Mid-Continent Cas. Co. v. Greater Midwest Builders, LTD, Case No. 17–2561–JWL

• Decision Date: 12 February 2018
• Docket Number: Case No. 17–2561–JWL
• Citation: 307 F.Supp.3d 1153
• Parties: MID–CONTINENT CASUALTY COMPANY, Plaintiff, v. GREATER MIDWEST BUILDERS, LTD and Greater Missouri Builders, Inc., Defendants.
• Court: U.S. District Court — District of Kansas

307 F.Supp.3d 1153

MID–CONTINENT CASUALTY COMPANY, Plaintiff,

v.GREATER MIDWEST BUILDERS, LTD and Greater Missouri Builders, Inc., Defendants.

Case No. 17–2561–JWL

United States District Court, D. Kansas.

Signed February 12, 2018

Curtis O. Roggow, Jeffrey C. Baker, Sanders Warren Russell & Scheer, LLP, Overland Park, KS, Robert P. Fitz–Patrick, Hall, Estill, Hardwick, Gable, Golden & Nelson, PC, Tulsa, OK, for Plaintiff.

Amber J. Simon, Lauren E. Tucker McCubbin, Lisa A. Weixelman, Polsinelli PC, Kansas City, MO, for Defendants.

MEMORANDUM AND ORDER

John W. Lungstrum,United States District Judge

This matter comes before the Court on defendants' motion to dismiss (Doc. # 11). The Court agrees with defendants that plaintiff has not stated a plausible claim for breach of contract. Accordingly, as more fully set forth below, the motion is granted , and this action is hereby dismissed.¹

I. Background

This case arises from liability insurance policies issued by plaintiff Mid–Continent Casualty Company ("MCC") to defendant Greater Midwest Builders, LTD ("GMB"). MCC alleges that GMB has breached those contracts by failing to pay MCC deductible amounts relating to MCC's payment of proceeds under the policies to claimants injured by GMB.

GMB built a number of townhomes in Kansas. The homeowners association ("HOA") and various owners of the townhomes sued GMB in Kansas state court to recover for water damage to the property. MCC and another insurer defended GMB in that litigation under reservations of rights. MCC then filed a declaratory judgment action in this Court, seeking a declaration of no coverage, but that action was stayed pending resolution of the Kansas case. GMB terminated the defense provided by the insurers, and it settled the claims against it; under the terms of that settlement agreement, GMB would not contest the claimants' claims at trial, and the plaintiffs could collect a judgment only from GMB's insurers. The Kansas state court subsequently issued a judgment in the claimants' favor against GMB in an amount in excess of $7,000,000.

The Kansas claimants then filed a statutory garnishment action against MCC in Missouri state court. In light of that filing, this Court dismissed MCC's declaratory judgment action; the Court reasoned that any issue concerning the applicability of certain policy exclusions would necessarily be decided in the Missouri garnishment action. See Mid–Continent Cas. Co. v. Greater Midwest Builders, LTD , 2011 WL 5597329 (D. Kan. Nov. 17, 2011), aff'd sub nom. Mid–Continent Cas. Co. v. The Village at Deer Creek Homeowners Ass'n, Inc. , 685 F.3d 977 (10th Cir. 2012). After a bench trial, the Missouri state court issued a judgment in favor of the HOA on its garnishment claim against MCC (claims by the individual owners had been settled). The Missouri Court of Appeals then affirmed that judgment, although it modified the amount of the judgment against MCC to $4,039,819.74 (plus post-judgment interest from the date of the Kansas judgment). See The Village at Deer Creek Homeowners Ass'n, Inc. v. Mid–Continent Cas. Co. , 432 S.W.3d 231 (Mo. Ct. App. 2014).²

MCC alleges that it settled that liability to the HOA, paying an amount in excess of $5,000,000. In this suit, MCC claims that application of the policies' $1000–peroccurrence deductibles would have offset the amount it paid in settlement, and it now asserts a claim against GMB for breach of contract to recover such deductibles. MCC also asserts a claim based on alter ego liability against GMB's parent company, defendant Greater Missouri Builders, Inc. ("Greater Missouri").

II. Personal Jurisdiction

The Court first addresses defendants' argument that the Court may not exercise personal jurisdiction over them. In Marcus Food Co. v. DiPanfilo , 671 F.3d 1159 (10th Cir. 2011), the Tenth Circuit reaffirmed the following standards governing this Court's analysis of the issue of personal jurisdiction over a defendant:

Where a federal lawsuit is based on diversity of citizenship, the court's jurisdiction over a nonresident defendant is determined by the law of the forum state. The party seeking to establish personal jurisdiction over a foreign defendant must make two showings: first, that the exercise of jurisdiction is sanctioned by the state's long-arm statute; and second, that it comports with the due process requirements of the Fourteenth Amendment. Kansas's long-arm statute is construed liberally so as to allow jurisdiction to the full extent permitted by due process principles. Consequently, this court need not conduct a statutory analysis apart from the due process analysis.

The due process analysis is also two-fold: First, [the defendant] must have "minimum contacts" with the forum state, demonstrating that he purposefully availed himself of the protections or benefits of the state's laws and should reasonably anticipate being haled into court there....

If [the defendant] is found to have the requisite minimum contacts with Kansas, then we proceed to the second step in the due process analysis: ensuring that the exercise of jurisdiction over him does not offend traditional notions of fair play and substantial justice. [The defendant] bears the burden at this stage to present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.

See id. at 1166–67 (citations and internal quotations omitted).

Defendants first argue that MCC cannot establish the requisite minimum contacts with Kansas to permit jurisdiction over defendant Greater Missouri. In their initial brief, however, defendants failed to address specifically the alter-ego basis for liability asserted by MCC. This Court has consistently ruled that if personal jurisdiction exists with respect to the primary defendant, alter ego allegations may support the exercise of jurisdiction over another defendant. See, e.g. , In re Syngenta AG MIR 162 Corn Litig. , 2016 WL 1047996, at *3 (D. Kan. Mar. 11, 2016) (Lungstrum, J.). In their reply brief, defendants do not dispute that alter ego allegations could provide the basis for jurisdiction over Greater Missouri, but they argue that MCC's alter ego allegations in this case are deficient. The Court disagrees, as MCC has alleged that GMB was not created for legitimate business purposes; that the two defendants share directors and officers; that Greater Missouri finances GMB; that GMB has inadequate capital; that Greater Missouri's employees conduct GMB's business; that GMB does not operate independently; that Greater Missouri performed the work on the Kansas project at issue here; and that Greater Missouri dominates the control of GMB. Those allegations have not been controverted by evidence from defendants, and thus they must be taken as true for purposes of determining the Court's jurisdiction. See Intercon, Inc. v. Bell Atlantic Internet Solutions, Inc. , 205 F.3d 1244, 1247 (10th Cir. 2000). Those allegations, which are not merely conclusory but which include factual assertions, support a plausible claim for alter ego liability. See Real Estate Investors Four, Inc. v. American Design Group Inc. , 46 S.W.3d 51, 56 (Mo. Ct. App. 2001) (setting out elements of alter ego claim).³

It is not clear whether defendants argue that GMB also lacks the requisite minimum contacts with Kansas. In the introduction and in the relevant sub-heading for this section of their brief, defendants stated that minimum contacts are lacking for Greater Missouri specifically. Defendants did argue in one paragraph of that brief, however, that the claim against GMB does not arise out of that defendant's contacts with Kansas. Thus, the Court will address the issue of GMB's minimum contacts as well.

Defendants argue that MCC's claim arises solely out of the insurance agreements and thus does not arise out of any activity in Kansas, although it does not cite any supporting authority. In response, MCC relies on Employers Mutual Casualty Co. v. Bartile Roofs, Inc. , 618 F.3d 1153 (10th Cir. 2010), in which the Tenth Circuit rejected a similar jurisdictional challenge. That case, filed in district court in Wyoming, involved a claim by an Iowa insurer against its insured, a Utah construction company, concerning its obligations under the insurance policy with respect to litigation in California arising from a Wyoming construction project. See id. at 1157–58. The Tenth Circuit ruled that the case arose out of the insured's construction activity in the forum state, which activity was therefore sufficient to support specific jurisdiction over the insured. See id. at 1160–61.

In their reply brief, defendants did not address this issue of the sufficiency of GMB's contacts, and thus defendants have not explained why Bartile Roofs would not control here. As in that case, MCC's claim here arose ultimately from GMB's construction activity in Kansas. Thus, the Court rejects any argument that GMB's contacts with Kansas are insufficient.

Defendants also argue that the exercise of jurisdiction over them in this case would offend traditional notions of fair play and substantial justice (the second step in the due process analysis). Defendants have not met their burden, however, to present a compelling case that jurisdiction here would be unreasonable.⁴ In particular, defendants (with counsel located in Kansas City, Missouri) have not explained why it would be at all burdensome to litigate this case in this Court, located in the Kansas City metropolitan area. See id. at 1161–64 (Tenth Circuit rejecting a similar argument where burden of litigating in adjacent state was light). Accordingly, the Court denies defendants' request for dismissal for lack of personal jurisdiction.

Defendants also argue that venue is lacking here. Venue is proper in "a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located," see 28 U.S.C. § 1391(b)(1), and for this purpose, a defendant is deemed to reside...