Goldsmith v. Marsh U.S. (In re GlassHouse Techs.)
| Decision Date | 30 September 2022 |
| Docket Number | 14-41352-CJP,AP 17-04022-CJP |
| Parties | In re: GLASSHOUSE TECHNOLOGIES, INC., Debtor v. MARSH USA, INC., Defendant JONATHAN R. GOLDSMITH, TRUSTEE IN BANKRUPTCY FOR GLASSHOUSE TECHNOLOGIES, INC., AND WF FUND IV LIMITED PARTNERSHIP (c/o/b as WELLINGTON FINANCIAL LP, WELLINGTON FINANCIAL FUND III, AND WELLINGTON FINANCIAL FUND IV), Plaintiffs |
| Court | United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts |
Before the Court is the Motion for Summary Judgment [Dkt. No. 114] (the "Motion") filed by the defendant, Marsh USA Inc. ("Marsh" or the "Defendant"), the prepetition insurance broker of the debtor GlassHouse Technologies, Inc. ("GlassHouse" or the "Debtor").[1] Pursuant to Fed.R.Civ.P. 56, as made applicable to this proceeding by Fed.R.Bankr.P. 7056, Marsh requests that judgment enter in its favor on all remaining counts of the complaint (the "Complaint") filed by the plaintiffs, Jonathan R Goldsmith, the Chapter 7 trustee appointed in the Debtor's case (the "Trustee"), and WF Fund IV Limited Partnership c/o/b Wellington Financial LP, Wellington Financial Fund III, and Wellington Financial Fund IV (collectively, "Wellington," and together with the Trustee, the "Plaintiffs"). In support of its Motion, Marsh filed a memorandum of law with accompanying exhibits [Dkt. No. 115] (the "Defendant's Memorandum"), a Statement of Undisputed Material Facts [Dkt. No. 116] (the "Defendant's Statement"), and the affidavit of Jonathan I. Handler [Dkt. No. 117]. The Plaintiffs filed an opposition to the Motion, with exhibits [Dkt. No. 121] (the "Plaintiffs' Opposition"), a Statement of Material Facts and Response to Defendant's Statement of Material Facts [Dkt. No. 122] ("Plaintiffs' Statement"), and the affidavits of David Olsky [Dkt. No. 123], Jonathan Goldsmith [Dkt. No. 124], Mark McQueen [Dkt. No. 125], and Alex Fooksman [Dkt. No. 126]. Thereafter, Marsh filed a reply memorandum with further exhibits attached [Dkt. No. 129] ("Defendant's Reply"). I held a hearing on the Motion and associated pleadings, after which the parties filed supplemental briefing.
GlassHouse filed a petition for relief under Chapter 7 of the Bankruptcy Code on June 16, 2014 (the "Petition Date"). The Plaintiffs in this adversary proceeding are the Trustee, as the representative of GlassHouse's bankruptcy estate (the "Estate"), and Wellington, a creditor of GlassHouse that was assigned the Estate's claims against Marsh, among others, pursuant to a Settlement and Joint Prosecution Agreement [Dkt. No. 95] (the "Prosecution Agreement"). Under the Prosecution Agreement, which was approved by the Court (Hoffman, J.) with certain modifications, the Plaintiffs agreed to pool various causes of action against GlassHouse's directors and officers ("Directors and Officers" or "D&Os"), its insurers, American International Group, Inc. and certain of its subsidiaries (collectively, "AIG"), and Marsh that Wellington would prosecute. [2] The Plaintiffs agreed to divide any recoveries on account of Estate claims and any direct claims possessed by Wellington. See Ord. dated 7/31/2015, 3, ¶ 3 [Dkt. No. 173].
In their Complaint, the Plaintiffs asserted three counts-breach of contract (Count I), negligence (Count II), and violations of Mass. Gen. Laws ch. 93A, §§ 2 and 11 ("Chapter 93A") and ch. 176D, § 3 ("Chapter 176D") (Count III). The claims in those counts arose from Marsh's alleged acts and omissions in procuring extended discovery period coverage (the "Tail") with respect to GlassHouse's D&O liability insurance policy, which the Plaintiffs contend resulted in an unauthorized reduction of the aggregate liability limit for claims noticed prior to the expiration of the original policy. Marsh filed a motion to dismiss that I granted in part, dismissing Counts II and III asserted by Wellington, and filed a request for reconsideration that I granted, dismissing Count III as to the Chapter 93A claims asserted by the Trustee. See In re GlassHouse Techs, Inc., 604 B.R. 600, 643 (Bankr. D. Mass. 2019); Ord. dated 5/12/2020 [Dkt. No. 96]. The remaining claims with respect to which Marsh now seeks summary judgment are breach of contract asserted by both the Trustee and Wellington (as a third-party beneficiary) (Count I) and the negligence claims asserted by the Estate (Count II).
For the reasons set forth below, I GRANT the Motion and will enter summary judgment in favor of Marsh on all remaining counts of the Complaint.
FACTUAL BACKGROUND[3]
GlassHouse, which previously provided information technology, infrastructure consulting, and managed services, retained Marsh to act as its insurance broker for purposes of obtaining a number of lines of coverage, including D&O insurance. Pls.' Stmt. p. 28, ¶ 4. [4] The parties executed an engagement letter dated April 24, 2013 (the "Engagement Agreement"). Def.'s Ex. 1; Pls.' Stmt. p. 28, ¶ 5. GlassHouse's primary contacts for communications with Marsh were Jeffrey Wakely ("Wakely")[5], Chief Financial Officer ("CFO") of GlassHouse, and Mark Chiplock ("Chiplock")[6], Vice President of Finance. The Engagement Agreement does not contain an express disclaimer of third-party beneficiaries, but does not reference Wellington or of any class or category of potential third-party beneficiaries. Def.'s Ex. 1.[7]
Wellington did not take part in either the drafting or negotiation of the Engagement Agreement and did not become aware of its terms at any time until it filed suit against the GlassHouse D&Os on May 28, 2014. 9/2/2020 Netterfield Dep. (Def.'s Ex. 16), 251:14-253:25.[8] Wellington also had no communication with Marsh at any time before GlassHouse purchased the Tail, but Wellington was aware that Marsh provided insurance brokerage services to GlassHouse. Id.; 10/1/2020 Petri Dep. (Def.'s Ex. 2), 89:15-17; Pls.' Stmt. p. 29, ¶ 8. When Marsh and GlassHouse entered into the Engagement Agreement in 2013, Marsh did not intend that the agreement or Marsh's services thereunder would be for Wellington's benefit. Def.'s Stmt. ¶ 9; 10/1/2020 Petri Dep., 179:16-180:9. There is no evidence that GlassHouse intended that the Engagement Agreement would benefit Wellington when it was signed. Def.'s Stmt. ¶ 10. While Wellington contends that the evidence shows that Marsh became aware Wellington could benefit from a tail policy, Wellington points to no evidence in the record that there were any discussions between Marsh and GlassHouse regarding Wellington at the time that the Engagement Agreement was signed or that GlassHouse had a specific intent to benefit Wellington at that time, only Chiplock's testimony that he would have made Marsh aware Wellington would be the third party beneficiary of the Tail. Pls.' Stmt. p. 30-31 ¶¶ 9-10.
The Engagement Agreement includes the following provision in paragraph 5 of the terms and conditions entitled "Your Responsibilities":
You shall be solely responsible for the accuracy and completeness of all information that you furnish to Marsh and/or insurers, and you shall sign any required application for insurance. Marsh shall not be responsible to verify the accuracy or completeness of any information that you provide, and Marsh shall be entitled to rely on that information. Marsh shall have no liability for any errors, deficiencies or omissions in any Services provided to you, including the placement of insurance on your behalf, that are based on inaccurate or incomplete information provided to Marsh. You understand that the failure to provide all necessary information to an insurer, whether intentional or by error, could result in the impairment or voiding of coverage. You will review all policy documents provided to you by Marsh.
Def.'s Ex. 1 ¶ 5. In paragraph 7, entitled "Disclaimers; Limitation of Liability," the Engagement Agreement provides in part: "In no event shall either party to this Agreement be liable for any indirect, special, incidental, consequential or punitive damages or for any lost profits arising out of or relating to any services provided by Marsh or its affiliates." Id. at ¶ 7. Paragraph 7 also specifies that GlassHouse acknowledges that Marsh, in performing services for GlassHouse, was not acting as a fiduciary,[9] "except to the extent required by applicable law." Id.
GlassHouse executives understood they had an obligation to review policy-related documents provided by Marsh and acknowledged that they would have raised it with Marsh if they had read something in such a document that conflicted with the coverage they believed they were purchasing, though Wakely testified that he did not recall reviewing every single policy document provided, and believed there was a difference between his review of them and understanding all the details. 9/23/2020 Wakely Dep. (Def.'s Ex. 15), 72:4-73:10 78:5-11. See also 10/12/2020 Sharp Dep. (Def.'s Ex. 11), 175:7-14.
Based on the parties' rights and responsibilities outlined in the Engagement Agreement, Marsh procured D&O insurance coverage for GlassHouse from AIG[10] for the period June 1, 2013 through June 1, 2014 (the "Policy"). Def.'s Ex. 12. Under the terms of the Policy:
If during the Policy Period or during the Discovery Period (if applicable) the Insureds shall become aware of any circumstances which may reasonably be expected to give rise to a Claim being made against the Insureds and shall give written notice to the Insurer of the circumstances, the Wrongful Act allegations anticipated and the reasons for anticipating such a Claim, with full particulars as to dates, persons and entities involved, then any Claim which is subsequently made against the Insureds and reported to the Insurer alleging, arising...
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