Brainard v. American Skandia Life Assur. Corp.

• Citation: 432 F.3d 655
• Decision Date: 28 December 2005
• Docket Number: No. 04-4510.,04-4510.
• Parties: Timothy BRAINARD, et al., Plaintiffs-Appellants, v. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

432 F.3d 655

Timothy BRAINARD, et al., Plaintiffs-Appellants, v. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION, Defendant-Appellee.

No. 04-4510.

United States Court of Appeals, Sixth Circuit.

Argued: October 28, 2005.

Decided and Filed: December 28, 2005.

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ARGUED: Christopher M. DeVito, Morganstern, MacAdams & DeVito, Cleveland, Ohio, for Appellants. Joseph Serino, Jr., Kirkland & Ellis, New York, New York, for Appellee. ON BRIEF: Christopher M. DeVito, Morganstern, MacAdams & DeVito, Cleveland, Ohio, for Appellants. Joseph Serino, Jr., Matthew Solum, Kirkland & Ellis, New York, New York, Arthur M. Kaufman, Erica L. Calderas, Hahn, Loeser & Parks, Cleveland, Ohio, for Appellee.

Before: MARTIN, GIBBONS, and GRIFFIN, Circuit Judges.

OPINION

GRIFFIN, Circuit Judge.

Plaintiffs-appellants Timothy Brainard, George Chanter, Robert Domachowski, and James Dovak (collectively "plaintiffs") appeal from a summary judgment entered in the district court in favor of defendant-appellee American Skandia Life Assurance Corporation ("ASLAC"). Plaintiffs' complaint, filed against ASLAC and Kevin and/or Neil O'Donnell and O'Donnell & Company (a/k/a O'Donnell Securities Corp.) (hereinafter referred to collectively as "the O'Donnells"), alleges wrongdoing in connection with the purchase of certain annuity contracts from ASLAC. Plaintiffs' first contend that the court erred by finding that no agency relationship existed between the O'Donnells and ASLAC. Second, plaintiffs assert that the court wrongly termed the opinion of their chosen expert "conclusory" and thereafter disregarded the expert's declaration. Third, plaintiffs argue that the court improperly granted a portion of ASLAC's motion to dismiss and, fourth, inappropriately disallowed plaintiffs from amending their complaint to add a "necessary" party. Finally, plaintiffs complain that the district court erroneously failed to strike a declaration submitted by ASLAC's attorney in support of its motion for summary judgment. We disagree and affirm the judgment.

I.

Plaintiffs are unsophisticated investors who sought out financial advice from the O'Donnells in connection with the investment of retirement funds totaling $1,971,314.10.¹ In doing so, plaintiffs indicated to the O'Donnells that they wished to pursue conservative investments. The O'Donnells recommended that plaintiffs purchase variable annuities offered by ASLAC and, in response, plaintiffs completed an application for an American Skandia Advisor Plan II ("ASAP II") variable annuity. By signing that application, each plaintiff acknowledged (1) receipt of a copy of the Prospectus, and (2) that "ANNUITY PAYMENTS ... ARE VARIABLE AND NOT GUARANTEED AS TO A DOLLAR AMOUNT ... [.]"

The Prospectus referenced in the ASAP II application revealed the particular features of the annuity and, in particular, contained sections discussing applicable fees and charges. A particular portion of the Prospectus allowed plaintiffs to "authorize a financial representative to decide on the allocation of [their] Account Value and to make financial transactions between investment options, subject to [ASLAC] rules." Significantly, the Prospectus goes on to state as follows:

We or an affiliate of ours may provide administrative support to financial representatives who make transfers on your behalf. These financial representatives may be firms or persons who are appointed by us as authorized sellers of the Annuity. However, we do not offer you advice about how to allocate your Account Value under any circumstance. Any financial firm or representative you engage to provide advice and/or make transfers for you is not acting on our behalf. We are not responsible for any recommendations such financial representatives make, any market timing or asset allocations programs they choose to follow or any specific transfers they make on your behalf.

On the day of signing their ASAP II applications, plaintiffs, acting pursuant to the Prospectus, appointed the O'Donnells as their "Registered Investment Adviser" by signing a document entitled "Investment Advisory Contract." In pertinent part, that document reflected that the O'Donnells would serve as plaintiffs "attorney-in-fact and as agent with authority to act in the name of [plaintiffs] and/or on behalf of the [plaintiffs] with respect to the election, implementations, purchase, sale and timing of the Contract Owner's mutual fund accounts or sub-accounts."

In the days following plaintiffs' execution of the Investment Advisory Contract ("IAC"), plaintiffs received the annuities themselves, including a variable annuity contract. On the first page of that document, it conspicuously cautioned that "[I]N THE ACCUMULATION PERIOD ANY PAYMENTS AND VALUES PROVIDED UNDER THE VARIABLE INVESTMENT OPTIONS ARE BASED ON THEIR INVESTMENT PERFORMANCE AND ARE, THEREFORE, NOT GUARANTEED." That front page likewise provided plaintiffs with a twenty-one day window, during which Plaintiffs could return the annuity and receive a refund.

Shortly after finalizing execution of the Investment Advisory Contract, plaintiffs entered into an Investment Allocation Services Agreement ("IASA") with the O'Donnells. In pertinent part, that document noted that ASLAC "will accept on behalf of [plaintiffs], instructions from [the O'Donnells] to reallocate Cash Value among the investment options provided under the Annuity based upon the Advisor's investment expertise in order to take advantage of changes in the market[.]" Significantly, the IASA expressly warned that ASLAC "has no responsibility or liability with respect to the transactions contemplated by this Agreement."

Despite plaintiffs requests to the contrary, the O'Donnells apparently made a series of high-risk investments which were unsuitable for plaintiffs given their ages and investment objectives. Those decisions led to precipitous market losses starting in 2000. Plaintiffs thereafter filed suit against ASLAC, Kevin P. O'Donnell individually, and O'Donnell & Company in Cuyahoga County Court of Common Pleas on June 30, 2003. Defendant ASLAC filed a Notice of Removal to the Northern District of Ohio on August 11, 2003. Plaintiffs' complaint originally alleged fifteen claims, which ASLAC moved to dismiss on September 19, 2003. By order dated April 8, 2004, the court dismissed all but four of plaintiffs' claims. Plaintiffs then asked the court to reconsider its ruling or, alternatively, to allow plaintiffs to amend their complaint to cure certain pleading deficiencies.

Although the court denied plaintiffs' motion to reconsider, it granted in part plaintiffs' motion to amend, thereby allowing plaintiffs to amend six of their claims. Rather than simply amending those claims, plaintiffs re-pled all fifteen counts and added Prudential Financial, Inc. as a new party defendant. After reviewing the amended complaint, the court issued an order striking, sua sponte, Prudential as a party defendant, noting that (1) the deadline to add new parties had long since passed, and (2) plaintiffs failed even to seek leave to add Prudential as a party defendant.²

ASLAC then filed its motion for summary judgment on July 30, 2004, which plaintiffs opposed. Plaintiffs also filed a "Motion to Strike Declaration of Matthew Solum in support of Motion for Summary Judgment and Attached Exhibits from the Record" on September 7, 2004 (hereinafter "Solum Declaration"). By order dated November 5, 2004, the court granted summary judgment in favor of ASLAC. In doing so, the court agreed with ASLAC that plaintiffs had failed to come forward with any evidence whatever reflecting an agency relationship between the O'Donnells and ASLAC. As for plaintiffs' motion to strike the Solomon Declaration, the court stated in a footnote at the conclusion of its opinion as follows:

The grounds for plaintiffs' Motion is that Mr. Solum is simply an attorney for the defendant and has no personal knowledge regarding any of the facts alleged in his Declaration or any of the Exhibits attached thereto. Further, plaintiffs argue that Mr. Solum's Declaration improperly sets forth legal arguments and attempts to authenticate exhibits. The Court rules as follows. The Court (1) grants plaintiffs' Motion to the extent Mr. Solum's Declaration contains any legal argument or unsupported factual assertions; (2) grants plaintiffs' Motion with regard to any Exhibits which are not independently authenticated by deposition testimony; and (3) denies plaintiffs' Motion with regard to any exhibits which are independently authenticated by deposition testimony.

This timely appeal followed.

II.

We review the district court's entry of summary judgment de novo. McWane, Inc. v. Fid. & Deposit Co. of Md., 372 F.3d 798, 802 (6th Cir.2004). A district court's interpretation of state law is likewise governed by the de novo standard. Ferro v. Garrison Ind., Inc., 142 F.3d 926, 931 (6th Cir.1998). Summary judgment is proper when there are no genuine issues of material fact in dispute and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). A genuine issue for trial exists only when there is sufficient "evidence on which the jury could reasonably find for the plaintiff." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (noting that, in deciding a motion for summary judgment, the court must view the evidence and draw all reasonable inferences in favor of the non-moving party).

We review a district court's decision to disallow the addition of a new party to a complaint for an abuse of discretion. Benzon v. Morgan Stanley Distribs., 420 F.3d 598, 605 (6th Cir.2005); see Cox v. Treadway, 75 F.3d 230, 240 (6th Cir.1996) (noting addition of a party constitutes an amendment to the complaint).

III.

Plaintiffs first assert...