Opinion ID: 2071197
Heading Depth: 1
Heading Rank: 6

Heading: the dismissals with prejudice

Text: Having failed to satisfy the prerequisites for maintaining a derivative action, Flocco was not entitled to sue on behalf of State Farm Mutual, and his complaint therefore could not stand against any defendant. The trial judge held that dismissal on these grounds must be without prejudice. No party has challenged this determination, [12] and we agree that it was correct. Our affirmance of the dismissal of the complaint without prejudice on the foregoing grounds does not, however, complete our task. The trial judge dismissed the action against President Clinton and Mr. Bennett with prejudice on the grounds that, as to these defendants, the complaint failed to state a claim upon which relief may be granted. The judge also dismissed the complaint with prejudice against defendants Rust and Trosino because, in his view, these defendants were not amenable to suit in the District of Columbia in connection with the transactions alleged in the complaint. Flocco contends that these rulings were erroneous, and we must therefore decide whether the claims against Clinton, Bennett, Rust, and Trosino were properly dismissed with (rather than without) prejudice.
In Count 1 of his complaint, Flocco alleged, on information and belief, that defendants Clinton and Bennett, acting in concert with Rust and Trosino, used President Clinton's policy with State Farm Fire as a pretext for the unlawful conversion of approximately ... $1,100,000 of State Farm Funds to the use and benefit of William J. Clinton, and have deprived State Farm of that sum. According to Flocco, each of the defendants unlawfully exercised ownership, dominion or control over State Farm funds. Flocco alleged that Rust and Trosino have done so by authorizing payments of State Farm funds for the benefit of Mr. Clinton even though State Farm had no legal duty to make such payments, [13] and that Clinton and Bennett have done so by receiving and retaining these funds, or the benefit thereof. Finally, Flocco asserted, on information and belief, that Clinton and Bennett, as well as Rust and Trosino, were all aware that there [was] no ground whatever for any claim that State Farm had any duty to defend Mr. Clinton against Ms. Jones' suit. The trial judge dismissed Count I, holding that Flocco had failed in that count to state a claim upon which relief could be granted. Citing Washington v. John T. Rhines Co., 646 A.2d 345, 346 n. 1 (D.C. 1994), the judge recognized that [i]n deciding a motion to dismiss pursuant to [Super. Ct. Civ. R.] 12(b)(6), the complaint is read in the light most favorable to the claimant and the factual allegations are accepted as true. Nevertheless, the judge concluded that on these facts, no relief can be granted for a derivative claim in conversion. The judge reasoned as follows: [T]he conversion count must be analyzed as one made by State Farm Fire for accepting and paying a claim made on behalf of a policyholder who held a valid policy at the time the claim was made. So analyzed, Count I cannot stand. At the time the claim was made, Clinton owned a valid liability insurance policy issued by State Farm Fire. Through his attorney, he made a claim on that policy in connection with a lawsuit filed against him. The insurer determined to pay the claim, that is, to support the defense of the lawsuit filed against the policyholder. Pursuant to that determination, it transferred certain funds either to Clinton or his attorney. By filing a derivative action on behalf of either State Farm Mutual or State Farm Fire against President Clinton and his attorney, plaintiff is forced into the position of asserting that State Farm Fire could claim that Clinton and Bennett converted State Farm Fire funds which State Farm Fire determined should be paid to those defendants. To state the proposition is to refute it. It cannot logically be that defendants Clinton and Bennett exercised unlawful dominion and control over State Farm Fire funds when State Farm Fire paid those funds to them pursuant to a claim made on a valid State Farm Fire insurance policy. Without unlawful ownership, dominion, or control, there can be no conversion, and Count I must be dismissed. Conversion has generally been defined as any unlawful exercise of ownership, dominion or control over the personal property of another in denial or repudiation of his rights thereto. Chase Manhattan Bank v. Burden, 489 A.2d 494, 495 (D.C. 1985) (quoting Shea v. Fridley, 123 A.2d 358, 361 (D.C.1956)). In the present case, Flocco claims to have sufficiently alleged conversion by asserting first, that Clinton, Bennett, Rust and Trosino all knew that the money in question belonged to State Farm Fire and that Clinton and Bennett had no right to it, and second, that in spite of their knowledge, the defendants took the funds away from their rightful owner and transferred them to a wrongdoer President Clintonwho allegedly had made a knowingly false claim of coverage. But even if conversion could be established by proof that Clinton and Bennett knew that the President was not entitled to the fundsan issue we need not and do not decideFlocco's complaint nevertheless fails. The flaw in Flocco's argument is that he treats as a fact, known to Clinton and Bennett, the proposition that the policy did not apply, when in reality that proposition turns on an unresolved and somewhat dubious legal theory. The complaint thus alleges that Clinton and Bennett knew a fact that, in our view, they could not have known because it is subject to genuine dispute and therefore not knowable. President Clinton's insurance policy, while excluding claims for discrimination and intentional conduct, [14] obligated State Farm Fire to pay for a net loss for personal injury, including libel, slander and defamation of character. Paula Jones' suit against the President included claims of defamation. Under familiar principles of insurance law, any reasonable doubt which may arise as to the meaning or intent of a condition of [the policy] will be resolved against the insurer. Cameron v. USAA Property & Cas. Ins. Co., 733 A.2d 965, 968 (D.C.1999) (citations omitted); accord, West American Ins. Co. v. Vago, 197 Ill.App.3d 131, 143 Ill.Dec. 195, 553 N.E.2d 1181, 1184, appeal denied, 133 Ill.2d 574, 149 Ill.Dec. 340, 561 N.E.2d 710 (1990) (The insurer must defend its insured if the complaint alleges facts which are within or potentially within policy coverage. . . The duty to defend exists even if the complaint alleges several causes of action and only one is within potential policy coverage.) (citations omitted). In Stanback v. Westchester Fire Ins. Co., 68 N.C.App. 107, 314 S.E.2d 775 (1984), the insured's umbrella policy provided coverage for suits against the insured for personal injury, including, inter alia, malicious prosecution and intentional infliction of emotional distress. The policy contained an exclusion for any act committed by . . . the insured with intent to cause personal injury or property damage. Id. at 778. The insured had been sued by his wife for inflicting mental anguish and for maliciously instituting a lawsuit against her without probable cause. The insurer denied coverage to the plaintiff, citing the exclusion for actions for injury resulting from intentional acts. The court ruled in favor of the insured: In this case the policy defined personal injury to include false arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution, libel and slander. These are clearly intentional torts. This definition when read in conjunction with exclusion (e), which purportedly attempts to exclude intentional torts, creates an ambiguity in the policy. Our supreme court has held that when language is used in an insurance policy which is reasonably susceptible of differing constructions, it must be given the construction most favorable to the insured, since the insurance company prepared the policy and chose the language. See Grant v. [Emmco] Insurance Co., 295 N.C. 39, 243 S.E.2d 894 (1978). In this case the apparent conflict between coverage and exclusion must therefore be resolved in favor of plaintiff, and we therefore reject defendants's argument that Mrs. Stanback's allegations regarding intentional infliction of mental anguish and malicious prosecution are excluded from coverage by exclusion (e). Id. at 779; see also Scudder v. Hanover Ins. Co., 201 Ill.App.3d 921, 147 Ill.Dec. 386, 559 N.E.2d 559, 562 (1990) ([U]nder Illinois law, policy provisions excluding coverage for acts committed by the insured with intent to cause personal injury will only exclude coverage if the insured acted with specific intent to injure, unless the policy states otherwise.); Burns v. Middlesex Ins. Co., 558 A.2d 701, 702 (Me. 1989) (exclusion from coverage of bodily injury ... which is expected or intended by the insured did not negate insurer's duty to defend suit against insured for defamation, invasion of privacy, and intentional infliction of emotional distress; exclusion applies only where insured subjectively wanted to cause bodily injury and subjectively foresaw it as practically certain; [i]f there is any legal or factual basis that could be developed at trial, which would obligate the insurer to pay under the policy, the insured is entitled to a defense) (emphasis in original) (citation omitted); but cf. Commercial Union Ins. Companies v. Sky, Inc., 810 F.Supp. 249, 254-55 (W.D.Ark.1992) (no duty to defend defamation claims made in insured's brief, where those claims arose out of the underlying non-covered claim of sexual harassment). [15] The question whether, as Flocco alleges, President Clinton and Mr. Bennett knew that the policy did not apply to Ms. Jones' action must be analyzed with the foregoing principles in mind. In our view, Flocco's critical allegation cannot be reconciled with the authorities we have cited. Indeed, Flocco's own submission to the trial court demonstrates that Clinton and Bennett could not have known what Flocco alleges that they knew. As a part of that submission, Flocco's attorney included a copy of Symposium: Is the President getting special insurance treatment for the Paula Jones lawsuit?, Insight, July 21, 1997, at 24-27. This symposium contains what is in effect a debate between two insurance experts who reached opposite conclusions on the issue. Richard Giller, a Los Angeles insurance lawyer, argued as follows: Neither Pacific Indemnity nor State Farm legally are [sic] obliged to provide the president with a defense in the Jones case, based upon the nature of the allegations of Jones' complaint, the terms and conditions of the two policies, applicable case law and the strong public policy against allowing people accused of sexual wrongdoing to pass off their liability to insurance companies. So why would Pacific Indemnity or State Farm agree to share in the million-dollar cost of defensea figure that could double or triple quickly? At least to this expert, the answer is simple and straightforward: because their policyholder is the President of the United States. If you or I were accused of the same wrongdoing of which Jones has accused the President, neither company would have lifted a finger to assist us. In Mr. Giller's view, Ms. Jones' defamation claim, like the other counts in her complaint, was based on intentional misconduct on the part of President Clinton, and it therefore fell outside the scope of the President's policy with State Farm Fire. [16] Id. at 24. But Sean Mooney, a senior vice president and economist at the Insurance Information Institute, was of a different opinion: The first issuewhether policies held by the president would provide coverageis relatively easy to answer. They do. The president purchased umbrella liability policies from two different insurance companies. These policies provide coverage for any personal injury for which a covered person legally is responsible. The policy defines personal injury to include mental anguish and injury, false arrest, false imprisonment, humiliation, libel, slander and defamation of character. As long as acts such as these were alleged in the Jones lawsuit the insurance company normally will provide coverage. Specifically, the lawsuit alleged false imprisonment and defamation of character, and the insurance companies provided coverage against these claims. They were not responding to the sexual-harassment charge. Indeed, one of the policies excludes acts of sexual harassment.     There is one exclusion in the umbrella insurance policy that is particularly relevant to the Jones lawsuit: the exclusion for intentional acts. The policy excludes an act committed or directed by a covered person with intent to cause personal injury. If the lawsuit alleges that the act was intended to cause injury, then this exclusion would apply. But if the lawsuit is silent on intent or equivocal, then insurance companies, in most cases, will believe they have an obligation to defend. Id. at 25. We find it unnecessary to determine whether Mr. Giller or Mr. Mooney has the better of the argument. The very existence of an evidently bona fide dispute regarding coverage between two specialists in the field refutes Flocco's purportedly factual assertion that Clinton and Bennett knew that Ms. Jones' claim was not covered. In assessing Flocco's allegations, it is our obligation to pierce through the pleadings and their adroit craftsmanship to get at the substance of the claim. United Nat'l Ins. Co. v. Tunnel, Inc., 988 F.2d 351, 354 (2d Cir.1993). While, for the purpose of a motion to dismiss, facts well pleaded must be taken as true, unsupported conclusions of the pleader may be disregarded. Oppenheim v. Sterling, 368 F.2d 516, 519 (10th Cir.1966), cert. denied, 386 U.S. 1011, 87 S.Ct. 1357, 18 L.Ed.2d 441 (1967). We should not accept as true allegations that are in conflict with facts judicially known to the court. Blackburn v. Fisk Univ., 443 F.2d 121, 123 (6th Cir. 1971). Because we know judicially that the dispute over coverage presents an unsettled question of law, we need not, and indeed cannot, credit Flocco's allegation in Count I that Clinton and Bennett knew that they were not entitled to the money paid to them by State Farm Fire. Stripped of this critical allegation, the claims against the President and his attorney fail to state a claim upon which relief may be granted. If, as we have concluded, the question of coverage was in doubt, then defendants Clinton and Bennett had the right to file a claim under the policy. We agree with the trial judge that the subsequent acceptance by these defendants of money which State Farm Fire voluntarily turned over to them in response to that claim could not constitute conversion, regardless of Flocco's criticism of the amount paid. Flocco asserts that even if Count I failed to state a claim for conversion, he should have been permitted to amend his complaint to allege some other tort. [17] But even if we were to assume that Flocco has preserved this point for appeala dubious assumption [18] he has failed to identify in any of his numerous filings a claim in tort which he could have filed in the name of State Farm Fire and which could have survived the excision from his complaint of the allegation that Clinton and Bennett knew that they were not entitled to coverage. We likewise know of no such tort. Accordingly, we conclude that the trial judge did not err by dismissing Count I with prejudice.
Finally, the trial judge dismissed with prejudice Count II of the complaint, which contained Flocco's claims against Rust and Trosino, for lack of personal jurisdiction over these defendants. Flocco contends that this dismissal was erroneous. He claims that Rust and Trosino were properly subject to the court's jurisdiction pursuant to the District's long arm statute. See D.C.Code § 13-423(a)(1) (1995). We do not agree. At the times relevant to this appeal, Rust was the Chief Executive Officer (CEO) of State Farm Mutual. He was also President and CEO of State Farm Fire and a director of that corporation. Trosino was a Vice Chairman of State Farm Mutual and a Vice President and Director of State Farm Fire. Both men were residents of Illinois. Flocco alleged in his complaint that Rust and Trosino sent agents to the District of Columbia to meet with defendant Bennett regarding President Clinton's claim under his State Farm Fire policy. Flocco further asserted that these defendants ordered the payment to Clinton and Bennett, in the District of Columbia, of funds belonging to State Farm Fire. [19] According to Flocco, the foregoing allegations were sufficient to confer personal jurisdiction on the Superior Court, not only over State Farm Mutual, but over Rust and Trosino as well. The trial judge held that these averments were insufficient. After noting the absence from the complaint of any allegation that Rust or Trosino had personally come to the District in connection with the transactions here at issue, the judge wrote: This court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person's . . . (1) transacting any business in the District of Columbia. D.C.Code § 13-423(a)(1) (1995 Repl.). When long-arm jurisdiction is based on transacting business in the District, only acts within the District related to the transaction of business can form the basis for personal jurisdiction. D.C.Code § 13-423(b); Trerotola v. Cotter, 601 A.2d 60, 63 (D.C.1991). Thus, any contacts of Rust and Trosino with the District of Columbia unrelated to the transactions complained of by plaintiff are irrelevant. It seems clear that even if defendants Rust and Trosino had the kind of personal involvement in the decision to reimburse part of President Clinton's cost of defense of the Jones action alleged in the complaint, which they have denied, that involvement would support the exercise of personal jurisdiction over the company for its transaction of business in the District pursuant to the long-arm statute, but would not confer personal jurisdiction on these individual defendants sued in their individual capacities. When there are no allegations that a nonresident defendant's contacts with a jurisdiction were for the purpose of transacting business as an individual, but rather were only to perpetuate a corporation's business, that defendant cannot be sued individually under the transacting business prong of the long-arm statute. Quinto v. Legal Times of Washington, Inc., 506 F.Supp. 554, 558 (D.D.C.1981); see also Wiggins v. Equifax Inc., 853 F.Supp. 500, 503 (D.D.C.1994). We have held, and Rust and Trosino concede, that the transacting any business provision of our long-arm statute extends as far as the Fifth Amendment's Due Process Clause permits. See, e.g., Shoppers Food Warehouse v. Moreno, 746 A.2d 320, 325 (D.C.2000) (en banc). [P]ersonal jurisdiction [therefore] exists when the defendant has purposely established minimum contacts with the forum state and when the exercise of jurisdiction comports with `traditional notions of fair play and substantial justice.' Wiggins, supra, 853 F.Supp. at 502 (quoting Asahi Metal Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 113, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987)). The critical [question] is whether the nonresident's `conduct and connection with the forum state are such that he [or she] should reasonably anticipate being haled into court there.' Trerotola v. Cotter, 601 A.2d 60, 64 (D.C. 1991) (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)); see also Shoppers Food Warehouse, supra, 746 A.2d at 331. In the present case, we conclude that this question must be answered in the negative. We do not doubt that if the well-pleaded allegations of the complaint are taken as true, then the trial court had personal jurisdiction over State Farm Mutual. But jurisdiction over an employee does not automatically follow from jurisdiction over the corporation which employs him. . . . Each defendant's contacts with the forum State must be assessed individually. . . . The requirements of International Shoe [ Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945)] must be met as to each defendant over whom a state court exercises jurisdiction. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781 n. 13, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984) (citations and internal brackets omitted). The present case is similar in dispositive respects to Wiggins, supra . In Wiggins, the plaintiff asked the court to exercise personal jurisdiction over Lowitz and Shaw, each of whom was a supervisor in the corporate defendant's office in Mc-Lean, Virginia. According to the plaintiff, the two nonresident supervisors directed and supervised subordinate employees who had engaged in the District of Columbia in activities prohibited by the federal Fair Credit Reporting Act and by RICO. The court held that the allegations of the complaint were insufficient under the Due Process Clause to confer jurisdiction over the supervisors. 853 F.Supp. at 502. The court continued: [A] court does not have jurisdiction over individual officers and employees of a corporation just because the court has jurisdiction over the corporation. See Quinto v. Legal Times, 506 F.Supp. 554, 558 (D.D.C.1981). Personal jurisdiction over the employees or officers of a corporation in their individual capacities must be based on their personal contacts with the forum and not their acts and contacts carried out solely in a corporate capacity. Thus, the corporation ordinarily [20] insulates the individual employee from the court's personal jurisdiction. In this case, defendants are clearly not doing business within the District of Columbia. They are merely employees of a company that has contacts with the District. These acts, carried out within the scope of their employment, do not create sufficient contacts to establish personal jurisdiction. The fact that Lowitz and Shaw may have acted in a supervisory capacity over persons with contacts with the District also fails to create personal jurisdiction. Id. at 503 (emphasis in original; footnote omitted). Flocco asserts that Rust and Trosino directed their subordinates to carry out activities contrary to the interests of State Farm Mutual, that these directives were personal rather than corporate in nature, and that the trial judge therefore should have exercised personal jurisdiction over these defendants. This contention is unpersuasive. In Richard v. Bell Atlantic Corp., 976 F.Supp. 40 (D.D.C.1997), the plaintiff in an action for employment discrimination alleged that three individual defendants, who were high-ranking officers of Bell Atlantic Corporation, but who did not reside in the District of Columbia, had intentionally directed subordinates to engage in a variety of activities which resulted in racial discrimination in the District against Bell Atlantic's black employees. The court held that, for jurisdictional purposes, notwithstanding the unlawful nature of their alleged conduct, the individual defendants' activities were performed in their capacity as corporate officers, and that in light of Keeton and other authorities, the court lacked personal jurisdiction over the nonresident defendants: All of these alleged jurisdictional facts involve the individual defendants' official duties for Bell Atlantic Corporation setting policies, communicating with employees, conducting investigations, and making employment decisions. As a matter of law, the defendants were at all times acting within the scope of their employment, because they were authorized to perform such acts for BAC. Accordingly, the plaintiffs have failed to plead sufficient jurisdictional facts, because acts committed within the scope of employment cannot be imputed to the individual defendants to establish personal jurisdiction over them. See Keeton, [supra, 465 U.S. at] 781 n. 13[, 104 S.Ct. 1473]; Wiggins, [ supra, ] 853 F.Supp. at 503 (finding no personal jurisdiction over two supervisors at a credit reporting company, because they acted within the scope of their employment when they purportedly (a) issued and transmitted the plaintiff's credit reports to another office and (b) supervised employees who collected information on the plaintiff). Id. at 50 (footnotes omitted). We agree with the analysis of the courts in Wiggins and Richard. [21] Even if we assume, contrary to their affidavits, that Rust and Trosino dispatched one or more subordinates to the District to negotiate with Mr. Bennett and that these defendants subsequently authorized the wrongful payment to President Clinton and his attorney of money belonging to State Farm Fire, we do not believe that Rust and Trosino could reasonably have anticipated being haled into court in the District, as individual defendants, to answer a suit such as Flocco's. Indeed, if Flocco's argument were accepted; it would be difficult to envision a reasonable limiting principle which would preclude the exercise of jurisdiction over each and every officer of State Farm Mutual and State Farm Fire, even if that individual has never set foot in the District of Columbia. Indeed, Flocco's doctrine would permit the exercise of jurisdiction even over nonresident officers of multi-national corporations located in jurisdictions many thousands of miles from the United States, whenever a plaintiff has made conclusory allegations, on information and belief, that such persons have directed or supervised activities of subordinates who have taken some action in the District. Our concern in this regard is compounded by Flocco's remarkable acknowledgment that he may have sued the wrong individuals, [22] and by his insistence that personal jurisdiction over Rust and Trosino exists anyway. Accordingly, we conclude that the claims against Rust and Trosino were properly dismissed. [23] In his written order, the trial judge stated that the action against Rust and Trosino was dismissed with prejudice. Presumably, the judge meant by this terminology that the order of dismissal was with prejudice to the filing of a new complaint against these defendants in the District of Columbia. In any event, dismissal for want of subject matter or personal jurisdiction is not a decision on the merits. Consequently, upon such a dismissal the plaintiff is free to institute the suit anew in a jurisdiction or under circumstances supporting jurisdiction. Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 n. 4 (2d Cir.1994) (citation omitted); see also Velasquez v. Franz, 123 N.J. 498, 589 A.2d 143, 147 (1991).