Norma Cooke v. Jackson National Life Insuran
919 F.3d 1024
| 7th Cir. | 2019Background
- Charles Cooke held a Jackson National life policy and paid premiums monthly via electronic transfer, though the policy specified annual or quarterly payments.
- In mid-2013 Jackson sent a notice increasing the monthly premium and later attempted an electronic draw that failed; it then sent a mid-August letter demanding a quarterly payment and implying the grace period ended August 28; Charles died September 10 without having paid.
- Cooke (the widow) sued for the death benefit, asserting waiver/estoppel and later that the August letter extended the grace period through September 15; the district court ruled for Cooke and awarded the death benefit.
- The district court also found Jackson’s litigation conduct unreasonable and awarded Cooke attorney’s fees under Illinois statute 215 ILCS 5/155; Jackson appealed, and an initial appeal was dismissed as premature until the fee amount was set.
- On remand the court awarded $42,835 in fees; Jackson appealed again. Cooke cross‑appealed but did not timely challenge the earlier merits judgment increasing the death benefit.
- The Seventh Circuit reversed the fee award, holding federal law (federal rules and inherent powers) governs sanctions in federal litigation and that the district court had improperly relied on the Illinois statute to police procedural conduct in federal court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 215 ILCS 5/155 may be applied to sanction conduct during federal litigation | Cooke: §5/155 authorizes fees for insurer’s vexatious conduct in litigation and governs conduct in federal court | Jackson: Federal rules and inherent powers govern sanctions in federal court, not state statute | Court: Reversed — federal law, not §5/155, governs procedural conduct and sanctions in federal litigation |
| Whether Jackson’s pre‑suit conduct was objectively vexatious justifying §5/155 fees | Cooke: Jackson’s pre‑suit denial was unreasonable and supports §5/155 award | Jackson: Pre‑suit dispute over payment terms was a good‑faith, reasonable dispute | Court: District judge’s analysis was objective and found pre‑suit conduct not sufficiently vexatious; fee award could only rest on litigation conduct, not pre‑suit behavior |
| Whether Jackson’s litigation conduct (failure to attach/identify documents) justified sanctions under federal law | Cooke: Failure to identify/attach documents needlessly prolonged litigation; statute or rules support fees | Jackson: Rule 12(d) treats attachments as converting to summary judgment; non‑attachment does not warrant §5/155 fines; federal sanctions doctrines were not properly applied | Court: District court erred by applying state statute; conversion under Rule 12(d) makes Jackson’s choice reasonable; sanctions not supported under federal doctrines as applied |
| Whether federal sanction tools (Chambers, Rules 11/26/37, §1927) support the award | Cooke: Alternatives (Rule 11, 26(g), 37, §1927) justify fees | Jackson: Those avenues were not invoked or applicable (e.g., §1927 targets lawyers, Rule 11 not moved for) | Court: None of those federal provisions, as invoked, supported awarding fees to Cooke; §1927 cannot be used to impose client liability; Rule 26/37/11 not shown to have been violated |
Key Cases Cited
- Shady Grove Orthopedic Assocs. v. Allstate Ins. Co., 559 U.S. 393 (discusses federal rules’ scope over state law in federal procedure)
- Burlington N. R.R. v. Woods, 480 U.S. 1 (federal procedural rules apply in federal court despite state law differences)
- Walker v. Armco Steel Corp., 446 U.S. 740 (federal practice governed by federal law in diversity cases)
- Chambers v. NASCO, Inc., 501 U.S. 32 (recognizes federal courts’ inherent power to sanction litigants)
- Budinich v. Becton Dickinson & Co., 486 U.S. 196 (judgment and attorney‑fees awards are separately appealable)
- TKK USA, Inc. v. Safety Nat’l Cas. Corp., 727 F.3d 782 (7th Cir. decision addressing insurer sanctions, but did not decide whether state statute governs federal litigation)
- Mayer v. Gary Partners & Co., 29 F.3d 330 (7th Cir. precedent on federal procedural governance)