Piedmont Office Realty Trust, Inc. v. XL Specialty Ins. Co.
| Decision Date | 28 March 2014 |
| Docket Number | No. 1:13–cv–02128–WSD.,1:13–cv–02128–WSD. |
| Citation | 11 F.Supp.3d 1184 |
| Parties | PIEDMONT OFFICE REALTY TRUST, INC., Plaintiff, v. XL SPECIALTY INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Northern District of Georgia |
Anthony Paul Tatum, Bethany Marie Rezek, James Andrew Pratt, King & Spalding, LLP, Atlanta, GA, for Plaintiff.
Charles C. Lemley, Wiley Rein LLP, Washington, DC, Douglas Lee Clayton, Swift, Currie, McGhee & Hiers, LLP, Atlanta, GA, for Defendant.
This matter is before the Court on XL Specialty Insurance Company's (“Defendant”) Motion to Dismiss Piedmont Office Realty Trust, Inc.'s (“Plaintiff”) Complaint.
A. Factual and Procedural History
Plaintiff purchased a primary insurance policy (“Primary Policy”) from Liberty Surplus Insurance Company that provided $10 million of insurance coverage for third-party claims brought against Plaintiff and its current or former officers and directors. Compl. at ¶ 12–13. Plaintiff also purchased an excess insurance policy from Defendant (“the Excess Policy”) that provided an additional $10 million of insurance coverage in excess of the coverage provided under the Primary Policy. Id. at ¶ 21–24. The Excess Policy applies “in conformance with the terms, conditions, endorsements, and warranties of the Primary Policy together with the terms, conditions, endorsements and warranties of any other Underlying Insurance.”Id. at ¶ 22. In other words, the terms and conditions of the Primary Policy apply equally to any claim for coverage under the Excess Policy unless the terms and conditions of the two policies contradict each other.1 Id. The Primary Policy, the terms of which are deemed included in the Excess Policy, provides coverage for third-party liability arising out of a securities claim as follows:
The Defendant's duty to provide coverage for the settlement of a securities claim by the Plaintiff is subject to Section III(A) of the Primary Policy, which is deemed included in the Excess Policy. Section III(A) of the Primary Policy provides that:
No Claims Expenses shall be incurred or settlements made, contractual obligations assumed or liability admitted with respect to any Claim without the Insurer's written consent, which shall not be unreasonably withheld. The Insurer shall not be liable for any Claims Expenses, settlement, assumed obligation or admission to which it has not consented.
Under the General Conditions of the Primary Policy, which are deemed included in the Excess Policy, a cause of action against the Defendant may not be maintained unless:
... as a condition precedent, thereto, there shall have been full compliance with all of the terms of this Policy, and the amount of the Insureds' obligation to pay shall have been finally determined either by judgment against the Insureds after actual trial, or by written agreement of the Insureds, the claimant and the Insurer.
On March 12, 2007, the Washtenaw County Employees' Retirement System (“Washtenaw”) filed a securities fraud complaint against the Plaintiff and its officers and directors in the United States District Court for the District of Maryland (“the Securities Action”). Compl. at ¶ 28. The case was thereafter transferred to this Court.2 Id.
On August 2, 2010, Plaintiff moved for summary judgment in the Securities Action. Id. at ¶ 32. The Plaintiff's Motion was denied. Id. Plaintiff renewed its motion for summary judgment prior to trial, and the district court granted summary judgment to the Plaintiff on all of Washtenaw's remaining claims. Id. at ¶ 34.
On October 12, 2012, Washtenaw filed its notice of appeal of the summary judgment entered in favor of the Plaintiff. Id. While Washtenaw's appeal was pending, Washtenaw and the Plaintiff agreed to mediate the dispute to determine whether they could reach a settlement. At the mediation, Washtenaw demanded over $158 million in damages. Id. at ¶ 38. By that time, the Defendant had paid nearly $4 million in defense costs under the Excess Policy. Id. at ¶ 37. Plaintiff sought the Defendant's consent to settle the dispute with Washtenaw for the amount remaining under the Excess Policy Limit. Id. Defendant evaluated the merits of Washtenaw's appeal and declined to contribute more than $1 million towards any settlement. Id. at ¶ 38.
Plaintiff, without seeking Defendant's consent, agreed with Washtenaw to settle the underlying dispute for $4.9 million.Id. at ¶ 39. Plaintiff claims that it “was compelled to settle the Underlying Suit for $4.9 million to protect its interests, given the magnitude of Washtenaw's claimed damages, the risk of reversal on appeal, and the prospect of continued costly and time consuming litigation.” Pl.'s Mem. of Law in Opp'n to Def.'s Mot. to Dismiss at 8.
On November 8, 2012, Plaintiff wrote to the Defendant, demanding that Defendant pay the $4.9 million which the Plaintiff had agreed to pay to settle the Securities Action. In its demand, Plaintiff threatened to assert claims under O.C.G.A. § 33–4–6 for Defendant's bad faith refusal to pay. Compl. at ¶ 41.
On January 4, 2013, Defendant responded to the Plaintiff's written demand, asserting that it was not obligated to provide coverage for the settlement amount because Plaintiff did not seek Defendant's consent to the settlement Plaintiff reached, and Defendant's refusal to provide consent thus was not unreasonably withheld because it was not sought. See Ex. 1, attached to Pl.'s Mem. of Law in Opp'n to Def.'s Mot. to Dismiss at 2–3.
On April 18, 2013, the district court entered a final order approving the settlement that Plaintiff had reached with Washtenaw. Compl. at ¶ 43.
On April 19, 2013, Plaintiff wrote to the Defendant again demanding payment for the full settlement amount of $4.9 million, and again threatening litigation under O.C.G.A. § 33–4–6. On April 29, 2013, Defendant contributed $1 million towards the settlement of the Securities Action in accordance with its agreement during the mediation to contribute that amount towards a proposed resolution of the dispute. Id. at ¶ 45. Defendant refused to pay the additional $3.9 million that Plaintiff unilaterally paid to resolve the Securities Action.
On June 25, 2013, Plaintiff filed its Complaint against Defendant in which it alleged that Defendant breached its contractual obligation to pay the full settlement amount. Plaintiff also alleged that it was entitled to statutory damages because Defendant violated O.C.G.A. § 33–4–6, and acted in bad faith when it refused to pay the full amount of the settlement in the Securities Action. On August 8, 2013, Defendant moved to dismiss the Complaint.3
The law governing motions to dismiss pursuant to Rule 12(b)(6) is well-settled. Dismissal of a complaint is appropriate “when, on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action.” Marshall Cnty. Bd. of Educ. v. Marshall Cnty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir.1993).
In considering a motion to dismiss, the Court accepts the plaintiff's allegations as true and considers the allegations in the complaint in the light most favorable to the plaintiff. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984) ; Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1295 (11th Cir.2007) ; see also Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273 n. 1 (11th Cir.1999) (). The Court, however, is not required to accept a plaintiff's legal conclusions. See Sinaltrainal v. Coca–Cola Co., 578 F.3d 1252, 1260 (11th Cir.2009) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ), abrogated on other grounds by Mohamad v. Palestinian Auth., ––– U.S. ––––, 132 S.Ct. 1702, 182 L.Ed.2d 720 (2012). Nor will the Court “accept as true a legal conclusion couched as a factual allegation.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Ultimately, the complaint is required to contain “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955.4
To state a claim to relief that is plausible, the plaintiff must plead factual content that “allows the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. “Plausibility” requires more than a “sheer possibility that a defendant has acted unlawfully,” and a complaint that alleges facts that are “merely consistent with” liability “stops short of the line between possibility and plausibility of ‘entitlement to relief.’ ” Id. (citing Twombly, 550 U.S. at 557, 127 S.Ct. 1955 ). “To survive a motion to dismiss, plaintiffs must do more than merely state legal conclusions; they are required to allege some specific factual bases for those conclusions or face dismissal of their claims.” Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1263 (11th Cir.2004) () (citations omitted).5
Defendant argues that the Plaintiff's Complaint should be dismissed because the Primary Policy does...
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