The Seventh Circuit’s 1953 opinion in Seaboard Surety Co. v. Racine Screw Co., 203 F.2d 532, “has been little cited, and criticized when it has.” Reliance Ins. Co. v. Zeigler, 938 F.2d 781, 783, n.2 (7th Cir., 1991). However, it is still good law in the Seventh Circuit and it has major implications in CERCLA contribution, and other equitable, actions. This blog entry will argue that Seaboard Surety correctly held that a court cannot properly exercise equitable discretion on summary judgment. 203 F.2d at 534.
In Seaboard Surety, the lower court granted summary judgment in the plaintiff’s favor in an action for specific performance of certain provisions in an indemnity agreement. Id. at 532. The defendant appealed, and the Seventh Circuit reversed reasoning that the plaintiff is “not entitled to [a judgment] as a matter of law” because “[t]he relief sought… is equitable, and its allowance or refusal rests in the sound discretion of the court.” Id. at 533. The Seventh Circuit explained its holding as follows:
Plaintiff cites a number of the legion of cases which have sustained the propriety of a summary judgment under Rule 56(c) of the Federal Rules of Civil Procedure, 28 U.S.C.A., because there was ‘no genuine issue as to any material fact.’ But these necessarily are all cases where, as the rule provides, ‘the moving party is entitled to a judgment as a matter of law.’ In the instant situation, however, plaintiff was not entitled to judgment as a matter of law; it was entitled only to appeal to the sound discretion of the court. In a legal action, a party is entitled to all the law allows; in the instant action for equitable relief, plaintiff was entitled only to that which the court in the exercise of a sound discretion concluded to be fair and equitable. And undoubtedly, in the latter situation the court was duty bound to take into consideration many circumstances and factors which would be of no consequence in the former. It is not difficult to visualize that in an action for specific performance, one court, on a certain set of facts and circumstances, might allow the relief sought, while another court on exactly the same record might deny the relief. And it is possible that both courts, on appeal, would be affirmed, because neither was shown to have abused its discretion.
Plaintiff relies upon a number of state court cases wherein specific performance has been decreed under circumstances similar to those instantly presented, but no case has been cited, and we know of none, where it has been held that relief may be obtained by means of a summary judgment. It is our view that the rule was not intended to, and from its phraseology does not encompass a situation wherein the relief sought is not allowable as a matter of law or of right but is dependent upon a discretion to be exercised by the court. True, we find no authority which either supports or refutes this conclusion. However, it appears wholly incompatible to say in one breath that a party is entitled to prevail as a matter of law, and in the next, to admit that it is entitled to do so only in the discretion of the court. The two premises cannot stand side by side...
Id. at 534 (Emphasis added). While the court thought it was “unnecessary to resolve” whether there were genuine issues of material fact because the plaintiff was not entitled to a judgment as a matter of law, it nonetheless noted that “[w]e think there was a genuine issue of material fact involved.” Id. at 533. However, as will be explained below, the presence of a genuine issue of material fact did make a difference in the analysis because, hypothetically speaking, without such an issue there would be no need for the court to exercise its discretion to grant plaintiff relief.
Courts citing, and criticizing, Seaboard Surety have summarized it to hold that “summary judgment is not available in actions which were formerly equitable actions.” Thickman v. Schunk, 391 P.2d 939, 944 (Wyoming Sup. Ct., 1964); see also, Booth v. Barber Transportation Co., 256 F.2d 927, 930 (8th Cir., 1958)(“the summary judgment remedy is available only in an action at law, and the remedy is not available in actions of an equitable nature.”). This criticism of Seaboard Surety has focused on the fact that one of the aims of the federal rules was the elimination of procedural differences between actions at law and those in equity. See Id. at 930-31; see also, Thickman, 391 F.2d at 944.
However, as distinctions between law and equity were abandoned, the very nature of an equitable action changed in some circumstances. It used to be that “equitable relief should be granted only as a matter of judicial discretion…” Eccles v. Peoples Bank of Lakewood Village, 333 U.S. 426, 431 (1948). However, today some actions that were formerly equitable actions no longer permit a court to exercise its equitable discretion. See Hatco Corp. v. W.R. Grace & Co.-Conn., 859 F.Supp. 769, 774 (D. New Jersey, 1994)(“The case law is generally uniform in holding that CERCLA cost recovery… is an equitable remedy.”); Town of Munster v. Sherwin-Williams Co. Inc., 27 F.3d 1268, 1271-72 (7th Cir., 1994)(“CERCLA does not permit equitable defense to [cost recovery].”) (Emphasis in original). Thus, it seems easy to dismiss the notion that summary judgment should be categorically unavailable in equitable actions because not all such actions require the court to exercise its discretion. Furthermore, it also seems easy to dismiss this reading of Seaboard Surety because, under it, one could not obtain summary judgment of an equitable claim based on a legal defense, such as the statute of limitations, and it is doubtful that is what the Seventh Circuit had in mind in Seaboard Surety.
The appellant in Reliance Insurance, supra, made, and then withdrew, an argument based on a slightly different reading of Seaboard Surety. 938 F.2d at 783 n.2. The appellant argued “district courts lack authority to grant equitable relief on summary judgment under Seaboard Surety.” Id. If that proposition is true, then Seaboard Surety would seem to be overruled by Environmental Transportation Systems, Inc. v. Ensco, Inc., 969 F.2d 503, 506, 512 (7th Cir., 1992), where the Seventh Circuit affirmed the district court’s decision granting summary judgment for contribution based on the court’s conclusion that the accident at issue was entirely the fault of one party. In other words, the Seventh Circuit affirmed the granting of equitable relief on summary judgment. Id. However, if the Ensco opinion, written by Justice Wood, overruled Seaboard Surety, then one would wonder why that was not mentioned in the opinion? Especially, when you consider that only 12 months earlier, Justice Wood was one of the Justices deciding Reliance Insurance which, specifically stated, “Seaboard Surety has been little cited, and criticized when it has. [Appellant’s] withdrawal of the issue, however, precludes us from making any definitive statement about Seaboard Surety’s continued validity.” Reliance Ins., 938 F.2d at 783, n.2. Ensco would seem to be the perfect time to discuss the continued validity of Seaboard Surety if, but only if, that case stood for the position that district courts lack authority to grant equitable relief on summary judgment.
There is a third way to view the holding in Seaboard Surety that is consistent with Ensco and is supported by the text of the Seventh Circuit’s decision itself. “It is our view that the [summary judgment] rule was not intended to, and from its phraseology does not encompass a situation wherein the relief sought is not allowable as a matter of law or of right but is dependent upon the discretion to be exercised by the court.” 203 F.2d at 534. In other words, Seaboard Surety can be seen to stand for the proposition that district courts cannot grant summary judgment where doing so requires the court to exercise its equitable discretion. Id.
This position is consistent with Ensco because there was no genuine issue of material fact regarding whose fault the accident was in Ensco, and no other factors were presented to the court. 969 F.2d at 512. Thus, the Ensco court did not have to exercise it equitable discretion when awarding contribution because the evidence before it could only be viewed one way. Id. In fact, the court specifically stated it would be “a different case” if the appellant would have submitted any evidence in its favor regarding the fault factor or another factor. Id. Additionally, this reading means that the existence of a genuine issue of material fact in Seaboard Surety played a role in the courts analysis, even if the court did not realize it, because without such an issue the court would not have to exercise its equitable discretion to grant specific performance. See 203 F.2d at 532-34. In other words, if all the evidence can only be viewed to point in one party’s favor, then there can be only one result and there is no need to exercise discretion.
Because contribution requires a court to consider the “totality of the circumstance presented” to it, and there are many possible factors it can consider, “the issue of contribution may not always be suited to disposition by summary judgment” because all that is necessary to defeat summary judgment is a genuine issue of material fact regarding any factor the court could consider in exercising its equitable discretion. See Ensco, 969 F.2d at 509-10, 512. Even if the court would completely disregard that factor, for which there was a genuine issue of material fact, when exercising its discretion, the fact that another court could consider that factor and reach a different result means the moving party is not entitled to summary judgment as a matter of law. See Seaboard Surety, 203 F.2d at 534 (“it appears wholly incompatible to say in one breath that a party is entitled to prevail as a matter of law, and in the next, to admit that it is entitled to do so only in the discretion of the court.). The fact that a court cannot exercise its equitable discretion on summary judgment—i.e., the court cannot decide which factor or factors, among competing factors, in a contribution case is going to control the court’s ultimate decision—is directly related to the proposition that, on summary judgment, a “trial court should not weigh the evidence of the plaintiffs against that of the defendants. That is the function of the fact finder at trial.” See Staren v. Am. Nat’l Bank & Trust Co., 529 F.2d 1257, 1261 (7th Cir., 1976).
Amazingly in Booth, supra, directly after criticizing Seaboard Surety based on its expansive reading of that case, the Eight Circuit reached the same holding as a narrow and proper reading of Seaboard Surety:
In situations such as here presented, where the granting of relief is dependent upon the sound discretion of the court, we believe the trial court should proceed cautiously in granting summary judgment, and that summary judgment should be withheld and trial held on the merits whenever it appears likely that evidence could be produced which might affect the exercise of the judicial discretion.
Booth, 256 F.2d at 931 (Emphasis added). In other words, a court cannot grant summary judgment where doing so requires the court to exercise its equitable discretion; a court may only grant summary judgment where there is only one possible outcome under the law. See Id.; see also, Seaboard Surety, 203 F.2d at 532-34. Thus, the party moving for summary judgment must be “entitled to [a judgment] as a matter of law”, rather than as a matter of the court’s equitable discretion, to obtain summary judgment. See Id.; see also, Booth, 256 F.2d at 931; Fed. R. Civ. P. 56(a). Therefore, courts cannot exercise equitable discretion on summary judgment because they have to consider the totality of the circumstances, which requires courts to weigh evidence, which cannot be done on summary judgment.
The Second Circuit reached a result similar to the expansive reading of Seaboard Surety, discussed above, in the context of a CERCLA contribution action. See Niagara Mohawk Power Corp. v. Chevron U.S.A., Inc., 596 F.3d 112, 132 (2nd Cir., 2010). The Court stated:
By referencing “equitable factors,” the statute requires district courts to consider the practical difficulties in these cases. Summary judgment is only proper when a defendant establishes it is not liable at all under CERCLA—namely, it is not a PRP under the statute, there is no plausible evidence that it discharged hazardous materials, or it is eligible for one of the three affirmative defenses available under § 107.
Id. In other words, the Second Circuit held that a party cannot obtain summary judgment in a CERCLA contribution case base on an equitable factor. Id. Perhaps later, the Second Circuit will allow a party to obtain summary judgment on a contribution claim if all the evidence regarding equitable factors can only be viewed in favor of that party. In any case, it appears the Second Circuit and Seventh Circuit are in agreement and are correct that courts cannot exercise their equitable discretion on summary judgment.
THAT’S MY ARGUMENT.
© June 2013 Brandon J. Evans
© June 2013 Brandon J. Evans