MusclePharm Corp. v. Liberty Insurance Underwriters, Inc.

712 F. App'x 745
CourtCourt of Appeals for the Tenth Circuit
DecidedOctober 17, 2017
Docket16-1462
StatusUnpublished
Cited by9 cases

This text of 712 F. App'x 745 (MusclePharm Corp. v. Liberty Insurance Underwriters, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
MusclePharm Corp. v. Liberty Insurance Underwriters, Inc., 712 F. App'x 745 (10th Cir. 2017).

Opinion

ORDER AND JUDGMENT *

Mary Beck Briscoe Circuit Judge

Plaintiff-Appellant MusclePharm Corporation (“MusclePharm”) appeals the district court’s grant of summary judgment in favor of Defendant-Appellee Liberty Insurance Underwriters, Inc. (“Liberty”). This insurance coverage lawsuit arises from a United States Securities and Exchange Commission (the “SEC”) investigation of MusclePharm (“the investigation”). We exercise jurisdiction in this diversity action pursuant to 28 U.S.C. §§ 1291 and 1332 and affirm.

I.

Factual Background

The Policy

MusclePharm and Liberty entered into an insurance agreement for the period beginning on January 6, 2013 and ending on January 6, 2014; The agreement, a “claims made policy,” covered “claims first made against” MusclePharm “during the policy ... or discovery period[s], ... and reported to” Liberty “as soon as practicable but ... no ... later than 60 days after the end of the policy ... or discovery period[s].” Aplt. App., at 297 (emphasis omitted).

Insuring Agreement 1,2 generally governed the parties’ relationship. It states:

Insured Organization Reimbursement: The Insurer shall pay on behalf of the Insured Organization all Loss which is permitted or required by law to indemnify the Insured Persons as a result of a Claim first made during the Policy Period or Discovery Period, if applicable, against the Insured Persons for a Wrongful Act which takes place before or during the Policy Period.

Id. at 299 (emphasis in original).

The policy provides that an “Insured Organization” is “any entity named in Item 1 of the Declarations.” Id. at 306. And, “MusclePharm Corporation” is named in Item 1. See id. at 297. “Insured Persons” are defined in relevant part as “one or more natural persons who were, now are, or shall hereafter be duly elected or appointed directors or officers of the Insured Organization.” Id. at 306. “Loss” is defined as “sums which the Insured Persons ... are legally obligated to pay solely as a result of any Claim insured by the Policy, including Defense Costs.” Id. (emphasis in original). “Defense costs” are “reasonable and necessary fees (including attorneys’ fees and experts’ fees) and expenses incurred in the defense of a Claim.” Id. at 306 (emphasis in original).

The policy defines and Endorsement No. 26 amends the term “Claim” through three relevant parts, as follows:

(a) a written demand for monetary or non-monetary relief against an Insured Person or, with respect to Insuring Agreement 1.3, against the Insured Organization; including a request to toll the statute of limitations; ...
(c) a formal administrative or regulatory proceeding against an Insured Person;
(d) a formal criminal, administrative, or regulatory investigation against an Insured Person when such Insured Persons’ [sic] receives a Wells Notice or target letter in connection with such investigations.

Id. at 340 (emphasis in original).

“Wrongful Act” is described in two parts as:

(a) any actual or alleged error, misstatement, misleading statement, act, omission, neglect, or breach of duty, actually or allegedly] committed or attempted by the Insured Persons in their capacities as such or in an Outside Position, or, with respect to Insuring Agreement 1.3, by the Insured Organization; or
(b) any matter claimed against the Insured Persons solely by reason of their status as Insured Persons.

Id. at 307 (emphasis in original).

• Finally, the policy contains a “Notice of Circumstance or Wrongful Act” provision in Section 8, which states:

Notice of Circumstance or Wrongful Act: If during the Policy Period the Insureds become aware of any circumstance or Wrongful Act that reasonably may be expected to give rise to a Claim, and if such circumstance or Wrongful Act is reported to the Insurer during the Policy Period in writing with details as to the nature and date of such circumstance or Wrongful Act, the identity of any potential claimant, the identity of any Insured Person involved in such circumstance or Wrongful Act, and the manner in which the Insureds first became aware of such circumstance or Wrongful Act, then any Claim subsequently arising from such circumstance or Wrongful Act shall be deemed under this Policy to be a Claim made during the Policy Period in which the circumstance or Wrongful Act was duly reported to the Insurer.

Id. at 302 (emphasis in original).

The SEC Investigation

On May 16, 2013, the SEC mailed a letter to MusclePharm stating that it was “conducting an inquiry into MusclePharm” and “requesting that MusclePharm voluntarily produce documents” (the “May 16 letter”). Id. at 353. The letter noted, “[t]his inquiry is non-public and should not be construed as an indication that the Commission or its staff believes any violation of law has occurred, nor should you consider it an adverse reflection upon any person, entity, or security.” Id. MusclePharm complied.

Later, on July 8, 2013, the SEC issued an “Order Directing Private Investigation and Designating Officers to Take Testimony” (the “July 8 Order”) to MusclePharm. Id. at 291. The July 8 Order stated that the SEC “has information that tends to show that from at least January 1, 2011,” MusclePharm “possibl[y]” violated provisions of the Securities Act of 1933 and the Exchange Act of 1934. Id. at 292-94. It ordered “that a private investigation be made to determine whether any persons or entities have engaged in, or are about to engage in, any of the reported acts or practices or any acts or practices of similar purport or object.” Id. at 294. It also noted that specific SEC officers may “administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of books, papers, correspondence, memoran-da, or other records deemed relevant or material to the inquiry.” Id. at 295. The footer of each page of the July 8 Order contained the following disclaimer: “it should be understood that the Commission has not determined whether any of the persons or companies mentioned in the order have committed any of the acts described or have in any way violated the law.” See id. at 291-95.

Thereafter, the SEC issued 21 subpoena’s to MusclePharm and to individual officers and directors. The subpoenas instructed MusclePharm to produce documents. The subpoenas also required individuals to produce documents and to appear for testimony.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
712 F. App'x 745, Counsel Stack Legal Research, https://law.counselstack.com/opinion/musclepharm-corp-v-liberty-insurance-underwriters-inc-ca10-2017.