Professional Investors Life Ins. Co. v. Roussel

• Decision Date: 04 December 1981
• Docket Number: No. 76-0178-C5.,76-0178-C5.
• Citation: 528 F. Supp. 391
• Parties: PROFESSIONAL INVESTORS LIFE INSURANCE COMPANY, INC., An Oklahoma corporation, Plaintiff, v. Louis J. ROUSSEL, et al., Defendants.
• Court: U.S. District Court — District of Kansas

528 F. Supp. 391

PROFESSIONAL INVESTORS LIFE INSURANCE COMPANY, INC., An Oklahoma corporation, Plaintiff, v. Louis J. ROUSSEL, et al., Defendants.

No. 76-0178-C5.

United States District Court, D. Kansas.

December 4, 1981.

COPYRIGHT MATERIAL OMITTED

John C. Frieden and Donald R. Paxson, Topeka, Kan., for plaintiff.

Robert Schartz, Wichita, Kan., for Perkins.

Walter C. Williamson, Wichita, Kan., for Mick, Stack Assoc., Mick, Smith and Adrian.

Bob W. Storey, Topeka, Kan., for Brandon, Pope and Salloum.

Michael F. Little, Baldwin & Haspel, New Orleans, La., Herbert A. Marshall, Marshall, Hawks, McKinney & Hendrix, Topeka, Kan., for Frank R. Leu.

Clifton S. Carl, Louie J. Roussel, III, Carl, Roussel & Hughes, New Orleans, La., Glenn D. Cogswell, Topeka, Kan., for Cauble, Azar and Salloum.

Ross D. Alexander, Wichita, Kan., for Kenneth Mick.

Glenn DeValerio, Kohn, Milstein & Cohen, Washington, D. C., Robert Ochs, Fisher, Ochs & Heck, P. A., Topeka, Kan., for National American.

Francois D. V. de La Barre, pro se.

Floyd J. Falcon, Jr., Baton Rouge, La., for F. D. V. de La Barre.

MEMORANDUM AND ORDER

ROGERS, District Judge.

This is a diversity action brought by plaintiff Professional Investors Life Insurance Co., Inc. for actual and punitive damages against a group of defendants who allegedly conspired to commit tortious acts in the takeover of a Kansas Insurance Holding Company, Farm and Ranch Financial Inc. ("Farm & Ranch"). Plaintiff had a contract with a limited partnership, First Greystone & Associates ("First Greystone"), to purchase a block of 290,000 shares of Farm & Ranch stock. Plaintiff claims that defendants' conspiratorial acts induced the breach of the contract and prevented plaintiff from gaining control of Farm & Ranch. A more detailed summary of the background of this case may be found at 445 F.Supp. 687 (D.Kan.1978).

Plaintiff's theory in this case, briefly capsulized, is that defendant Louis Roussel orchestrated the surreptitious purchase of 300,000 to 400,000 shares of Farm & Ranch stock by his friends, business associates and Roussel-controlled corporations for the purpose of placing financial pressure upon First Greystone so that First Greystone would breach its contract with plaintiff and sell its 290,000 shares to American Benefit Life Insurance Company, a Roussel-controlled company. These purchases, according to plaintiff, were made in violation of the Kansas Insurance Holding Company Act which requires persons or related entities who wish to purchase more than ten percent of a Kansas insurance company's stock, to file a Form A application with the Commissioner of Insurance. Plaintiff claims that defendants' conspiracy was effective because plaintiff had the option of backing out of its agreement to purchase the block of Farm & Ranch stock from First Greystone if plaintiff's Form A application was not approved by the Insurance Commissioner by July 1, 1975. Once it became clear that plaintiff's Form A filing would not be approved by July 1, 1975 First Greystone allegedly feared that its block of stock would plummet in value. This is because defendants' stock purchases outnumbered 290,000 shares. Thus, First Greystone's block of stock no longer represented effective control of Farm & Ranch. Fearing that plaintiff would not be interested in buying a minority interest in Farm & Ranch and, consequently, would use its option to back out of the stock purchase after July 1, 1975, and further fearing no other buyer could be found at the price of $5.20 per share, First Greystone breached its contract with plaintiff in June and sold the block of stock to American Benefit Life Insurance Company ("American Benefit"). Thus, plaintiff was deprived of its contractual right to buy the First Greystone block of Farm & Ranch stock as well as its opportunity to use that block of stock as a springboard for the takeover of Farm & Ranch.

The complaint contains three counts charging defendants with fraud, inducing a breach of contract, and interference with a prospective business advantage. Several defendants have now moved for summary judgment against all counts.¹ Many issues are raised by the summary judgment motions. Among them are: 1) whether defendants had knowledge of plaintiff's contract with First Greystone or of plaintiff's quest to take over Farm & Ranch; 2) whether plaintiff's release of First Greystone also operated to release defendants from liability; 3) whether the Kansas Insurance Holding Company Act, K.S.A. § 40-3301 et seq. is constitutional; and 4) whether First Greystone merely offered to sell defendants the previously contracted block of stock without any tortious inducement by defendants. Since several defendants raise these issues among others in their summary judgment motions, the issues will be considered according to their application to the three counts of the complaint. Issues raised individually and not duplicated in other defendants' summary judgment motions shall be considered separately after an examination of the three counts of the complaint.

Before looking at plaintiff's three causes of action in light of defendants' summary judgment arguments, it might be helpful to review the general standards governing the application of Fed.R.Civ.P. 56 to this case.

The Tenth Circuit recently reviewed these standards in Barber v. General Electric Co., 648 F.2d 1272 (10th Cir. 1981):

For summary judgment to lie, "`the movant must demonstrate entitlement to a summary judgment beyond a reasonable doubt and if an inference can be deduced from the facts whereby the non-movant might recover, summary judgment is inappropriate.'" Williams v. Borden, Inc., 637 F.2d 731, 738 (10th Cir. 1980), quoting from Mustang Fuel Corp. v. Youngstown Sheet and Tube Co., 516 F.2d 33, 36 (10th Cir. 1976); Webb v. Allstate Ins. Co., 536 F.2d 336, 340 (10th Cir. 1976). The court must construe the evidence, and all reasonable inferences therefrom, in the light most favorable to the party opposing the motion for summary judgment. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Bruce v. Martin Marietta Corp., 544 F.2d 442 (10th Cir. 1976). Summary judgment is not to be granted unless the evidence is clear to the point that there is no genuine factual issue upon which reasonable minds might differ. Williams v. Borden, supra.... The courts recognize that summary judgment is a drastic remedy which is to be granted with caution so as to insure that litigants will have a trial on bona fide factual disputes. Machinery Center, Inc. v. Anchor National Life Ins. Co., 434 F.2d 1 (10th Cir. 1970).

Id. at 1276 n. 1.

It is also worthwhile to note that summary judgment is not favored as a substitute for trial in conspiracy cases. The Tenth Circuit commented in Fisher v. Shamburg, 624 F.2d 156, 162 (1980):

Direct evidence of a conspiracy is rarely available, and the existence of a conspiracy must usually be inferred from the circumstances. Loew's, Inc. v. Cinema Amusements, 210 F.2d 86, 93 (10th Cir. 1954). As Justice Black stated in Adickes v. Kress & Co., 398 U.S. 144 at 176, 90 S.Ct. 1598 at 1618 26 L.Ed.2d 142 (concurring opinion):

The existence or nonexistence of a conspiracy is essentially a factual issue that the jury, not the trial judge, should decide. In this case petitioner may have had to prove her case by impeaching the store's witnesses and appealing to the jury to disbelieve all that they said was true in the affidavits. The right to confront, cross-examine and impeach adverse witnesses is one of the most fundamental rights sought to be preserved by the Seventh Amendment provision for jury trials in civil cases. The advantages of trial before a live jury with live witnesses, and all the possibilities of considering the human factors, should not be eliminated by substituting trial by affidavit and the sterile bareness of summary judgment.

These sentiments have been applied to cases involving conspiracies to violate state and federal securities laws (Ferguson v. Omnimedia, Inc., 469 F.2d 194, 198 (1st Cir. 1972)), conspiracies to commit fraud (Seaboard Surety Co. v. Permacrete Const. Corp., 105 F.Supp. 349, 350 (E.D.Pa.1952)), and claims of inducement to breach a contract (Savarin Corp. v. National Bank of Pakistan, 290 F.Supp. 285 (S.D.N.Y.1968)).

Finally, courts are reluctant to grant summary judgment in cases involving complex factual and legal issues, even when basic facts are settled. In Wessinger v. Southern Ry. Co., Inc., 438 F.Supp. 1256, 1259 (D.S.C.1977), the court stated:

Nor is summary judgment appropriate where inquiry into the facts is desirable to clarify the application of the law. Kirkpatrick v. Consolidated Underwriters, 227 F.2d 228 (4th Cir. 1955). Even though there may be no controversy over the basic facts, summary judgment should not be granted if the parties disagree as to the inferences which may properly be drawn. American Fid. & Cas. Co. v. London & Edinburgh Ins. Co., 354 F.2d 214, 216 (4th Cir. 1965).

See also, Eby v. Reb Realty, Inc., 495 F.2d 646, 649 (9th Cir. 1974); Security Benefit Life Ins. Co. v. United States of America, No. 77-4201 (D.Kan., unpublished, 4/8/80); Elliott v. Elliott, 49 F.R.D. 283, 284 (S.D.N. Y.1970); Petition of Bloomfield Steamship Co., 298 F.Supp. 1239, 1242 (S.D.N.Y.1969), aff'd 422 F.2d 728 (2d Cir. 1970); New York Stock Exchange, Inc. v. Sloan, 394 F.Supp. 1303, 1306 (S.D.N.Y.1975); Savarin Corporation v. National Bank of Pakistan, supra, 290 F.Supp. at 289; Cassady v. Duke Power Co., 30 F.R.D. 121, 122 (D.S.C.1962).

Of course, summary judgment is not precluded in a factually complex case involving conspiracy claims. See, e.g., Staffin v. Greenberg, 509 F.Supp. 825 (E.D.Pa. 1981). Much caution is warranted, however, before granting such a "drastic remedy."

FRAUD

In Kansas, the necessary elements of fraud have been listed as:

(1) that the representation was made as a statement of a material fact;

...