May 14, 2025|Franchise Frontlines
May 14, 2025 | United States District Court for the Eastern District of North Carolina | Published Decision
Executive Summary
In Golden Corral Corp. v. Illinois Union Insurance Co., 787 F. Supp. 3d 149 (E.D.N.C. 2025), the court denied a Rule 60(b)(6) motion filed by Golden Corral Corporation and Golden Corral Franchising Systems, Inc. seeking relief from a prior judgment concerning COVID-19 business-interruption coverage. After the Supreme Court of North Carolina issued a later decision interpreting “direct physical loss” in a manner more favorable to insureds, Golden Corral asked the federal court to revisit its earlier ruling. The court concluded that, while the later state decision clarified state law, such developments did not constitute the “extraordinary circumstances” required under Rule 60(b)(6). The court emphasized the importance of finality and noted that Golden Corral litigated its case promptly and did not request a stay while other COVID-19 insurance cases proceeded in state courts.
Relevant Background
Golden Corral initiated this action in 2020 and alleged that government-issued COVID-19 closure orders caused significant business-income losses at restaurants across its system. It sought coverage under its property insurance policy, arguing that its losses fell within the “physical loss, damage or destruction” provision. The insurer removed the case to federal court and moved for judgment on the pleadings.
In September 2021, the district court held that the policy language did not cover losses alleged to arise from government-mandated COVID-19 shutdowns. Golden Corral Corp. v. Illinois Union Ins., 559 F. Supp. 3d 476, 484–92 (E.D.N.C. 2021). Consistent with the approach required under Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), the court predicted how the Supreme Court of North Carolina would interpret the phrase “physical loss.” It concluded that, under then-existing North Carolina precedent, coverage did not extend to alleged pandemic-related business-income losses. Golden Corral, 559 F. Supp. 3d at 484–90.
Golden Corral appealed, and in 2022 the Fourth Circuit affirmed in an unpublished per curiam decision. Golden Corral Corp. v. Illinois Union Ins., No. 21-2119, 2022 WL 3278938, at *1 (4th Cir. Aug. 11, 2022). The judgment therefore became final.
In December 2024, the Supreme Court of North Carolina issued North State Deli, LLC v. Cincinnati Insurance Co., 386 N.C. 733, 908 S.E.2d 802 (2024), holding that certain “direct physical loss” clauses encompass losses resulting from COVID-19 closure orders. Golden Corral then moved in January 2025 for relief from judgment under Federal Rule of Civil Procedure 60(b)(6). Golden Corral asserted that North State Deli represented a significant clarification of state law and argued that the combination of this development and North Carolina’s policy of not accepting certified questions justified relief. The insurer opposed the motion. After briefing and review of the prior procedural history, the district court issued the present decision denying relief.
Decision
The court framed the motion as one invoking Rule 60(b)(6), which allows relief from a final judgment for “any other reason that justifies relief.” Fed. R. Civ. P. 60(b)(6). The court noted that Rule 60(b)(6) applies only in “extraordinary circumstances.” Golden Corral, 787 F. Supp. 3d at 151–52 (citing Aikens v. Ingram, 652 F.3d 496, 500 (4th Cir. 2011) (en banc)).
Golden Corral argued that the North Carolina Supreme Court’s later decision in North State Deli created the type of extraordinary circumstances warranting reopening of its federal case. The court disagreed, reiterating the established rule that “a change in decisional law subsequent to a final judgment provides no basis for relief under Rule 60(b)(6).” Id. at 151 (quoting Ross v. FTC, 74 F.4th 186, 194 (4th Cir. 2023)). The court cited multiple decisions holding that legal developments—whether in federal or state law—do not satisfy Rule 60(b)(6)’s high bar. See, e.g., Gonzalez v. Crosby, 545 U.S. 524, 535–38 (2005); Agostini v. Felton, 521 U.S. 203, 239 (1997).
Golden Corral also pointed to the Erie doctrine, arguing that because federal courts must predict state law when the state’s highest court has not spoken, a later clarification by the state court should permit revisiting a prior judgment. The court rejected that argument as well. Quoting the Fifth Circuit, the district court explained that in an Erie context, an intervening state decision “does not render the federal diversity court decision invalid, or mar the proceeding as unfair.” Golden Corral, 787 F. Supp. 3d at 152 (quoting Batts v. Tow-Motor Forklift Co., 66 F.3d 743, 750 (5th Cir. 1995)).
As part of its analysis, the court addressed North Carolina’s policy of not accepting certified questions. It acknowledged that federal courts hearing diversity cases do not have a mechanism to seek direct guidance from the Supreme Court of North Carolina. Nevertheless, the court held that “North Carolina’s policy not to accept certified questions… does not create extraordinary circumstances.” Id. at 153.
Finally, the court reviewed Golden Corral’s procedural posture. It noted that Golden Corral filed its case early in the pandemic-coverage litigation cycle, was aware that other related cases were proceeding through the state courts, and “never sought to stay this action” while those cases developed. Id. at 153. The court observed that Golden Corral also “vigorously opposed any delay in this action.” Id. The court characterized these points as part of its broader assessment of finality, stating that a litigant’s early pursuit of a ruling is a “voluntary, deliberate, free, and untrammeled choice” for purposes of Rule 60(b)(6). Id. (quoting Dowell v. State Farm Fire & Cas. Auto. Ins., 993 F.2d 46, 48 (4th Cir. 1993)).
Invoking longstanding precedent emphasizing the value of finality, the court concluded: “This very strict interpretation of Rule 60(b) is essential if the finality of judgments is to be preserved.” Id. (quoting Gonzalez, 545 U.S. at 535). Because the circumstances Golden Corral identified fell within the category of legal developments that do not warrant reopening final judgments, the court denied the motion.
Looking Forward
This case illustrates that once a federal judgment becomes final, later developments in state decisional law will not usually permit reopening under Rule 60(b)(6). For franchisors and large restaurant systems whose business-interruption claims were litigated early in the pandemic, the decision highlights the narrow circumstances in which federal courts may alter final judgments. Although later state rulings may clarify or shift the legal landscape, federal courts maintain a strong commitment to the stability and predictability of final judgments.
The opinion also underscores how the timing of litigation can influence procedural outcomes. Golden Corral’s case proceeded in federal court before the Supreme Court of North Carolina addressed similar coverage issues. The district court viewed that timing in the context of Rule 60(b)(6)’s finality principles, emphasizing the importance it places on a litigant’s decision to advance a claim without waiting for later state developments. Future litigants evaluating complex insurance questions may consider whether to seek a stay or coordinate with parallel state proceedings when addressing novel questions of state law.
Finally, the court’s discussion of certified-question practice provides useful context for enterprises operating in states that do not permit certification to the state supreme court. In jurisdictions like North Carolina, litigants must proceed with an understanding that federal courts will predict state law without the ability to obtain authoritative clarification mid-litigation. Franchise systems with national footprints may find this perspective helpful when assessing forum selection, litigation strategy, and the value of awaiting state appellate direction before pressing forward in federal court.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
