IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

CITIZENS INSURANCE )

COMPANY OF AMERICA, )

)

Plaintiff, )

) No. 20 C 3873

v. )

) Judge John Z. Lee

WYNNDALCO ENTERPRISES, )

LLC, DAVID ANDALCIO, JOSE )

FLORES, and MELISSA )

THORNLEY, DEBORAH )

BENJAMIN KOLLER, JOSUE )

HERRERA, MARIO CALDERON, )

and JENNIFER ROCIO, )

individually and on behalf of )

all others similarly situated, )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

In this insurance coverage dispute, Citizens Insurance Company of America 

(“Citizens”) seeks a declaratory judgment that it has no duty to defend or indemnify 

Wynndalco Enterprises, LLC (“Wynndalco”) in connection with two class action

lawsuits pending in other courts. Wynndalco and two of its executives, David 

Andalcio (its founder and Chief Executive Officer) and Jose Flores (its Chief 

Operational Officer) (collectively “Defendants” for purposes of this motion), move to 

stay this case pending those courts’ resolution of certain factual issues that 

Defendants say touch upon this action. For the reasons that follow, the motion is 

denied.

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I. Background

Citizens filed this action for a declaratory judgment “that it has no duty to 

defend or indemnify under a Business Owners Policy. . . issued to Wynndalco” (the 

“Policy”) in connection with two putative class actions suits pending in other courts. 

1st Am. Compl. ¶ 1, ECF No. 20; see id. ¶¶ 35–47. The underlying cases are captioned 

Thornley v. CDW-Government, LLC, No. 20 CH 4346 (Cook Cty. Cir. Ct. filed May 27, 

2020) (the “Thornley” lawsuit); and Calderon v. Clearview AI, Inc., No. 20 CV 1296

(S.D.N.Y. filed Feb. 13, 2020) (the “Calderon” lawsuit). Id. ¶¶ 1, 18, 28. 

Effective from October 2, 2019, to October 2, 2020, the Policy provides liability 

coverage for Wynndalco’s business, including duties to defend and indemnify. Id. ¶ 

16; see 1st Am. Compl., Ex. A., Business Owners Policy No. OBC-H062078-00, ECF 

No. 20-1. But a provision of the Policy entitled “Distribution Of Materials In Violation 

Of Statutes” (the “Exclusion”) excludes liability coverage for the following: 

“Bodily injury”, “property damage”, or “personal and 

advertising injury” arising directly or indirectly out of 

any action or omission that violates or is alleged to violate:

(1) The Telephone Consumer Protection Act (TCPA), 

including any amendment of or addition to such law;

(2) The CAN-SPAM Act of 2003, including any 

amendment of or addition to such law;

(3) The Fair Credit Reporting Act (FCRA), and any 

amendment of or addition to such law, including the 

Fair and Accurate Credit Transactions Act 

(FACTA); or 

(4) Any other laws, statutes, ordinances, or 

regulations, that address, prohibit, or limit the 

printing, dissemination, disposal, collecting, 

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recording, sending, transmitting, communicating or 

distribution of material or information.

1st Am. Compl. ¶ 17. Citizens contends that the Exclusion applies to the underlying 

class action lawsuits for which Wynndalco seeks insurance coverage. 

The underlying class actions allege that Wynndalco violated the Illinois 

Biometric Information Privacy Act (“BIPA”), id. ¶¶ 26, 33, which prohibits the

collection, retention, and disclosure of “biometric identifiers,” such as facial scans, or 

“biometric information,” meaning as “any information . . . based on” a biometric 

identifier, see 740 Ill. Comp. Stat. 14/10–14/15. In particular, each case centers

around a secretive technology created by a company called Clearview AI, Inc. 

(“Clearview”) that combines a database of over three billion facial scans, amassed by 

“scraping” photographs from the internet, and a facial recognition application, so as 

to enable the end-user to identify unknown persons by comparing their facial scan to 

those included in Clearview’s database. 1st Am. Compl. ¶¶ 19, 30; see 1st Am. Compl., 

Ex. B, Am. Class Action Complaint, Thornely v. CDW-Gov’t, LLC, No. 2020 CH 4346 

(Cook Cty. Cir. Ct. Aug. 5, 2020) (“Thornley Compl.”) ¶¶ 9–11, ECF No. 20-2; 1st Am. 

Compl., Ex. C, 1st Am. Class Action Compl., Calderon v. Clearview AI, Inc., No. 20 

CV 1296 (S.D.N.Y. July 22, 2020) (“Calderon Compl.”) ¶ 5, ECF No. 20-3. As for 

Wynndalco, the cases each allege that it operated as Clearview’s Illinois-based agent 

by purchasing Clearview’s technology and then reselling or licensing it to law 

enforcement agencies, whether directly or through another intermediary called CDWGovernment, LLC. See Thornley Compl. ¶¶ 26–30; Calderon Compl. ¶¶ 7, 15.

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Among other defendants, the Calderon plaintiffs claim that Wynndalco

violated the BIPA by capturing, collecting, receiving, storing, disclosing, and/or using

biometric identifiers and biometric information, without complying with the 

statutory requirements, in the course of its agency relationship with Clearview. See 

Calderon Compl. ¶¶ 29–32. The Thornley plaintiffs also claim that Wynndalco 

violated the BIPA, based on its “selling, leasing, trading, or otherwise profiting from

[their] biometric identifier[s] or biometric information.” Thornley Compl. ¶ 69. 

Additionally, the Thornley plaintiffs bring common law claims of unjust 

enrichment and invasion of privacy against Wynndalco. The unjust enrichment count 

asserts that Wynndalco “unjustly benefited . . . from its publication of Plaintiffs’ and 

the Class’s biometric identifiers and biometric information.” Id. ¶ 76. Similarly, the 

invasion of privacy count declares that Wynndalco’s “conduct in publishing and 

exploiting Plaintiffs’ and the Class’s biometric identifiers and biometric information 

. . . constituted an unauthorized intrusion into [their] seclusion” and “was offensive 

and objectionable.” Id. ¶¶ 79–80.

Wynndalco reports that the underlying class actions are each in the pleading 

and early discovery stages. See Defs.’ Wynndalco, Andalcio, and Flores’s Am. Mot. 

Stay (“Mot.”) at 5, ECF No. 51. In the meantime, Wynndalco and two of its executives, 

Andalcio and Flores, move to stay this case until certain “factual issues” whose 

determination they say “will impact this Court’s coverage decision . . . . have been 

resolved” in those actions. Id. at 1–2, ECF No. 51.

1

 

1 Wynndalco initially moved to stay on its own. See Def. Wynndalco’s Mot. Stay, ECF 

No. 43. When Andalcio and Flores sought to join in Wynndalco’s motion, the Court granted 

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II. Legal Standard

The Declaratory Judgment Act “provides the district court with the necessary 

discretion” to stay an action, including where there are “parallel proceedings” pending 

in difference courts. Med. Assur. Co. v. Hellman, 610 F.3d 371, 378 (7th Cir. 2010). 

When a stay is sought in this scenario, the district court should consider, among other 

things, “whether the declaratory suit presents a question distinct from the issues 

raised in the [parallel] proceeding” and “whether going forward with the declaratory 

action will serve a useful purpose in clarifying the legal obligations and relationships 

among the parties.” See Nationwide Ins. v. Zavalis, 52 F.3d 689, 692 (7th Cir. 1995).

Here, Defendants move to stay under “the so-called Peppers doctrine” of Illinois 

law,2 which “provides that ‘it is generally inappropriate for a court considering a 

declaratory judgment action to decide issues of ultimate fact that could bind the 

parties to the underlying litigation.’” Twin City Fire Ins. Co. v. Law Office of John S. 

Xydakis, P.C., 407 F. Supp. 3d 771, 778 (N.D. Ill. Sept. 16, 2019) (quoting Allstate Ins. 

Co. v. Kovar, 842 N.E.2d 1268, 1275 (Ill. App. 2006) (citing Md. Cas. Co. v. Peppers, 

355 N.E.2d 24, 30 (Ill. 1976))). “At the same time, the Peppers doctrine does allow 

declaratory judgments on issues that do not decide an ultimate fact in the underlying 

case.” Twin City Fire Ins. Co., 407 F. Supp. at 778. 

 

Defendants’ unopposed motion for leave to file an amended motion to stay that included these 

executives, without introducing any substantive changes. See Defs. Wynndalco, Andalcio, 

and Flores’s Unopposed Mot. Leave File Am. Mot. Stay, ECF No. 48. Because the motions to 

stay are essentially duplicates, the original motion is likewise denied. 

2 Defendants presume, and Citizens does not dispute, that Illinois law applies here. 

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III. Analysis 

Defendants raise several arguments in favor of a stay. First and foremost, they 

contend that resolving this coverage dispute would require the Court to determine 

two questions of ultimate fact on which the underlying actions hinge: (1) “whether 

Wynndalco was a government contractor, and therefore exempted under BIPA”; and 

(2) “whether Wynndalco ‘possessed’ biometric information.” Mot. at 7. 

This argument, however, suffers from several flaws. While the questions of 

fact that Defendants identify certainly go to the heart of Wynndalco’s liability in the

Thornley and Calderon lawsuits, the Court need not resolve either of them to 

determine whether those lawsuits trigger Citizens’ duty to defend.3 As the Seventh 

Circuit has observed, an insurer’s duty to defend “is most often determined primarily, 

if not exclusively, from the face of the underlying complaint against the insured.” 

Nationwide Ins., 52 F.3d at 693. Under this analysis, “[a]s long as the complaint 

comprehends an injury which may be within the scope of the policy, the company 

must defend the insured until the insurer can confine the claim to a recovery that the 

policy does not cover,” with any doubts on this score being resolved in favor of the 

insured. Id. at 693–94 (cleaned up). As a result, “a court ordinarily will have no 

 

3 As an initial matter, Defendants argue that the duty-to-indemnify aspect of Citizens’ 

claims for declaratory relief should be dismissed because “the issue of whether Citizens has 

a duty to indemnify Wynndalco . . . will not be ripe until liability is established in the 

underlying . . . actions.” Mot. at 5 (citing Med. Assur. Co., 610 F.3d at 375). But this is not 

necessarily so. Rather, while “the insurer’s duty to indemnify cannot be determined until the 

underlying action has been adjudicated” where “the duty to defend exists,” a court “may 

simultaneously determine that the insurer has no duty to indemnify” where it “determines 

that the insurer has no duty to defend.” Abrams v. State Farm Fire & Cas. Co., 714 N.E.2d 

92, 95 (Ill. App. Ct. 1999). 

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reason to immerse itself in the facts surrounding the incident in question; it need only 

look to the allegations made against the insured and decide whether, if proven, those 

allegations would establish an injury that the policy would cover.” Id. at 694. 

That is precisely the case here. To determine whether Citizens has a duty to 

defend, the Court need only ask whether the allegations of the Thornely or Calderon

complaints, “if proven, . . . would establish an injury” covered by the Policy—i.e., one 

that falls outside the scope of the Exclusion. See id. (emphases added). In other 

words, the Court need only consider whether the Thornley or Calderon complaints 

allege any injury other than “‘[b]odily injury’, ‘property damage’, or ‘personal and 

advertising injury’ arising directly or indirectly out of an act or omission that violates 

or is alleged to violate . . . . [a]ny . . . laws, statutes, ordinances, or regulations, that 

address, prohibit, or limit the printing, dissemination, disposal, collecting, recording, 

sending, transmitting, communicating or distribution of material or information,” 

regardless of whether Wynndalco is ultimately found liable for such an injury. See

1st Am. Compl. ¶ 17 (emphasis added). This question can be evaluated “primarily, if 

not exclusively,” from the face of the underlying complaints, Nationwide Ins., 52 F.3d 

at 693, “without any incursion into factfinding that would interfere” with the 

underlying actions, id. at 695. Indeed, Defendants implicitly recognize as much in 

their briefs, where they cite multiple precedents for the proposition that the insurer’s 

“duty to defend exists as long as the allegations of the underlying complaint are 

potentially within the scope of coverage.” See, e.g., Defs.’ Reply Supp. Mot. Stay 

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(“Reply”) at 3, ECF No. 52 (quoting Axiom Ins. Managers, LLC v. Capitol Specialty

Ins. Corp., 876 F. Supp. 2d 1005, 1008 (N.D. Ill. 2012) (emphasis added)). 

Defendants’ efforts to distinguish Nationwide Insurance are unavailing. They 

retort that it “does not apply in the instant case” because, in that case, the insured 

filed a motion to dismiss, not a motion to stay. Id. But the insured in that case moved 

to dismiss for the same reason that Defendants move to stay, and on the same legal 

grounds. See Nationwide Ins., 52 F.3d at 691–94; cf., e.g., Ironshore Indem., Inc. v. 

Synergy Law Grp., LLC, 926 F. Supp. 2d 1005, 1011–12 (N.D. Ill. 2013) (“[I]n 

determining whether to stay or dismiss a declaratory judgment action in the face of 

parallel state court proceedings . . . .” (emphasis added)).

Defendants also assert that the insurer in Nationwide Insurance “was 

providing a defense [in] the underlying action,” whereas Citizens, they report, is not 

currently doing so. Reply at 3. But that, too, is beside the point. See Nationwide 

Ins., 52 F.3d at 691 (noting that the insurer had been “supplying a defense . . . . in 

the state action under a reservation of rights” only to show that it had not waived its 

claim for declaratory relief). Whether the insurer is or is not defending the insured 

in the interim has no bearing on whether it has a “duty to defend.” See id. at 693

(emphasis added). 

The other cases on which Defendants rely are not to the contrary. In one, an 

Illinois appellate court upheld a stay where the exclusion on which the insured relied 

would have required the trial court to find facts “contradict[ing] the allegations in the 

underlying complaint.” Sentry Ins. v. Cont’l Cas. Co., 74 N.E.3d 1110, 1126 (Ill. App. 

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2017). Similarly, in the other, a federal district court granted a stay where it found 

that the issue of coverage required it to resolve two “contested issues [of fact] in the 

underlying action.” Lexington Ins. Co. v. Bd. of Educ. of Lake Forest Cmty. High Sch.

Dist. 115, No. 11 C 556, 2012 WL 74778, at *2 (N.D. Ill. Jan. 10, 2012). These 

scenarios are each accounted for in Nationwide Insurance, where the Seventh Circuit 

discussed the “occasion[al]” case in which “the court presiding over the declaratory 

action cannot decide whether the insured . . . has coverage or not”—such as where

coverage rests on “whether the insured acted negligently or intentionally”—“without 

resolving disputes that should be left to the court presiding over the underlying tort 

action.” See 52 F.3d at 694. But neither scenario applies here.

4

Defendants’ second argument fares no better. Here, reading the Exclusion to 

be “limit[ed] . . . to statutory violations,” Defendants suggest that it does not apply to

the common law claims brought against Wynndalco in the Thornley action. See Mot. 

at 6–7. But this line of reasoning goes only to the merits of one of the claims raised 

in this case—i.e., whether Citizens has a duty to defend Wynndalco in connection with

the Thornley action—not whether the Court must decide an issue of ultimate fact 

“that could bind the parties to the underlying litigation” to get there. See Allstate Ins. 

 

4 In yet another case cited in Defendants’ reply, an Illinois appellate court affirmed the 

denial of a stay where “[t]he sole issue determined by the trial court in the declaratory 

proceeding” was not “crucial to the underlying litigation.” Fid. & Cas. Co. of N.Y. v.

Envirodyne Eng’rs, Inc., 461 N.E.2d 471, 476 (Ill. App. Ct. 1983). For that reason, the trial 

court had even looked “beyond the underlying complaint”—and “properly” so, the appellate 

court held—in determining the issue of coverage. See id. at 473–76. Yet, the only similarity 

between that case and this one is that Defendants have identified no fact crucial to the 

underlying actions that must be resolved to determine whether Citizens has a duty to defend. 

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Co., 842 N.E.2d at 1275. For the reasons discussed above, Defendants fail to show 

that it must. 

Defendants’ remaining arguments are equally meritless. They contend that 

allowing this action to proceed will “unduly prejudice Wynndalco in the [underlying] 

class actions by forcing [it], in this federal action, to consider and even amplify 

arguments put forth by the plaintiffs in those cases.” Id. But that is simply incorrect: 

as discussed above, Wynndalco need only argue that the allegations of the underlying 

complaints, “if proven,” would establish an injury covered by the Policy. See

Nationwide Ins., 52 F.3d at 694 (emphasis added). For the same reason, the task of 

answering the complaint in this case does not amount to a “dress rehearsal” for the 

underlying cases. See Mot. at 11. Finally, the possibility that the Thornley plaintiffs 

may yet bring “new claims” has no bearing on whether the claims already brought 

trigger Citizens’ duty to defend. See Mot. at 10. 

In sum, because Citizens’ declaratory judgment action “presents a question 

distinct from the issues raised” in the underlying Thornley and Calderon class 

actions, to which an answer “will serve a useful purpose in clarifying the legal 

obligations and relationships among the parties,” Nationwide Ins., 52 F.3d at 692, 

the Court finds that a stay is unwarranted.

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IV. Conclusion

For the forgoing reasons, Defendants’ motion to stay is denied. 

IT IS SO ORDERED. ENTERED: 1/27/21

__________________________________

John Z. Lee

United States District Judge

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