Fednav International Ltd. v. Continental Insurance
624 F.3d 834
| 7th Cir. | 2010Background
- Fednav sought to recover attorney's fees, costs, and expenses incurred defending Continental's earlier subrogation actions.
- The district court dismissed Fednav's case for failure to state a claim.
- Continental sued Fednav in 2002-2003 under COGSA in several courts; the forum for those actions was the port of discharge.
- The Seventh Circuit previously affirmed dismissal for improper venue and described it as a costly mistake for Continental.
- Fednav filed this diversity-based suit in Illinois federal court to recover litigation costs caused by Continental's forum selection breach.
- Discerned issues include the American Rule in Illinois law and whether an exception applies, along with jurisdictional questions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fednav can recover litigation expenses as damages for breach of contract. | Fednav sought damages for fees under breach theory. | American Rule bars such recovery absent contract/ statute. | No; American Rule bars recovery. |
| Whether Illinois exception applies because a defendant's wrongful acts placed Fednav in third-party litigation. | Fednav argues third-party litigation damages available. | Exception does not apply to this scenario. | Not applicable; exception not satisfied. |
| Whether diversity jurisdiction exists given Fednav's Barbados incorporation and Continental's New Hampshire/ New York ties. | Diversity exists due to diverse citizenship and amount in controversy. | Not challenged; otherwise jurisdiction would fail. | Subject-matter jurisdiction affirmed under 28 U.S.C. § 1332(a)(2). |
| Whether Fednav waived its arguments by failing to raise them below. | Fednav could raise federal common-law arguments post hoc. | Waived; not raised in district court. | Waived; arguments not preserved. |
| Whether federal common law permits recovery for forum-selection clause breaches in this context. | Fednav relies on federal common law beyond Illinois rule. | No basis for federal-law recovery; Illinois rule controls. | Not supported; federal-law theory waived and rejected. |
Key Cases Cited
- Ritter v. Ritter, 46 N.E.2d 41 (Ill. 1943) (American Rule and fees as damages; generally not recoverable)
- Champion Parts, Inc. v. Oppenheimer & Co., 878 F.2d 1003 (7th Cir. 1989) (American Rule; exceptions for certain damages recognized)
- Nalivaika v. Murphy, 458 N.E.2d 995 (Ill. App. Ct. 1983) (damages for litigation-related expenses in exception context)
- Sorenson v. Fi Rito, 413 N.E.2d 47 (Ill. App. Ct. 1980) (expense recovery in certain tort-derived contexts)
- Hadley v. Baxendale, 9 Exch. 341 (Eng. 1854) (classic damages rule; contemporaneous damages framework cited)
- Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240 (1975) (American Rule reaffirmed; no court-created broad exception)
- Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600 (7th Cir. 1994) (federal common-law context; not addressing fee recovery here)
- Continental Ins. Co. v. M/V Orsula, 354 F.3d 603 (7th Cir. 2003) (affirmed dismissal for improper venue; forum-selection implications)