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
