7th Circuit Rejects Attempt to Reopen Final Judgment Under Rule 54(b)

12 November 2014 Wisconsin Appellate Law Blog

Last month, we wrote about the Seventh Circuit’s willingness to reopen a 23-year old judgment under Rule 60 of the Federal Rules of Civil Procedure. But in Selective Insurance Co. v. City of Paris, the court reminded parties once again that modifying a final judgment is the exception, not the rule. No. 13-1699 (7th Cir. Oct. 2, 2014).

In 1987, two individuals were wrongfully arrested for, prosecuted for, and convicted of arson and murder in the small town of Paris, Illinois. After many years of appeals and post-conviction challenges, the two were exonerated and released from prison in 2004 and 2008. Unsurprisingly, they filed suit against the City of Paris.

Just as unsurprisingly, the City turned to its insurers to defend and indemnify it. There was only one question: Which insurer? Western World insured the city during the 1987 convictions; Selective insured the city during the 2004 and 2008 exonerations; and Allianz insured the city during an intervening period.

The insurers all brought declaratory-judgment actions in federal district court seeking judgments that each had no duty to defend. The district court ruled that, under Illinois law, Western World had the duty to defend because it insured the city when the prosecution first was initiated. No party took an appeal from this decision, entered in May 2010. 

Meanwhile, in unrelated cases, the Seventh Circuit subsequently held that under Illinois law, a malicious-prosecution claim “occurs” for insurance purposes when the underlying conviction is invalidated or terminated. Had the district court applied this rule, Selective, not Western World, would have had the duty to defend the City of Paris.

Thirty-three months later, the City tried to rely on this new ruling, which would require Selective to defend and indemnify it. But how could it do so? Generally, there are two methods to reopen a final judgment, neither of which could apply here. Rule 59(e) gives a court ample discretion to alter or amend its judgment, but only within 28 days of its entry. Rule 60(b) allows the court to relieve a party from a final judgment over a longer time period (even 23 years later), but not based on an intervening change in the law.

So the City’s options were limited. Instead of relying on Rule 59 or 60, it instead argued that the summary-judgment decision (and the judgment entered on that decision) was not a final judgment at all. Under Rule 54(b), “any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than 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 a judgment adjudicating all the claims and all the parties’ rights and liabilities.” Under the City’s theory, because the court’s summary-judgment ruling did not address Selective’s request for damages in the “Prayer for Relief” section of Selective’s complaint, the ruling did not address “all the claims” in the case and was therefore not final.

The Seventh Circuit rejected this theory. First, it noted that a separate “judgment” was entered in accordance with Rule 58 of the Federal Rules, indicating that the district court believed that the case was final. Second, the Seventh Circuit determined that a request for monetary relief in a prayer for damages was not a separate “claim” under Rule 54(b).

At bottom, the court recognized that this was a roundabout attempt to secure relief that was barred by Rules 59 and 60. “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.” Slip Op. 13.

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