Opinion ID: 3005401
Heading Depth: 2
Heading Rank: 2

Heading: Dismissal at the Pleading Stage

Text: Defender argues that the district court erred by “prematurely” granting First Mercury’s motion to dismiss. It contends that First Mercury had a duty to investigate the underlying Brown claims before refusing to defend, and that it had not adequately investigated those claims at the time that it filed its 12(b)(6) motion. First Mercury argues that it had no duty to investigate the underlying facts, because it was clear from the face of the Policy and the Brown complaint that Defender’s claims were not covered by the Policy. We “determine [an] insurer’s duty to defend from the allegations contained within the complaint and from those facts known or ascertainable by the insurer after reasonable No. 14-1805 11 investigation.” Newnam, 871 N.E.2d at 401 (citations omitted). But, “[i]f the pleadings reveal that a claim is clearly excluded under the policy, then no defense is required.” Id. at 401 (emphasis added) (citation omitted). Or, “when the underlying factual basis of the complaint, even if proved true, would not result in liability under the insurance policy, the insurance company can properly refuse to defend.” Monroe 677 N.E.2d at 623 (emphasis in original) (citing Cincinnati Ins. Co. v. Mallon, 409 N.E.2d 1100, 1105 (Ind. Ct. App. 1980)). Defender’s claim is this: if Defender were permitted to move past the pleading stage into discovery, it could “likely show” that the recordings were “communicated to others within the organization.” And therefore, the recordings would meet the “publication” requirement imposed by the Policy. The first problem with Defender’s argument is that it didn’t need discovery to uncover whether the recordings had been communicated to others within its organization. Defender possessed that information from the outset—it was Defender’s information, within its access and control. But at no point did Defender allege that any individual accessed the recordings—not in its complaint, its opposition to summary judgment, or its briefs to this court. Defender contends that it could not have raised those allegations at the pleading stage, because “attaching evidence at the 12(b)(6) stage to send the Court on a fact-finding mission would have been inappropriate.” Defender, however, misunderstands the pleading requirements imposed by the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 8, 12(b)(6). To survive dismissal, the complaint must give enough factual information to state a claim to relief that is 12 No. 14-1805 plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007). But “allegations in the form of legal conclusions are insufficient.” McReynolds v. Merrill Lynch & Co., 694 F.3d 873, 885 (7th Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). As are “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Adams v. City of Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014) (quoting Iqbal, 556 U.S. at 678). Defender is incorrect in contending that it was procedurally precluded from providing any facts at the pleading stage to allege that the recordings were communicated to third parties. Defender’s complaint did not plausibly allege why the Policy provided coverage under the circumstances Defender faced. Nor did it detail why First Mercury’s refusal to defend constituted a breach of its duty to defend. The complaint merely stated that such a duty existed, and that “[t]he grounds set forth by FMIC for denying coverage are unfounded, groundless, and made in bad faith in an effort to delay and deny making payment under the policy.” But “allegations in the form of legal conclusions are insufficient” to survive dismissal, and by that standard Defender’s complaint was already on weak ground. McReynolds, 694 F.3d at 885. Defender could have alleged facts supporting its argument that the policy provided it coverage (even under First Mercury’s narrower definition of “publication”), and therefore imposed a duty to defend on First Mercury. That would have required some allegation about publication (i.e., to a third party) of the recordings at issue. We agree with Defender that it was not required to attach affidavits in support of its factual allegations. But if it needed to establish certain No. 14-1805 13 facts as grounds for relief, it should have alleged those facts in its complaint or at least asserted them in opposing dismissal in the district court. After all, nothing prevents a plaintiff opposing dismissal from elaborating on the complaint or even attaching materials to an opposition brief illustrating the facts the plaintiff expects to be able to prove. See Runnion v. Girl Scouts of Greater Chi. and Nw. Ind., 786 F.3d 510, 528 n.8 (7th Cir. 2015) (citing Geinosky v. City of Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012). Of course, Defender did not have to prove the facts at the motion to dismiss stage, but it did have to plead them or at least bring them to the district court’s attention in opposing the motion to dismiss. As we have already concluded, “a plaintiff must provide only enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests, and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief.” Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 763–64 (7th Cir. 2010) (internal quotes omitted) (citing Tamayo v. Blagojevich, 526 F.3d 1074, 1081, 1083 (7th Cir. 2008)), as amended (Dec. 16, 2010). If, to establish coverage under the Policy, Defender eventually needed to prove that publication occurred, it should have pled sufficient facts to make that showing, or elaborated in its opposition brief on the facts it intended to prove. But Defender did neither. Defender’s argument here is in essence an attempt to “argue in the alternative” on appeal without having presented the alternative argument below. In the district court, Defender put all of its eggs in the “publication-meansrecording” basket. It did not raise the alternative argument that even if First Mercury’s narrower definition of “publica14 No. 14-1805 tion” prevailed, Defender satisfied the narrower definition because it communicated the recordings to third parties. Defender could have alleged that fact in its pleadings—after all, if Defender did communicate the recordings to others, then it knew or should have known that fact. But Defender did not allege it. Nor did it make the argument in its opposition to the motion to dismiss, or move to amend the complaint. The district court committed no error by not considering an argument Defender never made, based on facts it did not allege.