United States District Court, D. Maryland
MADISON MECHANICAL, INC., et al., Plaintiffs and Counter-Defendants,
TWIN CITY INSURANCE CO., Defendant and Counter-Plaintiff,
ROBERT BUCZKOWSKI, Defendant and Cross-Defendant.
L. RUSSELL, III UNITED STATES DISTRICT JUDGE
MATTER is before the Court on three Motions: Plaintiffs
Madison Mechanical, Inc., Madison Mechanical OS Corp.,
Madison Mechanical Contracting, LLC, Glenn A. Haslam, Gary J.
Garofalo, Richard Arnold, Lawrence P. Kraemer, and Richard M.
Lombardo's Motion to Dismiss Defendant Twin City Fire
Insurance Co.'s (“Twin City”) Counterclaim
(ECF No. 22) and Motion for Partial Summary Judgment (ECF No.
Also pending before the Court is Twin City's Cross-Motion
for Summary Judgment (ECF No. 34). The Motions are fully
briefed and ripe for disposition. No hearing is necessary.
See Local Rule 105.6 (D. Md. 2016). For the reasons
that follow, the Court will deny Plaintiffs' Motion to
Dismiss and Motion for Partial Summary Judgment and grant in
part and deny as moot in part Twin City's Motion for
Madison Mechanical Contracting, LLC and Buczkowski's
declaratory action is an insurance-coverage dispute arising
out of Plaintiffs' formation of Madison Mechanical
Contracting, LLC (“MM LLC”) in an alleged effort
to take business from Madison Mechanical, Inc. (“MM
Inc.”), a wholly owned subsidiary of Madison Mechanical
OS Corp. (“MM Corp.”). (Buczkowski's Compl.
[“Underlying Compl.”] ¶¶ 73-74, ECF No.
2002, Buczkowski began his position as Chief Financial
Officer of MM Inc. (Id. ¶¶ 21-22). In
December 2007, when the owner of MM Inc. died, Haslam,
Garofalo, Buczkowski, Lombardo, and Kraemer formed MM Corp.
to purchase MM Inc. and operate it as a wholly owned
subsidiary of MM Corp. (Id. ¶¶ 27-28, 30).
That same month, MM Corp. purchased all outstanding shares of
MM LLC stock, making it the sole shareholder in MM Inc.
(Id. ¶ ¶ 31-32). Under the MM Corp.
shareholder agreement, the shares of MM Corp. were owned as
follows: Haslam: 54%; Garofalo: 13%; Buczkowski: 13%;
Lombardo: 10%; and Kraemer: 10%. (Id. ¶ 36).
2013 to 2015, MM Corp. engaged in ongoing discussions with
Arnold about buying shares in MM Corp. or forming a new
entity with existing MM Corp. shareholders. (Id.
¶ 67). On August 20, 2015, the Member Plaintiffs formed
MM LLC, excluding Buczkowski. (Id. ¶¶
71-72). Buczkowski first learned of MM LLC's existence in
November 2015. (Id. ¶ 77).
November 11, 2015, Buczkowski, through counsel, sent the
Member Plaintiffs a letter regarding the formation of MM LLC.
(Id. ¶ 78). In the letter, Buczkowski asserted
that the purpose of MM LLC's formation was to
“divert the business and client base of Madison
Mechanical for the benefit of Madison Mechanical Contracting,
LLC and to the detriment of Madison Mechanical.” (Def.
Twin City's Cross-Mot. Summ. J. & Opp'n
[“Def.'s Cross-Mot.”] Ex. 4 [“Nov. 2015
Letter”] at 2, ECF No. 21-7; Underlying Compl. ¶
78). The letter characterizes these actions as “legally
improper” and notes that it “could lead to a
cause of action for breach of fiduciary duty, interference
with a contractual relationship, interference with an
economic relationship, civil conspiracy, and other potential
causes of action.” (Nov. 2015 Letter at 2). The letter
further asserts that it is putting the Member Plaintiffs
“on notice of the potential litigation liability of
such actions both on a corporate and personal level.”
days later, MM Corp. or MM Inc. terminated Buczkowski
“for cause, effective immediately.” (Underlying
Compl. ¶ 81; Pls.' Reply Ex. 2, ECF No. 40-3).
Terminating Buczkowski “for cause” was “an
attempt to force a transfer of his stock” in MM Corp.
(Underlying Compl. ¶ 85). On December 21, 2015, after
Buczkowski's termination, Member Plaintiffs, MM LLC, and
MM Corp. dissolved MM Inc. (Id. ¶ 91).
January 14, 2016, MM Corp., through counsel, sent Buczkowski
a letter demanding that he sell his stock in MM Corp. back to
the company for $0 because he was terminated for cause.
(Id. ¶¶ 88-89). Buczkowski refused to do
so. (Id. ¶ 89).
10, 2016, almost six months later, Buczkowski sent a demand
letter to Haslam and MM Corp. (Id. ¶¶ 170;
Pls.' Mot. Partial Summ. J. [“Pls.'
Mot.”] Ex. 3, ECF No. 30-4). MM Corp. responded on May
13, 2016, explaining that MM Corp.'s board had rejected
Buczkowski's demand as “baseless.”
(Underlying Compl. ¶ 171).
Plaintiffs' Insurance Policies
purchased two insurance policies from Twin City that contain
Directors, Officers, and Entity (“DO&E”)
liability coverage for the Madison Mechanical entities and
their directors, officers, and managers. (Def.'s
Cross-Mot. Ex. 3 [“2015 Policy”] at 7, ECF No.
34-4; id. Ex. 6 at 3, 98 [“2016
Policy”], ECF No. 34-7; Pls.' Mot. Ex. 6 at 3- 4,
ECF No. 40-7). The first policy covers liability from May
1, 2015 to May 1, 2016 (the “2015 Policy”). (2015
Policy at 3). The second policy covers liability from May 1,
2016 to May 1, 2017 (the “2016 Policy” and,
collectively with the 2015 Policy, the
“Policies”). (2016 Policy at 3)
December 29, 2015, Haslam submitted an application to add MM
LLC to the existing 2015 Policy's DO&E liability
coverage, effective January 1, 2016 (the “2015
Application”). (Def.'s Cross-Mot. Ex. 5 at 1-2
[“2015 Application”], ECF No. 34-6). Relevant to
this case, the 2015 Application contained a “Prior
Knowledge” question, which provides:
With respect to each coverage currently purchased, did any
Applicant or any natural person for whom insurance is
intended have any knowledge or information, as of the
“date of coverage first purchased, ” of any
error, misstatement, misleading statement, act, omission,
neglect, breach of duty or other matter that may give rise or
could have given rise to a claim.
(2015 Application at 2). Haslam answered “no” to
this question. (Id.).
underneath the “Prior Knowledge” question, in a
shaded box, appears an exclusion (the “Prior Knowledge
It is agreed that if any such knowledge or information
existed, any claim based on, arising from, or in any way
relating to such error, misstatement, misleading statement,
act, omission, neglect, breach of duty, or other matter of
which there was knowledge or information shall be excluded
from coverage requested.
The Underlying Action
27, 2016, Buczkowski filed suit against MM LLC, MM Corp., and
the Member Plaintiffs in the Circuit Court for Baltimore
County, Maryland. (ECF No. 2-2). In his Complaint, Buczkowski
alleges that MM LLC “took over ongoing projects that
were previously being performed by [MM Inc.] as well as
several contracts that had been negotiated under [MM
Inc.]'s name and began performing the projects for the
benefit of [MM LLC].” (Underlying Compl. ¶ 104).
He further alleges that the purpose of MM LLC was to
“take business and corporate opportunities from [MM
Inc.] and [MM Corp.] for the benefit of [MM LLC] and its
members.” (Id. ¶ 74; see also
id. ¶¶ 106-15).
Underlying Complaint brings fourteen claims, both direct and
derivative, including breach of fiduciary and tortious
interference with economic relations. (Underlying Compl.
¶¶ 116-302). Buczkowski seeks, among other relief,
a declaration that he remains a 13% shareholder in MM Corp.
(Id. ¶ 118).
sought defense and indemnification from Twin City under the
2016 Policy. (See Compl. ¶¶ 31-32, ECF No.
2). In April 2017, Twin City denied coverage under the
Policies and refused to defend or indemnify Plaintiffs in the
Underlying Action. (See Answer & Countercl.
¶¶ 53-54, ECF No. 21).
Relevant Procedural History of this Declaratory Judgment
April 14, 2017, Plaintiffs filed suit against The Hartford
Products, Twin City, and Buczkowski in the Circuit Court for
Baltimore County, Maryland seeking a declaratory judgment
addressing, among other things, Twin City's duty to
defend and duty to indemnify in the Underlying Action (Count
I) and alleging Breach of Contract (Count II). (Compl.
¶¶ 44-52). On May 17, 2017, Defendants The Hartford
Products and Twin City removed the case to this
Court. (ECF No. 1). On June 8, 2017, Twin City
filed an Answer and Counterclaim against Plaintiffs and
Robert Buczkowski. (ECF No. 21).
21, 2017, Plaintiffs filed a Motion to Dismiss Twin
City's Counterclaim. (ECF No. 22). Twin City filed its
Opposition on July 11, 2017. (ECF No. 27). To date,
Plaintiffs have not filed a Reply.
27, 2017, Plaintiffs filed a Motion for Partial Summary
Judgment. (ECF No. 30). In response, on August 31,
2017, Twin City filed an Opposition and Cross-Motion for
Summary Judgment. (ECF No. 34). Plaintiffs filed a combined
Reply and Opposition to Twin City's Motion on October 12,
2017. (ECF No. 40). Twin City filed a Reply in Further
Support of its Cross-Motion for Summary Judgment and in
Response to Plaintiffs' Opposition to Twin City's