TIMOTHY BRAINARD, et al., Plaintiffs-Appellants, v. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION, Defendant-Appellee.
No. 04-4510
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
December 28, 2005
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 File Name: 05a0486p.06. Appeal from the United States District Court for the Northern District of Ohio at Cleveland. No. 03-01698—Patricia A. Gaughan, District Judge. Argued: October 28, 2005. Decided and Filed: December 28, 2005. Before: MARTIN, GIBBONS, and GRIFFIN, Circuit Judges.
COUNSEL
OPINION
GRIFFIN, Circuit Judge. Plaintiffs-appellants Timothy Brainard, George Chanter, Robert Domachowski, and James Dovak (collectively “plaintiffs“) appeal from a summary judgment entered in the district court in favor of defendant-appellee American Skandia Life Assurance Corporation (“ASLAC“). Plaintiffs’ complaint, filed against ASLAC and Kevin and/or Neil O‘Donnell and O‘Donnell & Company (a/k/a O‘Donnell Securities Corp.) (hereinafter referred to collectively as “the O‘Donnells“), alleges wrongdoing in connection with the purchase of certain annuity
I.
Plaintiffs are unsophisticated investors who sought out financial advice from the O‘Donnells in connection with the investment of retirement funds totaling $1,971,314.10.1 In doing so, plaintiffs indicated to the O‘Donnells that they wished
The Prospectus referenced in the ASAP II application revealed the particular features of the annuity and, in particular, contained sections discussing applicable fees and charges. A particular portion of the Prospectus allowed plaintiffs to “authorize a financial representative to decide on the allocation of [their] Account Value and to make financial transactions between investment options, subject to [ASLAC] rules.” Significantly, the Prospectus goes on to state as follows:
We or an affiliate of ours may provide administrative support to financial representatives who make transfers on your behalf. These financial representatives may be firms or persons who are appointed by us as authorized sellers of the Annuity. However, we do not offer you advice about how to allocate your Account Value under any circumstance. Any financial firm or representative you engage to provide advice and/or make transfers for you is not acting on our behalf. We are not responsible for any recommendations such financial representatives make, any market timing or asset allocations programs they choose to follow or any specific transfers they make on your behalf.
On the day of signing their ASAP II applications, plaintiffs, acting pursuant to the Prospectus, appointed the O‘Donnells as their “Registered Investment Adviser” by signing a document entitled “Investment Advisory Contract.” In pertinent part, that document reflected that the O‘Donnells would serve as plaintiffs “attorney-in-fact and as agent with authority to act in the name of [plaintiffs] and/or on behalf of the [plaintiffs] with respect to the election, implementations, purchase, sale and timing of the Contract Owner‘s mutual fund accounts or sub-accounts.”
In the days following plaintiffs’ execution of the Investment Advisory Contract (“IAC“), plaintiffs received the annuities themselves, including a variable annuity contract. On the first page of that document, it conspicuously cautioned that “[I]N THE ACCUMULATION PERIOD ANY PAYMENTS AND VALUES PROVIDED UNDER THE VARIABLE INVESTMENT OPTIONS ARE BASED ON THEIR INVESTMENT PERFORMANCE AND ARE, THEREFORE, NOT GUARANTEED.” That front page likewise provided plaintiffs with a twenty-one day window, during which Plaintiffs could return the annuity and receive a refund.
Shortly after finalizing execution of the Investment Advisory Contract, plaintiffs entered into an Investment Allocation Services Agreement (“IASA“) with the O‘Donnells. In pertinent part, that document noted that ASLAC “will accept on behalf of [plaintiffs], instructions from [the O‘Donnells] to reallocate Cash Value among the investment options provided under the Annuity based upon the Advisor‘s investment expertise in order to take advantage of changes in the market[.]” Significantly, the IASA expressly warned that ASLAC “has no responsibility or liability with respect to the transactions contemplated by this Agreement.”
Despite plaintiffs requests to the contrary, the O‘Donnells apparently made a series of high-risk investments which were unsuitable for plaintiffs given their ages and investment objectives. Those decisions
Although the court denied plaintiffs’ motion to reconsider, it granted in part plaintiffs’ motion to amend, thereby allowing plaintiffs to amend six of their claims. Rather than simply amending those claims, plaintiffs re-pled all fifteen counts and added Prudential Financial, Inc. as a new party defendant. After reviewing the amended complaint, the court issued an order striking, sua sponte, Prudential as a party defendant, noting that (1) the deadline to add new parties had long since passed, and (2) plaintiffs failed even to seek leave to add Prudential as a party defendant.2
ASLAC then filed its motion for summary judgment on July 30, 2004, which plaintiffs opposed. Plaintiffs also filed a “Motion to Strike Declaration of Matthew Solum in support of Motion for Summary Judgment and Attached Exhibits from the Record” on September 7, 2004 (hereinafter “Solum Declaration“). By order dated November 5, 2004, the court granted summary judgment in favor of ASLAC. In doing so, the court agreed with ASLAC that plaintiffs had failed to come forward with any evidence whatever reflecting an agency relationship between the O‘Donnells and ASLAC. As for plaintiffs’ motion to strike the Solomon Declaration, the court stated in a footnote at the conclusion of its opinion as follows:
The grounds for plaintiffs’ Motion is that Mr. Solum is simply an attorney for the defendant and has no personal knowledge regarding any of the facts alleged in his Declaration or any of the Exhibits attached thereto. Further, plaintiffs argue that Mr. Solum‘s Declaration improperly sets forth legal arguments and attempts to authenticate exhibits. The Court rules as follows. The Court (1) grants plaintiffs’ Motion to the extent Mr. Solum‘s Declaration contains any legal argument or unsupported factual assertions; (2) grants plaintiffs’ Motion with regard to any Exhibits which are not independently authenticated by deposition testimony; and (3) denies plaintiffs’ Motion with regard to any exhibits which are independently authenticated by deposition testimony.
This timely appeal followed.
II.
We review the district court‘s entry of summary judgment de novo. McWane, Inc. v. Fid. & Deposit Co. of Md., 372 F.3d 798, 802 (6th Cir. 2004). A district court‘s interpretation of state law is likewise governed by the de novo standard. Ferro v. Garrison Ind., Inc., 142 F.3d 926, 931 (6th Cir. 1998). Summary judgment is proper when there are no genuine issues of material fact in dispute and the moving party is entitled to judgment as a matter of law.
We review a district court‘s decision to disallow the addition of a new party to a complaint for an abuse of discretion. Benzon v. Morgan Stanley Distribs., 420 F.3d 598, 605 (6th Cir. 2005); see Cox v. Treadway, 75 F.3d 230, 240 (6th Cir. 1996) (noting addition of a party constitutes an amendment to the complaint).
III.
Plaintiffs first assert that the district court erred as a matter of law in holding that no agency relationship existed between ASLAC and the O‘Donnells for the purpose of investment decisions. For support, plaintiffs highlight deposition testimony given by ASLAC‘s experts who both indicated that an agency relationship existed between ASLAC and the O‘Donnells. Plaintiffs likewise direct this Court to Kevin O‘Donnell‘s insurance license with the state of Ohio, which ASLAC signed and, in doing so, agreed to “accept the responsibility for the management and supervision of the applicant while engaged in the business of insurance.”
An agency relationship may arise pursuant to several theories. First, actual agency occurs where a consensual relationship exists between the agent and principal. Funk v. Hancock, 498 N.E.2d 490, 493-94 (Ohio. Ct. App. 1985). Agency relationships may also arise from apparent agency or agency by estoppel. Agosto v. Leisure World Travel, 304 N.E.2d 910, 913 (Ohio Ct. App. 1973). The principal‘s ratification of the unauthorized acts of another may also establish an agency relationship. Eske Prop., Inc. v. Sucher, Montgomery App., 2003-Ohio-6520, at ¶ 97.3 Given that the existence of an agency relationship is a question of fact, rather than one of law, McSweeney v. Jackson, 691 N.E.2d 303, 307 (Ohio Ct. App. 1996), the court should have denied ASLAC‘s motion if any conflicting evidence of an agency relationship between plaintiffs and ASLAC was presented. In this case, plaintiffs argue that the instant facts potentially raise all three types of agency discussed above.
1. Actual Authority.
Ohio law reflects that actual agency occurs where there is a consensual relationship between the agent and principal. Flick v. Westfield Nat‘l Ins. Co., No. 91-CO-45, 2002 Ohio App. LEXIS 5250, at *27 (Ohio Ct. App. Sept. 26, 2002). “Such actual agency may be informally created and the assent of the parties thereto may be either express or implied.” Wisor v. Zimmerman, No. 1304, 1987 Ohio App. LEXIS 6042, at *7 (Ohio Ct. App. March 3, 1987) (citation omitted); see Damon‘s Missouri, Inc. v. Davis, 590 N.E.2d 254, 257 (Ohio 1992) (noting “an agent, acting within the scope of his actual authority, expressly or impliedly conferred, can bind the principal“). Simply stated, “express authority is that authority which is directly granted to or conferred upon the agent or employee in express terms by the principal, and it extends only to such powers as the principal gives the agent in direct terms[.]” Davis, 590 N.E.2d at 257. In contrast, an agent‘s implied authority may “arise from the express
In this case, no actual agency relationship, be it express or implied, was created between the O‘Donnells and ASLAC. Although, as noted, plaintiffs suggest that the deposition testimony given by ASLAC‘s experts indicates the presence of an agency relationship between ASLAC and the O‘Donnells, the district court rejected this argument. In doing so, the court properly noted that although the experts recognized that an actual agency relationship existed between ASLAC and the O‘Donnells, that relationship was limited solely to the selling of ASLAC insurance products. As the district court observed, “agency for the purpose of selling defendant‘s products is far different from agency for the purpose of providing investment advice[.]” Accord Aluminum Line Prods. Co. v. Rolls-Royce Motors, 649 N.E.2d 887, 894 (Ohio Ct. App. 1994) (“‘[A]gency for the one purpose does not necessarily imply agency for the other.‘“) (quoting Funk, 586 N.E.2d at 1117).
Plaintiffs further argue that an Insurance Product Sales Agreement (“IPSA“) creates an issue of material fact with regard to whether an agency relationship existed between ASLAC and the O‘Donnells for the purpose of giving/soliciting investment advice. That document, however, reflects an agreement whereby ASLAC “authorize[d] Broker-Dealer [the O‘Donnells] to solicit sales of Contracts identified in the attached schedule[s].” Pursuant to the IPSA, that authorization was limited solely “to the extent expressly granted in this Agreement. No further authority is granted or implied.” Thus, as the district court found, “[a] grant of authority to solicit sales and payments cannot be equated to a grant of authority to provide investment advice on behalf of American Skandia . . . .”
Contrary to plaintiffs’ contentions, no implicit agency relationship existed between ASLAC and the O‘Donnells. Plaintiffs rely chiefly on their own deposition testimony, which generally reflects their belief that ASLAC would “watch over” their retirement monies. Pursuant to Ohio law, however, plaintiffs’ subjective beliefs are irrelevant to the inquiry governing the existence of actual authority. See Chevrolet v. Calhoun, 2004 Ohio 1006, at ¶ 11 (Ohio Ct. App. 2004) (“[A]n implied agency exists by reason of actual authority given implicitly by the principal to the agent and does not depend upon what a third party may believe to be the agency relationship.“) (citing Rubbo v. Hughes Provision Co., 36 N.E.2d 144 (Ohio Ct. App. 1940)). Thus, the district court properly held that plaintiffs’ subjective beliefs regarding the relationship between the O‘Donnells and ASLAC “is simply not relevant to the issue of actual authority.” Accordingly, no agency relationship was created by a grant of actual authority from ASLAC to the O‘Donnells for the purpose of giving investment advice.
2. Apparent Authority.
For similar reasons, no apparent authority agency relationship existed between ASLAC and the O‘Donnells. For an agent to bind the principal in the context of apparent authority, the presented evidence must reflect “(1) that the principal held the agent out to the public as possessing sufficient authority to embrace the particular act in question, or knowingly permitted him to act as having such authority, and (2) that the person dealing with the agent knew of the facts and acting
Plaintiffs again offer their deposition testimony in support of their apparent authority claim. Again, however, a court‘s focus during an inquiry into the existence of apparent authority must be on the acts of the principal and whether those actions manifested a conveyance of authority to the agent. See Cupac, Inc. v. Mid-West Ins. Agency, Inc., 626 F. Supp. 559, 561 (S.D. Ohio 1985) (noting the “touchstone of apparent authority is the principal‘s conduct toward a third party and not the agent‘s“) (citing Logsdon, 141 N.E.2d at 223). Plaintiffs’ reliance on their own testimony sheds no light on this inquiry and, accordingly, their arguments must fail.4
For the totality of the foregoing reasons, no agency theory supports the conclusion that ASLAC should somehow be held liable for the consequences of the O‘Donnells investment advice. Significantly, each plaintiff testified that his financial damages arose from the O‘Donnells’ investment decisions. Moreover, as discussed above, ASLAC expressly distanced itself from any investment decisions via a number of binding documents, such as the Prospectus, the IAC, and the IASA. As the district court properly found, the record is devoid of evidence reflecting the existence of such a relationship. Accordingly, summary judgment was appropriate.
IV.
Plaintiffs next assign error to the district court‘s decision to reject the opinions of their expert, John J. Duval, Sr. Specifically, they argue that Duval based his expert opinion that ASLAC had full knowledge of the O‘Donnells’ actions in part on the following: (1) Kevin O‘Donnell once gave ASLAC ideas for subaccounts; (2) an ASLAC employee attended one of the O‘Donnells’ financial planning seminars; (3) the O‘Donnells supplied marketing materials that including information about ASLAC annuities; (4) certain employees at ASLAC knew about the O‘Donnells’ seminars; and (5) the O‘Donnells were the nation‘s largest distributor of ASLAC annuities. Thus, plaintiffs conclude, the district court erroneously disregarded the Duval affidavit as “conclusory.”
As a baseline premise, “[i]n rulings on the admissibility of expert opinion evidence[,] the trial court has broad discretion and its rulings must be sustained unless manifestly erroneous.” Viterbo v. Dow Chem. Co., 826 F.2d 420, 422 (5th Cir. 1987) (citation omitted). An expert opinion submitted in the context of a summary judgment motion “‘must be more than a conclusory assertion about ultimate legal issues.‘” Id. (quoting Hayes v. Douglas Dynamics, 8 F.3d 88, 92 (1st Cir. 1993)); see
The district court did not err by disregarding Duval‘s opinion on the ultimate issue of whether the O‘Donnells were ASLAC‘s agents for investment advice purposes. First, the Duval report and affidavit (collectively “the Duval materials“) were substantially different. Duval‘s affidavit opined that a document from the Ohio Commission of Insurance Commissioners appointing the O‘Donnells as broker-dealers reflects ASLAC‘s assumption of responsibility for the management and supervision of the O‘Donnells. In contrast, his expert report neither mentions, nor relies on that document. As a result, the district court properly possessed the discretion to exclude those materials from consideration. Indeed,
As a secondary matter, the court was correct in concluding that the Duval affidavit is, itself, conclusory. The Duval affidavit employs broad and dramatic language without substance or analysis. At one point, for example, the Duval affidavit summarily concludes that “the O‘Donnells were express agents working on behalf and under the supervision of ASLAC and ASM and with full knowledge of American Skandia, Inc. and its subsidiary entities, ASLAC, and ASM.” It further elaborates by stating that “ASLAC was aware that most of the O‘Donnell clientele were retirees and ignored the fact that the O‘Donnells were investing their clients in the highest category of commission investments.” Finally, the affidavit posits that “ASLAC condoned the O‘Donnell‘s[sic] actions.” Given the absence of meaningful analysis or reasoning, the district court acted well within its discretion by discarding the Duval affidavit. See Viterbo, 826 F.2d at 422; Mid-State Fertilizer Co., 877 F.2d at 1339.
V.
Plaintiffs next criticize the district court‘s April 8, 2004, order, which in part granted ASLAC‘s motion to dismiss. Citing our decision in Greenburg v. The Life Insurance Company of Virginia, 177 F.3d 507 (6th Cir. 1999), plaintiffs specifically contend that the court improperly applied the “economic loss” doctrine to dismiss certain of their negligence causes of action. Plaintiffs also assert that the court improperly dismissed their breach of contract claim because ASLAC breached the implied covenant of good faith and fair dealing. Moreover, plaintiffs argue, the court inappropriately dismissed their claim for negligent infliction of emotional distress.
Contrary to plaintiffs’ arguments, the district court acted within its discretion in dismissing plaintiffs’ negligence claims. Plaintiffs readily admit that they lost monies
Moreover, the court acted well within its discretion in dismissing plaintiffs’ claim for negligent infliction of emotional distress.6 Although plaintiffs contend that a decision by the Ohio Supreme Court permits recovery of emotional damages suffered as a result of a contractual breach, the district court rejected that identical argument. Citing Kishmarton v. William Bailey Construction, Inc., 754 N.E.2d 785 (Ohio 2001), plaintiffs argue that Ohio courts allow for the recovery of emotional damages absent a showing of physical injury or threat of physical harm. As the district court observed, however, Kishmarton did not involve a claim for negligent infliction of emotional distress.
The Ohio Supreme Court‘s decision in Kishmarton is indeed limited; the court‘s holding is expressly limited to allowing emotional distress damages in contract cases involving transactions between vendees and builder-vendors. 754 N.E.2d at 788 (“We are confident that allowing emotional distress damages in breach-of-contract actions involving vendees and builder-vendors will not open the floodgates.“). Given that Kishmarton does not support plaintiffs’ assertions, the district court properly noted that plaintiffs’ cause of action for negligent infliction of emotional distress must fail because they did not “allege that they have either witnessed or experienced a dangerous accident or appreciated actual physical peril.” Accord Walkosky v. Valley Mem‘ls, 765 N.E.2d 429, 432 (Ohio Ct. App. 2001) (“[T]his court has noted that an essential element is that the distress is caused by the plaintiff‘s fear of an actual physical peril.“) (citations omitted). Accordingly, the district court properly granted a portion of ASLAC‘s motion to dismiss without permitting plaintiffs to re-plead certain of their causes of action.
VI.
Plaintiffs next contend that the district court improperly denied their motion to add Prudential as a “necessary party.” Without relying on supporting legal authority, plaintiffs assert that ASLAC‘s apparent affiliation to or with Prudential Financial
Federal Rule of Civil Procedure 15(a) governs amendments to pleadings. Although a party may amend a pleading once as a matter of right if it is done before a responsive pleading is served, a party may otherwise amend the party‘s pleading only by leave of the court or by written consent of the adverse party.
In this case, the district court did not abuse its discretion by denying plaintiffs request to add Prudential as a party to these proceedings. First, plaintiffs did not seek leave to amend to add a new party.
VII.
Plaintiffs finally assert that the district court erred by failing to strike the affidavit of Matthew Solum, ASLAC‘s attorney. Plaintiffs specifically argue that because Solum was not a party to the case, his affidavit could not be a medium through which exhibits could be introduced. ASLAC contends that Solum‘s affidavit was created as a matter of convenience for the district court. In particular, it argues that the affidavit merely collected various forms of previously authenticated evidence for the court‘s benefit. Moreover, to the
Plaintiffs are correct that the district court should have ruled on their motion to strike the Solum affidavit before granting summary judgment to ASLAC. Generally, a district court should dispose of motions that affect the record on summary judgment before ruling on the parties’ summary judgment motions. E.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 n.5 (1986). Indeed, such an approach makes sense given that a court cannot determine the scope of materials properly before it without first ruling on any pending evidentiary or other discovery motions.
In this case, the district court‘s footnote ruling fails to precisely identify the excluded portions of the Solum affidavit. The court granted plaintiffs’ motion “to the extent Mr. Solum‘s Declaration contains any legal argument or unsupported factual assertions” and further granted their motion “with regard to any Exhibits which are not independently authenticated by deposition testimony.” Yet, confusingly, the court also denied plaintiffs’ motion “with regard to any exhibits which are independently authenticated by deposition testimony.” Such a ruling hardly clarifies the scope of materials properly considered by the court before ruling on a summary judgment motion.
All affidavits, regardless of the author, must be made on personal knowledge and set forth facts that would be admissible in evidence.
Any error by the district court in considering the Solum affidavit was, however, harmless. Even assuming the contents of the Solum affidavit improperly state facts not based on personal knowledge, plaintiffs were not prejudiced by the court‘s ruling. See
Although the better course would have been for the district court to specifically delineate the excluded portions of the Solum affidavit, any error was harmless given that the materials attached to the affidavit were properly authenticated and could therefore be considered by the court pursuant to
Affirmed.