Court Opinion

ID: 3178999
Source: CourtListenerOpinion
Date Created: 2016-02-19 20:04:26.52516+00
Date Added: 2024-06-11T12:16:52.734601
License: Public Domain

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.

                                   A.

     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.

                                                B.

      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

                                     16