Chicago, Illinois 60604 Submitted January 18, 2006 Decided January 20, 2006 Before… v. Baird & Warner Holding Company, Baird

United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted January 18, 2006
Decided January 20, 2006
Before
Hon. WILLIAM J. BAUER, Circuit Judge
Hon. FRANK H. EASTERBROOK, Circuit Judge
Hon. DIANE P. WOOD, Circuit Judge
ST. PAUL GUARDIAN INSURANCE COMPANY,
Plaintiff-Appellant,
No. 05-3252 v.
BAIRD & WARNER HOLDING COMPANY, BAIRD AND
WARNER RESIDENTIAL SALES, INCORPORATED, and
BAIRD & WARNER REAL ESTATE,
Defendants-Appellees.
Appeal from the United
States District Court
for the Northern
District of Illinois,
Eastern Division.
No. 05 C 9997
Amy J. St. Eve,
Judge.
Order
St. Paul Guardian Insurance Company asked the district
court to issue a declaratory judgment that its policy does not
require it to defend or indemnify Baird and Warner in two cases
that, at the time the action was filed, were pending in state
court. (There are several related insureds, to which we refer
collectively as Baird and Warner.) The federal judge dismissed
for want of jurisdiction, deeming the stakes inadequate to
satisfy the $75,000 minimum for diversity litigation, and St.
Paul has appealed.
While the appeal was pending, both state cases were wrapped
up. One was dismissed with prejudice and the other without
UNPUBLISHED ORDER
Not to be cited per Circuit Rule 53

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No. 05-3252 Page 2
(though apparently under circumstances that make it impossible
to re-file). Both of the plaintiffs in the state proceedings
already have been dismissed as parties to this appeal. Now Baird
and Warner asks us to dismiss the appeal as moot. It represents
that, even if the state litigation should be reinstated, it will
never call on St. Paul to defend or indemnify it with respect to
these two claims.
The end of the state suits, coupled with Baird and Warner's
representation, means that there is no ongoing controversy about
the insurer's duty to defend and indemnify. The right step,
however, is to vacate the district court's judgment and remand
with instructions to dismiss the suit, not to dismiss the
appeal. See
United States v. Munsingwear, Inc., 340 U.S. 36
(1950);
Bureau of Alcohol, Tobacco & Firearms v. Galioto, 477
U.S. 556 (1986). See also
U.S. Bancorp Mortgage Co. v. Bonner
Mall Partnership, 513 U.S. 18, 23 (1994) (vacatur appropriate if
prevailing party in the district court procured mootness
unilaterally).
St. Paul asks us to direct the district judge to enter
judgment in its favor. It thinks that a judgment would be more
reliable than its client's assurances. That gets the cart before
the horse, however; a federal court cannot enter a judgment on
the merits when there is no remaining controversy; even if there
is a controversy, a judgment would be improper if the dispute is
worth less than $75,000. Unless the state cases should come back
to life, and Baird and Warner reneges on its word, there is no
controversy. If Baird and Warner attempts to renege on a promise
solemnly made to a court, it will have more than a declaratory-
judgment action on its hands. That it would take such a risk is
too remote a likelihood to keep this dispute alive.
St. Paul observes that, if it became the victor, it would
be entitled to an award of costs, but a desire to obtain such an
award does not justify resolution of the merits. See, e.g.,
Steel Co. v. Citizens for a Better Environment, 523 U.S. 83,
107-08 (1998);
Lewis v. Continental Bank Corp., 494 U.S. 472,
480 (1990);
Diamond v. Charles, 476 U.S. 54, 70-71 (1986). St.
Paul did not recover its costs because it was not the prevailing
party in the district court, and mootness would not make it so.
The judgment of the district court is vacated, and the case
is remanded with instructions to dismiss as moot.

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