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Century Surety Co. v. John B.

January 17, 2006

CENTURY SURETY COMPANY, PLAINTIFF,
v.
JOHN B., INC., D/B/A JOHN BARLEYCORN; J.B. AT CLARK INC.,; AND MATTHEW SIRMON



The opinion of the court was delivered by: Judge Blanche M. Manning

MEMORANDUM AND ORDER

Plaintiff Century Surety has filed a motion for judgment on the pleadings with respect to its declaratory judgment action against defendants John B., Inc., d/b/a John Barleycorn ("Barleycorn"); J.B. at Clark, Inc.("JB"); and Matthew Sirmon ("Sirmon"). For the reasons stated below, the motion is granted.

I. Background

Sirmon filed a complaint in the Circuit Court of Cook County against defendants in the instant action, among others, John B., Inc. d/b/a John Barleycorn and J.B. at Clark, Inc. styled Matthew Sirmon v. John B., Inc. d/b/a John Barleycorn, et al., 04 L 12564 ("Underlying Action"). In general, the Underlying Action alleges negligence, battery, negligent hiring and supervision, and dram shop liability for injuries Sirmon allegedly sustained as a result of an altercation with bouncers at a bar/dram shop owned and operated by Barleycorn and JB.

Century filed the instant action seeking a declaration that it owes no insurance coverage obligations to the defendants Barleycorn and JB in connection with the Underlying Action.

II. Standard for Motion for Judgment on the Pleadings

A party is permitted under Federal Rule of Civil Procedure 12(c) to move for judgment on the pleadings after the parties have the complaint and the answer. Fed. R. Civ. P. 12(c); Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir. 1998). A motion for judgment on the pleadings "under Rule 12(c) is reviewed under the same standard as a motion to dismiss under 12(b): the motion is not granted unless it appears beyond doubt that the plaintiff can prove no facts sufficient to support his claim for relief, and the facts in the complaint are viewed in the light most favorable to the non-moving party." Flenner v. Sheahan, 107 F.3d 459, 461 (7th Cir. 1997). The court, in ruling on a motion for judgment on the pleadings, must "accept as true all well-pleaded allegations." Forseth v. Village of Sussex, 199 F.3d 363, 364 (7th Cir. 2000). A court may rule on a judgment on the pleadings under Rule 12(c) based upon a review of the pleadings alone, which include the complaint, the answer, and any written instruments attached as exhibits. Id. at 452-53.

III. Analysis

A. Preliminary issues

1. Jurisdiction

Barleycorn and JB have responded to Century's motion by asserting that the court does not have jurisdiction to hear this case. Specifically, Barleycorn and JB contend that, consistent with the denial in their answer, the $75,000 amount in controversy has not been met. According to JB and Barleycorn, because the state court has not determined liability, the indemnification claim is premature and therefore only costs of defense can apply to the amount in controversy. Thus, Barleycorn and JB argue, because Century has not come forward with evidence that the costs of defense will exceed $75,000, jurisdiction does not exist.

Prior to addressing the merits of the motion for judgment on the pleadings, the court must satisfy itself that jurisdiction properly lies in this court. The party seeking to invoke federal diversity jurisdiction bears the burden of demonstrating that the complete diversity and amount in controversy requirements were met at the time of removal. Chase v. Shop 'N Save Warehouse Foods, Inc., 110 F.3d 424, 427 (7th Cir. 1997). A defendant meets this burden by supporting its allegations of jurisdiction with "competent proof," such as, "evidence which proves to a reasonable probability that jurisdiction exists." Id. "Only if it were legally impossible for [the plaintiff] to win on claims totaling more than $75,000 would [the] suit fail for want of jurisdiction." Geschke v. Air Force Ass'n, 425 F.3d 337, 341 (7th Cir. 2005) (citations omitted).

Whether or not diversity jurisdiction exists is determined at the outset of the case, id.; thus, the court looks to the initial complaint filed in the Underlying Action to determine whether the amount in controversy is satisfied. To the extent that Barleycorn and JB argue that only defense costs can be used to determine the amount in controversy, this court rejects that argument as a matter of law. Simply because liability has not been established in the Underlying Action does not mean that it is impossible for Sirmon to win on his claims assuming they total more than $75,000. Id. ("that there may be a plausible argument that the plaintiff's claims must fail as a matter of law does not mean the court lacks jurisdiction to consider them.") (citations omitted).

The problem the court faces is that Century has not provided it with a copy of the initial complaint filed in the Underlying Action, only the First Amended Complaint ("FAC") (which satisfies the $75,000 requirement). As such, just considering the documents submitted to it regarding the instant motion for judgment on the pleadings, the court has no basis on which to ascertain whether the $75,000 requirement was met at the outset of the case.

Fortunately for Century, however, a copy of the initial complaint in the Underlying Action is attached to Century's original complaint in the instant declaratory judgment action. The initial complaint in the Underlying Action contains four counts including negligence, battery, negligent hiring and supervision, and a dram shop action, and requests $50,000 of damages as to each count. Because aggregation is appropriate, id. ("'It is the case, rather than the claim, to which the $75,000 minimum applies.'") (citation omitted), the claims clearly meet the jurisdictional amount. The court thus finds that diversity jurisdiction properly lies here. The court, however, cautions Century that in the future, the court may not be willing to search for and take notice of pleadings not brought before it in the motion at hand.*fn1

2. Superseded Complaint

In their response, JB and Barleycorn also seek to strike the motion for judgment on the pleadings because it is based on the FAC in the Underlying Action and not the currently pending Third Amended Complaint ("TAC"). According to JB and Barleycorn, the TAC contains allegations of negligence which may trigger coverage and a duty to defend by Century.

Century first responds with the argument that if the court were to consider the TAC, it would need to convert the motion for judgment on the pleadings to a Rule 56 motion for summary judgment. Fed. R. Civ. P 12(c) ("If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56."). It makes no sense to this court to claim that despite the fact that a party moved for judgment on the wrong pleading, if the court wanted to take notice of the correct (i.e., most current pleading) pleading, it would be required to convert the motion to one for summary judgment.

It is true, however, that the TAC, by not referencing or adopting the prior pleading, caused the FAC to become a nullity. Roy v. Coyne, 630 N.E.2d 1024, 1046 (Ill. App. Ct. 1994) ("Where an amendment is complete in itself and does not refer to or adopt the prior pleading, the earlier pleading ceases to be a part of the record for most purposes, being in effect abandoned and withdrawn."). Thus, Century has moved for judgment on a pleading that has been withdrawn and abandoned. To the extent that Century's motion for judgment on the pleadings is based on the FAC, it is stricken. However, given that Century relies on the TAC in its reply brief, the court will construe the motion for judgment on the pleadings as being directed to the TAC.*fn2

B. Merits

1. Applicable Law

Century seeks judgment on the pleadings on the ground that it has no duty to defend the Underlying Action, and therefore, because there was no duty to defend, it had no duty to indemnify.

As noted recently by the Illinois Appellate Court:

Addressing the issue of an insurer's duty to defend its insured, our supreme court in U.S. Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 73, 161 Ill.Dec. 280, 578 N.E.2d 926 (1991), stated:

"If the underlying complaints allege facts within or potentially within policy coverage, the insurer is obliged to defend its insured even if the allegations are groundless, false, or fraudulent. [Citation.] An insurer may not justifiably refuse to defend an action against its insured unless it is clear from the face of the underlying complaints that the allegations fail to state facts which bring the case within, or potentially within, the policy's coverage. [Citation.] Moreover, if the underlying complaints allege several theories of recovery against the insured, the duty to defend arises even if only one such theory is within the potential coverage of the policy. [Citation.]" (Emphasis in original.)

Moreover, in determining whether an insurer has a duty to defend its insured, it is the alleged conduct, and not the labeling of the claim in the complaint, that is controlling. See Lexmark International, Inc. v. Transportation Insurance Co., 327 Ill.App.3d 128, 136-37, 260 Ill.Dec. 658, 761 N.E.2d 1214 (2001) ("We give little weight to the legal label that characterizes the underlying allegations. Instead, we determine whether ...


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