MEMORANDUM

BLAIR, District Judge.

This is a declaratory judgment action involving the construction of an insurance contract. At issue are the scope of the defendant insurance company's duty to defend and whether, in the event no duty is found, the company is estopped from denying coverage because of its actions or inactions. Haines and the other named plaintiffs are co-partners in a Baltimore law firm, Wright Parks, the successor firm to Wright, Robertson Dowell. This suit initially was brought in the Circuit Court for Baltimore County, and was removed by the defendant, St. Paul Fire and Marine Insurance Company (St. Paul) pursuant to 28 U.S.C. § 1441. St. Paul is incorporated and has its principal place of business in Minnesota. Plaintiffs are all citizens of Maryland. Because complete diversity exists and the amount in controversy exceeds $10,000, this case was properly removed and this court has jurisdiction under 28 U.S.C. § 1332(a). Counsel have submitted a stipulated statement of facts and voluminous memoranda of law. Defendant has moved for summary judgment on all issues. Plaintiffs have moved for summary judgment on the coverage question alone, asserting that the estoppel issue is not proper for summary judgment.

This action arose out of a suit filed May 11, 1973 by the Securities and Exchange Commission. The complaint sought injunctive relief against twenty-five defendants including Haines and Wright, Robertson Dowell. Plaintiffs were named as defendants as a result of their acting as attorneys for Valu Vend Credit Corporation, a registrant in a debenture offering which was the subject of the SEC action. Plaintiffs were not offerors or sellers of any of the securities referred to in the complaint and acted only as attorneys for others. Plaintiffs did not receive any monies as a direct consequence of the debenture offering. Plaintiffs' sole monetary gain from the transaction was the receipt of their attorneys' fees which the parties stipulate to be reasonable and appropriate. The SEC action was concluded July 8, 1975 following the entry of orders, consent decrees and stipulations.

During the pendency of the SEC litigation, the plaintiffs were the insured under policy 519JC3544 issued by St. Paul. The policy was countersigned in Maryland by St. Paul's authorized agent and the premiums were paid in Maryland.

On May 14, 1973, Wright, Robertson Dowell requested that St. Paul provide a defense to the SEC action pursuant to the provisions of the policy. Although specifically reserving its rights under the policy, St. Paul agreed to undertake plaintiffs' defense. Haines acknowledged St. Paul's tender of a defense and reservation of rights. St. Paul has paid all expenses related to the plaintiffs' defense through April 23, 1975.

On April 23, 1975, St. Paul notified plaintiffs that it would no longer provide a defense in the SEC action. Since that date, plaintiffs incurred an additional $16,994.76 in legal fees and expenses which are the subject of this dispute.

The initial determination for the court is which law governs the construction of the contract. Neither party has raised the issue, conceding that Maryland law governs the contract. Under the stipulated facts, it is apparent that the last act necessary for the formation of the contract was performed in Maryland and therefore Maryland law controls. Riviera Beach Volunteer Fire Company, Inc. v. Fidelity Cas. Co., 388 F. Supp. 1114, 1119-20 (D.Md. 1975); Grain Dealer Mut. Ins. Co. v. Van Buskirk, 241 Md. 58, 215 A.2d 467, 471 (1965).

The duty to defend is a contractual obligation and therefore it is necessary to examine the precise language of the contract to determine the scope of defendant's duty. Riviera Beach, supra, 388 F. Supp. at 1120; see United States Fid. Guar. Co. v. National Paving Contracting, Co., 228 Md. 40, 178 A.2d 872, 876-77 (1962). The coverage provision of the policy provides:

Coverage A — Professional Liability

To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages arising out of the performance of professional services for others in the Insured's capacity as a lawyer and caused by the Insured or any other person for whose acts the Insured is legally liable (the performance of professional services shall be deemed to include the Insured's acts as an administrator, conservator, executor, guardian, trustee or in any similar fiduciary capacity, but only to the extent for which in the usual attorney-client relationship the Insured would be legally responsible as attorney for a fiduciary) and the Company shall have the right and duty to defend in his name and behalf any suit against the Insured alleging damages, even if such suit is groundless, false or fraudulent; but the Company shall have the right to make such investigation and negotiation of any claim or suit as may be deemed expedient by the Company. The Company, however, shall not make settlement or compromise any claim or suit without the written consent of the Insured.

Under this provision, a condition precedent to the assumption by the defendant of a defense is the existence of a suit alleging damages against the insured. The SEC action was nominally for injunctive relief only.

Under this contract of insurance, St. Paul assumed the duty to defend Haines and Wright, Robertson Dowell against any action covered by the policy, even though the action may be groundless, false or fraudulent. The duty to defend is separate and distinct from, and not dependent upon, St. Paul's liability to pay, despite the fact that the two are ultimately related because they are dependent upon the basic scope of coverage under the policy. It is the scope of coverage which is at issue here; specifically whether the SEC action seeking injunctive and "such other and further relief as the Court may deem just and equitable" falls within the coverage of "any suit against the Insured alleging damages."

Plaintiffs contend that the SEC action was an action alleging damages because of the ancillary relief available in SEC 10b-5 suits. See SEC v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1104 (2d Cir. 1972); SEC v. Texas Gulf Sulphur Co., 446 F.2d 1301, 1308 (2d Cir.), cert. denied, 404 U.S. 1005, 92 S.Ct. 561, 30 L.Ed.2d 558 (1971). Plaintiffs contend that if the federal district court had found Rule 10b-5 violations, it could have awarded damages by requiring restitution and disgorgement of all or part of the attorneys' fees paid to the plaintiffs for services rendered in the debenture offering. Alternatively, plaintiffs argue that they could have been held to be aiders and abettors and therefore jointly and severally liable for a money judgment. Plaintiffs argue that because ancillary relief is available in SEC injunctive actions, the action was a suit alleging damages and St. Paul had a duty to defend. St. Paul argues that because only injunctive relief was sought against Haines and Wright, Robertson Dowell, the suit was not a suit alleging damages, and is not within the policy coverage and therefore it had no duty to defend.

Plaintiffs are quite correct when they urge that in Maryland an insurer is obligated to defend if the complaint potentially alleges a claim within the policy coverage. The Court of Appeals of Maryland in United States Fid. Guar. Co. v. National Paving Contracting Co., 228 Md. 40, 178 A.2d 872, 879 (1962), adopted the general rule stated in Annot., 50 A.L.R.2d 458, 504:

Where the complaint does not state facts sufficient to clearly bring the case within or without the coverage, the general rule is that the insurer is obligated to defend if there is, potentially, a case under the complaint within the coverage of the policy. Stated differently, in case of doubt as to whether or not the allegations of a complaint against the insured state a cause of action within the coverage of a liability policy sufficient to compel the insurer to defend the action, such doubt will be resolved in the insured's favor.

The thrust, of plaintiffs' argument is that a money judgment, either restitution or disgorgement, potentially could have been ordered in the SEC action bringing the SEC action within the scope of the policy.

The underlying premise in plaintiffs' argument is that any money judgment is an award of damages. The Supreme Court has never taken this view. In Curtis v. Loether, 415 U.S. 189, 94 S.Ct. 1005, 39 L.Ed.2d 260 (1974), the Court stated:

We need not, and do not, go so far as to say that any award of monetary relief must necessarily be "legal" relief. See, e. g., Mitchell v. DeMario Jewelry, Inc., 361 U.S. 288 [ 80 S.Ct. 332, 4 L.Ed.2d 323] (1960); Porter v. Warner Holding Co., 328 U.S. 395 [66 S.Ct. 1086,90 L.Ed. 1332] (1946) (footnote omitted).

In Title VII cases, also, the courts have relied on the fact that the decision whether to award back pay is committed to the discretion of the trial judge. There is no comparable discretion here [Title VIII cases]: if a plaintiff proves unlawful discrimination and actual damages, he is entitled to judgment for that amount. Nor is there any sense in which the award here can be viewed as requiring the defendant to disgorge funds wrongfully withheld from the plaintiff. Whatever may be the merit of the "equitable" characterizations in Title VII cases, there is surely no basis for characterizing the award of compensatory and punitive damages here as equitable relief.

Both Mitchell v. Robert DeMario Jewelry, Inc., supra, and Porter v. Warner Holding Co., supra, were relied upon by the Second Circuit in SEC v. Texas Gulf Sulphur Co., 446 F.2d at 1307, when it found the power to order ancillary relief in a Rule 10b-5 action. The Porter case is particularly relevant because of the similarity between the ancillary relief sought there and the relief at issue here.

Porter involved the power of a federal court to order restitution in an enforcement proceeding under section 205(a) of the Emergency Price Control Act of 1942. The Court upheld a district court decree compelling an apartment house owner to disgorge profits, rents or property acquired in violation of rent controls. 328 U.S. at 398-99, 66 S.Ct. 1086. The Court distinguished between an action brought by the Price Administrator under section 205(a) and a private action for damages under section 205(e). The Court stated:

Restitution, which lies within that equitable jurisdiction, is consistent with and differs greatly from the damages and penalties which may be awarded under § 205(e). . . . When the Administrator seeks restitution under § 205(a), he does not request the court to award statutory damages to the purchaser or tenant or to pay to such person part of the penalties which go to the United States Treasury in a suit by the Administrator under § 205(e). Rather he asks the court to act in the public interest by restoring the status quo and ordering the return of that which rightfully belongs to the purchaser or tenant. Such action is within the recognized power and within the highest tradition of a court of equity.

Plaintiffs have cited Doyle v. Allstate Ins. Co., 1 N.Y.2d 439, 154 N.Y.S.2d 10, 136 N.E.2d 484 (1956), for the proposition that an insurance company must defend an action in equity because the court may award damages as proper relief. Plaintiffs' reliance on Doyle is misplaced. The issue in Doyle, as here, was an insurance company's duty to defend under an insurance policy. Doyle had been sued to enjoin the use of his property as a kennel. The Court of Appeals of New York found that the company had a duty to defend because the trial court could have awarded damages in lieu of granting an injunction. 154 N.Y.S.2d at 13, 136 N.E.2d 484, Doyle is distinguishable because the federal district court's ability to grant ancillary relief, as plaintiffs apparently concede, is limited to restitution, or disgorgement. Plaintiffs have not cited the court any SEC injunction actions in which an actual damage award, differentiated from other types of money judgments, has been granted. The court has found none. Acceptance of plaintiffs' theory would require the court to find that all money judgments equal damages. This theory emanates not from the law but from the artful advocacy of enterprising counsel. That is not enough to receive this court's warm embrace.

Plaintiffs argue alternatively that because the SEC complaint charged the plaintiffs with being "aiders and abettors" in violation of rule 10b-5, the plaintiffs could have been held jointly and severally liable for damage awards entered against other defendants in the SEC action.

Plaintiffs cite SEC v. Management Dynamics, Inc., 515 F.2d 801 (2d Cir. 1975), and Ross v. Licht, 263 F. Supp. 395 (S.D.N.Y. 1967), as authority for their position. Neither cue is apposite to this action. While Ross did discuss an aider and abettor theory of liability, it did so in the context of a private damage action, distinguishable from ancillary relief at issue here. Management Dynamics was a SEC action seeking injunctive relief and the issues on appeal related only to injunctions entered against three defendants and did not concern rescission, restitution, disgorgement or other ancillary relief.

Plaintiffs' argument fails to recognize the nature and purpose of the ancillary relief available under Texas Gulf Sulphur. In attempting to expand a limited doctrine to cover the facts in this case, plaintiffs take a position well beyond that adopted by the federal courts. Disgorgement is available in a securities action only if one has made a profit. Ohio Drill Tool Co. v. Johnson, 498 F.2d 186, 193 (6th Cir. 1974). It is not equivalent to a tort damage award because the monetary award is measured not by the damage to plaintiff, but by the gain of the defendant. See SEC v. Shapiro, 494 F.2d 1301, 1309 (2d Cir. 1974). Disgorgement is limited only to those who profit by their wrongdoing and does not extend beyond that. See SEC v. Texas Gulf Sulphur Co., 446 F.2d 1301, 1308 (2d Cir. 1971); SEC v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1104 (2d Cir. 1972). Under the standards delineated by the Second Circuit, disgorgement would be a proper remedy only if the plaintiffs participated in and profited from the debenture offering. Conversely, if plaintiffs neither participated in nor profited from the offering, the remedy would be unavailable. As a result, plaintiffs could not have disgorged profits they never earned. To find that plaintiffs could be liable for the profits of others, the court would have to ignore rationale underlying the disgorgement remedy. Defendant's motion for summary judgment will be granted as to paragraph 1(a) of the complaint.

Plaintiffs assert that the estoppel question is not properly before the court on paragraph 1(b) and therefore that it should not be the subject of summary judgment. Plaintiffs contend that the stipulation of counsel related only to paragraph 1(a) and material issues of fact exist concerning St. Paul's undertaking plaintiffs' defense. Plaintiffs have submitted the affidavits of C. Gordon Haines and John B. Powell, Jr. The Haines affidavit relates to conversations between plaintiffs and defendant's agents that took place prior to St. Paul's undertaking plaintiffs' defense and St. Paul's actions following a settlement offer. The Powell affidavit concerns only the settlement issue. The stipulated facts before the court, however, present no dispute as to the material relevant facts and the court will address the issue. On October 2, 1973, St. Paul agreed to assume the SEC defense, following an inquiry over the scope of coverage by plaintiffs. St. Paul's letter clearly indicates its position that coverage did not exist and its explicit reservation of all rights under the policy.

Even assuming that in a proper case, coverage can be afforded or extended by estoppel, see Snyder v. Travelers Ins. Co., 251 F. Supp. 76 (D.Md. 1966), the rule in Maryland is that:

For principles of estoppel to be applicable, the party claiming the benefit of estoppel must have been misled to his injury and changed his position for the worse, having believed and relied upon the representations of the party sought to be estopped.

Judgment will be entered separately.

2. Such other and further relief as the case may require.

Subsequent to removal of this action, St. Paul paid the amount claimed in plaintiffs' relief Ic. The issues which are the subject of this Memorandum are paragraphs la and b.