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BASF AG v. Great American Assurance Co.

May 8, 2006

BASF AG, PLAINTIFF,
v.
GREAT AMERICAN ASSURANCE COMPANY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on the parties' motions for summary judgment and on other related motions. For the reasons stated below we grant in part and deny in part the parties' motions.

BACKGROUND

Boots Pharmaceuticals, Inc. ("Boots") was a pharmaceutical company that manufactured the drug known as Synthroid. Plaintiff BASF AG ("BASF") alleges that International Insurance Company ("International") issued three consecutive insurance policies to Boots from 1989 to 1992 ("Westchester Policies"), and that Defendant Westchester Fire Insurance Company ("Westchester") assumed the obligations of the policies. BASF also alleges that Agricultural Insurance Company ("Agricultural"), the predecessor of Defendant Great American Assurance Company ("Great American"), issued an insurance policy to Boots for the period between April 1, 1992, and September 30, 1993 ("Great American Policy"). BASF also alleges that Defendant Federal Insurance Company ("Federal") issued two insurance policies to Boots for the period between September 30, 1993, and June 30, 1995 ("Federal Policies"). According to BASF, Boots had also purchased insurance policies ("Primary Policies") with separate primary insurers ("Primary Insurers") and the Westchester Policies, Great American Policy, and Federal Policies were additional umbrella policies. In 1995, Boots' parent company sold all shares in its United States subsidiaries, including Boots, to Knoll Pharmaceutical Company ("Knoll") and afterwards Boots was merged into Knoll and did not have a separate corporate existence.

BASF alleges that Knoll, as the successor to Boots, was sued in a nationwide class action complaint for alleged advertising campaigns and public statements that Boots made in scientific, regulatory, and medical communities between 1989 and 1995 ("Synthroid Litigation"). The plaintiffs in the Synthroid Litigation claimed that Boots had concealed medical information that showed that Synthroid was equivalent to other cheaper drugs and that Synthroid had bioequivalents. The plaintiffs in the Synthroid Litigation contended that Boots' misrepresentations caused them to purchase Synthroid rather than the cheaper bioequivalent drugs.

BASF claims that Knoll requested that the Primary Insurers defend Knoll in the Synthroid Litigation and that the Primary Insurers refused. BASF also claims that Knoll requested that Defendants defend Knoll in the Synthroid Litigation and Defendants refused. BASF claims that in 1997, Knoll ultimately paid tens of millions of dollars in defense costs and settled the matter for over $130 million. BASF claims that Knoll filed an action in federal court against the Primary Insurers and the federal district court ruled that the Primary Insurers breached their duty to defend and were estopped from disputing coverage ("Primary Insurers Action").

According to BASF, in March 2001, BASF, which is Knoll's parent company, sold Knoll, but the sales agreement provided that all rights to insurance claims relating to the Synthroid Litigation were retained by BASF. BASF brought the instant action and includes in its complaint a claim seeking a declaratory judgment stating that Defendants had a duty to defend and indemnify Knoll in the Synthroid Litigation (Count I), a breach of contract claim (Count II), and a claim seeking attorney's fees and costs pursuant to 215 ILCS 5/155 ("Section 5/155")(Count III). BASF has moved for summary judgment. Each of the Defendants has also individually moved for summary judgment. The parties have also filed a variety of miscellaneous motions relating to the motions for summary judgment.

LEGAL STANDARD

Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, reveals that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In seeking a grant of summary judgment, the moving party must 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 (1986) (quoting Fed. R. Civ. P. 56(c)). This initial burden may be satisfied by presenting specific evidence on a particular issue or by pointing out "an absence of evidence to support the non-moving party's case." Id. at 325. Once the movant has met this burden, the non-moving party cannot simply rest on the allegations in the pleadings, but, "by affidavits or as otherwise provided for in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). A "genuine issue" in the context of a motion for summary judgment is not simply a "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, a genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Insolia v. Philip Morris, Inc., 216 F.3d 596, 599 (7th Cir. 2000). The court must consider the record as a whole, in a light most favorable to the non-moving party, and draw all reasonable inferences that favor the non-moving party. Anderson, 477 U.S. at 255; Bay v. Cassens Transport Co., 212 F.3d 969, 972 (7th Cir. 2000). When there are cross motions for summary judgment, the court should "construe the evidence and all reasonable inferences in favor of the party against whom the motion under consideration is made." Premcor USA, Inc. v. American Home Assurance Co., 400 F.3d 523, 526-27 (7th Cir. 2005).

DISCUSSION

I. Miscellaneous Motions by the Parties

The parties have filed a variety of tangential motions that relate to the parties' motions for summary judgment. BASF moved to bar and strike the reports and testimony of certain experts proposed by Defendants. On April 23, 2006, BASF's motion to bar and strike was dismissed without prejudice by agreement of the parties. Defendants have jointly moved to strike portions of BASF's statement of material facts. BASF has also, in turn, moved to strike Defendants' statements of material facts. Defendants jointly moved to strike certain portions of BASF's reply brief and a declaration filed in support of BASF's motion for summary judgment, and moved in the alternative for a sur-reply. Great American also subsequently moved to strike portions of BASF's reply brief contending that it included other new arguments and Great American requested in the alternative to state its objection to certain facts in the reply brief. We note that BASF also filed a motion to strike statements in Great American's reply brief that BASF deemed inaccurate and unfounded, which motion we denied on April 27, 2006.

A. Defendants' Motion to Strike BASF's Statement of Material Facts

Defendants move to strike certain portions of BASF's statement of material facts. Defendants contend that BASF's statement of material facts contains legal arguments and paragraphs that are not concise as is required under Local Rule 56.1. We do not find that the paragraphs in BASF's statement of facts were such that the entire statement of facts should be stricken. We also note that statement of facts presented by Defendants themselves bear many of the aspects that Defendants complain about in their motion to strike. Therefore, we shall consider Defendants' arguments concerning specific portions of BASF's statement of material facts to determine whether specific paragraphs of BASF's statement of facts should be stricken.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 6 ("Paragraph 6"), which states, in part, that certain rights were retained by BASF. We agree that such a statement is a legal argument and conclusion, and therefore we grant Defendants' motion to strike, in part, Paragraph 6. See Malec v. Sanford, 191 F.R.D. 581, 585 (N.D. Ill. 2000)(stating in addition that "[t]he purpose of the 56.1 statement is to identify for the Court the evidence supporting a party's factual assertions in an organized manner: it is not intended as a forum for factual or legal argument").

Defendants argue that the court should strike BASF's statement of material fact paragraph number 10 ("Paragraph 10"), which states that the London Agency became the Westchester Specialty Group. Defendants contend that Paragraph 10 is argumentative and improperly seeks to characterize the supporting testimony. We disagree. Paragraph 10 provides facts to which Defendants can respond, and does not contain improper argument. Therefore, we deny Defendants' motion to strike Paragraph 10.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 13 ("Paragraph 13"), which addressed the duty to defend for the umbrella policies in certain situations. We agree with Defendants that such a statement is a legal argument, and therefore we grant Defendants' motion to strike Paragraph 13.

Defendants argue that the court should strike the portion of BASF's statement of material fact paragraph number 15 ("Paragraph 15"), which states "See also Ex. NN at 60:24-61:06." Defendants contend that the citation is an argumentative characterization of testimony. However, the citation itself does not contain any argument or statement about testimony. In addition, to the extent that BASF believes that the citation does not support the facts in Paragraph 15, the proper course under Local Rule 56.1 is to indicate the disagreement in Defendants' Local Rule 56.1 responses rather than move to strike the citation. Therefore, we deny Defendants' motion to strike any portion of Paragraph 15.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 22 ("Paragraph 22"), which states that Agricultural had a duty to defend in certain situations. We agree that such a statement is a legal argument, and therefore we grant Defendants' motion to strike Paragraph 22.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 26 ("Paragraph 26"), which states that the policy issued by Agricultural does not contain a provision prohibiting a transfer by operation of law. Defendants argue that such a statement is an argumentative characterization of the testimony. Again, if Defendants seek to challenge the supporting citation, a motion to strike is not the proper vehicle in which to do so. We conclude that Paragraph 26 includes a proper set of facts that complies with Local Rule 56.1 which could have been responded to by Defendants. Therefore, we deny Defendants' motion to strike Paragraph 26.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 36 ("Paragraph 36"), which states what the legal obligations were for the Primary Insurers under the Primary Policies. We agree with Defendants that such a statement is a legal argument, and therefore we grant Defendants' motion to strike Paragraph 36.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 37 ("Paragraph 37"), which states what the law is in regard to an insurer's duty to defend. We agree with Defendants that such a statement is a legal argument, and therefore we grant Defendants' motion to strike Paragraph 37.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 38 ("Paragraph 38"), which states, in part, that none of Knoll's primary insurers stepped forward to assist Knoll in the Synthroid Litigation, that they recognized that ambiguities existed in the Primary Policies, and that they collectively rejected Knoll's request for assistance. Defendants argue that Paragraph 38 contains legal conclusions. We conclude that Paragraph 38 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 38.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 39 ("Paragraph 39"), which states that Knoll filed an action against the Primary Insurers and states what the court's ultimate holding was in the action. We conclude that Paragraph 39 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 39.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 41 ("Paragraph 41"), which states the amount of damages owed to BASF in light of the settlement amount and the payments by the Primary Insurers. We conclude that Paragraph 41 complies with Local Rule 56.1. Defendants could either have admitted or denied the figures presented by BASF and provided support for any denial. Therefore, we deny Defendants' motion to strike Paragraph 41.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 52 ("Paragraph 52"), which states that the settlement funds remained deposited while the parties engaged in extensive negotiations and discovery. We conclude that Paragraph 52 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 52.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 53 ("Paragraph 53"), which explains how the settlement proceedings progressed and the parties' beliefs during the proceedings. We conclude that Paragraph 53 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 53.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 55 ("Paragraph 55"), which indicates what the court in the Synthroid Litigation stated. We conclude that Paragraph 55 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 55.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 57 ("Paragraph 57"), which states that Knoll devoted significant time and resources to defending itself in the Synthroid Litigation. We conclude that Paragraph 57 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 57.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 58 ("Paragraph 58"), which states that Knoll's counsel in the Synthroid Litigation provided "specialized talents" in the defense and that its counsel implemented "an integrated defense strategy that was both effective and cost-efficient." (BSF 38). We agree with Defendants that such a statement is argumentative, and therefore we grant Defendants' motion to strike Paragraph 58.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 61("Paragraph 61"), which states an approximate amount that Knoll spent in the Synthroid Litigation defense and explains why BASF's name appeared on some defense invoices. We conclude that Paragraph 61 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 61.

Defendants argue that the court should strike BASF's statement of material fact paragraph numbers 63 ("Paragraph 63"), 64 ("Paragraph 64"), and 65 ("Paragraph 65"), which state what the Master Consumer Class Action Complaint ("MCC") indicated in the Synthroid Litigation. If Defendants disagreed with the assertions, they could have indicated their disagreement in their Local Rule 56.1 response. We conclude that Paragraphs 63, 64, and 65 comply with Local Rule 56.1 and we deny Defendants' motion to strike the paragraphs.

Defendants argue that the court should strike BASF's statement of material fact paragraph numbers 66 ("Paragraph 66"), 67 ("Paragraph 67"), 69 ("Paragraph 69"), and 70 ("Paragraph 70"), which state what the Master Third-Party Payor Class Action ("MTPPC") indicated in the Synthroid Litigation. If Defendants disagreed with the assertions, they could have indicated their disagreement in their Local Rule 56.1 response. We conclude that Paragraph 66, 67, 69, and 70 comply with Local Rule 56.1 and we deny Defendants' motion to strike the paragraphs.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 71("Paragraph 71"), which states what the payors indicated. We conclude that Paragraph 71 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 71.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 73 ("Paragraph 73"), which provides facts concerning matters such as the mailing of certain letters and statements made by certain individuals. We conclude that Paragraph 73 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 73.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 75 ("Paragraph 75"), which states that a notice letter was mailed to the proper person for notifying Westchester and that the letter was forwarded by that person. We conclude that Paragraph 75 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 75.

Defendants argue that the court should strike BASF statement of material fact paragraph number 77 ("Paragraph 77"), which states that Westchester Specialty Group ("WSG") did not request materials from a meeting held by Knoll regarding the Synthroid Litigation or contact Knoll to learn about the meeting. We conclude that Paragraph 77 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 77.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 81 ("Paragraph 81"), which states what WSG included and did not include in its denial letter. We conclude that Paragraph 81 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 81.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 87 ("Paragraph 87"), which states that Agricultural failed to provide a definitive denial of coverage to Knoll. We conclude that Paragraph 87 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 87.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 89 ("Paragraph 89"), which states that to this day Agricultural has not taken a definitive position as to coverage and still refuses to provide coverage. We conclude that Paragraph 89 complies with Local Rule 56.1 and we deny Defendants' motion to strike Paragraph 89.

Defendants argue that the court should strike BASF's statement of material fact paragraph number 98 ("Paragraph 98"), which refers to a policy form not at issue in the instant action that BASF contends shows that the Defendants knew how to exclude coverage if they desired to do so. We agree with Defendants that such a statement does not involve material facts and is argumentative, and therefore we grant Defendants' motion to strike Paragraph 98.

In summation, we grant in part and deny in part Defendants' motion to strike BASF's statement of material facts and strike the following paragraphs of BASF's statement of material facts: 6, 13, 22, 36, 37, 58, and 98.

B. BASF's Motion to Strike Defendants' Statement of Facts

BASF moves to strike Defendants' statement of facts. However, BASF provides only general arguments concerning the substance of Defendants' statements of material facts and BASF fails to provide arguments concerning specific paragraphs of facts. Therefore, we deny BASF's motion to strike Defendants' statements of material facts.

C. Defendants' Motions to Strike Portions of BASF's Reply Brief

Defendants have filed two motions to strike portions of BASF's reply brief in support of BASF's motion for summary judgment. In Defendants' joint motion to strike, Defendants contend that BASF introduced fifteen separate groups of facts that were not addressed in BASF's memorandum in support of its motion for summary judgment. We do not agree that BASF improperly introduced new information. BASF is entitled to respond in its reply brief to Defendants' counter-arguments. Also, we have reviewed all the facts pointed to by Defendants in their motion to strike and, even if we were to strike the facts, such a ruling would have no effect on the court's ruling on the motions for summary judgment that follows. Therefore, we deny Defendants' joint motion to strike portions of BASF's reply brief and deny Defendants' request for leave to file a sur-reply.

Great American has also filed a separate motion to strike portions of BASF's reply brief. Great American contends that BASF included certain other new evidence in its reply brief that it did not include in its memorandum in support of its motion for summary judgment. However, regardless of whether the evidence pointed to by Great American was new, Great American has provided its objection to the evidence to the court and has voiced its position on the evidence. We also note that, even if we were to strike the evidence and accompanying factual assertions, such a ruling would have no effect on the court's ruling that follows. Therefore, we deny Great American's motion to strike portions of BASF's reply brief as moot and deny Great American's motion for leave to file a sur-reply.

II. Choice of Law

When a federal court has diversity subject matter jurisdiction in a case and does not have federal question subject matter jurisdiction, the court must apply "the choice-of-law rules of the forum state . . . ." Smurfit Newsprint Corp. v. Southeast Paper Mfg., 368 F.3d 944, 949 (7th Cir. 2004). The parties concede that this court solely has diversity subject matter jurisdiction and that the instant action was brought in federal court in Illinois. Therefore, we must look to Illinois state law for choice of law principles. Under Illinois law, in a case based upon an insurance contract, "[a]bsent an express choice of law, insurance policy provisions are generally 'governed by the location of the subject matter, the place of delivery of the contract, the domicile of the insured or of the insurer, the place of the last act to give rise to a valid contract, the place of performance, or other place bearing a rational relationship to the general contract.'" Lapham-Hickey Steel Corp. v. Protection Mut. Ins. Co., 655 N.E.2d 842, 845 (Ill. 1995)(quoting in part Hofeld v. Nationwide Life Insurance Co., 322 N.E.2d 454 (Ill. 1975)). The parties agree that Boots' principal place of business was Illinois, that some of the policies involved in this action were issued in ...


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