Lawrence D. Korn, a resident of the State of Michigan, appeals from an order that granted summary judgment to The Paul Revere Life Insurance Company (Paul Revere) on res judicata grounds. On appeal, Korn claims his present claim was not barred by claim preclusion, and the judge erred in granting the motion for summary judgment. We affirm.
a. Federal court. In 2004, Kom brought suit in the United States District Court for the Eastern District of Michigan (District Court) against Paul Revere for breach of contract, claiming that Paul Revere wrongfully withheld disability benefits that were due under the policy. In 2005, a District Court judge initially allowed Paul Revere’s motion to dismiss the suit as untimely under a contractual limitation period. In 2007, the United States Court of Appeals for the Sixth Circuit (Sixth Circuit), in an unpublished decision, reversed in part and remanded the case to the District Court. On remand, the District Court required that discovery be completed by September 30, 2008, and that all pretrial motions be filed by October 30, 2008.
While the case was on appeal in 2005, the insurance regulators of all fifty States conducted an investigation into questionable claims-handling practices of various insurance companies, including Paul Revere. The investigation resulted in a regulatory settlement agreement (RSA) between the regulators and the targeted insurance companies, in which the companies agreed to heightened claims assessment requirements and to reevaluate certain claims that had previously been denied.
On October 30, 2008, Paul Revere moved for summary judgment in District Court, claiming that Korn had failed to provide adequate proof of loss to qualify for benefits and that Paul Revere was therefore entitled to judgment as a matter of law. On November 13, 2008, Korn moved for leave to amend his complaint to state an additional breach of contract claim based on Paul Revere’s alleged breach of the RSA between it and the
On the merits, the Sixth Circuit concluded that Korn did not adequately document his claimed disability and loss of income and that Paul Revere did not breach the policy by so deciding. As to Korn’s motion to amend, the court concluded that Korn had failed to show “good cause” or “excuse” for his late request. The court held that the RSA — the contract on which Korn’s proposed amendment is based — had been publicly available since its implementation in January of 2005. The court also held that “Korn was clearly aware of the RSA when he asked [a Paul Revere employee] about it in her deposition on October 23, 2008. . . . Yet Korn did not move to add his claim for breach of the RSA until November 13, 2008, forty-four days after the close of discovery and fourteen days after the deadline for filing pretrial motions requiring extensive briefing. Because Korn [did] not explain his delay in moving to amend, Korn [did not satisfy] the ‘good cause’ requirement.”
Similarly, because Korn did not explain why, after receiving actual knowledge of the RSA, he waited to seek leave to amend until after the expiration of the discovery and motion-filing deadlines, the court held that Korn did not satisfy “the requirement imposed by the scheduling order that motions to amend the complaint ‘be made promptly after receipt of the information upon which the proposed amendment is based.’ ” In the end, the court determined that the District Court’s denial of the motion to amend was not an abuse of discretion.
b. State court. In April, 2010, while Korn’s appeal of Korn I was pending in the Sixth Circuit, Korn filed the instant matter in the Superior Court (Korn II). In this complaint, Korn alleged the same claim that he unsuccessfully attempted to add to his suit in District Court in Michigan, i.e., that Paul Revere had breached the RSA by, essentially, failing to notify him that he
2. Discussion, a. Standard of review. Summary judgment is proper where there is no genuine issue of material fact, and when viewing the evidence in the light most favorable to the nonmoving party, the moving party is entitled to judgment as a matter of law. See Kourouvacilis v. General Motors Corp.,
b. Choice of law. The parties disagree as to the applicable law in the circumstances of this case. Korn utilizes Massachusetts res judicata law to fashion his argument that it was error to allow Paul Revere summary judgment. Paul Revere and the Superior Court judge analyzed the claim under Michigan law because “in diversity cases, federal law incorporates the rules of preclusion applied by the State in which the rendering court sits.” Taylor v. Sturgell,
In Federal court, “[t]he preclusive effect of a judgment is defined by claim preclusion and issue preclusion, which are collectively referred to as ‘res judicata.’ Under the doctrine of claim preclusion, a final judgment forecloses ‘successive litigation of the very same claim, whether or not relitigation of the claim raises the same issues as the earlier suit.” Taylor v. Sturgell,
Under Federal law, the three elements of claim preclusion are
Kom claims that summary judgment should have been denied in Korn II because the Federal courts never addressed the merits of his RSA claim, which did not exist at the time he filed the complaint in Korn I. We disagree. Under Federal law, “[i]t is well settled that denial of leave to amend constitutes res judicata on the merits of the claims which were the subject of the proposed amended pleading.” Hatch, supra at 45-46, quoting from King v. Hoover Group, Inc.,
Even if we were not applying Federal law, or even if we were to conclude that the denial of a motion to amend was not a decision on the merits, see Curtis v. Citibank, N.A.,
What remains to be determined is whether claim preclusion may operate to bar a claim like the RSA claim in Korn II that did not exist at the time Korn I was commenced. In the circumstances of this case, we believe that it does. As the Sixth Circuit concluded, Kom had ample opportunity to timely amend his complaint to add the RSA claim. The RSA had been publicly available since 2005, and Korn knew of the RSA during the course of discovery, having mentioned it at a deposition. Despite this, Korn waited forty-four days after discovery closed and fourteen days after the deadline for filing pretrial motions to move to amend. In the end, the court held that Korn did not satisfy the “good cause” requirement. Whatever the reason for Korn’s dilatoriness in Korn I, it has proved fatal in Korn II, and we decline to reward Kom for his own delinquency by permitting Korn II to go forward.
At bottom, we see no principled distinction between a claim that could have been brought (but was not), and one that was untimely brought when it could have been added to the suit properly. In other words, because the RSA claim came into existence during a period when it could have been timely added to Korn I but was not, claim preclusion operates to bar its appearance in Korn II. See Bagley v. Moxley,
Judgment affirmed.
Notes
The exception to this rule is that if the Federal court in the first action would clearly not have had jurisdiction to hear the claim now being raised in State court, “or if, having jurisdiction, clearly would have declined to exercise it as a matter of discretion, then a second action in a State court should not be precluded.” Anderson, supra at 450. Korn does not argue that this exception applies, and we note that neither the District Court nor the Sixth Circuit determined that jurisdiction was lacking for Korn’s RSA claim.
We have not, nor has either party, discovered any apparent distinction in the development of the law of res judicata in Massachusetts or Michigan or on the Federal level that would affect this case in any material way. See Heacock v. Heacock,
There is no question the parties in Korn I and Korn II are identical. Nor is there any question that the gravamen of Korn’s complaint in each action grew out of the same transaction for purposes of res judicata. That is, the facts underlying each action were “related in time, space, origin or motivation,” they “formfed] a convenient trial unit,” and treating them as a unit would “conformQ to the parties’ expectations.” Airframe Sys., Inc. v. Raytheon Co.,
To the extent Korn argues that the judge in Korn II erred in blaming him for the delay in bringing the amendment, that matter is foreclosed by issue preclusion. The issue of delay was actually litigated and resolved in Korn I, and relitigation here is barred. See New Hampshire v. Maine,