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Gleason v. Markel American Insurance Co.

United States District Court, E.D. Texas, Sherman Division

January 24, 2018

TOM GLEASON and JULIE GLEASON
v.
MARKEL AMERICAN INSURANCE COMPANY

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE

         Pending before the Court are Defendant's Motion for Final Summary Judgment (Dkt. #20) and Plaintiffs' Motion for Partial Summary Judgment (Dkt. #22). After considering the motions, and the relevant pleadings, the Court finds that Defendant's motion should be granted and Plaintiffs' motion should be denied.

         BACKGROUND

         Plaintiffs Tom Gleason and Julie Gleason (“the Gleasons”) owned interests in a few closely held companies. Through these companies the Gleasons indirectly owned Oregon Ice Cream, LLC (“the Company”) and entered an agreement to sell their interest to OIC Holdings, LLC (“OIC”) on October 1, 2014. OIC alleged that the Gleasons made false representations during the negotiations and in the Equity Interest Purchase Agreement (the “Purchase Agreement”). Based on this transaction, OIC brought suit against the Gleasons in the 336th Judicial District Court of Collin County, Texas (“OIC Suit”). OIC filed its First Amended Petition and Request for Disclosure on June 8, 2016 (“the underlying Petition” or “the Petition”).

         Defendant Markel American Insurance Company issued a For Profit Management Liability Policy No. ML-815039 (the “Policy”) to the Company.[1] The Policy was effective for claims made between August 31, 2014, and October 2, 2020, for “Wrongful Acts” that occurred before October 2, 2014. The Policy included Directors and Officers and Company Liability coverage. The relevant portions of the Policy, including the Directors and Officers and Company Liability provision and Exclusion K, are as follows:

Section III - DEFINITIONSA. Claim means:

. . .

2. a civil proceeding against any Insured commenced by the service of a complaint or similar pleading upon such Insured;

. . .

for a Wrongful Act, including any appeal therefrom.

. . .

C. Insured Person, whether in the singular or plural, means:

1. any natural person who was, now is or shall during the Policy Period become a duly elected or appointed director, trustee, governor, Manager, officer, advisory director, or member of a duly constituted committee or board of the Company or their functional equivalent;

. . .

H. Outside Position means the position of director, officer, manager, trustee, governor or other equivalent executive position in an Outside Entity held by an Insured Person, if service in such position is with the knowledge and consent of, at the direction or request of, or part of the duties regularly assigned to the Insured Person by the Company.

. . .

K. Wrongful Act means:

1. any actual or alleged error, misstatement, misleading statement, act, omission, neglect, or breach of duty by any Insured Person in their capacity as such or in an Outside Position, or with respect to Insuring Agreement C, by the Company; or 2. any matter claimed against any Insured Person solely by reason of their serving in such capacity or in an Outside Position.

Section IV - EXCLUSIONS

The Insurer shall not be liable under this Coverage Part to pay any Loss on account of, and shall not be obligated to defend, any Claim made against any Insured:

. . .

K. based upon, arising out of or in any way involving (i) the actual, alleged or attempted purchase or sale, or offer or solicitation of an offer to purchase or sell, any debt or equity securities, or (ii) the actual or alleged violation of any federal, state, local or common or foreign law relating to debt or equity securities; provided this exclusion shall not apply to any Claim:
1. based upon, arising out of or in any way involving the purchase or sale, or offer or solicitation of an offer to purchase or sell, any debt or equity securities in a private[ ]placement transaction exempt from registration under the Securities Act of 1933, as amended.

(Dkt. #20, Exhibit A at pp. 26-29).

         On January 22, 2016, the Gleasons submitted their claim under the Policy to Defendant. On March 15, 2016, Defendant acknowledged the Gleasons as Insured Persons under the Policy, but denied coverage asserting that there was no “Wrongful Act” because the Gleasons did not act as officers or directors (“insured capacity”) in the allegations contained in the OIC Suit and that even if there were a “Wrongful Act, ” Exclusion K precluded coverage.

         On February 3, 2017, the Gleasons filed the present suit in the 366th Judicial District Court of Collin County, Texas, alleging a breach of contract and extra-contractual claims based on Defendant's denial of coverage. On March 6, 2017, Defendant filed its Notice of Removal (Dkt. #1). Since the Gleasons initiated the current suit, the OIC Suit concluded. The Gleasons prevailed on all claims and the district court awarded the Gleasons reasonable and necessary attorney's fees and costs. On September 15, 2017, Defendant filed its motion for summary judgment (Dkt. #20). The Gleasons filed their response on October 13, 2017 (Dkt. #26) and Defendant filed its reply on October 20, 2017 (Dkt. #30). On October 20, 2017, the Gleasons filed objections to the summary judgment evidence Defendant submitted (Dkt. #32) and Defendant responded to the Gleasons' objections on October 27, 2017 (Dkt. #36). Further, on September 18, 2017, the Gleasons filed their motion for partial summary judgment (Dkt. #22). On October 13, 2017, Defendant filed its response (Dkt. #27). The Gleasons filed their reply on October 20, 2017 (Dkt. #31) and Defendant filed its sur-reply on October 27, 2017 (Dkt. #35).

         LEGAL STANDARD

         The purpose of summary judgment is to isolate and dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Summary judgment is proper under Rule 56(a) of the Federal Rules of Civil Procedure “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A dispute about a material fact is genuine when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). Substantive law identifies which facts are material. Id. The trial court “must resolve all reasonable doubts in favor of the party opposing the motion for summary judgment.” Casey Enters., Inc. v. Am. Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981).

         The party seeking summary judgment bears the initial burden of informing the court of its motion and identifying “depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials” that demonstrate the absence of a genuine issue of material fact. Fed.R.Civ.P. 56(c)(1)(A); Celotex, 477 U.S. at 323. If the movant bears the burden of proof on a claim or defense for which it is moving for summary judgment, it must come forward with evidence that establishes “beyond peradventure all of the essential elements of the claim or defense.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). Where the nonmovant bears the burden of proof, the movant may discharge the burden by showing that there is an absence of evidence to support the nonmovant's case. Celotex, 477 U.S. at 325; Byers v. Dall. Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000). Once the movant has carried its burden, the nonmovant must “respond to the motion for summary judgment by setting forth particular facts indicating there is a genuine issue for trial.” Byers, 209 F.3d at 424 (citing Anderson, 477 U.S. at 248-49). A nonmovant must present affirmative evidence to defeat a properly supported motion for summary judgment. Anderson, 477 U.S. at 257. Mere denials of material facts, unsworn allegations, or arguments and assertions in briefs or legal memoranda will not suffice to carry this burden. Rather, the Court requires “significant probative evidence” from the ...


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