United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
M. DOW, JR. UNITED STATES DISTRICT JUDGE
Twin City Fire Insurance Company sold a professional
liability insurance policy to John S. Xydakis, an attorney
and one of the Defendants. Xydakis made two claims under the
policy, based on lawsuits and motions filed against him in
Illinois state court. Plaintiff brought this action, seeking
a declaration, pursuant to 28 U.S.C. § 2201, that Twin
City owes no insurance coverage to Defendants for those
claims, or in the alternative, seeking rescission of the
insurance policy. Before the Court is Defendants' motion
 to dismiss pursuant to Rule 12(b)(1), on the grounds
that the Court lacks subject matter jurisdiction because the
amount in controversy does not exceed $75, 000. Also before
the Court is Plaintiff's motion for leave to file a
sur-reply . In the Court's discretion,
Plaintiff's motion for leave to file a sur-reply  is
granted. For the reasons stated below Defendants' motion
to dismiss  is granted in part and denied in part.
Specifically, Counts I through IV are dismissed without
prejudice to the extent that they make claims regarding
Plaintiff's duty to indemnify Defendants; Defendants'
motion is denied as to Counts I through IV to the extent that
they make claims regarding Plaintiff's duty to defend
Defendants, and the motion is denied in its entirety as to
Counts V through XI. Defendants are ordered to file their
answer by September 30, 2019. This case is set for further
status hearing on October 3, 2019 at 9:00 a.m.
Twin City is an insurance company formed under the laws of
the State of Indiana with its principal place of business in
Connecticut. Plaintiff conducts business in Illinois and
within the geographical boundaries of this district.
Law Office of John S. Xydakis, P.C., is a dissolved
professional corporation that was organized under the laws of
Illinois and had its principal place of business in Chicago,
Illinois. The Law Office of John S. Xydakis, P.C. was
involuntarily dissolved by the Illinois Secretary of State on
or about October 11, 2013. The sole member of the Law Office
of John S. Xydakis, P.C. was John S. Xydakis, a citizen of
Illinois. Defendant Law Office of John S. Xydakis is a sole
proprietorship engaged in the practice of law in Illinois,
with its principal place of business in Illinois. The sole
proprietor of the Law Office of John S. Xydakis, is John S.
Xydakis, who is a citizen of Illinois and an attorney
licensed to practice law in the State of Illinois and who
does business as the Law Office of John S. Xydakis.
is proper in this district pursuant to 28 U.S.C. § 1391,
as the case addresses coverage under an insurance policy
issued in this district, related to claims pending against
putative insureds within the geographical boundaries of this
district. The Court's subject matter jurisdiction is in
dispute and is the subject of the motion before the Court.
While the parties are citizens of different states,
Defendants deny that the amount in controversy exceeds $75,
000.00. The Court discusses its findings on this issue below.
sold Defendants a professional liability insurance policy.
Defendants made two claims under that policy, one related to
Fiona Chen Consulting v. Edward Schrock, et al.,
which Plaintiff calls “The Chen Lawsuit, ” and
one related to a series of lawsuits regarding a condominium
association, which Plaintiff calls “The Spiegel
Fiona Chen Consulting v. Edward Schrock involves a
claim for unpaid invoices. Fiona Chen alleges that Xydakis
retained her to perform expert work in another lawsuit, that
they entered into an oral contract, and that Xydakis did not
pay her. She seeks $390, 180.18 in damages. See [1-1] at 25.
The Spiegel Lawsuits are a separate set of cases brought by
Marshall Spiegel, represented by Xydakis, against neighboring
condominium owners, the condo association, and attorneys and
law firms involved in the litigation. As a result of their
litigation tactics, Spiegel and Xydakis faced three motions
for sanctions pursuant to Illinois Supreme Court Rule 137.
One motion requested $492, 432.08 in attorneys' fees
incurred through July 2018, plus $27, 878 in increased
insurance costs. [28-1] at 9. Another sought fees and costs
of $194, 595.65. [28-1] at 14. The third requested fees and
costs of $279, 015.90 (later increased to $378, 310). [28-1]
sought coverage from Plaintiff for liability in the Chen
Lawsuit and for liability for the three motions for sanctions
in the Spiegel Lawsuits. Plaintiff denies that it owes a duty
to defend or a duty to indemnify to Defendants for either
claim. On September 19, 2018, Plaintiff brought this action
seeking a declaratory judgment that Plaintiff owes Defendants
no duty to defend or indemnify Defendants for the claims in
the Chen Lawsuit, nor a duty to defend or indemnify
Defendants for the claims in the three motions for sanctions.
See  at 10-18. In the alternative, Plaintiff seeks
rescission of the professional liability insurance policy it
issued to Defendants.  at 18-20. Regarding subject matter
jurisdiction, the Complaint alleges, “This Court has
subject matter jurisdiction over this action pursuant to 28
U.S.C. §1332 as the parties are citizens of different
states and the amount in controversy exceeds $75, 000.00
exclusive of costs and interest based [on] potential coverage
obligation for the defense of, as well as sums sought in[, ]
the Chen Lawsuit and the Spiegel Motions for Sanctions, which
Xydakis claims Twin City owes under the Policy.”  at
January 14, 2019, Defendants filed their Motion to Dismiss
Pursuant to Federal Rule of Civil Procedure Rule 12(b)(1),
which argues that Plaintiff has failed to demonstrate that
the amount in controversy exceeds $75, 000. See  at 1. In
the alternative to dismissal, Defendants seek a stay of the
federal case until the underlying state cases are resolved.
 at 7. After the initial briefing was complete, Plaintiff
filed a motion for leave to file a sur-reply , seeking to
update the Court on developments in the Spiegel Lawsuits and
attaching state court orders granting the three motions for
sanctions. See  and [28-1].
ruling on a motion to dismiss for lack of subject matter
jurisdiction, a district court must accept as true all
well-pleaded factual allegations and draw all reasonable
inferences in favor of the plaintiff. Long v. Shorebank
Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999);
Killingsworth v. HSBC Bank Nev., N.A., 507 F.3d 614,
618 (7th Cir. 2007). “The district court may properly
look beyond the jurisdictional allegations of the complaint
and view whatever evidence has been submitted on the issue to
determine whether in fact subject matter jurisdiction
exists.” Shorebank Dev. Corp., 182 F.3d at 554
(quoting Capitol Leasing Co. v. FDIC, 999 F.2d 188,
191 (7th Cir. 1993)). On a Rule 12(b)(1) motion, as with a
Rule 12(b)(6) motion, the court must also consider
“documents attached to the complaint, documents that
are critical to the complaint and referred to in it, and
information that is subject to proper judicial notice,
” along with additional facts set forth in the
non-movant's brief opposing dismissal, so long as those
facts “are consistent with the pleadings.”
W.C. Motor Co. v. Talley, 63 F.Supp.3d 843, 846
(N.D. Ill. 2014) (quoting Geinosky v. City of
Chicago, 675 F.3d 743, 745 n. 1 (7th Cir. 2012)). To the
extent an exhibit contradicts the complaint's
allegations, the exhibit takes precedence. See Forrest v.
Universal Savings Bank, F.A., 507 F.3d 540, 542 (7th
Cir. 2007). Where relevant, the Court also takes judicial
notice of documents filed in the state court cases that form
the basis of Defendant's insurance claims against
Plaintiff, as described in detail below. See Collins v.
Village of Palatine, 875 F.3d 839, 842 (7th Cir. 2017)
(“judicial notice of public court documents is
appropriate when ruling on a Rule 12(b)(6) motion to
dismiss” (citing White v. Keely, 814 F.3d 883,
885 n.2 (7th Cir. 2016))); Clark & Leland
Condominium, L.L.C. v. Northside Community Bank, 110
F.Supp.3d 866, 868 (N.D. Ill. 2015) (court may take judicial
notice of matters of public record without converting
12(b)(6) motion into motion for summary judgment).
burden is on the party asserting that jurisdiction
exists-here, Plaintiffs. Cty. of Cook v. HSBC N. Am.
Holdings Inc., 136 F.Supp.3d 952, 958 (N.D. Ill. 2015).;
see also Gonzalez v. Bank of Am., N.A., 2014 WL
26283, at *2 (N.D. Ill. Jan. 2, 2014) (“the plaintiff
bears the burden of establishing the basis for the
court's jurisdiction”). Where, as here, the
defendant challenges the plaintiff's allegation of the
amount in controversy, the plaintiff must support its
assertion with competent proof. McMillian v. Sheraton
Chicago Hotel & Towers, 567 F.3d 839, 844 (7th Cir.
2009) (quotation omitted). The plaintiff must prove the
“jurisdictional facts by a preponderance of the
evidence.” Id., quoting Meridian Sec. Ins.
Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir. 2006).
Dismissal is warranted only if it is a “legal
certainty” that the amount in controversy is actually
less than $75, 000. See St. Paul Mercury Indemnity Co. v.
Red Cab Co., 303 U.S. 283, 288-89, (1938) (“The
rule governing dismissal for want of jurisdiction in cases
brought in the federal court is that, unless the law gives a
different rule, the sum claimed by the plaintiff controls [ ]
if the claim is apparently made in good faith. It must appear
to a legal certainty that the claim is really for less than
the jurisdictional amount to justify dismissal.”);
Back Doctors Ltd. v. Metro. Prop. & Cas. Ins.
Co., 637 F.3d 827, 830 (7th Cir. 2011) (“[T]he
estimate of the dispute's stakes advanced by the
proponent of federal jurisdiction controls unless a recovery
that large is legally impossible.”); Sabrina Roppo
v. Travelers Commercial Ins. Co., 869 F.3d 568, 579 (7th
Cir. 2017) (“If the removing party is able to meet this
burden, then remand is appropriate only if the plaintiff can
establish the claim is for less than the requisite amount to
a legal certainty.”).