On a Rule 12(b)(6) motion to dismiss, plaintiff's well-pleaded
allegations of fact are taken as true and all reasonable inferences are
drawn in plaintiff's favor. Leatherman v. Tarrant County Narcotics
Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993); Dixon v.
Page, 291 F.3d 485, 486 (7th Cir. 2002); Stachon v. United Consumers
Club, Inc., 229 F.3d 673, 675 (7th Cir. 2000). A complaint need not set
forth all relevant facts or recite the law; all that is required is a
short and plain statement showing that the party is entitled to relief.
Fed.R.Civ.P. 8(a)(2); Boim v. Quranic Literacy Institute, 291 F.3d 1000,
1008 (7th Cir. 2002); Anderson v. Simon, 217 F.3d 472, 474 (7th Cir.
2000), cert. denied, 531 U.S. 1073 (2001); Scott v. City of Chicago,
195 F.3d 950, 951 (7th Cir. 1999). Plaintiffs in a suit in federal court
need not plead facts; conclusions may be pleaded as long as the defendant
has at least minimal notice of the claim. Fed.R.Civ.P. 8(a)(2);
Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002); Higgs v. Carver,
286 F.3d 437, 439 (7th Cir. 2002); Scott, 195 F.3d at 951; Albiero v. City
of Kankakee, 122 F.3d 417, 419 (7th Cir. 1997); Jackson v. Marion County,
66 F.3d 151, 153-54 (7th Cir. 1995). In the complaint itself, it is
unnecessary to specifically identify the legal basis for a claim as long
as the facts alleged would support relief. Forseth v. Village of Sussex,
199 F.3d 363, 368 (7th Cir. 2000); Scott,
195 F.3d at 951; Albiero, 122 F.3d at 419; Bartholet v. Reishauer A.G.
(Zurich), 953 F.2d 1073, 1078 (7th Cir. 1992). However, in response to a
motion to dismiss that raises the issue, the plaintiff must identify the
legal basis for a claim and make adequate legal arguments in support of
it. Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d 1039, 1041-42 (7th
Cir. 1999); Stransky v. Cummins Engine Co., 51 F.3d 1329, 1335 (7th Cir.
1995); Levin v. Childers, 101 F.3d 44, 46 (6th Cir. 1996); Carpenter v.
City of Northlake, 948 F. Supp. 759, 765 (N.D. Ill. 1996). As long as
they are consistent with the allegations of the complaint, a plaintiff
may assert additional facts in his or her response to a motion to
dismiss. Brokaw v. Mercer County, 235 F.3d 1000, 1006 (7th Cir. 2000);
Forseth, 199 F.3d at 368; Albiero, 122 F.3d at 419; Gutierrez v. Peters,
Ill F.3d 1364, 1367 n.2 (7th Cir. 1997). Also, documents that are
referred to in the complaint and that are central to a claim that is made
may be considered even if not attached to the complaint. Duferco. Steel
Inc. v. M/V Kalisti, 121 F.3d 321, 324 n.3 (7th Cir. 1997); Venture
Associates Corp. v. Zenith Data Systems Corp., 987 F.2d 429, 431 (7th
Cir. 1993); Hebein ex rel. Berman v. Young, 37 F. Supp.2d 1035, 1038-39
(N.D. Ill. 1998). This may include the full text of an SEC filing or
document that is integral to the complaint. See Bovee v. Coopers &
Lybrand C.P.A., 272 F.3d 356, 360-61 (6th Cir. 2001); Ehlert v. Singer,
245 F.3d 1313, 1316 n.4
(11th Cir. 2001); San Leandro Emergency Medical Group Profit Sharing Plan
v. Philip Morris Cos., 75 F.3d 801, 808-09 (2d Cir. 1996); Abrams v. Van
Kampen Funds, Inc., 2002 WL 1160171 *2 (N.D. Ill. May 30, 2002); In re
Newell Rubbermaid Inc. Securities Litigation, 2000 WL 1705279 *3 n.2
(N.D. Ill. Nov. 14, 2000).
The following facts are taken to be true for purposes of ruling on
defendant's motion to dismiss. For the pertinent time period, plaintiff
had a "claims made" directors and officers liability policy with
defendant (the "Policy"). On November 13, 2001, the SEC issued an order
entitled "Order Directing a Private Investigation and Designating
Officers to Take Testimony" (the "2001 Order"). The 2001 Order stated
that SEC staff had reported information indicating that, in connection
with securities transactions, Minuteman officers and others may have made
false or misleading statements, failed to keep accurate records and
accounts, and failed to implement and maintain a system of internal
accounting controls. The 2001 Order directs that a private investigation
be undertaken as to these matters and the Order empowers specified
individuals to administer oaths and affirmations, subpoena witnesses,
etc., in order to conduct this investigation.
A subpoena dated November 21, 2001 was served on plaintiff and certain
of its officers and employees requiring appearances for depositions and
the production of specified
categories of documents. On January 22, 2002, written notice of the
investigation and subpoena was provided to defendant. Plaintiff expended
in excess of $57,000 complying with the document production aspect of the
subpoena. Additional subpoenas requiring more depositions and document
production were also issued. Deponents retained counsel and defendant
reimbursed the deponents for their legals fees, which was an amount in
excess of $418,000. Plaintiff contends these two expenses qualify as
"Costs of Defense" under the Policy.
On May 31, 2003, the SEC entered a cease-and-desist order making
findings and imposing "undertakings" under the Securities and Exchange
Act of 1934. This order was based on the acceptance of plaintiff's offer
to settle the matter without admitting or denying the findings contained
in the cease-and-desist order. The findings included that certain
earnings were misstated. Plaintiff and certain officers were ordered to
cease and desist from engaging in securities law violations. Plaintiff
was also required to: (1) employ, for five years, a Chief Accounting
Officer who would be responsible for reviewing filings with the SEC and
be responsible for all financial reporting; (2) implement written internal
procedures to ensure quarterly sales were recorded in accordance with
generally accepted accounting principles; and (3) retain an additional
auditing firm to conduct quarterly audits and review internal controls.
It is alleged
that the Chief Accounting Officer and additional auditor will cost
an estimated $420,000 or more. Plaintiff contends this expense is a
"Loss" from a "Settlement" under the terms of the Policy.