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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.


therefore denied.


therefore denied.

42. Admitted.

43. Admitted.


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.


therefore denied.

59. Denied.

60. Denied.

61. Denied.

62. Denied.

63. Denied.


therefore denied.

65. Denied.

66. Denied.

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therefore denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.

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therefore denied.


therefore denied.


therefore denied.

81. Denied.

82. Denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.


therefore denied.

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90. Denied.


therefore denied.


therefore denied.

93. Upon information and belief, admitted.




therefore denied.


therefore denied.


therefore denied.

99. Denied.

100. 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.


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.


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.

28

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.

29

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.

30

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.

31

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.

32

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)

33

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

34

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.

35

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]

36

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]

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