Case Information
‐ ‐ cv Intelligent Dig. Sys., LLC Ins. Co.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER
R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT . C ITATION TO A SUMMARY ORDER FILED ON OR AFTER J ANUARY IS PERMITTED AND IS GOVERNED BY F EDERAL R ULE OF A PPELLATE P ROCEDURE 32.1 AND THIS COURT S L OCAL R ULE 32.1.1. W HEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT A PARTY MUST CITE EITHER THE F EDERAL A PPENDIX OR AN ELECTRONIC DATABASE ( WITH THE NOTATION SUMMARY ORDER ʺ ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL .
At stated term United States Court Appeals Second Circuit, held Thurgood Marshall United States Courthouse, Foley Square, City New York, th day September, two thousand seventeen. PRESENT: RALPH K. WINTER,
DENNY CHIN,
SUSAN L. CARNEY,
Circuit Judges .
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ x
INTELLIGENT DIGITAL SYSTEMS, LLC, RUSS &
RUSS PC DEFINED BENEFIT PENSION PLAN, JAY
EDMOND RUSS, individually assignees
Jack Jacobs, Robert Moe, Michael Ryan Martin
McFeely, Jason Gonzalez,
Plaintiffs ‐ Appellants ‐ ‐ cv
BEAZLEY INSURANCE COMPANY, INC.,
Defendant ‐ Appellee.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
FOR PLAINTIFFS APPELLANTS: IRA LEVINE, Law Office Ira Levine, Esq.,
Massapequa, New York. *2 FOR DEFENDANT ‐ APPELLEE: CHRISTOPHER M. STRONGOSKY (Joseph G.
Finnerty III, Neal F. Kronley, on brief ), DLA Piper LLP (US), New York, New York. Appeal from United States District Court for Eastern District of New York (Spatt, J. ).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED judgment of district is AFFIRMED .
Plaintiffs ‐ appellants Intelligent Digital Systems, LLC ( ʺ IDS ʺ ), Russ & Russ PC Defined Benefit Pension Plan (the Plan ʺ ), and Jay Edmond Russ, individually and assignees individuals Jack Jacobs, Robert Moe, Michael Ryan, Martin McFeely, Jason Gonzalez, appeal s October dismissing amended complaint resolving insurance action favor defendant ‐ appellee Beazley Insurance Company, Inc. ( ʺ Beazley ʺ ). primary issue is disclaimer coverage claims against Visual Management Systems, Inc. ( ʺ ). We assume familiarity underlying facts, procedural history, issues appeal.
A. Background is New York attorney who founded IDS, technology company digital recording industry. Directly indirectly (through another wholly owned company), sole officer IDS. He also fiduciary Plan.
In January 2008, IDS agreed to sell its assets to non ‐ party VMS, a company, now dissolved, video technology business. VMS agreed to pay IDS $1.5 million over time and issued a promissory note to effect, and it agreed also to add Russ Board of Directors and hire him as a consultant. On February VMS Board of Directors met and, after a motion made and seconded, approved transaction and Russ ʹ appointment, conditioned upon completion of transaction. The transaction closed on April 2008. VMS general counsel confirmed would be a director as of May meeting. participated three board meetings and paid for his services a board member. is Connecticut company provided insurance coverage under and officers liability insurance policy (the ʺ Policy ). Policy
provides ʺ [t]he Insurer shall pay on behalf Directors and Officers all Loss which indemnified by Company resulting any Claim first made against Directors and Officers during Policy Period for Wrongful Act. ʺ Suppl. App x (emphasis omitted). Policy defines ʺ Directors Officers include ʺ persons who were, now are, or shall or directors. ʺ Suppl. Section III(F) Policy contains what refer an exclusion, which excludes coverage any Claim . . . by, on behalf of, direction any Insureds, except extent such Claim . . . employment related brought behalf any Directors Officers. ʺ *4 Suppl. App ʹ x 559, (emphasis omitted). Policy defines Insureds as ʺ the Directors and Officers and the Company. ʺ Suppl. App ʹ x (emphasis omitted).
In December 2008, announced he resigning the board and might sue VMS for payments owed under the promissory note. Plaintiffs initiated an action against and the other five directors March 2009. Beazley denied VMS coverage under Policy and cited the insured insured exclusion. litigating parties settled action, four directors agreeing to pay total $75,000, all five directors agreeing to entry judgments against them amounts exceeding $2 million, plaintiffs agreeing unconditionally forbear collection judgments against five directors, and five assigning their rights under Policy plaintiffs. S. ʹ 59,
On March 12, 2012, commenced diversity action against Beazley and sought indemnification for unpaid amounts judgments. On November 2012, converted Beazley s motion dismiss complaint summary judgment motion, denied motion, denied Beazley subsequent motion for reconsideration. On June denied cross ‐ motions for summary amended complaint narrowed issues trial to: (1) whether Board thus entitled indemnification because exclusion (2) if not, could assert equitable estoppel defense against coverage *5 claim. jury found at trial had been duly elected appointed within meaning of Policy and therefore it did reach estoppel defense. Final entered favor October 5, 2016. This appeal followed.
B. Discussion
Two principal issues are presented: (1) whether v. clause applies case, and (2) assuming it does, whether director.
1. Applicability of Insured v. Insured Clause Under New York law, which parties agree applies Policy, insurance policies are interpreted according general rules of contract interpretation. ʺ Olin Corp. v. Am. Home Assurance Co. , 704 F.3d 89, 98 (2d Cir. 2012). This initial interpretation contract and its terms are ambiguous are questions law court, Morgan Stanley Grp. Inc. v. New England Ins. Co. , 225 F.3d 275 (2d Cir. 2000), so we review interpretation contract terms de novo , see U.S. Fid. & Guar. Co. Fendi Adele S.R.L. , 823 F.3d 149 (2d Cir. 2016). must interpret contract give effect intent expressed clear language contract, Morgan Stanley , F.3d at (quoting Vill. Sylvan Beach Travelers Indem. Co. F.3d (2d Cir. 1995)), give words phrases contract their plain meaning, Olin F.3d A term ambiguous if language could suggest ʹ more than one meaning when viewed objectively *6 reasonably intelligent person. ʹʺ Morgan Stanley 225 F.3d at 275 (quoting Lightfoot v. Union Carbide Corp., 110 F.3d 898, 906 (2d Cir. 1997)).
By limiting trial issue whether was or appointed, district essentially ruled as a matter law that insured v. insured clause applied case, rejecting plaintiffs ʹ contention at minimum there was ambiguity in clause exclusion could read as applying only claims brought by in their capacities directors.
We agree court. insured v. insured exclusion, on face, exempts coverage ʺ any claim brought by, on behalf of, at direction an insured director, unless claim employment ‐ related. Suppl. ʹ exclusion not limited claims brought by an insured in his capacity director. On face, exclusion applies claims (except employment ‐ related claims) regardless director brings claims an individual fiduciary capacity. Moreover, employment related exception exclusion applies only claims brought employees ‐‐ not by consultants, like Russ. Indeed, his consultant agreement specified he an independent contractor an employee. *7 Accordingly, plaintiffs ʹ challenge the application the insured v. insured exclusion claims fails the merits. Whether Was Duly Elected or Appointed
Assuming the clause applies, the next question is was duly elected or appointed ʺ director within meaning Policy. While question was put jury jury resolved it against plaintiffs, plaintiffs argue in essence that summary should have been granted in their favor. They contend that should have determined that Policy language ambiguous ambiguity should have been resolved in their favor. See Belt Painting Corp. TIG Ins. Co. N.Y.2d (2003) ( ʺ [P]olicy exclusions are given strict narrow construction, with any ambiguity resolved against insurer. ʺ ). Specifically, plaintiffs allege Policy language ambiguous process required directors be considered duly elected or appointed.
Our de novo review indicates no such ambiguity exists in Policy. plain meaning phrase duly Policy definition Directors Officers must selected, vote appointment, accordance proper procedures. There nothing language Policy support ʹ argument omission references ʺʹ de facto ʹ director[s], ʺ Appellants Br. renders otherwise unambiguous language ambiguous.
Plaintiffs ʹ reliance on the VMS bylaws is also misplaced. They argue that §§ 2.1, 2.2, 2.6 bylaws required the board to formally vote to expand its membership addition to voting to appoint a new director, that district court erred not reaching this conclusion a matter law. We are not persuaded.
Under Nevada law, which parties agree applies to bylaws, [2] whether a contract is ambiguous is a question law that court may decide on summary judgment. Galardi Naples Polaris, LLC P.3d 366 (Nev. 2013). ʺ [A] contract is ambiguous if terms may reasonably be interpreted more than one way. ʺ Id. court may admit expert evidence industry custom trade usage to provide context legal decision about a contract ambiguous. Id. If contractual language ambiguous, may admit extrinsic evidence to allow a jury assess parties intent, clarify ambiguities, fill omissions. Ringle Bruton P.3d (Nev. 2004).
As an initial matter, we tend disagree conclusion bylaws were ambiguous: we doubt that bylaws can be read require separate, formal vote increase number directors from five six. While bylaws provide number was determined Board time time, bylaws do specify formal vote *9 needed set or change the number. By voting unanimously to appoint Russ as sixth director, board implicitly ‐‐ if not explicitly ‐‐ ʺ determined, see App ʹ x that it would increase membership six. Cf. Redl Sec ʹ y of State P.3d (Nev. 2004) (finding sufficient substantial compliance with statutory requirements for corporate filings). Contrary plaintiffs ʹ suggestion, bylaws ʹ reference newly ‐ created directorships resulting any increase authorized number directors ʺ ʹ (emphasis added), does not explicitly require more formal action by board.
Even assuming district court correctly held that bylaws were ambiguous, question Russ was duly elected appointed as a director was put jury, jury determined he was. That decision was well supported by largely undisputed evidence: VMS s five were present February board meeting; thereafter began serving as director sought confirmation he was indeed covered Policy; he attended three board meetings paid his service; various filings with government agencies, represented director. All treated as director.
As we agree district applicability exclusion, we need address claims error rulings equitable estoppel defense, which we express no view.
We have considered remaining arguments find them without merit. Accordingly, we AFFIRM court.
FOR THE COURT: Catherine O Hagan Wolfe, Clerk
[1] In contrast, Trs. Princeton Univ. Nat l Union Fire Ins. Co. Pittsburgh, Pa. N.Y.S.2d WL (N.Y. Sup. Ct. Apr. 2007) (unreported disposition), case relied heavily, policy insured insured clause did contain limiting language, noted exclusion there narrower scope than typical ʹ versus exclusions. ʺ Id. *1 n.1.
[2] agree Nevada law contracts governs issue because Nevada corporation.