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Massachusetts Insurers Insolvency Fund v. Beacon Roofing Supply, Inc.

United States District Court, D. Massachusetts

February 5, 2016

MASSACHUSETTS INSURERS INSOLVENCY FUND
v.
BEACON ROOFING SUPPLY, INC., and BEACON SALES ACQUISITION, INC.

MEMORANDUM AND ORDER ON DEFENDANTS’ MOTION TO DISMISS

RICHARD G. STEARNS UNITED STATES DISTRICT JUDGE

Defendant Beacon Roofing Supply, Inc. (BRS), is a publicly traded distributor of roofing and complementary building products, as well as the parent and owner of defendant Beacon Sales Acquisition, Inc. (BSAI), d/b/a Beacon Sales Company, Inc. Plaintiff Massachusetts Insurers Insolvency Fund (the Fund) is a nonprofit entity organized under Mass. Gen. Laws ch. 175D. The Fund pays claims against insolvent Massachusetts insurance companies where the claimant is a resident of Massachusetts or the insured property is located permanently in the Commonwealth.[1] In this case, the Fund seeks to be reimbursed for litigation expenses it incurred in defending several asbestos-related lawsuits dating to the 1980s and 1990s. BRS and BSAI move to dismiss the Complaint.

BACKGROUND

Beacon Sales Company, Inc. (Beacon I), was a Massachusetts corporation (established in 1928) that sold roofing and building materials. In October of 1984, Andrew Logie and several minority shareholders incorporated Roofing Supply, Inc., and purchased the assets and trade name of Beacon I. The new owners then changed Roofing Supply’s corporate name to Beacon Sales Company, Inc. (Beacon II). A year later, Beacon I was formally dissolved.

From October of 1984 until January of 1989, Beacon II was insured under a general-liability coverage policy by Centennial Insurance Company (Centennial). The policy defined the “named insured” as “Beacon Sales Company Incorporated and all Subsidiary, Associated and Affiliated Companies and Entities . . . as they existed, exist now or may hereafter be constituted.” Dkt. # 32-2. Beacon II was insured by American Motorists Insurance Company (AMICO) from March of 1993 until March of 1997.

In the 1990s, a private equity fund, Code, Hennessy & Simmons II, LLP (CHS), approached Beacon II to discuss a leveraged buyout. On May 30, 1997, Beacon II shareholders accepted CHS’s offer. In July of 1997, the parties incorporated Beacon Holding Corporation (subsequently renamed BRS) and its subsidiary BSAI in Delaware. The transaction closed in August of 1997. At the closing, Beacon II and BSAI executed an Asset Purchase Agreement (APA) conveying Beacon II’s trade name “Beacon Sales Company., Inc.” and assets to BSAI.

Under the APA, Beacon II sold virtually all of its assets to BSAI, including its trade name, offices, real and intellectual property, inventory, equipment, vehicles, and its employee contracts. However, the APA expressly excluded “[a]ll Seller’s Insurance Policies and rights with respect thereto, including rights with respect to retrospective premium adjustments.” APA, Schedule 1.3(g). The APA also disclaimed “liabilities arising out of or in connection with . . . death of or injury to persons occurring on or prior to the Closing Date and involving products manufactured by Seller or services performed by Seller on or prior to the Closing Date.” APA, Article 2.2. Finally, Article 7.20 of the APA provided that:

[i]n the event that . . . a claim shall be asserted against Purchaser with respect to any matter which may be covered by Seller’s insurance coverage. . . . Seller shall, at Purchaser’s request, file a claim under such policies and use its best efforts to recover under such policies an amount equal to Purchaser’s Losses . . . . In the event of any such recovery, Seller shall promptly remit such funds to Purchaser.

Following the closing, Beacon II ceased doing business and renamed itself Beacon Liquidation. To confuse matters further, BSAI then incorporated a new subsidiary under the name Beacon Sales Company, Inc. (Beacon III). On February 28, 2003, Beacon Liquidation (Beacon II) filed Articles of Dissolution with the Secretary of the Commonwealth. The Secretary subsequently revived Beacon Liquidation each year from 2006 to 2009 to enable ongoing litigation against it.

After the dissolution of Beacon II, a series of tort claims were filed against “Beacon Sales Co., Inc., ” seeking damages for asbestos-related injuries allegedly incurred during the operation of Beacon II in the 1980s and 1990s. In addition, two asbestos plaintiffs sued BRS directly for injuries sustained during the operation of Beacon II.[2] The attorneys for BRS and BSAI, who also represented Beacon II at times, argued to the insurer that BRS was entitled to coverage as the successor to Beacon II and because of a de facto merger of Beacon II and BRS. Ultimately, AMICO assumed defense of the lawsuits.

On April 27, 2011, Centennial was declared insolvent, and was followed into bankruptcy by AMICO on May 10, 2013. Pursuant to Mass. Gen. Laws ch. 175D, the Fund assumed the defense of the lawsuits still pending against Beacon II. The Fund then sought reimbursement from BRS for its defense of these claims, based on BRS’s alleged status as a “high net worth insured” under Mass. Gen. Laws ch. 175D, § 17(3).[3] When efforts to achieve a settlement proved unsuccessful, the Fund filed suit in Suffolk Superior Court on May 18, 2015.

BRS and BSAI removed the lawsuit to the Federal District Court on June 9, 2015, on diversity grounds. On June 15, 2015, BRS and BSAI moved to dismiss under Fed.R.Civ.P. 12(b)(6), arguing that the Fund could not recover from either company because neither company was a named insured under the Centennial or AMICO policies. This court granted limited discovery for a 90-day period to permit the Fund to seek evidence in support of its theory that BRS and BSAI are corporate alter egos of Beacon II, or alternatively the successors of Beacon II. Following discovery, the parties submitted additional briefing on BRS and BSAI’s motion to dismiss.

DISCUSSION

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations and quotations omitted). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). When the defendant raises a ...


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