Opinion
No. 02-2124-DJW
January 8, 2003.
MEMORANDUM AND ORDER
This is an action for medical coverage under the Employee Retirement Income Security Act of 1974 ("ERISA"), as well as Kansas state law. Plaintiffs assert one count for ERISA civil enforcement and one count for ERISA equitable estoppel. Currently pending before the Court is Defendants' Second Motion for Leave to Amend Answer (doc. 44). For the reasons stated below, Defendants' Motion is granted.
29 U.S.C. § 1001 et seq.
Factual and Procedural Background
Defendant Peter Kiewit Sons', Inc. ("Kiewit") was an administrator of a self-funded group health insurance policy (the "Plan") for the benefit of certain employees of Kiewit, including Plaintiff Barry Beach. Defendant Mutual of Omaha Insurance Company ("Mutual of Omaha") provided claims administration services for the Plan.
On or about July 13, 2001, Plaintiff Barry Beach's son — Plaintiff Kevin Beach — was accepted as a student at Iowa Western Community College and enrolled in classes on a full-time basis with course work to begin on August 20, 2001. Kevin Beach paid $1,568.00 in tuition for eighteen credit hours, purchased required tools and supplies in an amount exceeding $400.00 and attended various meetings with school counselors and professors concerning his course schedule.
On August 13, 2001, Kevin Beach was seriously injured in an automobile accident, rendering him a paraplegic. At the time of the accident on August 13, 2001, Kevin Beach had not attended any classes at Iowa Western Community College.
On August 22, 2001, the Kiewit benefits department sent an enrollment form via facsimile to Barry Beach to re-enroll Kevin Beach. Barry Beach returned the enrollment form to the Kiewit benefits department on August 22, 2001. Plaintiff Kevin Beach's claim for medical benefits have been denied by Defendants on grounds that Plaintiff Kevin Beach was not a full-time student as of August 12, 2001, due to the fact that he had not yet begun attending classes.
Plaintiff Kevin Beach filed this lawsuit on March 20, 2002, and Defendants filed an Answer on April 23, 2002. The Court entered a Scheduling Order that set August 27, 2002 as the deadline to amend pleadings. On August 27, 2002, Plaintiff moved for leave to amend the Petition in order to clarify one of his claims and to add his father as a party plaintiff. Plaintiff's Motion to Amend was granted and Plaintiffs' First Amended Petition was filed by the Clerk on October 28, 2002. Defendants filed their Answer to the Amended Petition on November 8, 2002.
On December 11, 2002, Defendants moved for leave to amend their Answer in order to specifically raise the issues of subrogation and offset as affirmative defenses. Defendants claim the requested amendment merely provides greater specificity to the existing defense that Plaintiffs' claims are subject to the exclusions and limitations set forth in the Plan. Plaintiffs object to the amendment, arguing (1) Defendants have not complied with local rules concerning motions to amend and briefs or memoranda in support; (2) Defendants' motion is untimely under the terms of the Scheduling Order entered by this Court; (3) Defendants have waived their right to subrogation or reimbursement under the policy; and (4) Plaintiffs would be severely prejudiced by permitting the amendment.
Discussion
Rule 15 of the Federal Rules of Civil Procedure allows one amendment of the pleadings, before a responsive pleading is served or within twenty days after service. Subsequent amendments are allowed by leave of court or by written consent of an adverse party and should be "freely given when justice so requires." "The decision to grant leave to amend a [pleading], after the permissive period, is within the trial court's discretion . . . and will not be disturbed absent an abuse of that discretion." The district court should deny leave to amend only when it finds "undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment." A. Strict Compliance with Local Procedural Rules
Id.
Woolsey v. Marion Labs., Inc., 934 F.2d 1452, 1462 (10th Cir. 1991).
Id.
Plaintiffs argue Defendants' Motion to Amend should be denied because Defendants failed to file a separate written brief or memorandum in support of their Motion as required by D.Kan. Rules 7.1 and 7.6.
The Court is not persuaded by Plaintiffs' argument. While the Motion is not in strict compliance with the stated local rules, the Court finds Defendants complied with the rule on a fundamental level by including their supporting arguments within the Motion. The fact that the arguments in support of the Motion were not presented in a separate pleading is not sufficient to deny Defendants' Motion to Amend.
B. Timeliness
Plaintiffs next argue Defendants' Motion to Amend should be denied because it is untimely under the Scheduling Order. Again, the Court disagrees.
The August 21, 2002 Scheduling Order in this matter states "any motion for leave to join additional parties or to otherwise amend the pleadings shall be filed by August 27, 2002." It is the Court's understanding, however, that discovery in this matter was delayed by the parties until after the Court's October 28, 2002 ruling on Defendants' Motion to Dismiss and Plaintiff's Motion to Amend the Complaint. In fact, Plaintiffs' amendment to the Complaint, which clarified one of the asserted claims and added a party plaintiff, was not filed until October 28, 2002 and Defendants' Answer to that Amended Complaint was not filed until November 8, 2002. Thus, the current pleadings had only been in place for one month before Defendants filed their Motion to Amend Answer. Under these circumstances, the Court finds Defendants did not unduly delay their request for leave to amend their Answer.
C. Waiver
Plaintiffs argue Defendants waived their rights to subrogation, reimbursement and offset under the Plan by failing to respond to Plaintiffs' pre-suit demand letter of December 18, 2001. Plaintiffs claim Defendants are now estopped from asserting those defenses. Based on these arguments, and the rules applicable to amendment of pleadings, the Court will construe Plaintiffs' argument to be futility of the proposed amendment.
A court may deny a motion to amend as futile if the proposed amendment would not withstand a motion to dismiss or if it otherwise fails to state a claim. Accordingly, in order to determine whether the proposed amendment is futile, this Court must analyze Defendants' proposed amendments as if they were before the Court on a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6).
Lyle v. Commodity Credit Corp., 898 F. Supp. 808, 810 (D.Kan. 1995) (citing Ketchum v. Cruz, 961 F.2d 916, 220 (10th Cir. 1992)), aff'd., 104 F.3d 367 (10th Cir. 1996).
Given the current procedural posture of this litigation, the Court declines to engage in such an analysis at this time and instead will consider these issues in the context of a dispositive motion. Both parties have communicated to the Court that they intend to file dispositive motions in this matter. The dispositive motion deadline currently is January 10, 2003, however, as a result of this ruling, that deadline will be extended to January 24, 2003. The Court finds it a better utilization of judicial resources to consider all dispositive issues at once. Accordingly, the Court will defer consideration of the waiver/estoppel issues and the parties will be ordered to brief such issues as part of their dispositive motions.
D. Prejudice
Plaintiffs argue that allowing Defendants to now assert an affirmative defense of subrogation will severely prejudice them. In support of this position, Plaintiffs state they entered into a settlement agreement with a third-party and then disposed of settlement funds. Plaintiffs also state they have spent considerable time and energy litigating this matter based on their assumption that Defendants waived their subrogation rights.
Simply put, the Court finds Plaintiffs have failed to establish that they will prejudiced if the proposed amendment is granted. Prejudice under Rule 15 means undue difficulty in defending a lawsuit because of a change of tactics or theories on the part of the other party. There does not appear to be a change of tactics or theory on Defendants' part. First, Plaintiffs' statements and actions demonstrate they have been aware of the subrogation provisions within the Plan since before the lawsuit was filed. The December 18, 2001 letter from Plaintiffs' counsel asserts that if there was no appropriate response to the claim for coverage "we will assume that you will not be invoking any rights arising out of the plan . . . including . . . potential subrogation rights." Exhibit A to Plaintiffs' Memorandum in Opposition to Defendants' Second Motion to Amend (doc. 47) (emphasis added). Thus, Plaintiffs have been aware since the inception of this dispute that there was a potential subrogation defense. The fact that they were willing to assume the defense was waived does not work to extinguish this knowledge.
Heslop v. UCB, Inc., 175 F. Supp.2d 1310, 1313 (D.Kan. 2001) (citing LeaseAmerica Corp. v. Eckel, 710 F.2d 1470, 1474 (10th Cir. 1983); Sithon Maritime Co. v. Holiday Mansion, 177 F.R.D. 504, 508 (D.Kan. 1998)).
Moreover, Defendants' original Answer asserted as an affirmative defense that the Plan contained limitations and exclusions that could affect Plaintiffs' claims for benefits. Plaintiffs do not dispute that they have possessed a copy of the Plan since the lawsuit started. And, the Plan includes provisions regarding subrogation, reimbursement and set-off rights that the Plan has when a claim has been paid and the beneficiary receives payment from third parties for injuries that result in the claim. There is also evidence that Defendants' written discovery to Plaintiffs and questions posed during depositions focused on third-party payments to Kevin Beach for his injuries in this accident.
Given these circumstances, the Court finds Plaintiffs have failed to establish they will encounter any undue difficulty in defending against the proposed affirmative defenses because of a change of tactics or theories on behalf of Defendants.
While Plaintiffs also cite reliance and additional expense in support of their undue prejudice argument, they provide (1) no explanation of why entering into a third-party settlement agreement may cause undue difficulty in defending against the proposed affirmative defenses and (2) no examples of what additional expense they will incur or what undue difficulty they will confront in defending against a claim of subrogation if the leave to amend the Answer is granted. Plaintiffs do not assert they will need additional fact discovery in order to brief this issue before the Court.
There also appears to be no prejudice from the timing of the requested amendment. While the Scheduling Order was put in place on August 21, 2002, discovery was substantially delayed by the parties until the Court's October 28, 2002 Order ruling on Defendants' Motion to Dismiss and Plaintiff's Motion to Amend the Complaint. Plaintiffs' own amendment of their Complaint (which provided additional specificity with regard to one of Plaintiff's claims and added a new party plaintiff) was not filed until October 28, 2002. Defendants' Answer to that Amended Complaint was not filed until November 8, 2002. Thus, the current pleadings had only been in place for a month before Defendants filed their motion to amend the Answer. Moreover, it is the Court's understanding that discovery remains incomplete at this time: Plaintiffs still plan to take additional depositions in Omaha and Defendants have consented to this additional discovery notwithstanding the fact that the discovery deadline has passed.
The Court does not find any undue prejudice to Plaintiffs in allowing the amended Answer.
Accordingly, it is hereby ordered that
(1) Defendants' Second Motion for Leave to Amend Answer is granted. Pursuant to D. Kan Rule 15.1(a), the Clerk shall detach and file the original Amended Answer, and it shall be deemed filed as of the date this Order is filed. Defendants shall serve the Amended Answer on Plaintiffs within five (5) days after the Amended Answer is deemed filed. In addition, Defendants shall file a separate certificate of service;
(2) the January 10, 2003 dispositive motion deadline is reset to January 24, 2003; and
(3) the parties shall brief any outstanding disputed issues related to waiver and estoppel of Defendants' assertion of subrogation, reimbursement and set-off rights as part of their dispositive motions.
IT IS SO ORDERED.