Owner's Management Company v. Arthur J. Gallagher & Co. et al

Filing 33

Opinion and Order. Plaintiff's Motion for Reconsideration (Related doc # 27 ) is denied. Plaintiff's Motion for Leave to Amend Complaint (Related doc # 27 ) is granted. Plaintiff shall file an Amended Complaint by 7/23/2018. Defendant's Answer or other response is due per rule. Telephone Status Conference set for 8/8/2018 at 11:00 AM. Judge Christopher A. Boyko on 7/13/2018. (H,CM)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

OWNER’S MANAGEMENT
COMPANY,
Plaintiff,
Vs.
ARTHUR J. GALLAGHER & CO.,
Defendant.

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CASE NO.1:17CV881

JUDGE CHRISTOPHER A. BOYKO

OPINION AND ORDER

CHRISTOPHER A. BOYKO, J:
This matter is before the Court on Plaintiff Owner’s Management Company’s
(“Plaintiff”) Motion for Reconsideration of Order and Opinion Dismissing Counts III and V
of Complaint Against Defendant Arthur J. Gallagher & Co., or, in the alternative, Motion for
Leave to Amend Complaint (ECF DKT # 27). For the following reasons, the Court denies
Plaintiff’s Motion for Reconsideration and grants Plaintiff’s Motion for Leave to Amend
Complaint.
Background Facts
Plaintiff filed the instant Complaint on April 25, 2017, against HealthSmart Benefit

Solutions, Inc. (“HBS”) and Arthur J. Gallagher & Co. (“Gallagher”) for Breach of Contract,
Breach of Fiduciary Duties, Negligent Misrepresentation and for Accounting. Plaintiff is an
independent senior living and multi-family residences property management company.
Gallagher is an insurance brokerage and risk management company.
Plaintiff had a long-standing relationship with Gallagher and relied upon Gallagher’s
expertise and advice for its employee healthcare benefit needs. Compl. ¶¶ 14-15. Plaintiff
placed “special trust and confidence” in Gallagher to select and procure an employee
healthcare plan that was in Plaintiff’s best interests. Compl. ¶¶ 16-17. Gallagher
recommended a self-funded employee healthcare benefit plan (the “Plan”) from November 1,
2014 through October 31, 2015 that allegedly minimized Plaintiff’s cost and potential
exposure. Compl. ¶¶ 20-22. Gallagher also recommended that Plaintiff utilize HBS as
Claims Administrator. Plaintiff selected the Plan based upon Gallagher’s advice.
On November 1, 2014, Plaintiff, as Plan Sponsor, Administrator and Fiduciary,
entered into the HealthSmart Benefit Solutions, Inc. Administrative Services Agreement with
HBS. Compl. Ex. 2. Gallagher was not a party to that Agreement. According to the
Complaint, however, Gallagher and HBS modified how the assets of the Plan would be
managed and how the costs, including the amount of approved benefit claims, were to be
paid, all without Plaintiff’s knowledge or consent. Allegedly, Gallagher did not correctly or
adequately advise Plaintiff that the Plan posed a much higher risk than the other options; that
the cost of the Plan would be much higher than Gallagher represented; that Plaintiff would be
required to satisfy various reporting requirements and obligations for self-funded plans under
the Affordable Care Act and ERISA and that Plaintiff would need to create proper reserves to

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guard against cash flow fluctuations. Compl. ¶¶ 26, 28, 30-31. Ultimately, as a result of the
alleged failures, mismanagement and misconduct of Gallagher and HBS, the Plan was
underfunded and Plaintiff “caused the Plan to be terminated.”1 Compl. ¶ 52.
On July 26, 2017, Gallagher moved for dismissal of Count I (Breach of Contract);
Count III (Breach of Common Law Fiduciary Duties); Count V (Breach of ERISA Fiduciary
Duties); Count VII (Negligent Misrepresentations or Concealments) and Count IX (Action on
Accounting). On December 1, 2017, this Court dismissed Counts III and V against Gallagher.
On January 10, 2018, Plaintiff moved for reconsideration of the Court’s Opinion and
Order dismissing Counts III and V against Gallagher or, in the alternative, for leave to amend
its Complaint. Plaintiff contends that the Court “only focused on the relationship up to the
time the Plan was established” and did not give “due consideration... to its allegations that
fiduciary duties on the part of [Gallagher] were created and continued after the Plan was put
in place.” (Emphasis original). ECF DKT # 27, at 3. Furthermore, Plaintiff urges the Court
to consider Pfahler v. National Latex Products Company, 517 F.3d 816 (6th Cir. 2007), which
they contend allows them to recover on behalf of a terminated plan. Id. at 7.
LAW AND ANALYSIS
Motion to Reconsider
“District courts possess the authority and discretion to reconsider and modify
interlocutory judgments any time before final judgment.” Rodriguez v. Tenn. Laborers
Health & Welfare Fund, 89 F.App’x 949, 952 (6th Cir. 2004). See also Moses H. Cone

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The original Complaint refers to the “termination” of the Plan. Plaintiff seeks leave to amend the
Complaint to instead state that the plan was “converted” to a fully insured plan rather than terminated.

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Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 12 (1983) (“every order short of a final
decree is subject to reopening at the discretion of the district judge”). “District courts have
authority both under common law and Rule 54(b) to reconsider interlocutory orders and to
reopen any part of a case before entry of final judgment.” Rodriguez, 89 F.App’x at 959.
However, reconsideration is disfavored:
Although motions to reconsider are not ill-founded step-children of
the federal court’s procedural arsenal, they are extraordinary in
nature and, because they run contrary to notions of finality and
repose, should be discouraged. To be sure, a court can always take
a second look at a prior decision; but it need not and should not do
so in the vast majority of instances, especially where such motions
merely restyle or re-hash the initial issues.
McConocha v. Blue Cross and Blue Shield Mutual of Ohio, 930 F.Supp. 1182, 1184
(N.D.Ohio 1996) (internal citations and quotations omitted).
Motions for reconsideration “serve a limited purpose and should be granted for one of
three reasons: (1) because of an intervening change in controlling law; (2) because evidence
not previously available has become available; or (3) because it is necessary to correct a clear
error of law or preventing manifest injustice.” Boler Co. v. Watson & Chalin Mfg. Inc., 372
F.Supp.2d 1013, 1024-25 (N.D.Ohio 2004), quoting General Truck Drivers, Local No. 957 v.
Dayton Newspapers, Inc., 190 F.3d 434, 445 (6th Cir. 1999) (Clay, J. Dissenting), cert.
denied, 528 U.S. 1137 (2000).
Plaintiff seeks reconsideration “on the basis of error of fact and law.” Plaintiff
contends that the Court’s Opinion and Order dismissing Counts III and V contained “an error
as to whether [Plaintiff] has pled a plausible claim for breach of common law fiduciary duty
and had standing to pursue its ERISA-based claims.” However, the Court finds that these

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arguments are merely attempts to re-hash arguments that were, or should have been, raised in
Plaintiff’s Brief in Opposition to Gallagher’s original Motion to Dismiss.
First, Plaintiff contends that the Court did not give due consideration to its argument
that a common law fiduciary duty continued after the implementation of the Plan. However,
the Court did consider these allegations but found that ultimately, Plaintiff did not meet its
obligation to plead facts “beyond bare allegations” that could establish a special relationship
of trust between Plaintiff and Gallagher. Plaintiff’s disagreement with the Court’s decision
does not provide a basis for reconsideration absent any evidence or argument which could not
previously have been submitted or any manifest error of fact or law.
Next, Plaintiff contends that the Court failed to consider Pfahler v. National Latex
Products Company in holding that Plaintiff’s Breach of ERISA Fiduciary Duty claim lacks
facial plausibility. See 517 F.3d at 816. However, Plaintiff has failed to explain why this
argument was not raised in its Brief in Opposition. There has been no intervening change in
law nor was this evidence previously unavailable. It is not the Court’s duty to analyze
arguments that Plaintiff should have but failed to raise prior to the Court’s ruling on
Gallagher’s Motion to Dismiss. Therefore, the Court denies Plaintiff’s Motion for
Reconsideration.
Motion to Amend
Fed. R. Civ. P. 15(a)(2) reads in part, “[t]he court should freely give leave [to amend]
when justice so requires.” However, this liberal amendment policy is not without limits. The
Sixth Circuit has observed: “A motion to amend a complaint should be denied if the
amendment is brought in bad faith, for dilatory purposes, results in undue delay or prejudice

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to the opposing party, or would be futile.” Colvin v. Caruso, 605 F.3d 282, 294 (6th Cir.
2010) (citing Crawford v. Roane, 53 F.3d 750, 753 (6th Cir. 1995)).
Delay, by itself, “does not justify denial of leave to amend.” Morse v. McWhorter,
290 F.3d 800 (6th Cir. 2002). In addition, when discovery is in the early stages, any prejudice
from entertaining an amended pleading is minimal. Addressing the contention that an
amendment might necessitate another dispositive motion, the Sixth Circuit also noted that
“another round of motion practice... does not rise to the level of prejudice that would warrant
denial of leave to amend.” Morse, 290 F.3d at 801.
“In determining what constitutes prejudice, the court considers whether the assertion
of the new claim or defense would: require the opponent to expend significant additional
resources to conduct discovery and prepare for trial; significantly delay the resolution of the
dispute; or prevent the plaintiff from bringing a timely action in another jurisdiction.” Phelps
v. McClellan, 30 F.3d 658, 663 (6th Cir. 1994).
“A proposed amendment is futile if the amendment could not withstand a Rule
12(b)(6) motion to dismiss.” Cicchini v. Blackwell, 127 F.App’x 187, 190 (6th Cir. 2005)
(citing Ziegler v. IBP Hog Market, Inc., 249 F.3d 509, 518 (6th Cir. 2001)).
Plaintiff principally seeks leave to amend the Complaint in order to clarify that the
Plan was not “terminated” but rather “convert[ed]... to a fully insured plan.” Plaintiff has also
drawn attention to the Sixth Circuit’s holding in Pfahler that “there is no good reason why a
Plaintiff cannot obtain § 502(a)(2) relief [for breach of ERISA fiduciary duties] on behalf of a
defunct plan.” 517 F.3d at 827. Therefore, the Court cannot say that this amendment would
be futile.

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Furthermore, Plaintiff also seeks to amend its fiduciary duty claims to specifically
allege that Gallagher “owed Plaintiff OMC fiduciary duties” resulting from “[Gallagher]’s
long time relationship with OMC, the trust and confidence placed in [Gallagher], and
[Gallagher]’s voluntary assumption of a role in managing the operations and assets of the
Plan.” (Emphasis added). Since Plaintiff has now specifically alleged that Gallagher took an
active role in managing the Plan after its implementation, the Court finds that the proposed
amendments satisfy Rule 15's liberal amendment policy.
Gallagher contends that allowing Plaintiff to amend its Complaint would prejudice it
because “[t]he Court has already dismissed two claims against [Gallagher]... [and therefore]
[Gallagher] is relieved from defending these claims.” Furthermore, allowing amendment
would “delay proceedings.” However, the Court finds that these are not compelling reasons
to deny Plaintiff leave to amend, especially because this case is still in the initial pleading
stage.
Therefore, for the foregoing reasons, the Court denies Plaintiff’s Motion for
Reconsideration and grants Plaintiff leave to amend its Complaint. Plaintiff shall file an
Amended Complaint by July 23, 2018. Defendant’s Answer or other response is due per rule.
The Court will hold a telephone scheduling conference on August 8, 2018, at 11:00 AM.
IT IS SO ORDERED.
s/ Christopher A. Boyko
CHRISTOPHER A. BOYKO
United States District Judge
Dated: July 13, 2018

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