Creation Supply, Inc. v. Selective Insurance Company of, 51 F.4th 759

Creation Supply was sued for trademark infringement; its insurer Selective refused to defend, prompting Creation Supply to sue for a duty to defend.
Illinois state courts held Selective owed a duty to defend and awarded incidental relief under the declaratory-judgment statute in 2017 limited to pre-settlement fees (no consequential damages).
While the state duty-to-defend litigation was pending, Creation Supply filed a 2014 federal suit asserting breach of contract and an Illinois §155 claim; it later voluntarily dismissed the state breach-of-contract count in 2016 with the state court expressly reserving Creation Supply’s right to pursue that claim in federal court.
After extensive federal proceedings, the district court awarded Creation Supply damages on the §155 claim; this court remanded in 2021 for resolution of contract damages.
Following remand, the district court denied Creation Supply leave to amend (punitive damages) and granted Selective’s Rule 12(c) motion, concluding claim and issue preclusion barred the remaining federal breach-of-contract claim.
The Seventh Circuit reversed the grant of judgment on the pleadings (holding the state-court reservation defeats claim preclusion and issue preclusion does not bar the potentially different contract-damages question), affirmed denial to amend, and remanded to decide contract damages.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Claim preclusion	State court expressly reserved Creation Supply’s right to pursue breach-of-contract in federal court, so claim preclusion should not apply	The state final judgment on duty-to-defend and related relief bars the federal contract claim as the same cause of action	Reservation by the Illinois circuit court prevents claim preclusion; district court reversed
Issue preclusion	The state court decided only incidental relief (limited fees), not consequential or contractual damages, so damages issue remains open	The duty-to-defend and damages were litigated in state court; issue preclusion bars relitigation of liability and damages	Issue preclusion inapplicable because the damages issue in federal breach-of-contract suit is not identical to the narrower incidental-relief issue decided in state court
Leave to amend	Sought leave to add punitive damages after remand	Amendment would cause undue delay, prejudice, and reopen long-closed litigation	Denial of leave to amend affirmed as within district court’s discretion

Creation Supply, Inc. v. Selective Ins. Co. of the Southeast, 995 F.3d 576 (7th Cir. 2021) (prior appellate opinion remanding for contract-damages determination)
Cooney v. Rossiter, 986 N.E.2d 618 (Ill. 2012) (elements of claim preclusion under Illinois law)
Rein v. David A. Noyes & Co., 665 N.E.2d 1199 (Ill. 1996) (limits on tactic of dismissing counts without prejudice to harass defendants)
Hudson v. City of Chicago, 889 N.E.2d 210 (Ill. 2008) (discussing claim-splitting and final judgments)
Nowak v. St. Rita High Sch., 757 N.E.2d 471 (Ill. 2001) (issue-preclusion requires identical issue clearly decided)
Green v. Nw. Cmty. Hosp., 928 N.E.2d 550 (Ill. App. 2010) (applying Restatement exception when court expressly reserves right to bring subsequent action)
Valbruna Slater Steel Corp. v. Joslyn Mfg. Co., 934 F.3d 553 (7th Cir. 2019) (standards for reviewing preclusion questions)
Schor v. City of Chicago, 576 F.3d 775 (7th Cir. 2009) (deference to district court on leave-to-amend decisions)