Dunluck v. Assicurazioni Generali S.P.A. – UK Branch
| Citation | 590 F.Supp.3d 1293 |
| Docket Number | CV 20-136-M-DLC |
| Decision Date | 08 March 2022 |
| Parties | Lonny DUNLUCK, Aaron Anderson, Roberto Meraz-Avila, Jason Mathiason, and David Purdy, Plaintiffs, v. ASSICURAZIONI GENERALI S.P.A. – UK BRANCH, Defendant. Assicurazioni Generali S.P.A. – UK Branch, Counter-Plaintiff, v. Lonny Dunluck, Aaron Anderson, Roberto Meraz-Avila, Jason Mathiason, David Purdy and Vitality Natural Health LLC, Counter-Defendants. |
| Court | U.S. District Court — District of Montana |
Marcel A. Quinn, Thomas Hollo, Todd A. Hammer, Hammer, Quinn & Shaw, PLLC, Kalispell, MT, for Plaintiffs/Counter-Defendants.
James Sanders, Pro Hac Vice, Jared K. Clapper, Pro Hac Vice, Clyde & Co. US LLP, Chicago, IL, Maxon R. Davis, Davis Hatley Haffeman & Tighe, Great Falls, MT, for Defendant/Counter-Plaintiff.
Before the Court are Plaintiffs and Counter-Defendants Lonny Dunluck's, Aaron Anderson's, Roberto Meraz-Avila's, Jason Mathiason's, and David Purdy's (collectively referred to as "Plaintiffs") and Defendant and Counter-Plaintiff Assicurazioni Generali S.P.A. – UK Branch's ("Generali") motions for summary judgment. (Docs. 43; 51; 82; 85.) The principal focus of these motions is whether a directors' and officers' liability policy issued by Generali to Eureka 93, Inc. ("Eureka") covers a $1,055,082.59 default judgment Plaintiffs' obtained against Vitality Natural Health LLC ("Vitality") in Montana state court. For the reasons stated herein, the Court finds Generali is entitled to summary judgment on the issue of coverage.
Plaintiffs are Montana residents previously employed by Vitality, a foreign limited liability company that did business in Montana. (Doc. 38 at 2.) Plaintiffs all left their jobs between January and June of 2019 to join Vitality in its effort to "develop a cannabidiol processing plant in Eureka, Montana." (Docs. 53 at 2; 56 at 3.) On April 23, 2019, Vitality became a subsidiary of Eureka upon execution of an Amalgamation Agreement through which each entity obtained ownership shares in the other. (Doc. 91 at 5–6.) At some point, Eureka applied for a Director's and Officer's Liability Insurance policy ("the Policy") with Generali and it became effective on June 21, 2019. (Docs. 38 at 2; 38-1 at 3.)
The Court will discuss below the specifics of the Policy where necessary to adjudicate the pending motions.
The employer-employee relationship deteriorated between Vitality and Plaintiffs, and by September of 2019, Vitality began paying Plaintiffs with bad checks, and ultimately ceased payments altogether. (Doc. 56 at 3.) Despite Vitality's non-payment of wages, Plaintiffs continued coming to work for several months with the hope they would eventually receive the wages they were owed. (Id. at 4.) The situation did not improve, and Plaintiffs ceased coming to work. (Id. at 6.)
Plaintiffs were understandably confused about their employment status and were unable to "receive straight or truthful answers" from Vitality regarding whether they were still employed. (Docs. 56 at 5; 92 at 4.) This confusion is illustrated by the fact that Plaintiffs submitted unemployment benefit forms in late December 2019 and early January 2020, with divergent answers regarding their employment status. For example, on Plaintiff Aaron Anderson's form, submitted on December 2, 2019, he stated he was still employed with Vitality. (Docs. 91-1 at 2; 92 at 5.) Plaintiff Jason Mathiason submitted a form on the same day and also indicated he was still employed by Vitality. (Docs. 87-9 at 2; Doc. 92 at 7–8.) Plaintiff Lonny Dunluck applied for benefits on December 3, 2019 and said the same thing. (Docs. 91-2 at 2; Doc. 92 at 7–8.)
Conversely, Plaintiff Roberto Meraz-Avila's form, submitted on December 2, 2019, indicated that he had been laid off or discharged by Vitality, with his last day of work being November 20, 2019. (Docs. 87-6 at 2; 92 at 6.) Plaintiff David Purdy applied for unemployment benefits on January 21, 2020 and simply put "?" in the portion of the form asking about his employment status. (Docs. 87-7 at 2; 92 at 9.) Importantly, Vitality subsequently told the State that Plaintiffs had been terminated on January 4, 2020. (Doc. 92 at 12.) Vitality's relationship to Eureka changed during this period as well. On December 4, 2019, Eureka and Vitality executed an Agreement to Cancel Shares, Warrants and Options through which each company gave up its shares in the other. (Doc. 91 at 6; see also Doc. 23-4 at 241–47).
Everything came to a head on February 26, 2020, when Plaintiffs sued Vitality in Montana state court, complaining they were terminated on January 4, 2020 without good cause in violation of Montana's Wrongful Discharge from Employment Act. (Docs. 53 at 3–4; 78-3 at 9–10.) They also advanced claims for breach of contact and unpaid wages. (Doc. 78-3 at 10–11.) Less than a month later, Plaintiffs mailed a notice of claim to both Generali and another company called Tysers,1 at their offices in London. (Doc. 38 at 3.)
This letter stated, in relevant part, that Plaintiffs had instituted a lawsuit against Vitality and demanded Generali and Tysers "acknowledge receipt of this letter and to defend and indemnify Vitality ... for the claims asserted." (Id. at 3; see also Doc. 38-2.) At the time they sent this letter, Plaintiffs had a copy of the Policy. (Doc. 38 at 3.) Neither Generali or Tysers responded to this letter (Doc. 56 at 7), and it is unclear whether COVID-19 and its associated impacts resulted in a delay in Generali opening the letter. (Doc. 53 at 5.)
Despite being served with process, Vitality never appeared to defend the Montana state court lawsuit and neither did Generali.
(Docs. 38 at 3; 56 at 7.) Plaintiffs eventually obtained a $1,055,082.59 default judgment in the state court proceeding. (Doc. 38 at 3–4; see also Doc. 38-3.) In its order, the state court found that "Vitality wrongfully terminated Plaintiffs without cause ... on or about January 4, 2020." (Doc. 38-3 at 3.)
Plaintiffs subsequently sent Tysers and Generali another letter on June 26, 2020, demanding that they tender Policy limits based on the state court default judgment against Vitality. (Doc. 38 at 4; see also Doc. 38-4.) Generali received this letter but did not respond. (Doc. 38 at 4.) Indeed, it appears Generali did not respond to Plaintiffs' letters until after the instant lawsuit was filed. (Doc. 41 at 8.)
Plaintiffs commenced this action on August 28, 2020. (Doc. 1.) Their operative complaint advances claims against Generali for: (1) a declaratory judgment that Generali must indemnify Vitality for the judgment obtained in the underlying state court lawsuit; (2) negligence based on Generali's alleged failure to process and respond to Plaintiffs' letters; (3) equitable estoppel; (4) violation of Montana's Unfair Trade Practices Act; and (5) common law bad faith. (Doc. 33.) Generali has advanced various counterclaims ultimately seeking a declaration that the Policy does not cover the $1,055,082.59 state court judgment. (Doc. 41.)
The parties have now filed competing, fully briefed, motions for summary judgment. (Docs. 43; 51 82; 85.) Generali moved first (Doc. 43) arguing that it was entitled to summary judgment on all of Plaintiffs' claims. (Doc. 44.) The crux of Generali's argument is that the Policy, by its very terms, does not provide coverage for the state court judgment against Vitality for multiple reasons. (Id. ; Doc. 58.) Plaintiffs' briefing argues the opposite, contending that the Policy does provide coverage. (Docs. 52; 62.) The Court held a hearing on the first two motions (Doc. 76) and ordered the parties to submit additional briefs on the effect of the Policy's choice-of-law provision (Docs. 77–79). Following the filing of these motions and submission of additional briefing, the parties each filed new motions for summary judgment on an additional coverage issue in this case. (Docs. 82; 85.) The Court finds these motions ripe for ruling.
This Court can resolve an issue short of trial (i.e. summarily) if "there is no genuine dispute as to any material fact" and the prevailing party is "entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Material facts are those which may affect the outcome of the case. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual dispute is genuine when there is sufficient evidence for a reasonable factfinder to return a verdict for the other party. Id.
If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue of fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In meeting this burden, conclusory assertions are insufficient, and "non-speculative evidence of specific facts" is required. Cafasso v. General Dynamics C4 Sys., Inc. , 637 F.3d 1047, 1061 (9th Cir. 2011). In establishing facts, the parties may rely on evidence in an inadmissible form as long as the evidence could be introduced in an admissible form at trial. See Fraser v. Goodale , 342 F.3d 1032, 1036 (9th Cir. 2003) ); see also JL Beverage Co. v. Jim Beam Brands Co. , 828 F.3d 1098, 1110 (9th Cir. 2016) (). With these principles in mind, the Court turns to the merits of the issues presented.
Because this Court is exercising diversity jurisdiction, it applies Montana's substantive law and federal procedural law. Feldman v. Allstate Ins. Co. , 322 F.3d 660, 666 (9th Cir. 2003). A state's substantive law includes its...
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