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EPIS, INC. v. FIDELITY AND GUAR. LIFE INS.

July 30, 2001

EPIS, INC., DBA EPIS INSURANCE SERVICES, PLAINTIFF
v.
FIDELITY AND GUARANTY LIFE INSURANCE COMPANY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Illston, District Judge.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR LEAVE TO AMEND

Currently before the Court are defendant's motion for summary judgment and plaintiffs motion for leave to amend the complaint. Having considered the arguments of counsel and the papers submitted, the Court hereby GRANTS defendant's motion and DENIES plaintiff's motion.

BACKGROUND

On March 20, 2000, plaintiff EPIS, Inc., d/b/a EPIS Insurance Services ("EPIS") filed a state court action against Fidelity and Guaranty Life Insurance Company ("F & G"), Innovative Marketing Strategies, Inc. ("Innovative"), and Homesaver International Inc. ("Homesavers"). Following the voluntary dismissal of the only non-diverse defendant, the case was timely removed by F & G to this court on January 29, 2001. The Second Amended Complaint ("SAC") states causes of action against F & G for breach of contract, breach of the covenant of good faith and fair dealing, and trade libel/defamation.

The facts underlying the dispute are as follows. On March 27, 1997, EPIS and F & G entered into a General Agent's Agreement, authorizing EPIS to sell certain life insurance and annuity products on behalf of F & G. See Declaration of Tony P. Wilkey ("Wilkey Decl."), Exh. A, General Agent's Agreement ("GAA"); Separate Statement of Undisputed Material Facts in Support of F & G's Motion ("F & G's Statement of Facts") ¶ 2; Plaintiff EPIS' Separate Statement of Undisputed Facts in Opposition ("EPIS Statement of Facts") ¶ 2. Section 22 of the GAA provides that the agreement "may be terminated by either party upon 30 days notice in writing by ordinary mail to the last known address of the other party, or may be terminated by the Company immediately for cause."*fn1 GAA. Section 23 of the GAA provides, in pertinent part:

B. Effect on Previous Agreements: The execution of this Agreement abrogates, terminates, and supersedes all previous agreements between you and the Company.
C. Amendment of Agreement: This Agreement can only be amended and modified by a written instrument properly executed by you and an authorized officer of the Company. Failure of the Company to take advantage of any breach of the terms, conditions, or covenants herein contained shall not constitute a waiver or estoppel to thereafter enforce any of said terms, conditions or covenants. This Agreement cannot be modified by any acquiescence in practices or courses of dealing by the Company contrary to the terms, conditions, or covenants thereof.

Id. On March 19, 1999 F & G sent EPIS a letter stating, in part:

In accordance with the terms of your agreement dated March 26, 1997 section 22, we are exercising our right to terminate that agreement.
We ask that you return, to my attention, any and all marketing, sales, and agent contract information you may have for F & G Life in addition to any and all administrative materials you may have in your possession.

See Wilkey Decl., Exh. C. ("March 19, 1999 Letter"). On April 16, 1999, in response to an inquiry from EPIS, F & G wrote a second letter to EPIS providing:

Th[e] letter indicates that EPIS believes that it was terminated for cause by F & G Life Insurance by letter dated March 19, 1999. Please be advised that the termination exercised under Section 22 of the producer agreement was a notice termination and not a termination for cause.
We trust this clarification resolves the issues raised in your letter. If I can be of further assistance please feel free to contact me directly.

See Wilkey Decl., Exh. D ("April 16, 1999 Letter"). On April 22, 1999, F & G sent a third letter to EPIS regarding the exercise of termination under Section 22 of the GAA. That letter states in part:

Your letter of April 21, 1999 raises questions regarding the EPIS termination and the reason for the termination. As to the actual termination, F & G Life Insurance Company notified EPIS by letter dated March 19, 1999 that it was terminating the producer agreement between it and EPIS. Section 22 of that agreement allows for termination by either party upon thirty (30) days notice or termination for cause based upon certain enumerated provisions. F & G Life did not terminate the agreement for cause and did not rely on one of the provisions set forth in Section 22 defining "cause." Instead, F & G Life provided a written notice to EPIS indicating termination of the agreement (a "notice termination") as Section 22 provides.
Your second query concerns the reason for the termination and I would direct EPIS to Mr. McDaniel or Mr. Abate for that discussion. I point out that no reason is required for F & G Life to terminate its relationship with EPIS upon proper notice. EPIS enjoyed the same right to disassociate itself in the same manner while the agreement was in force and again, no reason would have been required.

See Wilkey Decl., Exh. E ("April 22, 1999 Letter").

EPIS alleges that F & G breached the GAA by terminating the agreement despite the "custom and practice, Federal Regulations, and implied and express duties of good faith and fair dealing" which were incorporated into the GAA, and, which prevented F & G from arbitrarily terminating the GAA without good cause and without notice or opportunity to correct any claimed breaches, defaults or nominal violations. SAC ¶¶ 30, 39. EPIS also argues that F & G's obligation of good faith and fair dealing included the implied covenant that F & G would not arbitrarily terminate the GAA under Section 22 or any other section of the GAA. SAC ¶ 50. The implied covenant of good faith and fair dealing, coupled with the terms, conditions and purposes of the GAA, also impliedly limited F & G's ability to terminate the GAA upon 30 days notice. Id. Finally, EPIS contends that F & G defamed EPIS. SAC ¶ 66.

Currently before the Court is F & G's motion for summary judgment, F & G's objections to evidence submitted by plaintiff in opposition to F & G's motion for summary judgment, and EPIS' motion to amend the Second Amended Complaint.

LEGAL STANDARD

I. Motion for Summary Judgment

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). The moving party, however, has no burden to negate or disprove matters on which the non-moving party will have the burden of proof at trial. The moving party need only point out to the Court that there is an absence of evidence to support the non-moving party's case. See id. at 325, 106 S.Ct. at 2554.

The burden then shifts to the non-moving party to "designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324, 106 S.Ct. at 2553 (quoting Fed.R.Civ.P. 56(e)). To carry this burden, the non-moving party must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538(1986). "The mere existence of a scintilla of evidence . . . will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2519, 91 L.Ed.2d 202(1986).

In deciding a motion for summary judgment, the evidence is viewed in the light most favorable to the non-moving party, and all justifiable inferences are to be drawn in its favor. Id. at 255, 106 S.Ct. at 2513. "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge [when she] is ruling on a motion for summary judgment." Id.

II. Motion to Amend

Federal Rule of Civil Procedure 15 governs the amendment of complaints. It states that if a responsive pleading has already been filed, the party seeking amendment "may amend the party's pleading only by leave of court or by written consent of the adverse party. Leave shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). This rule reflects an underlying policy that disputes should be determined on their merits, and not on the technicalities of pleading rules. See Foman v. Davis, 371 U.S. 178, 181-82, 83 S.Ct. 227, 230, 9 L.Ed.2d 222(1962). Accordingly, the Court must be very generous in granting leave to amend a complaint. Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990). The Court may deny amendment under Rule 15(a) "when amendment would be clearly frivolous, unduly prejudicial, cause undue delay or a finding of bad faith is made." United Union of Roofers v. Ins. Co. of America, 919 F.2d 1398, 1402 (9th Cir. 1990). A Court may also deny amendment if that amendment would be futile, or if there have been previous unsuccessful attempts to cure deficiencies. See Foman, 371 U.S. at 182, 83 S.Ct. at 230. The Court has the discretion to determine whether the presence of any of these elements justifies refusal of a request to amend the complaint; this discretion is particularly broad where plaintiff has previously amended the complaint. Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989).

DISCUSSION

I. Evidentiary Objections

"To survive summary judgment, a party does not necessarily have to produce evidence in a form that would be admissible at trial, as long as the party satisfies the requirements of Federal Rule of Civil Procedure 56." Block v. City of Los Angeles, 253 F.3d 410 (9th Cir. 2001) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265). With respect to evidence submitted by affidavit, Rule 56(e) requires that the affidavits "shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." Fed.R.Civ.P. 56(e).

F & G has filed objections to substantial portions of the evidence submitted by plaintiff in connection with the opposition to F & G's motion for summary judgment. The ...


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