Evanston Ins. Co. v. Certified Steel Stud Ass'n ( 2019 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 19a0493n.06
Case Nos. 18-3406/3407
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Sep 25, 2019
EVANSTON INSURANCE CO., ) DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellee, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE SOUTHERN DISTRICT OF
CERTIFIED STEEL STUD ASSOCIATION, ) OHIO
INC. and CLARKWESTERN DIETRICH )
BUILDING SYSTEMS, LLC, )
)
Defendants-Appellants. )
BEFORE: SILER, SUTTON, and WHITE, Circuit Judges.
SILER, Circuit Judge. Certified Steel Stud Association, Inc. (CSSA) and Clarkwestern
Dietrich Building Systems, LLC (ClarkDietrich) appeal the district court’s order declaring that
Evanston Insurance Co. (Evanston)—CSSA’s insurer—is not required to indemnify CSSA for
damages it owes ClarkDietrich based on a judgment ClarkDietrich obtained against CSSA.
ClarkDietrich also appeals the district court’s order denying its motion for partial summary
judgment. We: (1) REVERSE the district court’s order granting Evanston’s motion for summary
judgment, (2) REVERSE the district court’s order denying ClarkDietrich’s motion for partial
summary judgment and instruct the district court to enter partial judgment in ClarkDietrich’s favor,
Case Nos. 18-3406/3407, Evanston Insurance Co. v. Certified Steel Stud Assoc. Inc., et al.
and (3) REMAND for further proceedings to determine the extent of Evanston’s indemnity
obligation.
I.
ClarkDietrich produces steel products, CSSA is a trade association composed of three
entities—all of which are ClarkDietrich’s competitors—and Evanston is CSSA’s insurer. The
insurance policy (the Policy) between CSSA and Evanston states that, barring some exclusion,
Evanston will:
[P]ay on behalf of the Insured all sums in excess of the deductible amount . . . which
the Insured shall become legally obligated to pay as damages as a result of CLAIMS
FIRST MADE AGAINST THE INSURED DURING THE POLICY PERIOD
because of:
(a) any act, error or omission committed by the Insured arising out of the
conduct of association business or the administration, operation or
management of services provided to the Named Insured’s membership;
...
(c) publishers’ liability arising out of infringement of copyright, unfair
competition or plagiarism, including the unauthorized use of titles, formats,
ideas, characters, plots or other material embodied in any literary property
used, exhibited or published by the Named Insured or advertising activities
conducted by the Named Insured arising out of the conduct of association
business or the administration, operation or management of services
provided to the Named Insured’s membership . . . .
In 2013, ClarkDietrich sued CSSA and its members in Ohio state court, alleging they
disseminated false statements about ClarkDietrich and its products. ClarkDietrich claimed that
CSSA and its members: (1) violated the Ohio Deceptive Trade Practices Act (ODTPA),
(2) engaged in unfair competition, and committed (3) defamation and (4) commercial
disparagement (collectively, “the unlawful acts”). According to the complaint, CSSA published
false statements in: (1) the CSSA Publication, (2) “TechNote,” and (3) an advertisement titled
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“Don’t Paint Yourself Into a Corner” (the “Advertisement”). ClarkDietrich also asserted that
CSSA and its members committed the unlawful acts as part of a civil conspiracy.
CSSA tendered a claim to Evanston for insurance coverage. Evanston agreed to fund
CSSA’s defense from legal liability up to the Policy’s limits.1 The Policy also required CSSA to
“give full assistance and cooperation” to Evanston in its investigation of claims.
During trial, ClarkDietrich repeatedly attempted to settle its claims against CSSA.2
Initially, ClarkDietrich offered to settle for the Policy limit. CSSA informed Evanston of the offer,
but neither accepted. Later, ClarkDietrich sought to settle its claims for one-half of the policy
limit; again, CSSA notified Evanston of the offer but neither responded.
One day before closing arguments, ClarkDietrich and CSSA began discussing the
possibility of ClarkDietrich dismissing its claims. CSSA informed Evanston of these discussions,
but Evanston did not direct CSSA to agree to dismissal. Later that day, ClarkDietrich offered to
dismiss its claims against CSSA with prejudice and with no payment from CSSA or its insureds.
CSSA notified Evanston of the offer, and Evanston responded: “I would think that would be hard
to reject.” Nonetheless, CSSA rejected the offer, prompting ClarkDietrich to move to dismiss its
claims with prejudice. The next day, CSSA told Evanston that ClarkDietrich had moved to dismiss
its claims and that CSSA planned to object to the motion. The court heard argument on the motion
and rejected it. Evanston then instructed CSSA to accept ClarkDietrich’s offer to dismiss its
claims. At that time, however, the offer was no longer on the table.
Because CSSA refused to settle and ClarkDietrich could not persuade the court to dismiss
its remaining claims, the court submitted the following claims to the jury: (1) violation of ODTPA,
1
The Policy limits Evanston’s liability to $1 million per claim and $3 million total.
2
ClarkDietrich settled each of its claims against CSSA’s members.
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Ohio Rev. Code §§ 4164.01-4165.04 and unfair competition,3 (2) defamation, (3) common-law
commercial disparagement, and (4) commission of the unlawful acts in furtherance of a civil
conspiracy.
The court then instructed the jury on ClarkDietrich’s causes of action. With respect to the
civil conspiracy claim, the court explained:
Before you can find for the plaintiff, you must find by a preponderance of the
evidence that the defendant CSSA participated in a malicious combination
involving two or more persons, including the defendant, a result of which was the
commission of a wrongful act that caused injury to plaintiff. For purposes of this
instruction, person includes a company or the officers and agents of any of the
companies that are named as defendants in this case.
Proof [that] an underlying unlawful act was committed [i]s required before plaintiff
can prevail on its civil conspiracy claim. The unlawful acts plaintiff claims in this
case are the dissemination by the defendant of allegedly false or misleading
statements as alleged in the Deceptive Trade Practices Act/unfair competition,
defamation, and disparagement counts.
...
Malicious combination means a common understanding or design, whether spoken
or unspoken, entered into with malice by two or more persons to commit a wrongful
act. It does not require a showing of an express agreement. It is sufficient that the
participants, in any manner, reached a mutual understanding to commit[] a
wrongful act. A meeting of the participants is not necessary.
Malice is that state of mind under which a person does a wrongful act intentionally,
without a reasonable or lawful excuse, that causes injury.
The jury returned a verdict against CSSA on all counts. Then Evanston sought a judgment
in the Southern District of Ohio declaring that it had no obligation to indemnify CSSA for the
damages it owed ClarkDietrich. Evanston then moved for summary judgment, asserting that it
had no coverage obligation because: (1) the Policy excluded coverage for claims based on
3
The ODTPA claim and unfair competition claim were submitted to the jury as a single claim
because the elements of each claim are the same.
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dishonest conduct, and, in finding against CSSA, the jury found that it had acted dishonestly;
(2) the claims are uninsurable as a matter of law; and (3) CSSA violated the Policy’s cooperation
clause when it failed to consult Evanston prior to rejecting ClarkDietrich’s offer to dismiss the
claims against it with prejudice and without payment. In its reply, Evanston raised another
argument: ClarkDietrich should be estopped from collecting the limits of Evanston’s insurance
coverage because it argued during the state-court proceedings that CSSA is a “sham” organization.
In response, ClarkDietrich filed a counterclaim against Evanston pursuant to Ohio Rev.
Code § 3929.06(A), a statute that allows a judgment creditor to file a claim against an insurer to
satisfy its judgment. ClarkDietrich then moved for partial summary judgment on its counterclaim,
arguing that the Policy requires Evanston to indemnify CSSA for the losses CSSA sustained
because of ClarkDietrich’s ODTPA claim.4
The district court granted Evanston’s motion for summary judgment and denied
ClarkDietrich’s motion for partial summary judgment. The court reasoned that the Policy’s
“dishonest act” exclusion barred coverage because—given that the jury found that CSSA
committed the unlawful acts in furtherance of a conspiracy—the jury necessarily found that
“CSSA’s publication was intentionally false” and involved a dishonest act. The district court based
its decision on the jury verdict, instructions, and interrogatories and did not address Evanston’s
other arguments.
CSSA and ClarkDietrich appeal that decision. ClarkDietrich separately appeals the court’s
decision denying its motion for partial summary judgment.
4
ClarkDietrich explained that the portion of the judgment against CSSA attributed to the ODTPA
claim ($3.5 million) exceeds Evanston’s remaining insurance coverage, so, if Evanston is required
to satisfy part of the damages related to that claim, its coverage will be exhausted. Thus, according
to ClarkDietrich, it has no incentive to seek judgment or payment from Evanston on the remaining
claims.
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II.
As noted, this case presents an appeal from a grant of summary judgment and from a denial
of partial summary judgment. “This court reviews the district court’s grant of summary judgment
de novo.” Groening v. Glen Lake Cmty. Sch., 884 F.3d 626, 630 (6th Cir. 2018). “A denial of
summary judgment,” however, “is . . . not ordinarily subject to appeal.” Garner v. Memphis Police
Dep’t, 8 F.3d 358, 363 (6th Cir. 1993) (citation omitted). But where, as here, “an appeal from a
denial of summary judgment is presented in tandem with an appeal from a grant of summary
judgment, this court has jurisdiction to review the propriety of the district court’s denial of
summary judgment.” Id. (citation omitted). When a denial of summary judgment is based solely
on legal grounds, review is de novo. Id. (citation omitted).
III.
CSSA and ClarkDietrich both assert that the district court erred when it held that Evanston
had no obligation to indemnify CSSA, but they raise different arguments and seek different forms
of relief. While both seek reversal of the district court’s finding of no coverage based on the
Policy’s “dishonest acts” exclusion, only CSSA asks the panel to remand for trial based on that
error. ClarkDietrich asks the panel to instead take a few steps further: analyze and reject all of
Evanston’s arguments (including the ones the district court did not address), reverse the district
court’s grant of summary judgment in Evanston’s favor, reverse the district court’s denial of partial
summary judgment in ClarkDietrich’s favor, grant ClarkDietrich’s motion for partial summary
judgment on its counterclaim, and remand the matter for further proceedings and damages
determinations.
We will first analyze whether the district court erred in granting summary judgment to
Evanston pursuant to the Policy’s “dishonest acts” provision. Upon concluding that the district
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court erred in this regard, we will assess the other arguments Evanston raises in support of
summary judgment. Because no triable issues of fact remain and none of Evanston’s arguments
is persuasive, we conclude that ClarkDietrich is entitled to partial summary judgment and that the
district court erred in denying its motion.
In reaching these conclusions, we are guided by two maxims: First, under Ohio law, the
insurer bears the burden of proving that an exclusion applies. See Cont'l Ins. Co. v. Louis Marx &
Co., 415 N.E.2d 315, 317 (Ohio 1980). And second, Ohio courts presume that “that which is not
clearly excluded from the operation of [an insurance] contract is included in the operation thereof.”
King v. Nationwide Ins. Co., 519 N.E.2d 1380, 1386 (Ohio 1988) (internal quotation and citations
omitted).
A. The “Dishonest Acts” Exclusion
The Policy’s “dishonest act” exclusion states:
This Policy Does Not Apply:
(a) to any claim based upon or arising out of any dishonest, deliberately
fraudulent or criminal act, error, omission, personal injury or publishers’
liability committed by or at the direction of the Insured[.]
The district court reasoned that, because the jury found that CSSA committed the unlawful acts in
furtherance of a civil conspiracy, CSSA committed each act intentionally. So, the district court
explained, the jury necessarily found that “CSSA’s publication was intentionally false”—i.e., a
dishonest act.
We disagree.
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1. Defining Dishonest
The Policy does not define the term “dishonest act,” so, under Ohio law, we must interpret
that term consistent with its ordinary meaning.5 Mastellone v. Lightning Rod Mut. Ins. Co., 884
N.E.2d 1130, 1141 (Ohio Ct. App. 2008). Webster’s New World Dictionary defines “dishonest”
as “characterized by lack of truth, honesty, or trustworthiness.” Dishonest Definition, Merriam-
Webster.com., https://www.merriam-webster.com/dictionary/dishonest (last visited October 17,
2018). Moreover, Ohio courts have defined “dishonesty” as involving a “disposition to lie” and
have equated that term with “conscious wrongdoing . . . .” See Schoenfield v. Navarre, 843 N.E.2d
234, 239 (Ohio Ct. App. 2005) (citation and internal quotation marks omitted); Carrisalez v. Erie
Cty. Dep’t of Human Servs., No. E-91-19, 1992 WL 43110, at *4 (Ohio Ct. App. Mar. 6, 1992)
(citation omitted).
Accordingly, a “dishonest act” is synonymous with a “lie,” and one cannot lie—i.e., “make
an untrue statement with intent to deceive,” see Lie Definition, Merriam-Webster.com,
https://www.merriam-webster.com/dictionary/lie (last visited October 17, 2018)—without
knowing the truth. See Carrisalez, 1992 WL 43110, at *4 (stating that “[d]ishonest[y] implies a
willful perversion of truth in order to deceive . . . .” (citation omitted)).6
5
The parties do not dispute that Ohio law governs the substantive issues presented in this case.
6
Evanston insists that Ohio case law holds that a “dishonesty exclusion” in an insurance policy
negates coverage for losses related to intentional acts. To support this definition, it cites several
cases—including Twin Maples Veterinary Hospital v. Cincinnati Insurance Co., 824 N.E.2d 1027,
1030 (Ohio Ct. App. 2005) and Murrie v. Aiken Enterprises, Inc., No. L-96-324, 1997 WL 152056,
at *1 (Ohio Ct. App. Mar. 31, 1997). These cases are inapposite. Though courts in Twin Maples
and Murrie found that an insurance policy with a dishonesty exclusion only provided coverage for
claims based on negligent conduct, it reached that conclusion because the policies at issue
expressly limited coverage to losses based on negligent acts. See Twin Maples, 824 N.E.2d at
1031 (noting that policy said that insurer would only pay losses “caused by any negligent act”);
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2. None of the Unlawful Acts Contains an Element of Dishonesty
We ask next whether the jury necessarily found that CSSA acted dishonestly when it
committed the unlawful acts. The district court did not answer this question, but its resolution is
necessary to the disposition of the case. To answer it, we must review the elements of the unlawful
acts.
The jury did not have to find that CSSA acted dishonestly when it violated the ODTPA or
when it committed defamation and commercial disparagement. Courts in Ohio analyze ODTPA
claims in the same way that they analyze claims based on Section 43(a) of the Lanham Act, see
Cesare v. Work, 520 N.E.2d 586, 590 (Ohio 1987), and a plaintiff need not prove intent or
willfulness to establish a Lanham Act violation, see, e.g., Frisch’s Restaurants, Inc. v. Elby’s Big
Boy of Steubenville, Inc., 670 F.2d 642, 647 (6th Cir. 1982) (“Under [Section] 43(a) of the Lanham
Act it is not necessary to show that any false description or representation is willful or intentional.”
(citation omitted)). Further, per the jury instructions on the ODTPA claim, the jury had to decide
whether CSSA “made one or more false . . . statements”—not whether CSSA published statements
that it knew to be false. Similarly, the jury interrogatories do not show that the jury found that
CSSA published statements that it knew to be false. Likewise, the jury could have held CSSA
liable for defamation and disparagement by concluding that CSSA entertained serious doubts as
to the truth of its statements. Thus, none of the unlawful substantive acts standing alone includes
an element of dishonesty.
Murrie, 1997 WL 152056, at *4 (expressly excluding conduct “which is the result of
willful . . . acts of the insured”). The Policy in this case contains no such limitation.
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3. Civil Conspiracy
Because the jury did not find that CSSA acted dishonestly when it committed the unlawful
acts, the issue becomes whether the jury’s finding that CSSA committed each unlawful act in
furtherance of a civil conspiracy necessarily means that CSSA acted dishonestly.
Under Ohio law, “[t]he tort of civil conspiracy is a malicious combination of two or more
persons to injure another in person or property, in a way not competent for one alone, resulting in
actual damages.” Williams v. Aetna Fin. Co., 700 N.E.2d 859, 868 (Ohio 1998) (citations and
internal quotations omitted). Because civil conspiracy is a derivative tort, “[a]n underlying
unlawful act”—such as commission of a common-law tort or violation of a statute—“is required
before a civil conspiracy claim can succeed.” Id. Further, “[t]he malice involved in the tort is that
state of mind under which a person does a wrongful act purposely, without a reasonable or lawful
excuse, to the injury of another.” Id. (citations and internal quotation marks omitted).
The district court reasoned that, because the jury found “in favor of ClarkDietrich on its
civil conspiracy claim, the jury necessarily determined that CSSA committed [the] unlawful acts
‘intentionally’” and that, therefore, “CSSA’s publication was intentionally false . . . .” The district
court imputed the element of “intent” from the civil conspiracy claim onto the other unlawful acts.
Because CSSA acted intentionally, the court reasoned, CSSA published statements that were
intentionally false and therefore dishonest.
This analysis is flawed. As CSSA explains on appeal, because the jury instructions allowed
the jury to find against CSSA on the civil conspiracy claim upon a finding that CSSA intentionally
published false statements, the jury did not necessarily determine that CSSA published
intentionally false statements. In other words, the jury could have found that CSSA intentionally
published false statements rather than that CSSA published intentionally false statements.
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A finding that CSSA intentionally published statements that happened to be false is not equivalent
to a finding that CSSA acted dishonestly. Accordingly, the jury did not necessarily find that CSSA
acted dishonestly.
B. Evanston’s Alternative Arguments
Evanston argues that even if the district court erred, it is entitled to summary judgment
because: (1) the claims are uninsurable; (2) CSSA violated the Policy’s cooperation clause; and
(3) ClarkDietrich is estopped from collecting the limits of Evanston’s insurance coverage because
it argued during the state-court proceedings that CSSA is a “sham” organization.
1. Uninsurable as a Matter of Policy
Ohio law “prohibits liability insurance from covering damages caused by intentional” acts
undertaken with intent to injure. See, e.g., Buckeye Union Ins. Co. v. New England Ins. Co.,
720 N.E.2d 495, 499 (Ohio 1999) (“[A]n intent to injure . . . is a necessary element to
uninsurability.”); see also Allstate Ins. Co. v. Campbell, 942 N.E.2d 1090, 1095 (Ohio 2010).
Ordinarily, “[w]hether the insured had the necessary intent to cause injury is a question of
fact,” but the Ohio Supreme Court “has held that the intent to injure can be inferred as a matter of
law” in some circumstances. Buckeye Union, 720 N.E.2d at 499 (citation omitted). Such
circumstances arise “in cases in which the insured’s intentional act and the harm caused are
intrinsically tied so that the act has necessarily resulted in the harm.” Campbell, 942 N.E.2d at
1098. “[C]ourts should be careful to avoid applying the doctrine [of inferred intent] in cases where
the insured’s intentional act will not necessarily result in the harm caused by that act.” Id.
A few inferred intent cases are illustrative. In Buckeye Union, the Ohio Supreme Court
reasoned that an insurance company’s bad faith and malicious denial of coverage does not
constitute the type of intentional tort that is uninsurable under Ohio law. 720 N.E.2d at 499.
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The court reasoned that the insurance company declined coverage pursuant to “what it believed
were its rights under an insurance contract,” not so as to injure the plaintiff. Id. On the other hand,
intent to injure in Ohio can be inferred in civil cases involving criminal acts—such as murder or
molestation—because, in those instances, the unlawful act (i.e., murder) necessarily causes the
harm (death). See, e.g., Gearing v. Nationwide Ins. Co., 665 N.E.2d 1115, 1120 (Ohio 1996);
Preferred Risk Ins. Co. v. Gill, 507 N.E.2d 1118, 1124-25 (Ohio 1987).
ClarkDietrich’s claims are insurable. The jury did not find that CSSA acted with intent to
injure when it committed the unlawful acts, and no other evidence supports that proposition. Thus,
the unlawful acts are insurable unless we infer that the acts involved intent to injure, Buckeye
Union, 720 N.E.2d at 501 (“Since the jury did not specifically find that Buckeye acted with an
intent to injure, Buckeye’s bad-faith failure to settle the insurance claim was itself not necessarily
an uninsurable act.”), and we decline to make that inference. Like the insurance company in
Buckeye Union that denied its insured’s claim for coverage and was later found to have committed
bad-faith insurance practices, CSSA published a statement that was later found to be false and
tortious. See id. Therefore, as in Buckeye Union, Evanston’s “attempt to make . . . malice equal
intent to injure is misplaced . . . .” Id.
2. Cooperation Clause
Evanston argues that CSSA breached its cooperation obligation—and that it is therefore
absolved from any obligation to indemnify CSSA on ClarkDietrich’s claims—because CSSA
“unilateral[ly] reject[ed] . . . ClarkDietrich’s offer to dismiss all claims against the CSSA at no
cost, without notice or consultation with Evanston . . . .” Evanston cites no evidence to support its
contention that CSSA did not notify Evanston of ClarkDietrich’s offer and ignores the evidence
demonstrating that Evanston was made aware of the offer.
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When an insurance policy requires an insured to cooperate with the insurer in investigating
a claim, “the insurer may be relieved of further obligation with respect to [the] claim” if the insured
fails to cooperate. Gabor v. State Farm Mut. Auto. Ins. Co., 583 N.E.2d 1041, 1043 (1990)
(citations omitted). “To constitute a defense to liability,” however, “an insured’s lack of
cooperation must result in material and substantial prejudice to the insurance company.” Id.(citations omitted). “Whether an insured has violated the cooperation clause . . . is a question to
be determined in view of the facts and circumstances in each case.” Id. (citations omitted). Though
“the issue of whether there has been a violation” of a cooperation clause is typically a question for
the factfinder, “[a] court may decide the cooperation clause issue as a matter of law . . . when a
case presents undisputed facts.” Id.Here, the undisputed facts demonstrate that CSSA did not breach its duty to cooperate. The
Policy defined CSSA’s cooperation obligation as follows:
Assistance and Cooperation of the Insured: The Insured shall give full assistance
and cooperation to the Company [i.e., Evanston] as respects all claims made against
the Insured at the Insured’s expense. The Insured shall not, except at the Insured’s
own cost, make any payment, admit any liability settle any claims, assume any
obligation or incur any expense without the written consent of the Company.
And the record demonstrates that CSSA notified Evanston of ClarkDietrich’s offer to dismiss, to
which Evanston responded: “I would think that would be hard to reject.” Thus, CSSA did not
reject ClarkDietrich’s offer “without prior notice and/or consultation . . . .” Instead, CSSA
complied with its cooperation obligation by informing Evanston of the offer, and, presumably
because Evanston did not direct CSSA to accept it, rejected it.
3. Judicial Estoppel
Finally, Evanston argues that, because ClarkDietrich asserted that CSSA is a “sham”
organization during state-court proceedings, it is estopped from now arguing a contrary position.
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Evanston points out that ClarkDietrich: (1) argued in its closing arguments that “CSSA is just an
entity” composed of individuals who worked together to mount an attack against ClarkDietrich,
and (2) petitioned the state court to appoint a receiver for CSSA to prosecute a breach of fiduciary
duty claim against CSSA’s president, and, in doing so, argued that “the officers of [CSSA] used
the organization as a pawn in an ill-fated attempt to advance their companies’ competitive
positions” and that “CSSA is a mere vehicle used by its officers and members to disparage
ClarkDietrich . . . .”
“[T]he doctrine of judicial estoppel . . . preserve[s] judicial integrity by preventing parties
from intentionally ‘changing positions according to the exigencies of the moment.’” Am.
Guarantee & Liab. Ins. Co. v. Norfolk S. Ry. Co., 278 F. Supp. 3d 1025, 1048 (E.D. Tenn. 2017)
(quoting New Hampshire v. Maine, 532 U.S. 742, 750 (2001)); see also Edwards v. Aetna Life Ins.
Co., 690 F.2d 595, 598 (6th Cir. 1982) (“The doctrine of judicial estoppel applies to a party who
has successfully and unequivocally asserted a position in a prior proceeding; he is estopped from
asserting an inconsistent position in a subsequent proceeding.”). Courts consider several factors
in determining whether the doctrine applies:
First, a party’s subsequent position must be “clearly inconsistent” with its earlier
position. Second, the party’s prior position was actually successful in persuading
the prior court, “so that judicial acceptance of an inconsistent position in a later
proceeding would create the perception that either the first or second court was
misled.” Finally, the party asserting the inconsistent position would obtain an
unfair advantage over the opposing party if not estopped.
Am. Guarantee & Liab. Ins. Co., 278 F. Supp. 3d at 1048 (citations omitted).
Evanston’s judicial estoppel argument fails. Evanston has not explained how
ClarkDietrich’s assertions about CSSA contradict ClarkDietrich’s arguments in the coverage
litigation. Even if ClarkDietrich has taken inconsistent positions, Evanston’s argument fails
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because none of ClarkDietrich’s causes of action in the state-court action required it to prove that
CSSA operated as a sham organization. Thus, to the extent ClarkDietrich articulated that
proposition in its closing argument, neither the jury nor the court had to accept it. Moreover,
appointment of a receiver is warranted “where the failure to do so would place the petitioning party
[i.e., ClarkDietrich] in danger of suffering an irreparable loss or injury.” See Sobieraj v.
Gomersall, No. 817708, 2003 WL 21954758, at *3 (Ohio Ct. App. Aug. 14, 2003). The court
could have appointed a receiver to prosecute CSSA’s claims without finding that CSSA is a sham
organization.
IV.
Because the facts of this case are undisputed and all of Evanston’s arguments fail as a
matter of law, Evanston has not met its burden of proving that an exclusion absolves it from
providing coverage. See Cont'l Ins. Co., 415 N.E.2d at 317. Accordingly, the district court erred
when it denied ClarkDietrich’s motion and held that Evanston does not owe CSSA an indemnity
obligation with respect to ClarkDietrich’s ODTPA claim.
In light of that conclusion, we must now address the disposition of the case. Pursuant to
28 U.S.C. § 2106, we can “remand the cause and direct the entry of such appropriate judgment,
decree, or order, or require such further proceedings to be had as may be just under the
circumstances.” Further, because “both sides have had an opportunity to present evidence, the
facts are uncontroverted, and the proper disposition is clear, this court may direct the entry of
summary judgment.” See Garner, 8 F.3d at 366 (collecting cases). That said, we: (1) REVERSE
the district court’s order granting Evanston’s motion for summary judgment, (2) REVERSE the
district court’s order denying ClarkDietrich’s motion for partial summary judgment, (3) direct the
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district court to grant ClarkDietrich’s motion, and (4) REMAND to allow the district court to assess
the extent of Evanston’s indemnity obligation.
REVERSED and REMANDED.
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HELENE N. WHITE, Circuit Judge (concurring in part, dissenting in part). This is
a difficult case. There is no clear Ohio law on the application of the dishonest-acts exclusion to
the coverage and claims at issue here. Nor is Ohio law clear on the consequences of our conclusion
that the jury’s interrogatory answers in ClarkDietrich’s case against CSSA did not equate to a
determination that the acts underlying the verdict on the ODTPA/unfair competition claim were
dishonest within the meaning of the exclusion.
I agree with the majority that the jury’s verdict does not conclusively establish Evanston’s
entitlement to deny coverage based on the dishonest-acts exclusion. I also agree that Evanston’s
other defenses—the uninsurability of the risk as a matter of public policy, and the failure to
cooperate as required by the policy—fail for the reasons stated. However, I do not agree that the
district court erred in denying ClarkDietrich’s motion for summary judgment on its counterclaim.
Although I disagree with the district court’s ultimate conclusion, I do not agree with the
majority that the district court failed to answer the question whether CSSA acted dishonestly when
it committed the unlawful acts. I read the district court’s opinion as addressing that question:
[T]he court concludes that regardless of whether ClarkDietrich’s ODTPA,
defamation, and disparagement claims individually fall within the Policy’s
coverage, a favorable jury verdict on the civil conspiracy claim dooms coverage
under the Policy entirely. While the Court acknowledges Evanston bears the
burden of proving CSSA’s claim is excluded, the Court finds Evanston has met its
burden, as CSSA’s engagement in this particular civil conspiracy constitutes
“dishonest” conduct.
The Court’s conclusion in this case, however, does not render all conduct
related to civil conspiracies dishonest or deliberately fraudulent. Indeed, the Court
can envision a scenario wherein a civil conspiracy verdict would not be excluded
under the Policy. Accordingly, whether CSSA’s conduct was dishonest
necessitates a review of the unlawful acts the jury determined were part of the civil
conspiracy.
The jury identified the unlawful acts as follows: 1) Ohio Deceptive Trade
Practices Act/Unfair Competition; 2) Defamation; 3) and Disparagement. In
finding in favor of ClarkDietrich on the above claims, the jury made a number of
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Case Nos. 18-3406/3407, Evanston Insurance Co. v. Certified Steel Stud Assoc. Inc., et al.
findings by way of interrogatories. First, the jury determined that CSSA’s
publication was a false and misleading statement of fact. The jury also found that
CSSA’s publication was false. Moreover, the jury found CSSA published the
publication with fault amounting to “actual malice.” Next, the jury found CSSA
made a false and disparaging comment by publishing the publication. Further still,
the jury found CSSA disparaged ClarkDietrich with either knowledge of falsity or
with reckless disregard of the truth or falsity of the publication. Finally, the jury
found by publishing the publication that CSSA acted with intent to harm
ClarkDietrich’s interest or with knowledge that harm would inevitably result. The
question then becomes whether a finding of civil conspiracy renders the above
conduct dishonest.
....
Applied to the facts herein, the Court finds the Policy exclusion includes
CSSA’s unlawful acts in furtherance of the civil conspiracy. While the jury was
not required to find CSSA acted with intent in order to find in favor of ClarkDietrich
on the ODTPA, defamation, or disparagement claims separately, the jury was
required to find intent on the civil conspiracy claim. Imputing intent, then, the jury
found CSSA’s publication was intentionally false and a misleading statement of
fact. Such conduct fits within the usual and ordinary meaning of dishonest.
R. 97, Op. & Order PID 1893-95.
The problem with the district court’s ultimate conclusion is that the jury was not required
to find that the acts that caused it to find liability and award damages under the individual counts
were the same acts supporting its finding of liability and award of damages on the conspiracy
count. Evanston is correct that the civil conspiracy count required a finding of underlying unlawful
activity, and the jury identified conduct that violated each of the substantive claims—
ODTPA/unfair competition, defamation, business disparagement—but the individual claims
themselves, most clearly the ODTPA/unfair competition claim, included multiple individual
allegations directed to separate statements in the publication. Additionally, as ClarkDietrich
highlights, the civil-conspiracy count permitted the jury to consider additional publications not the
subject of the three underlying claims. Thus, the jury’s verdict did not necessarily embody a
finding that the acts underlying the ODTPA/unfair competition claim were dishonest.
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Case Nos. 18-3406/3407, Evanston Insurance Co. v. Certified Steel Stud Assoc. Inc., et al.
The majority concludes that a consequence of this determination is that Evanston is liable
under the policy to provide coverage to CSSA for the verdict entered on the ODTPA/unfair
competition count, and ClarkDietrich is entitled to judgment on its claim under Ohio Revised Code
§ 3929.06. Although Ohio law is not clear, I do not think it compels this result.
In Howell v Richardson, 544 N.E.2d 878, 881 (Ohio 1989), the Ohio Supreme Court
explained that in an action brought under § 3929.06, collateral estoppel applies to bar the insurer
from relitigating the insured’s mental state if that mental state was determined in the underlying
action. The Ohio courts appear to apply Ohio’s general principles of collateral estoppel in
§ 3929.06 actions.1 The question then is whether the prior action determined whether CSSA’s acts
were dishonest. As the majority observes, the jury’s verdict did not equate to a finding of
dishonesty. But it did not equate to a finding of no dishonesty either, and none of the specific
findings are inconsistent with a finding of dishonesty. Because the jury’s findings are consistent
with both dishonesty and no dishonesty, the issue remains undecided and Evanston is not
collaterally estopped from litigating the question in this coverage dispute.
Accordingly, I concur in the reversal of the grant of summary judgment to Evanston and
dissent from the reversal of the denial of partial summary judgment to ClarkDietrich on its
counterclaim.
1
Under Ohio law,
Collateral estoppel (issue preclusion) prevents parties or their privies from
relitigating facts and issues in a subsequent suit that were fully litigated in a prior
suit. Collateral estoppel applies when the fact or issue (1) was actually and directly
litigated in the prior action, (2) was passed upon and determined by a court of
competent jurisdiction, and (3) when the party against whom collateral estoppel is
asserted was a party in privity with a party to the prior action.
Thompson v. Wing, 637 N.E.2d 917, 923 (Ohio 1994) (citing Whitehead v. Gen. Tel. Co.,
254 N.E.2d 10 (Ohio 1969) (syllabus ¶ 2)).
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