Rhodes, Inc. v. Morrow, No. 6:95CV288.

• Court: United States District Courts. 4th Circuit. Middle District of North Carolina
• Writing for the Court: TILLEY
• Citation: 937 F. Supp. 1202
• Parties: RHODES, INC., as named fiduciary for The Rhodes, Inc. Group Health Plan, Plaintiff, v. John F. MORROW, Morrow, Alexander, Tash & Long, Forrest Dean Garner, Melinda A. Pickard, by and through her Guardian Ad Litem James H. Gilley, Jr., Safeco Life Insurance Company, and Jamestown Life Insurance Company, Defendants.
• Docket Number: No. 6:95CV288.
• Decision Date: 13 September 1996

937 F. Supp. 1202

RHODES, INC., as named fiduciary for The Rhodes, Inc. Group Health Plan, Plaintiff,
v.
John F. MORROW, Morrow, Alexander, Tash & Long, Forrest Dean Garner, Melinda A. Pickard, by and through her Guardian Ad Litem James H. Gilley, Jr., Safeco Life Insurance Company, and Jamestown Life Insurance Company, Defendants.

No. 6:95CV288.

United States District Court, M.D. N. Carolina, Winston-Salem Division.

September 13, 1996.

937 F. Supp. 1203

COPYRIGHT MATERIAL OMITTED

937 F. Supp. 1204

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937 F. Supp. 1205

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937 F. Supp. 1206

Edwin R. Gatton, Greensboro, NC, Donald B. Harden, Atlanta, GA, for plaintiff

J. Robert Elster, Nancy C. Schneider, Edwin W. Bowden, Winston-Salem, NC, J. Alexander Barrett, Greensboro, NC, Margaret C. Lumsden, Raleigh, NC, John V. Burch, Atlanta, GA, for defendants.

ORDER

TILLEY, District Judge.

This matter is before the Court on several motions by both parties: Defendants' Motion for Leave to File Amended Answer Doc. # 37; (2) Plaintiff's Motion for Leave to File Amended Complaint Doc. # 39; (3) Plaintiff's Motion to Stay Discovery Doc. # 48; (4) Defendants' Motion to Compel Discovery Doc. # 51; (5) Plaintiff's Motion for Judgment on the Pleadings Doc. # 55; and (6) Defendants' Motion for Summary Judgment Doc. # 77.

For the reasons set forth in the contemporaneously filed Memorandum Opinion, IT IS ORDERED that Defendants' Motion for Leave to File Amended Answer Doc. # 37 is DENIED;

IT IS FURTHER ORDERED that Plaintiff's Motion for Leave to File Amended Complaint Doc. # 39 is GRANTED;

IT IS FURTHER ORDERED that Plaintiff's Motion to Stay Discovery Doc. # 48 is DENIED AS MOOT;

IT IS FURTHER ORDERED that Defendants' Motion to Compel Discovery Doc. # 51 is DENIED AS MOOT;

IT IS FURTHER ORDERED that Plaintiff's Motion for Judgment on the Pleadings Doc. # 55 is GRANTED;

IT IS FURTHER ORDERED that Defendants' Motion for Summary Judgment Doc. # 77 is GRANTED in part and DENIED in part; and

IT IS FURTHER ORDERED that partial Summary Judgment in favor of Plaintiff is GRANTED.

MEMORANDUM OPINION

This matter is before the court on several motions from both parties: (1) Defendants' Motion for Leave to File Amended Answer Doc. # 37; (2) Plaintiff's Motion for Leave to File Amended Complaint Doc. # 39; (3) Plaintiff's Motion to Stay Discovery Doc. # 48; (4) Defendants' Motion to Compel Discovery Doc. # 51; (5) Plaintiff's Motion for Judgment on the Pleadings Doc. # 55; and (6) Defendants' Motion for Summary Judgment Doc. # 77.

I. Facts

Defendant Forrest Dean Garner's children were injured in an automobile accident in September, 1991 when they were struck head on by another vehicle. As a result of the accident, one of Defendant Garner's children was killed and two of the other children were seriously injured. Defendant Garner was then employed by Rhodes, Inc. and claimed benefits under the Rhodes, Inc. Group Health Plan "the Plan" to defer some of the expenses associated with the childrens' injuries. The Plan paid out over three hundred thousand dollars on behalf of the Garner children. Before the Plan paid any amount, however, Defendant Garner signed a Right of Reimbursement Agreement which, in part, stated that Defendant Garner agreed to reimburse the Plan "out of any recovery by settlement, judgment, or otherwise, from any person organization sic responsible for the subject injury, or from such person's or organization's insurance." (Exhibit I to Defs' Br. in Supp. of Mot. for Summ. J.) Subsequently, the Garner family retained John Morrow as counsel and sought recovery from the driver of the other car involved in the September 7th accident. Recovery was obtained from the tortfeasor's insurance company and, after subtracting his fee from that sum, Defendant Morrow remitted the remaining portion of those funds to the Plan. However, the limits of liability on the tortfeasor's policy were such that a complete recovery could not be had. Therefore Defendant Garner obtained a settlement from Nationwide Insurance, his wife's underinsurance coverage carrier. Defendant Garner maintains that the Plan is not entitled to any of the monies obtained from his underinsurance carrier. Proper ownership of those funds is the subject of this lawsuit.

937 F. Supp. 1207

II. Plaintiff's Motion to Amend Complaint

Plaintiff filed a Motion for Leave to Amend Complaint on November 15, 1995. The purpose of the amendment is to substitute parties and to add two defendants. Defendants have objected only to the addition of Nationwide as a defendant. Defendants claim that addition of Nationwide could prejudice Defendants by creating a conflict of interest that would require withdrawal of Petree Stockton as counsel for the Defendants. Petree Stockton represented Nationwide, the Garners' underinsurance carrier, in negotiating the accident settlement. The funds from that settlement are at issue in this matter. Petree Stockton obtained Nationwide's consent to its current representation of the Defendants.

Under Rule 15 of the Federal Rules of Civil Procedure, "leave to amend shall be freely given when justice so requires." It appears to the Court that the participation of Nationwide would facilitate proper and complete resolution of this action. Furthermore, the Court sees no reason why the addition of Nationwide, whose function in this action will be that of a stakeholder defendant, would in any way create a conflict of interest for Defendants' Counsel, Petree Stockton. Therefore, Plaintiff's Motion for Leave to Amend Complaint Doc. # 39 is GRANTED.

III. Plaintiff's Motion for Judgment on the Pleadings

Plaintiff filed a Motion for Judgment on the Pleadings Doc. # 55 on February 16, 1996, seeking judgment it its favor on Defendant Garner's Counterclaim and Defendants' Fourth Affirmative Defense. Plaintiff claims that the counterclaim and the affirmative defense are asserted against Rhodes in its capacity as employer and can not be brought in this action where Rhodes acts only in its representative capacity as fiduciary of the Rhodes, Inc. Group Health Plan. Alternately, Plaintiff claims that the statute of limitations has run on Defendant Garner's counterclaim and that it is time barred.

A district court may grant a motion for judgment on the pleadings if the pleadings, construed in the light most favorable to the non-moving party, fail to state a claim for relief. See, Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232-33, 81 L.Ed.2d 59 (1984). In this case, Plaintiff alleged in its complaint that it is the fiduciary of the Rhodes, Inc. Group Health Plan, (Compl. ¶ 2), and that allegation was admitted by the Defendants in their Answer, (Answer ¶ 2). Therefore, the fact that Rhodes, Inc. is suing in its fiduciary capacity is established for the purposes of this motion and the consideration of the motion may proceed on the merits.

A counterclaim under Rule 13 must be asserted against an "opposing party." Fed. R.Civ.P. 13. "The generally prevailing, although not uniform, view is that the `opposing party' requirement means that when a plaintiff has brought suit in one capacity, the defendant may not counterclaim against him in another capacity." Banco Nacional De Cuba v. Chase Manhattan Bank, 658 F.2d 875, 885 (2d Cir.1981). See also, Bender v. Williamsport Area School Dist., 475 U.S. 534, 543 n. 6, 106 S.Ct. 1326, 1332 n. 6, 89 L.Ed.2d 501 (stating that "Acts performed by the same person in two different capacities `are generally treated as the transactions of two different legal personages'"). In the case before this Court, it is alleged and admitted that Rhodes, Inc. is suing in its capacity as fiduciary of the Rhodes Inc. Group Health Plan. Because it is suing in a fiduciary capacity, Rule 13 dictates that it can be countersued only in that capacity.

Two exceptions to the general requirement that a party bringing suit in a representative or fiduciary capacity can be countersued only in that capacity should be noted. The first of these exceptions is that a counterclaim in an individual capacity will be allowed when "plaintiff has sued in a representative capacity but will benefit individually from any recovery." Blanchard v. Katz, 117 F.R.D. 527, 529 (S.D.N.Y.1987). A second exception exists and allows a counterclaim which is "made against a plaintiff in a capacity different than that in which he sued if principles of equity and judicial economy support such a counterclaim." Id.

These exceptions are not applicable in this case. First, any recovery obtained by Plaintiff will benefit only the Rhodes, Inc. Group

937 F. Supp. 1208

Health Plan and will not benefit Rhodes, Inc. in its individual capacity as a corporation and employer. Second, any recovery that Defendant Garner might ultimately obtain on his counterclaim or affirmative defense would have to be paid from the coffers of Rhodes, Inc. the employer and could not be paid, under the dictates of ERISA, by or from the accounts belonging to Rhodes, Inc. as fiduciary for the Rhodes, Inc. Group Health Plan. Because of this fact, equity and judicial economy do not dictate that the counterclaim against Rhodes, Inc. in its individual capacity should be allowed

In opposition to Plaintiff's Motion for Judgment on the Pleadings, Defendants have offered several arguments. Defendants first argue that Plaintiff's motion is untimely because it was filed four months after the Plaintiff filed its reply and three months after the deadline for filing motions to amend. (Defs.' Br. in Opp'n to Pl.'s Mot. for J. on the Pleadings, 4). Rule 12(c) provides that a motion for judgment on the pleadings may be made "after the pleadings are closed but within such time as not to delay the trial." Fed.R.Civ.P. 12(c). The Court is satisfied that the timing of Plaintiff's Motion satisfies the dictates of this rule.

Next, Defendants argue that Plaintiff waived the capacity defense. Rule 9(a) dictates that ...