Selective Insurance Company of v. City of Paris , 769 F.3d 501 ( 2014 )

In the
United States Court of Appeals
For the Seventh Circuit
________________________
Nos. 13-1699
SELECTIVE INSURANCE COMPANY OF
SOUTH CAROLINA, ET AL.,
Plaintiff-Appellee,
and
ALLIANZ GLOBAL RISKS US,
INSURANCE COMPANY,
Intervening Plaintiff-Appellee.
v.
CITY OF PARIS,
Defendant-Appellant,
and
GORDON R. STEIDL, ET AL.,
Defendants.
__________________________
Appeal from the United States District Court for the
Central District of Illinois
No. 2:07-cv-02224 - Michael P. McCuskey, Judge
__________________________
ARGUED JUNE 2, 2014—DECIDED OCTOBER 2, 2014
__________________________
2 No. 13-1699
Before FLAUM and WILLIAMS, Circuit Judges, and DOW,
District Judge.∗
DOW, District Judge. On October 24, 2012, approximately 33
months after the district court granted summary judgment for
Appellee Selective Insurance Company of South Carolina,
terminated the case, and entered judgment, Appellant City of
Paris (“City”) filed a motion to reconsider the district court’s
summary judgment ruling. The City argued that the case
remained open pursuant to Federal Rule of Civil Procedure
54(b) because certain claims were not adjudicated by the
Court’s ruling. The district court denied the motion,
concluding that the Court did not have jurisdiction pursuant to
Rule 54(b) to reconsider the final judgment that it had entered
years before, or, alternatively, that the City’s request did not
satisfy Rule 54(b)’s definition of a separate “claim for relief.”
We affirm.
I.
In 1987, Gordon Steidl and Herbert Whitlock were
wrongfully accused of, prosecuted for, and convicted of arson
and the brutal murders of two residents in the small town of
Paris, Illinois. Both Steidl and Whitlock received death
sentences. After years of pursuing post-conviction remedies,
Steidl was granted a writ of habeas corpus in 2003. The State of
Illinois decided not to retry him, and he obtained his release
from custody in 2004. Whitlock also won post-conviction relief
in state court in 2007. The State eventually decided not to
∗
The Honorable Robert M. Dow, Jr., of the Northern District of Illinois,
sitting by designation.
No. 13-1699 3
proceed with his retrial, and Whitlock too was released from
custody in 2008.
Following their exonerations, Steidl and Whitlock brought §
1983 and malicious prosecution claims against the City of Paris
and various police officers and prosecutors (collectively, the
“City Defendants”) whom Steidl and Whitlock alleged were
complicit in their wrongful convictions. The City Defendants
promptly turned to their insurers to seek defense and
indemnification. In 2007, one of the insurers, Selective
Insurance Company of South Carolina (“Selective”), brought a
declaratory judgment action in federal court seeking to clarify
whether it had a duty to defend against the claims asserted by
Steidl and Whitlock. In 2008, the district court permitted a
second insurer, Allianz Global Risks US Insurance Company
(“Allianz”), to intervene. A third insurer, Western World
Insurance Group (“Western World”), brought a separate
declaratory judgment action against Selective and Allianz,
claiming that it was only an excess carrier and therefore had no
duty to contribute to the defense of the Steidl and Whitlock
lawsuits. Western World’s complaint did not seek a declaration
that it had no duty to indemnify the City Defendants; rather, it
alleged that it had no current duty to defend until all other
insurance policies had been exhausted. The two declaratory
judgment lawsuits were consolidated in a single action before
Judge McCuskey.
An understanding of the insurance timeline provides
helpful context here. Western World had issued policies that
were in effect from 1985 to 1996. This time period encompassed
the wrongful investigations and prosecutions but not Steidl’s
and Whitlock’s exonerations. The second insurer, Allianz (or,
technically, its predecessor in interest, Monticello Insurance
Company), insured Defendants from 1996 to 1999. Neither the
wrongful convictions and prosecutions nor the exonerations
4 No. 13-1699
occurred during this timeframe. The third insurer, Selective,
insured the City Defendants from 1999 to 2007, during which
time Steidl’s exoneration occurred.
All three insurers moved for summary judgment. In an
opinion dated January 27, 2010, the district court granted
Allianz’s and Selective’s motions and denied Western World’s.
Although there was a 1978 Illinois Appellate Court case that
squarely held that a malicious prosecution claim “occurs” for
insurance purposes on the date that the plaintiff receives a
favorable termination of the underlying proceeding (see
Security Mutual Insurance Casualty Co. v. Harbor Insurance Co.,
382 N.E.2d 1 (Ill. App. Ct. 1978), rev’d on other grounds, 397
N.E.2d 839 (Ill. 1979)), the district court rejected its holding as
an outdated, minority view that likely did not foreshadow the
Illinois Supreme Court’s current view on the issue. The district
court instead adopted the majority view, that malicious
prosecution claims “occur” for insurance purposes when a
prosecution is instituted. From this premise, the court
concluded that Western World was on the hook, granted
Selective’s and Allianz’s summary judgment motions, denied
Western World’s cross-motion, entered judgment, and
terminated the case.
On February 24, 2010, Western World filed a timely Rule
59(e) motion to alter or amend the judgment, asserting that the
court erroneously or prematurely had held that it had a duty to
indemnify rather than simply a duty to defend. Western World
further requested that the court amend the order to clarify that
the “trigger” date also applied to Western World’s policies and
to identify the only Western World policy—the 1987 one—that
could be tagged for indemnification if the City Defendants were
found liable to Steidl and Whitlock. Western World also moved
for leave to file a second amended complaint. Selective filed a
two-paragraph document opposing the motion to the extent
No. 13-1699 5
that it could be “viewed as impacting the summary judgment
granted to Selective.” Allianz also filed a short response
expressing its view that Western World’s motions did not affect
the finality of the judgment in its favor. The City Defendants
agreed that the court’s indemnification ruling was premature,
but argued that so, too, was the additional relief sought by
Western World. In an order dated May 27, 2010, the court
agreed with all of the parties that it had erroneously conflated
the duties to indemnify and defend. The Court denied Western
World’s second request on the ground that it essentially sought
an advisory opinion. Accordingly, the Court granted in part
and denied in part the Rule 59(e) motion and denied Western
World’s motion for leave to file a second amended complaint.
No one timely appealed any of the district court’s rulings.
On April 28, 2010, this Court held that, under Illinois law, a
claim for malicious prosecution “occurs” for insurance
purposes on the date that the underlying conviction either is
invalidated or terminated in the plaintiff’s favor. See Nat’l Cas.
Co. v. McFatridge, 604 F.3d 335, 344-45 (7th Cir. 2010). In
reaching its conclusion, the panel relied on the 1978 Illinois
Appellate Court case rejected by the district court. Id. at 345
(citing Security Mutual Insurance Casualty, 382 N.E.2d at 6). 1
1 On March 16, 2012, this Court issued an opinion in American Safety Casualty
Insurance Co. v. City of Waukegan, Ill., 678 F.3d 475 (7th Cir. 2012), in which
we expounded upon and reaffirmed the abbreviated analysis in McFatridge.
E.g., Am. Safety, 678 F.3d at 478 (“McFatridge holds that, under Illinois law,
the issuer of the policy in force on the date a convict is exonerated must
defend and indemnify an insured whose law enforcement personnel violate
the Constitution (or state law) in the process of securing a criminal
conviction. American Safety * * * asks us to overrule McFatridge or certify the
issue to the Supreme Court of Illinois.”). We subsequently reaffirmed both
American Safety and McFatridge in Northfield Insurance Co. v. City of Waukegan,
701 F.3d 1124, 1130 (7th Cir. 2012).
6 No. 13-1699
On October 24, 2012—approximately 33 months after the
district court entered judgment—the City Defendants filed a
“Motion to Reconsider Order Granting Summary Judgment,” in
which they alerted the district court to American Safety, which
they accurately asserted was in direct conflict with the district
court’s order of nearly three years prior. In their brief, the City
Defendants also mentioned McFatridge, which (as noted above)
was issued in April 2010, while Western World’s motion to
reconsider was pending. 2 Invoking Federal Rule of Civil
Procedure 54(b), they argued that the court’s January 27, 2010
order was not a “final order” because “other claims, such as
SELECTIVE’s prayer for reimbursement for defense cost * * *
were not adjudicated by the Order within the meaning” of the
rule. Therefore, they contended, the court could and should
revisit its order to account for the “controlling or significant
change in the law or facts since the submission of the issue to
the court.” Selective opposed the motion on the grounds that
the January 27, 2010 judgment was final, that its ad damnum
prayer for reimbursement was not an unadjudicated “claim” for
relief, and that the City Defendants’ motion had not been
brought within a “reasonable period” as required by Rule 54(b).
On March 4, 2013, the district court denied the motion to
reconsider, concluding that the case was closed and had been
since January 2010. Thus, the court reasoned, it “ha[d] no
jurisdiction pursuant to Rule 54(b) to reconsider its prior
judgment, because final judgment has already been entered,
disposing of all claims.” The court held in the alternative that,
2 Because Western World’s Rule 59(e) motion tolled the time for appeal (see
Fed. R. App. P. 4(a)(4)(A); Banks v. Chi. Bd. of Educ., 750 F.3d 663, 666 (7th Cir.
2014)), and McFatridge was issued while Western World’s motion was still
pending, the City Defendants could have challenged the district court’s
order as incorrect had they timely filed a notice of appeal from the January
27, 2010 judgment order after Judge McCuskey ruled on the Rule 59(e)
motion.
No. 13-1699 7
even if its January 2010 order were to be considered
interlocutory (“which it is not”), the motion must be denied
because “Defendants seek review on an issue that does not
qualify for Rule 54(b)’s definition of a separate ‘claim for
relief.’” The district court concluded that Selective’s “claim” for
reimbursement was “an ancillary issue * * * based on the exact
same set of facts as the primary contested matter.” On April 2,
2013, the City Defendants appealed. 3
On April 4, 2013, we ordered the parties to submit briefing
on the scope of our jurisdiction. Selective filed a brief arguing
that the Court lacked jurisdiction to review the January 27, 2010
order because of the untimely nature of the City Defendants’
appeal. The City Defendants indicated their desire to appeal
the January 27, 2010 order and judgment, the May 27, 2010
order denying Western World’s Rule 59(e) motion, and March
4, 2013 order denying their 54(b) motion. Steidl also filed a
jurisdictional memorandum, 4 arguing that the Court lacked
3 On March 28, 2013, Steidl filed his own “motion for relief from this court’s
order of January 27, 2010.” Pursuant to “Rules 54(b) and/or 60(b)(6),” or its
“inherent authority,” Steidl asked the court to determine that the
“occurrences, as delineated by the Consent Judgment entered by Judge
Baker on March 27, 2013, fall within Selective’s policy periods.” Steidl’s
theory as to why Rule 54(b) should apply was that the court had declined to
rule on Western’s indemnification claims as unripe and that, in light of the
judgment from Judge Baker, that issue was now ripe. In the alternative,
Steidl argued that “[i]f this Court persists in its holding that its January 27,
2010 order is a final judgment, then it should nonetheless grant Steidl relief
under Rule 60(b)[(6)].” Selective opposed this motion, but the district court
stayed its consideration of Steidl’s motion pending resolution of the instant
appeal.
4 Pursuant to the consent judgment in the underlying case against the City
Defendants, “the City agreed to pay Steidl $350,000 of the $1.5 million
judgment and assigned its rights, if any, against Selective to Steidl in
exchange for a covenant not to execute the remaining $850,000 judgment
against the City.”
8 No. 13-1699
jurisdiction over the appeal because “the district court has not
entered a final appealable judgment within the meaning of 28
U.S.C. § 1291.” Steidl again asserted (as he did in his March
2013 motion) that the district court “specifically held that it had
not determined all the rights and liabilities of all the parties
since it recognized it was premature to enter a ruling both as to
Western World’s duty to indemnify the City Defendants as to
occurrences within its policy period and also as to Western
World’s duty to indemnify as it related to policy periods
outside of occurrence dates.” In response, Selective reiterated
its argument that the court’s January 27, 2010 order was final.
Following review, we issued an order limiting the appeal “to a
review of the order entered on March 4, 2013, denying
defendants’ motion to reconsider,” noting that “[t]he final
judgment” in this case was entered on January 27, 2010.
II.
The appeal in this case presents the limited question of
whether the district court properly denied the City’s motion to
reconsider. The City moved for reconsideration under Federal
Rule of Civil Procedure 54(b), which provides:
(b) Judgment on Multiple Claims or Involving
Multiple Parties. When an action presents more
than one claim for relief – whether as a claim,
counterclaim, crossclaim, or third-party claim – or
when multiple parties are involved, the court may
direct entry of a final judgment as to one or more,
but fewer than all, claims or parties only if the
court determines that there is no just reason for
delay. Otherwise, any order or other decision,
however designated, that adjudicates fewer than all
the claims or the rights and liabilities of fewer than
No. 13-1699 9
all the parties does not end the action as to any of
the claims or parties and may be revised at any
time before the entry of judgment adjudicating all
the claims and all the parties’ rights and liabilities.
The plain language of Rule 54(b) indicates that it does not apply
to judgments which adjudicate all claims involving all parties to
a suit. Disposition of this appeal thus turns on whether the
district court correctly determined that the January 27, 2010
judgment was a final judgment because no other “separate
claims” were pending at the time the court entered judgment.
Notwithstanding the City’s characterization of its motion as a
Rule 54(b) motion to reconsider, if final judgment on all claims
has been entered, the only avenues of relief are under Federal
Rules of Civil Procedure 59(e) and 60(b). See Abacarian v.
McDonald, 617 F.3d 931, 943 (7th Cir. 2010).
We review denials of motions for reconsideration brought
under Rules 59(e) and 60(b) for abuse of discretion. See, e.g.,
Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 955 (7th Cir. 2013)
(Rule 59(e)); Banks v. Chi. Bd. of Educ., 750 F.3d 663, 667 (7th Cir.
2014) (Rule 60(b)). A district court’s “determination that two or
more claims constitute separate claims of relief” also is
reviewed for “abuse of discretion.” Perera v. Siegel Trading Co.,
Inc., 951 F.2d 780, 786 (7th Cir. 1992). As explained below, we
find no abuse of discretion in the district court’s disposition of
the City’s motion for reconsideration. Indeed, because we
conclude that the district court’s ruling was correct, we would
uphold it even under the de novo standard of review urged by
the City. See TKK USA, Inc. v. Safety Nat. Cas. Corp., 727 F.3d
782, 795 (7th Cir. 2013) (“We need not come to closure on this
issue of Illinois law, though. Under either standard, de
novo review or abuse of discretion, the district court's decision
was correct.”).
10 No. 13-1699
III.
Turning to the merits, we find that the district court’s
January 27, 2010 order contained all of the standard indicia of
finality. The order addressed and disposed of dispositive
motions that typically are not granted without prejudice. When
the court granted Allianz’s and Selective’s motions for
summary judgment and denied Western World’s, a separate
entry on the court’s docket was made that same day on Form
AO 450—the form specifically used for entry of a separate final
judgment under Rule 58. This Court recently reiterated the
purpose and importance of complying with Rule 58: “The
purpose of the separate judgment required by [Rule 58] is to let
the parties (and the appellate court) know exactly what has
been decided and when. The entry of a final judgment
under Rule 58 starts the clock for an appeal . . . . Rule 58 is
designed to produce clarity.” Brown v. Fifth Third Bank, 730 F.3d
698, 699-700 (7th Cir. 2013) (noting that form AO 450 is “the
preferred and sound vehicle for complying with Rule 58”)
(quoting Reytblatt v. Denton, 812 F.2d 1042, 1043 (7th Cir. 1987)).
Additionally, when the parties briefed Western World’s Rule
59(e) motion—itself an indicator that a final judgment had been
entered—no one suggested that the January 27, 2010 order was
not final. In using Form AO 450, particularly in conjunction
with the summary judgment opinion noting that “[t]his case is
terminated,” the district court left no doubt that its order of
January 27, 2010, was intended to be final and appealable.
Nearly three years after the district court entered judgment,
the City moved under Rule 54(b) for the district court to
reconsider its prior judgment in light of “controlling or
significant change in the law or facts since the submission of the
issue to the court.” But, as previously explained, Rule 54(b)
cannot be used to modify a final judgment that has disposed of
No. 13-1699 11
all claims. Thus, the only question is whether any unresolved
“separate claims” within the meaning of Rule 54(b) remained
pending at the time that the district court entered judgment on
January 27, 2010, such that Rule 54(b), not Rule 60(b), controlled
the City’s motion. The City contends that the district court’s
summary judgment opinion and subsequent judgment left two
“claims” pending—namely (i) Selective’s ad damnum request for
reimbursement of costs and expenses incurred in defense of the
City Defendants in the Steidl lawsuit; and (ii) whether and the
extent to which Western World had a duty to indemnify the
City Defendants.
Selective responds that the latter justification for non-finality
cannot be raised before this Court because the City did not
present it below. We agree. “It is a well-established rule that
arguments not raised to the district court are waived on
appeal.” Puffer v. Allstate Ins. Co., 675 F.3d 709, 718 (7th Cir.
2012). In its motion to reconsider, the City argued that
“[a]lthough this Court entered a final order granting certain
Motions for Summary Judgment (Doc. 113), other claims, such
as SELECTIVE’s prayer for reimbursement of defense costs
(Doc. 23, p. 23), were not adjudicated by the Order within the
meaning of Rule 54(b).” The City’s motion does not mention
Western World’s duty to indemnify. Because the City neglected
to raise Western World’s duty to indemnify in its motion to
reconsider, it is waived on appeal.
That leaves only the issue of whether Selective’s prayer for
relief constitutes a separate “claim for relief” that was left
unresolved in light of the January 27, 2010 order. A “claim” is
“the aggregate of operative facts which give rise to a right in the
courts.” Sojka v. Bovis Land Lease, Inc., 686 F.3d 394, 399 (7th Cir.
2012). Selective’s complaint included four counts: two for
declaratory judgments as to its duty to defend and two for
declaratory judgments as to its duty to indemnify. The prayer
12 No. 13-1699
for relief included several requests for relief, including a request
that the district court find that it was entitled to reimbursement
of the expenses it already incurred in its defense of the City
Defendants. Selective’s request for declaratory relief and its
request for reimbursement of defense costs both depended on
the district court’s ruling on Selective’s duty to defend the City
(and by extension, its employees) in the Steidl and Whitlock
litigation. Plainly, if the district court had held that Selective
owed a duty to defend the City, Selective would not be entitled
to reimbursement of its defense costs. Likewise, when the
district court concluded that Selective did not have a duty to
defend the City and did not specifically award reimbursement
of costs and expenses, it implicitly denied that request. The
implication in fact is inescapable, and Selective did not (and
does not now) take issue with the district court’s decision not to
award reimbursement costs.
The City analogizes Selective’s “claim” for reimbursement
of costs to a claim for attorneys’ fees. The City points out that
“a proceeding to obtain an award of attorney’s fees is separate
from the underlying suit in which the fees were incurred.”
Estate of Drayton v. Nelson, 53 F.3d 165, 167 (7th Cir. 1994); see
also Amcast Indus. Corp. v. Detrex Corp., 45 F.3d 155, 158 (7th Cir.
1995) (“Suppose a final judgment were rendered in a plaintiff’s
favor and later he moved for an award of attorney’s fees or for
an order that the defendant disclose the whereabouts of assets
needed to pay the judgment. The plaintiff could not in those
subsequent, collateral proceedings reopen issues settled by the
final judgment, on the ground that the suit was ongoing. The
suit would have ended.”). But Selective never moved for
attorneys’ fees or even submitted a bill of costs. Rather, the
“fees” that it sought in the ad damnum clause were a measure of
pecuniary relief, like “lost profits.” In not granting that relief,
the district court implicitly concluded that it was not warranted
No. 13-1699 13
in this action. See Rule 54(c); see also Back Doctors Ltd. v. Metro.
Property & Cas. Ins. Co., 637 F.3d 827, 831 (7th Cir. 2011) (“In
federal courts, ‘[e]very * * * final judgment should grant the
relief to which each party is entitled, even if the party has not
demanded that relief in its pleadings.’”)
Further, this Court has suggested that requests for relief
asserted in ad damnum clauses are not claims for relief, at least
for the purposes of Rules 8 and 12(b)(6). In Sharp Electronics
Corp. v. Metropolitan Life Ins. Co., 578 F.3d 505, 512-13 (7th Cir.
2009), the Court rejected an ERISA plaintiff’s argument that
allegations made in an ad damnum clause were “sufficient to
demonstrate that it was seeking relief on behalf of the Plan.”
Sharp Electronics held that conclusory assertions in an ad
damnum clause cannot save an inadequately pleaded claim,
suggesting that claims and ad damnum clauses are distinct.
The bottom line is that the January 27, 2010 judgment was
final, and thus the district court did not err in concluding that
Rule 54(b) was inapplicable. Presumably the City understood
that the proper rules to use would have been 59(e) or 60(b);
however, the City also probably knew that those motions
would have been fruitless here. The City was too late to use
Rule 59(e), and “Rule 60(b) cannot be used to reopen the
judgment in a civil case just because later authority shows that
the judgment may have been incorrect.” Hill v. Rios, 722 F.3d
937, 938 (7th Cir. 2013) (citing Gonzalez v. Crosby, 545 U.S. 524,
536-38 (2005)); see also Nash v. Hepp, 740 F.3d 1075, 1078 (7th
Cir. 2014) (“[A] change in law showing that a previous
judgment may have been incorrect is not an ‘extraordinary
circumstance’ justifying relief under Rule 60(b)(6).”). Moreover,
“a party invoking Rule 60(b) must claim grounds for relief that
could not have been used to obtain a reversal by means of a
direct appeal.” Kiswani v. Phoenix Sec. Agency, Inc., 584 F.3d 741,
743 (7th Cir. 2009). As set forth above, because Western
14 No. 13-1699
World’s properly-filed Rule 59(e) motion tolled the time for
appeal (see Fed. R. App. P. 4(a)(4)(A); Banks, 750 F.3d at 666;
and Nat’l Cas. Co. v. McFatridge, 604 F.3d 335, 344-45 (7th Cir.
2010), was issued while Western World’s motion was still
pending, the City Defendants could have filed a timely notice of
appeal from district court’s January 27, 2010 judgment order.
But it cannot now challenge that judgment—final then and
now—under the artifice of Rule 54(b).
The judgment of the district court is AFFIRMED.