State Bank of Bellingham v. BancInsure, Inc.

Filing 121

ORDER granting 76 Motion for Summary Judgment; denying 88 Motion for Summary Judgment; granting in part and denying in part 15 Motion for Partial Summary Judgment. Plaintiff shall submit, within ten days of the date of this Order an affidavit and documentation of its reasonable attorneys fees and costs associated with bringing its Motion for Partial Summary Judgment.(Written Opinion) Signed by Judge Susan Richard Nelson on 09/29/2014. (SMD)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

State Bank of Bellingham,

Case No. 13-cv-0900 (SRN/JJG)

Plaintiff and Counterclaim
Defendant,
v.

MEMORANDUM OPINION
AND ORDER

BancInsure, Inc.,
Defendant and Counterclaim
Plaintiff.

Jonathan M. Bye and Bryan R. Freeman, Lindquist & Vennum, PLLP, 4200 IDS Center,
80 South Eighth Street, Minneapolis, MN 55402, for Plaintiff.
Joseph A. Nilan, Mark J. Johnson, T. James Power, and Joshua A. Dorothy, Gregerson,
Rosow, Johnson & Nilan, Ltd., 650 Third Avenue South, Suite 1600, Minneapolis, MN
55402, for Defendant.

SUSAN RICHARD NELSON, United States District Judge
I.

INTRODUCTION
This matter is before the Court on Plaintiff State Bank of Bellingham’s Motion for

Partial Summary Judgment, for Attorney’s Fees and for Punitive Damages [Doc. No. 15], as
well as the parties’ cross-motions for summary judgment [Doc. Nos. 76, 88]. For the
reasons stated below, the Court grants in part and denies in part Plaintiff’s Motion for Partial
Summary Judgment [Doc. No. 15], grants Plaintiff’s Motion for Summary Judgment [Doc.
No. 76], and denies Defendant BancInsure Inc.’s Motion for Summary Judgment [Doc. No.
88].

II.

BACKGROUND
A.

The Parties and the Bond

Plaintiff is a “Minnesota state bank with five employees and one location in
Bellingham, Minnesota.” (Carman Decl. [Doc. No. 80], ¶ 2.) Defendant is an insurance
company that is incorporated in Oklahoma. (Compl. [Doc. No. 1], ¶ 5; Amended Answer
and Counterclaim [Doc. No. 36], ¶ 5.) In October 2010, Defendant issued Financial
Institution Bond No. FIB0011607 (the “Bond”) to Bellingham Corporation, with coverage
effective from October 17, 2010, to October 17, 2013. (Bye Decl. dated April 25, 2014
[Doc. No. 79] (“Second Bye Decl.”), Ex. A (BancInsure Financial Institution Bond), at
1661.) Plaintiff is a named insured on the Bond. (Id. at 168.) Under the Bond, Defendant
agrees to indemnify Plaintiff in various circumstances, collectively referred to as “Insuring
Agreements,” including—relevant to this case—in the case of “computer systems fraud.”
(Id. at 166.) Under that provision, referred to as “Insuring Agreement (H)”:
Loss resulting directly from a fraudulent
(1)

entry of Electronic Data or Computer Program into, or

(2)

change of Electronic Data or Computer Program within

any Computer System operated by the Insured, whether owned or leased, or
any Computer System identified in the application for this Bond, or a
Computer System first used by the Insured during the Bond Period, provided
the entry or change causes
(1)

property to be transferred, paid or delivered,

1

Many of the exhibits in this case consist of documents with Bates-labels beginning
with “BI_000.” The Court will omit all but the final numerical digits from its citations to
these page numbers.
2

(2)

an account of the Insured or of its customer to be added, deleted,
debited or credited, or

(3)

an unauthorized account or a fictitious account to be debited or
credited.

In this Insuring Agreement (H), fraudulent entry or change shall include such
entry or change made by an employee of the Insured acting in good faith
(1)

on an instruction from a software contractor who has a written
agreement with the Insured to design, implement or service programs
for a Computer System covered by this Insuring Agreement (H), or

(2)

on an instruction transmitted by Tested telex or similar means of
Tested communication identified in the application for this Bond
purportedly sent by a customer, financial institution, or automated
clearing house.

(Id. at 173.) Coverage under Insuring Agreement (H) provides a single loss limit of liability
of $500,000, with a $5,000 deductible. (Id. at 166.)
The Bond also includes numerous exclusions. Relevant to the present motions,
Section 2 of the Bond states that it “does not cover”:
....
(h)

loss caused by an Employee, except when covered under Insuring
Agreement (A) or when covered under Insuring Agreement (B), (C) or
(R) and resulting directly from misplacement, mysterious
unexplainable disappearance or destruction of or damage to Property;

....
(bb)

under Insuring Agreements (H), (I), (J), (K), (L), (M), (N) and (O), in
addition to all of the other Exclusions
....
(4)

loss resulting directly or indirectly from theft of confidential
information,
3

....
(12)

loss resulting directly or indirectly from
(a)

mechanical failure, faulty construction, error in design,
latent defect, fire, wear or tear, gradual deterioration,
electrical disturbance or electrical surge which affects a
Computer System,

(b)

failure or breakdown of electronic data processing
media, or

(c)

error or omission in programming or processing,

....
(17)

loss caused by a director or Employee of the Insured or by a
person in collusion with any director or Employee of the
Insured . . . except when loss is caused by an Employee and
covered under Insuring Agreement (L) or (M) . . . .

(Id. at 186, 188.) Section 5 of the Bond requires the following in the event of a loss:
(a)

At the earliest practicable moment, not to exceed sixty (60) days, after
discovery of loss, the Insured shall give the Company notice of the
loss.

(b)

Within 6 months after such discovery, the Insured shall furnish to the
Company proof of loss, duly sworn to, with full particulars.

....
(Id. at 190.) Finally, Section 7 states:
....
(d)

Upon the Company’s request and at reasonable times and places
designated by the Company the Insured shall
(1)

submit to examination by the Company and subscribe to the
same under oath,

4

(2)

(3)

(e)

produce for the Company’s examination all pertinent records,
and
cooperate with the Company in all matters pertaining to the
loss.

The Insured shall execute all papers and render assistance to secure to
the Company the rights and causes of action provided for in this
Section 7. The Insured shall do nothing after discovery of loss to
prejudice such rights or causes of action.

(Id. at 191.)
B.

Wire Transfers at the Bank

The loss at issue stems from a fraudulent wire transfer. At the time the loss occurred,
Plaintiff made its wire transfers through the Federal Reserve’s FedLine Advantage Plus
system (“FedLine”). (Carman Decl. ¶ 4.) Plaintiff used a desktop computer that was
connected to a Virtual Private Network device (“VPN”) provided by the Federal Reserve.
(Id.) The VPN was both a modem and an encryptor. (Id.) It encrypted the information
entered on the computer and transmitted it over the internet to the Federal Reserve, where
the information was then decrypted. (Id.) In order to complete a wire transfer on FedLine,
a user had to enter an authorized user name and three passwords. (Id. ¶ 5.) One of the
passwords was provided by a security token issued by FedLine that had to be inserted into a
USB port on the computer. (Id.) The other two passwords were typed in by the user. (Id.)
And, although it was not required by FedLine, wire instructions had to be verified by entry
of a second user name and set of passwords. (Id.)

5

C.

The Day Before the Loss

On October 27, 2011, one of Plaintiff’s employees, Sharon Kirchberg, accessed
FedLine in order to complete a wire transfer. (Nilan Aff. [Doc. No. 90], Ex. 4 (Kirchberg
Dep. 49:2–6).) Ms. Kirchberg’s token, password, and pass phrase, as well as the token,
password, and pass phrase of another employee, were used to complete the transfer. (See
id., Ex. 4 (Kirchberg Dep. 49:13–53:15).) When Ms. Kirchberg left the Bank for the day,
she left both tokens in the computer and left the computer running. (Id., Ex. 4 (Kirchberg
Dep. 53:18–54:13).)
D.

The Loss

On October 28, Ms. Kirchberg arrived at work and accessed Fedline’s Account
Information Management application, which shows Plaintiff’s account balance with the
Federal Reserve. (Second Bye Decl., Ex. H (Proof of Loss), at 444.) At approximately 8:12
a.m. CST, she noticed that $940,000 had been transferred out of the bank using Fedwire
Funds, which is part of FedLine. (Id.) She began investigating the entry and discovered
that someone had attempted to initiate two wire transfers from a Demand Deposit Account
at the bank to two different banks in Poland. (Id. at 444–45.) The first transfer, to a
Citibank account in Warsaw, was in the amount of $485,000 and was initiated at 7:12 a.m.
CST (Id. at 444.) That transfer was completed at 7:25 a.m. CST using the user name and
passwords of Ms. Kirchberg and one other employee. (Id. at 444–45.) However, neither of
those employees authorized or verified the transfer or had access to FedLine at the time of
the transfer. (Id. at 445.) The second transfer, to an ING Bank account in Katowice, was in
the amount of $455,000 and was initiated at 7:21 a.m. CST and completed at 7:25 a.m.
6

CST. (Id.) The same user names and passwords were used, but, again, neither employee
even had access to FedLine at the time of the transfer. (Id.) Both transferee accounts were
in the name of Markus Vorreas. (Id.)
Ms. Kirchberg immediately attempted to reverse the wire transfers using FedLine.
(Id.) However, shortly after 8:00 a.m., Plaintiff’s internet service provider experienced a
distributed denial-of-service attack (“DDoS”), which disabled internet service near Plaintiff.
(Id.) Accordingly, Ms. Kirchberg was unable to electronically request reversal of the
transfers. (Id.) She then called the Federal Reserve and requested the reversals, but her
request was denied. (Id.)
On October 31, the Federal Reserve notified the two intermediary institutions for the
transfers that the transfers were fraudulent. (Id. at 446.) While the intermediary institution
for the second transfer was able to revert the transferred funds to Plaintiff, the $485,000 that
was transferred to the Citibank account in Warsaw has never been credited or reverted. (Id.)
E.

The Investigation

Plaintiff notified Defendant of the loss on October 28—the day it occurred—by
faxing a copy of the transaction details of the two transfers. (See Nilan Aff., Ex. 21 (Fax
Transmittal).) On November 3, BancInsure acknowledged receipt of Plaintiff’s notice and
advised Plaintiff that the claim had been assigned to Karbal Cohen Economou Silk Dunne
(“KCESD”) for investigation. (Dorothy Aff. [Doc. No. 22], Ex. 5 (Letter), at 272.) In a
letter dated November 9, KCESD reminded Plaintiff of its obligation under Section 5(b) of
the Bond to provide Defendant with “‘proof of loss, duly sworn to, with full particulars,’”
within six months of discovering the loss. (Nilan Aff., Ex. 22, at 381.) The letter included a
7

Proof of Loss form and requested that the proof of loss include documentation of the loss,
“full details concerning the transactions involved,” “as detailed a narrative as possible
regarding the circumstances surrounding the Bank’s discovery of [the] loss,” contact
information for any law enforcement authorities investigating the matter, pleadings in any
legal proceedings that were initiated, and any other relevant documents. (Id. at 382.) The
letter also requested that the proof of loss “detail the Bank’s security procedures” and that
Plaintiff provide copies of the transaction records involving the transfers at issue. (Id.)
Defendant reserved the right to make further inquiries and requests. (Id.)
Defendant received Plaintiff’s Proof of Loss, in which Plaintiff claimed a net loss of
$485,100, on December 27, 2011. (Second Bye Decl., Ex. H (Proof of Loss), at 442–43.)
In the “Details of Loss” section of the form, Plaintiff stated that “an unknown individual or
individuals gained unauthorized access to the FedLine Advantage Plus service on the State
Bank of Bellingham’s computer systems and fraudulently authorized two wire transfers.”
(Id. at 444.) Plaintiff went on to describe Ms. Kirchberg’s discovery and attempted reversal
of the transfers. (See id. at 444–45.) Plaintiff stated that, in addition to the Federal Reserve,
it had notified various law enforcement agencies and that the FBI had examined Plaintiff’s
computers but Plaintiff was not aware of the status of any investigations. (Id. at 446.) As
for its security measures, Plaintiff provided as follows:
. . . Internally, the Bank follows standard security procedures with respect to
user names and passwords for its systems in accordance with the Federal
Reserve Banks’ Password Practice Statement. All systems on the internal
network have Symantec Small Business Endpoint Protection 12.5, with not
only antivirus and antispyware features but a desktop firewall and intrusion
detection/protection. This security suite is centrally managed by the network
server for definitions and threat management and updates automatically.
8

Additionally, the native Windows firewall is activated on computers on the
internal network and the computers are configured to limit the software that
can be installed on the device.
As for external threats, the Bank uses a Sonic WALL NSA 240 firewall. The
firewall has Gateway Antivirus and Gateway Anti-Spyware inspecting all
traffic before passing through the gateway and uses Gateway Intrusion
Protection. This security suite likewise is updated automatically on a daily
basis, meaning no user accesses or modifies the firewall or the settings of the
software overall.
The Bank also has surveillance cameras on premises. The recordings of
October 27 and October 28 show no one entered the Bank between the time it
closed on October 27 and the time employees returned on the morning of
October 28.
(Id. at 446–47.) Plaintiff attached a print-out of its account balance activity with the Federal
Reserve banks as of 8:12 a.m. CST on October 28, 2011; the transaction details for each of
the two wire transfers; a letter from Plaintiff’s internet service provider explaining the
service outage on October 28, 2011; communications from the intermediary institutions
involved in the transfers; and contact information for the law enforcement authorities that
Plaintiff had contacted. (See id. at 448–59.)
In early February 2012, KCESD requested that Plaintiff and its counsel participate in
a conference call or face-to-face meeting to discuss the loss, but Plaintiff’s counsel asked
that any questions instead be presented in writing. (Nilan Aff., Ex. 23 (Letter), at 527.)
Accordingly, on February 6, KCESD provided Plaintiff’s counsel with a list of questions
and document requests regarding Plaintiff’s security procedures, Fedline, proof of coverage,
Plaintiff’s computer system, and Plaintiff’s investigation of the loss. (See id. at 528–32.)
Plaintiff’s counsel responded on February 29, providing answers to the questions, a letter

9

from the FBI to Ms. Kirchberg, and surveillance videos. (Id., Ex. 25 (Letter).) In response
to the questions regarding proof of loss, Plaintiff stated as follows:
SBB does not know the exact method by which the cyber thieves initiated the
transfers but believe[s] that since access could be achieved only through a
bank computer and Federal Reserve-provided hardware and software, hackers
may have somehow installed a computer program, e.g., a Trojan, worm or
other malware, that did keystroke logging or otherwise modified, deleted or
stole data in order to gain information necessary for the transfers or such other
steps to enable them to obtain that information and initiate the transfers.
....
SBB does not know the exact method by which the cyber thieves initiated the
transfers but the customer account attempted to be used for the transfers had
reoccurring wire transfers with a particular bank. To accomplish the
transfers, the thieves would have to fraudulently enter or change data or
information on SBB’s computers regarding that client, including such items
as the intermediary bank, the receiving bank and account numbers.
(Id. at 591–92.) Plaintiff indicated that it had not done a forensic analysis of its computer
system, but that the FBI had. (Id.) In addition, Plaintiff noted that in the ninety days
preceding the fraudulent transfers, there may have been some automatic updates in the
hardware and software but that Plaintiff had not initiated any updates. (Id. at 593.)
On May 9, 2012, Defendant issued its preliminary coverage evaluation of Plaintiff’s
claim. (Id., Ex. 26 (Letter).) Defendant noted that Plaintiff had not conducted a forensic
investigation of the loss and that the government would not provide the results of its
investigation to Defendant. (Id. at 792.) Accordingly, Defendant concluded that there was
“insufficient evidence” in the record before it to determine whether the loss was covered by
the Bond and that it was necessary to hire a forensic computer specialist to conduct an
investigation. (Id. at 787.)
10

On May 15, Defendant’s counsel informed Plaintiff’s counsel that it had retained
forensic computer specialist Mark Lanterman of Computer Forensic Services, Inc. (“CFS”),
and asked Plaintiff to request from the FBI the forensic images it had taken during its
investigation. (Id., Ex. 27 (Letter), at 825.) Plaintiff’s counsel stated that they would not
request the FBI’s images “unless and until appropriate confidentiality agreements necessary
to ensure compliance with federal banking and privacy laws ha[d] been executed.” (Id., Ex.
28 (E-mail Exchange), at 840.) Plaintiff’s counsel also expressed “dismay[]” that it had
taken Defendant five months to issue its preliminary coverage decision. (Id.) In response,
Defendant’s counsel noted that Defendant had been “exhausting all attempts to obtain
analysis and results concerning th[e] incident from other sources who may have conducted
investigations closer in time to the incident.” (Id. at 839.) He stated that, rather than
conducting its own investigation, Defendant could simply have determined that Plaintiff had
not met its burden to establish coverage or waited until the FBI concluded and released its
investigation. (Id.)
On May 21, Plaintiff’s counsel informed Defendant’s counsel that he had recently
learned that Plaintiff’s outside IT provider, Kiel Zinter, had sent documents to the FBI on
November 15, including logs and reports showing that the computer had been infected with
a virus, and information related to the DDoS attack. (Id., Ex. 16 (Letter), at 893–94.) He
forwarded those documents to Defendant’s counsel on May 23 and apologized for not
providing them sooner. (Id.) On June 13, Defendant’s counsel acknowledged receipt of the
documents but stated that it would still be necessary for Mr. Lanterman to have access to the
FBI’s forensic images. (Id., Ex. 29 (Letter), at 1073.) One week later, Plaintiff’s counsel
11

informed Defendant’s counsel that it had the hard drive in the condition it was in at the time
of the loss. (Id., Ex. 30 (E-mail), at 1288.) Plaintiff agreed to provide the hard drive to Mr.
Lanterman for examination under certain conditions, including after a confidentiality
agreement was executed. (Id., Ex. 31 (E-mail).)
Mr. Lanterman received the hard drive on August 8, and issued his report on October
10. (Id., Ex. 32 (Forensic Services Report), at 1399.) His report states the following:
Introduction of Zeus Virus
The analysis identified an email message, sent to the address
“[e-mail]”, which contained a hyperlink to a malicious
webserver. CFS further determined that this email had been read and the
embedded link clicked on.
....
The user’s action of clicking on the hyperlink ultimately lead to the download
of multiple files associated with the Zeus virus.
....
Understanding the Zeus Virus
....
Once a user accesses the malicious webserver and consequently installs the
virus, Zeus then periodically checks for instructions from the criminal.
Hackers post code to the compromised web servers that is later downloaded
and executed on the victim’s computer. . . .
Zeus often remains dormant until a user accesses a financial services web site.
Once Zeus identifies financial activity, it will then collect confidential data to
include a log of all keystrokes and screenshots. This compromised data is
then transmitted to the hacker.
The hacker then uses this data to initiate illegitimate financial
transactions . . . .
12

....
Anti-virus Software
....
The analysis revealed that [Zeus] was detected on October 13, 2011. Given
[Symantec’s] settings, it is more likely than not that Symantec notified the
user of the infection. The analysis revealed that [Zeus] was quarantined on
October 18, 2011 but the infection was never completely removed by
Symantec Antivirus. Given [Symantec’s] settings, it is more likely than not
that Symantec notified the user of the quarantine. . . . Once [Zeus] executed, it
remained resident, ultimately downloading a rash of subsequent infections
that resulted in the unauthorized ACH transactions. The continued use of the
computer after receiving multiple virus warnings is contrary to generally
accepted computer security practices.
Three additional malicious executable files, downloaded automatically by
[Zeus], still reside on the system. There is no evidence these files were
detected by Symantec. [One of the files] resulted in the download of . . . a
virus. This file . . . was downloaded and launched on October 26, 2011. This
file is considered to be directly responsible for the unauthorized wire
transfers.
....
Symantec Antivirus failed to identify these additional viruses. It was
determined that Symantec Antivirus was configured to complete a full scan
once weekly. Further, Symantec “Proactive Threat Protection” was disabled
due to the fact that it was last updated July 30, 2008. This left the system
vulnerable to viruses created after 2008. . . . Generally accepted security
practices would include daily virus scans and ensuring the virus definitions
are current.
Overview of Prior Infections
Additionally, the system was previously compromised on August 8, 2011.
Symantec Antivirus, however, successfully removed that infection. This
demonstrates that the computer has a history of vulnerabilities due to user
activity. The user(s) was also aware of this compromise after receiving
Symantec’s alert.

13

Computer Usage Patterns
After establishing a chronology for the deployment of the Zeus virus
executable file, CFS further analyzed the system to identify usage patterns
that contributed to the compromise.
As described above, CFS reviewed email activity on the system and was able
to identify the specific message containing the malicious hyperlink. Other
messages within the Outlook Express inbox also suggest that the email
application was being used for purposes other than FedLink. For instance, the
email account was used to order and track company purchases. This is
contrary to generally accepted security practices. The use of email on a
computer that’s purpose is to initiate FedLink transactions resulted in that
system’s compromise. Additionally, CFS determined that messages in the
spam folder had been opened or read. Spam is a typical vehicle for malware.
CFS recovered and analyzed nearly one million URLs from Internet browser
histories on the system. . . . Much of the history was found to relate to activity
other than banking. For example, the user “FedLine” visited Facebook.com
multiple times, with and without private browsing activated, before and after
the initial infection. . . . This is contrary to generally accepted computer
security practices.
CFS also determined that the administrator user accounts, “Administrator”
and “FedLine”, were not password protected. This would have allowed the
virus to execute itself as an administrator without the need of a password.
This is contrary to generally accepted computer security practices.
Conclusions
After a thorough review CFS is able to provide the following conclusions:
• The FedLine computer was used for email and personal activity such
as web browsing.
• The Administrator and FedLine user accounts on the system were not
password protected.
• Symantec Antivirus was configured to warn the user of threats.
• Symantec Antivirus “Proactive Threat Protection” was disabled.
• User activity resulted in the download and execution of the Zeus virus.
• Symantec Antivirus notified the user of the Zeus infection on October
13, 2011 and October 18, 2011. The computer remained in use after
these warnings.
14

• Symantec Antivirus failed to remove the persistent Zeus Trojan in a
timely manner.
• Multiple viruses exist on the system.
(Id. at 1400–06.)
On October 11, as part of its “supplemental phase of its coverage investigation,”
Defendant made eighteen additional document requests of Plaintiff pursuant to Section 7(d)
of the Bond. (Id., Ex. 33 (Letter), at 1392–93.) These requests sought Plaintiff’s policies
relating to FedLine, policies regarding employee training and use of computers, policies
regarding wire transfers, FedLine manuals, anti-virus program manuals, and documents
provided by the Federal Reserve, among other things. (Id.) Plaintiff objected, stating that
Section 7(d) only requires the production of “‘pertinent records,’” and that none of the
requested documents were pertinent to the coverage determination. (Id., Ex. 34 (Letter), at
1427.) On October 19, Defendant sent a letter explaining its position that, especially in light
of Mr. Lanterman’s report, the documents were necessary to determine the “‘direct cause’”
of the loss and whether any exclusions applied. (Id., Ex. 35 (Letter), at 1439–40.) On
November 19, Plaintiff’s counsel reiterated its view that the requested documents were not
relevant to coverage under Insuring Agreement (H) and that it did not intend to provide
them. (Id., Ex. 36 (Letter), at 1490.) However, Plaintiff submitted its responses to the
document requests on December 17, noting that several of the documents were publicly
available or had to be obtained from the FDIC or with the consent of the Federal Reserve.
(Id., Ex. 37 (Letter), at 3088–92.) Plaintiff stated that there was only one document that it
had the ability to release, and that the document could only be released subject to a
confidentiality agreement. (Id. at 3088, 3092.)
15

Defendant issued its coverage decision on March 6, 2013. (Id., Ex. 39 (Letter).)
Defendant determined that the loss was not covered by the Bond based upon the employee
exclusions in Section 2(h) and 2(bb)(17), the exclusion for theft of confidential information
in Section 2(bb)(4), and the exclusion for mechanical breakdown or deterioration of a
computer system in Section 2(bb)(12). (Id. at 3208–09.)
F.

Communications With the Minnesota Department of Commerce

Meanwhile, on October 26, 2012, counsel for Plaintiff sent a six-page letter to the
Department of Commerce (“DOC”), which states in relevant part:
The State Bank of Bellingham has been struggling for close to a year on a
claim under a Financial Institution Bond issued by BancInsure. Kevin
Murphy of the Minnesota Bankers Association is aware of this claim and has
discussed it with the [B]ank. He suggested that the [B]ank consider filing a
complaint with your department. As it appears the Bank is no closer to seeing
this claim resolved than it was months ago, please consider this the Bank’s
formal complaint against BancInsure for its actions and delay in handling the
claim discussed below. . . .
....
This loss occurred and was reported a year ago. Since then, the Bank has
submitted the Proof of Loss and supporting documentation, responded in
detail to follow-up questions and provided a DVD of the premises, provided
copies of information its IT consultant provided the FBI, and even let the
pertinent hard drive out of its possession to allow BancInsure to conduct a
forensic analysis. Now that the analysis is complete and shows that a covered
loss occurred in the method the Bank contended, BancInsure requests
extensive documents that have no bearing on whether the loss is within policy
coverage.
As the foregoing indicates, the Bank is rightfully concerned that these latest
requests are simply another step in an ongoing pattern of delay. And while
the latest letter from BancInsure’s attorney once again seeks to place the
blame for delay on the Bank, the Bank certainly invites the Division or its
investigator to see what BancInsure requested from the Bank and what the
Bank provided in response to those specific requests.
16

We believe BancInsure’s actions in handling this claim are unacceptable and
plainly violate the Minnesota Claims Practices statutes, if not the bad faith
laws. Therefore, the State Bank of Bellingham requests the Commissioner
enter an administrative order fining BancInsure and ordering payment of the
claim to the full extent of the coverage afforded the Bank, together with
interest from the date of loss and legal expenses.
Any assistance you can provide the Bank to conclude this Bond Claim with
BancInsure would be greatly appreciated.
(Bye Decl. dated Oct. 18, 2013 [Doc. No. 18] (“First Bye Decl.”), Ex. A (Letter), at 1, 5–6.)
The DOC forwarded the letter to Defendant on December 19 and asked for a
response. (Dorothy Aff., Ex. 25 (Letter).) On the same day, the DOC sent a letter to
Plaintiff with the following information:
Please take note that the Department’s authority is limited to the
determination of a licensee’s compliance with Minnesota law and/or policy
provisions, where applicable. Our Department cannot compel a company to
make a claim settlement, obtain damages on your behalf, or determine who is
correct in a factual dispute. This authority rests solely with a court of law. To
obtain the remedies you seek, you may have to seek legal counsel.
(Supplemental Nilan Aff. dated Jan. 13, 2014 [Doc. No. 33] (“Supplemental Nilan Aff.”),
Ex. 29 (Letter).)
Defendant responded on January 16, 2013, stating that “[t]he major themes in the
Bank’s complaint to the Department are that BancInsure has unduly delayed the review of
this claim, and that it has not asked pertinent questions in its investigation of the claim.”
(First Bye Decl., Ex. C (Letter), at 1.) Defendant explained its version of events and stated
its belief that the “concerns [were] unfounded” because the delays were due to Plaintiff’s
“withholding of information critical to the investigation,” and that the supplemental
information requests were “directly relevant to BancInsure’s coverage analysis.” (Id. at 1,
17

8.) According to Defendant, “[i]t is clear that the Bank has not submitted the ‘necessary
documentation required from the insured to establish entitlement to payment under a
policy,’” as required under the Minnesota Fair Claims Practices Act. (Id. (quoting Minn.
Stat. § 72A.201, subd. 3(12)).) In a subsequent letter to the DOC, dated March 13, 2013,
Defendant noted that it had issued a supplemental coverage position to Plaintiff on March 6
in which it denied coverage for the Bank’s claim “because of the Bond’s exclusions for loss
caused by an employee, theft of confidential information, and breakdown or deterioration of
computer software systems.” (Id., Ex. F (Letter), at 3.) Defendant also stated:
Although the Bank has been represented by an outside law firm throughout
this process, a second law firm recently informed us that the Bank will now
commence litigation against BancInsure relating to this loss. While we fully
understand the Bank has a right to the assistance of the Department of
Commerce, we believe it is also important to recognize that the Bank is a
sophisticated consumer, and the Department’s work should not be used to
further a litigation strategy.
We respectfully request that the Department at this time either (1) end this
investigation based upon the complete record available, or at least (2) defer
any further consideration until the Bank concludes the lawsuit it now intends
to pursue.
(Id.)
After receiving this letter from Defendant, the DOC closed the file. (See id., Ex. G
(Letter).) In a letter to Plaintiff, it stated:
. . . For our investigation and assessment of this matter, our Department may
only review the information and documentation that has been presented. In
this regard, the evidence does not appear to support our Department’s pursuit
of formal disciplinary action in this matter. Additionally, it is our
understanding that the company has denied the claim based on provisions
contained in the bond and that your company will be [pursuing] litigation to
debate the merits of the provisions cited given the events and circumstances
18

of the loss. It would appear such a forum would be most appropriate for this
dispute.
In light of the above, our Department does not have a sufficient basis to
pursue this matter further and will close our file at this time. Information
from this file will be retained should similar situations arise. Thank you for
bringing this matter to our attention.
(Id.)
G.

This Lawsuit

Plaintiff filed its Complaint in this matter on April 19, 2013, asserting a claim for
breach of contract based on Defendant’s denial of coverage under the Bond. (Compl.
¶¶ 28–32.) Plaintiff seeks an award of damages (including consequential damages),
attorney’s fees, and interest. (Id. ¶ 3.) In its Amended Answer and Counterclaim,
Defendant denies breaching the Bond and asserts numerous affirmative defenses. (See
Def.’s Amended Answer and Counterclaim ¶¶ 31, 34–41.) Defendant also asserts three
counterclaims. In Count I, Defendant seeks “a declaratory judgment that BancInsure owes
no duty under the Bond to provide coverage for or indemnify the Bank for any of its losses
described in the Complaint,” and claims that it is entitled to recover the costs and expenses
associated with the investigation. (Id. ¶ 35.) In Count II, Defendant asserts a claim for
breach of contract based on Plaintiff’s alleged failure to provide a complete and accurate
Proof of Loss and its alleged failure to cooperate with Defendant. (Id. ¶¶ 36–41.)
According to Defendant, this alleged breach of contract bars Plaintiff from recovering any
of the loss it claims. (Id. ¶ 41.) Finally, in Count III, Defendant brings a claim for
malicious prosecution based on Plaintiff’s complaint to the DOC. (Id. ¶¶ 42–46.) Plaintiff
denies these allegations and asserts numerous affirmative defenses. (See Reply to
19

Counterclaims [Doc. No. 9], ¶¶ 31–47, 1–15; Stip. to Amend Answer and Counterclaim
[Doc. No. 37], at 1.)
On October 18, 2013, Plaintiff filed its Motion for Partial Summary Judgment, for
Attorney’s Fees and for Punitive Damages. In that motion, Plaintiff seeks dismissal of
Defendant’s malicious prosecution counterclaim on the grounds that its letter to the DOC
constitutes “public participation” under Minnesota’s Strategic Lawsuits Against Public
Participation (“anti-SLAPP”) statute, Minnesota Statutes § 554.01 et seq. (Pl.’s Mem.
Supporting Mot. for Partial Summ. J., for Attorney’s Fees and for Punitive Damages [Doc.
No. 17] (“Pl.’s Partial SJ Mem.”), at 2.)2 Plaintiff notified the DOC of Defendant’s
counterclaim “alleging that [Plaintiff] did not have the right to seek the assistance of the
[DOC],” and of the pending motion for partial summary judgment. (Supplemental Bye
Decl. dated Jan. 2, 2014 [Doc. No. 32], Ex. J (Letter).) The DOC then informed Defendant
that it “disagrees with your company’s position” and that, “[s]hould your company continue
with this position, [the DOC] may seek to pursue administrative sanctions for violations of
Minn. Stat. § 72A.20, subd. 18 (b), as well as other applicable statutes.” (Id., Ex. K
(Letter).) Defendant argued that its position was that Plaintiff is liable for malicious

2

On February 28, Plaintiff moved to amend its Complaint to add a bad-faith
insurance claim under Minnesota Statutes § 604.18. (Pl.’s Mot. to Amend to Add Claim
Under Minn. Stat. § 604.18 [Doc. No. 44].) This motion was fully briefed by both parties
and heard by the Magistrate Judge on March 31 [Doc. No. 74]. The Magistrate Judge
denied the motion without prejudice and without ruling on the merits based on Plaintiff’s
statement that its arguments on the motion overlapped with its arguments in support of its
summary judgment motion. (Order dated Aug. 6, 2014 [Doc. No. 112], at 1–2.) The
Magistrate Judge noted that the parties could revive their submissions if the disposition of
the summary judgment motions “would favorably affect the outcome of the motion to
amend.” (Id. at 2.)
20

prosecution not simply for contacting the DOC, but rather based on Plaintiff’s continued
request that the DOC order payment of the disputed claim in light of the DOC’s December
19 letter to Plaintiff explaining the DOC’s limited authority. (Supplemental Nilan Aff., Ex.
28 (Letter), at 1–2.) Plaintiff’s motion was heard on January 24.
On April 25, 2014, Plaintiff moved for summary judgment on the remaining
claims—i.e., Plaintiff’s claim for breach of contract and Defendant’s counterclaims for
declaratory judgment and breach of contract. (Pl.’s Mem. in Support of Mot. for Summ. J.
[Doc. No. 78] (“Pl.’s SJ Mem.”), at 1.) On May 9, Defendant also moved for summary
judgment on those claims. (Def.’s Mot. for Summ. J. [Doc. No. 88], at 1.) Both motions
were heard on June 16.
III.

DISCUSSION
“Summary judgment procedure is properly regarded not as a disfavored procedural

shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed
‘to secure the just, speedy, and inexpensive determination of every action.’” Celotex
Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1). Summary
judgment is proper if, drawing all reasonable inferences in favor of the non-moving party,
there is no genuine issue as to any material fact and the moving party is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp., 477 U.S. at 322–23;
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249–50, 255 (1986). A dispute over a
fact is “material” only if its resolution might affect the outcome of the lawsuit under the
substantive law. Anderson, 477 U.S. at 248. A dispute over a fact is “genuine” if “the

21

evidence is such that a reasonable jury could return a verdict for the non-moving party.”
Id.
Although the party moving for summary judgment bears the burden of showing
that the material facts in the case are undisputed, Celotex Corp., 477 U.S. at 323, “a party
opposing a properly supported motion for summary judgment may not rest upon mere
allegation or denials of his pleading, but must set forth specific facts showing that there is
a genuine issue for trial,” Anderson, 477 U.S. at 256. Thus, the movant is entitled to
summary judgment where the nonmoving party has failed “to establish the existence of
an element essential to that party’s case, and on which that party will bear the burden of
proof at trial.” Celotex Corp., 477 U.S. at 322. No genuine issue of material fact exists
in such a case because “a complete failure of proof concerning an essential element of the
nonmoving party’s case necessarily renders all other facts immaterial.” Id. at 323.
A.

Malicious Prosecution

In its partial summary judgment motion, Plaintiff seeks dismissal, under Minnesota’s
anti-SLAPP statute, of Defendant’s counterclaim for malicious prosecution. The antiSLAPP statute was enacted “to ‘protect[] citizens and organizations from civil lawsuits for
exercising their rights of public participation in government.’” Middle-Snake-Tamarac
Rivers Watershed Dist. v. Stengrim, 784 N.W.2d 834, 839 (Minn. 2010) (quoting Act of
May 5, 1994, ch. 566, 1994 Minn. Laws 895, 895)). Under the statute, a party may move
“to dispose of a judicial claim on the grounds that the claim materially relates to an act of
the moving party that involves public participation,” Minn. Stat. § 554.02, subd. 1, and “the

22

responding party has the burden of proof, of going forward with the evidence, and of
persuasion on the motion,” id. § 554.02, subd. 2(2).
Accordingly, once the moving party meets its “minimal burden” of “mak[ing] a
threshold showing that the acts that are ‘materially’ related to the responding party’s claim
are themselves public participation,” Stengrim, 784 N.W.2d at 841, “the court shall grant
the motion and dismiss the judicial claim unless the court finds that the responding party has
produced clear and convincing evidence that the acts of the moving party are not
immunized from liability under section 554.03,” Minn. Stat. § 554.02, subd. 2(3) (emphasis
added). Under that section, “[l]awful conduct or speech that is genuinely aimed in whole or
in part at procuring favorable government action is immune from liability, unless the
conduct or speech constitutes a tort or a violation of a person’s constitutional rights.” Id.
§ 554.03. While the clear-and-convincing-evidence burden is “heavy,” it “is not
insurmountable for parties with meritorious claims.” Stengrim, 784 N.W.2d at 839.
If the moving party prevails, it is entitled to its attorney’s fees and costs associated
with bringing the motion. Minn. Stat. § 554.04, subd. 1. The moving party is also entitled
to actual damages if it can demonstrate that the responding party brought the underlying
claim for purposes of harassment, inhibiting public participation, interfering with the
exercise of constitutional rights, or “otherwise wrongfully injur[ing] the moving party.” Id.
§ 554.04, subd. 2(b). Finally, a court may award punitive damages if the moving party can
satisfy the requirements of Minnesota Statutes section 549.191.3 Id.

3

However, the moving party need not move to amend the pleadings as required
under that section. Minn. Stat. § 554.04, subd. 2(b).
23

Here, the Court finds that Plaintiff has met its minimal burden of showing that its
letter to the DOC constituted public participation, and that Defendant has failed to meet its
higher burden of demonstrating that Plaintiff’s conduct was not immunized from liability.
Accordingly, Plaintiff is entitled to its attorney’s fees and costs related to bringing its
motion for partial summary judgment. However, the Court declines to award Plaintiff
actual or punitive damages.
1.

Public participation

Plaintiff has made a threshold showing that its letter to the DOC, which is the basis
of Defendant’s malicious prosecution claim, constituted public participation. “Public
participation” consists of “speech or lawful conduct that is genuinely aimed in whole or in
part at procuring favorable government4 action.” Minn. Stat. § 554.01, subd. 6. The
Minnesota Court of Appeals has stated that “the use of ‘genuinely’ requires an analysis of
whether the speech was aimed at procuring favorable government action that is not solely
determined by post-litigation statements in which the speaker asserts subjective intent that
the speech was to procure such action.” Freeman v. Swift, 776 N.W.2d 485, 489 (Minn. Ct.
App. 2009).
Here, Plaintiff argues that its letter to the DOC “was aimed solely at procuring
favorable government action in its dispute with BancInsure.” (Pl.’s Partial SJ Mem., at 8.)
In support of its argument, Plaintiff points to its request in the letter for “‘any assistance you

4

“Government” is defined to “include[] a branch, department, agency, official,
employee, agent, or other person with authority to act on behalf of the federal government,
[Minnesota], or any political subdivision of [Minnesota] . . . .” Minn. Stat. § 554.01, subd.
2. There is no dispute in this case that the DOC is encompassed by this definition.
24

can provide the Bank to conclude this Bond Claim with BancInsure,’” (id.), and its request
that the DOC fine Defendant, (Pl.’s Reply Mem. Supporting Mot. for Partial Summ. J., for
Attorney’s Fees, and for Punitive Damages [Doc. No. 28] (“Pl.’s Partial SJ Reply”), at 4).
Defendant, on the other hand, contends that the letter was not “public participation” because
the DOC has no authority to order one of the forms of relief sought by Plaintiff— “payment
of the claim to the full extent of the coverage afforded the Bank.” (Def.’s Mem. in Opp. to
Pl.’s Mot. for Partial Summ. J., for Attorney’s Fees, and for Punitive Damages [Doc. No.
21] (“Def.’s Partial SJ Opp.”), at 22.) According to Defendant, “[t]he nature and purpose of
[Plaintiff’s] speech are the exact opposite of the speech the statute seeks to protect, which is
speech ‘genuinely aimed’ at procuring a result the government audience can legitimately
grant,” and instead Plaintiff’s letter was meant to “coerc[e]” Defendant into paying the
claim. (Id. at 22–23.)
The Court finds that Plaintiff’s letter was aimed at procuring favorable government
action. The letter describes what Plaintiff perceived to be Defendant’s “delay in handling
the claim” in violation of the Minnesota Claims Practices statutes and bad faith laws, and it
plainly states as Plaintiff’s goal the receipt of any assistance the DOC could provide to
conclude Plaintiff’s claim with Defendant. Because the intended result is expressly stated in
the letter and not based solely on Plaintiff’s present statements of past subjective intent, the
Court also finds that it was genuine. Defendant cites to no authority for the proposition that
the government’s inability to provide every form of relief sought precludes Plaintiff from
invoking the anti-SLAPP statute, and the Court has found none. Accordingly, the burden

25

shifts to Defendant to establish clear and convincing evidence that Plaintiff’s actions are not
immune from liability.
2.

Immunity

To meet its burden, the party responding to an anti-SLAPP motion must persuade
the court with clear and convincing evidence—rather than relying on the allegations in its
complaint—that the moving party’s conduct is not immune under Minnesota Statutes
section 554.03. Leiendecker v. Asian Women United of Minn., 848 N.W.2d 224, 226, 233
(Minn. 2014), as modified Sept. 3, 2014. The responding party can do so “by establishing
that the moving party’s conduct or speech was not aimed in whole or in part at procuring
favorable government action, that the conduct or speech constituted a tort, or that the
conduct or speech violated another’s constitutional rights.” Id. at 229. The Minnesota
Supreme Court in Leiendecker v. Asian Women United of Minnesota recently explained the
discrepancy between this standard and the summary judgment standard:
[T]he summary-judgment standard and the statutory framework for
evaluating an anti-SLAPP motion are mutually inconsistent.
For summary judgment motions, a court evaluates the evidence to determine
whether there are any genuine issues of material fact and whether either of the
parties is entitled to judgment as a matter of law. Minn. R. Civ. P. 56.03. An
anti-SLAPP motion, by contrast, requires the court to make a finding about
whether “the responding party has produced clear and convincing evidence
that the acts of the moving party” are not immune. Minn.Stat. § 554.02, subd.
2(3). However, according to the immediately preceding provision, Minn.Stat.
§ 554.02, subd. 2(2), the responding party carries three distinct burdens “on
the motion”: the burden of proof, the burden of production, and the burden of
persuasion. . . . Reading subdivisions 2(2) and 2(3) together, the responding
party bears the burden to persuade the trier of fact—here, the district court—
of the truth of a proposition—here, that the acts of the moving party are not
immune—and if it does not do so, then the court must “grant the motion and
dismiss the judicial claim,” Minn.Stat. § 554.02, subd. 2(3). Under the anti26

SLAPP statutes, therefore, the court is required to dismiss the claim, even in
the face of genuine issues of material fact, if the responding party has failed to
carry its burden of persuasion that the moving party is not immune by clear
and convincing evidence. Under a summary-judgment standard, by contrast,
genuine issues of material fact preclude summary judgment. Thus, the two
standards, which operate differently when genuine issues of material fact
exist, are incompatible with one another.
Id. at 231. Accordingly, the court rejected the Minnesota Court of Appeals’ statement in
Nexus v. Swift that, “if a party brings a motion for summary judgment asserting antiSLAPP immunity, the responding party is only ‘required to produce clear and convincing
evidence in light of the Rule 56 standard for granting summary judgment.’” Id. at 230
(quoting Nexus v. Swift, 785 F.W.2d 771, 782 (Minn. Ct. App. 2010)).5
Defendant argues that Plaintiff’s conduct is not immune under Minnesota Statutes
section 554.03 because it constitutes the tort of malicious prosecution. (See Def.’s Partial
SJ Opp., at 23.) “[T]o state a claim for malicious prosecution a plaintiff must demonstrate
that: (1) the action was brought without probable cause or reasonable belief that the plaintiff

5

Because the Minnesota Supreme Court’s opinion in Leiendecker was issued in
June 2014, the parties briefed the motion using the standard articulated in Nexus. (See
Pl.’s Partial SJ Mem., at 8; Def.’s Partial SJ Opp., at 20–21.) Defendant also relied on
the lower court’s holding in Leiendecker that the responding party need only allege facts,
rather than produce evidence, that clearly and convincingly demonstrate that the moving
party’s actions are not immune. (Def.’s Partial SJ Opp., at 21 (citing Leiendecker v.
Asian Women United of Minn., 834 N.W.2d 741, 751 (Minn. Ct. App. 2013)). That
holding was, however, reversed by the Minnesota Supreme Court, as discussed above.
Defendant filed a copy of the Minnesota Supreme Court’s opinion in Leiendecker with
this Court on June 30 and stated its belief that the opinion was relevant to Plaintiff’s
motion for partial summary judgment. (Letter dated June 30, 2014 [Doc. No. 110].)
Defendant asked the Court to advise counsel if it would like additional briefing. (Id.)
However, neither party sought leave to file supplemental briefing, and the Court finds
that additional briefing would be unnecessary.
27

would ultimately prevail on the merits; (2) the action must be instituted and prosecuted with
malicious intent; and (3) the action must terminate in favor of the defendant.” Kellar v.
VonHoltum, 568 N.W.2d 186, 192 (Minn. Ct. App. 1997) (citation omitted). Moreover, in
order to trigger the tort of malicious prosecution, “some formal legal action must be
instituted.” Stead-Bowers v. Langley, 636 N.W.2d 334, 341 (Minn. Ct. App. 2001) (finding
that a criminal charge or indictment would constitute “formal legal action” sufficient to
trigger a malicious prosecution claim, but that the initiation of a criminal investigation alone
would not).
The parties, as an initial matter, dispute whether Plaintiff’s letter to the DOC can
even constitute action sufficient to form the basis of a malicious prosecution claim. (See
Pl.’s Partial SJ Mem., at 8–10; Def.’s Partial SJ Opp., at 24–26; Pl.’s Partial SJ Reply, at 5–
8.) However, the Court need not reach this issue. Rather, even assuming that Plaintiff’s
letter to the DOC was conduct that could trigger the tort, Defendant has failed to present
clear and convincing evidence that Plaintiff’s actions constituted malicious prosecution.
a.

Probable cause

Defendant has not demonstrated that Plaintiff lacked probable cause to send the letter
to the DOC. “‘Probable cause for pursuing a civil action consists of such facts and
circumstances as will warrant a cautious, reasonable and prudent person in the honest belief
that his action and the means taken in prosecution of it are just, legal, and proper.’”
Mendota Heights Assocs. v. Friel, 414 N.W.2d 480, 484 (Minn. Ct. App. 1987) (quoting
First Nat’l Bank of Omaha v. Marquette Nat’l Bank of Minneapolis, 482 F. Supp. 514, 523
(D. Minn. 1979), aff'd, 636 F.2d 195 (8th Cir. 1980)). Moreover, to prevail on a claim for
28

malicious prosecution, “the want of probable cause must be very palpable.” Id. (citing
Virtue v. Creamery Package Mfg. Co., 142 N.W. 930, 936 (Minn. 1913); Eickhoff v.
Fidelity & Cas. Co., 76 N.W. 1030, 1031 (Minn. 1898)).
Defendant’s sole argument regarding probable cause is the same as its argument
regarding public participation—i.e., that because Plaintiff sought relief that the DOC was
without authority to grant, Plaintiff lacked probable cause or a reasonable belief that it
would prevail. (Def.’s Partial SJ Opp., at 26.) Plaintiff, on the other hand, argues that it had
a reasonable belief that the DOC could help the parties resolve their dispute because the
circumstances of the loss fall directly under the coverage provided by the Bond, yet
Defendant had been evaluating the claim for a year. (Pl.’s Partial SJ Mem., at 11.)
According to Plaintiff, Minnesota’s unfair claims handling statutes make it unlawful for an
insurer to fail to issue a coverage decision within a reasonable time after the proof of loss is
submitted or to demand information that is not relevant to the claims decision, and the DOC
enforces these statutes. (Pl.’s Partial SJ Reply, at 10 (citing Minn. Stat. § 72A.20, subd.
12(5); id. § 74A.201, subds. 1, 3(6), 4(9)). Moreover, Plaintiff points out, the DOC’s
website invites insureds to seek the DOC’s assistance in resolving disputes with their
insurers by filing a written complaint. (Id.; First Bye Decl., Ex. I.)
Defendant has not established by clear and convincing evidence that Plaintiff lacked
probable cause to seek assistance from the DOC through its letter. As discussed above, the
letter describes what Plaintiff perceived to be Defendant’s “delay in handling the claim” in
violation of the Minnesota Claims Practices statutes and bad faith laws, and it plainly states
as Plaintiff’s goal the receipt of any assistance the DOC could provide to Plaintiff. Based
29

on the unfair claims practices statutes and the DOC’s website, Plaintiff’s belief that it could
obtain assistance by submitting its written complaint to the DOC was reasonable.
Defendant even acknowledged in its follow-up letter to the DOC on March 13, 2013, that
Plaintiff had a right to the DOC’s assistance. Accordingly, any supposed want of probable
cause evidenced by the fact that the DOC may not have been able to provide every form of
relief referenced in the letter is not “very palpable,” and Defendant’s claim fails on this
element.
b.

No malicious intent

Defendant’s claim also fails for a want of evidence of malicious intent. “[T]o prevail
on a malicious-prosecution claim, a plaintiff must prove, at a minimum, that the defendant
knew that its actions were wrong.” Hirtzinger v. Pinnacle Airlines, Inc., No. 06-CV-1609
(PJS/RLE), 2008 WL 835644, at *16 (D. Minn. Mar. 27, 2008) (citing Allen v. Osco Drug,
Inc., 265 N.W.2d 639, 645 (Minn. 1978)), aff’d on other grounds, 310 Fed. App’x 949 (8th
Cir. 2009) (per curiam).
Here, Defendant argues that Plaintiff pursued its complaint with the DOC “with the
malicious intent to coerce BancInsure to abandon its investigation” and pay the claim.
(Def.’s Partial SJ Opp., at 27.) Defendant argues that, at the time Plaintiff complained, it
had misrepresented that it had not conducted an investigation, had withheld the hard drive,
had seen Mr. Lanterman’s report detailing the security deficiencies, and had received
Defendant’s supplemental document requests; and that the timing of the letter therefore
demonstrates Plaintiff’s malicious intent. (Id. at 28.) Defendant also points out that
Plaintiff did not notify Defendant of the letter when it was sent. (Id.)
30

The Court finds that Defendant has not provided clear and convincing evidence of
malicious intent on Plaintiff’s part. It appears, as Plaintiff notes, that Defendant had access
to Plaintiff’s IT consultant’s images and the hard drive at the time the letter was sent, (see
Pl.’s Partial SJ Reply, at 13), and that Mr. Lanterman had already issued his report. Despite
having this information, Defendant still had not issued its coverage decision, but instead had
made supplemental document requests, and the delay was the basis of Plaintiff’s letter.
Moreover, the DOC’s website states that it will contact the parties named in an insured’s
complaint. Accordingly, there is no evidence—let alone clear and convincing evidence—
that Plaintiff knew its actions were wrong when it sent the letter requesting the DOC’s
assistance.
c.

Neutral outcome

Finally, Defendant contends that the DOC’s proceedings terminated in favor of
Defendant because the DOC stated that the evidence did not support pursuit of formal
disciplinary action and decided not to grant Plaintiff any relief. (See Def.’s Partial SJ Opp.,
at 29.) Plaintiff, on the other hand, argues that the proceedings were not resolved in
Defendant’s favor because the DOC only stated that the pursuit of disciplinary action was
not appropriate “‘at this time,’” (Pl.’s Partial SJ Mem., at 12), and that a court would be the
“‘most appropriate’” forum for the parties’ dispute, (Pl.’s Partial SJ Reply, at 15). In fact,
Plaintiff claims that the proceedings resulted in Defendant finally announcing its coverage
decision, which is what Plaintiff sought. (Id.)
The Court finds that the DOC’s proceedings terminated in a neutral manner.
Although the DOC stated that it would not pursue formal disciplinary action against
31

Defendant based on the evidence before it, the DOC also acknowledged that there was
another forum available for resolving the issue. Even if this outcome were considered to be
favorable to Defendant, Defendant’s claim fails because it has not satisfied the first two
elements of malicious prosecution by clear and convincing evidence. Therefore, Defendant
has not met its burden under the anti-SLAPP statute, and its counterclaim for malicious
prosecution must be dismissed.
3.

Attorney’s fees and costs

As noted above, a moving party who prevails on a motion for dismissal based on the
anti-SLAPP statute is entitled to an award of attorney’s fees and costs associated with
bringing the motion. Minn. Stat. § 554.04, subd. 1. The moving party is also entitled to
actual damages if it can demonstrate that the opposing party brought the underlying claim
for purposes of wrongfully injuring the moving party. Id. § 554.04, subd. 2(b). However,
an award of punitive damages is permissive and can only be awarded if the moving party
satisfies the requirements of Minnesota Statutes section 549.191. Id. One such requirement
is meeting the standard in section 549.20:
(a)

Punitive damages shall be allowed in civil actions only upon clear and
convincing evidence that the acts of the defendant show deliberate
disregard for the rights or safety of others.

(b)

A defendant has acted with deliberate disregard for the rights or safety
of others if the defendant has knowledge of facts or intentionally
disregards facts that create a high probability of injury to the rights or
safety of others and:
(1)

deliberately proceeds to act in conscious or intentional
disregard of the high degree of probability of injury to the rights
or safety of others; or
32

(2)

deliberately proceeds to act with indifference to the high
probability of injury to the rights or safety of others.

Id. § 549.20, subd. 1.
In its motion, Plaintiff argues that—should it prevail—it is entitled to an award of
both attorney’s fees and punitive damages. (Pl.’s Partial SJ Reply, at 13.) Plaintiff does not
seek actual damages. As for punitive damages, Plaintiff asserts that Defendant retaliated
against Plaintiff for complaining to the DOC “by filing a baseless malicious prosecution
claim,” thereby deliberately disregarding Plaintiff’s rights and entitling Plaintiff to an award
of $25,000. (Id. at 16; see Pl.’s Partial SJ Mem., at 13–14.) Although Defendant does not
dispute that Plaintiff is entitled to its attorney’s fees if it prevails on the motion, Defendant
does argue that Plaintiff has failed to establish its entitlement to punitive damages. (Def.’s
Partial SJ Resp., at 29–30.) Specifically, Defendant contends that Plaintiff has not
demonstrated that Defendant intended to threaten Plaintiff’s rights by asserting the
counterclaim, and that, in fact, Defendant sought to protect its own rights to make coverage
determinations free from coercion. (Id. at 30–31.) Moreover, Defendant argues, the amount
requested by Plaintiff is arbitrary. (Id. at 31.)
Because Plaintiff is the moving party, and because the Court finds that Plaintiff has
prevailed on its anti-SLAPP motion, the Court will award Plaintiff its reasonable attorney’s
fees and costs associated with bringing the motion. Accordingly, within ten days of the date
of this Order, Plaintiff shall submit an affidavit documenting its reasonable attorney’s fees
and costs. Defendant may submit a responsive affidavit within ten days thereafter.
However, the Court declines to award Plaintiff punitive damages because Plaintiff has not
33

provided clear and convincing evidence that Defendant acted in deliberate disregard of
Plaintiff’s rights by asserting its malicious prosecution counterclaim. While Defendant was
ultimately unsuccessful on that claim, Defendant presented at least a colorable basis for it.
For these reasons, Plaintiff’s partial summary judgment motion is granted in part and denied
in part.
B.

Breach of the Bond

Resolution of the remaining claims—Plaintiff’s claim for breach of contract based on
Defendant’s denial of coverage, and Defendant’s counterclaims for a declaratory judgment
that it owes no coverage and for breach of contract based on Plaintiff’s alleged failure to
cooperate with Defendant—depends on the applicability of various provisions of the Bond.
State law governs the interpretation of insurance policies, Nat’l Union Fire Ins. Co. of
Pittsburgh v. Terra Indus., Inc., 346 F.3d 1160, 1164 (8th Cir. 2003), and the parties agree
that Minnesota law controls, (Pl.’s SJ Mem., at 5; Def.’s Mem. Supporting Its Mot. for
Summ. J. and Opposing Pl.’s Mot. for Summ. J. [Doc. No. 89] (“Def.’s SJ Mem.”), at 25).
Under Minnesota law, the interpretation and construction of an insurance policy is a matter
of law for the court, Watson v. United Servs. Auto. Ass’n, 566 N.W.2d 683, 688 (Minn.
1997), and “[g]eneral principles of contract interpretation apply,” Lobeck v. State Farm
Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn. 1998). “While the insured bears the
initial burden of demonstrating coverage, the insurer carries the burden of establishing the
applicability of exclusions.” Travelers Indem. Co. v. Bloomington Steel & Supply Co., 718
N.W.2d 888, 894 (Minn. 2006) (citation omitted).

34

As an initial matter, the parties dispute whether contra proferentem—the doctrine
under which ambiguous insurance policy terms are construed in favor of the insured—
applies to financial institution bonds. (See Pl.’s SJ Mem., at 5–11; Def.’s SJ Mem., at 26–
27; Pl.’s Mem. in Reply Supporting Its Summ. J. Mot. and Opposing Def.’s Summ. J. Mot.
[Doc. No. 99] (“Pl.’s SJ Reply”), at 2–3; Def.’s Reply Mem. Supporting Its Mot. for Summ.
J. [Doc. No. 103] (“Def.’s SJ Reply”), at 2–3.) However, the Court need not address that
issue because there is no dispute that Plaintiff’s loss falls under the coverage provided in
Insuring Agreement (H),6 and even if one of the asserted exclusions was implicated in this
case, Defendant has failed to show that the excluded cause was the overriding cause of
Plaintiff’s loss. In addition, Defendant has failed to demonstrate substantial prejudice
resulting from Plaintiff’s alleged breach of the Bond’s cooperation provisions.
Accordingly, Defendant is liable for coverage of Plaintiff’s loss, as well as for prejudgment
interest.
1.

Coverage liability

Defendant argues that the Bond’s exclusions for “loss caused by an Employee”
(Section 2(h) and 2(bb)(17)), “loss resulting directly or indirectly from theft of confidential
information” (Section 2(bb)(4)), and “loss resulting directly or indirectly from mechanical
failure . . . [or] gradual deterioration” of a computer system (Section 2(bb)(12)), preclude
coverage of Plaintiff’s claim. As for the employee exclusion, Defendant argues that “Bank

6

Defendant’s 30(b)(6) deposition witness agreed that, unless an exclusion applies,
Plaintiff’s loss is covered by Insuring Agreement (H). (Second Bye Decl., Ex. D (Cross
Dep. 27:5–8).)
35

employees caused the loss by intentionally disregarding Bank policies, Federal Reserve
policies, and good banking practices.” (Def.’s SJ Mem., at 30.) Specifically, Defendant
points to the employees’ downloading of the Zeus virus through spam email, the
employees’ continued use of the computer after it detected a virus, the employees’ failure to
enable and update antivirus software, the employees’ failure to password-protect the
FedLine user accounts, Ms. Kirchberg’s use of another employee’s password and token to
complete a transfer on the day preceding the loss, and Ms. Kirchberg’s failure to remove the
tokens from the computer or shut down the computer on the day preceding the loss. (See id.
at 30–35; Def.’s SJ Reply, at 4–5.) According to Defendant, “[t]hese actions caused the loss
by opening the door for cyber thefts.” (Def.’s SJ Reply, at 6.) As for the theft of
confidential information exclusion, Defendant argues that the employees’ passwords and
pass phrases were confidential, that those passwords and pass phrases were used to make
the transfers, and, therefore, that “[t]he theft of [the] passwords and pass phrases caused the
loss.” (Def.’s SJ Mem., at 39.) Finally, as for the mechanical failure or gradual
deterioration exclusion, Defendant asserts that, because Proactive Threat Protection was
disabled and its definitions not updated, the computer’s antivirus software gradually
deteriorated and allowed malware to be downloaded, which led to the unauthorized
transfers. (See id. at 41.) To the contrary, Plaintiff argues that none of these exclusions
were triggered by the circumstances of the loss, but that even if they had been, Defendant
cannot satisfy its burden under Minnesota’s concurrent causation doctrine of establishing
that an excluded cause was the “overriding” cause of the loss. (See Pl.’s SJ Mem., at 16–
27.)
36

The Court agrees with Plaintiff. When there are multiple causes of an insured’s loss,
one of which is a “covered peril” and the other of which is an “excluded peril,” Minnesota’s
concurrent causation doctrine provides that the availability of coverage or the applicability
of the exclusion depends on which peril was the “‘overriding cause’” of the loss. Friedberg
v. Chubb & Son, Inc., 691 F.3d 948, 952 (8th Cir. 2012) (quoting Henning Nelson Constr.
Co. v. Fireman’s Fund Am. Life Ins. Co., 383 N.W.2d 645, 653 (Minn. 1986)). In
Friedberg v. Chubb & Son, Inc., the Eighth Circuit recently examined the Minnesota
Supreme Court cases that form the basis of this doctrine: Henning Nelson Construction Co.
v. Fireman’s Fund American Life Insurance Co., 383 N.W.2d 645 (Minn. 1986), the case
that coined the term “overriding cause”; and Fawcett House, Inc. v. Great Central Insurance
Co., 159 N.W.2d 268 (Minn. 1968), and Anderson v. Connecticut Fire Insurance Co., 43
N.W.2d 807 (Minn. 1950), the two cases the court in Henning relied upon. The Eighth
Circuit summarized those cases as follows:
In Henning, an insurer denied the plaintiff coverage for the collapse of the
foundational wall of a construction project. The court rejected the insurer’s
argument to apply any of three exclusions, including one that excluded
coverage if loss was “caused by, resulting from, contributed to, or aggravated
by” water below the surface of the ground. But the court also held in the
alternative that “[e]ven if one of the three causes discussed above had been
established,” the insurer could not deny coverage, because “the testimony
established there were eight possible causes of the collapse, but no one factor
was considered to be the overriding cause.”
. . . . Fawcett House involved an insurance claim arising from destruction of
the plaintiff’s heating and plumbing system after vandals had entered and
turned off the electricity. The vandalism caused a “freeze-up” of the system.
The plaintiff’s policy covered “direct loss by Vandalism and Malicious
Mischief” but excluded “any loss resulting from change in temperature or
humidity.” The Supreme Court of Minnesota held that the exclusion did not
apply, and reasoned that “loss from ‘change in temperature or humidity’
37

encompasse[s] only losses directly caused by such changes, not those
incidentally aggravated by a change in temperature but which would not have
occurred except for acts of vandalism.” Anderson turned on whether a
building was damaged by a windstorm, a covered peril, or a blizzard, an
excluded cause. The Minnesota court concluded that coverage applied
because a jury reasonably could have found the windstorm to be the “efficient
and proximate cause” of the building’s collapse. Although wind was “not the
sole cause,” the windstorm weakened the building and resulted in a “collapse
[that] would not have taken place had not the structure first been weakened by
the wind.”
Fawcett House and Anderson illustrate what the court in Henning meant by
“overriding cause.” According to Henning, the earlier decisions hold that
even where an excluded peril “contributed to the loss,” an insured may
recover if a covered peril is what Anderson called “the efficient and
proximate cause” of the loss. Conversely, it follows that if an excluded peril
is the efficient and proximate cause of the loss, then coverage is excluded. An
“efficient and proximate cause,” in other words, is an “overriding cause.”
Friedberg, 691 F.3d 948, 952 (8th Cir. 2012) (internal citations omitted).
At issue in Friedberg was a claim for coverage for water damage to a home under an
insurance policy that covered “‘all risk of physical loss’” except for certain exclusions,
including for any loss caused by “‘[f]aulty planning, construction or maintenance.’” Id. at
950. Based on the cases discussed above, the Eighth Circuit concluded that the policy’s
exclusion for loss caused by faulty construction precluded coverage:
The faulty construction of the Friedbergs’ house, like the vandals in Fawcett
House and the windstorm in Anderson, was the efficient and proximate cause
of the loss. But for the faulty construction, the water damage would not have
taken place. Once the house was plagued with faulty construction, it was a
foreseeable and natural consequence that water would enter. Although water
intrusion played an essential role in the damage to the Friedbergs’ house, it
was not an independent and efficient cause of the loss. The water’s role was
comparable to the temperature change in Fawcett House and the snowfall in
Anderson, neither of which precluded the coexistence of an efficient and
proximate cause. . . .
Id. at 952.
38

Applying this precedent to the present set of facts, this Court finds that the computer
systems fraud was the efficient and proximate cause of Plaintiff’s loss. But for the hacker’s
fraudulent conduct, the $485,000 would not have been transferred. Conversely, neither the
employees’ violations of policies and practices (no matter how numerous), the taking of
confidential passwords, nor the failure to update the computer’s antivirus software was the
efficient and proximate cause of Plaintiff’s loss. Assuming all of these circumstances
existed as Defendant argues, it was not then a “foreseeable and natural consequence” that a
hacker would make a fraudulent wire transfer. Thus, even if those circumstances “played an
essential role” in the loss, they were not “independent and efficient causes” of the loss. In
other words, without the fraudster’s actions, there would have been no loss even if all of the
other circumstances existed. Therefore, according to Friedberg, Fawcett House, Anderson,
and Henning, the computer systems fraud was the overriding cause of Plaintiff’s loss.
Defendant’s arguments to the contrary are unavailing. First, Defendant argues that
the Eighth Circuit in Empire Bank v. Fidelity & Deposit Co., 27 F.3d 333 (8th Cir. 1994),
held that the employee exclusion does not require that the employee’s conduct be the only
cause of the loss in order for the exclusion to apply. (Def.’s SJ Mem., at 36.) However, as
Plaintiff notes, neither does the concurrent causation doctrine require that the employee’s
conduct be the sole cause of the loss in order for the exclusion to apply; rather, it requires
only that the employee’s conduct be the “overriding cause.”7 (See Pl.’s SJ Reply, at 4.)

7

In addition, Empire Bank is also inapposite because it involved Missouri law. See
27 F.3d at 334.
39

Second, Defendant asserts that the concurrent causation doctrine cannot apply in the
context of the theft of confidential information or mechanical failure or gradual
deterioration exclusions because those exclusions include losses “indirectly” caused by
those perils. (See Def.’s SJ Mem., at 40–41.) This argument, too, is unavailing. The
exclusion for faulty construction at issue in Friedberg applied to “‘any loss that is
contributed to, made worse by, or in any way results from that peril.’” 691 F.3d at 951.
Nevertheless, the Eighth Circuit conducted a thorough analysis to determine whether that
excluded peril was the overriding cause of the loss. See id. at 952. Only after determining
that faulty construction was, in fact, the overriding cause did the court determine that the
exclusion applied. See id.
Finally, Defendant argues that no Minnesota court has applied the concurrent
causation doctrine to a financial institution bond, and that other courts have declined to do
so. (Def.’s SJ Reply, at 8–9.) However, Defendant cites to no Minnesota cases in which a
court has determined that the exclusion cannot apply to financial institution bonds, and none
of the cases cited by Defendant applies Minnesota law. See Universal Mortg. Corp. v.
Wurttembergische Versicherung AG, 651 F.3d 759, 762 (7th Cir. 2011) (applying
Wisconsin law); Empire Bank, 27 F.3d at 334 (applying Missouri law); Bay Area Bank v.
Fidelity & Deposit Co., 629 F. Supp. 693, 697 (N.D. Cal. 1986) (applying California law).
Moreover, the state law in the one case cited by Defendant where the court declined to
apply the doctrine because it would nullify the exclusions is materially different than
Minnesota’s law—it did not require that a concurrent cause be the “overriding cause,” but
only “a” cause of the loss. See Bay Area Bank, 629 F. Supp. at 697–98 (applying
40

California’s concurrent causation doctrine, which “provides that ‘coverage under a . . .
policy is equally available to an insured whenever an insured risk constitutes simply a
concurrent proximate cause of the injury’”) (citation omitted). The courts in the other two
cases cited by Defendant for the proposition that courts do not apply the concurrent
causation doctrine to financial institution bonds simply did not mention “concurrent
causation” at all, so it is not clear that those courts would find that the concurrent causation
doctrine could never apply to a financial institution bond. See Universal Mortg. Corp., 651
F.3d at 761–64; Empire Bank, 27 F.3d at 335–36.
Because Defendant has presented no set of facts from which a reasonable jury could
find that one of the excluded perils—and not the computer systems fraud—was the
overriding cause of Plaintiff’s loss, Plaintiff is entitled to summary judgment on its claim for
breach of contract and on Defendant’s claim for a declaratory judgment that it is not liable
for coverage. Accordingly, Defendant owes Plaintiff $480,000 under the Bond, which is the
amount of the loss less the $5,000 deductible.
2.

Failure to cooperate

The parties also each seek summary judgment on Defendant’s counterclaim for
breach of the Bond’s cooperation provisions. In this type of claim, “the insurer has the
burden of proving a substantial and material lack of cooperation resulting in substantial
prejudice to its position.” Rieschl v. Travelers Ins. Co., 313 N.W.2d 615, 617 (Minn. 1981)
(citation omitted). Accordingly, it is not enough to simply show a lack of cooperation;
rather, the insurer must also show that the lack of cooperation resulted in substantial
prejudice. Id. at 618 (citing White v. Boulton, 107 N.W.2d 370, 372 (Minn. 1961)).
41

Although the question of whether an insured has breached a cooperation clause is a question
of fact, id. at 617, summary judgment is appropriate in this case because Defendant has not
presented evidence from which a reasonable jury could find that Defendant suffered
substantial prejudice due to Plaintiff’s actions. See Parr v. Gonzalez, 669 N.W.2d 401,
407–08 (Minn. Ct. App. 2003) (affirming the district court’s award of summary judgment
against the insurer where it “failed to present any evidence raising a material fact question
as to whether [the insured’s failure to cooperate] substantially prejudiced [the insurer’s]
position”).
As discussed above, Section 7 of the Bond required Plaintiff, “[u]pon the Company’s
request” to “submit to examination by the Company,” “produce for the Company’s
examination all pertinent records,” and “cooperate with the Company in all matters
pertaining to the loss.” And, Section 5 required Plaintiff to provide a “proof of loss, duly
sworn to, with full particulars.” Defendant argues that Plaintiff breached these provisions
by making countless misrepresentations and omissions regarding, for example, the fact that
the computer was left running with the tokens in it on the night of the loss, how the wire
transfer process should work and how the transfers at issue were initiated, the various ways
in which Plaintiff’s employees violated policies, Plaintiff’s IT consultant’s analysis of the
computer and storage of the hard drive, and Plaintiff’s correspondence with law
enforcement agencies. (See Def.’s SJ Mem., at 43–46.) Defendant also claims that Plaintiff
breached the Bond’s provisions by refusing to disclose the Federal Reserve documents or to
comply with KCESD’s request for a face-to-face meeting with Plaintiff’s employees. (See
id. at 46.)
42

While Defendant goes to great lengths to describe the many ways in which Plaintiff
allegedly breached its duty to cooperate, Defendant’s only descriptions of the prejudice it
allegedly suffered as a result are that Plaintiff “materially prejudiced BancInsure’s ability to
evaluate the claim” by “obscuring the true cause of the loss,” (id. at 46–47), and that, had
Plaintiff disclosed this information in its Proof of Loss, Defendant could have denied
coverage in early 2012 rather than conduct its own forensic analysis and spend two years
trying to obtain the information necessary to evaluate the claim, (Def.’s SJ Reply, at 13).
As discussed above, however, the true cause of the loss was computer systems fraud caused
by a hacker, as was initially represented by Plaintiff. Moreover, the evidence shows that
Defendant retained its own forensic computer specialist to conduct an investigation because
Plaintiff had not conducted its own investigation and the FBI was not willing to share the
results of its investigation. However, even after Plaintiff provided to Defendant the logs and
images collected by Plaintiff’s IT consultant following the loss, Defendant went forward
with its own forensic analysis conducted by Mr. Lanterman. Accordingly, Defendant’s
claim fails because it has not presented evidence from which a reasonable jury could
conclude that any alleged lack of cooperation resulted in prejudice—let alone substantial
prejudice—to Defendant.
3.

Prejudgment interest

In Minnesota,
[a]n insured who prevails in any claim against an insurer based on the
insurer’s breach or repudiation of, or failure to fulfill, a duty to provide
services or make payments is entitled to recover ten percent per annum
interest on monetary amounts due under the insurance policy, calculated from
the date the request for payment of those benefits was made to the insurer.
43

Minn. Stat. § 60A.0811, subd. 2(a); see Schwan’s Sales Enters., Inc. v. SIG Pack, Inc., 476
F.3d 594, 595 (8th Cir. 2007) (stating that “[p]rejudgment interest is a substantive matter of
state law”). Accordingly, Plaintiff is entitled to an award of prejudgment interest in the
amount of ten percent per annum on the $480,000 due under the Bond. The only dispute
between the parties is the date the interest began to accrue—i.e., when “the date the request
for payment of th[e] benefits was made to the insurer.” (See Def.’s SJ Mem., at 47 n.19.)
Plaintiff argues that the request was made on October 28, 2011, when it notified Defendant
of its loss. (Pl.’s SJ Mem., at 34.) Defendant argues that the earliest date on which interest
could have begun to accrue was when Plaintiff submitted its Proof of Loss, but that Plaintiff
did not submit the necessary information and so interest never began to accrue. (Def.’s SJ
Mem., at 47 n.19.) However, Defendant cites to no authority for these propositions, and the
plain language of the statute does not support them. Rather, as Plaintiff notes, the only
reason that it would have notified its insurance company of the fraud would be to request
benefits. (See Pl.’s SJ Reply, at 21.) Therefore, Plaintiff is entitled to an award of
prejudgment interest beginning on October 28, 2011, for a total of $140,187.36.8
IV.

ORDER
THEREFORE, IT IS HEREBY ORDERED THAT:
1.

Plaintiff’s Motion for Partial Summary Judgment [Doc. No. 15] is
GRANTED IN PART AND DENIED IN PART as detailed herein;

8

Ten percent per annum on $480,000 is $48,000. The daily rate is $131.51
($48,000 / 365). Assuming that judgment is entered on the date of this Order, September
29, 2014, the amount of prejudgment interest owed from October 28, 2011, is
$140,187.36 ($48,000 + 48,000 + (336 days x $131.51)).
44

2.

Plaintiff shall submit, within ten days of the date of this Order an affidavit and
documentation of its reasonable attorney’s fees and costs associated with
bringing its Motion for Partial Summary Judgment;

3.

Defendant may submit a responsive affidavit within ten days thereafter;

4.

Plaintiff’s Motion for Summary Judgment [Doc. No. 76] is GRANTED;

5.

Defendant’s Motion for Summary Judgment [Doc. No. 88] is DENIED; and

6.

Plaintiff is awarded the principal amount of $480,000 under the Bond, with
prejudgment interest of $140,187.36, for a total of $620,187.36.

LET JUDGMENT BE ENTERED ACCORDINGLY.

Dated: September 29, 2014

s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge

45