Continental Indemnity Co. v. BII, Inc.

The plaintiff obtained a default judgment against the defendant arising out of an injury to a worker at a construction site. Plaintiff attempted to collect the judgment by adding an insurance company to the action as a garnishee using Illinois state law and the Federal Rules of Civil Procedure. The district court, however, dismissed the matter by finding that adjudicating the scope of coverage under the applicable insurance policy was outside of its subject matter jurisdiction because it was factually and legally distinct from the underlying lawsuit. The Seventh Circuit affirmed, explaining that under federal ancillary jurisdiction, proceedings collateral to an underlying lawsuit must be sufficiently related to the facts and legal issues of the original action and that attempting to adjudicate new issues of liability against new parties fell outside the scope of ancillary enforcement jurisdiction. The appellate court noted that in order to resolve the dispute in a federal forum the plaintiff was required to file a new civil action. (BRENNAN and KIRSCH, concurring)