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Continental Casualty Company v. Todd A. Duckson

June 9, 2011

CONTINENTAL CASUALTY COMPANY,
CHICAGO INSURANCE COMPANY, AND NAUTILUS INSURANCE COMPANY, PLAINTIFFS,
v.
TODD A. DUCKSON, DEFENDANT. AND TODD A. DUCKSON, COUNTER-PLAINTIFF,
v.
CONTINENTAL CASUALTY COMPANY, CHICAGO INSURANCE COMPANY, AND NAUTILUS INSURANCE COMPANY, COUNTER-DEFENDANTS.



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

Magistrate Judge Morton Denlow

MEMORANDUM AND ORDER

Todd Duckson is a former partner at the Minneapolis office of the law firm of Hinshaw & Culbertson, LLP. Last September, the Securities and Exchange Commission sued Duckson alleging that he engaged in fraud while representing a private investment firm, Capital Solutions Monthly Income Fund. Duckson submitted a claim for coverage to Hinshaw's malpractice insurer, Continental Casualty Company, known as CNA. CNA denied coverage, and filed this suit for a declaratory judgment that it owed Duckson no duty to defend or indemnify him. Duckson, in turn, filed a counterclaim seeking (1) a declaratory judgment that CNA owes him a duty to defend and indemnify him, and (2) damages for breach of the insurance contract.

The plaintiffs have moved to strike Duckson's answer for being improperly formatted, and to dismiss his counterclaim. For the reasons stated below, the plaintiffs' motion to strike the answer is granted, but their motion to dismiss the counterclaim is denied.

BACKGROUND

The following facts are taken from Duckson's answer and counterclaim, and are accepted as true for purposes of CNA's motion to dismiss. See Avery Dennison Corp. v. Continental Datalabel, Inc., No. 10 CV 2744, 2010 WL 4932666, at *1 (N.D. Ill. Nov. 30, 2010).Duckson was a partner at Hinshaw & Culbertson from 2003 through 2008. In September 2010, the SEC sued Duckson for securities fraud based upon work he allegedly performed for the Capital Solutions Monthly Income Fund both during and after his time at Hinshaw & Culbertson. Duckson filed a claim for coverage with CNA through Hinshaw & Culbertson's malpractice insurance policy. CNA initially reserved its rights regarding coverage, but on December 9, 2010, CNA informed Duckson that no coverage existed and that it would not defend him.

CNA then filed a complaint with this court seeking a declaratory judgment that it owed Duckson no duty to defend or indemnify him in the SEC litigation. Duckson filed an answer, but his numbered paragraphs did not correspond to the paragraphs of the complaint to which they were directed, in violation of Local Rule 10.1. In his answer, Duckson also alleged a multi-count counterclaim. In counts I and III of the counterclaim, he seeks declaratory judgments that he was entitled to coverage (count I) and indemnification (count III) under Hinshaw & Culbertson's malpractice policy. In count II, he seeks damages based upon CNA's alleged breach of the malpractice policy by denying him coverage and indemnification.

Before this court is CNA's motion to strike Duckson's answer and dismiss his counterclaim. CNA advances several arguments for striking the answer and dismissing the individual counts of the counterclaim. The court addresses each argument in turn.

ANALYSIS

I. Deficiencies in Defendant's Answer

Plaintiffs contend that those portions of Duckson's answer that respond to the allegations of the complaint should be stricken (presumably under Federal Rule of Civil Procedure 12(f)) because Duckson's responses violate both Local Rule 10.1 and Federal Rule of Civil Procedure 8(b).

Local Rule 10.1 reads as follows:

Responsive pleadings shall be made in numbered paragraphs each corresponding to and stating a concise summary of the paragraph to which it is directed.

Local Rule 10.1. The answer does not satisfy that requirement of Rule 10.1 because single paragraphs of the answer refer to multiple paragraphs of the complaint. In addition, the paragraphs of the answer fail to concisely summarize the allegations to which they are responding, requiring the court to "lay two pleadings side by side, and to shift constantly from one to the other, to see just what has and has not been placed in issue," the very burden the local rule seeks ...


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