Resolute Management Inc. v. Transatlantic Reinsurance Co. , 87 Mass. App. Ct. 296 ( 2015 )

NOTICE: All slip opinions and orders are subject to formal
revision and are superseded by the advance sheets and bound
volumes of the Official Reports. If you find a typographical
error or other formal error, please notify the Reporter of
Decisions, Supreme Judicial Court, John Adams Courthouse, 1
Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-
1030; SJCReporter@sjc.state.ma.us
14-P-573 Appeals Court
RESOLUTE MANAGEMENT INC. & another1 vs. TRANSATLANTIC
REINSURANCE COMPANY & another.2
No. 14-P-573.
Suffolk. November 13, 2014. - April 29, 2015.
Present: Green, Wolohojian, & Blake, JJ.
Practice, Civil, Motion to dismiss. Consumer Protection Act,
Businessman's claim. Contract, Reinsurance agreement,
Interference with contractual relations. Conflict of Laws.
Civil action commenced in the Superior Court Department on
April 30, 2013.
A motion to dismiss was heard by Thomas P. Billings, J.
Bryce L. Friedman, of New York (Kevin O'Connor with him)
for the plaintiffs.
John N. Thomas, of New York (Ben T. Clements with him) for
the defendants.
GREEN, J. The plaintiffs appeal from a judgment of
dismissal entered in Superior Court following the allowance of
1
National Indemnity Company.
2
Alleghany Corporation.
2
the defendants' motion to dismiss the plaintiffs' complaint
pursuant to Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974).3 The
complaint asserted claims of tortious interference with
contractual relations and violation of G. L. c. 93A. We
conclude that the judge correctly dismissed the claims of
Resolute Management Inc. (Resolute) for tortious interference
with contractual relations as Resolute is not a party to the
contracts at issue. However, we conclude that the allegations
of the complaint do not establish as a matter of law that the
plaintiffs cannot maintain a cause of action under G. L. c. 93A,
or whether New York or Massachusetts law should apply to the
claims of National Indemnity Company (National) for tortious
interference with contractual relations. We accordingly reverse
so much of the judgment as dismisses the plaintiffs' c. 93A
claims and National's claims for tortious interference with
contractual relations.
Background. We summarize the facts alleged in the
plaintiffs' complaint which, for purposes of our review of the
defendants' motion to dismiss, we accept as true, construing all
3
The judge did not address the allegation by Alleghany
Corporation (Alleghany), under Mass.R.Civ.P. 12(b)(2), 365 Mass.
754 (1974), that the complaint should be dismissed for lack of
personal jurisdiction. Alleghany does not press that ground in
this appeal as an alternative basis to support dismissal of the
claims against it.
3
reasonable inferences from those facts in the plaintiffs' favor.
See Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008).
National, a Nebraska corporation with a principal place of
business in Nebraska, is an eligible surplus lines insurer and
reinsurer in the Commonwealth whose business includes issuing
reinsurance contracts and contracting to manage asbestos-related
personal injury claims for Massachusetts-based insurers.
National's business, in part, is to enter contracts with other
insurers' clients, pursuant to which it (or Resolute, as
National's agent) resolves claims against those other insurers
and collects reinsurance.
In 2001, National entered into an administrative service
agreement (ASA I) with two major insurers, pursuant to which
National was appointed to adjust, handle, agree, settle, pay,
compromise, or repudiate certain asbestos-related claims on
behalf of a number of Massachusetts-based insurers, and also was
appointed to collect reinsurance recoveries related to those
claims from Transatlantic Reinsurance Company (Transatlantic),
and other insurers. In 2011, National entered into similar
agreements with five other major insurers (ASA II) and, in 2012,
with another (ASA III). In each of the ASAs, Resolute, a
Delaware corporation with a principal place of business in
Massachusetts, was authorized as agent to carry out National's
duties under the ASA (or ASAs).
4
Transatlantic is a reinsurer licensed to do business in
Massachusetts, which it does on a regular basis. In March,
2010, after decades of being a subsidiary of American
International Group, Transatlantic became an independent,
publicly traded company. Because of a lack of operational
flexibility and other factors (including anticipated adverse
developments in so-called "legacy"4 asbestos claims),
Transatlantic found it difficult to compete with National in the
insurance and reinsurance markets. National and Resolute were
so efficient in resolving claims against their insurer clients
and in promptly collecting reinsurance that Transatlantic's
business model was damaged and its business threatened. Despite
a weak market, Transatlantic began to look for a merger partner.
In August, 2011, National offered to purchase Transatlantic
for approximately fifty-two dollars per share, all cash, which
was below Transatlantic's stated book value. Transatlantic
rejected the offer, but in 2012 allowed itself to be acquired by
Alleghany Corporation (Alleghany) (which was looking to enter
the reinsurance market) for approximately $59.79 per share.
The merger of Alleghany and Transatlantic got off to a
rocky start, in part because Transatlantic continued to be
4
Legacy claims arise from actions conducted decades
earlier, "leaving an unwanted 'legacy'" in the form of actual or
alleged injury. Pitre, Jr., Legacy Litigation & Act 312 of
2006, 20 Tul. Envtl. L.J. 347, 348 (2007).
5
plagued by its asbestos-related claims. Transatlantic sought to
commute (i.e., pay another entity to assume responsibility for a
risk) its asbestos-related reinsurance obligations to a group of
clients of National and Resolute, but the price Transatlantic
was willing to pay was significantly less than the amount of its
exposure to those clients, and neither National nor Resolute was
willing to yield to Transatlantic's demands.
For years prior to the merger between Transatlantic and
Alleghany, Resolute promptly billed Transatlantic for
reinsurance benefits under ASA I, and Transatlantic regularly
reviewed and audited information and data it received from
National's insurer-clients for compliance with the terms of ASA
I. Prior to its merger with Alleghany, Transatlantic never
raised a question about the amounts it was billed by Resolute,
and timely paid substantial sums to Resolute under ASA I.
Similarly, from mid-2011 through 2012, Transatlantic routinely
and timely paid bills submitted by Resolute pursuant to ASA II.
However, after Alleghany purchased Transatlantic, Transatlantic
unjustifiably refused to pay invoices Resolute submitted
pursuant to all three ASAs. Specifically (as alleged in the
complaint), Alleghany instructed Transatlantic to rid itself of
its problematic legacy asbestos liabilities and to punish
Resolute and National for failing to accept Transatlantic's
proposed terms to commute those claims. By withholding
6
reinsurance payments due to Resolute on behalf of National,
Alleghany and Transatlantic sought to harm National's and
Resolute's relationships with their clients, to impede
National's ability to perform its contractual obligations to
those clients, and to force National to agree to commute
Transatlantic's obligations at the "below-market and irrational
price" that Alleghany and Transatlantic demanded.
This litigation followed. By complaint filed April 30,
2013, against Transatlantic and Alleghany, Resolute and National
brought claims of tortious interference with contractual
relations (ASA I, ASA II, and ASA III), and violation of G. L.
c. 93A, § 11. A judge allowed the defendants' motion to dismiss
the complaint, and the plaintiffs appealed.
Discussion. For independent but similar reasons, central
to determination of the viability of the plaintiffs' complaint
is an assessment of the relationship to the Commonwealth of the
facts and circumstances giving rise to their claims. The
plaintiffs' claims for tortious interference with contractual
relations are viable (at least for pleading purposes) if they
are governed by Massachusetts law, but not if they are governed
by New York law.5 Similarly, the plaintiffs are entitled to
5
Under New York law, to prevail on a claim of tortious
interference with contractual relations a plaintiff must
establish, among other things, that the defendant's interference
caused an actual breach of a contract between the plaintiff and
7
maintain a claim pursuant to G. L. c. 93A, § 11, only if the
statute applies to the unfair or deceptive acts alleged. In
both instances, the required determination turns principally on
the relationship of the parties and their activities to the
Commonwealth, as we shall discuss infra.
1. Applicability of G. L. c. 93A. "Under c. 93A, § 11, it
is [the defendants'] burden to demonstrate that 'the center of
gravity of the circumstances that [gave] rise to the claim' were
not 'primarily and substantially within the Commonwealth.'"
Skyhook Wireless, Inc. v. Google Inc., 86 Mass. App. Ct. 611,
622 (2014), quoting from Kuwaiti Danish Computer Co. v. Digital
Equip. Corp., 438 Mass. 459, 470, 473 (2003) (Kuwaiti Danish).
As the Supreme Judicial Court observed in Kuwaiti Danish, supra
at 473, § 11 appears to contemplate that such an assessment
would occur following, and based upon, findings of fact made by
a judge.
As a threshold matter, we note that the defendants have
cited no appellate case in which the center of gravity of a § 11
a third party. See, e.g., Lama Holding Co. v. Smith Barney
Inc., 88 N.Y.2d 413, 424 (1996). By contrast, Massachusetts has
adopted § 766A of the Restatement (Second) of Torts (1979), see
Shafir v. Steele, 431 Mass. 365, 369 (2000), under which a
plaintiff need not establish an actual breach if he can show
that the defendant's interference either prevented the plaintiff
from performing the contract or caused his performance of the
contract to be more expensive or burdensome. In the present
case, the plaintiffs do not allege that an actual breach of ASA
I, ASA II, or ASA III has occurred.
8
claim was determined adversely to a plaintiff upon a motion to
dismiss (as compared to a motion for summary judgment or after
trial), and we are aware of none.6 In light of the multiple
factors to be applied, and the nuanced and flexible approach to
assessing them, as articulated in Kuwaiti Danish, see ibid., we
find it difficult to imagine how such an assessment might be
made on the basis of the allegations of the complaint alone --
at least where, as in the present case, the loss occurred in
Massachusetts, and substantial numbers of the claims upon which
the bills Resolute submitted to Transatlantic were based related
6
In support of their argument, the defendants cite several
unpublished decisions of the Superior Court dismissing a c. 93A
complaint on a motion to dismiss. To the contrary is a line of
published opinions of the United States District Court for the
District of Massachusetts. See Workgroup Technology Corp. v.
MGM Grand Hotel, LLC, 246 F. Supp. 2d 102, 118 (D. Mass. 2003)
(center of gravity decision must be based on factual findings
not made on motion to dismiss); Berklee College of Music, Inc.
v. Music Indus. Educators, Inc., 733 F. Supp. 2d 204, 213 (D.
Mass. 2010) ("absent some extraordinary pleading concession by a
claimant" challenge to c. 93A claim "cannot be resolved on Rule
12 motions"). See also In Re TJX Cos. Retail Security Breach
Litigation, 524 F. Supp. 2d 83, 93 (D. Mass. 2007) (allegations
of complaint adequate to survive motion to dismiss), aff'd in
part by 564 F.3d 489 (1st Cir. 2009); Hertz Corp. v. Enterprise
Rent-A-Car Co., 557 F. Supp. 2d 185, 197 (D. Mass. 2008)
(reserving ruling on motion to dismiss c. 93A claim pending
completion of trial on jury claims). Contrast Iantosca v.
Benistar Admin Servs., Inc., 738 F. Supp. 2d 212, 220 (D. Mass.
2010) (dismissing c. 93A complaint without prejudice where all
deceptive acts alleged in complaint [other than commencement of
litigation] occurred in Pennsylvania).
9
either to Massachusetts insurers or claimants.7 Though the
defendants assert that many of the activities upon which the
plaintiffs' claims are based occurred outside the Commonwealth,
the complaint includes no allegation or other indication to
support the assertion.8
To be sure, in light of the defendants' principal physical
presence in New York (of which the judge took judicial notice,
see note 8, supra), it is entirely possible that the principal
communications between the defendants concerning their
determination to refuse further payments to Resolute took place
outside the Commonwealth. Less influential, in our view, is the
fact that certain of the insurers with which National contracted
under the ASAs were headquartered outside Massachusetts -- at
7
We also note that paragraph 10 of the complaint alleges
that "Transatlantic's tortious conduct at issuer [sic] here
occurred substantially in Massachusetts," paragraph 11 alleges
that "Alleghany's tortious conduct at issue here occurred
substantially in Massachusetts," and paragraph 58 alleges that
the "unfair and deceptive acts [by the defendants] took place
primarily and substantially within the Commonwealth of
Massachusetts."
8
In his order allowing the defendants' motion, the judge
took judicial notice that Transatlantic is a New York
corporation headquartered in New York, that Alleghany is a
Delaware corporation headquartered in New York, and that neither
defendant maintains a place of business in Massachusetts. He
also took judicial notice of the headquarters locations of the
insurers that were counterparties to National under the ASAs,
observing that several are headquartered outside Massachusetts.
However, the complaint includes no detailed information about
where the defendants' allegedly tortious or deceptive acts
occurred, other than the general allegation that they occurred
in Massachusetts. See note 7, supra.
10
least if, as alleged in the complaint, the claims National (or
Resolute acting as National's agent) sought to adjust for them
were based in Massachusetts. In any event, we are aware of no
rule requiring a § 11 plaintiff to plead facts with
particularity sufficient to withstand a claim by the defendant
that the center of gravity of his claim is not within the
Commonwealth. In our view, the allegations of the complaint are
sufficient to warrant discovery and development of a factual
record adequate to allow a judge to conduct that assessment. In
the present procedural posture of the case, it was error to
dismiss the plaintiffs' claims under G. L. c. 93A, § 11.
2. Tortious interference with contractual relations. A
similar (though not identical) concern shapes our view of the
judge's conclusion that New York law should be applied to the
plaintiffs' claims of tortious interference with contractual
relations. "Massachusetts generally follows a functional
approach to resolving choice of law questions on substantive
matters, eschewing reliance on any particular choice-of-law
doctrine." Lou v. Otis Elevator Co., 77 Mass. App. Ct. 571, 583
(2010). We look to the Restatement (Second) of Conflict of Laws
for guidance; it in turn articulates several factors for
consideration. See id. at 584-585 & n.22. As a general
principle, the "rights and liabilities of the parties with
respect to an issue in tort are determined by the local law of
11
the state which, with respect to that issue, has the most
significant relationship to the occurrence and the parties under
the principles stated in § 6." Restatement (Second) of Conflict
of Laws § 145 (1971).9
For reasons quite similar to those discussed supra, the
allegations of the complaint, standing alone, are inadequate to
determine as a matter of law whether New York or Massachusetts
law should be applied. The complaint does not state where the
ASAs were entered into or, except in the most general terms,
describe the rights and obligations of the parties to them. Nor
does the complaint describe with particularity the claims that
National undertook to resolve, including how many of those
9
Restatement (Second) of Conflict of Laws § 6 (1971), in
turn, states:
"(1) A court, subject to constitutional restrictions, will
follow a statutory directive of its own state on choice of
law.
"(2) When there is no such directive, the factors relevant
to the choice of the applicable rule of law include (a) the
needs of the interstate and international systems, (b) the
relevant policies of the forum, (c) the relevant policies
of other interested states and the relative interests of
those states in the determination of the particular issue,
(d) the protection of justified expectations, (e) the basic
policies underlying the particular field of law, (f)
certainty, predictability and uniformity of result, and (g)
ease in the determination and application of the law to be
applied."
Paragraph (1) of § 6 is inapplicable, as no Massachusetts
statute governs choice of law on a claim for tortious
interference with contractual relations.
12
claims have a substantial connection to Massachusetts. Again,
though it appears that many of the parties (if not their
activities relevant to the complaint) are headquartered outside
the Commonwealth, it is impossible for us to conclude as a
matter of law on the basis of the complaint alone that New York
(or any particular State, for that matter) has the most
significant contacts with, and greatest interest in, the
plaintiffs' claims of tortious interference with the ASAs. As
in our c. 93A discussion, discovery and development of a factual
record are required to conduct the functional assessment
envisioned by the Restatement. We accordingly must reverse the
judgment insofar as it dismissed National's claim of tortious
interference with contractual relations based on the premise
that it failed to allege an element of that claim that is
essential under New York law but not under Massachusetts law.
See note 5, supra.
However, even without resolution of the choice of law
question we conclude that the judge correctly dismissed
Resolute's claims because it was not a party to any of the
contracts with which the defendants allegedly interfered, and it
does not otherwise claim a cognizable legal interest on its own
behalf in their enforcement.10 Resolute thus is unable to
10
Resolute's suggestion that it may maintain its claims
because it acts as National's agent with respect to the ASAs is
13
demonstrate the first of the elements described in Harrison v.
NetCentric Corp., 433 Mass. 465, 476 (2001): "that [it] had a
contract with a third party."11
Conclusion. So much of the judgment as dismisses the
plaintiffs' claims under G. L. c. 93A, § 11, and National's
claims for tortious interference with contractual relations
under ASA I, ASA II, and ASA III is reversed, and those claims
are remanded for further proceedings consistent with this
opinion. In all other respects, the judgment is affirmed.
So ordered.
unavailing. Resolute's rights and obligations as National's
agent all relate to enforcement of the ASAs on National's
behalf. Resolute claims no right to enforce the contracts for
its own benefit. In the present case, we need not consider
whether an intended or third-party beneficiary of a contract
might have standing to claim tortious interference with a
contract to which it is not a party. See, e.g., CSY Liquidating
Corp. v. Harris Trust & Sav. Bank, 162 F.3d 929, 932-933 (7th
Cir. 1998).
11
We reject Resolute's alternative contention that the
complaint should be construed broadly to assert a claim for
tortious interference with advantageous relations; put simply,
the several counts of the complaint speak specifically and
exclusively of interference with contractual relations. In any
event, we note that Resolute does not allege that the defendants
"knowingly induced a breaking of the [advantageous]
relationship" between it and any third party, a required element
of the alternative claim of tortious interference with
advantageous relations. Blackstone v. Cashman, 448 Mass. 255,
260 (2007).