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NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION WAKE COUNTY 17 CVS 11692
MIKE CAUSEY ) COMMISSIONER OF INSURANCE ) OF NORTH CAROLINA, ) ) Petitioner, ) ) ANSWER AND COUNTERCLAIM v. ) ) CANNON SURETY, LLC, ) A NORTH CAROLINA LIMITED ) LIABILITY COMPANY, ) ) Respondent. ) ____________________________________)
ANSWER
NOW COMES Respondent Cannon Surety, LLC, by their undersigned counsel, and
pursuant to the North Carolina Rules of Civil Procedure, hereby files its Answer to the
Petitioner’s Verified Petition, alleges and says and follows:
1. Admitted.
2. Admitted.
3. Admitted.
4. Admitted.
5. Admitted.
6. Admitted.
7. Admitted.
8. Admitted.
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9. Admitted.
10. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
11. Admitted.
12. Admitted.
13. Admitted.
14. Admitted.
15. Admitted.
16. Admitted.
17. Admitted.
18. Admitted.
19. Admitted.
20. Admitted.
21. Admitted.
22. Admitted.
23. Admitted.
24. Denied.
25. Denied.
26. Denied.
27. Admitted.
28. Admitted.
29. Admitted.
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30. Admitted.
31. Admitted.
32. Admitted.
33. Admitted, however an extension was granted by DOI through Jeffrey A. Trendel, which
extension had not expired as of the entry of the Seizure Order on September 27, 2017.
34. Admitted.
35. Admitted.
36. Admitted.
37. Admitted.
38. Admitted.
39. Admitted.
40. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
41. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
42. Admitted.
43. Admitted.
44. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
45. Admitted.
46. Admitted.
47. Admitted.
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48. Admitted.
49. Admitted.
50. Admitted.
51. Admitted.
52. Admitted.
53. Admitted.
54. Admitted.
55. Denied.
56. Denied.
57. Denied.
58. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
59. Denied.
60. Denied.
61. Denied.
62. Denied.
63. Denied.
64. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
65. Denied.
66. Denied.
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67. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
68. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
69. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
70. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
71. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
72. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
73. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
74. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
75. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
76. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
77. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
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78. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
79. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
80. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
81. Denied.
82. Denied.
83. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
84. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
85. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
86. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
87. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
88. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
89. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
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90. Denied.
91. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
92. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
93. Upon information and belief, admitted.
94. Upon information and belief, admitted.
95. Upon information and belief, admitted.
96. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
97. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
98. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
99. Denied.
100. Admitted.
101. Upon information and belief, admitted.
102. Upon information and belief, admitted.
103. Upon information and belief, admitted. Mr. Brawley was removed as Secretary by court
order in Guilford County case file 16 CVS 7708, to wit, a Preliminary Injunction.
104. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
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105. Denied. The Department was informed of the Preliminary Injunction Order in Guilford
County case file 16 CVS 7708. Mr. Trendel was present in the courtroom when the Preliminary
Injunction was ordered.
106. Denied.
107. Denied.
108. Respondent is without sufficient information to admit or deny this allegation, and it is
therefore denied.
109. Denied.
110. Denied.
111. Denied.
112. Denied.
113. Denied.
114. Denied.
WHEREFORE Respondent prays the Court as follows:
1. To not enter an Order of Rehabilitation;
2. To immediately dissolve the Seizure Order entered on September 27, 2017 in its entirety;
3. To order the immediate return of the Respondent’s premises to the Respondent;
4. To order the immediate return of all of the items of personal property and documents,
including bank accounts and all office files to the Respondent;
5. To order the Petitioner to immediately resolve all issues related to any bond forfeitures
entered in any county in the State of North Carolina, so that the Respondent is NOT
responsible or liable for payment of ANY of those multiple bail bond forfeitures;
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6. To order the Petitioner to immediately reinstate all appointed bail agents that were
appointed to write bail bonds for the Respondent and to give each of them notice of their
reinstatement via email and certified United States mail;
7. To grant such other and further relief as the Court may deem just and proper.
COUNTERCLAIM (JURY TRIAL DEMANDED)
NOW COMES Respondent Cannon Surety, LLC (“Respondent” or “Cannon”), by and
through through their undersigned counsel, and in response to the Verified Petition filed by the
Commissioner of the North Carolina Department of Insurance Mike Causey (“Petitioner”), and
hereby files its counterclaims for violations of federal and state law, compensatory damages,
punitive damages, and attorney fees against the Commissioner of the North Carolina Department
of Insurance Mike Causey (“Petitioner” or “Causey”), do hereby allege as follows:
NATURE OF ACTION
1. This counterclaim is a civil action for damages brought under 42 U.S.C. § 1983, 42
U.S.C. § 1988(b), and North Carolina law. On Thursday, September 28, 2017, at 10:00
a.m., North Carolina Department of Insurance (“DOI”) personnel burst into the offices
of Cannon Surety, a privately owned and run, North Carolina insurance company. With
a Seizure Order in hand, the DOI rounded up Cannon employees into a conference room
and began taking company assets and other property items, finally leaving the building
sealed, posted, and the locks changed. This is not a case of a failing company being shut
down to protect the public – this is a case of a successful company being shut down to
appease its competitors, detractors and financial political contributors of Commissioner
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Mike Causey. It is an egregious case of incestuous political corruption involving an all
to familiar criminal scheme of “Pay to Play”, which runs rampant throughout the DOI,
orchestrated and directed by Commissioner Mike Causey himself.
2. Causey and DOI relied on flawed and speculative evidence, construed to cast Cannon in
an artificially negative light. Data from various examinations have been cherry picked,
either out of malice, or a lack of understanding of the unique operations of a special
captive bail bonds insurance company. Causey and DOI obtained this extraordinary ex
parte Seizure Order, based on a blatantly, intentionally false and extremely reckless
legally insufficient claim of imminent collapse of the company, that would cause “harm
to the public”. The Petition was filed with the Wake County Superior Court despite
evidence that the company is healthy, growing, and maintains over $1.4 million in cash
reserves. Additionally, interactions between competing special captive insurance
companies in North Carolina, Causey and DOI personnel cast doubt on the motives and
methods for this investigation. Seizing the assets of an insurance company is a last resort
in order to guide a company back into conformity, not the first step in correcting very
minor violations.
3. As a consequence of Causey’s actions, Respondent has suffered deprivations of their
federal constitutional rights under the Fifth and Fourteenth Amendments to the
Constitution of the United States, economic and emotional harm, incalculable losses to
its reputation, and tens of thousands of dollars in legal fees incurred to defend itself
against a baseless seizure.
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PARTIES
4. Respondent Cannon Surety, LLC. Is a private limited liability company formed under the
laws of North Carolina with its primary place of business in Greensboro, North
Carolina.
5. Petitioner Mike Causey is the Commissioner of the North Carolina Department of
Insurance. Upon information and belief, Causey is, and has been at all times relevant to
this action, a citizen and resident of North Carolina.
6. Petitioner North Carolina Department of Insurance is a state agency operating under the
laws of North Carolina. Upon information and belief, the Department of Insurance has
purchased liability insurance sufficient under N.C. Gen. Stat. § 160A-485 to waive its
immunity against civil liability.
JURISDICTION AND VENUE
7. This action arises under the Fifth and Fourteenth Amendments to the Constitution of the
United States; Article I, Section 19, of the North Carolina State Constitution; 42 U.S.C.
§ 1983; 42 U.S.C. § 1988(b); and North Carolina law.
8. The United States District Court for the Eastern District of North Carolina has original
jurisdiction over Respondent’s constitutional and federal law claims pursuant to 28
U.S.C. § 1331.
9. The United States District Court for the Eastern District of North Carolina has
supplemental jurisdiction over Respondent’s state law claims pursuant to 28 U.S.C. §
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1367(a) because they are part of the same case and controversy described by
Respondent’s federal claims.
10. Venue is proper in the Eastern District of North Carolina pursuant to 28 U.S.C.
§§ 1391(b)(1), (2), and (3), because the Petitioner resides and may be found in the
Eastern District of North Carolina, and meanwhile a substantial part of the events giving
rise to these claims occurred in the Middle District of North Carolina.
FACTUAL ALLEGATIONS
Plaintiff is a successful special captive insurance company in North Carolina. 11. Cannon Surety is a limited liability company existing under the laws of North Carolina,
with its principal place of business located at 2903 W. Meadowview Road, Suite 200, in
Greensboro, Guilford County, North Carolina.
12. Cannon Surety was issued a license by the North Carolina Department of Insurance as a
special captive insurance company on December 22, 2014
13. Cannon contracts with over 200 agents, has a full-time staff of five employees, and one
part-time employee.
14. Prior to September 28, 2017, Cannon Surety was a successful company who made
valuable contributions to the surrounding community.
The NC Department of Insurance unlawfully seized all assets and assumed control of Cannon Surety.
15. On September 27, 2017, Causey filed a verified petition setting forth the grounds for
seizure and rehabilitation of Cannon Surety. Hearing the patently false petition presented
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by Causey ex parte, the Honorable Wake County Superior Court Judge Carl R. Fox, was
upon information and belief, intentionally misled by Causey, into ordering the seizure of
Cannon assets and business operations.
16. On September 28, 2017, the Seizure was executed on Cannon’s offices in Greensboro,
North Carolina.
17. Cannon employees, along with the managers and owners, have been irreparably harmed
and put at risk without due process of law, due to Causey and DOI’s intentional and
extremely reckless conduct. In the weeks following the seizure, important Cannon
business and correspondence has been neglected; deadlines allowed to lapse; and the
scope of the Seizure Order has been overtly and intentionally violated.
The grounds asserted by Causey and DOI are based on flawed and misinterpreted information and fails to justify seizure of the Respondent company.
18. Dallas R. McClain was the founder of the first domestic captive bail surety formed
under the N.C. Captive Insurer Act, N.C. Gen. Stat. § 58-10-335, and sold his interest
before the licensing of Cannon Surety.
19. Cannon Surety LLC is only the second domestic captive bail surety company to exist in
the State of North Carolina.
20. Bail surety companies operate and function very differently from other lines of
insurance that the DOI is accustomed to regulating and do not align with DOI’s normal
and familiar insurance company operations, management and revenue.
21. Cannon Surety maintains in excess of $1.4 million in cash reserves on deposit with DOI,
split between a general reserves account of $987,627.00 on deposit with the Petitioner,
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which has never been used for any reason, and in excess of $400,000.00 cash on deposit
in a Build Up Fund (“BUF”).
22. A successful bail bonds surety company is defined by the number of bonds written, the
number of agents appointed and the bond forfeitures handled without loss to the
company.
23. The liability totals in bail surety, constantly change and is indicative of sales and
revenue. As long as the bond forfeitures are resolved, as has been the case with Cannon
for nearly three years, old cases are exonerated and new liability is considered growth.
24. The financial information relied upon by Petitioner suffers from inadequate preparation;
improper and erroneous interpretation by the DOI.
25. An examination was conducted in June of 2016 for which Cannon paid the expenses of
about $5,000.00. After over 15 months, NO FEEDBACK WHATSOEVER from this
examination was ever been shared with Cannon principals, in direct violation of
N.C.G.S. 58-2-131(L) and N.C.G.S. 58-2-132(B). A second examination was conducted
by the DOI in 2017, for which Cannon paid $8000.00. Again, no results, good or bad,
have ever been shared with Cannon principals, all in direct violation of N.C.G.S. 58-2-
131(L) and N.C.G.S. 58-2-132(B).
26. A 2016 independent examination conducted by Rives & Associates (“Rives) was
conducted at a cost of $12,000, which was paid for by Cannon.
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27. After repeated delays by Rives, including requesting an extension, Rives ultimately
broke all contact, not performing the examination and returning a portion of a retainer
fee paid in advance by Respondent.
28. Upon information and belief, Rives was contracted to do a competitor’s examinations in
the prior two years, and either Rives or employees of DOI were the only possible
sources of the leaks of Cannon’s confidential financial information intended to benefit
Cannon’s competitors.
29. On at least two occasions, Mr. McClain has expressed concern to Deputy Commissioner
Jeffrey A. Trendel (“Trendel”) that Rives was divulging Cannon financial information to
a competitor, and that confidential information was being posted on the internet.
30. Upon information and belief, Rives has previously been involved in a lawsuit
specifically related to their inability to properly examination, and said information is
readily available about Rives & Associates various problems on the internet.
31. The Commissioner’s Petition cites multiple examples of Cannon’s conduct that the DOI
alleges is deficient, including using QuickBooks accounting software, growing the
number of bonds serviced, late paperwork, and maintaining a $987,627.00 deposit with
the Commissioner rather than $1,250,000.00 million.
32. The Petition cites these issues as cause for immediate seizure, without any prior notice
to Cannon, to correct or have its chance to rebut these questionable, false and/or trivial
criticisms in court, in direct violation of N.C.G.S. 58-2-131(L) and N.C.G.S. 58-2-
132(B).
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33. The DOI failed to properly balance the interests of other parties against the extreme
prejudice and irreparable damages inflicted upon Cannon by its actions.
DOI’s decision to instigate formal delinquency proceedings was “arbitrary and capricious”, and was a proximate and direct result of “Pay to Play” Political
Corruption 34. An “incestuous relationship” exists between the DOI, other captive insurance
companies, the North Carolina Bail Agents Association (NCBAA), and its members:
Phillip Bradshaw, James Camp, Melissa Seiler and Mark Wayne Cartret, suggesting the
DOI’s Petition was made in extreme bad faith and was the direct result of influence
peddling, bribery through campaign donations to Causey, and “Pay to play” criminal
political corruption. Evidence exists to support such an inference.
35. There are currently only three domestic bail sureties in North Carolina. Cannon’s
competitors and detractors, including the North Carolina Bail Agents Association
(“NCBAA”), had great incentive to diminish Cannon’s market share through any means
possible.
36. In a previous civil case, Union County Senior Resident Superior Court Judge, the
Honorable C. W. Bragg found evidence of impropriety between the DOI and the
NCBAA. After a review of the whole record in that case, Judge Bragg found “credible
evidence exists that can establish Commissioner Wayne Goodwin and the NCDOI have
a close and even incestuous relationship with the NCBAA.” Mathis v. NCDOI, 16 CVS
3049, Order of Review of Administrative Appeal (p. 13).
37. The underlying cause of this seizure is not justified by the reasons enumerated in
Causey’s petition, but is instead brought about by a disgruntled Cannon minority
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shareholder, Clyde Robert Brawley, Jr., who has now entered into business with one of
Cannon’s competitors, Mark Cartret, as well as various corrupt campaign donations
made to Causey by the NCBAA, Jim Camp, Phil Bradshaw, Mark Cartret and an
additional $4,000.00 contribution made in January of 2017 by Cartret’s lawyers at
Nelson, Mullins, Riley & Scarborough, through its Nelson, Mullins, Riley &
Scarborough PAC.
38. The DOI was either duped by rumor, innuendo, disinformation, and untruths, or chose to
be complicit in the fabrication of the inaccuracies and misrepresentations tendered to the
Court to support the seizure of Cannon through outright influence peddling and overt
political corruption through “pay to play” politics by Commissioner Mike Causey.
Evidence exists to confirm the latter.
39. Multiple pending lawsuits, of which the Attorney General’s office and DOI are keenly
aware, have uncovered the minority shareholder, Clyde Robert Brawley’s forgery of 80
plus bank signature cards and resolutions, all in violation of federal and state criminal
laws.
40. Admitting to the forgery of bank documents in a sworn affidavit, Brawley, the minority
shareholder was stripped of all legal authority by a Preliminary Injunction granted in a
parallel case pending in Guilford County by Rockingham County Superior Court Judge
Stanley L. Allen in November of 2016. This disgruntled minority shareholder, has
aligned himself with NCBAA, an internet blogger and with other detractors and
competitiors in order to devalue and destroy Cannon by any means possible, including
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defamation, character assassination, repetitive frivolous complaints to the DOI, and
social media smear campaigns.
41. Within DOI, and certain employees of DOI specifically Trendel, there still exists a
culture of preferential treatment, yielding to outside pressure to act unfairly, and the
abuse of power, while continuing to engage in outright influence peddling and overt
criminal political corruption through “Pay to Play” politics enabled and instructed by
Commissioner Mike Causey.
42. On June 2, 2016, Mr. McClain requested a meeting with DOI and was told he needed to
have both owners (himself and Robert Brawley) present.
43. Yet the former owner, Brawley, has recently bragged that he has held meetings with
DOI and the Attorney General’s staff concerning Cannon without Mr. McClain present,
in violation of Judge Stanley L. Allen’s Preliminary Injunction. The aforementioned
parties who met with Brawley, were complicit in violating Judge Allen’s Preliminary
Injunction, which they had actual knowledge of its contents for months.
44. Seizure in the instant case was not brought about to correct or rehabilitate, but to
completely shut down, irreparably harm and liquidate the company, without justification
or excuse as the direct result of outright influence peddling and overt criminal political
corruption through “Pay to Play” politics enabled and instructed by Commissioner Mike
Causey, which is equal to, if not more egregious than similar conduct by former House
Speaker Jim Black and former N.C. Commissioner of Agriculture Meg Scott Phipps.
45. The deposition of Commissioner Causey was taken on Wednesday, October 18, 2017
and he was questioned directly about the financial contributions made to him by: the
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NCBAA, James Camp, Phillip Bradshaw, Mark Cartret and the Nelson, Mullins, Riley
and Scarborough, PAC (Deposition of Commissioner Mike Causey transcript excerpt
attached as Exhibit 1).
46. Commissioner Causey was also questioned in his deposition about a meeting he held in
the Commissioner’s Conference Room at DOI in the spring of 2017 with Melissa Seiler,
Executive Director of the NCBAA, James Camp, Phillip Bradshaw, and Mark Cartret.
Commissioner Causey could NOT recall the specifics of that meeting or all of the
persons present (Causey Deposition transcript excerpt attached as Exhibit 1).
47. All of the suspicious activity regarding the multiple campaign political contributions
made to Commissioner Causey by Cannon’s detractors and enemies; the curious timing
of the seizure; DOI obtaining of the Seizure Order using apparent false pretenses given
to Superior Court Judge Carl R. Fox ex parte, despite the fact that DOI knew that
Cannon was represented by counsel, and DOI knew who that specific counsel was; the
flagrant and intentional violations by DOI of N.C.G.S. 58-2-131(L) and N.C.G.S. 58-2-
132(B) of NOT sharing the results of 2 financial examinations of Cannon; nor DOI
giving Cannon ANY opportunity to correct any deficiencies found in the 2
examinations, adds to the malicious cloud of criminal political corruption as the sole
motivation for Causey’s actions in obtaining the seizure order of Cannon on September
27, 2017.
48. This improper, curious, malicious and politically motivated seizure has allowed
Cannon’s competitors to poach its agents, and remove any possibility of the owners to
protect their investment.
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49. NCDOI ignored statutory law and procedure by allowing Cannon’s agents to be
immediately appointed with other surety companies without regard for whether the
agent owed Cannon any money for premiums or bond forfeitures, which would
statutorily prevent appointment to another surety company.
50. Following the seizure, Mr. McClain described “a feeding frenzy” among competing
recruiters for Cannon agents caught up in this newly created instability.
51. Irreparable harm has been continuing daily, as the competitors in the limited North
Carolina market of bail agents, seek to divest Cannon of its agents and employees for
their own profit.
52. The purpose of insurance regulation in North Carolina is to “protect the interests of
policyholders, claimants, creditors, and the public generally with minimum interference
with the normal prerogatives of the owners and managers of insurers.” N.C. Gen. Stat.
58-30-1(c). This is accomplished by “[e]arly detection of any potentially dangerous
condition in an insurer, and prompt application of appropriate corrective measures.”
N.C. Gen. Stat. 58-30-1(c)(1). According to the Department of Insurance website, the
purpose of the captive insurance law is to relax regulation, encourage revenue to stay
within North Carolina, and to cut “red tape.” (http://www.ncdoi.com/NCCaptives/).
53. In a previous civil case involving members of Cannon Surety, Union County Senior
Resident Superior Court Judge C. W. Bragg recognized that the DOI had been “arbitrary
and capricious” in its aggressive enforcement of regulations against parties associated
with Cannon.
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54. In the aforementioned case, Judge Bragg concluded that “while the NCDOI has the
ability to use its discretion in regulating and enforcing the licensure and conduct of bail
bondsmen in North Carolina, the NCDOI would act outside of their authority and in an
arbitrary and capricious manner by favoring the NCBAA.” Mathis v. NCDOI, 16 CVS
3049 - Union County Superior Court, Order of Review of Administrative Appeal (p. 13).
55. No records can be found of the DOI shutting down, winding down, or rehabilitating a
bail surety EVER, prior to this instant case involving Cannon.
56. There are numerous bail surety companies, besides the three domestic ones
headquartered in the State, that are headquartered out of state and not subject to the same
regulatory scrutiny as domestic insurers.
57. The true measure of a bail surety company’s success is the ability to deal with and the
inevitable bond forfeitures.
58. There is no data to support that Cannon presents a risk of unsatisfied forfeitures,
especially since other local bail surety companies have history of prohibition in multiple
counties for multiple days and weeks.
59. Cannon has never experienced more than an occasional prohibition in any county, and
then only overnight until it could be corrected the morning of the very next business
day.
60. Other bail surety companies are currently prohibited in multiple counties, ranging from
three counties to one company being prohibited in fifteen counties across the state.
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61. None of these other companies have been seized by the DOI. Compared with any other
company the DOI could evaluate, Cannon’s management practices result in better
control of the occasionally unavoidable forfeitures.
62. Among the list of alleged deficiencies in Cannon’s finances, the Petition implies
impropriety by citing two examples of bond forfeitures that were satisfied through to
judicial consent orders. Consent orders such as these are standard in the industry and are
commonly used by all other bail surety companies.
63. Additionally, criticism based on hypothetical accounting problems, with no evidence of
actual problems in years of successful operation, is not a careful consideration of
Cannon’s business practices.
64. Failing to engage in any less drastic remediation demonstrates a failure to exercise
reasoning and judgment by the DOI; in addition to collusion with Cannon’s enemies,
competitors and detractors by engaging in criminal political corruption all to the extreme
detriment of Cannon.
65. Cannon Surety was never notified of any of the accounting issues the Petition cites,
despite three (3) examinations being conducted, beginning in 2015. No feedback was
ever relayed to Cannon during the years since, all in violation of N.C.G.S. 58-2-131(L)
and N.C.G.S. 58-2-132(B).
66. There is no fair and reasoned purpose for DOI to withhold this information from
Cannon. Apparently, according to DOI’s logic, the public was endangered while the
DOI allowed these problems to persist.
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67. If these problems had allegedly persisted for years, why then did DOI wait until
September 27, 2017 to suddenly seek the ex parte Seizure Order through patently false
pretenses, never notifying Cannon of said problems and allowing Cannon the statutorily
required opportunity to fix them?
68. If compliance and correction was in fact DOI’s true goal, Cannon would have been
notified that it was out of compliance.
69. Further, Cannon’s license could have simply been suspended until DOI was satisfied.
70. Imposing the most extreme, intrusive, egregious and damaging remedy for minor
statutory violations, such as untimely paperwork, is manifestly unfair to Cannon, its
contracted agents and its employees.
The Seizure Order creates an equitable imbalance, causing greater harm than that Petitioner sought to prevent.
71. Mr. McClain has stated in an affidavit, that while for the most part DOI personnel were
courteous when carrying out their orders during the seizure, a disregard for personal
property was rampant.
72. Items belonging to individuals, property on loan to Cannon, and private individuals’
U.S. Mail, as well as confidential and privileged legal files, concerning other private
individuals, not related to or involved with Cannon were all seized.
73. There is no legitimate reason for the DOI to seize a coffee maker, charging cords, a
gold-plated bail bondsman badge, or office supplies including telephones and printers.
This is a small example of the DOI’s failure to abide by the law and the Seizure Order,
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and demonstrates a lack of intent to continue operating the business as a fiduciary and
steward during rehabilitation.
74. The DOI has neither the manpower; the resources; nor the specific knowledge to protect
Cannon’s interests by continuing its operations.
75. The DOI is not in a position to, and does not understand how to skip trace, file set aside
motions, recover and surrender defendants as Cannon regularly does. At the time of the
seizure, Cannon was not prohibited (“cut off”) from writing and/or posting criminal
appearance bonds in any county.
76. On September 28, 2017, the day of the seizure, DOI personnel were repeatedly advised
by Mr. McClain, that pending forfeitures needed to be handled IMMEDIATELY
without any delay, in order to avoid county prohibitions.
77. On Friday September 29, 2017, despite these warnings and the assurances that DOI
would have the North Carolina Attorney General’s office take care of the impending
forfeitures, the forfeitures were not addressed and Cannon was shut off for an
unresolved forfeiture in Wake County; that through the inaction of DOI, Cannon has
now been shut off in more than 9 counties and has forfeitures exceeding Two Hundred
Thirty Thousand Dollars ($230,000.00) which will serve to reduce the owners of
Cannon’s Nine Hundred Eighty Seven Thousand Dollars ($987,000.00) collateral
deposit posted with DOI by Two Hundred Thirty Thousand Dollars ($230,000.00) if
these forfeitures are paid out of this collateral fund. Prior to the seizure, no forfeiture
had ever been paid out of Cannon’s collateral fund.
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78. On Monday October 2, 2017, DOI was notified of other upcoming forfeiture matters that
needed to be handled to avoid Cannon’s prohibition. DOI ignored these matters and Mr.
McClain was forced to file a court motion in Randolph County to avoid a $50,000
judgment against Cannon.
79. Since assuming control of Cannon on September 28, 2017, Causey and DOI failed to
make and issue payroll checks to Cannon employees on Friday, September 29, 2017,
which was the regular pay day for all employees of Cannon.
80. The DOI has failed to assert how any alleged flaws in Cannon’s operation will cause
immediate, irreparable harm to the “policyholders, creditors, or the general public.” In
fact, Cannon has no policyholders. And the general public, in the form of the public
school system, is in danger only if DOI is allowed to continue to ignore the mounting
forfeitures they have allowed and are allowing to occur.
81. The facts of this case and the previous conduct of Causey and DOI, coupled with its
overt criminal political corruption and collusion with Cannon’s enemies, competitors
and detractors, indicates it has no intention to protect creditors, Cannon, its agents, the
school system as the recipient of forfeiture funds, nor the general public. Instead, its
obvious intent is to simply decimate Cannon Surety, a privately owned, North Carolina
company, in order to benefit Cannon’s competitors, enemies and detractors.
82. Only by allowing Cannon to continue operating in its normal capacity would the DOI
ensure revenues sufficient to pay any bond forfeiture liability as it comes due.
83. The only harm to be found in this case befalls Cannon, its agents, employees, and
managers. Years of hard work to create a business model, become profitable, and build
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goodwill in the community have been utterly destroyed by Causey and DOI in one
single maneuver.
The seizure of private property here took place without due process of law.
84. This seizure violates the constitutional principle that due process must be followed to
seize private property.
85. Cannon seeks to protect its property rights through ordinary judicial proceedings
designed to assure due process of law.
86. Cannon has been unfairly denied these basic rights without notice or opportunity to be
heard by the swift and unfettered actions of Causey and DOI through its obtaining an ex
parte seizure order, upon information and belief, by means of apparent patently false
pretenses to Judge Carl R. Fox, taking over their long-standing and successful insurance
business.
FIRST CAUSE OF ACTION: SEIZURE WITHOUT CAUSE IN VIOLATION OF 42 U.S.C. § 1983
(Against Causey in his individual capacity)
87. Respondent hereby incorporates paragraphs 1-86, above as if fully set forth herein.
88. Under color of law, Commissioner Causey, acting individually and in concert with
Department supervisors, effected seizure of Cannon’s business on the grounds of
financial insolvency with a reckless disregard for the fact that the decision to seize
Cannon was not supported by credible evidence.
89. As a result of Petitioner’s conduct, Respondent was deprived of its rights under the Fifth
and Fourteenth Amendment to the United States Constitution.
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90. As a consequence of these deprivations, Respondent has suffered severe economic
losses.
91. As a further consequence of these deprivations, Respondent was required to retain
counsel to represent them in the civil proceedings pursued against them.
92. As compensation for injuries caused by Petitioner’s seizing of Respondent’s company
by legal process without probable cause, Respondent seeks damages in an amount to be
established at trial as compensation for constitutional deprivations, past and future
economic loss, and expenses associated with defending against the unlawful civil
proceedings initiated and sustained by the Petitioner; 2) damages in an amount to be
established at trial to punish Petitioner for outrageous conduct pursued out of actual
malice, to discourage them from engaging in similar conduct in the future, and to deter
others similarly situated from using their positions to abuse the legal process in order to
effect illegal seizures; 3) attorneys’ fees, pursuant to 42 U.S.C. § 1988(b); 4) an award
for reasonable and customary costs, expenses, and interest incurred in pursuit of this
action; and 5) whatever additional relief the Court may deem appropriate.
SECOND CAUSE OF ACTION: VIOLATIONS OF 42 U.S.C. § 1983 AND
MONELL V. DEP’T OF SOCIAL SERVS., 436 U.S. 658 (1977) (Against Causey in his official capacity, and against the North Carolina Department of
Insurance)
93. Respondent incorporate allegations made in paragraphs 1-92, above.
94. Causey and DOI’s supervisors failure to train, control, and supervise employees led to
violations of Cannon’s federally protected constitutional rights.
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95. In light of the history of the DOI’s favorable treatment of certain insurance companies,
including direct competitors of Cannon, the Causey and other supervisory officials in the
Department of Insurance acted recklessly or with deliberate indifference when they
proceeded with a petition to seize Cannon’s assets and in violation of N.C.G.S. 58-2-
131(L) and N.C.G.S. 58-2-132(B). A conspiracy of collusion and criminal political
corruption between Commissioner Causey and Melissa Seiler, Executive Director of
The NCBAA, James Camp, Phillip Bradshaw, and Mark Cartret, was designed to bring
about the destruction of Cannon Surety.
96. As a direct and foreseeable consequence of these acts and omissions, Cannon was
deprived of its rights under the Fourth, Fifth, and Fourteenth Amendments to the United
States Constitution.
97. Commissioner Causey and other supervisory officials in the Department of Insurance
knew, or should have known, about these deprivations, but demonstrated a reckless
disregard or deliberate indifference, by failing to take prompt and meaningful
preventative or remedial action.
98. As a direct and foreseeable consequence of Causey’s and other supervisors’ failure to
train and supervise NCDOI employees, the Respondent was deprived of its rights under
the Fourth, Fifth, and Fourteenth Amendments to the United States Constitution.
99. As a consequence of the foregoing constitutional deprivations, the Respondent has
suffered substantial economic losses.
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100. As a further consequence of these deprivations, Respondent was required to retain
counsel to represent itself in the civil proceedings pursued against it.
101. As compensation for injuries caused by Petitioner’s conduct as supervisors in the
North Carolina Department of Insurance, Respondent seeks damages in an amount to be
established at trial as compensation for constitutional deprivations, past and future
economic loss and expenses associated with defending against the unlawful civil
proceedings initiated and sustained by defendants; 2) damages in an amount to be
established at trial to punish Causey and DOI for outrageous conduct, to discourage
them from engaging in similar conduct in the future, and to deter others similarly
situated from violating the public trust by failing adequately to supervise agents under
their authority; 3) attorneys’ fees, pursuant to 42 U.S.C. § 1988(b); 4) an award for
reasonable and customary costs, expenses, and interest incurred in pursuit of this action;
and 5) whatever additional relief the Court may deem appropriate.
THIRD CAUSE OF ACTION: MALICIOUS PROSECUTION AND CONSPIRACY IN VIOLATION OF NORTH
CAROLINA LAW (Against Causey in his individual capacity)
102. Plaintiffs incorporate by reference all allegations made in paragraphs 1-101 above. As if
fully set forth herein.
103. On September 27, 2017 Commissioner Causey proceeded to submit the petition to seize
assets and control of Cannon Surety all in a civil and criminal conspiracy involving overt
collusion with Trendel, the NCBAA, Melissa Seiler, James Camp, Phillip Bradshaw and
Mark Wayne Cartret.
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104. Petitioner’s aggressive and intrusive prosecution of this unfounded action was based on the
allegations of a disgruntled minority shareholder, who has a history of improper contact
with the Department in violation of Superior Court Judge Stanley L. Allen’s Preliminary
Injunction, and has previously made unproven allegations of impropriety, and could not
provide a consistent or corroborated account of events; and with a civil and criminal
conspiracy of collusion and political corruption between Commissioner Causey, Melissa
Seiler, Executive Director of the NCBAA, James Camp, Phillip Bradshaw, and Mark
Wayne Cartret.
105. Petitioner continued to pursue the seizure action despite evidence proving that no wrong-
doing had occurred that warranted any such extreme action.
106. The DOI demonstrated ill-will and a wanton disregard for Respondent’s rights by
conspiring to and by manufacturing false and misleading reports with the knowledge that
these reports would be used to advance and perpetuate the seizure process against Cannon.
107. As a direct and foreseeable consequence of Causey’s conduct, Cannon was unreasonably
and unlawfully subjected to seizure and takeover of the company by Causey and his co-
conspirators at DOI.
108. As a direct consequence of being subjected to this seizure, Cannon has suffered severe
economic losses.
109. As a further consequence of being subjected to civil prosecution, Cannon was required to
retain counsel to represent it in further proceedings.
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110. As compensation for injuries caused by Causey’s intentional pursuit of an illegal seizure,
Cannon seeks 1) damages in an amount to be established at trial as compensation for past
and future economic losses; past and future physical harm; emotional trauma; and expenses
associated with defending against the unlawful civil proceedings initiated and sustained by
Causey; 2) damages in an amount to be established at trial by a jury to punish Causey for
extreme and outrageous conduct pursued out of actual malice and a criminal conspiracy of
“Pay to Play” political corruption; to discourage them from engaging in similar conduct in
the future; and to deter others similarly situated from using their positions to pursue illegal
prosecutions; 3) attorneys’ fees; 4) an award for reasonable and customary costs, expenses,
and interest incurred in pursuit of this action; and 5) any additional relief that the Court
may deem appropriate.
FOURTH CAUSE OF ACTION: TORTIOUS INTERFERENCE WITH CONTRACT
(Against Causey in his individual capacity) 111. Plaintiffs hereby incorporate the allegations made in paragraphs 1-110 above. As if fully
set forth herein.
112. Seizure in the instant case was not to correct or rehabilitate, but rather to liquidate and to
completely shut down Cannon Surety.
113. This allowed Cannon’s competitors to poach its agents, and remove all possibility of the
owners to protect their investment.
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114. NCDOI ignored statutory laws and allowed Cannon’s agents to be immediately appointed
with other surety companies without regard for whether the agent owed Cannon money,
which would statutorily prevent appointment to another surety company.
115. Following the seizure, Mr. McClain has described “a feeding frenzy” among competing
recruiters for Cannon agents caught up in this newly created instability.
116. Irreparable harm has been continuing daily as competitors in the limited North Carolina
market seek to divest Cannon of its agents and employees for their own profit.
117. As a result of Petitioner’s actions, Cannon Surety was forced from competing in the
insurance industry and were denied the benefits and entitlements of a duly licensed
business in the state of North Carolina.
118. As a result of Petitioner’s actions, Cannon agents are being approached to withdraw from
their employment with Cannon, causing the Respondent to suffer lost business
opportunities.
119. As a result of Petitioner’s actions, Cannon Surety’s existing business and contractual
relationships are jeopardized in the future.
120. As compensation for injuries caused by Petitioner’s intentional or reckless conduct
interfering with Respondent’s contractual relationships with third parties, Respondent seeks
damages in an amount to be established at trial as compensation for past and future
economic loss; and 2) whatever additional relief the Court may deem appropriate.
FIFTH CAUSE OF ACTION: TORTIOUS INTERFERENCE WITH PROSPECTIVE ECONOMIC
ADVANTAGE (Against Causey in his individual capacity)
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121. Plaintiffs hereby incorporate the allegations made in paragraphs 1-120 above as if fully set
forth herein.
122. An “incestuous relationship” exists between the Department of Insurance and some captive
insurance companies, suggesting the Department’s Petition was made in bad faith.
123. There are currently only three domestic bail sureties in North Carolina. Cannon’s
competitors, including the North Carolina Bail Agents Association (“NCBAA”), had great
incentive to diminish Cannon’s market share through any means possible.
124. In a previous civil case, Union County Senior Resident Superior Court Judge Honorable C.
W. Bragg found evidence of impropriety between the DOI and the NCBAA. After a review
of the whole record, Judge Bragg found “credible evidence exists that can establish
Commissioner Wayne Goodwin and the NCDOI have a close and even incestuous
relationship with the NCBAA.” Mathis v. NCDOI, Order of Review of Administrative
Appeal (p. 13) 16 CVS 3049.
125. The underlying cause of this seizure is not justified by the reasons enumerated in the
Insurance Commissioner's petition, but is instead brought about by a disgruntled Cannon
owner who has now entered into business with one of Cannon’s competitors.
126. The DOI was either duped by rumor, innuendo, disinformation, and untruths, or chose to be
complicit in the fabrication of the inaccuracies and misrepresentations tendered to the
Court to support the seizure of Cannon.
127. As compensation for injuries caused by Causey’s intentional or reckless conduct interfering
with Respondent’s economic relationships with third parties, Cannon seeks damages in an
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amount to be established at trial as compensation for past and future economic loss; and 2)
any other additional relief that the Court may deem just and appropriate.
SIXTH CAUSE OF ACTION: (PUNITIVE DAMAGES)
128. Respondent incorporates the allegations in paragraphs 1 – 127 above as if fully set forth
herein.
129. Causey’s actions in this case are willful are wanton, malicious, and intentionally taken to
embarrass, harass, and torment Cannon, and Cannon is entitled to recover punitive damages
as such, and/or because the law of this State presumes compensatory damages for this type
of intentional action by Causey such that Cannon is entitled, by law, to recover punitive
damages against Causey. Cannon fully incorporates by reference the all of the allegations
above as if fully set forth herein verbatim. Causey has committed egregiously wrongful
acts against Cannon by inter alia making false, offensive, and blatantly derogatory oral and
written statements against Cannon, causing malicious legal process and related
investigatory claims to be pursued, without any merit, evidence, good faith, or other basis
for doing so. Pursuant to the applicable North Carolina General Statutes, Cannon is entitled
to an award of punitive damages in amounts in excess of TWENTY-FIVE THOUSAND
AND NO/100 DOLLARS ($25,000.00), respectively, against Causey in both his official
and individual capacities, to deter Causey and others from committing similar wrongful
acts.
JURY DEMAND
Cannon hereby requests a trial by jury on all claims and issues so triable.
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This the 27th day of October, 2017.
BIBBS LAW GROUP
/s/ Mark L. Bibbs ____________________________
Mark L. Bibbs Attorney for Respondent Cannon Surety N.C. State Bar No. 22680 410 North Boylan Avenue Raleigh, North Carolina 27603 Telephone: (919) 256-3775 [email protected]
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CERTIFICATE OF SERVICE
The undersigned hereby certifies that the following persons were served a copy of the foregoing document via hand delivery, or email delivery and/or United States mail to the following address, postage pre-paid: Ms. Denise Stanford, Esq. Mr. Dan Johnson, Esq. Ms. Heather Freeman, Esq. Assistant Attorney General N.C. Attorney General’s Office 114 W. Edenton St. Raleigh, North Carolina 27602-0629
This the 27th day of October, 2017
BIBBS LAW GROUP
/s/ Mark L. Bibbs
By: ____________________________ Mark L. Bibbs Attorney for Respondent Cannon Surety N.C. State Bar No. 22680 410 North Boylan Avenue Raleigh, North Carolina 27603 Telephone: (919) 256-3775 [email protected]