American General Life Insurance Company v. Baker et al

Filing 106

ORDER granting 94 Motion for Leave to file a First Amended Complaint Amended Complaint due by 6/15/2010. Adverse parties shall respond to the First Amended Complaint within the time allowed by Fed. R. Civ. P. 15(a). Ordered by Magistrate Judge F. A. Gossett. (CLS, )

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF NEBRASKA ) ) ) ) P l a i n t i f f, ) ) vs. ) ) D O N N A J. BAKER, a Nebraska resident, ) a n d FIVE POINTS BANK, a Nebraska ) Bank, ) ) D e f e n d a n t s. ) ) A M E R I C A N GENERAL LIFE I N S U R A N C E COMPANY, a Texas in su ra n ce company, D O N N A J. BAKER, T h ird -P a rty Plaintiff, vs. M A T T H E W L. GEISER, a Nebraska re side n t, T h ird -P a rty Defendant. ) ) ) ) ) ) ) ) ) ) ) 8 :0 9 C V 1 0 6 ORDER

T h is matter is before the magistrate judge on the motion (Filing No. 94) of American G e n e ra l Life Insurance Company ("American General") for leave to file a First Amended C o m p la in t. The court has considered the parties' briefs and evidentiary materials (Filings N o s . 95, 96, 97, 98, 100 and 103) and finds that the motion should be granted.

BACKGROUND A t issue in this lawsuit is a $1.5 million life insurance policy ("Policy") purchased by W illiam C. Baker from American General through Five Points Bank Insurance Agency1 to c o v e r an outstanding loan from Five Points Bank to Mr. Baker. The Policy was issued O c to b e r 5, 2006. Defendant, Donna J. Baker, was named as the primary beneficiary, and the B a n k is a collateral assignee of $500,000 of the $1.5 million death benefit. The Policy's annual renewal premium was not paid by the October 5, 2008 due date. M r. Baker discovered that the premium had not been paid and took steps to reinstate the P o lic y by signing an application for reinstatement of the Policy on December 19, 2008. The a p p lic a tio n , however, did not contain all of the necessary information. Mr. Baker died u n e x p e cte d ly on December 28, 2008, while the application for reinstatement was pending. T h e third-party defendant, Matthew L. Geiser, assisted in completing or processing th e application for reinstatement. During the relevant time period, Mr. Geiser was an e m p lo ye e of Five Points Bank, was authorized to sell life insurance in Nebraska, and was c o n tra c te d with American General as a registered representative. O n approximately January 8, 2009, American General sent a letter addressed to Mr. B ak er advising that it needed additional information and a larger premium payment before

By stipulation of the parties, Donna Baker's third-party claims against Five Points Bank Insurance Agency were dismissed without prejudice. (See Filing No. 66). -2-

1

it could process the application for reinstatement. The necessary information was received f ro m Mr. Geiser the following day. American General's January 13, 2009, letter addressed to Mr. Baker advised that the P o licy had been reinstated. American General was not informed of Mr. Baker's death until a claim was made on the Policy on or after January 27, 2009. American General denied the claim for death benefits, asserting that the Policy lapsed o n October 5, 2008, was not in force when Mr. Baker died on December 28, 2008, and A m e ric a n General does not owe any death benefits to Donna Baker or the Bank. The parties a d v e rs e to American General contend that death benefits are owing because the policy was e f f e c tiv e ly reinstated prior to Mr. Baker's death. B a se d on information provided in the parties' Rule 26(f) Planning Report (Filing No. 4 7 ), the court entered an initial progression order on September 2, 2009 providing, inter alia, th a t "[a]ny motion to amend pleadings and/or add parties shall be filed not later than October 3 0 , 2009." (Filing No. 49 at p. 3/3 ¶ 7). The court held telephonic status conferences with counsel on December 11, 2009 and M a rc h 4, 2010. All parties have made substantial progress in completing discovery, but a f in a l case progression order has not been entered and the case has not yet been set for trial. A m e ric a n General filed the instant motion on April 1, 2010, seeking leave to file an a m e n d e d complaint supplementing its factual allegations, naming Matthew Geiser as a d e f e n d a n t, and asserting additional causes of action against both Geiser and the Bank for -3-

n e g lig e n c e ,

negligent

misrepresentation,

fraudulent

misrepresentation,

fraudulent

c o n c e a lm e n t, breach of fiduciary duty, indemnification, respondeat superior, breach of the d u ty of good faith and fair dealing, and conspiracy to commit fraud. M r. Geiser and the Bank oppose the motion on grounds of timeliness. See Fed. R. C iv . P. 16(b). They further contend that some or all of the proposed amendments would be f u tile . D IS C U S S IO N A. T im e lin e s s

If a party moves for leave to amend a pleading after the deadline specified in the co u rt's scheduling order has passed, the party must show cause to modify the schedule before th e court may grant leave to amend. Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 716 (8 th Cir. 2008). This rule reflects the plain language of Fed. R. Civ. P. 16(b)(3), which re q u ire s the district courts to issue a scheduling order limiting the time to amend the p le a d in g s . The rule specifically provides that "[a] schedule may be modified only for good c a u se and with the judge's consent." Fed. R. Civ. P. 16(b)(4). "'The primary measure of g o o d cause is the movant's diligence in attempting to meet the order's requirements.'" S h e rm a n , 532 F.3d at 717 (quoting Rahn v. Hawkins, 464 F.3d 813, 822 (8th Cir. 2006)). T h e record shows that a substantial amount of discovery was conducted between O c to b e r 30, 2009 (the original date set for filing motions to amend pleadings) and April 1, 2 0 1 0 (the date this motion was filed). Under Fed. R. Civ. P. 9(b), American General "must -4-

s ta te with particularity" the circumstances constituting fraud or mistake. In this regard, much o f the information proving the basis for the proposed amendments was not obtained until the d e p o sitio n s of Matthew Geiser and William Marshall, the president of Five Points Bank, w e re completed on January 29 and February 1, 2010, respectively. U n d e r the circumstances, the court finds that American General has acted diligently a n d has shown good cause for an extension of the deadline for filing motions for leave to a m e n d the pleadings. B. R u le 15(a) Standards

U n d e r Fed. R. Civ. P. 15(a)(2), the court should "freely give leave" to amend a p le a d in g "when justice so requires"; however, parties do not have an absolute right to amend their pleadings. Sherman v. Winco Fireworks, Inc., 532 F.3d at 715. "A district court a p p r o p r ia t e l y denies the movant leave to amend if 'there are compelling reasons such as u n d u e delay, bad faith, or dilatory motive, repeated failure to cure deficiencies by a m e n d m e n ts previously allowed, undue prejudice to the non-moving party, or futility of the a m e n d m e n t .'" Id. (quoting Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F .3 d 1052, 1065 (8th Cir. 2005)). "In most cases, '[d]elay alone is insufficient justification; p re ju d ic e to the nonmovant must also be shown.'" Moses.com, 406 F.3d at 1065 (quoting B e ll v. Allstate Life Ins. Co., 160 F.3d 452, 454 (8th Cir. 1998)). It is hardly unusual for parties in civil litigation to request leave to amend the p lead ing s after conducting discovery. In this case, all the parties have conducted discovery -5-

w ith diligence. The record does not suggest that any party has acted in bad faith or with a d ila to ry motive. Turning to the argument that the proposed amendments are futile, I note that "a motion to amend should be denied on the merits "only if it asserts clearly frivolous claims or d e f e n s e s . Gamma-10 Plastics, Inc. v. American President Lines, Ltd., 32 F.3d 1244, 1255 (8 th Cir. 1994), cert. denied, 513 U.S. 1198 (1995). Likelihood of success on the new claim o r defenses is not a consideration for denying leave to amend unless the claim is clearly f riv o lo u s . See id. at 1256." Becker v. Univ. of Neb. at Omaha, 191 F.3d 904, 908 (8th Cir. 1 9 9 9 ). "Ordinarily, the decision of whether to allow a plaintiff leave to amend a complaint is within the district court's discretion, however, when the court denies leave on the basis of f u tility, it means the district court has reached the legal conclusion that the amended c o m p la in t could not withstand a motion to dismiss under Rule 12(b)(6) of the Federal Rules o f Civil Procedure." Cornelia I. Crowell GST Trust v. Possis Medical, Inc., 519 F.3d 778, 7 8 1 -8 2 (8th Cir. 2008). Most of the arguments presented by Mr. Geiser and the Bank focus on the factual b a sis for the claims and evidentiary submissions, and conclude that American General is not lik e ly to prevail on the merits. The proposed claims based on negligence, fraud, indemnity a n d respondeat superior, however, are not "clearly frivolous." P a ra g ra p h 63 of the proposed Amended Complaint, which relates to the doctrine of r e sp o n d e a t superior, alleges that the Bank "is responsible for the tortious acts of Geiser, who -6-

w a s acting within the scope of his employment in committing the unlawful actions described a b o v e ." The allegation that Geiser was acting within the scope of his employment may be in c o n sis te n t with American General's proposed claim for civil conspiracy. Under Nebraska la w , "[t]o pursue a claim of civil conspiracy where ... the allegations involve a conspiracy b e tw e e n the corporation and its corporate employees, the petition must allege that the latter a re acting outside the scope of their authority or other than in the normal course of their c o r p o r a te duties." Eicher v. Mid Am. Fin. Inv. Corp., 275 Neb. 462, 479-79, 748 N.W.2d 1, 1 5 (2008). The plaintiff must allege that the employee "acted outside any legitimate scope o f corporate employment." See Eicher, 275 Neb. at 480, 748 N.W.2d at 16 (emphasis a d d e d ). The mere fact that Geiser was employed by the Bank is not dispositive of the c o n s p ira c y claim. While it is possible that American General might eventually be required to elect b e tw e e n the alternative theories of civil conspiracy and respondeat superior, a final election o f remedies need not be made at the pleading stage. See Genetti v. Caterpillar, Inc., 261 N e b . 98, 122, 621 N.W.2d 529, 548 (2001) (an election must be made between remedies for b re a ch of warranty and the remedy of revocation of acceptance, but both theories may be p re s e n te d to the jury). The court finds that American General's proposed amendments are neither frivolous n o r futile. The sufficiency of the claims would be better addressed by a Rule 12 motion after th e Amended Complaint is served. -7-

ORDER I T IS ORDERED that American General's Motion for leave to file a First Amended C o m p l a in t (Filing No. 94) is granted. American General shall file and serve the First A m e n d e d Complaint on or before June 15, 2010. Adverse parties shall respond to the First A m e n d e d Complaint within the time allowed by Fed. R. Civ. P. 15(a). DATED May 21, 2010. B Y THE COURT: s / F.A. Gossett U n ite d States Magistrate Judge

-8-