Fidelity and Deposit Company v. Edward E. Gillen Company ( 2019 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 18-2144 & 18-3446
FIDELITY AND DEPOSIT COMPANY OF MARYLAND,
Plaintiff-Appellant,
v.
EDWARD E. GILLEN COMPANY,
Defendant-Appellee.
____________________
Appeals from the United States District Court for the
Eastern District of Wisconsin.
No. 13-C-1291 — Lynn Adelman, Judge.
____________________
ARGUED APRIL 1, 2019 — DECIDED JUNE 3, 2019
____________________
Before EASTERBROOK, SYKES, and BRENNAN, Circuit Judges.
BRENNAN, Circuit Judge. Although linguists call Latin a
“dead language,” legal nomenclature dies hard. This case pre-
sents a surety’s claim for quia timet—equitable protection
from probable future harm. The surety (an insurance com-
pany) is suing its principal (a construction company) that
allegedly went belly up on a government project. The ancient
equitable doctrine of quia timet remains viable into the 21st
century, but the surety’s claim in this case is a dead letter.
2 Nos. 18-2144 & 18-3446
I. Background
The relevant facts are straightforward and undisputed.
About ten years ago, the Public Building Commission of Chi-
cago awarded a harbor construction contract to a joint venture
formed by Edward E. Gillen Company (“Gillen”) and two
other entities. The joint venture subcontracted some of the
work to Gillen, which in turn subcontracted with various
other companies for labor and materials.
To secure its work, the joint venture obtained over $30 mil-
lion in performance and payment bonds 1 issued by Fidelity
and Deposit Company of Maryland (“Fidelity”). Fidelity re-
ceived in return (in addition to its premium) an indemnity
agreement and a net worth retention agreement, both exe-
cuted by Gillen. The indemnity agreement obligated Gillen to
“exonerate, indemnify, and keep indemnified” Fidelity for all
losses and expenses incurred on the bonds. In the net worth
retention agreement, Gillen promised to maintain a net worth
greater than $7.5 million.
During 2012, over a dozen subcontractors sued Gillen in
Illinois state court, alleging Gillen failed to pay for labor and
materials used on the harbor project. Those plaintiffs named
Fidelity as a co-defendant based on its payment bond
1 Aptly named, a performance bond on a construction project is a
surety’s guarantee that the principal’s work will be completed. A payment
bond guarantees the principal will pay its laborers, subcontractors, and
suppliers. PETER A. ALCES, THE LAW OF SURETYSHIP AND GUARANTY
§§ 10.2–10.3 (2018 ed.); see also Marilyn Klinger, et al., Contract Performance
Bonds, in THE LAW OF SURETYSHIP 81, 81–83 (Edward G. Gallagher ed., 2d
ed. 2000); Kelly Allbritton Katzman, Purpose of The Payment Bond and Who
and What Is Covered, in THE LAW OF SURETYSHIP 147, 147–48 (Edward G.
Gallagher ed., 2d ed. 2000).
Nos. 18-2144 & 18-3446 3
obligations. Eleven of the lawsuits have been resolved over
the years; six remain pending.
Fidelity then sued Gillen in federal court, alleging five
claims: breach of the indemnity agreement (Count I); a re-
quest for an accounting of contract payments under the
indemnity agreement (Count II); breach of the net worth re-
tention agreement (Count III); quia timet (Count IV); and a de-
mand for access to books and records (Count V). On its quia
timet claim, Fidelity sought $2.5 million in cash from Gillen as
bond collateral and an order requiring Gillen to satisfy all
bond obligations and prohibiting Gillen from disbursing
money without court approval. Gillen counterclaimed.
After several years of slow-moving litigation, the district
court (with both sides’ agreement) referred the case to a mag-
istrate judge for mediation. The parties settled all claims at the
mediation, except for Fidelity’s quia timet claim. They agreed
their settlement would not impact the quia timet claim (or Gil-
len’s defenses) in any manner.
With only quia timet remaining, Gillen filed a motion for
summary judgment, which the district court granted. Gillen
then submitted a bill of costs that the clerk of court eventually
taxed against Fidelity. Fidelity filed a separate notice of ap-
peal challenging each order.
II. Discussion
A. The Doctrine of Quia Timet
To start, the doctrine is pronounced “kwee-ə tim-et” and
translates from Latin as “because he fears.” Quia timet,
BLACK’S LAW DICTIONARY (10th ed. 2014). Centuries ago,
4 Nos. 18-2144 & 18-3446
English courts of equity modeled bills 2 quia timet on even-
more-ancient common law writs known as brevia anticipan-
tia—unique relief available before the plaintiff sustained an
injury. 2 EDWARD COKE, THE FIRST PART OF THE INSTITUTES OF
THE LAWES OF ENGLAND 100a (London, Stationers’ Co. 1628);
see also 2 JOSEPH STORY, COMMENTARIES ON EQUITY
JURISPRUDENCE § 825 (Boston, Hilliard, Gray, & Co. 1836);
GEORGE TUCKER BISPHAM, THE PRINCIPLES OF EQUITY § 568
(Philadelphia, Kay & Bro. 1874).
Justice Story described such bills as “in the nature of writs
of prevention to accomplish the ends of precautionary jus-
tice[,] … applied to prevent wrongs or anticipated mischiefs,
and not merely to redress them when done.” STORY, supra,
§ 826. Historically, litigants have used bills quia timet to pur-
sue preemptive relief regarding myriad issues, such as
remainder interests in real estate, 3 disputes over wills, 4 the
appointment of a receiver, 5 and the annulment of marriages.6
See STORY, supra, §§ 827–851; BISPHAM, supra, §§ 569–81; see
also Jay M. Mann, Exoneration and Quia Timet, in THE LAW OF
SURETYSHIP 455, 457 (Edward G. Gallagher ed., 2d ed. 2000).
Application of the doctrine to surety relationships is simi-
larly longstanding. See, e.g., Nisbet v. Smith (1789) 29 Eng. Rep.
317, 319; 2 Bro. C. C. 579 (Lord Thurlow LC) (“It is clear and
2 Equity pleading’s version of a civil complaint.
3
See, e.g., Criswell v. Criswell, 163 N.W. 302 (Neb. 1917); Champlin v.
Champlin, 4 Edw. Ch. 228 (N.Y. Ch. 1843).
4 See, e.g., Bryant v. Peters, 3 Ala. 160 (1841).
5 See, e.g., Dougherty v. McDougald, 10 Ga. 121 (1851).
6 See, e.g., Mattison v. Mattison, 20 S.C. Eq. 387 (1847).
Nos. 18-2144 & 18-3446 5
never has been disputed … that a surety, generally speaking,
may come into this Court, and apply for the purpose of com-
pelling the principal debtor for whom he is surety to pay in
the money, and deliver him from the obligation.”); Ranelaugh
v. Hayes (1683) 23 Eng. Rep. 405, 406; 1 Vern. 190 (Lord
Keeper) (noting a surety may use quia timet to require a prin-
cipal to discharge a debt, “it being unreasonable that a man
should always have such a cloud hang over him”). 7
A surety’s equitable right to quia timet relief is closely re-
lated to its right to exoneration, and the two concepts are often
muddled. 8 Jay M. Mann & Curtis A. Jennings, Quia Timet: A
Remedy for the Fearful Surety, 20 FORUM 685, 687 (1984); see also
Walter W. Downs, Quia Timet as a Preventer of Anticipated
Mischief, 1956 ABA SEC. INS. NEGL. & COMP. L. PROC. 173,
174-75 (1956) (“[Q]uia timet has from ancient times been con-
sidered as a separate remedy applicable where exoneration is
not appropriate.”). Exoneration is the surety’s “right to
enforce the principal’s duty to perform when the underlying
obligation is due.” PETER A. ALCES, THE LAW OF SURETYSHIP
AND GUARANTEE § 6:12 (2018 ed.). When the person to whom
performance is owed comes to the surety to collect, the surety
7 See also 18 CHARLES VINER, GENERAL ABRIDGMENT OF LAW AND
EQUITY 141–42 (Hampshire, Aldershot 1744); STORY, supra, § 849; JOHN
WILLARD, A TREATISE ON EQUITY JURISPRUDENCE 331 (New York, Banks &
Bros. 1863); 1 WILLIAM WAIT, GENERAL PRINCIPLES OF THE LAW 656–57
(Albany, William Gould, Jr. & Co. 1885); cf. Escrow Agents’ Fidelity Corp. v.
Superior Court, 4 Cal. App. 4th 491, 495 (1992) (“Quia timet is in fact espe-
cially suited to surety cases.”).
8Count IV of Fidelity’s operative complaint is labeled “QUIA TIMET
AND EXONERATION.” But Fidelity is no longer pursuing an exoneration
claim, focusing solely on quia timet relief.
6 Nos. 18-2144 & 18-3446
may use exoneration to force its principal to perform (thus re-
leasing the surety from its secondary obligation). See Admiral
Oriental Line v. United States, 86 F.2d 201, 204 (2d Cir. 1936)
(Hand, J.) (“[B]efore paying the debt a surety may call upon
the principal to exonerate him by discharging it; he is not
obliged to make inroads into his own resources when the loss
must in the end fall upon the principal.”). But “before the un-
derlying obligation is due,” a surety may use quia timet “to
demand that the principal obligor provide adequate assur-
ance of the principal’s performance.” ALCES, supra, § 6:12; see
also Borey v. Nat’l Union Fire Ins. Co., 934 F.2d 30, 32 (2d Cir.
1991) (explaining the temporal distinction between a surety’s
quia timet and exoneration rights).
Given the versatility of bills quia timet and their breadth of
applications, the remedies available are correspondingly var-
ied. STORY, supra, § 826 (explaining chancellors could adapt
“their relief to the precise nature of the particular case, and
the remedial justice required by it”); see also RESTATEMENT
(THIRD) OF SURETYSHIP & GUARANTY § 21 cmt. k (Mar. 2019
supp.) (“The relief granted, when exoneration or quia timet
rights are asserted, depends on the facts of the particular
case.”). Courts may appoint receivers, enjoin actions, order a
defendant to pay money into the court, or otherwise provide
security to the plaintiff. 1 WAIT, supra at n.7, at 657–61. Injunc-
tive relief is only one option available to a court of equity con-
sidering a bill quia timet. BISPHAM, supra, § 568; see also Borey,
934 F.2d at 33 (distinguishing between preliminary injunc-
tions and quia timet as a “final remedy”).
With the lack of formal causes of action in courts of equity,
see CHARLES HERMAN KINNANE, FIRST BOOK ON ANGLO-
AMERICAN LAW § 220 (2d ed. 1952), the term quia timet (as used
Nos. 18-2144 & 18-3446 7
in the context of suretyship) took on a dual meaning. Courts
and commentators have used the term to refer to the surety’s
common law right to assurance of the principal’s future per-
formance and also to the various equitable remedies available
in such scenarios. See, e.g., Borey, 934 F.2d at 32 (describing
quia timet as the surety’s “right” to demand security from its
principal and also as a “procedural device”); Walter W.
Downs, Quia Timet as a Preventer of Anticipated Mischief, 1956
ABA SEC. INS. NEGL. & COMP. L. PROC. 173, 173 (1956) (“What
is quia timet? Is it a principle of equity or is it a form of relief?”);
JOHN NORTON POMEROY, A TREATISE ON EQUITY
JURISPRUDENCE §§ 1393, 1394 (Spencer W. Symons ed., 5th ed.
1941) (describing “bills quia timet” as remedies for declaring
or establishing another legal or equitable right).
B. A Principal’s Insolvency and Quia Timet Relief
Returning to the case at hand, Fidelity’s quia timet claim
seeks $2.5 million in cash collateral from Gillen, as well as an
order requiring Gillen to satisfy bond claims. The district
court awarded Gillen summary judgment, ruling quia timet re-
lief was unavailable due to Gillen’s alleged insolvency. The
district court, in effect, applied a Catch-22: Fidelity’s basis for
quia timet relief is Gillen’s alleged insolvency; Gillen is unable
to provide security to Fidelity if it is insolvent; but if Gillen is
not insolvent, then there is no basis for quia timet relief. Deci-
sion and Order 4, Fidelity & Deposit Co. v. Edward E. Gillen Co.,
No. 13-C-1291 (E.D. Wis. Apr. 23, 2018), ECF No. 158.
Contrary to the district court’s ruling, insolvency does not
preclude quia timet relief. A principal’s insolvency may often
serve as a reasonable basis for a surety to fear the principal’s
nonperformance or nonpayment and seek court intervention.
See, e.g., Western Cas. & Surety Co. v. Biggs, 217 F.2d 163, 164
8 Nos. 18-2144 & 18-3446
(7th Cir. 1954) (affirming quia timet relief awarded to surety
based on general contractors’ insolvency); Morley Constr. Co.
v. Maryland Cas. Co., 90 F.2d 976, 977 (8th Cir. 1937) (similar);
contra Fireman’s Fund Ins. Co. v. S.E.K. Constr. Co., 436 F.2d
1345, 1349 (10th Cir. 1971) (citing the fact that the principal
was solvent as a factor weighing against quia timet relief). 9
The district court’s ruling relied on Escrow Agents’ Fid.
Corp. v. Superior Court, 4 Cal. App. 4th 491 (1992), but that case
does not stand for the proposition that a principal must be
solvent for quia timet relief to be appropriate. The California
Court of Appeal explained that one use of a quia timet action
is to prevent a solvent principal from wasting or diverting
assets. Id. at 496. But the opinion never disclaims other appli-
cations of the doctrine nor does it purport to make proof of
the principal’s solvency a required element of the surety’s
claim.
The district court’s summary judgment decision also
rested on the incorrect premise that a defendant’s inability to
comply with a judgment defeats the plaintiff’s claim. That is
not a valid defense. Many civil defendants are insolvent; that
9 See also Miller v. Speed, 56 Tenn. 196, 201 (1872) (“Where the principal
debtor is insolvent, his surety may proceed against him before paying the
debt, for indemnity or to subject particular assets to the payment of the
debt.”); Crawford v. McAdams, 63 N.C. 67, 69 (1868) (“So, if a surety fears
that by the delay of a creditor the principal may become insolvent, he has
election either to discharge the debt, and sue his principal for ‘money
paid,’ or to file a bill ‘quia timet.’”); 74 AM. JUR. 2d Suretyship § 125 (Feb.
2019 supp.) (“Where a principal is known to be insolvent, after the debt
has become due, the surety has an immediate right to sue to compel the
principal to pay so that the surety’s position is not further harmed.”);
Downs, supra, at 184 (describing the principal’s insolvency as an “obvious
example” of a circumstance justifying quia timet relief).
Nos. 18-2144 & 18-3446 9
does not render a judgment against them pointless or moot.
A judgment against a thriving defendant with deep pockets
may be more valuable than one against a bankrupt firm, but
both have legal significance. Whether Gillen can provide
Fidelity with cash collateral if a court order requires Gillen to
do so does not impact whether Fidelity is entitled to such col-
lateral as a matter of law. The summary judgment grant to
Gillen cannot be upheld on these rationales.
C. Gillen’s Alternative Argument for Affirmance
We may affirm a judgment on any ground supported by
the record, so long as the issue was adequately raised in the
district court and the opposing party had an opportunity to
contest it. O’Brien v. Caterpillar Inc., 900 F.3d 923, 928 (7th Cir.
2018); see also United States v. Am. Ry. Express Co., 265 U.S. 425,
435 (1924) (Brandeis, J.) (“[T]he appellee may, without taking
a cross-appeal, urge in support of a decree any matter appear-
ing in the record, although his argument may involve an at-
tack upon the reasoning of the lower court or an insistence
upon matter overlooked or ignored by it.”). Although the dis-
trict court did not address the question, Gillen contends Fidel-
ity “released” its equitable rights in settlement.
Recall that the two sides resolved their respective claims
at mediation, except for Fidelity’s equitable quia timet claim.
Although the settlement agreement is not crystal clear,
Fidelity did not release its quia timet claim, as Gillen contends.
Fidelity instead used a belt-and-suspenders approach to rein-
force its refusal to release Count IV. Section 7 of the settlement
agreement states the quia timet claim “shall remain pending
and is not affected by this Agreement,” and Section 9 reads,
“The parties intend that this release shall have no effect what-
soever upon Count IV and any affirmative defenses and
10 Nos. 18-2144 & 18-3446
counterclaim alleged with respect to said Count IV.” Settle-
ment Agreement and Release ¶¶ 7, 9, Fidelity & Deposit Co. v.
Edward E. Gillen Co., No. 2:13-cv-01291-LA (E.D. Wis. Sept. 22,
2017), ECF No. 139-1. The text of the settlement agreement
shows Fidelity did not release its equitable quia timet claim.
But Gillen’s substantive argument is that Fidelity cannot
use an equitable doctrine to supplement its contractual rights.
The issue is not whether Fidelity released its quia timet claim,
but whether it could pursue such a claim in the first place.
In the modern world, financial institutions do not issue
multi-million-dollar bonds based on an oral promise and a
handshake. Notwithstanding their common law equitable
rights, sophisticated sureties take care to draft written indem-
nity agreements, detailing the respective obligations between
the surety and the principal. Armen Shahinian, The General
Agreement of Indemnity, in THE LAW OF SURETYSHIP 487
(Edward G. Gallagher ed., 2d ed. 2000); see also RESTATEMENT
(THIRD) OF SURETYSHIP & GUARANTY § 6 cmt. a (Mar. 2019
supp.) (“Agreements … that set out the duties of the principal
obligor to the secondary obligor are often referred to as in-
demnity agreements, and are customary in many business
contexts.”). Fidelity is no exception. Before issuing the bonds,
it required Gillen to sign a detailed indemnity agreement,
which included an express indemnification provision, a
584-word collateralization provision (remarkably, all one sen-
tence), and a contingent trust. Fidelity also had Gillen and its
owners execute a net worth retention agreement, promising
that Gillen would maintain a net worth greater than $7.5 mil-
lion. Fidelity brought breach of contract claims seeking relief
under these contractual provisions. Did Fidelity also have ad-
ditional rights under the equitable doctrine of quia timet?
Nos. 18-2144 & 18-3446 11
That question raises an antecedent one: What jurisdic-
tion’s law governs? Here, diversity of citizenship provides
federal subject matter jurisdiction, 28 U.S.C. § 1332(a)(1),
which ordinarily means we employ the choice-of-law rules of
the state in which the district court sits. NewSpin Sports, LLC
v. Arrow Elec., Inc., 910 F.3d 293, 300 (7th Cir. 2018). Fidelity
argues Illinois substantive law applies. Although Gillen dis-
cusses Wisconsin law in its brief, it offers no justification for
that choice of law.
Wisconsin’s choice-of-law rules, adopted in 1967 from the
work of Professor Robert A. Leflar, see Heath v. Zellmer, 151
N.W.2d 664, 672 (Wis. 1967) (citing Robert A. Leflar, Choice-
Influencing Considerations in Conflicts Law, 31 N.Y.U. L. Rev.
267 (1966)), look to five factors: (1) predictability of results;
(2) maintenance of interstate and international order; (3) sim-
plification of the judicial task; (4) advancement of the forum’s
governmental interests; and (5) application of the better rule
of law. Drinkwater v. Am. Family Mut. Ins. Co., 714 N.W.2d 568,
576 & n.4 (Wis. 2006). 10 This dispute arises out of a construc-
tion project in Illinois, funded by an arm of Illinois state
10 Wisconsin continues to formally distinguish between contract and
tort actions for purposes of conflict-of-law analysis. See State Farm Mut.
Auto. Ins. Co. v. Gillette, 641 N.W.2d 662, 670–71, 676 (Wis. 2002) (applying
the “most significant relationship” rule for contract issues and Professor
Leflar’s five factors for tort issues). As a request for common law equitable
relief, Fidelity’s quia timet claim does not fit neatly into either category. But
the two tests overlap significantly, as the jurisdiction favored by Professor
Leflar’s five factors can usually be said to have the “most significant
relationship” with the case. Because the Wisconsin Supreme Court in
Drinkwater applied Professor Leflar’s five factors after focusing on “the
centrality of the equitable nature of subrogation,” 714 N.W.2d at 650, we
apply that same test to the equitable claim in this case.
12 Nos. 18-2144 & 18-3446
government, which led to the lawsuits in Illinois state court
that form the basis for Fidelity’s claim. Wisconsin’s only con-
nection to this case is that Gillen is a Wisconsin company. The
predictability and maintenance of interstate order factors
weigh heavily in favor of applying Illinois law. The parties
agree that Illinois’s law on quia timet is more developed than
that of Wisconsin, so the third and fifth factors also favor Illi-
nois law. And Wisconsin has no apparent governmental in-
terest in construction bond litigation arising out of an Illinois
project. So Wisconsin’s choice-of-law rules direct us to apply
Illinois law.
The more intriguing choice-of-law issue—not raised by
the litigants—is whether we must apply state law, or if federal
common law controls. After Erie R.R. Co. v. Tompkins, 304 U.S.
64 (1938), the scope of federal common law is exceedingly nar-
row. Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630,
641 (1981) (explaining that, absent congressional authoriza-
tion, “federal common law exists only in … narrow areas,”
such as conflicts between States and admiralty cases); see also
Todd v. Societe Bic, S.A., 21 F.3d 1402, 1414 (7th Cir. 1994)
(“When this court sits in diversity, federalism requires us to
enforce the substantive law of the forum state, even when we
conclude we see a more enlightened path.”). But post-Erie
Supreme Court precedent suggests federal courts’ equitable
powers are limited, not by state law, but to the traditional
powers exercised by English courts of equity, even in
Nos. 18-2144 & 18-3446 13
diversity cases. Guaranty Tr. Co. v. York, 326 U.S. 99, 105–07
(1945). 11 The Supreme Court has held (albeit before Erie) that
quia timet relief in federal court is a matter of federal common
law. McConihay v. Wright, 121 U.S. 201, 206 (1887) (“Bills quia
timet … belong to the ancient jurisdiction in equity, and no
change in state legislation … can, of itself, curtail the jurisdic-
tion in equity of the courts of the United States.”).
Yet solving this thorny choice-of-law problem ultimately
is not necessary to resolve this case. Fidelity does not have a
quia timet claim under either Illinois or federal law. Neither
permits a surety to use general equitable principles to obtain
rights beyond those for which it negotiated in a written in-
demnity agreement.
Take Illinois law first: as a general rule, an indemnity
agreement renders unavailable common law theories of
“implied indemnity.” Quilico v. Union Oil Co., 374 N.E.2d 219,
226 (Ill. App. Ct. 1978); see also Carroll v. Acme-Cleveland Corp.,
955 F.2d 1107, 1113 (7th Cir. 1992) (applying Quilico rule). The
existence of the indemnity agreement “precludes inquiry into
11 See also Davilla v. Enable Midstream Partners, 913 F.3d 959, 973 (10th
Cir. 2019) (“[T]he practice of borrowing state rules of decision does not
apply with equal force to determining appropriate remedies, especially
equitable remedies, as it does to defining actionable rights.”); Perfect Fit
Indus., Inc. v. Acme Quilting Co., 646 F.2d 800, 806 (2d Cir. 1981) (“State law
does not govern the scope of the equity powers of the federal court; and
this is so even when state law supplies the rule of decision.”); Clark Equip.
Co. v. Armstrong Equip. Co., 431 F.2d 54, 57 (5th Cir. 1970) (holding federal
courts have “the power to enforce State-created substantive rights by well-
recognized equitable remedies even though such remedy might not be
available in the courts of the State”); 19 CHARLES A. WRIGHT, ET AL.,
FEDERAL PRACTICE & PROCEDURE § 4513 (3d ed. 2018 supp.) (detailing the
history of the “equitable-remedial-rights doctrine”).
14 Nos. 18-2144 & 18-3446
potential rights and liabilities under implied indemnity and a
recovery by the indemnitee, if any, must stem from the con-
tract.” Prater v. Luhr Bros., Inc., 366 N.E.2d 399, 404 (Ill. App.
Ct. 1977). We see no reason to think Illinois courts would de-
viate from that approach for contractual collateralization
rights and prospective relief like quia timet. Cf. Mountbatten
Surety Co. v. Szabo Contracting, Inc., 812 N.E.2d 90, 100–01 (Ill.
App. Ct. 2004) (analyzing surety’s indemnity and collaterali-
zation rights based on terms of contract, without resort to gen-
eral equitable principles); Travelers Cas. & Surety Co. v.
Bowman, 893 N.E.2d 583, 591 (Ill. 2008) (distinguishing
between express and implied indemnification for statute of
limitation purposes). The parties’ indemnity agreement pro-
vided mechanisms for Fidelity to demand bond collateral, in-
demnification by Gillen, and the imposition of a trust over
contract payments received by Gillen. Fidelity sued on those
contractual rights, but it settled those claims at mediation.
Illinois law does not afford Gillen additional common law
rights based on general equitable principles.
Likewise, federal courts (including ours) have declined to
use their equitable powers to supplement a surety’s rights un-
der a written contract. See, e.g., Northwestern Nat’l Ins. Co. v.
Lutz, 71 F.3d 671, 677 (7th Cir. 1995) (“We agree that the exist-
ence of a separate indemnification agreement dictates that the
rights of the parties will be determined according to that doc-
ument.”); Commercial Ins. Co. v. Pacific-Peru Constr. Corp., 558
F.2d 948, 953 (9th Cir. 1977) (“[R]esort to implied indemnity
principles is improper when an express indemnification
Nos. 18-2144 & 18-3446 15
contract exists.”). 12 Fidelity is aware of that. Fidelity & Deposit
Co. v. Bristol Steel & Iron Works, Inc., 722 F.2d 1160, 1163 (4th
Cir. 1983) (holding Fidelity’s indemnification and exoneration
rights were determined by the “letter of [its] contract” rather
than “general ‘indemnity principles’”). 13
After negotiating for specific collateralization and indem-
nification rights, suing on that indemnity agreement, and
then settling its breach of contract claims, Fidelity cannot now
use this ancient equitable doctrine to get additional relief.
Gillen is entitled to summary judgment. As per another Latin
maxim: Aequitas non supplet ea quae in manu orantis esse possunt
(“Equity does not provide for those things that may be in the
hand of an applicant.”). Legal Maxims, BLACK’S LAW
DICTIONARY app. b at 1901 (10th ed. 2014).
12 See also 72 C.J.S. Principal and Surety §
248 (Mar. 2019 supp.) (“Where
there is an express indemnification agreement, resort to implied indem-
nity principles ordinarily will be precluded. Moreover, when there is an
express contract for indemnity, the rights of the surety are not to be deter-
mined by general indemnity principles, but by the letter of the contract for
indemnity.”); 74 AM. JUR. 2d Suretyship § 122 (Feb. 2019 supp.) (“When
there is an express contract for indemnity, the rights of the surety are not
to be determined by general indemnity principles but by the letter of the
contract for indemnity, and a court will apply the ordinary rules of con-
tract construction.”).
13 Fidelity points to one district court opinion that permitted both a
breach of contract claim and an equitable quia timet claim to survive a mo-
tion to dismiss. Appellant’s Reply at 19 (citing Hanover Ins. Grp. v. Singles
Roofing Co., No. 10 C 611, 2012 WL 2368328 (N.D. Ill. June 21, 2012)). No-
where does that opinion discuss this issue, as it appears the defendant did
not raise it as a basis for dismissing the quia timet claim.
16 Nos. 18-2144 & 18-3446
D. The Costs Order
In addition to its merits appeal, Fidelity also challenges the
costs taxed by the clerk of court. Fidelity argues numerous
items claimed as costs by Gillen are not covered by the appli-
cable statute, 28 U.S.C. § 1920. But Fidelity’s arguments are
not properly before this court.
After the district court’s summary judgment decision,
Gillen filed a bill of costs under FED. R. CIV. P. 54(d)(1), which
specifies: “The clerk may tax costs on 14 days’ notice. On mo-
tion served within the next 7 days, the court may review the
clerk’s action.” The district court’s local rules flesh out the ap-
plicable procedure before the clerk of court, directing a party
opposing costs to serve objections within 14 days and giving
each side 7 days to file their response and reply briefs. E.D.
WIS. CIV. R. 54(a)(3). The local rules also explain how a party
may challenge the clerk’s order taxing costs: “A party may
move for review of the Clerk of Court’s decision taxing costs
pursuant to Fed. R. Civ. P. 54(d) within 7 days from taxation.”
E.D. WIS. CIV. R. 54(c).
Fidelity objected to Gillen’s bill of costs with the clerk of
court. But after the clerk taxed costs in Gillen’s favor, Fidelity
did not move for district court review; it simply filed a notice
of appeal to this court.
An objecting party is not permitted to bypass the district
court and seek immediate review of a clerk’s costs order in the
court of appeals. See Cooper v. Eagle River Mem. Hosp., 270 F.3d
456, 464 (7th Cir. 2001); 10 CHARLES ALAN WRIGHT, ET AL.,
FEDERAL PRACTICE & PROCEDURE § 2679 (4th ed. Nov. 2018
supp.) (“[A] party’s failure to seek review of a clerk’s costs
order in the district court constitutes a waiver of the right to
Nos. 18-2144 & 18-3446 17
challenge that order on appeal.”). 14 Both FED. R. CIV. P. 54(d)
and E.D. WIS. CIV. R. 54(c) direct a party dissatisfied with a
clerk’s costs order to file a motion for review by the district
court. Fidelity failed to heed those directives and, thereby,
forfeited its objections. Although Gillen does not point out
Fidelity’s forfeiture in its brief, we may raise it ourselves.
Lauth v. Covance, Inc., 863 F.3d 708, 718 (7th Cir. 2017).
We cannot look past Fidelity’s procedural misstep.
Fidelity relies on 28 U.S.C. § 1291 for appellate jurisdiction,
which provides, “The courts of appeals … shall have jurisdic-
tion of appeals from all final decisions of the district courts of
the United States … .” But there has been no final decision on
costs made by the district court, only an order entered by the
clerk of court. See Johnson v. United States, 780 F.2d 902, 910
(11th Cir. 1986) (holding the court of appeals lacked jurisdic-
tion to consider objections to clerk’s order taxing costs be-
cause the district court had not yet ruled on such objections).
Without a final decision by the district court, we lack jurisdic-
tion to rule on Fidelity’s objections to the costs taxed against
it.
III. Conclusion
Fidelity negotiated for specific indemnification and collat-
eralization rights in its written agreements, sued on those
rights, and settled its breach of contract claims. It may not
augment its contractual rights now with the ancient equitable
doctrine of quia timet.
14 See also Ahlberg v. Chrysler Corp., 481 F.3d 630, 638–39 (8th Cir. 2007);
Bloomer v. United Parcel Serv., Inc., 337 F.3d 1220, 1221 (10th Cir. 2003) (per
curiam); Walker v. California, 200 F.3d 624, 625–26 (9th Cir. 1999) (per
curiam); Prince v. Poulos, 876 F.2d 30, 34 (5th Cir. 1989).
18 Nos. 18-2144 & 18-3446
For these reasons, we AFFIRM summary judgment for
Gillen on the merits and DISMISS Fidelity’s challenge to the
costs taxed by the clerk of court.