173 Ill. 2d 235 | Ill. | 1996
NOTICE: Under Supreme Court Rule 367 a party has 21 days
after the filing of the opinion to request a rehearing.
Also, opinions are subject to modification, correction or
withdrawal at anytime prior to issuance of the mandate by
the Clerk of the Court. Therefore, because the following
slip opinion is being made available prior to the Court's
final action in this matter, it cannot be considered the
final decision of the Court. The official copy of the
following opinion will be published by the Supreme Court's
Reporter of Decisions in the Official Reports advance
sheets following final action by the Court.
Docket No. 80025--Agenda 16--March 1996.
ZURICH INSURANCE COMPANY, Appellee, v. BAXTER
INTERNATIONAL, INC., et al. (Baxter International, Inc.,
et al., Appellants).
Opinion filed June 20, 1996.
JUSTICE HARRISON delivered the opinion of the court:
This appeal concerns a declaratory judgment action
brought in the circuit court of Lake County by Zurich
Insurance Company to determine its obligations under various
insurance policies issued to Baxter International, Inc., and
Baxter Healthcare Corporation (referred to collectively as
Baxter). The question before us is whether the circuit court
abused its discretion when it issued an order pursuant to
section 2--619(a)(3) of the Code of Civil Procedure (735 ILCS
5/2--619(a)(3) (West 1992)) staying Zurich's lawsuit pending
the outcome of a second declaratory judgment action involving
the same issues subsequently filed by Baxter against Zurich
in the state of California. For the reasons that follow, we
agree with the appellate court that the stay should not have
been granted. 275 Ill. App. 3d 30. Subject to certain
modifications pertaining to the joinder of parties, the
appellate court's judgment is therefore affirmed.
The relevant facts are undisputed. Zurich is a Swiss
corporation whose main administrative offices in the United
States are located in Illinois. Baxter International, Inc.,
and Baxter Healthcare Corporation are Delaware corporations
whose corporate headquarters, including their risk management
department, are also located in Illinois. According to the
record, Zurich issued a series of comprehensive general
liability insurance policies to Baxter covering periods
between 1978 and 1986. All of these policies were delivered,
issued, and serviced in Illinois by Illinois brokers and
underwriters.
One of Baxter's businesses involves extracting blood
factor concentrates from plasma for use in treating
hemophilia. Baxter has been sued by hemophiliacs from
Illinois and elsewhere who allege that these concentrates
were contaminated with the human immunodeficiency virus
(HIV), that the concentrates infected them with the virus,
and that they suffer or expect to suffer from Acquired Immune
Deficiency Syndrome (AIDS). Although the parties have not
cited any evidence indicating the precise number of such
lawsuits, the jurisdictions in which the suits have been
filed or how many individual claimants there are, counsel
represent that Baxter is involved in at least 100 cases
involving more than 10,000 HIV-infected hemophiliacs. Among
these are cases that are pending or have been tried in
Illinois, including a class action on behalf of approximately
7,500 claimants filed in the United States District Court for
the Northern District of Illinois.
In the wake of this litigation, Zurich filed the present
action to obtain a declaratory judgment that it had no duty
under the comprehensive general liability insurance policies
it had issued to Baxter to defend the company against or
indemnify it for claims pertaining to the HIV-contaminated
blood factor concentrates. Baxter responded by filing its own
action in California, where the blood factor concentrates
were processed, asking for a declaratory judgment that Zurich
did have a duty under the policies to defend and indemnify
it. The California action also sought a declaratory judgment
with respect to the rights and obligations of Baxter's
numerous excess insurers, but all but one of those excess
insurers have now been dismissed from the case.
At the outset of these proceedings Baxter claimed that
it initiated the separate action in California as a "counter
punch" to Zurich's lawsuit. Before this court, its position
is different. The company denies that its motive is to harass
Zurich or secure some tactical advantage over it. According
to Baxter, its true purpose is simply to sidestep the HIV-
infected hemophiliacs who have sued it.
Here, as in the appellate court, Baxter contends that
under Illinois law, tort claimants are necessary parties in
declaratory judgment actions regarding insurance coverage for
their claims, and they must be joined in order for the
declaratory judgment proceedings to go forward. Under
California law, by contrast, they are not necessary parties
and joinder is not required. Accordingly, Baxter contends
that suing in California will enable it to resolve its
insurance coverage dispute with Zurich free from
participation by the legion tort claimants who are pursuing
it.
While Baxter now professes concern with simplifying its
dispute against Zurich, we note that Zurich's original
Illinois complaint was actually less complex than the
complaint filed by Baxter itself in California. Unlike the
California action, the Illinois litigation did not name any
of Baxter's excess insurers. The only parties to the
proceeding were Zurich and Baxter, and Baxter did not assert
that the case could not proceed in that posture.
When Baxter subsequently moved to stay or dismiss the
Illinois action, it did not do so on the grounds that
Zurich's original complaint was defective and should be
dismissed for failure to join necessary parties. Instead, it
invoked section 2--619(a)(3) of the Code of Civil Procedure
(735 ILCS 5/2--619(a)(3) (West 1992)), which provides that
a defendant may move for dismissal or other appropriate
relief on the grounds that "there is another action pending
between the same parties for the same cause." Baxter also
argued that the case was premature.
The idea that there might be a problem with failure to
join necessary parties did not arise until it was raised by
the circuit court, sua sponte. Although the court denied
Baxter's motion to dismiss, the court was concerned that
Illinois law might require joinder of the underlying tort
claimants in cases such as this, as Baxter now asserts. The
court gave the parties the opportunity to brief the issue and
present arguments at a series of hearings, after which it
concluded that the underlying tort claimants were necessary
parties and must be joined before the case could proceed. The
court further concluded that the joinder problem could not
be avoided by using class action procedures or by relying on
the doctrine of representation.
Rather than dismiss Zurich's complaint outright, the
circuit court continued the case, giving the company leave
to file an amended complaint addressing the joinder problem.
Zurich responded by filing a new complaint that named as
parties Baxter's excess insurers and the particular
underlying claimants over whom the Illinois courts could
assert in personam jurisdiction. In this version of its
complaint, Zurich dropped its request for a comprehensive
declaration of its rights and obligations under the Baxter
insurance policies. Instead, it limited its prayer for relief
to the circumstances presented by the particular claimants
it had actually joined as parties.
Baxter did not deny that this approach resolved the
circuit court's joinder concerns. Its attack on Zurich's
action took a new turn. Baxter now filed a new motion to
dismiss under section 2--619(a)(3) of the Code, arguing that
the Illinois action should be stayed pending resolution of
the case in California because, in its amended form, the
Illinois action was now less "comprehensive" than its
California counterpart. The circuit court agreed with
Baxter's argument, and on October 25, 1994, it entered an
order granting the stay requested by Baxter.
Several days later, on a motion filed by Zurich, the
circuit court also made a written finding under Supreme Court
Rule 308 (155 Ill. 2d R. 308) that its previous orders with
respect to the issue of joinder involved questions of law as
to which there is substantial ground for difference of
opinion and that an immediate appeal may materially advance
the ultimate termination of the litigation. The particular
questions of law identified by the circuit court were (1)
whether the underlying claimants and excess insurers did in
fact have to be joined as necessary parties for the case to
proceed, and (2) whether the court correctly refused to allow
Zurich to use a class action mechanism or to rely on the
doctrine of representation in lieu of joining the individual
claimants from the underlying tort actions against Baxter.
Once the circuit court entered its findings, Zurich
sought leave to appeal under Supreme Court Rule 308 (155 Ill.
2d R. 308) from the circuit court's orders concerning the
issue of joinder. Although the appellate court denied
Zurich's application, we entered an order in the exercise of
our supervisory authority requiring the appellate court to
hear Zurich's Rule 308 appeal on the merits. We subsequently
clarified that order to make clear that our instructions were
not meant to bar Baxter from arguing that Zurich had waived
its right to contest the joinder issues.
At the same time it was pursuing this Rule 308 appeal,
Zurich also filed an interlocutory appeal as of right from
the circuit court's order staying the Illinois declaratory
judgment action pending resolution of the action in
California. 155 Ill. 2d R. 307(a)(1). The appellate court
subsequently consolidated this appeal with Zurich's appeal
under Rule 308, reversed the circuit court's stay, and
remanded the cause for trial, holding, inter alia, that
Zurich had not waived its right to contest the joinder issues
and that joinder of all of the underlying claimants is not
necessary in mass-tort litigation such as this. 275 Ill. App.
3d 30. On Baxter's application, the appellate court granted
a certificate of importance, and the matter is now before us
for review under Rule 316 (155 Ill. 2d R. 316).
Here, as in the appellate court, Baxter continues to
assert that Zurich has waived its right to contest the
circuit court's rulings on the issue of joinder. We agree.
As previously mentioned, the circuit court held that the
underlying tort claimants were necessary parties, that they
all had to be joined in order for the case to proceed, and
that this joinder requirement could not be satisfied by means
of a class action or through the doctrine of representation.
Faced with such a ruling, Zurich could have elected to stand
on its pleadings, taken an involuntary dismissal of its
action with prejudice pursuant to section 2--615 of the Code
of Civil Procedure (735 ILCS 5/2--615 (West 1992)), and then
appealed that judgment. It elected not to do so. Instead, it
responded to the circuit court's rulings by filing an amended
pleading.
Zurich's new pleading was complete in itself, did not
refer to or adopt allegations in the prior pleadings, and
sought relief in the specific context of particular claimants
over whom the Illinois courts could assert in personam
jurisdiction. There were no class action allegations or
allegations involving the doctrine of representation, and
Zurich no longer asserted that it could proceed against
Baxter alone without joinder of the underlying tort
claimants. Under these circumstances, Zurich's previous
pleadings were, in effect, abandoned and withdrawn (Pfaff v.
Chrysler Corp., 155 Ill. 2d 35, 61 (1992)), and Zurich waived
any objection to the circuit court's rulings with respect to
those pleadings (Boatmen's National Bank v. Direct Lines,
Inc., 167 Ill. 2d 88, 99 (1995)). Because the issues raised
by Zurich's Rule 308 appeal pertained only to the earlier
pleadings and were inapplicable to the final version of
Zurich's complaint, the appellate court therefore erred in
addressing them on the merits. Accordingly, the appellate
court's discussion of necessary parties in mass-tort
litigation cannot stand and is of no precedential value.
Although we must disavow that portion of the appellate
court's opinion, we nevertheless agree with its ultimate
conclusion that the circuit court erred in staying the
circuit court proceedings pursuant to section 2--619(a)(3)
of the Code. That provision allows a defendant to move for
a dismissal or stay whenever there is "another action pending
between the same parties for the same cause." 735 ILCS 5/2--
619(a)(3) (West 1992). Although the purpose of the law is to
avoid duplicative litigation, a circuit court is not
automatically required to dismiss or stay a proceeding under
section 2--619(a)(3) even when the "same cause" and "same
parties" requirements are met. Multiple actions in different
jurisdictions arising out of the same operative facts may be
maintained where the circuit court, in a sound exercise of
its discretion, determines that both actions should proceed.
Factors a court should consider in deciding whether a stay
is warranted under section 2--619(a)(3) include comity; the
prevention of multiplicity, vexation and harassment; the
likelihood of obtaining complete relief in the foreign
jurisdiction; and the res judicata effect of a foreign
judgment in the local forum. Kellerman v. MCI
Telecommunications Corp., 112 Ill. 2d 428, 447-48 (1986).
In this case, both Zurich and Baxter have headquarters
in Illinois. Baxter's risk management department is located
in Illinois, the disputed insurance policies were negotiated
and signed in Illinois, and there is no question that
interpretation of the policies will be governed by Illinois
law. This is, in every way, an Illinois dispute, and the
California trial court before which Baxter's action is
pending has recognized it as such. If the Illinois courts are
willing to provide a forum, the California trial court will
gladly yield.
Although Baxter denies any improper motive, its
original justification for filing in California, to "counter
punch" Zurich, seems blatantly retaliatory. It subsequently
attempted to legitimize its position by focusing on interests
of the underlying tort claimants. As our previous discussion
indicated, however, the question of whether those claimants
should participate in the litigation was raised by the
circuit court, sua sponte, not by Baxter. When Baxter
initially responded to Zurich's Illinois action and filed its
own complaint in California, the underlying claimants played
no discernible role in its strategy. Baxter did not embrace
the notion that they might be necessary parties until the
circuit court's actions indicated that such a position might
help the company rationalize its decision to file a parallel
suit in California.
Even after Baxter began expressing concern for the tort
claimants, its sincerity was questionable. While the company
appeared to champion the importance of protecting the tort
claimants' interests, its attorney asserted at oral argument
before this court that his client's true reason for suing in
California was to prevent the claimants from playing any role
in the litigation. Rather than guarding the claimants, Baxter
is intent on avoiding them.
Baxter's strategy is based on the notion that where an
insurance company brings a declaratory judgment action
against its insured to determine the company's obligations
under a liability policy, claimants seeking recovery from the
insured in the underlying tort actions are not necessary
parties to the declaratory judgment action under California
law. According to Baxter, the law in Illinois is different.
Here, they are necessary parties who must be joined in order
for the declaratory judgment action to proceed. See M.F.A.
Mutual Insurance Co. v. Cheek, 66 Ill. 2d 492, 495 (1977);
but see Zurich Insurance Co. v. Raymark Industries, Inc., 118
Ill. 2d 23 (1987) (a declaratory judgment defining an
insurer's duty to defend and indemnify its insured in
thousands of underlying actions was reviewed on the merits
by this court even though none of the underlying tort
claimants had been joined as parties).
The joinder question was one of the issues raised by
Zurich's Rule 308 appeal. As we have held, Zurich waived the
issue when it decided to amend its complaint to seek relief
in the context of specific litigation involving particular
litigants over whom the Illinois courts had in personam
jurisdiction. Without suggesting how we would resolve the
issue if it were properly before us, we note that even if we
agreed with Baxter's interpretation of the law, the company's
argument would be unavailing.
If Baxter's interpretation is correct, Illinois law
evinces a recognition that the underlying claimants have a
substantial interest in how insurance coverage questions are
resolved. It also reflects a belief that this interest is
best protected by having the claimants participate directly
in the litigation between the insurance carrier and the
insured, rather than by allowing the claimants to sue the
carrier independently, as is apparently the practice in
California. Accordingly, if Baxter's construction of the law
is correct, the fact that the claimants will be excluded from
the coverage litigation in California is not a reason to
defer to the California courts. It is a reason to insist that
the Illinois action be allowed to proceed in the courts of
Illinois. Litigants such as Baxter should not be permitted
to invoke section 2--619(a)(3) of the Code as a means for
evading this state's public policy.
As noted earlier, Baxter ultimately succeeded in staying
the Illinois litigation by persuading the circuit court that
the California action would be more "comprehensive" than the
action framed by the final amended version of Zurich's
Illinois complaint. It is difficult to see, however, how the
California action can be considered more "comprehensive" in
any meaningful sense of the term. As a matter of due process,
a judgment can only bind the actual parties to a case or
those in privity with them. Parklane Hosiery Co. v. Shore,
439 U.S. 322, 327 n.7, 58 L. Ed. 2d 552, 559 n.7, 99 S. Ct.
645, 649 n.7 (1979). In its present form, the California
action has only three parties: Zurich, Baxter, and another
of Baxter's insurers. By contrast, the Illinois action
includes not only those three parties, but also more than a
hundred of Baxter's excess insurers and dozens of claimants
from the underlying tort actions. In terms of the number of
litigants affected, a judgment in the Illinois action will
therefore have a far greater impact than any judgment in the
California proceeding. To this extent, Baxter's California
action is actually less comprehensive than Zurich's action
in Illinois, not more so.
When Baxter claims that the California action is more
"comprehensive," it has no concern for any of the other
litigants. It is interested only in the case's potential for
resolving its dispute with Zurich. Because Zurich's Illinois
action now seeks relief in the context of the claims asserted
by the specific Illinois claimants who have been joined,
Baxter suggests that its effect must necessarily be more
restrictive than the California litigation, which refers to
the AIDS litigation generally. According to Baxter, the
California case will cover every issue presented by every
underlying claim, while the Illinois case will necessarily
be limited to the circumstances of the particular claimants
who have been joined here. The flaw in this argument is that
it presumes that the claims of the Illinois claimants are in
someway distinguishable from the additional claims underlying
the California case. There is nothing in the record before
us to substantiate such a contention. As between Zurich and
Baxter, the issues presented by the two cases are, for all
practical purposes, identical. Under these circumstances, a
judgment in the Illinois action would be no less conclusive,
as between Zurich and Baxter, than a judgment in the
California proceeding.
For the foregoing reasons, we believe that there was no
valid reason for the circuit court to have stayed Zurich's
action under section 2--619(a)(3) pending outcome of Baxter's
action in California. Entry of that stay constituted an abuse
of discretion, and the appellate court was correct when it
reversed the circuit court's order and remanded the cause to
the circuit court for further proceedings. The judgment of
the appellate court, as modified by this opinion, is
therefore affirmed.
Affirmed as modified.
CHIEF JUSTICE BILANDIC took no part in the
consideratioan or decision of this case.
JUSTICE FREEMAN, specially concurring:
I fully agree with and join the majority's decision to
affirm the appellate court's judgment. The appellate court
correctly determined that the trial court abused its
discretion by granting a stay of the underlying declaratory
judgment action in favor of proceedings filed by defendant
in California. I write only to highlight the salient factors
that undergird our decision.
The record reveals that Baxter filed its declaratory
judgment action in California against Zurich, its insurer,
nine days after Zurich filed the instant suit in Illinois.
The California action sought a declaration that Zurich and
105 of Baxter's excess insurers had duties to defend and
indemnify Baxter under certain insurance policies against
claims of numerous HIV-infected persons. These HIV-infected
persons were not parties to the California action and, under
California law, they were not considered necessary parties.
By the time of this appeal, all, save one, of Baxter's 105
excess insurers were dismissed as parties from the case. The
California action was also stayed, pending resolution of the
instant Illinois action.
Zurich's third-amended complaint in this action named
Baxter, Baxter's excess insurers, and those HIV claimants,
17 in number, over whom Illinois courts could assert personal
jurisdiction. The third-amended complaint seeks a declaration
that Zurich and Baxter's excess insurers owe no duties to
defend and indemnify Baxter under the same policies against
claims of these 17 persons.
The trial court, exercising its discretion, stayed the
instant action pursuant to section 2--619(a)(3), finding the
California action more "comprehensive." 735 ILCS 5/2--
619(a)(3) (West 1992). The appellate court vacated the stay,
which ruling the majority now affirms.
Section 2--619(a)(3) provides that a defendant may move
for a dismissal or stay whenever there is "another action
pending between the same parties for the same cause." 735
ILCS 5/2--619(a)(3) (West 1992). The provision is designed
to avoid duplicative litigation and is to be applied to carry
out that purpose. Kellerman v. MCI Telecommunications Corp.,
112 Ill. 2d 428, 447 (1986). The "same cause and same parties
requirements" are apparently threshold considerations to
granting section 2--619(a)(3) relief. See A.E. Staley
Manufacturing Co. v. Swift & Co., 84 Ill. 2d 245, 252-54
(1980); Kellerman, 112 Ill. 2d at 447; see also Perimeter
Exhibits, Ltd. v. Glenbard Molded Binder, Inc., 122 Ill. App.
3d 504, 509 (1984) (failure to meet section 619(a)(3) "same
parties" requirement fatal to request for such relief).
Nonetheless, even if the dual requirements are met,
relief under section 2--619(a)(3) is not mandated. The
court's decision to grant relief or allow multiple actions
to proceed in different jurisdictions remains a matter of
discretion. Kellerman, 112 Ill. 2d at 447. The factors a
court should consider in making that decision include:
comity; the prevention of multiplicity, vexation, and
harassment; the likelihood of obtaining complete relief in
the foreign jurisdiction; and the res judicata effect of a
foreign judgment in the local forum. Kellerman, 112 Ill. 2d
at 447-48.
The present case presents a situation where at least one
of the dual threshold requirements for section 2--619(a)(3)
relief was not met. The Illinois and California actions do
not involve the same parties. The California action is
between only Baxter, Zurich and one of Zurich's excess
insurers; the Illinois action names these parties and also
includes 17 of the underlying claimants as well as an entire
group of Baxter's excess insurers. Further, this is not a
case where the same parties requirement should be relaxed.
See Catalano v. Aetna Casualty & Surety Co., 105 Ill. App.
3d 195, 197 (1982) (requirement relaxed where parties in
close privity); Perimeter Exhibits, Ltd. v. Glenbard Molded
Binder, Inc., 122 Ill. App. 3d at 508 (requirement relaxed
where parties in one action are nominal parties or their
claims are not in issue); People ex rel. Fahner v. Climatemp,
Inc., 101 Ill. App. 3d 1077, 1084 (1981) (parties are same
legal entity). This point is demonstrated by the fact that,
under California law, the unnamed underlying claimants'
third-party rights to a recovery under the policy could not
be determined in the California action. Any declaratory
judgment regarding Zurich's duty to indemnify Baxter for the
underlying claims would not be res judicata as against those
claimants. See Shapiro v. Republic Indemnity Co. of America,
52 Cal. 2d 437, 341 P.2d 289 (1959). In the Illinois action,
by contrast, Zurich's obligation to fund Baxter's defense and
payment of these particular claims would be adjudicated.
In addition to the failure of this requirement,
discretionary factors which weigh against granting section
2--619(a)(3) relief are readily apparent here. The California
court repeatedly expressed frustration with the fact that our
circuit court would not assert its jurisdiction over the
matter. The California court stated, inter alia:
"This is an Illinois contract, entered in by
Illinois parties, signed in the state of Illinois
*** [f]or some reason Illinois courts either don't
want to, won't, can't, choose not to or whatever.
For the last year and half they have been deciding
through the courts whether or not they are [going]
to go take jurisdiction of this case or not, and
it really belongs in Illinois.
***
[I am b]aby sitting this thing until Illinois
finally decides they have an interest in the
case."
The California action was also stayed, pending resolution of
the case here in Illinois. Clearly, the California court, for
the sake of comity, would have been willing to defer to the
circuit's judgment here. That willingness and the absence of
the same parties in each suit was indicative that a stay of
the Illinois action was unnecessary to prevent a multiplicity
of actions.
Moreover, it cannot be said that the prior-in-time
Illinois action was filed to vex or harass Baxter. In
deciding whether to grant or deny the stay, the trial court
should have considered whether this factor argued for a stay
of the Illinois action due to the actions or animus of Zurich
in bringing the suit. Baxter's motivation in bringing the
California action is really not critical to the determination
of whether this Illinois action was properly stayed. The
majority need not belabor that point. Clearly, however,
Baxter was attempting to speedily advantage itself by forum
shopping when it filed in California nine days after Zurich
filed here.
Another discretionary factor that should have been
considered was the likelihood that the Illinois parties would
have realized some manner of complete relief via the
California action. Again, clearly, they could not. The
California action would have adjudicated Baxter's rights
under its policy with Zurich and under one excess layer
policy with another insurer. Such judgment would afford no
relief to Baxter's remaining excess insurers and the 17
claimants in the Illinois action. Furthermore, any judgment
between Zurich and Baxter in California would clearly have
no res judicata effect against the remaining excess insurers
and 17 claimants named as parties here.
In conclusion, the trial court abused its discretion in
granting a stay of the instant action because a threshold
requirement for section 2--619(a)(3) relief was not met, the
two actions did not involve the same parties, and not one
discretionary factor argued in any way for such relief.