Argonaut Insurance Company v. Broadspire Services, Inc.

United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Argued February 21, 2006
Decided December 18, 2006
Before
Hon. WILLIAM J. BAUER, Circuit Judge
Hon. MICHAEL S. KANNE, Circuit Judge
Hon. ILANA DIAMOND ROVNER, Circuit Judge
No. 05-2517
ARGONAUT INSURANCE
COMPANY,
Plaintiff-Appellant,
v.
BROADSPIRE SERVICES, INC.,
Defendant-Appellee.
Appeal from the United States
District Court for the Northern
District of Illinois, Eastern Division
No. 05 CV 218
James B. Moran,
Judge.
O R D E R
Argonaut, an insurance company, sued Broadspire, a claims management
company, alleging that Broadspire violated its contractual obligation not to provide
services to Argonaut’s clients that choose not to renew their insurance contracts.
The district court granted Broadspire’s motion to dismiss for failure to state a
claim. We now reverse and remand in order to permit discovery to go forward.
The contract in question was executed on January 23, 2003 by Argonaut,
Lumbermen’s Mutual Casualty Company and American Manufacturers Mutual
Insurance. Both Lumbermen’s and American Manufacturers were Kemper
Insurance companies. At the time, Broadspire was named NATLSCO and was a
subsidiary of Lumbermen’s. NATLSCO was not a signatory to the contract, only its
parent.
UNPUBLISHED ORDER
Not to be cited per Circuit Rule 53

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No. 05-2517 Page 2
Under the contract, Argonaut purchased the renewal rights to a collection of
insurance policies from the Kemper companies. The contract included a section
titled “NATLSCO” that obligated NATLSCO to provide claims services to various
Argonaut clients and imposed price controls for those services. The section also
required that “the Sellers” (referring to Lumbermen’s and American
Manufacturers) would not “provide NATLSCO Claim Services” to any Argonaut
clients that switched their coverage to competing carriers. Additionally, NATLSCO
was a signatory to a subsequent contract that defined its obligations to provide
claim services to another set of Argonaut’s clients. This later agreement was
referenced by the contract in question and was attached to it.
In July 2003, NATLSCO was sold to Platinum Equities LLC, which changed
NATLSCO’s name to Broadspire. In December 2004, one of Argonaut’s clients
chose not to renew its contract and instead contracted with a rival company.
Broadspire, however, continued to provide claim services to the client. After
Broadspire refused to cease its services to the former client despite Argonaut’s
requests, Argonaut sued on January 13, 2005.
In its complaint Argonaut alleged that NATLSCO, and thus Broadspire, was
bound by the initial agreement signed by its parent. In the alternative, Argonaut
alleged that NATLSCO’s parent assigned its obligations to Broadspire or that
Broadspire assumed those obligations.
The district court dismissed Argonaut’s complaint for failure to state a claim.
It determined that the use of “the Sellers” made the contract plain on its face that
only Lumbermen’s and American Manufacturers were prohibited from providing
NATLSCO’s services to Argonaut’s former clients—NATLSCO was free to do as it
pleased once it was no longer under the control of its contractually-bound parent.
We review the district court’s grant of Broadspire’s motion to dismiss de
novo. County of McHenry v. Ins. Co. of the West, 438 F.3d 813, 817 (7th Cir. 2006);
Witzke v. Femal, 376 F.3d 744, 749 (7th Cir. 2004). We accept as true all well-
pleaded factual allegations and make all possible inferences from those allegations
in favor of Argonaut. See County of McHenry, 438 F.3d at 817; Barnes v. Briley, 420
F.3d 673, 677 (7th Cir. 2005). We affirm only if it appears beyond a doubt that
Argonaut cannot prove any set of facts in support of its claim that would entitle it to
relief. See County of McHenry, 438 F.3d at 817; Cole v. U.S. Capital, Inc., 389 F.3d
719, 724 (7th Cir. 2004). The issue is not whether Argonaut will ultimately prevail
but whether it is entitled to offer evidence in support of its claims. See Cole, 389
F.3d at 724.
Here, if we take as true the allegations of Argonaut’s complaint, we cannot
conclude that Argonaut could not prove any set of supporting facts which would

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No. 05-2517 Page 3
entitle it to relief. It has alleged that NATLSCO was bound by the initial
agreement, and neither the complaint nor the attached contract are clear on their
face as to whether NATLSCO was bound. Discovery might reveal that its parent
had the power to bind it in just such a way. Moreover, Argonaut has alleged facts
regarding NATLSCO’s behavior post-contract and Broadspire’s behavior post-
acquisition, and Argonaut claims that this behavior evinces either an original intent
to be bound or an adoption of the contract. Finally, Argonaut alleges that any
obligations of NATLSCO or its parent were assigned to Broadspire. Discovery
might bear out facts that would allow recovery on any of these theories.
We also note that the Federal Rules of Civil Procedure require only notice
pleading, and Argonaut has pleaded all that is necessary to be entitled to the
inferences afforded to complaints on motions to dismiss. See Hefferman v. Bass, 467
F.3d 596, 599 (7th Cir. 2006).
Argonaut is at least entitled to discovery on its allegations.
REVERSED AND REMANDED.

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