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Sealey v. Johanson

United States District Court, S.D. Mississippi, Northern Division

January 4, 2017




         This ERISA case is before the Court on Defendant Herbert C. Bruister's Motion to Dismiss Count Nine of the Amended Complaint and Certain of the Relief Requested against him in the Amended Complaint [120]. For the reasons that follow, the motion is granted.

         I. Facts and Procedural History

         The factual underpinning of this case began in 2002, when Bruister & Associates, Inc. (“BAI”), following the legal advice of attorney David R. Johanson, established an Employee Stock Ownership Plan (“ESOP”). Between 2002 and 2005, BAI's owner, Defendant Bruister, sold 100% of BAI's shares to its employees through a series of transactions with the ESOP. Those transactions ultimately led to the Secretary of Labor and two plan participants filing separate lawsuits alleging that the transactions violated various ERISA provisions (the “ERISA Actions”). Following a 19-day bench trial on the consolidated cases, the Court entered judgment in favor of Plaintiffs and against Bruister and other Defendants for in excess of $6 million; the Court later awarded the prevailing private Plaintiff, Vincent Sealey, an additional $3.1 million in attorneys' fees and expenses.

         At the time the ERISA Actions were filed, Bruister, the other plan fiduciaries, and some related entities were insured under a fiduciary-liability policy issued by Beazley Insurance Company. Beazley disputed coverage, and Bruister and others ultimately filed a civil action against Beazley in this Court in August 2010 (the “Coverage Action”). The parties to the Coverage Action settled that matter effective December 1, 2011, pursuant to a Confidential Settlement Agreement and Release (the “Agreement”). Under the Agreement, which Bruister signed both in his individual capacity and as a Trustee to the ESOP, Beazley withdrew its reservation or rights and agreed to pay defense costs and any settlement or judgment in the ERISA Actions subject to reduced limits of liability under its policy. By the time the Court entered its judgment in the ERISA Actions, the reduced insurance coverage had been fully exhausted by defense costs.

         On February 27, 2015, Sealey filed this suit against Bruister, Johanson, Beazley, and others, complaining of Defendants' actions with respect to the Coverage Action and the Agreement. Sealey filed an Amended Complaint [83] on February 24, 2016; Bruister both answered [119] the Amended Complaint and filed the instant motion [120] on June 10, 2016. Plaintiff responded [127] to Bruister's motion, and Bruister failed to file a reply within the time provided by local rules. The Court has personal and subject-matter jurisdiction and is prepared to rule.

         II. Standard

         Bruister suggests that his motion is governed by Federal Rule of Civil Procedure 12(b)(6). Def.'s Mot. [120] at 6-7. But the motion was filed after Bruister had answered, so it is properly considered as a motion for judgment on the pleadings under Rule 12(c). See Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999). Regardless, “the standards for deciding motions under both rules are the same.” Great Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 313 n.8 (5th Cir. 2002).

         In considering a motion under Rule 12(c), the “court accepts ‘all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.'” Martin K. Eby Constr. Co. v. Dall. Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004) (quoting Jones, 188 F.3d at 324). But “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To overcome a Rule 12(c) motion, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. at 555 (citations and footnote omitted).

         “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.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). It follows that “where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)). “This standard ‘simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of' the necessary claims or elements.” In re S. Scrap Material Co., LLC, 541 F.3d 584, 587 (5th Cir. 2008) (citing Twombly, 550 U.S. at 556).

         III. Analysis

         A. Fraud Claim

         Bruister seeks dismissal of the fraud claim asserted against him; he argues that “[t]here is no allegation that Bruister made any representation to the Plans or to Plaintiff Sealey.” Def.'s Mot. [120] at 9-10. It is well-settled that a plaintiff asserting a fraud claim under Mississippi law must prove that the defendant made a material false representation upon which the plaintiff justifiably relied. See Howard v. CitiFinancial, Inc., 195 F.Supp.2d 811, 824 (S.D.Miss. 2002). And the circumstances of the alleged fraud-including “the time, place and contents of any false ...

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