United States District Court, N.D. Iowa, Cedar Rapids Division
January 10, 2017
AMY STANCZYK, Plaintiff,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant.
WILLIAMS, UNITED STATES MAGISTRATE JUDGE
matter is before the Court pursuant to defendant Prudential
Insurance Company of America's Motion for Leave to Amend
Scheduling Order and For Leave to File Amended Answer and
Counterclaim. Doc. 75. Plaintiff, Amy Stanczyk, originally
sued defendant in state court alleging defendant refused in
bad faith to pay her insurance benefits pursuant to a Group
Long-Term Disability Plan. Doc. 3. Defendant filed an answer
to the complaint, denying liability. Doc. 9. Defendant now
seeks to amend its answer and assert a counterclaim alleging
plaintiff was ineligible for coverage because she did not
work full time. Defendant's counterclaim seeks return of
benefits paid by defendant to plaintiff under an unjust
enrichment theory. Plaintiff resists defendant's motion.
Doc. 80. Plaintiff argues defendant has not shown good cause
to modify the Court's scheduling order. Plaintiff also
argues the Court should deny defendant's motion to amend
on the ground defendant's counterclaim is futile because
it is defective for a number of reasons.
December 5, 2016, the Court heard argument on defendant's
motion. For the reasons that follow, the Court grants
defendant's motion to amend its answer and bring a
was a certified public accountant who worked as a part-time
independent contractor. On July 7, 2004, plaintiff applied
for insurance coverage. Doc. 75-5 (Exhibit A). Pursuant to
the terms of the policy, for plaintiff to be eligible for
coverage, she was required to be "actively at work on
full time." Doc. 75-6, at 9 (Exhibit B). The policy
defines "full time" as "regularly working
17½ or more hours per week." Id. The
policy further provides:
Your Participant Insurance under a Coverage will be delayed
if you do not meet the Active Work Requirement on the day
your insurance would otherwise begin. Instead, it will begin
on the first day you meet the Active Work Requirement and the
other requirements for the insurance. The same delay rule
will apply to any change in your insurance that is subject to
this section. If you do not meet the Active Work Requirement
on the day that change would take effect, it will take effect
on the first day you meet that requirement.
Doc. 75-6, at 10. The policy again defines "Active Work
Requirement" as working full time, meaning 17½ or
more hours per week." Id., at 18.
October 13-14, 2016, defendant deposed plaintiff. During her
deposition, plaintiff testified that she charged at least
$100 per hour (and up to $150 per hour) for work she
performed from the mid-1990s until she stopped working in
2006. Doc. 75-7 (Exhibit C, at 31, 116-17). Plaintiff also
testified that she would trust her husband's recollection
better than her own regarding the most she made in a year
because he completed the taxes; plaintiff's husband
testified that the "largest revenue year for
[plaintiff's] consulting practice was about $60,
000." Id., at 117.
on this testimony about plaintiff's hourly rate and
maximum revenue, defendant calculated that she worked less
than the required 17½ hours per week. Doc. 75-4, at 4.
Through further discovery requests, defendant obtained
plaintiff's Social Security records. Defendant asserts
these records show that plaintiff's actual work hours
were even fewer than previously calculated based on
plaintiff's husband's recollection of plaintiff's
now seeks to amend its answer and assert an unjust enrichment
counterclaim against plaintiff, seeking restitution in excess
of a quarter of a million dollars. Specifically,
defendant's proposed counterclaim asserts, in pertinent
10. On July 7, 2004, Stanczyk applied for LTD coverage under
the Policy by submitting an application for coverage
electronically to Aon Corporation ("Aon"). At that
time, Aon received and processed applications for the
coverage under the Policy.
11. At the time Stanczyk applied for coverage[, ] she was not
regularly working 17½ or more hours per week and had
not done so for several years.
12. At no time since Stanczyk applied for coverage under the
Policy has she regularly worked 17½ hours per week.
13. Stanczyk applied for and ultimately received LTD benefits
under the Policy beginning on or about January 18, 2007, less
a six month elimination period specified in the Policy.
14. Stanczyk received LTD benefits under the Policy through
July 31, 2013[, ] in the amount of $3, 000 per month.
15. Because Stanczyk has never been eligible for LTD
insurance coverage under the Policy, she was paid LTD
benefits in the amount of $238, 900 to which she was not
entitled. By paying LTD benefits to Stanczyk, Prudential
conferred a benefit upon Stanczyk.
16. Stanczyk voluntarily accepted and retained the payments,
and took affirmative actions, and made affirmative
representations, in order to procure the payment of the LTD
17. The entire amount of the payment, less the premiums
Stanczyk paid for coverage, is money belonging in good
conscience to Prudential.
23. Stanczyk was enriched by the receipt of LTD benefits in
the amount of $238, 900 less the net premiums she paid for
coverage under the Policy, of $2, 615.40.
26. Prudential is entitled to restitution in the amount of
$236, 284.60, which equals the benefits paid by Prudential,
less the premiums paid by Stanczyk.
Doc. 75-1, at 29-31.
STANDARD FOR GRANTING MOTIONS TO AMEND
Rule of Civil Procedure 15 provides that leave to amend shall
be freely given "when justice so requires."
Fed.R.Civ.P. 15(a)(2). Courts view motions to amend filed
before the deadline set out in the scheduling order with a
"liberal policy favoring amendments." Kozlov v.
Associated Wholesale Grocers, Inc., 818 F.3d 380, 395
(8th Cir. 2016) (citing In re Graphics Processing Units
Antitrust Litig., 540 F.Supp.2d 1085, 1090 (N.D. Cal.
2007)); see also Williams v. TESCO Servs., Inc., 719
F.3d 968, 976 (8th Cir. 2013) (describing the standard as
"liberal"). The Rule 15(a) standard is
discretionary and leave should only be denied "where
there are compelling reasons 'such as undue delay, bad
faith, or dilatory motive, repeated failure to cure
deficiencies by amendments previously allowed, undue
prejudice to the non-moving party, or futility of the
amendment.'" Moses.com Sec, Inc. v.
Comprehensive Software Sys., Inc., 406 F.3d 1052, 1065
(8th Cir. 2005) (quoting Hammer v. City of Osage Beach,
MO, 318 F.3d 832, 844 (8th Cir. 2003)).
parties do not have an absolute right to amend their
pleadings, even under this liberal standard."
Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715
(8th Cir. 2008) (citing United States ex rel. Lee v.
Fairview Health Sys., 413 F.3d 748, 749 (8th Cir.
2005)); see also Hammer, 318 F.3d at 844 (holding
that there is no right to amend pleadings). A court may deny
a motion to amend where there was "undue delay, bad
faith on the part of the moving party, futility of the
amendment or unfair prejudice to the opposing party."
United States ex rel. Joshi v. St. Luke's Hosp.,
Inc., 441 F.3d 552, 557-58 (8th Cir. 2006) (internal
quotation marks and citation omitted). The court may consider
several other factors when deciding whether to grant leave to
amend, such as repeated failures to cure deficiencies by
amendments previously. See Brown v. Wallace, 957
F.2d 564, 565 (8th Cir. 1992).
as here, however, the motion to amend a pleading would
require modification of the scheduling order, then a party
has the burden of demonstrating good cause. Fed.R.Civ.P.
16(b)(4); Local Rule 16(f) ("The deadlines established
by the Rule 16(b) and 26(f) scheduling order and discovery
plan will be extended only upon written motion and a showing
of good cause."). In multiple cases, this Court has
discussed the interplay between the liberal amendment
provision of Rule 15 and the good cause requirement of Rule
16. See, e.g., Afshar v. WMG, L.C., 310 F.R.D. 408,
408-12 (N.D. Iowa 2015); Pick v. City of Remsen, 298
F.R.D. 408, 410-12 (N.D. Iowa 2014); French v. Cummins
Filtration, Inc., No. C-11-3024-MWB, 2012 WL 2992096
(N.D. Iowa July 19, 2012). In short, the party moving to
modify a scheduling order in order to amend a pleading bears
the burden of showing "diligence in attempting to meet
the order's requirements." Rahn v. Hawkins,
464 F.3d 813, 822 (8th Cir. 2006). Although a court may
consider prejudice to the non-moving party, courts generally
will not address prejudice where a moving party has failed to
demonstrate diligence. Bradford v. DANA Corp., 249
F.3d 807, 809 (8th Cir. 2001).
Rule 16(b)(4) standard presupposes, however, that the party
moves to modify the schedule prior to the expiration of the
deadline. Rule 16 does not necessarily govern where, as here,
a party moves to extend deadlines after the deadline has
passed. Rather, Rule 6(b)(1)(B) of the Federal Rules of Civil
Procedure provides that "the court may, for good cause,
" extend a deadline "on motion made after the time
has expired if the parties failed to act because of excusable
neglect." Rule 6 applies to "any time period
specified in [the Federal Rules of Civil Procedure], [and] in
any local rule or court order . . Fed.R.Civ.P. 6(a)
Federal Rules of Civil Procedure do not define
"excusable neglect." In Pioneer Inv. Services
Co. v. Brunswick Associates Ltd. Partnership, 507 U.S.
380, 392 (1993), the Supreme Court found that
"'excusable neglect' under Rule 6(b) is a
somewhat 'elastic concept' and is not limited
strictly to omissions caused by circumstances beyond the
control of the movant." In determining whether excusable
neglect exists, a court therefore must consider "all
relevant circumstances surrounding the party's
omission." Id. See also Fink v. Union Central Life
Ins. Co., 65 F.3d 722, 724 (8th Cir. 1995) (citing
Pioneer, 507 U.S. at 395). These circumstances include:
(1) the danger of prejudice to the non-moving party;
(2) the length of delay and its potential impact on judicial
(3) the reason for the delay, including whether it was within
the reasonable control of the movant; and
(4) whether the movant acted in good faith.
Treasurer, Trustees of Drury Industries, Inc. Healthcare
Plan and Trust v. Goding, 692 F.3d 888, 893 (8th Cir.
2012) (citing Pioneer). The four factors do not,
however, carry equal weight; "the excuse given for the
late filing must have the greatest import." Lowry v.
McDonnell Douglas Corp., 211 F.3d 457, 463 (8th Cir.
deadline for amending pleadings in this case was January 29,
2016 (Doc. 18), a little over ten months before defendant
filed its motion to modify the scheduling order to allow
leave to file its amended answer and counterclaim.
Accordingly, pursuant to Rules 6 and 16(b), defendant must
demonstrate good cause and excusable neglect for the Court to
modify the scheduling order to permit it to file an amended
answer and counterclaim. Finally, defendant must meet the
requirements for amending pleadings pursuant to Rule 15. The
Court will apply each of these rules in turn to
argues it has demonstrated good cause to amend the
Court's scheduling order because it "was unable to
discover that the Plaintiff failed to meet the active work
requirement prior to her deposition." Doc. 75-4, at 4.
In her written resistance to defendant's motion,
plaintiff devoted only a page to the issue of whether
defendant has shown good cause to modify the Court's
scheduling order, simply asserting that "Prudential has
identified no newly discovered facts or a change in
circumstances that give rise to an opportunity to sue
[plaintiff] now 10 years after [defendant's]
contestability period ended." Doc. 80, at 5. Plaintiff
ultimately conceded, at the hearing on this motion, that she
could not prove that defendant knew, prior to plaintiff's
deposition, the information upon which it now relies to
assert its counterclaim. Plaintiff argued defendant has
failed to show good cause, however, because defendant could
have easily discovered the number of hours plaintiff worked
had it simply looked into the matter earlier.
asserts that after plaintiff filed suit, it "focused on
the Plaintiff's potential work since being approved for
benefits in 2006, " and "had no reason to request
documents before 2006, as the Plaintiff's eligibility for
coverage was not an issue in this case." Doc. 75-4, at
4. Defendant argues that it "was only the combination of
the (1) the [sic] Plaintiff's deposition testimony about
her low levels of earnings, (2) the Social Security document
obtained as a result of her deposition testimony showing even
lower levels of earnings, and (3) the Plaintiff's
deposition testimony about her hourly billing rate that,
collectively, told Prudential that the Plaintiff could not
possibly have worked enough hours to be eligible for the
Policy or its coverage." Id. at 5.
Court finds defendant has demonstrated good cause to modify
the scheduling order and amend its answer. Defendant has
shown, and plaintiff concedes, that it first learned facts
that could give rise to the counterclaim when it deposed
plaintiff in October of this year. Defendant has also shown
that it then acted with reasonable diligence to conduct
further investigation into the facts before moving for leave
to file a counterclaim.
argues that defendant could have verified her employment
status "by the most cursory investigation at the time
the policy was issued by Prudential or at any time during the
contestable period." Doc. 80 at 7. Although plaintiff
makes this argument in relation to a futility argument, which
the Court will address below, this argument could also be a
comment on the reasonableness of defendant's diligence.
For purposes of Rule 16 good cause analysis, however, the
question is not whether a party could have, in the past,
obtained the information that would support a motion to amend
a pleading, but whether once suit was brought, the party
acted with diligence in uncovering the information. In other
words, it does not matter for purposes of Rule 16 that
defendant could have investigated this issue years ago; what
matters is whether it acted with sufficient diligence to
investigate the claim after suit was filed. Here, the Court
finds it did.
also argued that defendant is simply wrong, and the
information upon which it relies to assert its claim does not
prove she worked less than full time as required by the
policy. Doc. 80, at 1. That may be true, but that is a
factual matter that goes to the merits of the claim, not to
whether defendant may bring the claim in the first instance.
Whether defendant can ultimately prove the claim, in other
words, is not the test for whether there is good cause to
modify the scheduling order to permit defendant to assert the
does not argue, and the Court finds no basis to conclude,
that defendant acted in bad faith in relation to the delay in
bringing this motion.
in assessing whether the Court should modify the scheduling
order to permit defendant to file an amended answer and bring
a counterclaim, the Court may consider possible prejudice to
plaintiff. In her brief, plaintiff argued that she
"would be severely prejudiced if [defendant] were
permitted to amend its Answer and countersue [plaintiff] this
late into the proceedings." Doc. 80, at 21. She asserts
it "would be a substantial financial burden" on her
and "would certainly [require] additional discovery on
the new factual issues raised" by defendant's
proposed amendment. Doc. 80, at 22. Plaintiff also suggests
that she "would need to seek additional information from
its [sic] expert and engage an entirely new expert to
formulate a defense" to the countersuit. Id.
Finally, plaintiff argued that if the Court permits the
amendment, it will require a new dispositive motion deadline
and may jeopardize the trial date. Id., at 22-23. In
her written resistance, plaintiff did not describe the
additional discovery she believed the counterclaim would
necessitate. At the hearing on the motion, however, plaintiff
described some of the documents she believed defendant would
need to produce in discovery if the Court permitted defendant
to file its counterclaim. She also indicated that she would
need to talk to a number of witnesses, including
defendant's employees who knew or should have known about
the hours plaintiff was working.
deadline for filing dispositive motions in this case has
passed. The deadline for completion of discovery (December
31, 2016) has passed. Trial is scheduled for March 6, 2016.
context of Rule 16(b), prejudice includes reopening discovery
or requiring a continuance of the trial. See, e.g.,
National Liberty Corp. v. Wal-Mart Stores, Inc., 120
F.3d 913, 917 (8th Cir. 1997) (district court properly denied
motion to amend based on prejudice where defendant sought
leave to amend to add a counterclaim almost three months
after deadline for amendments and after close of discovery);
Phelps v. McClellan, 30 F.3d 658, 662-63 (6th Cir.
1994) (prejudice includes whether the amendment asserts a new
claim or defense requiring the opposing party to expend
significant additional resources to conduct discovery and
prepare for trial, significantly delay resolution of the
case, or prevent plaintiff from bringing a timely action in
another jurisdiction); Ashe v. Corley, 992 F.2d 540,
543 (5th Cir. 1993) (noting that, although delay alone is not
sufficient ground to deny leave to amend, adding a new cause
of action shortly before trial was prejudicial to the
opposing party); Block v. First Blood Assocs., 988
F.2d 344, 350 (2d Cir. 1993) (holding that, although mere
delay is not enough to deny leave to amend, leave may be
denied when a new claim requires the opponent to expend
significant resources to conduct discovery and prepare for
the trial, would significantly delay resolution of the
dispute, or would prevent the plaintiff from bringing an
action in another jurisdiction). Prejudice may also inhere in
denying the plaintiff the opportunity to develop a strategy
to oppose the defense, or in permitting an amendment that
changes the issues or nature of the case. See
Elema-Schonander, Inc. v. K. C.F. Medical Supply Co.,
Inc., 869 F.2d 1124, 1126 (8th Cir. 1989) (repeated
tardiness of responses to discovery and other deadlines
coupled with a late-filed motion to amend to assert an answer
that would alter the "posture and complexion" of
the case constituted prejudice sufficient to deny leave to
Court finds plaintiff will suffer some prejudice as a result
of this late counterclaim. Doubtless, some additional
discovery will be necessary, with concomitant costs. The
Court is not persuaded that this counterclaim will generate
significant new discovery or require a significant
expenditure of additional resources. The factual issue is
limited to how many hours plaintiff worked during the
relevant period, and what defendant knew about her hours.
Plaintiff already has documents from defendant's file
regarding its knowledge of her hours; she relies on them to
oppose the instant motion. It is unclear what additional
documents defendant would have in its custody regarding the
hours plaintiff worked. Plaintiff has provided only
conclusory allegations that she will need a new expert to
address this issue and has failed to meaningfully articulate
why her current expert would need to seek additional
information. Some time remains before trial to complete
discovery on this rather finite issue, but realistically, an
extension of the deadline to complete discovery is likely
required. Likewise, plaintiff may have grounds for filing a
motion for summary judgment which would, of course,
necessitate the modification of the scheduling order by the
avoid undue prejudice to plaintiff as a result of allowing
defendant to amend its answer and bring a counterclaim, the
Court finds there is good cause to modify the scheduling
order to provide plaintiff relief. Should plaintiff request
it, the Court will modify the scheduling order to extend the
discovery deadline, and/or the deadline for filing a
dispositive motion, regarding defendant's counterclaim.
Likewise, if plaintiff requests it, the Court will continue
the Court finds defendant has met the standard under Rule 16
for showing good cause to modify the scheduling order.
the Court found good cause and excusable neglect exists under
Rules 6 and 16 to modify an expired deadline of the
scheduling order to permit defendant to file a motion for
leave to amend its answer and bring a counterclaim, the Court
looks next to Rule 15 to determine whether the amendment
should be allowed. Once the Court amends the scheduling
order, it should freely grant leave to amend, pursuant to
Rule 15(a)(2), "unless there exists undue delay, bad
faith, repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the non-moving party,
or futility of the amendment." Kozlov v. Associated
Wholesale Grocers, Inc., 818 F.3d 380, 394 (8th Cir.
2016) (internal quotation marks and citation omitted).
plaintiff's written resistance did not clearly reference
the Rule 15 standard, reading her resistance broadly, it
appears plaintiff argues that the amendment should be denied
because of (1) undue delay; (2) undue prejudice, and (3)
because it would be futile. In ruling on the Rule 16 motion
to modify the scheduling order, the Court has addressed the
first two arguments. Here, the Court will address
plaintiff's claim that the amendment would be futile.
of a motion for leave to amend on the basis of futility
'means the district court has reached the legal
conclusion that the amended complaint could not withstand a
motion to dismiss under Rule 12(b)(6) of the Federal Rules of
Civil Procedure.'" In re
Agriprocessors, Inc., No. ADV 10-09131, 2011 WL
4900037, at * 5 (Bankr. N.D. Iowa Oct. 14, 2011) (quoting
Zutz v. Nelson, 601 F.3d 842, 850 (8th Cir. 2010)).
See also In re Senior Cottages of Am. LLC, 482 F.3d
997, 1001 (8th Cir. 2007) (stating that denial of leave to
amend based on futility is appropriate in the face of a legal
finding that the proposed complaint could not survive a Rule
12 motion). Accordingly, this Court must determine under the
Rule 12(b)(6) standard if defendant's proposed amendment
to the complaint "contain[s] sufficient factual matter,
accepted as true, to 'state a claim to relief that is
plausible on its face.'" Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp v.
Twombly, 550 U.S. 544, 570 (2007)).
deciding a motion to dismiss under Rule 12(b)(6) here, the
Court assumes all facts in defendant's counterclaim to be
true and construes all reasonable inferences from those facts
in the light most favorable to defendant. Morton v.
Becker, 793 F.2d 185, 187 (8th Cir. 1986). The Court
need not, however, accept as true wholly conclusory
allegations. Hanten v. Sch. Dist. of Riverview
Gardens, 183 F.3d 799, 805 (8th Cir. 1999). Nor is the
Court obligated to accept legal conclusions drawn by the
party from the facts alleged. Westcott v. City of
Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990).
appears to raise five grounds for why defendant's
counterclaim would be futile: (1) defendant's
counterclaim is precluded by the incontestability clause in
the policy; (2) defendant's policy requirement that
plaintiff work full time only applied to her eligibility for
coverage; (3) plaintiff truthfully enrolled for coverage; (4)
the counterclaim is barred by the statute of limitations; and
(5) the counterclaim is barred by laches and estoppel by
acquiescence. Plaintiff's arguments fail at this stage of
the litigation because they each rely on evidence outside the
four corners of the counterclaim itself. That this is clear
requires only a review of plaintiff's brief in support of
her arguments. Plaintiff repeatedly cites to documents that
are not properly considered in relation to ruling on a Rule
12(b)(6) motion. See Doc. 80, at 7-9, 11-13, 15, 17,
regard to plaintiff's statute of limitations argument, on
its face it appears the statute of limitations may bar some
portion of the proposed counterclaim. Other periods of time
when plaintiff received benefits to which defendant claims
she was not entitled, however, appear to fall within the
statute of limitations. Plaintiff's statute of
limitations defense is, at best, therefore, only a partial
defense. Moreover, defendant asserts there are grounds for
the claim to relate back to the time that would otherwise be
barred by the statute of limitations. The viability of the
relation back doctrine, however, would turn on facts outside
the four corners of defendant's counterclaim.
Accordingly, it is not proper to bar defendant from filing
the counterclaim. Whether some or all of defendant's
counterclaim could survive a motion for summary judgment is
another matter not presently before the Court.
aside plaintiff's reliance on facts outside of the
pleading to support her argument that the counterclaim is
futile because of the incontestability clause, the Court is
not persuaded that the incontestability clause would clearly
bar the counterclaim. The incontestability clause at issue in
this policy appears to be distinguishable from the
incontestability clause at issue in Freed v. Bankers Life
Ins. Co. of Nebraska, 216 N.W.2d 357 (Iowa 1975), upon
which plaintiff relies. The incontestability clause at issue
in this case does not appear to bar suit unless it is tied to
a statement by the insured. See Doc. 75-3, at 20
("This limits Prudential's use of your statements in
contesting an amount of that insurance for which you are
insured."). The policy at issue in Freed, in
contrast, contained a blanket prohibition against the
insurance company contesting coverage after one year.
Freed, 216 N.W.2d at 358. This is significant
because defendant's counterclaim appears to allege
plaintiff was not eligible for coverage because she did not
work the required hours, not because she made a false
statement about the number of hours she worked.
the Court cannot, at this point, find defendant's
counterclaim is clearly futile on its face so as to bar
defendant from at least making the claim. Plaintiff may have
some significant and perhaps even decisive defenses to
defendant's counterclaim, but those defenses are largely,
if not completely, reliant upon facts beyond the four corners
of defendant's proposed counterclaim. As the Court must
assume the facts alleged in that counterclaim to be true, at
this stage, the Court cannot find defendant's
the Court finds it is appropriate under Rule 15 to grant
leave to defendant to file an amended answer and
reasons set forth above, the Court grants defendant's
motion for leave to file an amended answer and counterclaim
 LTD refers to defendant's Group
Long-Term Disability Plan.