Bancroft Life & Casualty ICC, Ltd. v. Intercontinental Management Ltd.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 11-1209
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BANCROFT LIFE & CASUALTY ICC, LTD.
v.
INTERCONTINENTAL MANAGEMENT LTD.,
a corporation that, upon information and belief,
is organized under the laws of St. Thomas (U.S. Virgin Islands),
d/b/a INTERCONTINENTAL CAPTIVE MANAGEMENT COMPANY, LTD.;
THE ROBERTS AND PATTON LAW FIRM,
upon information and belief, a Pennsylvania Partnership;
JOHN R. PATTON, ESQ., an individual resident of Pennsylvania;
GEORGE THOMAS ROBERTS, ESQ., an individual resident of Pennsylvania;
NIGEL BAILEY, an individual resident of St. Thomas (U.S. Virgin Islands);
CUNNINGHAM HUGHAN & COMPANY,
a professional corporation organized under the laws of Pennsylvania;
THOMAS HUGHAN, C.P.A., an individual resident of Pennsylvania;
INTERCONTINENTAL MANAGEMENT LTD, a corporation that,
upon information and belief, is organized under the laws of Pennsylvania
Intercontinental Management Ltd.;
The Roberts and Patton Law Firm;
John R. Patton, Esq.;
George Thomas Roberts, Esq.;
Nigel Bailey;
Intercontinental Management Ltd.,
Appellants
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On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 2-10-cv-00704)
District Judge: Honorable William L. Standish
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Submitted Pursuant to Third Circuit LAR 34.1(a)
October 25, 2011
Before: FISHER, VANASKIE and ROTH, Circuit Judges.
(Filed: January 5, 2012)
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OPINION OF THE COURT
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FISHER, Circuit Judge.
Intercontinental Captive Management Company, Ltd. (“ICMC”), Intercontinental
Management, Ltd., the Roberts Patton Law Firm, John R. Patton, Esquire, George
Thomas Roberts, Esquire (“Roberts”), and Nigel Bailey (collectively, “IM”) appeal the
District Court’s granting of Bancroft Life & Casualty ICC, Ltd.’s (“Bancroft”) motion for
preliminary injunction, which ordered IM to return Bancroft’s property, including its
corporate books and records, and to cease interfering in Bancroft’s relations with its
incorporated cells. For the following reasons, we will affirm the District Court’s order.
I.
We write principally for the parties, who are familiar with the factual context and
legal history of this case. Therefore, we will set forth only those facts necessary to our
analysis.
On October 15, 2004, Bancroft, an insurance company formed in the British
Virgin Islands, entered into an “Insurance and Taxation Services and Advisory
Agreement” (“Management Agreement”) with ICMC, a corporation that offers
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management and administrative services to international insurance companies. ICMC
was not licensed to sell insurance, so Bancroft and ICMC were not competitors. Under
the Management Agreement, ICMC agreed, among other things, to maintain complete
books, records and accounts of Bancroft and to file all required reports to ensure that
Bancroft complied with the laws of its domicile jurisdiction. The Management
Agreement specifically provided that Bancroft would retain ownership of all books and
records produced by ICMC in connection with its management of Bancroft.
In 2006, Bancroft relocated to St. Lucia. That same year, the International
Insurance Act (“Insurance Act”) of St. Lucia was amended to allow an international
insurance company to offer a new line of business based on an incorporated cell company
(“ICC”). The ICC is licensed to provide insurance and operates through a separate
company called an incorporated cell (“IC”). In late 2007, Bancroft decided to offer
insurance to United States companies using its ICC/IC model, which expanded ICMC’s
management responsibilities under the Management Agreement to include the formation
and management of Bancroft’s ICs. To better maintain its records, Bancroft and IM
agreed to dedicate a computer server solely for Bancroft’s records and installed an
external hard drive and a Dell computer. In 2008 and 2009, ICMC and the Roberts and
Patton Law Firm formed several ICs for Bancroft, including Joyce IC and CDG IC.
Dissatisfied with the management of IM, Bancroft decided to replace IM with
CBIZ MHM (“CBIZ”) and sent a memo to IM confirming the termination of the
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Management Agreement on October 6, 2009. On December 10, 2009, Bancroft sent a
letter to ICMC demanding the delivery of all Bancroft records to CBIZ. A week later, IM
sent a letter to Matthew Brown (“Brown”), a tax attorney that referred business to
Bancroft, stating that IM would “no longer be acting as the U.S. Manager for Bancroft.”
The letter specifically stated that ICMC “terminated [the] Management Agreement due to
Bancroft’s: (1) failure to pay on a timely basis several invoices for services previously
rendered; and (2) decision to move to a new direction, which [IM] did not support.” The
letter was sent to other service providers, as well as the owners of Joyce IC and CDG IC.
Brown informed IM that the letter created a panic among Bancroft’s business associates.
On January 5, 2010, Roberts scheduled a board meeting of Joyce IC and CDG IC without
notifying Bancroft and proposed resolutions to transfer the registrations of Joyce IC and
CDG IC to a competitor of Bancroft, the ostensible owner of which was the brother of
ICMC’s Vice President.
In March 2010, an audit of Bancroft by the St. Lucia Ministry of Finance (“the
Regulator”) for the year 2008 revealed non-compliance with the amended Insurance Act.
Among other things, the audit revealed ICMC’s failure to prepare semi-annual financial
reports for Bancroft’s ICs. Upon being notified of Joyce IC’s noncompliance, the
Regulator sent a letter stating that Joyce’s failure to comply with the statute “will result in
the enforcement of Section 21A” of the amended Insurance Act.
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On May 21, 2010, Bancroft filed a civil action and later moved for a Temporary
Restraining Order on June 24, 2010. On July 7, 2010, Bancroft and IM entered into a
consent TRO, which provides, among other things, that IM will not interfere with
Bancroft’s efforts to manage its ICs. On January 13, 2011, the District Court granted
Bancroft’s motion for preliminary injunction, ordering IM to return Bancroft’s property,
including books and records, and cease interfering in Bancroft’s relations with its ICs.1
IM filed a timely appeal.
II.
The District Court had subject matter jurisdiction under 28 U.S.C. § 1332. We
have jurisdiction under 28 U.S.C. § 1291. We review the District Court’s “findings of
fact for clear error, its conclusions of law de novo, and the ultimate decision to grant the
preliminary injunction for abuse of discretion.” Miller v. Mitchell, 598 F.3d 139, 145 (3d
Cir. 2010) (citation omitted).
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The District Court also denied without prejudice IM’s motion for judgment as a
matter of law. Although IM argues that the District Court erred in denying its motion for
judgment, we lack jurisdiction to review the District Court’s order. First, the District
Court’s order did not resolve any claims or issues, and the motion was denied without
prejudice; thus, it cannot constitute a final order under 28 U.S.C. § 1291. See Fed. Home
Loan Mortg. Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 438 (3d Cir. 2003). Second,
under 28 U.S.C. § 1292, we do not have jurisdiction to review the denial of a motion for
judgment as a matter of law. In addition, we do not have pendent jurisdiction because the
preliminary injunction appeal can be resolved without reviewing the denial of IM’s
motion for judgment. See Am. Soc’y for Testing & Materials v. Corrpro Cos., Inc., 478
F.3d 557, 581 (3d Cir. 2007).
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III.
To grant a preliminary injunction, a district court must weigh and consider
(1) whether the movant has shown a likelihood of success on the merits; (2) whether the
movant will suffer irreparable harm if the relief is denied; (3) whether granting relief will
result in even greater harm to the nonmoving party; and (4) whether the public interest
favors such relief. Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102, 109 (3d
Cir.2010). IM submits that the District Court erred in granting Bancroft’s motion for
preliminary injunction because Bancroft did not meet its burden of showing the four
preliminary injunction factors. We disagree.
The District Court correctly granted Bancroft’s request for a preliminary
injunction with respect to the claim that IM should return Bancroft’s property, including
books and records, still in IM’s possession. First, Bancroft showed a likelihood of
success on its conversion claim. Under Pennsylvania law, conversion is “the deprivation
of another’s right of property in, or use or possession of, a chattel, or other interference
therewith, without the owner’s consent and without lawful justification.” McKeeman v.
Corestates Bank, N.A., 751 A.2d 655, 659 n.3 (Pa. Super. 2000) (citation omitted).
Despite IM’s contention that it returned all records pertaining to Bancroft, the fact that
Bancroft continued to receive records up to the time of the preliminary injunction hearing
supports the District Court’s finding that Bancroft still had not received many of its
documents that should have been in IM’s possession. And although IM denies that it
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knows the password for the external hard drive and Dell computer, IM’s use and
possession of those devices since they were installed in early 2008 up until delivery to
Bancroft was sufficient to establish a prima facie case that IM was interfering with
Bancroft’s property right to access its own records. See Highmark, Inc. v. UPMC Health
Plan, Inc., 276 F.3d 160, 173 (3d Cir. 2001).
Second, Bancroft established that it would suffer “immediate irreparable harm, or
a presently existing actual threat of harm” if IM did not return records necessary for
Bancroft’s compliance with the amended Insurance Act. Premier Dental Prods., Co. v.
Darby Dental Supply Co., 794 F.2d 850, 858 (3d Cir. 1986) (citation omitted). The
Regulator’s threat to take action against Joyce IC under Section 21A of the amended
Insurance Act, which could include the cancellation of its registration as an IC in St.
Lucia, was sufficient to satisfy the second preliminary injunction factor. See Presbytery
of N.J. of Orthodox Presbyterian Church v. Florio, 40 F.3d 1454, 1458 (3d Cir. 1994).
Third, preliminarily enjoining IM to turn over Bancroft’s records would not result
in an even greater harm to IM. IM argues that it would suffer irreparable harm because
the injunction would deprive it of business income derived from its longtime clients,
Joyce IC and CDG IC. However, “[w]e have long held that an injury measured in solely
monetary terms cannot constitute irreparable harm.” Liberty Lincoln-Mercury, Inc. v.
Ford Motor Co., 562 F.3d 553, 557 (3d Cir. 2009) (citations omitted). Further, IM’s
management relationship with these Bancroft ICs existed due to IM’s Management
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Agreement with Bancroft. Because that Agreement has been terminated, IM has neither
the right to manage Bancroft’s ICs nor any use for the records of Bancroft pertaining to
those ICs. Accordingly, IM would not suffer irreparable harm by returning Bancroft’s
books and records.
Fourth, given the likelihood of success on Bancroft’s conversion claim, the
preliminary injunction would protect Bancroft’s property right to access its own books
and records. We agree with the District Court that the public has a strong interest in
protecting property rights. See Minard Run Oil Co. v. U.S. Forest Serv., --- F.3d ---,
2011 WL 4389220, at *14 (3d Cir. 2011).
The District Court also did not abuse its discretion in preliminarily enjoining IM
from interfering with Bancroft’s efforts to manage its ICs. First, Bancroft established a
likelihood of success on its claims of tortious interference with existing or prospective
contractual relationships, defamation, and breach of fiduciary duty. To prove a claim of
tortious interference with contractual relationships, a party must prove there was (1) a
contractual or prospective business relationship between the plaintiff and a third party;
(2) purposeful conduct intended to harm an existing or prospective relationship; (3) the
absence of privilege or justification on the part of the defendant; (4) damages resulting
from the defendant’s conduct; and (5) for prospective contracts, a reasonable likelihood
that the relationship would have occurred but for the defendant’s interference. Acumed
LLC v. Advanced Surgical Servs,. Inc., 561 F.3d 199, 212 (3d Cir. 2009).
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There was a contractual or prospective business relationship between Bancroft and
the ICs because St. Lucia law holds Bancroft responsible for the governance of its ICs
and mandates an operating agreement between ICs and ICCs. The District Court’s
factual finding that IM purposefully acted to harm this relationship is supported by
evidence that IM orchestrated the transfer of Bancroft’s ICs to a competitor, in which IM
retained an interest. Although competitors, in certain circumstances, are privileged in the
course of competition to interfere with others’ contractual relationships, Acumed, 561
F.3d at 214-15, IM and Bancroft were not competitors, so IM’s interference was not
privileged. Finally, IM’s actions caused damage by hindering Bancroft from bringing its
ICs into compliance with St. Lucia’s amended Insurance Act.
Bancroft also established a likelihood of success on its defamation claim, which
requires a plaintiff to prove “(1) the defamatory character of the communication; (2) its
publication by the defendant; (3) its application to the plaintiff; (4) the understanding by
the recipient of its defamatory meaning; (5) the understanding by the recipient of it as
intended to be applied to the plaintiff; (6) special harm resulting to the plaintiff from its
publication; and (7) abuse of a conditionally privileged occasion.” 42 Pa. Cons. Stat.
§ 8343(a). The December letter IM sent to Bancroft’s business associates as well as
Joyce IC and CDG IC went far beyond notifying others of the termination of the
Management Agreement. This communication by IM clearly applied to Bancroft and
was defamatory in nature by ascribing conduct, such as the failure to honor financial
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commitments, that would adversely affect Bancroft’s business reputation. See Beverly
Enters., Inc. v. Trump, 182 F.3d 183, 187 (3d Cir. 1999) (citation omitted) (holding
statement is defamatory when it “tends so to harm the reputation of another”). Recipients
of the letter understood the letter applied to Bancroft because one of the recipients,
Brown, sent an email to IM indicating that the letter depicted Bancroft in a “very negative
light.” The letter also suggested that the statement created panic amongst Bancroft’s
business associates, resulting in special harm. And there was no evidence that IM’s
statement was privileged. Thus, the District Court properly concluded that Bancroft was
likely to succeed on its defamation claim.
In addition, Bancroft established a likelihood of success on its fiduciary duty
claim. Under Pennsylvania law, an agent “is considered a fiduciary with respect to
matters within the scope of his agency and is subject to a duty not to act or to agree to act
. . . for persons whose interests conflict with those of the principal in matters in which the
agent is employed.” Prudential Ins. Co. of Am. v. Stella, 994 F. Supp. 318, 322 (E.D. Pa.
1998). As Bancroft’s managing agents, ICMC and its principals owed a fiduciary duty to
Bancroft. “Fiduciary duty demands undivided loyalty” and “prohibits conflicts of
interest.” Id. (citation omitted). IM’s actions, including the publication of damaging
information regarding Bancroft and an attempt to transfer the registrations of Joyce IC
and CDG IC to Bancroft’s competitor, in which IM retained an interest, implicated
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serious conflicts of interest and supported a finding that IM likely breached its fiduciary
duty to Bancroft.
Bancroft suffered irreparable harm because IM’s interference prevented Bancroft
from ensuring that its ICs comply with St. Lucia’s amended Insurance Act. IM will not
suffer greater harm from the preliminary injunction; although ICMC introduced the
owners of Joyce IC and CDG IC to Bancroft, ICMC was paid to develop business for
Bancroft and has no right to interfere with Bancroft’s business relationship with its ICs.
Moreover, the injunction is also narrowly tailored and does not prevent IM from doing
business with entities other than Bancroft ICs. Finally, preventing companies from
interfering with another’s existing or prospective business relations, especially when such
interference involves defamation and breach of fiduciary duties, furthers the public
interest. Thus, the District Court did not abuse its discretion in granting Bancroft’s
motion for a preliminary injunction.
IV.
For the foregoing reasons, we will affirm the order of the District Court.
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