Creation Supply, Inc. v. Hahn
| Citation | 608 F.Supp.3d 668 |
| Decision Date | 24 June 2022 |
| Docket Number | 19 C 6063, No. 21 C 529 |
| Parties | CREATION SUPPLY, INC., Plaintiff, v. David G. HAHN, an individual, and Drew L. Block, an individual, Defendants. Creation Supply, Inc., v. George Cherrie, an individual, Defendant. |
| Court | United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois) |
Edward L. Bishop, Nicholas S. Lee, James Joseph Jagoda, Bishop Diehl & Lee, Ltd., Schaumburg, IL, for Plaintiff.
Daniel Keenan Ryan, Marcos Reilly, Hinshaw & Culbertson LLP, Chicago, IL, for Defendant David G. Hahn in 19 C 6063.
Ryan Thomas Brown, Paul Gamboa, Gordon & Rees LLP, Chicago, IL, for Defendant Drew L. Block in 19 C 6063.
Edward C. Eberspacher, IV, Meyer Law Group LLC, Chicago, IL, for Defendant in 21 C 529.
REBECCA R. PALLMEYER, United States District Judge For almost a decade, Plaintiff Creation Supply, Inc. ("CSI") has litigated its insurer's refusal to provide a defense to CSI in a trade dress infringement case. CSI prevailed in the original state court declaratory judgment action, winning an award of nearly $195,000 from its insurer, Selective Insurance Company of the Southeast ("Selective"). Outraged by Selective's alleged bad-faith failure to tender a timely defense, CSI then sought additional recovery from Selective in federal court, but the Seventh Circuit concluded that CSI is not entitled to extracontractual damages under an Illinois state statute, and Judge Kocoras of this court declined to award any additional contractual damages.
CSI has not given up its effort to seek recovery beyond what the state court has awarded. In the first of two cases pending before this court, CSI sued Selective's attorneys: Defendants Drew Block (Selective's outside counsel) and David Hahn (in-house counsel).1 This court dismissed CSI's original complaint for failure to state a claim. CSI has now amended that complaint, still seeking recovery against Hahn and Block for the denial of insurance coverage. In yet another lawsuit, CSI asserts nearly identical allegations against Defendant George Cherrie (Hahn's supervisor). The court here expresses no views on CSI's claims that it is entitled to recover additional amounts for Selective's alleged wrongdoing. The court does conclude, however, that CSI is not entitled to recover such damages from Selective's agents. Accordingly, both complaints are dismissed, and the cases are dismissed with prejudice.
The following procedural and factual account is based on the allegations in the First Amended Complaint against Hahn and Block ([44], hereinafter "FAC"), and the Complaint in CSI's recent suit against Cherrie ([1], hereinafter "CC").2
Before turning to Plaintiff CSI's substantive allegations, the court offers an overview of the complicated procedural posture of these cases.
The insurance coverage dispute at the heart of this litigation arose in 2012, when Plaintiff CSI was sued in federal court in Oregon for trade dress infringement ("Oregon action"),3 and tendered defense of that action to its commercial liability insurer, Selective. (See FAC ¶¶ 10–12; CC ¶¶ 7–9.) In June 2012, Selective denied the request. (FAC ¶¶ 13–14, 111; CC ¶¶ 10–11.) This denial spurred several lawsuits.
First, in July 2012, shortly after denying coverage, Selective filed a lawsuit in the Circuit Court of Cook County, Illinois ("Illinois action"), seeking a declaration that it did not have a duty to defend CSI in the Oregon action. (FAC ¶ 17; CC ¶ 14.) See Selective Ins. Co. of the Southeast. v. Creation Supply, Inc. , 12 CH 24438. CSI counterclaimed, seeking a declaration that Selective did have such a duty (Count I) and alleging breach of contract (Count II) and violation of Section 155 of the Illinois Insurance Code, 215 ILCS 5/155 (Count III). (Ex. M to FAC [44-13] and CC [1-13]); see Selective Ins. Co. of Se. v. Creation Supply, Inc. , 2015 IL App (1st) 140152-U, ¶¶ 8, 10, 2015 WL 522247 (hereinafter " First Illinois Appeal"). That section "provides an extracontractual remedy to policyholders whose insurer's refusal to recognize liability and pay a claim under a policy is vexatious and unreasonable." Cramer v. Ins. Exch. Agency , 174 Ill. 2d 513, 519, 221 Ill.Dec. 473, 675 N.E.2d 897, 900 (1996).
This litigation lasted several years and generated two appeals. First, in December 2013, the Illinois court granted partial summary judgment in favor of CSI, finding that Selective was obligated to defend CSI in the Oregon action. ( First Illinois Appeal, 2015 IL App (1st) 140152-U ¶¶ 2, 17 ; FAC ¶ 31; CC ¶ 28.) The Illinois Appellate Court affirmed in February 2015. ( First Illinois Appeal, 2015 IL App (1st) 140152-U ¶ 1 ; FAC ¶¶ 40–41; CC ¶¶ 37–38.)
Second, in June 2016, the state court entered judgment in the amount of about $392,000 on Count I of CSI's counterclaims (a claim for declaratory judgment); the court's order permitted CSI to voluntarily dismiss with leave to refile Count II of its counterclaims (a breach of contract claim), and "expressly reserved [CSI's rights] to maintain its action against Selective" in the specific federal lawsuit discussed below, "regarding claims of breach of contract and violation of Section 155."4 (Ex. II to FAC [44-35] and CC [1-35] (hereinafter "June 2016 Order") at 2–3.) In June 2017, the Illinois Appellate Court affirmed the determination that Selective's duty to defend required it to pay the cost for CSI's defense, but reduced the time period for which CSI was entitled to an award of attorneys’ fees incurred in that defense, concluding that this period ended when CSI settled with the underlying plaintiff in the Oregon action. (Ex. KK to FAC [44-37] and CC [1-37]); see Selective Ins. Co. of the Se. v. Creation Supply, Inc. , 2017 IL App (1st) 161899-U, ¶¶ 56–61, 2017 WL 2855984 (hereinafter "Second Illinois Appeal"). In October 2017, the Illinois court entered final judgment; pursuant to the appellate court's decision, it awarded CSI about $195,000.5 (Ex. OO to FAC [44-41] and Ex. PP to CC [1-42] (hereinafter "October 2017 Order").)
In November 2014, as the Illinois litigation was pending, CSI sued Selective in this district (hereinafter "federal action") for breach of contract and for violating Section 155. (FAC ¶ 32; CC ¶ 29); see Creation Supply, Inc. v. Selective Ins. Co. of the Se. , No. 14 C 8856. CSI initially succeeded in that case, which was assigned to Judge Kocoras of this court: in 2017, Judge Kocoras granted partial summary judgment in favor of CSI, finding that Selective had breached its insurance contract with CSI, but leaving the issue of contractual damages for a later trial. ([146] in 14 C 8856.). In 2018, Judge Kocoras held a bench trial on CSI's Section 155 claim; he found that Selective's refusal to defend CSI in the Oregon action was vexatious and unreasonable, and awarded CSI more than $2.8 million for Selective's violation of Section 155. ([259, 260, 320] in 14 C 8856.) In January 2019, Selective appealed Judge Kocoras's Section 155 ruling. ([262] in 14 C 8856.)
While the appeal was pending—and recognizing the possibility that Judge Kocoras's Section 155 award could be overturned—CSI decided to look in another direction to recover its claimed losses. In September 2019 (now seven years after the underlying insurance dispute with Selective arose), CSI filed suit against Selective's lawyers: David Hahn (in-house counsel) and Drew Block (outside counsel). ([1-1] in 19 C 6063, hereinafter "OC"). In its original complaint, CSI alleged tort claims of intentional interference with the insurance contract, civil conspiracy, and (against Block) aiding and abetting. (OC ¶¶ 105–120.) In support of these claims, CSI made factual allegations describing Hahn's and Block's roles in the underlying coverage dispute with Selective—namely, their part in denying CSI's claim, withholding money under the insurance contract, and instituting and prolonging the Illinois declaratory judgment action.6 (Id. ¶¶ 9–104.)
This court dismissed the original complaint against Hahn and Block based on Illinois's conditional privilege against tortious interference. See Creation Supply, Inc. v. Hahn , No. 19 C 6063, 2020 WL 4815905 (N.D. Ill. Aug. 19, 2020). Under this conditional privilege, a company's agents "generally cannot be liable in tort when they interfere with the company's contracts for the benefit of the company." Nation v. Am. Cap., Ltd. , 682 F.3d 648, 652 (7th Cir. 2012). The conditional privilege does not extend to unjustified or malicious conduct. HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc. , 131 Ill. 2d 145, 156, 137 Ill.Dec. 19, 545 N.E.2d 672, 677 (1989). But to establish unjustified conduct, the court explained, CSI needed to allege a basis for concluding that Block and Hahn "acted solely for their own gain, solely for the purpose of harming Plaintiff, or contrary to Selective's interests." Hahn , 2020 WL 4815905, at *6 ; accord Webb v. Frawley , 906 F.3d 569, 577 (7th Cir. 2018). Because the original complaint demonstrated that Defendants acted on behalf of and to further Selective's interests, the conditional privilege shielded their conduct.
In September 2020, CSI filed an amended complaint against Hahn and Block, again alleging tortious interference claims. (FAC ¶¶ 172–87.) Several months later, in January 2021, CSI filed a substantively identical complaint against another of Selective's agents: CSI brought claims of intentional interference and civil conspiracy against George Cherrie, who was Hahn's supervisor from March 2014 to September 2015 (there are no other allegations about Cherrie's role at Selective).7 (CC ¶ 46.) This court stayed proceedings pending appeal of Judge Kocoras's Section 155 ruling and $2.8 million award against Selective. The court noted that CSI's amended complaint "seeks recovery against these Defendants for the same losses, occasioned by the same wrongdoing,...
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