United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM AND ORDER
BLANCHE M. MANNING UNITED STATES DISTRICT JUDGE
the court is Old Republic Insurance Company's (“Old
Republic”) Fed.R.Civ.P. 12(b)(6) motion to dismiss
portions of the second amended counterclaim of Ness, Motley,
Loadholt, Richardson & Poole, P.A., Motley Rice, L.L.C.
and M.R.R.M., P.A. (collectively, “Ness Motley”).
For the reasons that follow, the court grants in part and
denies in part the motion to dismiss.
purposes of this order, the court will presume familiarity
with its prior decisions regarding this case and will deem as
true all well-pleaded allegations in the Second Amended
the present action stems from a $36 million judgment entered
against the now defunct law firm of Ness Motley. See
Interclaim Holdings, Ltd. v. Ness, Motley, Loadholt,
Richardson & Poole, 2001 WL 1313799 (N.D. Ill. Oct.
29, 2001) amended in Interclaim Holdings, Ltd. v. Ness,
Loadholt, Richardson & Poole, 2004 WL 725287 (N.D.
Ill. April 1, 2004) (hereinafter “Underlying Illinois
Action”). Old Republic, which issued excess
professional liability insurance policies to Ness Motley (the
“Policies”), has filed the instant action seeking
a declaration that it has no liability in connection with the
judgment entered in the Underlying Illinois Action. The Old
Republic Policies provide policy limits of $10 million each,
both per claim and in the aggregate, in excess of the
underlying $20 million limits of the primary insurance
policies issued by Twin City Fire Insurance Company.
November 30, 2004, Ness Motley filed its Second Amended
Affirmative Defenses and Second Amended Counterclaim
(“SAC”). The SAC alleges that Old Republic
breached its contract by refusing to acknowledge its coverage
obligations and by refusing to assist Ness Motley in placing
a supersedeas bond with respect to Ness Motley's efforts
to perfect an appeal in the Underlying Illinois Action. The
SAC also alleges that Old Republic committed fraud because it
never intended to provide coverage for punitive damages to
Ness Motley despite the fact that the Policies contain
language appearing to cover such damages.
Republic initially moved to dismiss all counts, but
subsequently withdrew its arguments relating to ripeness and
its motion to dismiss Count I (breach of contract) of the
SAC. Accordingly, currently pending before this court is Old
Republic's Rule 12(b)(6) motion to dismiss Count II
(common law fraud), Count III (violation of the Illinois
Consumer Fraud Act), and Count IV (breach of contract/ breach
of duty of good faith and fair dealing) of the SAC.
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) challenges the sufficiency of the complaint (here,
the counterclaim) for failure to state a claim upon which
relief may be granted. General Elec. Capital Corp. v.
Lease Resolution Corp., 128 F.3d 1074, 1080 (7th
Cir.1997). Thus, the issue is not whether counter plaintiffs
ultimately will prevail, but whether they are entitled to
present evidence in support of their claim. Conley v.
Gibson, 355 U.S. 41, 45-46 (1957). In deciding a motion
to dismiss, the court must assume all facts alleged in the
complaint to be true, construe the allegations liberally and
view the allegations in the light most favorable to
plaintiffs. Meriwether v. Faulkner, 821 F.2d 408,
410 (7th Cir.1987), cert. denied sub nom., 484 U.S.
935 (1987). Dismissal is appropriate only if it appears
beyond a doubt that the plaintiff can prove no set of facts
in support of its claim that would entitle it to relief.
Conley, 355 U.S. at 45-46; Kennedy v. Nat'l
Juvenile Det. Ass'n, 187 F.3d 690, 695 (7th
Count II (Common Law Fraud) and Count III (Illinois Consumer
Count II of the SAC, Ness Motley alleges that Old
Republic's “promises to insure Ness Motley for
punitive or exemplary damages were knowingly false,
fraudulent, and deceptive, ” because Old Republic
“never intended to provide the punitive damage
coverage.” Instead, according to Ness Motley, Old
Republic, in the event that a claim was made under the
Policies, planned to contend that the Policies were governed
by Illinois law and that coverage for punitive damages
resulting from one's own behavior under Illinois law was
against public policy. SAC at ¶17.
Republic argues that this count must be dismissed because (1)
the SAC alleges a misrepresentation regarding the legal
effect of a document (i.e., the Policies) which is not
grounds for fraud, and (2) the SAC alleges “promissory
fraud” which Ness Motley has not properly plead.
its first argument, Old Republic argues that in order to
state a claim for fraud, Ness Motley must allege a
misrepresentation of fact. Randazzo v. Harris
Bank Palatine, N.A., 104 F.Supp.2d 949, 954 (N. D. Ill.
2000), aff'd 262 F.3d 663 (7th Cir.
2001) (“a party's interpretation of a legal
document - whether correct or not - cannot be a
representation of a material fact but rather is merely that
party's personal opinion as to the legal effect of the
document.”) (citation omitted). According to Old
Republic, any representations regarding the scope of coverage
under the Policies, the law applicable to the Policies or the
state law regarding the insurability of punitive damages is
not a misrepresentation of fact and cannot, as a
matter of law, constitute a basis for fraud. Old Republic
contends that it “could not have known at the time it
sold the Policies that a court would find Illinois law
applicable, ” so there was no misrepresentation of
Motley, however, argues that nothing in the Counterclaim is
based upon the construction or legal effect of the Policies
in general, and specifically, the punitive damages coverage
provision. According to Ness Motley, the language of the
punitive damages provision is clear and ...