United States District Court, E.D. Texas, Sherman Division
MEMORANDUM OPINION AND ORDER
L. MAZZANT, UNITED STATES DISTRICT JUDGE
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.
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”).
Markel American Insurance Company issued a For Profit
Management Liability Policy No. ML-815039 (the
“Policy”) to the Company. 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.
. . .
2. a civil proceeding against any
Insured commenced by the service of a
complaint or similar pleading upon such
. . .
for a Wrongful Act, including any appeal
. . .
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
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).
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
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).
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.
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 ...