United States District Court, D. South Dakota, Western Division
JEFFREY L. VIKEN, CHIEF JUDGE
States Magistrate Judge Veronica L. Duffy filed a report and
recommendation (“R&R”). (Docket 82).
Defendants filed objections to the R&R. (Dockets 83 &
83-1). Plaintiff filed a response to defendants'
objections. (Docket 94). By a March 21, 2019, order the court
granted the defendants' motion to dismiss “count VI
of the amended complaint, exploitation of an adult with a
disability.” (Docket 120 at p. 11). The court reserved
ruling on “the remainder of the recommendations in the
R&R (Docket 82) associated with defendants' Rule
12(b)(6) motions to dismiss and the remainder of
defendants' objections (Docket 83)[.]” Id.
For the reasons stated below, defendants' objections
(Dockets 83 & 83-1) to the R&R are overruled. The
court adopts the R&R consistent with this order.
David Wetch filed a six-count amended complaint against all
four defendants. (Docket 44). The five claims remaining
asserted the following: count I, bad faith; count II,
intentional infliction of emotional distress; count III,
Medicare Secondary Payer Act private cause of action; count
conversion; and count V, exemplary and punitive damages.
Id. at pp. 13-17.
Crum & Forster Commercial Insurance (“C&F
Commercial”), Crum & Forster Holdings Corporation
(“C&F Holdings”) and North River Insurance
Company (“North River”) filed motions to dismiss
the amended complaint pursuant to Fed.R.Civ.P. 12(b)(2)
and(b)(6). (Dockets 45 & 46). They assert the amended
complaint fails to state a claim upon which relief may be
granted. Id. Defendant United States Fire Insurance
Company (“U.S. Fire”) filed a motion pursuant to
Rule 12(b)(6) to dismiss plaintiff's count VI of the
amended complaint (Docket 47) and subsequently filed an
answer asserting the amended complaint “fails to state
a claim for relief against defendant and should therefore be
dismissed.” (Docket 50 at p. 26 ¶ 2).
to 28 U.S.C. § 636, the case was referred to Magistrate
Judge Duffy “for the purposes of resolving pretrial
motions and conducting any necessary hearings, including
evidentiary hearings . . . .” (Docket 75). The
magistrate judge issued a R&R addressing defendants'
motions. (Docket 82). The report recommended, in relevant
part, the following:
1. C&F Holdings' “arguments for dismissal on
the basis of Rule 12(b)(6) (failure to state a claim) . . .
be denied as moot.” Id. at p. 49 ¶ 1
(bold and capitalization omitted);
2. C&F Commercial's and North River's motion to
dismiss the “remaining counts against these two
defendants should be denied.” Id. (bold and
capitalization omitted); and
3. U.S. Fire's motion to dismiss “should be . . .
denied as to all . . . counts.” Id. ¶ 3
(bold and capitalization omitted).
C&F Commercial and North River timely filed objections to
the R&R. (Docket 83). Pursuant to Fed.R.Civ.P. 72(b)(2)
plaintiff timely filed a response (Docket 94) to
defendants' objections. See Docket 120 at p. 8.
filed 39 specific objections to the R&R. (Docket 83-1).
Several of defendants' objections relate to the
R&R's consideration of the 1992 litigation captioned
Wetch v. North River Insurance Co. and Crum &
Forster Commercial Insurance Co., CIV. No.
92-5123 (D.S.D. 1992) (“1992 litigation”).
Defendants claim the R&R “includes independent
research relating to plaintiff's 1992 litigation, which
was not submitted by either party, and for which defendants
were not given any notice or an opportunity to be heard
before the [R&R] was filed.” (Docket 83 at p. 2).
Defendants contend “[p]laintiff did not produce [the]
1992 complaint, [d]efendants' 1992 motion and answer
(which, while not discussed in the [R&R], included a
motion to dismiss) or any evidence adduced by either party in
the 1992 litigation.” Id. at p. 10. For these
reasons, defendants argue their objections to the R&R
“should be granted on the basis . . . the 1992
litigation was not part of the record.” Id.
each specific objection associated with the 1992 litigation,
defendants' basis for the objection is “[j]udicial
[n]otice of facts without notice and opportunity.”
(Docket 83-1 at pp. 1-2, 5-6 & 10). Other variations of
the same objection interposed by the defendants are the
“[e]vidence not in record, ” “[n]ot in
evidence, ” “[i]t is not part of the record in
this case, ” “[e]vidence not before court”
or “[a]nswer not in evidence.” Id. at
pp. 1, 5-6 & 9-10. While making these objections,
defendants also ask the court to specifically consider parts
of the 1992 litigation. Id. at pp. 1-2, 6-10;
see also Dockets 83 at pp. 3, 5-8 & 15 and 84-1
were on notice by plaintiff's complaint that the 1992
litigation would play some role in the present litigation.
See Dockets 1 ¶¶ 16- 18 and
Plaintiff's submissions in response to defendants'
motion to dismiss specifically referenced the 1992
litigation. See Dockets 24; 28 at pp. 3-5; and 28-1
at pp. 2-4. In fact, defendants' reply brief specifically
drew the magistrate judge's attention to the 1992
litigation. See Docket 30 at pp. 6 & 9.
Plaintiff's supplemental response again referenced the
1992 litigation. See Dockets 52 at pp. 5-6 and 53-4
at pp. 2-3.
be highlighted later in this order, the magistrate judge took
judicial notice of facts which were part of the earlier
litigation between the same parties. See Fed.R.Evid.
201(b) and (b)(2) (“The court may judicially notice a
fact that is not subject to reasonable dispute because it . .
. can be accurately and readily determined from sources whose
accuracy cannot reasonably be questioned.”). Rule 201
further provides that “[o]n timely request, a party is
entitled to be heard on the propriety of taking judicial
notice and the nature of the fact to be noticed. If the court
takes judicial notice before notifying a party, the party, on
request, is still entitled to be heard.” Fed.R.Evid.
Rule 201(e). Finally, under Rule 201, the magistrate judge
“must take judicial notice if a party requests it and
the court is supplied with the necessary information.”
Fed.R.Evid. 201(c)(2). Defendants were on notice the court
would likely review the 1992 litigation since it was readily
accessible through the CM/ECF court indexing system and had
been referenced by both parties. At no time during briefing
on defendants' motion to dismiss did they request leave
to be heard regarding the propriety of considering the 1992
litigation. It is disingenuous for defendants to assert
objections to the work of the magistrate judge when
defendants themselves made reference to the 1992 litigation.
court finds defendants' judicial notice objections are
without merit. The magistrate judge properly considered the
1992 litigation and incorporated facts which could not be
challenged. Defendants' objections based on judicial
notice are overruled.
to defendants' specific objections to statements in the
R&R, the court will address each objection without
reference to the page of the R&R where the statement was
made. Defendants' objections are as follows:
North River and C&F Commercial Ins. specifically admitted
they provided the relevant workers compensation insurance and
adjusting services in connection with Mr. Wetch's claim.
(Referencing 1992 litigation, Docket 5 at p. 4).
claim there is no evidence in the record to support this
statement. (Docket 83-1 at p. 1). In plaintiff's
complaint in the 1992 litigation, Mr. Wetch alleged:
4. At all times relevant herein, North River Insurance
Company provided worker's compensation insurance to the
5. At all times relevant herein, the Defendant Crum &
Forster Commercial Insurance provided adjusting and claims
services to the Insurer, North River Insurance Company.
(1992 litigation, Docket 1 at p. 7 ¶¶ 4 & 5).
In their joint answer, North River and C&F Commercial
admitted paragraphs 4 and 5 of the complaint. Id.,
Docket 5 ¶ XI.
objection to the factual statement made in the R&R is
without merit. It is first-year law school civil procedure
that an answer which admits an allegation of a complaint is
deemed to be true and no further proof is required of the
fact stated. “In responding to a pleading, a party must
. . . admit or deny the allegations alleged against it by an
opposing party.” Fed.R.Civ.P. 8(b)(1)(B). An answer
which admits an allegation in the complaint concedes the
statement is true. See Commonwealth of Kentucky v. State
of Indiana, 281 U.S. 163, 175 (1930) (“By
admitting in its answer that the allegations of the complaint
are true, the state of Indiana admits the making of the
contract and the authority of its officers to make it under
the applicable legislation. Not only are the allegations of
fact in the complaint conceded to be true, but there is also
no dispute as to the legal import of these facts.”).
statement in the R&R is an accurate summary of the
allegations in the complaint and the defendants' answer
in the 1992 litigation. Defendants' objection 1 is
North River and C & F Commercial Ins. filed a very
extensive joint answer in which a veritable litany of
affirmative defenses were [sic] raised, but they never argued
that the court lacked personal jurisdiction over them.
(Referencing 1992 litigation, Docket 5).
contend this statement is not based on any evidence in the
record. (Docket 83-1 at p. 1). A cursory examination of the
answer filed by North River and C&F Commercial in the
1992 litigation allows the court to conclude the answer was
extensive and contained several affirmative defenses but the
defendants never raised the absence of personal jurisdiction
to claim the court should not proceed on plaintiff's
complaint. See 1992 litigation, Docket 5.
statement in the R&R is an accurate summary of
defendants' 1992 litigation answer. Defendants'
objection 2 is overruled.
Neither North River nor C & F Commercial Ins. ever moved
to dismiss for lack of personal jurisdiction in this prior
federal case involving these same parties, this same work
injury, and this same obligation or lack thereof to pay
workers compensation benefits.
argue this observation in the R&R is not based on any
evidence in the record. (Docket 83-1 at p. 1). Defendants
fail to point to any filing in the 1992 litigation which
supports their objection. A review of the 1992 litigation
permits the court to find the statement in the R&R is a
proper conclusion derived from the earlier case.
statement in the R&R is an appropriate observation and
conclusion derived from a review of the 1992 litigation.
Defendants' objection 3 is overruled.
Apparently the distinction was being drawn for purposes of
determining the appropriate defendant's net worth to
submit to the jury in connection with Mr. Wetch's claim
for punitive damages. (Referencing 1992 litigation, Dockets
57 & 58).
submit this observation in the R&R is not based on any
evidence in the record. (Docket 83-1 at p. 2). While the
magistrate judge may not have the opportunity to specifically
review the defendants' pleadings in the 1992 litigation,
it is clear from the docket text in CM/ECF the documents were
associated with the financial condition of North River and
C&F Commercial. See 1992 litigation, Dockets 57
(“Motion in limine re: punitive damages/financial
condition by defendant North River . . . [and] Crum and
Forster Ins[.]”) and 58 (“Memorandum by defendant
North River . . ., defendant Crum & Forster Ins[.] in
support of motion in limine re: punitive dam[ages]/ financial
magistrate judge's statement is a fair comment on at
least one of the reasons the defendants may have wanted to
separate themselves from Mr. Wetch's claims.
Defendant's objection 4 is overruled.
Donovan further asserted that C & F Commercial Ins.
undertook actions on behalf of North River-i.e. that C &
F Commercial Ins. was the agent of North River.
assert this statement “is in error.” (Docket 83-1
at p. 2). They claim Mr. Donovan's affidavit did not
state “that Crum & Forster Commercial Insurance was
an agent of North River or that it had undertaken any actions
on behalf of North River.” Id. Instead,
defendants claim “Mr. Donovan actually attested all
actions taken in the [1992 litigation was] undertaken by
North River, which does business under the trade name Crum
& Forster Commercial Insurance.” Id.
Donovan's 1993 affidavit was filed in the current case as
an exhibit in support of plaintiff's brief in resistance
to defendants' motions. See Docket 28-1 at pp.
2-5. Mr. Donovan stated “[t]he proper trade name
pursuant to which several insurers owned directly or
indirectly by Crum and Forster, Inc., a New Jersey
corporation did business [as] ‘Crum & Forster
Commercial Insurance.' ” Id. ¶ III.
The affidavit continued, “[t]he activities of The North
River Insurance Company in this action [the 1992 litigation]
were undertaken by that company. No contention is being made
that The North River Insurance Company should not be held
liable for any act done by it or its representative under
the trade name ‘Crum and Forster Commercial
Insurance.' ” Id. ¶ V (emphasis
Mr. Donovan's affidavit did not use the term
“agent, ” it is a fair reading of the statement
that its representative, its agent, was “Crum and
Forster Commercial Insurance.” Id. The R&R
is a fair interpretation of Mr. Donovan's affidavit.
Defendants' objection 5 is overruled.
Donovan assured the court it was not making any
contention that North River should not be held liable for any
acts undertaken by C & F Commercial Ins. on its behalf.
(Emphasis in R&R).
claim this statement “is in error . . . . [because] Mr.
Donovan's affidavit plainly states that the actions taken
in the underlying matter were taken by North River―not
Crum & Forster Commercial Insurance, which is merely a
trade name under which North River did business.”
(Docket 83-1 at p. 2). Again, the affidavit specifically
stated that “[n]o contention is being made that The
North River Insurance Company should not be held liable for
any act done by it or its representative under the trade
name ‘Crum and Forster Commercial
Insurance.' ” (Docket 28-1 ¶ V) (emphasis
defendants' argument was correct, the affidavit would not
have referenced North River's
“representative” and the declaration made by Mr.
Donovan would have simply ended with the words “done by
it.” Id. The statement by the magistrate judge
is a proper interpretation of Mr. Donovan's 1993
affidavit. Defendants' objection 6 is overruled.
Mr. Donovan's affidavit was truthful and C & F
Commercial Ins. has no employees, then Ms. Hoek appears to
have been employed by both North River and U.S. Fire
Ins. simultaneously as their claims adjustor. . . .
Another possibility is that Mr. Donovan's affidavit
was untruthful and Ms. Hoek was an employee
of C & F Commercial Ins. (Emphasis in R&R;
referencing Docket 53-5).
argue “[i]t is uncommon for an employee to work for
both the parent company and its subsidiary.” (Docket
83-1 at p. 2). Defendants submit that just because “Ms.
Hoek was employed by both North River and U.S. Fire does not
make Mr. Donovan's affidavit untruthful.”
Donovan claims C&F Commercial has no employees, yet it
may have been a representative of North River. (Docket 28-1
¶¶ IV and V). Ms. Hoek, on the other hand, acted as
both a claims adjustor for U.S. Fire and North River. (Docket
52 at pp. 5-6). Notwithstanding defendants' assertions,
C&F Commercial was the only named insurer in the case
cited by plaintiff, Suhn v. Hyland Angus Ranch, Employer,
and Crum & Forster Commercial Insurance,
Insurer, S.D. Department of Labor, HF No. 278,
1990/91, 1992 WL 518728 (May 5, 1992).
court finds the magistrate judge's statement was a fair
comment on the confusion created by C&F Commercial, North
River and U.S. Fire. Since Ms. Hoek was the claims adjustor
in Suhn and C&F Commercial was the only
identified insurer in that workers' compensation case
before the South Dakota Department of Labor, Division of
Labor and Management (“SDDOL”), it is reasonable
to conclude Ms. Hoek was an employee of C&F Commercial.
If that conclusion is correct, then it is a
“possibility” that Mr. Donovan's statement
was untruthful. (Docket 82 at p. 5). Defendants'
objection 7 is overruled.
proceedings before the SDDOL in late 2015, C & F
Commercial Ins. appeared and defended its position that the
medical expenses were not, or not wholly, its obligation to
pay under the 1994 stipulation. (Referencing Docket 1-15).
claim this statement in the R&R is not accurate because
“C & F Commercial Ins. did not ‘appear and
defend' [in the 2015 SDDOL proceeding].” (Docket
83-1 at p. 3). Like in Suhn, C&F Commercial is
the only named insurer identified in Mr. Wetch's
worker's compensation case before the SDDOL. See
Docket 1-15. C&F Commercial did appear and defend against
Mr. Wetch's claims in 2015. Id. The statement ...