Hill, John A. v. Baxter Healthcare ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-3080
JOHN A. HILL and SUSAN M. HILL,
Plaintiffs-Appellees,
v.
BAXTER HEALTHCARE CORPORATION,
FUJISAWA USA, INC., AMERICAN
PHARMACEUTICAL PARTNERS, INC., et al.,
Defendants-Appellees.
APPEAL OF: NEAL LEWIS
____________
Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 01 C 9315—Rebecca R. Pallmeyer, Judge.
____________
ARGUED FEBRUARY 10, 2005—DECIDED APRIL 21, 2005
____________
Before MANION, EVANS, and SYKES, Circuit Judges.
EVANS, Circuit Judge. This appeal concerns whether a
federal trial judge had the authority to resolve an attorney
lien dispute after the underlying case settled. In December
of 2001, Indiana residents John Hill and wife Susan filed a
diversity action in federal district court against manufac-
2 No. 04-3080
turers of the drug Heparin. Their complaint alleged that
Mr. Hill’s use of Heparin following bypass surgery caused
the loss of three limbs. The suit was filed by a Chicago
attorney, David Fitzpatrick, only a week after the plaintiffs
fired Neal Lewis, an attorney from Orland, Indiana. Lewis
did not participate in the lawsuit.
In November of 2003, Lewis filed a lien action in Indiana
state court seeking a share of any settlement or damages
awarded in the plaintiffs’ federal lawsuit. Lewis alleged in
his complaint that the Hills’ decision to dump him as counsel
constituted a breach of contract and that Fitzpatrick tor-
tiously interfered with their pact in wresting control over
the case. Lewis contends that he put in 18 months of work
on the case and deserves a piece of the pie.
The parties in the federal litigation reached settlements
in June of 2004. On June 29, Judge Pallmeyer approved the
settlement agreements and dismissed all of plaintiffs’
claims with prejudice, noting that the case was “fully and
finally resolved.” Her order did not incorporate the settle-
ment agreements nor did it expressly retain jurisdiction to
enforce them.
Despite these settlements, the proceedings were far from
over. On July 5, Lewis faxed to the defendants a notice of
his attorney’s lien, along with a request asking them to with-
hold payment of the settlement funds until the Indiana
proceeding regarding his claim was resolved. On July 8, the
plaintiffs filed a “petition to quash and/or adjudicate attor-
ney’s lien,” arguing that the lien should be quashed because
Lewis failed to comply with the Illinois Attorneys Lien Act,
770 ILCS 5/1 (2004). The plaintiffs did not identify any
authority for the district court to consider this request. The
plaintiffs did provide Lewis with notice of the petition but
did not serve him with a summons or seek to have him
added as a party to the now-dismissed federal lawsuit. The
No. 04-3080 3
next day, back in Indiana state court, Lewis sought leave to
file an amended complaint in order to add the settling drug
companies as defendants in that action.
On July 15, the district court granted the plaintiffs’
petition to quash the lien:
Mr. Lewis having filed no objection to the motion, it is
granted. All Defendants other than Fujisawa are di-
rected to pay settlement proceeds to the court pursuant
to an order to be drafted by counsel. Plaintiff acknowl-
edges that Fujisawa has paid its portion of the settle-
ment in full. The court will retain jurisdiction for
purposes of distribution. Notice of liens received by
Fujisawa after the date of its payment to Plaintiff are
hereby declared void.
That is all the order said. The court did not specify its
authority for entering such an order.
On July 23, Lewis asked for leave to file a “non-party
motion to dismiss petition and vacate order.” Lewis asserted
that the district court acted without subject matter and
personal jurisdiction in granting the plaintiffs’ petition to
quash the attorney’s lien. On July 26, the plaintiffs coun-
tered by filing a motion asking Judge Pallmeyer to halt the
Indiana lien proceeding. Their request sought injunctive
relief in the form of
an order Enjoining and Restraining Mr. Neal Lewis,
pursuant to the All Writs Act, 28 U.S.C. § 1651(a) from
commencing any action or proceeding of any kind rel-
ative to his claimed lien interest against the defendant
pharmaceutical companies, and further enjoining and
restraining the Porter County, Indiana state court from
accepting any action or proceeding of any kind from Mr.
Neal Lewis relative to his claimed lien interest against
the defendant pharmaceutical companies . . . .
On August 3, Lewis filed another motion, this time asking
to be joined as an indispensable party under Federal Rule
4 No. 04-3080
of Civil Procedure 19(b). He also asked the district court to
declare its July 15 order void because it was entered without
jurisdiction, see Fed. R. Civ. P. 60(b)(4), and to dismiss the
plaintiffs’ original petition because the court did not have
subject matter jurisdiction over the lien dispute.
On August 6, the district court conducted a hearing on
Lewis’s motions filed on July 23 and August 3, as well as
the plaintiffs’ July 26 request for injunctive relief. Later
that day, the court issued three summary orders, ruling
against Lewis on every front. The court also asked the
parties to collaborate and draft a detailed order granting
the plaintiffs’ request for injunctive relief. But the parties
could not agree to language, and on August 10, the plaintiffs
submitted a proposed order on their own. On August 11,
Lewis filed a submission explaining that he could not agree
with the proposed order drafted by the plaintiffs because it
would effectively extinguish his ability to pursue his lien
claim. That same day, Lewis filed a notice of appeal, spe-
cifying the three August 6 orders as those being appealed.
On August 12, the district court, citing as authority the
All Writs Act, 28 U.S.C. § 1651, issued an order enjoining
Lewis from pursing his lien claim and the Indiana state
court from adjudicating it. Furthermore, it explicitly re-
tained jurisdiction to distribute the settlement funds.
On appeal, Lewis argues that the district court acted
without jurisdiction when it entered its orders on July 15,
August 6, and August 12 relating to his asserted lien, and
that it erred by denying his motion for relief from judgment
under Rule 60(b)(4). Although we generally review Rule 60(b)
decisions for abuse of discretion, we review challenges to
Rule 60(b)(4) decisions de novo to the extent they turn on
errors of law. In re Hanson, 397 F.3d 482, 484 (7th Cir.
2005). Lewis argues that the case was over on June 29 and
that the court’s later orders are void. He is correct. The case
ended when Judge Pallmeyer dismissed the case with pre-
No. 04-3080 5
judice, which, in her own words, rendered the dispute “finally
and fully resolved.” Despite this language, however, the court
continued to preside over the case, resolving Lewis’s lien
and taking hold of the settlement funds. But a case that is
dismissed with prejudice is unconditional; therefore, it’s
over and federal jurisdiction is terminated. See Jessup v.
Luther, 277 F.3d 926, 929 (7th Cir. 2002); McCall-Bey v.
Franzen, 777 F.2d 1178, 1190 (7th Cir. 1985). Thus, the court
erred by denying Lewis’s motion to vacate under Rule 60(b)(4)
because its orders entered on July 15, August 6, and August
12 are void for lack of jurisdiction. See Marques v. Fed.
Reserve Bank of Chi., 286 F.3d 1014, 1018 (7th Cir. 2002)
(judgment entered without subject matter jurisdiction is
void).
The plaintiffs disagree and make three arguments to jus-
tify the district court’s actions. First, they argue that the
case really wasn’t over on June 29 because they filed a timely
motion for reconsideration under Federal Rule of Civil
Procedure 59(e). Indeed, the filing of a proper motion to alter
or amend a judgment under that rule would have permitted
further proceedings. See Romo v. Gulf Stream Coach, Inc.,
250 F.3d 1119, 1121 n.3 (7th Cir. 2001). But the plaintiffs’
petition to quash the lien did not come under the scope of
Rule 59(e), as it did not in any way seek to reconsider and
revise the June 29 decision. See Curry v. United States, 307
F.3d 664, 666 (7th Cir. 2002); see also White v. N.H. Dep’t of
Employment Sec., 455 U.S. 445, 451 (1982) (request for
attorneys fees under 42 U.S.C. § 1988 raises issues col-
lateral to the judgment and may not be characterized as a
Rule 59(e) request); Lentomyynti Oy v. Medivac, Inc., 997
F.2d 364, 367 (7th Cir. 1993).
Next, the plaintiffs argue that the district court had sup-
plemental jurisdiction to resolve the lien dispute, 28 U.S.C.
§ 1367, as the lien action was a direct assault on the set-
tlement agreement itself. Courts do not automatically have
supplemental jurisdiction over any agreement that has as
6 No. 04-3080
part of its consideration the dismissal of a federal case, but
may retain the power to protect and enforce their judgments.
Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 380 (1994);
Lucille v. City of Chicago, 31 F.3d 546, 548 (7th Cir. 1994).
“Thus if the judgment explicitly incorporates the settlement,
or reserves authority to enforce the settlement, the court
possesses ancillary jurisdiction.” Lucille, 31 F.3d at 548
(citing Kokkonen, 511 U.S. at 381-82); see also Goulding v.
Global Med. Prods. Holdings, Inc., 394 F.3d 466, 468 (7th
Cir. 2005). Judge Pallmeyer’s order did neither:
The Court, having reviewed the stipulation of dismis-
sal . . . finds that all claims asserted by Plaintiffs against
the above-named Defendants have been fully and fi-
nally resolved through separate settlement agreements
with each of the respective Defendants, and that all claims
asserted against the named Defendants in this lawsuit
are hereby dismissed with prejudice. The Court further
finds, as stipulated by the parties through their respec-
tive undersigned counsel, that each of the settlement
agreements reached between Plaintiffs and
Defendants . . . was the result of arms-length negotia-
tions conducted in good faith; that the agreed-upon
consideration and the releases and settlement agree-
ments between Plaintiffs and each of the Defendants, re-
spectively, constitute fair, reasonable and good faith
settlements . . .; and that each such settlement should
operate as a bar to the bringing of any actions for
contribution and/or indemnification against any of the
above-named Defendants by any person or party or
tortfeasor arising out of Plaintiffs’ claimed injuries and
causes of action.
The court did not expressly retain jurisdiction, nor did it
make the terms of the settlement agreements part of its
judgment, which would have rendered a violation of the
agreement a violation of a court order. This is in contrast to
No. 04-3080 7
the court’s later order of July 15, which stated explicitly
that “the court will retain jurisdiction for purposes of dis-
tribution.” But that element was lacking in the June 29
order and therefore the court could not exercise supplemen-
tal jurisdiction over the lien dispute.
Finally, the plaintiffs contend that the district court
was authorized to resolve the lien dispute by virtue of the
All Writs Act, which authorizes federal courts to “issue all
writs necessary or appropriate in aid of their respective
jurisdictions and agreeable to the usages and principles of
law.” 28 U.S.C. § 1651(a); In re Campbell, 264 F.3d 730, 731
(7th Cir. 2001). But the All Writs Act does not itself create
jurisdiction, it merely confers supplemental jurisdiction
where jurisdiction already exists. Syngenta Crop Prot., Inc.
v. Henson, 537 U.S. 28, 33 (2002); Campbell, 264 F.3d at
731. The district court therefore needed an independent
basis of federal jurisdiction in order to consider the plain-
tiffs’ motion to quash the lien. But there is none. The
plaintiffs’ original suit triggered diversity jurisdiction, but
their request to quash the lien did not. The plaintiffs and
Lewis all hail from Indiana and are nondiverse, see 28
U.S.C. § 1332, and the lien dispute is a matter of state law
that does not involve a federal question, see Commercial
Nat’l Bank of Chi. v. Demos, 18 F.3d 485, 489 (7th Cir.
1994).1
Accordingly, the district court’s orders issued on July 15,
August 6, and August 12 are VACATED, and the case is
1
The parties also debate whether the district court had personal
jurisdiction over Lewis, but we need not resolve this issue in light
of our determination that it lacked subject matter jurisdiction over
the lien dispute.
8 No. 04-3080
REMANDED2 with instructions for the court to dismiss the
plaintiffs’ requests to quash the lien. Costs are awarded to
Mr. Lewis.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
2
The dispute, at this point, only involves the Hills, the obvious
and unquestioned interests of attorney Fitzgerald in receiving his
attorney’s fees, and the interest, if any, of attorney Lewis to re-
ceive some attorney’s fees out of the settlement proceeds. The
defendants have no dog in this fight. We trust that the district
judge, in consultation with the interested parties, will appropri-
ately answer the question of what to do with the proceeds of the
settlement that were paid in to the court while the interests,
again if any, of attorney Lewis are determined. The defendants
deserve to be excused from any further participation in this case,
and we trust that an appropriate order (or better yet, an agree-
ment between the interested parties) to that effect will be entered.
USCA-02-C-0072—4-21-05