Stanczyk v. Prudential Insurance Company of America, The
ORDER granting 75 Motion for leave to file an amended answer and counterclaim (See Order Text). Signed by Magistrate Judge CJ Williams on 1/10/2017. (des)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA,
This matter is before the Court pursuant to defendant Prudential Insurance
Company of America’s Motion for Leave to Amend Scheduling Order and For Leave to
File Amended Answer and Counterclaim.
Plaintiff, Amy Stanczyk,
originally sued defendant in state court alleging defendant refused in bad faith to pay her
insurance benefits pursuant to a Group Long-Term Disability Plan.
Defendant filed an answer to the complaint, denying liability. Doc. 9. Defendant now
seeks to amend its answer and assert a counterclaim alleging plaintiff was ineligible for
coverage because she did not work full time.
Defendant’s counterclaim seeks return of
benefits paid by defendant to plaintiff under an unjust enrichment theory.
resists defendant’s motion. Doc. 80. Plaintiff argues defendant has not shown good
cause to modify the Court’s scheduling order.
Plaintiff also argues the Court should
deny defendant’s motion to amend on the ground defendant’s counterclaim is futile
because it is defective for a number of reasons.
On December 5, 2016, the Court heard argument on defendant’s motion. For
the reasons that follow, the Court grants defendant’s motion to amend its answer and
bring a counterclaim.
Plaintiff was a certified public accountant who worked as a part-time independent
On July 7, 2004, plaintiff applied for insurance coverage.
(Exhibit A). Pursuant to the terms of the policy, for plaintiff to be eligible for coverage,
she was required to be “actively at work on full time.” Doc. 75-6, at 9 (Exhibit B).
The policy defines “full time” as “regularly working 17½ or more hours per week.”
Id. The policy further provides:
Your Participant Insurance under a Coverage will be delayed if you do not
meet the Active Work Requirement on the day your insurance would
otherwise begin. Instead, it will begin on the first day you meet the Active
Work Requirement and the other requirements for the insurance. The
same delay rule will apply to any change in your insurance that is subject
to this section. If you do not meet the Active Work Requirement on the
day that change would take effect, it will take effect on the first day you
meet that requirement.
Doc. 75-6, at 10. The policy again defines “Active Work Requirement” as working full
time, meaning “17½ or more hours per week.”
Id., at 18.
On October 13-14, 2016, defendant deposed plaintiff. During her deposition,
plaintiff testified that she charged at least $100 per hour (and up to $150 per hour) for
work she performed from the mid-1990s until she stopped working in 2006. Doc. 75-7
(Exhibit C, at 31, 116-17). Plaintiff also testified that she would trust her husband’s
recollection better than her own regarding the most she made in a year because he
completed the taxes; plaintiff’s husband testified that the “largest revenue year for
[plaintiff’s] consulting practice was about $60,000.”
Id., at 117.
Based on this testimony about plaintiff’s hourly rate and maximum revenue,
defendant calculated that she worked less than the required 17½ hours per week. Doc.
75-4, at 4. Through further discovery requests, defendant obtained plaintiff’s Social
Defendant asserts these records show that plaintiff’s actual work
hours were even fewer than previously calculated based on plaintiff’s husband’s
recollection of plaintiff’s maximum revenue.
Defendant now seeks to amend its answer and assert an unjust enrichment
counterclaim against plaintiff, seeking restitution in excess of a quarter of a million
dollars. Specifically, defendant’s proposed counterclaim asserts, in pertinent part:
At the time Stanczyk applied for coverage[,] she was not regularly
working 17½ or more hours per week and had not done so for
At no time since Stanczyk applied for coverage under the Policy has
she regularly worked 17½ hours per week.
Stanczyk applied for and ultimately received LTD benefits under the
Policy beginning on or about January 18, 2007, less a six month
elimination period specified in the Policy.
Stanczyk received LTD benefits under the Policy through July 31,
2013[,] in the amount of $3,000 per month.
On July 7, 2004, Stanczyk applied for LTD1 coverage under the
Policy by submitting an application for coverage electronically to
Aon Corporation (“Aon”). At that time, Aon received and
processed applications for the coverage under the Policy.
Because Stanczyk has never been eligible for LTD insurance
coverage under the Policy, she was paid LTD benefits in the amount
LTD refers to defendant’s Group Long-Term Disability Plan.
of $238,900 to which she was not entitled. By paying LTD benefits
to Stanczyk, Prudential conferred a benefit upon Stanczyk.
Stanczyk voluntarily accepted and retained the payments, and took
affirmative actions, and made affirmative representations, in order
to procure the payment of the LTD benefits.
The entire amount of the payment, less the premiums Stanczyk paid
for coverage, is money belonging in good conscience to Prudential.
Stanczyk was enriched by the receipt of LTD benefits in the amount
of $238,900 less the net premiums she paid for coverage under the
Policy, of $2,615.40.
Prudential is entitled to restitution in the amount of $236,284.60,
which equals the benefits paid by Prudential, less the premiums paid
Doc. 75-1, at 29-31.
STANDARD FOR GRANTING MOTIONS TO AMEND
Federal Rule of Civil Procedure 15 provides that leave to amend shall be freely
given “when justice so requires.” FED. R. CIV. P. 15(a)(2). Courts view motions to
amend filed before the deadline set out in the scheduling order with a “liberal policy
favoring amendments.” Kozlov v. Associated Wholesale Grocers, Inc., 818 F.3d 380,
395 (8th Cir. 2016) (citing In re Graphics Processing Units Antitrust Litig., 540 F. Supp.
2d 1085, 1090 (N.D. Cal. 2007)); see also Williams v. TESCO Servs., Inc., 719 F.3d
968, 976 (8th Cir. 2013) (describing the standard as “liberal”). The Rule 15(a) standard
is discretionary and leave should only be denied “where there are compelling reasons
‘such as undue delay, bad faith, or dilatory motive, repeated failure to cure deficiencies
by amendments previously allowed, undue prejudice to the non-moving party, or futility
of the amendment.’” Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406
F.3d 1052, 1065 (8th Cir. 2005) (quoting Hammer v. City of Osage Beach, MO, 318
F.3d 832, 844 (8th Cir. 2003)).
“But parties do not have an absolute right to amend their pleadings, even under
this liberal standard.”
Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir.
2008) (citing United States ex rel. Lee v. Fairview Health Sys., 413 F.3d 748, 749 (8th
Cir. 2005)); see also Hammer, 318 F.3d at 844 (holding that there is no right to amend
pleadings). A court may deny a motion to amend where there was “undue delay, bad
faith on the part of the moving party, futility of the amendment or unfair prejudice to the
opposing party.” United States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552,
557-58 (8th Cir. 2006) (internal quotation marks and citation omitted). The court may
consider several other factors when deciding whether to grant leave to amend, such as
repeated failures to cure deficiencies by amendments previously.
See Brown v. Wallace,
957 F.2d 564, 565 (8th Cir. 1992).
Where, as here, however, the motion to amend a pleading would require
modification of the scheduling order, then a party has the burden of demonstrating good
cause. FED. R. CIV. P. 16(b)(4); Local Rule 16(f) (“The deadlines established by the
Rule 16(b) and 26(f) scheduling order and discovery plan will be extended only upon
written motion and a showing of good cause.”).
In multiple cases, this Court has
discussed the interplay between the liberal amendment provision of Rule 15 and the good
cause requirement of Rule 16. See, e.g., Afshar v. WMG, L.C., 310 F.R.D. 408, 40812 (N.D. Iowa 2015); Pick v. City of Remsen, 298 F.R.D. 408, 410-12 (N.D. Iowa
2014); French v. Cummins Filtration, Inc., No. C-11-3024-MWB, 2012 WL 2992096
(N.D. Iowa July 19, 2012). In short, the party moving to modify a scheduling order in
order to amend a pleading bears the burden of showing “diligence in attempting to meet
the order’s requirements.”
Rahn v. Hawkins, 464 F.3d 813, 822 (8th Cir. 2006).
Although a court may consider prejudice to the non-moving party, courts generally will
not address prejudice where a moving party has failed to demonstrate diligence.
Bradford v. DANA Corp., 249 F.3d 807, 809 (8th Cir. 2001).
The Rule 16(b)(4) standard presupposes, however, that the party moves to modify
the schedule prior to the expiration of the deadline. Rule 16 does not necessarily govern
where, as here, a party moves to extend deadlines after the deadline has passed. Rather,
Rule 6(b)(1)(B) of the Federal Rules of Civil Procedure provides that “the court may, for
good cause,” extend a deadline “on motion made after the time has expired if the parties
failed to act because of excusable neglect.”
Rule 6 applies to “any time period specified
in [the Federal Rules of Civil Procedure], [and] in any local rule or court order . . ..”
FED. R. CIV. P. 6(a) (emphasis added).
The Federal Rules of Civil Procedure do not define “excusable neglect.”
Pioneer Inv. Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380, 392
(1993), the Supreme Court found that “‘excusable neglect’ under Rule 6(b) is a somewhat
‘elastic concept’ and is not limited strictly to omissions caused by circumstances beyond
the control of the movant.” In determining whether excusable neglect exists, a court
therefore must consider “all relevant circumstances surrounding the party’s omission.”
Id. See also Fink v. Union Central Life Ins. Co., 65 F.3d 722, 724 (8th Cir. 1995)
(citing Pioneer, 507 U.S. at 395). These circumstances include:
(1) the danger of prejudice to the non-moving party;
(2) the length of delay and its potential impact on judicial proceedings;
(3) the reason for the delay, including whether it was within the reasonable control
of the movant; and
(4) whether the movant acted in good faith.
Treasurer, Trustees of Drury Industries, Inc. Healthcare Plan and Trust v. Goding, 692
F.3d 888, 893 (8th Cir. 2012) (citing Pioneer). The four factors do not, however, carry
equal weight; “the excuse given for the late filing must have the greatest import.”
v. McDonnell Douglas Corp., 211 F.3d 457, 463 (8th Cir. 2000).
The deadline for amending pleadings in this case was January 29, 2016 (Doc. 18),
a little over ten months before defendant filed its motion to modify the scheduling order
to allow leave to file its amended answer and counterclaim. Accordingly, pursuant to
Rules 6 and 16(b), defendant must demonstrate good cause and excusable neglect for the
Court to modify the scheduling order to permit it to file an amended answer and
counterclaim. Finally, defendant must meet the requirements for amending pleadings
pursuant to Rule 15. The Court will apply each of these rules in turn to defendant’s
A. Rule 16
Defendant argues it has demonstrated good cause to amend the Court’s scheduling
order because it “was unable to discover that the Plaintiff failed to meet the active work
requirement prior to her deposition.” Doc. 75-4, at 4. In her written resistance to
defendant’s motion, plaintiff devoted only a page to the issue of whether defendant has
shown good cause to modify the Court’s scheduling order, simply asserting that
“Prudential has identified no newly discovered facts or a change in circumstances that
give rise to an opportunity to sue [plaintiff] now 10 years after [defendant’s] contestability
period ended.” Doc. 80, at 5. Plaintiff ultimately conceded, at the hearing on this
motion, that she could not prove that defendant knew, prior to plaintiff’s deposition, the
information upon which it now relies to assert its counterclaim.
defendant has failed to show good cause, however, because defendant could have easily
discovered the number of hours plaintiff worked had it simply looked into the matter
Defendant asserts that after plaintiff filed suit, it “focused on the Plaintiff’s
potential work since being approved for benefits in 2006,” and “had no reason to request
documents before 2006, as the Plaintiff’s eligibility for coverage was not an issue in this
case.” Doc. 75-4, at 4. Defendant argues that it “was only the combination of the (1)
the [sic] Plaintiff’s deposition testimony about her low levels of earnings, (2) the Social
Security document obtained as a result of her deposition testimony showing even lower
levels of earnings, and (3) the Plaintiff’s deposition testimony about her hourly billing
rate that, collectively, told Prudential that the Plaintiff could not possibly have worked
enough hours to be eligible for the Policy or its coverage.” Id. at 5.
The Court finds defendant has demonstrated good cause to modify the scheduling
order and amend its answer. Defendant has shown, and plaintiff concedes, that it first
learned facts that could give rise to the counterclaim when it deposed plaintiff in October
of this year. Defendant has also shown that it then acted with reasonable diligence to
conduct further investigation into the facts before moving for leave to file a counterclaim.
Plaintiff argues that defendant could have verified her employment status “by the
most cursory investigation at the time the policy was issued by Prudential or at any time
during the contestable period.” Doc. 80 at 7. Although plaintiff makes this argument
in relation to a futility argument, which the Court will address below, this argument could
also be a comment on the reasonableness of defendant’s diligence. For purposes of Rule
16 good cause analysis, however, the question is not whether a party could have, in the
past, obtained the information that would support a motion to amend a pleading, but
whether once suit was brought, the party acted with diligence in uncovering the
information. In other words, it does not matter for purposes of Rule 16 that defendant
could have investigated this issue years ago; what matters is whether it acted with
sufficient diligence to investigate the claim after suit was filed. Here, the Court finds it
Plaintiff also argued that defendant is simply wrong, and the information upon
which it relies to assert its claim does not prove she worked less than full time as required
by the policy. Doc. 80, at 1. That may be true, but that is a factual matter that goes
to the merits of the claim, not to whether defendant may bring the claim in the first
instance. Whether defendant can ultimately prove the claim, in other words, is not the
test for whether there is good cause to modify the scheduling order to permit defendant
to assert the claim.
Plaintiff does not argue, and the Court finds no basis to conclude, that defendant
acted in bad faith in relation to the delay in bringing this motion.
Finally, in assessing whether the Court should modify the scheduling order to
permit defendant to file an amended answer and bring a counterclaim, the Court may
consider possible prejudice to plaintiff. In her brief, plaintiff argued that she “would be
severely prejudiced if [defendant] were permitted to amend its Answer and countersue
[plaintiff] this late into the proceedings.” Doc. 80, at 21. She asserts it “would be a
substantial financial burden” on her and “would certainly [require] additional discovery
on the new factual issues raised” by defendant’s proposed amendment. Doc. 80, at 22.
Plaintiff also suggests that she “would need to seek additional information from its [sic]
expert and engage an entirely new expert to formulate a defense” to the countersuit.
Finally, plaintiff argued that if the Court permits the amendment, it will require a new
dispositive motion deadline and may jeopardize the trial date.
Id., at 22-23. In her
written resistance, plaintiff did not describe the additional discovery she believed the
counterclaim would necessitate.
At the hearing on the motion, however, plaintiff
described some of the documents she believed defendant would need to produce in
discovery if the Court permitted defendant to file its counterclaim. She also indicated
that she would need to talk to a number of witnesses, including defendant’s employees
who knew or should have known about the hours plaintiff was working.
The deadline for filing dispositive motions in this case has passed. The deadline
for completion of discovery (December 31, 2016) has passed. Trial is scheduled for
March 6, 2016.
In the context of Rule 16(b), prejudice includes reopening discovery or requiring
a continuance of the trial.
See, e.g., National Liberty Corp. v. Wal-Mart Stores, Inc.,
120 F.3d 913, 917 (8th Cir. 1997) (district court properly denied motion to amend based
on prejudice where defendant sought leave to amend to add a counterclaim almost three
months after deadline for amendments and after close of discovery); Phelps v. McClellan,
30 F.3d 658, 662-63 (6th Cir. 1994) (prejudice includes whether the amendment asserts
a new claim or defense requiring the opposing party to expend significant additional
resources to conduct discovery and prepare for trial, significantly delay resolution of the
case, or prevent plaintiff from bringing a timely action in another jurisdiction); Ashe v.
Corley, 992 F.2d 540, 543 (5th Cir. 1993) (noting that, although delay alone is not
sufficient ground to deny leave to amend, adding a new cause of action shortly before
trial was prejudicial to the opposing party); Block v. First Blood Assocs., 988 F.2d 344,
350 (2d Cir. 1993) (holding that, although mere delay is not enough to deny leave to
amend, leave may be denied when a new claim requires the opponent to expend
significant resources to conduct discovery and prepare for the trial, would significantly
delay resolution of the dispute, or would prevent the plaintiff from bringing an action in
another jurisdiction). Prejudice may also inhere in denying the plaintiff the opportunity
to develop a strategy to oppose the defense, or in permitting an amendment that changes
the issues or nature of the case.
See Elema–Schonander, Inc. v. K.C.F. Medical Supply
Co., Inc., 869 F.2d 1124, 1126 (8th Cir. 1989) (repeated tardiness of responses to
discovery and other deadlines coupled with a late-filed motion to amend to assert an
answer that would alter the “posture and complexion” of the case constituted prejudice
sufficient to deny leave to amend).
The Court finds plaintiff will suffer some prejudice as a result of this late
Doubtless, some additional discovery will be necessary, with
The Court is not persuaded that this counterclaim will generate
significant new discovery or require a significant expenditure of additional resources.
The factual issue is limited to how many hours plaintiff worked during the relevant
period, and what defendant knew about her hours. Plaintiff already has documents from
defendant’s file regarding its knowledge of her hours; she relies on them to oppose the
instant motion. It is unclear what additional documents defendant would have in its
custody regarding the hours plaintiff worked.
Plaintiff has provided only conclusory
allegations that she will need a new expert to address this issue and has failed to
meaningfully articulate why her current expert would need to seek additional information.
Some time remains before trial to complete discovery on this rather finite issue, but
realistically, an extension of the deadline to complete discovery is likely required.
Likewise, plaintiff may have grounds for filing a motion for summary judgment which
would, of course, necessitate the modification of the scheduling order by the Court.
To avoid undue prejudice to plaintiff as a result of allowing defendant to amend
its answer and bring a counterclaim, the Court finds there is good cause to modify the
scheduling order to provide plaintiff relief. Should plaintiff request it, the Court will
modify the scheduling order to extend the discovery deadline, and/or the deadline for
filing a dispositive motion, regarding defendant’s counterclaim. Likewise, if plaintiff
requests it, the Court will continue the trial.
Accordingly, the Court finds defendant has met the standard under Rule 16 for
showing good cause to modify the scheduling order.
B. Rule 15
Because the Court found good cause and excusable neglect exists under Rules 6
and 16 to modify an expired deadline of the scheduling order to permit defendant to file
a motion for leave to amend its answer and bring a counterclaim, the Court looks next to
Rule 15 to determine whether the amendment should be allowed.
Once the Court
amends the scheduling order, it should freely grant leave to amend, pursuant to Rule
15(a)(2), “unless there exists undue delay, bad faith, repeated failure to cure deficiencies
by amendments previously allowed, undue prejudice to the non-moving party, or futility
of the amendment.” Kozlov v. Associated Wholesale Grocers, Inc., 818 F.3d 380, 394
(8th Cir. 2016) (internal quotation marks and citation omitted).
Although plaintiff’s written resistance did not clearly reference the Rule 15
standard, reading her resistance broadly, it appears plaintiff argues that the amendment
should be denied because of (1) undue delay; (2) undue prejudice, and (3) because it
would be futile. In ruling on the Rule 16 motion to modify the scheduling order, the
Court has addressed the first two arguments. Here, the Court will address plaintiff’s
claim that the amendment would be futile.
“Denial of a motion for leave to amend on the basis of futility ‘means the district
court has reached the legal conclusion that the amended complaint could not withstand a
motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure.’”
Agriprocessors, Inc., No. ADV 10-09131, 2011 WL 4900037, at * 5 (Bankr. N.D. Iowa
Oct. 14, 2011) (quoting Zutz v. Nelson, 601 F.3d 842, 850 (8th Cir. 2010)). See also
In re Senior Cottages of Am. LLC, 482 F.3d 997, 1001 (8th Cir. 2007) (stating that denial
of leave to amend based on futility is appropriate in the face of a legal finding that the
proposed complaint could not survive a Rule 12 motion). Accordingly, this Court must
determine under the Rule 12(b)(6) standard if defendant’s proposed amendment to the
complaint “contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atl. Corp v. Twombly, 550 U.S. 544, 570 (2007)).
In deciding a motion to dismiss under Rule 12(b)(6) here, the Court assumes all
facts in defendant’s counterclaim to be true and construes all reasonable inferences from
those facts in the light most favorable to defendant.
Morton v. Becker, 793 F.2d 185,
187 (8th Cir. 1986). The Court need not, however, accept as true wholly conclusory
Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th Cir.
1999). Nor is the Court obligated to accept legal conclusions drawn by the party from
the facts alleged. Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990).
Plaintiff appears to raise five grounds for why defendant’s counterclaim would be
futile: (1) defendant’s counterclaim is precluded by the incontestability clause in the
policy; (2) defendant’s policy requirement that plaintiff work full time only applied to her
eligibility for coverage; (3) plaintiff truthfully enrolled for coverage; (4) the counterclaim
is barred by the statute of limitations; and (5) the counterclaim is barred by laches and
estoppel by acquiescence. Plaintiff’s arguments fail at this stage of the litigation because
they each rely on evidence outside the four corners of the counterclaim itself. That this
is clear requires only a review of plaintiff’s brief in support of her arguments. Plaintiff
repeatedly cites to documents that are not properly considered in relation to ruling on a
Rule 12(b)(6) motion. See Doc. 80, at 7-9, 11-13, 15, 17, 19-20.
With regard to plaintiff’s statute of limitations argument, on its face it appears the
statute of limitations may bar some portion of the proposed counterclaim. Other periods
of time when plaintiff received benefits to which defendant claims she was not entitled,
however, appear to fall within the statute of limitations. Plaintiff’s statute of limitations
defense is, at best, therefore, only a partial defense. Moreover, defendant asserts there
are grounds for the claim to relate back to the time that would otherwise be barred by the
statute of limitations. The viability of the relation back doctrine, however, would turn
on facts outside the four corners of defendant’s counterclaim. Accordingly, it is not
proper to bar defendant from filing the counterclaim.
Whether some or all of
defendant’s counterclaim could survive a motion for summary judgment is another matter
not presently before the Court.
Setting aside plaintiff’s reliance on facts outside of the pleading to support her
argument that the counterclaim is futile because of the incontestability clause, the Court
is not persuaded that the incontestability clause would clearly bar the counterclaim. The
incontestability clause at issue in this policy appears to be distinguishable from the
incontestability clause at issue in Freed v. Bankers Life Ins. Co. of Nebraska, 216 N.W.2d
357 (Iowa 1975), upon which plaintiff relies. The incontestability clause at issue in this
case does not appear to bar suit unless it is tied to a statement by the insured.
75-3, at 20 (“This limits Prudential’s use of your statements in contesting an amount of
that insurance for which you are insured.”). The policy at issue in Freed, in contrast,
contained a blanket prohibition against the insurance company contesting coverage after
Freed, 216 N.W.2d at 358.
This is significant because defendant’s
counterclaim appears to allege plaintiff was not eligible for coverage because she did not
work the required hours, not because she made a false statement about the number of
hours she worked.
Ultimately, the Court cannot, at this point, find defendant’s counterclaim is clearly
futile on its face so as to bar defendant from at least making the claim. Plaintiff may
have some significant and perhaps even decisive defenses to defendant’s counterclaim,
but those defenses are largely, if not completely, reliant upon facts beyond the four
corners of defendant’s proposed counterclaim.
As the Court must assume the facts
alleged in that counterclaim to be true, at this stage, the Court cannot find defendant’s
Accordingly, the Court finds it is appropriate under Rule 15 to grant leave to
defendant to file an amended answer and counterclaim.
For the reasons set forth above, the Court grants defendant’s motion for leave to
file an amended answer and counterclaim (Doc. 75).
IT IS SO ORDERED this 10th day of January, 2017.
United States Magistrate Judge
Northern District of Iowa
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