Deborah Amling v. Harrow Industries, LLC

943 F.3d 373

• Court: Court of Appeals for the Seventh Circuit
• Decided: November 19, 2019
• Docket: 19-1805
• Status: Published

Opinion

In the

United States Court of Appeals For the Seventh Circuit ____________________ No. 19‐1805 DEBORAH AMLING, personally, and as Personal Representative for the ESTATE OF ROBERT M. AMLING, Plaintiffs‐Appellants,

v.

HARROW INDUSTRIES LLC, et al., Defendants‐Appellees. ____________________

Appeal from the United States District Court for the Central District of Illinois. No. 3:18‐cv‐03108‐SEM‐TSH — Sue E. Myerscough, Judge. ____________________

ARGUED SEPTEMBER 23, 2019 — DECIDED NOVEMBER 19, 2019 ____________________

Before EASTERBROOK, HAMILTON, and ST. EVE, Circuit Judges. HAMILTON, Circuit Judge. Deborah Amling and her hus‐ band Robert sued Harrow Industries and other businesses in an Illinois state court for causing Robert to develop mesothe‐ lioma by exposing him to asbestos. Two years later, the Am‐ lings sued Harrow again, this time in federal court, seeking a declaratory judgment on the meaning of an asset‐purchase 2 No. 19‐1805

agreement between Harrow and another company, Nexus, also a defendant in the Amlings’ state suit. The district judge thought the declaratory judgment action unripe and dis‐ missed it. Even if it were ripe, the judge ruled in the alterna‐ tive, she would decline to exercise jurisdiction over it. The Amlings appealed. Robert died while this appeal has been pending; Deborah now prosecutes the state and the federal lawsuits in her own right and as representative of Robert’s es‐ tate. We affirm. It is virtually certain that the Amlings’ state suit will answer the question presented by their federal suit: whether under the terms of the asset‐purchase agreement Harrow or Nexus could be liable for their injuries. That fact makes this a live controversy but simultaneously justifies the district court’s sound exercise of its discretion in deciding not to issue a declaratory judgment. I. Factual and Procedural Background To determine whether subject matter jurisdiction exists, a court may look past the complaint to any pertinent evidence. Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999). The com‐ plaint’s jurisdictional allegations are taken as true, though, unless the defendant offers evidence calling jurisdiction into question. Id. at 856. The undisputed jurisdictional facts in this case are taken from the Amlings’ federal and state complaints, as well as from the docket of a related federal case and certain public documents, all properly subject to the district court’s judicial notice. Robert Amling began working in the horticulture industry in 1965 and continued in that career for the rest of his working life. At one point, Robert worked for National Greenhouse No. 19‐1805 3

Company, whose products allegedly contained asbestos to which he was exposed during his work. Sometime between 1965 and 1990, National Greenhouse’s assets and liabilities were transferred to Harrow Products, a division of Harrow Industries. In November 1990, Harrow Products executed an asset‐purchase agreement with Nexus, transferring all of National Greenhouse’s assets and, critically for our purposes, some of its liabilities to Nexus, as defined by the agreement. Robert Amling was diagnosed with mesothelioma in 2015. In 2016, the Amlings sued Harrow, Nexus, and others in Illi‐ nois state court, alleging the defendants caused Robert’s mes‐ othelioma by tortiously exposing him to asbestos. In 2017, Harrow filed a declaratory judgment action against Nexus in the Central District of Illinois. Harrow sought a declaration that any liability of National Greenhouse to the Amlings had passed from Harrow to Nexus under the terms of the 1990 asset‐purchase agreement. Apprised of Har‐ row’s suit, the Amlings successfully sought a stay of their own suit and unsuccessfully moved to intervene in Harrow’s. Har‐ row voluntarily dismissed its action in 2018 without a deci‐ sion on the merits. The Amlings then filed their own declaratory judgment action in the same federal district court—the case before us now. The district court had jurisdiction of the suit under 28 U.S.C. § 1332. The Amlings’ suit is basically a mirror image of Harrow’s: it seeks a declaration that under the terms of the 1990 agreement, Harrow, not Nexus or any other entity, is li‐ able for National Greenhouse’s torts alleged in the Amlings’ state complaint. (Schlage Lock Company is also named as a 4 No. 19‐1805

defendant here as Harrow’s alter ego or successor in interest; we need not discuss it further.) The Amlings’ state case is still stayed. Prudently policing its own jurisdiction, the district court ordered the parties to address whether the case was justicia‐ ble. After briefing, the court concluded it was not because there not yet a ripe controversy suitable for judicial action. In the alternative, the court held it would decline to exercise whatever jurisdiction it might have had. The court dismissed the action without prejudice. We have jurisdiction of the Am‐ lings’ appeal under 28 U.S.C. § 1291. II. Analysis The Declaratory Judgment Act provides, with irrelevant exceptions: “In a case of actual controversy within its jurisdic‐ tion,” a district court “may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a) (emphases added). The two italicized phrases are the subjects of this appeal. We address each in turn. A. “Case of Actual Controversy” Article III of the Constitution limits the jurisdiction of fed‐ eral courts to “cases” and “controversies.” Rock Energy Coop. v. Village of Rockton, 614 F.3d 745, 748 (7th Cir. 2010). The phrase “case of actual controversy” in the Declaratory Judg‐ ment Act “refers to the type of ‘Cases’ and ‘Controversies’ that are justiciable under Article III.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007), citing Aetna Life Ins. Co. v. Ha‐ worth, 300 U.S. 227, 240 (1937). The requirements of the Act and those of Article III are therefore coextensive. See Aetna, 300 U.S. at 239–41. We review de novo whether these No. 19‐1805 5

requirements have been met. Deveraux v. City of Chicago, 14 F.3d 328, 330 (7th Cir. 1994). One aspect of the case‐or‐controversy requirement is ripe‐ ness. Central States, Southeast and Southwest Areas Health and Welfare Fund ex rel. Bunte v. American Int’l Group, 840 F.3d 448, 451 n.2 (7th Cir. 2016), citing Metropolitan Washington Airports Auth. v. Citizens for Abatement of Aircraft Noise, Inc., 501 U.S. 252, 265 n.13 (1991). Declaratory judgment actions are ripe and otherwise justiciable when “‘the facts alleged, under all the circumstances, show that there is a substantial contro‐ versy, between parties having adverse legal interests, of suffi‐ cient immediacy and reality to warrant the issuance of a de‐ claratory judgment.’” MedImmune, 549 U.S. at 127, quoting Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941). There must be a “definite and concrete,” “real and sub‐ stantial” dispute that “touches the legal relations of parties having adverse legal interests” and “admits of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hy‐ pothetical state of facts.” Id. (cleaned up), quoting Aetna, 300 U.S. at 240–41. These general phrases take on more concrete meaning in specific cases.1

1 The Supreme Court generally treats ripeness as an aspect of subject‐ matter jurisdiction. In a few cases, however, typically presenting issues of national importance that would inevitably be decided soon, the Court has treated ripeness not so much as binary and jurisdictional but instead as allowing some room for the exercise of pragmatic judgment about justici‐ ability. See, e.g., Buckley v. Valeo, 424 U.S. 1, 117–18 (1976) (“this is a ques‐ tion of ripeness, rather than lack of case or controversy under Art. III”; constitutional challenge to method of selecting members of new Federal Election Commission had become more ripe while appeal was pending under special statute for expedited judicial review); Regional Rail 6 No. 19‐1805

Whether the 1990 asset‐purchase agreement provided that Harrow or Nexus would be liable to the Amlings for torts by National Greenhouse is such a ripe and specific controversy. We do not yet know whether National Greenhouse tortiously caused Robert’s mesothelioma. We know that, if it did, Har‐ row or Nexus may be liable for it. Interpreting the 1990 agree‐ ment is necessary and sufficient to find out which. Moreover, it is virtually certain that, absent federal inter‐ vention, the question will be answered in the ordinary course of the ongoing state litigation. Harrow and/or Nexus have every reason to insist on its judicial determination. As noted, Harrow has already tried once to secure one. As a matter of procedure such determination may be made “at any stage of the cause, before or after judgment, as the ends of justice may require,” 735 Ill. Comp. Stat. 5/2‐407 (nonjoinder and misjoin‐ der of parties), and as a matter of substance, the determination could be made today. The meaning of the 1990 agreement as applied to the Amlings’ claims waits on no future condition.

Reorganization Act Cases, 419 U.S. 102, 140 (1974) (question of ripeness was jurisdictional but also called for prudential judgment; Takings Clause challenge to Act had become inevitable while appeal of dismissal for lack of ripeness was pending). Especially in Declaratory Judgment Act juris‐ prudence, where the Act predated modern refinements of different threads of justiciability doctrine, including ripeness, mootness, standing, and even abstention, the distinctions among those doctrines are not al‐ ways crisp. See, e.g., MedImmune, 549 U.S. at 128 n.8 (reversing dismissal of action; “standing and ripeness boil down to the same question in this case”); Rock Energy, 614 F.3d at 748 (where district court dismissed for lack of standing, we affirmed for lack of ripeness). Because this case presents a ripe controversy, we need not try to resolve here the tension in the case law between jurisdictional purity and occasional pragmatic flexibility. No. 19‐1805 7

Ripeness and other justiciability requirements bar a fed‐ eral court from deciding a question that depends on so many future events that a judicial opinion would be “advice about remote contingencies.” Rock Energy, 614 F.3d at 748, quoting Meridian Sec. Ins. v. Sadowski, 441 F.3d 536, 538 (7th Cir. 2006). There is nothing remote about a plaintiff’s asking which of two defendants she is currently suing is the right one to sue. In a practical sense, there is nothing contingent about it either. If the plaintiff does not raise the question, one or both defend‐ ants almost certainly will. The parties and the district court focused on the extensive case law dealing with the justiciability of disputes among tort victims, insured tortfeasors, and insurers. Such disputes are often the subject of declaratory judgment cases. Those cases teach that a live dispute between an insurer and its insured over the insurer’s duties to defend and indemnify the insured against its victim’s tort claims is also a live dispute between each of them and the victim. Maryland Casualty Co., 312 U.S. at 273–74; Bankers Trust Co. v. Old Republic Ins. Co., 959 F.2d 677, 680–82 (7th Cir. 1992); Truck Insurance Exchange v. Ashland Oil, Inc., 951 F.2d 787, 789 (7th Cir. 1992); Hawkeye‐Security Ins. Co. v. Schulte, 302 F.2d 174, 176–77 (7th Cir. 1962). As we summarized in Truck Insurance Exchange, “a tort vic‐ tim has a practical, albeit only a potential, financial interest in the tortfeasor’s insurance policy, and the impairment of such an interest is an injury that will support standing under Arti‐ cle III.” 951 F.2d at 789. And again in Bankers Trust: a tort vic‐ tim “has a legally protectable interest” in the tortfeasor’s in‐ surance policy even before she has reduced her tort claim to judgment, and “[s]uch an interest is all one needs to bring a dispute that seriously threatens it within the scope of Article 8 No. 19‐1805

III.” 959 F.2d at 682. If a tort victim has a protectable interest in an indemnification contract, which assumes liability and determines merely who will pay for it, a fortiori she has a pro‐ tectable interest in a contract that determines who holds the underlying liability in the first place. True, “[w]e regularly say that decisions about indemnity should be postponed until the underlying liability has been established,” Lear Corp. v. Johnson Elec. Holdings Ltd., 353 F.3d 580, 583 (7th Cir. 2003) (collecting cases), though Bankers Trust shows the rule is “general” rather than “absolute.” 959 F.2d at 680. The general rule exists because, until a case proceeds to judgment, “the precise ground of liability, and thus the rela‐ tion of the insured’s liability to the policy’s coverage and ex‐ clusions, is uncertain.” Meridian Sec. Ins., 441 F.3d at 538. Here, by contrast, the question concerns the operation of the 1990 asset‐purchase agreement on the day it was executed. For these reasons, we disagree with the district court’s conclusion that the Amlings’ declaratory judgment action was not a “case of actual controversy” within the meaning of the Declaratory Judgment Act and Article III. It presents a ripe controversy. That is not the end of this appeal, however, be‐ cause the district court ruled in the alternative that it would not exercise whatever jurisdiction it had over the Amlings’ ac‐ tion. We agree with that ruling. B. “May Declare” The Declaratory Judgment Act “says only that the court ‘may declare the rights and other legal relations of any inter‐ ested party, not that it must do so.’” Haze v. Kubicek, 880 F.3d 946, 951 (7th Cir. 2018), quoting MedImmune, 549 U.S. at 136 (internal citation and quotation marks omitted). This No. 19‐1805 9

statutory language has long been understood to confer on fed‐ eral courts “unique and substantial discretion in deciding whether to declare the rights of litigants.” Id., quoting MedIm‐ mune, 549 U.S. at 136. We review a district court’s decision not to declare the rights of litigants for abuse of that discretion. Envision Healthcare, Inc. v. PreferredOne Ins. Co., 604 F.3d 983, 985–86 (7th Cir. 2010). Before turning to the district court’s exercise of its discre‐ tion in this case, we must address Harrow’s argument that, coming on the heels of its no‐jurisdiction ruling, the court’s alternative ruling was advisory and unreviewable. We disa‐ gree with that conclusion. Among different “threshold grounds for denying audience to a case on the merits,” there is no mandatory priority. Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 431 (2007), quoting Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 585 (1999). For example, a court need not decide whether it has personal jurisdiction over the defendant before dismissing for forum non conveniens, id. at 435–36, nor whether non‐federal claims come within its sup‐ plemental jurisdiction before exercising its discretion not to decide them after independent bases for federal jurisdiction have fallen away, see Moor v. Alameda County, 411 U.S. 693, 715 (1973), nor whether the plaintiff has Article III standing before dismissing on grounds of sovereign immunity. Meyers v. Oneida Tribe of Indians of Wis., 836 F.3d 818, 821–23 (7th Cir. 2016). Nor, we conclude, must a court decide that a declara‐ tory judgment action presents a “case of actual controversy” before exercising its discretion not to decide it. The district court’s discretion on this point was guided by what is now known as the Wilton‐Brillhart doctrine. See Wilton v. Seven Falls Co., 515 U.S. 277 (1995); Brillhart v. Excess 10 No. 19‐1805

Insurance Co., 316 U.S. 491 (1942). While there are “no set cri‐ teria” under Wilton‐Brillhart for determining proper declina‐ tion, the “classic example” is declining to hear a federal de‐ claratory action while an action pending in state court be‐ tween the same parties will answer “the same precise legal question.” Envision Healthcare, 604 F.3d at 986–87. This case is such a “classic example.” The Amlings’ declar‐ atory judgment action is basically an attempt at reverse certi‐ fication: asking the district court to decide a discrete question of state contract law for use by the same parties in ongoing state‐court litigation of state‐law tort claims. The district court did not abuse its discretion in deciding not to answer that question of state law that almost certainly will be answered by the state courts. Its judgment of dismissal is therefore AFFIRMED. No. 19‐1805 11

ST. EVE, Circuit Judge, concurring. I agree that the district court did not abuse its discretion in declining to exercise its jurisdiction over the Amlings’ declaratory judgment action under the Wilton‐Brillhart doctrine, and thus concur in the judgment. I write separately, however, because I disagree that the Amlings had standing to bring this case in the first place. Again, in the federal suit, the Amlings seek a declaration re‐ garding the rights and obligations as between Harrow and Nexus based on an asset purchase agreement to which the Amlings are neither a party nor a third‐party beneficiary. In support of standing, the Amlings rely entirely on cases in‐ volving insurance contracts. See, e.g., Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270 (1941); Bankers Tr. Co. v. Old Republic Ins. Co., 959 F.2d 677 (7th Cir. 1992); Truck Ins. Exch. v. Ashland Oil, Inc., 951 F.2d 787 (7th Cir. 1992); Hawkeye‐Sec. Ins. Co. v. Schulte, 302 F.2d 174 (7th Cir. 1962). It is, of course, well‐established that a tort victim “has a legal right to protect his potential interest in [an insurance] policy.” Truck Ins. Exch., 951 F.2d at 789. But “[t]hat right is conferred in recog‐ nition that a tort victim has a practical, albeit only a potential, financial interest in the tortfeasor’s insurance policy, and the impairment of such an interest is an injury that will support standing under Article III.” Id. (citing Maryland Casualty, 312 U.S. at 270; and Hawkeye‐Security, 302 F.2d at 176–77). The Amlings have not cited, and I have not found, any authority conferring a similar right on a nonparty to a contract outside of the insurance context, nor identified any principle that would do so. And, even so, the Amlings have not articulated how any alleged “interest” (an interest they also have not at‐ tempted to define) may be impaired. Unlike a tort victim and a tortfeasor’s insurer, the Amlings can—and have—sue both Harrow and Nexus directly for any alleged torts. See id. (“[A]n 12 No. 19‐1805

insured’s tort victim cannot (except in direct‐action states) sue the insurance company directly.”); Zegar v. Sears Roebuck & Co., 570 N.E.2d 1176, 1177 (Ill. App. Ct. 1991) (“In Illinois, di‐ rect actions against insurance companies are against public policy.”). The Amlings do not have a legally protectable inter‐ est in the 1990 asset purchase agreement, and thus lacked standing to bring the federal lawsuit. I would affirm the dis‐ trict court’s judgment on that basis.