# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 7- 33 92

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Ro be rt M au ; Eag le W el l Se rv ic es , Inc

.

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff s - Ap pe ll an ts

v.

Twin Cit y

Fir e In su ran ce Co

.

ll ll ll ll ll ll ll ll ll ll l

Defe nd an t - Ap pe ll ee

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App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of No rth Dako ta - Bi sm arck

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Su bm it te d: Octo be r 18 , 20 18
Fi le d: Decem

be r 6, 2 01 8

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Befo re SM ITH, Chi ef J ud ge , LOKE N and GRUENDER, Circu it Ju dg es

.

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GRUENDER, Circ ui t J ud ge

.

Ro be rt Mau an d Eag le W el l Serv ic es , In c. (“ EW S”) ap pe al th e di st ric t co ur t’s 1

gr an t of Twin Ci ty Fi re In su ran ce Co m pa ny’ s (“ Twin Ci ty”) cro ss -m ot io n fo r

The Hon or ab le Dan ie l L. Hov la nd

, Ch ie f Ju dg e, Uni te d St at es Dis tri ct Co ur t 1

fo r th e Dis tri ct of No rth Dako ta

.su m

m ary jud gm en t. The di st ric t co ur t fo un d th at Twin Ci ty di d no t owe Mau or EW S

a d ut y to de fen d u nd er a Twin Cit y in su ran ce p ol ic y . W e aff irm.

The co m pl ic at ed fact s of th is cas e are se t ou t fu ll y in th e di st ric t co ur t’s or de r,

Mau v. Twi n Ci ty Fir e I n s

. Co

. , No. 1: 16 -CV-3 25

, 20 17 W L 44 79 73 1, at *1 -3
(D.N.D. Oct. 3, 20 17 ), so we rel at e on ly th e m os t rel ev an t fact s he re. Twin Ci ty

in su red Eag le Ope rat in g, In c. an d it s su bs id ia rie s. End or se m en t No. 2 of th e po li cy
de fin ed Eag le Ope rat in g’s su bs id ia rie s to i n c l u d e EWS an d MW In du st rie s, In c.

Dur in g th e rel ev an t peri od

, Mau was pr es id en t of Eag le Ope rat in g, sh areh ol de r an d

pr es id en t of EW S, di rect or an d pr es id en t of MW, an d an own er of Am eri can W el l

Serv ic es (“ AW S”).

In Feb ru ary 20 12 , EW S so ld it s as se ts to a pr ed eces so r of Su n Well Serv ic es (“ Su n W el l” ) th ro ug h an Ass et Pu rch as e Agr eem en t (“ Agr eem en t” ). EW S an d Mau

were pa rti es to th e Agr eem en t, whi ch in cl ud ed a no nc om pe ti ti on co ve na nt

. Afte r th e Agr eem en t was si gn ed

, MW so ld eq ui pm en t to AW S. Cl ai m in g th at th e sa le vi ol at ed

th e no nc om

pe ti ti on co ve na nt

, Su n W el l su ed Mau fo r br each of co nt ract

, frau d, an d

ci vi l co ns pi racy, an d it su ed EW S fo r br each of co nt ract an d frau d. Twin Ci ty refu se d

to de fen d t he su it

. 2

Mau an d EW S su ed Twin Ci ty, se ek in g a de cl arat io n t h a t th ey were in su red

un de r th e po li cy

. The y al so su ed Twin Ci ty fo r br each of co nt ract an d br each of th e

im pl ie d co ve na nt of go od fai th a n d fai r de al in g. Mau fil ed a m ot io n fo r pa rti al

su m m ary jud gm en t. Twin Ci ty fil ed a res po ns e in op po si ti on an d a cro ss -m ot io n fo r

Twin Ci ty ba se d it s de ni al as to EW S on End or se m en t No. 9 an d End or se m en t 2

No. 10 of t h e i n s u r an ce po li cy , whi ch to ge th er de le te d End or se m en t No. 2 an d
ch an ge d th e po li cy so th at EW S was no lo ng er an in su red su bs id ia ry of Eag le Ope rat in g. The pa rti es di sp ut e th e va li di ty of End or se m en t No. 9 an d End or se m en t
No. 10

. W e as su m e, wit ho ut de ci di ng , th at th ey are in va li d an d th at EW S is th us an in su red su bs id ia ry

acco rd in g t o En do rs em en t No . 2.

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-su m

m ary jud gm en t, as ki ng th e co ur t to fin d th a t Tw i n C i t y ha d no du ty to de fen d

Mau or EW S. The di st ric t co ur t de ni ed Mau ’s m ot io n fo r pa rti al su m m ary jud gm en t,

an d i t g ran te d Twi n C it y ’s cro ss -m ot io n fo r su m m ary jud gm en t.

W e rev ie w a gr an t of su m m ary jud gm en t de no vo
, co ns id eri ng th e fact s “ in th e

li gh t m os t fa vo rab le to th e no nm ov in g pa rty.” Hil an d Par tn er s GP Ho ld in gs , L LC

v. Na t’l Uni on Fir e In s. Co

. of Pit ts bu rg h

, PA

, 84 7 F.3 d 59 4, 59 7 (8 th Ci r. 20 17 ). A

m ot io n fo r s um m ary jud gm en t wil l be gr an te d whe re “ th e m ov an t sh ows th at th ere
is no ge nu in e di sp ut e as to an y m at eri al fact an d th e m ov an t is en ti tl ed to jud ge m en t

a s a mat t e r o f la w.” Fed

. R. Ci v. P. 56 (a). W e rev ie w “ th e di st ric t co ur t’s

co ns tru ct io n of a n i n s u r a n ce po li cy an d in te rp ret at io n of st at e la w de no vo .”

Phi la de lp hi a Co ns ol

. Hol di ng Co rp

. v. LS I-Lo wer y Sy st ems
, In c. , 77 5 F.3 d 10 72

, 10 76 (8t h C ir. 2 01 5)

.

The pa rti es ag ree th at Nor th Dak ot a la w ap pl ie s in th is cas e. “ [T]he pa ram et ers

of [an in su rer’s] du ty to de fen d are go ve rn ed by th e al le ga ti on s in th e c o mp l ai nt

ag ai ns t th e in su red .” Pen nz oi l Co . v . U.S . Fi d. & Gua r. Co

. , 5 0 F.3 d 58 0, 58 3 (8 th

Ci r. 19 95 ) (ap pl y in g Nor th Dak ot a la w )

. “[A ]n in su rer ha s no du ty to de fen d an

act io n if th ere is no po ss ib il it y of co ve rag e un de r th e po li cy .” Sc hu lt ze v. Co nt ’l In s.

Co

. , 61 9 N.W .2d 51 0, 51 3 (N.D. 20 00 ). “ [A]ny do ub t ab ou t whe th er a du ty to de fen d

ex is ts m us t be res ol ve d in fav or of th e in su red .” Ti lb er t v. No da k Mut

. In s. Co

. , 81 6

N.W .2d 31 , 42 (N.D. 20 12 ).

The di st ric t co ur t pr op erl y gr an te d su m m ary jud gm en t to Twin Ci ty as to bo th

Mau an d EW S. Mau arg ue d be fo re th e di st ric t co ur t th at Twin Ci ty owe d hi m a du ty

to de fen d be cau se Su n W el l su ed hi m in hi s cap aci ty as a di rect or an d of fic er of MW,

an in su red su bs id ia ry of Eag le Ope rat in g. The di st ric t c ou rt reject ed hi s arg um en t,

an d so do we. Su n W el l’s cl ai m s do no t de pe nd on an y act io ns Mau to ok as pr es id en t

of MW. Thi s is ev id en ced b y t h e f a c t t ha t Su n W el l di d no t su e MW. W hi le Su n

W el l’s co m

pl ai nt m en ti on s M W

co nt ex tu al ly, MW is n ot a pa rty to t he su it

.

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-In st ead

, Su n W el l’s cl ai m s de pe nd on th e al le ge d br each of th e no nc om pe ti ti on

co ve na nt in th e Agr eem en t be twee n EW S an d Su n W el l, an ag reem en t to whi ch MW

was no t a pa rty. Su n W el l wou ld ha ve no cl ai m fo r br each of co nt ract

, frau d, or ci vi l

co ns pi racy ag ai ns t Mau were it no t fo r th e Agr eem en t, whi ch he si gn ed as pr es id en t

of EW S, no t as a di rec t o r a nd of fic er of MW. Thu s, Su n W el l su ed Mau in hi s

cap aci ty as pr es id en t of EW S. Bec au se Su n W el l’s co m pl ai nt co n t a i n s no cl ai m s
ba se d on an y act io ns Mau to ok as a di rect or an d of fic er of MW, Twin Ci ty owe s hi m

no du ty to d efen d o n t ha t b as is

.

Fo r th e fir st ti m e on ap pe al

, Mau arg ue s t h a t Tw i n Ci ty owe s hi m a du ty to

de fen d be cau se he was s u e d i n hi s cap aci ty as pr es id en t of EW S. Bu t be fo re th e
di st ric t co ur t he arg ue d on ly th at he was en ti tl ed to co ve rag e in hi s cap aci ty as of fic er

an d di rect or of MW. “ It is well se tt le d th at we wil l no t co ns id er an arg um en t rai se d

fo r th e fir st ti m e on ap pe al .” Eag le Tech

. v. Exp an de r Ams., In c. , 78 3 F.3 d 11 31

, 11 38 (8 th Ci r. 20 15 ). Bec au se Mau di d no t gi ve th e di st ric t co ur t th e op po rtu ni ty to

co ns id er whe th er he was en ti tl ed to co ve rag e in hi s cap aci ty as pr es id en t of EW S, we
de cl in e to do so he re.

Bu t ev en ha d Mau rai se d th is arg um en t be fo re th e di s t r ic t co ur t, Eag le
Ope rat in g’s in su ran ce po li c y wit h Twin Ci ty in cl ud es an ex cl us io n th at ap pl ie s to

Mau in hi s cap a c i t y a s p r e si de nt of EW S. The du al se rv ic e ex cl us io n pr ov id es as

fo ll ows :

The In su rer sh al l no t pa y Lo ss :

. . . o f an In su red Per so n ba se d up on , ari si ng fro m , or in an y way rel at ed to su ch In su red Pers on ’s se rv ic e, at

an y ti m e, as a di rect or , o f f i c e r , tru st ee, reg en t, go ve rn or or eq ui va le nt

ex ecu ti ve or as an em

pl oyee of an y en ti ty ot he r th an an In su red Enti ty

ev en if su ch se rv ic e is at th e di rect io n or r e q u e s t o f su ch In su red
Enti ty

. . . .

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-Bec au se th e al le ga ti on s o f th e co m pl ai nt go ve rn th e du ty to de fen d, we lo ok to Su n

W el l’s co m

pl ai nt whe n ap pl y in g th e du al se rv i c e e x c l u si on

. Se e Pen nz oi l Co

. , 50

F.3 d at 58 3. The co m

pl ai nt sa y s th at Mau “ pa rti ci pa te d in t h e fo rm at io n an d

su bs eq ue nt op erat io n” of AW S. And it sa y s th at AW S is an “ affi li at e ” o f Mau “ as

t h a t t e r m is de fin ed in Sect io n 7.1 3 of th e [Ag reem en t].” The Agr eem en t de fin e s

affi li at e as a “ pe rs on th at di rect ly or in di rect ly, th ro ug h on e or m or e in te rm ed ia rie s,

Co nt ro ls

, is Co nt ro ll ed by, or is un de r co m m on Co nt ro l wit h, su ch fir st pe rs on .” Any

lo ss Mau su ffer s fro m th e Su n W el l li ti ga ti on cert ai nl y “ ari se s fro m ” an d is “ rel at ed

to ” hi s se rv ic e in on e of th e ex cl us io n’s st ip ul at ed ro le s fo r AW S, an un in su red en ti ty.

Thu s, t he du al ser vi ce ex cl us io n a pp li es to Mau

.

Bec au se Mau was no t su ed in hi s cap aci ty as di rect or an d offi cer o f MW and

be cau se th e du al se rv ic e ex cl us io n ap pl ie s, th ere is no po ss ib il it y of co ve rag e fo r Mau

un de r Twin Ci ty’ s po li cy

. Se e Sc hu lt ze , 61 9 N.W .2d at 51 3. Twin Ci ty ha s no du ty

to de fen d M au in th is su it

.

S i mi la rly, Twin Ci ty ha s no du ty to de fen d EW S in th is su it

. The in su ran ce

po li cy in cl ud es an ot he r ex cl us io n t ha t re ad s as fol lo ws:

Th e In su rer sh al l no t pa y Lo ss un de r In su rin g Agr eem en t (C ) i n

co nn ect io n wit h an y Cla im ba se d up on , ari si ng fro m , or in an y way rel at ed to an y

act ua l o r al le ge d:

(1 ) li ab il it y un de r an y co nt ract or ag r eem en t, pr ov id ed th at th is

ex cl us io n sh al l no t ap pl y to th e ex te nt th at li ab il it y wou ld ha v e be en in cu rred in th e ab se nc e o f su ch co nt ract or a gr eem en t . . . .

In ot he r wor ds

, th e co nt ract ex cl us io n ap pl ie s to cl ai m s ari si ng fro m th e i n s u r e d’s

co nt ract s or ag reem en ts un le ss li ab il it y ot he rwis e wou ld ex is t i n th e ab se nc e of th e

co nt ract or ag reem en t. Thi s ex cl us io n ap pl ie s to EW S b e c a us e Su n W el l’s cl ai m s

ag ai ns t EW S fo r br each of co nt ract an d frau d are ba se d up on , ari s e f r o m, or are

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-rel at ed to th e Agr eem en t, an d li ab il it y co ul d no t ha ve be en in cu rred in th e ab se nc e

of th e Agr eem en t.

EW S do es no t co nt es t th at Su n W el l’s cl ai m s are ba se d up on , ari se fro m , or are
rel at ed to th e Agr eem en t. In st ead

, EW S ad va nc es se v e ral th eo rie s co nt en di ng th at

li ab il it y ex is ts “ in th e ab se nc e of ” th e Agr eem en t. Fo r ex am pl e, it arg ue s th at

, un de r

Nor th Dak ot a la w, th e no nc om pe ti ti on co ve na nt was on ly en fo rcea bl e in on e co un ty.

Se e N.D.C.C. § 9- 08 -0 6 (s ti pu la ti ng th at res tra in ts on bu si ne ss are vo id e xc ep t th at

a p a rty can ag ree to “ refr ai n fro m carr y in g on a si m il ar bu si ne ss wit hi n a s p e c i f i e d

co un ty, ci ty, o r a p a r t of ei th er”)

. EW S th eref or e cl ai m s th at it co ul d be li ab le fo r

frau d i n t ho se co un ti es wher e th e n on co m pe ti ti on co ve na nt was vo id

. EW S arg ue s

fu rth er th at Su n W el l’s frau d cl ai m crea te d th e po ss ib il it y th at th e Agr eem en t wou ld

be res ci nd ed

. If th e Agr eem en t were to be r es ci nd ed

, EW S cl ai m s, li ab il it y wou ld

ex is t i n t he ab se nc e o f th e Agr eem en t.

In ei th er cas e, ev en if EW S’s arg um en ts ha d s om e va li di ty, th e co nt ract

ex cl us io n wo ul d a pp ly to an y res ul ti ng li ab il it y . Sun W el l’s fra ud cla im wou ld no t

ex is t i n t he ab se nc e of th e Agr eem en t. The frau d cl ai m all eg ed th at Mau an d EWS

“ co nc eal ed ” m at eri al fact s ab ou t th ei r pl an to br each th e no nc om pe ti ti on co ve na nt

th at th ey ha d a du ty to di sc lo se

. And a co nt ract th at do e s n o t e x i s t can no t be

r es ci nd ed

. Any reco ve ry fo r res ci ss io n of th e Agr eem en t, su ch as th e r e t u r n o f

am ou n t s r e c ei ve d un de r th e co nt ract

, wou ld no t co m e ab ou t in th e ab se nc e of th e Agr eem en t.

The re is no po ss ib il it y of co ve rag e fo r EW S un de r Twin Ci ty’ s po li cy be cau se

th e co nt ract ex cl us io n ap pl ie s. Twin Ci ty do es no t owe E W S a du ty to de fen d. Se e

Sc hu lt ze , 61 9 N.W.2d a t 5 13

.

Fo r th e fo reg oi ng reas on s, we af fir m

.

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