Court Opinion

ID: 8991455
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:14:44.376658+00
Date Added: 2024-06-11T17:10:55.833250
License: Public Domain

ESCHBACH, Senior Circuit Judge,
dissenting.
I respectfully dissent because I regard Judge Wood’s excellent opinion in Hartford Cas. Ins. Co. v. Borg-Warner Corp., 913 F.2d 419 (7th Cir.1990) as controlling in the present case. Also, I believe that the declaratory nature of any judgment that the District Court might reach and the requirements of Illinois law support the District Court’s decision to abstain.
The only difference between the present case and Hartford Casualty is that in the latter case the rehabilitator had begun a “specialized proceeding” to resolve claims —“therein lies the rub” according to the majority. Majority Opinion at 323. But this point cannot be dispositive. Although a state proceeding existed in Hartford, “Hartford’s claims e[ould] not be brought in [that] state proceeding.” 913 F.2d at 425. What’s more, the state court in Hartford had specifically authorized suits such as the one at issue to proceed. 913 F.2d at 421, 426. By contrast, in the present case, the majority reverses an abstention order even though the claims at issue are amenable to suit in state court, and a state court order has specifically authorized the reha-bilitator to “petition the courts having jurisdiction over ... [all pending] litigation for stays whenever necessary to protect the estate of Central National.” Order for Rehabilitation, March 9, 1990, ¶ 10. This litigation posture makes the present case even more appropriate for abstention than was Hartford.
Further, I differ from the majority because of its failure to explain the consequences of “rehabilitation”. Under the rehabilitation order, the Nebraska Director of Insurance is “directed to forthwith take possession and control of the assets of Central National ... [and] the books, accounts, bank accounts, documents, and other records of Central National and of the premises occupied by it.” Order for Rehabilitation, March 9, 1990, 113. The Director of Insurance has received “all the powers of the directors, officers, and managers of Central National, whose authority shall be suspended.” Id., II 5. In short, “rehabilitation” means that the Nebraska Director of Insurance has complete control of Central National.
As the majority acknowledges, “[w]e should ... abstain ‘from the exercise of federal review that would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.’ ” Majority Opinion at 322, quoting Hartford, 913 F.2d at 425. An order to the Director of Insurance, telling him to pay a specific dollar amount to PCIL out of Central National’s limited assets, would be a bald usurpation of the Director’s duties, and nothing in the majority opinion supports such an order. The District Court was thus right to “view what’s potentially involved here as declaratory in nature.” Transcript of Proceedings of March 29, 1990, p. 8; see Lac D‘Amiante v. American Home Assurance, 864 F.2d 1033, 1042 (3rd Cir.1988) (construing a district court’s judgment against an insolvent insurer as merely declaratory and reversing for failure to abstain). That is, PCIL will not be able to execute any judgment the District Court might reach until the Nebraska courts or the Nebraska Director of Insurance say that it can.1 Perhaps the Nebraska authorities will pay PCIL a fractional value of the face amount of any judgment based on the ratio of *328Central National’s assets to its liabilities, or perhaps PCIL will be in a class of creditors that receives no compensation. Either way, the utility of the District Court’s judgment is dubious. It is hard to see an abuse of discretion in the District Court’s refusal to issue a judgment that it cannot enforce. See, e.g., A.G. Edwards & Sons, Inc. v. Public Building Commission, 921 F.2d 118, 120 (7th Cir.1990) (stating that district courts have “wide discretion” to abstain from issuing a declaratory judgment and are “under no compulsion to exercise th[eir] jurisdiction” in such cases).2
Finally, the majority essentially ignores its own statement that Illinois law controls this case. See Majority Opinion at 322 n. 5. Under Ill.Rev.Stat., ch. 73, 11833.4, Illinois courts would require that this suit be brought against Central National in Nebraska, because of Central National’s rehabilitation status and the “reciprocal” nature of Nebraska’s and Illinois’ insurance codes. See Clark v. Standard Life & Accident Ins., 68 Ill.App.3d 977, 987, 25 Ill. Dec. 416, 425, 386 N.E.2d 890, 899 (1st Dist.1979) (such a claim “has to ‘be proved in the [insurer's] domiciliary state as provided by the law of such state’ ”) (emphasis added). The majority cannot avoid this rule merely by labelling it “prudential.” See Majority Opinion at p. 321 n. 3. Whatever considerations may motivate Illinois’ law, that law governs this case.
In short, the majority fails to follow Hartford; fails to respond to the District Court’s accurate conclusion that any judgment would be essentially declaratory; and fails to apply Illinois’ clear rule of law. For these reasons, I dissent.

. In its brief to this Court (at p. 24), Central National argued that "PCIL’s claim will not be paid, in any event, before a plan of rehabilitation is approved” in Nebraska state court, a point which PCIL has not challenged.

. It might be appropriate in some cases for a federal court to issue a judgment that it cannot immediately enforce, if only because evidence does not last forever. But the possible loss of evidence is not a significant concern in the present case. PCIL urges that the dispute is a simple matter of contract interpretation that is appropriate for summary judgment. See, e.g., Opening Brief of Plaintiff-Appellant, p. 23. Nothing prevents the pending summary judgment motions from being renewed at any later time or from being filed in a new state court suit at relatively little cost.
Also, the majority acknowledges that the Nebraska rehabilitation statute at issue follows a model act and is similar to that in other states. See Majority Opinion at 325 n. 11. This point indicates that the Nebraska procedure is not likely to be of such “unknown nature” as the majority’s opinion suggests. Id., at 326.