In the

United States Court of Appeals
                For the Seventh Circuit

No. 08-1334

C HRISTINE B. C OLLINS, et al.,
                                                 Plaintiffs-Appellants,
                                   v.

U NITED S TATES OF A MERICA,
                                                  Defendant-Appellee.


              Appeal from the United States District Court
         for the Northern District of Illinois, Eastern Division.
                No. 03 CV 2958—John W. Darrah, Judge.


      A RGUED S EPTEMBER 19, 2008—D ECIDED M AY 1, 2009




  Before P OSNER, R IPPLE, and E VANS, Circuit Judges.
  P OSNER, Circuit Judge. In 2000, two small planes
collided while approaching the Waukegan Regional
Airport, which is near Lake Michigan north of Chicago,
and crashed into a medical center. The planes’ occu-
pants—the pilot and passenger of one, the student pilot
of the other—were killed, and the medical center was
damaged. When the collision occurred, one plane was
approaching the airport, intending to land, and the
other plane, the one piloted by the student pilot, was
2                                                No. 08-1334

practicing takeoffs and landings and also intending to
land. The airport’s control tower had no radar, so that in
clearing planes to take off or land the air traffic controller
on duty in the tower had to rely on what he could see
from the tower and on what the pilots told him by radio
were their positions. The controller was employed by
Midwest Air Traffic Control Services, a contractor hired
by the Federal Aviation Administration to provide air
traffic control at the Waukegan airport. The collision
occurred because he could not see either plane and the
pilot of the first plane misreported his position, leading
the controller to believe that the planes were at a safe
distance from each other; and so he cleared them to land.
A contributing factor was that one plane was flying
slightly higher than the other, and the wings of the
higher plane were below the plane’s fuselage and the
wings of the lower plane above its fuselage, so that the
pilots could not see each other. Glare from the sun, and
ground clutter (the complex pattern formed by buildings
and other features of the ground, which makes it difficult
for a pilot, looking down, to see a plane flying beneath
him), were other contributing factors.
  A flurry of suits arising from the accident were brought
in both state and federal court. All eventually were
settled except the one before us, which was brought against
the United States under the Federal Tort Claims Act by the
representatives of the three persons who were killed. The
district judge, after a bench trial, entered judgment for
the United States.
  The Act grants the federal courts jurisdiction over
suits for damages against the United States “for injury or
No. 08-1334                                                3

loss of property, or personal injury or death caused by
the negligent or wrongful act or omission of any em-
ployee of the Government while acting within the scope
of his office or employment, under circumstances where
the United States, if a private person, would be liable to
the claimant in accordance with the law of the place
where the act or omission occurred.” 28 U.S.C. § 1346(b)(1).
(That place, in this case, is Illinois.) An employee of the
government includes “employees of any federal agency,”
such as the Federal Aviation Administration, but ex-
cludes “any contractor with the United States.” § 2671.
Midwest Air Traffic Control Services is a contractor, and
the district judge ruled that although the FAA exercises
close supervision over the companies to which it contracts
out air traffic control, the supervision is not close enough
to render controllers employed by those companies
employees of the United States. So though he found
that the air traffic controller on duty the day of the
accident had been negligent in clearing the planes to
land when he could not see them, the judge refused to
impute that negligence to the United States.
  The plaintiffs also contended that the FAA had been
negligent in failing to install radar at the Waukegan
airport. But this ground of liability, the judge ruled, was
blocked because the act “shall not apply to any
claim . . . based upon the exercise or performance or the
failure to exercise or perform a discretionary function
or duty on the party of a federal agency . . . whether or not
the discretion involved be abused.” 28 U.S.C. § 2680(a).
 Before we can consider the merits of the appeal, we
must address the government’s contention that the
4                                                  No. 08-1334

district court lost subject-matter jurisdiction over the
case when on the eve of trial Midwest settled the plain-
tiffs’ claims against it. Under Illinois law, a principal
whose liability is based on the doctrine of respondeat
superior, which is Midwest’s situation, cannot be sued
if the agent whose negligence is imputed to the principal
by that doctrine—in this case the air traffic controller
who was on duty when the collision occurred—settles with
the plaintiff. Gilbert v. Sycamore Municipal Hospital, 

, 797 (Ill. 1993); Doe v. City of Chicago, 

, 673 (7th Cir. 2004) (Illinois law); J&J Timber Co. v.
Broome, 

, 7-8 (Miss. 2006); Restatement (Third) of
Torts: Apportionment of Liability § 16, comment d and
illustration 2 (2000); contra, Harris v. Miller, 

,
741-42 (N.C. 1994). The reason is that the principal in
such a case has a common law right to be indemnified
by his agent. Washington Gaslight Co. v. District of Columbia,

, 328 (1896); Steele v. Hartford Fire Ins. Co.,

, 446 (7th Cir. 1986); Stawasz v. Aetna Ins. Co.,

, 703-04 (Ill. App. 1968). That right arose
as an exception to the traditional common law rule reject-
ing contribution among joint tortfeasors—that if the
plaintiff sued and obtained a judgment against just one of
the joint tortfeasors, that one could not sue to force the
others to help pay the judgment. Northwest Airlines v.
Transportation Workers Union, 

, 86 (1981); Dono-
van v. Robbins, 

, 1178-79 (7th Cir. 1985); Dan B.
Dobbs, The Law of Torts § 386, pp. 1078-80 (2000). The
traditional rule has been abrogated in most jurisdictions in
favor of contribution, but indemnity retains significance
because it shifts the entire loss to the tortfeasor held to
No. 08-1334                                               5

have a duty to indemnify, rather than sharing out the loss
among the tortfeasors.
  The reason for this shifting, in the case in which an
employer’s liability is based on the doctrine of respondeat
superior, is that the employee is in a better position than
his employer to avoid inflicting the injury that incited
the suit against the employer. Allowing the employer to
shift the full financial responsibility for the employee’s
negligence to the employee increases the latter’s incentive
to take care, and his care is crucial because if he takes
due care, an accident will be averted that the employer
might not have been able to avert.
  But the right of indemnity makes a settlement by the
employee with the tort plaintiff illusory if the employer
remains liable to the plaintiff. Midwest settled with the
plaintiffs for less than a million dollars. The plaintiffs’
aggregate injury was much greater, which is why they
are suing the United States despite the settlement with
Midwest. If (a big if, as we’re about to see), Midwest is
deemed the “employee” of the United States, then, were it
not for the rule that extinguishes the principal’s liability
when the agent settles, Midwest would be faced with the
prospect of a suit for indemnity by the United States
should the plaintiffs obtain damages in their tort claims
suit. If the suit succeeded, Midwest would have gained
nothing from settling with the United States’ agent.
  The parties to the settlement with Midwest seem to
have been aware of the rule that a settlement with the
agent discharges the principal, because they stated in the
settlement agreement that the agreement was not a set-
6                                               No. 08-1334

tlement. But it was, because in exchange for a payment
by Midwest the plaintiffs relinquished their claim
against Midwest. That’s what a settlement is, regardless
of what the parties call it. But the rule discharging the
principal has no proper application here because the
government, when it is held liable under the Federal Tort
Claims Act, has no right of indemnity from its negligent
employee. United States v. Gilman, 

, 508-10
(1954); Gregory C. Sisk, Litigation with the Federal Govern-
ment § 3.04(e), pp. 122-23 (4th ed. 2006); see also Munson
v. United States, 

, 978 (6th Cir. 1967); Restate-
ment (Second) of Torts § 895D, comment j (1979). Indeed,
because the Westfall Act, 28 U.S.C. § 2679(b)(1), forbids
bringing a suit against a federal employee for com-
mitting a “negligent or wrongful act or omission . . . while
acting within the scope of his office or employment,” the
government has made itself exclusively liable for such
torts, and by doing so, it can be argued, has determined
that the employee should bear no liability himself, in-
cluding the indirect liability that the doctrine of indem-
nity would create. See 

.
   Granted, Midwest, the settling party, was not an em-
ployee of the United States, even if the errant air traffic
controller is deemed to have been one. But the govern-
ment would have no right of indemnity (unless as a matter
of contract, which has not been suggested) against Mid-
west even if Midwest were deemed an employee of the
United States. For remember that the right to be indemni-
fied is based on the difference between direct and vicarious
liability—the liability of a person who commits a tortious
act versus the liability of his employer just by virtue of
No. 08-1334                                                  7

being his employer. Midwest’s liability arises from its
being the employer of the air traffic controller. Its
liability, like that of the United States, is vicarious. The
symmetry of the two defendants’ positions defeats the
government’s appeal to the indemnity rule, which is based
on the superior ability of the agent who commits the tort to
have avoided committing it by the exercise of due care,
compared to his employer, who is liable for the tort only by
virtue of being the original tortfeasor’s employer. The
parties could of course by contract impose a duty of
indemnity in such a case, Restatement (Third) of Agency
§ 3.15, comment d and illustration 9 (2006), but remember
that there is no suggestion of such a contractual provision
in this case. The doctrine applicable here is “tort indem-
nity,” imposed by law rather than by contract, perhaps
to soften the rigors of the old rule denying a right of
contribution among joint tortfeasors. Zapico v. Bucyrus-Erie
Co., 

, 718-19 (2d Cir. 1978) (Friendly, J.); see
also Araujo v. Woods Hole, 

, 2 (1st Cir. 1982);
W. Page Keeton et al., Prosser and Keeton on the Law of Torts
§ 51, pp. 341-42 (5th ed. 1984).
   Even if the government were right that the settle-
ment with Midwest had discharged the government’s
liability to the plaintiffs, it would be wrong to insist, as it
did with some vehemence at the oral argument, that it is
an issue of jurisdictional moment. The government’s
lawyer further argued that the rules in the Tort Claims
Act itself that bar government liability when either the
original tortfeasor is an independent contractor, rather
than an employee, or the government’s act is shielded by
the discretionary-function exception to liability, are also
8                                                  No. 08-1334

jurisdictional. This would mean that even if the govern-
ment failed to raise any of these defenses, the district
court and this court (and the Supreme Court, if the case
went that far) would be obliged to consider it. (Inconsis-
tently, the government asks us merely to affirm the
district court’s decision, which was a decision on the
merits, not a decision dismissing the case for want of
jurisdiction.)
   The government was repeating arguments that we had
rejected emphatically in United States v. Cook County, 

(7th Cir. 1999), and more recently in Parrott v.
United States, 

, 634-35 (7th Cir. 2008); see also
Palay v. United States, 

, 424 (7th Cir. 2003). Now
it is true that ours is a minority position, see Loughlin v.
United States, 

, 162-63 (D.C. Cir. 2004); Williams
v. United States, 

, 304-05 (4th Cir. 1995); Fazi v.
United States, 

, 539 (2d Cir. 1991); Feyers v.
United States, 

, 1225-26 (6th Cir. 1984), and it
is also true that our opinion in Palay acknowledges some
wavering in our own 

. But the cases
that hold that defenses to the government’s liability under
the Tort Claims Act are jurisdictional do not so much
analyze the issue as treat it as an automatic corollary of the
Act’s constituting a waiver of the federal government’s
sovereign immunity from suit. We cannot see what that
has to do with jurisdiction. Because of its sovereign
immunity, the federal government does not have to allow
people to sue it. But almost all statutes that create a right to
sue are matters of grace, in the sense that the legislature
was not required to enact the statute under which the
plaintiff is suing. “[W]hat sovereign immunity means is
No. 08-1334                                                 9

that relief against the United States depends on a statute;
the question is not the competence of the court to render a
binding judgment, but the propriety of interpreting a given
statute to allow particular relief.” United States v. 

, 167 F.3d at 389.
  A court has subject-matter jurisdiction if it has the
“authority to decide the case either way.” The Fair v. Kohler
Die & Specialty Co., 

, 25 (1913) (Holmes, J.); see
also Heitmann v. City of Chicago, 

, at *2 (7th
Cir. Mar. 25, 2009); Kircher v. Putnam Funds Trust, 

(7th Cir. 2004); Ricketts v. Midwest National Bank,

, 1181 (7th Cir. 1989). The term is thus re-
served “for prescriptions delineating the classes of
cases . . . within a court’s adjudicatory authority.” Kontrick
v. Ryan, 

, 455 (2004). (This emphatic recent
restatement by the Supreme Court of the principle of The
Fair v. Kohler Die & Specialty Co. may prompt a rethinking
by the courts that have declined to apply the principle
to federal tort claims cases.)
  Thus, “to say that Congress has authorized the federal
courts to decide a class of disputes is to say that subject-
matter jurisdiction is present.” United States v. T & W
Edmier Corp., 

, 765 (7th Cir. 2006). Obviously
the federal courts are authorized to decide suits under
the Federal Tort Claims Act; indeed, no other court
system is. 28 U.S.C. § 1346(b)(1).
  We turn at last to the merits, where there are two
issues. The first is whether the FAA exerted enough control
over Midwest’s air controllers to make them de facto
federal employees. This issue was recently addressed in
10                                                  No. 08-1334

a nearly identical case, involving another midair collision
to which the negligence of an air traffic controller em-
ployed by Midwest was alleged to have contributed. We
held that, extensive though the control of the FAA over
its contract controllers is, they are not its employees.
Alinsky v. United States, 

(7th Cir. 2005).
We decline to revisit that decision.
  The second issue is the applicability to this case of the
discretionary-function exception to the liability of the
federal government for tort claims. TARDIS, an acronym
for “Terminal Automated Radar Display Information
System,” is an inexpensive radar system designed for air
traffic control. Although it has not been certified by the
FAA because it hasn’t undergone the stringent tests for
accuracy required for certification, we’ll assume that had
the control tower at the Waukegan Regional Airport been
equipped with TARDIS the collision would have been
averted. The FAA, partly because of doubts about
TARDIS’s accuracy and partly because it preferred to
finance other radar-system projects, decided not to try to
equip VFR (“visual flight rules”—that is, not radar-
equipped) airports, such as the Waukegan Regional
Airport, cheap as TARDIS was (though just how cheap
is unclear from the record—the range of estimates is
$20,000 to $100,000), even though other radar systems
were not yet available in 2000.
  In making decisions on equipment allocation for
airports, the FAA considers a variety of factors, including
the volume of air traffic at the airport, the variety of aircraft
that use the airport, terrain and climate, cost, of course,
No. 08-1334                                                11

and, related to cost, competing needs for the agency’s
limited funds. At the time of the accident, only eight
airports had TARDIS. The district judge thought the
FAA had been negligent in failing to install TARDIS at
the Waukegan airport because of the danger of collisions
at an airport from which planes piloted by student pilots
are taking off and landing, and the horrendous conse-
quences of a collision. Even so, he was right that the
FAA’s negligence was shielded from liability by the
discretionary-function exception.
  The prioritization of demands for government money is
quintessentially a discretionary function. United States v.
Varig Airlines, 

, 819-20 (1984); Cope v. Scott, 

, 450-51 (D.C. Cir. 1995); Williams v. United States,

, 310 (4th Cir. 1995); Pennbank v. United States,

, 180 (3d Cir. 1985) (“a decision regarding the
allocation of federal funds is a discretionary function
which goes to the heart of governmental activity”). The
FAA must allocate its limited funds among competing
radar systems, between radar systems and other safety
methods, and between safety measures and measures for
improving other dimensions of air traffic control, such
as reducing the delays caused by crowded skies. The
agency might prioritize so unreasonably that its decision
could be adjudged negligent, but the Tort Claims Act is
explicit that once a decision is classified as an exercise
of discretion, the fact that the discretion was abused or
even not exercised at all is irrelevant.
  Which is why it is irrelevant that some of the VFR
airports that received TARDIS were ones in which mem-
12                                              No. 08-1334

bers of Congress had asked the FAA to install the system
and others were ones in which the only reason for the
installation appears to have been that there had been a
collision, regardless of the risk of future collisions. It
may not be right in some moral sense, but it is certainly
an example of discretionary decision making, for a
federal agency to give weight to requests from members
of Congress, and also to shut the barn door after the
horses have escaped. The first point is obvious, the second
only slightly less so. If there has been a collision at an
airport, a radar system is not installed in the wake of the
collision, and then there is another collision, the FAA
will receive searing criticism even if it can show that the
first collision really wasn’t predictive of future collisions
at that airport.
  Against this reasoning the plaintiffs cite United States v.
Gaubert, 

, 325 n. 7 (1991), where the Supreme
Court said that “there are obviously discretionary acts
performed by a Government agent that are within the
scope of his employment but not within the discretionary
function exception because these acts cannot be said to
be based on the purposes that the regulatory regime
seeks to accomplish. If one of the officials involved in
this case drove an automobile on a mission connected
with his official duties and negligently collided with
another car, the exception would not apply. Although
driving requires the constant exercise of discretion, the
official’s decisions in exercising that discretion can
hardly be said to be grounded in regulatory policy.”
Similarly, “if the employee violates [a] mandatory regula-
tion, there will be no shelter from liability because there
No. 08-1334                                                13

is no room for choice and the action will be contrary to
policy.” 

The plaintiffs reason from this
language that the FAA is not protected by the
discretionary-function exception in the present case
because prioritizing in response to congressional
pressures and the occurrence of a previous collision
does not further the purposes of the regulatory regime.
  The plaintiffs are overreading Gaubert. It is true that if a
statute or regulation or other directive intended to be
binding forbids the specific act contended to have been
negligent, the employee who committed the act was not
exercising authorized discretion. Reynolds v. United States,

, 1112 (7th Cir. 2008). And likewise if his
exercise of discretion had no policy content. Suppose a
federal food inspector, while driving to a meat-processing
plant that he is required to inspect, decides to run a
red light because he fears that if he stops abruptly the
car behind him will hit him and he doesn’t see another
car approaching the intersection. But he is mistaken and
the cars collide (and his car is also hit from the rear,
anyway). He made a conscious choice to run the light and
so was exercising discretion, but it was an exercise unre-
lated to the formulation and implementation of the Federal
Food, Drug, and Cosmetic Act. Invoking the discretionary-
function defense in such a case would not serve its in-
tended purpose of protecting the discretionary policy-
related decisions of federal officers from being second-
guessed by judges. But the decision to install TARDIS at
some airports but not others, the others including the
Waukegan airport, was a discretionary policy judgment,
whether or not we think the FAA should allow itself to be
14                                                 No. 08-1334

influenced by congressional or public opinion, cf. United
States v. 

, 499 U.S. at 322-23; Miller v. United
States, 

, 593-94 (9th Cir. 1998), and it was
therefore behind the liability shield. Alinsky v. United 

, 415 F.3d at 648.
                                                    A FFIRMED.




                             5-1-09