IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MONTANA HELENA DIVISION

MARK BIEGLER, CV-20-32-H-CCL Plaintiff, Vs. Opinion & Order G.M.I. N.A. INC. D/B/A GMI INSURANCE; UNDERWRITING SERVICE MANAGEMENT COMPANY, LLC; UNITED SPECIALTY INSURANCE COMPANY, and DOES 1-10, Defendants.

Defendants Underwriting Service Management Company, LLC (Underwriting Service) and United Specialty Insurance Company (United Specialty) move to dismiss Plaintiff's complaint for lack of personal jurisdiction, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. (Doc. 16). Having been briefed fully, Defendants’ motion is ripe for disposition. BACKGROUND This claim arises out of a decision by Fleetlogix, Inc. (Fleetlogix) to

terminate its business relationship with Plaintiff Mark Biegler (Biegler) after Underwriting Service cancelled a policy issued by United Specialty to Fleetlogix.

Biegler claims that the cancellation of the policy led Fleetlogix to terminate its

business relationship with him, causing the loss of future commissions.

Biegler enumerates six separate claims for relief in his complaint. In his

first claim for relief (Count I) he alleges that Defendant G.M.LN.A. Inc. (GMI)'

“failed to exercise reasonable care to bind the coverage for Fleetlogix that was

acceptable to the insurer and/or failed to properly communicate the nature of the

coverage to” Underwriting Service and United Specialty. (Doc. 1 at § 30). He

further alleges that Underwriting Service and United Specialty are responsible for

GMI’s conduct “by principles of agency.” (Doc. | at 31). Biegler’s second claim for relief (Count Il) is directed only at Underwriting

Service and United Specialty. He alleges Underwriting Service and United

Specialty failed to “review and be aware of the terms of coverage that it bound.”

(Doc. 1 at 33). In his third claim for relief (Count III), Biegler alleges that Underwriting

Service failed to provide accurate information to Biegler “in connection with the

placement” of the insurance coverage for Fleetlogix and failed to provide accurate

information during Biegler’s July telephone call with representatives of

| GMI has also moved to dismiss the complaint, a motion which the Court will address in a separate order. Page 2 of 16

Underwriting Service. (Doc. | at 937). Biegler further alleges that Underwriting

Service made negligent misrepresentations to him in a June 2018 telephone call.

(Doe. 1 at § 39). He alleges that United Specialty is liable for those negligent

misrepresentations by its agents, GMI and Underwriting Service. (Doc. | at

- 39). Biegler’s fourth claim for relief (Count IV) is directed at GMI and

Underwriting Service and does not name United Specialty. Biegler alleges that

GMI and Underwriting Service breached their “absolute duty” to procure the

insurance he requested for Fleetlogix. (Doe. | at (42). He further alleges that

GMI and Underwriting Service assured him that the requested coverage had been

procured. (Doc. | at § 43). Biegler’s fifth claim for relief (Count V) is directed at GMI and

Underwriting Service and does not name United Specialty. Biegler alleges that

Underwriting Service negligently performed the duty it had voluntarily undertaken

to provide the primary insurance coverage Biegler requested on behalf of

Fleetlogix. (Doc. | at 47). Biegler attempts to state tort claims in his first through fifth claims for

relief, which allege negligence, negligent misrepresentation, and breach of duty.

His sixth claim for relief (Count VI), in which he alleges that all three defendants

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acted with malice, as that term is defined by Montana law, (Doc. 1 at 50), does

not actually state a separate claim and is designed to support his request for

punitive damages. Biegler negotiated with Amy Phillips (Phillips) of GMI to obtain the United

Specialty coverage for Fleetlogix starting in January of 2018. (Doc. 1 at 12).

The policy was underwritten by Underwriting Service with United Specialty “on

the paper.” (Doc. 1 at § 13). The terms were finalized in April of 2018. (Doc. 1

at J 16). In May of 2018, Biegler reported a Fleetlogix potential bodily injury claim

to Phillips, who contacted the carrier and then gave Biegler contact information

for John Kolb (Kolb) the underwriter at Underwriting Service who provided the

United Specialty quote. (Doc. 1 at 19). Biegler contacted Kolb, who put him in

touch with Murphy, the owner of Underwriting Service. (Doc. 1 at J 19).

Biegler is a Montana citizen and an insurance producer licensed and

authorized to do business in Montana. (Doc. | at § 2). GMIis a Pennsylvania

corporation authorized to do business in Montana. (Doc. | at § 3). Fleetlogix is

headquartered in San Diego, California. (Doc. 1-1 at 1). Underwriting Service is a Delaware limited liability company (Doc. 17-1 at

q 5), with its principal place of business in Pennsylvania. (Doc. | at § 4).

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Biegler’s first contact with anyone from Underwriting Service occurred in May of

2018, after the contract terms had been finalized. (See Doc. | at qq 19 - 20).

Underwriting Service’s owners/members are all citizens of states other than

Montana. (Doc. 17-1 at 6). Although Underwriting Service has no business

operations in Montana, it has placed a minimal amount of surplus lines coverage

for Montana insureds. (Doc. 17-1 at § 7). Underwriting Service is not registered

with the Montana Secretary of State, has no employees working or living in

Montana, and owns no property in Montana. (Doc. 17-1 at ff 8 - 10). Underwriting Service does not advertise in Montana. (Doc. 17-1 at § 11).

Underwriting Service maintains a website that is “international in scope, not

specific to Montana, and through which insurance products may not be

purchased.” (Doc. 17-1 at 12). Underwriting Service “does not derive any

significant amount of revenues from Montana.” (Doc. 17-1 at ¥ 13).

United Specialty is a Delaware Corporation with its principal place of

business in Texas. (Doc. 1 at 9.5). United Specialty had no direct communication

with Biegler or GMI “with respect to the subject insurance policy giving rise to

this case” and acted through its general agent, Underwriting Service. (Doc. 17-2

at § 10). Although United Specialty has no business operations in Montana, it has

written a minimal amount of premiums for Montana insureds. (Doc. 17-2 at § 4).

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Its income from those premiums is “minuscule in comparison to [its] nationwide

business operations.” (Doc. 17-2 at 49). United Specialty is recognized as an

eligible surplus line insurer with the Montana Insurance Commissioner, but is not

registered to do business in Montana with the Montana Secretary of State. (Doc.

17-2 at ] 5). United Specialty has no employees working or living in Montana,

does not own property in Montana and has not advertised in Montana. (Doc. 17-2

at J§ 6 - 8). LEGAL STANDARDS “Where a defendant moves to dismiss a complaint for lack of personal

jurisdiction, the plaintiff bears the burden of demonstrating that jurisdiction is

appropriate.” Schwarzenegger v. Fred Martin Motor Co.,

(9"

Cir. 2004). When the district court decides the motion without an evidentiary

hearing, it must accept as true uncontroverted and well-pleaded factual allegations

in the complaint, and plaintiff need only make a prima facie showing of personal

jurisdiction. Boschetto v. Hansing,

(9" Cir. 2008).

Defendants Underwriting Service and United Specialty presented an affidavit in

support of their motion (Doc. 17-1) and Plaintiff Biegler submitted a declaration in

support of his opposing brief. (Doc. 23). Any conflicts between statements made

‘nthe declaration and affidavit must be resolved in Biegler’s favor.

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Schwarzenegger,

.

In determining whether in personam jurisdiction exists over a non-resident

defendant in a case where subject matter jurisdiction is based on diversity of

citizenship, the Court must apply a two-part test. First, the Court looks to the long-

arm statute of the state in which it sits; and second, the Court determines whether

application of the statute is consistent with due process. See BNSF Ry. v. Tyrell,

(2017)(citing International Shoe Co. v. Washington,

(1945)). Montana courts look to Rule 4(b) of the Montana Rules of

Civil Procedure to determine whether a Montana court can exercise personal

jurisdiction over a non-resident defendant. Milky Whey, Inc. v. Dairy Partners,

LLC,

(Mont. 2015). Under Rule 4(b)(1), a person is subject

to the general jurisdiction of the courts of Montana if he or she is “found” within

the state and subject to specific jurisdiction if the plaintiffs claim for relief arises

“from any of the acts listed in Rule 4(b)(1)(A - G).”

Although Montana’s

long-arm statute has been construed liberally in favor of finding jurisdiction in

Montana courts. see, e.g., Prentice Lumber Company, Inc. v. Spahn,

(Mont. 1970), Montana courts, like federal courts, must consider “whether the

exercise of personal jurisdiction conforms with ‘the traditional notions of fair play

and substantial justice embodied in the due process clause.’” Milky Whey, 342

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P.3d at J 18 (quoting Cimmaron Corp. v. Smith,

(Mont. 2002)).’

Exercise of personal jurisdiction over a non-resident defendant is consistent

with due process in one of two circumstances. “If the nonresident defendant’s

activities in the forum are sufficiently substantial and continuous, general

jurisdiction will lie even if the cause of action is not related to defendant's

activities in the state. Pacific Atlantic Trading Co. v. M/V Main Express,

(9" Cir. 1985). “But if the defendant’s activities are not sufficiently

pervasive to support general jurisdiction, the nature and quality of the

forum-related activities must be evaluated in relation to the specific cause of

action” to determine whether limited (specific) jurisdiction exists.

Plaintiff in this case appears to concede that the activities of Defendants

Underwriting Service and United Specialty in Montana are not sufficiently

pervasive to support general jurisdiction, arguing in favor of specific personal

jurisdiction. (See Doc. 22 at 15).2 The Ninth Circuit uses a three part test to

determine whether a defendant has sufficient contacts with the forum state to

2 This case does not appear to raise the same issues now being considered by the United States Supreme Court, after granting certiorari in Ford Motor Company v. Montana Eighth Judicial District Court,

(Mont. 2019). The undersigned has reviewed the Montana Supreme Court’s opinion and listened to the oral argument before the United States Supreme Court. 3 The Court uses the pagination assigned to the document in the CM/ECF system, rather than the page numbers assigned by the parties. Page 8 of 16

assert specific personal jurisdiction: (1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum; thereby invoking the benefits and protection of its laws, (2) the claim must be one which arises out of or relates to the defendant’s forum-related activities; and

(3) the exercise of jurisdiction must comport with fair play and substantial justice; i.e. it must be reasonable.

Schwarzenegger,

(quoting Lake v. Lake,

(9"

Cir. 1987)). Although Biegler bears the burden to establish the first two prongs of

this test, if and when he meets his burden, the burden shifts to Defendants “to

‘present a compelling case’ that the exercise of jurisdiction would not be

unreasonable.” Jd. (quoting Burger King Corp. V. Rudzewicz,

, 476 -

78 (1985)). Because Biegler’s claims sound in tort, the Court applies the “purposeful

direction” test and considers “evidence that the defendant has directed his action at

the forum state, even if those actions took place elsewhere.” Picot v. Weston,

(9 Cir. 2015). “Under this test, a defendant purposefully

directed his activities at the forum if he: ‘(1) committed an intentional act, (2)

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expressly aimed at the forum state, (3) causing harm that the defendant knows is

likely to be suffered in the forum state.’””

at 1214 (quoting Dole Food Co. v.

Watts,

(9 Cir. 2002)). DISCUSSION Biegler contends that Underwriting Service purposefully directed its acts

toward Biegler into Montana through Kolb, starting as early as June 11, 2018, as

evidenced by the email exchange between Kolb and Biegler about the

primary/non-contributory issue. (Doc. 22 at 18). Biegler further contends that

Underwriting Service purposefully directed its acts toward Biegler when Murphy

“called Biegler back in Montana at his Montana office on his Montana phone

number and pledged to honor the policy and its endorsements.” (Doc. 22 at 19).

According to the complaint, this phone conversation took place “[o]n or about

June 14, 2018.” (Doc. 1 at □ 20). Biegler also contends that Underwriting Service

purposefully directed its acts toward Biegler in Montana by choosing to

communicate with Biegler directly when it cancelled the coverage and refused to

reconsider this allegedly wrongful act “after many hours of calls and

correspondence with Biegler who fully informed them of their obligations.” (Doc.

22 at] 19). Biegler appears to argue that the actions of Kolb and Murphy should

be attributed to United Specialty because Underwriting Service was acting as an

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agent for United Specialty, a fact apparently conceded by United Specialty, at least

for purposes of its motion to dismiss. (See Doc. 17-2 at ¥ 10).

Biegler argues that his negligent misrepresentation claim against

Underwriting Service and United Specialty arises from the emails and phone calls

made after Fleetlogix made its first claim against the United Specialty policy, and

not from the initial decision by Underwriting Service and United Specialty to

provide coverage. (Doc. 22 at 20). He argues that the fact that the emails and

phone calls were directed to him in Montana is sufficient to provide this Court

with specific personal jurisdiction as to the negligent misrepresentation claim.

He next argues that this Court can assert specific personal jurisdiction as to his

other claims because they arise out of the same nucleus of facts as the negligent

misrepresentation claim. Jd.

The Court begins its analysis by reviewing the record to determine whether

Biegler has alleged sufficient facts to meet all three prongs of the “purposeful

direction” test, as laid out by the Ninth Circuit. See Schwarzenegger,

. Kolb and Murphy committed an intentional act when they communicated

with Biegler via email and by phone. For purposes of this motion, the Court

presumes that Kolb and Murphy were acting as agents for both Underwriting

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Service and United Specialty when they communicated with Biegler. Biegler has

alleged sufficient facts to meet the first test of the “purposeful direction” test as to

both Underwriting Service and United Specialty. The second prong of the “purposeful direction” test requires the plaintiff to

allege facts demonstrating that “the defendant’s allegedly tortious action was

‘expressly aimed at the forum.’” Picot,

(quoting Brayton Purcell

LLP vy. Recordon & Recordon,

(9" Cir. 2010)). While Kolb

and Murphy’s intentional acts may have been aimed at Biegler, the fact that

Biegler was in Montana when Kolb and Murphy contacted him is not sufficient to

establish the second prong of the test, which “looks to the defendant’s contacts

with the forum State itself, not the defendant’s contacts with persons” who live in

the foreign state. Walden v. Fiore,

(2014).

Having determined that Biegler fails to meet his burden as to the second

prong of the “purposeful direction” test, the Court need not reach the third prong.

See Axiom Foods, Inc. v. Acerchem Int’l Ltd.,

(9" Cire.

2017). The Court has nevertheless considered the third prong and agrees with

Defendants’ argument that something more than a foreseeable effect in the forum

state is necessary to meet the third prong. (See Doc. 26 at 6). Defendants United

Specialty and Underwriting Service could not have known that their cancellation

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of an insurance policy with Fleetlogix, a California company, could have caused

Biegler to suffer injury in Montana.

Defendants United Specialty and Underwriting Service argue in the

alternative that the Court should dismiss the complaint for lack of personal

jurisdiction over them because Biegler cannot satisfy the requirements of

Montana’s long-arm statute. (Doc. 26 at 7). Biegler relies on an unpublished case decision entered by Judge Murray for

the United States District Court for the District of Montana in 1975 to support his

argument that a Montana court would have specific personal jurisdiction over his

claim for negligent misrepresentation because the claim accrued in Montana.

(Doc. 22 at 21, citing Johnson Flying Service v. Mackey Int’l Inc.,

). Biegler ignores the many changes made in Montana law as it

relates to the long-arm statute since Judge Murray decided Johnson Flying

Service. In Threlkeld v. Colorado, the Montana Supreme Court held that when a

plaintiffs “deceit and fraud claims relate entirely to services to be performed” in a

state other than Montana, “the mere existence of interstate communications

relating to those services does not provide a basis for personal jurisdiction” in a

Montana court.

, 365 § 30 (Mont. 2000). Biegler’s claim that he

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suffered a monetary loss in Montana as a result of Defendants’ conduct, even

when combined with the allegation that representatives of Underwriting Service

made material misrepresentations to him in Montana, is not sufficient to establish

that his claim accrued in Montana. Tackett v. Duncan,

, 929 §j 35

(Mont. 2014). United Specialty and Underwriting Service correctly argue that the

Court lacks personal jurisdiction over them under Montana’s long-arm statute, as

interpreted by the Montana Supreme Court.

Biegler also argues that this Court has specific personal jurisdiction over

United Specialty and Underwriting Service because GMI was acting as their agent

in connection with obtaining the insurance policy at issue in this case. Biegler

cites a case decided by the United States District Court for the Southern District of

Florida to support his argument that Defendant GMI’s contacts with Biegler can

be imputed to Defendants United Specialty and Underwriting Service because

GMI was acting as their agent. (Doc. 22 at 22, citing GolTV, Inc. v. Fox Sports

Latin Am. Ltd., 277 F. Supp 34d, 1301, 1314 (S.D. Fla. 2017)). Defendants point

out that Biegler fails to cite any Ninth Circuit or Montana law to support his

theory and argue that Biegler must satisfy the two-part test laid out by the Ninth

Circuit in Harris Rutsky & Co. Ins. Serve. v. Bell & Clements Ltd., to establish

jurisdiction based on an agency theory. (Doc. 26 at 10 - 11).

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The Court agrees with United Specialty and Underwriting Service that

Biegler fails to allege sufficient facts in his complaint to satisfy the Ninth Circuit’s

agency test. The test is designed for situations where a plaintiff attempts to impute

conduct of a subsidiary to a parent corporation. See Harris Rutsky & Co. Ins.

Serve. v. Bell & Clements Ltd.,

, 1134 (9" Cir. 2003). There is

nothing in the complaint or in Biegler’s declaration to support such a relationship

or to meet the requirements of the Harris Rutsky test.

United Specialty and Underwriting Service also point out that the Ninth

Circuit’s agency test may no longer be viable, citing Daimler AG v. Bauman,

(2014). (Doc. 26 at 10). Putting aside the issue of the continued

validity of the Ninth Circuit’s agency test, the Ninth Circuit requires that “under

any standard for finding an agency relationship, the parent company must have the

right to substantially control its subsidiary’s activities.” Williams v. Y amaha

Motor Co. Ltd.,

, 1024 - 25 (9" Cir. 2017). Biegler has neither

alleged nor shown that United Specialty and Underwriting Service had the power

to control GMI’s conduct. The Court has carefully considered the complaint, Biegler’s declaration, and

each argument raised by Biegler to support his claim that the Court has personal

jurisdiction over Underwriting Service and United Specialty in this case. Biegler

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having failed to meet his burden of establishing personal jurisdiction, IT IS HEREBY ORDERED that the motion of Defendants Underwriting Service and United Specialty to dismiss for lack of personal jurisdiction (Doc. 16) is GRANTED. Plaintiff's complaint is dismissed without prejudice as to Defendants Underwriting Service and United Specialty and he is free to file his

case in the appropriate jurisdiction. Dated this LEE: November, 2020.

laep Cee RL . LOVELL SENIOR UNITED STATES DISTRICT JUDGE

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