Helms et al v. Nationwide Insurance Company of America

Filing 21

ORDER granting 16 Motion to Strike plaintiffs' First and Second Amended Complaints. Defendant's request for monetary sanctions is DENIED. If plaintiff seeks to pursue any claims against Joshua Sanders, they must file a formal motion for leave to amend on or before 2/20/12. Signed by Magistrate Judge Stephanie K. Bowman on 2/14/12. (jl1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

WILLIAM HELMS, et al.,

Case No. 1:11-cv-410

Plaintiffs,

Bowman, M.J.

v.

NATIONWIDE INSURANCE
COMPANY OF AMERICA,
Defendant.

MEMORANDUM OPINION AND ORDER
This breach of contract and bad faith case was filed by Plaintiffs against their
insurer in state court, but was removed by Defendant to this Court on the basis of
diversity jurisdiction. Thereafter, the parties consented to final disposition before the
undersigned magistrate judge, pursuant to 28 U.S.C. §636(c). (Doc. 7).
Although the parties appeared before the Court for a preliminary pretrial
conference in September 2011, no scheduling order has yet been entered pending the
Court’s disposition of Defendant Nationwide’s motion to strike Plaintiffs’ first and second
amended complaints. In addition to Defendant’s pending motion to strike, the Court on
its own initiative notes a potential issue concerning service on the defendant recently
named in the amended complaint, Joshua Sanders.
I. Factual and Procedural Background
On February 23, 2010, Plaintiff William Helms was involved in an automobile
accident in Hamilton County, Ohio. Plaintiffs allege that the accident was caused by the
1

negligence of another driver, Joshua Sanders. Sanders is alleged to have been insured
by Progressive Casualty Insurance Company (“Progressive”). Mr. Helms alleges that
he sustained serious injuries during the accident,1 resulting in significant monetary
damages.

His wife, Gail Helms, alleges damages resulting from the loss of her

husband’s companionship. (Doc. 3). Plaintiffs had an active underinsured motorist
(“UIM”) policy at the time of the accident, which is alleged to include UIM coverage in
the amount of $300,000 per person. (Id.).
Rather than filing suit against Sanders and/or Progressive, Plaintiffs initiated suit
in state court against their own insurer, Defendant Nationwide Insurance Company of
America, for breach of contract and bad faith concerning payment under their UIM
policy. On June 23, 2011, Defendant removed the litigation to this Court based upon
the parties’ diversity of citizenship, and simultaneously moved to dismiss based upon
Plaintiffs’ alleged failure to join a necessary party under Rule 19, Fed. R. Civ. P.
Defendant Nationwide argued that Sanders, the actual tortfeasor, was a necessary
party, and that Plaintiffs could not proceed under their UIM policy without also naming
the negligent driver.
In its motion to dismiss, Nationwide represented that it has already advanced
$100,000 to the Plaintiffs in recognition of the coverage provided by Sanders’ liability
policy. Defendant did so in compliance with Ohio law that holds that a UIM insurer may
advance the tortfeasor’s policy limits in lieu of granting consent to settle, in order to
preserve the insurer’s subrogation rights. See Bogan v. Progressive Cas. Ins. Co., 36

1

Nationwide disputes that Plaintiffs’ injuries were proxim ately caused by the accident.
2

Ohio St.3d 22, 521 N.E.2d 447 (1988)(overruled in part on other grounds by Ferrando v.
Auto-Owners Mut. Ins. Co., 98 Ohio St.3d 186, 781 N.E.2d 927 (2002)).
On September 12, 2011, the Court denied Defendants’ motion to dismiss based
partly on the lack of information concerning whether Sanders was a “necessary,” party,
but without prejudice to Defendants to renew their motion following further development
of the record.2

The Court reasoned that: (1) Ohio law governing an underinsured

motorist claim requires proof that the insured is “entitled to recover” from the
underinsured driver, but does not mandate that an insured actually file suit against the
negligent driver; (2) Ohio law requires courts to look to the express terms of the
insurance policy to determine the conditions that an insured is required to fulfill prior to
bringing a UIM claim; (3) only where a failure to file suit breaches a contractual duty - for
example, an insured’s duty to preserve an insurer’s subrogation rights- can an insurer
contend that the filing of suit is a prerequisite to coverage; and (4) the express language
of the policy at hand suggested that suit against Sanders was discretionary absent the
fulfillment of certain conditions, which Defendant failed to prove had occurred at the
time of their motion.3 (Doc. 10).

2

Am ong the relevant docum ents not filed of record was the March 4, 2010 letter agreem ent between
Defendant and Plaintiffs, concerning the advancem ent of $100,000 in coverage in order to preserve
Defendant’s subrogation rights against Sanders.

3

One of those conditions required proof that Defendant had clearly directed Plaintiffs to file suit against
Sanders. W hile Defendant’s m otion to dism iss itself m ight be construed as such direction, it was not
considered to satisfy the condition precedent listed in the policy language. Plaintiffs assert that Defendant
to this day has “never outright dem and[ed] that Plaintiffs sue Sanders,” but concede that Nationwide has
“insisted that they file [suit against Sanders] in a roundabout way.” (Doc. 17 at 8). As Nationwide points
out, the language of the policy does not set forth a tim e lim it for requiring Plaintiffs to sue Sanders, and, to
the extent that Nationwide was attem pting to resolve Plaintiffs’ claim prior to suit being filed, com m on
sense dictated against requiring Plaintiffs to pursue their claim against Sanders at that tim e.

3

However, because the policy language at issue stated both that the insured must
preserve the insurer’s subrogation rights, and that the insured must “do whatever is
proper to secure” subrogation rights and “do nothing to prejudice them,” (Doc. 8-1 at
24), the Court also agreed with Defendant that Plaintiffs could not simply abandon all
claims against the negligent driver. Citing Ohio case law, the Court explained:
[T]he statement in Bogan that the injured party may not, voluntarily or
otherwise, abandon his claim against the tortfeasor in order to proceed
directly against his own insurer remains true both as a general principle
and in the context of the policy at issue in this case. To the extent that an
insured will lose his right to pursue UIM if, by his activity (i.e., settlement
without his insurer’s consent), or inactivity (i.e., failing to provide timely
notice until following the expiration of the statute of limitations), he fails to
preserve the insured’s subrogation rights.
Id. at 12. In other words, in order to recover UIM benefits, a plaintiff must prove that his
damages exceed the tortfeasor’s policy limits.

Thus, a plaintiff who ignores the

tortfeasor in proceeding against his own UIM insurer does so at his peril; no liability will
accrue if the injured party abandons his underlying claim to the prejudice of the UIM
insurer.
Defendant’s prior motion to dismiss was denied without prejudice after the Court
concluded that “this Court cannot determine whether Plaintiffs’ failure to file suit directly
against the Tortfeasor has yet prejudiced or impeded the Defendant’s subrogation
rights.” At the time the Defendant filed its motion, neither party had presented any
evidence as to whether Plaintiffs had ever pursued any claim at all against Sanders, or
whether pursuing such a claim would be futile because Sanders is judgment-proof. See

4

Ponser v. St. Paul Fire & Marine Insurance Company et al, 104 Ohio St. 3d 621, 628,
821 N.E.2d 173, 179 (Ohio 2004).
As the Court previously stated: “Ohio law supports a finding of presumptive
prejudice to the Defendant’s subrogation rights where an insured fails to pursue any
claim against the tortfeasor prior to suing his ...insurer“ (Doc. 10 at 14). However, the
Court explained that Plaintiffs could overcome that presumption by proving:
a) the Tortfeasor is without assets, such that abandonment results in no
prejudice to the Defendant’s rights;
b) they are pursuing their claim in a manner so as to avoid prejudice
(through extrajudicial settlement, for example); or
c) some other circumstance exists that avoids any prejudice to the
Defendant.
(Id.). On September 15, 2011, following entry of the Court’s Memorandum Opinion
denying Defendant’s motion to dismiss, the parties appeared through counsel for a
preliminary pretrial conference.
Citing the Court’s ruling, Plaintiffs orally moved for leave of court to file an
amended complaint in order to bring a claim against Sanders - implicitly conceding that
Plaintiffs’ failure to pursue Sanders might prejudice Nationwide on the facts presented.
The Court granted Plaintiffs’ oral motion, directing Plaintiffs to file their amended
complaint and to answer Defendant’s counterclaim within fourteen (14) days.

On

September 23, 2011, Plaintiffs filed an amended complaint (Doc. 13), and on October
10, 2011, Plaintiffs filed a second amended complaint. (Doc. 14).

5

On October 24, 2011, Defendant filed an answer to the second amended
complaint, as well as a cross claim against Joshua Sanders and counterclaim against
Plaintiffs. (Doc. 15). On the same, date, Defendant moved to strike Plaintiffs’ amended
complaint as exceeding the boundaries of the Court’s ruling at the pretrial conference,
and as otherwise procedurally improper. (Doc. 16). Plaintiffs have filed a response to
the motion to strike, to which Defendant has filed a reply. (Docs. 17, 19).
On January 17, 2012, Plaintiffs filed an “Affidavit in support of Plaintiffs’ Service
by Publication on Defendant, Joshua Sanders.” No formal motion is pending before the
Court regarding service, which pursuant to Rule 4(m), Fed. R. Civ. P., must be
completed within 120 days of the date the amended complaint was filed. Because it
concerns personal jurisdiction over a party who ostensibly was the reason for filing an
amended complaint, the Court will also address the issue of service.
II. Analysis
A. Motion to Strike
Defendant Nationwide has moved to strike Plaintiffs’ first and second amended
complaints pursuant to Rule 12(f), Fed. R. Civ. P. That rule provides that a court “may
strike from a pleading...any redundant, immaterial, impertinent, or scandalous matter.”
Nationwide argues that Plaintiffs’ two amended complaints exceed the leave to amend
orally granted by this Court at the preliminary pretrial conference, to the prejudice of the
Defendant.

In addition, Defendant argues that some of the new allegations are

immaterial and impertinent. The Court agrees.

6

1. The First Amended Complaint
Before turning to the heart of Defendant’s arguments, the Court notes that only
Plaintiffs’ second amended complaint remains the subject of Defendant’s motion. In
their response in opposition to Defendant’s motion, Plaintiffs represent that their Second
Amended Complaint “is designed to completely supersede the First Amended
Complaint.” (Doc. 17 at 3). To that extent, Defendant’s request to strike Plaintiffs’ First
Amended Complaint from the record can be granted without impacting Plaintiffs’ claims.
2. The Second Amended Complaint
Defendant argues that although Plaintiffs have named Joshua Sanders in the
caption of the second amended complaint, they have failed to assert any causes of
action against him. Nationwide argues that Plaintiffs’ conduct “has placed Nationwide’s
subrogation rights directly at risk,” since Nationwide “stands in the shoes of the insuredsubrogor and has no greater rights than those of its insured-subrogor.” Nationwide Mut.
Ins. Co. v. Zimmerman, 2004 WL 3038032 ¶16 (Ohio App. 5 Dist., Dec. 27, 2004). In
other words, Nationwide argues that to the extent that Plaintiffs’ claim against Sanders
is so deliberately and inartfully pled as to be subject to immediate dismissal, Plaintiffs
have violated the terms of the insurance policy that requires them to preserve
Nationwide’s subrogation rights, doing “whatever is proper to secure” those rights and
“nothing to prejudice them,”
Nationwide also complains that Plaintiffs have improperly added a new cause of
action against Nationwide for declaratory relief, because Plaintiffs now seek a
declaration that Plaintiffs have complied with the terms fo the Nationwide policy. In their

7

second amended complaint, Plaintiffs allege that Nationwide has waived its rights to
subrogate against the tortfeasor, (Doc. 14 ¶46), which allegations Defendant describe
as impertinent on the record presented.
Defendant also seeks to strike the second amended complaint based upon
Plaintiffs’ allegations about the conduct of legal counsel after this litigation was initiated,
as support for Plaintiffs’ bad faith claim. (Doc. 14 ¶¶ 32-33, 39-40). Nationwide asserts
that those allegations are both factually false, and that the allegations are legally
irrelevant to Plaintiffs’ bad faith claim.
Nationwide contends that the new allegations and claim against Nationwide
violate the Court’s instructions during the Rule 16 conference, because Plaintiffs’
counsel asked only for leave to amend to add Joshua Sanders, and never sought leave
to assert additional claims against Nationwide. Due to counsel’s silence, Nationwide
was not provided any opportunity to object to the amendment insofar as it concerns a
new claim against Nationwide. Nationwide now strenuously objects on grounds that the
new claim is subject to immediate dismissal. Based upon Plaintiffs’ alleged violation of
Rule 15(a) (failure to seek leave of court for the new claim), Nationwide asks the Court
to strike the amended complaint in its entirety. In the alternative, Defendant seeks an
order striking the referenced new allegations against Nationwide with prejudice, and
requiring Plaintiffs to pay monetary sanctions in the form of defense costs for attending
the pretrial conference, for preparing answers to the two amended complaints, and for
preparing its motion to strike.

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a. Rule 11
Within the body of their motion to strike, Defendants allege that “Plaintiffs have
violated Fed.R.Civ.P. 11 and 15(a).” (Doc. 16 at 6).

In part, Rule 11 requires an

attorney who files a pleading to certify by his or her signature that the legal contentions
“are warranted by existing law or by a nonfrivolous argument for extending, modifying,
or reversing existing law or for establishing new law,” and that the factual contentions
have “evidentiary support or, if specifically so identified, will likely have evidentiary
support” after discovery. Rule 11(b)(2) and (b)(3). However, Rule 11(c) also requires
that any motion that seeks sanctions under the rule “must be made separately from any
other motion” and must be first served but not filed or presented to the court until 21
days after service. Based upon Nationwide’s failure to comply with Rule 11(c), the
Court declines to consider Defendant’s arguments under Rule 11.
b. Rule 15(a)
Defendant correctly notes that because Nationwide had already served its
responsive pleading, Plaintiffs could amend their original complaint only with leave of
court under Rule 15(a). Plaintiffs briefly argue that they “never formally moved the
Court for permission to amend,” and did not tender their proposed amended pleading.
(Doc. 17 at 7).

However, both the parties and this federal Court remain bound by the

Federal Civil Rules of Procedure. Rule 15(a)(2) permits amendment of a complaint
after an answer has been filed only “with the opposing party’s written consent or the
court’s leave.”

9

Plaintiffs did not obtain Nationwide’s written consent but orally sought leave of
Court to file an amended complaint at the September 12, 2011 preliminary pretrial
conference. This Court granted leave for the sole purpose expressed at that time by
Plaintiffs - to file a new claim against Joshua Sanders, the tortfeasor. Plaintiff asserts
that the Defendant’s reference to the Rule 16 conference discussions are
“disingenuous,” and lack supporting “transcripts, sworn statements or affidavits
concerning the content of those discussions.” (Doc. 17 at 6).
Pursuant to this Court’s practice, no court reporter was present at the Rule 16
conference - a fact that precludes the filing of a supporting transcript and of which
Plaintiffs’ counsel was aware.4 The Court finds Plaintiffs’ criticism of Defendant for
failing to file a supporting transcript to itself be disingenuous. Although the Defendant
might have filed a supporting affidavit, that formality is of little consequence given this
Court’s own clear recollection of the proceeding before it.
Just as there is no question that amendment under Rule 15 was orally sought by
Plaintiffs’ counsel at the Rule 16 conference, there is equally no question that the Court
granted the construed oral motion for the purpose of joining Sanders. It is true that the
details of the proposed amendment were neither discussed in any great detail nor
expressly limited by the minute entry, since the essence of a negligence claim in an
automobile accident case is not complex and the drafting of particular allegations falls
within the discretion of counsel. However, it is mistaken, if not misleading, for Plaintiffs
to interpret the Court’s ruling as carte blanche to name Sanders in the caption without
4

In the future, if the parties desire a transcript of a conference, the presence of a court reporter m ust be
requested 7 days prior to the conference.

10

actually asserting any claims against him, and instead to present amendments not
discussed, including new claims against Nationwide. See U.F.C.W. Local 56 Health
and Welfare Fund v. J.D.’s Market, 240 F.R.D. 149, 153 (D.N.J. 2007)(oral grant of
motion to amend was implicitly limited to counsel’s representation concerning simple
addition of party; excessive amendment stricken under Rule 12(f)); Dover Steel Co. v.
The Hartford Accident and Indemnity Co., 151 F.R.D. 570, 574 (E.D. Pa. 1993)(rejecting
notion that order granting leave to amend following telephone conference granted leave
“to file any old amended complaint,” when court had relied upon different tendered
amended complaint than that which was filed).
i. New Allegations Against Sanders
Plaintiffs assert that their second amended complaint does “just what Nationwide
requested” because it “joins Sanders and makes substantive allegations against him.”
(Doc. 17 at 3). Notably, Plaintiffs fail to cite to any portion of their second amended
complaint that makes “substantive allegations” against Sanders or presents any specific
claim against Sanders. Under the “factual allegations common to all claims” section of
their second amended complaint, Plaintiffs allege generally that Sanders had an
insurance policy with Progressive, (Doc. 15, ¶16), and that Sanders “negligently
operated his motor vehicle in such a manner that he struck W. Helms, causing him
severe bodily injury.” (Id., ¶18). However, there is no claim of negligence or plea for
damages against Sanders. Instead, Plaintiffs purport, “[i]n the alternative...[to] reserve
all rights against Sanders.” (Id., ¶49). Absent any actual claim against Sanders, this
alleged “alternative” reservation of rights does not equal a substantive claim, and

11

arguably would not preserve the statute of limitations for any future claim against
Sanders.
Plaintiffs argue that by joining Sanders in the caption, they have refrained from
prejudicing Nationwide because Nationwide can and has asserted a cross claim for
subrogation against Sanders. This Court previously surmised that “Defendant may itself
file a third party complaint against the Tortfeasor to obtain reimbursement” of the sum it
previously advanced to Plaintiffs. (Doc. 10). Upon further reflection, the Court notes
that Ohio law is not entirely clear on whether Nationwide can maintain an independent
claim against Sanders without any viable claim being made by Plaintiffs. See, e.g.,
Jesenovec v. Marcy, ___ N.E.2d ___, 2011 WL 4389960 (Ohio App. 8 Dist., Sept. 22,
2011)(trial court erred in failing to permit UIM carrier to pursue claim against tortfeasor
to enforce subrogation rights); St. Paul Fire and Marine Ins. Co. v. Cassens Transport
Co., 86 Fed. App’x 869, 2004 WL 162559 (6th Cir. 2004)(discussing limited right of
UIM/UM carrier to pursue tortfeasor under Ohio law); State Farm Mut. Auto. Ins. Co. v.
Trumpy, 2000 WL 1878951 (Ohio App. 6 Dist. Dec. 29, 2000)(UIM carrier could
maintain suit against tortfeasor on facts presented, distinguishing cases involving
contribution among joint tortfeasors). But see, Cincinnati v. Keneco Distributors, Inc.,
1999 WL 1048236 (Ohio App. 6 Dist., Nov. 19, 1999)(holding that right of subrogation
does not confer upon UIM carrier a right to maintain an independent cause of action in
negligence against an insured joint tortfeasor); United Ohio Ins. Co. v. Faulds, 118 Ohio
App.3d 351, 692 N.E.2d 1059 (1997); Westfield Ins. Co. v. Jeep Corp., 55 Ohio App.3d
109, 111, 562 N.E.2d 912 (1988).

12

In their second amended complaint, Plaintiffs have failed to present any viable
claim that Sanders is liable to them. Because Plaintiffs have failed to assert a claim of
negligence or any other claim against Sanders, Sanders would be subject to immediate
dismissal, assuming Plaintiffs achieve service.

Nationwide argues that Plaintiffs’

conduct is prejudicial to Nationwide’s rights and in violation of the express language of
the policy. Although the Court is not in the habit of issuing prospective rulings absent
full briefing, the Court’s prior Memorandum Opinion should have made abundantly clear
to Plaintiffs that failing to “do whatever is proper to secure such [subrogation] rights,” or
failing to “do whatever is necessary to recover for us payments made under this
coverage,” or doing anything at all to prejudice Nationwide (Doc. 8-1 at 24), violates the
express language of the UIM policy as well as Ohio law. (Doc. 10 at 12)(emphasis
added).
At the prior pretrial conference and again in opposition to Defendant’s motion to
strike, Plaintiffs continue to profess “no interest in incurring the costs to pursue a claim
against Sanders when they have realized the benefit of his insurance coverage
already.” (Doc. 17 at 6).5 But the benefit that Plaintiffs have realized cannot come at
Nationwide’s expense, either under the express terms of the policy or under Ohio law.
As the Court previously explained, if an insured either takes action (settlement without
consent) or fails to take action against the tortfeasor that prejudices the right of the UIM
carrier to recover from the tortfeasor, he risks forfeiting his UIM claim. Again, while this
Court is loathe to instruct any litigant on how best to plead their claim(s), Plaintiffs’
5

Even in Plaintiffs’ second am ended com plaint, Plaintiffs allege that after accepting the advance of
paym ent from Nationwide, “Plaintiffs have no ongoing dispute with Sanders and do not have any
reasonable basis to incur the expense necessary to pursue claim s against him .” (Doc. 14, ¶26).
13

complaint states no viable claim against Defendant Sanders in its present form.
Because leave to amend was implicitly conditioned upon counsel’s representation that
Plaintiffs sought leave to assert a claim against Sanders, and no viable claim has been
asserted, the Court will grant Defendant’s motion to strike.
ii. New Allegations Against Nationwide
As an additional basis for striking the second amended complaint, Defendant
argues that Plaintiffs’ amendment dramatically exceeds the leave granted by this Court
insofar as new allegations are asserted against Nationwide. See Keithley Instruments,
599 F. Supp.2d 908, 912 (N.D. Ohio 2009)(striking new causes of action that exceeded
court’s grant of leave to amend); accord Graves v. Mohoning County, Civil Case No.
3:10-cv-2821, 2011 WL 3703950 *4 (N.D. Ohio, Aug. 23, 2011)(where court granted
leave to amend within context of representations by counsel, Plaintiffs were not free to
file “whatever amendment they saw fit.”). The Court agrees.
In opposition to the motion to strike, Plaintiffs counter that they have continually
asserted bad faith against Nationwide, and the new allegations and claim for declaratory
relief flow directly from that original claim. Plaintiffs alternatively argue that “the spirit of
Rule 15 is to permit the free amendment of pleadings,” (Doc. 17 at 7), but Plaintiffs
neglect to include the full language of the rule, which explains that amendment is
required only “when justice so requires.” Rule 15(a)(2).
The new allegations against Nationwide were neither anticipated by the Court nor
discussed at the preliminary pretrial conference in the context of Plaintiffs’ oral motion to
amend. As with the purely nominal addition of Sanders, the new allegations against

14

Nationwide concerning the bad faith claim, and new claim for declaratory relief, arguably
would not survive a motion to dismiss.
Plaintiffs’ new allegations against Nationwide include the following:
In response to the Complaint, Nationwide, through its Counsel, threatened
to remove the Action to this [federal] Court unless Plaintiffs voluntarily
withdrew their bad faith allegations and claims, despite the fact that the
jurisdiction and venue for the Action have nothing to do with whether
Plaintiffs have a substantive bad faith claim. Plaintiffs refused to give up
this valuable right, and, on June 23, 2011, Nationwide did, in fact remove
the Action to this Court
(Doc. 14, ¶32). Plaintiffs additionally allege that
[I]n response to Plaintiffs’ complaint, Nationwide moved to dismiss the
Action, premised upon the fact that Plaintiffs failed to join Sanders into the
Action originally, despite the fact that, as stated above, they had no
continuing claim or dispute with Sanders. Importantly, prior to filing this
Motion, as stated above, Nationwide had never demanded that Plaintiffs
pursue and action against Sanders, nor has Nationwide made that
demand to this day.
(Id. ¶33). In addition to these general allegations, Plaintiffs have amended their bad
faith claim to allege that Nationwide has
abus[ed] the jurisdiction of this Court to try to exact a dismissal of
Plaintiffs’ bad faith claims; and [sought] a dismissal of this Action,
premised upon Plaintiffs’ failure to join Sanders in the Action, even though
it had never exercised its right under the policy to request that Plaintiffs do
so.
(Id., ¶39). Plaintiffs further allege that Nationwide’s “bad faith conduct is continuing and
will continue throughout the pendency of this Action....,” and that its “actions undertaken
in this Action” are part of conduct that Plaintiffs describe as “outrageous, malicious and
extreme.” (Id., ¶¶41, 42)(emphasis added).
Counts One and Two against Nationwide ostensibly mirror Plaintiffs’ original
claims of breach of contract and bad faith. However, in an entirely new “Count Three,”
15

Plaintiffs seek declaratory relief that “Nationwide has either waived, or Plaintiffs have
complied with, all terms in the Policy requiring Plaintiffs to take action against Sanders
or otherwise protect Nationwide’s subrogation rights.” (Id., ¶48).6 In support of that
relief, Plaintiffs allege that Nationwide “has never directed Plaintiffs to bring any type of
legal action against Sanders,” and has “waived its right to make such demand, or, in the
alternative, Plaintiffs have satisfied this requirement...by joining Sanders as a party to
this Action.” (Id., ¶46). Plaintiffs additionally allege that they “have complied with all
requirements in the Policy mandating that they protect Nationwide’s subrogation rights
against Sanders, to wit, the Court now has jurisdiction over Sanders, prior to the
expiration of the applicable Statute of Limitations, due to Plaintiffs naming him in this
Action, and Nationwide may cross claim against Sanders for any amounts it has paid
out.” (47).
In sum, Plaintiffs’ new allegations charge Nationwide with bad faith based upon
Defendant’s post-litigation conduct, including counsel’s decision to remove the case to
this Court, and subsequent motion to dismiss based upon the failure to join Sanders.
Plaintiffs also bring an entirely new claim that purports to seek a declaration that
Plaintiffs have overcome any presumption of prejudice to Nationwide’s subrogation
rights simply by naming Sanders in the caption of the second amended complaint, or in
the alternative, that Nationwide has waived any requirement that Plaintiffs pursue a
claim against Sanders.

6

Under Ohio law, a UIM insurer that objects to a proposed settlem ent between the insured and the
tortfeasor and thereafter advances the am ount of the tortfeasor’s policy lim its preserves its subrogation
rights. Jesenovec v. Marcy, ___ N.E.2d ___, 2011 W L 4389960 *6 (Ohio App. 8 Dist Sept. 22, 2011).
16

Plaintiffs contend that the new allegations concerning post-litigation conduct by
defense counsel merely add to their bad faith claim against Nationwide.

Plaintiffs

indicate that they intend to depose “those involved” in Nationwide’s post-litigation
decisions, to the extent those decisions relate to Plaintiffs’ bad faith claim. Alternatively,
Plaintiffs attempt to characterize the new allegations as relating back “to Nationwide’s
original omission [failing to demand suit against Sanders] and not specifically to its postsuit conduct.” (Doc. 17 at 13).
In seeking to strike the new allegations and claim for declaratory relief,
Defendant cites substantial authority for the principle that post-litigation conduct by
counsel generally does not - as a matter of law - support a claim of bad faith against an
insurer. See e.g., Dakota, Minnesota & Eastern R.R. Corp. v. Acuity, 771 N.W.2d 623
(S.D. 2009)(surveying case law); FDIC v. Aetna Cas. and Sur. Co., 903 F.2d 1073,
1080 (6th Cir. 1990)(“pressing a legitimate contractual defense...can certainly not be a
basis for a bad faith claim”); Timberlake Constr. Co., v. United States Fidelity & Guar.
Co., 71 F.3d 335, 340-341 (10th Cir. 1995)(evidence of litigation conduct rarely, if ever,
admissible to prove bad faith); Barefield v. DPIC Companies, 215 W. Va. 544, 600 S.E.
2d 256 (W. Va. 2004)(if aggressive defense tactics were to constitute bad faith, it would
improperly penalize the insurer for defending itself in litigation).
As other courts have observed:
Allowing litigation conduct to serve as evidence of bad faith would
undermine an insurer’s right to contest questionable claims and to defend
itself against such claims. [P]ermitting allegations of litigation misconduct
would have a chilling effect on insurers, which could unfairly penalize them
by inhibiting their attorneys from zealously and effectively representing
their clients within the bounds permitted by law. Insurers’ counsel would
17

be placed in an untenable position if legitimate litigation conduct could be
used as evidence of bad faith.
Knotts v. Zurich Ins. Co., 197 S.W.3d 512, 522 (Ky. 2006)(quoting Timberlake, 71 F.3d
at 340-341).

Nationwide voices the same concern, noting Plaintiffs’ reference to

deposing those involved in litigation decisions, which could intrude upon the attorneyclient privilege and inhibit Nationwide’s ability to fully defend itself.
Ultimately, the Court finds it unnecessary to determine whether the new
allegations and claim against Nationwide for post-litigation conduct would survive a
motion to dismiss. Instead, the Court concludes that the second amended complaint is
subject to being stricken because the new allegations and claim against Nationwide
clearly exceed any permissible bounds of the Court’s prior grant of Plaintiffs’ oral motion
to amend his complaint. The grant of that motion was intended to be limited to Plaintiffs’
assertion of a new claim or claims against the alleged tortfeasor, Joshua Sanders.
B. Service of Joshua Sanders
As discussed, Plaintiffs’ second amended complaint ostensibly names Joshua
Sanders as a defendant.

The record does not yet reflect any appearance by Mr.

Sanders,7 but on January 17, 2012, Plaintiffs’ counsel filed an “Affidavit” in support of
“service by publication” upon Defendant Sanders pursuant to Rule 4(d), Fed. R. Civ. P.,
and Ohio Civil Rule 4.4.
Plaintiffs have filed no formal motion seeking alternate service or an extension of
time for service.

Instead, Plaintiffs represent in counsel’s affidavit that “service on

7

The Court takes judicial notice of the fact that defense counsel served a copy of Defendant’s m otion to
strike upon “J. Tim othy Riker” in Cincinnati, Ohio, listed by Defendant Nationwide as “Attorney for
Defendant Joshua Sanders.”
18

Sanders by publication is appropriate,” and conclude that “[t]his affiant therefore states
that service upon Defendant Joshua Sanders will be complete forth with [sic].” (Doc.
20).
Plaintiffs’ second amended complaint was filed on October 10,2011. Rule 4(m)
of the Federal Rules of Civil Procedure provides in pertinent part as follows:
If a defendant is not served within 120 days after the complaint is filed, the
court - on motion or on its own after notice to the plaintiff- must dismiss the
action without prejudice against that defendant or order that service be
made within a specified time. But if the plaintiff shows good cause for the
failure, the court must extend the time for service for an appropriate
period.
Id.8 “Unless a named defendant agrees to waive service, the summons continues to
function as the sine qua non directing an individual or entity to participate in a civil
action or forgo procedural or substantive rights.” Murphy Bros., Inc. v. Michetti Pipe
Stringing, Inc., 526 U.S. 344, 351, 119 S. Ct. 1322 (1999). Indeed, absent either waiver
or proper service of process, this Court does not have personal jurisdiction over Mr.
Sanders. See Friedman v. Estate of Presser, 929 F.2d 1151, 1156 (6th Cir. 1991) (and
cases cited therein). Plaintiff bears the burden of exercising due diligence in perfecting
service of process and in showing that proper service has been made. See Byrd v.
Stone, 94 F.3d 217, 219 (6th Cir. 1996); Jacobs v. University of Cincinnati, 189 F.R.D.
510, 511 (S.D. Ohio 1999).

8

The Court’s discussion of service under Rule 4(m ) is not intended to address any issues concerning the
applicable statute of lim itations. W hile exceptions m ay apply, ordinarily the addition of a new defendant
does not “relate back” to the filing of a com plaint. See generally Cox v. Treadway, 75 F.3d 230, 240 (6 th
Cir. 1996); DeBois v. Pickoff, MD, 3:09-cv-230, 2011 W L 1233665 *10 (S.D. Ohio, March 28, 2011)
(holding that Krupski v. Costa Crociere, 130 S. Ct. 2485 (2010) did not alter established law that “the
addition of new parties alongside those that are already part of the action precludes relation back to the
original com plaint.”).
19

Notwithstanding Plaintiffs’ counsel’s affidavit declaring service to be “complete,”
through “publication,” the record reflects no effective service to date.

Service by

publication is governed by Ohio Civil Rule 4.4 and Ohio Revised Code §2703.14. Rule
4.4(A)(1) states:
[I]f the residence of a defendant is unknown, service shall be made by
publication in actions where service is authorized by law. Before service
by publication can be made, an affidavit of a party...shall be filed with the
court. The affidavit shall aver that service of summons cannot be made
because the residence of the defendant is unknown to the affiant, all of the
efforts made on behalf of the party to ascertain the residence of the
defendant, and the residence of the defendant cannot be ascertained with
reasonable diligence.
(Id.).
In this case, Plaintiffs’ affidavit begins by stating that Plaintiffs have “asserted a
claim against Defendant, Joshua Sanders,” (Doc. 20 at 1), a proposition with which this
Court disagrees, as discussed above. In any event, the affiant asserts that Plaintiffs
“have attempted to serve Sanders through the Federal Civil Rules’ waiver provisions at
his last known address,” but have “discovered that this address is invalid.” (Id.). With
no further detail, the affidavit concludes that “Plaintiffs have made attempts to obtain
Sanders’ current address to no avail.” (Id.).
The affidavit is patently invalid to support service by publication under Ohio Civil
Rule 4.4, even if a motion had been filed.

The Ohio rule requires that any supporting

affidavit set forth in some detail “all of the efforts made on behalf of the party to
ascertain the residence of the defendant,” in order to show that Plaintiffs cannot effect
service “with reasonable diligence.” In this case, the affidavit sets forth no details, and
fails to show reasonable diligence.

It would appear that all that Plaintiffs have
20

attempted to do is to mail a waiver of the summons form. No information is set forth
concerning Plaintiffs’ attempt to contact Sanders’ insurer, nor is there information
concerning Plaintiffs’ attempts to achieve personal service through inquiries to former
neighbors, or searches of such city and county records such as the telephone book, city
directory, credit bureau, auto title department or board of elections, or basic internet
searches.
In addition to the facial infirmities of the affidavit under Ohio Civil Rule 4.4,
O.R.C. §2703.14 sets forth the limited types of cases in which service by publication
can be made. The only possible category applicable to the case at hand appears to be
subsection (L), which provides for service by publication:
[i]n an action in which the defendant, being a resident of this state, has
departed from the county of his residence with intent to delay or defraud
his creditors or to avoid the service of a summons, or keeps himself
concealed with a similar intent.
O.R.C. §2703.14(L). There is nothing in the record to suggest that Mr. Sanders has
departed his prior county of residence or the state of Ohio in an attempt to avoid
service.

Accord Rittner v. Huggins, 2008 WL 5111177 (S.D. Ohio Dec. 1,

2008)(denying motion for service by publication for lack of compliance with
requirements); Charter v. Hedges, 2003 WL 21211943 (Ohio App. 3 Dist. May 27,
2003)(failure to show due diligence; plaintiffs made only “perfunctory” attempts through
service by certified mail and contact of driver’s insurance carrier).
Upon a showing of good cause for the failure to effect timely service, “the court
shall extend the time for service for an appropriate period.” Fed. R. Civ. P. 4(m);
Osborne v. First Union Nat’l Bank of Delaware, 217 F.R.D. 405, 408 (S.D. Ohio 2003).
21

In the absence of a showing of good cause, the court has discretion to dismiss sua
sponte, provided that the plaintiff has notice of the proposed action. See Osborne, 217
F.R.D. at 408; United States v. Gluklick, 801 F.2d 834, 837 (6th Cir. 1986), cert. denied,
480 U.S. 919 (1987). At this point in time, Plaintiffs have failed to serve Defendant
Sanders, have failed to demonstrate due diligence in their attempts to achieve service,
and have sought no extension of the 120-day time limit mandated by Rule 4(m).
However, because the second amended complaint is subject to being stricken from the
record on other grounds, the issue of service - ordinarily of primary importance in
obtaining personal jurisdiction - has become secondary.
Accordingly, IT IS ORDERED HEREIN:
1. Defendant’s motion to strike Plaintiffs’ first and second amended complaints
(Doc. 16) is GRANTED but Defendant’s related request for monetary sanctions is
DENIED. Both amended complaints (Docs. 13, 14) shall be stricken from the record for
the reasons stated herein;
2. To avoid any further confusion, to the extent that Plaintiffs seek to pursue any
claims against Joshua Sanders, they must file a formal motion for leave to amend
pursuant to Rule 15(a)(2) and attach their amended complaint on or before February
20, 2012.9
s/ Stephanie K. Bowman
Stephanie K. Bowman
United States Magistrate Judge

9

The Court’s tim e lim it for bringing claim s against Sanders is not intended to express any opinion
concerning any defenses to such claim s, including but not lim ited to the applicable statute of lim itations.
22