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Federal Insurance Co. v. Indeck Power Equipment Co.

United States District Court, W.D. Oklahoma

September 27, 2017

FEDERAL INSURANCE COMPANY, Plaintiff/Counter-Defendant,
INDECK POWER EQUIPMENT COMPANY, et al., Defendants/Counter-Plaintiffs.



         Counter-Defendant Federal Insurance Company (“Federal”) has filed a Motion to Dismiss [Doc. No. 197] seeking the partial dismissal of Indeck Power Equipment Company’s Second Amended Counterclaim [Doc No. 195]. Counter-Plaintiff Indeck Power Equipment Company (“Indeck”) has filed a response in opposition [Doc. No. 207], to which Federal has replied [Doc. No. 216]. The matter has been fully briefed and is at issue.


         In October 2003, Indeck contracted with the City of Altus and the Altus Municipal Authority (collectively, “Altus Plaintiffs”). Under the terms of that agreement, Indeck was to install portions of a water treatment system. Federal’s Original Complaint [Doc. No. 1] at 2–3, ¶ 11. Disputes arose, and, pursuant to that contract, Altus Plaintiffs filed a lawsuit (“Altus”) against Indeck on November 5, 2013. By that time, Federal had issued thirteen insurance policies to Indeck, all effective continuously from December 1, 2002 to December 1, 2015 (“Federal Policies”). Indeck’s Second Amended Counterclaim at 3, ¶ 4. In the Federal Policies, Federal allegedly agreed to defend Indeck in Altus, subject to a reservation of rights, and agreed that Indeck could rely on independent counsel at Federal’s expense. Id. at 4, ¶ 20.

         Because of certain developments surrounding Indeck’s use of independent counsel in Altus, Federal now brings the present action. Federal originally claimed to have no duty to defend or indemnify Indeck and sought to withdraw from Indeck’s defense in Altus, claiming that Altus Plaintiffs do not seek any damages covered by the Federal Policies. Id. at 7, ¶¶ 34–36. Indeck has since filed and twice amended a counterclaim. Second Amended Counterclaim, Doc. No. 195.

         At issue here are Counts I–VI of Indeck’s Second Amended Counterclaim. Count I alleges a breach of contract. Id. at 25. Count II is a voluntary undertaking claim. Id. at 27. Count III alleges violations of § 155 of the Illinois Insurance Code. Id. at 29. Count IV alleges breach of the duty of good faith and fair dealing, under Oklahoma law. Id. at 33. Count V is a claim for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (“Consumer Fraud Act”). Id. at 34. Count VI is a claim for prejudgment interest. Id. at 39. Facts relevant to each count will be detailed in corresponding sections below.


         To survive a motion to dismiss under Rule 12(b)(6), “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, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. The “plausibility standard” announced in Twombly and Iqbal is not a “heightened standard” of pleading, but rather a “refined standard.” Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (citing Kansas Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011)). Under the “refined standard, ” plausibility refers “to the scope of the allegations in the complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs have not nudged their claims across the line from conceivable to plausible.” Khalik, 671 F.3d at 1191; see also Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008). Further, the Tenth Circuit has noted that “[t]he nature and specificity of the allegations required to state a plausible claim will vary based on context.” Khalik, 671 F.3d at 1191.

         I. A ruling on choice-of-law issues at this stage of the litigation remains premature.

         Federal is alleged to have tortiously breached the duty of good faith and fair dealing. Second Amended Counterclaim at 33. While Indeck brings these claims in Count IV under Oklahoma law, Federal maintains that Illinois law should govern any bad faith allegations. Motion at 4. Under Illinois law-Federal asserts-Indeck has failed to state a claim. Id. Federal once before made this argument to the Court in a motion to dismiss. See Federal’s Motion to Dismiss Count III of Indeck’s First Amended Counterclaim, Doc. No. 88. In denying Federal’s earlier Motion, the Court concluded that “at this stage of litigation, it would be inappropriate to issue a ruling . . . because doing so would require what applicable precedent prohibits, which is to weigh the choice-of-law evidence submitted by the parties.” Order, Doc. No. 107. The Court explicitly stated that such a ruling would be “improper on a motion brought under Rule 12(b), and the issue would be better resolved through summary judgment.” Id. at 3 (citing Jones v. Lattimer, 29 F.Supp.3d 5, 10 n.3 (D.D.C. 2014)).

         The Court adheres to its previous ruling. While certainly the litigation has progressed, discovery is still ongoing. See Scheduling Order, Doc. No. 222. And applicable precedent influencing the Court’s logic in its previous Order holds true. Any choice-of-law issues will be better resolved at the summary judgment stage.

         The Court declines to reconsider its previous Order and decide any choice-of-law issues prematurely. All parties agree Illinois substantive law controls the analysis of the remaining claims. Second Amended Counterclaim at 4.

         II. Indeck’s voluntary undertaking claim is dismissed without prejudice, given that Federal had a duty to defend.

         Federal moves the Court to dismiss Count II of Indeck’s Second Amended Counterclaim, a voluntary undertaking claim. Indeck agrees dismissal of Count II is proper on different grounds. Indeck’s Response, Doc. No. 207, at 28. Indeck pleaded the voluntary undertaking claim in the alternative, should the Court find Federal owed no duty to defend. See Indeck’s Response, Doc. No. 207 at 28. The Court, in a previous Order- issued after Indeck filed its Second Amended Counterclaim-determined Federal’s duty to defend was triggered. Order, Doc. No. 190, at 12.

         Therefore, both parties submit that the voluntary undertaking claim should be dismissed. Federal’s Reply at 3 n.3. The Court ...

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