Background
Golden Corral, a buffet restaurant chain, obtained commercial property insurance from Illinois Union Insurance Company. When North Carolina’s Governor issued Executive Orders in March 2020 mandating the closure of all indoor dining facilities and prohibiting non-essential travel in response to the COVID-19 pandemic, Golden Corral suspended operations and suffered significant lost revenue. Golden Corral submitted a coverage claim to Illinois Union, seeking reimbursement for losses resulting from the government-mandated closures.
Illinois Union denied the claim, arguing that the COVID-19 virus could not cause the “physical loss or damage” to property required for coverage under the policy. Golden Corral sued in North Carolina state court for declaratory relief, but the case was removed to federal court based on diversity jurisdiction. In September 2021, the district court granted Illinois Union’s motion for judgment on the pleadings and dismissed the case with prejudice, holding that Golden Corral had failed to allege a covered loss under North Carolina law. The Fourth Circuit affirmed this judgment in an unpublished opinion in August 2022.
Three years later, in December 2024, the North Carolina Supreme Court reached a different result in North State Deli v. Cincinnati Insurance Company, holding that similar business interruption losses stemming from COVID-19 government mandates were covered under the dining establishments’ commercial insurance policies. Golden Corral promptly filed a motion under Federal Rule of Civil Procedure 60(b)(6) seeking relief from the final judgment, arguing that the North Carolina Supreme Court’s subsequent ruling constituted extraordinary circumstances warranting reopening of its case. The district court denied the motion in 2025, and Golden Corral appealed.
The Court’s Holding
The Fourth Circuit affirmed the denial of Golden Corral’s Rule 60(b)(6) motion and held that a subsequent change in state decisional law, standing alone, does not constitute the “extraordinary circumstances” required for reopening a final judgment. The court emphasized that finality of judgments is a fundamental principle of common law that allows parties to move forward after adjudication and permits case law to develop without unwarranted disruption. While Rule 60(b)(6) is a “catch-all provision” that permits exceptions to finality, such relief may be granted only when “appropriate to accomplish justice,” which requires a showing of truly extraordinary circumstances.
The court acknowledged that federal courts sitting in diversity must apply the substantive law of the forum state and may need to predict how a state’s highest court would rule when no applicable precedent exists. However, it established that “a mere change in decisional law—without more” does not provide grounds for Rule 60(b)(6) relief. The court noted that though the district court’s 2021 decision might have differed had the North Carolina Supreme Court’s 2024 ruling in North State Deli been available beforehand, “unfortunately for Golden Corral, the timing was not in its favor.”
The court addressed a narrow exception recognized by some circuits for Rule 60(b)(6) relief where parallel federal and state actions arising from the “same transaction or occurrence” produced inconsistent results. However, the court found this exception inapplicable here: while both Golden Corral’s case and North State Deli involved COVID-19 pandemic-related business interruption claims, they involved different insured parties, different insurance providers, different policies, and different circumstances. The court also rejected Golden Corral’s argument that it should have been relieved of the consequences of its litigation strategy, namely its choice not to seek a stay while North State Deli was pending. The court held that “free, calculated, deliberate” litigation choices are not subject to relief under Rule 60(b)(6).
Key Takeaways
- A subsequent change in state law, even if it contradicts a federal court’s diversity decision, does not alone constitute extraordinary circumstances sufficient to warrant Rule 60(b)(6) relief from final judgment.
- The narrow exception permitting Rule 60(b)(6) relief based on divergent decisional law applies only when the federal and state court cases arise from the “same transaction or occurrence,” which does not include factually distinct claims under different insurance policies.
- The consequences of a party’s litigation strategy decisions—such as declining to seek a stay pending a potentially relevant state court decision—do not justify Rule 60(b)(6) relief, even if those decisions prove strategically unwise in hindsight.
- Federal courts applying state law in diversity cases must do their best to predict state supreme court rulings based on available precedent, and adherence to finality principles prevents reopening judgments based on subsequent clarifications of state law.
Why It Matters
This decision provides important guidance on the limits of Rule 60(b)(6) relief in diversity jurisdiction cases involving state law claims. It clarifies that parties cannot use subsequent developments in state law as a basis to reopen settled federal judgments, establishing a bright-line rule that finality generally trumps the desire for consistent results across separate state and federal proceedings. This has significant implications for insurance litigation and other diversity cases in which state law is evolving, as litigants cannot rely on later state court decisions to undo adverse federal judgments—even when those later decisions suggest the federal court would have ruled differently.
The decision also underscores the risks inherent in parallel litigation strategies. Golden Corral’s failure to seek a stay while North State Deli was pending effectively foreclosed any ability to benefit from that favorable ruling. The court’s holding that such strategic choices carry finality consequences sends a signal to future litigants in similar positions that they must actively manage their litigation strategy when potentially precedent-setting parallel cases are underway, as subsequent law changes will not provide a safety net for adverse judgments.