Case: 21-10299 Document: 00516141242 Page: 1 Date Filed: 12/22/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
December 22, 2021
No. 21-10299
Lyle W. Cayce
Clerk
Realpage, Incorporated,
Plaintiff—Appellant,
versus
National Union Fire Insurance Company of Pittsburgh,
Pennsylvania; Beazley Insurance Company,
Incorporated,
Defendants—Appellees.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:19-CV-1350
Before Owen, Chief Judge, and Jones and Wilson, Circuit Judges.
Cory T. Wilson, Circuit Judge:
This case results from a successful phishing expedition. After a
RealPage, Inc. employee clicked a fake link in a seemingly innocuous email
and provided login information for RealPage’s account with Stripe, Inc., a
third party payment processor, phishers stole the login credentials. They
then used them to divert millions of dollars in rent payments from tenants
intended for RealPage’s property manager clients. RealPage and Stripe
recovered some of the stolen funds but lost about $6 million to the phishing
Case: 21-10299 Document: 00516141242 Page: 2 Date Filed: 12/22/2021
No. 21-10299
crooks. RealPage reimbursed its clients and filed claims under its commercial
crime insurance policies for the stolen funds. But its primary insurer denied
coverage, determining the pfished funds were not covered losses because
RealPage never “held” them. RealPage then filed this action challenging the
denial of coverage. The district court agreed with RealPage’s insurer and
granted summary judgment. Because we agree that RealPage never “held”
the diverted funds, we AFFIRM.
I.
RealPage partners with online payment processors to collect rent from
tenants and route those payments to property management companies.
Basically, using an online platform maintained by RealPage, tenants and
property managers submit bank account and credit card information.
RealPage, except for some accounts it handles directly, then transmits this
payment information to third party processors, like Stripe, which process
rent payments according to the instructions RealPage provides.
The accounts at issue in this case were generally handled as follows:
Stripe, using the information submitted by tenants, withdrew funds from
tenants’ bank or credit card accounts and deposited the funds into Stripe’s
Wells Fargo bank accounts. Stripe kept a small percentage of the funds for
itself as transaction fees, designated a slightly larger percentage for RealPage
as its transaction fees, and then, within a few days of the tenant drafts,
transmitted the balance to individual property managers’ bank accounts.
These transactions were in accordance with the information and instructions
sent to Stripe by RealPage.
In April 2018, a RealPage employee received an email purportedly
from Stripe. The employee clicked on a fake link embedded in the email and
entered login credentials used to access the fund disbursement information
RealPage provided to Stripe. In doing so, RealPage’s employee took the bait
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from criminal phishers hook, line, and sinker, unwittingly providing the
phishers a giant catch. Using the stolen credentials, the criminals changed
RealPage’s payment instructions and prompted Stripe to disburse over $10
million designated for RealPage and its property manager clients to other
bank accounts.
RealPage and Stripe were alerted to the fraudulent activity and were
able to reverse some of the disbursements. Meanwhile, RealPage directly
reimbursed its property manager clients whose funds were stolen.
Ultimately, despite their efforts, RealPage and Stripe were unable to recover
roughly $6 million. As a result, RealPage filed loss claims under the $5
million commercial crime insurance policy it maintained through National
Union Fire Insurance Company and the $5 million excess fidelity and crime
policy it maintained through Beazley Insurance Company.
The National Union policy limits coverage to “property: (1) [t]hat
[RealPage] own[ed] or lease[d]; or (2) . . . h[e]ld for others whether or not
[RealPage] [was] legally liable for the loss of such property.” Based on this
policy language, National Union determined that RealPage owned the funds
that Stripe had earmarked as RealPage’s transaction fees and provided
coverage for that loss, which totaled $1,067,560.73. However, National
Union determined that RealPage neither owned nor leased the funds
designated for its property manager clients and that Stripe held those funds,
not RealPage. Consequently, National Union denied coverage for those
unrecouped funds. Because the excess policy written by Beazley only
provides coverage once the underlying $5 million National Union policy has
been “exhausted by the actual payment of loss(es),” Beazley also denied
coverage.
RealPage sued National Union and Beazley in federal court (1) seeking
a declaration that both policies cover the stolen funds designated for the
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property managers, (2) alleging breach of contract against National Union
and Beazley, and (3) alleging various violations of Texas insurance law. After
discovery, the parties filed cross-motions for summary judgment.
National Union maintained that RealPage did not own, lease, or hold
the funds designated for the property managers, and therefore the loss of
those funds was not covered by its policy. RealPage conceded it did not own
or lease the funds but asserted that because it controlled Stripe’s
disbursement of the funds, RealPage ultimately held the funds. Construing
the insurance policy’s text, the district court agreed with National Union.
The court determined that RealPage never possessed the funds intended for
the property managers and thus did not “hold” those funds. Because
RealPage did not hold the funds, the court concluded the policy did not cover
their theft. Based on its interpretation of the National Union policy, the court
determined National Union and Beazley properly denied coverage, and it
granted summary judgment for the insurers on RealPage’s claims.
RealPage now appeals.
II.
“This court reviews a grant of summary judgment de novo, applying
the same standard as the district court.” Luminant Mining Co. v. PakeyBey,
14 F.4th 375, 379 (5th Cir. 2021) (internal quotation marks omitted) (quoting
Renfroe v. Parker,
974 F.3d 594, 599 (5th Cir. 2020)). “Summary judgment
is merited when ‘the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.’”
Id.
(quoting Fed. R. Civ. P. 56(a)).
A.
In this diversity case, “Texas law governs our interpretation of the
[p]olic[ies]” at issue. Cooper Indus., Ltd. v. Nat’l Union Fire Ins. Co., 876 F.3d
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119, 128 (5th Cir. 2017). In Texas, “[t]he interpretation of an insurance
policy, like other contracts, begins with the text, and requires that undefined
words be given their plain, ordinary, and generally accepted meanings absent
some indication of a different intent.” U.S. Metals, Inc. v. Liberty Mut. Grp.,
Inc., 490 S.W.3d 20, 23 (Tex. 2015) (citations omitted). We read policy
terms “in context and in [the] light of the rules of grammar and common
usage.” Anadarko Petroleum Corp. v. Hous. Cas. Co.,
573 S.W.3d 187, 192
(Tex. 2019) (quoting RSUI Indem. Co. v. The Lynd Co.,
466 S.W.3d 113, 118
(Tex. 2015)). “To determine a term’s common, ordinary meaning, we
typically look first to dictionary definitions and then consider the term’s
usage in other authorities.”
Id. (citing Tex. State Bd. of Exam’rs of Marriage
& Family Therapists v. Tex. Med. Ass’n,
511 S.W.3d 28, 35 (Tex. 2017)).
RealPage’s commercial crime policy issued by National Union covers
losses from employee theft, forgery, alteration, theft of money and securities,
robbery, safe burglary, computer fraud, and funds transfer fraud. Recovery
under the policy is conditioned on several factors. Specifically, subsection
(p) of the policy’s Conditions states that:
The property covered under this policy is limited to property:
(1) That you own or lease; or
(2) That you hold for others whether or not you are legally
liable for the loss of such property.
RealPage does not contend that it owned or leased the money that was
designated for its property manager clients, so its claim for coverage turns on
the meaning of “hold,” used as a verb in the above coverage limitation.
Because “hold” is used in the context of the policy language as a third
category distinct from but related to “own” and “lease,” “hold” must have
some relationship to those other terms. Cf. Anadarko Petroleum Corp., 573
S.W.3d at 192 (citing RSUI Indem. Co.,
466 S.W.3d at 118; Tex. State Bd. of
Exam’rs of Marriage & Family Therapists,
511 S.W.3d at 35).
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“[L]ook[ing] first to dictionary definitions,” id., Black’s Law
Dictionary offers seven definitions of the verb “hold,” only four of which
possibly pertain to “holding” the funds at issue:
1. To possess by a lawful title <Sarah holds the account as her
separate property> . . . . 4. To keep in custody or under an
obligation <I will ask the judge to hold you accountable>. 5. To
take or have an estate from another; to have an estate on
condition of paying rent or performing service <James holds
Hungerstream Manor under lease> . . . . 7. To possess or
occupy; to be in possession and administration of <Jones holds
the office of treasurer>.
Hold, Black’s Law Dictionary (11th ed. 2019). And because this
court must “give effect to all of the words and provisions [of a policy] so that
none is rendered meaningless[,]” RSUI Indem. Co., 466 S.W.3d at 118
(citations omitted), any definition of “hold” that merges it with “own” or
“lease” must be rejected. To “own” is to “rightfully have or possess as
property; to have legal title to.” Own, Black’s Law Dictionary (11th
ed. 2019). To “lease” is “[t]o grant the possession and use of (land,
buildings, rooms, movable property, etc.) to another in return for rent or
other consideration[.]” Lease, Black’s Law Dictionary (11th ed.
2019). Judging from Black’s, then, the only definitions of “hold” reasonably
applicable in the instant context are “[t]o keep in custody or under an
obligation,” and, similarly, “[t]o possess or occupy[.]” Neither helps
RealPage’s case because RealPage never possessed (or kept in its custody)
the funds at issue.
RealPage does not maintain that it ever had possession of the funds
disbursed by Stripe. And, to be clear, it did not. The transactions between
tenants, Stripe, and RealPage’s property manager clients were structured so
that once the tenants entered their bank or credit card account information
into RealPage’s online portal, RealPage transmitted that information to
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Stripe for processing and did not save it. RealPage’s stated desire was to
“protect the credit card information and bank account information that the
renters were providing by not having it.” When it came time for a tenant to
pay rent, Stripe drafted funds directly from the tenant’s account. Likewise,
once a tenant’s funds were deposited in Stripe’s accounts, Stripe disbursed
the funds to the appropriate property manager. Beyond providing tenants’
and property managers’ account information, RealPage had no further
involvement. In other words, when money changed hands, RealPage’s
fingers never touched it.
Essentially, RealPage provided routing instructions to Stripe, and
Stripe effectuated the transactions and handled the funds transferred from
tenants to property managers. Under any definition of “hold” that entails
“keep[ing] in custody” or “possession,” RealPage cannot claim a loss under
National Union’s policy because RealPage never “held” the funds intended
for its property manager clients.
RealPage posits that “control,” rather than “possession,” is the
proper definition of “hold” as used in the National Union policy. To the
extent both definitions could apply, RealPage also contends that “hold” is
ambiguous, such that this court should construe its meaning strictly against
National Union. See, e.g., Glover, 545 S.W.2d at 761 (“[W]hen the language
of an insurance contract is ambiguous . . . then that construction which
affords coverage will be the one adopted.”). But the text of a policy is
“ambiguous only if it is subject to more than one reasonable interpretation
and not merely because the parties or other courts differ over its
interpretation.” U.S. Metals, Inc., 490 S.W.3d at 24 (citing RSUI Indem. Co.,
466 S.W. 3d at 119; Grain Dealers Mut. Ins. Co. v. McKee,
93 S.W.2d 455, 458
(Tex. 1997)).
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We do not discern the ambiguity RealPage sees. RealPage’s alternate
definition for “hold,” constructed from an amalgam of selective dictionary
definitions, only gains currency if divorced from the context in which “hold”
is used in the policy at issue. Moreover, RealPage’s proposed dictionary
definitions that actually relate to holding property ultimately distill to
possessing the property, not merely being able to direct someone else to do
something with it. See, e.g., Hold, https://www.merriamwebster.com/dictionary/hold (last visited Oct. 11, 2021) (defining “hold” as
“to have possession or ownership of or have at one’s disposal[]”; emphasis
added to show language omitted by RealPage in its briefing); Hold,
https://dictionary.cambridge.org/us/dictionary/english/hold (last visited
Oct. 11, 2021) (similarly defining “hold”). RealPage’s dictionary citations
are thus more consistent with the Black’s definitions quoted above than they
are in either showing that “hold” equates to “control” or that the term is
ambiguous.
Accepting arguendo RealPage’s conflation of “hold” with “control,”
the record demonstrates that RealPage ultimately did not control the funds
designated for the property managers. All funds processed through Stripe
were deposited “in pooled clearing accounts” at Wells Fargo. These were
Stripe’s accounts, not RealPage’s. In fact, Stripe’s services agreement with
RealPage expressly provides that RealPage had “no rights to the Clearing
Accounts or to any funds held in the Clearing Accounts[.]” RealPage was
“not entitled to draw funds from the Clearing Accounts[,]” and Stripe
reserved the right to impose conditions on the release of any funds. While
Stripe handled the funds as RealPage directed, Stripe, not RealPage,
ultimately controlled the funds in Stripe’s custody—demonstrated by the
very fact that RealPage could do nothing to recover the stolen funds without
Stripe’s help, as RealPage conceded at oral argument.
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To recap, RealPage never possessed its property manager clients’
funds that got caught in the phishers’ net. And, crediting RealPage’s
argument that it could nonetheless “hold” the funds without “possessing”
them, RealPage did not control the lost funds either, notwithstanding the
routing instructions it provided to Stripe. We thus agree with the district
court that RealPage never held the funds, as “hold” is used in the National
Union policy.
B.
RealPage offers two alternative theories to argue that it “held” the
funds: a bailment theory and an agency theory. First, RealPage asserts that
it held the funds in bailment for the property managers. In Texas, to establish
a bailment, “there must be (1) delivery of personal property from one person,
the bailor, to another, the bailee, for a specific purpose; (2) acceptance of
delivery by the bailee; (3) an express or implied contract between the parties
that the specific purpose will be realized; and (4) an agreement between the
parties that the property will be either returned to the bailor or dealt with
according to the bailor’s direction.” State v. $281,420.00, 312 S.W.3d 547,
551 (Tex. 2010) (citing Cessna Aircraft Co. v. Aircraft Network, LLC,
213
S.W.3d 455, 462–63 (Tex. App. 2006); Int’l Freight Forwarding, Inc. v. Am.
Flange,
993 S.W.2d 262, 263 (Tex. App. 1999)).
RealPage’s bailment theory readily falters because, as discussed
above, RealPage never had possession of any funds. Because no property was
ever delivered to RealPage, and consequently RealPage never accepted
delivery of any property, no bailment could have existed. Id. (citing Cessna
Aircraft Co., 213 S.W.3d at 462–63; Int’l Freight Forwarding, Inc.,
993 S.W.2d
at 263).
Second, RealPage asserts that Stripe acted as its agent for the purposes
of receiving and disbursing the funds at issue. But RealPage has failed to
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demonstrate that an agency relationship existed between it and Stripe. To
the contrary, Stripe’s services agreement explicitly disclaims any agency
relationship between RealPage and Stripe. Setting aside this explicit
disclaimer, under Texas law, RealPage still must prove that it had the right
“(1) to assign the agent’s task; and (2) to control the means and details of the
process by which the agent will accomplish that task.” Happy Indus. Corp. v.
Am. Specialties, Inc., 983 S.W.2d 844, 852 (Tex. App. 1998) (citing Johnson
v. Owens,
629 S.W.2d 465, 468 (Tex. App. 1982)). Nothing in the record
demonstrates RealPage had any control over Stripe’s payment processes
beyond giving Stripe routing instructions for the funds at issue. Accordingly,
RealPage’s agency argument also fails.
III.
Because RealPage never held the funds at issue, National Union was
within its rights to deny coverage of the stolen funds intended for RealPage’s
property manager clients. And because National Union’s coverage was not
exhausted, Beazley was also within its rights to deny coverage under
RealPage’s excess policy. This holding is “sufficient to preclude coverage,”
such that this court “need not consider the parties’ remaining contentions.”
Cooper Indus., Ltd., 876 F.3d at 129 (citing Shamloo v. Miss. State Bd. of Trs.
of Insts. of Higher Learning,
620 F.2d 516, 524 (5th Cir. 1980)). Finally,
because RealPage is not entitled to coverage under the policies at issue, its
arguments that National Union breached Chapter 541 and 542 of the Texas
Insurance Code by not timely paying its claims are similarly without merit.
The district court’s summary judgment is
AFFIRMED.
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