United States District Court, D. Rhode Island
For Transched Systems Limited, Plaintiff: Christine K. Bush, Eric E. Renner, LEAD ATTORNEYS, Scott & Bush Ltd., Providence, RI; Matthew J. Ginsburg, LEAD ATTORNEY, PRO HAC VICE, Rickey G. Glover, PRO HAC VICE, Robert J. Gilbert, PRO HAC VICE, Gilbert and Renton LLC, Andover, MA.
For Federal Insurance Company, Defendant: Thomas C. Angelone, LEAD ATTORNEY, Hodosh, Spinella & Angelone, Providence, RI; Michael O. Kassak, PRO HAC VICE, White and Williams LLP, Cherry Hill, NJ.
MEMORANDUM AND ORDER
John J. McConnell, Jr., United States District Judge.
Before the Court is Defendant Federal Insurance Company's Motion to Dismiss Plaintiff TranSched Systems Limited's Complaint. (ECF No. 10.) In its Complaint, TranSched seeks a declaration that Federal is liable under Rhode Island's direct action statute, R.I. Gen. Laws § 27-7-2.2, and for statutory and/or common-law bad faith. Federal raises two arguments in its motion: 1) TranSched's claims for insurance coverage fail because the Policy excludes those claims and 2) its bad faith claims fail because it is neither the insured under the policy nor an assignee of the insured. TranSched opposes Federal's
motion. (ECF No. 12.) Because the Court finds that TranSched has sufficiently pled a claim that the policy provides coverage, Federal's Motion is DENIED.
I. FACTS AND TRAVEL
TranSched obtained a jury verdict on a breach of contract action filed in Delaware against Versyss Transit Solutions, LLC, Versyss Commercial Systems, LLC, Holbrook Systems, Inc. (" Versyss" ), and Henry W. Holbrook.  In that suit, TranSched alleged that Versyss, specifically Vice President Sheryl Miller and Chief Technology Officer Lorin Miller,  made material misrepresentations during the negotiation and execution of an Asset Purchase Agreement (APA) through which TranSched would acquire Versyss' transportation software assets. (ECF No. 1 at ¶ ¶ 6, 9-10.) Federal Insurance Company, with whom Versyss had an insurance policy, retained counsel for Versyss in the Delaware case. ( Id. at ¶ ¶ 16-20.)
After trial, a jury found Versyss liable to TranSched for 1) breach of contract regarding misrepresentations and warranties in the APA, 2) breach of the implied covenant of good faith and fair dealing, and 3) intentional misrepresentation. ( Id. at ¶ ¶ 12-13.) " On March 29, 2012, the trial court ruled that, in addition to the $500,000 damages award from the jury, TranSched was entitled to $19,874.25 in costs, $170,268.75 in prejudgment interest, and post-judgment interest at a rate of $154.11 per diem. On that same date, the trial court entered an order resolving all post-trial motions and leaving intact the jury verdict awarded in favor of TranSched and against Versyss." ( Id. at ¶ 14.)
Versyss failed to pay the judgment and is now defunct. Federal disclaimed any duty to indemnify based on the Policy's fraud and contract exclusions. (ECF No. 10 at 7.) TranSched filed this lawsuit, seeking a declaration that Federal must pay the $500,000 jury award under the Policy, and damages for statutory and/or common law bad faith. (ECF No. 1 at ¶ 14.) Federal seeks dismissal of the case based on the exclusions in the Policy. (ECF No. 10.)
II. STANDARD OF REVIEW
In reviewing a motion to dismiss filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court accepts as true the well-pleaded factual allegations of the complaint and draws all reasonable inferences in favor of the plaintiff.
Cook v. Gates , 528 F.3d 42, 48 (1st Cir. 2008); McCloskey v. Mueller , 446 F.3d 262, 266 (1st Cir. 2006). To withstand " a motion to dismiss, a complaint must allege 'a plausible entitlement to relief.'" ACA Fin. Guar. Corp. v. Advest, Inc. , 512 F.3d 46, 58 (1st Cir. 2008) (quoting Bell A. Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 1967-69, 167 L.Ed.2d 929 (2007)); see also Ashcroft v. Iqbal , 556 U.S. 662, 678-87, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In Iqbal , the Supreme Court further explained, " [a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." 556 U.S. at 664. " [A] plaintiff . . . is . . . required to set forth factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory." Gooley v. Mobil Oil Corp. , 851 F.2d 513, 515 (1st Cir. 1988).
A. APPLICABLE LAW