CE Design Ltd. v. Matrix LS, Inc. et al

Filing 154

MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 6/27/2012:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

INDIANA INSURANCE COMPANY,
Plaintiff,
Case No. 06 C 2115
v.
Hon. Harry D. Leinenweber
MATRIX LS, INC. and CE DESIGN
LTD.,
Defendants.

MEMORANDUM OPINION AND ORDER
Before the Court is Defendant CE Design Ltd.’s (“CE Design”)
Motion to Dismiss, it Motion to Transfer and Plaintiff Indiana
Insurance Company’s (“Indiana”) Motion for Summary Judgment.

For

the reasons stated herein, the Court grants Defendant CE Design’s
Motion to Dismiss and accordingly does not reach the Motion to
Transfer or Plaintiff’s Motion for Summary Judgment.
I.

BACKGROUND

This case has a somewhat convoluted history.

CE Design filed

a class action lawsuit against Michigan Defendant Matrix LS, Inc.
(“Matrix”) in state court in Lake County, Illinois on March 22,
2005, alleging violations of the Telephone Consumer Protection Act
(the “TCPA”) and other laws by sending unsolicited junk faxes.
That action remains pending in Lake County.
On March 14, 2006, CE Design filed this declaratory judgment
action in Lake County seeking a declaration that Matrix’s insurer,

Indiana,

had

a

duty

underlying suit.

to

defend

and

indemnify

Matrix

in

the

(Matrix was administratively dissolved by the

State of Michigan in 2008 and, by all indications, is judgment
proof.)

Indiana removed the declaratory judgment action to this

Court on April 14, 2006 and countersued for its own declaratory
judgment relief, seeking a ruling that it had no duty to defend or
indemnify Matrix.
On March 6, 2007, the parties and this Court decided in open
court that CE Design would voluntarily dismiss its action without
prejudice, Indiana would become the plaintiff and Matrix would be
the defendant, with CE Design joined as a necessary defendant to
Indiana’s declaratory judgment action.

The parties agreed CE

Design

judgment

would

reinstate

its

counterclaim against Indiana.

declaratory

action

as

a

Although Indiana agreed that CE

Design was a necessary party to its declaratory judgment action
against Matrix, it disputed that CE Design had standing under
Illinois law to bring its own counterclaim.

The parties agreed to

resolve CE Design’s standing issue through summary judgment before
litigating Indiana’s declaratory judgment action.
Motion

for

Summary

Judgment

on

CE

Design’s

While Indiana’s

Counterclaim

was

pending, Indiana twice unsuccessfully sought to obtain default
judgment against Matrix, which had not responded to Indiana’s
Amended Complaint.

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On December 11, 2007, the Court ruled in favor of Indiana on
the issue of CE Design’s Counterclaim, dismissing it.

Although

Indiana’s declaratory judgment action remained pending, the Court’s
clerk erroneously entered a “Judgment in a Civil Case” form.
ECF No. 96.

For the next 47 months, neither party filed a motion,

status report, or summary judgment motion.

In fact, no activity

whatsoever occurred until November 17, 2011 when Indiana filed a
new attorney appearance form on its way to asking for summary
judgment on its duty to defend, which was filed March 23, 2012.
The renewed interest in this case by Indiana came shortly after CE
Design filed an action in Wisconsin state court on November 3,
2011, again seeking judgment on the duty to defend issue.

CE

Design subsequently voluntarily dismissed that action and refiled
in Massachusetts state court.
Indiana
erroneous

does

not

“Judgment

proceedings.

in

claim
a

that

Civil

it
Case”

mistakenly
entry

thought

the

terminated

the

Instead, it claims the lack of activity in this case

was deliberate abstention while the underlying suit proceeded.
II.

ANALYSIS

CE Design argues for dismissal on three grounds.

First, that

the summary judgment order entered by this Court on December 11,
2007

was

a

final

judgment

and

therefore

this

Court

has

no

jurisdiction; second, it moves for dismissal under Federal Rule of
Civil Procedure 41(b), arguing Indiana failed to prosecute the case

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for nearly four years; and third, it argues the Court should
abstain in favor of the action pending in Massachusetts state
court.
A. The Erroneous Entry of Judgment Form
Did Not Terminate This Court’s Jurisdiction
The Court agrees with Indiana that the order of December 11,
2007 was not intended by the Court to be a final judgment.

CE

Design is correct that there are entries in the record indicating
a final judgment was entered.

The first is the entry of the docket

clerk describing the Court’s minute order [ECF No. 94].
docket

entry

reads

“Civil

case

terminated.”

However,

That
the

underlying minute order of the Court itself does not contain that
language.
Docket entry No. 96, a judgment form prepared by the clerk,
also erroneously indicates that a judgment had been reached.
Incidentally, the erroneous of entry of judgment was likely
not the clerk’s fault.

The imprecise wording of the minute order

used two sentences to say the same thing:
“The Motion for Summary Judgment of Indiana Insurance
Company is Granted. The Counterclaim of CE Design Ltd.
is Dismissed.”
ECF No. 94.
It would not have been unreasonable to interpret the first
sentence as a statement that Indiana had been granted summary
judgment

on

its

declaratory

judgment

action.

With

that

understanding, a reader might naturally assume the second sentence
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meant, since Indiana had prevailed on its declaratory judgment
action, CE Design’s Counterclaim seeking declaratory judgment was
necessarily dismissed. Instead, what the Court intended was simply
to state that only CE Design’s Counterclaim had been ruled on,
dismissed as a result of a Motion for Summary Judgment.
In any case, it is clear from the record that the entry of
judgment was in error because the substance of both the memorandum
opinion

itself

and

open-court

exchanges

show

that

Indiana’s

declaratory judgment was still pending.
For instance, the Memorandum Opinion and Order reads:
The second argument is that the right of a claimant to
bring a declaratory judgment action against an insurer is
limited to situations, unlike here, where there is no
pending declaratory judgment action between the insured
and insurer . . .
Mem. Op. and Order of Dec. 11, 2007, 3 (emphasis added).
Additionally, in discussing in open court the best way to
present

the

parties’

claims,

it

was

plain

that

all

parties

understood that if CE Design was deemed not to have standing to
bring its own declaratory judgment action, Indiana’s declaratory
judgment action would continue nonetheless.

On March 6, 2007,

Indiana’s own attorney stated:
In other words, [CE Design] initiated this action by
filing a complaint for declaratory judgment, so they are
already in that fight. We take the position that they
don’t have standing to do so.
So once that is ruled on, one way or the other, there may
– there would then be a basis for them to be an

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interested
party
in
our
declaratory judgment. . . .

counterclaim,

which

is

Tr. of Proceedings of Mar. 6, 2007, 2-3.
Finally, Indiana by its briefing indicates that it was not
confused by the erroneous judgment entry and that it was well aware
that its declaratory judgment action remained.
Thus, there is ample evidence that Indiana’s claims were not
resolved and there was no final judgment.
change this.

A clerical error cannot

See United States v. Coles, 97 Fed.Appx. 665, 668

(7th Cir. 2004) (scrivener’s error in docket sheet indicating a
lesser felony was charged did not supersede the clear facts in the
charging instrument indicating a more serious felony had been
lodged).
B. Indiana’s Failure to Take Any Action
For Nearly Four Years, Without Explanation,
Constitutes a Failure to Prosecute Worthy of Dismissal
But the Court cannot agree with Indiana that its unexplained
silence and inaction for nearly four years in this case should not
result in dismissal under Federal Rule of Civil Procedure 41(b) for
failure to prosecute. The situation is nearly identical to that in
Krause v. Mississippi Coal Corp., where a plaintiff did nothing for
56 months after his opponent filed a motion to dismiss. Krause, 93
F.2d 515, 516-517 (7th Cir. 1937) (deciding the district court’s
sua sponte dismissal for failure to prosecute was not an abuse of
discretion).

Indiana

has

done

little

to

differentiate

inactivity from the failure to prosecute in Krause.
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its

Granted, the

period of inactivity is less than in Krause, but the Court does not
see

a

substantial

difference

between

nearly

five

years

of

inactivity and nearly four.
One possible differentiation would be that Krause was a preFederal Rules of Civil Procedure case, but this does not help
Indiana. As the Supreme Court noted, “the federal courts’ power to
dismiss for failure to prosecute remains unaffected by Rule 41(b).”
Carlisle v. United States, 517 U.S. 416, 426 (1996) (superseded by
statute on other grounds as stated in United States v. Maricle,
No. 09-16, 2010 U.S. Dist. LEXIS 105931, at *6 (W.D. Ky. Oct. 4,
2010).

Another possible basis for differentiation could be that

Krause involved a matter of equity while this case is a matter of
law.

That too is of no import.

Roadway Express v. Piper indicates

that dismissal for failure to prosecute is an inherent power in
courts of both law and equity.

Roadway Express, 447 U.S. 752, 765

(1980).
Instead of differentiating its case from Krause, Indiana
relies on a Seventh Circuit case indicating that dismissal is “an
extraordinarily harsh sanction” that should be used only in extreme
situations, and after consideration of certain factors, including
prejudice.

Kasalo v. Harris & Harris, 656 F.3d 557, 561 (7th Cir.

2011).
First, Kasalo can be distinguished because it did not involve
a party’s utter failure to take any action in a case for 47 months.
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Instead, it ruled that a District judge acted too hastily in
dismissing a case where no filings had been made in two months and
the plaintiff’s attorney was 16 minutes late to a hearing that had
recently been moved up in time by an hour.

Id. at 558-560.

Seventh

too

Circuit

found

these

infractions

minor

to

The
merit

dismissal.
Even within Kasalo’s constraints, dismissal is appropriate.
It advises dismissal is appropriate “when there is a record of
clear delay.”

Id.

Delay does not get much clearer than a 47-month

period of no activity whatsoever.

Moreover, Indiana’s reliance on

a lack of prejudice to CE Design is misplaced.
Actual prejudice need only be shown when a party comes forward
with a reason for its delay.

See Boyle v. Am. Auto Serv., 571

F.3d 734, 743 (8th Cir. 2009) (affirming dismissal of plaintiff’s
breach of contract and tort suit where plaintiff failed to take any
action for 44 months after initially issuing summons and offered no
reason in its briefings for the delay).
Here, Indiana has offered no serious justification for its
failure to do anything in this case.

Instead it offers only that

both Indiana and CE Design “abstained from taking any action in
this lawsuit while they waited for the underlying class action to
move forward.”

Indiana’s Resp. 3.

That “explanation” merely

reflects that Indiana indeed made a conscious choice to do nothing
in this case; it does not explain why.

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Nor does it explain why

Indiana

did

not

approach

this

Court

and

move

to

have

the

proceedings stayed pending resolution of the underlying suit, which
would have been the proper mechanism for the outcome Indiana
desired.

See

United

States

ex

rel.

Mallavaru

v.

Acadiana

Cardiology, LLC et al., No. 04-732, 2010 U.S. Dist. LEXIS 104718,
at

*50-52

(W.D.

La.

Aug.

16,

2010) (finding

dismissal

under

Rule 41(b) inappropriate when alleged failure to prosecute came
about

as

the

result

of

an

order

granting

a

motion

to

stay

proceedings).
Indiana’s suggestion that CE Design shares responsibility in
this 4-year delay is irrelevant.

It is indeed curious that CE

Design did not approach the Court or its opponent in an attempt to
move things along.

But as the defendant in the remaining action,

it was not obligated to do so.

What CE Design was obligated to do

was press its action, which it did diligently.
declaratory

judgment

action

in

state

court

It initiated its
and

litigate it when the case was removed to this Court.

continued

to

It continued

that litigation until this Court ruled that it did not have
standing to bring its action.

Indiana’s action for declaratory

judgment was not CE Design’s responsibility.
The Court does not know why Indiana did nothing in this case
for nearly four years.

Maybe it was lazy.

Maybe it made a

mistake. Maybe it saw a tactical advantage in keeping CE Design in
limbo, making it invest more and more money in its underlying suit

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without a clear indication of whether there would be a party to
collect from if it prevailed.

Maybe it feared Illinois’ rather

stringent insurance estoppel cases would not go its way.
Whatever the reason, the Court is convinced that no reasonable
person would park his car on the street and expect it to still be
there four years later, a useable vehicle for getting where he
wanted to go.

Neither should any plaintiff think that it can park

its case in a court for four years, doing nothing to feed the
meter, and expect it to still be there, a useable vehicle for
getting where it wants to go.
III.

CONCLUSION

The Court finds a clear record of delay by Indiana in this
case and dismisses its action for declaratory judgment for failure
to prosecute under Federal Rule of Civil Procedure 41(b).

This

dismissal “operates as an adjudication on the merits” as the rule
commands, and is a final judgment, subject to immediate appeal by
both parties.

FED. R. CIV. P. 41(b).

Because the case is dismissed for want of prosecution, the
Court does not reach CE Design’s abstention argument, nor its
Motion to Transfer, nor Indiana’s Motion for Summary Judgment.
IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
DATE:

6/27/2012
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