United States District Court, D. South Carolina, Charleston Division
ORDER AND OPINION
Richard Mark Gergel United States District Court Judge.
matter is before the Court on requested briefing regarding
The Episcopal Church in South Carolina's
("TECSC") standing to bring claims for breach of
contract, bad faith, breach of fiduciary duty, and aiding and
abetting a breach of fiduciary duty against The Church
Insurance Company of Vermont's ("CIC-VT") for
providing a defense to various Disassociated Parishes in
their litigation with TECSC. (Dkt. No. 54.) For the reasons
set forth below, the Court finds that TECSC lacks standing to
bring this case and dismisses this action.
case arises out of a schism in 2012 in the Historic Diocese,
originally known as the "Protestant Episcopal Church in
the State of South Carolina," in which certain members
and parishes sought to dissociate from The Episcopal Church
("TEC"), a nationwide hierarchical church. As
alleged, CIC-VT is a captive insurance company for TEC. (Dkt.
No. 1 at ¶¶ 7 - 11.) The insurance company was
created to provide insurance to TEC and its "provinces,
dioceses, parishes, missions, agencies, institutions and
other entities connected with the Church[.]"
(Id. at ¶ 12.) Pursuant to its mission, CIC-VT
issued a Master Policy to The Episcopal Church in South
Carolina ("TECSC"), the associated diocese of TEC
in South Carolina. (Id. at ¶¶ 13 - 20.)
Multiple parishes within TECSC were included in the Master
Policy as participants and provided a certificate number.
(Id. at ¶ 16.)
2012, a group, now calling themselves the Anglican Diocese of
South Carolina, (the "Disassociated Diocese")
purported to disassociate from TEC and multiple parishes
within TECSC similarly purported to disassociate from TEC and
joined the new Disassociated Diocese ("Disassociated
Parishes.") Notably, multiple Disassociated Parishes
were included as participants in the Master Policy issued by
CIC-VT. As represented by TECSC, the premiums under the
Master Policy were paid for, at least in part, by parishes.
(Dkt. No. 55 at 19.) Furthermore, as alleged, the operative
policies issued in 2012 were issued prior to the
disassociation. (Id. at 2 n. 1; 58 at 5.)
2013, the Disassociated Diocese and Disassociated Parishes
sued TECSC and TEC in state court, focusing largely on state
property claims. (Dkt. No. 1 at ¶ 28.) TEC and TECSC
filed counterclaims and, ultimately, on August 2, 2017, the
South Carolina Supreme Court held that TEC owned most of the
property in dispute and found that twenty-eight of the
Disassociated Parishes held real and personal property in
trust for TEC. Protestant Episcopal Church in the Diocese
of S.C. v. Episcopal Church, 421 S.C. 211, 265, 806
S.E.2d 82, 111 (2017), reh'g denied (Nov. 17,
2017), cert, denied sub nom. Protestant Episcopal Church
in the Diocese of S.C. v. The Episcopal Church, 138
S.Ct. 2623 (2018). That case has since been remitted to the
Dorchester County Circuit Court.
2013 TECSC filed a complaint against the Disassociated
Diocese in this Court, alleging that the Disassociated
Diocese and Disassociated Parishes were infringing and
diluting TEC and TECSC's trademarks and engaging in false
advertising. See No. 2:13-cv-587- RMG. This Court
has since entered judgment in favor of TEC and TECSC in that
case, and the case is currently on appeal. See No.
2:13-cv-587-RMG, Dkt. Nos. 667, 671, 673.
these litigations, CIC-VT has provided a defense to the
Third-Party Disassociated Parishes insured by CIC-VT.
Initially, CIC-VT denied coverage to some of the
Disassociated Parishes as they were not
"affiliates" of TEC, and some Disassociated
Parishes sued CIC-VT in this District, seeking, in part, a
declaratory judgment that CIC-VT had a duty to defend the
Disassociated Parishes against the counterclaims in the state
court action. (Id. at ¶ 44 - 44.) See
No. 2:15-cv-2590-PMD, Dkt. No. 1 at ¶¶ 28 -
However, the case was ultimately resolved in later 2015 by a
joint stipulation of dismissal with prejudice. (Dkt. No. 1 at
¶ 43) See No. 2:15-cv-2590-PMD, Dkt. No. 30.
11, 2019, TECSC brought claims against CIC-VT for breach of
contract, bad faith, breach of fiduciary duty and aiding and
abetting a breach of fiduciary duty. (Dkt. No. 1.) The
Complaint alleges, generally, that CIC-VT breached its
contractual duties and engaged in bad faith and a breach of
fiduciary duty by funding the litigation efforts of the
Third-Party Parishes against TEC and TECSC, the intended
beneficiary under the Master Policy. (Id.) The
Complaint focuses on the allegation that, under South
Carolina law and CIC-VT's corporate charter, a captive
insurance company may not insure any risks other than those
of its parent and affiliated companies, and that TECSC was
the primary and intended beneficiary under the Master Policy.
(Id. at ¶¶ 10, 16.) TECSC alleges that by
funding the litigation efforts of no longer affiliated
parishes, CIC-VT is liable to TECSC for the foreseeable
damages from the litigation, such as lost insurance proceeds,
lost value of TECSC property, and the increased costs of
legal proceedings over six years. (Id. at
¶¶ 52, 58, 64, 71.)
responding to the Court's request for briefing of
standing, TECSC asserts, generally, that it has standing to
assert claims for breach of contract and bad faith as state
laws regarding captive insurance companies are both
explicitly and implicitly incorporated into the Policies at
issue, that it has standing to allege aiding and abetting a
breach of fiduciary duty as CIC-VT's funding of
litigation participates in the Disassociated Diocese and
Parishes' misuse of trust funds, and that it has standing
to allege a breach of fiduciary duty as CIC-VT owed TECSC a
fiduciary duty as a captive insurer. (Dkt. No. 55.) CIC-VT,
in opposition, states that neither the Policies nor
applicable law require it to abstain from providing a defense
to a separate insured, and further denies that it owes any
fiduciary duty to TECSC or that it aided and abetted a breach
of a fiduciary duty. (Dkt. No. 58.)
for lack of standing is a legal question for the Court to
decide under Fed.R.Civ.P. 12(b)(1). See White Tail Park,
Inc. v. Stroube, 413 F.3d 451, 459 (4th Cir 2005). There
are two components to standing: Article III standing under
the constitution and prudential standing which is a
judicially created limit on jurisdiction. Doe v. Va. Dep
't of State Police, 713 F.3d 745, 753 (4th Cir.
2013). The party invoking federal jurisdiction, here TECSC,
has the burden to demonstrate standing. See Spokeo, Inc.
v. Robins, 136 S.Ct. 1540, 1547 (2016), as
revised (May 24, 2016) ("The plaintiff, as the
party invoking federal jurisdiction, bears the burden of
establishing these elements."). To demonstrate Article
III standing, a plaintiff must show that: "(1)...he or
she suffered an actual or threatened injury that is not
conjectural or hypothetical, (2) the injury must be fairly
traceable to the challenged conduct; and (3) a favorable
decision must be likely to redress the injury."
Miller v. Brown, 462 F.3d 312, 316 (4th Cir. 2006)
citing Lujan v. Defenders of Wildlife, 504 U.S. 555,
560 - 61 (1992). Prudential standing, which is less clearly
defined, includes "the general prohibition on a
litigant's raising another person's legal rights, the
rule barring adjudication of generalized grievances more
appropriately addressed in the representative branches, and
the requirement that a plaintiffs complaint fall within the
zone of interests protected by the law invoked.'"
Va. Dep Y of State Police, 713 F.3d at 753.
each cause of action TECSC fails to show that there is any
injury or that an injury is traceable to the challenged
conduct and further TECSCs claims solely attempt to raise
another entity's ...