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Axiom Insurance Managers Agency, LLC v. Indemnity Insurance Corporation

September 1, 2011

AXIOM INSURANCE MANAGERS AGENCY, LLC, PLAINTIFF,
v.
INDEMNITY INSURANCE CORPORATION, RISK RETENTION GROUP, AND JEFFREY COHEN DEFENDANTS.



The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge:

Hon. Amy J. St. Eve

MEMORANDUM OPINION AND ORDER

Plaintiff Axiom Insurance Managers Agency, LLC ("Axiom"), filed the present lawsuit on March 25, 2011, alleging that its competitor, Defendant Indemnity Insurance Corporation, Risk Retention Group ("Indemnity"), had filed numerous frivolous lawsuits against it and had falsified financial information concerning Axiom to insurance regulators and other entities. (R. 1 at passim.) On May 10, 2011, Axiom filed its Second Amended Complaint ("the Complaint") (R. 21), which Indemnity now requests the Court to dismiss under Federal Rule of Civil Procedure 12(b)(6). (R. 26.) Incorporating Indemnity's arguments, Defendant Jeffrey Cohen, Indemnity's principal ("Cohen"), also moves to dismiss the Complaint. (R. 39; R. 41.) Indemnity has separately filed a motion for sanctions. (R. 59.) For reasons explained below, the Court grants in part and denies in part Indemnity's and Cohen's motions to dismiss (R. 26; R. 39), and denies Indemnity's motion for sanctions (R. 59). The Court declines to stay "Count V" of the Complaint, seeking a declaration that Axiom has not breached the Settlement Agreement, pending the outcome of the related proceeding in the U.S. District Court for the District of Maryland. Finally, pursuant to Axiom's request (R. 49 at 13), the Court dismisses Axiom's claim for tortious interference, without prejudice.

BACKGROUND

In the present case, Axiom alleges that Indemnity has committed fraud on insurance regulators, such as the District of Columbia Department of Insurance, Securities and Banking ("DISB"), and insurance-rating agencies, including AM Best, to the effect that Indemnity is financially sound when it is not. (R. 21 at 4, passim.) It further contends that Indemnity has sued anyone who has challenged its financial condition, and alleges that Indemnity has sued Axiom on five separate occasions. (Id. at 8.)

The first count of the Complaint, which is for abuse of process, concerns a recent Texas lawsuit that Indemnity brought against Axiom. (R. 21 at 11.) The Complaint alleges that Indemnity "ha[d] an ulterior motive in bringing" the case, specifically "to control the market in which it competes with Axiom." (Id.) Axiom submits that the Texas lawsuit is frivolous. (Id.) The Complaint's second count is for an alleged violation of the Lanham Act. (Id. at 12.) Axiom contends that Indemnity's "misrepresentations to AM Best, DISB, NAIC, and prospective insureds regarding [Indemnity's] financial condition, [sic] constitute a violation of . . . 15 U.S.C. § 1125(a)(1)(B)." (Id.) The third count, which Axiom directs only at Cohen, contends that Indemnity, through Cohen, "has engaged in [sic] pattern of racketeering activities involving the use of United States mails and/or wires," including by (1) making false representations in its December 31, 2010, NAIC filing; (2) its May 6, 2011, letter to Axiom's brokers and to regulators; and (3) by pursuing baseless litigation against Axiom. (Id. at 13-14.) Finally, Axiom brings a count alleging breach of the parties' prior settlement agreement, and also seeks a declaration that Axiom has not breached the same.*fn1

On February 19, 2010-prior to Axiom's filing the present case-Axiom and Indemnity entered in an agreement "to fully and finally settle the claims asserted" in five previous cases between the parties ("the Settlement Agreement"). (R. 85 at 18-24.) "[I]n full settlement and discharge of any and all claims and potential claims between them," Axiom agreed to release Indemnity "of and from any and all actual or potential claims, demands, damages, liabilities, rights, causes of action, rights of action, . . . and remedies of each and every kind or nature whatsoever . . . and whether the same are known or unknown, anticipated or unanticipated . . . that Axiom had, may have had, or now has, based upon or arising out of any act by the IIDC Released Parties predating the execution of this Agreement, including all claims which were asserted, or could have been asserted, in the Litigation." (Id. at 18-19.)

On May 19, 2011, Indemnity filed the motion to dismiss that is now before the Court.

(R. 26.) Indemnity argues that the February 2010 Settlement Agreement bars Axiom's claims, and further contends that, independent of the Settlement Agreement, each of Axiom's claims fails to satisfy the requirements of Federal Rule of Civil Procedure 8(a). (Id. at passim.) Cohen separately moves to dismiss the Complaint, both on the grounds submitted in Indemnity's motion to dismiss and on the basis that the Court lacks personal jurisdiction over him. (R. 39.) Indemnity has also a filed motion for sanctions. (R. 59.)

On June 10, 2011, pursuant to the parties' stipulation concerning personal jurisdiction, the Court withdrew Cohen's Rule 12(b)(2) motion to dismiss. (R. 47.) Cohen's Rule 12(b)(6) motion, however, remains pending. (Id.)

LEGAL STANDARD

I. Motion to Dismiss Under Federal Rule of Civil Procedure 12(b)(6)

"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted." Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). Pursuant to Rule 8(a)(2), a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Under federal notice-pleading standards, a plaintiff's "factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. Put differently, a "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570). "[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94 (2007); McGowan v. Hulick, 612 F.3d 636, 638 (7th Cir. 2010) (holding that courts accept factual allegations as true and draw all reasonable inferences in the plaintiff's favor). Finally, "a Rule 12(b)(6) motion must be decided solely on the face of the complaint and any attachments that accompanied its filing." Miller v. Herman, 600 F.3d 726, 733 (7th Cir. 2010) (citing Fed. R. Civ. P. 10(c)).

II. Motions for Sanctions under Rule 11

Federal Rule of Civil Procedure 11 provides that every pleading must be signed by at least one attorney of record and further states that, in "presenting to the court a pleading . . . an attorney . . . certifies that[,] to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: (1) it is not being presented for any improper purposes . . .; (2) the claims . . . are warranted by existing law or by a non-frivolous argument for extending, modifying, or reversing existing law or for establishing new law; (3) the factual contentions have evidentiary support . . .; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information." Fed. R. Civ. P. 11(a),(b). The rule further provides that a party filing a motion for sanctions must do so separately from any other motion and must describe the specific conduct that it alleges violates Rule 11(b). Id. at (c)(2). "If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule[.]" Id. at (c)(1).

The Seventh Circuit has observed that courts "may impose Rule 11 sanctions for arguments 'that are frivolous, legally unreasonable, without factual foundation, or asserted for an improper purpose.'" Indep. Lift Truck Builders Union v. NACCO Materials Handling Grp., Inc., 202 F.3d 965, 968-69 (7th Cir. 2000) (quoting Fries v. Helsper, 146 F.3d 452, 458 (7th Cir. 1998)). The Supreme Court has instructed that Rule 11 "requires a court to consider issues rooted in factual determinations" and has explained, as an example, that, "to determine whether an attorney's prefiling inquiry was reasonable, a court must consider all the circumstances of a case." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 401 (1990).

DISCUSSION

I. The Court Grants Indemnity's Motion to Dismiss in Part and Denies It in Part Indemnity argues that the Court should dismiss the Complaint on any, or all, of three grounds. Its principal argument is that the Settlement Agreement bars all of Axiom's claims.

(R. 85 at 4-6; R. 86 at 1-3.) Indemnity further contends that each count of the Complaint fails to state a claim. (R. 85 at 7-14; R. 86 at 3-10.)*fn2 The Court addresses each of these arguments in turn.

A. The Settlement Agreement Does Not Foreclose Axiom's Claims

As noted, pursuant to the Settlement Agreement, Axiom released Indemnity "of and from any and all actual or potential claims. . . and remedies of each and every kind or nature whatsoever . . . and whether the same are known or unknown, anticipated or unanticipated . . . that Axiom had, may have had, or now has, based upon or arising out of any act by the IIDC Released Parties predating the execution of this Agreement, including all claims which were asserted, or could have been asserted, in the Litigation."*fn3 (R. 85 at 18-19) (emphasis added).

The question whether the Settlement Agreement bars Axiom's claims, therefore, turns on whether the alleged facts giving rise to those claims predate the ...


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