United States District Court, D. Arizona
PAUL G. ROSENBLATT, District Judge.
Before the Court are Defendant's motion to dismiss (Doc. 5) and Plaintiff's motion for partial summary judgment (Doc. 8). The Court held oral argument on April 22, 2014. For the reasons set forth herein, the Court will grant Defendant's motion to dismiss.
Defendant National Union Fire Insurance Company ("National Union") issued Directors, Officers and Corporate Liability Insurance Policy #XXX-XX-XX to Plaintiff AMERCO, covering the period from July 23, 2002, to July 23, 2003. (Doc. 5-1, Ex. A.) The Policy covered certain loss to AMERCO, including loss arising from securities claims against the company and from claims against its directors or officers. ( Id. )
Two provisions of the Policy are at issue here. Exclusion 4(I) excludes coverage for
any Loss in connection with a Claim... by any security holder of the company, whether directly or derivatively, unless such security holder's claim is instigated and continued totally independent of, and totally without the solicitation of, or assistance of, or active participation of, or intervention of, any Insured or the Company. Endorsement 13 ("Family Exclusion") excludes
any Loss in connection with any Claims(s)... brought by any security holder of the Company, whether directly or derivatively, unless such Claim(s) is instigated and continued totally independent of, and totally without the solicitation of, or assistance of, or active participation of, or intervention of, any member of the Shoen family.
In September 2002, Paul Shoen, a family member and former AMERCO director, brought an action in the Nevada state court, alleging securities violations against AMERCO's directors and officers. ( See Doc. 9, ¶ 12.) AMERCO tendered a request for coverage to National Union, which National Union denied based on the exclusions just noted. AMERCO does not contest this decision. ( Id., ¶29.)
After the Shoen action was filed, two more actions were filed in the Nevada state court, one by Belec and one by MS Management, neither of which were Insureds under the National Union policy. ( Id., ¶ 12.) In February 2003, Belec filed a motion to consolidate his case with MS Management case. ( Id., ¶ 13.) The Nevada state court sua sponte consolidated all three actions-Shoen, Belec, and MS Management. ( Id., ¶¶ 14-15; Doc. 5-1, Ex. F.) The court noted that it did "not have the power to merge the complaints or claims for relief." (Doc. 5-1, Ex. F at 2.)
On March 26, 2003, National Union denied coverage for the Belec and MS Management actions. National Union informed AMERCO:
We have reviewed the dockets for the Belec, Shoen and MS Management matters and it appears that these matters have all been consolidated under the Shoen matter (referred to herein as the "Consolidated Action"). Therefore, it appears that the Consolidated Action is being brought with the assistance of, active participation of and intervention of a member of the Schoen Family. Additionally, Paul Schoen is a former director of the Company and thus is an Insured under the Policy. Accordingly, the provisions of Exclusion 4(i) and Endorsement No. 13 preclude coverage for these matters.
(Doc. 5-1, Ex. B.)
In April 2003, two other actions were filed against AMERCO's directors, by Glenbrook Capital and Alan Kahn. Neither Glenbrook nor Kahn were Insureds under the National Union policy. ( See Doc. 9, ¶¶ 18-19.)
On May 5, 2003, Shoen filed a Notice of Intent to File Merged Complaint, with the consolidated complaint superceding the individual complaints. (Doc. 1-1, ¶ 9; Doc. 5-2, Ex's G, H.) The plaintiffs agreed to work together, through counsel, to prosecute their merged claims in the Consolidated Action by establishing a "Litigation Committee" to "distribute work and avoid duplication" of efforts. (Doc. 5-2, Ex. H.) Shoen's attorney was designated "Co-Lead Counsel" for the Consolidated Action and given responsibility for "determining litigation strategy, assigning work, entering into agreements and stipulations with Defendants, initiating and taking discovery, supervising the drafting of pleadings and motions, and conducting the trial and any appeals." ( Id. )
On May 8, 2003, the Nevada trial court granted the defendants' motions to dismiss consolidated complaint. ( Id., ¶ 20.)
On May 19, 2004, National Union denied AMERCO's claim for coverage regarding the Kahn and Glenbrook actions, explaining:
Due to Paul Schoen's instigation of the Consolidated Action by first filing the state derivative claim and his continued involvement and assistance with the Consolidated Action, National Union maintains that coverage for defense and indemnity of the Consolidated Action is precluded by Exclusion 4(i) and Endorsement No. 13.
Upon consolidation of the Belec, the MSMC, the Kahn, and the Glenbrook actions with the Shoen action, the Belec, MSMC, Kahn and Glenbrook actions' independence from Mr. Shoen clearly discontinued, and, therefore it ...