Factory Mutual Insur v. Bobst Group USA Inc

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-2401
FACTORY MUTUAL INSURANCE COMPANY,
Plaintiff-Appellee,
v.
BOBST GROUP USA, INC.,
Defendant-Appellant.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 02 C 0283—James B. Moran, Judge.
____________
ARGUED DECEMBER 1, 2004—DECIDED DECEMBER 21, 2004
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Before EASTERBROOK, EVANS, and SYKES, Circuit Judges.
EASTERBROOK, Circuit Judge. Bobst Group sold a print-
ing press to Wm. Wrigley Jr. Company. After one of the
press’s components exploded, Factory Mutual indemnified
Wrigley and sued Bobst as its subrogee. Bobst not only
denied responsibility but also filed a flurry of third-party
claims for indemnity, plus a counterclaim against Factory
Mutual. According to Bobst, whatever Factory Mutual re-
ceives (should it prevail) it must return in whole or in part
as contribution. Bobst’s theory is that, by acquiring through
its insurance contract a right to inspect Wrigley’s plant in
order to reduce safety hazards (and thus the risk to which
2 No. 04-2401
it was exposed), Factory Mutual undertook a duty to help
Wrigley’s vendors reduce the hazards that their machines
create.
While discovery on Factory Mutual’s principal claim was
ongoing, the district court granted summary judgment
against Bobst on the counterclaim. The insurance policy
declares that Factory Mutual’s right to inspect is for its sole
benefit and that no other person—not Wrigley, and cer-
tainly not potential tortfeasors who have not paid any part
of the premium—is entitled to rely on the quality of the
inspections. The district judge concluded that neither the
policy nor the fact that the insurer gave Wrigley some
advice about how to make the printing press safer created
any duty of care to Bobst. 2004 U.S. Dist. LEXIS 4076 (N.D.
Ill. Mar. 15, 2004). The judge might well have added that,
although Illinois (whose law governs) has held that an
insurer’s power to inspect can imply a duty toward victims
of torts, see Nelson v. Union Wire Rope Corp., 31 Ill. 2d 69,
199 N.E.2d 769 (1964), neither Illinois nor any other state
has held that this duty runs to a tortfeasor, relieving it of
the financial consequences of its own negligence, and thus
eliminating its incentive to take care.† Good Samaritan
liability to victims is rare; Good Samaritan liability to in-
jurers is unheard of.
†
Nelson was decided under Florida law, and it is no longer sound
on its own facts. The Supreme Court of Illinois used the insurer’s
inspection as a loophole in the exclusivity provision of the state’s
workers’ compensation program, and the legislature has since
forbidden that kind of evasion. See 810 ILCS 305/5. See also Reid
v. Employers Mutual Insurance Co., 59 Ill. 2d 194, 319 N.E.2d
769 (1974). But Illinois continues to hold that negligent perfor-
mance of a voluntary undertaking can at least sometimes support
liability. See Pippin v. Chicago Housing Authority, 78 Ill. 2d 204,
399 N.E.2d 596 (1979); Restatement (Second) of Torts §§ 323,
324A. For reasons that will soon become clear, we need not decide
how Illinois would today deal with claims based on insurers’
inspections.
No. 04-2401 3
Having resolved the counterclaim, the district judge decided
to enter a partial final judgment under Fed. R. Civ. P. 54(b).
2004 U.S. Dist. LEXIS 9305 (N.D. Ill. May 20, 2004). The
judge recognized that the claim and counterclaim have many
issues in common but thought a separate judgment proper
because the only issue actually resolved—whether the in-
surer had a duty to take care for Bobst’s benefit— affects
the counterclaim alone. At oral argument we questioned
appellate jurisdiction, however, and directed the parties to
file supplemental memoranda. After considering these we
conclude that Rule 54(b) does not permit entry of a partial
final judgment on a claim for contribution.
Rule 54(b) permits entry of a partial final judgment only
when all of one party’s claims or rights have been fully ad-
judicated, or when a distinct claim has been fully resolved
with respect to all parties. These requirements are designed
to ensure that the claim is distinct—the sort of dispute that,
but for the joinder options in the Rules of Civil Procedure,
would be a stand-alone lawsuit. Otherwise Rule 54(b) would
amount to nothing more than an option on the district
court’s part to certify issues for interlocutory appeal. Rule
54(b) authorizes only appeals from final decisions, however;
its jurisdictional counterpart is 28 U.S.C. §1291, see Sears,
Roebuck & Co. v. Mackey, 351 U.S. 427, 435 (1956), and
interlocutory appeals in actions for damages must proceed
under §1292(b), which requires not only a demonstration
that the issue for appeal has general importance (and can
accelerate resolution of the case) but also the appellate
court’s permission. To keep Rule 54(b) distinct from §1292(b),
we have insisted that Rule 54(b) be employed only when the
subjects of the partial judgment do not overlap with those
ongoing in the district court. See, e.g., Horn v. Transcon Lines,
Inc., 898 F.2d 589 (7th Cir. 1990); Jack Walters & Sons
Corp. v. Morton Building, Inc., 737 F.2d 698 (7th Cir. 1984).
Contribution claims not only overlap but also depend on
the principal claims in the suit. There can be no contribu-
tion without established underlying liability. See Cooper
4 No. 04-2401
Industries, Inc. v. Aviall Services, Inc., No. 02-1192 (U.S
Dec. 13, 2004). Unless Bobst is liable to Wrigley (and so,
derivatively, to Factory Mutual as its subrogee), Factory
Mutual cannot be liable to Bobst in contribution. It makes
little sense for an appellate court to address contribution
when that subject may be made academic by the outcome of
trial. Everything we do on this appeal could be wasted.
Resolution of disputes about contribution and indemnity
usually should wait until the underlying claim has been
decided. See, e.g., Interstate Power Co. v. Kansas City Power
& Light Co., 992 F.2d 804, 807-08 (8th Cir. 1993);
Corrosioneering, Inc. v. Thyssen Environmental Systems,
Inc., 807 F.2d 1279 (6th Cir. 1986). Although district courts
may think it prudent to alter this order, if by doing so they
can simplify a trial, it is imprudent to dispatch the contribu-
tion or indemnity claim for immediate appeal, as appellate
resolution may never be necessary. This kind of entan-
glement between the underlying claim and a demand for
indemnity led us to hold in McMunn v. Hertz Equipment
Rental Corp., 791 F.2d 88, 90-91 (7th Cir. 1986), that Rule
54(b) may not be used to enter a partial final judgment
limited to indemnity, while the principal claim remains un-
resolved. Contribution should be treated the same way.
Contribution, like indemnity, is impossible without some
underlying liability. More than that, the proceedings to fix
the amount of that liability will cover many of the issues
that would matter to contribution. This case provides a
vivid illustration. Bobst seeks contribution from Factory
Mutual on the theory that its inspections failed to detect
and prevent whatever led to the explosion. Bobst makes
essentially the same contention defending the main claim,
in which Factory Mutual is subrogated to Wrigley’s contract
and tort rights. Here Bobst labels the argument “assump-
tion of risk”—demonstrated, Bobst insists, by Wrigley’s
decision to hire an inspector yet not carry out all of the
inspector’s recommendations. Bobst also contends that
No. 04-2401 5
Wrigley’s damages should be reduced on the theory that it
bears part of the fault. What part? Why, the part repre-
sented by not having an inspector find and prevent the
explosion! In offering these defenses, Bobst relies on the
same contracts and letters that it argues on this appeal
show that Factory Mutual’s duty of care runs at least to
Wrigley, and thus offers some derivative benefit to Bobst
itself. Thus Bobst’s demand for contribution is neither logic-
ally nor factually separate from Factory Mutual’s demands
in the main suit. Both should be handled on one appeal—
from the real final judgment in the whole case.
Recognizing the problems entailed in treating contribu-
tion as a separate “claim” for purposes of Rule 54(b), Bobst
contended in its post-argument memorandum that jurisdic-
tion could be sustained under the rule’s separate-party
provision. According to Bobst, the district court has resolved
all claims involving Factory Mutual Engineering Associa-
tion (FMEA), which it describes as “an unincorporated
association owned by four insurance companies.” True
enough, FMEA is not a party in the proceedings ongoing in
the district court—but this is because it has never been a
party to the claim, the counterclaim, or the third-party
practice, as it does not exist. Bobst’s brief says that the four
companies “merged with Factory Mutual Ins. Co. in July of
1999, before the incident in question occurred and before
the lawsuit was filed.” So it was never named as a party.
Perhaps the Rule 54(b) judgment wrapped up all theories of
liability on account of acts that FMEA performed while it
existed. But it did not dispose of all claims by and against
FMEA as a party, for it never has been one. Its assets and
liabilities were merged into Factory Mutual, which remains
a party in the district court.
Because there is no appellate jurisdiction, we cannot ex-
plore the question whether there may be difficulties in sub-
ject-matter jurisdiction as well. Some of the additional par-
ties are limited liability companies. Factory Mutual and
6 No. 04-2401
Bobst have treated them as corporations, with two citizen-
ships: state of incorporation and principal place of business.
They are not; for jurisdictional purposes they are part-
nerships, and the citizenship of every member must be
ascertained. See Cosgrove v. Bartolotta, 150 F.3d 729 (7th
Cir. 1998). Perhaps some or all of the third-party practice
could be supported by the supplemental jurisdiction, but the
limitations in 28 U.S.C. §1367(b) must be considered and,
so far, have not been. The district judge should look at these
potential problems before the case proceeds any further.
The appeal is dismissed for want of jurisdiction.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—12-21-04