U.S. Court of Appeals Reverses Trial Court on the Issue of Whether a Federal Court Can Ignore a State Court Judgment on the Grounds that the State Court Did Not Have Jurisdiction

Robert Lodholtz was seriously injured in 2011 while working at a plant owned by Pulliam Enterprises in Indiana. Lodholtz filed a personal-injury lawsuit against Pulliam in the Indiana state court. Pulliam called on Granite State Insurance Co., its primary liability insurer, along with New Hampshire Insurance Co., to defend and indemnify it against the lawsuit.

Granite State refused to indemnify Pulliam stating that Lodholtz as an employee should pursue his claim for worker’s compensation. Lodholtz disagreed arguing that he was employed by another company while he worked at Pulliam’s plant and therefore had no basis for a worker’s compensation claim.

Pulliam chose not to file an answer to the complaint, so Lodholtz moved for default judgment, which was granted. Lodholtz then agreed with Pulliam not to pursue the default judgment and in return Pulliam assigned to Lodholtz its rights against Granite State. Granite State then moved to intervene in Lodholtz’s lawsuit. The Indiana state court denied the motion to intervene.

Granite State then filed a lawsuit in the U.S. District Court in Indiana against Lodholtz and Pulliam seeking declaratory judgment that Granite State has no duty to indemnify Pulliam. At the same time, Granite State appealed to the Indiana Court of Appeals from the trial court’s denial of its motion to intervene. The Indiana Court of Appeals affirmed the denial of the motion to intervene. The Indiana Supreme Court refused to take on the Granite State appeal.

However, the federal district court ruled that because Lodholtz’s employer had “leased” Lodholtz to Pulliam to work at Pulliam plant, he had been Pulliam’s employee as well, and therefore the Indiana state court judgment in favor of Lodholtz’s should be “disregarded.”

Lodholtz then appealed the district court’s decision to the U. S. Court of Appeals in Chicago. The issue before it was whether a federal court can ignore a state court judgment on the ground that the state court was wrong about its jurisdiction over the case. The panel stated that Rule 60(b)(4) of the Federal Rules of Civil Procedure authorizes a federal district court to relieve a party from a judgment if the judgment is “void.” In addition, it stated that Rule 60(d)(1) authorizes an independent action to relieve a party from a judgment.

Because the panel said that Rule 60(d)(1) should be exercised sparingly, collateral attacks on subject-matter jurisdiction are to be discouraged as the U.S. Supreme Court set out in Travelers Indemnity Co. v. Bailey.

The court said the federal court is not the only court with appellate authority over state courts, but even the Supreme Court would have no authority over the decision in the Indiana state court, the panel reasoned, because no federal law was involved in that litigation. The panel cited the Rooker-Feldman Doctrine.

In summary, the court of appeals determined that the jurisdictional issue was resolved by the Indiana state court, and there was no basis for a collateral attack by another judicial system on that determination. Accordingly, the district court’s decision was reversed.

In Re: Robert Lodholtz, et al., No. 14-8014 (U.S. Court of Appeals for the 7th Cir., Oct. 6, 2014).

Kreisman Law Offices has been handling work injury cases, construction site accident cases, truck accident cases, car accident cases and nursing home abuse cases for individuals and families who have been harmed, injured or died as a result of the carelessness or negligence of another for more than 38 years in and around Chicago, Cook County and its surrounding areas, including Bolingbrook, Romeoville, Joliet, Frankfurt, Alsip, Arlington Heights, Orland Park, Mount Prospect, Prospect Heights, Harwood Heights, Merrionette Park, Park Ridge and Forest Park, Ill.