Vantage Commodities Financial Services v. Assured Risk Transfer PCC ( 2022 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 31, 2022 Decided April 22, 2022
No. 21-7033
VANTAGE COMMODITIES FINANCIAL SERVICES I, LLC,
APPELLANT
v.
ASSURED RISK TRANSFER PCC, LLC, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:17-cv-01451)
John Gibbons argued the cause for appellant. With him on
the briefs was Steven J. Roman.
G. Richard Dodge, Jr. argued the cause for Reinsurer
appellees. With him on the brief were Alanna Clair, Mary Ann
D’Amato, and William Davis.
Christopher J. St. Jeanos argued the cause for Willis
appellees. With him on the brief was Elizabeth J. Bower.
Before: HENDERSON and TATEL, Circuit Judges, and
GINSBURG, Senior Circuit Judge.
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Opinion for the court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: In this insurance coverage dispute, an
insured company seeks to sidestep its insurer by collecting a
$22 million claim from ten reinsurers and insurance brokers.
The district court concluded that these entities are not liable for
the insured company’s losses. We agree.
I.
This case involves a complex network of insurance and
reinsurance agreements between several companies. Appellant
Vantage Commodities Financial Services I, LLC (“Vantage”),
a company that finances retail energy companies, entered into
a loan agreement extending credit to Glacial Energy Holdings
(“Glacial”). Seeking to mitigate the risk of Glacial defaulting
on its loan, Vantage retained Equifin Risk Solutions LLC
(“Equifin”) to create and manage Assured Risk Transfer PCC
LLC (“ART”), a special purpose “captive” insurance entity
backed by reinsurance. Equifin in turn retained Willis Towers
Watson Management (Vermont) Ltd. (“Willis Vermont”) to
assist in the formation, licensing, and management of ART.
After forming ART, Equifin President Paul Palmer began
looking for reinsurers. In December 2012, reinsurers Hannover
Ruckversicherung AG (“Hannover Re”) and Partner
Reinsurance Europe plc (“Partner Re”) committed to reinsure
ART for a portion of insurance payments made to Vantage
under the primary insurance policy, confirming their
commitments in signed reinsurance placement slips. Willis
Vermont, on behalf of ART, then issued a Credit Insurance
Binder (“2012 Binder”) which confirmed that Vantage’s credit
insurance had been bound with ART, noted that ART had
secured reinsurance coverage, and outlined the general terms
of the insurance and reinsurance agreements. Am. Compl.
Ex. 5. Two weeks later, ART issued a formal Credit Insurance
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Policy, insuring Vantage for up to $22 million for one year
against any nonpayment or losses from lending to an energy
service company, such as Glacial. Am. Compl. Ex. 1. The
policy made no mention of reinsurance.
In the months following the issuance of the Credit
Insurance Policy, ART entered into a formal reinsurance
contract with Hannover Re and Partner Re whereby each
reinsurer agreed to cover a share of ART’s limit of liability in
insuring Vantage. Am. Compl. Ex. 8. ART also entered into a
reinsurance agreement with five additional reinsurers (“Panel
Reinsurance Agreement”). Am. Compl. Ex. 7. The two
reinsurance agreements (collectively, “Reinsurance
Agreements”) covered about 90 percent of the $22 million limit
of liability in ART’s Credit Insurance Policy with Vantage.
Both Reinsurance Agreements stated that they were “solely
between [ART] and the Reinsurer[s], and nothing contained in
th[ese] Agreement[s] shall create any obligations or establish
any rights against the Reinsurer[s] in favor of any person or
entity not a party hereto.” Am. Compl. Ex. 7 at 2, Ex. 8 at 4.
Thereafter, Vantage requested that Palmer send another
copy of the 2012 Binder. In response, Palmer sent Vantage an
updated version of the binder (“2013 Binder”), which included
an updated list of reinsurers and stated that the “revised Binder
is being issued for review/illustrative purposes only.” Am.
Compl. Ex. 6.
When Glacial defaulted on its loan, Vantage submitted a
claim to ART seeking over $19 million in payment. Vantage
and ART disputed the claim in arbitration, and the arbitration
panel held that Vantage was entitled to recover over $25
million, consisting of $22 million under the Credit Insurance
Policy plus interest and costs. ART had insufficient funds to
pay the arbitration award itself. Before it submitted a claim
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under the Reinsurance Agreements, however, the seven
reinsurers (collectively, “Reinsurers”) notified ART that any
future claim would be denied because ART had failed to
comply with the terms of the Reinsurance Agreements. In
particular, ART failed to notify the Reinsurers of Vantage’s
claims or provide the Reinsurers with proof of Vantage’s losses
within the time limit provided by the Reinsurance Agreements.
After the Reinsurers notified ART that they would deny
any claims for reinsurance, Vantage filed suit in the U.S.
District Court for the District of Columbia against ART, Willis
Vermont, and the Reinsurers. Am. Compl. ¶¶ 5–6, 9–15.
Vantage also named as defendants Willis Limited and Willis
Re Inc., reinsurance intermediaries that share the same parent
company as Willis Vermont. Id. ¶¶ 7–8 & Ex. 7 at 3. Vantage
raised claims against the Willis Defendants for negligence,
professional negligence, negligent undertaking, and negligent
misrepresentation. Id. ¶¶ 173–81, 186–197. As for the
Reinsurers, Vantage alleged claims for breach of contract,
breach of implied contract, promissory estoppel, and unjust
enrichment. Id. ¶¶ 161–64, 198–214. Vantage also sought a
declaration of “the obligations of [the Reinsurers] under the
contractual agreements to pay” for Vantage’s losses. Id.
¶¶ 165–72.
The district court dismissed Vantage’s claims for breach
of contract and declaratory judgment. Vantage Commodities
Financial Services I, LLC v. Assured Risk Transfer PCC, LLC,
321 F. Supp. 3d 49, 61–63 (D.D.C. 2018) (Vantage I). After
discovery, the court granted summary judgment for the
Reinsurers and the Willis Defendants as to the remaining
claims against them. Vantage Commodities Financial Services
I, LLC v. Willis Ltd., 531 F. Supp. 3d 153, 166–79 (D.D.C.
2021) (Vantage II). Vantage appealed. We review de novo the
district court’s rulings on the defendants’ motions to dismiss
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and motions for summary judgment. Physicians for Social
Responsibility v. Wheeler, 956 F.3d 634, 642 (D.C. Cir. 2020)
(for dismissal); Arrington v. United States, 473 F.3d 329, 333
(D.C. Cir. 2006) (for summary judgment).
II.
We affirm the district court’s dismissal of Vantage’s
breach of contract and declaratory judgment claims because, as
the district court concluded, Vantage failed to plead facts
sufficient to show a contractual relationship with the
Reinsurers. Vantage alleged that the Reinsurers “created a
direct contractual relationship when Willis and ART . . . ,
acting on behalf of [the Reinsurers] as their agents, provided
the Credit Insurance Binders to Vantage.” Am. Compl. ¶ 65.
But the binders’ disclosures of a reinsurance policy and
description of that policy did not create a direct contractual
relationship between Vantage and the Reinsurers. As the
district court explained, a reinsurer generally “does not have a
direct contractual relationship with the original insured unless
the terms of the reinsurance agreement create such a
relationship.” Vantage I, 321 F. Supp. 3d at 60 (citing
Bruckner-Mitchell v. Sun Indemnity Co. of New York, 82 F.2d
434, 444 (D.C. Cir. 1936)). The Reinsurance Agreements here
created no contractual relationship with Vantage, stating
instead that the agreements were “solely between [ART] and
the Reinsurer[s]” and that “nothing contained in th[e]
Agreement[s] shall create any obligations or establish any
rights against the Reinsurer[s] in favor of any person or entity
not a party hereto.” Am. Compl. Ex. 7 at 2, Ex. 8 at 4.
Vantage cites several cases explaining that, in certain
circumstances, the reinsurer may become directly liable to the
insured. See, e.g., World Omni Financial Corp. v. Ace Capital
Re, Inc., No. 02-cv-0476, 2002 WL 31016669, at *1 (S.D.N.Y.
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Sept. 10, 2002) (Reinsurer and original insured “dealt directly
with each other,” and reinsurer “consistently treated [original
insured] as if it were [the reinsurer’s] direct insured.”);
Executive Risk Indemnity, Inc. v. Charleston Area Medical
Center, Inc., 681 F. Supp. 2d 694, 724 (S.D. W. Va. 2009)
(“[Reinsurer] dealt with [insured] directly[.]”). But unlike
those cases, Vantage’s complaint contains no allegations that
the Reinsurers dealt directly with Vantage or otherwise treated
Vantage as if it were directly insured by them. Accordingly,
Vantage’s breach of contract and declaratory judgment claims
are not “plausible on [their] face.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (internal quotation marks omitted).
III.
The district court properly granted summary judgment for
the Reinsurers on Vantage’s remaining claims against them.
Beginning with the implied contract claim, Vantage points to
no record evidence of any consideration to support its alleged
implied contract with the Reinsurers. See Paul v. Howard
University, 754 A.2d 297, 311 (D.C. 2000) (To establish an
implied-in-fact contract, a plaintiff must show “all the
necessary elements of an express contract—including offer,
acceptance, and consideration[.]”). As the district court
observed, the record reveals only two exchanges of
consideration, neither of which occurred between Vantage and
the Reinsurers. First, the Credit Insurance Policy required
Vantage to pay premiums to ART in the amount of 12 percent
of the policy limit in exchange for the insurance provided by
ART to Vantage. Vantage II, 531 F. Supp. 3d at 175–76.
Second, the Reinsurance Agreements obligated ART to pay
$800,000 in premiums to the Reinsurers as consideration for
their reinsurance obligations to ART. Vantage II, 531 F. Supp.
3d at 176. Because Vantage identifies no evidence of any
“consideration that the Reinsurers received for allegedly
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obligating themselves to cover Vantage directly and on top of
the risk that [the Reinsurers] assumed on behalf of ART,”
Vantage II, 531 F. Supp. 3d at 176, the implied contract claim
cannot survive summary judgment. See, e.g., Steele v. Isikoff,
130 F. Supp. 2d 23, 33 (D.D.C. 2000) (finding insufficient
evidence to support “the alleged second contract . . . because it
lacks any independent, valid consideration”).
Vantage’s promissory estoppel and unjust enrichment
claims also suffer from the absence of any evidentiary support.
As pled, both claims depend on the existence of an agency
relationship between the Reinsurers and either ART or the
Willis Defendants. See Am. Compl. ¶ 206 (alleging that the
Reinsurers “effectively promised” to pay Vantage’s losses by
“providing Vantage with the Credit Insurance Binders through
[the Reinsurers’] agents, ART . . . and Willis”); id. ¶ 212
(alleging that “Vantage conferred a benefit on [the Reinsurers]
by paying premiums to them through their agents, ART . . . and
Willis”). Vantage asserts that ART and the Willis Defendants
had “actual authority” to act as the Reinsurers’ agents in their
“dealings with Vantage.” Appellant’s Br. 51; see Restatement
(Third) of Agency § 3.01 (2006) (“Actual authority . . . is
created by a principal’s manifestation to an agent that, as
reasonably understood by the agent, expresses the principal’s
assent that the agent take action on the principal’s behalf.”).
But Vantage points to no evidence of statements or conduct by
the Reinsurers that authorized ART or the Willis Defendants to
act on their behalf. Nor does Vantage point to any evidence that
ART or the Willis Defendants interpreted any of the
Reinsurers’ statements or conduct as a manifestation of consent
to act on their behalf. Although the Panel Reinsurance
Agreement described Willis Limited and Willis Re Inc. as
“intermediaries . . . through whom all communications and
payments relating [to the reinsurance contract] shall be
transmitted,” Am. Compl. Ex. 7 at 3, the use of these entities
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as intermediaries granted them no broad authority to act on
behalf of the Reinsurers as their agents. As the district court
explained, “‘handling of such routine matters’ as transmitting
communications or even premium payments ‘is certainly not
. . . sufficient to make [a broker] an agent of the [Reinsurers].’”
Vantage II, 531 F. Supp. 3d at 171 (quoting Travelers
Indemnity Co. v. Booker, 657 F. Supp. 280, 287 (D.D.C.
1987)).
Changing tack from the agency theory presented in its
complaint, Vantage argued on summary judgment that it need
not establish agency to prevail on its promissory estoppel claim
because the Reinsurers “directly assented to the promises
transmitted to Vantage.” Appellant’s Br. 48. But the Credit
Insurance Binders Vantage cites contain no promise that the
Reinsurers would pay for Vantage’s losses under its Credit
Insurance Policy. As noted above, these binders merely
disclose the existence and terms of a reinsurance agreement
between ART and the Reinsurers.
Because Vantage’s claims of implied contract, promissory
estoppel, and unjust enrichment are wholly unsupported by
record evidence, the Reinsurers are entitled to summary
judgment. See Fed. R. Civ. P. 56(a) (Summary judgment shall
be granted if “there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.”).
IV.
Vantage’s claims against the Willis Defendants fare no
better than its claims against the Reinsurers. To begin with, its
claims of negligence, professional negligence, and negligent
undertaking are barred by the District of Columbia’s
“economic loss doctrine,” which prohibits claims of negligence
where, as here, a claimant seeks to recover purely economic
losses. See Aguilar v. RP MRP Washington Harbour, LLC, 98
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A.3d 979, 985–86 (D.C. 2014). The economic loss doctrine
carves out a “limited” special relationship exception, which
applies when the defendant has “an obligation . . . to care for
[the plaintiff’s] economic well-being or an obligation that
implicate[s the plaintiff’s] economic expectancies.” Whitt v.
American Property Construction, P.C., 157 A.3d 196, 205
(D.C. 2017) (internal quotation marks omitted). But as the
district court explained, Vantage and the Willis Defendants had
nothing approaching the “close” or “intimate” nexus needed to
fall within the special relationship exception. Vantage II, 531
F. Supp. 3d at 177–79 (internal quotation marks omitted); see
Aguilar, 98 A.3d at 985 n.3 (analogizing the District of
Columbia’s special relationship exception to those in other
jurisdictions that require an “‘intimate nexus’” or “‘close
nexus’” between the parties). Although Willis Limited served
as an intermediary between ART and the Reinsurers, it had no
contact with Vantage. Willis Re Inc., though listed as an
intermediary in the Panel Reinsurance Agreement, had no
involvement with any of the transactions in this dispute.
Vantage II, 531 F. Supp. 3d at 172 n.14 (“[T]he Willis
Defendants contend that Willis Re Inc. . . . was not involved in
these transactions,” and “Vantage never disputes this fact.”).
Willis Vermont assisted Equifin in its formation, licensing, and
management of ART but had minimal direct contact with
Vantage. Because “there was no mutually agreed upon
relationship” between Vantage and the Willis Defendants,
Aguilar, 98 A.3d at 985, the economic loss doctrine applies and
bars Vantage’s claims.
Next, we turn to Vantage’s claim of negligent
misrepresentation. Under District of Columbia law, “[o]ne who
. . . supplies false information for the guidance of others in their
business transactions, is subject to liability for pecuniary loss
caused to them by their justifiable reliance upon the
information, if he fails to exercise reasonable care or
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competence in obtaining or communicating the information.”
Restatement (Second) of Torts § 552 (1977); Remeikis v. Boss
& Phelps, Inc., 419 A.2d 986, 990 (D.C. 1980) (adopting the
definition of negligent misrepresentation set forth in the
Restatement (Second) of Torts).
Vantage alleges that the Willis Defendants misrepresented
the terms of the Reinsurance Agreements when they stated in
the Credit Insurance Binders that reinsurance was ceded on the
“same terms, conditions and settlements” as the original
insurance policy, a statement Vantage construed as a
commitment to pay claims covered by its policy with ART.
Am. Compl. ¶¶ 193–94 (internal quotation marks omitted). But
this statement is identical to the language in Hannover Re’s and
Partner Re’s reinsurance placement slips, which confirmed
their reinsurance commitments at the time that the 2012 Binder
was issued. And Willis Vermont obtained these placement slips
to document the reinsurers’ commitments prior to issuing the
2012 Binder on behalf of ART. Vantage points to no record
evidence suggesting that the 2012 Binder’s representations
were false when made or that Willis Vermont “fail[ed] to
exercise reasonable care or competence in obtaining or
communicating the information” in the 2012 Binder.
Restatement (Second) of Torts § 552; see id. cmt. e (“[T]he
defendant is subject to liability if, but only if, he has failed to
exercise the care or competence of a reasonable man in
obtaining or communicating the information.”). As for the
2013 Binder, Vantage could not have reasonably relied on its
representations because the binder stated explicitly that it was
“being issued for review/illustrative purposes only.” Am.
Compl. Ex. 6; see, e.g., In re U.S. Office Products Co.
Securities Litigation, 251 F.Supp.2d 58, 74 (D.D.C. 2003)
(“[T]he plaintiff [must] reasonably rel[y] on the alleged
misrepresentation.”).
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Vantage next asserts that the Willis Defendants
“committed a misrepresentation [by failing] to send Vantage’s
demand for arbitration to the Reinsurers after Willis had
informed Vantage that it would pass information to
Reinsurers.” Vantage Cross Motion for Partial Summary
Judgment and Opposition to Defendants’ Motions for
Summary Judgment at 46, Vantage Commodities Financial
Services I, LLC v. Assured Risk Transfer PCC, LLC, No. 17-
cv-1451, ECF No. 144-1. In support, Vantage cites a single
email from Willis Vermont stating that Vantage’s insurance
premium “should . . . be paid to [ART]” and that “[u]pon
receipt, Willis [Vermont] as manager of ART will remit
payment to ART’s reinsurers . . . as is customary.” Am. Compl.
Ex. 10. Because this email includes no indication that the Willis
Defendants represented that they would pass information to the
Reinsurers, it provides no support for Vantage’s negligent
misrepresentation claim.
Vantage insists that the district court erred because it
applied the economic loss doctrine to Vantage’s claim of
negligent misrepresentation. But we need not address this
argument. As discussed above, and as the Willis Defendants
argued before the district court, the evidentiary record creates
no genuine dispute of material fact regarding Vantage’s claim
of negligent misrepresentation. Accordingly, we affirm the
district court’s grant of summary judgment for the Willis
Defendants. See EEOC v. Aramark Corp., Inc., 208 F.3d 266,
268 (D.C. Cir. 2000) (“[B]ecause we review the district court’s
judgment, not its reasoning, we may affirm on any ground
properly raised.”).
V.
For the foregoing reasons, we affirm.
So ordered.