Crawford et al v. United States Liability Insurance Company

Filing 25

ORDER denying 9 Motion to Dismiss/General (Written Opinion). Signed by Judge Susan Richard Nelson on 06/24/2014. (SMD)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Carlson & Lyter Distributing, Inc.,
Josephine A. Crawford, and Joan Carlson,

Case No. 13-cv-2493 (SRN/LIB)

Plaintiffs,

MEMORANDUM OPINION
AND ORDER

v.
United States Liability Insurance Company,
Defendant.

Taylor D. Tarvestad-Sztainer and James F. Baldwin, Moss & Barnett, PA, 90 South
Seventh Street, Suite 4800, Minneapolis, Minnesota 55402, for Plaintiffs.
Britton D. Weimer, Jones Satre & Weimer PLLC, 7900 Xerxes Avenue South, Suite 820,
Bloomington, Minnesota 55431, for Defendant.

SUSAN RICHARD NELSON, United States District Judge
I.

INTRODUCTION
This matter is before the Court on Defendant’s Motion to Dismiss. (Def.’s Mot. to

Dismiss [Doc. No. 9].) For the reasons that follow, the Court denies Defendant’s motion.
II.

BACKGROUND
A. The Parties
Plaintiff Carlson & Lyter Distributing, Inc. (“C&L”) is a Minnesota corporation,

headquartered in Sauk Rapids, Minnesota. (Compl. ¶ 2 [Doc. No. 1].) Plaintiff
Josephine Crawford (“Crawford”) is a Minnesota resident, and a director and officer of
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C&L. (Id. ¶ 4.) Plaintiff Joan Carlson (“Carlson”) is also a Minnesota resident, and a
director and officer of C&L. (Id. ¶ 3.)
Defendant United States Liability Insurance Company (“USLI”) is a Pennsylvania
corporation with its principal place of business in Pennsylvania. (Id. ¶ 5.) USLI
transacts insurance business in Minnesota. (Id.)
B. The Policy
On or about November 15, 2009, USLI issued an Employment Practices Liability
Policy (“the Policy”), No. EPL1017094, to Plaintiffs, providing them with business and
employment-related coverage from November 15, 2009 to November 15, 2012. 1 (Id. ¶
8.) In relevant part, the Policy states:
I.

INSURING AGREEMENT
A. The Company will pay on behalf of the Insured, Loss in excess
of the Retention not exceeding the Limit of Liability shown on
the policy Declarations for which this coverage applies that the
Insured shall become legally obligated to pay because of Claims
first made against the Insured during the Policy Period or
during any Extended Reporting Period, if applicable, for
Wrongful Acts arising solely out of an Insured’s duties on
behalf of the Organization.
B. The Company has the right and duty to defend any Claim to
which this insurance applies, even if the allegations of the Claim
are groundless, false or fraudulent.

(USLI Employment Practices Liability Policy, Section I, Ex. A to Compl. [Doc. No. 11].)
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C&L is the named Insured and Parent Organization under the Policy. Carlson and
Crawford are “Individual Insureds” under the Policy, due to their status as directors,
officers, and employees of C&L. (USLI Employment Practices Liability Policy, Section
III(I), Ex. A to Compl. [Doc. No. 1-1].)
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The Policy set forth various definitions, including:
B. “Claim” means:
(1) any written notice received by any Insured that any person or
entity intends to hold such Insured responsible for a Wrongful
Act; or
(2) any proceeding initiated against any Insured, including any
appeal therefrom, seeking to hold such Insured responsible for a
Wrongful Act, including any proceeding conducted by the Equal
Employment Opportunity Commission or similar federal, state or
local agency and any appeal therefrom;
K. “Loss” means damages and settlements, front pay and back pay, and
pre-judgment and post judgment interest awarded by a court and punitive or
exemplary damages to the extent such damages are insurable under
applicable law but does not include fines, penalties, taxes, the multiplied
portion of any multiple damage award or an express obligation to make
payments in the event of the termination of employment.
R. “Wrongful Act” means any actual or alleged act of:
(1) Discrimination; or
(2) Harassment; or
(3) Retaliation; or
(4) Wrongful Termination; or
(5) Workplace Tort . . .
. . . committed or allegedly committed by the Organization or by an
Individual Insured acting solely within his/her capacity as such,
involving and brought by any Employee, former Employee or
applicant for employment with the Organization or asserted by any
Employee, former Employee or applicant for employment with the
Organization against an Individual Insured because of his/her
status as such.
S. “Wrongful Termination” means the actual or constructive termination
of an employment relationship or the demotion of or the failure to promote
any Employee in a manner which is illegal and wrongful or in breach of an
implied agreement to continue employment.
(Id. at Section III(B), (K), (R), (S).)
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Further, the Policy set forth various exclusions, including:
B. The Company shall not be liable to make payment for Loss or Defense
Costs . . . in connection with any Claim made against the Insured arising
out of, directly or indirectly resulting from or in consequence of, or in any
way involving:
(1) conduct of the Insured or at the Insured’s direction that is
fraudulent, dishonest, or criminal provided that this exclusion will
not apply to:
(a) Defense Costs incurred until such conduct is established
to be fraudulent, dishonest or criminal by final and nonappealable judgment or adjudication;
(b) the strictly vicarious liability of the Insured for the
fraudulent, dishonest or criminal conduct of another Insured .
..
C. The Company shall not be liable to make payment for Loss in
connection with any Claim made against the Insured arising out of,
directly or indirectly resulting from or in consequence of, or in any way
involving:
(1) the Insured’s actual or alleged liability for damages under any
express employment contract or express employment agreement;
provided that this exclusion shall not apply to liability for a
Wrongful Act which the Insured would have in the absence of such
contract or agreement . . .
(Id. at Sections IV(B), (C).)
Finally, the Policy provided terms concerning defense and settlement:
Except as otherwise provided in this Policy, if a Claim is made against an
Insured for Loss that is both covered and uncovered by this Policy, the
Company will pay one hundred percent (100%) of the Defense Costs for
the Claim until such time that the Limits of Liability of this policy are
exhausted by payment of a covered Loss or the Claim for the covered Loss
is resolved by settlement, verdict, or summary judgment.
(Id. at Section VIII(B).)
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C. Perryman Litigation
On September 19, 2011, Bernadette Perryman (“Perryman”) sued Joan Carlson
and Josephine Crawford, individually and as trustees of the Arland G. Carlson 2007
Revocable Trust (“the Trust”), C&L, and other entities in Benton County, Minnesota.
(Compl., Perryman v. Carlson et al., No. 05-cv-11-1964 (Benton Cty. Ct. Minn.)
(“Perryman Complaint”), Ex. B to Compl. [Doc. No. 1-2].) Until her termination on July
14, 2011, Perryman was President, Chief Executive Officer, Equity Manager, director,
and shareholder of C&L. (Id. ¶ 5.)
The Perryman Complaint alleges that Carlson and Crawford collaborated to
“squeeze-out” Perryman—efforts which culminated at a board meeting on July 14, 2011.
(Id. ¶¶ 1, 52.) At this meeting, C&L’s Directors were present: Carlson, Crawford, and
Perryman. (Id. ¶ 52.) Michael Bengtson, a non-director and C&L’s Chief Financial
Officer, attended as well. (Id. ¶¶ 50, 52.) By vote of the Directors, Bengtson was elected
Spokesperson and Secretary for the meeting. (Mins. of the C&L Board Meeting at 1, Ex.
E to Pls.’ Sur-Reply Mem. in Opp’n to Def.’s Mot. to Dismiss [Doc. No. 23-1].)
Bengtson stated that a majority of the Board, Carlson and Crawford, had decided to
terminate Perryman’s employment on the basis of Perryman’s alleged misconduct, which
included: (1) disregarding the requirements and duties of a Chief Executive Officer and
Equity Manger; (2) failing to oversee C&L’s operations and expenses properly; (3)
failing to reduce excess discretionary expenses in light of declining revenues; and (4)
giving time and company resources to organizations that did not relate to C&L’s
business. (Id.) According to the minutes, Bengtson gave Perryman “the opportunity to
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resign from all of her positions with the Corporation,” and “as consideration for such
resignation also offered certain benefits, terms and conditions as set forth in a written
offer letter dated July 14, 2011.” (Id.) Perryman claims that Bengtson told her that if she
did not resign from her positions with C&L, she would be terminated for “justifiable
cause.” (Perryman Compl. ¶¶ 56, 58.) Faced with the possibility of such a termination,
and unable to negotiate, discuss, or otherwise consider the documents properly, Perryman
claims that she signed two resignation letters, whose terms were effective immediately.
(Id. ¶ 60; Mins. of the C&L Board Meeting at 2.) Perryman, Carlson, and Crawford
signed the written offer letter. (Mins. of the C&L Board Meeting at 2.) The minutes
from the board meeting were signed by Bengtson, and accepted and approved by Carlson
and Crawford. (Id. at 7.)
The Perryman Complaint contains the following counts: (1) declaratory judgment
pursuant to Minnesota Statute § 555.01 et seq.; (2) breaches of fiduciary duty; (3) aiding
and abetting tortious conduct; (4) equitable relief; (5) tortious interference with contract
and prospective economic advantage; (6) civil conspiracy; and (7) defamation.
(Perryman Compl. ¶¶ 66-97.) In Count One, Perryman seeks a declaratory judgment
stating in part that “her employment with C&L, including her positions as an officer,
director and employee and Equity manager were unlawfully terminated by Defendants’
actions at and prior to the July 14, 2011 Board meeting.” (Id. ¶ 67.) The Prayer for
Relief requests the same:
An order pursuant to Minn. Stat. § 555.01 et seq. declaring that (a)
Perryman’s employment with C&L, including her positions as an officer,
director and employee and Equity Manager, and her position as trustee and
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voting trustee of the Carlson Revocable Trust, were unlawfully terminated
by Defendants’ actions at and prior to the July 14, 2011 Board meeting; (b)
that the July 14, 2011 resignation letters are unenforceable, void or, at
Perryman’s election, voidable; and (c) the restrictive covenants in
Perryman’s Employment Agreement are unenforceable.
(Id. at Prayer for Relief ¶ 1 (emphasis added).) Count Four alleges that Carlson,
Crawford, and the Carlson Revocable Trust
. . . treated Perryman in an unjust, illegal, fraudulent, and unfairly
prejudicial manner in her capacity as a shareholder, officer, director, and
employee of C&L, and as a trustee and voting trustee. Furthermore,
through Defendants’ actions and omissions, Perryman has been deprived of
her reasonable expectation to maintain her long-established rights and
authority as an employee, officer, director, and shareholder of C&L and as
a trustee of the Carlson Revocable Trust.
(Id. ¶ 80.) Count Four also seeks damages for “lost compensation and benefits which
Bernie [Perryman] reasonably anticipated would continue until her retirement at age 70.”
(Id. ¶ 81(c).) And, Count Seven alleges that “Defendants terminated and/or threatened to
terminate Perryman’s employment without proper notice . . . .” (Id. ¶ 90.) Finally, the
Prayer for Relief seeks an order directing the defendants to purchase Perryman’s interest
in C&L at a fair value; an award of damages in excess of fifty thousand dollars; an award
of Perryman’s costs, disbursements, attorneys’ fees, expert fees, and expenses; an award
of pre- and post-judgment interest; and other equitable relief deemed to be just and
reasonable. (Id. at Prayer for Relief ¶¶ 2-6.)
D. Declaratory Judgment Action
On or about September 28, 2011, Plaintiffs in the instant case notified USLI of the
Perryman litigation, and tendered for defense and indemnification the claims contained in
the Perryman Complaint. (Compl. ¶ 12.) On or about October 13, 2011, USLI notified
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Plaintiffs that it declined coverage under the Policy for the claims in the Perryman
Complaint. (Id. ¶ 13.) On or about December 6, 2012, Plaintiffs asked USLI to
reconsider the declination of coverage under the Policy. (Id. ¶ 15.) On or about
December 20, 2012, USLI again declined coverage under the Policy. (Id. ¶ 16.)
Consequently, Plaintiffs undertook their own defense of the Perryman litigation,
incurring attorneys’ fees and other expenses. (Id. ¶ 14.) In the summer of 2013, the
Perryman litigation resolved under the terms of a confidential settlement. (Id. ¶ 17.)
The declaratory judgment action requests this Court to: (1) declare the rights,
duties and obligations of the parties; (2) declare that USLI has a duty under the Policy to
defend and indemnify Plaintiffs against all claims asserted in the Perryman Complaint;
(3) direct entry of a money judgment in favor of Plaintiffs against USLI in an amount that
includes: (a) all sums incurred by Plaintiffs to settle the Perryman litigation, (b) all sums
incurred by Plaintiffs to defend against those claims contained in the Perryman
Complaint, and (c) all attorneys’ fees incurred by Plaintiffs in this declaratory judgment
action; (4) award Plaintiffs interest; and (5) grant any further necessary and proper relief.
(Id. at Prayer for Relief ¶¶ 1-5.)
On October 16, 2013, Defendant moved to dismiss the Complaint under Rule
12(b)(6) of the Federal Rules of Civil Procedure. (Def.’s Mot. to Dismiss [Doc. No. 9].)
Plaintiffs opposed Defendant’s motion on November 6, 2013. (Pls.’ Mem. in Opp’n to
Def.’s Mot. to Dismiss [Doc. No. 16].) On November 19, 2013, Defendant filed a reply.
(Def.’s Reply Mem. for Mot. to Dismiss [Doc. No. 18].) On December 18, 2013,
Plaintiffs filed a sur-reply. (Pls.’ Sur-Reply Mem. in Opp’n to Def.’s Mot. to Dismiss
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[Doc. No. 22].) On February 7, 2014, this Court heard oral argument on Defendant’s
Motion to Dismiss. (Feb. 7, 2014, Court Mins. [Doc. No. 24].)
III.

DISCUSSION
A. Standard of Review
When evaluating a motion to dismiss under Rule 12(b)(6) of the Federal Rules of

Civil Procedure, the Court assumes the facts in the Complaint to be true and construes all
reasonable inferences from those facts in the light most favorable to the plaintiff. Morton v.
Becker, 793 F.2d 185, 187 (8th Cir. 1986). The Court, however, need not accept as true
wholly conclusory allegations, Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799,
805 (8th Cir. 1999), or legal conclusions that the plaintiff draws from the facts pled.
Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990).
To survive a motion to dismiss, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545
(2007). Although a complaint need not contain “detailed factual allegations,” it must
contain facts with enough specificity “to raise a right to relief above the speculative level.”
Id. at 555. “Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements,” will not pass muster under Twombly. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (citing Twombly, 550 U.S. at 555). In short, this standard “calls for enough
fact to raise a reasonable expectation that discovery will reveal evidence of [the claim].”
Twombly, 550 U.S. at 556.
B. Materials Considered
When considering a motion to dismiss under Rule 12(b)(6), the Court generally
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must ignore materials outside the pleadings, but it may consider some materials that are
part of the public record or do not contradict the complaint, as well as materials that are
“necessarily embraced by the pleadings.” Porous Media Corp. v. Pall Corp., 186 F.3d
1077, 1079 (8th Cir. 1999).
Both parties have submitted extra-pleading materials with their memoranda.
Defendant includes the insurance policy issued to Plaintiffs for the policy period
November 15, 2009 to November 15, 2012, and the Perryman Complaint. (USLI
Employment Practices Liability Policy, Ex. A to Def.’s Mot. to Dismiss [Doc. No. 12-2];
Perryman Compl., Ex. B to Def.’s Mot. to Dismiss [Doc. No. 12-3].) Plaintiffs provide:
(1) Bengtson’s prepared statement at the July 14, 2011, C&L Board Meeting; (2) a letter
from defense counsel, Britton Weimer, to Michael Bengtson, dated October 13, 2011,
declining coverage under the Policy to Plaintiffs; (3) a letter from Plaintiffs’ counsel,
James Baldwin, dated December 6, 2012, demanding that Defendant remedy the alleged
breach of obligations to Plaintiffs; (4) Weimer’s letter in response to Baldwin, dated
December 20, 2012, maintaining Defendant’s decision to decline to defend; and (5) the
minutes from the July 14, 2011, C&L board meeting. (Prepared Statement, Ex. A to Pls.’
Opp’n to Def.’s Mot. to Dismiss [Doc. No. 16-3]; Oct. 13, 2011, Letter, Ex. B to Pls.’
Opp’n to Def.’s Mot. to Dismiss [Doc. No. 16-3]; Dec. 6, 2012, Letter, Ex. C to Pls.’
Opp’n to Def.’s Mot. to Dismiss [Doc. No. 16-3]; Dec. 20, 2012, Letter, Ex. D to Pls.’
Opp’n to Def.’s Mot. to Dismiss [Doc. No. 16-3]; July 14, 2011, Meeting Mins., Ex. E to
Pls.’ Sur-Reply Mem. in Opp’n to Def.’s Mot. to Dismiss [Doc. No. 23-1].)
The Court views all of these materials as necessarily embraced by the pleadings.
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The Court considers the Policy and the Perryman Complaint because they are referenced
in and attached to the Complaint, and they form the basis of this dispute. (Compl. ¶¶ 8,
9.) The Court considers the letters dated October 13, 2011, December 6, 2012, and
December 20, 2012, because they are referenced in the Complaint and form the basis of
this dispute. (Id. ¶¶ 13, 15, 16.) Finally, the Court considers Bengtson’s prepared
statement at the July 14, 2011 C&L Board Meeting, as well as the minutes from this
meeting, because they are referenced in the Perryman Complaint and inform whether
there is coverage under the Policy based on the Perryman Complaint. (Perryman Compl.
¶¶ 52-53.) These materials are considered without converting this motion into one for
summary judgment.
C. Insurance Coverage
An insurer owes an insured two potential duties: the duty to defend and the duty to
indemnify. Nelson v. Am. Home Assurance Co., 824 F. Supp. 2d 909, 915 (D. Minn.
2011). The duty to defend is broader than the duty to indemnify in three ways: (1) the
duty to defend extends to every claim that arguably falls within the scope of coverage; (2)
the duty to defend one claim creates a duty to defend all claims; and (3) the duty to
defend exists regardless of the merits of the underlying claims. Scottsdale Ins. Co. v.
Universal Crop Prot. Alliance, 620 F.3d 926, 935 (8th Cir. 2010).
The duty to indemnify is triggered “only when liability is assessed on a claim
within the policy coverage.” Nelson v. Am. Home Assurance Co., No. 11-1161, 2011
WL 6151519, at *2 (D. Minn. Dec. 12, 2011). Where the underlying action settles before
trial, the party seeking indemnification only needs to show that it could have been liable
11

under the facts shown at trial, and not whether it would have been. Netherlands Ins. Co.
v. Main St. Ingredients, LLC, 745 F.3d 909, 913 (8th Cir. 2014). The settlement terms,
however, must include the claims of the insured that were actually covered by the
insurer’s policy. Id.
In this case, the Policy covers “Claims . . . for Wrongful Acts arising solely out
of an Insured’s duties on behalf of the Organization.” (USLI Employment Practices
Liability Policy, Section I (emphasis in original).) The parties dispute whether coverage
exists with respect to the terms “wrongful acts” and “solely.”
1. “Wrongful Act”
Defendant argues that Plaintiffs are not entitled to coverage because they cannot
show any “wrongful act.” (Def.’s Mem. in Supp. of Mot. to Dismiss at 12 [Doc. No. 9].)
Plaintiffs contend that the Perryman Complaint alleges a “wrongful act” against
Defendants—namely, that of wrongful termination. (Pls.’ Mem. in Opp’n to Def.’s Mot.
to Dismiss at 15 [Doc. No. 16].)
The Policy defines “Wrongful Act” as “any actual or alleged act of”:
(1) Discrimination; or
(2) Harassment; or
(3) Retaliation; or
(4) Wrongful Termination; or
(5) Workplace Tort . . .
. . . committed or allegedly committed by the Organization or by an
Individual Insured acting solely within his/her capacity as such,
involving and brought by any Employee, former Employee or
applicant for employment with the Organization or asserted by any
Employee, former Employee or applicant for employment with the
Organization against an Individual Insured because of his/her
status as such.
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(USLI Employment Practices Liability Policy, Section III(B).) “Wrongful Termination”
is defined as
the actual or constructive termination of an employment relationship or the
demotion of or the failure to promote any Employee in a manner which is
illegal and wrongful or in breach of an implied agreement to continue
employment.
(Id. at Section III(S).)
Accordingly, the Court considers whether the Perryman Complaint alleges a
wrongful termination. Although there is no express “wrongful termination” count, the
essence of the Perryman Complaint regards Perryman’s alleged wrongful termination
from the company. For example, Count One seeks a declaratory judgment that “her
[Perryman’s] employment with C&L, including her positions as an officer, director and
employee and Equity Manager were unlawfully terminated by Defendants’ actions at and
prior to the July 14, 2011, Board meeting.” (Perryman Compl. ¶ 67; see Prayer for Relief
¶ 1.) Count Four alleges that Carlson, Crawford, and the Carlson Revocable Trust
. . . treated Perryman in an unjust, illegal, fraudulent, and unfairly
prejudicial manner in her capacity as a shareholder, officer, director, and
employee of C&L, and as a trustee and voting trustee. Furthermore,
through Defendants’ actions and omissions, Perryman has been deprived of
her reasonable expectation to maintain her long-established rights and
authority as an employee, officer, director, and shareholder of C&L and as
a trustee of the Carlson Revocable Trust.
(Perryman Compl. ¶ 80.) Count Four also seeks damages for “lost compensation and
benefits which Bernie [Perryman] reasonably anticipated would continue until her
retirement at age 70.” (Id. ¶ 81(c).) And, Count Seven alleges that “Defendants
terminated and/or threatened to terminate Perryman’s employment without proper notice
13

. . . .” (Id. ¶ 90.) Such language, particularly when read in the context of the underlying
facts, alleges a wrongful termination, and thus, a “wrongful act,” under the Policy.
Next, the Court considers Defendant’s argument that the Perryman Complaint fails
to plead a wrongful termination because it does not allege any specific board vote to
terminate Perryman in accordance with Minnesota law. 2 (February 7, 2014, Hr’g Tr. at
4-5; Def.’s Reply Mem. for Mot. to Dismiss at 6-8 [Doc. No. 18].) The Court
respectfully disagrees that the Perryman Complaint required such detail to raise the
possibility of coverage under the Policy. The Perryman Complaint refers to the C&L
board meeting on July 14, 2011, at which Bengtson, acting as a spokesperson for Carlson
and Crawford, read a prepared statement that the Board had decided to terminate
Perryman’s employment. (Perryman Compl. ¶¶ 52, 55.) It is also alleged that the Board
refused to entertain any discussion or debate about the reasons for her termination. (Id. ¶
55.) Perryman further alleges being told by Bengtson that if she did not sign the
resignation documents, she would be terminated for “justifiable cause” immediately. (Id.
¶¶ 58, 59.) Faced with such a threat, and lacking any ability to negotiate the resignation
documents or consider them properly, Perryman signed the documents. (Id. ¶ 60.) These
allegations collectively convey Perryman’s central claim that the Board wrongfully
terminated her employment, whether actually or constructively. Whether the Board’s
actions actually complied with Minnesota law is academic at this time.

2

Defendants cite Minnesota Statute § 302A.237 for its language that a “board shall take
action by [sic] affirmative vote . . . .” (Id. at 5); MINN. STAT. § 302A.237, subd. 1
(2013).
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Defendant additionally argues that there is no claim for wrongful termination
without a claim for monetary damages, and Count One of the Perryman Complaint does
not seek monetary damages. (Def.’s Reply Mem. for Mot. to Dismiss at 5 [Doc. No.
18].) Under the Policy, “[t]he Company will pay on behalf of the Insured, Loss . . . that
the Insured shall become legally obligated to pay because of Claims . . . for Wrongful
Acts arising solely out of an Insured’s duties on behalf of the Organization.” (USLI
Employment Practices Liability Policy, Section I.) As defined by the Policy,
“Loss” means damages and settlements, front pay and back pay, and prejudgment and post judgment interest awarded by a court and punitive or
exemplary damages to the extent such damages are insurable under
applicable law but does not include fines, penalties, taxes, the multiplied
portion of any multiple damage award or an express obligation to make
payments in the event of the termination of employment.
(Id. at Section III(K).) Although Count One of the Perryman Complaint does not seek
monetary damages, the Prayer for Relief seeks: “an award of damages against
Defendants, jointly and severally, upon all counts, in excess of $50,000,” “[a]n award . . .
requiring Defendants to pay all of Plaintiff’s costs, disbursements, attorneys’ fees, expert
fees and expenses,” and “[a]n award of prejudgment and post-judgment interest.”
(Perryman Compl., Prayer for Relief ¶¶ 3-5.) The Court finds that these requests fall
squarely within the realm of “damages and settlements,” and “pre-judgment and post
judgment interest,” as contemplated by the “loss” definition.
For these reasons, the Court finds that the Perryman Complaint adequately alleged
a wrongful termination under the Policy.

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2. “Solely”
Defendant argues that Plaintiffs are not entitled to coverage because Carlson and
Crawford “were not acting ‘solely’ as Insureds, but rather, were acting in multiple nonInsured capacities.” (Def.’s Mem. in Supp. of Mot. to Dismiss at 14 [Doc. No. 11].) At
oral argument, Defendant abandoned its argument that Carlson and Crawford were acting
as shareholders, (Feb. 7, 2014, Hr’g Tr. at 11), but maintains that they were acting for
personal, rather than business, purposes. (Id. at 13; Def.’s Mem. in Supp. of Mot. to
Dismiss at 15-16 [Doc. No. 11].)
The Court respectfully disagrees. Although Defendant cites language from the
Perryman Complaint that Carlson and Crawford engaged in “self-dealing” and “selfinterested, conflicted actions designed to benefit themselves,” such language alone is
insufficient to show that Carlson and Crawford were acting in multiple capacities.
(Perryman Compl. ¶¶ 3, 62.) Defendant relies on Carlson v. Twin City Fire Ins. Co., No.
09-608, 2009 WL 1793887, at *3-4 (D. Minn. June 23, 2009), in which the Court found
that an association’s policy did not cover the wrongful conduct alleged, because the
conduct arose not from duties owed by Carlson to the association, but rather, from his
personal dealings for a separate business. Perryman, however, does not allege any
actions taken by Carlson or Crawford for the benefit of a separate business.
Moreover, it is disputed whether Defendants were acting out of self-interest in
terminating Perryman. Plaintiffs argue, for example, that “C&L benefitted from the
eradication of an underperforming and unreliable Equity manager and CEO [Perryman]
who was not fulfilling her job duties.” (Pls.’ Mem. in Opp’n to Def.’s Mot. to Dismiss at
16

19 [Doc. No. 16].) And, the minutes from the July 14, 2011, meeting reflect the Board’s
stated reasons for terminating Perryman: her alleged (1) disregard of the requirements
and duties of a Chief Executive Officer and Equity Manager; (2) failure to oversee
C&L’s operations and expenses properly; (3) failure to reduce excess discretionary
expenses in light of declining revenues; and (4) time and company resources devoted to
organizations that did not relate to C&L’s business. (Mins. of the C&L Board Meeting at
1.) Furthermore, Plaintiffs assert that Carlson and Crawford did not benefit personally
from Perryman’s termination, because Perryman was simply replaced by another Equity
Manager and Chief Executive Officer who retained voting control. (Feb. 7, 2014, Hr’g
Tr. at 22-23.) Thus, this inquiry is fact-intensive and inappropriate to resolve on a motion
to dismiss.
Finally, the board minutes from the July 14, 2011, meeting show that Carlson and
Crawford acted in their official board capacity when terminating Perryman. The minutes
note the presence of Carlson, Crawford, and Perryman—“all of the members of the Board
of Directors”—as constituting a quorum. (Mins. of the C&L Board Meeting at 1.) By
vote of the Directors, Bengtson was elected Spokesperson and Secretary for the meeting.
(Id.) Bengtson stated that a majority of the Board of Directors had decided that
Perryman’s employment should be terminated immediately, and Perryman was asked to
resign voluntarily. (Id.) Elsewhere, the minutes describe Carlson and Crawford as
“acting as a majority of the members of the Board of Directors” during this meeting:
He [Bengtson] stated reasons for the decision, as found by Ms. Carlson and
Ms. Crawford, acting as a majority of the members of the Board of
Directors . . . .
17

. . . Mr. Bengtson, acting as Spokesperson for Ms. Carlson and Ms.
Crawford, who were acting as a majority of the members of the Board of
Directors, offered Ms. Perryman the opportunity to resign from all of her
positions with the Corporation, and as consideration for such resignation
also offered certain benefits, terms and conditions as set forth in a written
offer letter dated July 14, 2011.
(Id.) Carlson, Crawford, and Perryman signed the written offer letter. (Id. at 1-2.)
Carlson and Crawford accepted and approved the board minutes as well. (Id. at
7.) Accordingly, the Court finds that, on the face of the Complaint, it is alleged
that Carlson and Crawford wrongfully terminated Perryman solely in their official
capacity as members of the Board, sufficient to avoid dismissal of the Complaint.
IV.

ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS

HEREBY ORDERED that:
1. Defendant’s Motion to Dismiss [Doc. No. 9] is DENIED.

Dated:

June 24, 2014

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

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