### In the 

# United States Court of A p peals For the Seventh Circuit

____________________ No. 14

- 8015
I N RE : R OBERT L ODHOLTZ , et al., Petitioner s ,

____________________ Petition for Permission to Appeal from the Northern District of Indiana, South Bend Division. No. 3:11

- cv

- 00435

- RL

- CAN

— Rudy Lozano
, Judge

____________________
S UBMITTED J ULY 30 , 2014

— D ECIDED O CTOBER 6, 2014

____________________

Before P OSNER , K ANNE , and W ILLIAMS , Circuit Judges

. P OSNER , Circuit Judge

. Before us is a petition filed under 28 U.S. C. § 1292 (b) for permission to appeal from an o r der by the district court on the ground that though not the final order in the litigation it resolved a “controlling que s tion of law” incorrectly
, and that correction will expedite the resol ution of the entir e litigation

— in fact end it. See Ahre n holz v. Board of Trustees of University of Illinois , 219 F.3d 674, 675

– 76 (7th Cir. 2000). We grant the petition, and since the papers filed by the parties cover the merits adequately, we can pr oceed to the decision of the appeal.2 No. 14

- 8015

The case has a long tail; we’ll simplify. Robert Lodholtz, seriously injured in 2011 while wor k ing at a plant owned by Pulliam Enterprises in Indiana
, filed a pe r sonal injury suit against Pulliam in an Indiana state court . Pulliam asked Granit e State Insurance Company
, its primary liability i nsurer , along with New Hampshire I n surance Company, its umbrella insurer and Granite State ’ s parent (but we can i gnore it and treat Granite State as the only insurer)
, to defend and indemnify it against the suit. Granite State d e clined to do so, believing that Pulliam was not liable because, as an employee injured in the course of his e m ployment, Lodh oltz could not maintain a tort suit but only a claim for workers’ compensation. Lodholtz disagreed, contendin g that he’d been employed not by Pulliam but by an other firm even though he’d been injured while working on Pulliam’s pre mises. Since he wasn’t Pulliam’s employee, he had no basis for filing a claim for workers’ compensation.
When Pulliam failed to file an answer to the complaint, Lodholtz moved f or entry of a default judgm ent . H is m o tion was granted

. But he agreed not to execute his default jud gment , and in return Pulliam agreed to assign him its rights against Gra n ite State

. Worried that it might have to indemnify Lodholtz and continuing to insist th a t he’d been Pulliam’s employee when injured, Granite State moved to intervene in Lodholtz’s suit in order to a s sert the defense that Pulliam would have made had it not defaulted

. The Indiana trial court denied the m otion to intervene and after taking evidence on the amount of damages to which Lodholtz was entitled entered judgment in his favor for almost $4 mi l lion.No. 14

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Within days Granite State filed the present suit in federal district court in Indiana, a diversi ty suit against Lodholtz and Pulliam seeking a declaratory judgment that Granite State has no duty to indem nify Pulliam. Moving on a diffe rent front, a month later Granite State appealed to the Indiana Court of Appeals from the trial court’s denial of its motion to intervene in Lodholtz’s state court suit against Pulliam . It argued that it had a sufficient interest in the suit to justify intervention in order to prove that Lod holtz’s exclusive re medy was under the state’s workers’ compensation act b ecause h e had been e m ployed by Pullman , and not merely working on its premises , when the accident oc curred. The court of appeals affirmed the denial of Granite State’s motion to intervene

. Granite State Ins. Co. v. Lo d holtz
, 981 N.E. 2d 563 (Ind. App. 2012). The co urt pointed out that Granite State had sought leave to intervene in order to d efend Pulliam a gainst Lodholtz’s suit under a reservation of rights

. That is, Granite State wanted to reserve the right, should Lodholtz obtain any damages in the suit, to try to avoid having to reimbu r se Pulliam for those damages by show ing that it had no duty to indemnify Pulliam. A rese rvation of rights is problematic from the insured’s stan d point. It creates a risk that the insurer will not put up a strong d efense to the suit against the insured (Lodholtz’s suit against Pulliam) , wis h ing to economize on legal expense and hoping to avoid having to i n demnify the insure d at all if the latter is hit with a judgment. Mindful of this danger, the Indiana
courts fo r bid the insurer to c ontrol the defense of the insured without acknowledging coverage. Cincinnati Ins. Co. v. Young , 825 N.E.2d 8, 13

– 15 (Ind. App. 2006); see also Trave lers I n demnity Co. v. Dingwell , 884 F.2d 629, 638

– 40 (1st Cir. 1989). “Such intervention [in the defense of the suit ] would4 No. 14

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unfairly r e strict the insured, who faces the very real risk of an uni n sured liability, and grant the insurer ‘a double bite at escaping liabil ity. ’” Id . at 639 , quoting United States Autom obile Ass’n v. Morris , 741 P.2d 246, 251 (Ariz. 1987 ). Granite State sought review of the appellate court’s dec ision in the Indiana Supreme Court, and was turned down, ending the state court litigation. Although at both appellate levels Granite State had argued that the judgment in Lo dholtz’s favor should b e vacated , neither court addressed the argument in refusing to al low the insurance company to i ntervene. We’ll come back to this omission. One might have thought that Granite State’s total defeat in the Indiana court system would have doomed its federal

su it, based as it was on the same assertion that Lodholtz had been Pulliam’s employee. But no; the federal district court, at Granite State ’s urging after the state courts had finished with the case, ruled that because Lodholtz’s employer had “leased” Lodhol tz to Pulliam to do work at Pul l iam’s plant, he had been Pulliam’s employee as well , and that therefore the Ind i ana state court judgment in favor of Lodholtz should be “disregarded

. ” For if
, as the federal judge be lieved
, Lo dholtz had been Pulliam’s employ ee when i n jured, the state’s workers’ compensation act had deprived the Indiana courts of jurisdiction to entertain his tort suit. Ind i ana courts have no jurisdiction to entertain a tort suit by an injured worker against his e m ployer. GKN Co. v. Magness , 7 44 N.E.2d 397, 400 (Ind. 2001)

. That is the exclusive domain of workers’ compensation, an administrative rather than judicial rem edy. The state trial court, which entered judgment against Pu lliam, obviously thought it had subject

- matter jurisdi c tion

.No. 14

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The a ppellate court must have thought so as well . For it ruled on Granite State’s motion to intervene, and it would have lacked jurisdiction to do so had the trial court lacked jurisdiction of Lodholtz’s suit

. The trial court and the appe llate court knew of cou rse that Granite State wanted to argue that the courts had no jurisdiction over Lodholtz’s tort

case

— that jurisdiction to award him compens a tion lay solely in the Workers Compensation Board of Indiana. The t rial or appe l late court could easily have said “n ow that we know there may be a question of our subject

- matter j u risdiction we'd better answer it , mindful of our i n dependent duty to police our j u risdiction. ” That neither Indiana court said or hinted at this indicates that both were satisfied that there

w as jurisdiction

. The trial court had awarded millions of do llars in damages to Lo d holtz, all premised on a finding tha t he was not Pulliam's employee. T he appel late court had no reason to doubt that the trial court had had jurisdi c tion to make such an awar d. The question for us therefore is whether a federal court can ignore a state court judgment on the ground that the state court misco n ceived its jurisdiction over the case , and thus whether it is open to Granite State to try to prove in its federal case t hat Lodholtz really was an employee of Pulliam and therefore the state courts had no jurisdiction of his suit against Pulliam

. Rule 60(b)(4) of the Federal Rules of Civil Procedure a uthorizes a federal district court to relieve a party from a final ju dgme nt if the judgment is “void ” (Ind i ana has the same rule for its courts: Ind iana Rule of Trial Procedure 60(B)(6).) The normal procedure is to file a motion in the court that rendered the judgment. But Rule 60(d)(1) authorizes “an i n-6 No. 14

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dependent action to reli eve a part y from a judgment.” This is an authority to be exercised rarely; collateral attacks on su bject

- matter jurisdiction are to be discouraged, as the S upreme Court said in Travelers Indemnity Co. v. Bailey
, 557 U.S. 137, 15 2

– 54 (2009). Though the bar is not absolute, see id . at 153 n. 6, it is to be lifted only in “egregious” cases. As for other cases “the courts say that the court that issued the judgment in excess of its jurisdiction had jurisdiction to d etermine jurisdiction, and its jurisdictional finding, even if erroneous, is therefore good against collateral attack, like any other erroneous but final jud g ment.” In re Edwards , 962 F.2d 641, 644 (7th Cir. 1992) ; United States v. Tittjung , 235 F.3d 330, 335 (7th Cir. 2000). One might have thought t hat because the Indiana courts denied Granite State’s motion to intervene, the insurance company never had a chance to argue absence of jurisdiction as a party to the litigation. As we know, that is not true; we know that Granite State made the argument

— in deed the a rgument was the entire premise of its refusal to cover Lo dholtz’s liability to Pulliam. Had Granite State been wil l ing to relinquish its reservation of rights, its motion to inte r vene would have been granted. It was not willing; and in asser ting a reservation of rights it was trying to undermine the I ndiana law that gives the i n sured the right to manage its own defense when the insurer reserves the right to deny cove rage

. The Supreme Court of the United States is the only fe deral court with appell ate authority over state courts; that is the Rooker

- Feldman doctrine. See Rooker v. Fidelity Trust Co.
, 263 U.S. 413 (1923); District of Columbia Co urt of Appeals v. Feldman , 460 U.S. 462 (1983). But even the Supreme CourtNo. 14

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would have had no authority over the Indiana courts in Lo dholtz v. Pulliam because no issue of federal law was i n volved in that litigation. Granite State has struck out. The jurisdi ctional issue on which its federal suit is based was resolved against it by the Indiana courts, and there is no ground for a collateral attack by another judicial system on that determ ination.
The judgment is reversed and Granite State’s suit di smissed

.