W.C. and A.N. Miller Development v. Continental Casualty Company ( 2016 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-2327
W.C. AND A.N. MILLER DEVELOPMENT COMPANY,
Plaintiff - Appellant,
v.
CONTINENTAL CASUALTY COMPANY,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. George J. Hazel, District Judge.
(8:14-cv-00425-GJH)
Argued: October 28, 2015 Decided: December 30, 2015
Amended: February 19, 2016
Before GREGORY, DUNCAN, and FLOYD, Circuit Judges.
Affirmed by published opinion. Judge Floyd wrote the opinion,
in which Judge Gregory and Judge Duncan joined.
ARGUED: Paul Joseph Kiernan, HOLLAND & KNIGHT, LLP, Washington,
D.C., for Appellant. Richard A. Simpson, WILEY REIN LLP,
Washington, D.C., for Appellee. ON BRIEF: Gary P. Seligman,
Ashley E. Eiler, WILEY REIN LLP, Washington, D.C., for Appellee.
FLOYD, Circuit Judge:
In this case we must determine whether an insurance company
properly denied coverage to its insured. In 2006, entities and
individuals related to Appellant W.C. & A.N. Miller Development
Company (Miller) were sued in a contract dispute. Subsequently,
in 2010, Miller entered into a liability insurance contract with
Appellee Continental Casualty Company (Continental). Miller
itself was sued in 2010 in a fraudulent conveyance action
seeking recovery on the judgment entered in the 2006 lawsuit.
Miller tendered the 2010 suit to Continental, seeking coverage
of defense costs. Continental, however, determined that the
2010 lawsuit alleged “interrelated wrongful conduct” with the
allegations made in the 2006 lawsuit brought against entities
related to Miller. Because allegations of such interrelated
wrongful conduct constituted a “claim” first made in 2006,
before the policy period, Continental denied coverage. Miller
went on to successfully defend the 2010 lawsuit at its own cost.
In 2014, Miller sued Continental for breach of the
insurance contract and sought as damages the costs it incurred
defending itself in the 2010 lawsuit. The crux of the parties’
dispute is whether the allegations in the 2006 and 2010 lawsuits
are, indeed, interrelated wrongful acts as defined by the
insurance policy. The district court determined that Continental
properly denied coverage. We now affirm.
2
I.
A.
In the early 2000s, one of the principals of Miller, Edward
J. Miller, Jr., founded a land development company, Haymount
Limited Partnership (Haymount). Miller owned upwards of 80% of
Haymount at all relevant times. Edward J. Miller, Jr., is the
chairman of Miller as well as the President of Haymount.
Haymount’s goal was to develop 1,700 acres of land along the
Rappahannock River in Virginia’s Caroline County.
In order to develop the property, Haymount required
considerable financing. On September 10, 2002, Haymount entered
into an agreement with International Benefits Group, Inc. (IBG).
IBG agreed to introduce Haymount to third-party lenders in
exchange for a finder’s fee of $3 million if Haymount secured a
loan as a result of IBG’s introductions. On November 8, 2002,
Haymount entered into a similar arrangement with American
Property Consultants, Ltd. (APC). This agreement provided that
APC, too, would receive a finder’s fee if a loan to Haymount
resulted from any of APC’s introductions to lenders.
Haymount eventually secured a $14 million loan from General
Motors Acceptance Corporation Residential (GMAC). Haymount then
paid a finder’s fee to APC and terminated their agreement. Upon
learning of the GMAC loan, IBG also sought payment of its fee
and sent Haymount a list of lenders to whom IBG had introduced
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Haymount. The list of introduced lenders included GMAC.
Haymount refused to pay the $3 million fee and terminated its
agreement with IBG on June 25, 2004. IBG filed for Chapter 11
bankruptcy less than a month later, allegedly as a direct result
of Haymount’s failure to pay its fee.
B.
In 2006, IBG sued in the District of New Jersey seeking
payment of the $3 million fee it claimed it was owed under the
agreement with Haymount. 1 IBG named several defendants:
Haymount; Westminster Associates II, Inc. (Westminster), another
development company that invested in Haymount; John A. Clark
(Clark), the owner of Westminster; Edward J. Miller, Jr.; and
APC. IBG asserted causes of action for breach of contract,
unjust enrichment, tortious interference, common law civil
conspiracy, and state law statutory conspiracy. Through their
motions to dismiss and for summary judgment, the defendants
successfully narrowed the claims to one: IBG’s claim for breach
of contract. On January 8, 2010, the district court entered
judgement against Haymount, among others, on IBG’s breach of
1
Technically, the bankruptcy trustee, Jonathan Kohn, was
the plaintiff in the action; however, for simplicity’s sake, we
refer to IBG as the plaintiff in both the 2006 and 2010 actions
even though both were brought by the trustee.
4
contract claim for the sum of $3 million plus interest, for a
total judgment of $4,469,158.
Eight months after the judgment in the 2006 lawsuit, on
October 29, 2010, IBG again sued Haymount and related parties.
The 2010 lawsuit alleged that the defendants took actions to
render themselves judgment proof so that IBG could not collect
on the judgment entered in its favor after the 2006 lawsuit. In
this second suit, IBG named as defendants, among others,
Haymount, Miller, Edward J. Miller, Jr., and Clark. The causes
of action asserted in the 2010 lawsuit included fraudulent
transfer, fraudulent conveyance, common law and statutory
conspiracy, creditor fraud, and aiding and abetting. The
complaint in the 2010 action detailed the Haymount development
project, the ownership structure of Haymount, the events leading
to the contract between IBG and Haymount, and the course of the
2006 lawsuit giving rise to the judgment in IBG’s favor.
Miller entered into a liability insurance contract with
Continental in 2010. Miller tendered this second lawsuit to
Continental seeking coverage of defense costs. Continental
denied coverage as being outside the scope of the policy.
Miller therefore proceeded with the defense at its own expense.
The district court granted summary judgment to the
defendants. The court concluded that the challenged transfers
were legitimate transfers to a secured creditor senior to IBG
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and were not, therefore, fraudulent conveyances designed to
defeat IBG’s judgment. The Third Circuit affirmed. Kohn v.
McGuire Woods, 541 F. App’x 163 (3rd Cir. 2013).
C.
Miller filed the lawsuit that is the subject of this appeal
on February 12, 2014. Miller alleges that Continental
wrongfully denied coverage under the policy and should be
required to pay the costs Miller incurred defending the 2010
lawsuit.
The policy, J.A. 35-75, contains several relevant
provisions. The policy includes coverage for employment
practices liability, directors and officers liability, and
entity liability. General terms and conditions at the beginning
of the policy apply throughout. Under the policy, Continental
will provide coverage to Miller for claims against Miller made
during the coverage period for a wrongful act by an insured
person. The policy coverage period is November 1, 2010 through
November 1, 2011. 2 A “claim” is a demand for damages or relief,
2Although the 2010 complaint was filed on October 29, 2010,
the policy provides that a claim is “deemed made . . . on the
earliest of the date of service upon or other receipt by any
Named Company Insured of a complaint . . . .” J.A. 43. The
record indicates that Miller was served the 2010 complaint “on
or about November 4, 2010.” J.A. 123. Thus, the October filing
(Continued)
6
including a civil action, against an insured. The insurance
policy covers claims made against subsidiaries of Miller such as
Haymount.
The policy provides, however: “More than one Claim
involving the same Wrongful Act or Interrelated Wrongful Acts
shall be considered as one Claim which shall be deemed made on
. . . the date on which the earliest such Claim was first made.
. . .” J.A. 43 (emphases in original). In other words, if more
than one claim involving interrelated wrongful acts is made
against Miller or its subsidiaries, the multiple claims are
considered a single claim made on the date on which the earliest
of the claims was made. Further, the policy expansively defines
“interrelated wrongful acts” as “any Wrongful Acts which are
logically or causally connected by reason of any common fact,
circumstance, situation, transaction or event.” J.A. 39
(emphasis in original). From this language, Continental
reasoned that the acts alleged in the 2006 lawsuit and the
fraudulent conveyance and other acts alleged in the 2010 lawsuit
were interrelated wrongful acts constituting a single “claim.”
Under the terms of the policy, such a claim should be deemed to
have been made in 2006, before the policy coverage period began
date of the 2010 lawsuit did not itself automatically preclude
coverage under the policy.
7
on November 1, 2010. Continental therefore concluded the claim
was not insured by the policy.
After some limited discovery, Continental moved for
judgment on the pleadings and Miller moved for summary judgment.
On November 7, 2014, the district court granted Continental’s
motion and denied Miller’s motion. The district court found
that the allegations in the 2010 lawsuit were “interrelated
wrongful acts” with the allegations in the 2006 lawsuit and,
therefore, pursuant to the policy, that the 2010 claim was
deemed to have been made in 2006.
The district court agreed with Continental that under the
policy’s “broad[]” definition of interrelated wrongful acts,
J.A. 298, the 2006 and 2010 lawsuits were related and “shared a
common nexus” because they involved allegations of a common
scheme involving the same claimant, the same fee commission, the
same contract, and the same real estate transaction. J.A. 300.
In addition to finding the existence of an alleged common
scheme, the district court found that the alleged common scheme
“logically and causally” connected the 2006 and 2010 actions:
“but for the alleged actions of [Haymount], Mr. Miller, and
others trying to avoid payment to IBG, the 2010 Lawsuit would
never have been filed.” J.A. 303. Accordingly, the district
court concluded that the 2010 lawsuit constitutes part of the
claim brought in 2006 and that Continental properly denied
8
coverage because the claim was made before the commencement of
the policy period on November 1, 2010.
This appeal followed.
II.
We review de novo the district court’s ruling on a motion
for judgment on the pleadings pursuant to Federal Rule of Civil
Procedure 12(c), and in doing so, apply the standard for a Rule
12(b)(6) motion. Butler v. United States, 702 F.3d 749, 751-52
(4th Cir. 2012). “To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to
state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation and
internal quotations omitted). We review the district court’s
denial of summary judgment de novo. See Nat’l City Bank of Ind.
v. Turnbaugh, 463 F.3d 325, 329 (4th Cir. 2006). Summary
judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a).
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III.
A.
In this case, we must determine whether the district court
properly interpreted and applied the provisions of the insurance
contract. The district court sat in Maryland and, therefore,
Maryland choice of law rules apply. Wells v. Liddy, 186 F.3d
505, 521 (4th Cir. 1999). In the absence of a contractual
choice of law provision, Maryland applies the doctrine of lex
loci contractus. Allstate Ins. Co. v. Hart, 611 A.2d 100, 101
(Md. 1992). “The locus contractu of an insurance policy is the
state in which the policy is delivered and the premiums are
paid.” Cont’l Cas. Co. v. Kemper Ins. Co., 920 A.2d 66, 69 (Md.
2007) (citation and internal quotations omitted). Here, the
policy was delivered to Miller in Maryland. Maryland’s law of
contracts governs interpretation of the policy.
“Under Maryland law, insurance policies are interpreted in
the same manner as contracts generally; there is no rule in
Maryland that insurance policies are to be construed most
strongly against the insurer.” Catalina Enters., Inc. Pension
Tr. v. Hartford Fire Ins. Co., 67 F.3d 63, 65 (4th Cir. 1995)
(citing Collier v. MD–Individual Practice Ass’n, 607 A.2d 537,
539 (Md. 1992)). “Clear and unambiguous language, however, must
be enforced as written and may not yield to what the parties
later say they meant.” Id. (citing Board of Trs. of State
10
Colls. v. Sherman, 373 A.2d 626, 629 (Md. 1977)). Unless there
is an indication that the parties intended to use words in a
special technical sense, the words in a policy should be
accorded their “usual, ordinary, and accepted meaning.” Bausch
& Lomb, Inc. v. Utica Mut. Ins. Co., 625 A.2d 1021, 1031 (Md.
1993) (citations omitted). “A word’s ordinary signification is
tested by what meaning a reasonably prudent layperson would
attach to the term.” Id. (citation omitted). However, where an
insurance contract is ambiguous, “any doubt as to whether there
is a potentiality of coverage under [the] insurance policy is to
be resolved in favor of the insured.” Clendenin Bros. v. U.S.
Fire Ins. Co., 889 A.2d 387, 394 (Md. 2006) (citation and
internal quotations omitted). Finally, under Maryland law, when
policy language is unambiguous a judge may determine the
applicability of a coverage provision. Faw, Casson & Co. v.
Everngam, 616 A.2d 426, 429 (Md. Ct. Spec. App. 1992).
As noted above, the policy’s definition of “interrelated
wrongful acts” is expansive: “any wrongful acts which are
logically or causally connected by reason of any common fact,
circumstance, situation, transaction or event.” J.A. 39. We do
not find this definition to be ambiguous, particularly on the
facts before us, and will apply it in accordance with the
ordinary meaning of the words used.
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We conclude that the conduct alleged in the 2006 and 2010
lawsuits share a common nexus of fact and are, therefore,
interrelated wrongful acts under the policy’s definition. As
the district court observed, the two lawsuits are linked by (1)
a multitude of common facts: in particular, that Haymount did
not pay IBG the $3 million finder’s fee; (2) a common
transaction: the contract between Haymount and IBG; and (3)
common circumstances: namely, Haymount’s attempts to secure
financing for its land development project in Virginia. These
elements logically and causally connect the two lawsuits.
Absent Haymount’s breach of its contract and other alleged
torts, IBG would not have sued for damages in 2006, nor would it
have sued for enforcement of the 2006 judgment in 2010. Thus,
we agree with the district court that the 2006 and 2010 lawsuits
share a common nexus: “an alleged scheme involving the same
claimant, the same fee commission, the same contract, and the
same real estate transaction.” J.A. 300.
B.
Miller attempts to avoid this straightforward conclusion by
characterizing the allegations in the two lawsuits as alleging
merely a “common motive” which is insufficient to establish the
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interrelatedness of the 2006 and 2010 lawsuits. 3 In support,
Miller urges us to adopt the reasoning of ACE Am. Ins. Co. v.
Ascend One Corp., 570 F. Supp. 2d 789 (D. Md. 2008).
The insured in ACE was the subject of an investigation by
state attorneys general for allegedly continuing harmful
business practices related to the marketing of consumer credit
repair products which had already been the subject of a U.S.
Senate investigation and a consumer class-action. Id. at 791-
92. When the insured tendered the investigative subpoenas to
its insurer for coverage of its defense costs, the insurer
denied coverage on the grounds that the business practices being
investigated by the state attorneys general were the same as
those giving rise to the earlier consumer class action. Id.
The district court in ACE, however, disagreed with the insurer
and held that a subsequent lawsuit based on similar wrongful
business practices, but differing in time and factual specifics
from the original wrongful acts, were not interrelated as
defined in the policy at issue. Id. at 794.
3
Ultimately, it is immaterial that Miller prevailed on many
of the causes of action in the 2006 lawsuit and on all of the
causes of action in the 2010 lawsuit. For the purposes of
determining interrelatedness, we look only to “wrongful acts” as
alleged in the 2006 and 2010 complaints, not as ultimately
adjudicated on the merits. J.A. 57 (defining “wrongful act” as
“any actual or alleged” act) (emphasis added).
13
In reaching its conclusion, the ACE court distinguished the
facts underlying the two allegedly related claims there from the
claims in other cases where courts found a sufficient factual
nexus to render two claims interrelated. The cases
distinguished by the ACE court are instructive here. In those
cases, the interrelated claims were based on the same misleading
statement, Zunenshine v. Exec. Risk Indem., Inc., No. 97 Civ.
5525 (MBM), 1998 WL 483475, at *5 (S.D.N.Y. Aug. 17, 1998),
aff’d, 182 F.2d 902, 1999 WL 464988 (2d Cir. 1999); the same
agreement to sell stocks, Home Ins. Co. of Ill. (N.H.) v.
Spectrum Info. Techs., Inc., 930 F. Supp. 825, 850 (E.D.N.Y.
1996); the same omissions in the same proxy literature,
Ameriwood Indus. Int’l Corp. v. Am. Cas. Co. of Reading, Pa.,
840 F. Supp. 1143, 1152 (W.D. Mich. 1993); and the same
development of an industrial park and one party’s attempts to
interfere with the development, Bensalem Twp. v. Int’l Surplus
Lines Ins. Co., Civ. A. No. 01-5315, 1992 WL 142024, at *2 (E.D.
Pa. June 15, 1992), rev’d on other grounds, 38 F.3d 1303 (3d
Cir. 1994).
Contrary to Miller’s protestations, this case has more in
common factually with the cases distinguished by the ACE court
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than with ACE itself. 4 Here, the allegations in the 2006 and
2010 lawsuit arise out of the same land development project,
involve the same contract to secure financing, implicate a
dispute over the same fee, and were brought by the same
claimant. This factual web creates a common nexus sufficient to
make the claims brought against Miller in 2006 and 2010
interrelated under the policy’s broad definition of
“interrelated wrongful acts.” 5
Because they involve interrelated wrongful acts, the 2010
lawsuit and the 2006 lawsuit are part of the same claim under
the policy. Pursuant to the policy provisions, we deem the
claims in the 2010 lawsuit “first made,” J.A. 43, on the date on
4
We find the other main cases cited by Miller, FDIC v.
Mmahat, 907 F.2d 546 (5th Cir. 1990), and Eureka Fed. Sav. &
Loan Ass’n v. Am. Cas. Co. of Reading, Pa., 873 F.2d 229 (9th
Cir. 1989), similarly unpersuasive. Miller wishes us to
construe the current case as a “common business practices” or
“common motive” case, but we decline to do so because of the
factual congruence underlying the allegations in both the 2006
and 2010 lawsuits.
5
Miller also argues that the breach of contract claim in
the 2006 lawsuit cannot serve as a foundational “wrongful act”
for the interrelatedness analysis because the policy does not
cover loss from breaches of contract. See J.A. 59. Assuming
Miller is correct on this point—and we are not convinced that it
is—the facts alleged to support the other causes of action in
the 2006 lawsuit—unjust enrichment, tortious interference, and
civil conspiracy—are sufficiently related to those pleaded in
the 2010 lawsuit, alleging fraudulent conveyance, fraud, and
civil conspiracy, to render the conduct alleged in both lawsuits
“interrelated” pursuant to the policy’s definitions.
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which the 2006 lawsuit was filed—March 17, 2006. As the
district court determined, because March 17, 2006 is outside the
policy period, Continental properly denied coverage.
For the foregoing reasons, we affirm.
AFFIRMED
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