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JACKSON NATL. LIFE INS. CO. v. GOFEN & GLOSSBERG

August 21, 1995

JACKSON NATIONAL LIFE INSURANCE COMPANY, Plaintiff,
v.
GOFEN & GLOSSBERG, INC., BOULEVARD BANK NATIONAL ASSOCIATION and MIDWEST SECURITIES TRUST COMPANY, Defendants.



The opinion of the court was delivered by: MARVIN E. ASPEN

 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.

 I. Background1

 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.

 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.

 II. Discussion

 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). *fn2" 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 ...

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