Resolute Mgmt. Inc. v. Transatlantic Reinsurance Co.

• Decision Date: 29 April 2015
• Docket Number: No. 14–P–573.,14–P–573.
• Citation: 87 Mass.App.Ct. 296,29 N.E.3d 197
• Parties: RESOLUTE MANAGEMENT INC. & another v. TRANSATLANTIC REINSURANCE COMPANY & another.
• Court: Appeals Court of Massachusetts

87 Mass.App.Ct. 296

29 N.E.3d 197

RESOLUTE MANAGEMENT INC. & another¹

v.TRANSATLANTIC REINSURANCE COMPANY & another.²

No. 14–P–573.

Appeals Court of Massachusetts, Suffolk.

Argued Nov. 13, 2014.

Decided April 29, 2015.

Bryce L. Friedman, of New York (Kevin O'Connor, Boston, with him) for the plaintiffs.

John N. Thomas, of New York (Ben T. Clements, Boston, with him) for the defendants.

Present: GREEN, WOLOHOJIAN, & BLAKE, JJ.

Opinion

GREEN, J.

The plaintiffs appeal from a judgment of dismissal entered in Superior Court following the allowance of the defendants' motion to dismiss the plaintiffs' complaint pursuant to Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974).³ The complaint asserted claims of tortious interference with contractual relations and violation of G.L. c. 93A. We conclude that the judge correctly dismissed the claims of Resolute Management Inc. (Resolute) for tortious interference with contractual relations as Resolute is not a party to the contracts at issue. However, we conclude that the allegations of the complaint do not establish as a matter of law that the plaintiffs cannot maintain a cause of action under G.L. c. 93A, or whether New York or Massachusetts law should apply to the claims of National Indemnity Company (National) for tortious interference with contractual relations. We accordingly reverse so much of the judgment as dismisses the plaintiffs' c. 93A claims and National's claims for tortious interference with contractual relations.

Background. We summarize the facts alleged in the plaintiffs' complaint which, for purposes of our review of the defendants' motion to dismiss, we accept as true, construing all reasonable inferences from those facts in the plaintiffs' favor. See Iannacchino v. Ford Motor Co., 451 Mass. 623, 636, 888 N.E.2d 879 (2008).

National, a Nebraska corporation with a principal place of business in Nebraska, is an eligible surplus lines insurer and reinsurer in the Commonwealth whose business includes issuing reinsurance contracts and contracting to manage asbestos-related personal injury claims for Massachusetts-based insurers. National's business, in part, is to enter contracts with other insurers' clients, pursuant to which it (or Resolute, as National's agent) resolves claims against those other insurers and collects reinsurance.

In 2001, National entered into an administrative service agreement (ASA I) with two major insurers, pursuant to which National was appointed to adjust, handle, agree, settle, pay, compromise, or repudiate certain asbestos-related claims on behalf of a number of Massachusetts-based insurers, and also was appointed to collect reinsurance recoveries related to those claims from

Transatlantic Reinsurance Company (Transatlantic), and other insurers. In 2011, National entered into similar agreements with five other major insurers (ASA II) and, in 2012, with another (ASA III). In each of the ASAs, Resolute, a Delaware corporation with a principal place of business in Massachusetts, was authorized as agent to carry out National's duties under the ASA (or ASAs).

Transatlantic is a reinsurer licensed to do business in Massachusetts, which it does on a regular basis. In March, 2010, after decades of being a subsidiary of American International Group, Transatlantic became an independent, publicly traded company. Because of a lack of operational flexibility and other factors (including anticipated adverse developments in so-called “legacy”⁴ asbestos claims), Transatlantic found it difficult to compete with National in the insurance and reinsurance markets. National and Resolute were so efficient in resolving claims against their insurer clients and in promptly collecting reinsurance that Transatlantic's business model was damaged and its business threatened. Despite a weak market, Transatlantic began to look for a merger partner.

In August, 2011, National offered to purchase Transatlantic for approximately fifty-two dollars per share, all cash, which was below Transatlantic's stated book value. Transatlantic rejected the offer, but in 2012 allowed itself to be acquired by Alleghany Corporation (Alleghany) (which was looking to enter the reinsurance market) for approximately $59.79 per share.

The merger of Alleghany and Transatlantic got off to a rocky start, in part because Transatlantic continued to be plagued by its asbestos-related claims. Transatlantic sought to commute (i.e., pay another entity to assume responsibility for a risk) its asbestos-related reinsurance obligations to a group of clients of National and Resolute, but the price Transatlantic was willing to pay was significantly less than the amount of its exposure to those clients, and neither National nor Resolute was willing to yield to Transatlantic's demands.

For years prior to the merger between Transatlantic and Alleghany, Resolute promptly billed Transatlantic for reinsurance benefits under ASA I, and Transatlantic regularly reviewed and audited information and data it received from National's insurer-clients

for compliance with the terms of ASA I. Prior to its merger with Alleghany, Transatlantic never raised a question about the amounts it was billed by Resolute, and timely paid substantial sums to Resolute under ASA I. Similarly, from mid–2011 through 2012, Transatlantic routinely and timely paid bills submitted by Resolute pursuant to ASA II. However, after Alleghany purchased Transatlantic, Transatlantic unjustifiably refused to pay invoices Resolute submitted pursuant to all three ASAs. Specifically (as alleged in the complaint), Alleghany instructed Transatlantic to rid itself of its problematic legacy asbestos liabilities and to punish Resolute and National for failing to accept Transatlantic's proposed terms to commute those claims. By withholding reinsurance payments due to Resolute on behalf of National, Alleghany and Transatlantic sought to harm National's and Resolute's relationships with their clients, to impede National's ability to perform its contractual obligations to those clients, and to force National to agree to commute Transatlantic's obligations at the “below-market and irrational price” that Alleghany and Transatlantic demanded.

This litigation followed. By complaint filed April 30, 2013, against Transatlantic and Alleghany, Resolute and National brought claims of tortious interference with contractual relations (ASA I, ASA II, and ASA III), and violation of G.L. c. 93A, § 11. A judge allowed the defendants' motion to dismiss the complaint, and the plaintiffs appealed.

Discussion. For independent but similar reasons, central to determination of the viability of the plaintiffs' complaint is an assessment of the relationship to the Commonwealth of the facts and circumstances giving rise to their claims. The plaintiffs' claims for tortious interference with contractual relations are viable (at least for pleading purposes) if they are governed by Massachusetts law, but not if they are governed by New York law.⁵

Similarly, the plaintiffs are entitled to maintain a claim pursuant to G.L. c. 93A, § 11, only if the statute applies to the

unfair or deceptive acts alleged. In both instances, the required determination turns principally on the relationship of the parties and their activities to the Commonwealth, as we shall discuss infra.

1. Applicability of G.L. c. 93A. “Under c. 93A, § 11, it is [the defendants'] burden to demonstrate that ‘the center of gravity of the circumstances that [gave] rise to the claim’ were not ‘primarily and substantially within the Commonwealth.’ ” Skyhook Wireless, Inc. v. Google Inc., 86 Mass.App.Ct. 611, 622 (2014), quoting from Kuwaiti Danish Computer Co. v. Digital Equip. Corp., 438 Mass. 459, 470, 473, 781 N.E.2d 787 (2003) ( Kuwaiti Danish ). As the Supreme Judicial Court observed in Kuwaiti Danish, supra at 473, 781 N.E.2d 787, § 11 appears to contemplate that such an assessment would occur following, and based upon, findings of fact made by a judge.

As a threshold matter, we note that the defendants have cited no appellate case in which the center of gravity of a § 11 claim was determined adversely to a plaintiff upon a motion to dismiss (as compared to a motion for summary judgment or after trial), and we are aware of none.⁶ In light of the multiple factors to be applied, and the nuanced and flexible approach to assessing them, as articulated in Kuwaiti Danish , see ibid., we find it difficult to imagine how such an assessment might be made on the basis of the allegations of the complaint alone—at least where, as in the present case, the loss occurred in Massachusetts, and substantial

numbers of the claims upon which the bills Resolute submitted to Transatlantic were based related either to Massachusetts insurers or claimants.⁷ Though the defendants assert that many of the activities upon which the plaintiffs' claims are based occurred outside the Commonwealth, the complaint includes no allegation or other indication to support the assertion.⁸

To be sure, in light of the defendants' principal physical presence in New York (of which the judge took judicial notice, see note 8, supra ), it is entirely possible that the principal communications between the defendants concerning their determination to refuse further payments to Resolute took place outside the Commonwealth. Less influential, in our view, is the fact that certain of the insurers with which National contracted under the ASAs were headquartered outside Massachusetts—at least if, as alleged in the complaint, the claims National (or Resolute acting as National's agent) sought to adjust for them were based in Massachusetts. In any event, we are aware of no rule requiring a § 11 plaintiff to plead facts with particularity sufficient to withstand a claim by the defendant that the center of gravity of his claim is not within the Commonwealth. In our view, the allegations of the complaint are sufficient to warrant discovery and development of a factual record adequate to...