SUPERIOR INSURANCE COMPANY v. CONTINENTAL CASUALTY COMPANY et al
Filing
80
ORDER denying Superior Group's 45 Motion for Summary Judgment and granting CC's 48 Motion for Summary Judgment subject to the resolution of Bose McKinney's claim. Signed by Judge Richard L. Young on 3/31/2016. (TMD)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
SUPERIOR INSURANCE GROUP,
)
)
Plaintiff,
)
)
vs.
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CONTINENTAL CASUALTY COMPANY,
)
BOSE MCKINNEY & EVANS LLP, and
)
BRADFORD T. WHITMORE,
)
)
)
Defendants.
______________________________________ )
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WILMINGTON TRUST COMPANY,
)
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Intervenor.
1:14-cv-01163-RLY-MJD
ENTRY ON THE PARTIES’ CROSS MOTIONS FOR SUMMARY JUDGMENT
Presently before the court are the parties’ cross motions for summary judgment.
For the reasons set forth below, the court GRANTS Continental Casualty Company’s
(“CCC”) motion and DENIES Superior Insurance Group’s motion.
I.
Background
This is a related case to IGF Ins. Co. (“IGF”), et al. v. Continental Casualty Co.,
Cause No. 1:01-cv-799-RLY-MJD (the “IGF Action”). The IGF Action arose from the
sale of CCC’s crop insurance book of business to IGF, IGF Holdings, Inc. (“IGFH”), and
Symons International Group, Inc. (Indiana) (“SIG”) (collectively the “IGF Parties”)
pursuant to the parties’ contract of sale called the Strategic Alliance Agreement (“SAA”).
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When it became apparent that IGF could not pay CCC under the terms of the SAA, IGF
sold its business to Acceptance Insurance Companies, Inc., on June 6, 2001. Things
quickly went south.
The IGF Parties eventually filed suit against CCC for breach of contract, fraud,
and breach of fiduciary duty. CCC and its affiliate, 1911 Corp., filed a counterclaim,
which was later amended. The Amended Counterclaim asserted claims against the IGF
Parties and four affiliated companies, Goran Capital, Inc. (“Goran”), Granite Reinsurance
Company, Ltd. (Barbados) (“Granite Re”), Pafco General Insurance Company (“Pafco”),
Superior Insurance Company (“Superior”), and the officers of those companies, G.
Gordon Symons, Alan G. Symons, and Douglas H. Symons. 1 The Amended
Counterclaim alleged that the IGF Parties breached the terms of the SAA (Count I and
II); IGFH breached the terms of a promissory note (Count III); and that IGF fraudulently
transferred assets to Goran, SIG, Granite Re, Pafco and Superior (Count IV). Count V
alleged that the Individual and Corporate Counterdefendants should be liable for the
contractual liabilities of IGF and IGFH under an alter ego theory. During the IGF
Action, Superior was in rehabilitation proceedings in Florida, and Pafco was in
rehabilitation proceedings in Indiana.
1
IGF, IGFH, Granite Re, Goran, Pafco, SIG, and Superior are known collectively as the
“Corporate Counterdefendants.” Gordon Symons, Alan Symons, and Douglas Symons are
known collectively as the “Individual Counterdefendants.” The Individual and Corporate
Counterdefendants are known collectively as the “Counterdefendants.”
2
On March 22, 2007, the court granted CCC’s unopposed Motion for Summary
Judgment against the IGF Parties, and on March 31, 2007, the court granted CCC=s
Motion for Summary Judgment on Counts I and II of their Amended Counterclaim,
finding the IGF Parties liable to CCC in the amount of $34,258,078.
On March 21, 2008, CCC submitted to the Florida Department of Financial
Services, as Receiver and Rehabilitator for Superior, a proof of claim against Superior
due to the court’s Entry on CCC’s Motion for Summary Judgment against SIG in the
amount of $34,258,078. After reviewing its records as to Superior’s transactions, as well
as this court’s Entry, the Receiver recognized and recorded on Superior’s books and
records a current liability to CCC of $6,732,800, including interest of $1,632,800, on
account of the fraudulently transferred funds that were obtained by Superior in order to
defraud CCC. (Filing No. 49-2 at 3). In addition to the foregoing current liability, and
because the court’s judgment was not yet final, Superior’s financial statements also
recorded, as a contingent liability, CCC’s claim for $34,258,078 against Superior as
SIG’s and IGF’s alter ego. (Id.).
Counts III-V of the Amended Counterclaim were tried to the court on November,
18, 19, 20, and 21, 2008, and January 8 and 9, 2009. Following extensive Findings of
Fact and Conclusions of Law, the court ruled in favor of CCC on Counts IV and V of its
Amended Counterclaim. (1:01-cv-799-RLY-MJD, Filing No. 257). Among other things,
the court determined that the Individual Counterdefendants owned the majority interest in
and effectively controlled SIG, Granite Re, Superior, Pafco, IGF, and IGFH. (Id.,
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Findings of Fact ## 157-58). The court also noted that SIG indirectly owned 100% of
Pafco and Superior. (Id., Finding of Fact # 161). The court concluded:
129. The court finds that CCC has proven, by a preponderance of the
evidence, that the Counterdefendants are liable under Section 14(2) and
Section 15 of the Indiana Fraudulent Transfer Act, as alleged in Count IV of
the Amended Counterclaim. The court further finds that CCC has proven,
by clear and convincing evidence, that the Counterdefendants are liable
under Section 14(1) of the Indiana Fraudulent Transfer Act, as alleged in
Count IV of the Amended Counterclaim. The Counterdefendants are
therefore jointly and severally liable to CCC in the amount of $24,000,000
plus interest as of June 1, 2006.
130. The court finds that the CCC has proven, by a preponderance of the
evidence, that the Counterdefendants were alter egos of one another, and
thus, the court finds the corporate veil should be pierced to prevent fraud and
injustice, as alleged in Count V of the Amended Counterclaim. The
Counterdefendants are therefore jointly and severally liable to CCC in the
amount of $34,258,078 plus interest as of June 1, 2006. (See Findings of
Fact ## 40, 43, 45).
(Id., Conclusions of Law ## 129-30).
On March 30, 2012, in an effort to expedite the conclusion of the IGF Action, the
court granted CCC’s motion to sever Superior from the IGF Action. (See 1:12-cv-423RLY-MJD, Filing No. 1).
On July 14, 2014, the court issued its Amended Final Judgment in the IGF Action
in favor of CCC and against SIG and IGFH on Counts I and II of the Amended
Counterclaim, and against “the Individual and Corporate Counterdefendants Alan G.
Symons, Robert Symons, as successor in interest of G. Gordon Symons, IGFH, SIG,
Goran Capital, Inc. and Granite Reinsurance Company, Ltd. on Counts IV (fraudulent
transfers) and V (alter ego) of the Amended Counterclaim,” “jointly and severally, in the
amount of $34,258,078.00, plus prejudgment interest in the amount of $10,036,978
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through December 31, 2012, for a total of $44,295,056.00, plus $3,458 per day since
December 31, 2012 to the date of the entry of the Judgment.” (1:01-cv-799-RLY-MJD,
Filing No. 557, ¶¶ B, C, D).
On December 5, 2014, the court issued writs of execution against Alan and Robert
Symons, IGFH, SIG, Goran and Granite Re in the IGF Action. (Id., Filing Nos. 631636). On the same day and in the same proceeding, the court granted in essence CCC’s
Motion for Proceedings Supplemental, including the garnishment proceedings against
Superior Group and Superior Management in the IGF Action. Superior Group and
Superior Management are a part of these proceedings because SIG is the 100% owner of
Superior Management which, in turn, is the 100% owner of Superior Group, which, in
turn, is the 100% owner of Superior and Pafco. (See 1:01-cv-799-RLY-MJD, Filing No.
36-2 at ECF p. 18, Organizational Chart; 1:01-cv-799-RLY-WGH, Filing No. 36-8, List
of Officers and Directors).
The Seventh Circuit recently affirmed the court’s Judgment in the IGF Action on
all issues; however, the court did not resolve whether Alan Symons and the Estate of
Gordon Symons could be individually liable under the IUFTA. See Continental Cas. Co.
v. Symons, --F.3d--, 2016 WL 1118566, at *12 (7th Cir. March 22, 2016). The Seventh
Circuit found the court’s “alter-ego findings are enough to put Alan and Gordon’s Estate
on the hook without broadening beneficiary liability under the IUFTA to include
vicarious or participatory liability.” Id.
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II.
Current Litigation
As of July 14, 2014, the IGF Action consisted of cross claims that arose out of the
Interpleader Complaint filed by Stephen W. Robertson, as the Commissioner of the
Indiana Department of Insurance and as Rehabilitator of Pafco, and the Interpleader
Complaint filed by the Florida Department of Financial Services, as Receiver and
Rehabilitator for Superior. The remaining claims to the assets were the competing
general creditor claims of CCC, Bradford T. Whitmore, 2 and Bose McKinney & Evans
LLP, and shareholder claims of Superior Group. Accordingly, the court severed CCC’s
claims against Superior Group and initiated this action which includes, as intervenor, the
Wilmington Trust Company (“WTC”), a competing creditor of SIG. CCC, Mr.
Whitmore, and WTC have since entered into a Settlement Agreement with CCC,
pursuant to which CCC is entitled to collect all monies owed to CCC, Mr. Whitmore, or
WTC; and CCC will share a portion of the funds collected with the other settling parties.
Bose McKinney & Evans, to date, has not participated in these proceedings.
CCC and Superior Group now cross move for summary judgment over the
interpleaded assets of Superior and Pafco. Mr. Whitmore has no objection to CCC’s
motion. The assets of Superior total over $10 million while the assets of Pafco are far
less substantial. (See Filing No. 47-7, Order Approving Receiver’s Motion for Approval
and Windup and Termination Plan for Superior Insurance Company at 3; see also Filing
2
See Whitmore v. Symons Int’l Grp., 1:09-cv-391-RLY-MJD. In that action, the
Wilmington Trust Company intervened.
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No. 446, Notice of Compliance with Order on First Stage of Rehabilitator’s Complaint
for Interpleader).
III.
Discussion
Superior Group claims it is entitled to the interpleaded funds because it is the only
remaining claimant with a vested right to the interpleaded assets under the applicable
insurance statutes. See Ind. Code § 27-9-3-40; Fla. Stat. § 631.271. Superior Group’s
position is incorrect. Indiana Code § 27-9-3-40 sets forth the order in which claims from
an insurer’s estate are paid and provides that claims of general creditors are given fifth
priority, and claims of shareholders or other owners are given ninth priority. Similarly,
Florida Statute § 631.271 provides that, when distributing claims from an insurer’s estate,
general creditors have sixth priority, while shareholders have tenth priority. CCC is a
general creditor of Superior, while Superior Group’s only claim to the interpleaded funds
is as Superior’s sole shareholder. CCC’s claim to the interpleaded funds, therefore, must
be given priority over Superior Group.
Having determined CCC’s priority status over Superior Group, the court must next
determine if CCC is entitled to recover all of the interpleaded funds. Superior Group
claims that CCC is entitled to recover no more than $4.5 million, which represents the
amount SIG fraudulently transferred to Superior and Pafco. (1:01-cv-799-RLY-MJD,
Filing No. 257, Finding of Fact # 48 and Conclusion of Law # 61). CCC disputes
Superior Group’s assessment, and claims to have a direct creditor claim against Superior
in the amount of $6,732,000. There is an easier route to the entirety of the interpleaded
funds; that being, CCC’s direct claim against Superior as an alter ego.
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A.
CCC’s Claim to Superior’s Interpleaded Funds
Superior has been a defendant in the IGF Action since 2001. Although CCC was
precluded from proceeding to judgment against Superior on the alter ego claim because
of the automatic stay issued by the Florida state court in the Superior rehabilitation
proceedings, substantial evidence was presented at trial concerning Superior because of
the patent overlap between the individuals involved and the actions they took on behalf of
the various Symons entities, including Superior. As a result, the court determined that
Superior participated in the fraudulent transfers and was an alter ego of the other
Counterdefendants. (1:01-cv-799-RLY-MJD, Filing No. 257, Finding of Fact # 48;
Conclusions of Law ## 42, 62, 82, 128, 129, 130). The absence of a judgment against
Superior is not fatal to CCC’s recovery of the interpleaded funds because, for the reasons
discussed below, Superior Group is barred from relitigating the court’s findings and
conclusions regarding Superior’s alter ego liability.
Res judicata bars relitigation of the same cause of action between the same parties
where the first litigation resulted in a valid, final judgment on the merits. Brzostowski v.
Laidlaw Waste Sys., Inc., 49 F.3d 337, 338 (7th Cir. 1995). Res judicata applies to a
prior federal court judgment if the following three factors are met: (1) identity of the
parties or privies; (2) identity of the cause of action; and (3) final judgment on the merits.
Id.
The term “privies” refers to “those who control an action, though not a party to it,
and those whose interests are represented by a party to the action.” Tofany v. NBS
Imaging Sys., Inc., 616 N.E.2d 1034, 1038 (Ind. 1993). Superior Group is the sole owner
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of both Superior and Pafco. As the sole owner of Superior and Pafco, Superior Group
had the right to appoint their board members, giving it direct control over both
companies’ affairs. This is exemplified by the fact that Superior Group’s sole officer and
director is Doug Symons, the late Gordon Symons’ son and Alan’s brother. (Filing No.
55-1, Affidavit of Douglas H. Symons ¶ 5). Until recently, Alan, Gordon, and Doug
Symons each served on the board of Superior Group and Superior Management, and
Gordon Symons was the chairman of each board. (See 1:01-cv-799-RLY-WGH, Filing
No. 36-8, List of Officers and Directors). The overlapping control of Superior Group,
Superior Management, and the Counterdefendants further shows that Superior Group and
Superior Management are in privity with them.
Finally, the court’s finding that Superior Group’s and Superior Management’s
wholly owned subsidiaries, their sole officer and director, and SIG were all alter egos of
one another logically compels a finding that Superior Group and Superior Management
are in privity with the Counterdefendants. It is completely implausible that Superior
Group and Superior Management, which have no assets other than Superior and Pafco,
could somehow have interests that were not represented by the individuals and entities
that it was controlled by and controlled. Accordingly, Superior Group and Superior
Management are in privity with Superior and Pafco.
The other two elements are easily met. Superior Group’s claim to the interpleaded
funds and CCC’s claim that Superior Group and Superior are alter egos of the
Counterdefendants and thus responsible for the debt to CCC, is the same issue raised and
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decided by the court in the IGF Action. The court issued a final judgment on the merits,
which was later amended and affirmed by the Seventh Circuit.
Even if res judicata does not apply, Superior Group is collaterally estopped from
relitigating these issues. Collateral estoppel bars the subsequent litigation of a fact or
issue that was necessarily adjudicated in a former lawsuit if the same fact or issue is
presented in the subsequent lawsuit. For a ruling to have collateral estoppel effect, four
elements must be present: (1) the issue sought to be precluded must be the same as that
involved in the prior litigation; (2) the issue must have been actually litigated; (3) the
determination of the issue must have been essential to the final judgment; and (4) the
party against whom estoppel is invoked must have been fully represented in the prior
action. H-D Michigan, Inc . v. Top Quality Serv., Inc., 496 F.3d 755, 760 (7th Cir. 2007).
These elements are met here. The issue sought to be precluded – alter ego liability
– is the same issue that was actually litigated in the IGF Action. The alter ego
determination was essential to the final judgment. And Superior Group was fully
represented in the post-trial proceedings in the IGF Action by highly competent counsel,
Alerding Castor LLP and Cohen & Malad. Prior to trial, the Counterdefendants were
represented by highly competent counsel as well from the law firm of Scopelitis Garvin
Light Hanson & Feary, P.C. and the Law Office of Robert M. Baker III.
Even if res judicata and collateral estoppel do not apply, the court finds that
Superior is an alter ego of the Counterdefendants and equally liable for payment of the
Final Judgment based on the evidence already in the record in the IGF Action. 1:01-cv799-RLY-MJD. Having so found, the court finds CCC has a direct claim against
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Superior as alter ego of SIG in the full amount of the Final Judgment, in an amount in
excess of $46 million, and is entitled to Superior’s surplus.
CCC also has a claim to the funds of Superior based on CCC’s Final Judgment
against SIG. SIG, as noted previously, is the 100% owner of Superior through SIG’s
100% ownership of Superior Management, and Superior Management’s 100% ownership
of Superior Group. CCC has a judgment lien on all of SIG’s property through the
issuance of the writ of execution. Blake v. First Crown Fin. Corp., 443 N.E.2d 871, 875
(Ind. Ct. App. 1983) (“A lien attaches to property of a debtor when an execution issues
upon a judgment.”). CCC also has a judgment lien on Superior Group’s and Superior
Management’s property by virtue of the garnishment proceedings. Freedom Group, Inc.
v. Lapham-Hickey Steel Corp., 50 F.3d 408, 411 (7th Cir. 1995); In re Perdew, 227 B.R.
865, 868 (S.D. Ind. 1998). Indeed, a lien on all personal property of the judgment debtor
is established at the time proceedings supplemental are commenced. Radiotelephone Co.
of Ind., Inc. v. Ford, 531 N.E.2d 238, 240 (Ind. Ct. App. 1998) (“[A] creditor acquires an
equitable lien on funds owed by a third party to the judgment debtor from the time the
third party receives service of process in proceedings supplemental.”).
Pursuant to the writ of execution on SIG and to the proceedings supplemental,
CCC is entitled to ownership of all shares of stock owned by the judgment debtor, SIG,
including the shares of stock owned by each subsidiary of its subsidiaries, down to
Superior. CCC is entitled to enforce its judgment liens against those assets forthwith.
Through acquiring ownership of Superior Group, CCC is also entitled to both waive any
right Superior Group has to the surplus of Superior (vis-à-vis CCC) and/or step in the
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shoes of Superior Group and assert its entitlement to the Superior surplus. With the
issuance of the writ of execution against SIG and the commandment of proceedings
supplemental, CCC is entitled to foreclose on those liens against all assets owned by
Superior Group, Superior Management, and Superior.
B.
CCC’s Claim to Pafco’s Interpleaded Funds
In January 2005, CCC settled and released its claims against IGF and Pafco.
(Filing No. 47-6, Settlement Agreement § 4.6). Significantly, the Settlement Agreement
did not release CCC’s claims against the Counterdefendants in the IGF Action. (Id. §
2.5). A condition of the Settlement Agreement specifically stated that CCC “may
continue to prosecute [the IGF Action] against all parties other than IGF and Pafco.” (Id.
§ 5). Thus, contrary to Superior Group’s argument, the terms of the Settlement
Agreement do not preclude CCC from any claim to the interpleaded assets. CCC’s
claims to Pafco’s interpleaded funds stems from the fact that the Counterdefendants were
found to have fraudulently transferred assets amongst one another rather than pay the
debt owed to CCC and, as alter egos, funneled assets away from IGF so that it could not
pay its creditors, including CCC. CCC clearly has a superior claim to Pafco’s assets than
Superior Group.
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IV.
Conclusion
CCC is entitled to the interpleaded assets of Superior and Pafco over Superior
Group. The claim of Bose McKinney & Evans LLP is unresolved. Accordingly, CCC’s
Motion for Summary Judgment (Filing No. 48) is GRANTED subject to the resolution of
Bose McKinney’s claim. Superior Group’s Motion for Summary Judgment (Filing No.
45) is DENIED.
SO ORDERED this 31st day of March 2016.
__________________________________
RICHARD L. YOUNG, CHIEF JUDGE
United States District Court
Southern District of Indiana
Distributed Electronically to Registered Counsel of Record.
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