Johnson v. Am. Family Ins.
Johnson v. Am. Family Ins.
2020 WL 10181572 (N.D. Ga. 2020)
February 7, 2020
Bly, Christopher C., United States Magistrate Judge
Summary
The Court found that Plaintiff had documents in ESI as of October 4, 2018, and December 27, 2018, which showed that the Agent Advance Compensation Plan (ACP) and the Agent Finance Plan (AFP) were separate plans. This information was important to the Court's decision, as it showed that Plaintiff was not a participant in or party to an ACP.
KHIDJA JOHNSON, Plaintiff,
v.
AMERICAN FAMILY INSURANCE a/k/a AMERICAN FAMILY MUTUAL INSURANCE COMPANY, et al., Defendants
v.
AMERICAN FAMILY INSURANCE a/k/a AMERICAN FAMILY MUTUAL INSURANCE COMPANY, et al., Defendants
CIVIL ACTION NO. 1:18-CV-1552-ODE-CCB
United States District Court, N.D. Georgia, Atlanta Division
Filed February 07, 2020
Counsel
Carl L. Sollee, Sollee Law, LLC, Atlanta, GA, for Plaintiff.Jana Laura Korhonen, Gregory Young Shin, Margaret Santen (Hanrahan), Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Rodney Gregory Moore, Dentons US LLP, Atlanta, GA, for Defendants American Family Insurance, American Family Life Insurance Company, American Standard Insurance Company of Wisconsin.
Bly, Christopher C., United States Magistrate Judge
ORDER AND NON-FINAL REPORT AND RECOMMENDATION
*1 This matter is before the Court for consideration of Defendants American Family Mutual Insurance Company S.I., American Family Life Insurance Company, and American Standard Insurance Company of Wisconsin's motion for judgment on the pleadings, (Doc. 75); Plaintiff's motion to file a fourth amended complaint, (Doc. 77), and Defendants’ motions for sanctions, (Doc. 93, 96).[1] In this action, Plaintiff Khidja Johnson asserts claims for discrimination and retaliation under Title VII of the Civil Rights Act of 1964, discrimination and retaliation under 42 U.S.C. § 1981, and breach of contract. (Doc. 27 at ¶¶ 122–144). For the reasons set forth below, the undersigned DENIES Plaintiff's motion to file a fourth amended complaint, (Doc. 77); RECOMMENDS that Defendants’ motion for judgment on the pleadings be GRANTED, (Doc. 75); and RECOMMENDS that Defendants’ motion for sanctions be DENIED WITHOUT PREJUDICE, (Doc. 96).
Plaintiff and Defendants have filed several motions to seal. (Docs. 79, 83, 95, 98, 103). These motions are GRANTED. The Clerk is DIRECTED to seal the following documents (by docket number): 78, 82-1, 82-6, 93 and all attached exhibits (93-1 through 93-20), 97, 97-1, and 102-1.
I. PROCEDURAL BACKGROUND
Plaintiff initiated this action on April 11, 2018, by filing an application for leave to proceed in forma pauperis. (Doc. 1). On April 13, 2018, the Court granted Plaintiff's application and directed her to amend her complaint to comply with the Federal Rules of Civil Procedure and the Local Rules no later than April 30, 2018. (Doc. 2). As directed, Plaintiff filed an amended complaint, through counsel, on April 30, 2018. (Doc. 5).
Defendants filed a motion to dismiss on June 11, 2018. (Doc. 14). On June 25, 2018, Plaintiff filed a motion to amend the complaint. (Doc. 15). The Court granted the motion to amend, denied Defendants’ motion to dismiss as moot, and directed Plaintiff to file a second amended complaint by July 26, 2018. (Doc. 24). Plaintiff filed her second amended complaint, which she styled as a third amended complaint,[2] on July 16, 2018. (Doc. 27). Defendants filed their answer to the third amended complaint on August 13, 2018. (Doc. 33).
The parties filed their Joint Preliminary Report and Discovery Plan on August 10, 2018. (Doc. 29). That plan set forth time limits for amending the pleadings, which the Court adopted. (Doc. 35 at 1–2). Specifically, it provides that amendments to the pleadings submitted more than 30 days after August 10, 2018, “will not be accepted for filing, unless otherwise permitted by law.” (Doc. 29 at 7). The Court entered a scheduling order on August 27, 2018, which set the end of discovery for January 10, 2019. (Doc. 35). The Court has extended discovery several times, and discovery finally concluded on June 7, 2019. (Docs. 38 (granted by unnumbered docket entry), 72, 80). During and after discovery, the parties have engaged in several conferences with the Court regarding discovery disputes. (Docs. 37, 66, 72, 74, 91).
*2 On May 21, 2019, Defendants filed a motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure. (Doc. 75). On June 4, 2019, Plaintiff filed her response. (Doc. 82). Defendants replied on June 18, 2019. (Doc. 88).
On May 27, 2019, Plaintiff filed a motion to amend her complaint. (Doc. 77). Defendants responded to the motion to amend on June 10, 2019. (Doc. 85). No reply was filed.
On August 16, 2019, Defendants filed a motion for sanctions. (Doc. 93). Because Defendants inadvertently failed to make necessary redactions to the exhibits attached to that motion, they filed a corrected motion for sanctions that included the necessary redactions on August 19, 2019. (Doc. 96). Plaintiff responded on September 5, 2019, (Doc. 101), and Defendants replied on September 11, 2019, (Doc. 102).
II. MOTION FOR LEAVE TO FILE A FOURTH AMENDED COMPLAINT
The Court first resolves Plaintiff's motion for leave to file the fourth amended complaint, because it will determine the operative pleading in this case.[3] Plaintiff began working for Defendants as an agent on March 5, 2013, under the provisions of the American Family Agent Agreement. (Doc. 27 at ¶ 17). The motion to amend relates to a termination provision in that agreement. Plaintiff argues that Defendants’ supplemental discovery responses provided on May 23, 2019, show that the allegation in paragraph 70 of the third amended complaint—about when an Agent Advance Compensation Plan terminated—is not accurate. (Doc. 78 at 4). To understand Plaintiff's argument, it is necessary to review both paragraphs 69 and 70 of the third amended complaint, which state this:
69. Plaintiff's American Family Agent Agreement provided:
Termination. h.1) Except as provided below in paragraph 2), this agreement may be terminated by either party with or without cause by giving written notice to the other and shall be deemed terminated as of the date specified in that notice....2) After two years from the effective date of this agreement or after the termination date of your Agent Advance Compensation Plan, which ever is later, the Company will give you notice in writing of any undesirable performance which could cause termination of this agreement if not corrected. The Company will not terminate this agreement for those reasons for period of six months after that written notice....
70. The Agent Advance Compensation Plan terminated May 1, 2017. (Doc. 27 at ¶¶ 69–70) (ellipses in original). Plaintiff seeks to keep paragraph 69 the same but replace paragraph 70 with the following text:
70. The Plaintiff was not a participant in an Agent Advance Compensation Plan or a party to an Agent Advance Compensation Plan Agreement; she was a party to an Agent Finance Plan Agreement.
(Doc. 78 at 3).
Plaintiff asserts that she and her counsel operated under the mistaken assumption that the Agent Advance Compensation Plan (ACP) and the Agent Finance Plan (AFP) were functionally identical, such that documents in discovery and deposition questions that referred to “compensation plan,” “finance plan,” or related acronyms all referred to the same agreement. Id. at 7–10. Plaintiff claims that she and her counsel operated under this assumption because—while Plaintiff admits she “was a participant in an [AFP]”—she did “not appreciate[ ] or notic[e] the difference in terminology,” had “never heard of a separate advance compensation plan,” and “recalled receiving no documentation on [the ACP].” Id. at 7–8. Plaintiff claims that it was not until Defendants supplemented their interrogatory responses on May 23, 2019, that she was able to discern that the ACP and the AFP were not the same thing. Id. at 11–12.
*3 In response, Defendants argue that Plaintiff has not shown good cause for failing to abide by the filing deadline for amended pleadings in the Court's scheduling order because “new facts or evidence have not arisen and there is no reason offered to justify why Plaintiff did not move to amend” the complaint earlier. (Doc. 85 at 8). Defendants note that the exhibits attached to Plaintiff's motion were produced on October 4, 2018, and December 27, 2018, well before Plaintiff filed her motion to amend. Id. Defendants also argue that Plaintiff's proposed amendment fails under Rule 15(a) because it was unduly delayed, was not cured by a previous amendment, would be prejudicial, and would be futile. Id. at 12–17. Plaintiff did not file a reply.
District courts are required to enter a scheduling order that limits the time to amend the pleadings. Fed. R. Civ. P. 16(b)(3)(A). A scheduling order may be modified “only for good cause.” Fed. R. Civ. P. 16(b)(4). If a motion for leave to amend a pleading is filed within the time prescribed by the scheduling order, Rule 15(a) of the Federal Rules of Civil Procedure governs a court's analysis. See Sosa v. Airprint Sys., Inc., 133 F.3d 1417, 1419 (11th Cir. 1998). But if it is filed after the scheduling order's deadline, the party “must first demonstrate good cause under Rule 16(b) before [courts] will consider whether amendment is proper under Rule 15(a).” Id.
The “good cause” standard under Rule 16(b) “precludes modification unless the schedule cannot be met despite the diligence of the party seeking the extension.” Id. at 1418 (internal quotation marks omitted). On the other hand, Rule 15(a) sets out a “liberal amendment standard,” id. at 1419, which instructs that “[t]he court should freely give leave [to amend] when justice so requires,” Fed. R. Civ. P. 15(a).
Here, Plaintiff did not move for leave to amend within the time prescribed by the Court's scheduling order. The Joint Preliminary Report and Discovery Plan requires any amendments to the pleadings to be filed within 30 days of that report, which was filed on August 10, 2018. (Doc. 29 at 8). The Court adopted the dates set out in the report, (Doc. 35 at 2), so amended pleadings had to be filed by September 10, 2018. Plaintiff filed the motion for leave to file the fourth amended complaint on May 27, 2019. (Doc. 77). Because that filing was outside the time prescribed by the scheduling order, she must show good cause. She has not done so.
As noted above, Plaintiff maintains that, when she filed the third amended complaint, she thought the AFP and the ACP were the same thing—and she alleged that the ACP terminated on May 1, 2017. (Doc. 78 at 2, 7). On May 23, 2019, Defendants provided supplemental discovery that, Plaintiff alleges, “implies that Plaintiff was not a participant in or party to an [ACP]”—instead, Plaintiff now maintains that she was subject to the AFP and not the ACP. Id. at 3. Specifically, in response to a request for production for all “documents governing or describing the operation of the [ACP],” Defendants provided a supplemental response on May 23, 2019, objected to the request, but then stated that “the effective date of Plaintiff's removal from the [ACP] was April 30, 2017.” (Doc. 78-3 at 6–7). But in support of that statement, Defendants cited to a particular email that refers to the AFP—not the ACP. (Doc. 78-5). Thus, Plaintiff argues, when Defendants stated that Plaintiff's ACP terminated on April 30, 2017, (Doc. 78-3 at 7), but then cited to an email in support that references the AFP but not the ACP, Defendants have now conceded that Plaintiff was subject to an AFP and not an ACP. (Doc. 78 at 5–6).
In her motion, Plaintiff attaches several exhibits that she offers to prove that neither she nor her counsel could have known that the ACP and the AFP were separate plans—documents that show, contrary to her initial thoughts—“that the ACP is not the [AFP].” (Doc. 78 at 5–7 (citing Docs. 78-6 through 78-11)). The problem for Plaintiff is that these documents show—contrary to her claimed understanding—that the ACP and AFP are not the same thing. One document—“Endorsement No. 1,” (Doc. 78-11)—is particularly instructive. The entire text of Endorsement No. 1 is reproduced here:
*4
ENDORSEMENT NO. 1
to
Agent Advance Compensation Plan Agreement (ACP), Agent Support Plan Agreement (ASP), Agent Advance Support Plan Agreement (AASP), and Agent Finance Plan Agreement (AFP)
CASH BONUS
It is agreed that your Agent Advance Compensation Plan (ACP), Agent Support Plan (ASP), Agent Advance Support Plan (AASP), or Agent Finance Plan (AFP), (Company finance plan) is amended as follows:If you qualify for an Agent Bonus under Agent Compensation Schedule No. 3 to the American Family Agent Agreement, and are an agent as of the date of payment, you will be eligible to receive a portion of your Agent Bonus payable in cash.If you are on any Company finance plan or owing a finance plan balance to the Company, you will receive 50% of the calculated Agent Bonus in cash, with the remaining 50% of the calculated bonus applied to your Company finance plan balance through your account statement.All other terms and conditions of your Company finance plan remain unchanged. The Company reserves the right to change or terminate this endorsement at any time.
(Doc. 78-11). Endorsement No. 1 clearly shows the ACP and the AFP as separate plans. The heading (which is in bold) and introductory paragraph list the ACP and AFP as separate documents, and the second and third paragraphs refer to a “Compensation Schedule” and “finance plan” respectively. Id. The information within the four corners of this document alone at the very least raises a question about whether the ACP and AFP are different agreements. And Plaintiff had Endorsement 1—and the other documents (including the email noted above) attached to its motion—as of, at the latest, December 27, 2018. (Doc. 85 at 8 (noting that the relevant documents were produced on October 4, 2018, and December 27, 2018)). Thus, Plaintiff should not have been under the impression that the plans were the same. Plaintiff argues only that Endorsement 1 was “seemingly not relevant” until the supplemental production in May of 2019. (Doc. 78 at 12). But it is unclear to the Court why Plaintiff or her counsel would have felt that way—they claim that they thought the ACP and AFP were the same thing, but this document clearly shows they were not.
And critically, Plaintiff had the email (that references the AFP) on December 27, 2018, well before the May supplemental production and approximately five months before she filed the motion for leave to amend. (Doc. 85 at 9 n.4).[4] Simply put, Plaintiff is required to be more diligent than she has been. See Sosa, 133 F.3d at 1419 (holding that a plaintiff failed to show good cause under Rule 16(b) for lack of diligence when, in part, the plaintiff had the relevant information via interrogatory responses that were received two weeks prior to the deadline for amending her complaint and approximately six months before “taking steps to preserve her ability to assert a viable theory” based on that information). Instead, Plaintiff waited until after Defendants filed their motion for judgment on the pleadings to seek to amend her complaint. See McNerney v. Hall Cty. Bd. of Comm'rs, No. 2:09-CV-38-RWS, 2010 WL 883756, at *1 (N.D. Ga. Mar. 5, 2010) (denying leave to amend a complaint that was untimely under Rule 16(b) and which was done with a “desire to intercept a ruling on” the defendants’ pending motion for judgment on the pleadings).
Plaintiff has also already filed an original pro se complaint and two amended complaints through counsel. (Docs. 1, 5, 27). And in the order granting leave to file the third amended complaint, the Court stated that it would “allow Plaintiff one final opportunity to amend.” (Doc. 24 at 2) (emphasis added). “The object of Rule 16(b) is to ‘assure that at some point ... the pleadings will be fixed.’ ” Nicarry v. Cannaday, 6:03-cv-87-Orl-28DAB, 2007 WL 9719196, at *1 (M.D. Fla. Jan. 9, 2007) (quoting Fed. R. Civ. P. 16 advisory committee's note). Defendants have a right to know what they are defending against, discovery has closed, and to the extent that Plaintiff was confused about what plan she was under when she filed her third amended complaint, she should have been more diligent in finding out that information or, at the very least, been less definitive in her pleading. And, once Plaintiff received the relevant documents in December of 2018, she was obligated to seek leave to amend diligently—and not to wait until after Defendants filed their motion for judgment on the pleadings. For these reasons, Plaintiff has not shown good cause, see Sosa, 133 F.3d at 1418, and her motion for leave to amend the complaint is DENIED.[5] The Court now turns to Defendants’ motion for judgment on the pleadings.
III. MOTION FOR JUDGMENT ON THE PLEADINGS
*5 Defendants move for partial judgment on the pleadings seeking judgment against Plaintiff on Count V, which alleges breach of contract. (Doc. 75). Count V of the third amended complaint alleges that Defendants breached their American Family Agent Agreement in five ways: (1) by failing to perform it in good faith, (2) by falsely accusing Plaintiff of conduct in a June 2016 letter, (3) by failing to give her an opportunity to cure, (4) by wrongfully terminating her, and (5) by firing her for being rude when she had not been rude. (Doc. 27 at ¶ 143). Plaintiff opposes the motion, (Doc. 82), and Defendants have filed a reply brief, (Doc. 88).
A. Factual Background
The Court draws the following facts from Plaintiff's third amended complaint. (Doc. 27). The allegations in the complaint are considered true for the purposes of a motion for judgment on the pleadings. See Perez v. Wells Fargo N.A., 774 F.3d 1329, 1335 (11th Cir. 2014) (“In determining whether a party is entitled to judgment on the pleadings, we accept as true all material facts alleged in the non-moving party's pleading, and we view those facts in the light most favorable to the non-moving party.”). The Court has also incorporated some facts alleged in Defendants’ answer, but only to the extent that those allegations have not been denied or do not conflict with those of the complaint. See Stanton v. Larsh, 239 F.2d 104, 106 (5th Cir. 1956).
Plaintiff is licensed as an insurance agent in Georgia. (Doc. 27 at ¶ 16). She began working for Defendants in March of 2013 under a written American Family Agent Agreement (the agent agreement) dated March 5, 2013. Id. at ¶ 17. The agent agreement provides the following termination provisions:
Termination. h.1) Except as provided below in paragraph 2), this agreement may be terminated by either party with or without cause by giving written notice to the other and shall be deemed terminated as of the date specified in that notice....2) After two years from the effective date of this agreement or after the termination date of your Agent Advance Compensation Plan, which ever is later, the Company will give you notice in writing of any undesirable performance which could cause termination of this agreement if not corrected. The Company will not terminate this agreement for those reasons for period of six months after that written notice....
Id. at ¶ 69. The agent agreement also includes a jurisdiction provision, which provides:
This agreement shall be deemed to have been made within the State of Wisconsin and shall be interpreted and construed in accordance with the laws of the State of Wisconsin.
(Doc. 75-1 at p. 9, § 7(d)).
On June 26, 2016, Plaintiff received a written letter via email, bearing a date of June 12, 2016, from Mike Marlin, her sales manager, which accused her of unprofessional conduct, being rude, and violating certain company guidelines. (Doc. 27 at ¶¶ 50–51). The letter gave Plaintiff an opportunity to cure this alleged misconduct and stated that Marlin had “total confidence that [she would] learn from [her] experience here and act appropriately going forward.” Id. at ¶ 52. Plaintiff was never rude to employees of Defendants including Marlin, and she asserts that some allegedly rude conduct should be better interpreted as professional advocacy on behalf of her insurance customers, not rudeness. Id. at ¶¶ 49, 54, 55, 65. She received no further feedback on the letter. Id. at ¶ 52.
B. Standard on a Motion for Judgment on the Pleadings
*6 A party may move for judgment on the pleadings after the pleadings are closed. Fed. R. Civ. P. 12(c). “Judgment on the pleadings is appropriate where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law.” Perez, 774 F.3d at 1335 (internal quotation marks omitted). “In determining whether a party is entitled to judgment on the pleadings, [a court must] accept as true all material facts alleged in the non-moving party's pleading, and ... view those facts in the light most favorable to the non-moving party.” Id. “If a comparison of the averments in the competing pleadings reveals a material dispute of fact, judgment on the pleadings must be denied.” Id.
“[O]n a motion for judgment on the pleadings, documents that are not a part of the pleadings may be considered, as long as they are central to the claim at issue and their authenticity is undisputed.” Id. at 1340 n.12. This applies even to documents that are attached to the motion and not included in either the complaint or answer. Id.
“The legal standard for assessing a motion for judgment on the pleadings is the same as the standard for a motion to dismiss under Rule 12(b)(6).” Mobile Telecomms. Techs., LLC v. United Parcel Serv., Inc., 173 F. Supp. 3d 1324, 1327 (N.D. Ga. 2016). “The main difference between the motions is that a motion for judgment on the pleadings is made after an answer and that answer may also be considered in deciding the motion.” United States v. Bahr, 275 F.R.D. 339, 340 (M.D. Ala. 2011).
On a Rule 12(b)(6) motion to dismiss, while a plaintiff need not include “detailed factual allegations” in the complaint, the plaintiff must demonstrate grounds for relief, which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Instead, to 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) (internal quotation marks omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.
These standards suggest a two-pronged approach for courts evaluating a motion to dismiss a complaint. See id. at 678–79; Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010). First, “eliminate any allegations in the complaint that are merely legal conclusions.” Am. Dental Ass'n, 605 F.3d at 1290. While a court must accept the factual allegations in the complaint as true and construe them in the light most favorable to the plaintiff, Powell v. Thomas, 643 F.3d 1300, 1302 (11th Cir. 2011), it need not consider “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements,” Iqbal, 556 U.S. at 678. Nor should it consider “a legal conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986). Second, “where there are well-pleaded factual allegations, assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Am. Dental Ass'n, 605 F.3d at 1290 (internal quotation marks omitted).
C. Discussion
Defendants argue that paragraph h.1 of the agent agreement controls in this case and that Defendants could terminate the agent agreement without cause under the express terms of that paragraph. (Doc. 75 at 8–10). Alternatively, Defendants argue that they complied with the termination provisions of paragraph h.2. Id. at 10–11. Finally, they argue that, to the extent that Plaintiff asserts a claim for a breach of a covenant of good faith and fair dealing, that claim fails because such a claim must attach to an actionable claim for breach of contract under Georgia law—and here there is no breach. Id. at 12.
*7 In response, Plaintiff argues that paragraph h.2 applies, and Plaintiff never engaged in any “undesirable performance which could cause termination” under that paragraph. (Doc. 82 at 3). Alternatively, Plaintiff argues that Defendants waived their right to terminate her without cause under paragraph h.1 by giving her “notice and opportunity to cure,” and she cured by not being rude or unprofessional. Id. at 2. Finally, she argues that Georgia law should not apply because a provision in the agent agreement specifically provides that the agent agreement is governed by Wisconsin law, which imposes higher standards and allows for an independent claim for a breach of good faith and fair dealing. Id. at 3.
In reply, Defendants cite Plaintiff's motion for leave to file a fourth amended complaint as evidence of Plaintiff's concession that, as pleaded, Count V is likely subject to dismissal. (Doc. 88 at 3). Defendants argue that Georgia law applies but that Count V would still be subject to dismissal under either Georgia or Wisconsin law. Id. at 4–6. Defendants repeat their claim that paragraph h.1 applies and that its “plain terms” allow for termination without cause. Id. at 7. Additionally, they claim that they did not waive their right to terminate without cause because there was no “mutual departure” from the terms of the agreement. Id. at 10–11. Regarding paragraph h.2, Defendants argue that even if it applies, Plaintiff was given the six-month notice required and that her conduct constituted “undesirable performance.” Id. at 11–13. Finally, they assert that the claim for a breach of good faith and fair dealing would fail under either Georgia law or Wisconsin law. Id. at 14–15.
“The elements for a breach of contract claim in Georgia are the (1) breach and the (2) resultant damages (3) to the party who has the right to complain about the contract being broken.” SAWS at Seven Hills, LLC v. Forestar Realty, Inc., 805 S.E.2d 270, 274 (Ga. Ct. App. 2017) (internal quotation marks omitted). In Wisconsin, the elements of a cause of action for breach of contract are “(1) the formation of a contract between the plaintiff and the defendant; (2) failure of the defendant to do what it undertook to do; and (3) resulting damages.” BMO Harris Bank N.A. v. Valley Trucking, LLC, No. 18-C-1331, 2019 WL 2582570, at *4 (E.D. Wis. June 24, 2019) (internal quotation marks omitted). In both Wisconsin and Georgia, courts give effect to the terms of a contract if they are unambiguous. Chaudhuri v. Fannin Reg'l Hosp., 730 S.E.2d 425, 427 (Ga. Ct. App. 2012) (“First, the trial court must decide whether the language is clear and unambiguous. If it is, the court simply enforces the contract according to its clear terms....” (internal quotation marks omitted)); Milwaukee Police Supervisors’ Org. v. City of Milwaukee, 815 N.W.2d 391, 396 (Wis. Ct. App. 2012) (“Unless the contractual language is ambiguous, the contract must be enforced as written.”).[6]
Under the plain terms of paragraph h.1, “[e]xcept as provided ... in paragraph 2,” either party can terminate the agent agreement “with or without cause.” (Doc. 27 at ¶ 69). Paragraph h.2, in turn, applies only after the later of one of two dates: (1) two years after the effective date of the agent agreement or (2) the termination date of the ACP. Id. The agent agreement was dated March 5, 2013, which makes the first of these relevant dates March 5, 2015. (Doc. 27 at ¶ 17). The second relevant date is May 1, 2017, the date that the ACP terminated. Id. at ¶ 70. The agent agreement is unambiguous in stating which date determines when paragraph h.2 applies, and here May 1, 2017, is the later of the two relevant dates. Defendants terminated the agency agreement on April 12, 2017, before the triggering date for paragraph h.2. Id. at ¶ 63. Thus, even if they terminated it without cause, Defendants did not breach the contract. The elements noted above for a breach-of-contract claim further show that this outcome is the same under both Georgia and Wisconsin law.
*8 Plaintiff argues that the June 6, 2016, letter that she received from Marlin acts as a waiver of Defendants’ rights under paragraph h.1 to terminate the agreement without cause. (Doc. 82 at 9–14). This, again, was the letter from Marlin where he outlined Plaintiff's alleged unprofessional conduct and disregard for company guidelines and advised her that he expected her to adhere to the guidelines in the future and that non-compliance may result in termination of the agreement. (Doc. 82-5). Plaintiff argues that, by sending this letter, Defendants waived the right to terminate without cause. (Doc. 82 at 10). Plaintiff cites Wisconsin law and argues that it is significant that “Defendant[s] drafted, signed and delivered,” the letter. Id. at 11. Plaintiff also notes that “[b]oth parties performed for about 10 months under this letter,” and that the phrasing of the letter is similar to the text of paragraph h.2. Id. at 11–12. Defendants argue that giving advance notice of what they perceived as undesirable behavior does not constitute waiver. (Doc. 88 at 10–11).
Although under Wisconsin law “the intent to waive may be inferred as a matter of law from the conduct of the parties,” Royster-Clark, Inc. v. Olsen's Mill, Inc., 714 N.W.2d 530, 536 (Wis. 2006) (internal quotation marks omitted), none of the evidence Plaintiff puts forth is convincing. See Christensen v. Equity Coop. Livestock Sale Ass'n, 396 N.W.2d 762, 763 (Wis. Ct. App. 1986) (“The party asserting the existence of facts that give rise to a waiver has the burden of proving them.”). Simply put, there is nothing in the agency agreement that prohibits Defendants from providing the kind of feedback they expressed in the letter and nothing in the letter to indicate that Defendants were in any way waiving the right to terminate without cause. The letter simply identifies areas where Defendants deemed Plaintiff deficient, encourages her to improve, and reminds her that the agreement could be terminated in the future. (Doc. 82-5). Under Plaintiff's argument, every time Defendants alerted Plaintiff to a potential breach of the contract without immediately terminating it would amount to a waiver and, not surprisingly, Plaintiff points to no case establishing that as the law.
And the fact that Defendants “drafted, signed, and delivered” the letter says nothing about their intent to modify a contract. Additionally, Plaintiff's claim that both parties performed under the contract for 10 months fails to show an intent to waive—it simply shows that Defendants waited to terminate the contract during a time period when they had every right to do so, with or without cause. Indeed, Plaintiff claims she received no feedback from Defendants after receiving this letter. (Doc. 27 at ¶ 52). Plaintiff again cites no legal authority indicating that 10 months of silence shows an intent to waive. Finally, the phrasing of the June 6, 2016, letter and paragraph h.2 are not similar enough to constitute evidence of Defendants’ intent to waive. They both discuss the same general subject matter—the risk of termination if issues do not improve—but the mere mention of this issue in the letter is not sufficient to find that Defendants intended to waive their right to enforce paragraph h.1. Waiver simply requires more than that. See William Heinlein, Densing Realty, Inc. v. Clayton Indus., No. 97-1544, 1997 WL 784213, at *3 (Wis. Ct. App. Dec. 23, 1997) (holding that a reasonable jury could find a party's conduct “cumulatively demonstrate[d]” intent to waive when the party: did not respond to the other party's requests for modification, continued doing work after the expiration of the old contract, had “service order notations” that were “consistent with the suggested modification,” and made reassurances that it was committed to performing). Defendants did not waive their rights under paragraph h.1 to terminate the agent agreement without cause. Therefore, their termination of the agent agreement was not a breach.
Plaintiff also argues that the June 6, 2016, letter and the parties’ performance constitute mutual departure under Georgia law. (Doc. 82 at 13–14, citing O.C.G.A. § 13-4-4). This alternative argument lacks merit. The statute provides:
*9 Where parties, in the course of the execution of a contract, depart from its terms and pay or receive money under such departure, before either can recover for failure to pursue the letter of the agreement, reasonable notice must be given to the other of intention to rely on the exact terms of the agreement. The contract will be suspended by the departure until such notice.
O.C.G.A. § 13-4-4. Initially, the Court notes that the “mutual departure doctrine is used most in the context of repeated monthly payments of a debt.” Snyder v. Time Warner, Inc., 179 F. Supp. 2d 1374, 1380 (N.D. Ga. 2001). And the statute expressly requires that parties to a contract “depart from its terms and pay or receive money under such departure.” O.C.G.A. § 13-4-4 (emphasis added). Thus, it does not seem that O.C.G.A. § 13-4-4 applies to this case because it involves no payments contemplated by the statute. Nevertheless, the parties’ arguments revolve around the June 6, 2016, letter and performance under that letter. Assuming O.C.G.A. § 13-4-4 applies, the Court agrees with Defendants that this conduct is not a mutual departure because it does not purport to depart from the terms of the agent agreement. (See Doc. 88 at 10). As stated above, the letter simply points out Plaintiff's perceived deficiencies. Just because the letter mentions termination and the opportunity to improve does not show that Defendants wished to tie it to the terms of paragraph h.2, which happen to also reference termination.
Because paragraph h.1 applies, and Defendants were entitled to terminate the agreement with or without cause, the Court declines to address the parties’ arguments regarding whether the termination was also successful under paragraph h.2.
Plaintiff alleges that Defendants breached the agreement by failing to perform in “good faith.” (Doc. 27 at ¶ 143). Defendants argue that, to the extent Plaintiff is alleging that Defendants breached a covenant of good faith and fair dealing, that claim must be dismissed because under Georgia law such a claim does not create an independent basis for liability outside of the claim for breach of contract. (Doc. 75 at 11–12). Plaintiff responds that the issue should be addressed under Wisconsin law, which does allow for an independent claim. (Doc. 82 at 20). Defendants reply that, even under Wisconsin law, simply exercising rights authorized under the contract cannot amount to a breach of the implied duty of good faith. (Doc. 88 at 14–15).
Georgia law does not allow for an independent cause of action outside of a claim for breach of an express term of the contract. See Morrell v. Wellstar Health Sys., Inc., 633 S.E.2d 68, 72 (Ga. Ct. App. 2006). Also under Georgia law, “there can be no breach of an implied covenant of good faith where a party to a contract has done what the provisions of the contract expressly give him the right to do.” Whisenant v. Fulton Fed. Sav. & Loan Ass'n of Atlanta, 406 S.E. 2d 793, 795 (Ga. Ct. App. 1991) (internal quotation marks omitted).
Under Wisconsin law, “a violation of the implied promise of good-faith dealing may be considered independent of any breach of the underlying contract.” Beidel v. Sideline Software, Inc., 842 N.W.2d 240, 256 (Wis. 2013). But, “the covenant cannot be used to turn what was specifically authorized in the agreement into a breach.” Id.; see also Uebelacker v. Paula Allen Holdings, Inc., 464 F. Supp. 2d 791, 803 (W.D. Wis. 2006) (“[I]f a contract expressly provides a party with certain rights, exercising those rights cannot amount to a breach of the implied duty of good faith.”).
*10 Because Plaintiff's claim for breach of contract fails, Plaintiff cannot sustain a claim for a breach of a covenant of good faith and fair dealing under Georgia law. See Morrell, 633 S.E.2d at 72. And while she could do so under Wisconsin law independent of her claim for breach of contract, see Beidel, 842 N.W.2d at 256, she has not shown that Defendants did anything that they were not contractually authorized to do. Both Georgia and Wisconsin law prevent a claim for breach of good faith when the allegedly breaching party was authorized under the contract to do what they did. See Whisenant, 406 S.E. 2d at 795 (Georgia); Uebelacker, 464 F. Supp. 2d at 803 (Wisconsin). Neither Plaintiff's third amended complaint nor her response brief link any specific conduct to a breach of good faith. And the possible conduct of terminating Plaintiff without cause cannot support this claim because Defendants were expressly authorized to do so under paragraph h.1.
For the reasons stated above, the undersigned RECOMMENDS that Defendants’ motion for judgment on the pleadings as to Count V should be GRANTED.
IV. MOTION FOR SANCTIONS
The Court now turns to Defendants’ motion for sanctions. (Doc. 96). Defendants request monetary sanctions and dismissal of Plaintiff's case based on Plaintiff's “committing perjury, perpetrating fraud on the Court, failing to comply with Court rules, and failing to participate in discovery in good faith.” Id. at 1–2. Defendants seek sanctions under Rules 26, 37, and 41 of the Federal Rules of Civil Procedure, as well as under the inherent power of the Court. Id. at 1. This motion relates to Plaintiff's prior arrest records, and Defendants argue that Plaintiff's conduct rises to a sanctionable level because she “has lied, evaded, and failed to tell the whole truth to enjoy an advantage over Defendants, which has caused Defendants to expend substantial resources to respond to, undo, and uncover the extent of Plaintiff's lies.” Id. at 21.
In response, Plaintiff argues that dismissal is an extreme remedy that would circumvent the trial process and is not appropriate in this case because the allegedly sanctionable conduct “amounts to faulty memories and minor mistakes.” (Doc. 101 at 2–3). Plaintiff argues that the appropriate remedy for Defendants is for them to challenge Plaintiff's “memory issues or inconsistencies on cross examination.” Id. at 5.
In reply, Defendants argue that Plaintiff's claim of a faulty memory is not credible because it is not supported by any sworn testimony, it implicates answers to questions about serious conduct that one would unquestionably remember, and she took “calculating steps” to “hide her previous conviction.” (Doc. 102 at 3).
Rule 26(e) provides:
A party who has ... responded to an interrogatory, request for production, or request for admission—must supplement or correct its disclosure or response:(A) in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing; or(B) as ordered by the court.
In turn, Rule 26(g) provides:
(1) Signature Required; Effect of Signature. Every disclosure under Rule 26(a)(1) [initial disclosures] or (a)(3) [pretrial disclosures] and every discovery request, response, or objection must be signed by at least one attorney of record in the attorney's own name--or by the party personally, if unrepresented--and must state the signer's address, e-mail address, and telephone number. By signing, an attorney or party certifies that to the best of the person's knowledge, information, and belief formed after a reasonable inquiry:
...
(B) with respect to a discovery request, response, or objection, it is:*11 (i) consistent with these rules and warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law, or for establishing new law;(ii) not interposed for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; and(iii) neither unreasonable nor unduly burdensome or expensive, considering the needs of the case, prior discovery in the case, the amount in controversy, and the importance of the issues at stake in the action.
“Rule 26(g) requires attorneys to vouch for the completeness, truthfulness and good faith nature of disclosures, discovery requests, responses and objections. If a party violates 26(g), the rule empowers the Court to impose an appropriate sanction.” SCADIF, S.A., v. First Union Nat'l Bank, 208 F. Supp. 2d 1352, 1377 (S.D. Fla. 2002) (internal quotation marks omitted).
“Rule 37(b) provides that a district court may impose sanctions for failure to comply with discovery orders.” Agilysys, Inc. v. Hall, No. 1:16-CV-3557-ELR-JFK, 2019 WL 3483173, at *5 (N.D. Ga. May 29, 2019) (internal quotation marks and omission omitted). Rule 37(b)(2) provides:
(A) For Not Obeying a Discovery Order. If a party or a party's officer ... fails to obey an order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a), the court where the action is pending may issue further just orders. They may include the following:....(v) dismissing the action or proceeding in whole or in part;...(C) Payment of Expenses. Instead of or in addition to the orders above, the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.
“Rule 37 sanctions are intended to prevent unfair prejudice to the litigants and insure the integrity of the discovery process.” Gratton v. Great Am. Commc'ns, 178 F.3d 1373, 1374 (11th Cir. 1999). And a district court has substantial discretion in deciding whether to impose sanctions under Rule 37. See Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1366 (11th Cir. 1997); Malautea v. Suzuki Motor Co., Ltd., 987 F.2d 1536, 1542 (11th Cir. 1993).
Rule 41(b) provides, “[i]f the plaintiff fails ... to comply with these rules or a court order, a defendant may move to dismiss the action or any claim against it.” “Rule 41(b) makes clear that a trial court has discretion to impose sanctions on a party who fails to adhere to court rules.” Zocaras v. Castro, 465 F.3d 479, 483 (11th Cir. 2006).
Finally, the Court “may impose sanctions for litigation misconduct under its inherent power.” Eagle Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298, 1306 (11th Cir. 2009). This inherent power “derives from the court's need to manage its own affairs so as to achieve the orderly and expeditious disposition of cases.” Id. (internal quotation marks and alteration omitted). However, “[b]ecause of their very potency, inherent powers must be exercised with restraint and discretion.” Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991). “The key to unlocking a court's inherent power is a finding of bad faith.” Eagle Hosp. Physicians, LLC, 561 F.3d at 1306 (internal quotation marks omitted). “A party demonstrates bad faith by, inter alia, delaying or disrupting the litigation or hampering enforcement of a court order.” Id. “[O]utright dismissal of a lawsuit ... is a particularly severe sanction, yet is within the court's discretion ... [and] the ‘less severe sanction’ of an assessment of attorney's fees is undoubtedly within a court's inherent power as well.” Chambers, 501 U.S. at 45.
*12 Here Defendants’ argument centers on two actions: (1) Plaintiff's alleged failure to obey the Court's discovery order, (Doc. 66), which directed her to obtain a police report stemming from her August 2014 arrest, and (2) her alleged perjurious testimony relating to her arrest history. (See Doc. 96 at 19). Defendants include detailed accounts of various conduct unearthed through open records requests that they claim show dishonest or illegal conduct in a variety of contexts, including Plaintiff allegedly giving untruthful responses on her insurance agent application; being involved in several criminal offenses (with corresponding police reports and/or court proceedings), some of which involved threats and assault; and giving allegedly evasive answers during her deposition. Id. at 7–14. These accusations are significant, and Defendants seek sanctions under several rules.
As to Rule 26, Plaintiff was required to supplement her discovery responses as she learned that the responses were incomplete or incorrect. Fed. R. Civ. P. 26(e)(1)(A). Three discovery responses are relevant. First, interrogatory No. 2 asked: “Have you ever been arrested, convicted, charged with a crime, or ordered or advised to attend an anger management or similar behavioral program?” Plaintiff responded “No.” (Doc. 96-20 at 2–3). Second, request for production of documents No. 15 asked for documents related to Plaintiff's involvement in any civil or criminal matter; Plaintiff responded, “Plaintiff has not been involved in any criminal matter and therefore has no documents to produce.” (Doc. 96-19 at 16–17). Plaintiff did, however, provide notice that she had been involved in a car accident with a pending case in Fulton County. Id. And third, interrogatory No. 7 asked Plaintiff to identify every legal action, criminal or civil, which Plaintiff participated in; Plaintiff identified only the civil action regarding the car accident. (Doc. 96-20 at 13).
Defendants argue that the answers are untrue. They note that, at her deposition, Plaintiff admitted to an arrest on August 1, 2014. (Doc. 96 at 5). Further, Defendants assert that they have uncovered, through alternate means, evidence of other arrests in 2004, 2006, 2008, and 2010. Id. at 9. Defendants maintain that Plaintiff also concealed her arrest history on her insurance-agent license application. Id.
If Plaintiff became aware that her responses were incomplete or incorrect, Rule 26 imposed a duty on her to correct them by supplementing her response in a timely manner unless “the additional or corrective information [had] otherwise been made known to” Defendants. On the record before the Court, Plaintiff's responses are, at the very least, incomplete. (See Doc. 96-2 at 5). Although Plaintiff appears to argue that one of her convictions was expunged, see id., answering the discovery noted above (and only identifying a car accident) is incomplete at best. And while Plaintiff argues that Defendants have provided examples of “mistakes and faulty memory issues,” (Doc. 101 at 7), she has not supported that statement with a declaration or an affidavit. She has not sworn, for example, that she did not remember the prior arrests.
On this record, the Court does not agree with Defendants’ insinuation that her arrest record is so voluminous or her conduct so egregious that she must have remembered something about being arrested or charged with a crime. (See Doc. 96 at 20). Plaintiff could have, in good faith, felt that those instances did not meet the definition of arrest, conviction, or being charged with a crime—or she could have simply not recalled. See Benac v. Wal-Mart Stores, Inc., No. 3:04cv460/MCR/EMT, 2006 WL 8444450, at *1–2 (N.D. Fla. June 8, 2006) (finding dismissal as a Rule 37 sanction unwarranted when plaintiff's inconsistent answers between his answers to interrogatories and testimony at his deposition were the product of confusion and a faulty memory).
*13 Under the facts as they exist now, the Court cannot determine whether the arrests Defendants have uncovered are actually those of Plaintiff, why Plaintiff answered the discovery requests in the way that she did, or whether she lied or simply forgot about the prior incidents in question. Simply put, the Court cannot determine whether Plaintiff's responses to the interrogatories and requests for production were untruthful. And as a result, Defendants’ motion should be denied. And the same holds true under the Court's inherent powers, which require a finding of bad faith. See Eagle Hosp. Physicians, LLC, 561 F.3d at 1306 (“The key to unlocking a court's inherent power is a finding of bad faith.” (internal quotation marks omitted)).
But Defendants have uncovered enough smoke to suggest that there may also be some fire. If Defendants’ information is correct, that Plaintiff has at least four prior arrests, (Doc. 96 at 9), it is a real stretch to think that Plaintiff simply forgot about them. Maybe those arrests are not her. Maybe some of them are and others are not. Maybe she did forget. Maybe they all belong to her, she remembered all of them, and she lied in the course of discovery. On this record, the Court does not know enough to know whether Plaintiff was honest in how she responded to discovery, and the only real way to find out is to give her the opportunity to explain. The undersigned therefore recommends that, although Defendants’ motion should be denied on the present record, it should be denied without prejudice such that, should Defendants decide to further pursue the issue, Plaintiff's deposition be reopened to allow Defendants to confront Plaintiff with the evidence that they have uncovered and allow Plaintiff to explain her prior discovery responses. I hesitate to make this recommendation in light of how long this case has been pending, but Defendants should have the opportunity to put the information they discovered (and which they might well have had prior to Plaintiff's deposition if she had been more forthcoming in her interrogatory responses) in front of her and let her explain. If there is a credible explanation, then no sanctions are warranted. If she lied, or her answers are not credible, then sanctions might very well be appropriate.
Defendants also argue that Plaintiff failed to comply with the Court's prior order that Plaintiff “does have an obligation to get from her criminal attorney and from the lawyer that she had in the civil case ... the documents related to those cases” arising from the 2014 arrest. (Doc. 68 at 16–17). But this order specifically referred to Plaintiff attempting to get these documents from her previous attorneys. Indeed, the Court explicitly withheld judgment as to whether the previous attorneys had any relevant documents but said that “to the extent that they do ... she has an obligation to try and get [the documents] from those attorneys.” Id. at 18. Defendants argue that Plaintiff disregarded this order by “reach[ing] out to Plaintiff's previous attorneys,” but not making “any efforts to locate the police report.” (Doc. 96 at 19–20) (emphasis omitted). But reaching out to the previous attorneys is what Plaintiff was directed to do. As such, the sanction of dismissal is not warranted on this basis.
V. CONCLUSION
For the reasons stated above, the undersigned DENIES Plaintiff's motion to file a fourth amended complaint, (Doc. 77); RECOMMENDS that Defendants’ motion for judgment on the pleadings, (Doc. 75), be GRANTED; RECOMMENDS that Defendants’ motion for sanctions, (Doc. 96), be DENIED WITHOUT PREJUDICE; and RECOMMENDS that Defendants’ initial motion for sanctions, (Doc. 93), be DENIED AS MOOT. If the District Judge agrees with the recommendation regarding the motion for sanctions, the undersigned RECOMMENDS that, to the extent Defendants wish to pursue the matter further, Plaintiff's deposition be reopened for the limited purpose of allowing Defendants to question Plaintiff about the information they have discovered regarding Plaintiff's possible prior arrests. The undersigned does not recommend that any additional discovery be authorized.
*14 Plaintiff and Defendants have filed several motions to seal. (Docs. 79, 83, 95, 98, 103). These motions are GRANTED. The Clerk is DIRECTED to seal the following documents (by docket number): 78, 82-1, 82-6, 93 and all attached exhibits (93-1 through 93-20), 97, 97-1, and 102-1.
IT IS SO ORDERED and RECOMMENDED, this 7th day of February, 2020.
Footnotes
Defendants have filed two motions for sanctions. (Docs. 93, 96). Defendants inadvertently filed the first of these motions, (Doc. 93), without making necessary redactions, (Doc. 95). Defendants then moved to seal the first motion for sanctions and filed a second motion with the necessary redactions. (Doc. 95). Therefore, the first motion for sanctions, (Doc. 93), should be DENIED AS MOOT.
For ease of reference and consistency, the Court refers to the second amended complaint as it is titled—the third amended complaint. The Court likewise refers to the complaint that Plaintiff seeks leave to file as the fourth amended complaint. (See Doc. 78).
As stated earlier, this complaint is actually the third amended complaint (but it would be the fourth complaint filed in the case). See supra pg. 3 n.2.
Plaintiff has not challenged Defendants’ statements about when Defendants produced the relevant documents.
Because Plaintiff has failed to show good cause to amend under Rule 16(b), the Court declines to address the parties’ arguments under Rule 15. Plaintiff cannot meet the “good cause” requirement of Rule 16(b), so there is no need to progress on to determine whether the amended complaint is proper under Rule 15.
Defendants do not address the choice-of-law issue at all in their opening brief. Plaintiff mentions the issue in her response brief and concludes that Wisconsin law applies with little analysis or citation to legal authorities. (Doc. 82 at 3, 13). And Defendants relegate the issue to a footnote in the reply. (Doc. 88 at 4 n.3). On such sparse briefing, the Court is not inclined to wade into what could be a complicated question of which state's law applies. Nevertheless, as explained below, the outcome is the same on each critical question under both Georgia and Wisconsin law.