Summary
In Tillman, the Tenth Circuit held that, under the 1993 version of the statute, the employer had no insurable interest in the life of the plaintiff, a "rank-and-file" employee as distinguished from a "key" employee.
Summary of this case from Lewis v. Wal-Mart Stores, Inc.Opinion
Case No. 02-CV-0761-EA (J)
September 29, 2003
ORDER
Now before the Court is Defendant Camelot Music Inc.'s Motion to Dismiss (Dkt. # 19), Plaintiff's Motion for Partial Summary Judgment (Dkt, #21), Plaintiff's Cross-Motion for Partial Summary Judgment Concerning the Affirmative Defense of Limitations (Dkt #28-1), and Defendant Camelot Music Inc.'s Cross-Motion for; Summary Judgment Dismissing the Complaint [sic] (Dkt, #34-1). Plaintiff Betina L. Tillman, personal representative of the estate of Felipe M. Tillman, seeks a declaration that defendant Camelot Music, Inc. ("Camelot") had no insurable interest in Felipe Tillman's life. Camelot owned arid operated a national chain of more than 300 music tape, CD and video stores. In 1990, Camelot employed Felipe Tillman for a short period of time in one of its Oklahoma stores. The company had "corporate owned life insurance" ("COLI") that covered Felipe Tillman as well as 1,430 other Camelot employees who worked more than 20 hours per week. Felipe Tillman died on January 2, 1992, and Camelot received $339,302 in policy benefits.
I.
A motion to dismiss is properly granted when it appears beyond doubt that the plaintiff could prove no set of facts entitling it to relief.See Conley v. Gibson, 355 U.S. 41-45-46 (1957); Ramirez v. Department of Corrections, 222 F.3d 1238, 1240 (10th Cir. 2000). For purposes of making this determination, a court must accept all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff.Ramirez, 222 F.3d at 1240. However, the Court need not accept as true those allegations that are conclusory in nature, Erikson v. Pawnee County Board of County Commissioners, 263 F.3d 1151, 1154-55 (10th Cir. 2001) (citations omitted). "The issue is not whether the plaintiff will ultimately prevail, but whether it is entitled to offer evidence to support its claims." Cooper Mfg. Corp. v. Home Indem. Co., 131 F. Supp.2d 1230, 1232 (N.D.Okla. 2001).
Camelot submitted news articles and a document filed with the Securities and Exchange Commission ("SEC") in support of its motion to dismiss. If the. Court considers. these exhibits, the Courtis obliged to convert Camelot's motion to dismiss into a motion for summary judgment and give all parties a reasonable opportunity to present alt material pertinent to the motion. See Fed.R.Civ.P. 12(b). Camelot argues that the Court may take judicial notice of newspaper and magazine articles, see Cotton v. Merrill Lynch, Pierce, Fenner Smith, Inc., 699 F. Supp. 251, 256 (N.D.Okla. 1988), and the contents of public documents filed with the SEC, Bryant v. Avado Brands. Inc., 187 F.3d 1271, 1276 (11th Cir. 1999). Plaintiff argues that the Court should treat the motion as one for summary judgment, and, in fact, submits her own exhibits in support of her response to the motion to dismiss. She also moves for summary judgment regarding the statute of limitations issue. Hence, there is no dispute that the parties have had a reasonable, opportunity to present all material pertinent to the motion to dismiss, and the Court will treat it as a motion for. summary judgment. Summary judgment pursuant to Fed.R.Civ.P. 56 is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Kendall v. Watkins, 998 F.2d 848, 850 (10th Cir. 1993). The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that, party's case, and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 317. "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Id. at 327.
"When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (citations omitted). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the [trier of fact] could reasonably find for the plaintiff." Anderson, 477 U.S. at 252. In essence, the inquiry for the Court is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 250. In its review, the Court construes the record in the light most favorable to the party opposing summary judgment. Garratt v. Walker, 164 F.3d 1249, 1251 (10th Cir. 1998).
II.
Plaintiff, Felipe Tillman's sister, claims that Camelot was not entitled to the benefits under Okla. Stat. tit. 36, § 3604(C)(2), which provides that an insurable interest exists, for policy beneficiaries who are not related by blood or law to the insured person, only when the designated beneficiary has "a lawful and substantial economic interest in haying the life, health, or bodily safety of the individual insured, continue, as distinguished from. an interest which would arise only by, or would be enhanced in value by, the death, disablement or injury of the individual insured." Thus, plaintiff argues, the Oklahoma statute, as it read both at the time the insurance contract was created and at the time of Felipe Tillman's death, did not permit an employer to have an insurable interest in the life of a former employee. See id. § 3604(C)(4)(a). Plaintiff claims that Camelot violated the statute and was unjustly enriched when it received the proceeds and benefits of the COLI policy as a result of Felipe Tillman's death. She seeks a money judgment in the amount of $339,302, or a judgment disgorging the same amount. She also seeks punitive damages.
Camelot argues that the statute of limitations has run on plaintiff's claims, but, even if the Court rules that the limitations period has not run, the Oklahoma statute pertaining to insurable interests is not applicable. That statute is inapplicable, Camelot asserts, because Camelot's COLI policies were not issued or delivered in Oklahoma and, in any event, the policies are governed by Ohio or Georgia law. Camelot also argues that plaintiff's claims were discharged when a bankruptcy court confirmed Camelot's plan of reorganization. Finally, Camelot argues that plaintiffs claim for unjust enrichment should be dismissed because plaintiff did not convey any benefit to Camelot regarding the COLI policies.
As recounted in several news articles submitted by Camelot, COLI policies were purchased by numerous companies, including Fortune 500 companies, in the 1990s to take advantage of a tax loophole. Companies borrowed money from the insurer to cover the cost of the policies, took a tax deduction on the interest, and repaid the loans with proceeds from the benefits they collected when employees covered by the policies died. Most companies, like Camelot, claimed that they purchased the policies as part of a strategy to increase resources they could devote to other employee benefit programs. Some companies informed their employees of the policies and gave them the option to be excluded from coverage. Many would provide incentives to the employees by offering life insurance benefits in amounts smaller than the company would receive if the employees would agree to coverage. The companies paid the premiums for COLI policies; covered employees paid nothing.
The Internal Revenue Service ("IRS") began contesting the interest deductions on COLI policies, see American Elec. Power, Co., Inc. v. United States, 326 F.3d 737 (6th Cir. 2003); Dow Chemical Co. and Subsidiaries v. United States, 250 F. Supp.2d 748 (E.D.Mich. 2003); Winn-Dixie, Inc. v. Comm'r, 113 T.C. 254, 1999 WL 907566 (U.S. Tax. Ct. 1999), aff'd, 254 F.3d 1313 (11th Cir. 2001), and Camelot was a casualty of one of these contests. A Delaware federal district court ruled in favor of the IRS against Camelot in 2000, In re CM Holdings, Inc., 254 B.R. 578, 590 (D. Del. 2000), after Camelot filed for bankruptcy in 1996 and merged with Trans World Entertainment in 1999, Employees, or their estates, also began challenging the COLI policies similar to the way in which plaintiff challenges Camelot's policies in this matter, and at least one court has ruled in favor of covered employees. See Mayo v. Hartford Life Ins. Co., 220 F. Supp.2d 714, 780-84 (S.D.Tex. 2002). Plaintiff brings this suit in the wake of the Mayo decision. Significantly, theMayo court denied a motion to intervene filed by Felipe Tillman's heirs, holding that the heirs' claims were "materially different" from those of the Texas plaintiffs because the heirs relied on Oklahoma law. Mayo v. Hartford Life Ins. Co., 214 F.R.D. 458, 463 (S.D.Tex. 2002).
III.
The parties disagree as to what law applies to this controversy. TheMayo decision involves an extensive discussion of the appropriate choice. of law. The defendants in that case argued, as Camelot argues in this matter, that the law of the forum Estate did, not apply to a determination of whether employers had an insurable interest in the lives of their employees covered by COLI policies. TheMayo court did not agree. See id. at 763. For similar reasons, this Court finds Camelot's choice of law arguments defective."It is well-established that federal courts sitting in diversity apply the choice of law provisions of the forum state." Progressive Gas, Ins. Co. v. Engemann, 268 F.3d 985, 987 (10th Cir. 2001). Camelot argues that the Court should apply a conflict of laws analysis applicable to contracts. In Oklahoma, conflict of laws relating to contracts is governed under the lex loci contractus rule unless the law of the state where the contract was made is "contrary to the public policy of Oklahoma, or unless the facts demonstrate that another jurisdiction has the most significant' relationship with the subject matter and the parties." Bohannan v. Allstate Ins. Co., 820 P.2d 787, 797 (Okla. 1991).
The Bohannan holding involved a motor vehicle insurance, contract, but there is no reason to believe that it would not apply to a life insurance contract as well.
Camelot points out that its COLI contract was made in Ohio and that the public policy behind the requirement that a beneficiary have an insurable interest in the life of' insured is the same in both Ohio and Oklahoma: to prevent wagering contracts. See Ducros v. Commissioner of Internal Revenue, 272 F.2d 49, 51 (6th Cir. 1959); Mutual Aid Union v. Stephens, 223 P, 648. 649 (Okla. 1924). Camelot argues that Ohio has the most significant relationship with the COLI policies because Camelot is based in Ohio, it negotiated the terms of the COLI policies in Ohio, it paid the policy premium from its corporate account in Ohio, and death benefits were wired to Camelot's Ohio account.
Alternatively, Camelot argues that Georgia law would apply because, where the lex loci contractus rule would not protect the fundamental policies of the forum state and the rights of the parties, the Restatement (Second) of Conflict of Laws (hereinafter "Restatement") § 187 (1971) applies. Bohannan, 820 P.2d at 796 n. 5. Section 187 provides, in relevant part:, that "[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied . . . unless . . . (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice. . . . Camelot argues that the parties, i.e., Camelot and its insurer, intended for Georgia law to apply, the policies were issued in Georgia, the insurer paid its premium taxes on the Camelot policies in Georgia, Camelot's COLI plan servicer was based in Georgia, Camelot had corporate offices in Georgia, and Camelot had retail stores throughout Georgia.
Plaintiff argues that the policies were not issued in Georgia, despite a stipulation to that effect in the litigation between Camelot and the TRS, because the judge in that case recognized the stipulation as wrong, based on the facts. See Pl. Reply Br., Dkt, # 40. at 3.
Further, Camelot argues, the section of the Restatement applicable in the absence of an effective choice of law (§ 188) would not dictate that the, Court apply Oklahoma law. That section lists five "contacts" for consideration: "(a) the place of contracting, (b) the place of negotiating the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties." Restatement § 188(2). It further provides: "These contacts are to be evaluated according to their relative importance with respect to the particular issue." Id. Camelot argues that the only contact in plaintiffs favor is the location of the subject matter: Felipe Tillman was an Oklahoma resident. The other factors could lead to application of Ohio, Georgia, New Jersey, or even Florida law. Camelot asserts, and plaintiff does not dispute, that Camelot had an insurable interest in Felipe Tillman's life under the laws of Ohio and Georgia.
Camelot's arguments are based on the flawed premise that a conflict of laws analysis applicable to contracts is appropriate here. Plaintiff is not suing for breach of contract; she is not a party to the contract. Plaintiff is suing for violation of an Oklahoma. statute, and for unjust enrichment as a result of conduct allegedly in violation of that statute. Neither Felipe Tillman nor the plaintiff was a signatory to the contract. As plaintiff asserts, Camelot was doing business in Oklahoma and was subject to the same obligations as an Oklahoma corporation. Okla. Stat. tit. 18, § 1130D. In particular, Camelot was subject to Oklahoma's laws concerning its relationship with its employees. See id., tit. 40, § 165.1 et. seq. This is not a dispute between Camelot and its insurance company.
Recognizing the unusual nature, of this issue, the Mayo court applied the "most significant relationship test" described inRestatement § 6, as well as the contacts listed inRestatement § 188 applicable to contract actions. It is not dear whether Oklahoma courts would apply this test. Plaintiff argues that they would and cites to several Oklahoma cases. See Pl. Reply Br., Dkt. # 40, at 4 n. 7. Yet, the cases cited by plaintiff involved tort actions or a commercial transaction governed by the Uniform Commercial Code ("UCC"). In tort actions, the most significant contacts test of Restatement $145 applies. In cases involving the sale of goods, the choice of law provisions of the UCC apply.
The factors listed in section 6. are as follows:
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests, of those states in the determination of the particular issues,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied.
Curiously, the parties have not directed the Court's attention specifically to Restatement § 192, which specifically addresses life insurance contracts. The section provides:
The validity of a life insurance contract issued to the insured upon his application and the rights created thereby are determined, in the absence of an effective choice of law by the insured in his application, by the local law pf the state where the insured was domiciled at the time the policy was applied for, unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the. other state will be applied.
The comment to this section indicates that "[t]he rule does not apply to life insurance issued upon the life of someone other. than the applicant. . . ." Restatement § 192 cmt. a. In that instance, according to the comment, the rule stated in Restatement § 188. controls. Again, a review of the factors listed in section 188, and the comments to that section, leave the distinct impression that it applies in the traditional context of actions involving a breach of contract or requiring interpretation of a contract where the parties to the contract are the same as the parties to the dispute in which the choice of law matters.
The Court finds the rationale for the rule stated inRestatement g 192 instructive for the unique facts of this case even though the rule itself is not strictly applicable. "With respect to life insurance contracts, the almost universal reference is to the law of the insured's domicile which, typically, is also the place of the forum. The rule has its origin in the concern of the. forum to protect its residents against adhesion contracts, a concern that is further reflected in, the limited-ability of the parties to select the applicable law by stipulation." Eugene F. Scoles et al., Conflict of Laws 868 (3rd ed. 2000). Here, Felipe Tillman had no opportunity to select the applicable law. The concern of the forum in this instance is even greater than protection against adhesion contracts. It is reflected in the policy underlying the insurable interest requirement in Okla. Stat. tit 36, § 3604: to prevent speculation "upon the hazards of a life,"Mutual Aid Union, 223 P. at 649 (citation omitted).
The life of an Oklahoma citizen is central to this controversy. Plaintiff has alleged a violation of Oklahoma statute, not an Ohio statute or a Georgia statute. There is. no reason for this Court to believe that Ohio or Georgia has a greater interest in the determination of whether Camelot has an insurable interest in the lives of Oklahomans. "With respect to using the forum state's law, it has been held that insurance contracts are governed by the law of the state where the contract was consummated unless public policy requires the assertion of the forum state's paramount interest in protecting its residents" Eric Mills Holmes, Holmes's Appleman on Insurance 21.4. at 263-64 (2d ed. 1998) (emphasis added).
Focusing on the life of the insured in this instance is not inconsistent with application of the rule set forth inBohannan, given that the Court may apply Oklahoma law if it has the most significant relationship with the subject matter and the parties. 820 P.2d at 797. Analysis of the "most significant relationship" necessarily involves consideration of the factors listed in theRestatement, The "relevant policies of the forum" factor listed in Restatement § 6 and the location of the subject matter of the contract in Restatement § 188 outweigh all other factors that might tend to favor Camelot if the dispute were between Camelot and it's insurer. As. set forth in Restatement § 188(2): "These contacts are to be evaluated according to their relative importance with respect to the particular issue."
Accordingly, Camelot's argument with regard to the most significant relationship is misplaced: it is not the state that has the most significant relationship to the COLI policies that matters; it is the state that has "the most significant relationship with the subject matter and the parties." Bohannan, 820 P.2d 797 (emphasis added). The subject matter in this case is the life of the insured and the statute designed to protect it. The parties to the policy, Camelot and the insurer, are not the same as the parties to the lawsuit, the employer beneficiary and the personal representative of the estate of the insured employee. The amount plaintiff seeks is the amount Camelot received under the terms of the COLI policy, but a choice of law analysis based solely upon the lex loci contractus rule is not appropriate. Under Bohannan as well as theRestatement, Oklahoma has the most significant relationship with the subject matter and the parties.
Camelot has not argued separately that Oklahoma law is inapplicable to plaintiff's unjust enrichment claim. To the; extent that unjust enrichment is based on, the COLI policy, the analysis set forth above applies. To the extent it is not, Restatement § 221 could apply, as plaintiff asserts. Section 221(2) provides:
(2) Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include;
(a) the place where a relationship between the parties was centered, provided that the receipt of enrichment was substantially related to the relationship,
(b) the place where the benefit or enrichment was received,
(c) the place where the act conferring the benefit or enrichment, was. done,
(d) the domicil [sic], residence, nationality, place of incorporation and place of business of the parties, and
(e) the place where a physical thing, such a land or a chattel, which was substantially related to the enrichment, was situated at the time of the enrichment.
These contacts are to be evaluated according to their relative importance with respect to the particular issue.
Restatement § 221(2).
An analysis of these contacts leads to the conclusion, that Oklahoma, law applies primarily because the relationship between Camelot and Felipe Tillman was centered in Oklahoma, Felipe Tillman's death triggered Camelot's right to claim benefits under the policy, Felipe Tillman lived, worked for Camelot, and died in Oklahoma, and Camelot is domesticated in Oklahoma an business here. Other factors, such as the place where the benefit was received and the place where Camelot is incorporated, are significantly overshadowed by the factors that favor application of Oklahoma law to plaintiff's unjust enrichment claim. Accordingly, the Court finds that Oklahoma law governs the entire controversy at issue in this dispute.
IV.
Camelot argues that the limitations period has run because plaintiff's claim for violation of the Oklahoma insurable interest statute is covered by a one-year statute of limitations applicable to penalty and forfeiture statutes. Camelot also argues that plaintiffs claim, for unjust enrichment is governed by a three-year statute of limitations, and is barred. In 1990, Camelot purchased the COLI policy insuring Felipe Tillman's life. Felipe Tillman died in 1992, and plaintiff brought suit more than ten years later, in October 2002,
Plaintiff contends that the limitations period was tolled by Camelot's fraudulent concealment of its COLI policies, and the limitations period has not expired, given that she first learned of the policies in March or April 2002. Camelot counters that plaintiff had constructive notice of the policies: (1) when the national press began reporting on the existence of COLI policies in 1995; (2) when Camelot acknowledged the existence of the policies in its February 1998 SEC filing; (3) when the federal court in Delaware filed a May 1998 opinion in Camelot's bankruptcy case; or (4) when news articles appeared in 2000 concerning tax litigation between Camelot and the IRS.
Oklahoma's insurable interest statute (with respect to personal insurance), Okla. Stat. tit. 36, § 3604(B), does not contain its own statute of limitations or tolling provisions. Camelot maintains that it is a penal statute because it is based entirely on the state's interest in preventing speculation "upon the hazards of a life." Mutual Aid Union v. Stephens, 223 P. 648, 649 (Okla. 1924) (citation omitted). A penal statute is one in which "the state's purpose was to punish an offense against the public justice of the state" as opposed to affording "a private remedy to a person injured by the wrongful act." Sudbury v. Deterding, 19 P, 3d 856, 859 (Okla. 2001). The statute of limitations applicable to penal or forfeiture statutes is one year. Okla. Stat. tit. 12, § 95(4).
Plaintiff argues that the one-year statute of limitations is not applicable because she has been injured by a wrongful act and is entitled to monetary compensation in the amount by which Camelot has been "unjustly enriched." The Court has not found any Oklahoma decision explicitly construing Okla. Stat. tit. 36, § 3604 as a penal or forfeiture statute. The state's purpose may have been to punish an offense against the public justice by affording a private remedy to a person injured by the wrongful act. It provides, in relevant part: "If the beneficiary . . . under any contract made in violation of this section receives from the insurer, any benefits thereunder accruing upon the death . . . of the individual insured, the individual insured or his executor or administrator, as the case may be, may maintain an action to. recover such, benefits: from the person so receiving them." Id. § 3604(B). The Court declines to hold that the one-year statute of limitations, is applicable.
The Court also refuses to find applicable the five-year statute of limitations "upon any contract, agreement, or promise in writing," Okla. Stat. tit., 12, § 95(4), as plaintiff would have the Court find. Plaintiff has not brought an action for breach: of contract; she has brought an action for violation of statute and unjust enrichment. The fact that an insurance contract underlies this controversy does not dictate the limitations period. Oklahoma courts have found other limitations; periods applicable to insurance contracts "where the claim is, for example, one for bad faith refusal to settle a claim, Taylor v. State Farm Fire and Gas, Co., 981 P.2d 1253, 1257 n. 10 (Okla. 1999), or equitable subrogation, Republic Underwriters Ins. Co. Fire Ins. Exchange, 655 P.2d 544, 546 (Okla. 1982).
The Court finds applicable the three-year statute of limitations for an "action upon a liability created by statute other than a forfeiture, or penalty; . . ." Okta. Stat tit. 12, § 95(2). "[A] liability created by statute is defined as a liability which would not exist but for the statute." Lincoln Bank and Trust Co. v. Neustadt 917 P.2d 1005.1008 (Okla.Ct.App. 1996) (citations omitted) Similarly, plaintiff's unjust enrichment claim is governed by the three-year statute of limitations. Lapkin v. Garland Bloodworth Inc., 23 P.3d 958, 962 (Okla.Ct.App. 2000).
Camelot asserts that plaintiffs cause of action accrued the day Felipe Tillman died (January 2, 1992), because that is when death benefits became payable under the COLI policy. See Digital Design Group, Inc. v. Information Builders, Inc., 24 P.3d 834, 839 (Okla. 2001) ("[a]n action accrues when a litigant can first maintain an action to a successful conclusion"). The Court finds that the limitations period for plaintiff's claim for violation of Oklahoma's insurable interest statute commenced the day Camelot bought the policy because, theoretically, plaintiff could have sought a declaratory judgment that Camelot had no insurable interest. The Court finds that the limitations period for plaintiff's unjust enrichment claim commenced on the day Camelot received the policy benefits. In any event, plaintiff failed to bring suit within three years of all of these dates. Thus, the key issues are: whether the limitations period was polled by Camelot's alleged fraudulent concealment; whether plaintiff had constructive notice of her claim; and if so, when.
"[F]raudulent concealment by a wrongdoer of the injured party's cause of action will toll the period of limitations until the injured party is placed on reasonable: notice of the wrong." Telex Corp. v. Int'l Bus. Machines Corp., 367 F. Supp. 258, 360 (N.D.Okla.), rev'd on other grounds, 510 F.2d 894 (10th Cir. 1973); see also Funnel v. Jones, 737 P.2d 105. 107 (Okla. 1985); Liberty Nat'l Bank of Weatherford v. Lewis, 44 P, 2d 127, 129 (Okla. 1935):Tice v. Pennington, 30 P.3d 1164, 1171 (Okla.Ct.App. 2001). Plaintiff points to. statements made during the bankruptcy litigation as evidence of Camelot's concealment of the COLI policies and death benefits. During the course of that litigation, Camelot's former Chief financial Officer and Vice President of finance, Jack Rogers, testified that Camelot took precautions to prevent Camelot employees and their families from discovering the policies because the company did not want the employees or their families claiming some entitlement to the benefits.
Q. Now, Mr. Rogers, Camelot took precautions to prevent the employees from learning of the fact that Camelot had taken insurance on their lives, isn't that correct?
A. That's correct. Yes.
Q. In fact, they even went to the step of making sure that what death benefit proceeds came in did not go into the general account of Camelot; correct?
A. Yes, that's true, because once you let a few people know, a few people are going to tell a few more people and you might as well tell the entire company. If you make the decision to keep this information limited to a small group, you have to work hard to keep it maintained to a small group.
Pl. Br. in Support of her Motion for Partial. Summary Judgment, Dkt. # 21, Ex. B-2, at 376, 11. 2-14; see also id. at 375, 11. 8-19; id. at 376, 11. 15-25. In particular, the benefits collected on the COLI polices were paid into a special account for executive compensation and later transferred into a general account.Id. at 333, 1. 3-335, 1. 12. Thus, Rogers essentially admitted that Camelot concealed the existence of its COLI policies from its employees.
Camelot argues that its plan to prevent employees or their families from discovering the existence of the COLI policies was nothing more than non-disclosure of a right to bring a cause of action. Under Oklahoma law, "[t]he mere failure to disclose that a cause of action exists is not sufficient to prevent the running of the statute. There must be something more; some actual artifice to prevent knowledge of the facts; some affirmative act of concealment or some misrepresentation to exclude suspicion and prevent inquiry." McClenahan v. Okla. Ry. Co., 267 P. 657, 658 (Okla. 1928); accord Wills v. Black West 344 P.2d 581, 584 (Okla. 1959). The "something more" in this instance was Camelot's effort to hide the insurance benefits in an account for executive compensation. Camelot's accounting methods prevented any Camelot employee, or the administrator of an employee's estate, from ever becoming privy to that information, or any other information which would have revealed the insured. Therefore, the Court finds that Camelot actively concealed the existence of its COLI policies from its employees and their families.
Camelot's constructive notice arguments are equally unavailing. Where a party seeks to toll a statute of limitations based on failure to discover the alleged fraud, constructive notice from public records may start the limitations period. See Gearhart Industries. Inc. v. Grayfox Operating Co., 829 P.2d 1005, 1006 (Okla. Ct. App, 1992). The 1995 Newsweek article upon which Camelot relies describes COLI policies in general, see Opening Memorandum of Camelot Music Inc., in Support of Its Motion to Dismiss, Dkt. # 20, Ex., B, but the Court is not aware of any articles informing the reader that Camelot had purchased COLI policies covering its employees as well as officers. Even if the article had mentioned Camelot in addition to other companies that had COLI policies, there is no indication that plaintiff saw the article, and no reason that it would have led her to believe that Felipe Tillman was covered under the policy or that she might otherwise have a cause of action. Publication in a national news magazine of a general article on COLI policies did not provide constructive notice and, thus, did not start the statute of limitations for plaintiff's claims.
Camelot also relies on its filing of an SEC Form 10-K on February 13, 1998, which disclosed the IRS' claim against Camelot in Camelot's bankruptcy proceedings, "the large majority of which relates to a proposed disallowance by the TRS of certain deductions for interest payments made by Camelot in connection with, its corporate-owned life insurance program (the "COLI Deductions")." See Opening Memorandum, Dkt. #20, Ex. A, at 21. The Court does not deem this statement sufficient to put Camelot employees covered by the COLI policies on notice of any potential claim. A prospective plaintiff reading this statement could have assumed that Camelot's "program" referred to "key person" policies covering certain executive officers. See Am. Elec. Power, Inc. v. United States, 136 F. Supp.2d 762, 768 (S.D.Ohio 2001) ("Corporations have, for many years, purchased life insurance on the lives of their most valuable employees in order to protect the corporation against economic losses which would occur as a result of the untimely death of such an employee. This form of COLI is commonly known as key person life insurance.").
An obscure opinion in the Camelot's bankruptcy case is also insufficient to provide constructive notice. On May 29, 1998, the United States District Court for the Districts of Delaware withdrew the reference from the bankruptcy court to resolve the adversary proceeding created when Camelot filed an objection to the IRS' proof of claim. In the court's opinion withdrawing the reference, it wrote: "Beginning in 1990, Camelot established a COLI plan to provide funding for future liabilities in connection with its self-insured employee benefit plans. Under this COLI plan, Camelot purchased individual, whole-life policies on the lives of approximately 1,400 of its employees and officers."Internal Revenue Serv. v. CM Holdings, Inc., 221 B.R. 715, 724 (D. Del. 1998).
Camelot argues that, under Oklahoma law, public filings provide constructive notice to commence the statute, of limitations period.See Woodward v. Ross, 549 P.2d 1207, 1209 (Okla. 1976);Fidelity and Cas. Co. of New York Y, Board of County Commissioners of Tulsa County, 342 P.2d 547, 551 (Okla. 1959). InWoodward, the complaining parties filed suit to set aside a joint tenancy deed that had been on record for a number 1.4 years. They alleged that the deed had been obtained from their aunt by fraud and undue influence. They stood to inherit the property if the deed were set aside. The court stated:
Where means of discovering fraud are in hands of party defrauded and defrauding party has not covered up his fraud to extent it would be difficult or impossible to discover, party defrauded will be deemed to have had means of discovering such fraud came into his hands and fraud will be deemed to have been discovered upon that date.Woodward, 549 P.2d at 1209; see also Gearhart, 829 P.2d at 1006-1007. Similarly, the Fidelity case involved allegations of fraud. The complaining party brought an action to recover on a "Public Employees Faithful Performance Blanket Position Bond" when the Chief Deputy Court Clerk of Tulsa County misappropriated funds. The court found that the complaining party could have discovered the fraud if it had checked court records. The Fidelity court wrote: "Where the means of discovery lie in public records, required by law to be kept, which involve the very transaction in hand, and the interests of the parties to the litigation, the public records themselves are sufficient constructive notice of the fraud to set the statute in motion." 342 P.2d at 551 (citation and internal quotation omitted).
Woodward and Fidelity are inapposite. Plaintiff had no involvement in. the. bankruptcy proceedings and no actual notice of their occurrence. To expect her to follow the bankruptcy proceedings, or hire a lawyer to check the docket sheet daily, for any indication mat her deceased brother, a former Camelot employee, may have been covered by a life. insurance policy he or she never knew about, is too high an expectation. It would certainly have required more than "the exercise of ordinary diligence" to discover. See Gearhart, 829 P.2d at; 1.007. The order withdrawing the reference does not constitute constructive notice. As iiiSzczepka v. Weaver, 942 P.2d 247, 249 (Okla. Ct. A pp. 1997), the complaining party had no reason to learn of the public filing.
Finally, the October 18, 2000 Wall Street Journal article discussing Camelot's COLI tax litigation in Delaware, Opening Memorandum, Dkt. # 20, Ex. C, does not constitute constructive notice of a possible claim in connection with Camelot's COLI policies. Plaintiff claims, that it. was not until a Wall Street Journal writer called her to inquire about her brother, his employment with Camelot, and the COLI policy, that plaintiff learned of a possible claim. That was in March or April 2002, and she filed her Complaint in October 2002.
Camelot argues, in its reply brief, that "it is too early in the proceedings to reach these conclusions," and requests discovery on the issue, Def. Reply Br., Dkt. # 33, at 12. Camelot bases its statement and request on a Fed.R.Civ.P. 56(f) affidavit filed by its attorney in which he argues that "[i]t is premature to conclude what Ms. Till man knew about the COLI policies and when she knew it" because Camelot has not taken discovery of Ms. Tillman, and she has not produced any documents. Declaration of Thorn as E. Steichen in Opposition to Plaintiff's Cross-Motion for Partial Summary Judgment on Limitations, Dkt. # 32, ¶ 3. He also asserts that Camelot has been unable to contact its former comptroller who would have information regarding the administration of Camelot's COLI polices. Id. ¶ 4.
Fed.R.Civ.P. 56(f) provides: "Should it appear from the affidavits of a party opposing the motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just."
The Court finds the affidavit insufficient to warrant a continuance for two reasons: (1) the former comptroller is unlikely to know anything about what plaintiff knew about the COLI policies and when she knew it; (2) Camelot moved to dismiss this action based: upon statute of limitations grounds and attached several exhibits to its pleadings. It is only in response to plaintiff's cross-motion, which plaintiff filed in response to Camelot's motion to dismiss, that Camelot has questioned Ms. Tillman's knowledge of Camelot's COLI policies. Further, Camelot has not explained why it has not yet discovered these basic facts. A Rule 56(f) affidavit must, among other things, "identify[ ] the probable facts not available and what steps have been taken to obtain these facts."Price ex. rel. Price v. Western Resources, Inc., 232 F.3d 779, 783 (10th Cir. 2000) (quoting Committee for the First Amendment v. Campbell, 962 F.2d 1517, 1522 (10th Cir. 1992)). Even if the information Camelot seeks is exclusively or peculiarly within plaintiff s knowledge, that fact alone would be insufficient to warrant a continuance or a denial of plaintiff's request for summary judgment. See id. at 784 (citing Weir v. Anaconda Co., 773 F.2d 1073. 1083 (10th Cir. 1989)).
Plaintiff filed this action on October 1, 2002, and Camelot waived service of summons on October 25, 2002. Plaintiff filed an amended complaint, which Camelot moved to dismiss on December 2, 2002. Plaintiff was permitted to amend her. complaint again on December 18, 2002, and the motion to dismiss was denied as moot. The Court entered a scheduling order on January 7, 2003. Camelot filed its motion to dismiss on statute; of limitations grounds on January 6, 2003, and plaintiff filed a combined, response and cross-motion for partial summary judgment on January 31, 2003, Camelot requested an extension of time to file its combined. reply and response, which the Court granted. Camelot filed that response on February 14, 2003. In the meantime, plaintiff and defendant each filed dispositive motions on the merits . . . Debriefing with regard to those motions was not completed until March 24, 2003. Nothing has precluded Camelot from taking discovery of plaintiff on this limited issue in the months before or after the filing of its affidavit on February 14, 2003. Camelot has not met its burden to show entitlement to a continuance for purposes of discovering what plaintiff knew about the COLI policies and when she knew it.
The Court finds that plaintiff filed this lawsuit within three years of reasonable notice of the. alleged wrong, and it is therefore not barred by the statute of limitations,
V.
Camelot argues that the Oklahoma insurable interest statute, under which plaintiff sues, docs not apply to its COLI policies because they were not issued or. delivered in Oklahoma. That statute provides, in relevant part, that the article shall not apply to: "[p]olicies or contracts not issued for delivery in Oklahoma nor delivered in Oklahoma. . . ." Okla. Stat tit 36, § 3601(2). The terms "issued for delivery" or "delivered" are not separately defined by statute or Oklahoma case law. Camelot first argues, in its cross motion, that its COLI policy was signed in Ohio and sent to Florida, where it was processed for the New Jersey insurer. Camelot argues that it intended the policy to be deemed "issued" in Georgia, where the insurer paid taxes on the policy premiums. Camelot later argues, in its reply brief, that its COLI policy was "issued" in New Jersey by its insurer and "delivered" to Ohio, where it was signed by Camelot's former chief financial officer.
Camelot relies on Korzinek v. Postal Life Ins. Co., 224 F. Supp. 1001 (S.D.N.Y. 1964), for the proposition that an insurance policy is "issued" where the insurance company is located, but Korzinek merely states that the subject group insurance policy was "issued by a New York insurance company to [the insured's employer], which has its principal place of business in New York City." Id. at 1002. Another New York case indicates that "[a] policy of insurance is issued when it is delivered and accepted, whereby it comes into full, effect and operation as a binding mutual obligation, or when it is. prepared and signed, as distinguished from its delivery to the insured." Taagert v. Security Ins. Co. of New Haven, Connecticut, 100 N.Y.S.2d 563, 564 (N.Y.App.Div. 1950). Camelot argues that "delivery" is where the. contract is physically sent as the final act of consummating the insurance agreement and commencing the insurance coverage." Def. Reply Br., Dkt. # 41, at 2 (citing Lee R. Russ Thomas F. Segalla,Couch on Insurance § 14:1 (3d ed. 1995). Hence, the Camelot policy could be considered "issued" m either New Jersey or Ohio, and it was actually "delivered" in Ohio. The Court agrees that these definitions. reflect the typical usage of the terms "issued" and "delivered" in the insurance context, but the Camelot COLI policy is not atypical insurance contract, and this is not the typical case.
The cited section in Couch on Insurance provides, in relevant part:
Determining when the contract of insurance comes into being is important in many contexts. Contracts of insurance are frequently conditioned upon the execution, issuance or delivery of the policy. These terms can have distinct meanings but may also be used interchangeably. For example, the term "issuance" has been employed to refer to the preparation and signing of the policy, the delivery and acceptance of the policy, and to the preparation, execution, and delivery of the instrument as a binding obligation. A distinction between "issuance" and "delivery" is sometimes recognized in construing a statute or determining when a contract of insurance is in effect. "Delivery" is not essential to the completion of a contract which becomes effective, according to its terms, upon the "issuance" of the policy.Id. (internal footnotes omitted).
Plaintiff argues, based on Oklahoma law, that insurance policies may be "constructively" delivered when a. carrier issues a policy without imposing delivery conditions, as in this case. See Mid-Continent Life Ins. Co. v. Dees, 269 P.2d 322, 323 (Okla. 1954). This accords with case law in other jurisdictions. See, e.g., Life Gas. Inc. Co. of Tennessee v. Gurley, 229 F.2d 326, 329-30 (4th Cir. 1956) ("delivery has been held to be largely a matter of intention and . . . physical transfer of possession of the policy is not essential"). Case law defining "delivery" inevitably assumes delivery to "the insured or some person acting for him." McDermott Intern., Ins, v. Lloyd's Underwriters of London, 120 F.3d 583, 586 (5th Cir. 1997) (applying Louisiana law); cf. Weber v. Continental Cas. Co., 379 F.2d 729, 731 (10th Cir. 1967) (group policy delivered in California where the employer was located, and insured employee received His "Certificate of Participation there as a California resident.") There is no evidence that Felipe Tillman authorized Camelot to act for him with respect to a life insurance policy naming him as the insured. Camelot's former chief financial officer testified that there was only "one form insurance contract," and that policy named "Paul David" as the insured.See Declaration of Jack K. Rogers, ¶ 9, Dkt. # 36, Ex. E at 3.
Plaintiff implies that, if the statute is construed to require physical issuance and delivery in the state, as opposed to constructive delivery, life insurance' carriers could, avoid regulation by issuing specimen policies such as Camelot's policy and maintaining policy specific information electronically. Camelot's "specimen" policy contains only three references to "delivery." The first reference is merely to an amount payable "on or before delivery" to maintain the policy until a certain date. Rogers Decl., Dkt. #36, Ex. E at 3. The next two references indicate that "a statement of the method of calculation of [policy] values" and rate change "procedures and standards" will be on file with insurance officials in the "jurisdiction in which, this policy is delivered." Id. at 10, 12.
Plaintiff asserts, and Camelot does not dispute, that Camelot's insurer presented the policy form to the Oklahoma Department of Insurance for approval, Such approval is necessary for policies to be issued or delivered in Oklahoma. Okla. Stat. tit. 36, § 3610. The Court finds it difficult to believe that the insurer would go to the trouble of gaining approval for the Camelot, COLI policies if Camelot did not intend to benefit from compliance with the laws of the state(s) in which the people it sought to insure (its employees) lived and worked. The ambiguous reference in the policy to the "jurisdiction in which this policy is delivered" can be fairly interpreted that Camelot and its insurer intended the policy to be effective and enforceable in Oklahoma, and, in essence, "issued for delivery" in each and every state where the insurer sought approval and where the insured employees lived and worked — even if they never intended the policies to be actually delivered to the insured employees, or, for that matter, for the employees to even know about the policies.
Plaintiff moves under Fed.R.Civ.P. 56(f)for additional discovery as to whether Camelot's insurer delivered the information described in the policy to the Oklahoma Department of Insurance. Since Camelot does not dispute that it did, additional discovery is unnecessary.
Under Oklahoma law, "[i]f a policy term is ambiguous, — i.e., where it is susceptible to two or more different meanings, — it will he construed against the insurer." IPG. Inc. v. Continental Cas. Co., 275 F.3d 916, 921 n. 2 (10th Cir. 2001) (citation and internal quotation omitted).
The Court is persuaded by Stickney v. Smith, 693 F.2d 563 (5th Cir. 1982), in which the court held in reference to a similar statute regulating uninsured motorist coverage in Louisiana, that "the state's insurance regulations apply also to policies emanating from beyond its borders but effective within them." Id., at 566. Similarly, a Florida court has held that an auto insurance policy was "issued for delivery" in Florida even though it was delivered to the insured in New York because, in part, the insurer knew that vehicle was garaged in Florida, and the policy was written to cover risks that would occur in Florida. Amarnick v. Automobile Ins. Co., 643 So.2d 1130, 1131-32 (Fla. Dist Ct. App. 1994). Here, Camelot and its insurer knew that. Felipe Tillman lived in Oklahoma and title policy was written to cover a risk that, might occur in Oklahoma. This is consistent with a case cited by Camelot, which held that a; Florida statute comparable to Okla. Stat. tit. 36, § 3601, "does not require that the policy or contract be delivered to the insured in this state, but merely that it be delivered in this state." Blue Cross of Florida, Inc. v. Turner, 363 So.2d 133, 135 (Fla. Dist. Ct. App. 1978). The fact that Camelot's COLI policy was "delivered" to the Oklahoma Department of Insurance is enough to bring the policy within the scope of section 3601, in this unique circumstance, where the insured was unaware that the beneficiary (his employer) purchased an insurance policy on his life,
VI.
Plaintiff contends that Camelot did not have an "insurable interest" in Felipe Tillman. At the time Camelot purchased its COLI policy, and at the time Felipe Tillman died, the Oklahoma statute defining an insurable interest with respect to personal insurance provided, in relevant part, that "no person shall procure or cause to be procured any insurance contract upon the life or body of another individual unless the benefits under such contract are payble to the individual insured or his personal representatives, or to a person having, at the time when such contract was made, an insurable interest in the individual insured." Okla. Stat. tit. 3.6, § 3604(A) (1991). "Insurable interest" is defined to include, in the case of persons other than those related by blood or law, as "a lawful and substantial economic interest in having the life, health, or bodily safety of the individual insured continue, as distinguished from an interest which Would arise only by, or would be enhanced in value by, the death, disablement or injury of the individual insured." Id., § 3604(C)(2).
In 1994, the statute was amended to provide that an employer could insure the lives of its employees for the benefit of the employer "only with the written consent of the insured." See 36 Okla. Stat. tit. 36 § 3604(C)(4)(a)(2001).
Oklahoma case law, both prior to and after the enactment of the statute in 1957, is in accord with the basic principles embodied in section 3604.See Hulme v. Springfield Life Ins. Co., 565 P, 2d 666, 670 (Okla. 1977); Mutual Aid Union v. Stephens, 223 P. 648, 649 (Okla. 1924). There is no dispute that Felipe Tillman was a Camelot employee at the time that Camelot purchased its COLI policy. There is no evidence that Camelot chose to cover only those employees, for example, whom the company deemed nonproductive or likely to retire or resign. It cannot be legitimately denied that Camelot, like all employers, spent valuable resources recruiting, screening, training, and retaining its employees in an effort to generate profits. The Court finds no genuine issue of material fact as to whether Camelot had a lawful and substantial economic interest in having the lives of its employees continue.
Plaintiff argues that Camelot had no lawful, and, substantial economic interest in having Felipe Tillman's life continue after he left Camelot's employ. However, the insurable interest "is not defeated by the cessation of the insurable. interest unless the terms of the policy so provide"Ryan v. Andrewski, 242 P.2d 448, 452 (Okla. 1952). There is no evidence in the record to indicate that the policy so provides. Further, there is. rip valid reason to: believe that a COLI policy undermines the public policy embraced by section 3604. It is simply implausible that a COLI policy, designed for tax benefits, would give any employer an incentive to wager on the lives of its employees, or even former employees. Camelot had an interest in Felip Tillman's life and is entitled to summary judgment on plaintiff's claim for violation of the Oklahoma statute.
Even the Mayo court recognized that Texas law was designed to remove the " theoretical incentive to commit murder or to wager on the life of the insured." 220 F. Supp.2d at 787 (emphasis added).
VII.
Plaintiff did not move for summary judgment on its claim for unjust enrichment, but Camelot did (albeit under Ohio, law).
The term "unjust enrichment" describes a condition resulting from the failure of a party to make restitution in circumstances where it is inequitable. It is a recognized ground for recovery in Oklahoma. A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another.Laokin v. Garland Bloodworm, Inc., 23 P.3d 958, 961 (Okla.Ct.App. 2000) (citations omitted). This Court has further observed, "[t]o establish entitlement, plaintiff must at a minimum show either an expenditure adding to the property of another or one that saves the: other from expense or loss." City of Tulsa v. Tyson Foods, Inc., 258 F. Supp.2d 1263, 1310 (N, D. Okla. 2003) (citations and internal quotations omitted).
Plaintiff has made no such showing, Camelot paid all premiums for the COLI policy on Felipe Tillman's life. Felipe Tillman paid nothing. Camelot obtained no benefit at Felipe Tillman's expense, and thus, plaintiff has no equitable basis to expect restitution. If the Court were to hold otherwise, the estate would receive an unmerited windfall. Felipe Tillman suffered no wrong as a result of Camelot's decision to insure his life. Camelot was not unjustly enriched.
Since the Court is granting summary judgment in Camelot's favor, it need not reach the issue of whether plaintiffs claim was discharged in Camelot's bankruptcy proceedings.
VIII.
For these reasons, defendant Camelot Music. Inc.'s: Motion to Dismiss (Dkt. #19) is DENIED, Plaintiff's Motion for Partial Summary Judgment (Dkt. #21) is DENIED; Plaintiff's Cross-Motion for Partial Summary Judgment Concerning the Affirmative Defense of Limitations (Dkt. #28-1) is GRANTED; and Defendant Camelot Music Inc.'s Cross-Motion for Summary Judgment Dismissing the Complaint [sic] (Dkt. #34-1) is GRANTED. Judgment will be entered for defendant.