Summary
analyzing Oregon law and so concluding
Summary of this case from Bates v. Bankers Life & Cas. Co.Opinion
Civil No. 01-1202-AS.
July 12, 2004
OPINION and ORDER
Plaintiff Neal A. Pearson ("Plaintiff") filed an action for breach of contract to recover disability benefits denied him by Defendant Provident Life and Accident Insurance Co. ("Provident). This court granted summary judgment in favor of Provident finding that Plaintiff failed to meet the definition of "totally disabled" under the terms of the disability insurance policy issued by Provident to Plaintiff (the "Policy"). Plaintiff appealed the ruling and the Ninth Circuit reversed and remanded the action finding that "[t]here remains a material dispute of fact as to whether Pearson is capable of performing the duties of the occupation, rather than merely the particular job at Enway, given the unusual and noncustomary way he performed that job."
On remand, Plaintiff filed an amended complaint and added claims for breach of implied contract, estoppel, RICO violations, fraud and violation of the Tennessee Consumer Protection Act (TCA § 47-18-101 et seq.) (the "Tennessee Act"), as well as adding UnumProvident Corporation ("Unum") as a defendant. Provident and Unum (collectively "Defendants") moved to dismiss Unum and all but the breach of contract claims. In an opinion dated March 16, 2004, this court granted the motion with regard to the claims for estoppel, RICO violations, fraud and violation of the Tennessee Act. Plaintiff was allowed to proceed against Defendants on his claims for breach of contract and breach of the implied duty of good faith and fair dealing.
On April 19, 2004, Plaintiff filed a Third Amended Complaint setting forth claims for breach of contract and breach of the implied duty of good faith and fair dealing as well as two claims for fraud and a claim for intentional interference with contract against Unum. Plaintiff stipulated to the dismissal of the fraud and intentional interference with contract claims. Based on this stipulation, paragraphs 40 through 54, as well Plaintiff's damage prayers relating to the two claims for fraud and the claim for intentional interference with contract, are stricken from the Third Amended Complaint.
Plaintiff agreed to the dismiss the fraud and intentional interference claims without prejudice and intends to move the court for leave to add those claims in a fourth amended complaint.
Defendants now move to strike large portions of the revised Third Amended Complaint (the "Complaint") arguing that the Complaint contains allegations that support the RICO claims that the court previously dismissed. Plaintiff asserts that the allegations are relevant to his claim of breach of the implied covenant of good faith and fair dealing and should remain in the Complaint.
Legal Standard
Under Fed.R.Civ.P. 12(f), a party may make a motion to strike from any pleading "any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter."
"`Immaterial' matter is that which has no essential or important relationship to the claim for relief or the defenses being pleaded." . . . "`Impertinent' matter consists of statements that do not pertain, and are not necessary, to the issues in question."Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993)rev. on other grounds, 510 U.S. 517 (1994).
"`[T]he function of a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial. . . .'" Id., quoting Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). In a motion to strike the court must view the facts most favorably to the non-moving party. State of Cal., ex rel State Lands Commission v. U.S., 512 F. Supp. 36, 39 (N.D. Cal. 1981); Bank Tejarat v. Varsho-Saz, 723 F. Supp. 516, 517 (C.D. Cal. 1989).
Discussion
Defendant moves to strike portions of paragraph 2, all of paragraphs 3 and 11-26, and the last sentence of paragraph 27. The court will address each of these paragraphs below with the general understanding that all allegations relevant to the relationship between the parties and the Policy are relevant and will remain in the Complaint. Allegations that refer to other insureds, other policies or other actions are irrelevant and must be stricken.
In paragraph 2, Plaintiff alleges the technicalities of the corporate restructuring of Provident and Unum from 1995 to 1999. The court previously ruled that Unum was a proper party to the action based on Plaintiff's agreement to include these allegations. These allegations are relevant and will remain in the Complaint. Paragraph 3 describes the relationship and interaction between Unum and its subsidiaries. These allegations are proper as well.
The bulk of Plaintiff's objectionable allegations contain information about Defendants' claims handling procedures in which certain policies, such as Plaintiff's, are targeted for denial or termination. Plaintiff refers to these procedures as Defendants' "fraudulent claims handling processes." Defendants argue that these allegations are irrelevant to Plaintiff's implied duty claim because the insurers motivation for the denial of a claim is not at issue in such a claim. However, Defendants concede that the duty of good faith imposes an obligation to perform the express terms of a contract in good faith.
The implied, contractual duty of good faith and fair dealing is a well-recognized part of Oregon common law. Best v. United States Nat'l Bank of Or., 303 Or. 557, 561 (1987). This duty requires that the parties will not act in a way that destroys or injures the other, Perkins v. Standard Oil Co. of Ca., 235 Or. 7, 16 (1963), or that frustrates or defeats the object of the contract. Warnock v. Bonneville General Agency, Inc., 271 Or. 634 (1975). The contractual good faith doctrine is designed to "effectuate the reasonable contractual expectations of the parties." Best, 303 Or. at 561. "The obligation of good faith does not vary the substantive terms of the bargain * * *, nor does it provide a remedy for an unpleasantly motivated act that is expressly permitted by contract * * *." U.S. National Bank v. Boge, 311 Or. 550, 567 (1995).
It is true that an insurer has the right to deny a claim where the insured does not meet the requirements of the policy. However, an insurer does not have a right to sell a policy with the intent to deny all claims under that policy or to manipulate the opinions of physicians upon which such denials are based. The majority of Plaintiff's allegations, while strongly stated in terms of a fraudulent scheme, are relevant to whether Defendants breached the implied duty of good faith and fair dealing.
Defendants argue that the references to "bad faith" and "fraudulent conduct" alleged in the pleadings will cause an unwarranted prejudice to Defendants. The court is able to consider the evidence presented in the pleadings without being swayed by the terms used by Plaintiff to describe the conduct. If this case goes to trial, all of the descriptive words will be removed from the pleadings in the pretrial order and will not be presented to the jury. Plaintiff will be allowed to present evidence on Defendants' claim handling procedures as well as the history and purpose behind such procedures but will not be allowed to refer to such procedures as fraudulent or in bad faith.
Paragraphs 11-16 all relate to Defendants' general procedure for reviewing disability claims and are, to some degree, relevant to Plaintiff's implied duty claim. In paragraph 17, Plaintiff makes allegations of specific conduct but does not allege that Defendants engaged in any such conduct with Plaintiff. In light of the specific nature of the allegations in paragraph 17, they need to be stricken unless Plaintiff can tie them to his own relationship with Defendants. Paragraphs 18-22 describe Defendants' conduct with regard to other plaintiffs in other actions, are irrelevant to the case at hand and must be stricken. Paragraphs 23 and 24 allege the specifics of Plaintiff's relationship with Defendants and are relevant. Paragraph 25 again describes actions taken by Defendants in other claims and other actions, with the exception of subparagraph 25(C)4, which describes Defendants' contacts with Plaintiff. Accordingly, the portion of paragraph 25 not related to Plaintiff is irrelevant. Paragraph 26 alleges that Defendants have engaged in fraudulent acts with a number of claims and claimants. These allegations are duplicative of the allegations found in paragraphs 11-16 and are not particularly relevant to the specific claims before the court.
In the last sentence of paragraph 27, Plaintiff adds a claim for damages in "a sum necessary to purchase a replacement policy that will provide coverage for future claims for occupational disability, in a sum to be established at trial, from a reputable and honest company." The court has previously ruled that Plaintiff is limited to recovery of contract damages under his contract and implied duty claims. This sentence is inappropriate and must be stricken.
Conclusion
Defendants' motion (#111) to strike is GRANTED in part and DENIED in part as set forth above. Paragraphs 17-22, paragraph 25, with the exception of subparagraph 25(C)4, paragraph 26, and the last sentence of paragraph 27, are irrelevant or duplicative and are hereby stricken from the Complaint.