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State of Oklahoma, ex rel. Doak v. Acrisure Business Outsourcing Services, LLC

United States Court of Appeals, Tenth Circuit

July 16, 2013

STATE OF OKLAHOMA, ex rel., JOHN DOAK, Insurance Commissioner, as receiver for Imperial Casualty and Indemnity Company, Plaintiff-Appellant,
v.
ACRISURE BUSINESS OUTSOURCING SERVICES, LLC; ACRISURE, LLC; CAMPBELL MANAGEMENT GROUP, INC., Defendants-Appellees, and PATRICK MONTGOMERY; EMPLOYMENT TRADITIONS, INC.; PEOPLE ESSENTIALS, INC.; E.T. 2, INC.; E.T. 4, INC.; E.T. 6, INC.; E.T. 10, INC.; CFC I/ET, INC.; CFC II/ET, INC.; MONTGOMERY, INC., Defendants. STATE OF OKLAHOMA, ex rel., JOHN DOAK, Insurance Commissioner, as receiver for Park Avenue Property and Casualty Insurance Company, Plaintiff-Appellant,
v.
ACRISURE BUSINESS OUTSOURCING SERVICES, LLC; ACRISURE, LLC; CAMPBELL MANAGEMENT GROUP, INC., Defendants-Appellees, and PATRICK MONTGOMERY; EMPLOYMENT TRADITIONS, INC.; PEOPLE ESSENTIALS, INC.; E.T. 2, INC.; E.T. 4, INC.; E.T. 6, INC.; E.T. 10, INC.; CFC I/ET, INC.; CFC II/ET, INC.; MONTGOMERY, INC., Defendants.

W.D. Okla. D.C. Nos. 5:11-CV-00863-C, 5:11-CV-00864-C

Before BRISCOE, Chief Judge, McKAY and O'BRIEN, Circuit Judges.

ORDER AND JUDGMENT [*]

Mary Beck Briscoe Chief Judge

Plaintiff, the State of Oklahoma, on behalf of John Doak, its Insurance Commissioner and the receiver for Imperial Casualty and Indemnity Company and Park Avenue Property and Casualty Insurance Company (collectively the Insurers), appeals from the district court's orders granting summary judgment in favor of defendants Acrisure Business Outsourcing Services, LLC (Acrisure Services),

Acrisure, LLC (Acrisure), and Campbell Management Group, Inc. (Campbell) (collectively the ABOS defendants). Mr. Doak also appeals the orders that denied his motions to: (1) amend the scheduling order and reconsider that order; (2) conduct additional discovery to respond on summary judgment; and (3) remand the case to state court under the Burford abstention doctrine. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the orders.

I. BACKGROUND

Employment Traditions, Inc. (Traditions), a professional employer organization, provided employee services to its customers in return for a fee. Patrick Montgomery was the president and sole shareholder of Traditions. As part of its services, Traditions purchased high-deductible worker's compensation insurance from the Insurers for the benefit of its customers' employees. Under the high-deductible policies the Insurers covered catastrophic losses and Traditions was self-insured for minor injuries. The Insurers were responsible for administering all of the benefits for worker's compensation claims, including the payment of claims for non-catastrophic injuries. In addition to paying premiums and administrative expenses, Traditions was obligated to reimburse the Insurers for all of the non-insured claims paid by the Insurers to its customers' employees. Beginning in 2005, Traditions fell behind in its payments to the Insurers.

In late 2008, Traditions began negotiations to sell some of its assets to Campbell, a Michigan corporation that operated a commercial insurance agency. Campbell conducted the due diligence for the transaction. The parties eventually agreed on a deal that covered 126 customer accounts, or 51.6% of Traditions' assets. To that end, on December 31, 2008, Campbell sold all of its assets, including Acrisure Services, a Michigan limited liability company, to Acrisure, a Michigan limited liability company that was formed expressly for the purpose of acquiring Campbell. Later that same day, Acrisure Services purchased approximately 51% of Traditions' accounts for $4.5 million. Acrisure guaranteed the promissory notes used to fund part of the purchase of Traditions. At or about the time of the transaction, Traditions' employees began to tell its customers, vendors, and creditors that its name would change to Acrisure Services effective January 1, 2009. Following the closing, Acrisure Services hired 33 of Traditions' 38 employees, including Mr. Montgomery.

Not long after the transaction closed, the Insurers went into liquidation. Mr. Doak eventually filed two separate state court suits in which he alleged more than $9 million in damages on behalf of each Insurer for: (1) breach of contract against Traditions; (2) negligence and breach of fiduciary duty against Mr. Montgomery; (3) constructive fraudulent transfer against Traditions, Mr. Montgomery, and the ABOS defendants; (4) successor liability against the ABOS defendants; and (5) a corporate-veil-piercing claim against Traditions and Mr. Montgomery. The defendants removed the cases to federal court.[1]

II. PROCEDURAL ORDERS

A. The Scheduling Order

The scheduling order was entered on September 1, 2011. March 1, 2012, was designated as the deadline for completion of discovery and other matters such as dispositive motions. In October 2011, Acrisure and Campbell moved for judgment on the pleadings on the grounds that they were not parties to the purchase agreement and therefore could not be liable as a matter of law. Mr. Doak filed an unopposed motion for extension of time to respond. In his response filed on December 2, Mr. Doak argued for more time to conduct discovery to determine whether Acrisure and/or Campbell were the alter-egos of Acrisure Services or had received some of Traditions' assets. The district court denied the motion for judgment on the pleadings on January 30, 2012.

In the meantime, on November 11, 2011, the ABOS defendants served written discovery, and in early February 2012, they served a notice to depose Mr. Doak. Although Mr. Doak eventually responded to the requests for admissions, he never responded to the interrogatories or requests for production of documents nor did he appear for deposition.

On February 15, 2012, just two weeks before the discovery deadline, Mr. Doak moved to amend the scheduling order to extend all of the deadlines by sixty days. The motion was filed nearly six weeks after Mr. Doak's expert witness list and reports were due and the same day that his witness and exhibit lists were due.

As grounds, Mr. Doak cited the "pendency of Acrisure and Campbell's Motion for Judgment on the Pleadings, " Aplt. App. at 162, as well as the administrative and litigation demands placed on the "small firm retained by [Mr. Doak] to act as assistant receiver, " id. at 161. According to Mr. Doak, his lawyers needed additional time to confer with the assistant receiver to not only respond to the past-due discovery, but to "coordinat[e] with the assistant receiver regarding the preparation of discovery to Defendants." Id. at 162. Although he did not say so Mr. Doak suggested that his counsel intended to serve discovery before the end of January 2012, but were unable to do so because of the unexpected death on January 24 of a lawyer's relative. He stated that he did not move for an extension on January 24 because opposing counsel led his lawyers to believe that they would agree to an extension.

The ABOS defendants objected on the grounds that Mr. Doak "has failed to cooperate in discovery or comply with the Court's scheduling Order and the actions of his counsel indicate [he] does not intend to comply." Id. at 195. They disavowed having agreed to an extension and insisted that they were willing only to discuss an extension of time for Mr. Doak to respond to the past-due discovery. On March 1, 2012, while Mr. Doak's motion was pending, the ABOS defendants filed for summary judgment. On March 2, the district court denied Mr. Doak's motion to extend the deadlines.

"A schedule may be modified only for good cause and with the judge's consent." Fed.R.Civ.P. 16(b)(4). "[T]he court may modify the schedule on a showing of good cause if it cannot reasonably be met despite the diligence of the party seeking the extension." Fed.R.Civ.P. 16 advisory committee's note (1983 Amendment Discussion).

"We review a court's refusal to enter a new scheduling order for abuse of discretion." Rimbert v. Eli Lilly & Co., 647 F.3d 1247, 1254 (10th Cir. 2011). "An abuse of discretion occurs when the district court's decision is arbitrary, capricious or whimsical, or results in a manifestly unreasonable judgment." Moothart v. Bell, 21 F.3d 1499, 1504-05 (10th Cir. 1994) (internal quotation marks omitted). See also Bylin v. Billings, 568 F.3d 1224, 1231 (10th Cir. 2009) (recognizing that "appellate courts that have applied Rule 16 have afforded wide discretion to district courts' applications of that rule").

There was no abuse of discretion. As the district court explained in its order, Mr. Doak "has not shown good cause for extension: In addition to continuously missing deadlines and failing to respond to discovery requests, [Mr. Doak] misrepresents the pendency of a motion as a basis for extension." Aplt. App. at 330.

On appeal, Mr. Doak argues that his lawyers were overwhelmed by having to respond to the motion for judgment on the pleadings and the discovery requests. But the motion for judgment on the pleadings was not filed until October 21, 2011, nearly two months after entry of the scheduling order and Mr. Doak's response stated that he needed to conduct discovery to prepare a response. There was ample time before the motion was filed and after Mr. Doak responded to have conducted discovery. Nor are we swayed by the argument that the burden of responding to discovery requests that were served in mid-November prevented counsel from conducting their own discovery. Indeed, it appears that the responses were being managed by the assistant receiver's office and thus Mr. Doak's lawyers could have pursued their own discovery. In any event, these "complications" should have been evident long before February 2012, when Mr. Doak filed his motion to extend the deadlines. Like the district court, we are sympathetic to events such as the unexpected death of a family member; however, Mr. Doak was already in the eleventh hour and has never explained why a different lawyer did not prepare any discovery. In short, there was no abuse of discretion.

B. The Motion to Reconsider and Rule 56(d) Motion

On March 22, 2012, Mr. Doak filed two motions; the first to reconsider the denial of his motion to extend the deadlines and the second under Fed.R.Civ.P. 56(d) ...


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