Court Opinion

ID: 2797310
Source: CourtListenerOpinion
Date Created: 2015-04-29 15:05:30.210389+00
Date Added: 2024-06-11T12:45:49.591227
License: Public Domain

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14-P-573                                              Appeals Court

     RESOLUTE MANAGEMENT INC. & another1 vs. TRANSATLANTIC
                 REINSURANCE COMPANY & another.2

                              No. 14-P-573.

         Suffolk.       November 13, 2014. - April 29, 2015.

             Present:    Green, Wolohojian, & Blake, JJ.

Practice, Civil, Motion to dismiss. Consumer Protection Act,
     Businessman's claim. Contract, Reinsurance agreement,
     Interference with contractual relations. Conflict of Laws.

     Civil action commenced in the Superior Court Department on
April 30, 2013.

    A motion to dismiss was heard by Thomas P. Billings, J.

     Bryce L. Friedman, of New York (Kevin O'Connor with him)
for the plaintiffs.
     John N. Thomas, of New York (Ben T. Clements with him) for
the defendants.

    GREEN, J.       The plaintiffs appeal from a judgment of

dismissal entered in Superior Court following the allowance of

    1
        National Indemnity Company.
    2
        Alleghany Corporation.
                                                                    2

the defendants' motion to dismiss the plaintiffs' complaint

pursuant to Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974).3    The

complaint asserted claims of tortious interference with

contractual relations and violation of G. L. c. 93A.   We

conclude that the judge correctly dismissed the claims of

Resolute Management Inc. (Resolute) for tortious interference

with contractual relations as Resolute is not a party to the

contracts at issue.   However, we conclude that the allegations

of the complaint do not establish as a matter of law that the

plaintiffs cannot maintain a cause of action under G. L. c. 93A,

or whether New York or Massachusetts law should apply to the

claims of National Indemnity Company (National) for tortious

interference with contractual relations.   We accordingly reverse

so much of the judgment as dismisses the plaintiffs' c. 93A

claims and National's claims for tortious interference with

contractual relations.

     Background.   We summarize the facts alleged in the

plaintiffs' complaint which, for purposes of our review of the

defendants' motion to dismiss, we accept as true, construing all

     3
       The judge did not address the allegation by Alleghany
Corporation (Alleghany), under Mass.R.Civ.P. 12(b)(2), 365 Mass.
754 (1974), that the complaint should be dismissed for lack of
personal jurisdiction. Alleghany does not press that ground in
this appeal as an alternative basis to support dismissal of the
claims against it.
                                                                   3

reasonable inferences from those facts in the plaintiffs' favor.

See Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008).

    National, a Nebraska corporation with a principal place of

business in Nebraska, is an eligible surplus lines insurer and

reinsurer in the Commonwealth whose business includes issuing

reinsurance contracts and contracting to manage asbestos-related

personal injury claims for Massachusetts-based insurers.

National's business, in part, is to enter contracts with other

insurers' clients, pursuant to which it (or Resolute, as

National's agent) resolves claims against those other insurers

and collects reinsurance.

    In 2001, National entered into an administrative service

agreement (ASA I) with two major insurers, pursuant to which

National was appointed to adjust, handle, agree, settle, pay,

compromise, or repudiate certain asbestos-related claims on

behalf of a number of Massachusetts-based insurers, and also was

appointed to collect reinsurance recoveries related to those

claims from Transatlantic Reinsurance Company (Transatlantic),

and other insurers.   In 2011, National entered into similar

agreements with five other major insurers (ASA II) and, in 2012,

with another (ASA III).   In each of the ASAs, Resolute, a

Delaware corporation with a principal place of business in

Massachusetts, was authorized as agent to carry out National's

duties under the ASA (or ASAs).
                                                                    4

     Transatlantic is a reinsurer licensed to do business in

Massachusetts, which it does on a regular basis.   In March,

2010, after decades of being a subsidiary of American

International Group, Transatlantic became an independent,

publicly traded company.   Because of a lack of operational

flexibility and other factors (including anticipated adverse

developments in so-called "legacy"4 asbestos claims),

Transatlantic found it difficult to compete with National in the

insurance and reinsurance markets.   National and Resolute were

so efficient in resolving claims against their insurer clients

and in promptly collecting reinsurance that Transatlantic's

business model was damaged and its business threatened.   Despite

a weak market, Transatlantic began to look for a merger partner.

     In August, 2011, National offered to purchase Transatlantic

for approximately fifty-two dollars per share, all cash, which

was below Transatlantic's stated book value.   Transatlantic

rejected the offer, but in 2012 allowed itself to be acquired by

Alleghany Corporation (Alleghany) (which was looking to enter

the reinsurance market) for approximately $59.79 per share.

     The merger of Alleghany and Transatlantic got off to a

rocky start, in part because Transatlantic continued to be

     4
       Legacy claims arise from actions conducted decades
earlier, "leaving an unwanted 'legacy'" in the form of actual or
alleged injury. Pitre, Jr., Legacy Litigation & Act 312 of
2006, 20 Tul. Envtl. L.J. 347, 348 (2007).
                                                                   5

plagued by its asbestos-related claims.   Transatlantic sought to

commute (i.e., pay another entity to assume responsibility for a

risk) its asbestos-related reinsurance obligations to a group of

clients of National and Resolute, but the price Transatlantic

was willing to pay was significantly less than the amount of its

exposure to those clients, and neither National nor Resolute was

willing to yield to Transatlantic's demands.

     For years prior to the merger between Transatlantic and

Alleghany, Resolute promptly billed Transatlantic for

reinsurance benefits under ASA I, and Transatlantic regularly

reviewed and audited information and data it received from

National's insurer-clients for compliance with the terms of ASA

I.   Prior to its merger with Alleghany, Transatlantic never

raised a question about the amounts it was billed by Resolute,

and timely paid substantial sums to Resolute under ASA I.

Similarly, from mid-2011 through 2012, Transatlantic routinely

and timely paid bills submitted by Resolute pursuant to ASA II.

However, after Alleghany purchased Transatlantic, Transatlantic

unjustifiably refused to pay invoices Resolute submitted

pursuant to all three ASAs.   Specifically (as alleged in the

complaint), Alleghany instructed Transatlantic to rid itself of

its problematic legacy asbestos liabilities and to punish

Resolute and National for failing to accept Transatlantic's

proposed terms to commute those claims.   By withholding
                                                                    6

reinsurance payments due to Resolute on behalf of National,

Alleghany and Transatlantic sought to harm National's and

Resolute's relationships with their clients, to impede

National's ability to perform its contractual obligations to

those clients, and to force National to agree to commute

Transatlantic's obligations at the "below-market and irrational

price" that Alleghany and Transatlantic demanded.

     This litigation followed.   By complaint filed April 30,

2013, against Transatlantic and Alleghany, Resolute and National

brought claims of tortious interference with contractual

relations (ASA I, ASA II, and ASA III), and violation of G. L.

c. 93A, § 11.   A judge allowed the defendants' motion to dismiss

the complaint, and the plaintiffs appealed.

     Discussion.    For independent but similar reasons, central

to determination of the viability of the plaintiffs' complaint

is an assessment of the relationship to the Commonwealth of the

facts and circumstances giving rise to their claims.     The

plaintiffs' claims for tortious interference with contractual

relations are viable (at least for pleading purposes) if they

are governed by Massachusetts law, but not if they are governed

by New York law.5   Similarly, the plaintiffs are entitled to

     5
       Under New York law, to prevail on a claim of tortious
interference with contractual relations a plaintiff must
establish, among other things, that the defendant's interference
caused an actual breach of a contract between the plaintiff and
                                                                   7

maintain a claim pursuant to G. L. c. 93A, § 11, only if the

statute applies to the unfair or deceptive acts alleged.    In

both instances, the required determination turns principally on

the relationship of the parties and their activities to the

Commonwealth, as we shall discuss infra.

    1.     Applicability of G. L. c. 93A.   "Under c. 93A, § 11, it

is [the defendants'] burden to demonstrate that 'the center of

gravity of the circumstances that [gave] rise to the claim' were

not 'primarily and substantially within the Commonwealth.'"

Skyhook Wireless, Inc. v. Google Inc., 86 Mass. App. Ct. 611,

622 (2014), quoting from Kuwaiti Danish Computer Co. v. Digital

Equip. Corp., 438 Mass. 459, 470, 473 (2003) (Kuwaiti Danish).

As the Supreme Judicial Court observed in Kuwaiti Danish, supra

at 473, § 11 appears to contemplate that such an assessment

would occur following, and based upon, findings of fact made by

a judge.

    As a threshold matter, we note that the defendants have

cited no appellate case in which the center of gravity of a § 11

a third party. See, e.g., Lama Holding Co. v. Smith Barney
Inc., 88 N.Y.2d 413, 424 (1996). By contrast, Massachusetts has
adopted § 766A of the Restatement (Second) of Torts (1979), see
Shafir v. Steele, 431 Mass. 365, 369 (2000), under which a
plaintiff need not establish an actual breach if he can show
that the defendant's interference either prevented the plaintiff
from performing the contract or caused his performance of the
contract to be more expensive or burdensome. In the present
case, the plaintiffs do not allege that an actual breach of ASA
I, ASA II, or ASA III has occurred.
                                                                  8

claim was determined adversely to a plaintiff upon a motion to

dismiss (as compared to a motion for summary judgment or after

trial), and we are aware of none.6   In light of the multiple

factors to be applied, and the nuanced and flexible approach to

assessing them, as articulated in Kuwaiti Danish, see ibid., we

find it difficult to imagine how such an assessment might be

made on the basis of the allegations of the complaint alone --

at least where, as in the present case, the loss occurred in

Massachusetts, and substantial numbers of the claims upon which

the bills Resolute submitted to Transatlantic were based related

     6
       In support of their argument, the defendants cite several
unpublished decisions of the Superior Court dismissing a c. 93A
complaint on a motion to dismiss. To the contrary is a line of
published opinions of the United States District Court for the
District of Massachusetts. See Workgroup Technology Corp. v.
MGM Grand Hotel, LLC, 246 F. Supp. 2d 102, 118 (D. Mass. 2003)
(center of gravity decision must be based on factual findings
not made on motion to dismiss); Berklee College of Music, Inc.
v. Music Indus. Educators, Inc., 733 F. Supp. 2d 204, 213 (D.
Mass. 2010) ("absent some extraordinary pleading concession by a
claimant" challenge to c. 93A claim "cannot be resolved on Rule
12 motions"). See also In Re TJX Cos. Retail Security Breach
Litigation, 524 F. Supp. 2d 83, 93 (D. Mass. 2007) (allegations
of complaint adequate to survive motion to dismiss), aff'd in
part by 564 F.3d 489 (1st Cir. 2009); Hertz Corp. v. Enterprise
Rent-A-Car Co., 557 F. Supp. 2d 185, 197 (D. Mass. 2008)
(reserving ruling on motion to dismiss c. 93A claim pending
completion of trial on jury claims). Contrast Iantosca v.
Benistar Admin Servs., Inc., 738 F. Supp. 2d 212, 220 (D. Mass.
2010) (dismissing c. 93A complaint without prejudice where all
deceptive acts alleged in complaint [other than commencement of
litigation] occurred in Pennsylvania).
                                                                    9

either to Massachusetts insurers or claimants.7   Though the

defendants assert that many of the activities upon which the

plaintiffs' claims are based occurred outside the Commonwealth,

the complaint includes no allegation or other indication to

support the assertion.8

     To be sure, in light of the defendants' principal physical

presence in New York (of which the judge took judicial notice,

see note 8, supra), it is entirely possible that the principal

communications between the defendants concerning their

determination to refuse further payments to Resolute took place

outside the Commonwealth.   Less influential, in our view, is the

fact that certain of the insurers with which National contracted

under the ASAs were headquartered outside Massachusetts -- at

     7
       We also note that paragraph 10 of the complaint alleges
that "Transatlantic's tortious conduct at issuer [sic] here
occurred substantially in Massachusetts," paragraph 11 alleges
that "Alleghany's tortious conduct at issue here occurred
substantially in Massachusetts," and paragraph 58 alleges that
the "unfair and deceptive acts [by the defendants] took place
primarily and substantially within the Commonwealth of
Massachusetts."
     8
       In his order allowing the defendants' motion, the judge
took judicial notice that Transatlantic is a New York
corporation headquartered in New York, that Alleghany is a
Delaware corporation headquartered in New York, and that neither
defendant maintains a place of business in Massachusetts. He
also took judicial notice of the headquarters locations of the
insurers that were counterparties to National under the ASAs,
observing that several are headquartered outside Massachusetts.
However, the complaint includes no detailed information about
where the defendants' allegedly tortious or deceptive acts
occurred, other than the general allegation that they occurred
in Massachusetts. See note 7, supra.
                                                                    10

least if, as alleged in the complaint, the claims National (or

Resolute acting as National's agent) sought to adjust for them

were based in Massachusetts.    In any event, we are aware of no

rule requiring a § 11 plaintiff to plead facts with

particularity sufficient to withstand a claim by the defendant

that the center of gravity of his claim is not within the

Commonwealth.    In our view, the allegations of the complaint are

sufficient to warrant discovery and development of a factual

record adequate to allow a judge to conduct that assessment.       In

the present procedural posture of the case, it was error to

dismiss the plaintiffs' claims under G. L. c. 93A, § 11.

    2.    Tortious interference with contractual relations.    A

similar (though not identical) concern shapes our view of the

judge's conclusion that New York law should be applied to the

plaintiffs' claims of tortious interference with contractual

relations.   "Massachusetts generally follows a functional

approach to resolving choice of law questions on substantive

matters, eschewing reliance on any particular choice-of-law

doctrine."   Lou v. Otis Elevator Co., 77 Mass. App. Ct. 571, 583

(2010).   We look to the Restatement (Second) of Conflict of Laws

for guidance; it in turn articulates several factors for

consideration.   See id. at 584-585 & n.22.   As a general

principle, the "rights and liabilities of the parties with

respect to an issue in tort are determined by the local law of
                                                                  11

the state which, with respect to that issue, has the most

significant relationship to the occurrence and the parties under

the principles stated in § 6."   Restatement (Second) of Conflict

of Laws § 145 (1971).9

     For reasons quite similar to those discussed supra, the

allegations of the complaint, standing alone, are inadequate to

determine as a matter of law whether New York or Massachusetts

law should be applied.   The complaint does not state where the

ASAs were entered into or, except in the most general terms,

describe the rights and obligations of the parties to them.    Nor

does the complaint describe with particularity the claims that

National undertook to resolve, including how many of those

     9
       Restatement (Second) of Conflict of Laws § 6 (1971), in
turn, states:

     "(1) A court, subject to constitutional restrictions, will
     follow a statutory directive of its own state on choice of
     law.

     "(2) When there is no such directive, the factors relevant
     to the choice of the applicable rule of law include (a) the
     needs of the interstate and international systems, (b) the
     relevant policies of the forum, (c) the relevant policies
     of other interested states and the relative interests of
     those states in the determination of the particular issue,
     (d) the protection of justified expectations, (e) the basic
     policies underlying the particular field of law, (f)
     certainty, predictability and uniformity of result, and (g)
     ease in the determination and application of the law to be
     applied."

     Paragraph (1) of § 6 is inapplicable, as no Massachusetts
statute governs choice of law on a claim for tortious
interference with contractual relations.
                                                                    12

claims have a substantial connection to Massachusetts.    Again,

though it appears that many of the parties (if not their

activities relevant to the complaint) are headquartered outside

the Commonwealth, it is impossible for us to conclude as a

matter of law on the basis of the complaint alone that New York

(or any particular State, for that matter) has the most

significant contacts with, and greatest interest in, the

plaintiffs' claims of tortious interference with the ASAs.     As

in our c. 93A discussion, discovery and development of a factual

record are required to conduct the functional assessment

envisioned by the Restatement.   We accordingly must reverse the

judgment insofar as it dismissed National's claim of tortious

interference with contractual relations based on the premise

that it failed to allege an element of that claim that is

essential under New York law but not under Massachusetts law.

See note 5, supra.

     However, even without resolution of the choice of law

question we conclude that the judge correctly dismissed

Resolute's claims because it was not a party to any of the

contracts with which the defendants allegedly interfered, and it

does not otherwise claim a cognizable legal interest on its own

behalf in their enforcement.10   Resolute thus is unable to

     10
       Resolute's suggestion that it may maintain its claims
because it acts as National's agent with respect to the ASAs is
                                                                  13

demonstrate the first of the elements described in Harrison v.

NetCentric Corp., 433 Mass. 465, 476 (2001):   "that [it] had a

contract with a third party."11

     Conclusion.   So much of the judgment as dismisses the

plaintiffs' claims under G. L. c. 93A, § 11, and National's

claims for tortious interference with contractual relations

under ASA I, ASA II, and ASA III is reversed, and those claims

are remanded for further proceedings consistent with this

opinion.   In all other respects, the judgment is affirmed.

                                    So ordered.

unavailing. Resolute's rights and obligations as National's
agent all relate to enforcement of the ASAs on National's
behalf. Resolute claims no right to enforce the contracts for
its own benefit. In the present case, we need not consider
whether an intended or third-party beneficiary of a contract
might have standing to claim tortious interference with a
contract to which it is not a party. See, e.g., CSY Liquidating
Corp. v. Harris Trust & Sav. Bank, 162 F.3d 929, 932-933 (7th
Cir. 1998).
     11
       We reject Resolute's alternative contention that the
complaint should be construed broadly to assert a claim for
tortious interference with advantageous relations; put simply,
the several counts of the complaint speak specifically and
exclusively of interference with contractual relations. In any
event, we note that Resolute does not allege that the defendants
"knowingly induced a breaking of the [advantageous]
relationship" between it and any third party, a required element
of the alternative claim of tortious interference with
advantageous relations. Blackstone v. Cashman, 448 Mass. 255,
260 (2007).