UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW HAMPSHIRE

Guardian Angel Credit Union,

on its own behalf and on 

behalf of a class of persons

similarly situated

 v. Case No. 08-cv-261-PB 

Opinion No. 2011 DNH 112

Metabank and

Meta Financial Group

MEMORANDUM AND ORDER

Plaintiff Guardian Angel Credit Union (“Guardian Angel”) 

has filed a motion to amend its complaint against MetaBank and 

Meta Financial Group, Inc. (collectively, “MetaBank”) to add a 

claim for punitive damages. I deny Guardian Angel‟s motion 

because I determine that its proposed amendment would be futile.

I. BACKGROUND

Guardian Angel represents a class of plaintiffs that 

attempted to purchase Certificates of Deposit (“CDs”) from 

defendant MetaBank between 1995 and 2007. In 2008 Guardian 

Angel and the other class plaintiffs learned that their CDs had 

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been fraudulently issued without authorization by an employee of 

MetaBank, Charlene Pickhinke, who converted many of the funds to 

her own personal use.

1 

Guardian Angel‟s initial class-action complaint asserted 

causes of action against MetaBank for breach of contract, 

negligent hiring, supervision, and retention, and vicarious 

liability for Pickhinke‟s wrongful acts. Guardian Angel now 

seeks to amend its complaint to add a claim for punitive 

damages. It contends that it discovered new information 

supporting this claim while taking a deposition of Sandra 

Hegland, MetaBank‟s Director of Human Resources. Hegland 

testified that she raised concerns regarding Pickhinke to 

MetaBank‟s audit department in 2000 and 2002 based on the fact 

that Pickhinke did not appear to be taking all of her vacation 

time. Not taking vacations is a possible sign that an employee 

is perpetrating a fraud because the employee‟s constant presence 

at the office may be required to continue the fraud. There are 

apparently no documents available regarding the actions taken by 

the audit department in response to these concerns.

 

1 The facts underlying this case are set out in more detail in my 

Memorandum and Order on the parties‟ cross-motions for summary 

judgment (Doc. No. 127).

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II. STANDARD OF REVIEW

A motion for leave to amend should not be granted if the 

amendment “would be futile or reward undue delay.” Abraham v. 

Woods Hole Oceanographic Inst., 553 F.3d 114, 117 (1st Cir. 

2009). “If leave to amend is sought before discovery is 

complete and neither party has moved for summary judgment, the 

accuracy of the „futility‟ label is gauged by reference to the 

liberal criteria of Federal Rule of Civil Procedure 12(b)(6).” 

Hatch v. Dep‟t for Children, Youth and Their Families, 274 F.3d 

12, 19 (1st Cir. 2001). “If, however, leave to amend is not 

sought until after discovery has closed and a summary judgment 

motion has been docketed, the proposed amendment must be not 

only theoretically viable but also solidly grounded in the 

record.” Id. In that type of situation, an amendment is 

properly classified as futile unless the allegations of the 

proposed amended complaint are supported by substantial 

evidence.” Id.2

 

2 The procedural posture of this motion to amend is unusual 

because, although it was first filed before summary judgment 

motions, the parties have since filed their cross-motions for 

summary judgment. Because Guardian Angel has had every 

opportunity to supplement its motion to amend with additional 

factual information since its initial filing and has chosen not 

to, I will apply the more rigorous “substantial evidence” 

standard in this Order. See Hatch, 274 F.3d at 19 (applying the 

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III. ANALYSIS

Iowa law allows punitive damage claims where “the conduct 

of the defendant from which the claim arose constituted willful 

and wanton disregard for the rights. . . of another.” Iowa Code 

§ 668A.1.

3 Negligent conduct alone does not support such a 

claim. Cawthorn v. Catholic Health Initiatives Iowa Corp., 743 

N.W.2d 525, 529 (Iowa 2007) (“Punitive damages serve as a form 

of punishment, and as such, mere negligent conduct is not 

sufficient to support such a claim.”). Punitive damages can be

available against a corporation for the acts of its employees, 

but “only when the corporate employer wrongfully authorized, 

contributed to, or ratified the outrageous conduct which caused 

plaintiff‟s injury.” Briner v. Hyslop, 337 N.W.2d 858, 861 

(Iowa 1983). 

This “complicity rule” still requires that the employer act 

with legal malice, and thus requires at least reckless conduct, 

 

substantial evidence standard where “all the pertinent evidence 

is in the record” and the plaintiff “does not suggest that 

additional discovery would reveal new facts sufficient to put 

the case in a different light”). In any event I find that the 

proposed claim for punitive damages would also be futile under 

the more relaxed 12(b)(6) standard given the lack of facts 

pleaded in support of the claim.

3 I determined in my Order on Class Certification, Doc. No. 58, 

that Iowa substantive law applies in this case.

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not mere negligence. See Seraji v. Perket, 452 N.W.2d 399, 401 

(Iowa 1990) (“It is the reckless conduct of the employer that 

the [complicity] rule seeks to punish and deter.”). An employer 

acts recklessly “if it intentionally does or fails to do 

something it has a duty to do or not to do.” Id. at 402.

The facts that Guardian Angel has identified in its motion 

to amend do not provide substantial evidence to support a claim 

for punitive damages. It is undisputed that MetaBank was 

completely unaware of Pickhinke‟s scheme and acted quickly to 

investigate as soon as it became aware of the fraud in 2008. 

Hegland‟s testimony does little to add to the plausibility of a 

claim for punitive damages. As an initial matter, Hegland‟s 

decision to contact MetaBank auditors was entirely appropriate

and demonstrated the opposite of the institutional recklessness 

that Guardian Angel must plead to establish a claim for punitive 

damages. 

Most importantly, however, Guardian Angel does not plead 

any facts showing that MetaBank responded inappropriately to 

Hegland‟s complaints. Cawthorn v. Catholic Health Initiatives 

Iowa Corp., 743 N.W.2d 525 (Iowa 2007) is instructive in this 

area. There the court found that a punitive damages claim 

against a hospital for the actions of one of its surgeons was 

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not supported by the evidence and was rightfully withheld from a 

jury. 743 N.W.2d at 529. This was despite evidence that the 

hospital had received a prior complaint about the doctor‟s care. 

Id. The court noted that “[t]hough evidence certainly exists 

that Mercy Hospital was aware that Dr. Miulli's competency was 

at issue, the evidence does not support a finding of willful and 

wanton conduct, as required by section 668A.1(1)(a).” Id. 

While a later investigation did suspend the doctor‟s license, 

the “substance of the investigation” was not known by the 

hospital at the time of the surgery. Id.

Here, as in Cawthorn, the mere fact that MetaBank had some 

evidence that Pickhinke‟s conduct may have been suspect does 

not, without more, support a finding of willful and wanton 

conduct. Hegland‟s complaint was based solely on the relatively 

minor concern that Pickhinke had not been taking all of her 

vacation time, and Guardian Angel does not identify any 

additional facts that could have suggested to the audit 

department the true nature or scope of her scheme. Any 

deficiencies in MetaBank‟s investigation would rise only to the 

level of negligence. Therefore Guardian Angel‟s claim for 

punitive damages, which requires more than mere negligence, is 

not supported by substantial evidence.

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IV. CONCLUSION

For all of the foregoing reasons, I conclude that the 

proposed amendment would be futile and deny Guardian Angel‟s 

motion to amend its complaint (Doc. No. 84).

SO ORDERED.

/s/Paul Barbadoro 

Paul Barbadoro

United States District Judge

July 14, 2011

cc: Christopher T. Meier, Esq.

Randall F. Cooper, Esq. 

Bruce Felmly, Esq.

Christine B. Cesare, Esq.

Howard M. Rogatnick, Esq.

Ronald Joshua Bliss, Esq.

Cathryn E. Vaughn, Esq.

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