Fraser v. Nationwide Mutual Insurance , 352 F.3d 107 ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
12-10-2003
Fraser v. Nationwide Mutl Ins
Precedential or Non-Precedential: Precedential
Docket No. 01-2921
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PRECEDENTIAL
Filed December 10, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-2921
RICHARD FRASER
a/b/a
R.A. FRASER AGENCY;
DEBORAH FRASER,
Appellants
v.
NATIONWIDE MUTUAL INSURANCE CO.;
NATIONWIDE MUTUAL FIRE INSURANCE CO.;
NATIONWIDE LIFE INSURANCE CO.;
NATIONWIDE GENERAL INSURANCE CO.;
NATIONWIDE PROPERTY & CASUALTY
INSURANCE CO.; NATIONWIDE VARIABLE LIFE
INSURANCE CO.; COLONIAL INSURANCE CO. OF
WISCONSIN
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 98-cv-06726)
District Judge: Honorable Anita B. Brody
Argued June 23, 2003
Before: SLOVITER, AMBRO and BECKER, Circuit Judges
2
(Opinion filed December 10, 2003)
James G. Wiles, Esquire (Argued)
P.O. Box 442
Yardley, PA 19067
Attorney for Appellants
Frederick C. Fletcher, II, Esquire
Curtis P. Cheyney, III. Esquire
(Argued)
Swartz, Campbell & Detweiler
1601 Market Street, 34th Floor
Philadelphia, PA 19103
Attorneys for Appellees
OPINION OF THE COURT
AMBRO, Circuit Judge:
Richard Fraser, an independent insurance agent for
Nationwide Mutual Insurance Company, was terminated by
Nationwide as an agent. We decide whether: he has stated
a viable claim for wrongful termination under Pennsylvania
law; he is entitled to damages under the Electronic
Communications Privacy Act and parallel Pennsylvania law
for Nationwide’s alleged unauthorized access to his e-mail
account; an Agents’ Review Board process reviewing his
termination was properly conducted; a forfeiture-for-
competition provision in his agency agreement is
enforceable; and the District Court abused its discretion in
refusing to allow Fraser to amend his complaint and in not
sanctioning Nationwide for alleged discovery violations. We
affirm the District Court on all but the forfeiture-for-
competition and discovery violations issues. As to the
former, we remand to the District Court for reconsideration
in light of new caselaw from the Pennsylvania Supreme
Court. We also remand Fraser’s discovery sanctions claim,
which the District Court did not address.
I. Background
This dispute stems from Nationwide’s September 2, 1998
termination of Fraser’s Agent’s Agreement (the
3
“Agreement”). It provided that Fraser sell insurance policies
as an independent contractor for Nationwide on an
exclusive basis. The relationship was terminable at will by
either party.
The parties disagree on the reason for Fraser’s
termination. Fraser argues Nationwide terminated him
because he filed complaints with the Pennsylvania Attorney
General’s office regarding Nationwide’s allegedly illegal
conduct, including its discriminatory refusal to write car
insurance for unmarried and new drivers.1 Fraser also
contends that he was terminated for criticizing Nationwide
while acting as an officer of the Nationwide Insurance
Independent Contractors Association (the “Contractors
Association”) and for attempting to obtain the passage of
legislation in Pennsylvania to ensure that independent
insurance agents could be terminated only for “just cause.”
Nationwide argues, however, that it terminated Fraser
because he was disloyal. It points out that Fraser drafted a
letter to two competitors — Erie Insurance Company
(“Erie”) and Zurich American Insurance (“Zurich”) —
expressing Contractors Association members’
dissatisfaction with Nationwide and seeking to determine
whether Erie and Zurich would be interested in acquiring
the policyholders of the agents in the Contractors
Association. Fraser claims that the letters only were drafted
to get Nationwide’s attention and were not sent. (Were the
letters sent, however, they would constitute a violation of
the “exclusive representation” provision of Fraser’s
Agreement with Nationwide.)
When Nationwide learned about these letters, it claims
that it became concerned that Fraser might also be
revealing company secrets to its competitors. It therefore
searched its main file server — on which all of Fraser’s e-
mail was lodged — for any e-mail to or from Fraser that
showed similar improper behavior.2 Nationwide’s general
1. As a result of Fraser’s efforts, Nationwide was required to pay fines,
entered into a consent order, and the Pennsylvania Attorney General’s
Office wrote Fraser a “thank you” letter.
2. Nationwide’s associate general counsel (Randall Orr) testified that he
directed a systems expert to perform the search in his (Randall Orr’s)
presence. The systems expert opened e-mail written to or by Fraser if the
e-mail headers (i.e., the to, from, and re: lines) contained relevant
information.
4
counsel testified that the e-mail search confirmed Fraser’s
disloyalty. Therefore, on the basis of the two letters and the
e-mail search, Nationwide terminated Fraser’s Agreement. It
is this search of his e-mail that gives rise to Fraser’s claim
for damages under the Electronic Communications Privacy
Act of 1986 (“ECPA”), 18 U.S.C. § 2510, et seq., and a
parallel Pennsylvania statute, 18 Pa. Cons. Stat. § 5702, et
seq.
After Nationwide terminated Fraser in September 1998,
he filed an appeal with the Agents’ Administrative Review
Board (the “Board”). Fraser’s Agreement with Nationwide
provides that “the Agent shall have access to the Agents’
Administrative Review Board, and its procedures, as it may
exist from time to time.” The Agreement did not, however,
specify any particular procedures that the Board would
follow, nor did it guarantee the availability of Board review.
Board procedures were laid out in the agents’
Compensation and Security Handbook (the “Handbook”),
which stated explicitly that the procedures were not part of
the Agreement between an agent and Nationwide. In
considering Fraser’s case, the Board split 2-2, and
Nationwide’s employee, acting as the tiebreaker, affirmed
Fraser’s termination. Fraser argues that the review process
was a “sham” and contends that Nationwide conducted the
review process in bad faith.
Within a year of his termination, Fraser went to work for
a competitor of Nationwide, thereby triggering a “forfeiture-
for-competition” provision in his Agreement. That provision
specifies that an agent will forfeit deferred compensation by
becoming employed by another insurance business within
a twenty-five mile radius within one year of cancellation of
the agent’s Agreement. Fraser contends that, because of the
provision, he forfeited several hundred thousand dollars of
deferred compensation.3 He argues that the provision is
invalid under Pennsylvania law because it is unduly
restrictive.
3. We note, however, that there is no record evidence concerning the
amount of deferred compensation Fraser forfeited and the District Court
made no findings of fact on this issue.
5
As a result of these events, Fraser filed suit in the United
States District Court for the Eastern District of
Pennsylvania to contest: (1) his termination; (2) the alleged
violation of his privacy rights under the ECPA and parallel
Pennsylvania statute; (3) the Board’s review procedure; and
(4) the forfeiture-for-competition provision in his
Agreement. Events during litigation in the District Court
also have spawned issues on appeal. First, Fraser alleges
that Nationwide committed numerous discovery violations.
He claims that “[i]t is no hyperbole to state that in this
case, no discovery was received from Nationwide without a
court order compelling discovery, no court order compelling
discovery from Nationwide went unviolated and more than
one Nationwide witness was less than candid.” On this
basis, Fraser seeks discovery sanctions against Nationwide.
Second, the District Court denied Fraser leave to amend his
complaint a third time to add two more state-law causes of
action: conversion and invasion of privacy. The Court
believed that Fraser’s third amendment was merely a
dilatory tactic because he sought leave to amend the day
before Fraser’s response to Nationwide’s motion for
summary judgment was due. The Court granted summary
judgment for Nationwide on all counts. Fraser appeals.4
II. Discussion
A. Wrongful Termination Claim
Whether Pennsylvania grants a cause of action for
wrongful termination in this context is a question of law,
over which we exercise plenary review. Borse v. Piece Goods
Shop, Inc., 963 F.2d 611, 613 (3d Cir. 1992). Fraser argues
that, notwithstanding that his agency relationship with
Reliance was “at-will,” his termination was wrongful (and
actionable) because it was motivated by his agitations for
just-cause legislation — which Nationwide found
undesirable, his reporting of Nationwide’s allegedly illegal
4. The District Court had jurisdiction under 28 U.S.C. § 1331 and 1332.
We exercise appellate jurisdiction pursuant to 28 U.S.C. § 1291.
Nationwide asserts that we lack appellate jurisdiction because Fraser’s
appeal was untimely. A motions panel of this Court has, however,
concluded otherwise, and we agree.
6
activities, and his leadership position in the Contractors
Association. He notes that, while the general rule is that at-
will employees may be terminated for any or no reason,
courts have forbidden the firing of at-will employees when
doing so would offend Pennsylvania’s public policy. See
Geary v. U.S. Steel, 319 A.2d 174, 185 (Pa. 1974). He
asserts that his termination fits this exception. Nationwide
responds that Fraser was not an employee but rather an
independent contractor, and thus the cases prescribing this
public policy exception do not apply here.
Because no Pennsylvania case addresses whether there
are limitations on a company’s ability to terminate an
independent contractor (as opposed to an employee), the
District Court assumed arguendo that the public policy
cases apply equally to independent contractors. We too
proceed by so assuming without deciding the question.
We begin by noting that Pennsylvania courts have
construed the public policy exception to at-will employment
narrowly, lest the exception swallow the general rule. See
Clay v. Advanced Computer Applications, Inc., 559 A.2d
917, 918 (Pa. 1989) (“Exceptions to [the rule that
terminations from at-will positions may not be challenged]
have been recognized in only the most limited of
circumstances, where discharges of at-will employees would
threaten clear mandates of public policy.”). In Hennessy v.
Santiago, 708 A.2d 1269 (Pa. Super. Ct. 1998), a
Pennsylvania court recognized three limited circumstances
in which public policy will trump employment at-will. “[A]n
employer (1) cannot require an employee to commit a crime
[and fire the employee for refusing to do so], (2) cannot
prevent an employee from complying with a statutorily
imposed duty, and (3) cannot discharge an employee when
specifically prohibited from doing so by statute.” Id. at 1273(internal citation omitted). The Pennsylvania Supreme
Court has never formally adopted Hennessy’s three
exceptions to the at-will employment doctrine. However, in
Shick v. Shirey, 716 A.2d 1231 (Pa. 1998), the Supreme
Court did say that “public policy” is not limited to “that
which has been legislatively enacted.” Id. at 1235. But it
also went on to note that a non-legislatively expressed
public policy must be extremely clear to be cognizable in
7
this context; indeed acceptance must be virtually universal.
Quoting Mamlin v. Genoe, 17 A.2d 407 (Pa. 1941), it stated:
It is only when a given policy is so obviously for or
against the public health, safety, morals or welfare that
there is a virtual unanimity of opinion in regard to it,
that a court may constitute itself the voice of the
community in so declaring. There must be a positive,
well-defined, universal public sentiment, deeply
integrated in the customs of and beliefs of the people
and in their conviction of what is just and right and in
the interests of the public weal.
Shick, 716 A.2d at 1235-36 (quoting Mamlin, 17 A.2d at
409).
Fraser argues that his case fits within Hennessy’s first
two exceptions: Nationwide fired him for refusing to commit
a crime and for his attempt to comply with a statutorily
imposed duty. We find these arguments unconvincing. Even
assuming that the Pennsylvania Supreme Court would also
view these as exceptions to an employer’s right to fire an at-
will employee, Fraser has presented no evidence that
Nationwide directed him to commit any crime, nor has he
pointed us to any statutory duty to report Nationwide’s
violations of the law. Compare Field v. Philadelphia Electric
Co., 565 A.2d 1170 (Pa. Super. 1989) (holding termination
wrongful when employee had a statutory duty to report
violations), with Hennessy v. Santiago, 708 A.2d 1269 (Pa.
Super. 1998) (rejecting the argument that a counselor could
not be fired because she reported a rape of another to the
district attorney because the employee had no statutory
duty to report the rape).
Fraser also relies on Shick’s pronouncement that public
policy may be broader than what is legislatively enacted. He
notes that in Novosel v. Nationwide Insurance Co., 721 F.2d
894 (3d Cir. 1983), we held that firing an employee for his
refusal to participate in a political lobbying effort
contravened public policy and therefore was impermissible.
In light of Novosel, Fraser asserts we should view the First
Amendment of the United States Constitution and the
Pennsylvania Constitution as limitations on employers’
discretion to fire at-will employees. Yet we have declined to
8
read Novosel so broadly and, indeed, have previously
rejected Fraser’s position. In Borse, we noted that “the
Superior Court has refused to extend constitutional
provisions designed to restrict governmental conduct in the
absence of state action.” Borse, 963 F.2d at 619 (citing
Martin v. Capital Cities Media, Inc., 511 A.2d 830, 844 (Pa.
Super. 1986); Cisco v. United Parcel Servs., Inc., 476 A.2d
1340, 1344 (Pa. Super. 1984)). We “predict[ed] that if faced
with the issue, the Pennsylvania Supreme Court would not
look to the First . . . Amendment[ ] as [a] source[ ] of public
policy when there is no state action.” Id. at 620. Moreover,
we note that Pennsylvania courts “have repeatedly rejected
claims that a private employer [as opposed to a public
employer] violated public policy by firing an employee for
whistleblowing, when the employee was under no legal duty
to report the acts at issue.” Donahue v. Fed. Express Corp.,
753 A.2d 238, 244 (Pa. Super. 2000).5 As a result, we have
essentially limited Novosel to its facts — a firing based on
forced political speech.
In this context, we predict that the Pennsylvania
Supreme Court would decline to find a cause of action for
termination under Fraser’s circumstances and hence affirm
the District Court on this ground.
B. ECPA Claims and Parallel State Law Claims
1. Title I
Fraser argues that, by accessing his e-mail on its central
file server without his express permission, Nationwide
violated Title I of the ECPA, which prohibits “intercepts” of
electronic communications such as e-mail.6 The statute
defines an “intercept” as “the aural or other acquisition of
the contents of any wire, electronic, or oral communication
through the use of any electronic, mechanical, or other
5. The Pennsylvania Whistleblower’s Law, 43 Pa. Cons. Stat. § 1421, et
seq., does not apply to private employers.
6. As noted, Fraser also argues that Nationwide has violated the
Pennsylvania counterpart to ECPA Title I, 18 Pa. Cons. Stat. § 5702, et
seq. Because this statute is interpreted in the same way as the ECPA,
the analysis and conclusions in the text apply equally to this state-law
claim, which Fraser also does not analyze separately.
9
device.” 18 U.S.C. § 2510(4). Nationwide argues that it did
not “intercept” Fraser’s e-mail within the meaning of Title I
because an “intercept” can only occur contemporaneously
with transmission and it did not access Fraser’s e-mail at
the initial time of transmission.
On this matter of statutory interpretation which we
review de novo, Moody v. Sec. Pac. Bus. Credit, Inc., 971
F.2d 1056, 1063 (3d Cir. 1992), we agree with Nationwide.
Every circuit court to have considered the matter has held
that an “intercept” under the ECPA must occur
contemporaneously with transmission. See United States v.
Steiger, 318 F.3d 1039, 1048-49 (11th Cir. 2003); Konop v.
Hawaiian Airlines, Inc., 302 F.3d 868 (9th Cir. 2002); Steve
Jackson Games, Inc. v. U.S. Secret Serv., 36 F.3d 457 (5th
Cir. 1994); see also Wesley College v. Pitts, 974 F. Supp.
375 (D. Del. 1997), summarily aff ’d, 172 F.3d 861 (3d Cir.
1998).
The first case to do so, Steve Jackson Games, noted that
“intercept” was defined as contemporaneous in the context
of an aural communication under the old Wiretap Act,7 see
United States v. Turk, 526 F.2d 654 (5th Cir. 1976), and
that when Congress amended the Wiretap Act in 1986 (to
create what is now known as the ECPA) to extend
protection to electronic communications, it “did not intend
to change the definition of ‘intercept.’ ” Steve Jackson
Games, 36 F.3d at 462. Moreover, the Fifth Circuit noted
that the differences in definition between “wire
communication” and “electronic communication” in the
ECPA supported its conclusion that stored e-mail could not
be intercepted within the meaning of Title I. A “wire
communication” under the ECPA was (until recent
amendment by the USA Patriot Act, see note 8) “any aural
transfer made in whole or in part through the use of
facilities for the transmission of communications by the aid
of wire, cable, or other like connection between the point of
origin and the point of reception . . . and such term includes
any electronic storage of such communication.” 18 U.S.C.
7. The Wiretap Act was formally known as the 1968 Omnibus Crime
Control and Safe Streets Act and was also found at 18 U.S.C. § 2510, et
seq. As noted in the text infra, it was superseded by the ECPA.
10
§ 2510(1) (emphasis added) (superseded by USA Patriot Act).8
By contrast, an “electronic communication” is defined as
“any transfer of signs, signals, writing, images, sounds,
data, or intelligence of any nature transmitted in whole or
in part by a wire, radio, electromagnetic, photoelectronic or
photooptical system . . . but does not include . . . any wire
or oral communication.” 18 U.S.C. § 2510(12) (emphasis
added). Thus, the Fifth Circuit reasoned that because “wire
communication” explicitly included electronic storage but
“electronic communication” did not, there can be no
“intercept” of an e-mail in storage, as an e-mail in storage
is by definition not an “electronic communication.” Steve
Jackson Games, 36 F.3d at 461-62.
Subsequent cases, cited above, have agreed with the Fifth
Circuit’s result. While Congress’s definition of “intercept”
does not appear to fit with its intent to extend protection to
electronic communications, it is for Congress to cover the
bases untouched. We adopt the reasoning of our sister
circuits and therefore hold that there has been no
“intercept” within the meaning of Title I of ECPA.
2. Title II
Fraser also argues that Nationwide’s search of his e-mail
violated Title II of the ECPA.9 That Title creates civil liability
for one who “(1) intentionally accesses without
authorization a facility through which an electronic
communication service is provided; or (2) intentionally
exceeds an authorization to access that facility; and thereby
obtains, alters, or prevents authorized access to a wire or
electronic communication while it is in electronic storage in
such system.” 18 U.S.C. § 2701(a). The statute defines
“electronic storage” as “(A) any temporary, intermediate
storage of a wire or electronic communication incidental to
the electronic transmission thereof; and (B) any storage of
such communication by an electronic communication
8. The USA Patriot Act § 209, Pub. L. No. 107-56, § 209(1)(A), 115 Stat.
272, 283 (2001), amended the definition of “wire communication” to
eliminate electronic storage from the definition of wire communication.
9. Fraser contends as well that Nationwide has violated the Pennsylvania
counterpart to ECPA Title II, 18 Pa. Cons. Stat. § 5741, et seq. The
analysis is identical to that of ECPA Title II.
11
service for purposes of backup protection of such
communication.” Id. § 2510(17).
The District Court granted summary judgment in favor of
Nationwide, holding that Title II does not apply to the e-
mail in question because the transmissions were neither in
“temporary, intermediate storage” nor in “backup” storage.
Rather, according to the District Court, the e-mail was in a
state it described as “post-transmission storage.” We agree
that Fraser’s e-mail was not in temporary, intermediate
storage. But to us it seems questionable that the
transmissions were not in backup storage — a term that
neither the statute nor the legislative history defines.
Therefore, while we affirm the District Court, we do so
through a different analytical path, assuming without
deciding that the e-mail in question was in backup storage.
18 U.S.C. § 2701(c)(1) excepts from Title II seizures of e-
mail authorized “by the person or entity providing a wire or
electronic communications service.” There is no circuit
court case law interpreting this exception. However, in
Bohach v. City of Reno, 932 F. Supp. 1232 (D. Nev. 1996),
a district court held that the Reno police department could,
without violating Title II, retrieve pager text messages
stored on the police department’s computer system because
the department “is the provider of the ‘service’ ” and “service
providers [may] do as they wish when it comes to accessing
communications in electronic storage.” Id. at 1236. Like the
court in Bohach, we read § 2701(c) literally to except from
Title II’s protection all searches by communications service
providers. Thus, we hold that, because Fraser’s e-mail was
stored on Nationwide’s system (which Nationwide
administered), its search of that e-mail falls within
§ 2701(c)’s exception to Title II.
C. Bad Faith in Board Review
Fraser next argues that the Board’s review of his
termination was a “sham.” He contends that, when the
Board was split 2-2 whether to affirm his termination,
Nationwide’s employee did not in good faith consider his
case but rather was essentially instructed by Nationwide
management to affirm his dismissal. Nationwide replies
that, because the Board review process was not guaranteed
12
in his Agreement with Nationwide, Fraser had no
contractual right to Board review at all. And while it argues
that the specifics of the Board review process were
discussed in the Handbook, it contends that the Handbook
was not incorporated into the Agreement and thus did not
contractually bind Nationwide. See Jacques v. AZKO Int’l
Salt, Inc., 619 A.2d 748, 753 (Pa. Super. 1993) (“An
employee handbook only forms the basis of an implied
contract if the employee shows that the employer
affirmatively intended that it do so.”). According to
Nationwide, because it did not intend the Handbook to be
a contractual right, there can be no breach of any implied
covenant of good faith and fair dealing with respect to
Board review.
Even assuming that his Agreement with Nationwide
entitles Fraser to a review because a Board review
procedure currently exists in the Handbook, Fraser has not
made the case that Nationwide acted in bad faith. There is
no record evidence to suggest that it was inappropriate
(albeit counterintuitive) for a Nationwide employee to act as
a tiebreaker if the Board was divided. More to the core,
there is no evidence that the Board’s decision would even
be binding — as opposed to merely advisory — on
Nationwide. Fraser has failed to meet his burden of proof
on this issue and thus the District Court correctly granted
summary judgment in favor of Nationwide.
D. Forfeiture-for-Competition Provision
Section 11(f) of the Agent’s Agreement contains a
forfeiture-for-competition provision, whereby an agent will
forfeit deferred compensation by becoming associated with
another insurance business in a twenty-five mile radius
within one year of cancellation of the Agent’s Agreement.
Fraser alleges that, because of financial hardship, he was
forced to seek work with another insurance company and,
as a result, forfeited several hundred thousand dollars of
deferred compensation. The District Court held the
provision enforceable under the three-part test set out in
Bilec v. Auburn & Associates, Inc. Pension Trust, 588 A.2d
538 (Pa. Super. 1991). Under that test, a Pennsylvania
court will uphold a forfeiture-for-competition provision if:
(1) it “relate[s] to a contract for employment; (2) [it is]
13
supported by adequate consideration; [and] (3) [its
application is] reasonably limited in both time and
territory.” Id. at 541 (citing Piercing Pagoda, Inc. v. Hoffner,
351 A.2d 207, 210 (Pa. 1976)). Fraser argues that the
provision is void because his termination was involuntary
and inequitable and because forfeiture is disfavored in
Pennsylvania.
When the District Court issued its opinion, it did not
have the benefit of the Pennsylvania Supreme Court’s
opinion in Hess v. Gebhard & Co., Inc., 808 A.2d 912 (Pa.
2002), in which the Supreme Court held a forfeiture-for-
competition provision invalid as applied. While Hess
involved a quite different situation — an insurance
company that had sold its business was attempting to
enforce a restrictive covenant not to compete even though
it had no ongoing operating interest in the insurance
business — the decision was written in broad terms and
thus guides our analysis. The Court noted that we must
“balance the employer’s protectible business interest
against the oppressive effect on the employee’s ability to
earn a living in his or her chosen profession, trade, or
occupation.” Id. at 923. It went on to say that “pure
financial gain at the expense of restricted competition is
insufficient to constitute a protectible business interest.” Id.While the Court recognized that goodwill and trade secrets
might in some cases justify restrictive covenants, it
concluded that, on the facts before it, the selling company
“ha[d] not demonstrated that the information it seeks to
protect, mainly its prices and customer lists, is particular
or unique to its business and deserves protection as a trade
secret or confidential information.” Id. at 923-24. For
example, lists of potential customers for an insurance
business were available merely by looking in telephone
directories. This context therefore could not justify a
restrictive covenant. Id. at 924.
Because the District Court did not have the benefit of
Hess, we remand Fraser’s forfeiture-for-competition claim
to it to apply the Hess analysis. On remand, the Court will
need to balance the interests Nationwide seeks to protect (if
any) against the harm to Fraser. In so doing, because the
record is silent as to the precise amount of deferred
14
compensation that the clause would require Fraser to forfeit
as well as the nature of Nationwide’s protectible business
interests, the Court will need to make additional factual
findings.
E. Claims for Invasion of Privacy and Conversion
Fraser sought to amend his complaint a third time to
assert common law claims for invasion of privacy and
conversion. The District Court, however, first granted
Nationwide’s motion for summary judgment on all of
Fraser’s other claims, then denied leave to amend. We
review the District Court’s denial of leave to amend for
abuse of discretion. Lake v. Arnold, 232 F.3d 360, 373 (3d
Cir. 2000).
Under the Federal Rules of Civil Procedure, a plaintiff is
entitled to amend his complaint once; courts may grant
subsequent amendments “when justice so requires.” Fed. R.
Civ. P. 15(a). While this Rule also states that leave to
amend should be “freely given,” a district court has
discretion to deny a request to amend if it is apparent from
the record that (1) the moving party has demonstrated
undue delay, bad faith or dilatory motives, (2) the
amendment would be futile, or (3) the amendment would
prejudice the other party. See, e.g., Grayson v. Mayview
State Hosp., 293 F.3d 103, 108 (3d Cir. 2002) (citing Foman
v. Davis, 371 U.S. 178, 182 (1962)). Nationwide contends
that Fraser presented no support for its argument that the
Court abused its discretion. Moreover, Fraser sought leave
to file a third amended complaint to state these two
additional causes of action at the eleventh hour — the day
before his opposition to Nationwide’s summary judgment
motion was due.
In this context, we do not believe the District Court
abused its discretion. As noted, the Court allowed
Nationwide to amend its complaint two times previously.
This third — and untimely — effort to amend appears
dilatory. While Fraser argues that Nationwide committed
discovery violations, mentioned below, it is unclear how
these alleged violations adversely affected Fraser’s ability to
assert his conversion and invasion of privacy claims in an
earlier amendment — as all the claims are based on the
15
same facts and events as the federal ECPA claims and
parallel state claims he asserted at the outset.
F. Discovery Violations
Finally, Fraser argues that the District Court erred in not
adjudicating his motion for discovery sanctions under Fed.
R. Civ. P. 37, which has been pending since December
2000. The record reveals that Fraser has submitted a
memorandum of law detailing the costs he incurred as a
result of Nationwide’s alleged discovery violations, which
the District Court never addressed. Nationwide submitted a
memorandum in opposition. Because we remand for other
reasons, and the District Court is more familiar with how
the discovery process unfolded in this case than are we, we
leave it to the District Court to address the motion for
sanctions in the first instance.10
III. Conclusion
We affirm the District Court’s grant of summary
judgment in favor of Nationwide on Fraser’s wrongful
termination claim, his ECPA and parallel state claims, and
his bad-faith claim. We vacate and remand the forfeiture-
for-competition claim for consideration in light of the
Pennsylvania Supreme Court’s recent decision in Hess.
Moreover, on remand, the Court should address Fraser’s
motion for discovery sanctions.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
10. In so doing, we take no position on the merits of Fraser’s claim for
sanctions.