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Companion Property & Casualty Insurance Co. v. Wood

United States District Court, D. South Carolina, Columbia Division

September 20, 2017

COMPANION PROPERTY AND CASUALTY INSURANCE COMPANY, Plaintiff,
v.
CHARLES DAVID WOOD, JR.; AMS STAFF LEASING, INC.; BRECKENRIDGE ENTERPRISES, INC.; and ASPEN ADMINISTRATORS, INC., Defendants.

          OPINION AND ORDER ON MOTION TO DISMISS

          CAMERON MCGOWAN CURRIE Senior United States District Judge

         This matter is before the court on Defendants' Motion to Dismiss the First Amended Complaint. ECF No. 25 (Motion to Dismiss); ECF No. 21 (First Amended Complaint). For the reasons set forth below, the motion is granted in part and denied in part.

         BACKGROUND

          Related Actions.

          This is the third related action between the parties. The first action was initiated by Highpoint Risk Services, LLC (“Highpoint”), an entity owned by Defendant Charles David Wood, Jr. (“Wood”), against Companion Property and Casualty Insurance Company (“Companion”) in the Northern District of Texas. Highpoint Risk Serv., LLC, et al. v. Companion Prop. & Casualty Ins. Co., C.A. No. 3:14-cv-3398-L (“Companion I”). See ECF No. 25-1 at 3 (summarizing prior litigation). The claims in Companion I focus on a line of business the courts and parties have referred to as the “Pay-Go” line of business. The Defendants here were later added as third-party Defendants in Companion I. Id. The third-party claims and counterclaims address a line of business governed by a 2006 Coverage Agreement and various related agreements in addition to the Pay-Go line of business. Id.[1] Companion I is set for trial in February 2018. See ECF No. 25-1 at 3 n.4 (citing Companion I, ECF No. 139).

         Companion II.

          Roughly a month after Companion I was filed, Companion filed an action in this court against Highpoint, Wood, and several other entities owned by Wood. Those entities include the present Defendants AMS Staff Leasing, Inc. (“AMS”); Breckenridge Enterprises, Inc. (“Breckenridge”); and AMS Staff Leasing II, Inc. (“AMS II”) (collectively “AMS Defendants”)). Companion Prop. & Casualty Ins. Co. v. Wood, et al., C.A. No. 3:14-cv-3719-CMC (“Companion II”). The claims in Companion II related to both the Pay-Go line of business and the 2006 Coverage Agreement line of business. However, in deference to the court in which the claims were first raised, this court stayed and later dismissed claims related to the Pay-Go line of business from Companion II. The remaining claims proceeded through discovery and are now in the final stages of litigation.

         Certain deadlines in Companion II are significant to some of Defendants' arguments for dismissal. These include the deadline for amendment of pleadings, which passed on August 13, 2015. See Companion II, ECF No. 71 (Second Amended Scheduling Order). They also include the deadline for discovery, which passed on September 14, 2016, subject to an extension for limited purposes into October 2016. See Companion II, ECF Nos. 164 (Sixth Amended Scheduling Order), 185 (Order on Discovery Issues). While Companion II is not yet closed, many claims have been resolved on cross-motions for summary judgment, partial settlement just prior to a scheduled jury trial, and through rulings on non-jury issues. E.g., Companion II, ECF Nos. 258, 409, 414.

         Remaining issues will be resolved through accounting and actuarial reviews, now in their final stages, and post-judgment petition for attorneys' fees, costs, and interest. Companion II, ECF No. 409 (Joint Submission); ECF No. 425 (Order on Actuarial Report).

         Present Action.

         The claims in the present action are based primarily if not solely on the 2006 Coverage Agreement and related agreements. See ECF No. 21 (First Amended Complaint). The related agreements include two agreements signed by Wood: a Guaranty and Indemnity Agreement (“Wood Guaranty”); and a Pledge Agreement (“Wood Pledge”).[2] See, e.g., id. ¶¶ 8, 9, 31. The causes of action are summarized below.

         1. The first cause of action alleges the AMS Defendants breached the 2006 Coverage Agreement by failing to provide a $20 million letter of credit following a November 4, 2016 demand. Id. ¶¶ 46-54 (seeking damages and specific performance).

         2. The second cause of action alleges Wood breached the Wood Guaranty by failing to cause a letter of credit to be issued (covering the AMS Defendants' obligations) following a November 14, 2016 demand. Id. ¶¶ 55-69 (seeking damages and specific performance).

         3. The third cause of action alleges Wood breached the Wood Guaranty by failing to provide annual financial statements despite “several written requests” including a November 14, 2016 demand. Id. ¶¶ 70-78.[3]

         4. The fourth cause of action alleges Wood breached the Wood Guaranty and Wood Pledge by failing to provide information relating to pledged assets (including stock in AMS and AMS II) and to deliver certain instruments of transfer and assets following a November 14, 2016 demand. Id. ¶¶ 79-90. It also alleges Wood breached the Wood Pledge through his surreptitious sale of essentially all assets of AMS and AMS II and attempted dissolution of those entities in March 2016.[4] Id.

         5. The fifth cause of action alleges the breach of contract addressed in the fourth cause of action was accomplished with fraudulent intent and accompanied by a fraudulent act because Wood concealed the information relating to the sale and attempted dissolution. Id. ¶¶ 91-100. Companion alleges Wood acted with an intent to (1) avoid providing Companion protections contemplated by their agreements, (2) “limit or escape liability under the agreements”; and (3) “misappropriate the assets of [AMS and AMS II] for his own benefit and to Companion's detriment.” Id. ¶ 89.

         6. The sixth cause of action alleges Wood's sale of AMS and AMS II assets constitutes a fraudulent conveyance. Id. ¶¶ 101-06. Companion alleges Wood was “a debtor who . . . owed Companion a first priority lien and security interest in AMS's assets” and, in contravention of Companion's interest as a creditor, “secretly transferred all of AMS's assets” to a third party “for the purpose of making Wood and AMS judgment proof[.]” Id. ¶¶ 102, 103.

         7. The seventh cause of action alleges Wood's sale of AMS and AMS II assets breached a fiduciary duty Wood owed to Companion. Id. ¶¶ 107-13.

         8. The eighth cause of action alleges Wood and the AMS Defendants are obligated to reimburse Companion for the portion of Companion's settlement with the North Carolina Insurance Guaranty Association (“NCIGA”) attributable to the below-deductible portion of insurance claims covered by that settlement. Id. ¶¶ 114-120. It also alleges Defendants are obligated to contribute the same share of “any future liability associated with the alleged ‘dual' or ‘overlapping' Policies” that have caused various state's insurance guaranty associations to pursue claims against Companion. Id. ¶ 119.

         9. The ninth cause of action alleges Wood is obligated under the Wood Guaranty to “pay all legal fees, costs, losses, and expenses incurred by Companion related to the claims of state guaranty funds.” Id. ¶ 125. This claim does not specifically mention and is not limited to the settlement with NCIGA.

         10. The tenth cause of action alleges Wood is obligated under the Wood Guaranty to “satisfy the demands or claims made by Companion in the First Amended Complaint in this action and ‘indemnify and hold Companion harmless from and against any and all claims, suits, hearings, proceedings, actions, damages, liabilities, fines, penalties, losses, costs, or expenses, including without limitation attorneys' fees, at any time arising out of or otherwise related to, directly or indirectly, ' the 2006 Coverage Agreement and/or the Policies.” Id. ¶ 133.

         STANDARD

         A motion under Federal Rule of Civil Procedure 12(b)(6) should be granted only if, after accepting all well-pleaded allegations in the complaint as true, it appears certain the plaintiff cannot prove any set of facts in support of its claims that entitles it to relief. See Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999). Although the court must take the facts in the light most favorable to the plaintiff, it “need not accept the legal conclusions [the plaintiff would draw] from the facts.” Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting Eastern Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000)). The court may also disregard any “unwarranted inferences, unreasonable conclusions, or arguments.” Id.

         The Rule 12(b)(6) standard has often been expressed as precluding dismissal unless it is certain the plaintiff is not entitled to relief under any legal theory that plausibly could be suggested by the facts alleged. See Mylan Labs., Inc. v. Markari, 7 F.3d 1130, 1134 (4th Cir. 1993). Nonetheless, the plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (quoted in Giarratano, 521 F.3d at 302).

         Thus, in applying Rule 12(b)(6), the court also applies the relevant pleading standard. Despite the liberal pleading standard of Rule 8, a plaintiff in any civil action must include more than mere conclusory statements in support of a claim. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (court need only accept as true the complaint's factual allegations, not its legal conclusions); see also McCleary-Evans v. Maryland Dept. of Trans., 780 F.3d 582, 587 (4th Cir. 2015) (noting Iqbal and Twombly articulated a new requirement that a complaint must allege a plausible claim for relief, thus rejecting a standard that would allow a complaint to survive a motion to dismiss whenever the pleadings left open the possibility that a plaintiff might later establish some set of [undisclosed] facts to support recovery.” (emphasis and alteration in original, internal quotation marks omitted)); Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citing Robertson v. Sea Pines Real Estate Companies, Inc., 679 F.3d 278 (4th Cir. 2012) for proposition plaintiff need not forecast evidence sufficient to prove the elements of a claim, but must allege sufficient facts to establish those elements).

         DISCUSSION

         I. Contract Claims

         Defendants argue Companion's contract-based claims (first through fifth and eighth through tenth causes of actions) should be dismissed for the following five reasons: (1) they improperly split claims that were or could have been raised in prior litigation; (2) they are barred by the statute of limitations; (3) damages are not adequately pleaded; (4) the allegations of a contractual duty are deficient to the extent Companion alleges breach based on sale of assets or attempted ...


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