American Trucking and Transport Insurance Company v. Nelson et al
ORDER granting in part and denying in part 4 Motion to Dismiss. Signed by Judge Dana L. Christensen on 7/28/2017. (ASG)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
JUL 2 8 2017
Cieri<, l! S District Court
D1stnct Of Montana
AMERICAN TRUCKING AND
COMPANY, a Risk Retention Group,
RALPH NELSON, ROBERT GORMAN,
SR., BOBBY J. GORMAN, DAN
DOOLEY, and WESTCHESTER
SURPLUS LINES INSURANCE
Before the Court is the Defendant Dan Dooley's ("Dooley") motion to
dismiss. Dooley argues that the claims against him should be dismissed because:
(1) he is not subject to personal jurisdiction in the state of Montana; (2) Plaintiffs
claim for breach of contract fails as a matter of law; (3) Plaintiffs claim for breach
of fiduciary duty fails as a matter of law; (4) Plaintiff fails to state a claim against
Dooley for fraud, negligent representation or constructive fraud; (5) Plaintiff fails
to state a claim against Dooley for negligence; (6) Plaintiffs claim against Dooley
for negligence per se fails as a matter of law; (7) Plaintiff fails to state a claim
against Dooley for acts in concert or civil conspiracy; and finally, (8) Plaintiff fails
to state a claim against Dooley for piercing the corporate veil. For the reasons
below, the Court grants the motion in part and denies the motion in part.
"On a motion to dismiss, material allegations of the complaint are taken as
admitted, and the complaint is to be liberally construed in favor of the plaintiff."
Kennedy v. H & M Landing, Inc., 529 F.2d 987, 989 (9th Cir. 1976).
Plaintiff American Trucking and Transportation Insurance Company
("ATTIC") is a risk retention group located in Missoula, Montana. ATTIC offers
its member insureds certain benefits which are not generally available to insureds
purchasing insurance on the open market. In exchange for these benefits, the
member insureds are subject to heightened duties to ATTIC and the other member
insured shareholders. Gorman Group is a transportation, shipping, and logistics
company, and was the holding company for a number of subsidiaries, including
Tango Transport. Tango Transport was the principal operating entity for Gorman
Group's trucking operations. In 2010, Gorman Group became a shareholder of
ATTIC and both Gorman Group and Tango Transport became ATTIC insureds
(hereafter collectively referred to as "the Insureds"). As shareholders, the Insureds
nominated Ralph Nelson, Gorman Group's Senior Vice President and General
Counsel, to be their representative to the ATTIC Board of Directors, and ATTIC
required that at least one board meeting be held in the State of Montana.
On October 1, 2010, ATTIC issued policy number ATTTANl 10 which
provided coverage to the Insureds and other affiliated companies. The policy
provided the insureds with commercial trucking, property, and personal injury
liability coverage with a $5 million per occurrence policy limit subject to a
$350,000 per occurrence deductible. Tango Transport managed all obligations to
ATTIC on behalf of itself and Gorman Group. Tango Transport made all premium
payments, paid claims, paid defense costs on the claims it handled, and reimbursed
ATTIC on the claims it paid.
ATTIC provided coverage and issued annual policies to the Insureds in
2010, 2011, 2012, 2013, and 2014. From October 1, 2010, through September 30,
2015, Ralph Nelson, acting as the Insureds' claims handling manager, handled the
intake, investigation, and resolution of claims in which the Insureds anticipated
ultimate exposure would fall below $175,000. The Complaint alleges that Robert
Gorman, Sr., as well as Dan Dooley, as the restructuring agent of Tango Transport,
were advised and aware of the status of the claims handling process.
In 2014, Tango Transport began experiencing financial difficulties.
However, Ralph Nelson informed ATTIC that the Insureds were refinancing their
debt obligations. By September 2015, the Insureds were unable to meet their
financial obligations to ATTIC. At this time, Dan Dooley advised ATTIC that
Tango Transport was either going to sell its operating equipment or would cease
ATTIC immediately took over all open liability claims that were within
Tango Transport's deductible under the policies issued by ATTIC, and all other
open but unpaid claims. ATTIC alleges that once it took over the claims, it
became clear that the Insureds failed to satisfy their obligations under the ATTIC
Shareholders Agreement and Bylaws, had misrepresented their liabilities, and
were negligent in the manner in which they had handled the claims.
On September 20, 2015, ATTIC and the Insureds agreed to extend the
policy for 45 days to allow the Insureds time to transfer their operating equipment
to another purchasing entity, Celadon, Inc. The Insureds paid a flat rate for
coverage, and also transferred funds to ATTIC to pay for unpaid claims. By
October 2015, the Insureds had informed ATTIC and their creditors that they
planned to liquidate their remaining assets. In April 2016, Tango Transport filed
for Chapter 11 Bankruptcy.
As of December 1, 2016, ATTIC had filed two unsecured claims in the
consolidated bankruptcy case filed in the Federal Bankruptcy Court, Easter
District of Texas, Dallas, In re Tango Transport, LCL, et al. On December 21,
2016, the bankruptcy court determined that ATTIC may proceed against the nondebtors for civil damages.
ATTIC's Complaint alleges ten counts against Dooley: (I) breach of
contract; (II) breach of fiduciary duty; (III) negligent misrepresentation; (IV)
fraud; (V) constructive fraud; (VI) negligence; (VII) negligence per se; (VII) acts
in concert; (IX) civil conspiracy; and (X) piercing the corporate veil.
Dan Dooley's motion to dismiss is personal to him as a Defendant and is
made pursuant to Federal Rule of Civil Procedure 12(b)(2) and 12(b)(6). The
Court addresses each issue raised by Dooley separately below.
A defendant may move, prior to trial, to dismiss a complaint for lack of
personal jurisdiction. Fed. R. Civ. P. 12(b)(2).
The power of a federal court entertaining a case based on diversity of
citizenship to exercise personal jurisdiction over a nonresident defendant
turns on two independent considerations: whether an applicable state rule or
statute potentially confers personal jurisdiction over the defendant and
whether assertion of such jurisdiction accords with constitutional principles
of due process.
Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1286 (9th Cir.1977)
(citations omitted). The party invoking jurisdiction of a federal court has the
burden of establishing jurisdiction. KVOS, Inc. v. Associated Press, 299 U.S. 269,
278 (1936). It is the plaintiffs burden to demonstrate facts supporting a finding of
jurisdiction to avoid a motion to dismiss. Data Disc, 557 F.2d at 1285. "[T]he
plaintiff need only make a prima facie showing of jurisdictional facts to withstand
the motion to dismiss." Brayton Purcell LLP v. Recordon & Recordon, 606 F .3d
1124, 1127 (9th Cir.2010) (citation and quotation omitted). On considering a
motion to dismiss for lack of personal jurisdiction, uncontested allegations in the
complaint must be read as true and disputes of fact are resolved in favor of the
Under Montana law, courts follow a two-step test to determine whether
personal jurisdiction exists. Milky Whey, Inc. v. Dairy Partners, LLC, 342 P.3d
13, 17 (Mont. 2015). Courts first determine whether jurisdiction exists under
Montana's long-arm statute, Montana Rule of Civil Procedure 4(b)(l). Id. If
personal jurisdiction exists under that first step, courts then consider "whether the
exercise of personal jurisdiction conforms with the traditional notions of fair play
and substantial justice embodied in the due process clause." Id.
Rule 12(b)(6) motions test the legal sufficiency of a pleading. Fed. R. Civ.
P. 12(b)(6). Under Federal Rule of Civil Procedure 8(a)(2), a complaint must
contain "a short and plain statement of the claim showing that the pleader is
entitled to relief." "To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible
on its face."' Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility
when the court can draw a "reasonable inference" from the facts alleged that the
defendant is liable for the misconduct alleged. Id.
Montana Rule of Civil Procedure 4(b)(1) incorporates principles of general
and specific personal jurisdiction. Simmons Oil Corp. v. Holly Corp., 796 P .2d
189, 194 (Mont. 1990). The first sentence of the rule expresses the principle of
general personal jurisdiction by inquiring as to whether a party is "found within"
Montana. Id. A party is found within Montana if it is physically present in the
state or if its contacts with the state are "so pervasive that it ... may be deemed to
be physically present." Id. A nonresident defendant must maintain "substantial"
or "continuous and systematic" contacts with Montana to be found within the
This Court does not have general jurisdiction over Dooley because he was
never present in Montana, nor did he have continuous and systematic contacts
with Montana sufficient to be found within the state. ATTIC alleges that Dooley
made calls to, sent letters to, and emailed ATTIC in Montana during the Tango
Transport restructuring process. However, this is not enough to be considered
"found" within Montana because it occurred within a limited time period during
the restructuring process and, thus, was not continuous and systematic. Moreover,
ATTIC effectively concedes that general jurisdiction over Dooley does not exist,
because it did not present any counter arguments in regards to general jurisdiction
in its response brief. 1 (See Doc. 15 at 10-14.)
A claim for relief may also arise from any of the acts listed in Rule
4(b)( 1)(A-G) and create specific jurisdiction for the purpose of litigating that
particular claim. Milky Whey, Inc., 342 P.3d at 17. Thus, absent general personal
jurisdiction, courts in Montana may exercise specific jurisdiction over any person
as to any claim for relief arising from the doing personally, or through
an employee or agent, of any of the following acts:
(A) the transaction of any business within Montana;
(B) the commission of any act resulting in accrual within Montana of
a tort action;
(C) the ownership, use, or possession of any property, or of any
interest therein, situated within Montana;
During the July 25, 2017 hearing on the motion to dismiss, ATTIC's counsel
also conceded that general personal jurisdiction does not exist.
(D) contracting to insure any person, property, or risk located within
Montana at the time of contracting;
(E) entering into a contract for services to be rendered or for materials
to be furnished in Montana by such person;
(F) acting as director, manager, trustee, or other officer of a
corporation organized under the laws of, or having its principal place
of business within, Montana; or
(G) acting as personal representative of any estate within Montana.
Mont. R. Civ. P. 4(b)(l).
Rule 4(b )(1 )(A) allows for the exercise of jurisdiction over any person who
transacts business in Montana. A defendant's interactions must be "substantial"
and "occur within Montana," however, "[e]xtensive interstate communications ...
do not give rise to jurisdiction where the contract is to be performed in another
state." Milky Whey, 342 P.3d at 19 (citations omitted); Cimmaron Corp. v. Smith,
67 P.3d 258, 261(Mont.2003). Rule 4(b)(l)(B) allows the exercise of jurisdiction
over anyone who commits an act that results in the accrual of a tort action within
Montana based "on where the events giving rise to the tort claims occurred, rather
than where the plaintiffs allegedly experienced or learned of their injuries."
Tackett v. Duncan, 334 P.3d 920, 92 (Mont. 2014). Finally, Rule 4(b )(1 )(D)
allows the exercise of jurisdiction over anyone who enters into a "risk located
within [Montana] at the time of contracting." Carter v. Mississippi Farm Bureau
Cas. Ins. Co., 109 P.3d 735, 744 (Mont. 2005).
Further, in the Ninth Circuit, tort cases and contract cases are treated
differently. "In tort cases, [the court] typically inquire[s] whether a defendant
'purposefully direct[s] his activities' at the forum state, applying an 'effects' test
that focuses on the forum in which the defendant's actions were felt, whether or
not the actions themselves occurred within the forum." Yahoo! Inc. v. La Ligue
Cantre Le Racisme Et L 'Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006)
(citations omitted). In a tort case, "express aiming" is satisfied through three
requirements: "the defendant allegedly [must] have (1) committed an intentional
act, (2) expressly aimed at the forum state, (3) causing harm that the defendant
knows is likely to be suffered in the forum state." Id. "By contrast, in contract
cases, [the court] typically inquire[s] whether a defendant 'purposefully avails
itself of the privilege of conducting activities' or 'consummate[s][a] transaction' in
the forum, focusing on activities such as delivering goods or executing a contract."
Here, ATTIC alleges both tort and contract claims. Regarding the contract
claims, Dooley was never a party to a contract with ATTIC, never consummated a
transaction personally with ATTIC in Montana, nor did he ship or deliver tangible
goods to Montana. Consequently, there is no specific personal jurisdiction over
Dooley under the contract claims alleged by ATTIC.
However, this Court does have specific personal jurisdiction over Dooley
under the remaining tort claims. Dooley directed his conduct as the restructuring
agent of Gorman Group and Tango Transport directly to ATTIC, and at all times
during the restructuring process ATTIC was domiciled in Montana with its
principal place of business in Missoula, Montana. (Doc. 1 at 2, 7.) The Complaint
alleges that Dooley would have been advised of the status of the claims handling
process for ATTIC, and that he personally communicated to ATTIC that Tango
Transport would be selling its operating equipment. (Doc. 1 at 38, 43.) In
Forsythe v. Overmyer, the Ninth Circuit found that "[a]n out-of-state act having an
effect within the state may be sufficient to support jurisdiction" and especially in
instances where a corporate employee "could have remained behind multiple veils
of his complex business organization" but chose not to do so. 576 F.2d 779,
783-784 (9th Cir. 1978). Here, although Dooley contends he never set foot in
Montana, Dooley personally participated in the restructuring process and worked
with ATTIC in the attempt to avoid liquidation of Tango Transport. 2
ATTIC contends in its response brief that Dooley made calls and sent letters and emails
to ATTIC in Montana. (Doc. 15 at 12.) This allegation is not set forth in the Complaint.
However, the Complaint does allege that Dooley had contacts with ATTIC. (Doc. 1 at if 43.) At
the hearing on this motion, the Court questioned the parties about Dooley's correspondence with
ATTIC in Montana and their supporting affidavits from Dan Dooley and Ken Crippen. (Docs. 51 at 2; 15-1 at 2-3.) Dooley's counsel conceded that Dooley made calls and sent emails to
ATTIC during the restructuring process. Thus, there is no dispute that Dooley sent numerous
emails and made phone calls to ATTIC in Montana.
Further, Montana is the only forum where ATTIC alleges harm was
suffered. See Calder v. Jones, 465 U.S. 783, 789 (1984) (finding that California
was "the focal point both of the store and of the harm suffered" and that
jurisdiction is proper in California based on the "effects" of the defendant's
conduct in California.). Although under Montana law extensive interstate
communications do not give rise to jurisdiction where the contract is to be
performed in another state, here the insurance contract between ATTIC and the
Insureds was performed in Montana. The Complaint adequately alleges that
Dooley was aware that the harm suffered by ATTIC would be felt in Montana.
Dooley's contacts with ATTIC establish that he personally availed himself of the
privilege of conducting activities in Montana. Dooley was certainly aware that
ATTIC was located in Montana and should have reasonably anticipated that he
could be haled into court in Montana.
Finally, since ATTIC has made a prima facie showing that the exercise of
personal jurisdiction over Dooley is constitutional, Dooley must respond with a
"compelling case" that doing so would be unreasonable and therefore in violation
of due process. "In determining whether the exercise of jurisdiction comports with
'fair play and substantial justice' and is therefore reasonable, [the court]
consider[s] seven factors:
the extent of the defendants' purposeful injection into the forum
the burden on the defendant of defending in the forum;
the extent of the conflict with the sovereignty of the defendant's state;
the forum state's interest in adjudicating the dispute;
the most efficient judicial resolution of the controversy;
the importance of the forum to the plaintiffs interest in convenient
and effective relief; and
the existence of an alternative forum."
CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1079 (9th Cir. 2011).
Dooley does not address these factors in his briefing. Thus, the Court concludes
that Montana is the appropriate forum that comports with fair play and substantial
justice. Although it may be burdensome for Dooley as a resident of Illinois to
defend himself in Montana, the extent of the Defendant's alleged conduct was
directed to ATTIC in Montana. Montana has the greater interest in adjudicating
the dispute since the harm suffered to ATTIC occurred in this state and because
ATTIC is domiciled here. There exists no alternate forum that would have more
interest in the dispute. This Court is already familiar with the issues in this case,
and adjudicating the case in Montana will provide ATTIC with convenient and
effective relief. Accordingly, the only factor that favors Dooley is the
inconvenience of defending himself in Montana, but that factor is outweighed by
the other six factors which favor jurisdiction in Montana.
Accordingly, this Court has specific personal jurisdiction over Dan Dooley.
Dooley's motion to dismiss for lack of personal jurisdiction is denied.
Count I: Breach of Contract
Dooley next argues that ATTIC's breach of contract claims against him fails
as a matter of law because there was never a contract between him and ATTIC.
ATTIC contends that Dooley was the actual cause of the breach when he acted as
an agent of Gorman Group and Tango Trucking during the restructuring process.
Count I fails as a matter of law because Dooley was not a party to any
contract with ATTIC, and therefore may not be held liable for breach of contract.
See Paatalo v. First American Title Co. ofMont., Inc., 2014 WL 2002839 (D.
Mont. 2014); Gruender v. Rosell, 2010 WL 2079759 (D. Ariz. 2010) ("It would be
a novel holding for the [C]ourt to rule that a breach of contract action can be
maintained against a person who is not a party to the contract being sued upon")
(citation omitted); see also Credit Gen. Ins. Co. v. Midwest Indemnity Corp., 916
F. Supp. 766, 772 (N.D. Ill. 1996). ATTIC's argument that he caused the breach is
unavailing because there was no contract between Dooley and ATTIC to begin
Consequently, Count I against Dooley is dismissed.
Count II: Breach of Fiduciary Duty
The parties also dispute whether there is a valid claim for breach of
fiduciary duty. Dooley argues that no special relationship exists between him and
ATTIC. ATTIC asserts that because a corporation can only act through its
officers, a corporation's officer can be individually liable for a corporation's
breach of fiduciary duty.
Under Montana law, to determine whether there exists a special relationship
between the parties, a court may be required to make a fact-intensive inquiry.
Gliko v. Permann, 130 P.3d 155, 161 (Mont. 2006). Whether a special
relationship gives rise to a fiduciary duty is a question of law for the court to
Here, ATTIC has pled no facts to suggest that a special relationship may
have existed between Dooley and ATTIC. In fact, the Complaint only alleges that
Ralph Nelson had a special relationship with ATTIC. (Doc. 1at18-19.) Further,
Dooley's role during the events in question was as the restructuring agent during a
specified period of time.
Therefore, the Court finds that there is no plausible breach of fiduciary duty
claim against Dooley. Count II against Dooley is dismissed.
Counts 111-V: Fraud Claims
Next, Dooley contends that ATTIC's fraud claims-Count III: Negligent
Misrepresentation, Count IV: Fraud, and Count V: Constructive Fraud-fail as a
matter of law. Dooley argues that ATTIC did not adhere to the heightened
pleading standard required for fraud claims and that the Complaint does not
adequately allege the the "who, what, when, where, and how of the alleged fraud."
(Doc. 5 at 19.)
Pursuant to Federal Rule of Civil Procedure 9(b), "[i]n alleging fraud or
mistake, a party must state with particularity the circumstances constituting fraud
or mistake." Fed. R. Civ. P. 9(b). Under Rule 9(b ), "the circumstances
constituting the alleged fraud must be specific enough to give defendants notice of
the particular misconduct ... so that they can defend against the charge and not
just deny that they have done anything wrong." Kearns v. Ford Motor Co., 567
F.3d 1120, 1124 (9th Cir.2009) (internal quotations omitted). The degree of
particularity required depends upon the amount of access a plaintiff has to specific
facts. Novak v. Anaconda Sch. Dist., Sch. Dist. No. 10, Deer Lodge Cty., No. CV
10-62-BU-RFC-CSO, 2011WL2489760, at *7 (D. Mont. May 5, 2011) (citing
Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 999 (9th Cir.2010) (requirements can
be relaxed where evidence is exclusively within defendant's possession)).
"Rule 9(b) serves three purposes: (1) to provide defendants with adequate
notice to allow them to defend the charge and deter plaintiffs from the filing of
complaints as a pretext for the discovery of unknown wrongs; (2) to protect those
whose reputation would be harmed as a result of being subject to fraud charges;
and (3) to prohibit plaintiffs from unilaterally imposing upon the court, the parties
and society enormous social and economic costs absent some factual basis." Id.
(citing Kearns, 567 F.3d at 1125.) Even though there is a higher degree of notice
under Rule 9, it does not abrogate the Rule 8 notice pleading standard-the two
rules must be read together. See US. ex rel. Grubbs v. Kanneganti, 565 F.3d 180,
185-86 (5th Cir.2009). Further, with respect to a motion to dismiss under Rule
l 2(b)(6), a defendant retains the burden of proving that plaintiff has failed to state
a fraud claim. Novak, 2011 WL 2489760, at *7-8.
Count III: Negligent Misrepresentation
The following elements must be established to support a claim for negligent
( 1) the defendant made a representation as to a past or existing
(2) the representation must have been untrue;
(3) regardless of its actual belief, the defendant must have made the;
representation without any reasonable ground for believing it to be
(4) the representation must have been made with the intent to induce
the plaintiff to rely on it;
(5) the plaintiff must have been unaware of the falsity of the
representation; it must have acted in reliance upon the truth of the
representation and it must have been justified in relying on the
(6) the plaintiff, as a result if his or her reliance, sustained damage.
Deichl v. Savage, 216 P.3d 749, 753 (Mont. 2009) (citations omitted).
Here, the Court finds that ATTIC has pied with particularity that Dooley
allegedly committed negligent misrepresentation. At first glance, the "who"
referred to in the Complaint is Defendant Nelson. (Doc. 1 at 20-21.) However,
the Complaint also states that "Defendant Nelson acted as an agent of and in
concert or in furtherance of a civil conspiracy with the Ownership Group and/or
Dooley." (Id. at 20.) This notifies Dooley of his participation in the alleged
negligent misrepresentation. The "what" is properly stated by ATTIC in the
Complaint as "representations to ATTIC that claims against Tango Transport and
TMT were properly reserved and were being properly investigated and paid."
(Id.) The "when" identified by ATTIC is sufficiently pied as the time period from
when the Insureds made representations to ATTIC that the claims were being
properly handled to when ATTIC took over the Insureds claims and discovered
that they failed to do so. (Id.) At the time ATTIC became aware of the
mishandled claims-around August or September 2015-Dooley was working as
the Insured's restructuring agent. ATTIC's Complaint is also clear "where" the
harm occurred. ATTIC stated that it is domiciled in Montana and all harm
suffered was felt by the company in Montana. (Doc. 1at2, 21.) Finally, ATTIC
explains "how" the alleged negligent misrepresentation occurred: when it took
over the handling of the Insured's claim files it became clear that the Insureds
were misrepresenting their liabilities and exposure. (Id. at 21.)
Consequently, ATTIC's Complaint alleges sufficient facts to state a claim
for negligent misrepresentation against Dooley that is plausible on its face. Under
Rule 9, ATTIC has pled all facts it can at this point in the litigation and allowing
further discovery is warranted. Thus, Dooley's motion to dismiss Count III is
Count IV: Fraud
In Montana, a party must particularly plead the following nine elements to
properly state a fraud claim:
( 1) a representation;
(2) the falsity of that representation;
(3) the materiality of that representation;
(4) the speaker's knowledge of the representations falsity or ignorance of its
(5) the speaker's intent that the representation should be acted upon by the
person and in the manner reasonably contemplated;
(6) the hearer's ignorance of the representation's falsity;
(7) the hearer's reliance upon the truth of the representation;
(8) the hearer's right to rely upon the representation; and
(9) the hearer's consequent and proximate injury or damages caused by their
reliance on the representation.
Id. (citing In re Estate ofKindsfather, 108 P.3d 487, 490 (Mont.2005)).
Here, ATTIC sufficiently pled a fraud claim to survive a motion to dismiss.
Count IV states that the "Defendants" collectively committed fraud, which
satisfies the "who" requirement. (Doc. 1 at 21-25.) The "what" and "how" is also
identified by ATTIC as the fraudulent concealment of the claims being handled
incorrectly and that concealment was material to ATTIC's insurance business
practices. ATTIC contends that it relied on the Defendants' representations to
their detriment, and that ATTIC suffered a damages as a result. (Id.) Although the
intent element is not specifically pled, ATTIC explained that Dooley had
knowledge of the claims handling process. (Id.) ATTIC explained how Dooley
was involved in the fraud through his role as a restructuring agent and his
relationship with the other corporate officers of Gorman Group and Tango
Transport. The motion to dismiss stage is not appropriate to determine whether
fraudulent intent exists here. The Court finds that further discovery is necessary in
regards to this element. Finally, the "where" is satisfied because the Complaint
states that the harm occurred in Montana. There is also no ambiguity in the
Complaint that Dooley's fraudulent acts were allegedly committed during the
Therefore, ATTIC has pled with particularity the elements of fraud against
Dooley. The motion to dismiss Count IV is denied.
Count V: Constructive Fraud
Constructive fraud consists of:
any breach of duty that, without an actually fraudulent intent, gains an
advantage to the person in fault or anyone claiming under the person
in fault by misleading another person to that person's prejudice or to
the prejudice of anyone claiming under that person; or
any act or omission that the law especially declares to be fraudulent,
without respect to actual fraud.
Mont. Code Ann. § 28-2--406. "The presence of a legal duty is an essential
element of a claim for constructive fraud" and the existence of such a duty
"is a question of law for the court's determination." Harris v. St. Vincent
Healthcare, 305 P.3d 852, 858 (Mont. 2013).
ATTIC's Complaint names all Defendants in its constructive fraud claim,
including Dooley. (Doc. 1 at 25.) ATTIC further claims that all Defendants "had
a duty to convey complete and accurate information to ATTIC commensurate with
their obligations under the Shareholders Agreement, Bylaws of ATTIC" and that
they breached their duties when they "misled ATTIC as to the total exposure for
outstanding Tango Transport claims and as to the total risk for subsequent
potential bad faith claims in the handling of underlying Tango Transport claims."
(Doc. 1 at 25-26.) ATTIC contends that the Defendants' actions and inactions led
ATTIC to assume the liabilities of the outstanding claims and that "Tango
Transport and Gorman Group were relieved of the obligation to satisfy nearly
$10.3 million in potential open claims and in closed but unpaid claims." (Id. at
26.) ATTIC further alleges that by failing to disclose such information, ATTIC
was misled by the Defendants, including Dooley, as to "the total exposure for
outstanding Tango Transport claims and as to the total risk for subsequent
potential bad faith claims in the handling of underlying Tango Transport claims."
(Id.) ATTIC's allegations satisfy the "who," "what," "when," "where," and "how"
of the heightened pleading standard necessary to survive a motion to dismiss on a
constructive fraud claim.
Thus, Dooley's motion to dismiss Count V is denied.
A cause of action for negligence requires that a plaintiff plead four essential
(1) the defendant owed the plaintiff a legal duty;
(2) the defendant breached that duty;
(3) the breach was the actual and proximate cause of an injury to the
(4) resulting damages.
Peterson v. Eichhorn, 189 P.3d 615, 621(Mont.2008). The existence of a legal
duty is a question of law to be determined by the court. Fisher v. Swift Transp.
Co., 181P.3d601, 607 (Mont. 2008). "In analyzing whether a duty exists,
[courts] consider whether the imposition of that duty comports with public policy,
and whether the defendant could have foreseen that his conduct could have
resulted in an injury to the plaintiff." Id.
Dooley contends that he owed no legal duty to ATTIC and that ATTIC
failed to allege any specific duty in its Complaint. However, ATTIC alleges that
the "Defendants had a duty to convey complete and accurate information to
ATTIC commensurate with their obligations under the Shareholders Agreement,
Bylaws of ATTIC, the policies of insurance issued to the insureds, the ATTIC
Claims Handling Protocol and the course of dealing between the parties." (Doc. 1
at 27.) ATTIC further alleges that by failing to properly investigate and handle
claims, the Defendants caused damage to ATTIC. (Doc. 1at27-29.) These facts
satisfy the plausible pleading standard under Iqbal for negligence.
Negligence per se is a failure to comply with a legal mandate. An allegation
of negligence per se must establish:
(1) that the defendant violated a particular statute; (2) that the statute
was enacted to protect a specific class of persons; (3) that the plaintiff
is a member of the class; (4) that the plaintiffs injury is the kind of
injury that the statute was enacted to prevent; and (5) that the statute
was intended to regulate members of the defendant's class.
Spreadbury v. Bitterroot Pub. Library, No. CV 11-64-M-DWM-JCL, 2011 WL
4708044, at *3 (D. Mont. Oct. 4, 2011) (citing Doyle v. Clark, 254 P.3d 570, 576
ATTIC alleges that the Defendants collectively violated Mont. Code Ann. §
35-1-418(1). (Doc. 1 at at 28.) Mont. Code Ann.§ 35-1-418(1) governs general
standards for corporate directors. The Complaint states that Dooley was "at all
times relevant, was the restructuring agent hired by Gorman Group during 2015
and was an officer of Gorman Group during the attempted restructuring of Gorman
Group and Tango Transport." (Doc. 1at3.) ATTIC concedes that Dooley was
not a director for any of the implicated entities. (Doc. 15 at 30.) Thus, Dooley
cannot be liable for negligence per se under Mont. Code Ann. § 35-1-418(1 ).
Therefore, Count VI survives, but Count VII is dismissed.
Acts in Concert
"Under Montana law, an individual defendant can be held liable for the
tortious conduct of another individual ifthe former 'knows that the other's
conduct constitutes a breach of duty and [the former] gives substantial assistance
or encouragement to the other so to conduct himself."' Howell v. Earl, No. CV
13-48-BU-DWM-JCL, 2014 WL 2594235, at *20 (D. Mont. May 30, 2014), report
and recommendation adopted, No. CV 13-48-BU-DWM-JCL, 2014 WL 2761342
(D. Mont. June 18, 2014) (citing Sloan v. Fauque, 784 P.2d 895, 896 (Mont.1989)
(quoting Restatement (Second) of Torts§ 876)). Thus, "where two or more
persons commit tortious acts in concert, all are liable for the tortious acts of
Dooley argues that ATTIC pied a mere recitation of the elements above and
that since the acts in concert claim relates to the fraud claims, ATTIC is subject to
the heightened pleading standard. Further, Dooley contends that there is no
factual support for the conclusory allegations. ATTIC claims that "Dooley's
knowledge of the fact that Gorman Group and Tango Transport were
under-reserving claims and failing to make payments on settled claims, and his
subsequent failure to disclose the same to ATTIC at the very time his fellow
officers and directors were actively misrepresenting their claims handling
practices constitutes, at a minimum, silence during the commission of a tort,
regardless of whether Dooley actively encouraged or instructed them to withhold
such critical information from ATTIC." (Doc. 15 at 32-33.)
First, the Court has already determined that ATTIC has satisfied the
heightened pleading standard in support of its fraud-based claims. But, more
importantly here, ATTIC's Complaint is not an unsupported recitation of the
elements of acts in concert. Instead, the Complaint alleges that the Defendants
were aware of the fraud and misrepresentations, knew that they had a duty to
convey complete and accurate information to ATTIC with respect to their claims
handling process, and that all Defendants acted in concert to conceal the alleged
wrongdoings. (Doc. 1 at 30-31.) This may include Dooley's silence, a subject
that ATTIC should be allowed to explore in discovery. Thus, the Court finds that
ATTIC has pled sufficient facts to make out a prima facie cause of action for
Dooley's alleged acts in concert with the other Defendants.
Consequently, Dooley's motion to dismiss Count VIII is denied.
VII. Civil Conspiracy
A claim for civil conspiracy requires the following elements:
( 1) two or more persons;
(2) with an object to accomplish;
(3) had a meeting of minds on the object or course of action;
(4) to commit one or more unlawful overt acts; and
( 5) damages were the proximate result thereof.
Boylan v. Van Dyke, 806 P.2d 1024, 1028 (Mont. 1991).
Again, Dooley contends that ATTIC recites the elements and that the
Complaint does not contain sufficient facts to survive a motion to dismiss. The
Complaint states that "[d]uring 2015 Defendant Dooley joined together with the
Ownership Group and Nelson to further advance the plan previously designed by
the Ownership Group and Nelson." (Doc. 1at32.) ATTIC further alleges that the
plan to deceive ATTIC involved the failure to properly investigate, pay, and
handle claims. (Id.) ATTIC specifically alleges that the Defendants had a meeting
of the minds to improve Gorman Group and Tango Transport's financial position
prior to liquidation at the expense and hardship of ATTIC. (Id.) This alleged
conspiracy caused harm directly to ATTIC because ATTIC had to assume the
handling and payment of closed and unreimbursed claims from the Insureds. (Id.)
Instead of rehashing the elements of civil conspiracy, ATTIC combines
facts with every element to sufficiently plead a plausible claim for civil conspiracy
against Dooley. Thus, Dooley's motion to dismiss Count IX is denied.
VIII. Piercing the Corporate Veil
Finally, Dooley moves to dismiss ATTIC's claim for piercing the corporate
veil. ATTIC agrees that its piercing the corporate veil claim does not apply to
Dooley. (Doc. 15 at 34-35.) Thus, this claim is dismissed with respect to Dooley.
Accordingly, IT IS ORDERED that Defendant Dooley's Motion to Dismiss
(Doc. 4) is GRANTED IN PART and DENIED IN PART. Defendant's Motion to
Dismiss for Lack of Personal Jurisdiction is DENIED. Defendant's Motion to
Dismiss Counts I, II, VII, and Xis GRANTED. Defendant's Motion to Dismiss
Counts III, IV, V, VI, VIII, and IX is DENIED.
DATED this 28.+taay of July, 2017.
Dana L. Christensen, Chief Judge
United States District Court
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