Court Opinion

ID: 4524552
Source: CourtListenerOpinion
Date Created: 2020-04-10 21:00:12.499482+00
Date Added: 2024-06-11T09:26:10.240167
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 19-1826

 NEWTON COVENANT CHURCH, GARRETT SMITH, CARMEN ALDINGER, ANDERS
 BROWNSWORTH, THOMAS DEVOL, HAROLD JONES, DORIS KELLOM, KRISTEN
  LUCKEN, ROGER MARK, ROSELIND PICARD, DANIEL ROMAINE, BEATRICE
                             YANKEY,

                     Plaintiffs, Appellants,

                               v.

                GREAT AMERICAN INSURANCE COMPANY,

                      Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS
         [Hon. Richard G. Stearns, U.S. District Judge]

                             Before

                      Lynch, Circuit Judge,
                   Souter, Associate Justice,
                    and Lipez, Circuit Judge.

     Kimberly L. Wehle, with whom Miller Friel, PLLC, Robert J.
Gilbert, and Latham & Watkins, LLP were on brief, for appellants.
     Ashly Scheufele, with whom Barry S. Pollack and Pollack
Solomon Duffy LLP were on brief, for appellee.

                         April 10, 2020

     
       Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
            SOUTER, Associate Justice.          Plaintiffs Newton Covenant

Church    and   its    individual    officers    appeal    from   a   judgment

dismissing their breach-of-contract action against Defendant Great

American Insurance Company.         We affirm.

                                       I

            Newton Presbyterian Church (NPC) is a member church of

a national Presbyterian denomination known as the Presbyterian

Church (USA) (PCUSA).       On January 15, 2017, a majority of NPC's

members voted to withdraw from PCUSA and to affiliate with a non-

Presbyterian organization: the Evangelical Covenant Church.                 The

withdrawing members called themselves the "Newton Covenant Church"

(NCC).

            On March 17, 2017, NPC and the Presbytery of Boston1

brought suit in Suffolk Superior Court against NCC and those

individuals chosen to act as its officers, alleging trespass and

conversion.     According to the complaint, the NCC and its officers

had   succeeded   in    unlawfully    exerting    control    over     NPC   real

property, as well as NPC bank accounts, following a dispute over

PCUSA's    "progressive    stances"     on   same-sex     marriage    and   the

ordination of gay, lesbian, bisexual and transgender ministers.

App. 41.    The complaint alleged that the "break-away" group had

rejected the Presbytery's authority to resolve the ecclesiastical

      1The Presbytery of Boston governs PCUSA member churches in
the greater Boston area.

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schism, and instead conducted a "vote" not authorized under the

PCUSA's Constitution.   App. 42-43.     Among other things, NPC and

the Presbytery sought a declaratory judgment that NPC owned church

property at 75 Vernon Street, in Newton, Massachusetts.

          On March 23, 2017, the group known as NCC submitted

documentation to the Secretary of the Commonwealth that resulted

in changing the congregation's name from "Newton Presbyterian

Church" to "Newton Covenant Church."     It then submitted a notice

to the Great American Insurance Company (GAIC) requesting a defense

in the Suffolk Superior Court action under a $1 million Directors

and Officers insurance policy (Policy).      Acknowledging that the

named insured under the Policy was NPC, not NCC, the notice

asserted that NCC was, as a matter of law, the same legal entity

as the named insured.   App. 134-135.   On April 26, 2017, GAIC sent

a letter denying coverage.

          On November 6, 2017, the Superior Court awarded partial

summary judgment to NPC and the Presbytery of Boston.            In a

separate judgment, the court later declared that "NPC is the sole

and exclusive owner of the property" in question and ordered NCC

and its members to vacate the premises.      App. 85.     Accordingly,

the Secretary of the Commonwealth restored the registered entity

name to "Newton Presbyterian Church."     App. 127.     NCC's officers

then filed Articles of Organization with the Secretary of the

Commonwealth to create a new entity called the "Newton Covenant

                               - 3 -
Church."    On June 14, 2018, the parties reached a settlement

agreement to dismiss the lawsuit with prejudice and to vacate the

partial summary judgment order.2

           On December 21, 2018, Plaintiffs NCC and its individual

officers brought this action against GAIC for breach of contract,

alleging   that     GAIC,   as    their    insurer,    failed     to   defend   and

indemnify them in the state court action.                 The district court

granted GAIC's motion to dismiss the complaint for failure to state

a claim under Fed. R. Civ. P. 12(b)(6).

                                          II

           We review de novo an order granting a motion to dismiss.

Rodi v. New England Sch. of Law, 389 F.3d 5, 12 (1st Cir. 2004).

"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) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.

544, 570 (2007)).      While "a district court is generally limited to

considering 'facts and documents that are part of . . . the

complaint,'" Giragosian v. Ryan, 547 F.3d 59, 65 (1st Cir. 2008)

(quoting Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 524

      2GAIC asserts that the plaintiffs "knowingly relinquished
any right they might have had to file this lawsuit" when they
signed the settlement agreement. Brief of Appellee 19. Because
we affirm on the basis of the Policy, we need not determine the
significance of this agreement.

                                       - 4 -
F.3d 315, 321 (1st Cir. 2008)), it may also consider "documents

incorporated by reference in [the complaint], matters of public

record, and other matters susceptible to judicial notice," In re

Colonial Mortgage Bankers Corp., 324 F.3d 12, 20 (1st Cir. 2003).

            An insurer must defend its insured "when the allegations

in a complaint [against the insured] are reasonably susceptible of

an interpretation that states or roughly sketches a claim covered

by the policy terms."       Billings v. Commerce Ins. Co., 936 N.E.2d

408, 414 (Mass. 2010).         As relevant here, the Policy defines

"Insured"    to   include   both   the     "Organization"   and   "Insured

Persons."    Add. 12.   "Organization" refers to "the entity named"

in certain declarations, here the NPC, while "Insured Persons"

includes, among others, "persons who were, now are, or shall be

directors, trustees, [or] officers . . . of the Organization."

Id. Plaintiffs assert that, at the time of the state court action,

they qualified as "Insured[s]": the NCC as an "Organization" and

the individual officers as "Insured Persons."         App. 15-16.

            Plaintiffs' allegations are not reasonably susceptible

of an interpretation that would state a claim covered under the

Policy.   Although the Policy covers "legal fees . . . incurred in

the investigation or defense of any Claim," it defines "Claim" to

include only, as relevant here, a "civil proceeding . . . made

against any Insured." Add. 11 (emphasis added). It is uncontested

that the only "Organization" named under the Policy as an "Insured"

                                   - 5 -
is an entity called "Newton Presbyterian Church."              Therefore, to

the extent that NCC claims it was a distinct organization even

prior to its separate registration with the State, it was not

within the definition of an insured "Organization."            To the extent

that NCC claims instead that it was a segment of the original NPC

at the time of the state court complaint, coverage is barred for

another reason: § IV.H of the Policy.            That provision, one of a

handful of "Exclusions" under the Policy, precludes coverage for

claims between insureds.3    See Mt. Airy Ins. Co. v. Greenbaum, 127

F.3d 15, 19 (1st Cir. 1997) ("There is . . . no duty to defend a

claim    that   is   specifically     excluded     from     coverage"     under

Massachusetts law).     And, finally, to the extent that NCC claims

it was the original organization that had simply undergone a formal

name change, once again that would implicate § IV.H's exclusion.

As the district court observed, "the complaint alleges that NPC

and NCC were, at best, the same entity."                  Add. 30.      Because

     3 Section IV.H provides that: "This Policy does not apply to
any Claim made against any Insured . . . by, or for the benefit
of, or at the behest of the Organization or any Subsidiary or any
entity which controls, is controlled by, or is under common control
with the Organization or any Subsidiary, or any person or entity
which succeeds to the interests of the Organization or any
Subsidiary, provided, however, this exclusion shall not apply to
any Claim brought by the receiver, conservator, liquidator,
trustee, rehabilitator, examiner or similar official of the
Organization, if any, in the event of Financial Insolvency." Add.
15 (emphases omitted).

                                    - 6 -
"insureds would be on both sides of the litigation," id., the

exclusion would apply.4

            As   for   the   individual    plaintiffs   who   are   current

officers of the NCC, § IV.H of the Policy works a similar effect,

given any of the alternative assumptions just discussed.              Thus,

because current NCC officers claim to have been "Insured Persons"

as defined by the Policy, their claim must be that they were

officers of the named insured, NPC, at the time of the state court

action.     If so, NPC would be in litigation against its own

officers.    Accordingly, the Policy expressly precludes claims of

this nature.5

            Affirmed.

     4 Because we affirm on the basis of this exclusion, we need
not address plaintiffs' other contentions concerning the district
court's alternative grounds for dismissal.
     5 It is also apparent from the underlying state pleadings that
plaintiffs here were not sued for wrongdoing within the meaning of
the policy. The Policy covers "Wrongful Act[s]" claimed against
insured persons only when such persons are "acting in their
capacity" with the "Organization," "solely by reason of their
status" with the "Organization," or "arising out of their service"
as officers of an outside entity, "but only if such service is at
the request of the Organization." Add. 14. In state court, the
NCC officers were sued not in any such official capacity as NPC
officers, but as members of the "'Leadership Team' of NCC." App.
44-45. Indeed, the state pleadings described NCC as a "religious
organization founded in early 2017 by former members of NPC" and
clearly not at the request of NPC. Id. at 44 (emphasis added).

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