United States District Court, N.D. Indiana, South Bend Division
SAMARON CORP. d/b/a TROYER, PRODUCTS, Plaintiff,
UNITED OF OMAHA LIFE INSURANCE COMPANY, Defendant. UNITED OF OMAHA LIFE INSURANCE COMPANY, Third-Party Plaintiff,
DAVID A. BUCK, Third-Party Defendant.
OPINION AND ORDER
RUDY LOZANO, District Judge.
This matter is before the Court on: Troyer Products' Motion for Partial Summary Judgment, filed on September 13, 2013 (DE 60); United of Omaha Life Insurance Company's Motion for Partial Summary Judgment, filed on September 27, 2013 (DE 65); David A. Buck's Motion for Summary Judgment, filed on September 27, 2013 (DE 63); and Plaintiff Troyer Products' Request for Oral Argument on Summary Judgment Motions, filed on October 25, 2013 (DE 72). The Court finds that oral argument is not necessary, and Troyer's request for oral argument (DE 72) is therefore DENIED. For the reasons set forth below, Troyer Products' Motion for Partial Summary Judgment (DE 60) is DENIED; United of Omaha Life Insurance Company's Motion for Partial Summary Judgment (DE 65) is DENIED as to Count I (breach of contract) and GRANTED as to Counts II (negligent misrepresentation) and III (bad faith); and David A. Buck's Motion for Summary Judgment (DE 63) is GRANTED. The Clerk is directed to enter judgment in favor of Buck on Counts I and IV of the Third-Party Complaint. This case remains pending as to Count I of the Second Amended Complaint only (the breach of contract claim).
On July 23, 2012, Samaron Corp. d/b/a Troyer Products ("Troyer") filed a complaint against United of Omaha Life Insurance Company ("United"), alleging that United breached its contract when it failed to provide Troyer with life insurance proceeds from a $1, 000, 000 policy insuring the life of Ron Clark ("Clark"). United then filed a Third-Party Complaint against David Buck ("Buck"), the recipient of the death benefit, alleging that, if sums were paid to him improperly, Buck owes a duty of contribution and indemnity to United. United also alleged conversion and theft against Buck, and sought prejudgment garnishment of Buck's assets pending resolution of this suit. A motion for prejudgment writ of attachment was filed but later withdrawn by the parties. It does not, however, appear that the count of the Third-Party Complaint asserting a right to prejudgment attachment was ever dismissed. Troyer filed an amended complaint against United on November 9, 2012, alleging both breach of contract and negligent misrepresentation. The Second Amended Complaint was filed on August 14, 2013, again alleging breach of contract and negligent misrepresentation, but also alleging that United breached its duty of good faith and fair dealing. The parties stipulated to the dismissal of United's theft and conversion claims against Buck.
Shortly thereafter, the instant motions for summary judgment were filed. Troyer seeks summary judgment on its breach of contract claim only (Count I of the Second Amended Complaint). United, in turn, seeks summary judgment in its favor on all of Troyer's claims. Buck has filed a separate motion for summary judgment alleging that judgment should be entered in his favor on United's claim for contribution and/or indemnification because neither is available to United under the facts of this case. The motions are now fully briefed and ripe for adjudication.
The standards that generally govern summary judgment motions are familiar. Pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment shall be granted "if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Nebraska v. Wyoming, 507 U.S. 584, 590 (1993); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). In other words, the record must reveal that no reasonable jury could find for the nonmovant. Karazanos v. Navistar Int'l Transp. Corp., 948 F.2d 332, 335 (7th Cir. 1991). See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). In deciding a motion for summary judgment, a court must view all facts in the light most favorable to the nonmovant. Anderson, 477 U.S. at 255; Trade Fin. Partners, LLC v. AAR Corp., 573 F.3d 401, 406 (7th Cir. 2009). According to Rule 56:
A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:
(A)citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or
(B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.
Fed. R. Civ. P. 56(c). Furthermore, "[i]f a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the court may... consider the fact undisputed for purposes of the motion [or] grant summary judgment if the motion and supporting materials - including the facts considered undisputed - show that the movant is entitled to it..." Fed.R.Civ.P. 56(e)(2), (3). "Whether a fact is material depends on the substantive law underlying a particular claim and only disputes over facts that might affect the outcome of the suit under governing law will properly preclude the entry of summary judgment.'" Walter v. Fiorenzo, 840 F.2d 427, 434 (7th Cir. 1988) (citing Anderson, 477 U.S. at 248). Where a party bears the burden of proof on a particular issue, the party may not rest on its pleading, but must affirmatively demonstrate, by specific factual allegations, that there is a genuine dispute requiring a trial. See Beard v. Whitley Cnty. REMC, 840 F.2d 405, 410 (7th Cir. 1988); Hickey v. A.E. Stanley Mfg., 995 F.2d 1385, 1391 (7th Cir. 1993). Therefore, if a party fails to establish the existence of an essential element on which the party bears the burden of proof at trial, summary judgment will be appropriate.
Where the parties file cross-motions for summary judgment, the Court must consider each motion, but despite the parties' agreement that no genuine issue of material fact exists, the Court can deny all motions if the parties do not establish their rights to judgment as a matter of law. Grabach v. Evans, 196 F.Supp.2d 746, 747 (N.D. Ind. 2002). Furthermore, the Court is permitted to consider materials in the record whether or not they are cited to by the parties. Fed. R. Civ. Pro. 56(c)(3).
Troyer is an Indiana company that distributes upholsterybased and other products to the RV Industry. From the mid-1980s until January 1, 2005, Darlene and Ron Clark owned Troyer. Ron Clark was described as honest, straightforward, and someone who kept his word. (Darlene Clark Dep. at 21 (DE 65-2)).
Buck began working for Troyer in 1987, while still in high school. (Buck Dep. at 13 (DE 63-2)). By 1992, Buck was the General Manager and Chief Operations Officer of Troyer (a position he held until he left the company in August of 2012). ( Id. at 19, 51 (DE 65-3)). The same year that Buck was promoted, Clark gave Buck two shares of the company and invited him to join the Board of Directors ("Board"). ( Id. at 19).
In the mid-1990's, Troyer implemented an IRA program for its employees. Clark contacted Daniel Holtz ("Holtz"), a licensed securities dealer, to set up the program. In 1998, Clark asked Holtz to join Troyer's Board.
Buck and Clark applied for a life insurance policy through United.
On September 16, 2002, Clark and Buck applied for a life insurance policy with United. The application identified Clark as the insured, and Buck as the proposed owner and beneficiary of the policy.
Holtz, who at the time was only a Troyer Board member, was not involved in applying for the life insurance policy. Buck and Clark never discussed the policy with Holtz when they were completing the application.
The beneficiary of the policy was changed to Troyer.
Ultimately, the policy was issued with Troyer as the beneficiary. There are two competing versions of how this came to be. According to Troyer, United's underwriting department would not allow Buck to be the beneficiary of the policy. So, on February 5, 2003, United's underwriters "approved" the policy and noted, "amend owner as Troyer Products... amend benef as Troyer Products." (Tylkowski Dep. at 61-62, 87 & Ex. 30 (DE 60-6)). According to United, due to tax concerns, Clark and Buck decided to amend the policy so that Troyer was the designated beneficiary. (Buck Dep. at 40 (DE 65-3)). For purposes of the instant motions, the reason for the change is not material.
On February 12, 2003, United sent Troyer the "policy output" packet which is "information that goes out in regard to the issuance of coverage." (Tylkowski Dep. at 64 & Ex. 28 (DE 60-6)). United included in this packet an amendment intended to change the owner and beneficiary of the policy to Troyer and asked Troyer to have the amendment "signed by the Applicant and returned to United of Omaha." Id.
On February 17, 2003, Clark and Buck signed the amendment. The amendment changed the beneficiary of the policy from Dave Buck to Troyer Products.
United issued the policy with Troyer as owner and beneficiary. United issued Policy No. BU1096496 (the "policy") with the owner and beneficiary as Troyer, effective February 12, 2003. The policy's expiration date was February 12, 2039. The parties agree that the policy is a valid and enforceable contract.
Under the policy, United was required to pay Troyer $1, 000, 000 if Clark passed away before the expiration of the policy and no exclusions to coverage applied. If United failed to pay Troyer the death benefit within 30 days of the date United received proof of Clark's death, United agreed to pay interest on the proceeds at a "guaranteed rate of interest" of three percent from the date of death to the date of payment. (Policy at 9, 13 (DE 53-2)).
United "coded" the amendment as a Post Issue Requirement ("PIR") in the image folder.
The policy has an electronically-stored image folder that contains every document related to the policy. The policy's image folder contains a table of contents that identifies each document in the folder by name and number. If a United employee needs to access a particular document, they would click on the document link and an image of the document would appear on their computer screen.
United has a facility in Blair, Nebraska "where the incoming mail comes in [and] gets scanned and coded into [United's] computer system." (Tylkowski Dep. at 32 (DE 60-6)). "[E]very time a piece of mail comes in or a document comes in with respect to a policy" the employees in United's Blair facility "are responsible for scanning it into the image folder, sending it into the image folder, and then updating the image folder to make sure... the document is coded properly." ( Id. at 32.)
On March 11, 2003, United scanned the signed amendment into the Policy's image folder and improperly coded the amendment as a Post-Issue Requirement or "PIR, " instead of a beneficiary change.
The Clarks sold the company to Holtz and Buck.
The Clarks decided they wanted to retire. They wanted to sell the company to Buck, but Buck could not afford it. Ultimately, on January 1, 2005, the Clarks sold all of their Troyer shares to Holtz and Buck. This was effectuated through a leveraged buyout of the Clarks' shares through a Stock Purchase Agreement ("SPA"). Under the SPA, the Clarks loaned $1.75 million to Holtz and Buck to purchase their shares. In return, Holtz and Buck executed promissory notes that would repay the Clarks over time from income they would earn as Troyer shareholders.
Holtz became Troyer's president and Buck continued in his role as General Manager and Chief Operating Officer. Since January 1, 2005, Holtz has owned 61% and Buck has owned the remaining 39% of Troyer.
Buck had considerably more experience at Troyer than Holtz, but Holtz indicated he felt he was "in a better position to know how to do things" than Buck. (Holtz Dep. at 70 (DE 65-1)). Buck wanted to run things much as Clark had. ( Id. at 49). This led to tension between the two. Nonetheless, Troyer continued to perform well.
United told Troyer that Buck was the beneficiary of the policy.
On November 12, 2011, Clark passed away. Up until Clark's death, Troyer paid all premiums for the policy.
In November of 2011, after Clark died, Buck and Holtz discussed the policy. During this discussion, Buck told Holtz that Troyer was the beneficiary of the policy. This discussion prompted Holtz to call United to verify the policy's beneficiary.
When he called United on December 1, 2011, Holtz was the President and majority owner of Troyer and was acting on behalf of the Company. During the call, United employee Joyce McDaniel ("McDaniel") advised Holtz that Buck was the beneficiary of the policy. McDaniel either obtained that information from the policy's image folder or another system called "Epiphany." During his call with McDaniel, Holtz had an unexecuted copy of the amendment and asked McDaniel if United had an executed copy in the policy's file. McDaniel said no.
United informed Troyer, in writing, that Buck was the beneficiary and instructed Troyer to have Buck complete the claim statement.
Kevin Breeling is a life-claims specialist at United. On December 2, 2011, Breeling reviewed the policy's image folder and, like McDaniel, concluded that Buck was the beneficiary of the policy. Breeling relied upon the policy's application within the image folder to determine that Buck was the beneficiary. Breeling reviewed only the application and did not look at any other documents in the image folder because none of them referenced a "beneficiary update" and that was Breeling's "first concern." (Breeling Dep. at 68-69 (DE 60-1)). Breeling did see a document labeled PIR in the image folder, but he did not review that document because "[t]he PIR entries wouldn't have anything to do with the beneficiary...if there was a change, it should have been a beneficiary update." ( Id. at 69). That document labeled PIR was the amendment that made Troyer the beneficiary of the policy.
On December 2, 2011, Breeling sent a letter to Troyer enclosing a blank claim statement for the policy. Breeling addressed the letter to Holtz because, based on United's system, Holtz was the person who initiated the claim process. In his letter, Breeling stated:
[t]he beneficiary of the policy is Dave Buck. Please ask him to complete and sign the enclosed claim statement.
( Id. at 69-70 & Ex. 7). Breeling relied solely on the policy's application, and never spoke with anyone from Troyer before sending this letter.
Buck called United on December 12, 2011. At that time, he was unaware that Holtz had called United, but a United representative told him that Holtz had already called to report Clark's death. (Buck Dep. at 187-88 (DE 65-3)).
Holtz did not object to Buck completing the claim statement.
On Thursday, December 15, 2011, Troyer's Board of Directors met to discuss, among other things, the policy. At that time, there were three living Directors of Troyer - Holtz, Buck, and Darlene Clark - all of whom were present at the meeting. Buck was the only Board member at the meeting with personal knowledge of changing the beneficiary to Troyer. At the meeting, Buck believed that Troyer was the policy's beneficiary. (Buck Dep. at 192-93 (DE 60-5)). Holtz indicates he believed that Buck was the beneficiary because that is what United told him on December 1, 2011 - therefore, at the meeting, Holtz assumed that Buck "would be doing what he needed to [do] to get the money." (Holtz Dep. at 210-11, DE 60-3)). United, however, contends that Holtz knew Troyer was the beneficiary of the policy because he had discussed this with Buck. (Holtz Dep. at 296 (Doc 60-3)). Likewise, Troyer notes that Darlene Clark testified that she thought Buck was the beneficiary, and she believed this was said at the meeting on December 15, 2011. (Clark Dep. at 174-75 (DE 60-4)). She admits her belief was based on an assumption and former discussions dating back to 2002. ( Id. ). But, despite her assertion that Buck was the beneficiary, the minutes which Clark endorsed show that the beneficiary had been changed to Troyer. (Clark Dep. at 86 (DE 65-2)).
At the conclusion of the Board meeting, and based upon United's representations on December 1, 2011, Holtz did not object to Buck executing a claim statement to redeem the policy's death benefit. The parties offer divergent views of what occurred at that Board meeting. According to Darlene Clark, Troyer determined that, regardless of who was the beneficiary, the money from the policy would go to Buck. (Clark Dep. at 220-21 (DE 65-2)). Darlene Clark testified that, in making this decision, Troyer did not rely on any information from United. ( Id. at 121).
The meeting was recorded and both Darlene Clark and Dan Holtz took handwritten notes. After the meeting, Darlene Clark's notes and the audio recording were given to Jennifer Yoder ("Yoder"). Yoder was asked to type minutes of the meeting. She typed the minutes and attests that what she prepared accurately reflected the discussion at the meeting. (DE 65-17 ¶¶ 2-5). Those minutes state, in relevant part, that:
Discussion of insurance proceeds for the term life insurance from United Omaha Life, Policy Number BU1096496 on the life of Ronald Clark, who passed away November 12, 2011. David discussed that in 2003 Dave and Ron took out this policy and on the hand written application listed David Buck as the beneficiary then it was changed to Troyer Products for tax purposes, with the understanding that the proceeds would go to David Buck for the purpose of buying Troyer Products. Board approved proceeding with filing the paperwork ...