Saint Consulting Grp., Inc. v. Endurance Am. Specialty Ins. Co.

• Citation: 699 F.3d 544
• Decision Date: 02 November 2012
• Docket Number: No. 12–1569.,12–1569.
• Parties: The SAINT CONSULTING GROUP, INC., Plaintiff, Appellant, v. ENDURANCE AMERICAN SPECIALTY INSURANCE COMPANY, INC., Defendant, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

699 F.3d 544

The SAINT CONSULTING GROUP, INC., Plaintiff, Appellant,

v.ENDURANCE AMERICAN SPECIALTY INSURANCE COMPANY, INC., Defendant, Appellee.

No. 12–1569.

United States Court of Appeals,

First Circuit.

Heard Oct. 1, 2012.

Decided Nov. 2, 2012.

Robert D. Cohan with whom Cohan Rasnick Myerson LLP, Jonathan D. Plaut and Chardon Law Offices were on brief for appellant.

Michael F. Perlis with whom Richard R. Johnson, Rachael Shook, Locke Lord LLP, Michael P. Roche and Murphy & Riley, P.C. were on brief for appellee.

Before LYNCH, Chief Judge, BOUDIN, Circuit Judge, and McCONNELL, JR., ^* District Judge.

BOUDIN, Circuit Judge.

This dispute between The Saint Consulting Group, Inc. (“Saint”) and its liability insurer Endurance American Specialty Insurance Company (“Endurance”) stems from Endurance's refusal to defend Saint in a lawsuit against Saint in the Northern District of Illinois, Rubloff Dev. Grp. v. SuperValu, Inc., 863 F.Supp.2d 732 (N.D.Ill.2012) (the “Rubloff Action”). The district court dismissed Saint's lawsuit against Endurance based on an exclusion in the policy, and Saint now appeals.

The Rubloff Action. According to the complaint in that action, ¹ Saint is a consulting company that advises and advocates for its clients in land use disputes; its work includes gaining approval for its clients' projects and opposing projects to which its clients are opposed. Saint has developed a niche practice: acting on behalf of rival grocery store chains, it aims to block or delay Wal–Mart stores from opening in a rival's territory. Calling its operatives “Wal–Mart killers,” Saint has allegedly blocked or delayed hundreds of Wal–Mart stores by spurring litigation and regulatory proceedings.

The Rubloff Action centers on Saint's alleged efforts to block two Wal–Mart stores in the Chicago area on behalf of its client SuperValu, Inc. (“SuperValu”). SuperValu, the third-largest grocery retailer in the country, owns Jewel–Osco, a chain of Chicago area grocery stores that competes with Wal–Mart. The Rubloff Action focused on two proposed Wal–Mart stores: one was planned for a shopping center to be built in Mundelein, Illinois; the other, planned for a shopping center to be built in New Lenox, Illinois. Both are in the vicinity of Chicago.

In Mundelein, real estate developer Rubloff Development Group, Inc. and an associated company (“Rubloff Development”) agreed with Mundelein officials to annex land for a shopping center; in New Lenox, McVickers Development, LLC and associated entities (“McVickers Development”) acquired and later exercised an option to purchase land for a shopping center. Rubloff Development and McVickers Development (collectively, the “Rubloff plaintiffs”) each had an agreement with Wal–Mart to sell it a parcel of land in their respective developments for a Wal–Mart store and had agreements or negotiations with other retailers to open stores there.

In or around 2007, SuperValu allegedly hired Saint to lead a campaign to delay or block these two developments in order to hinder Wal–Mart from competing with Jewel–Osco in the Chicago area grocery market. To carry out this mission, Saint's representative (Leigh Mayo) organized local landowners to oppose the two new developments; using a pseudonym, he told a false story of his parents supposedly being evicted from their home to make room for a Wal–Mart store and retained a lawyer (William Graft) to represent them, never explaining that both Mayo and Graft were being paid by Saint, and ultimately by SuperValu. Rubloff, 863 F.Supp.2d at 738–39.

In Mundelein, Graft allegedly initiated several administrative complaints and lawsuits against the Rubloff development starting in 2007; the lawsuits dragged on for years and were ultimately settled in 2011 for $200,000, but the Mundelein development still has not been built and (due to the extreme delay) may never be built. Rubloff, 863 F.Supp.2d at 738–39. With the New Lenox development, obstacles in obtaining various permits (allegedly caused by Saint's obstructive activities) delayed the development by two years, causing significant losses to McVickers Development.

After Mayo left Saint's employment, he contacted Rubloff Development and, in exchange for payment, turned over thousands of Saint documents detailing Saint's scheme to block the developments. Rubloff, 863 F.Supp.2d at 738–39. In June 2010, the Rubloff plaintiffs sued Saint and SuperValu in federal district court in Illinois—the Rubloff Action—where the case was assigned to Judge Leinenweber. The initial complaint, as slightly amended a day later, focused on the documents Mayo had turned over and which Saint had demanded back.

Claiming that the documents were needed for a lawsuit it intended to bring against Saint and SuperValu, Rubloff Development sought a declaratory judgment that the documents were not privileged and that it need not return them; made a claim for negligent spoliation of evidence alleging that Saint and SuperValu had destroyed documents needed for the lawsuit; and sought injunctive relief to foreclose further destruction of documents. In September 2010, Judge Leinenweber dismissed most of the claims but retained the declaratory relief claim against Saint alone.

The Rubloff plaintiffs then moved in October 2010 for leave to file a proposed Second Amended Complaint and before acting upon it, Judge Leinenweber resolved the retained declaratory relief claim, holding that most of Saint's documents were not privileged. Thereafter, in July 2011, Judge Leinenweber allowed the Second Amended Complaint.² This complaint, in which McVickers Development joined as co-plaintiff, greatly expanded the suit. In this new complaint, Rubloff Development and McVickers Development centrally charged Saint and SuperValu with the following:

-violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c) (2006), by engaging in a pattern of mail or wire fraud, 18 U.S.C. §§ 1341, 1343, involving deceptions (the Mayo pseudonym and misrepresentations) to hide their involvement in the opposition to the Wal–Mart supermarkets, and conspiracy to violate RICO, 18 U.S.C. § 1962(d);

-conspiracy in restraint of trade under the Sherman Act, 15 U.S.C. § 1, and the Illinois Antitrust Act, 740 Ill. Comp. Stat. 10/1 (2010), to prevent Wal–Mart from opening stores; and

-tortious interference with prospective economic advantage by disrupting the developers' expected business relationships with Wal–Mart and other tenants or purchasers of space in the shopping centers; common law fraud by the aforementioned deceptive means, and conspiracy to commit the torts listed above.

Two other claims were part of the case: first, Rubloff Development alone made a separate claim alleging abuse of process on the ground that Saint and SuperValu initiated litigation to delay and impose costs on Rubloff Development related to the Mundelein development; and second, the Rubloff plaintiffs reiterated their document-related claims for declaratory relief.

Finally, on top of the original and the newly proposed claims made by the plaintiffs, Saint itself filed counterclaims in the Rubloff Action against Rubloff Development; these claims were directed to the documents that Mayo had turned over to it, and included inducement of breach of fiduciary duty, conversion, replevin, tortious interference with contractual relations, and misappropriation pursuant to the Illinois Trade Secrets Act, 765 Ill. Comp. Stat. 1065/1.

On March 27, 2012, Judge Leinenweber issued a decision, dismissing in full all of the Rubloff plaintiffs' claims on a variety of grounds. Rubloff, 863 F.Supp.2d at 737–38. The antitrust, RICO, and tortious interference claims were dismissed as governed by the Noerr–Pennington doctrine hereafter discussed. See note 4, below. The declaratory judgment claim was dismissed as moot, and the other claims were also dismissed without prejudice to further amendment, id. at 745–49. In addition, Saint's counterclaims relating to the Mayo documents were greatly narrowed. Id. at 748–51.

On June 7, 2012, Rubloff Development filed a Third Amended Complaint reasserting many of the claims with more detailed allegations of fact, aiming to cure deficiencies identified by the court. The litigation remains pending, although the Third Amended Complaint was filed after the expiration of Saint's policy with Endurance and does not figure in this lawsuit.

Saint's Suit Against Endurance. This history now brings us to the insurance coverage dispute that arises out of the Rubloff Action, depends upon its allegations, and is the subject of the separate litigation now before us on appeal. In 2008, Saint obtained from Endurance a liability insurance policy running from November 1, 2008, through November 1, 2009. This policy, which was later renewed for another year, was in force when the original and First Amended complaints were filed in the Rubloff Action and when the Second Amended Complaint was initially proposed in October 2010.

The policy is labeled as a “Premier Professional Liability Insurance Policy.” It is a type of policy often referred to as an “errors and omissions” policy or a “malpractice” policy, which insures firms or individuals against liability from errors and omissions committed in the performance of their professional services. 4 Thomas & Abramovsky, New Appleman on Insurance Law § 25.01[1], at 25–6 (library ed.2012). Such insurance is common among skilled professionals such as physicians, attorneys, architects, engineers, and accountants. Id. § 25.01[2], at 25–9–25–10.

These policies typically cover claims based on performing or failing to perform professional services—claims that are themselves often expressly excluded from commercial general liability policies. Med. Records Assocs. v. Am. Empire Surplus Lines Ins. Co., 142 F.3d 512, 513 & n. 1 (1st Cir.1998). However, Saint's policy contains many exclusions that are common in malpractice policies,...