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American Trucking and Transportation Insurance Co. v. Nelson

United States District Court, D. Montana, Missoula Division

July 28, 2017

AMERICAN TRUCKING AND TRANSPORTATION INSURANCE COMPANY, a Risk Retention Group, Plaintiff,
v.
RALPH NELSON, ROBERT GORMAN, SR., BOBBY J. GORMAN, DAN DOOLEY, and WESTCHESTER SURPLUS LINES INSURANCE COMPANY Defendants.

          ORDER

          Dana L. Christensen, Chief Judge.

         Before the Court is the Defendant Dan Dooley's ("Dooley") motion to dismiss. Dooley argues that the claims against him should be dismissed because: (1) he is not subject to personal jurisdiction in the state of Montana; (2) Plaintiffs claim for breach of contract fails as a matter of law; (3) Plaintiffs claim for breach of fiduciary duty fails as a matter of law; (4) Plaintiff fails to state a claim against Dooley for fraud, negligent representation or constructive fraud; (5) Plaintiff fails to state a claim against Dooley for negligence; (6) Plaintiffs claim against Dooley for negligence per se fails as a matter of law; (7) Plaintiff fails to state a claim against Dooley for acts in concert or civil conspiracy; and finally, (8) Plaintiff fails to state a claim against Dooley for piercing the corporate veil. For the reasons below, the Court grants the motion in part and denies the motion in part.

         BACKGROUND

         "On a motion to dismiss, material allegations of the complaint are taken as admitted, and the complaint is to be liberally construed in favor of the plaintiff." Kennedy v. H & M Landing, Inc., 529 F.2d 987, 989 (9th Cir. 1976).

         Plaintiff American Trucking and Transportation Insurance Company ("ATTIC") is a risk retention group located in Missoula, Montana. ATTIC offers its member insureds certain benefits which are not generally available to insureds purchasing insurance on the open market. In exchange for these benefits, the member insureds are subject to heightened duties to ATTIC and the other member insured shareholders. Gorman Group is a transportation, shipping, and logistics company, and was the holding company for a number of subsidiaries, including Tango Transport. Tango Transport was the principal operating entity for Gorman Group's trucking operations. In 2010, Gorman Group became a shareholder of ATTIC and both Gorman Group and Tango Transport became ATTIC insureds (hereafter collectively referred to as "the Insureds"). As shareholders, the Insureds nominated Ralph Nelson, Gorman Group's Senior Vice President and General Counsel, to be their representative to the ATTIC Board of Directors, and ATTIC required that at least one board meeting be held in the State of Montana.

         On October 1, 2010, ATTIC issued policy number ATTTAN110 which provided coverage to the Insureds and other affiliated companies. The policy provided the insureds with commercial trucking, property, and personal injury liability coverage with a $5 million per occurrence policy limit subject to a $350, 000 per occurrence deductible. Tango Transport managed all obligations to ATTIC on behalf of itself and Gorman Group. Tango Transport made all premium payments, paid claims, paid defense costs on the claims it handled, and reimbursed ATTIC on the claims it paid.

         ATTIC provided coverage and issued annual policies to the Insureds in 2010, 2011, 2012, 2013, and 2014. From October 1, 2010, through September 30, 2015, Ralph Nelson, acting as the Insureds' claims handling manager, handled the intake, investigation, and resolution of claims in which the Insureds anticipated ultimate exposure would fall below $175, 000. The Complaint alleges that Robert Gorman, Sr., as well as Dan Dooley, as the restructuring agent of Tango Transport, were advised and aware of the status of the claims handling process.

         In 2014, Tango Transport began experiencing financial difficulties. However, Ralph Nelson informed ATTIC that the Insureds were refinancing their debt obligations. By September 2015, the Insureds were unable to meet their financial obligations to ATTIC. At this time, Dan Dooley advised ATTIC that Tango Transport was either going to sell its operating equipment or would cease operations.

         ATTIC immediately took over all open liability claims that were within Tango Transport's deductible under the policies issued by ATTIC, and all other open but unpaid claims. ATTIC alleges that once it took over the claims, it became clear that the Insureds failed to satisfy their obligations under the ATTIC Shareholders Agreement and Bylaws, had misrepresented their liabilities, and were negligent in the manner in which they had handled the claims.

         On September 20, 2015, ATTIC and the Insureds agreed to extend the policy for 45 days to allow the Insureds time to transfer their operating equipment to another purchasing entity, Celadon, Inc. The Insureds paid a flat rate for coverage, and also transferred funds to ATTIC to pay for unpaid claims. By October 2015, the Insureds had informed ATTIC and their creditors that they planned to liquidate their remaining assets. In April 2016, Tango Transport filed for Chapter 11 Bankruptcy.

         As of December 1, 2016, ATTIC had filed two unsecured claims in the consolidated bankruptcy case filed in the Federal Bankruptcy Court, Easter District of Texas, Dallas, In re Tango Transport, LCL, et al. On December 21, 2016, the bankruptcy court determined that ATTIC may proceed against the non-debtors for civil damages.

         ATTIC's Complaint alleges ten counts against Dooley: (I) breach of contract; (II) breach of fiduciary duty; (III) negligent misrepresentation; (IV) fraud; (V) constructive fraud; (VI) negligence; (VII) negligence per se; (VII) acts in concert; (IX) civil conspiracy; and (X) piercing the corporate veil.

         Dan Dooley's motion to dismiss is personal to him as a Defendant and is made pursuant to Federal Rule of Civil Procedure 12(b)(2) and 12(b)(6). The Court addresses each issue raised by Dooley separately below.

         LEGAL STANDARD

         A defendant may move, prior to trial, to dismiss a complaint for lack of personal jurisdiction. Fed.R.Civ.P. 12(b)(2).

The power of a federal court entertaining a case based on diversity of citizenship to exercise personal jurisdiction over a nonresident defendant turns on two independent considerations: whether an applicable state rule or statute potentially confers personal jurisdiction over the defendant and whether assertion of such jurisdiction accords with constitutional principles of due process.

Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1286 (9th Cir.1977) (citations omitted). The party invoking jurisdiction of a federal court has the burden of establishing jurisdiction. KVOS, Inc. v. Associated Press, 299 U.S. 269, 278 (1936). It is the plaintiffs burden to demonstrate facts supporting a finding of jurisdiction to avoid a motion to dismiss. Data Disc, 557 F.2d at 1285. "[T]he plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion to dismiss." Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1127 (9th Cir.2010) (citation and quotation omitted). On considering a motion to dismiss for lack of personal jurisdiction, uncontested allegations in the complaint must be read as true and disputes of fact are resolved in favor of the plaintiff. Id.

         Under Montana law, courts follow a two-step test to determine whether personal jurisdiction exists. Milky Whey, Inc. v. Dairy Partners, LLC, 342 P.3d 13, 17 (Mont. 2015). Courts first determine whether jurisdiction exists under Montana's long-arm statute, Montana Rule of Civil Procedure 4(b)(1). Id. If personal jurisdiction exists under that first step, courts then consider "whether the exercise of personal jurisdiction conforms with the traditional notions of fair play and substantial justice embodied in the due process clause." Id.

         Rule 12(b)(6) motions test the legal sufficiency of a pleading. Fed.R.Civ.P. 12(b)(6). Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility when the court can draw a "reasonable inference" from the facts alleged that the defendant is liable for the misconduct alleged. Id.

         ANALYSIS

         I. Personal Jurisdiction

         Montana Rule of Civil Procedure 4(b)(1) incorporates principles of general and specific personal jurisdiction. Simmons Oil Corp. v. Holly Corp., 796 P.2d 189, 194 (Mont. 1990). The first sentence of the rule expresses the principle of general personal jurisdiction by inquiring as to whether a party is "found within" Montana. Id. A party is found within Montana if it is physically present in the state or if its contacts with the state are "so pervasive that it... may be deemed to be physically present." Id. A nonresident defendant must maintain "substantial" or "continuous and systematic" contacts with Montana to be found within the state. Id.

         This Court does not have general jurisdiction over Dooley because he was never present in Montana, nor did he have continuous and systematic contacts with Montana sufficient to be found within the state. ATTIC alleges that Dooley made calls to, sent letters to, and emailed ATTIC in Montana during the Tango Transport restructuring process. However, this is not enough to be considered "found" within Montana because it occurred within a limited time period during the restructuring process and, thus, was not continuous and systematic. Moreover, ATTIC effectively concedes that general jurisdiction over Dooley does not exist, because it did not present any counter arguments in regards to general jurisdiction in its response brief.[1] (See Doc. 15 at 10-14.)

         A claim for relief may also arise from any of the acts listed in Rule 4(b)(1)(A-G) and create specific jurisdiction for the purpose of litigating that particular claim. Milky Whey, Inc., 342 P.3d at 17. Thus, absent general personal jurisdiction, courts in Montana may exercise specific jurisdiction over any person

as to any claim for relief arising from the doing personally, or through an employee or agent, of any of the following acts:
(A) the transaction of any business within Montana;
(B) the commission of any act resulting in accrual within Montana of a tort action;
(C) the ownership, use, or possession of any property, or of any interest therein, situated within Montana;
(D) contracting to insure any person, property, or risk located within Montana at the time of contracting;
(E) entering into a contract for services to be rendered or for materials to be furnished in Montana by such person;
(F) acting as director, manager, trustee, or other officer of a corporation organized under the laws of, or having its principal place of business within, Montana; or
(G) acting as personal representative of any estate within Montana. Mont. R. Civ. P. 4(b)(1).

Rule 4(b)(1)(A) allows for the exercise of jurisdiction over any person who transacts business in Montana. A defendant's interactions must be "substantial" and "occur within Montana, " however, "[e]xtensive interstate communications . . . do not give rise to jurisdiction where the contract is to be performed in another state." Milky Whey, 342 P.3d at 19 (citations omitted); Cimmaron Corp. v. Smith, 67 P.3d 258, 261 (Mont. 2003). Rule 4(b)(1)(B) allows the exercise of jurisdiction over anyone who commits an act that results in the accrual of a tort action within Montana based "on where the events giving rise to the tort claims occurred, rather than where the plaintiffs allegedly experienced or learned of their injuries." Tackett v. Duncan, 334 P.3d 920, 92 (Mont. 2014). Finally, Rule 4(b)(1)(D) allows the exercise of jurisdiction over anyone who enters into a "risk located within [Montana] at the time of contracting." Carter v. Mississippi Farm Bureau Cas. Ins. Co., 109 P.3d 735, 744 (Mont. 2005).

         Further, in the Ninth Circuit, tort cases and contract cases are treated differently. "In tort cases, [the court] typically inquire[s] whether a defendant 'purposefully direct[s] his activities' at the forum state, applying an 'effects' test that focuses on the forum in which the defendant's actions were felt, whether or not the actions themselves occurred within the forum." Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006) (citations omitted). In a tort case, "express aiming" is satisfied through three requirements: "the defendant allegedly [must] have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." Id. "By contrast, in contract cases, [the court] typically inquire[s] whether a defendant 'purposefully avails itself of the privilege of conducting activities' or ' consummate[s] [a] transaction' in the forum, focusing on activities such as delivering goods or executing a contract." Id.

         Here, ATTIC alleges both tort and contract claims. Regarding the contract claims, Dooley was never a party to a contract with ATTIC, never consummated a transaction personally with ATTIC in Montana, nor did he ship or deliver tangible goods to Montana. Consequently, there is no specific personal jurisdiction over However, this Court does have specific personal jurisdiction over Dooley under the remaining tort claims. Dooley directed his conduct as the restructuring agent of Gorman Group and Tango Transport directly to ATTIC, and at all times during the restructuring process ATTIC was domiciled in Montana with its principal place of business in Missoula, Montana. (Doc. 1 at 2, 7.) The Complaint alleges that Dooley would have been advised of the status of the claims handling process for ATTIC, and that he personally communicated to ATTIC that Tango Transport would be selling its operating equipment. (Doc. 1 at 38, 43.) In Forsythe v. Overmyer, the Ninth Circuit found that "[a]n out-of-state act having an effect within the state may be sufficient to support jurisdiction" and especially in instances where a corporate employee "could have remained behind multiple veils of his complex business organization" but chose not to do so. 576 F.2d 779, 783-784 (9th Cir. 1978). Here, although Dooley contends he never set foot in Montana, Dooley personally participated in the restructuring process and worked with ATTIC in the attempt to avoid liquidation of Tango Transport.[2]

         Further, Montana is the only forum where ATTIC alleges harm was suffered. See Calder v. Jones, 465 U.S. 783, 789 (1984) (finding that California was "the focal point both of the store and of the harm suffered" and that jurisdiction is proper in California based on the "effects" of the defendant's conduct in California.). Although under Montana law extensive interstate communications do not give rise to jurisdiction where the contract is to be performed in another state, here the insurance contract between ATTIC and the Insureds was performed in Montana. The Complaint adequately alleges that Dooley was aware that the harm suffered by ATTIC would be felt in Montana. Dooley's contacts with ATTIC establish that he personally availed himself of the privilege of conducting activities in Montana. Dooley was certainly aware that ATTIC was located in Montana and should have reasonably anticipated that he could be haled into court in Montana.

         Finally, since ATTIC has made a prima facie showing that the exercise of personal jurisdiction over Dooley is constitutional, Dooley must respond with a "compelling case" that doing so would be unreasonable and therefore in violation of due process. "In determining whether the exercise of jurisdiction comports with 'fair play and substantial ...


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