Rolan v. New W. Health Servs.

Decision Date07 November 2017
Docket NumberDA 17-0009
Citation389 Mont. 228,2017 MT 270,405 P.3d 65
Parties Dana ROLAN, own her own behalf and on behalf of the class she represents, Plaintiffs and Appellants, v. NEW WEST HEALTH SERVICES, Defendant and Appellee.
CourtMontana Supreme Court

For Appellants: Erik B. Thueson, Thueson Law Office, Helena, Montana

For Appellee: Robert C. Lukes, Emma L. Mediak, Garlington, Lohn & Robinson PLLP, Missoula, Montana

Justice Michael E Wheat delivered the Opinion of the Court.

¶ 1 Dana Rolan and the class she represents appeal from the order of the First Judicial District Court, Lewis and Clark County, granting New West Health Service's (New West) motion for summary judgment. Finding the issue stated below dispositive we decline to address the additional issues raised by the parties. We reverse and remand for further proceedings.

¶ 2 We restate the issue on appeal as follows:

Whether the District Court abused its discretion by granting New West leave to amend its answer to assert ERISA preemption.
FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 Dana Rolan (Rolan) was injured in a vehicular collision on November 16, 2007, and sustained serious injury, resulting in medical expenses totaling approximately $120,000. Rolan carried health insurance through New West. The tortfeasor who caused the accident carried liability insurance through Unitrin Services Group (Unitrin). Unitrin accepted legal responsibility and paid approximately $100,000 of Rolan's medical bills.

¶ 4 On January 26, 2010, Rolan filed a complaint against New West alleging individual and class claims for breach of contract, violation of made-whole rights, and unfair claims settlement practices under §§ 33-18-201, MCA, et seq. Rolan sought compensatory and punitive damages. During a deposition, New West's representative affirmatively stated that Rolan's plan was "not a properly constituted ERISA plan." Relying on such representation, Rolan proceeded with her claims and class claims based solely on state law.

¶ 5 Rolan sought to certify a class under M. R. Civ. P. 23(b)(2) for declaratory and injunctive relief arising from the claims for breach of contract and violation of made-whole rights. Rolan's class certification was based on the systematic practices by New West to avoid paying medical bills for an insured when a liability carrier was available to pay medical bills as part of tort damages. On April 25, 2012, the District Court granted class certification. Maintaining that Rolan's claims were based solely on state law claims, New West proceeded to appeal to this Court Rolan's class certification. We upheld the class certification in Rolan v. New West Health Servs., 2013 MT 220, 371 Mont. 228, 307 P.3d 291.

¶ 6 On October 24, 2013, New West moved to amend its answer alleging the policy was an Employee Retirement Income Security Act (ERISA) policy and that all state law claims were preempted by federal law. Rolan opposed New West's motion to amend. The District Court allowed New West to amend its answer to include the affirmative defense of ERISA preemption. The District Court reasoned, "[i]f federal law does in fact preempt state law resolution of this case, the ends of justice would not be served by denying the motion to amend." The District Court granted Rolan attorney fees for time spent addressing New West's abandoned defenses. Following the District Court's order allowing New West to amend, New West moved for summary judgment.

¶ 7 On May 6, 2015, the District Court granted New West's motion for summary judgment holding that Rolan's policy was subject to ERISA and thus her original state law claims were preempted. However, the District Court allowed Rolan to amend her complaint to include ERISA claims. On June 1, 2015, Rolan amended her complaint to include both state law and ERISA claims. New West then removed the case to federal court.

¶ 8 On February 29, 2016, the federal court remanded the case back to state court. The federal court determined that New West's removal was untimely. Judge Lovell cited several causes for the delay in removal; one cause was: "New West's inexplicable confusion over whether its own plan was or was not an ERISA plan." Nevertheless, the federal court concluded that the state court had concurrent jurisdiction over Rolan's ERISA 502(a)(1) claims and therefore Rolan may proceed with her ERISA claims in state court.

¶ 9 Following remand, Rolan filed a motion requesting the District Court to resolve all matters regarding ERISA preemption. New West moved for summary judgment asserting ERISA preemption requires dismissal of Rolan's state law and ERISA claims. On December 7, 2016, the District Court granted New West's motion for summary judgment and denied Rolan's motion. The District Court again dismissed Rolan's argument that New West waived the affirmative defense of ERISA preemption. Further, the District Court determined that complete preemption under § 502 of ERISA was proper and thus barred any state law claims asserted by Rolan.

STANDARDS OF REVIEW

¶ 10 We review the district court's decision to amend for an abuse of discretion. Lindey's v. Professional Consultants, 244 Mont. 238, 242, 797 P.2d 920, 923 (1990). "A district court abuses its discretion when it acts arbitrarily, without employment of conscientious judgment, or in excess of the bounds of reason resulting in substantial injustice." Kershaw v. Mont. Dept. of Transp., 2011 MT 170, ¶ 11, 361 Mont. 215, 257 P.3d 358 (citation omitted).

DISCUSSION

¶ 11 Whether the District Court abused its discretion by granting New West leave to amend its answer to assert ERISA preemption.

¶ 12 Rolan argues on appeal that the District Court abused its discretion in granting New West's motion to amend its answer. Specifically, Rolan maintains that ERISA preemption is an affirmative defense and should have been pled in the answer.

¶ 13 New West counters that the District Court did not err by allowing leave to amend because leave should be freely given "when justice so requires." M. R. Civ. P. 15(a)(2). New West contends that there was no evidence of bad faith, intentional delay, or dilatory motive by New West; therefore, leave to amend was proper.

¶ 14 Montana Rule of Civil Procedure 8(c) provides that "[i]n responding to a pleading, a party must affirmatively state any avoidance or affirmative defense." The rationale for requiring these defenses be affirmatively pled are the underlying principles of fairness and notice. Weaver v. State, 2013 MT 247, ¶ 35, 371 Mont. 476, 310 P.3d 495. We have previously held that ERISA preemption is an affirmative defense and thus is waivable if not timely raised pursuant to M. R. Civ. P. 8(c). Winslow v. Mont. Rail Link, Inc., 2005 MT 217, ¶¶ 37-38, 328 Mont. 260, 121 P.3d 506 ; Rimrock Chrysler, Inc., v. DOJ, 2016 MT 165, ¶ 29, 384 Mont. 76, 375 P.3d 392 (citing Wolf v. Reliance Std. Life Ins., 71 F.3d 444, 449 (1st Cir. 1995) ). However, Rule 8(c) is not absolute; a district court may allow a defendant to amend its answer to include an affirmative defense pursuant to M. R. Civ. P. 15. Keller v. Dooling, 248 Mont. 535, 542, 813 P.2d 437, 441 (1991).

¶ 15 Montana Rules of Civil Procedure 15(a) provides "a party may amend its pleading only with the opposing party's written consent or court's leave. The court should freely give leave when justice so requires." However, "this does not mean that a court must automatically grant a motion to amend." Kershaw, ¶ 25. We have articulated circumstances justifying a court's denial of a motion to amend. Such situations include when the denial is "for an apparent reason such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by allowance of the amendment, futility of the amendment, etc." Bitterroot Int'l Sys. v. Western Star Trucks, Inc., 2007 MT 48, ¶ 50, 336 Mont. 145, 153 P.3d 627 (quoting Lindey's, 244 Mont. 238, 242, 797 P.2d 920, 923 ).

¶ 16 In determining whether an amendment would cause undue prejudice, a court should balance the prejudice suffered by the opposing party "against the sufficiency of the moving party's justification of the delay." Farmers Coop. Ass'n v. Amsden, LLC, 2007 MT 286, ¶ 14, 339 Mont. 445, 171 P.3d 690. We previously have concluded undue prejudice exists when the opposing party already had expended "substantial effort and expense" in the course of the dispute that "would be wasted" if the moving party were allowed to proceed on a new legal theory. Eagle Ridge Ranch v. Park County, 283 Mont. 62, 68-69, 938 P.2d 1342, 1346 (1997).

¶ 17 Initially, the District Court failed to conduct an inquiry into whether Rolan and the class she represents would be prejudiced. The District Court failed to determine if undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by allowance of the amendment, or futility of the amendment existed. The District Court's reasoning was as follows:

"[t]he Court is sensitive to Rolan's arguments regarding the effects of allowing amendment at this stage. However, the briefing before the Court does not directly address the question of whether ERISA in fact preempts federal law. If federal law does in fact preempt state law resolution of this case, the ends of justice would not be served by denying the motion to amend."

Clearly, the District Court allowed amendment purely because the defense would apply.

¶ 18 We have upheld a District Court's denial to amend to include an affirmative defense, even if such defense could apply. See, e.g., Bitterroot, ¶ 54 ; Cullen v. Western Mortgage & Warranty Title Co., 47 Mont. 513, 530, 134 P. 302, 307 (1913) ; Meadow Lake Estates Homeowners Ass'n v. Shoemaker, 2008 MT 41, ¶¶ 30-31, 341 Mont. 345, 178 P.3d 81 ; Peuse v. Malkuch, 275 Mont. 221, 228, 911 P.2d 1153, 1157...

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