Snyder Insurance Services, Inc. et al v. Kulin-Sohn Insurance Agency, Inc. et al

Filing 38

MEMORANDUM AND ORDER denying 33 Motion to Dismiss for Failure to State a Claim. Signed by District Judge Daniel D. Crabtree on 06/06/2018. (mig)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

SNYDER INSURANCE SERVICES,
INC. and RAYMOND F. SNYDER,
Plaintiffs,
v.

Case No. 16-2535-DDC-GLR

KULIN-SOHN INSURANCE AGENCY,
INC. and MARK R. SOHN,
Defendants.
____________________________________

MEMORANDUM AND ORDER
Amateur sports and fitness activities play a substantial role in the development of
American youth. Often, the gyms and fitness centers who host these activities elect to buy
insurance coverage to protect themselves from liability. The parties in this case—plaintiff
Snyder Insurance Services, Inc. and defendant Kulin-Sohn Insurance Agency, Inc.—both
provide insurance brokerage services to amateur sports venues and children’s fitness centers.
But there’s some bad blood between these two. Snyder Insurance and plaintiff Raymond
Snyder—an agent and Snyder Insurance’s owner and President—allege that Kulin-Sohn
Insurance and defendant Mark Sohn—Kulin-Sohn Insurance’s owner and also an agent—have
made defamatory remarks about plaintiffs and caused plaintiffs to lose some of their clients.
Currently before the court is defendants’ Motion to Dismiss (Doc. 33). In it, defendants
argue that the Complaint1 fails to allege a tortious interference with prospective business
relations claim sufficiently. For reasons explained below, the court denies the motion.

1

The Complaint at issue here is the third Complaint filed in this lawsuit. See Doc. 32. For simplicity, the
court will refer to it as “the Complaint.”

I.

Facts
Because defendants’ motion relies on Federal Rule of Civil Procedure 12(b)(6), the court

must accept the well-pleaded facts in the Complaint as true. Brokers’ Choice of Am., Inc. v. NBC
Universal, Inc., 757 F.3d 1125, 1136 (10th Cir. 2014). It also must construe the alleged facts in
the light most favorable to plaintiff. Id.
As explained above, Snyder Insurance and Kulin-Sohn Insurance are insurance brokers
who insure amateur sports and children’s fitness centers. Mr. Snyder is the owner, President,
and an agent for Snyder Insurance. Mr. Sohn owns Kulin-Sohn Insurance and acts as an agent
for that company. The market for insuring amateur sports and children’s fitness centers is a
relatively small, niche segment of the larger insurance market.
In 2016, defendants told several of plaintiffs’ clients—including Emerald City
Gymnastics, All-Star Gymnastics, and Ninja Zone—that plaintiffs had lied to them, misled them
about their insurance coverage, and misled other gyms about their insurance coverage.
Defendants also said that plaintiffs had lied to plaintiffs’ insured and insurance carriers. Snyder
Insurance expected Emerald City, All-Star, and Ninja Zone to continue to renew their policies
through Snyder Insurance and possibly refer new clients there. Particularly, Snyder Insurance
expected Ninja Zone to refer new clients because it franchises its program curriculum to other
gyms who might need the same type of insurance. Mr. Snyder expected to receive commissions
and broker’s fees for anticipated renewals by Emerald City, All-Star, and Ninja Zone. But he
allegedly lost these earnings when they secured insurance through someone else.
Defendants made these statements despite knowing they were false. Indeed, defendants
had made similar statements in 2004 and 2008. When defendants made the false statements in

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2004 and 2008, plaintiffs sent defendants cease and desist letters, cautioning defendants to stop
making false statements to plaintiffs’ clients.
Plaintiffs now have filed this lawsuit against defendants. In the newly amended
Complaint, plaintiffs bring two claims: defamation (Count I) and tortious interference with
prospective business relations and advantage (Count II). Previously, the court ruled that the
Complaint sufficiently alleged a defamation claim. Doc. 18 at 5. But, in the same Order, the
court held that the prior Complaint required more specific factual allegations to plead a sufficient
claim for tortious interference with prospective business relations (“TIBR”). Id. at 9. On March
1, 2018, plaintiffs filed an amended Complaint. Two weeks later, defendants filed this motion
challenging the sufficiency of the allegations supporting the TIBR claim.
II.

Legal Standard
On a motion to dismiss for failure to state a claim, the court accepts all facts pleaded by

the non-moving party as true and draws any reasonable inferences in favor of the non-moving
party. Brokers’ Choice of Am., 757 F.3d at 1136. “To survive a motion to dismiss [under Rule
12(b)(6)], a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “Under
this standard, ‘the complaint must give the court reason to believe that this plaintiff has a
reasonable likelihood of mustering factual support for these claims.’” Carter v. United States,
667 F. Supp. 2d 1259, 1262 (D. Kan. 2009) (quoting Ridge at Red Hawk, L.L.C. v. Schneider,
493 F.3d 1174, 1177 (10th Cir. 2007) (emphasis in original)).

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Although this Rule “does not require ‘detailed factual allegations,’” it demands more than
“[a] pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a
cause of action’” which, as the Supreme Court has explained, simply “will not do.” Iqbal, 556
U.S. at 678 (quoting Twombly, 550 U.S. at 555). This is so because the court need not “ʻaccept
as true a legal conclusion couched as a factual allegation.’” Twombly, 550 U.S. at 557 (quoting
Papasan v. Allain, 478 U.S. 265, 286 (1986)).
III.

Discussion
As explained above, defendants’ current motion solely challenges the sufficiency of the

allegations supporting the Complaint’s TIBR claim. In Kansas,2 TIBR requires pleading and
proof of: “(1) the existence of a business relationship or expectancy with the probability of
future economic benefit to the plaintiff; (2) knowledge of the relationship or expectancy by the
defendant; (3) that, except for the conduct of the defendant, plaintiff was reasonably certain to
have continued the relationship or realized the expectancy; (4) intentional misconduct by
defendant; and (5) damages suffered by plaintiff as a direct or proximate cause of the defendant’s
misconduct.” Byers v. Snyder, 237 P.3d 1258, 1269 (Kan. Ct. App. 2010) (quoting Turner v.
Halliburton Co., 722 P.2d 1106, 1115 (Kan. 1986)).

2

In a diversity jurisdiction case, like this one, federal courts apply the choice of law rules of the forum state.
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Here, that is Kansas. For the tort claims, Kansas
law applies the “law of the ‘place of the wrong.’” Atchison Casting Corp. v. Dofasco, Inc., 889 F. Supp. 1445, 1455
(D. Kan. 1995) (citing Ling v. Jan’s Liquors, 703 P.2d 731, 735 (Kan. 1985)). “The ‘place of the wrong’ is that
place where the last event necessary to impose liability took place.” Id. “In the case of alleged financial harm . . . ,
the court looks to the state in which the plaintiff felt the harm.” Carolina Indus. Prods., Inc. v. Learjet, Inc., 189 F.
Supp. 2d 1147, 1163 n.12 (D. Kan. 2001). A corporate plaintiff feels financial harm in the state where it maintains
its principal place of business. See id. (using Kansas choice of law principles and applying Georgia law to a tortious
interference with business expectancy claim because plaintiffs’ principal place of business was in Georgia). Here,
Snyder Insurance’s principal place of business and Mr. Snyder’s place of resident is in Kansas, Doc. 32 ¶¶ 1, 2, so
the court applies Kansas law to the TIBR claim.

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Defendants argue that the Complaint fails to allege the first three elements of this tort
sufficiently. In the next three subsections, the court addresses the merits of defendants’
argument.
A.

The existence of a business relationship or expectancy with the probability of
future economic benefit to the plaintiffs

The first element of this tort requires the Complaint to allege that plaintiffs had a business
relationship or expected to secure one with a probability of future economic benefit. Meyer Land
& Cattle Co. v. Lincoln Cty. Conservation Dist., 31 P.3d 970, 975–76 (Kan. Ct. App. 2001). To
survive a motion to dismiss, plaintiffs must allege more than generalized damage to its business
reputation or public stigma. Id. at 976. Instead, plaintiffs must plead a particular business
relationship with which defendants interfered. Id. Here, the Complaint alleges that plaintiffs had
a business relationship with Emerald City, All-Star, and Ninja Zone. Doc. 32 ¶ 44. So, the
Complaint identifies the particular business relationships defendants allegedly interfered with,
and thus sufficiently alleges the existence of a business relationship.
Defendants assert four arguments that show, in their minds, at least, why the Complaint
fails to allege this element sufficiently. First, defendants argue that the Complaint fails to allege
who the prospective or current clients were with whom plaintiffs had a relationship. Doc. 34 at
3. But, as already identified, the Complaint specifies at least three relationships with which
defendants allegedly interfered. This argument is wholly unpersuasive.
Next, defendants argue that the Complaint fails to allege the nature of the existing or
prospective relationship. Id. But, as already observed, the Complaint alleges that Emerald City,
All-Star, and Ninja Zone were plaintiffs’ clients. So, the economic relationship between
plaintiffs and these lost clients was that of insurance broker and insured. The Complaint thus

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identifies the nature of the existing economic relationship between plaintiffs and the clients they
allegedly lost.
Third, defendants argue that the Complaint cannot allege this element sufficiently. They
argue that the Complaint merely alleges defendants interfered with future “referrals”—but never
alleges who the referrals are. To be sure, simply alleging that plaintiffs had future business
opportunities with unspecified people or businesses would not sustain a claim for TIBR. See
Snyder v. Am. Kennel Club, 661 F. Supp. 2d 1219, 1237 (D. Kan. 2009) (“Under Kansas law,
general conclusory allegations of the type made by the plaintiffs, i.e., potential contracts with
unspecified [American Kennel Club] dog owners, are insufficient to show the existence of a
business relationship or expectancy with the probability of future economic benefit.”). Had the
Complaint merely alleged that plaintiffs expected referrals from previous clients, the court might
find the motion persuasive. But the Complaint alleges more than defendants pretend it does. It
alleges that plaintiffs had a business relationship or expectancy of a business relationship with
three specific businesses—Emerald City, All-Star, and Ninja Zone. So, this argument provides
no basis for dismissing the TIBR claim.
Last, defendants argue that the Complaint fails to allege that Mr. Snyder had any business
relationship that is separate and distinct from Snyder Insurance. Again, this argument
misapprehends the Complaint. It alleges that Mr. Snyder received commissions and broker’s
fees from Emerald City, All-Star, and Ninja Zone that he expected to continue to receive. Doc.
32 ¶ 41. The Complaint thus alleges a separate business relationship that Mr. Snyder expected to
enjoy into the future with the lost clients that is different from the relationship between Snyder
Insurance and the three lost clients.
In sum, the Complaint sufficiently alleges the first element of a TIBR claim.

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B.

Knowledge of the relationship or expectancy from the defendants

Defendants also argue that the Complaint alleges no facts to support the conclusion that
they knew about plaintiffs’ business relationships with their lost clients. The Complaint alleges,
“Defendants, as sophisticated parties and direct competitors in the same niche insurance field,
had actual and constructive knowledge of these relationships and expectancies.” Doc. 32 ¶ 42.
This allegation suffices to allege knowledge properly. See United States ex rel Smith v. Boeing
Co., 505 F. Supp. 2d 974, 985 (D. Kan. 2007) (holding plaintiff sufficiently pleaded knowledge
when the Complaint alleged that defendant “ʻknowingly’ caused to be submitted through
defendant . . . false or fraudulent claims for payment or approval . . . .” (quoting the Complaint));
see also Fed. R. Civ. P. 9(b) (“Malice, intent, knowledge, and other conditions of a person’s
mind may be alleged generally.”).
The Complaint specifically alleges that defendants were “in the same niche insurance
field” and were “sophisticated parties and direct competitors” to plaintiffs. These allegations—
assuming plaintiffs adduce admissible evidence to support them—provide a sufficient basis for
an inference that defendants would know which businesses in the small arena of amateur sports
procure their insurance through plaintiffs. The Complaint thus sufficiently alleges defendants’
knowledge of the plaintiffs’ relationship with their lost clients.
C.

Except for the conduct of the defendants, plaintiffs were reasonably certain
to have continued the relationship or realized the expectancy

Finally, defendants argue that the Complaint does not allege sufficiently that their
conduct caused plaintiffs to lose their clients. The causation element of the TIBR tort requires
plaintiffs to establish that, but for defendants’ wrongful conduct, plaintiffs were reasonably
certain to retain the business they lost. Kendall State Bank v. Archway Ins. Servs., No. 10-2617KHV, 2012 WL 3758647, at *4 (D. Kan. Aug. 29, 2012). The Complaint can allege this element
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successfully by pleading facts that, if proven, would support a reasonable inference that plaintiffs
would have retained the relationships but for defendants’ misconduct. Id. Here, the Complaint
alleges that defendants told the lost clients that plaintiffs had been lying to them and others about
their insurance coverage. Doc. 34 ¶ 40. One reasonably could infer from these allegations that if
defendants never had made these statements, the clients would still be insured through plaintiffs.
The Complaint thus sufficiently alleges the causation element of this tort.
IV.

Conclusion
For reasons explained above, the court denies defendants’ Motion to Dismiss (Doc. 33).
IT IS THEREFORE ORDERED BY THE COURT THAT defendants’ Motion to

Dismiss (Doc. 33) is denied.
IT IS SO ORDERED.
Dated this 6th day of June, 2018, at Topeka, Kansas.

s/ Daniel D. Crabtree______
Daniel D. Crabtree
United States District Judge

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