MEMORANDUM OPINION AND ORDER
MARVIN E. ASPEN, Chief District Judge:
Although all claims against it have been dismissed, defendant Midwest Securities Trust Company ("MSTC") remains in this litigation because of its cross-claim for indemnification against defendant Boulevard Bank National Association ("Boulevard"). In lieu of participating in the final pretrial order submitted by the remaining parties, MSTC and Boulevard have filed cross-motions for summary judgment on MSTC's claim. For the reasons set forth below, Boulevard's motion is granted and MSTC's motion is denied.
From 1984 to approximately 1990, Jackson National Life Insurance ("JNL") engaged Boulevard to hold certain securities on its behalf. On March 3, 1986 and March 11, 1986, JNL made two purchases of 12% Senior Subordinated Debentures issued by MGM Grand Hotels ("12% Debentures") at a total price of approximately $ 6.5 million. As with many of its securities, JNL had Boulevard hold these debentures as custodian. Boulevard, in turn, had MSTC hold the 12% Debentures pursuant to a Participant's Agreement entered into by MSTC and Boulevard in March 1981.
On or about March 21, 1986, MGM filed with the Securities and Exchange Commission a prospectus for an exchange offer ("MGM Exchange Offer"), wherein MGM offered to exchange the 12% Debentures for higher yielding secured notes. Except for JNL, almost all other 12% Debenture holders took advantage of the MGM Exchange Offer. Subsequently, MGM's successor defaulted on its obligations and filed for bankruptcy, rendering the 12% Debentures essentially worthless.
In March 1993, JNL filed this diversity action against the various defendants, alleging that their malfeasance had caused at least $ 50,000 in damage. JNL's initial complaint alleged that Boulevard had received notice of the MGM Exchange Offer in 1986, but did not pass this information along to either JNL or its investment advisor, thereby preventing JNL from exchanging the 12% Debentures for the secured notes. In its amended complaint, filed in March 1994, JNL added MSTC as an additional defendant. MSTC filed its cross-claim against Boulevard in September 1994, invoking a contractual indemnity provision contained in the Participant's Agreement. On January 4, 1995, we dismissed JNL's and Boulevard's claims against MSTC, 882 F. Supp. at 718-22, and denied Boulevard's motion for a more definite statement of MSTC's cross-claim. Id. at 725-27.
II. Summary Judgment Standard
Summary judgment is appropriate if "there is no genuine issue of material fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). This standard places the initial burden on the moving party to identify "those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986) (quoting Fed. R. Civ. P. 56(c)). Once the moving party has met this burden, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(c); see Maxwell v. City of Indianapolis, 998 F.2d 431, 433 (7th Cir. 1993). In satisfying these burdens, the parties are required to comply with General Rules 12(M) and 12(N) of the United States District Court for the Northern District of Illinois ("Local Rules 12(M) and 12(N)"). These rules direct the parties to explicitly state what material facts they believe justify the grant (or denial) of summary judgment, and to cite specific pieces of evidence which support their assertions. Failure to comply with Local Rules 12(M) or 12(N) justifies either denying the motion or deeming unrelated facts admitted.
Notwithstanding the fact that the parties have challenged each other's factual averments, MSTC and Boulevard still argue that no material facts are in dispute and each one claims to be entitled to summary judgment on MSTC's cross-claim. This cross-claim against Boulevard is based on the Participant's Agreement between the two parties that was in effect during the entire time period from 1982 to 1990 when Boulevard used MSTC a custodian. MSTC first contends that Paragraph 9 of the agreement obligates Boulevard to indemnify it for any losses it sustained because of the claims asserted against it in this litigation. MSTC also argues that its Rules, which are incorporated into the agreement, see Participant's Agreement PP 1, 3, obligate Boulevard to reimburse it for the losses and expenses it incurred in defending against these claims.
Indemnity provisions contained in a contract are interpreted in Illinois according to the intention of parties. Charter Bank v. Eckert, 223 Ill. App. 3d 918, 585 N.E.2d 1304, 1310, 166 Ill. Dec. 282 (Ill. App. Ct. 1992).
In deciding what the parties intended an indemnity provision to mean, we examine all the terms of the agreement and the factual setting of the case. Id. However, indemnity provisions are not favored and are strictly construed against the indemnitee. Id.; Fidelity & Deposit Co. of Md. v. Rosenmutter, 614 F. Supp. 348, 351 (N.D. Ill. 1985).
MSTC first grounds its cross-claim in Paragraph 9 of the Participant's Agreement, which states:
[Boulevard] hereby agrees to indemnify [MSTC] and any nominee in the name of which securities credited to the account of [Boulevard] by [MSTC] are registered against any and all loss, liability or expense sustained, without fault on the part of [MSTC] or such nominee, by reason of the registration of securities credited to the account of [Boulevard] in the name of any such nominee, including (i) assessments, (ii) losses, liabilities and expenses arising from claims of third parties and from taxes or other governmental charges, and (iii) related expenses in respect of any such securities.
Participant's Agreement, P 9. MSTC argues that this provision "requires Boulevard to indemnify MSTC for any and all loss, expense or liability sustained as a consequence of MSTC's provision of custodial services to Boulevard." MSTC's Reply in Support of its Motion, at 2. Boulevard contends, however, that it is only obligated to indemnify MSTC if its losses were incurred "by reason of the registration of securities credited to the account of [Boulevard]."
Boulevard asserts in its 12(M) statement that this condition has not been fulfilled. In support, Boulevard submits an affidavit from a former employee who explains that the phrase "registration of securities" refers to the process by which the name of the holder of the securities is registered. Boulevard's 12(M) P 8.
This employee also maintains that notifying participants of capital change events, such as an exchange offer, is a separate service provided by depositories, and is not related to the registration of a security. Id. P 9. Rather than pointing to evidence in its 12(N) response that would contradict these statements, MSTC simply denies their veracity. Such a response is clearly insufficient under Local Rule 12(N)(3) and Fed. R. Civ. P. 56(e), and therefore we deem Boulevard's statements to be admitted by MSTC.
See Stewart v. McGinnis, 5 F.3d 1031, 1034 (7th Cir. 1993) (noting that "district court may strictly apply Rule 12 N"), cert. denied, U.S. , 127 L. Ed. 2d 393, 114 S. Ct. 1075 (1994); Bell, Boyd & Lloyd v. Tapy, 896 F.2d 1101, 1103 (7th Cir. 1990) (finding 12(N) response inadequate where defendant failed to reference any supporting materials).
Given these admissions, we must conclude that the losses at issue were not caused by reason of the registration of securities to the account of Boulevard. The basis for JNL's and Boulevard's claims against MSTC was its alleged failure to notify them of a capital change event--ie., the exchange offer of the 12% Debentures. There is no allegation that the claimed losses resulted from the registration of the 12% Debentures in Boulevard's name, or that somehow this registration prevented MSTC from giving proper notice of the exchange offer. Thus, because the underlying litigation did not ensue from MSTC's recording of the 12% Debentures in Boulevard's name, any losses sustained by MSTC did not arise because of the "registration of securities" and are not covered by Paragraph 9 of the Participant's Agreement. Moreover, even if we could twist the language of the agreement to fit this case, we would not be inclined to do so because MSTC, as drafter of the indemnity provision, bears the onus of its strict construction. Charter Bank, 585 N.E.2d at 1310. Accordingly, we conclude that Paragraph 9 of the Participants Agreement does not provide MSTC with a basis for recovering the expenses it incurred in this lawsuit.
MSTC next argues that it is entitled to summary judgment on its cross-claim because of two Rules that were incorporated into the Participant's Agreement. MSTC first cites Article I, Rule 3, Section 2 ("Rule 3"):
Participants shall indemnify and hold harmless [MSTC] against any loss, liability or expense sustained, including (i) assessments, (ii) losses, liabilities and expenses arising from claims of third parties and from taxes or other government charges, (iii) related expenses in respect to any Security, and (iv) losses, liabilities and expenses arising from [MSTC's] reliance on or by reason of the breach of any warranty provided by the Participant to [MSTC] at the time a Security is delivered or deposited to [MSTC] . . . . , provided, however, Participants shall not be liable for any such losses, costs, expenses, damages and liabilities that may arise by reason of the grossly negligent, fraudulent or criminal acts of [MSTC] or its respective officers, employees or agents.