Mann Bracken, LLP v. Executive Risk Indemnity, Inc.

Filing 22

MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 9/28/2015. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
MANN BRACKEN, LLP
:
v.

:

Civil Action No. DKC 15-1406

:
EXECUTIVE RISK INDEMNITY, INC.
:
MEMORANDUM OPINION
Presently

pending

and

ready

for

resolution

in

this

insurance case is a motion to remand filed by Cheryl E. Rose
(“Ms. Rose”), acting in her official capacity as receiver of
Mann Bracken, LLP (“Mann Bracken”) (ECF No. 16) and a motion to
dismiss

filed

by

Defendant

Executive

Risk

Indemnity,

(“Executive Risk” or “Defendant”) (ECF No. 8).

Inc.

The issues have

been briefed, and the court now rules, no hearing being deemed
necessary.
motion

Local Rule 105.6.

to

remand

will

be

For the following reasons, the

denied

and

Defendant’s

motion

to

dismiss will be granted.
I.

Background
A.

Factual Background

The following facts are alleged in the complaint.
2).

Mann

collection.

Bracken

was

Axiant,

a

LLC

law

firm

that

(“Axiant”),

specialized

which

is

offered consumer debt collection support services.
4, at 1).

now

(ECF No.
in

debt

bankrupt,

(ECF No. 2-

On April 4, 2008, Mann Bracken and Axiant entered

into an Administrative Services Agreement and a Legal Services
Agreement.

(ECF

Nos.

2-4;

2-5).

Under

the

Administrative

Services Agreement, Axiant was to:
[P]rovide
such
offices,
personnel,
facilities, equipment, and related services
as are determined to be reasonably necessary
for the proper and efficient operation of
[Mann Bracken’s collection activities and
other legal services].
. . .
[Axiant was
also
to]
provide
administrative
and
accounting services as are determined to be
reasonably necessary for the proper and
efficient
operation
of
[Mann
Bracken’s
collection
activities
and
other
legal
services].
(ECF No. 2-4, at 1).

The complaint summarizes Axiant’s duties

under the Administrative Services Agreement as requiring it to
provide “consumer debt collection support activities, including
client

management

collection

services,
and

other

related

support

services,

support

activities

together with all required administrative services.”

(ECF No. 2

¶ 34).

software,

arbitration

Generally, “Axiant made available to Mann Bracken the

Axiant offices, personnel, facilities, equipment, software, and
Collection Agency Services for the benefit of Mann Bracken” and
also maintained Mann Bracken’s records.
Legal

Services

Agreement

allowed

(Id. ¶¶ 36-37).

Axiant

“in

its

sole

The
and

absolute discretion [to] place Accounts with [Mann Bracken] for
collection from Debtors.”

(ECF No. 2-5, at 1).

2

The

complaint

Services

Agreement,

accounts

to

alleges

cover

under

the

debited

Axiant

that,

funds

from

“certain

reoccurring

and

Administrative
Mann

certain

Bracken’s
periodic

expenses, including payment of Axiant’s own management fees.”
(ECF No. 2 ¶ 38).

These funds would also cover court costs and

other related fees.
Bracken

learned

(Id. ¶ 48).

that,

through

On or about July 1, 2009, Mann
the

debiting

of

Axiant owed Mann Bracken as much as $8,874,593.00.
Axiant

filed

for

bankruptcy

on

November

20,

these

funds,

(Id. ¶ 47).

2009,

and

Mann

Bracken filed a proof of claim for $8,874,593.00 as part of the
bankruptcy proceedings on January 15, 2010.

(Id. ¶¶ 56, 69).

Due in part to the funds taken by Axiant, Mann Bracken ceased
operations in December 2009.

On February 27, 2010, the Circuit

Court for Montgomery County appointed Ms. Rose as the receiver
for Mann Bracken.
On December 27, 2011, Ms. Rose, acting in her capacity as
receiver for Mann Bracken, initiated a lawsuit against Axiant
seeking damages “for its negligence and breach in failing to
perform its Collection Agency Services as required by law and
the agreements: specifically, by failing to fully reimburse Mann
Bracken

amounts

owed

to

it

from

the

[unreimbursed

costs] and Mann Bracken’s collection efforts.”
64-65; 8-1, at 11).

advanced

(ECF Nos. 2 ¶¶

On April 29, 2013, Ms. Rose and Axiant

reached an agreement resolving that action.
3

(ECF No. 2 ¶ 76).

Under the settlement agreement, Ms. Rose, on behalf of Mann
Bracken, holds “a liquidated, general unsecured claim against
Axiant in the amount of $13,400,000.00.”
settlement

agreement

also

“assigned

(Id. at 13).

all

rights,

The

title,

interest in [Axiant’s insurance policy] to Mann Bracken.”

and
(Id.

¶ 81).
Defendant Executive Risk issued an insurance policy (the
“Policy”)

to

Axiant

August 10, 2010.

for

the

period

of

(ECF No. 2-3, at 2).

February

12,

2009

to

The insuring clause of

the policy states that: “[Defendant] shall pay Loss on behalf of
[Axiant] resulting from any Claim first made against [Axiant]
and reported to [Defendant] in writing during the Policy Period,
or any Extended Reporting Period, for Wrongful Acts committed by
[Axiant] solely in the performance of or failure to perform
Insured

Services”

during

the

policy

period.

(Id.

at

9).

“Insured Services” is separately defined as “Collection Agency”
services.
monetary

(Id. at 7).
damages

or

A “claim” is any “written demand for

non-monetary

relief;

a

civil

proceeding

commenced by the service of a complaint or a similar pleading;
or an arbitration proceeding, against Axiant.”

(Id.

at 9).

“Wrongful Acts” is defined as “any actual or alleged negligent
act,

error

or

omission

committed,

attempted,

or

allegedly

committed or attempted, solely in the performance of or failure
to perform Insured Services.”

(Id. at 12).
4

Section IX governs “Reporting.”

It provides in relevant

part:
(A) Reporting of Claims and Wrongful Acts:
(1) If a Claim is made against
the Insureds or the Parent
shall immediately forward to
every demand, notice, summons,
other process received by the
their representatives.

any Insured,
Organization
the Company
complaint or
Insureds or

(2)If during the Policy Period an insured
becomes aware of a Wrongful Act which may
subsequently give rise to a Claim, and
during the Policy Period the Insureds:
(a) give the Company written notice of such
WrongfulAct, including a description of the
Wrongful Act in question, the Identities of
the potential claimants, the consequences
which have resulted or may result from the
Wrongful Act, the damages which may result
from the Wrongful Act and the circumstances
by which the Insureds first became aware of
the Wrongful Act; and
(b) request coverage under this Policy for
any subsequently resulting Claim
for such
Wrongful Act,
then the Company will treat any such
subsequently resulting Claim as if it had
been made against the Insureds during the
Policy Period and, provided that written
notice of such Claim is then given to the
Company as soon as practicable after it is
first made, as if such Claim had also been
reported to the Company during the Policy
Period.
(Id. at 15).

5

B.

Procedural History

Ms. Rose, “in her official capacity as receiver of Mann
Bracken LLP, and as assignee of Axiant, LLC,” commenced this
action on March 10, 2015, by filing a complaint in the Circuit
Court for Montgomery County.

(ECF No. 2).

The complaint’s

caption denominates the plaintiffs as “Mann Bracken, LLP, c/o
Cheryl E. Rose, Esq. and a/s/o Axiant, LLC.”

After receiving

notice of the complaint on April 20, 2015, Defendant timely
removed this case on May 15, 2015.

(ECF No. 1).

Defendant

filed the pending motion to dismiss on May 22, 2015.
8).

(ECF No.

Ms. Rose filed an opposition (ECF No. 15), and Defendant

replied (ECF No. 20).

On June 8, 2015, Ms. Rose filed the

pending motion to remand.

(ECF No. 16).

Defendant filed an

opposition on June 25, 2015 (ECF No. 21), and Ms. Rose did not
reply.
II.

Motion to Remand
A.

Standard of Review

When a plaintiff challenges the propriety of removal, the
defendant bears the burden of proving proper removal.
v.

Crown

Title

Corp.,

216

F.Supp.2d

519,

521

See Greer

(D.Md.

2002)

(citing Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148,
151 (4th Cir. 1994)).

In considering a motion to remand, the

court must “strictly construe the removal statute and resolve
all

doubts

in

favor

of

remanding
6

the

case

to

state

court.”

Richardson v. Philip Morris Inc., 950 F.Supp. 700, 702 (D.Md.
1997)

(internal

quotation

marks

omitted).

This

standard

reflects the reluctance of federal courts “to interfere with
matters properly before a state court.”
B.

Id. at 701.

Analysis
(a)

Diversity of Citizenship

“The federal removal statute allows a defendant to remove
to federal district court ‘any civil action brought in a State
court of which the district courts of the United States have
original

jurisdiction.’”

Davis

v.

North

Carolina

Dep’t

of

Corrections, 48 F.3d 134, 138 (4th Cir. 1995) (quoting 28 U.S.C.
§ 1441(a)).
diversity

Defendant invokes federal jurisdiction based on

of

citizenship.

Federal

district

courts

have

diversity jurisdiction over “all civil actions where the matter
in controversy exceeds the sum or value of $75,000, exclusive of
interest and costs, and is between . . . citizens of different
States.”

28 U.S.C. § 1332(a).

It is undisputed that the amount

in controversy exceeds $75,000, but the parties disagree as to
whether
diversity

the

diversity

of

requirement

citizenship

diversity requirement.

must

exist

Defendant

has

not

satisfied.
to

satisfy

Complete
§

1332’s

The parties agree that Defendant is a

citizen of Delaware and New Jersey.
that

is

met

its

However, Ms. Rose contends

burden

of

proof

of

showing

complete diversity because it did not: (1) properly identify
7

Mann Bracken’s citizenship and (2) Axiant either is or should be
a plaintiff, which would destroy diversity.
Defendant, in its notice of removal, identified Plaintiff’s
citizenship

as

Maryland

because

Cheryl

Rose,

Mann

Bracken’s

court-appointed receiver, is an undisputed citizen of Maryland.
(ECF

No.

Plaintiff

1,

at

2).

captioned

the

Defendant
case,

alleges

Ms.

Rose,

that,
as

despite

Mann

how

Bracken’s

receiver, is actually bringing the action and is the appropriate
plaintiff.

Defendant

further

argues

that

the

court

order

appointing Ms. Rose granted her authority to “[p]ursue claims
against Axiant through its bankruptcy proceeding and against any
insurance policies of Axiant.”

(ECF 21-1, at 5).

Ms. Rose

purports, as illustrated by the caption, to be bringing this
action on behalf of Mann Bracken.
itself

is

a

true

Plaintiff,

She asserts that Mann Bracken

and,

because

it

is

a

limited

liability partnership, its citizenship is that of each of its
partners, which Defendant has not attempted to identify.

(ECF

No. 16, at 6); see, e.g., Central West Virginia Energy Co. v.
Mountain State Carbon, LLC, 636 F.3d 101, 103 (4th Cir. 2011);
Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 120
(4th Cir. 2004).
Courts look to the citizenship of a fiduciary (such as a
receiver) rather than the entity she represents, when “the law
of the appointing authority permits [her] to sue in [her] own
8

name, without joining any of the persons that [she] represents.”
Gross v. Hougland, 712 F.2d 1034, 1037 (6th Cir. 1983) (citations
omitted).

Here, Maryland law states that:
A person winding up a partnership’s
business may . . . prosecute and defend
actions and proceedings, whether civil,
criminal, or administrative, settle and
close the partnership’s business, dispose of
and transfer the partnership’s property,
discharge
the
partnership’s
liabilities,
distributed the assets of the partnership, .
.
.
settle
disputes
by
mediation
or
arbitration, and perform other necessary
acts.

Md.

Code

Ann.,

Corps.

&

Ass’ns

§

9A-803(c).1

The

order

appointing Ms. Rose as receiver grants her power to “participate
in the Axiant Bankruptcy proceeding to collect [Mann Bracken’s]
entitlement [and to] . . . [p]ursue claims against Axiant . . .
and against any insurance policies of Axiant.”
at 5).

(ECF No. 21-1,

The order mandates that Ms. Rose “[t]ake and possess all

financial accounts of [Mann Bracken,] . . . [c]ollect checks
payable

to

[Mann

Bracken]

and

accounts

receivable

assets to which [Mann Bracken] is entitled.”

and

other

(Id. at 3-4).

In

short, Maryland law and the court order appointing Ms. Rose
grant

her,

and

not

Mann

Bracken

1

itself,

which

has

ceased

Notably, the analogous provision regarding receivership of
corporations grants a receiver “full title to all assets of the
corporation” and states that the receiver “has full power to
enforce obligations or liabilities” in the corporation’s favor.
Md. Code. Ann., Corps. & Ass’ns § 3-418(a).
9

operations

and

is

insolvent,

the

authority

to

control

Mann

Bracken’s assets and bring suit against Axiant and Executive
Risk.

Moreover, Ms. Rose has repeatedly taken the position in

other cases in this court that she should be substituted as the
proper

party

for

Mann

Bracken.

See,

e.g.,

Thomas

v.

Mann

Bracken, LLP, et al., RDB 09-3440, ECF No. 15; Mann Bracken LLP
v.

LDG

Financial

Services

LLC,

WGC

09-2103,

ECF

No.

21.

Accordingly, Ms. Rose, as receiver for Mann Bracken, is the
appropriate plaintiff in this case, despite the caption of the
complaint.
Additionally, courts generally “treat [a receiver] as the
plaintiff[]” for purposes of diversity jurisdiction.

Mitchell

v. Maurer, 293 U.S. 237, 242 (1934); see also Gray v. Bush, 628
F.3d 779, 783 (6th Cir. 2010); Hoagland ex rel. Midwest Transit,
Inc. v. Sandberg, Phoenix & Von Gontard, P.C., 385 F.3d 737, 738
(7th Cir. 2004); Coal & Iron Ry. Co. v. Reherd, 204 F. 859, 883
(4th Cir. 1913); Bank of America v. Musselman, 222 F.Supp.2d 792,
794 n.3 (E.D.Va. 2002).2

The two cases Plaintiff relies on to

2

The United States Court of Appeals for the Fourth Circuit
has not squarely addressed this question since Reherd, over 100
years ago.
It did note, in passing, that diversity was met
because, “[a]s an initial matter, . . . [t]he deputy receiver
[was] acting on behalf of” a corporation that satisfied
diversity.
Gross v. Weingarten, 217 F.3d 208, 220 (4th Cir.
2000).
Because the Fourth Circuit did not specifically decide
the issue at hand, its brief discussion in Gross does not change
the effect of the aforementioned precedent.
10

argue against using a receiver’s citizenship are not persuasive.
In New Alaska Development Corp. v. Guetschow, the Ninth Circuit
used

a

corporation’s

citizenship

in

a

suit

brought

by

a

corporation against its receiver for wrongful conduct of the
corporation’s affairs.

869 F.2d 1298, 1300-01 (9th Cir. 1989).

Guetschow does not apply to the current case because it was not
a suit brought by a receiver.
a

corporation

against

a

Rather, it was a suit brought by

receiver.

Accordingly,

Circuit’s reasoning does not apply here.

the

Ninth

Plaintiff also cites

an unpublished district court opinion from Massachusetts, but,
in

that

instance,

citizenship

because

the
a

court

did

receiver

not

had

look
not

at

yet

the

receiver’s

been

appointed.

College-Town v. U.S. Tradewinds, Inc., No. 85-4758-MA, 1986 U.S.
Dist. LEXIS 22709, at *5-6 (D.Mass. July 16, 1986).3
Plaintiff also argues that Axiant is a plaintiff in the
current case or should be added as a necessary party.
16, at 9).

(ECF No.

Plaintiff alleges that this would destroy diversity

because Defendant has not met its burden of identifying Axiant’s
citizenship.

Defendant counters that Axiant is not an existing

3

The district court did note, again in passing, that “[i]f
a dissolved corporation is considered sufficiently alive to sue
or be sued, it continues to be a citizen, for diversity
jurisdictional purposes, of the state which incorporated it.”
Tradewinds, Inc., 1986 U.S. Dist. LEXIS, at *5.
The court did
not elaborate or rely on this statement, instead basing its
holding on the fact that because the receiver was not yet
appointed and the corporation still existed, the citizenship of
the potential receiver did not matter. Id. at *5-6.
11

plaintiff and is not a necessary and indispensable party under
Rule 19 of the Federal Rules of Civil Procedure.
at 8-12).
Axiant

(ECF No. 21,

Plaintiff’s attempts to style this action to include

as

a

plaintiff

are

unavailing,

as

the

record

and

submissions by the parties clearly show that Axiant is not an
existing plaintiff in this action.
Plaintiff

also

argues

that

Axiant

“certainly

meets

the

requirements of Rule 19 as a necessary and indispensable party.”
(ECF No. 16, at 9).

Defendant contends that Axiant is not a

necessary and indispensable party because it assigned all its
rights to Plaintiff as part of its settlement agreement and has
no “legally cognizable interest in the claims being asserted in
this action, which all belong exclusively to [Plaintiff]”.
No. 21, at 9).

(ECF

As the Fourth Circuit has articulated:

Rule 19 of the Federal Rules of Civil
Procedure sets forth a two-step inquiry for
courts to determine whether a party is
“necessary” and “indispensable.”
The first
question under Rule 19(a) is “whether a
party is necessary to a proceeding because
of its relationship to the matter under
consideration.”
Teamsters Local Union No.
171 v. Keal Driveaway Co., 173 F.3d 915, 917
Second, if the party is
(4th Cir. 1999).
necessary but joining it to the action would
destroy complete diversity, the court must
decide
under
Rule
19(b)
“whether
the
proceeding can continue in that party’s
absence.” Id. at 917-18.
Home Buyers Warranty Corp. v. Hanna, 750 F.3d 427, 433 (4th Cir.
2014).

“The inquiry contemplated by Rule 19(a) is a practical
12

one, and is addressed to the sound discretion of the court.”

R-

Delight Holding LLC v. Anders, 246 F.R.D. 496, 498 (D.Md. 2007)
(citations and internal quotation marks omitted).

Here, it is

undisputed

title,

that

Axiant

“assigned

all

rights,

and

interest” to the underlying settlement agreement to Plaintiff,
as the receiver for Mann Bracken.

(ECF Nos. 2 ¶ 81; 21, at 12).

There is no indication that complete relief cannot be afforded
in Axiant’s absence or that Axiant “claims an interest relating
to the subject of the action.”

Fed.R.Civ.P. 19(a).

Axiant has no remaining interest.

Rather,

Further, Axiant’s absence

will not “impede [its] ability to protect that interest” or
subject the current parties to a “substantial risk” of incurring
inconsistent obligations.
been

transferred

to

Id.

All of Axiant’s interests have

Plaintiff,

and

Axiant

has

no

separate

interests in this dispute beyond those represented by Plaintiff.4
For

the

foregoing

reasons,

there

is

complete

diversity

of

citizenship in the current action.

4

The one case Plaintiff cites to argue that Axiant is a
necessary party is, as Defendant notes, not relevant to the
current case. In the cited case, the Fourth Circuit held that a
national parent company was a necessary party in an insurance
action involving a local subsidiary because it had different
interests.
National Union Fire Ins. Co. of Pittsburgh, PA v.
Rite Aid of South Carolina, Inc., 210 F.3d 246, 250-51 (4th Cir.
2000).
Additionally, the parent company had filed a parallel
state court action with the subsidiary.
See id. at 248.
The
current case is significantly different.
13

(b)

Abstention

Plaintiff also argues that this court should abstain from
exercising its jurisdiction over this case and remand it to
state

court

action.”

“in

(ECF

light
No.

16,

of

[the]

at

ongoing

10).

state

Plaintiff

receivership

argues

that

the

undersigned should abstain from hearing this case in light of
the Fourth Circuit’s decision in First Penn-Pacific Life Ins.
Co. v. Evans, 304 F.3d 345 (4th Cir. 2002).

In Evans, the Fourth

Circuit upheld a district court’s abstention because the case
would

have

interfered

with

Evans, 303 F.3d at 348.

state

receivership

proceedings.

The plaintiff in that case was seeking

to rescind a life insurance policy due to fraud.

Id. at 346.

The Fourth Circuit noted that allowing the action to proceed in
federal

court

dissolution
Defendant

of

“would

severely

[Defendant’s]

avers

that

complicate

estate.”

abstention

is

Id.

the
at

efficient

349.

inappropriate

Here,
because

Plaintiff is seeking damages and not equitable or discretionary
relief.

(ECF No. 21, at 12-14); see Myles Lumber Co. v. CAN

Financial

Corp.,

233

F.3d

821,

823

(4th

Cir.

2000)

(citing

Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 721 (1996)).
The “threshold requirement that must be satisfied for a case to
be subject to remand [due to abstention] is that the complaint
seek either equitable or otherwise discretionary relief.”
Lumber,

233

F.3d

at

823;

see
14

also

1-77

Properties,

Myles
LLC

v.

Fairfield County, 288 F.App’x 108, 110 (4th Cir. 2008) (holding
“that dismissal based on abstention principles is appropriate
only where the relief sought is equitable”).
Plaintiff’s

counts

seek

legal

monetary

Here, all three of

damages.

Unlike

Evans, Plaintiff is not seeking equitable relief.

in

Therefore,

abstention is not appropriate.5
III. Defendant’s Motion to Dismiss
A.

Standard of Review

The purpose of a motion to dismiss under Rule 12(b)(6) is
to test the sufficiency of the complaint.

Presley v. City of

Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006).

A complaint

need only satisfy the standard of Rule 8(a), which requires a
“short and plain statement of the claim showing that the pleader
is entitled to relief.”

Fed.R.Civ.P. 8(a)(2).

“Rule 8(a)(2)

still requires a ‘showing,’ rather than a blanket assertion, of
entitlement to relief.”
544, 555 n.3 (2007).

Bell Atl. Corp. v. Twombly, 550 U.S.

That showing must consist of more than “a

formulaic recitation of the elements of a cause of action” or
“naked

assertion[s]

devoid

of

further

factual

enhancement.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations omitted).
At this stage, all well-pleaded allegations in a complaint
must be considered as true, Albright v. Oliver, 510 U.S. 266,
5

Plaintiff also seeks reasonable fees due to Defendant’s
“wrongful removal.” (ECF No. 16, at 11-12). This request will
be denied because removal was proper.
15

268 (1994), and all factual allegations must be construed in the
light

most

favorable

to

the

plaintiff.

See

Harrison

v.

Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.
1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134
(4th Cir. 1993)).

In evaluating the complaint, unsupported legal

allegations

not

need

be

accepted.

Revene

Comm’rs, 882 F.2d 870, 873 (4th Cir. 1989).

v.

Charles

Cnty.

Legal conclusions

couched as factual allegations are insufficient, Iqbal, 556 U.S.
at 678, as are conclusory factual allegations devoid of any
reference to actual events.

United Black Firefighters v. Hirst,

604 F.2d 844, 847 (4th Cir. 1979).
B.

Analysis

The central issue in this case is whether Plaintiff can
recover under the policy issued by Defendant for the damages
caused by Axiant.

Defendant argues that: (1) Plaintiff did not

make its claim within the policy period, nor was it reported, as
required

by

the

Bracken

fell

Policy;

outside

(2)
the

Axiant’s

relationship

Policy,

which

with

covered

Mann

solely

“Collection Agency” services; and (3) coverage is barred by the
Policy’s

Exclusion

(A)(7)(B)

because

both

Axiant

and

Bracken were owned or controlled by the same person.

Mann

(ECF No.

8, at 2-3).
As

an

initial

matter,

Defendant

contends

that

North

Carolina law applies because the policy was issued in North
16

Carolina.

(ECF

No.

8-1,

at

16

n.6).

Plaintiff

“does

not

address choice-of-law” issues, and does not oppose Defendant’s
assertion that North Carolina law applies.
n.3).

(ECF No. 15, at 7

In an action based upon diversity of citizenship, the

district court must apply the law of the forum state, including
its choice-of-law rules.
313

U.S.

487,

496-97

Klaxon Co. v. Stentor Elec. Mfg. Co.,
(1941).

Maryland

follows

lex

loci

contractus and applies the law of the jurisdiction in which the
contract was made.

See, e.g., Allstate Ins. Co. v. Hart, 327

Md. 526 (1992); Nautilus Ins. Co. v. REMAC America, Inc., 956
F.Supp.2d 674, 684 (D.Md. 2013).

“Maryland’s appellate courts

view the locus contractus of an insurance policy as the state in
which the policy is delivered and where the premiums are paid,
because

such

acts

are

the

insurance policy binding.”

last

acts

necessary

to

make

an

Nautilus Ins. Co., 956 F.Supp.2d at

684; see Aetna Cas. & Sur. Co. v. Souras, 78 Md.App. 71, 77
(1989).

Here,

Carolina.

Additionally, although the Policy contains no choice-

of-law

the

provision,

Endorsement”
Carolina law.

to

it
bring

Policy

was

includes
the

a

Policy

issued

“North
in

to

Axiant

Carolina

compliance

(ECF No. 2-3, at 27-28).

in

North

Amendatory
with

North

Accordingly, North

Carolina law governs interpretation of the Policy.
Defendant asserts that Plaintiff cannot recover under the
Policy because no claim was made within the reporting period
17

(February

12,

Plaintiff

nor

within

the

undisputed

2009

through

Mann

policy
that

Bracken

August

10,

2010)

reported

the

claim

period.

the

Policy

(ECF
was

No.
a

8-1,

and

neither

to
18).

at

Defendant
It

is

“claims-made-and-reported”

policy that explicitly held Defendant liable only for “any Claim
first

made

against

[Axiant]

and

writing during the Policy Period.”
added)).

reported

to

[Defendant]

in

(ECF No. 2-3, at 9 (emphasis

Under some circumstances, written notice during the

policy period, followed by a subsequent claim, will also be
covered.

(Id. at 15).

Plaintiff’s complaint alleges that “[u]pon information and
belief,

on

or

about

December

21,

2009,

Mann

Bracken

sent

a

letter notifying Axiant’s insurer of Mann Bracken’s claim for
damages in excess of $6,000,000.00 due to Axiant’s failure to
properly provide Collection Agency Services.”

(ECF No. 2 ¶ 58).

Mann Bracken also “filed its proof of claim for $8,874,593.00 in
the Axiant bankruptcy proceeding” on January 15, 2010.
69).

(Id. ¶

Plaintiff asserts that these two instances satisfy the

Policy’s

reporting

Defendant

contends

requirement.
that

(ECF

Plaintiff’s

No.

“claim”

15,
is

at

the

5-6).
lawsuit

Plaintiff initiated against Axiant on December 27, 2011, more
than one year after the Policy lapsed.
20, at 6-7).

(ECF Nos. 8-1, at 19;

Defendant also argues that the proof of claim

filed in January 2010 is not a valid claim because it did not
18

contain allegations of Axiant’s alleged wrongful act.
20, at 8).

(ECF No.

Defendant finally argues that Plaintiff’s assertion,

“upon information and belief,” that Mann Bracken provided notice
of

its

claim

in

December

2009

survive a motion to dismiss.

is

not

pled

sufficiently

to

(ECF No. 8-1, at 19-22).

Regardless of whether the “claim” was first made by way of
the

bankruptcy

filing

or

later

in

the

underlying

action,

Plaintiff has not alleged that any written notice was provided
to

Defendant

alleges

first

within
that

the

applicable

“Upon

information

period.
and

The

belief,

complaint
during

the

policy period, Axiant noticed [Executive Risk] of the claim by
Mann Bracken discussed in depth below.”
Second,

in

paragraph

58,

the

(ECF No. 2 ¶ 24).

complaint

alleges:

“Upon

information and belief, on or about December 21, 2009, Mann
Bracken

sent

a

letter

notifying

Axiant’s

insurer

of

Mann

Bracken’s claim for damages in excess of $6,000,000.00 due to
Axiant’s

failure

Services.”

to

properly

provide

Collection

Agency

(Id. ¶ 58).

Defendant contends that allegations “upon information and
belief” are insufficient to defeat a motion to dismiss.
No. 8-1, at 19-22).

(ECF

Under the pleading standard the Supreme

Court articulated in Twombly and Iqbal, a complaint’s conclusory
allegations

based

solely

“upon

information

“insufficient to defeat a motion to dismiss.”
19

and

belief”

are

Harman v. Unisys

Corp., 356 F.App’x 638, 640-41 (4th Cir. 2009); see also In re
Darvocet,

Darvon,

and

Propoxyphene

Products

Liability

Litigation, 756 F.3d 917, 931 (6th Cir. 2014); Mann v. Palmer,
713 F.3d 1306, 1315 (11th Cir. 2013); Malibu Media, LLC v. Doe,
No. PWG-13-365, 2014 WL 7188822, at *4 (D.Md. Dec. 16, 2014).
As Judge Grimm recently noted, it is important to differentiate
“between a case in which pleading ‘upon information and belief’
is used as an inadequate substitute for providing detail as to
why the element is present in an action . . . [and the] proper
use of ‘upon information and belief,’ where a plaintiff does not
have personal knowledge of the facts being asserted.”

Malibu

Media, 2014 WL 7188822, at *4 (citations and internal quotation
marks omitted).

Indeed, “‘pleading on the basis of information

and

generally

belief

is

‘particularly

within

appropriate’

defendants’

where

knowledge

information
and

is

control.’”

Kajoshaj v. New York City Dept. of Educ., 543 F.App’x 11, 16 (2d
Cir. 2013) (quoting Boykin v. KeyCorp, 521 F.3d 202, 215 (2d Cir.
2008)).
Here,

Plaintiff’s

use

of

“upon

information

and

belief”

falls squarely within the first category Judge Grimm identified
– it is an “inadequate substitute for providing detail” that
should

be

squarely

within

Plaintiff’s

control.

See

Malibu

Media, 2014 WL 7188822, at *4.

The fact that Mann Bracken sent

notice

not

to

Executive

Risk

is
20

something

that

would

be

particularly

in

Defendant’s

control.

Rather,

Plaintiff,

as

receiver for Mann Bracken, would uniquely have access to Mann
Bracken’s documents and records and would be able to determine
with certainty beyond “upon information and belief” that Mann
Bracken provided notice.

Tellingly, Plaintiff did not attach

copies of the alleged notice or any proof whatsoever that notice
was actually provided to Executive Risk.
no

other

facts

supporting

providing notice.
No.

JFM-15-212,

the

The complaint alleges

conclusory

allegations

about

See Capital Meats, Inc. v. Meat Shoppe, LLC,
2015

WL

4249166,

at*8

(D.Md.

July

9,

2015)

(denying motion to dismiss despite “upon information and belief”
language, in part, because the plaintiff alleged certain other
facts that were sufficient to state a plausible claim).

The

complaint’s brief conclusory allegations, which have no factual
support, are woefully inadequate to survive a motion to dismiss.
In addition, any such advance notice or report would only
be effective under the policy if that written notice described
“the Wrongful Act in question, the identities of the potential
claimants, the consequences which have resulted or may result
from the Wrongful Act, the damages which may result from the
Wrongful

Act

and

the

circumstances

by

which

[Axiant]

first

became aware of the Wrongful Act” in addition to requesting
coverage

for

any

subsequent

claim.

(ECF

No.

8-3,

at

14).

Further, under the policy, using the advance notice procedure
21

requires

“written

notice

of

such

claim

[to

be]

given

to

[Executive Risk] as soon as practicable after it is first made.”
(Id.).

There are no allegations that any written notice, in

December 2009, or later, contained all the necessary information
or promptly notified Defendant of either the bankruptcy filing
or the underlying lawsuit.
Plaintiff also argues that Defendant must show prejudice
from

any

late

prejudice

is

notice,

not

a

but

Defendant

requirement

of

policy under North Carolina law.
Carolina

case

different

supporting

type

of

her

insurance

a

correctly

argues

that

claims-made-and-reported

Plaintiff cites only one North
argument,

policy

with

but

it

involves

different

a

language.

Great American Ins. Co. v. C.G. Tate Const. Co., 303 N.C. 387
(1981).
notice

The policy in that case did not require the claim or
to

occur

during

the

policy

period.

Instead,

merely had to be given “as soon as practicable.”
Conversely,

the

policy

here

is

a

notice

Id. at 391.

claims-made-and-reported

policy, which unambiguously states that a claim must be made and
reported within the policy period.

North Carolina courts have

held that “prejudice is irrelevant [when] the parties have a
plain

unambiguous

contract

setting

agreement” as is the case here.

out

the

terms

of

Eagle Engineering, Inc. v.

Continental Cas. Co., 191 N.C.App. 593, 599 (2008).

Defendant

does not need to show it was prejudiced by the late notice.
22

the

Accordingly, Defendant’s motion to dismiss will be granted
because Plaintiff has not pled facts showing that its untimely
claim and/or report is covered by the Policy.6
IV.

Conclusion
For

will

be

granted.

the

foregoing

denied

and

reasons,

Defendant’s

Plaintiff’s
motion

to

motion
dismiss

to

remand

will

be

A separate order will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

6

Because Plaintiff’s claim will be dismissed due to lack of
sufficient facts showing a timely claim and report, it is
unnecessary to address Defendant’s other arguments supporting
its motion to dismiss.
23