v. Nash, 357 Ark. 581, 587-588, 184 S .W .3 d 425, 428 (2004) (citing Ray & Sons Masonry, 353 Ark. 201, 216, 114 S.W.3d 1 8 9 , 198 (2003); Courtney v. First Nat'l Bank, 300 Ark. 498, 780 S.W.2d 536 (1989)). In his amended brief in response to Jefferson's motion for summary judgment, P la in tif f argues that Jefferson breached the contract by failing to administer the Policies in accordance with their terms. (#80 at pp. 13-14) Specifically, Plaintiff claims that D e f en d a n ts breached the Policies by failing to pay him "interest earnings" he was entitled to "as zero net cost loans," by deducting the cost of insurance from the Policies, and by m iscalcu latin g the cash values and death benefits on the Policies. (#80 at pp. 13-14) Under Plaintiff's theory, his cause of action for breach of contract accrued, at the la te st, in January of 1994, when Defendants began deducting the cost of insurance from th e cash value of the Policies. Plaintiff claims the deductions breached the Policies b e c a u s e they: (1) reduced the cash value of the Policies each month, resulting in less in te re st earnings on the Policies; (2) reduced the amount he could borrow each month on a zero-net cost basis; and (3) went against representations Mr. Fakouri allegedly made th a t insurance would not deducted from his Policies. In spite of the deductions for in s u ra n c e , Plaintiff continued to take loans of $500.00 per month on each of the Policies. 11 A s a result, beginning in January, 1994, Plaintiff began taking monthly loans on the P o licie s in excess of the interest earned. Under the terms of the Policies, Defendants c h a rg e d Plaintiff interest on those loans, and treated them as loans that had to be repaid or th e amount deducted from the death benefits or cash surrender values of the Policies. Plaintiff claims the contracts include terms that were not part of the written P o lic ie s. Specifically, Plaintiff claims that in 1988, Mr. Fakouri guaranteed him a stream o f tax free income at the guaranteed minimum interest rate of 6% per year and told him th a t he would not be charged insurance on the Policies. (#82 at p. 2, 9; p. 3, 14) P la in tif f also claims that Defendants have breached what he calls the "course of dealing" o f the parties. Plaintiff asserts that the dealings between the parties over the years e sta b lish e d an agreement by Defendants to reduce his monthly loan payments a u to m a tic a lly to equal the interest earned on the Policies. Under Arkansas law, the statute of limitations on oral contracts is three years. ARK. CODE ANN. 16-56-105 (Lexis 2005). Plaintiff acknowledges that Mr. Fakouri's s ta te m e n ts were made in 1988. Again, Plaintiff's breach of contract claim on any oral c o n tra c t Plaintiff is alleging would have accrued, at the latest, in 1994, when Defendants b e g a n deducting for insurance on the Policies resulting in a breach when Defendants did n o t, upon the request of Plaintiff, adjust his monthly loan payments to account for the d e d u c tio n . Accordingly, even if Mr. Fakouri's statements and the course of dealings of 12 th e parties established a separate contract, the contract claim is still barred by the statute o f limitations. Plaintiff's cause of action for breach of contract accrued, and the statute of lim ita tio n s began to run, at the latest, in January, 1994. The statute of limitations expired, a t the latest, in January, 1999, more than eight years before this lawsuit was filed. Accordingly, unless equitable tolling applies, Plaintiff's breach of contract claim is barred b y the statute of limitations. 2. E q u ita b le Tolling A s an alternative to his argument that the cause of action accrued in January, 2006, Plaintiff argues that "equitable tolling" should apply because Defendants denied him "the in f o rm a tio n necessary to determine that Jefferson was breaching the contract." (#80 at p. 9 ) Plaintiff claims that, until January, 2006, Defendants provided him with "non-answers to his questions regarding interest rates being charged, couching those non-answers in te rm s artfully designed to reassure Plaintiff that his policies were being administered a c co rd in g to the contract terms and the course of dealing between Plaintiff and Jefferson a n d its predecessors in interest." (#80 at p. 10) P lain tiff claims the "equitable tolling doctrine allows a plaintiff to avoid the statute o f limitations bar if, despite due diligence, he is unable to obtain important information re g a rd in g the existence of his claim." (#80 at p. 9) Defendants argue that "equitable 13 to llin g " is applicable only to federal statutory claims and does not apply to claims asserted u n d e r Arkansas state law. Arkansas courts have recognized equitable tolling in cases of fraudulent c o n c ea lm e n t. See Stracener v. Williams, 84 Ark. App. 208, 213, 137 S.W.3d 428, 431 (2 0 0 3 ) ("it is `hornbook law' that limitations periods are customarily subject to equitable to llin g unless it would be inconsistent with the relevant statute") (citing Young v. United S ta te s, 535 U.S. 43, 49, 122 S.Ct. 1036, 152 L.Ed.2d 79 (2002)). Fraudulent concealment m a y suspend the statute of limitations until the party who has the cause of action d is c o v e rs , or should have discovered, the fraud by exercising reasonable diligence. First P y ra m id Life Ins. Co., 311 Ark. at 318. Ignorance on the part of the plaintiff is not e n o u g h to suspend the statute of limitations. Id. at 319. Ignorance which is the result of a n affirmative and fraudulent act of concealment, however, does suspend the running of th e statute of limitations. Elder v. The Security Bank of Harrison, 68 Ark. App. 132, 5 S .W .3 d 78 (1999) (citations omitted). Further, a failure to disclose may prevent the s ta tu te of limitations from running when there is an affirmative duty to speak. Id. W h ile a question of fraudulent concealment is normally a question of fact that is n o t suited for summary judgment, Arkansas courts have held that when the evidence le a v es no room for a reasonable difference of opinion, a trial court may "resolve fact is s u e s as a matter of law." Varner v. Peterson Farms, 371 F.3d 1011, 1016-1018 (8th C ir. 2004) (quoting Alexander v. Flake, 322 Ark. 239, 910 S.W.2d 190, 191 (1995)). 14 T h e facts in this case do not support Plaintiff's claim that Defendants took a f f irm a tiv e steps to fraudulently conceal his claims. Plaintiff was given the original P o lic ie s when he purchased them in January, 1988. He read the policies. (#55-3 at pp. 4, 1 1 ) In a December 17, 1990 letter, Plaintiff acknowledged receiving a "recent status re p o rt" and noticed "the death benefit on the policies will be reduced by any unpaid lo a n s." In the same letter, Plaintiff calculated that he had already taken out a total of " ro u g h ly $311,250" in loans. (#55-13 at p. 1) On January 9, 1991, Jefferson wrote P la in tif f to respond to his December, 1990, correspondence and told Plaintiff that the d e a th benefit on his Policies might be reduced by the amount of any outstanding loan on th e policy, if the loan value was equal to or less than the interest earned. (#55-14) This s ta te m e n t was not ambiguous or misleading, but rather was in line with the terms of the P o lic ie s . In December, 1997, Jefferson made Plaintiff aware of an error in its calculation of in te re st on the loan balances of his Policies. (#55-16 at p. 1) Jefferson notified Plaintiff that the loan balances on all of his Policies had been recalculated. (#55-16 at pp. 1-2) Jefferson gave Plaintiff a "detailed `Loan Recalculation' page for each policy showing the errant loan calculation and the corrected loan recalculation." (#55-16 at pp. 4-19) The "Loan Recalculation" page clearly shows loan balances on each of Plaintiff's Policies a n d indicates that Defendants did not take affirmative steps to conceal its alleged breach o r to mislead Plaintiff about the Policies. 15 P lain tiff acknowledges that Jefferson provided him with annual statements on his p o lic ie s between 1998 and 2002. (#55-3 at pp. 25-26) The annual statements reflected u n p aid loans on the Policies. (#55-3 at p. 26) In December 2000, Plaintiff was again made aware of his loans against the P o lic ie s when he signed a "request to surrender" form for two of his policies that in d ic a te d that he understood the net cash value he would receive upon surrender would be c a lcu late d by deducting any outstanding loan balance on the policy and applicable s u rre n d e r charges from the gross cash value of the policy. Plaintiff acknowledges re c eiv in g two net cash value checks with deductions taken for outstanding loan balances o n the policies.6 In the light of Plaintiff's acknowledgment of the deductions taken for o u tsta n d in g loans from value checks he received and negotiated, Plaintiff cannot claim ig n o ra n c e resulting from an affirmative and fraudulent act of concealment by the D e f e n d a n ts . In 2002, Plaintiff retained counsel to represent him in matters relating to the P o lic ie s. On September 1, 2002, Plaintiff's counsel sent a letter to counsel for Jefferson th re a te n in g litigation because "past payments [to Plaintiff] are [being] treated by Conseco a s policy loans." Not only was Plaintiff aware of Defendants' alleged breach of the Plaintiff received checks for $81,661.32 and $82,519.44 on his surrendered p o lic ie s, significantly less than the $100,000 premium he paid for each policy in 1988. 16 6 P o lic ie s, but, on his behalf, counsel was threatening to bring the very lawsuit that he w a ite d more than five years to bring. E v e n in the case of fraudulent concealment, a litigant in Arkansas must show that h e was reasonably diligent in order to take advantage of the doctrine of equitable tolling. S e e Stracener v. Williams, 84 Ark. App. 208, 137 S.W.3d 428 (citing Smith v. St. Paul F ir e & Marine Ins. Co., 76 Ark. App. 264, 64 S.W.3d 764 (2001)). Plaintiff has not e sta b lis h e d that Defendants took affirmative steps to conceal their alleged breach of the P o lic ie s or that he was reasonably diligent in bringing a claim to prevent the running of th e statute of limitations. See Hampton v. Taylor, 318 Ark. 771, 887 S.W.2d 535 (1994) (a f f irm in g the grant of summary judgment because mere allegations of fraud, unsupported b y evidence, are not enough to create an issue of material fact on whether the statute of lim itatio n s should be tolled for fraudulent concealment). T h e statute of limitations began to run on Plaintiff's breach of contract claim, at the latest, in January, 1994, and expired on January 31, 1999, more than eight years b ef o re this lawsuit was filed. Accordingly, the Court recommends that the District Court g ra n t Defendants' motions for summary judgment on Plaintiff's breach of contract claim. C. I n t e n tio n a l Infliction of Emotional Distress/Outrage In his Amended Complaint, Plaintiff asserts a claim for intentional infliction of e m o tio n a l distress/outrage. Under Arkansas law, the limitations period for the tort of o u tra g e is three years. ARK. CODE ANN. 16-56-105 (Lexis 2005). Accordingly, the tort 17 c la im is barred if it accrued before August 17, 2004. At his deposition, Plaintiff alleged th a t he had suffered emotional distress from Defendants' allegedly outrageous conduct in 2 0 0 2 . (#55-2 at p. 22) Based on Plaintiff's testimony, his emotional distress/outrage c la im is barred by the statute of limitations, and the Court recommends that the District C o u rt grant Defendants' motions for summary judgment on the claim. D. A r k a n s a s Deceptive Trade Practices Act P la in tif f also claims Defendants have violated the Arkansas Deceptive Trade P r a c tic e s Act ("the Act").7 While the Act gives the state authority to establish rules of c o n d u c t and punish offenders, it does not give private individuals, who are insured, the a u th o rity to bring a private cause of action against an insurance company for violations of th e Act or for violations of regulations promulgated under the Act. See ARK. CODE ANN. 23-66-202(b); Design Professionals Ins. Co. v. Chicago Ins. Co., 454 F.3d 906, 9 1 1 -91 2 (8th Cir. 2006); Columbia Mut. Ins. Co. v. Home Mut. Fire Ins. Co. , 74 Ark. A p p . 166, 175, 47 S.W.3d 909, 914 (2001). Because under the Act Defendants owe a d u ty to the state, and not to the insured, Plaintiff does not have a private right of action against Defendants under the Act. Accordingly, the Court recommends that the District C o u rt grant Defendants' motions for summary judgment on Plaintiff's claim under the A c t. Plaintiff does not allege an emotional distress/outrage claim in his proposed S e c o n d Amended Complaint. (#42-2 at pp. 14-21) 18 7 V. P la in tiff's Motion for Leave to File Second Amended Complaint: P la in tif f seeks leave to file a Second Amended Complaint which adds claims for b a d faith, fraudulent misrepresentation, declaratory judgment and enhanced penalties u n d e r Ark. Code Ann. 4-88-201 et seq. (#42-2 at pp. 14-20) Defendant Jefferson o b je c ts to the motion, arguing that Plaintiff inappropriately waited until the end of d isco v ery to file the motion adding new claims. (#43) Rule 15(a) of the Federal Rules of Civil Procedure provides that leave to amend s h o u ld be "freely given when justice so requires." However, "denial of leave to amend m a y be justified by undue delay, bad faith on the part of the moving party, futility of the a m e n d m e n t or unfair prejudice to the opposing party." United States ex rel. Gaudineer & C o m ito , L.L.P. v. Iowa, 269 F.3d 932, 936 (8th Cir. 2001) (internal quotation omitted). As set forth below, the Court recommends that the District Court deny Plaintiff's m o tio n to amend, because the amendments are futile. A. B a d Faith In his proposed Second Amended Complaint, Plaintiff claims it was bad faith for D e f en d a n ts to refuse to investigate his claims regarding his Policies despite "repeated re q u e sts made over a period of seven years." Plaintiff's claim of bad faith is barred by 19 A rk a n sa s's three-year statute of limitations if it accrued before August 17, 2004.8 ARK. C ODE ANN. 16-56-105 (Lexis 2005). According to the facts alleged by Plaintiff in the proposed Second Amended C o m p lain t, Defendants acted in bad faith by refusing to investigate his claims about his P o lic ie s for "seven years." (#42-2 at p. 17, 71) Assuming Plaintiff's statement is true, D ef en d an ts ' alleged bad faith occurred and the cause of action accrued in 2001, six years b e f o re Plaintiff's original complaint was filed. Moreover, in his amended brief in o p p o sitio n to Jefferson's motion for summary judgment, Plaintiff relies on email c o rre sp o n d e n c e written by Jefferson's actuaries on October 10, 1997 and December 29, 1 9 9 7 , and correspondence Defendants sent to him on December 23, 1997, to establish his c la im of bad faith. (#80 at pp. 18-19) P la in t if f again attempts to argue the statute of limitations should be tolled because D e f en d a n ts fraudulently concealed facts that would have put him on notice of the bad f a ith . As set forth above, however, a beneficiary's ignorance of his rights does not p re v e n t the operation of the statute of limitations. See First Pyramid Life Ins. Co. v. S to ltz, 311 Ark. at 319. In this case, Plaintiff has not produced evidence of affirmative and fraudulent acts o f concealment on the part of Defendants to conceal the claim. Instead, as indicated For purposes of this Recommended Disposition, the Court assumes, without d e c id in g , that the claims Plaintiff raises in the Second Amended Complaint relate back to th e claims he raised in his original complaint. 20 8 a b o v e , Plaintiff and his counsel had regular correspondence with Defendants regarding h is Policies since he purchased the Policies in 1988. Accordingly, Plaintiff knew or sh o u ld have known of the facts he now alleges establish bad faith, and the Court re c o m m e n d s that Plaintiff's motion to amend to add a bad faith claim against Defendants b e denied as futile. B. F r a u d u l e n t Misrepresentation L ik e the statute of limitations for bad faith, the statute of limitations for fraudulent m is re p re se n ta tio n is three years. See ARK. CODE ANN. 16-56-105 (Lexis 2005); Martin v . Equitable Life Assur. Soc. of the U.S., 344 Ark. 177, 182, 40 S.W.3d 733, 737 (2001). Plaintiff's claim for fraudulent misrepresentation is, therefore, also barred if it accrued b e f o re August 17, 2004. In his proposed Second Amended Complaint, Plaintiff claims tw o fraudulent misrepresentations on which he allegedly relied to his detriment. First, he c la im s Mr. Fakouri made statements about the terms of the Policies in 1987 and 1988. Second, Plaintiff claims Jefferson made misrepresentations about the terms of the Policies in a letter to him dated April 14, 2003. Based on the facts alleged by Plaintiff, his f ra u d u le n t misrepresentation claim accrued, at the latest, in April, 2003. Accordingly, P lain tiff 's claim is barred by the statute of limitations, and the Court recommends that his m o tio n to amend to add the claim be denied as futile. 21 C. D e c la r a to r y Judgment P lain tiff also seeks to amend to raise a new claim for "declaratory judgment." In h is "declaratory judgment" claim, Plaintiff asks the Court to declare that the Policies in c lu d e terms he claims Mr. Fakouri promised him in 1988. A declaratory judgment declares rights, status, and other legal relationships w h e th e r or not further relief is or could be claimed. ARK. CODE ANN. 16-111-103(a) (L e x is 2005); see also Martin, 344 Ark. at 181. A declaratory judgment action is not a s u b s titu te for ordinary causes of action, and is intended to supplement, rather than s u p e rs e d e , those causes of action. City of Fort Smith v. Didicom Towers, Inc., 362 Ark. 4 6 9 , 209 S.W.3d 344 (2005); Martin v. Equitable Life Assur. Soc. of the U.S., 344 Ark. 1 7 7 , 40 S.W.3d 733 (2001). Ordinarily, a declaratory judgment determines the obligations of the insurer under a n insurance policy. Martin, 344 Ark. at 180. In this case, however, Plaintiff is not s e e k in g a determination of his rights under the policy, but rather seeks to have the P o lic ie s reformed to conform to representations allegedly made to him by Mr. Fakouri. "Reformation of contract is available where there has been a mistake of one party a c co m p a n ie d by fraud or other inequitable conduct of the other party, and that is sought b y an action seeking reformation, not by a proceeding for declaratory judgment." Id. at 1 8 0 -81 . Accordingly, the Court recommends that the District Court deny Plaintiff's r e q u e s t to amend his complaint to bring a declaratory judgment action. Such a claim is a 22 f u tile attempt by the Plaintiff to substitute a new claim for his time-barred breach of c o n tra c t claim. See Martin, 344 Ark. at 181. D. D a m a g e s and Attorneys' Fees P la in tif f also brings separate claims for enhanced penalties under Ark. Code Ann. 4-88-201, et seq., attorney's fees and a twelve percent penalty under Ark. Code Ann. 23-79-208. Because the Court recommends that the District Court dismiss Plaintiff's s u b s ta n tiv e claims as barred by the statute of limitations, it recommends that the District C o u rt also dismiss Plaintiff's claims for enhanced damages and attorneys' fees as moot. V I. C o n c lu s io n : F o r the reasons set forth above, the Court recommends that the District Court G R A N T Defendants' Motions for Summary Judgment (#53, #59, #62) and DENY P la in tif f 's Motion to File Amended Complaint (#42). It is furthered recommended that th e Court DENY Plaintiff's Motion to Compel (#44); Defendant Jefferson's Motion to C o m p el (#45); Defendant Jefferson's Motion to Exclude Testimony of Plaintiff's Expert (#5 7 ); and Defendant Protective's Motion to Exclude Testimony of Plaintiff's Expert (# 6 0 ) as moot. DATED this 2nd day of October, 2008. ___________________________________ U N IT E D STATES MAGISTRATE JUDGE 23

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