Allianz Life Insurance Company of North America v. Muse

UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF OKLAHOMA

ALLIANZ LIFE INSURANCE )

COMPANY OF NORTH AMERICA, )

)

Plaintiff/Counterclaim Defendant, )

)

v. ) No. CIV-17-1361-G

)

GENE L. MUSE, M.D., )

)

Defendant/Counterclaimant; )

)

and )

)

PATIA PEARSON, )

)

Defendant. )

ORDER

Now before the Court is the Motion for Post-Trial Relief Under Rules 50(b), 59(a),

and 52(a) (Doc. No. 219) filed through counsel by Plaintiff/Counterclaim Defendant

Allianz Life Insurance Company of North America (“Allianz”). Defendant/

Counterclaimant Gene L. Muse, MD, and Defendant Patia Pearson have filed a Response

(Doc. No. 227), to which Allianz has replied (Doc. No. 229). For the reasons discussed

below, Allianz’s Motion is denied.

I. Background

Allianz issued a long-term care insurance policy (the “Policy”) to Muse in 2000 and,

after Muse claimed that he became “chronically ill” within the meaning of the Policy

following a fall from a ladder, paid Muse benefits for services he claimed were received

between July 1, 2015, and April 21, 2017. See Final Pretrial Report (Doc. No. 177) at 2-

4; Order Approving Final Pretrial Report (Doc. No. 181) at 1 (collectively referred to

herein at the Final Pretrial Order or FPO). Allianz stopped paying benefits effective April

22, 2017, and brought suit in this Court on December 20, 2017.

Allianz has alleged that Muse and his caregiver, Pearson, fraudulently represented

Muse’s health as well as details regarding Pearson’s arrangements with Muse and with the

home health care company AdLife HomeCare, LLC (“AdLife”) that affected Muse’s

eligibility to receive benefits for services provided by Pearson. Allianz asserted claims of

fraud and conspiracy to commit fraud against Muse and Pearson, seeking recovery of

damages for benefits improperly paid prior to April 22, 2017, and a judicial declaration

that Muse was not entitled to additional Policy benefits in connection with care provided

to him from April 22, 2017, to the present. Allianz also sought to have the Policy rescinded.

Muse and Pearson have denied these allegations and contested Allianz’s entitlement

to damages or the other relief requested. Additionally, Muse asserted counterclaims

against Allianz for breach of contract and breach of the duty of good faith and fair dealing.

The Court’s orders prior to trial narrowed the claims and issues to be presented. By

Order dated December 18, 2019, the Court granted partial summary judgment to Allianz,

determining that Allianz was entitled to a declaratory judgment that Muse was not entitled

to benefits under the Policy in connection with services performed by Pearson from April

22, 2017, through March 30, 2018. Order of Dec. 18, 2019 (Doc. No. 128) at 17.

Specifically, as to the period from April 22, 2017, to December 31, 2017, the Court found

that there was no genuine factual dispute that a provision in the Policy excluding payment

of benefits for “service(s) . . . for which you have no financial liability or that is provided

at no charge in the absence of insurance” applied and precluded payment of benefits to

Muse. Id. at 11-13 (finding it undisputed that “Muse’s obligation to pay Ad[L]ife was

contingent upon his receipt of benefits from Allianz” and that “there is no evidence [in the

summary judgment record] from which to reasonably infer that Muse was financially liable

for the services rendered [by Pearson] during this time or that Muse would be held liable

for these services in the absence of insurance”). As to the period from January 1, 2018, to

March 30, 2018, the Court found that there was no genuine factual dispute that Muse’s

claim fell outside a provision in the Policy whereby Allianz is only obligated to pay benefits

if Muse receives services from a “Home Health Aide” working “‘under the supervision of

a Home Health Care Agency.’” Id. at 13-14 (finding it undisputed that Pearson was not

working for AdLife or any other Home Health Care Agency, as defined by the Policy,

during that period).

The Court also determined that Allianz was entitled to summary judgment on

Muse’s counterclaim for breach of the implied duty of good faith and fair dealing, in which

Muse challenged Allianz’s failure to pay benefits beginning April 22, 2017. Id. at 14-16

(finding that, in light of prior determination that Muse was not entitled to benefits for the

period from April 22, 2017, to March 30, 2018, no bad faith claim could be premised on a

failure to pay such benefits). Further, in deciding a subsequent motion in limine, the Court

precluded Muse from presenting evidence of damages on his counterclaim for breach of

contract as it related to three time periods: “(1) from April 22, 2017, through March 30,

2018; (2) from March 31, 2018, through the present date; and (3) beyond the present date.”

Order of Jan. 9, 2020 (Doc. No. 167) at 2. As to the first period, the Court reiterated its

previous decision that Muse was not entitled to benefits for services rendered by Pearson

from April 22, 2017, to March 30, 2018. Id. at 2. As to the second period, the Court

determined that Muse was precluded by law from offering evidence of damages because it

was undisputed that Muse had not timely submitted any claim for benefits for services

rendered from March 31, 2018, to “present” and Muse could not rely on a theory of

anticipatory repudiation to excuse his compliance with that requirement. Id. at 2-4. As to

the third period, the Court determined that Muse was precluded by law from offering

evidence of damages because Muse likewise could not rely on a theory of anticipatory

repudiation and the claim for such damages was improperly contingent and speculative

under Oklahoma law. Id. at 4-5 (citing Okla. Stat. tit. 23, § 21). Following these rulings,

Muse acknowledged that nothing remained of his contract counterclaim and that “the Court

has effectively granted judgment to Allianz on” that claim. Defs.’ Mot. (Doc. No. 173) at

8.1

Remaining for disposition were Allianz’s claims of fraud and conspiracy to commit

fraud against Muse and Pearson, seeking recovery of damages for benefits improperly paid

prior to April 22, 2017, as well as Allianz’s requested remedy that the Policy should be

rescinded pursuant to title 36, section 4426.1(C) of the Oklahoma Statutes (allowing

rescission of long-term care insurance policy as relevant here “only upon a showing that

the insured knowingly and intentionally misrepresented relevant facts relating to the

insured’s health”) or as a result of “fraud committed by Muse.” FPO at 3-4. Prior to trial,

1 Accordingly, Muse omitted the contract counterclaim from the Final Pretrial Report. See

FPO at 2-5.

the Court determined that while the claims of fraud and conspiracy to commit fraud—and

the more specific issue of whether Muse misrepresented relevant facts relating to his

health—must be determined by the jury, the requested remedy of rescission is purely

equitable in this context and would be determined by the Court as necessary. Tr. of Jan.

14, 2020 (Doc. No. 232).

Following a six-day trial, the jury returned its verdict in favor of Defendants on

Allianz’s fraud and conspiracy to commit fraud claims. Verdict (Doc. No. 203) at 1-4.

Further, the jury found, in answer to an interrogatory, that Muse had not knowingly and

intentionally misrepresented relevant facts relating to his health. See id. at 5. The Court

entered final judgment on January 31, 2020. See J. (Doc. No. 207).

II. Discussion

Allianz now seeks judgment as a matter of law or, alternatively, a new trial on one

of the theories of fraud presented to the jury: that Muse and Pearson made fraudulent

misrepresentations as to details of Pearson’s arrangements with Muse and with AdLife that

affected Muse’s eligibility to receive benefits for services provided by Pearson. Allianz

additionally requests an amended judgment with respect to its declaratory judgment claim,

as well as a determination that the Policy is rescinded.

A. Allianz’s Renewed Motion for Judgment as a Matter of Law Under Rule

50(b)

“Judgment as a matter of law is appropriate only if the evidence points but one way

and is susceptible to no reasonable inferences which may support the nonmoving party’s

position.” Elm Ridge Expl. Co. v. Engle, 721 F.3d 1199, 1216 (10th Cir. 2013) (internal

quotation marks omitted).2 In considering whether judgment as a matter of law is proper,

the Court must “[d]raw[] all reasonable inferences in favor of the nonmoving party.”

ClearOne Commc’ns, Inc. v. Bowers, 643 F.3d 735, 772 (10th Cir. 2011) (internal

quotation marks omitted). The Court may not “weigh evidence, judge witness credibility,

or challenge the factual conclusions of the jury.” Deters v. Equifax Credit Info. Servs.,

Inc., 202 F.3d 1262, 1268 (10th Cir. 2000); see Henry v. Storey, 658 F.3d 1235, 1238 (10th

Cir. 2011). Rule 50(b) motions should be “cautiously and sparingly granted and then only

when the court is certain the evidence ‘conclusively favors one party such that reasonable

men could not arrive at a contrary verdict.’” Weese v. Schukman, 98 F.3d 542, 547 (10th

Cir. 1996). Where, as here, the party moving for judgment as a matter of law has the burden

of proof, “the motion may be granted only where the movant has established his case by

evidence that the jury would not be at liberty to disbelieve.” Black v. M & W Gear Co.,

269 F.3d 1220, 1238 (10th Cir. 2001) (alteration and internal quotation marks omitted).

Allianz contends that the evidence presented at trial conclusively establishes that

Muse and Pearson intentionally and falsely represented that Pearson was supervised by

AdLife during the period of July 1, 2015, through August 25, 2015, and again during the

period of January 1, 2016, through April 21, 2017. Such a misrepresentation would be

significant because, under the Policy, benefits are payable for home health services

provided by a Home Health Aide, which is defined as “a person, other than a RN or nurse,

2 The Court denied Allianz’s initial request for judgement as a matter of law at trial, and

Allianz’s renewed Motion is timely under Rule 50(b) of the Federal Rules of Civil

Procedure. See Fed. R. Civ. P. 50(a), (b).

who provides: Maintenance or Personal Care; medical; speech; occupational; physical; or

respiratory therapeutic care services under the supervision of a Home Health Care

Agency.” Pl.’s Trial Ex. 2 at 12.3

1. July 1, 2015, to August 25, 2015

On August 25, 2015, AdLife owner Tom Adams sent an email to Pearson in which

he discussed certain employment-related matters, including payroll and insurance, and set

up a meeting with Pearson to “get the paperwork going.” Pl.’s Trial Ex. 252. Allianz

contends that this email proves that neither Muse nor Pearson had formed a relationship

with AdLife prior to that date and that, consequently, AdLife could not have supervised

Pearson’s caregiver services prior to that date. Despite the absence of a relationship with

AdLife, says Allianz, Muse and Pearson represented that Muse received caregiver services

supervised by AdLife as of July 1, 2015, by submitting to Allianz (1) Muse’s Live-In

Service Agreement with AdLife dated July 1, 2015, and (2) a claim form dated July 28,

2015, that designates AdLife as Muse’s home health care provider. See Pl.’s Trial Exs. 17,

140.

The Court finds that the evidence, viewed in Defendants’ favor, does not

conclusively preclude the finding that AdLife supervised Pearson during the period at

issue. Even assuming the formalities of Pearson’s employment with AdLife had not been

3 A party seeking to establish fraud under Oklahoma law must show: “(1) a false material

misrepresentation; (2) made as a positive assertion which is known to be false or is made

recklessly without knowledge of the truth; (3) with the intention that it be acted upon; and

(4) which is relied on by the other party to his detriment.” Simon v. Metro. Prop., No. CIV-

08-1008-W, 2014 WL 12479649, at *6 (W.D. Okla. Apr. 17, 2014) (citing Bowman v.

Presley, 212 P.3d 1210 (Okla. 2009)).

finalized by August 25, 2015, the jury was presented with evidence susceptible to the

inference that AdLife nonetheless supervised Pearson as of July 1, 2015. For example,

Adams testified that AdLife was providing 24-hour live-in care to Muse in or around July

2015, and that his first meeting with Muse and Pearson was “probably June of 2015.”

Adams Dep. (Doc. No. 199) 35:8-12, 41:19-25. Adams testified that he held a second

meeting with Muse and Pearson to sign documents and to go over the Live-In Service

Agreement, which was ultimately signed on July 1, 2015. Id. 114:13-115:2, 115:23-25.

The purpose of the document signing was, Adams testified, to allow AdLife “to begin

starting care.” Id. 114:24-115:2.

A submission to Allianz on September 30, 2015, likewise supports the finding that

AdLife supervised Pearson as of July 1, 2015. This submission included a letter from

Adams to Allianz stating that AdLife’s caregiver services were initiated July 1, 2015, the

date on which Muse executed the Live-In Service Agreement with AdLife. Adams’

submission included a billing statement bearing his signature for Pearson’s services

beginning July 1, 2015, as well as Pearson’s caregiver activity log containing notes

beginning that same date. See Pl.’s Trial Ex. 36.

While Adams’ statements appear to be inconsistent, a jury could reasonably infer

from the totality of the evidence that AdLife supervised the caregiver services Pearson

provided to Muse beginning July 1, 2015. Judgment as a matter of law on this issue is,

therefore, improper.

2. January 1, 2016, to April 21, 2017

On January 1, 2016, Pearson’s employment status with AdLife changed from W-2

employee to independent contractor. AdLife’s Independent Contractor Agreements with

Pearson, dated January 1, 2016, and January 1, 2017, state that AdLife “shall not direct,

supervise, or control, or be responsible for the supervision, direction, or control of the

Home Health Aide while said Home Health Aide is performing the nursing services.” Pl.’s

Trial Exs. 240, 248. Allianz argues that Pearson and Muse continued to represent that

Pearson was an employee of AdLife despite this change in employment status and failed

to disclose the Independent Contractor Agreements to Allianz.

In response, Defendants assert that the Policy requires only that the caregiver be

supervised by a Home Health Care Agency; it does not expressly state that the caregiver

must be an employee of a Home Health Care Agency. See Pl.’s Trial Ex. 2 at 12 (defining

Home Health Aide as “a person . . . who provides: Maintenance or Personal Care . . . under

the supervision of a Home Health Care Agency”). They contend that AdLife supervised

Pearson regardless of the label of independent contractor.

The evidence at trial plainly and overwhelmingly showed that Muse and Pearson

failed to disclose to Allianz that Pearson, in her written agreements with AdLife, was

designated an independent contractor and not an employee beginning January 1, 2016. The

Court agrees with Defendants, however, that the Policy provision at issue does not preclude

the possibility that a caregiver might be nominally labeled as an independent contractor but

in actual fact supervised by a Home Health Care Agency and, therefore, qualify as a Home

Health Aide. See Haworth v. Jantzen, 172 P.3d 193, 197 (Okla. 2006) (explaining that

under Oklahoma law, unambiguous insurance contract language should be accepted in its

“plain, ordinary, and popular sense,” and ambiguities and uncertainties should be construed

against the insurer); see also id. (“When an insurer desires to limit its liability under a

policy, it must employ language that clearly and distinctively reveals its stated purpose.”);

Am. Econ. Ins. Co. v. Bogdahn, 89 P.3d 1051, 1054 (Okla. 2004) (“Under the reasonable

expectations doctrine,” which Oklahoma has adopted, “when construing an ambiguity or

uncertainty in an insurance policy, the meaning of the language is not what the drafter

intended it to mean, but what a reasonable person in the position of the insured would have

understood it to mean.”).

As to whether Muse and Pearson misrepresented whether AdLife supervised

Pearson’s caregiver services, the evidence adduced at trial does not point solely in Allianz’s

favor. Both Adams and Pearson testified that the transition from employee to independent

contractor was merely a perfunctory response to changing employment regulations. See

Adams Dep. 163:6-24 (noting that a change in regulations “drove the change to a contractor

status”); Trial Tr. vol. 5, 790:16-791:4 (Pearson testifying that the change was due to a new

law). When questioned regarding the actual effect of the transition on her work, and the

level of supervision she received from AdLife, Pearson testified this transition had no

practical effect. Trial Tr. vol. 5, 790:16-21; see id. 803:11-804:3 (“[T]hey did supervise

my work. I still called them if I needed help. . . . I still sent them my daily time sheets,

they still Q-and-A’d them, did a quality assurance. So it was supervision for me. I still

called them if I needed them, you know, or had any questions.”). As a result, the stipulation

in the Independent Contractor Agreements that Pearson was not supervised by AdLife

could have been disregarded by the jury as false and Pearson’s testimony that AdLife in

fact continued to supervise her could have been accepted by the jury as true.

To adopt Allianz’s argument would, therefore, require the Court to impermissibly

weigh the evidence and judge witness credibility. Even if Defendants misrepresented to

Allianz that Pearson was an employee of AdLife rather than an independent contractor with

AdLife during the relevant time period, the jury was confronted with evidence susceptible

to a reasonable inference that any such misrepresentation was not material, as required to

prove fraud.

Judgment as a matter of law is inappropriate if the evidence does not conclusively

favor the moving party “such that reasonable [jurors] could not arrive at a contrary verdict.”

Black, 269 F.3d at 1238 (internal quotation marks omitted). In view of the evidence

referenced above, and drawing all reasonable inferences in Defendants’ favor, the Court

determines that Allianz is not entitled to judgment as a matter of law on the issue presented.

B. Allianz’s Alternative Motion for a New Trial Under Rule 59

Pursuant to Rule 50(b) of the Federal Rules of Civil Procedure, Allianz included in

its Motion an alternative request for a new trial under Rule 59. Specifically, Allianz

contends that the jury’s verdict on Allianz’s fraud claim, as it relates to Muse and Pearson’s

arrangement with AdLife, was contrary to the clear weight of the evidence. Where, as

here, the “new trial motion asserts that the jury verdict is not supported by the evidence,

the verdict must stand unless it is clearly, decidedly, or overwhelmingly against the weight

of the evidence.” M.D. Mark, Inc. v. Kerr-McGee Corp., 565 F.3d 753, 762 (10th Cir.

2009) (internal quotation marks omitted).

The Court finds that the arguments and evidence tendered by Allianz do not justify

a new trial in this matter. As discussed above, evidence was presented at trial that would

allow a reasonable jury to infer that AdLife in fact supervised Pearson during the periods

at issue. Having considered all the evidence, the Court determines that the verdict was not

against the clear weight of the evidence. See Nanda v. Phillips 66 Co., 754 F. App’x 675,

680 (10th Cir. 2018) (noting that a new trial under Rule 59 is improper if “the jury’s verdict

had at least some ‘basis in fact’”).

C. Allianz’s Motion to Amend the Judgment Under Rule 59(a)(2)

As noted, the Court granted summary judgment in favor of Allianz with respect to

its declaratory judgment claim. Specifically, the Court found that Allianz was entitled to

a declaratory judgment that Muse was not entitled to benefits under the Policy for the

home-health services performed by Pearson from April 22, 2017, through March 30, 2018.

Allianz now requests that the Court amend the judgment pursuant to Rule 59(a)(2) of the

Federal Rules of Civil Procedure, contending that—based upon evidence discovered after

summary judgment—the judgment should be amended to include a declaratory judgment

that Muse was not entitled to benefits for three additional timeframes: (1) July 1, 2015,

through August 24, 2015, (2) January 1, 2016, through April 21, 2017, and (3) any time

between March 30, 2018,4 and September 16, 2019, when Muse paid Pearson directly for

caregiver services.

4 As the Court’s decision granting declaratory relief encompassed the date of March 30,

2018, the Court assumes that Allianz intended the third timeframe to begin March 31, 2018,

and the Court has applied the latter date in its discussion accordingly. Any request to

expand the declaratory judgment to include March 30, 2018 is moot and is therefore denied.

As to the first and second of these periods, Allianz repeats its argument that

undisputed evidence shows Pearson was not supervised by AdLife. As to the third period,

Allianz argues that an exhibit not admitted at trial evidences that Pearson could not have

been supervised by AdLife, or any other Home Health Care Agency, from March 31, 2018,

to September 16, 2019. Pl.’s Mot. at 18-19.

As an initial matter, the Court agrees with Defendants that Rule 59(a)(2) is an

improper vehicle for the requested relief. That rule provides: “After a nonjury trial, the

court may, on motion for a new trial, open the judgment if one has been entered, take

additional testimony, amend findings of fact and conclusions of law or make new ones,

and direct the entry of a new judgment.” Fed. R. Civ. P. 59(a)(2). As Allianz’s declaratory

relief claim was decided on summary judgment and was not subject to a bench trial, the

Court agrees with Defendants that relief under Rule 59(a)(2) is not proper. See Morgan v.

N.A.R., Inc., No. 2:06-CV-470 TS, 2008 WL 2149370, at *1 (D. Utah May 19, 2008)

(declining to consider request for amendment of judgment under Rule 59(a)(2) because the

“case was concluded on summary judgment, rather than by a nonjury trial”); Leathers v.

Leathers, No. 08-cv-1213, 2015 WL 12733383, at *2 (D. Kan. Nov. 19, 2015) (“Rule

59(a)(2) . . . provides that the court may reopen the judgment and may conduct further

proceedings after a bench trial.”).

Even if the Court were to construe the request under Rule 59(e), the motion would

fail. “Rule 59(e) provides a means to support reconsideration of matters properly

encompassed in a decision on the merits.” Steele v. Young, 11 F.3d 1518, 1520 n.1 (10th

Cir. 1993) (internal quotation marks omitted); see Exxon Shipping Co. v. Baker, 554 U.S.

471, 486 n.5 (2008) (Rule 59(e) motions “may not be used to relitigate old matters, or to

raise arguments or present evidence that could have been raised prior to the entry of

judgment.” (internal quotation marks omitted)). As to the first and second periods cited by

Allianz, Allianz did not seek declaratory relief for any time prior to April 22, 2017, in its

motion for summary judgment. See Pl.’s Mot. Partial Summ. J. (Doc. No. 98) at 23; accord

Compl. ¶ 45 (Doc. No. 1) (“Allianz requests that Muse be found to be not entitled to

additional Policy benefits for services provided from April 22, 2017 to the present.”). And

Allianz did not include these time periods in any claim for declaratory relief in the Final

Pretrial Report. See FPO. “Rule 59(e) cannot be used to expand a judgment to encompass

new issues which could have been raised prior to issuance of the judgment.” Steele, 11

F.3d at 1520 n.1.

As to the third period (March 31, 2018, through September 16, 2019), Allianz cites

the Court’s grant of summary judgment on Allianz’s declaratory judgment claim, in which

the Court held that Muse is not entitled to benefits under the Policy based on the home-

health services performed by Pearson from January 1, 2018, through March 30, 2018, see

Order of Dec. 18, 2019 (Doc. No. 128) at 13-14 (finding it undisputed that Pearson was

not working for, or supervised by, AdLife or any other Home Health Care Agency during

that period), and asks that this declaration be extended to the period from March 31, 2018,

to September 16, 2019. Allianz argues that financial records included in what was labeled

by Defendants as their Exhibit 27—which was not admitted at trial (see Doc. No. 200-1)—

reflect direct “payments from Muse to Pearson for caregiver services allegedly provided

between April 2018 and September 2019,” and therefore show that Pearson was not

working for or supervised by AdLife or any other Home Health Care Agency during that

period. Pl.’s Mot. at 18-19. Defendants correctly note that Allianz did not seek summary

judgment as to this later period. See Pl.’s Mot. Partial Summ. J. This is not significant,

though, as Allianz was not required to do so and in any event Allianz asserts that

Defendants failed to produce certain relevant documents and Allianz did not learn of them

until they were provided by AdLife on October 6, 2019—after summary judgment briefing

had essentially been concluded. See Pl.’s Reply at 4. What is significant is that Allianz

did not ask the Court for relief as to that alleged discovery deficiency prior to trial and,

following the grant of summary judgment, did not include any claim for additional

declaratory relief in the Final Pretrial Report. See FPO. Entry of a new judgment under

Rule 59(e) is not appropriate in these circumstances. See Steele, 11 F.3d at 1520 n.1.

In its Reply, Allianz adds a contention that 28 U.S.C. § 2202 allows the Court to

expand its declaratory judgment even as to a timeframe for which there was no prior

demand or proof. See Pl.’s Reply at 2. Because this argument was not made until the filing

of a reply brief, it will not be considered. See Reedy v. Werholtz, 660 F.3d 1270, 1274

(10th Cir. 2011); Mikado v. Allbaugh, No. CIV-15-1389-D, 2016 WL 3579228, at *2

(W.D. Okla. June 28, 2016); LCvR 7.1(i) (allowing reply briefs insofar as they address

“new matter raised in the response”). Moreover, it appears the matter is premature because,

according to Muse, he has not submitted a claim for benefits under the Policy with respect

to the period from March 31, 2018, to September 16, 2019.

D. Allianz’s Motion That the Court Enter Findings of Fact and Conclusions of

Law under Rules 39(c) and 52(a) Declaring the Policy to Be Rescinded

Finally, Allianz requests that the Court enter findings of fact and conclusions of law

on the issue of rescission pursuant to Federal Rule of Civil Procedure 52(a), which provides

in relevant part that “[i]n an action tried on the facts without a jury or with an advisory

jury, the court must find the facts specially and state its conclusions of law separately.”

Fed. R. Civ. P. 52(a)(1). According to Allianz, the jury served as an advisory jury, as

contemplated by Federal Rule of Civil Procedure 39(c)(1), on the issue of rescission

because the Court submitted an interrogatory to the jury related to that issue. Rule 39(c)

provides that, “[i]n an action not triable of right by a jury, the court, on motion or on its

own . . . may try any issue with an advisory jury.” Fed. R. Civ. P. 39(c)(1).

It is useful to trace the procedural history of Allianz’s request for rescission of the

Policy. Throughout this litigation, Allianz pursued the legal claim of fraud and sought

rescission of the Policy not as a separate equitable claim, but as a remedy for fraud in

addition to damages. Compare Compl. (Doc. No. 1) ¶ 53, with Okla. Stat. tit. 15, §§ 231-

242 (Oklahoma statutes governing claims of rescission). In the summary judgment

briefing, the parties disagreed as to whether title 36, section 4426.1(C) of the Oklahoma

Statutes allowed rescission of an insurance contract when the insured is found to have

committed fraud in the claims process rather than merely the initial application process

(i.e., whether rescission could be premised on a misrepresentation made in the performance

of the contract or only a misrepresentation made as an inducement to enter the contract).

In its Order denying Defendants’ Motion for Summary Judgment, the Court held—without

deciding the issue—that, “At this juncture, the Court will not foreclose Allianz’s ability to

seek rescission under the statute, should the alleged fraudulent conduct be proven.” Order

of Dec. 18, 2019 (Doc. No. 127) at 17.5

At trial, the sole claims remaining for disposition were Allianz’s claims of fraud and

conspiracy to commit fraud against Muse and Pearson. On those claims, Allianz sought

remedies of (1) recovery of damages for benefits improperly paid to Muse prior to April

22, 2017, and (2) rescission of the Policy pursuant to section 4426.1(C) or as a result of

“fraud committed by Muse.” FPO at 3-4. In the absence of a claim by Muse to recover on

the Policy, whether in contract or tort, there was no need to put before the jury any defense

that the Policy was void for fraud; therefore, Allianz’s requested remedy of rescission was

purely equitable and to be determined by the Court. A jury determination was still required,

however, as to the issues common to Allianz’s legal and equitable contentions, namely the

claim that Muse committed fraud and—as required to invoke section 4426.1(C)—the

narrower assertion that Muse knowingly and intentionally misrepresented relevant facts

relating to his health.6 See Beacon Theatres, Inc. v. Westover, 359 U.S. 500 (1959); Palace

Expl. Co. v. Petroleum Dev. Co., 316 F.3d 1110, 1119 (10th Cir. 2003); see also 9

Cyclopedia of Federal Procedure § 31.16 (3d ed. 2010) (“When both legal and equitable

issues are involved in the same action and a jury trial of the legal issues has been demanded,

5 The Court noted its tentative agreement with Allianz’s construction of the statute and that

Defendants’ cited authorities did not address section 4426.1(C).

6 To the extent that Allianz premised its request for rescission on section 4426.1(C), it was

required to “show[] that the insured knowingly and intentionally misrepresented relevant

facts relating to the insured’s health.” Okla. Stat. tit. 36, § 4426.1(C).

the court may dispose of the entire matter in a single trial by impanelling a jury, taking

such evidence as is germane to the issues for the jury to determine, submitting those issues

to the jury, and then deciding the equitable issues, or, if necessary, taking such additional

evidence as may be necessary on the equitable issues in the absence of the jury. This same

procedure may be followed when there are both jury and nonjury issues at law.” (footnote

omitted)).

Accordingly, prior to trial the Court held that it would submit to the jury Allianz’s

fraud claims, and also an interrogatory as to whether Muse misrepresented relevant facts

relating to his health, but would reserve the question of whether the Policy should be

rescinded for determination by the Court as necessary. Tr. of Jan. 14, 2020 (Doc. No. 232)

2:22-3:3 (Court stating that the interrogatory was intended to “serve as a predicate for the

plaintiff to ask the Court to declare that contract to be rescinded,” should the jury find in

Allianz’s favor on both the fraud claim and the interrogatory). No party objected to this

procedure. Following a six-day trial, the jury returned its verdict in favor of Defendants

on Allianz’s fraud and conspiracy to commit fraud claims. Verdict (Doc. No. 203) at 1-4.

Further, the jury found, in answer to the interrogatory, that Muse had not knowingly and

intentionally misrepresented relevant facts relating to his health. Id. at 5. Because this

verdict denied Allianz a foundation on which to base any request for rescission, there was

no need for further evidence or further findings as to that remedy, and the Court entered

final judgment on January 31, 2020.

Undeterred, Allianz now asks that the Court render additional findings and

conclusions, including—supplanting the jury’s verdict—that Muse submitted claims for

benefits that were based on intentional misrepresentations of both his health and Pearson’s

supervision by AdLife and, therefore, that the Policy is rescinded. Pl.’s Mot. at 19-22.

Allianz contends that, consistent with Federal Rule of Civil Procedure 39(c)(1), the jury

served as an advisory jury on the issue of rescission and, consistent with Federal Rule of

Civil Procedure 52(a), the Court may not give deference to the jury’s advisory verdict but

must make independent and detailed findings of fact and conclusions of law. Id. at 19-20.

First, Allianz’s reliance on Rule 39(c) is misplaced. No claim or issue was tried

with an advisory jury. As detailed above, the issues common to Allianz’s legal and

equitable contentions—specifically, Allianz’s claim that Muse committed fraud and its

narrower assertion that Muse knowingly and intentionally misrepresented relevant facts

relating to his health—were tried to and submitted for full determination by the jury. As

such, the Court may not disregard the jury’s verdict but, consistent with the Federal Rules

of Civil Procedure, “is bound by the jury’s determination of factual issues common to both

the legal and equitable claims.” Palace Expl. Co., 316 F.3d at 1119 (internal quotation

marks omitted).

As to Rule 52(a), no findings and conclusions are required here beyond those

reflected in the Verdict and the Judgment. The necessity of additional evaluation and

determination of the equitable remedy of rescission was contingent upon the jury finding

in favor of Allianz on its fraud claim and, possibly, the interrogatory as to whether Muse

had misrepresented his health. Because the jury returned a verdict against Allianz on that

fraud claim (as well as the specific question of whether a fraudulent representation was

made about Muse’s health), there was no support for a remedy of rescission. See Silk v.

Phillips Petroleum Co., 760 P.2d 174, 180 (Okla. 1988) (explaining that “an action for

rescission based on fraud must necessarily fail” if the underlying fraud is not proven). No

equitable issue remained to be considered, and, therefore, no findings or conclusions were

required other than to simply state the outcome. See Ioselev v. Schilling, No. 3:10-CV-

1091-J-34MCR, 2014 WL 905521, at *4 (M.D. Fla. Mar. 7, 2014) (“[T]he Court must

make findings of fact and conclusions of law as to [the] equitable claims to the extent that

the Verdict did not resolve those claims.”).7

CONCLUSION

For the reasons stated above, Allianz’s Motion for Post-Trial Relief Under Rules

50(b), 59(a), and 52(a) (Doc. No. 219) is DENIED.

7 As was the case in deciding Defendants’ Motion for Summary Judgment, the Court need

not—and does not—reach the issue of whether title 36, section 4426.1(C) of the Oklahoma

Statutes allows rescission of an insurance contract when the insured is found to have

committed fraud in the claims process rather than merely the application process. The

Court notes, however, that Allianz has reversed its position on that issue and now contends

section 4426.1 pertains only to fraud in the inducement and is therefore inapplicable to its

request for rescission here. See Pl.’s Post-Trial Mot. at 21; Pl.’s Reply at 10. Allianz’s

candor is appreciated but it does not change the result. The Court also need not—and does

not—reach the issue of whether damages and rescission are mutually exclusive remedies

for fraud under Oklahoma law. See Trial Tr. vol. 3 (Doc. No. 215-2) 557:2-6 (Court

ordering supplemental briefing during trial as to whether Allianz, if it prevailed on its fraud

claim, must choose between recovery of damages and rescission and, if so, when that

choice must be made); cf. Fed. Deposit Ins. Corp. v. Palermo, 815 F.2d 1329, 1338-39

(10th Cir. 1987) (“We need not decide whether [the] remedies [of rescission and damages

for his fraud claim] are mutually exclusive . . . because we find that Palermo’s failure to

comply with the Oklahoma statute governing rescission, Okla. Stat. Ann. tit. 15, § 235,

prevents him from seeking that remedy.”).

IT IS SO ORDERED this 26th day of October, 2020.

CHARLES B. GOODWIN

United States District Judge

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