McMunn v. Hertz Equipment Rental Corp.
| Decision Date | 20 May 1986 |
| Docket Number | No. 85-2502,85-2502 |
| Citation | 791 F.2d 88 |
| Parties | Norman McMUNN, Plaintiff, v. HERTZ EQUIPMENT RENTAL CORPORATION, Defendant, Third-Party-Plaintiff-Appellee, v. EICHLEAY CORPORATION, Third-Party-Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Carl N. Carpetner, Galvin, Galvin & Leeney, Hammond, Ind., for third-party-defendant-appellant.
Joseph Stalmack, Hammond, Ind., for defendant, third-party-plaintiff-appellee.
Before BAUER and POSNER, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.
This appeal requires us to consider a difficult issue of Indiana law pertaining to indemnity contracts--provided we satisfy ourselves that we have jurisdiction of the appeal.
McMunn was injured at a construction site while operating a "bobcat loader" that his employer, Eichleay, a construction contractor, had leased from Hertz and was using in the performance of a construction contract with Inland Steel. McMunn sued Hertz in state court, charging it with negligence in having failed to discover that the loader was defective. Hertz removed the case to federal court on the basis of diversity of citizenship and then impleaded Eichleay under Rule 14(a) of the Federal Rules of Civil Procedure, pointing out that the lease contained a clause in which Eichleay had promised to indemnify Hertz for the consequences of any tort suit brought against Hertz arising out of the lease. Eichleay defended on the ground that the clause was invalid under Indiana law. The district court disagreed and granted summary judgment for Hertz on its third-party complaint. The court then directed the entry of judgment against Eichleay, accompanied by a finding that there was no just reason for delay. This was done so that Eichleay could take an immediate appeal under Rule 54(b) of the Federal Rules of Civil Procedure even though McMunn's suit against Hertz remained (and remains) pending in the district court.
Rule 54(b) allows an immediate appeal from a judgment that resolves a separate claim, or a dispute with a separate party, even though the rest of the litigation is still going on in the district court. The judgment for Hertz resolves Hertz's claim against Eichleay, but the question is whether it does so finally, given that the judgment cannot become final even as between these two parties until the dispute with McMunn is resolved. If Hertz wins, there will be no damage judgment for Eichleay to indemnify; even if Hertz loses, until that happens and Hertz's liability to McMunn is thereby both established and quantified, Eichleay will not know how much it owes Hertz. Although Rule 54(b) dispenses with finality in the sense of completion of the entire litigation, it still requires finality as to the separate claim, or the dispute between separate parties, in regard to which the judgment sought to be appealed under the rule is entered. The rule says this; and so does 28 U.S.C. Sec. 1291, which circumscribes the rule, see Fed.R.Civ.P. 82. Of course the word "final" is not self-defining; its meaning depends on practical considerations such as that the federal courts of appeals do not have time to decide appeals that may become moot because the order sought to be appealed is conditional on an event that may never come to pass. A contingent judgment is not final till the contingency materializes. Freeman v. Kohl & Vick Machine Works, Inc., 673 F.2d 196, 200 (7th Cir.1982) (per curiam); Minnesota v. Pickands Mather & Co., 636 F.2d 251, 253 (8th Cir.1980); Williams v. Ford Motor Credit Co., 627 F.2d 158, 160-61 (8th Cir.1980); cf. Allegheny Airlines, Inc. v. LeMay, 448 F.2d 1341, 1343 (7th Cir.1971) (per curiam).
Admittedly, this strong conclusion is inconsistent with several cases, cited in 6 Moore's Federal Practice p 54.36, at p. 605 n. 12 (2d ed.1985) (and see additional citations in the 1984-1985 Cum.Supp. to Moore's), which have allowed the use of Rule 54(b) to make an order dismissing a third-party claim appealable immediately. But they may be distinguishable from a case such as this where the order grants the third-party claim. An order dismissing a third-party claim is definitive as to the third-party defendant; he is out of the case. An order granting such a claim keeps the third-party defendant in the case until the case is over and the defendant knows how much if anything he must pay, for until the main claim is adjudicated the amount to be indemnified by the third-party defendant will be unknown. To allow an appeal from such an order might therefore violate the rule that an order which determines liability but not damages is not a final decision on the claim. See, e.g., Dimmitt & Owens Financial, Inc. v. United States, 787 F.2d 1186, 1190 (7th Cir.1986), and cases cited there. There is, however, an exception to this rule for cases where the computation of damages is mechanical, and therefore unlikely to produce a second appeal. See Parks v. Pavkovic, 753 F.2d 1397, 1401-02 (7th Cir.1985), and cases cited there. The relevance of a second appeal's being unlikely is that the main reason for forbidding interlocutory appeals is to prevent the same case from generating more than one appeal. An order to indemnify fits the exception because the amount to be indemnified will be determined automatically by the judgment on the main claim.
Despite this point--which may seem to erase the distinction, so far as appealability is concerned, between orders granting and denying third-party claims--the cases that allow immediate appeal under Rule 54(b) from orders denying third-party claims may be distinguishable from cases such as this where the order grants such a claim. In both types of case a powerful objection to allowing an immediate appeal is that the order will be moot if the main claim is dismissed; but in the first type the order really is final as to the third-party defendant, while in the second he must wait around till the case ends.
The appeal in the present case, however, is saved by the fact that the judgment granting the third-party claim is only partially contingent on the success of the main claim and will therefore not be moot even if the main claim is dismissed. For the indemnity clause not only requires Eichleay to make good any damages that McMunn may collect from Hertz; it requires Eichleay to pay Hertz the expenses of defending against McMunn's suit. Those expenses will be incurred--some of them have been incurred already--whether or not McMunn wins his suit. It is true that if he loses after Hertz has incurred only modest expenses in defense, the amount that Hertz can realize on the judgment on its third-party complaint may be so small that Eichleay may not consider the judgment worth appealing. In this sense an element of contingency pervades the entire appeal even though the judgment imposes an unconditional obligation on Eichleay. The full monetary value of the obligation is unknown and may in the end be small, although it will be computable mechanically and is therefore not indefinite in the sense in which an order that determines liability but not damages normally is indefinite and therefore not immediately appealable.
Nevertheless the unconditional element prevents us from dismissing the appeal. We have no discretion to turn down an appeal in a case to which Rule 54(b) applies and in which the district judge certifies a judgment for immediate appeal under the rule; and unless the application of the rule is to become even more complex than it is already, a judgment that is only partially contingent should be held to be within the rule's scope and hence appealable to us as a matter of right once the district judge enters judgment under Rule 54(b), as he did here.
So we come to the merits. Indemnity agreements are a common device for shifting the burden of liability from a tortfeasor to someone better able to bear the burden. The someone may be an insurance company that is able to spread the risk better than the tortfeasor or it may be another tortfeasor, who could have prevented...
To continue reading
Request your trial
-
U.S. v. Gilbert
...in Indiana, see LTV Steel Co. v. Northwest Eng'g & Constr., Inc., 41 F.3d 332, 335 (7th Cir.1994) (citing McMunn v. Hertz Equip. Rental Corp., 791 F.2d 88, 92 (7th Cir.1986)), so we do not know whether there was a particular scenario(s) at which this portion of the statute was aimed. The mo......
-
Mizuho Corporate Bank (Usa) v. Cory & Associates, Inc., 02-1126.
...an incentive to do so by being made responsible for the consequences." Jinwoong, 310 F.3d at 965; see also McMunn v. Hertz Equip. Rental Corp., 791 F.2d 88, 91 (7th Cir.1986); Hillier v. S. Towing Co., 714 F.2d 714, 720 (7th Cir.1983). But while insurance and pure indemnity claims frequentl......
-
An Or. Corp.. v. Yearout Mech.al Inc.
...since, as many a curbstone philosopher has observed, everything is related to everything else.”); cf. McMunn v. Hertz Equip. Rental Corp., 791 F.2d 88, 92 (7th Cir.1986) (noting the danger of construing the word “affecting” too broadly because “[i]n an interrelated economy almost everything......
-
Winston Network, Inc. v. Indiana Harbor Belt R. Co.
...IHB's defense costs in the state court litigation. That determination is viewed as "mechanical," see, e.g., McMunn v. Hertz Equip. Rental Corp., 791 F.2d 88, 90-91 (7th Cir.1986); see also Horn v. Transcon Lines, Inc., 898 F.2d 589 (7th Cir.1990), and, in any event, it has already been comp......