United States District Court, D. South Dakota, Southern Division
KRISTI H. THOMPSON, Plaintiff,
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, Defendant.
MEMORANDUM OPINION AND ORDER DENYING MOTION TO
LAWRENCE L. PIERSOL, UNITED STATES DISTRICT JUDGE
Kristi Thompson ("Thompson"), has moved the Court
pursuant to Federal Rule of Civil Procedure 15(a)(2) for an
Order granting leave to amend her Complaint to add additional
parties. (Doc. 21.) For the reasons set forth below, the
motion is denied.
a breach of contract and bad faith action stemming from
Thompson's coverage under a worker's compensation
insurance policy issued by Defendant, National Union Fire
Insurance Company of Pittsburgh ("NUF"), to
Thompson's employer. In both her initial Complaint and
her proposed Amended Complaint, Thompson alleges that NUF
breached the insurance contract by failing to timely pay
worker's compensation benefits, and committed bad faith
by: 1) terminating benefits with no reasonable basis to do
so; 2) delaying the processing and handling of Thompson's
claim; and 3) requiring an adverse medical examination by a
physician who was biased in favor of insurance companies.
(Doc. 1; Doc. 21-1.) In her proposed Amended Complaint,
Thompson adds four parent companies as defendants under the
theory of alter ego liability. (See Doc. 23 at 6.)
NUF contends that Thompson's motion to amend and add the
four parent companies is futile because there is no factual
or legal basis for claims against the companies.
generally a court should freely give leave to a party to
amend its pleadings when justice so requires, FED.R.CIV.P.
15(a)(2), it may properly deny a party's motion to amend
a complaint when such amendment would unduly prejudice the
non-moving party or would be futile. Popoalii v.
Correctional Med. Servs., 512 F.3d 488, 497 (8th Cir.
2008). Denial of a motion for leave to amend on the basis of
futility "means the district court has reached the legal
conclusion that the amended complaint could not withstand a
motion to dismiss under Rule 12(b)(6) of the Federal Rules of
Civil Procedure." Cornelia I. Crowell GST Trust v.
Possis Med., Inc., 519 F.3d 778, 782 (8th Cir. 2008).
ruling on a motion to dismiss under Rule 12(b)(6), a district
court generally may not consider materials outside the
pleadings, other than some public records, materials that do
not contradict the complaint, or materials that are
"necessarily embraced by the pleadings." Noble
Systems Corp. v. Alorica Cent., LLC, 543 F.3d 978, 982
(8th Cir. 2008); Porous Media Corp. v. Pall Corp.,
186 F.3d 1077, 1079 (8th Cir. 1999). This Court will
therefore consider only the sufficiency of the allegations
contained in Thompson's proposed Amended Complaint in
determining the futility issue. See Peoples v. Sebring
Capital Corp., 209 F.R.D. 428, 430 (N.D. Ill.2002) (The
test for futility in a motion to amend complaint does not
depend on whether the proposed amendment could potentially be
dismissed on a motion for summary judgment, but whether the
proposed pleading can withstand a motion to dismiss for
failure to state a claim.); Journal Pub. Co. v. American
Home Assur. Co., 771 F.Supp. 632, 635 (S.D.N.Y.
l99l)(district court considers only sufficiency of the
allegations in a proposed amended complaint in determining
whether proposed amendments are futile).
survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to 'state a
claim to relief that is plausible on its face.'"
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). "[A]lthough a complaint need not include
detailed factual allegations, 'a plaintiffs obligation to
provide the grounds of his entitlement to relief requires
more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do.'"
C.N. v. Willmar Pub. Schs., Indep. Sch. Dist. No.
347, 591 F.3d 624, 629-30 (8th Cir. 2010) (quoting
Twombly, 550 U.S. at 555). The factual content in
the complaint must "allo[w] the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged." Braden v. Wal-Mart Stores,
588 F.3d 585, 594 (8th Cir. 2009) (quoting Ashcroft,
556 U.S. at 678).
generally do not presume that a parent corporation is liable
for the actions of its wholly owned subsidiary. United
States v. Bestfoods, 524 U.S. 51, 61 (1998). There is an
exception to this presumption, however '"where one
corporation is so organized and controlled and its affairs
are so conducted that it is, in fact, a mere instrumentality
or adjunct of [the parent] corporation.'" Epps
v. Stewart Information Services Corp., 327 F.3d 642, 649
(8th Cir. 2003) (quoting Lakota Girl Scout Council, Inc.
v. Havey Fund-Raising Mgmt., Inc., 519 F.2d 634, 637
(8th Cir. 1975)).
law is viewed to determine whether and how to pierce the
corporate veil." Epps, 327 F.3d at 649. South
Dakota law provides that "[a] parent corporation
is liable for the acts of its subsidiary under the
instrumentality exception when (1) the parent controls the
subsidiary to such a degree as to render the latter the mere
instrumentality of the former; and (2) adherence to the rule
of corporate separateness would produce injustices and
inequities." Glanzer v. St. Joseph Indian Sch.,
438 N.W.2d 204, 207 (S.D. 1989) (citations omitted). A parent
is also responsible for the conduct of its subsidiaries
"when an agency relationship exists between them."
Id. (citations omitted).
South Dakota Supreme Court has identified and adopted
additional factors to consider under the first factor in the
instrumentality exception. These factors indicate the
"control" necessary to hold the parent liable for
the actions of the subsidiary:
(a) The parent corporation owns all or most of the capital
stock of the subsidiary.
(b) The parent and subsidiary corporations have common
directors or officers.
(c) The parent corporation finances the subsidiary.
(d) The parent corporation subscribes to all the capital
stock of the subsidiary or otherwise causes ...