Cooke v. Jackson Nat'l Life Ins. Co.

• Decision Date: 26 March 2019
• Docket Number: Nos. 18-3527 & 18-3583,s. 18-3527 & 18-3583
• Citation: 919 F.3d 1024
• Parties: Norma L. COOKE, Plaintiff-Appellee, Cross-Appellant, v. JACKSON NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

919 F.3d 1024

Norma L. COOKE, Plaintiff-Appellee, Cross-Appellant,

v.JACKSON NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellant, Cross-Appellee.

Nos. 18-3527 & 18-3583

United States Court of Appeals, Seventh Circuit.

Submitted March 12, 2019

Decided March 26, 2019

Steven Bradley Pollack, Attorney, POLLACK LAW FIRM, Lake Bluff, IL, for Plaintiff-Appellee.

Alexander David Marks, Attorney, BURKE, WARREN, MACKAY & SERRITELLA, P.C., Chicago, IL, for Defendant-Appellant.

Jeffrey S. Marks, Attorney, BUSSE BUSSE & GRASSE, Chicago, IL, Steven Bradley Pollack, Attorney, POLLACK LAW FIRM, Lake Bluff, IL, for Plaintiff-Appellant.

Before Easterbrook and Barrett, Circuit Judges, and Stadtmueller, District Judge.^*

Easterbrook, Circuit Judge.

In this suit under the diversity jurisdiction, a district court ordered Jackson National Life Insurance to pay about $ 191,000 on a policy of life insurance.243 F. Supp. 3d 987(N.D. Ill.2017).The court added that the insurer had litigated unreasonably and ordered it to reimburse Cooke’s legal fees under 215 ILCS 5/155.(Throughout this opinion "Cooke" refers to plaintiffNorma Cooke, the widow of decedent Charles Cooke.)The insurer paid the death benefit and appealed to contend that the court should not have tacked on attorneys’ fees.But because the district court had not specified how much the insurer owes, we dismissed the appeal as premature.882 F.3d 630(7th Cir.2018).

The district court then awarded $ 42,835 plus interest.2018 WL 6067248, 2018 U.S. Dist. LEXIS 197908(N.D. Ill.Nov. 20, 2018).The insurer filed another appeal (No. 18-3527), which we resolve using the briefs filed in its initial appeal (No. 17-2080).Cooke filed a cross-appeal (No. 18-3583).Her lead contention is that the district court should have awarded a higher death benefit, but that argument comes too late.As our first decision explains, a judgment on the merits and an award of attorneys’ fees are separately appealable.Budinich v. Becton Dickinson & Co. , 486 U.S. 196, 108 S.Ct. 1717, 100 L.Ed.2d 178(1988).Cooke did not appeal within 30 days of the district court’s order specifying the amount payable on the policy, and a later award of attorneys’ fees does not reopen that subject.

Instead of seeking additional fees, Cooke’s brief in No. 18-3583 is principally devoted to contending that the judge did the right thing for the wrong reason.She made a similar argument in response to the insurer’s initial appeal.We turn to the award under § 5/155 and consider all of the arguments in all of the briefs filed in Nos. 17-2080and18-3583.

Section 5/155(1) provides:

In any action by or against a company wherein there is in issue the liability of a company on a policy or policies of insurance or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, and it appears to the court that such action or delay is vexatious and unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts:

(a) 60% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;

(b) $ 60,000;

(c) the excess of the amount which the court or jury finds such party is entitled to recover, exclusive of costs, over the amount, if any, which the company offered to pay in settlement of the claim prior to the action.

The district judge understood this statute to allow an award either for pre-litigation conduct or for behavior during the litigation.243 F. Supp. 3d at 1006.He wrote that "Jackson’s denial of coverage was based on a good-faith dispute regarding the nature of Cooke’s payments"( ibid . ) and that the insurer could not properly be penalized for insisting that a judge resolve the parties’ dispute.But, the judge added, "Jackson’s behavior in this litigation has been much less reasonable."Id . at 1007.

The judge faulted the insurer because it opposed Cooke’s motion for judgment on the pleadings without attaching the full policy to its papers.Jackson observed that Cooke had not supplied the court with all of the pertinent writings (which included an electronic funds transfer agreement as well as the policy) but failed to do so itself, until the summary-judgment stage, and the judge thought this unreasonable.Ibid .The judge summed up ( ibid . ):

This Court believes that this case could have been resolved on Plaintiff’s motion for judgment on the pleadings one year ago.This is a straightforward insurance policy dispute with essentially undisputed facts, and the primary issue is the interpretation of the policy.Had Jackson provided with its response the full document to be construed, or clearly identified those documents it had already turned over that it contended were necessary to interpret the policy, this case may have been resolved one year ago.By frustrating Plaintiff’s motion solely by pointing to the incomplete policy and then coyly refusing to identify the deficiency for months thereafter, Defendant unnecessarily and unreasonably extended this litigation for no reason related to its good-faith position on the merits.

The district court assumed that § 5/155 governs the conduct of litigation in federal court.It did not explain why.Many cases hold that federal, not state, rules apply to procedural matters—such as what ought to be attached to pleadings—in all federal suits, whether they arise under federal or state law.See, e.g., Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co ., 559 U.S. 393, 130 S.Ct. 1431, 176 L.Ed.2d 311(2010);Burlington Northern R.R. v. Woods , 480 U.S. 1, 107 S.Ct. 967, 94 L.Ed.2d 1(1987);Walker v. Armco Steel Corp ., 446 U.S. 740, 100 S.Ct. 1978, 64 L.Ed.2d 659(1980);Mayer v. Gary Partners & Co ., 29 F.3d 330(7th Cir.1994).Federal rules and doctrines provide ample means to penalize unreasonable or vexatious conduct in federal litigation.The district court’s decision to rely on state rather than federal law was a mistake.

Cooke tells us that TKK USA, Inc. v. Safety National Casualty Corp ., 727 F.3d 782, 795(7th Cir.2013), has established that § 5/155 regulates the conduct of federal litigation.We do not read it so.The district judge in TKK cited § 5/155 in support of an award against an insurer that filed unnecessary and unreasonable papers.In contesting that award, the insurer did not rely on Shady Grove and its predecessors.Instead it argued that its litigation strategy had been reasonable.We agreed with the district court on that score, and by doing so we did not resolve an issue (the extent to which state law governs the conduct of federal litigation) that was neither briefed by the parties nor mentioned in the opinion.

It has long been understood that federal judges have a common-law power (sometimes called an inherent power) to impose sanctions on parties that needlessly run up the costs of litigation.SeeChambers v. NASCO, Inc ., 501 U.S. 32, 111 S.Ct. 2123, 115 L.Ed.2d 27(1991).The parties and the panel in TKK understandably did not focus on the source of law, when § 5/155andChambers came to the same thing.But the district court in our case did not invoke Chambers or treat § 5/155 as a doppelganger of the Chambers doctrine.Instead it penalized Jackson for failing to attach evidence to a document at the pleading stage.

The initial question should have been whether the Rules of Civil Procedure require a defendant to attach documents to a filing that opposes a plaintiff’s request, under Rule 12(c), for judgment on the pleadings.The answer is no. Quite the contrary.Although attaching documents is permissible, the usual consequence is to defeat the motion and require the case to proceed to summary judgment.Rule 12(d) reads:

RESULT OF PRESENTING MATTERS OUTSIDE THE PLEADINGS .If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.

Courts occasionally hold that, despite the word "must" in Rule 12(d), presenting the court with matters outside the pleadings does not inevitably move the suit to the summary-judgment stage.See, e.g., Yassan v. J.P. Morgan Chase & Co ., 708 F.3d 963, 975(7th Cir.2013).But conversion to summary judgment is the norm under Rule 12(d), which makes it hard to see how Jackson can be penalized for taking a step (not attaching documents) that had the same effect as attaching them: moving to summary judgment.If the district judge believed that § 5/155 changes the rules for what documents must be attached to which filings, and with what effect, it was giving state law forbidden priority over a federal rule.

Perhaps the district judge did not mean to penalize the insurer just for its failure to attach documents to papers opposing Cooke’s motion.Several passages in the judge’s opinion imply that the problem was Jackson’s failure to identify all of the pertinent documents, which had already been turned over under Fed. R. Civ. P. 26(a), so that the parties could focus their efforts on them.We agree with the district judge that Jackson could and should have done this earlier than it did.Imposing sanctions for failing to point to the right documents could have been justified under Chambers .But Cooke has not used this doctrine to defend the district court’s decision or asked us to remand so that the judge can consider Chambers .Instead she relies on Fed. R. Civ. P. 11, 26(g)(3), and 37(b)(2)(C), plus 28 U.S.C. § 1927.

Rule 11 concerns the pleadings, and neither Cooke nor the district judge identified any problem with the insurer’s pleadings.Nor did Cooke make the motion required by Rule 11(c)(2).

Rule 26(g)(3) reads:

If a certification violates this rule without substantial

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