Gen. Ins. Co. of Am. v. Clark Mall Corp.
| Citation | 738 F.Supp.2d 864 |
| Decision Date | 20 September 2010 |
| Docket Number | No. 08 C 2787,08 C 2787 |
| Parties | GENERAL INSURANCE COMPANY OF AMERICA, Plaintiff, v. CLARK MALL CORP. d/b/a Discount Mega Mall Corp., Marcos I. Tapia, Juan E. Bello, Jose L. Garcia, Leticia Hurtado, Young S. Ko, Mariano Kon, Choong I. Kuan, Rosa G. Madrigal, Hilda Mendoza, Man Ok No, Hee T. Park, Sung W. Park, Maria L. Roman, Victor H. Visoso. Kyun Hee Park, and Jennifer Park, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Rick L. Hammond, William K. McVisk, Charlene S. Mitchell, Christopher W. Loweth, Gabriel Racine Judd, Mary K. Cryar, Johnson & Bell, Ltd., Chicago, IL, for Plaintiff.
Lawrence B. Ordower, Michael Thomas Stanley, Ordower And Ordower, PC, Won K. Lee, Lee Law Offices, Ltd., Chicago, IL, for Defendants.
As part of the fall out from a fire at their discount mall, subsequent litigation in state court, a dispute over insurance coverage, and a declaratory judgment action their insurance company, General Insurance Company of America ("GICA"), has filed against them, the defendants have brought a counterclaim for fraud against GICA. Basically, they charge that GICA issued them an insurance policy it had no intention of honoring. It's one of several counts against the insurance company, but the only one at issue here. GICA moves to dismiss it because it doesn't pass muster underBell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). 1
Twombly and Iqbal sounded the death knell for the rote recitation pleading that prevailed under Conley v. Gibson. Twombly retired Conley's rule that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief," saying that "[t]he phrase is best forgotten as an incomplete, negative gloss on an accepted pleading standard: once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Twombly, 550 U.S. at 563, 127 S.Ct. 1955. A complaint need not provide detailed factual allegations, but must amount to "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Id. at 555, 127 S.Ct. 1955; Iqbal, 129 S.Ct. at 1949. And it must contain sufficient factual matter to " 'state a claim for relief that is plausible on its face.' " Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). After review of the defendants' allegations and GICA's argument, it must be concluded that the fraud count is sufficient to withstand a motion to dismiss.
GICA first argues that the misrepresentations the defendants allege it made were nothing more than the terms of the policy it issued to the defendants. When these are coupled with the defendants' claims that GICA and its officers were aware they would not investigate and pay defendants' claim in a timely manner, defendants' allegations are nothing more than a formulaic recitation of the elements of a fraud clam, which is insufficient under Twombly and Iqbal. Second, GICA contends that the defendants' claim that GICA had no intention of honoring the policy it issued to the defendants is an implausible, wild accusation, which also disqualifies it under the recent Supreme Court precedent. Such allegations have survived motions to dismiss (at least under Conley ). See e.g., Old Republic Insurance Co. v. Ness, Motley, Loadholt, Richardson & Poole, 2005 WL 991909 at *3-5 (N.D.Ill.2005).
As for GICA's first argument, the terms of the policy are the alleged misrepresentations, of course, because that's the defendants' claim: that GICA said it would do things it never had any intention of doing. And stating the offending misrepresentations is part and parcel of any cause of action for fraud. Reger Development, LLC v. National City Bank, 592 F.3d 759, 766 (7th Cir.2010). But there is more to the complaint than that. In paragraph 87, the fraud count summarizes what was called "a series of acts alleged designed to effectuate an overarching scheme to collect premiums without having to pay claims and with the intent not fairly to consider those claims" in General Ins. Co. of America v. Clark Mall Corp., 2010 WL 1286076, *9. These acts are detailed further in paragraphs 22-43, and depict a far-reaching and burdensome investigation into defendants' claim that went beyond the incident itself. They include one document request after another, which covered not just the mall where the fire occurred, but defendants' other business interests as well. Interrogatories were directed to the defendants' accountants. There were repeated depositions of Mr. Park, one totalingfifteen hours and spanning three days, another lasting four hours. When the defendants made inquiries into the progress of their claim, GICA was unresponsive. The process stretched for over a year-and-a-half without any determination on the defendants' claim from GICA—not until GICA filed a declaratory judgment action, anyway.
These additional allegations provide the answer to GICA's criticism that the defendants haven't pled anything that demonstrates GICA had a fraudulent intent. Rule 9(b), Federal Rules of Civil Procedure, specifically allows mental condition or intent to be averred generally. At the same time, the complaint must afford a basis for believing that plaintiffs could prove scienter. Tricontinental Industries, Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir.2007); In re HealthCare Compare Corp. Securities Litigation, 75 F.3d 276, 281 (7th Cir.1996). The defendants' allegations are sufficient to do that. Fraudulent intent cannot be itemized like item numbers in a catalog. If the plaintiff's tacit argument is right, there would seldom, if ever, be a successful complaint alleging fraudulent intent because the fraud would have been so obvious as to have been doomed from the start.
American Communications Ass'n, C.I.O. v. Douds, 339 U.S. 382, 411, 70 S.Ct. 674, 94 L.Ed. 925 (1950). Where mental state is in issue, it is to be proved "by the outward manifestations of state of mind." Id. Accordingly, circumstances are all a complaint can point to.
The conduct that occurred after the policy was issued and on which the complaint relies might be "hindsight"—as GICA complains—but that would be the conduct by which GICA avoided its obligations under the policy. As indicated in the opinion on GICA's previous motion to dismiss defendants' counterclaim, the allegations regarding that conduct can be interpreted as depicting a:
series of dilatory, deceptive and punitive maneuvers designed to mask that non performance. .... [They] depict[ ] not merely an inefficient failure to follow through on obligations GICA had under the policy, but an insurance company that was doing all in its power to wear down the insureds and to put off indefinitely a frank decision regarding coverage and the reasons for the denial. The allegations can be read as charging an attempt by GICA to set up the insured for a claim on non-cooperation, thereby enabling GICA to claim that it was the insured who breached the contract. The insureds were promised their claims would be assessed in a reasonable and honest manner. But when they finally had a claim, what they got, according to the counter claim, was the proverbial "run around." 2010 WL 1286076, *5.
Now, as was noted in the opinion, a fire investigation can be a drawn-out affair. At the same time, however, as was also noted, the type of ordeal depicted in the counterclaim arguably presents circumstances on which it can plausibly be concluded that the defendant committed the fraud alleged. 2010 WL 1286076, *5 n. 6. Proof, of course, must come later. That's when the defendants will have to "show" that fraud "was GICA's intention when it issued the policy"—not now, as GICA seems to demand. ( GICA's Motion to Dismiss, at 8).
GICA's second argument attacks the plausibility of the fraud claim, relying principally on Iqbal. In Iqbal, the complaint alleged that the FBI arrested and detained thousands of Muslim men as part of its investigation of the events of September 11 and held them in highly restrictive conditions of confinement until they were "cleared," purposefully designating these individuals as being of "high interest" because of their race, religion, or national origin. Iqbal, 129 S.Ct. at 1951. But the Court found that, on the facts alleged, the charged conduct was likely lawful and justified by the nondiscriminatory intent to detain aliens who were illegally present in the United States and who had potential connections to those who committed terrorist acts. Id. Here, however, there are no allegations in the counterclaim that undermine the plausibility of the defendants' fraud claim. There is nothing that suggests the fire was of suspicious origin, or provides a likely reason for GICA's seemingly singling out the defendants' claim for such heightened scrutiny and extensive investigation. As it stands, the defendants' claim is, at least, plausible.
GICA also submits that the counterclaim is implausible because it fails to allege GICA's motive for defrauding the defendants. For the proposition that motive must be pled—even though it is not an element of a claim for fraud or perhaps any other common law claim—GICA relies on DiLeo v. Ernst & Young, 901 F.2d 624 (7th Cir.1990) and Tricontinental Industries. The defendants' contention overlooks the fundamental pr...
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