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

• Court: Court of Appeals for the Fourth Circuit
• Decided: February 19, 2016
• Docket: 14-2327
• Status: Published

Opinion

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

3 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

5 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).

9 III.

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.

11 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.

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

12 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

14 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.

15 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