Taqueria El Primo LLC v. Farmers Group, Inc.

Background

Taqueria El Primo LLC, Victor Manuel Delgado Jimenez, Mitchelle Chavez Solis, Benjamin Tarnowski, El Chinelo Produce, Inc., and Virginia Sanchez-Gomez brought a class action against several insurance companies. The plaintiffs alleged that the defendants had confidential agreements with certain health care providers under which the providers agreed not to bill the defendants for treatment provided to people insured by the defendants. The plaintiffs alleged that the defendants did not disclose those agreements and that the resulting coverage limitations violated Minnesota law and the insurance policies.

The plaintiffs asserted claims under the Minnesota Consumer Fraud Act, the Minnesota Deceptive Trade Practices Act, and for breach of contract. They sought declaratory and injunctive relief and monetary damages.

The defendants filed an answer on June 19, 2020. The answer did not include an affirmative defense based on the filed-rate doctrine discussed in Schermer v. State Farm Fire & Casualty Co. The scheduling order set August 1, 2020, as the deadline for motions to amend the pleadings.

On August 24, 2021, the defendants asked to modify the deadline and amend their answer to add a filed-rate defense. According to the defendants, the doctrine barred insureds under Minnesota law from retroactively claiming that an insurer overcharged them or seeking refunds of premiums. The magistrate judge denied the motion after finding that the defendants had not shown good cause because they had not acted diligently.

District Court Review

The defendants objected to the magistrate judge’s order. The district court could reverse only if the order was clearly erroneous or contrary to law. The court explained that, when a party seeks to amend a pleading after a scheduling deadline, the primary consideration in deciding whether there is good cause is the party’s diligence.

The court held that the magistrate judge’s diligence findings were not clearly erroneous. Before the amendment deadline, the plaintiffs had requested information about premiums paid, and the defendants had agreed to provide it. The court concluded that this information could have alerted the defendants that the plaintiffs might seek damages involving premiums. Even if the plaintiffs’ discovery responses were unclear, the defendants could have sought clarification or asked to postpone the amendment deadline.

The court also agreed that the defendants had notice by March 30, 2021, that the plaintiffs’ damages expert might use premiums to calculate damages. The expert’s March declaration and later merits report used essentially the same basic formula involving premiums. The defendants did not seek to amend their answer until after August 2, 2021, several months after receiving the March information.

The defendants argued that the magistrate judge should have considered factors other than diligence, including the plaintiffs’ role in creating uncertainty, the lack of clear authority on whether the defense had to be pleaded, the defense’s importance, and the absence of prejudice to the plaintiffs. The district court explained that courts may consider additional factors, but they ordinarily do so only after diligence has been established. The court further concluded that those factors would not require reversal here. Allowing the amendment could prejudice the plaintiffs by requiring additional discovery and potentially dividing the damages class based on different damages theories.

The court expressly made no finding about the nature of the filed-rate doctrine, whether it applied to this case, or whether it had to be pleaded as an affirmative defense.

Ruling

Judge John R. Tunheim overruled the defendants’ appeal, denied the defendants’ objections to the magistrate judge’s order, and affirmed that order. The defendants therefore were not permitted, through this motion, to amend their answer to add the filed-rate defense.