2021 WL 27475

United States District Court, W.D. Kentucky.
GEORGE GILLETT, Plaintiff
v.
SPIRIT COMMERCIAL AUTO RISK RETENTION GROUP, INC., CTC TRANSPORTATION INSURANCE SERVICES, LLC, and SARMAN TRUCKING, LLC, Defendants
GEORGE GILLETT, Plaintiff
v.
THOMAS MULLIGAN, et al., Defendants
Civil Action No. 3:19-cv-00260-RGJ, Civil Action No. 3:20-cv-00058-RGJ
|
Filed 01/04/2021

MEMORANDUM OPINION & ORDER
Rebecca Grady Jennings, District Judge United States District Court
*1 Defendant Spirit Commercial Auto Risk Retention Group, Inc. (“Spirit”) moves the Court to reconsider its Order [DE 86] denying Spirit’s motion to dismiss [DE 11] Plaintiff George Gillett’s (“Gillett”) complaint for lack of subject matter jurisdiction. [DE 86]. The motion is fully briefed [DE 93; DE 102]. Spirit also moves for a hearing. [DE 103]. For the reasons below, the Court GRANTS IN PART Sprit’s motion to reconsider, DENIES Spirit’s motion for hearing, STAYS Gillett’s claims against Spirit pending the liquidation proceedings in Nevada, and AMENDS the last paragraph of Section II.B.7 of its prior ruling on Sprit’s motion to dismiss [DE 74 at 2023] in accordance with this Order.

I. BACKGROUND
The full facts and background are in the Court’s previous order [DE 74]. On January 11, 2019, the Nevada Commissioner of Insurance petitioned the Eighth Judicial District Court of the State of Nevada (“Liquidation Court”) for an order appointing a Receiver over Spirit. On January 18, 2019, the Liquidation Court issued a temporary restraining order appointing the Nevada Commissioner of Insurance as Temporary Receiver over Spirit. [DE 11-1]. On February 21, 2019, Gillett filed this action against Spirit seeking a judgment against Spirit for the full amount of the judgment obtained against Sarman up to the state limit of the MCS-90 endorsement. Gillett also seeks from Spirit any equitable, declaratory, injunctive, and other relief to which Gillett is entitled, including, but not limited to, an order or decree directing Spirit (and CTC1) to pay in full the judgment entered against Sarman. [DE 1-2]. On February 27, 2019, the Liquidation Court issued a permanent injunction (“Injunction”) and appointed the Nevada Commissioner of Insurance as the Permanent Receiver over Spirit. [DE 11-1 at 176].

The Court denied Spirit’s motion to dismiss for lack of jurisdiction, finding that it has jurisdiction and declining to dismiss the claim against Spirit. [DE 74 at 2021-23]. Spirit asks the Court to reconsider its opinion due to an error of law. Gillett argues that motions for reconsideration are improper and the Court did not err as a matter of law. Although Spirit moved under Fed. R. Civ. P. 60(b)(6), the catch-all provision of Rule 60(b), the Court construes Spirit’s motion as one under Fed. R. Civ. P. 60(b)(1) to alter, amend, or vacate the Court’s order for a mistake of law or fact.

II. DISCUSSION
Federal Rule of Civil Procedure 60(b) provides that a court “may relieve a party or its legal representative from final judgment, order, or proceeding” for many reasons. Rule 60(b) provides that “[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect ….” Relief under Rule 60(b)(1) is proper “in only two situations: (1) when a party has made an excusable mistake or an attorney has acted without authority, or (2) when the judge has made a substantive mistake of law or fact in the final judgment or order.” United States v. Reyes, 307 F.3d 451, 455 (6th Cir. 2002) (citing Cacevic v. City of Hazel Park, 226 F.3d 483, 490 (6th Cir. 2000)).

*2 The issue here is whether the Court’s opinion denying Spirit’s motion to dismiss contained a substantive mistake of law or fact. Spirit argues that the Court’s finding did not accurately reflect Spirit’s position or the holding in AmSouth Bank v. Dale, 386 F.3d 763, 781 (6th Cir. 2004). Specifically, Spirit argues that the following paragraph, in denying Spirit’s motions to dismiss, reflects a mistake of law or fact:
Even so, Spirit also acknowledges that “declaratory rights action … would not impair the operation of insurance insolvency law and that the McCarran–Ferguson Act therefore would not preclude the Court from exercising jurisdiction over the action.” [DE 36 at 476 (citing AmSouth Bank v. Dale, 386 F.3d 763, 781 (6th Cir. 2004) (“the threatened declaratory judgment actions against insolvent insurance companies for the purpose of evading liability in a threatened common-law coercive action by the insurance companies have only an attenuated connection to regulating the business of insurance”) ]. Given the limited scope of the relief sought against Spirit, the Court has jurisdiction and will not dismiss the claim against Spirit.
[DE 74 at 2023]. Spirit disputes this characterization of its reliance on AmSouth Bank as inaccurate. Spirit argues that although AmSouth Bank held that a declaratory action brought by banks could not impair the operation of the business of insurance so that the McCarran-Ferguson Act would reverse preempt federal jurisdiction, AmSouth Bank states the following in dicta that supports Spirit’s reverse preemption argument:
Because state liquidation proceedings of insolvent insurers are exactly the sort of intricate state regulation on behalf of state-resident policyholders that these doctrines [McCarran-Ferguson Act reverse preemption and Burford abstention] are intended to protect, these arguments have some force when angry creditors attempt to sue insolvent insurance companies in federal court to jump ahead in the queue of claims, but they have less force here, where the insurance companies are themselves the natural plaintiffs, as Receivers vociferously argue.
AmSouth Bank, 386 F.3d at 780. Further, Spirit disputes the Court’s implication that Gillett is merely seeking a declaratory judgment.

The Court understands Spirit’s argument and citation to AmSouth Bank. The Court also understands and clarifies for purposes of this Order that Gillet is seeking a money judgment from Spirit, not only a declaration of rights. [DE 1-2; DE 35 at 404 n.15]. The Court sees two issues: (1) does Kentucky’s Insurers Rehabilitation and Liquidation Law (“IRLL”) reverse preempt, under the McCarran-Ferguson Act, this Court’s subject-matter jurisdiction?; and (2) if not reverse-preempted, should this Court exercise Burford abstention? For the reasons stated below, the IRLL does not reverse-preempt the Court’s subject-matter jurisdiction, but the Court exercises discretion under Burford to stay Gillett’s claim against Spirit pending resolution of the matter in the Nevada Liquidation Court.

1. Is the Court’s jurisdiction over Gillett’s claim against Spirit reverse-preempted by the IRLL under the McCarren-Ferguson act?
Defendant CTC removed this case to federal court based on diversity jurisdiction under 28 U.S.C. § 1332. As discussed in the Court’s prior Order [DE 74 at 2009-11], the parties are diverse and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(b). Thus the Court has subject-matter jurisdiction to adjudicate this dispute. However, Spirit argues that because the IRLL vests exclusive jurisdiction to the Liquidation Court in Nevada, that under the McCarran-Ferguson act, this Court’s diversity jurisdiction is reverse-preempted by the IRLL.

*3 When a state law conflicts with a federal law, generally the federal law preempts the state law, rendering the state law without effect. U.S. Const. art. VI, cl. 2; Altria Group, Inc. v. Good, 555 U.S. 70, 76 (2008). But the McCarran–Ferguson Act carved out an exception to this general rule when state laws regulate the “business of insurance.” 15 U.S.C. § 1011 et seq. Congress sought, under the Commerce Clause as derived in Article I, Section 8 of the United States Constitution, to prevent general federal laws from interfering with state insurance regulations. See AmSouth Bank v. Dale, 386 F.3d 763, 780 (6th Cir. 2004); Am. Ins. Ass’n v. Garamendi, 539 U.S. 396, 428 (2003). McCarran–Ferguson establishes situations of “reverse preemption,” where a state law preempts the federal law. “No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance …” 15 U.S.C. § 1012(b). In order for the McCarran–Ferguson Act to reverse preempt a federal law, (1) the state statute must have been enacted to regulate the business of insurance, (2) that federal statute must not specifically relate to the business of insurance, and (3) applying the federal law would “invalidate, impair, or supersede” the state statute. Humana Inc. v. Forsyth, 525 U.S. 299, 307 (1999).

Kentucky adopted a comprehensive regulatory scheme for insurance. Nichols v. Vesta Fire Ins. Corp., 56 F. Supp. 2d 778, 780 (E.D. Ky. 1999). Kentucky’s IRLL requires that:
In a liquidation proceeding in a reciprocal state against an insurer domiciled in that state, claimants against the insurer who reside within this state may file claims either with the ancillary receiver, if any, in this state, or with the domiciliary liquidator. Claims must be filed on or before the last dates fixed for the filing of claims in the domiciliary liquidation proceeding.
KRS 304.33-570. Nevada and Kentucky are reciprocal states. [DE 11-1 at 179]. No ancillary receiver has been established in Kentucky. Spirit thus argues that only the Liquidation Court in Nevada has exclusive jurisdiction. Because the IRLL vests exclusive jurisdiction for matters relating to an insurance company’s liquidation, the McCarran–Ferguson doctrine reverse preempts the Court’s subject-matter jurisdiction. Further, Spirit notes that Gillett has submitted a claim for payment of the Sarman Judgment to the Liquidation Court, thus submitting to its jurisdiction. [DE 86 at 2183, Exh. 4].

But the Sixth Circuit has suggested that Kentucky’s IRLL does not reverse-preempt the federal diversity jurisdiction statute. Atkins v. CGI Techs. & Sols., Inc., 724 Fed. App’x 383, 388 (6th Cir. 2018) (“the district court’s jurisdictional ruling, rejecting the Liquidator’s argument that Kentucky’s IRLL reverse-preempted the federal diversity jurisdiction statute, is consonant with Sixth Circuit law and the majority view among the circuits.”) AmSouth Bank, 386 F.3d at 783 (“courts tend to look unfavorably on claims of McCarran–Ferguson preemption of … the removal statutes so as to insulate that action from the federal courts”); Dykhouse v. Corp. Risk Mgmt. Corp., No. 91-1646, 1992 WL 97952 *2 n.9 (6th Cir. May 8, 1992) (unpublished per curiam decision) (“although the McCarran–Ferguson Act indicated Congress’s intent to leave regulation of the insurance business largely to the states, there is no indication that Congress thereby intended to divest the federal courts of jurisdiction over state insurance claims”).

Several Circuit Courts of Appeals and other federal district courts that have addressed this question have either rejected the argument or expressed doubt in applying McCarran–Ferguson to the federal diversity jurisdiction statute. Beam Partners, LLC v. Atkins, 340 F. Supp. 3d 627, 641 (E.D. Ky. 2018) citing AmSouth Bank, 386 F.3d at 783; Hawthorne Savs. F.S.B. v. Reliance Ins. Co. of Ill., 421 F.3d 835, 843 (9th Cir. 2005), Gross v. Weingarten, 217 F.3d 208, 222 (4th Cir. 2000); Munich Am. Reins. Co. v. Crawford, 141 F.3d 585, 595–96 (5th Cir. 1998); Murff v. Prof’l Med. Ins. Co., 97 F.3d 289, 293 (8th Cir. 1996).

*4 After reviewing these cases, the Court does not believe that Kentucky’s IRLL reverse preempts this Court’s diversity jurisdiction under the McCarran-Ferguson act. Instead, the Court believes the better course is to stay Gillett’s claim against Spirit pending the Liquidation Court’s action in Nevada under Burford abstention.

2. Should the Court exercise Burford abstention?
Abstention under Burford v. Sun Oil Company, 319 U.S. 315 (1943) is appropriate (1) when there are difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar; or (2) where the exercise of federal review of the question in a case and in similar cases would disrupt state efforts to establish a coherent policy with respect to a matter of substantial public concern. New Orleans Pub. Serv., Inc. v. Council of City of New Orleans (NOPSI), 491 U.S. 350, 361 (1989) (internal quotations and citation omitted).

The Sixth Circuit has stated in an unpublished per curiam decision that “Burford abstention is appropriate to avoid considering questions regarding state liquidation proceedings in order to protect the state’s substantial interests in this regard, provided that no direct federal question is involved.” Dykhouse, No. 91–1646, 1992 WL 97952, at *3. Here, there is no federal question and the issue is whether Spirit must pay damages to Gillett under an insurance policy issued by Spirit to Sarman.

Other federal courts have recognized Burford abstention as appropriate in a cases against insurance companies involved in state liquidation proceedings. See e.g., Callon Petro. Co. v. Frontier Ins. Co., 351 F.3d 204, 209 (5th Cir. 2003) (“We can certainly agree that, had the Superintendent timely moved the district court to dismiss or stay this action on Burford grounds, it would have been proper, if not obligatory, for the district court to have done so.”); Lac D’Amiante du Quebec, Ltee v. Am. Home Assur. Co., 864 F.2d 1033, 1048 (3rd Cir.1988) (“[Burford] abstention and stay or dismissal [is] appropriate in the circumstance of a suit against an insurer in liquidation proceedings.”) See, e.g., Property and Casualty Ins. Ltd. v. Central Nat’l Ins. Co. of Omaha, 936 F.2d 319, 321 n. 3 (7th Cir.1991); Martin Ins. Agency Inc. v. Prudential Reinsurance Co., 910 F.2d 249, 254 (5th Cir.1990) (action brought in federal court against insolvent insurer not properly dismissed for lack of jurisdiction; instead, use Burford abstention); Grimes v. Crown Life Ins. Co., 857 F.2d 699, 702 (10th Cir. 1988) (McCarran–Ferguson Act did not intend to divest federal courts of jurisdiction in diversity cases), cert. denied, 489 U.S. 1096 (1989); Sonic Automotive, Inc. v Chrysler Insurance Co., No. 1:10-cv-717, 2012 WL 6170825 at *2 (S.D. Ohio Dec. 11, 2012) (Burford abstention exercised to stay case against insurance company involved in state liquidation proceedings).

The decision from Emons Indus., Inc. v. Liberty Mut. Fire Ins. Co., 545 F. Supp., 186 (S.D.N.Y. 1982) is persuasive. There, Plaintiff Emons Industries, Inc. (“Emons”) brought a declaratory rights action against Reserve Insurance Company (“Reserve”) seeking a declaration that Reserve was contractually obligated under a policy of liability insurance to indemnify Emons for certain products liability judgments. Emons Indus., Inc. 545 F. Supp. 185 at 185–86. The basis of subject-matter jurisdiction was diversity. Id. Reserve, an Illinois insurance company, was found insolvent and placed in liquidation under Illinois’ version of the IRLL four years after Emons sued Reserve for a declaration of right. Id. at 190-91. The federal district court stayed Emons’ declaratory rights claims against Reserve, over Emons’ objection, because “where a claim is asserted in a New York action against a foreign insurer which is in receivership but where no ancillary receiver has been appointed in New York, that claim must be adjudicated in the insurer’s domiciliary state.” Id. at 191. The Court emphasized that Illinois’ Uniform Insurers Liquidation Act’s purpose is to provide a “ ‘uniform, orderly and equitable method of making and processing claims against (a) defunct insurer …’ ” Id. at 190.

*5 Upon consideration of the parties’ briefs on Spirit’s motion for reconsideration, this Court will stay Gillett’s claims against Spirit under the Burford abstention doctrine. In the context of a complaint seeking “both equitable [relief] and money damages,” as in this case, “a federal court’s discretion to abstain from exercising jurisdiction does not extend so far as to permit a court to dismiss or remand, as opposed to stay, an action at law.” Gray v. Bush, 628 F.3d 779, 785 (6th Cir. 2010) citing Superior Beverage Co., Inc. v. Schieffelin & Co., 448 F.3d 910, 913–14 (6th Cir.2006). But “the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.” Id. at 785 (citation omitted). For these reasons, the Court will stay Gillett’s claims against Spirit pending conclusion of the liquidation proceedings in Nevada.

III. CONCLUSION
For these reasons, having considered the above motion, it is ORDERED as follows:
(1) Spirit’s Motion to Reconsider [DE 86] is GRANTED IN PART as set forth above;
(2) The Court AMENDS the last paragraph of Section II.B.7 of its prior ruling on Spirit’s motion to dismiss [DE 74 at 2023] with this Order;
(3) Spirit’s motion for a hearing [DE 103] is DENIED;
(4) Gillett’s claims against Spirit are STAYED pending the conclusion of the liquidation proceedings pending in the Eighth Judicial District Court of the State of Nevada, Clark County, Nevada, Case No. A-19-7883225-B, Dept. No 27.

Copies to: Counsel

All Citations
Slip Copy, 2021 WL 27475

Footnotes

1
CTC Transportation Insurance Services, LLC (“CTC”).

2021 WL 76828

United States District Court, N.D. Illinois, Eastern Division.
ANDRE TAYLOR, ELRESE BOOKER, and KATRINA J. STONE, Plaintiffs,
v.
LEONARD M. KILMER, individually and as agent of WILSON LINES, INC., and WILSON LINES, INC. Defendants.
Case No. 18 C 7403
|
01/08/2021

HON. JORGE ALONSO, United States District Judge

MEMORANDUM OPINION AND ORDER
*1 Plaintiffs, Andre Taylor, Elrese Booker, and Katrina J. Stone, now move for summary judgment against Defendants, Leonard M. Kilmer and Wilson Lines, Inc., as to one of Defendants’ affirmative defenses. For the reasons that follow, the Court grants Plaintiffs’ motion.

BACKGROUND
This suit arises from a November 2017 traffic collision that happened on an entrance ramp to Interstate 290 in the City of Chicago. (Pl.’s LR 56.1 SOF., Ex. 2 at ¶ 1, ECF No. 141.) Defendant Leonard Kilmer was driving a semi-tractor-trailer for his employer, Defendant Wilson Lines, Inc. As Kilmer drove down the ramp towards I-290, he rear-ended a vehicle carrying Plaintiffs Andre Taylor, Elrese Booker, and Katrina Stone. (Id. at ¶¶ 1-2.)1

In October 2018, Taylor filed suit against Defendants in Illinois state court, and in November 2018, Defendants removed the suit to this Court. (See generally ECF No. 1.) The Court later granted an unopposed motion to file a first amended complaint, which added Plaintiffs Booker and Stone. (See ECF No. 62; see also ECF No. 64.) Plaintiffs’ First Amended Complaint alleges Defendants were negligent in rear-ending Plaintiffs’ vehicle, and Plaintiffs seek damages for personal injuries they allegedly suffered in the accident. (See generally Am. Compl., ECF No. 70; see also ECF No. 141 at ¶ 16.)2

Thereafter, Defendants filed their answer, which contained two affirmative defenses. (See Defs.’ Answer, ECF No. 73.) The second affirmative defense is titled “fraud in the presentation of evidence as to all plaintiffs” and alleges, in its entirety:
Defendants contend Plaintiff’s cause of action is barred by fraud due to fraudulent actions pre-accident being the sole proximate cause of the accident and/or claimed damage or the extent of it being misrepresented. Defendants’ investigation and discovery into this matter is incomplete at this early stage.
(Id. at 36.) After the close of discovery, Plaintiffs moved for summary judgment on Defendants’ second affirmative defense, arguing there are no genuine disputes of material fact in the record and that Defendants’ affirmative defense fails as a matter of law because Defendants fail to offer evidence sufficient to prove fraud. (See generally Pl.’s Memo. in Support of Summary Judgment, Ex. 1, ECF No. 141.) Defendants oppose Plaintiffs’ motion.

LEGAL STANDARD
“The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); Wackett v. City of Beaver Dam, 642 F.3d 578, 581 (7th Cir. 2011). A genuine dispute of material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). At the summary judgment stage, a court does not make credibility determinations, weigh evidence, or decide which inferences to draw from the facts; those are jury functions. See Gibbs v. Lomas, 755 F.3d 529, 536 (7th Cir. 2014). Rather, a court construes the evidence and all inferences that reasonably can be drawn therefrom in the light most favorable to the nonmoving party. See Kvapil v. Chippewa Cty., 752 F.3d 708, 712 (7th Cir. 2014). “A party that does not bear the burden of persuasion [at trial] may move for summary judgment by showing—that is, point out to the district court—that there is an absence of evidence to support the nonmoving party’s case.” Modrowski v. Pigatto, 712 F.3d 1166, 1167 (7th Cir. 2013) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)) (quotations omitted). If the moving party makes such a showing, “the nonmoving party bears the burden of production under Rule 56 to designate specific facts showing that there is a genuine issue for trial.” Ricci v. DeStefano, 557 U.S. 557, 586 (2009).

DISCUSSION
*2 Plaintiffs move for summary judgment on Defendants’ second affirmative defense. Again, the affirmative defense states that “Plaintiff’s cause of action is barred by fraud due to fraudulent actions pre-accident being the sole proximate cause of the accident and/or claimed damage or the extent of it being misrepresented.” (ECF No. 73 at 76.) Plaintiffs argue there is not sufficient evidence in the record that would permit a reasonable trier of fact to find for Defendants on this affirmative defense. For the reasons that follow, the Court agrees with Plaintiffs.

In this diversity suit, Illinois law governs plaintiffs’ claims and any affirmative defenses. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80, 58 S. Ct. 817, 822-23 (1938); see also Williams v. Jader Fuel Co., Inc., 944 F.2d 1388, 1400 (7th Cir. 1991) (“In a diversity case, the legal and factual sufficiency of an affirmative defense is examined with reference to state law.”); RBS Citizens, N.A. v. Sanyou Imp., Inc., 525 F. App’x 495, 497-98 (7th Cir. 2013) (applying state law and affirming summary judgment on defendants’ affirmative defense). Under Illinois law, Defendants bear the burden of proving their affirmative defense of fraud. See e.g., Cordeck Sales, Inc. v. Constr. Sys., 382 Ill. App. 3d 334, 384-85, 320 Ill. Dec. 330, 378, 887 N.E.2d 474, 522 (Ill. App. Ct. 2008) (noting “the well-established legal principle that it is the party raising an affirmative defense that bears the burden of proof” and granting summary judgment on affirmative defense of fraud); see also Andrews v. Metro. Water Reclamation Dis. of Greater Chicago, 2019 IL 124283, ¶ 23, — Ill. Dec. —-, — N.E.3d —- (Ill. 2019) (reviewing grant of summary judgment and noting defendant bears the burden of proving affirmative defense).

The parties agree that, to prevail on their defense, Defendants must show by clear and convincing evidence that: (1) the plaintiffs made a false statement of material fact; (2) the plaintiffs knew the representation was false; (3) the plaintiffs intended that the representation induce the defendants to act; (4) the defendants relied upon the truth of the statement; and (5) defendants’ damages resulting from the reliance.” See Connick v.Suzuki Motor Co., 174 Ill. 2d 482, 496, 221 Ill. Dec. 389, 396, 675 N.E.2d 584, 591 (Ill. 1996); see also Wernikoff v. Health Care Serv. Corp., 376 Ill. App. 3d 28, 235, 315 Ill. Dec. 524, 530, 877 N.E.2d 11, 17 (Ill. App. Ct. 2007) (affirming summary judgment); JPMorgan Chase Bank, N.A. v. Asia Pulp & Paper Co., 707 F.3d 853, 864-65 (7th Cir. 2013) (applying Illinois law and affirming summary judgment on fraud-based defense). Defendants further argue that their fraud defense can also be based on Plaintiffs’ concealment of a material fact. (Defs.’ Resp. at 2, ECF No. 145.) This is true, but under a theory of fraudulent concealment, the elements differ slightly and Defendants’ burden of proof is greater. For instance, Defendants must show a special relationship existed between the parties giving rise to a duty to speak. See Connick, 174 Ill. 2d at 500; see also Schrager v. N. Cmty. Bank, 328 Ill. App. 3d 696, 706-07, 767 N.E.2d 376, 384 (Ill. App. Ct. 2002) (analyzing elements of common law fraudulent concealment).

In their motion, Plaintiffs show a lack of evidence in the record to support these elements and argue that, as a result, Defendants’ second affirmative defense fails as a matter of law. (See ECF No. 141 at 3-5; see also id., Ex. 2 at ¶¶ 1-2, 5-16.) Accordingly, the burden shifts to Defendants to point to evidence in the record that creates a genuine issue of material fact. Modrowski, 712 F.3d at 1167. Defendants appear to offer three theories for which they argue there is sufficient evidence to support their defense of fraud.

*3 Before addressing these theories, the Court must address Defendants’ failures to comply with Local Rule 56.1 and the attendant consequences. In relevant part, LR 56.1 requires a party opposing summary judgment to file “a concise response to the movant’s statement that shall contain,” among other things, “numbered paragraphs, each…stating a concise summary of the paragraph to which it is directed” and a response to each numbered paragraph “including, in the case of any disagreement, specific references to the affidavits, parts of the record, and other supporting materials relied upon[.]” LR 56.1(b)(3). First, Defendants fail to summarize (or restate) the paragraph to which they are responding. While this violation of LR 56.1 is mainly a matter of inconvenience, Defendants’ improper denials are more seriously problematic. When Defendants deny the facts offered by Plaintiffs, they do so with bare denials or legal argument and fail to offer opposing facts supported by citations to the record. (See Defs.’ LR 56.1 Resp., Ex. 1 at ¶¶ 6-16, ECF No. 145.) This is insufficient to contest Plaintiff’s proffered facts. Defendants cannot create disputes of fact by relying upon legal arguments, conclusions, or suppositions because these are not facts. See Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371, 382 (7th Cir. 2008); see also Almy v. Kickert Sch. Bus Line, Inc., No. 08-CV-2902, 2013 WL 80367, at *2 (N.D. Ill. Jan. 7, 2013) (noting “courts are not required to wade through improper denials and legal argument in search of a genuinely disputed fact”) (quoting Bordelon v. Chi. Sch. Reform Bd. Of Trs., 233 F.3d 524, 529 (7th Cir. 2000)). Accordingly, the Court disregards Defendants’ improper denials and deems admitted the underlying facts proffered and properly supported by Plaintiffs. See Ibrahim v. Univ. of Chi., No. 17 C 6213, 2020 WL 405635, at *1 (N.D. Ill. Jan. 24, 2020) (disregarding unsupported and argumentative responses and deeming underlying facts admitted).

The Court also notes Defendants flagrantly disregard LR 56.1’s requirements when it comes to their own statement of additional facts. Defendants offer 79 additional facts, many of which are clearly immaterial to deciding the instant motion. (ECF No. 145, Ex. 1 at ¶¶ 17-96.) By rule, Defendants are limited to 40 additional facts, unless they first obtain leave of Court, which they did not. LR 56.1(b)(3)(C). These violations undermine LR 56.1’s important purpose, which is to aid a district court in isolating legitimately disputed facts and determining whether summary judgment is appropriate. See Hemsworth v. Quotesmith.com, Inc., 476 F.3d 487, 490 (7th Cir. 2007). It is well-settled that district courts have the discretion to require strict compliance with LR 56.1, and the Court could choose to simply disregard the supplemental facts that violate LR 56.1. Flint v. City of Belvidere, 791 F.3d 764, 767 (7th Cir. 2015). However, to the extent Defendants have offered well-supported additional facts, the Court has chosen to consider them.

Turning to the parties’ arguments, the Court discerns three theories of fraud from the briefing. The premise of the first theory appears to be that there was a white sedan involved in the collision and that Plaintiffs and the driver of the white sedan conspired to purposefully cause the collision. Although Plaintiffs spend time in their motion attacking the evidence supporting this theory, (see ECF No. 141 at 3-5; see also id., Ex. 2 at ¶ 10), the Court need not delve too deeply into the issue because Defendants appear to abandon this theory in their response. (See generally ECF No. 145 at 4 (mentioning white sedan but making no argument of conspiracy or agreement between driver and plaintiffs to cause collision); see also id., Ex. 1 at ¶ 10 (denying defense is based on conspiracy theory).) To the extent Defendants do base their defense on this theory (and assuming the theory can support a defense of fraud), Defendants’ failure to develop their argument or offer evidentiary support amounts to waiver. See Lewandowski v. City of Milwaukee, 823 F. App’x 426, 430 (7th Cir. 2020) (“A district court is entitled to expect a party…opposing summary judgment to lay out her arguments and the supporting, admissible evidence in sufficient detail that the court is not forced to construct the arguments itself.”) Further, to the extent Defendants did choose not to pursue this theory in their response, they were correct to do so because there is not sufficient evidence in the record suggesting, “let alone clearly and convincingly” showing, that Plaintiffs and the driver of the white sedan were working together to cause the collision. Asia Pulp & Paper Co., 707 F.3d at 865.3

*4 The second theory of fraud also fails. In essence, Defendants argue the following: Plaintiffs say there was traffic on the on-ramp that caused them to stop moments before Defendant Kilmer struck their vehicle, but other evidence shows there was no traffic on the on-ramp at the time of the collision. Defendants argue this other evidence shows that, or at least creates a dispute of fact whether, Plaintiffs provided false testimony about the traffic on the on-ramp. Defendants contend this false testimony can provide the basis for their fraud defense. (ECF No. 145 at 5-6.)

Defendants are wrong. Simply put, Defendants conflate lying with fraud. Even assuming Plaintiffs are lying about the traffic on the on-ramp at the time of the collision, this misrepresentation cannot form the basis of a fraud defense because Defendants fail to offer any evidence to prove the other elements of fraud. For example, there is no evidence showing that Defendants reasonably relied on Plaintiffs’ false testimony or that the testimony induced Defendants to take any particular action that caused them damages. Asia Pulp & Paper Co., 707 F.3d at 864-65. Indeed, quite the opposite is true. Defendants are fighting liability in this suit and are challenging the truthfulness of Plaintiffs’ testimony (which, of course, they are free to do at trial). Tellingly, in their response, Defendants make no argument, nor point to any evidence, showing how they can prove all elements of fraud based on this theory. (ECF No. 145 at 5-6.) Defendants appear to think catching Plaintiffs in a lie is enough to prove a defense of fraud. It is not. Arnold v. Villarreal, 853 F.3d 384, 389 (7th Cir. 2017).

Finally, Defendants argue they have a viable fraud defense based on a theory that Plaintiff Katrina Stone obtained a rental car from Defendants through fraudulent means. Although the record is far from clear, the parties seem to agree that, soon after the collision, an agent of Defendant Wilson Lines, Inc. contacted Stone about providing her a rental vehicle due to the fact that her vehicle was damaged in the collision. (See ECF No. 141 at 4; see also ECF No. 145 at 3-4.) At some point, some man—identified only in Defendants’ response brief as Defendant’s “investigator”—came to take photographs of the damage to Stone’s vehicle. (See ECF No. 145 at 3; see also id., Ex. 1 at ¶ 38 (providing no citation to record).) The investigator did not speak to Stone or ask her any questions about the damage caused by the collision. Defendant eventually provided Stone with a rental vehicle sometime in 2017 for an unspecified amount of time. (See ECF No. 145 at 5.) However, after the collision giving rise to this suit, Stone’s vehicle was apparently involved in another collision that caused further damage, and Stone allegedly failed to disclose this fact to Defendant’s agent or the man who took photographs of her vehicle prior to obtaining the rental vehicle. (Id. at 3-4.) Defendants argue Stone’s concealment of this fact amounts to fraud. (Id. at 5-6.)

In response, Plaintiffs point out they are not seeking to recover damages relating to Stone’s vehicle or any property damage for that matter, so Defendants’ rental car theory is ultimately irrelevant. The Court doubts whether this theory of fraud amounts to an affirmative defense because it would not avoid liability on Plaintiffs’ negligence claims; rather, it sounds like a counterclaim. See Solis v. Wallis, No. 11 C 3019, 2013 WL 12447274, at *4 (N.D. Ill. Sept. 13, 2013). But this pleading defect does not ultimately doom Defendants. See id.; see also Fed. R. Civ. P. 8(c)(2) (“If a party mistakenly designates…a counterclaim as a defense, the court must, if justice requires, treat the pleading as though it were correctly designated….”). Nor does the pleading defect ultimately matter because, once again, Defendants fail to point to any evidence in the record that could support many of the required elements of the alleged fraud.

*5 As described above, Defendants’ theory is premised not on an affirmative misrepresentation but on Stone’s concealment of a material fact, i.e., that certain damage to her vehicle was caused by a subsequent accident. So Defendants’ theory is actually one of fraudulent concealment, and again, under Illinois law, more is required of Defendants to prove fraudulent concealment. Defendants must show:
(1) the concealment of a material fact; (2) the concealment was intended to induce a false belief, under circumstances creating a duty to speak…; (3) the innocent party could not have discovered the truth through a reasonable inquiry or inspection, or was prevented from making a reasonable inquiry or inspection, and relied upon the silence as a representation that the fact did not exist; (4) the concealed information was such that the injured party would have acted differently had he been aware of it; and (5) that reliance by the person from whom the fact was concealed led to his injury….[Defendants] must further demonstrate justifiable reliance, as well as the existence of a special or fiduciary relationship giving rise to a duty to convey accurate information.
Schrager, 767 N.E.2d at 384 (quotations and citations omitted). At the very least, Defendants fail to point to any evidence in the record showing that they relied on a mistaken belief about the vehicle damage in providing Stone a rental vehicle. Indeed, the only evidence in the record on this issue is Stone’s testimony that she talked to someone on the phone about a rental car and that she saw a man taking photographs of her damaged car. That is it. There is no evidence regarding the content of the phone conversation between Stone and Defendant’s agent. There is no evidence showing what Defendant knew before providing the rental car or how Defendant made the decision to provide a rental vehicle to Stone. This absence of evidence is enough, on its own, to warrant summary judgment here. Even further though, Defendants do not show that they actually paid for a rental vehicle or provided it to Stone (i.e., that Defendants were actually injured). Further still, Defendants point to no evidence relating to the existence of a “special or fiduciary relationship” between Defendants and Stone; Defendants also fail to address the “reasonable inquiry” element. The latter failure is surprising, given that Defendants admit that Defendant Kilmer took photographs of Stone’s vehicle just after the collision (and therefore, Defendants presumably had the information needed to discover the truth about this issue). (See ECF No. 145 at 3.)

Defendants oppose summary judgment by explaining they will provide a representative at trial who “will testify” on at least some of these issues. (Id. at 5-6.) This is insufficient. As Plaintiffs point out, “[s]ummary judgment is the proverbial ‘put up or shut up’ moment in a lawsuit, when a party must show what evidence it has that would convince a trier of fact to accept its version of events.” Beardsall v. CVS Pharmacy, Inc., 953 F.3d 969, 973 (7th Cir. 2020). Defendants contend they learned about the subsequent collision involving Stone’s vehicle for the first time at her deposition, in December 2019. (ECF No. 145 at 5.) So Defendants had ample time before fact discovery closed to develop support for this theory. As Plaintiffs point out in their reply, Defendants did not do so. (See Reply, ECF No. 148 at 5, 9.) Defendants cannot escape summary judgment now by speculating about testimony that may come out at trial.

*6 Finally, in one sentence at the end of their response, Defendants ask the Court, in the alternative, to permit them to amend their second affirmative defense to better allege the second and third theories of fraud discussed above. (ECF No. 145 at 6; see also id., Exs. E and F (amended versions of second affirmative defense).) “In considering a request to amend pleadings, the district court has the discretion to deny the request if there is undue delay, bad faith, or dilatory motive, or undue prejudice to the opposing party by virtue of allowance of the amendment, or futility of the amendment.” Malone v. Am. Friends Ser. Comm., 213 F. App’x 490, 495 (7th Cir. 2007). Even if the Court granted leave to amend, summary judgment would still be appropriate for the reasons discussed above, so in other words, Defendants’ proposed amendments are futile. Sound of Music Co. v. 3M, 477 F.3d 910, 923 (7th Cir. 2007) (affirming denial of leave to amend based on futility where amended pleading would not survive a motion for summary judgment). Moreover, even if by some chance Defendants have evidence to support their amended fraud allegations, they have not described such evidence. To permit Defendants the chance to revisit the pleadings now, after the close of fact discovery and summary judgment briefing, would unduly delay the resolution of this case, especially where Defendants have no showing of good cause as to why they could not have made their proposed amendments earlier. Accordingly, Defendants’ request to amend is denied. See Ferguson v. Roberts, 11 F.3d 696, 706-07 (7th Cir. 1993).4

CONCLUSION
For the foregoing reasons, the Court grants Plaintiff’s motion for summary judgment [141] on the second affirmative defense. The Court sets a status hearing for January 29, 2021.

SO ORDERED. ENTERED: January 8, 2021

HON. JORGE ALONSO

United States District Judge
All Citations
Slip Copy, 2021 WL 76828

Footnotes

1
The Court has jurisdiction over this suit pursuant to 28 U.S.C. § 1332(a) and 28 U.S.C. § 1367(a). (See Not. of Removal at ¶¶ 2-7, ECF No. 1; see also Mot. to Amend Compl. at 3-5, ECF No. 62); see Dancel v. Groupon, Inc., 940 F.3d 381, 384-85 (7th Cir. 2019) (existence of subject matter jurisdiction can be gleaned from record as a whole).

2
Plaintiffs’ First Amended Complaint added a fourth plaintiff, Shanika N. Taylor, who was later dismissed as a party for want of prosecution. (See ECF No. 111.)

3
Along with testimony that the white sedan stopped on the ramp and prompted Plaintiffs’ vehicle to stop, the only evidence related to this theory is Defendant Kilmer’s deposition testimony, raised by Plaintiffs, that “the only thing that would make me believe that they [Plaintiffs and the white sedan] were working together was that the guy chased off after the white car and never came back.” (ECF No. 141, Ex. 2 at ¶ 12.) The parties fail to explain exactly what Kilmer meant by this, but even viewed in a light most favorable to Defendants, no reasonable fact finder could infer the existence of a conspiracy based on this evidence.

4
The Court need not address the Defendants’ opening argument that Plaintiffs’ motion should be denied as an “ill-timed motion to strike.” (ECF No. 145 at 1-2.) Putting aside the fact that Defendants certainly fail to allege their fraud defense with the particularity Rule 9(b) requires, see RBG Plastic, LLC v. Webstaurant Store, No. 1:18-cv-5192, 2020 WL 7027601, at *4-6 (N.D. Ill. Nov. 30, 2020) (analyzing applicable standard), Plaintiffs attack the sufficiency of the evidence supporting Defendants’ fraud defense. It is on this basis that summary judgment is appropriate.