CONTINENTAL CASUALTY COMPANY, Plaintiff-Appellant, v. INDIAN HEAD INDUSTRIES, INC., Defendant-Appellee.
No. 18-2152
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
October 23, 2019
19a0267p.06
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b). Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:05-cv-73918—Denise Page Hood, Chief District Judge.
Before: MOORE, McKEAGUE, and LARSEN, Circuit Judges.
COUNSEL
ON BRIEF: Eileen King Bower, CLYDE & CO US LLP, Chicago, Illinois, for Appellant. James E. Wynne, Daniel R.W. Rustmann, BUTZEL LONG, P.C., Detroit, Michigan, for Appellee.
McKEAGUE, Circuit Judge. Continental Casualty Company filed the complaint in this case fourteen years ago. For over a decade, Continental has litigated over its rights and duties under a liability insurance policy with Indian Head Industries, Inc. Now, on this appeal, the issues have narrowed considerably. However, narrow as they are, the issues are still worth hundreds of thousands of dollars.
The previous appeal in this case affirmed a coverage allocation method, designed to calculate the extent of Continental‘s duty to cover defense and indemnity costs stemming from asbestos-related lawsuits filed against Indian Head. Continental now moves for damages based on that allocation method, drawing on an earlier declaratory judgment and requesting further relief under that judgment. The district court denied that motion, finding that the motion was untimely and that this court‘s remand from an earlier appeal deprived it of authority to hear a motion for further relief. Because we find that, despite the remand, the district court had the authority to hear Continental‘s properly filed motion for further relief, we REVERSE and REMAND.
Background
This case has a lengthy history. Thankfully, we need not recount all of it here.
At issue in this case is Indian Head‘s production and sale of gaskets. In 1984, Indian Head acquired a gasket-manufacturing division from a Detroit company. It then purchased three consecutive liability insurance policies from Continental, providing coverage from April 1984 to April 1987. Indian Head then manufactured and sold the gaskets from 1984 until 1989.
Those gaskets contained asbestos. As is often the case with companies who make asbestos-containing products, Indian Head was eventually flooded with lawsuits—numbering in the tens of thousands. Indian Head submitted these claims to Continental, and for a while Continental defended and indemnified Indian Head on all the claims. But in 2005, Continental sought to avoid paying all of the defense costs, so it sued Indian Head to clarify its rights and obligations under the policy.
Years of litigation followed. The two biggest issues were: (1) how to define “bodily injury” under the policy, and (2) how to calculate the amount Continental had to pay for indemnity and defense costs under the policy. Eventually, through a combination of party stipulations and court rulings, these two issues were resolved, and the proper coverage allocation method was decided. The details of that dispute are not necessary to recount here, but they can be found in this court‘s opinion on the most recent appeal. Cont‘l Cas. Co. v. Indian Head Indus., Inc., 666 F. App‘x 456 (6th Cir. 2016). This appeal, however, does not turn on the coverage allocation method itself. Instead, it turns on what costs the allocation method will be applied to—specifically,
Crucial to that issue are the parties’ cross-motions for summary judgment, filed in July 2013. The parties attached a “Joint Stipulation” to their motions. The stipulation grouped similar claims into “buckets” and stipulated the amount of defense and indemnity costs for all the claims. The parties wanted the court to rule on how those costs should be allocated between Continental and Indian Head. The stipulation only covered claims pending between October 12, 2005 and December 31, 2012. They stopped at December 31 for convenience, so that they would have time to review and verify the information contained in the Joint Stipulation. But they agreed that the court‘s rulings would be applied to cases filed since December 31, 2012.
On September 30, 2015, the district court granted summary judgment, adopting an allocation method for coverage under the policy. In addition, it found that “the same method and calculation must be applied . . . to actions filed after December 31, 2012.” This court affirmed on all issues except one, an assumption-of-liabilities issue. The parties later settled that issue, so we need not describe it here. What is relevant, however, is the fact that before the settlement, this court remanded the case to the district court using the following language: “We REMAND to the district court for further consideration of the question of Continental‘s liabilities arising out of those claims that were based on the assumption of liabilities in the 1984 Agreement, but related to injuries that were ongoing thereafter, in accordance with this opinion.” Cont‘l Cas., 666 F. App‘x at 469.
After the appeal, Continental moved for further relief under
Standard of Review
Normally, we would review a denial of relief under the Declaratory Judgment Act for abuse of discretion. Wilton v. Seven Falls Co., 515 U.S. 277, 289 (1995); Bench Billboard Co. v. City of Covington, 547 F. App‘x 695, 698 (6th Cir. 2013). However, when the denial of relief is based on a conclusion of law, we review de novo. United Nat‘l Ins. Co. v. SST Fitness Corp., 309 F.3d 914, 916 (6th Cir. 2002).
Here, the district court denied Continental‘s motion for further relief under the Declaratory Judgment Act,
The district court construed Continental‘s
Under
On the other hand, a motion falls under
Here, Continental‘s motion should be construed as a
Insisting that
Because we find that this motion was properly brought under
II. Limited Remand
After an earlier appeal in this litigation, we remanded to the district court “for further consideration of the question of Continental‘s liabilities arising out of those claims that were based on the assumption of liabilities in the 1984 Agreement, but related to injuries that were ongoing thereafter, in accordance with this opinion.” Cont‘l Cas., 666 F. App‘x at 469. The district court held that this remand deprived it of authority to grant a
Remands can be general or limited. General remands direct district courts to address all the matters remaining in a case, in a way that is consistent with the appellate court‘s ruling. United States v. Campbell, 168 F.3d 263, 265 (6th Cir. 1999). Limited remands direct district courts to address specific issues, creating “a narrow framework within which the district court must operate.” United States v. Richardson, 906 F.3d 417, 422 (6th Cir. 2017) (quoting Campbell, 168 F.3d at 265).
Indian Head correctly points out that limited remands confine the district court‘s authority to examine issues. Under the “mandate rule,” the “district court is bound to the scope of the remand issued by the court of appeals.” Campbell, 168 F.3d at 265. “Traditionally, the mandate rule instructs that the district court is without authority to expand its inquiry beyond the matters forming the basis of the appellate court‘s remand.” Id. The court cannot go beyond the scope of the remand and reexamine previously decided issues unless one of the narrow exceptions to the mandate rule applies. See id. at 265, 269.
But this rule does not mean that the district court cannot enforce its earlier declaratory judgments. Indian Head cites no authority holding that the mandate rule eliminates a district court‘s authority to grant further relief under the Declaratory Judgment Act,
III. Res Judicata
The district court held that it had “no authority to review the request for further damages under
Res judicata comes from the Latin meaning “a thing adjudicated,” and it refers to situations in which an earlier judgment can bind a later proceeding on one or more issues. Black‘s Law Dictionary (11th ed. 2019). Res judicata in fact covers two different doctrines:
claim preclusion and issue preclusion. Id. Claim preclusion prevents parties from re-raising claims or defenses that were or could have been raised in the prior action. Mitchell v. Chapman, 343 F.3d 811, 819 (6th Cir. 2003). Under the doctrine, a party will be precluded by an earlier judgment if (1) the judgment was a “final decision on the merits,” (2) it involved the same parties (or parties who can be treated as legally the same), (3) the new claim or defense was litigated or “should have been litigated in the prior action,” and (4) “an identity exists between the prior and present actions.” Id. Issue preclusion prevents parties from relitigating particular issues, not just whole claims and defenses. It applies when “an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment.” B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1303 (2015) (quoting Restatement (Second) of Judgments § 27 (1982)).
The traditional rules apply a little differently to declaratory judgments. Claim preclusion generally does not apply to declaratory judgments. ASARCO, L.L.C. v. Mont. Res., Inc., 858 F.3d 949, 955 (5th Cir. 2017). Otherwise, declaratory judgments would lose their teeth. “The whole point of a declaratory judgment action is to decide only a single issue in dispute, one that is often preliminary as subsequent events will need to occur before a traditional lawsuit can be pursued.” Id. For that reason, declaratory judgments are often prefaces to later actions for damages or an injunction. Id. Claim preclusion would make these later actions impossible. Applying ordinary claim preclusion to declaratory judgments would thus be in tension with
We disagree, for two reasons. First, cases in other circuits apply the declaratory judgment exception even when the plaintiff also sought coercive relief in the first suit. For example, the Fifth Circuit held that a claim for money damages under
Second, there is a better, more nuanced way to read the cases Indian Head cites. Essentially, those cases want to prohibit parties from doing an end-run around claim-preclusion rules by adding a claim for declaratory relief to their otherwise-coercive action. To avoid this result, when a case involves both a request for declaratory relief and one for coercive relief, simply ignore the request for declaratory relief. Look at the claims for coercive relief in the earlier judgment; if those alone would preclude the later action, then it is precluded. If not, then no preclusion. As the Fifth Circuit put it, “when it comes to claim preclusion, a request for declaratory relief neither giveth nor taketh away.” ASARCO, 858 F.3d at 956. It neither adds any preclusive effect of its own nor detracts from the preclusive effect of the coercive parts of the judgment.
ASARCO illustrates how this works. There, the plaintiff had brought an earlier suit in bankruptcy court, requesting (1) a declaration that it had certain rights under one provision of the contract, and (2) damages for breach of a different provision of that contract. Id. at 953. Both those claims were dismissed. Id. Later, after emerging from bankruptcy, the plaintiff again sued the defendant for breach of contract—this time under the provision for which the plaintiff had sought a declaratory judgment in the earlier proceeding. Id. at 953–54. The Fifth Circuit had to decide the preclusive effect of the bankruptcy action on this later breach-of-contract action. Id. at 954.
The court determined that the action for declaratory relief was not preclusive, but the action for damages could be. Id. at 955–57. The court examined cases applying the declaratory judgment exception to claim preclusion, and it determined that the request for a declaration of contract rights could not preclude the parties in a later case from seeking additional relief in the form of damages or an injunction. Id. at 955–56. But the earlier breach-of-contract
Here, Continental initially requested monetary relief for claims pending between October 12, 2005 and December 31, 2012. But for claims filed after 2012, Continental requested only a declaratory judgment mandating that the same coverage-calculation method be applied. And the district court found for Continental on that issue: “[I]n cases filed after December 31, 2012 . . . the same method and calculations must be used as set forth in [the calculation method] noted above.” Because of the declaratory-judgment exception, the earlier declaratory judgment does not preclude Continental‘s motion. So the question is whether the claim for monetary relief (the October 2005 to December 2012 claim), standing alone, precludes Continental‘s later motion for further relief on post-2012 coverage.
We hold that Continental is not precluded. Continental sought monetary relief only for October 2005–December 2012 coverage, and it did not need to supplement this request for relief with post-2012 claims. Generally, a party has no duty to supplement its complaint. Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521, 530 (6th Cir. 2006). That means if a plaintiff sues a defendant, and then after the filing of the first complaint the defendant engages in additional, similar wrongdoing, that plaintiff will not be barred from bringing another, later lawsuit against the same defendant for the post-filing wrongdoing. Id. The same reasoning holds true here.
Continental moved for summary judgment in July 2013 and sought only that monetary relief currently available to it, reimbursement for costs incurred on cases pending from October 2005 through the end of 2012. If we were to hold that this motion precluded Continental from all costs in the Interim Period (January 2013–September 2015), then we would effectively be imposing on Continental a duty to supplement its motion with every cost incurred between the filing of its motion and the entry of summary judgment. That would both conflict with precedent and put an unreasonable burden on litigants like Continental, so we do not impose such a duty here. Cf. Allegheny Int‘l, Inc. v. Allegheny Ludlum Steel Corp., 40 F.3d 1416, 1430 (3d Cir. 1994).
IV.
For those reasons, we REVERSE the judgment of the district court. We decline to consider for the first time on appeal the further factual questions necessary to resolve the motion, including whether Continental properly calculated damages using the coverage allocation method. Such factual questions are better reserved for the district court. Accordingly, we REMAND for consideration of the coverage allocation method‘s application to Continental‘s motion to recoup payments made between December 31, 2012 and September 30, 2015.