Kantner v. Travelers Cas. & Sur. Co. of Am.
| Decision Date | 06 August 2020 |
| Docket Number | Case No. 2:19-cv-4250 |
| Citation | 477 F.Supp.3d 637 |
| Parties | Kyle KANTNER, Plaintiff, v. TRAVELERS CASUALTY AND SURETY CO. OF AMERICA, Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
Janica Pierce Tucker, Jonathan N. Olivito, Michael Alan Byers, Taft Stettinius & Hollister LLP, Columbus, OH, for Plaintiff.
Melvin J. Davis, Reminger Co., L.P.A., Columbus, OH, Brian D. Sullivan, Reminger & Reminger, Cleveland, OH, for Defendant.
This matter is before the Court on cross-motions for summary judgment filed by Plaintiff Kyle Kantner and Defendant Travelers Casualty and Surety Company of America. (ECF Nos. 14, 15.) For the reasons that follow, the Court DENIES Plaintiff's Motion and GRANTS Defendant's Motion.
The facts in this case are relatively undisputed.
On August 1, 2015, Defendant Travelers Casualty and Surety Company of America ("Travelers") issued Insurance Policy No. 069-LB-105651376 hereafter referred to as the "Policy" to non-party Air Waves, Inc., for the period of August 1, 2015 to August 1, 2017. (Pl. Ex. 1, 10, ECF No. 15-2.) The Policy provided coverage, "subject to its terms, conditions, limitations and exclusions, for Claims first made during the Policy Period against the Insureds for Wrongful Acts." (Def. Ex. C, 1, ECF No. 14-3.) Plaintiff Kyle Kantner (an employee, officer, and shareholder of Air Waves during the Policy period) and Air Waves were both named as Insureds under the Policy. (Pl. Ex. 1, 10; Kantner Decl., ¶¶ 4, 5, ECF No. 15-1.)
On May 16, 2017, Michael Leaventon (former Chief Operating Officer, Secretary, Board Member, and 37.5% owner of Air Waves) filed a lawsuit in the Franklin County Court of Common Pleas, Case No. 17-CV-004495, alleging one count of breach of contract against Air Waves1 and one count of indemnification against Mr. Kantner and Air Waves. (Def. Ex. A, ECF No. 14-1; Def. Ex. B, ECF No. 14-2.)
According to Mr. Leaventon's complaint, an interested party contacted Air Waves in 2015 about purchasing the business for $17 million. (Def. Ex. A, ¶ 8.) At the time, Mr. Kantner, David Kaiser (25% shareholder of Air Waves), and Mr. Leaventon were discussing a possible buyout of Mr. Leaventon's shares. (Id. ¶¶ 7, 9.) After keeping Mr. Leaventon in the dark during the negotiations for the sale of Air Waves, Mr. Kantner e-mailed Mr. Leaventon in January 2016 to tell him the sale had fallen through and that Mr. Leaventon "needed to provide his number for a buyout of his shares." (Id. ¶¶ 10–11.) Mr. Kantner told Mr. Leaventon he believed Mr. Leaventon's shares were worth $3 million but would only pay $2 million. (Id. ¶ 12.) When Mr. Leaventon called the potential buyer to ask about the deal falling through, the potential buyer referred him to Mr. Kantner, who told Mr. Leaventon that if he did not take the buyout deal, Mr. Kantner would fire him and never sell the company. (Id. ¶ 13.)
On February 12, 2016, Mr. Leaventon, Mr. Kantner, and Mr. Kaiser executed a redemption agreement, under which Air Waves bought Mr. Leaventon's shares. (Id. ¶ 14.) Under the redemption agreement, Air Waves represented that it had not withheld information relating to the potential sale of the company or its assets from Mr. Leaventon. (Id. ¶ 15.) However, according to Mr. Leaventon, Air Waves did withhold information relating to the potential sale of the company; the deal with the potential buyer never fell through but instead Mr. Kantner and Air Waves concealed material information from Mr. Leaventon about the sale to induce him to sell his shares at a depressed price. (Id. ¶ 16.) Ultimately, Air Waves sold its assets for over $17 million. (Id. ¶ 18.) Had Mr. Leaventon been a shareholder at the time of closing, he would have received much more money than he received for his stock under the redemption agreement. (Id. ¶ 19.) Had he known about the potential sale before execution of the agreement, he would either "not have agreed to sell his shares or would have required a much higher price." (Id. ¶ 20.)
Count one of the Leaventon Lawsuit sought monetary damages from Air Waves for breaching the redemption agreement by withholding information concerning a potential sale of the company. (Id. ¶¶ 22–25.) The second count, the indemnification claim, sought to enforce section 6.2 of the redemption agreement, requiring Air Waves and Mr. Kantner to reimburse Mr. Leaventon for all reasonable attorney fees and costs arising out of Air Waves’ breach of the redemption agreement. (Id. ¶¶ 27–29.)
Several days after the filing of the Leaventon Lawsuit, Mr. Kantner contacted Travelers and requested that it defend him against Mr. Leaventon's indemnification claim pursuant to the "Private Company Directors and Officers Liability" section (hereafter referred to as "D&O Coverage") of the Policy. (Kantner Decl., ¶ 11.) Under the Policy, Travelers has the right and duty to defend any claim covered by a liability coverage, such as the D&O Coverage. (Pl. Ex. 1.) The D&O Coverage provides that Travelers will pay on behalf of:
(Id. at 48.) Under the Policy, a "Claim" includes "a civil proceeding commenced by service of a complaint or similar pleading."
(Id. ) A "Wrongful Act" is defined in part as "any actual or alleged act, error, omission, misstatement, misleading statement or breach of duty or neglect by, or any matter asserted against, an Insured Person in his or her capacity as such." (Id. at 50.) "Loss" includes "Defense Expenses and money which an Insured is legally obligated to pay as a result of a Claim." (Id. at 49.) There is no dispute that Mr. Kantner is an "Insured Person" and Air Waves is an "Insured Organization" under the Policy. (Id. )
Acknowledging that "the [Leaventon] Complaint appears to constitute a Claim for a Wrongful Act as defined by the Policy," Travelers nevertheless refused to defend Mr. Kantner in the Leaventon Lawsuit, citing two exclusions in the Policy. (Def. Ex. C, 3.)
The first cited exclusion falls under Section IV.A.9 of the Policy and precludes coverage as follows:
9. The Company will not be liable for Loss for any Claim by or on behalf of, or in the name or right of, any Insured[.]
(Pl. Ex. 1, 52.) According to Travelers, because the action was brought by Mr. Leaventon, who was an officer and board member of Air Waves until February 2016, he constitutes an Insured under the Policy and the Policy does not afford coverage for any Claim brought by an Insured unless one of the exceptions to the exclusion applies, which it does not. (Def. Ex. C, 4.) Mr. Kantner contends that the exception described in subsection (b) applies to exempt him from the exclusion.2
The second exclusion cited by Travelers falls under Section IV.A.13 of the Policy and precludes coverage as follows:
(Id. at 53.) Insuring Agreement C refers to Travelers's agreement to pay on behalf of Air Waves for "Loss for Wrongful Acts." (Id. at 48.) According to Travelers, the Leaventon Lawsuit asserts a claim against "Defendants" for breach of contract and this exclusion provides that the Policy "will not respond to a claim against the Insured Organization under any express contract or agreement." (Def. Ex. C., 5.) Travelers now clarifies that this exclusion only applies to preclude coverage to Air Waves for the breach of contract claim, not the indemnification claim against Mr. Kantner. (Def. Response, 3–4, ECF No. 20.)
The Leaventon Lawsuit was settled on March 11, 2019. (Kantner Decl., ¶ 19.) Travelers did not participate in settlement discussions. (Id. ¶ 18.)
On August 29, 2019, Mr. Kantner filed an amended complaint in the Delaware County Court of Common Pleas alleging claims for (1) declaratory judgment; (2) breach of contract; and (3) bad faith. (ECF Nos 1-1, 5.) On September 24, 2019, Travelers removed the case to this Court pursuant to 28 U.S.C. §§ 1332, 1441.3 (ECF No. 1.) Travelers filed an Answer on October 1, 2019. (ECF No. 6.)
On May 15, 2020, the parties filed cross-motions for summary judgment. (ECF Nos. 14, 15.) Both sides filed their respective responses on June 15 (ECF Nos. 20, 21), and reply briefs on July 6 (ECF Nos. 26, 27.) The cross-motions are now ripe for review.
Summary judgment is appropriate when "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). The movant has the burden of "identifying those parts of the record that demonstrate an absence of any genuine issue of material fact." Moldowan v. City of Warren , 578 F.3d 351, 374 (6th Cir. 2009) ; Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden then shifts to the nonmoving party to " ‘set forth specific facts showing that there is a genuine issue for trial.’ " Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (quoting Fed. R. Civ. P. 56 ). The non-moving party "may not rest upon its mere allegations or denials of the adverse party's pleadings, but rather must set forth...
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