Zenith Insurance Company v. Martin Newell, Jr. ( 2023 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 21-1748
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ZENITH INSURANCE COMPANY,
Appellant
v.
MARTIN P. NEWELL, JR.;
M.P.N., INC.
_______________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 2:20-cv-03878)
District Judge: Honorable Wendy Beetlestone
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Argued June 15, 2023
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Before: PORTER, FREEMAN, and FISHER,
Circuit Judges.
(Filed: August 24, 2023)
_______________
Sharon F. McKee
Ronald P. Schiller [ARGUED]
Hangley Aronchick Segal Pudlin & Schiller
One Logan Square
18th & Cherry Streets, 27th Floor
Philadelphia, PA 19103
Counsel for Appellant
Jeffrey J. Vita [ARGUED]
Rachel S. Pearson
Saxe Doernberger & Vita
35 Nutmeg Drive
Suite 140
Trumbull, CT 06611
Counsel for Appellee
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OPINION OF THE COURT
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2
PORTER, Circuit Judge.
Zenith Insurance Company asked the District Court to
declare that it is not contractually obligated to defend its
insured, M.P.N., Inc., against a workplace liability lawsuit.
Instead, in a partial summary judgment, the District Court
declared that “Zenith has a duty to defend M.P.N., Inc. in
connection with the underlying action.” App. 2. Because the
District Court did not rule on all of the claims before it, that
order is not final and cannot be appealed under our usual source
of jurisdiction, 28 U.S.C. § 1291.
Zenith appealed anyway. It claims we can consider its
challenge to the District Court’s declaration under 28 U.S.C.
§ 1292(a)(1), which permits appeals from non-final orders that
relate to injunctive relief. According to Zenith, the District
Court has required that it defend M.P.N. and can enforce that
edict through contempt sanctions. We disagree. The rule in our
Circuit is that purely declaratory orders are not injunctive and
cannot be enforced by contempt. Absent some other hook for
immediate appealability, parties cannot appeal these orders
under § 1292(a)(1). So we will dismiss Zenith’s appeal for lack
of jurisdiction.
Appellee M.P.N., Inc., manufactures radiators at a plant
in Philadelphia. Jerry Mercer, Jr. worked at M.P.N. from 2015
to 2017. In 2019, Mercer sued M.P.N. in the Court of Common
3
Pleas of Philadelphia County. 1 According to Mercer’s
complaint, M.P.N. concealed blood test results showing that he
had dangerously high levels of zinc and lead after he was
exposed to lead and cadmium on the job. A physician advised
M.P.N. to remove Mercer from work due to the results, but
M.P.N. ignored the advice. As a result, Mercer spent another
year working at M.P.N. and suffered permanent and avoidable
brain damage.
By its terms, the Pennsylvania Workers’ Compensation
Act is the “exclusive” source of employer liability for suits
relating to workplace injuries suffered by employees. 77 Pa.
Cons. Stat. §§ 1, 481(a). Mercer argues in Count I of his lawsuit
that he can recover from M.P.N. under a “fraudulent
misrepresentation” exception recognized by the Pennsylvania
Supreme Court. See Martin v. Lancaster Battery Co., Inc., 606
A.2d 444, 448 (Pa. 1992). Mercer’s complaint also includes
claims for medical monitoring costs, battery, and intentional
infliction of emotional distress. 2
1
Mercer’s son was also a plaintiff in the case but is no longer
a party. The Mercers also sued appellee Martin P. Newell,
M.P.N.’s owner. The District Court found that Newell is not
covered by Zenith’s policy, and neither Newell nor M.P.N.
appeals that determination.
2
In July 2022, the Pennsylvania Supreme Court dismissed
Counts II-IV of Mercer’s lawsuit with prejudice. Zenith argues
that some of the underlying allegations in those counts are
relevant to whether it has, or ever had, a duty to defend M.P.N.
For the reasons discussed below, we lack jurisdiction to
consider this issue.
4
In July 2019, M.P.N. tendered the Mercer lawsuit to its
insurer, Zenith. Under the insurance policy Zenith issued to
M.P.N., Zenith agreed to pay damages incurred “because of
bodily injury to” employees of M.P.N. arising “out of and in
the course of the injured employee’s employment.” 3 App. 255;
see id. (policy stating that one requirement of coverage is that
“[b]odily injury by disease must be caused or aggravated by
the conditions of your employment.”). Zenith also agreed “to
defend,” at its own expense, “any claim” against M.P.N. “for
damages payable by this insurance.” App. 256. But when
M.P.N. asked for coverage, Zenith declined. It cited policy
provisions excluding coverage for “[b]odily injury
intentionally caused or aggravated” by the insured and for
claims payable under the Pennsylvania Workers’
Compensation Act. App. 55–56 (¶ 29) (quoting App. 256).
Unsurprisingly, M.P.N. did not agree that Mercer’s lawsuit
was not covered.
At an impasse, Zenith sued M.P.N. in the District Court
under the Federal Declaratory Judgment Act, 28 U.S.C. § 2201et seq. It requested a declaration that “Zenith does not have a
duty to defend or indemnify MPN . . . in the Mercer Action”
and eventually moved for judgment on the pleadings under
Federal Rule of Civil Procedure 12(c). App. 63; Dist. Ct. ECF
No. 24-4 at 1. M.P.N. answered, counterclaimed for breach of
contract and bad faith, and requested its own declaratory
judgment. It then moved for partial summary judgment under
3
Zenith issued M.P.N. three identical, one-year insurance
policies. We refer to them in the singular—“the policy”—for
simplicity’s sake.
5
Federal Rule of Civil Procedure 56(c), asking for a declaration
that “Zenith is obligated to defend” and “reimburse” M.P.N.
“for all defense fees and costs incurred from the date of tender
to Zenith.” Dist. Ct. ECF. No. 23-3 at 1. M.P.N. did not ask the
District Court to rule on indemnification or breach of contract.
The District Court partially granted M.P.N.’s motion. It
explained that “Mercer Jr.’s Martin claim potentially comes
within the scope of the Policy, and Zenith is therefore obligated
to tender a defense.” App. 19. And on March 19, 2021, it
docketed the following order:
Zenith has a duty to defend M.P.N., Inc. in
connection with the underlying action Mercer v.
Newell, et al., June Term 2019, No. 7041, filed
in the Philadelphia Court of Common Pleas.
App. 2. 4 Zenith appealed the March 19 order to this Court.
After it appealed, Zenith asked the District Court to
enter partial final judgment under Federal Rule of Civil
Procedure 54(b) or, in the alternative, to certify its order for
interlocutory appeal under 28 U.S.C. § 1292(b). Dist. Ct. ECF
No. 36. The court declined. Dist. Ct. ECF No. 40. It
characterized the request as one for “leave to appeal the Court’s
March 19, 2021 Order granting partial summary judgment in
4
The court also declared that “Zenith has no duty to defend or
indemnify Martin P. Newell, Jr. in connection with the
underlying action.” App. 2. As discussed, this portion of the
order—which granted Zenith’s Rule 12(c) motion in part—is
not at issue on appeal.
6
favor of [] MPN [] and ordering Zenith to provide a defense to
MPN” Id. at n.1. The court also rejected Zenith’s motion to
stay the order pending appeal under Federal Rule of Civil
Procedure 62(d). Dist. Ct. ECF No. 41.
Finally, M.P.N. filed a motion stating that “Zenith has
neither assumed MPN’s defense nor reimbursed MPN” and
asking the court to require compliance. Dist. Ct. ECF No. 46 at
1–2. The District Court denied the motion. Dist. Ct. ECF No.
47. In an order docketed on July 27, 2021, it stated:
The March 19 Order is currently on appeal in the
Third Circuit. Pursuant to that Order, Zenith is
required to both provide MPN with a defense in
the underlying action and reimburse MPN for
defense fees and costs incurred in the state
litigation. Zenith refuses to comply. . . . This
Court awaits a decision of the Third Circuit
before taking any further action.
Id. at n.1.
Zenith and M.P.N. are citizens of different states and the
amount in controversy exceeds $75,000, so the District Court
had subject matter jurisdiction under 28 U.S.C. § 1332(a)(1).
Zenith argues that this Court has appellate jurisdiction because
the District Court’s “March 19, 2021 Order is appealable as of
right as an injunction under 28 U.S.C. § 1292(a)(1).” ECF 4-1
at 1. Zenith adds that the District Court’s July 27 order
“confirmed” the “injunctive nature” of the March 19 order.
Appellant’s Br. 6. We always have jurisdiction to consider our
7
own jurisdiction, and our review is plenary. Aleynikov v.
Goldman Sachs Grp., Inc., 765 F.3d 350, 355–56 (3d Cir.
2014).
We do not have jurisdiction over Zenith’s appeal. The
March 19 order is not final, so it is not appealable under 28
U.S.C. § 1291. 5 Nor is it immediately appealable under
§ 1292(a)(1), because it does not have the practical effect of
granting or denying injunctive relief. We will therefore dismiss
5
Read naturally, the text of the Declaratory Judgment Act,
which Zenith sought relief under, provides that all declaratory
judgments are final and immediately appealable under 28
U.S.C. § 1291. See 28 U.S.C. § 2201(a) (“Any such declaration
shall have the force and effect of a final judgment or decree
and shall be reviewable as such.”). But declaratory judgments
that leave other claims for relief unresolved are not
immediately appealable. Liberty Mut. Ins. Co. v. Wetzel, 424
U.S. 737, 742 (1976). Zenith’s request for a declaration about
its duty to indemnify M.P.N. remains pending in the District
Court, along with M.P.N.’s request for indemnification and
breach of contract and bad-faith claims. So, the text of
§ 2201(a) notwithstanding, the March 19 order does not “have
the force and effect of a final judgment” and is not “reviewable
as such.” See Henglein v. Colt Indus. Operating Corp., 260
F.3d 201, 211 (3d Cir. 2001) (declaratory judgments not
immediately appealable when they leave “open significant
issues relating to damages and other relief.”).
8
the appeal without considering the merits of Zenith’s
arguments.
A
As we recently explained in Zurn Indus., LLC v. Allstate
Ins. Co., et al., the general rule of appellate jurisdiction is that
federal courts of appeals can only review the final decisions of
district courts. --- F.4th ----, 2023 WL 4835137, at *3 (3d Cir.
July 28, 2023). There are several limited exceptions. One of
them, 28 U.S.C. § 1292(a)(1), authorizes the courts of appeals
to review non-final orders “granting, continuing, modifying,
refusing or dissolving injunctions, or refusing to dissolve or
modify injunctions, except where a direct review may be had
in the Supreme Court.” This exception is “narrow,” Hershey
Foods Corp. v. Hershey Creamery Co., 945 F.2d 1272, 1276
(3d Cir. 1991), and the Supreme Court approaches it
“somewhat gingerly[,] lest a floodgate be opened that brings
into the exception many pretrial orders.” Switz. Cheese Ass’n.,
Inc. v. E. Horne’s Mkt., Inc., 385 U.S. 23, 24 (1966); see also
Zurn, 2023 WL 4835137, at *3.
Section 1292(a)(1)’s plain text gives courts of appeals
jurisdiction over orders expressly granting or refusing
injunctions. But orders that have the “practical effect” of
granting or denying injunctive relief—even if they do not say
so explicitly—may also be immediately appealable. Carson v.
Am. Brands, Inc., 450 U.S. 79, 83–84 (1981). We use a
“functional test” to determine whether an order is effectively
injunctive. Ramara, Inc. v. Westfield Ins. Co., 814 F.3d 660,
669–70 (3d Cir. 2016). That test asks whether the order (1) is
“directed to a party,” (2) may be enforced by contempt, and (3)
is “designed to accord or protect some or all of the substantive
9
relief sought by a complaint in more than a [temporary]
fashion.” Zurn, 2023 WL 4835137, at *3 (quoting Cohen v. Bd.
of Trs. of Univ. of Med. & Dentistry of N.J., 867 F.2d 1455,
1465 n.9 (3d Cir. 1989) (quotation marks omitted)). When an
interlocutory order has the practical effect of granting an
injunction, we have jurisdiction to review it. Saudi Basic Indus.
Corp. v. Exxon Corp., 364 F.3d 106, 111 (3d Cir. 2004). When
an interlocutory order has the practical effect of denying an
injunction, a movant may obtain immediate appellate review
by satisfying the three-part functional test and making two
additional showings: the risk of “a serious, perhaps irreparable
consequence” and that the order can be “effectually challenged
only by immediate appeal.” Id. (quoting Carson, 450 U.S. at
84) (internal quotation marks omitted). 6
6
In Abbott v. Perez, the Supreme Court held that the “‘practical
effect’ rule” applies to orders issued under 28 U.S.C. § 1253, a
provision it deemed “analogous” to § 1292(a)(1). 585 U.S. ,
138 S. Ct. 2305, 2319–21 (2018). The Court took jurisdiction
only after determining that the orders appealed from (1)
effectively granted injunctive relief, (2) risked irreparably
harming the State of Texas, and (3) could only be effectually
challenged through an immediate interlocutory appeal. Id. at
2324. The Court also explained that there is “[n]o authority”
for the proposition that “an order denying an injunction (the
situation in Carson) and an order granting an injunction (the
situation here) should be treated differently.” Id. at 2321 (citing
Carson v. Am. Brands, Inc., 450 U.S. 79, 84 (1981)).
Abbott may undercut our cases that treat orders effectively
denying injunctive relief differently from orders effectively
granting it. We have long held that parties appealing an
10
Perhaps due to a misreading of our cases, insurers in our
Circuit and others commonly seek immediate appellate review
of orders that merely announce the meaning of a contested
policy provision and do nothing else. But years ago, in Am.
Motorists Ins. Co. v. Levolor Lorentzen, Inc., we were clear
that when a court defines an insurer’s contractual obligations
but does “not order it to undertake the defense” or “do
anything,” the court’s order “cannot be enforced pendente lite
by contempt and [does] not constitute an injunction.” 879 F.2d
1165, 1173 (3d Cir. 1989). That well describes the March 19
order, which simply states that “Zenith has a duty to defend
M.P.N., Inc. in connection with the underlying action.” App.
2. Zenith insists that it might face contempt for failing to
comply, but American Motorists holds exactly the opposite.
Applying American Motorists, we conclude that we lack
jurisdiction over Zenith’s appeal.
effective grant of injunctive relief need not show that the
interlocutory order has a “serious, perhaps irreparable,
consequence” and “can be ‘effectually challenged’ only by
immediate appeal.” Saudi Basic Indus. Corp v. Exxon Corp,
364 F.3d 106, 111 (3d Cir. 2004) (quoting Carson and
collecting cases). The Eleventh Circuit has rejected such a
distinction, citing Abbott. Positano Place at Naples I Condo.
Ass’n, Inc. v. Empire Indem. Ins. Co., 71 F.4th 827, 835–36 &
n.5 (11th Cir. 2023). Nevertheless, because we hold that the
March 19 order is not enforceable by contempt and therefore
does not have the practical effect of granting injunctive relief,
we need not consider whether the rule we described in Saudi
Basic Industries—which neither party questions—has been
abrogated.
11
Zenith argues otherwise, invoking Ramara. See 814
F.3d at 665. In Ramara, the insurer wanted to appeal a non-
final order that stated: “prospectively, [the insurer] shall
provide defense to Ramara in the underlying action.” Id. at 669(alterations and citation omitted). Interpreting the order by its
terms, we concluded that it was a mandatory injunction
because it directed Westfield to defend Ramara. Id. at 671–72.
(“[T]he order also directed Westfield to defend Ramara going
forward and thus it granted equitable relief and was
immediately appealable.”). We noted, too, that the order
granted “forward-looking monetary relief,” id. at 671, just like
the order we found immediately appealable in Aleynikov. 765
F.3d at 356 & n.1 (allowing appeal under § 1292(a)(1) of order
that, inter alia, ordered party to pay legal fees under supervision
of magistrate judge). Satisfied that the order in Ramara was
punishable by contempt and met the other elements of an
injunction, we allowed the appeal under § 1292(a)(1). 814 F.3d
at 672.
The March 19 order that Zenith seeks to appeal is
everything like the order in American Motorists and nothing
like the orders in Ramara and Aleynikov. It announces that
Zenith has a “duty to defend” under the policy it issued M.P.N.,
but it does not direct Zenith to begin defending or to advance
any costs. See App. 2. To restate the rule of American
Motorists, orders declaring the meaning of a contract are not
enforceable by contempt unless the district court explicitly
provides as much or mandates, in the text of the order, that
some action be taken to effectuate the declaratory relief. 879
F.2d at 1173. That is what happened in Ramara and Aleynikov,
but it is not what happened here. The March 19 order “did not
direct [Zenith] to do anything,” so it is not enforceable by
12
contempt and therefore cannot be appealed under
§ 1292(a)(1). 7 Id.
B
On July 27, 2021—after Zenith appealed—the District
Court denied M.P.N.’s motion to enforce the March 19 order.
Dist. Ct. ECF No. 47. “Pursuant to that Order,” the court
explained in a footnote, “Zenith is required to both provide
MPN with a defense in the underlying action and reimburse
MPN for defense fees and costs.” Id. at n.1. Zenith argues that
the footnote to the July 27 order “confirmed” the “injunctive
nature of the March 19 [o]rder.” Appellant’s Br. 6. We
disagree. In Ramara, we explained that “a district court’s
characterization of its order is not dispositive.” 814 F.3d at 669.
“[W]hat counts is what the court actually did, not what it said
it did.” Id. (citing Sampson v. Murray, 415 U.S. 61, 86–87
(1974)). And what the District Court did in the March 19 order
was declare that the policy Zenith issued M.P.N. requires
Zenith to defend M.P.N. against the Mercer lawsuit. App. 2.
7
As Zenith points out, in Nautilus Ins. Co. v. 200 Christian St.
Partners LLC, 819 Fed. App’x. 87, 88 (3d Cir. July 16, 2019)
(not precedential), we took jurisdiction under § 1292(a)(1)
over an order that stated: “Nautilus has a duty to defend
Defendants in the underlying suits until it is clear that there is
no longer a possibility of a product-related tort claim.” See
Nautilus Ins. Co. v. 200 Christian St. Partners LLC, No. 2:18-
cv-01545-RBS, ECF No. 47 at 1 (E.D. Pa. Jan. 30, 2019). We
must instead follow American Motorists because it decided
precedentially that a nearly identical order was not appealable
under § 1292(a)(1).
13
As discussed, that declaration is not appealable under
§ 1292(a)(1) and American Motorists.
At oral argument, Zenith took this theory a step further.
It insisted that “[t]here’s no question that in response to [the
July 27] order, we would have been subject to contempt if we
didn’t . . . comply.” Oral Arg. at 4:30–55. M.P.N., which has
never contested appellate jurisdiction, agreed. Id. at 13:55–
14:40.
The footnote to the District Court’s July 27 order does
not give us appellate jurisdiction. Once Zenith filed its notice
of appeal on April 15, 2021, the District Court lost jurisdiction
“over those aspects of the case involved in the appeal.”
Coinbase v. Bielski, 599 U.S. ----, 143 S. Ct. 1915, 1919 (2023)
(quoting Griggs v. Provident Consumer Disc. Co., 459 U.S. 56,
58 (1982), and citing Marrese v. Am. Acad. of Orthopaedic
Surgeons, 470 U.S. 373, 379 (1985)). So nothing in the July 27
order could have had any legal effect on the duty-to-defend
issue addressed in the March 19 order and in Zenith’s appeal
to our Court. 8 The District Court appeared to recognize as
much. At least twice after Zenith filed its appeal, including in
8
Zenith also failed to appeal the July 27 order. It obviously did
not designate it in its notice of appeal because the July 27 order
did not exist yet. See Fed. R. App. P. 3(c)(1) (“The notice of
appeal must,” inter alia, “designate the judgment—or the
appealable order—from which the appeal is taken.”). Rule 3’s
“dictates are jurisdictional in nature, and . . . a prerequisite to
appellate review.” Smith v. Barry, 502 U.S. 244, 248 (1992).
Nor did Zenith file a new notice of appeal, amend its old one,
or make any argument about why the July 27 order was
properly before us.
14
the very footnote Zenith trumpets, the District Court denied
motions and explained, “[t]his Court awaits a decision of the
Third Circuit before taking any further action.” Dist. Ct. ECF
Nos. 40 n.1 & 47 n.1.
In 1989, we explained that orders declaring the meaning
of a contract are not enforceable by contempt unless the district
court explicitly provides as much or, in the text of the order,
directs that some action be taken to effectuate the declaratory
relief. American Motorists, 879 F.2d at 1173. That rule honors
the narrow finality exception that Congress enumerated in 28
U.S.C. § 1292(a)(1). Because Zenith seeks to challenge an
order that did not direct it to undertake a defense, advance or
reimburse costs, or do anything at all, we lack appellate
jurisdiction. We will therefore dismiss the appeal.
15