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Waters v. AIG Claims, Inc.

United States District Court, M.D. Alabama, Northern Division

June 14, 2018

LORRIE WATERS and DERRAL KEITH WATERS, Plaintiffs,
v.
AIG CLAIMS, INC.; NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA; EXPRESSJET AIRLINES, INC. CONSOLIDATED WELFARE BENEFIT PLAN; and EXPRESSJET AIRLINES, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          W. KEITH WATKINS CHIEF UNITED STATES DISTRICT JUDGE

         Plaintiffs Lorrie Waters and Derral Keith Waters (“Plaintiffs”) bring this action pursuant to the Employment Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001, et seq., against Defendants AIG Claims, Inc.; National Union Fire Insurance Company of Pittsburg, PA; ExpressJet Airlines, Inc.; and ExpressJet Airlines, Inc. Consolidated Welfare Benefits Plan (“Defendants”). The Magistrate Judge entered an order ruling on various pretrial motions. (Doc. # 75.) The Magistrate Judge's order included a ruling that substantially denied Plaintiffs leave to amend the complaint to bring additional claims, finding that the newly proposed claims would be meritless and therefore futile. Plaintiffs claim that the latter ruling was outside the Magistrate Judge's authority, and, regardless of whether a Magistrate Judge or District Judge should make the decision, the findings were wrong under both the clearly erroneous and de novo standards of review. Defendants submitted a Response, and Plaintiffs submitted a Reply. The court adopts the Magistrate Judge's order in large part, but withdraws the general reference to the Magistrate Judge with respect to discovery motions. In light of the accusations of party misconduct and the need to promote the efficient resolution of Plaintiffs' claims, this court will grant Plaintiffs' motion to lift the stay. Plaintiffs may file an amended complaint clarifying Counts I and II by June 29, 2018, and discovery may begin immediately thereafter.

         I. FACTS AND PROCEDURAL HISTORY[1]

         In August 2015, Cody Waters died in a single-car accident. At the time of his death, he had two life insurance policies totaling more than $500, 000 in coverage, and his parents, Plaintiffs here, were the beneficiaries under those plans. Plaintiffs timely filed a claim under the policy in October 2015. On April 1, 2016, Defendants denied the claim under the policy's intoxication exclusion. Plaintiffs initiated an appeal on June 27, 2016, and submitted their final appeal on October 26, 2016, claiming that the blood sample taken from the decedent's heart was an unreliable method of determining whether the decedent was intoxicated at the time of the wreck. In January 2017, Defendants initiated a court action in Louisiana in an attempt to acquire the decedent's vitreous samples, a type of physical sample that may be a more reliable indicator of whether the decedent was intoxicated at the time of his accident. According to Defendants, service in the Louisiana action was attempted on Plaintiffs and a courtesy copy of the pleading was provided to Plaintiffs' counsel. (Doc. # 77, at 2.) Plaintiffs do not clearly dispute this account. (Doc. # 66-1, at 6-7.)

         In March 2017 - before Defendants had made a determination on Plaintiffs' appeal and while Defendants still sought the vitreous sample[2] - Plaintiffs filed the instant action. (Doc. # 1.) Notwithstanding that the appeal was proceeding in Defendants' administrative review process, Plaintiffs alleged that the lengthy delays in making the determination amounted to a “deemed denial.” In other words, Plaintiffs alleged that Defendants' inaction resulted in an actionable denial, and that any administrative review that occurred after the deemed denial was a “legal nullity.”[3] (Doc. # 66-1, at 11.) In October 2017, Defendants purported to issue a denial of Plaintiffs' appeal. Thereafter, Plaintiffs sought to amend the complaint to add state law claims relating to the October 2017 “denial” including allegations of various improprieties relating to acquiring and maintaining the vitreous sample in connection with the Louisiana action. The Magistrate Judge denied Plaintiffs' motion for leave to amend the complaint to add state law claims on the basis that the amendment was futile. Specifically, the Magistrate Judge found that the claims were preempted by ERISA because they relate to the administration of a claim and, in the alternative, that they failed to state a claim on which relief could be granted.

         Apart from denying Plaintiffs' motion for leave to amend the complaint to add claims relating to the October 2017 appeal, the Magistrate Judge's order disposed of various other motions. It: granted Plaintiffs' motion for leave to amend the complaint for the purposes of clarifying Counts I and II; denied Plaintiffs' motion to lift a stay (Doc. # 59); allowed the withdrawal of Plaintiffs' motion for sanctions and denied Plaintiffs' motion for limited discovery (Doc. # 60); allowed the withdrawal of Plaintiff's motion for summary judgment (Doc. # 37); denied as moot Defendants' motions for summary judgment (Docs. # 35, 36); and denied as moot Plaintiffs' motion for hearing (Doc. # 73). Plaintiffs contest the Magistrate Judge's findings with respect to Plaintiffs' motion for leave to amend the complaint, their motion to lift stay and for limited discovery, and Defendants' motions for summary judgment.

         II. STANDARD OF REVIEW

         The parties disagree as to the appropriate standard of review by which this court should review the Magistrate Judge's order. Rule 72 of the Federal Rules of Civil Procedure and 28 U.S.C. § 636 outline two standards of review for the decisions of magistrate judges: (1) de novo review for orders on dispositive matters to which a party objects, and (2) clearly erroneous review for orders on nondispositive matters. Here, Plaintiffs concede that the clearly erroneous standard of review applies to the Magistrate Judge's decision related to discovery, but argues that the de novo standard of review applies to the Magistrate Judge's denial of leave to amend the complaint and denial of Defendants' motions for summary judgment. (Doc. # 76, at 5-7.)

         The clearly erroneous standard of review applies to the Magistrate Judge's findings related to discovery, as well as to the denials of Defendants' motions for summary judgment.[4] The denials of summary judgment were made with leave for Defendants to refile after the complaint is amended, so these rulings are clearly nondispositive in nature. See Young v. City of Augusta, Ga. Through DeVaney, 59 F.3d 1160, 1167 & n.13 (11th Cir. 1995) (noting that Magistrate Judge had authority to rule on a motion for a hearing on a summary judgment motion when it was not dispositive of the motion).

         It is unclear what standard of review should apply to the Magistrate Judge's denying Plaintiffs leave to amend the complaint, and it does not appear that the Eleventh Circuit has considered this question. The Magistrate Judge's authorizing statute precludes a Magistrate Judge from ruling on certain dispositive motions:

a motion for injunctive relief, for judgment on the pleadings, for summary judgment, to dismiss or quash an indictment or information made by the defendant, to suppress evidence in a criminal case, to dismiss or to permit maintenance of a class action, to dismiss for failure to state a claim upon which relief can be granted, and to involuntarily dismiss an action.

28 U.S.C. § 636(b)(1)(A). Obviously, motions for leave to amend a complaint are not expressly exempted from a Magistrate Judge's authority under this statute. Nevertheless, certain courts have found - and Plaintiffs now argue - that because a Magistrate Judge must consider the underlying merits of the prospective claims in order to deny leave to amend a complaint on the basis of futility, such a finding is dispositive within the meaning of Rule 72. See Allendale Mut. Ins. Co. v. Rutherford, 178 F.R.D. 1, 2 (D. Maine 1998); HCC, Inc. v. RH & M Mach. Co., 39 F.Supp.2d 317, 321-22 (S.D.N.Y. 1999); Mueller Co. v. U.S. Pipe & Foundry Co., 351 F.Supp.2d 1, 2 (D.N.H. 2005). In contrast, at least one circuit court has found that denial of motions for leave to amend a complaint is within the authority of the Magistrate Judge. See Hall v. Norfolk S. Ry. Co., 469 F.3d 590, 595 (7th Cir. 2006). Dicta from unpublished Eleventh Circuit cases suggest that the more deferential standard of review may be appropriate. See Goble v. Ward, 628 Fed.Appx. 692, 702 (11th Cir. 2015) (“Nonetheless, the magistrate judge's decision to deny Goble's third motion to amend was not an abuse of discretion.”); Palmore v. Hicks, 383 Fed.Appx. 897, 899-900 (11th Cir. 2010) (“An order disposing of a motion to amend is a non-dispositive pretrial ruling.”).

         The court need not decide, however, which standard of review is appropriate with respect to the Magistrate Judge's denial of Plaintiffs' motion for leave to amend the complaint because, as will be explained below, the Magistrate Judge's findings are correct under either standard. Assuming, without deciding, that the de novo standard of review applies, the court adopts the Magistrate Judge's order with respect to Plaintiffs' motion for leave to amend the complaint. See Action Nissan, Inc. v. Hyundai Motor Am., No. 6:06-CV-1747-ORL-19KRS, 2008 WL 11336609, at *1 (M.D. Fla. Aug. 6, 2008).

         III. ...


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