Opinion
Case No. CV 00-735-S-BLW.
June 18, 2002
ORDER, REPORT AND RECOMMENDATION
Currently pending before the Court are Defendants' Motion to Dismiss Defendant Gene Schiffler (Docket No. 53), Defendants' Motion to Dismiss for Failure to Prosecute in Name of Real Party in Interest or to Compel Pete Veenstra's Attendance at Deposition (Docket No. 58), and Defendants' Motion to Exclude Evidence/Witnesses or Motion for Order Compelling Discovery and Local Rule 37.1 Statement (Docket No. 67).
Having carefully reviewed the record, considered oral arguments, and otherwise being fully advised, the Court enters the following Order, Report and Recommendation pursuant to 28 U.S.C. § 636(b).
I. BACKGROUND
In this action, Plaintiff Veenstra Family Trust alleges various causes of action arising from a life insurance policy issued to Louis Allen on or about September 23, 1998. Plaintiff alleges that upon Allen's death, Defendant United Heritage refused to pay Plaintiff's assignor, Pete Veenstra, the proceeds of the policy.II. ANALYSIS
A. Standard for Motion to Dismiss
When analyzing a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court must accept as true the factual allegations contained in the complaint and construe them in the light most favorable to the plaintiff. Mishler v. Clift, 191 F.3d 998, 1003 (9th Cir. 1999). Dismissal is improper unless it appears beyond doubt that the plaintiff can prove no set of facts in support of its claim that would entitle it to relief. Id. Thus, "[t]he issue is not whether a plaintiff will ultimately prevail but whether [he] is entitled to offer evidence to support the claims." Cervantes v. City of San Diego, 5 F.3d 1273, 1274 (9th Cir. 1993) (emphasis in the original).
B. Defendant Gene Schiffler's Motion to Dismiss (Docket No. 53)
In the District Court's Order of March 20, 2002, Plaintiff's following causes of action were dismissed: negligent misrepresentation; intentional misrepresentation; breach of fiduciary relationship and claim for constructive trust; and all claims for negligence except for negligent denial of payment. (Docket No. 61). Thus, Plaintiff's remaining causes of action are for breach of contract, bad faith breach of contract, and the negligent denial of payment.
Of the remaining causes of action, Plaintiff designated that the claims for breach of contract and bad faith breach of contract pertain only to Defendant United Heritage. Complaint, pp. 6-7. Thus, the only remaining claim against Defendant Gene Schiffler is for negligent denial of payment.
In Idaho, it is beyond reasonable dispute that "a properly pled cause of action can be sustained against an insurer which negligently fails to make a timely settlement of an insurance claim." Reynolds v. Am. Hardware Mut. Ins. Co., 115 Idaho 362, 365, 766 P.2d 1243, 1246 (1988). In recognizing this tort, the court in Reynolds extended the Supreme Court of Idaho's decision in White v. Unigard, 112 Idaho 94, 730 P.2d 1014 (1986) which first recognized the tort of bad faith. In extending the tort to include negligent denial of payment, the court in Reynolds recognized that a "special relationship" exists between insurer and insured "which requires the parties deal with each other fairly, honestly, and in good faith." 766 P.2d at 1246 (citing White, 730 P.2d at 1019).
In the context of a claim for bad faith, "it is clear that [insurance agents] would have no personal liability for any sum eventually found due under the policy." Greene v. Truck Ins. Exchange, 114 Idaho 63, 69, 753 P.2d 274, 280 (Ct.App. 1988). The court in Greene stated that "such liability rests upon the insurance company, which is bound by contracts made, as well as any representations made, by its agents within the scope of their express, implied, or apparent authority." Id. Thus, the court in Greene recognized that an agent may be liable if a plaintiff's cause of action "is grounded upon independent representations allegedly made by [the agent], perhaps in excess of [his] authority." Id.
The court in Reynolds stated that, as a claim for bad faith, a cause of action for the negligent denial of payment can be sustained against an insurer. 766 P.2d at 1246. Although Idaho courts have not yet addressed an insurance agent's personal liability in the context of a negligent denial of payment case, since the claim is derived and closely related to a claim for bad faith, the Court is of the view that the reasoning and conclusion from Greene should be extended to the instant action. Thus, in the Court's view, there would be no personal liability on the part of an agent for a claim of negligent denial of payment unless he acted outside his scope of authority.
In the instant action, Plaintiff alleges that Defendant Schiffler "is an individual licensed to do business in the State of Idaho and in fact did operate a business of selling and providing insurance, and specifically operating as an agent" for Defendant United Heritage. Complaint ¶ 2. Further, Plaintiff alleges that Defendant Schiffler "solicited the application of insurance from the deceased Louis Allen." Id. ¶ 12. With respect to its claim for negligence, Plaintiff alleges that "Louis Allen relied upon the representations of Defendants . . . in procuring life insurance. . . ." Id. ¶ 27.
As discussed above, the court in Greene stated that generally, insurance agents cannot be personally liable for a claim of bad faith. However, in Greene, the court recognized that the plaintiffs' complaint against the agents was "apparently grounded upon independent representations allegedly made by them." 753 P.2d at 280. Thus, the court in Greene remanded the action to the district court to determine whether "a genuine reason exists to keep the agents in the case as named defendants." Id.
The Court notes that in Greene, the court addressed a motion for summary judgment. In contrast to the circumstances in Greene, the instant motion before the Court is a motion to dismiss. However, even by accepting the facts in Plaintiff's Complaint as true, as the Court must on a motion to dismiss, Plaintiff has not alleged any facts that Defendant Schiffler made any independent representations beyond his scope of authority. Therefore, the Court concludes that Defendant Schiffler cannot be personally liable as an agent for the negligent denial of payment, and this cause of action against him should be dismissed.
Accordingly, since dismissal of this claim results in no remaining causes of action against Defendant Schiffler, the Court concludes that Defendant Schiffler's Motion to Dismiss should be granted.
C. Defendants' Motion to Dismiss for Failure to Prosecute in Name of Real Party in Interest or to Compel Pete Veenstra's Attendance at Deposition
It is undisputed that at the initiation of the instant action, Pete Veenstra and Maria Veenstra were co-trustees of the Veenstra Family Trust ("Trust"). Defendants argue as a co-trustee, and pursuant to Fed.R.Civ.P. 17, Pete Veenstra must be joined in the action in order for Plaintiff to prosecute this action.
Rule 17(a) of the Federal Rules of Civil Procedure requires that "[e]very action shall be prosecuted in the name of the real party in interest." When a cause of action is prosecuted on behalf of a trust, it is the trustee, not the trust itself that is entitled to bring suit under Rule 17(a). 6A Wright and Miller, Federal Practice and Procedure § 1548, p. 377 (2d ed. 1990); see also Carpenters Millwrights Health Benefit Trust Fund v. Domestic Insulation Co., 387 F. Supp. 144, 147 (D. Colo. 1975). Although not specifically addressed by courts in the Ninth Circuit, courts in other jurisdictions have recognized that where there are multiple trustees, the trustees are the real parties in interest. United Mine Workers of Am., Dist. 22 v. Roncco, 204 F. Supp. 1, 3 (D. Wyo. 1962), rev'd on other grounds, 314 F.2d 186 (10th Cir. 1963); see also Syms v. Castleton Indus., Inc, 470 F.2d 1078, 1085 (5th Cir. 1973), Domestic Insulation, 387 F. Supp. at 147.
The Court notes that Defendants have previously moved to dismiss the action for failure to prosecute in the name of the real party in interest. (Docket No. 36). In Defendants' Memorandum in Support of its Motion to Dismiss, Defendants argued that since both Pete Veenstra and Maria Veenstra were co-trustees, this action must be prosecuted in the name of both trustees. (Docket No. 37).
In response to Defendants' Motion to Dismiss, Plaintiff filed a notice of joinder of Maria Veenstra as the real party in interest. (Docket No. 39). After carefully considering Defendants' motion, this Court recommended that Defendants' Motion to Dismiss for Failure to Prosecute in the Name of Real Party in Interest should be denied as moot. On February 20, 2002, Defendants filed their objections to this Court's Report and Recommendation with respect to the findings related to Plaintiff's individual causes of actions, but did not include objections to the findings related to the Motion to Dismiss for Failure to Prosecute in the Name of Real Party in Interest. On March 20, 2002, the District Court denied Defendants' Motion. (Docket No. 61).
In the instant motion, Defendants again argue that Pete Veenstra is a co-trustee and, as such, he must be designated as a real party in interest pursuant to Rule 17. However, in light of the foregoing, this Court concludes that the issue of whether the action is properly brought under Rule 17 has already been decided by this Court and the District Court. As a result of these previous rulings, the Court concludes that Plaintiff has satisfied Rule 17 by bringing the instant action in the name of Maria Veenstra regardless of whether Pete Veenstra is a real party in interest as a co-trustee. Accordingly, Defendants' Motion to Dismiss on this ground should be denied.
Alternatively, Defendants argue that Pete Veenstra is a real party in interest as a co-trustee and should be required to attend a noticed deposition.
On November 1, 2001, Defendants served a Notice of Taking of Deposition of Pete Veenstra for November 19, 2001. Affidavit of Jeffrey Thomson Ex. B (Docket No. 60). However, Plaintiff represents that on October 30, 2001, Pete Veenstra resigned as trustee of the Trust. Memorandum in Opposition, p. 3 (Docket No. 63). Thus, Plaintiff argues that since Pete Veenstra was no longer a trustee, he no longer had any interest in the litigation as a party so he was not required to appear at his deposition. Id. at p. 3.
According to the terms of the Trust, Wendy Stadler is identified as the individual who would replace Pete or Maria Veenstra as a co-trustee in the event that either is unable to serve. Thomson Aff. Ex. A, p. 12. Further, the Trust states:
Any trustee may resign at any time. The resigning trustee must give written notice of the resignation by personal delivery or registered mail to all income beneficiaries. The resignation becomes effective on the acceptance of office by a designated successor trustee.Id. (emphasis added).
After a review of the record, the Court is unable to find any evidence that establishes that at the time Pete Veenstra was to be deposed, he had been replaced as co-trustee as required by the clear terms of the Trust. Rather, the Court is of the view that Pete Veenstra's resignation was ineffective, and will be until a successor accepts the position. Therefore, the Court concludes that at the time Defendant served its Notice of Deposition, Pete Veenstra was still a co-trustee.
As a co-trustee, the Court concludes that Pete Veenstra remains a real party in interest for purposes of Defendants' Motion to Compel Attendance at Deposition. Thus, although the Court has previously determined that he need not be joined in the action pursuant to Rule 17, the Court finds that Pete Veenstra must nevertheless comply with Defendants' noticed deposition pursuant to Rule 30. Therefore, the Court will require the parties to agree upon a date for this deposition within ten (10) days from the date of this Order, Report and Recommendation.
In the alternative, if Pete Veenstra will not appear for deposition in Boise, Idaho, he must pay for Defendants' counsel's time and cost to travel to his location to conduct the deposition. If, however, Pete Veenstra does not comply with this Court's order, then the Court will recommend that the District Court consider imposition of sanctions including dismissal of the instant action. Fed.R.Civ.P. 37(b)(2)(C). Accordingly, Defendants' Motion to Compel Pete Veenstra's Attendance at Deposition is granted.
D. Defendants' Motion to Exclude Evidence and/or Witnesses or Alternatively, Motion to Compel (Docket No. 67)
At oral argument, counsel for Defendants, Jeffrey Thomson, stated that he was withdrawing the instant motion to the extent that it seeks to exclude evidence and/or witnesses. Therefore, Defendants' motion is limited to a motion to compel discovery.
As a preliminary matter, the Court recognizes that pursuant to Fed.R.Civ.P. 5(b), "service on an attorney or party shall be made by delivering or mailing a copy to the attorney or party at their last known address." The Ninth Circuit Court of Appeals has held that "service by fax does not satisfy Fed.R.Civ.P. 5(b)." Magnuson v. Video Yesteryear, 85 F.3d 1424, 1429 (9th Cir. 1996); see also D. Id. L. Civ. R. 5.2(c) ("FAX service does not comply with this rule."). Further, service by an electronic means is only effective if "consented to in writing by the person served." Fed.R.Civ.P. 5(b)(2)(D). The court in Magnuson held that a party must demonstrate "exceptional good cause for failing to comply with Rule 5(b)." 85 F.3d at 1431.
In the instant action, Defendants served their First Set of Interrogatories, Request for Production of Documents, and Requests for Admission on Maria Veenstra on January 14, 2002 via facsimile. Affidavit of Jeffrey A. Thomson Ex. C (Docket No. 69). However, counsel for Plaintiff, Terry Martin, averred that "[a]t no time prior to January 14, 2002 did I or co-counsel Timothy J. McDermott provide permission or consent, in any form, written or oral, to Defendants allowing them to serve any document, pleading or discovery by facsimile transmission." Affidavit of Terry Martin ¶ 2 (Docket No. 71).
As a result of Defendants' service of the discovery requests by facsimile, Defendants must demonstrate "exceptional good cause" as to why Plaintiff should be required to respond. The Court finds that such circumstances do not exist in the instant action.
According to the Affidavit of Jeffrey Thomson, Defendants have on occasion served documents by facsimile only. (Docket No. 73). However, the Court finds this manner of service is limited to the parties' litigation plans and Defendants' "Supplemental Authority in Response to Plaintiff's Motion to Amend Complaint to Add Demand/Request for Jury Trial." Id. ¶ 4.
Mr. Thomson also avers that Defendants served by fax and mail several other documents. Id. ¶ 6.
In the Court's view, Defendants have not demonstrated why they could not serve the discovery requests as contemplated by the Rules, nor have Defendants demonstrated that Plaintiff consented to service by fax. Magnuson, 85 F.3d at 1431. Rather, it is undisputed that Plaintiff has not consented in writing to service by facsimile as required by the Rules.
Further, the Court concludes that Defendants have not demonstrated that Plaintiff has waived its right to insist on compliance with the Rules. As noted above, the Court recognizes the parties' litigation plans and a memorandum by Defendants were sent by facsimile only. However, at no point have the parties served discovery by facsimile. Thus, the Court is of the view that the service by facsimile of a very limited nature does not establish a waiver by Plaintiff in requiring compliance with the Rules of Civil Procedure. Accordingly, Defendants' Motion to Compel is denied.
III. ORDER
Based on the foregoing, IT IS HEREBY ORDERED:
1. Defendants' Motion to Compel Pete Veenstra's Attendance at Deposition (Docket No. 58) is GRANTED as provided herein.
2. Defendants' Motion to Exclude Evidence/Witnesses or Motion for Order Compelling Discovery and Local Rule 37.1 Statement (Docket No. 67) is DENIED.
IV. RECOMMENDATION
Based on the foregoing, this Court recommends the District Court enter the following order:
1. Defendant's Motion to Dismiss Defendant Gene Schiffler (Docket No. 53) should be GRANTED.
2. Defendants' Motion to Dismiss for Failure to Prosecute in Name of Real Party in Interest (Docket No. 58) should be DENIED.
Written objections to this Report and Recommendation must be filed within ten (10) days pursuant to 28 U.S.C. § 636(b)(1) and Local Rule 72.1 or as a result that party may waive the right to raise factual and/or legal objections in the Ninth Circuit Court of Appeals.