In the

United States Court of Appeals

For the Seventh Circuit

No. 08-1334

CHRISTINE B. COLLINS, et al.,

Plaintiffs-Appellants,

v.

UNITED STATES OF AMERICA,

Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 03 CV 2958—John W. Darrah, Judge.

ARGUED SEPTEMBER 19, 2008—DECIDED MAY 1, 2009

Before POSNER, RIPPLE, and EVANS, Circuit Judges.

POSNER, Circuit Judge. In 2000, two small planes

collided while approaching the Waukegan Regional

Airport, which is near Lake Michigan north of Chicago,

and crashed into a medical center. The planes’ occupants—the pilot and passenger of one, the student pilot

of the other—were killed, and the medical center was

damaged. When the collision occurred, one plane was

approaching the airport, intending to land, and the

other plane, the one piloted by the student pilot, was
2 No. 08-1334

practicing takeoffs and landings and also intending to

land. The airport’s control tower had no radar, so that in

clearing planes to take off or land the air traffic controller

on duty in the tower had to rely on what he could see

from the tower and on what the pilots told him by radio

were their positions. The controller was employed by

Midwest Air Traffic Control Services, a contractor hired

by the Federal Aviation Administration to provide air

traffic control at the Waukegan airport. The collision

occurred because he could not see either plane and the

pilot of the first plane misreported his position, leading

the controller to believe that the planes were at a safe

distance from each other; and so he cleared them to land.

A contributing factor was that one plane was flying

slightly higher than the other, and the wings of the

higher plane were below the plane’s fuselage and the

wings of the lower plane above its fuselage, so that the

pilots could not see each other. Glare from the sun, and

ground clutter (the complex pattern formed by buildings

and other features of the ground, which makes it difficult

for a pilot, looking down, to see a plane flying beneath

him), were other contributing factors.

A flurry of suits arising from the accident were brought

in both state and federal court. All eventually were

settled except the one before us, which was brought against

the United States under the Federal Tort Claims Act by the

representatives of the three persons who were killed. The

district judge, after a bench trial, entered judgment for

the United States.

The Act grants the federal courts jurisdiction over

suits for damages against the United States “for injury or
No. 08-1334 3

loss of property, or personal injury or death caused by

the negligent or wrongful act or omission of any employee of the Government while acting within the scope

of his office or employment, under circumstances where

the United States, if a private person, would be liable to

the claimant in accordance with the law of the place

where the act or omission occurred.” 28 U.S.C. § 1346(b)(1).

(That place, in this case, is Illinois.) An employee of the

government includes “employees of any federal agency,”

such as the Federal Aviation Administration, but excludes “any contractor with the United States.” § 2671.

Midwest Air Traffic Control Services is a contractor, and

the district judge ruled that although the FAA exercises

close supervision over the companies to which it contracts

out air traffic control, the supervision is not close enough

to render controllers employed by those companies

employees of the United States. So though he found

that the air traffic controller on duty the day of the

accident had been negligent in clearing the planes to

land when he could not see them, the judge refused to

impute that negligence to the United States.

The plaintiffs also contended that the FAA had been

negligent in failing to install radar at the Waukegan

airport. But this ground of liability, the judge ruled, was

blocked because the act “shall not apply to any

claim . . . based upon the exercise or performance or the

failure to exercise or perform a discretionary function

or duty on the party of a federal agency . . . whether or not

the discretion involved be abused.” 28 U.S.C. § 2680(a).

Before we can consider the merits of the appeal, we

must address the government’s contention that the
4 No. 08-1334

district court lost subject-matter jurisdiction over the

case when on the eve of trial Midwest settled the plaintiffs’ claims against it. Under Illinois law, a principal

whose liability is based on the doctrine of respondeat

superior, which is Midwest’s situation, cannot be sued

if the agent whose negligence is imputed to the principal

by that doctrine—in this case the air traffic controller

who was on duty when the collision occurred—settles with

the plaintiff. Gilbert v. Sycamore Municipal Hospital, 622

N.E.2d 788, 797 (Ill. 1993); Doe v. City of Chicago, 360 F.3d

667, 673 (7th Cir. 2004) (Illinois law); J&J Timber Co. v.

Broome, 932 So. 2d 1, 7-8 (Miss. 2006); Restatement (Third) of

Torts: Apportionment of Liability § 16, comment d and

illustration 2 (2000); contra, Harris v. Miller, 438 S.E.2d 731,

741-42 (N.C. 1994). The reason is that the principal in

such a case has a common law right to be indemnified

by his agent. Washington Gaslight Co. v. District of Columbia,

161 U.S. 316, 328 (1896); Steele v. Hartford Fire Ins. Co.,

788 F.2d 441, 446 (7th Cir. 1986); Stawasz v. Aetna Ins. Co.,

240 N.E.2d 702, 703-04 (Ill. App. 1968). That right arose

as an exception to the traditional common law rule rejecting contribution among joint tortfeasors—that if the

plaintiff sued and obtained a judgment against just one of

the joint tortfeasors, that one could not sue to force the

others to help pay the judgment. Northwest Airlines v.

Transportation Workers Union, 451 U.S. 77, 86 (1981); Donovan v. Robbins, 752 F.2d 1170, 1178-79 (7th Cir. 1985); Dan B.

Dobbs, The Law of Torts § 386, pp. 1078-80 (2000). The

traditional rule has been abrogated in most jurisdictions in

favor of contribution, but indemnity retains significance

because it shifts the entire loss to the tortfeasor held to
No. 08-1334 5

have a duty to indemnify, rather than sharing out the loss

among the tortfeasors.

The reason for this shifting, in the case in which an

employer’s liability is based on the doctrine of respondeat

superior, is that the employee is in a better position than

his employer to avoid inflicting the injury that incited

the suit against the employer. Allowing the employer to

shift the full financial responsibility for the employee’s

negligence to the employee increases the latter’s incentive

to take care, and his care is crucial because if he takes

due care, an accident will be averted that the employer

might not have been able to avert.

But the right of indemnity makes a settlement by the

employee with the tort plaintiff illusory if the employer

remains liable to the plaintiff. Midwest settled with the

plaintiffs for less than a million dollars. The plaintiffs’

aggregate injury was much greater, which is why they

are suing the United States despite the settlement with

Midwest. If (a big if, as we’re about to see), Midwest is

deemed the “employee” of the United States, then, were it

not for the rule that extinguishes the principal’s liability

when the agent settles, Midwest would be faced with the

prospect of a suit for indemnity by the United States

should the plaintiffs obtain damages in their tort claims

suit. If the suit succeeded, Midwest would have gained

nothing from settling with the United States’ agent.

The parties to the settlement with Midwest seem to

have been aware of the rule that a settlement with the

agent discharges the principal, because they stated in the

settlement agreement that the agreement was not a set-
6 No. 08-1334

tlement. But it was, because in exchange for a payment

by Midwest the plaintiffs relinquished their claim

against Midwest. That’s what a settlement is, regardless

of what the parties call it. But the rule discharging the

principal has no proper application here because the

government, when it is held liable under the Federal Tort

Claims Act, has no right of indemnity from its negligent

employee. United States v. Gilman, 347 U.S. 507, 508-10

(1954); Gregory C. Sisk, Litigation with the Federal Government § 3.04(e), pp. 122-23 (4th ed. 2006); see also Munson

v. United States, 380 F.2d 976, 978 (6th Cir. 1967); Restatement (Second) of Torts § 895D, comment j (1979). Indeed,

because the Westfall Act, 28 U.S.C. § 2679(b)(1), forbids

bringing a suit against a federal employee for committing a “negligent or wrongful act or omission . . . while

acting within the scope of his office or employment,” the

government has made itself exclusively liable for such

torts, and by doing so, it can be argued, has determined

that the employee should bear no liability himself, including the indirect liability that the doctrine of indemnity would create. See Sisk, supra, at 123.

Granted, Midwest, the settling party, was not an employee of the United States, even if the errant air traffic

controller is deemed to have been one. But the government would have no right of indemnity (unless as a matter

of contract, which has not been suggested) against Midwest even if Midwest were deemed an employee of the

United States. For remember that the right to be indemnified is based on the difference between direct and vicarious

liability—the liability of a person who commits a tortious

act versus the liability of his employer just by virtue of
No. 08-1334 7

being his employer. Midwest’s liability arises from its

being the employer of the air traffic controller. Its

liability, like that of the United States, is vicarious. The

symmetry of the two defendants’ positions defeats the

government’s appeal to the indemnity rule, which is based

on the superior ability of the agent who commits the tort to

have avoided committing it by the exercise of due care,

compared to his employer, who is liable for the tort only by

virtue of being the original tortfeasor’s employer. The

parties could of course by contract impose a duty of

indemnity in such a case, Restatement (Third) of Agency

§ 3.15, comment d and illustration 9 (2006), but remember

that there is no suggestion of such a contractual provision

in this case. The doctrine applicable here is “tort indemnity,” imposed by law rather than by contract, perhaps

to soften the rigors of the old rule denying a right of

contribution among joint tortfeasors. Zapico v. Bucyrus-Erie

Co., 579 F.2d 714, 718-19 (2d Cir. 1978) (Friendly, J.); see

also Araujo v. Woods Hole, 693 F.2d 1, 2 (1st Cir. 1982);

W. Page Keeton et al., Prosser and Keeton on the Law of Torts

§ 51, pp. 341-42 (5th ed. 1984).

Even if the government were right that the settlement with Midwest had discharged the government’s

liability to the plaintiffs, it would be wrong to insist, as it

did with some vehemence at the oral argument, that it is

an issue of jurisdictional moment. The government’s

lawyer further argued that the rules in the Tort Claims

Act itself that bar government liability when either the

original tortfeasor is an independent contractor, rather

than an employee, or the government’s act is shielded by

the discretionary-function exception to liability, are also
8 No. 08-1334

jurisdictional. This would mean that even if the government failed to raise any of these defenses, the district

court and this court (and the Supreme Court, if the case

went that far) would be obliged to consider it. (Inconsistently, the government asks us merely to affirm the

district court’s decision, which was a decision on the

merits, not a decision dismissing the case for want of

jurisdiction.)

The government was repeating arguments that we had

rejected emphatically in United States v. Cook County, 167

F.3d 381 (7th Cir. 1999), and more recently in Parrott v.

United States, 536 F.3d 629, 634-35 (7th Cir. 2008); see also

Palay v. United States, 349 F.3d 418, 424 (7th Cir. 2003). Now

it is true that ours is a minority position, see Loughlin v.

United States, 393 F.3d 155, 162-63 (D.C. Cir. 2004); Williams

v. United States, 50 F.3d 299, 304-05 (4th Cir. 1995); Fazi v.

United States, 935 F.2d 535, 539 (2d Cir. 1991); Feyers v.

United States, 749 F.2d 1222, 1225-26 (6th Cir. 1984), and it

is also true that our opinion in Palay acknowledges some

wavering in our own cases. 349 F.3d at 424. But the cases

that hold that defenses to the government’s liability under

the Tort Claims Act are jurisdictional do not so much

analyze the issue as treat it as an automatic corollary of the

Act’s constituting a waiver of the federal government’s

sovereign immunity from suit. We cannot see what that

has to do with jurisdiction. Because of its sovereign

immunity, the federal government does not have to allow

people to sue it. But almost all statutes that create a right to

sue are matters of grace, in the sense that the legislature

was not required to enact the statute under which the

plaintiff is suing. “[W]hat sovereign immunity means is
No. 08-1334 9

that relief against the United States depends on a statute;

the question is not the competence of the court to render a

binding judgment, but the propriety of interpreting a given

statute to allow particular relief.” United States v. Cook,

supra, 167 F.3d at 389.

A court has subject-matter jurisdiction if it has the

“authority to decide the case either way.” The Fair v. Kohler

Die & Specialty Co., 228 U.S. 22, 25 (1913) (Holmes, J.); see

also Heitmann v. City of Chicago, 2009 WL 764155, at *2 (7th

Cir. Mar. 25, 2009); Kircher v. Putnam Funds Trust, 373

F.3d 847 (7th Cir. 2004); Ricketts v. Midwest National Bank,

874 F.2d 1177, 1181 (7th Cir. 1989). The term is thus reserved “for prescriptions delineating the classes of

cases . . . within a court’s adjudicatory authority.” Kontrick

v. Ryan, 540 U.S. 443, 455 (2004). (This emphatic recent

restatement by the Supreme Court of the principle of The

Fair v. Kohler Die & Specialty Co. may prompt a rethinking

by the courts that have declined to apply the principle

to federal tort claims cases.)

Thus, “to say that Congress has authorized the federal

courts to decide a class of disputes is to say that subjectmatter jurisdiction is present.” United States v. T & W

Edmier Corp., 465 F.3d 764, 765 (7th Cir. 2006). Obviously

the federal courts are authorized to decide suits under

the Federal Tort Claims Act; indeed, no other court

system is. 28 U.S.C. § 1346(b)(1).

We turn at last to the merits, where there are two

issues. The first is whether the FAA exerted enough control

over Midwest’s air controllers to make them de facto

federal employees. This issue was recently addressed in
10 No. 08-1334

a nearly identical case, involving another midair collision

to which the negligence of an air traffic controller employed by Midwest was alleged to have contributed. We

held that, extensive though the control of the FAA over

its contract controllers is, they are not its employees.

Alinsky v. United States, 415 F.3d 639 (7th Cir. 2005).

We decline to revisit that decision.

The second issue is the applicability to this case of the

discretionary-function exception to the liability of the

federal government for tort claims. TARDIS, an acronym

for “Terminal Automated Radar Display Information

System,” is an inexpensive radar system designed for air

traffic control. Although it has not been certified by the

FAA because it hasn’t undergone the stringent tests for

accuracy required for certification, we’ll assume that had

the control tower at the Waukegan Regional Airport been

equipped with TARDIS the collision would have been

averted. The FAA, partly because of doubts about

TARDIS’s accuracy and partly because it preferred to

finance other radar-system projects, decided not to try to

equip VFR (“visual flight rules”—that is, not radarequipped) airports, such as the Waukegan Regional

Airport, cheap as TARDIS was (though just how cheap

is unclear from the record—the range of estimates is

$20,000 to $100,000), even though other radar systems

were not yet available in 2000.

In making decisions on equipment allocation for

airports, the FAA considers a variety of factors, including

the volume of air traffic at the airport, the variety of aircraft

that use the airport, terrain and climate, cost, of course,
No. 08-1334 11

and, related to cost, competing needs for the agency’s

limited funds. At the time of the accident, only eight

airports had TARDIS. The district judge thought the

FAA had been negligent in failing to install TARDIS at

the Waukegan airport because of the danger of collisions

at an airport from which planes piloted by student pilots

are taking off and landing, and the horrendous consequences of a collision. Even so, he was right that the

FAA’s negligence was shielded from liability by the

discretionary-function exception. 

The prioritization of demands for government money is

quintessentially a discretionary function. United States v.

Varig Airlines, 467 U.S. 797, 819-20 (1984); Cope v. Scott, 45

F.3d 445, 450-51 (D.C. Cir. 1995); Williams v. United States,

50 F.3d 299, 310 (4th Cir. 1995); Pennbank v. United States,

779 F.2d 175, 180 (3d Cir. 1985) (“a decision regarding the

allocation of federal funds is a discretionary function

which goes to the heart of governmental activity”). The

FAA must allocate its limited funds among competing

radar systems, between radar systems and other safety

methods, and between safety measures and measures for

improving other dimensions of air traffic control, such

as reducing the delays caused by crowded skies. The

agency might prioritize so unreasonably that its decision

could be adjudged negligent, but the Tort Claims Act is

explicit that once a decision is classified as an exercise

of discretion, the fact that the discretion was abused or

even not exercised at all is irrelevant.

Which is why it is irrelevant that some of the VFR

airports that received TARDIS were ones in which mem-
12 No. 08-1334

bers of Congress had asked the FAA to install the system

and others were ones in which the only reason for the

installation appears to have been that there had been a

collision, regardless of the risk of future collisions. It

may not be right in some moral sense, but it is certainly

an example of discretionary decision making, for a

federal agency to give weight to requests from members

of Congress, and also to shut the barn door after the

horses have escaped. The first point is obvious, the second

only slightly less so. If there has been a collision at an

airport, a radar system is not installed in the wake of the

collision, and then there is another collision, the FAA

will receive searing criticism even if it can show that the

first collision really wasn’t predictive of future collisions

at that airport.

Against this reasoning the plaintiffs cite United States v.

Gaubert, 499 U.S. 315, 325 n. 7 (1991), where the Supreme

Court said that “there are obviously discretionary acts

performed by a Government agent that are within the

scope of his employment but not within the discretionary

function exception because these acts cannot be said to

be based on the purposes that the regulatory regime

seeks to accomplish. If one of the officials involved in

this case drove an automobile on a mission connected

with his official duties and negligently collided with

another car, the exception would not apply. Although

driving requires the constant exercise of discretion, the

official’s decisions in exercising that discretion can

hardly be said to be grounded in regulatory policy.”

Similarly, “if the employee violates [a] mandatory regulation, there will be no shelter from liability because there
No. 08-1334 13

is no room for choice and the action will be contrary to

policy.” Id. at 324. The plaintiffs reason from this

language that the FAA is not protected by the

discretionary-function exception in the present case

because prioritizing in response to congressional

pressures and the occurrence of a previous collision

does not further the purposes of the regulatory regime.

The plaintiffs are overreading Gaubert. It is true that if a

statute or regulation or other directive intended to be

binding forbids the specific act contended to have been

negligent, the employee who committed the act was not

exercising authorized discretion. Reynolds v. United States,

549 F.3d 1108, 1112 (7th Cir. 2008). And likewise if his

exercise of discretion had no policy content. Suppose a

federal food inspector, while driving to a meat-processing

plant that he is required to inspect, decides to run a

red light because he fears that if he stops abruptly the

car behind him will hit him and he doesn’t see another

car approaching the intersection. But he is mistaken and

the cars collide (and his car is also hit from the rear,

anyway). He made a conscious choice to run the light and

so was exercising discretion, but it was an exercise unrelated to the formulation and implementation of the Federal

Food, Drug, and Cosmetic Act. Invoking the discretionaryfunction defense in such a case would not serve its intended purpose of protecting the discretionary policyrelated decisions of federal officers from being secondguessed by judges. But the decision to install TARDIS at

some airports but not others, the others including the

Waukegan airport, was a discretionary policy judgment,

whether or not we think the FAA should allow itself to be
14 No. 08-1334

influenced by congressional or public opinion, cf. United

States v. Gaubert, supra, 499 U.S. at 322-23; Miller v. United

States, 163 F.3d 591, 593-94 (9th Cir. 1998), and it was

therefore behind the liability shield. Alinsky v. United States,

supra, 415 F.3d at 648.

AFFIRMED.

5-1-09