banner

PSD Wins Federal Appeal in Insurance Coverage Case

On April 10, 2020, a federal appellate court in Boston ruled for PSD’s client. In the case, a group of church members sought a seven-figure damages award. The claims arose from an insurance coverage dispute. In the ruling, the court focused on a coverage exclusion. Justice David Souter authored the opinion.

Background

On January 15, 2017, a group of church members voted to withdraw from a Presbyterian organization. The “break-away” group called themselves the “Newton Covenant Church.”

On March 17, 2017, the insured Presbyterian church brought a lawsuit in state court against the “break-away” group. The state court complaint alleged trespass and conversion. According to the complaint, the “break-away” group exerted control over real property and bank accounts. As alleged, the dispute followed the church’s “progressive stances” on same-sex marriage and the ordination of gay, lesbian, bisexual and transgender ministers.

On March 23, 2017, the “break-away” group changed the church’s name at the Secretary of the Commonwealth from “Newton Presbyterian Church” to “Newton Covenant Church.” The “break-away” group then submitted a notice to the Great American Insurance Company seeking coverage in the state court action under a Directors and Officers insurance policy. Later, the “break-away” group lost a summary judgment motion, Then, the “break-away” group settled the state court action.

In the federal case that followed, the “break-away” group challenged a denial of coverage.

The trial court granted PSD’s motion for summary judgment that invoked a coverage exclusion.

Appellate Ruling for PSD’s Client

Writing for the court, Justice Souter rejected the “break-away” group’s arguments. In the opinion, the court found no significance to the change of corporate status. The court held:

[T]o the extent that NCC claims it was a distinct organization even prior to its separate registration with the State, it was not within the definition of an insured “Organization.” To the extent that NCC claims instead that it was a segment of the original NPC at the time of the state court complaint, coverage is barred for another reason: § IV.H of the Policy. That provision, one of a handful of “Exclusions” under the Policy, precludes coverage for claims between insureds…. And, finally, to the extent that NCC claims it was the original organization that had simply undergone a formal name change, once again that would implicate §IV.H’s exclusion.

In this case, PSD lawyer Ashly Scheufele argued the appeal for the Great American Insurance Company. Barry Pollack and Lauren Riddle also worked on the matter. Click here for a copy of the decision.

On April 2, 2020, PSD won a motion to transfer federal court claims from Michigan to Maine. In the case, a former employee sued Legacy Global Sports, LP and Premier Sports Events, LLC. By his complaint, the employee sought millions of dollars from PSD’s clients, PSE and Legacy. The former employee claimed he had been discriminated against as a male. Furthermore, he alleged breaches of certain employment and bonus agreements. Prior to the events he complained about, this employee joined the business as part of a buyout of a company he started.

Forum Selection Clause

Importantly, the Purchase & Sale Agreement contained a forum selection clause requiring the resolution of any dispute between the parties in a Maine court. By contrast, the employee signed that agreement for the corporate seller. With respect to the P&S Agreement, he did not sign in his individual capacity. His employment and bonus agreements contained choice-of-law provisions that provided for the application of Maine law. Those agreements lacked forum selection clauses.

Ruling

Despite the presence of individual claims, the federal court found the former employee “closely related” to the selling party and personally bound by the forum selection clause in the P&S Agreement. The ruling applied even for claims arising under his employment agreement and bonus agreement.

The federal court explained:

Lukasak did not personally sign the P&S Agreement. However, he admits that he was intimately related to the P&S Agreement: He signed the P&S Agreement twice, in his capacity as representative of both Premier Sports Events, Inc, and Premier Sports Events, LLC. In doing so, Lukasak represented the entirety of the seller side of the agreement. He was closely involved in the buyout deal, as evidenced by the fact that he negotiated the deal on the seller side. The buyout was the sole motivating factor for the creation of both his Employment Agreement and his Bonus Incentive Agreement: Without the buyout, the supplemental contracts that bind Lukasak personally would not exist. Taking all these facts together, it is clear to the Court that all of the contracts signed on February 1, 2014 were part of the same transaction and that they form one agreement.

As a result, the case will proceed if at all in Maine. Click here for a copy of the decision.

PSD lawyers Barry Pollack, Phil Rakhunov, Ashly Scheufele and Lauren Riddle represented PSE and Legacy.