Hart, Fred J. v. Schering-Plough ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-3689
Fred J. Hart,
Plaintiff-Appellant,
v.
Schering-Plough Corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 C 0814--David H. Coar, Judge.
Argued April 2, 2001--Decided June 7, 2001
Before Bauer, Cudahy, and Easterbrook,
Circuit Judges.
Easterbrook, Circuit Judge. Alarm bells
went off when we read the jurisdictional
statement of Fred Hart’s brief: "Amount
in controversy: $72,436.62 plus
Plaintiff’s attorney’s fees, to be
assessed by the court, should plaintiff
prevail, pursuant to 705 ILCS sec.225/1."
Oops. "The district courts shall have
original jurisdiction of all civil
actions where the matter in controversy
exceeds the sum or value of $75,000,
exclusive of interest and costs" and the
parties are of diverse citizenship. 28
U.S.C. sec.1332(a). The Illinois statute
on which Hart relies defines attorneys’
fees as part of costs, making it hard to
see how this case belongs in federal
court, for diversity of citizenship is
its only jurisdictional foundation.
Schering-Plough Corp., the defendant,
recognized that something is amiss. The
jurisdictional statement in its brief
asserts: "The amount in controversy is
$90,000 plus attorney fees." Why the
difference? Hart contends that he is
entitled to one year’s pay as a severance
benefit, and according to the complaint
his annual salary at the time of his
discharge was $90,000. But this does not
mean that the amount in controversy is
$90,000, because Schering-Plough made a
severance payment of $17,463.38 when it
let Hart go. The amount in controversy is
whatever is required to satisfy the
plaintiff’s demand, in full, on the date
suit begins. See Gardynski-Leschuck v.
Ford Motor Co., 142 F.3d 955, 958-59 (7th
Cir. 1998). The controverted amount--the
stake of this case--is Hart’s annual
salary, less what Schering-Plough already
has paid. So Hart was right to deduct the
severance payment, and the jurisdictional
problem remains. (If the severance
payment were due under a welfare-benefit
plan, then the claim would arise under
federal law and the amount in controversy
would not matter. But the claim rests on
a contract negotiated in Australia;
neither side contends that this contract
creates a plan covered by ERISA.)
At oral argument we directed the parties
to file supplemental memoranda on
subject-matter jurisdiction. Schering-
Plough’s response relies on the
attorneys’ fees authorized by 705 ILCS
sec.225/1 in the event an employee
obtains fringe benefits though
litigation. Although that statute defines
fees as part of costs, and sec.1332(a)
says that the amount in controversy must
exceed $75,000 "exclusive of interest and
costs", we know from Missouri State Life
Insurance Co. v. Jones, 290 U.S. 199
(1933), that the division between
"damages" and "costs" in sec.1332 depends
on federal law. It is therefore possible
in principle for attorneys’ fees under
705 ILCS sec.225/1 to count toward the
amount in controversy, just as Jones held
that attorneys’ fees under the state law
in question were treated as part of
damages. If, for example, Hart had
incurred fees pursuing his demand before
filing suit, and if these were
compensable under 705 ILCS sec.225/1,
they might propel the amount in
controversy over $75,000. See Sarnoff v.
American Home Products Corp., 798 F.2d
1075, 1078 (7th Cir. 1986); Ross v.
Inter-Ocean Insurance Co., 693 F.2d 659
(7th Cir. 1982). But neither Hart nor
Schering-Plough relies on this
possibility. Instead Schering-Plough
contends that legal expenses incurred
after filing count toward the amount in
controversy. That submission can’t be
reconciled with Gardynski-Leschuck or the
proposition that jurisdiction depends on
events that exist on or before the date
of filing. If the defendant can
extinguish the plaintiff’s entire claim
by tendering $75,000 or less at the
outset, then the amount "in controversy"
does not exceed $75,000. (To the extent
Sarnoff, Ross, and Batts Restaurant, Inc.
v. Commercial Insurance Co. of Newark,
406 F.2d 118 (7th Cir. 1969), imply that
attorneys’ fees incurred during the
federal litigation count toward the
jurisdictional minimum, they have been
superseded by Gardynski-Leschuck. None of
the earlier opinions dealt with the
question how fees yet to be incurred
could be "in controversy" on the date the
complaint is filed, and none can be
deemed a holding on a point that was
assumed but not decided. Gardynski-
Leschuck squarely addresses that question
and represents this circuit’s resolution
of it.)
As it happens, however, Hart’s salary
was more than $90,000 per year. Hart’s
jurisdictional memorandum states that
"[d]uring discovery, it developed that .
. . [Hart’s] annual salary, at the time
of his termination, was in fact
$99,972.80". Actually it was higher
still. The document to which Hart’s
memorandum referred us shows that his
salary for 1996 was $109,472.80, of which
$9,500 was contributed to a retirement
plan but must be included in the base for
purposes of severance pay. Surely Hart
did not need discovery to learn his own
salary. Much pain could have been avoided
had Hart’s complaint correctly identified
the stakes. But the fact remains that the
amount in controversy on the date of fil
ing was $91,910.42 ($109,472.80
$17,562.38). Even on appeal the parties
may amend their pleadings under 28 U.S.C.
sec.1653 to show the true jurisdictional
facts when the litigation began. Newman-
Green, Inc. v. Alfonzo-Larrain, 490 U.S.
826, 831 (1989). Hart’s jurisdictional
memorandum implies a motion to amend the
pleadings under sec.1653, and we grant
that motion. Jurisdiction is secure.
Pitman-Moore employed Hart as a
scientist in Australia, his native land.
Knowing that his position was about to be
reorganized out of existence, Hart agreed
to accept a transfer to Pitman-Moore’s
facilities in the United States. He
signed a contract, which the parties
called a "Foreign Assignment Agreement",
providing for 12 months’ employment, plus
an option to extend this period for an
extra six months. Pitman-Moore promised
to add substantial housing benefits, an
automobile allowance, and a cost-of-
living allowance to Hart’s annual salary
of $54,000. The agreement wraps up with
this termination clause:
Should your employment be
involuntarily terminated by Pitman-
Moore, Inc., other than for cause as
defined in the Policy Manual, or
there is no assignment available in
Australia at the end of your twelve
(12) month assignment, the Company
will provide you with a severance
payment of one (1) year’s salary in
effect at the time of termination.
Hart moved to the United States in
January 1994 and went to work at Pitman-
Moore’s facility in Mundelein, Illinois.
At the end of that year Pitman-Moore
(which renamed itself Mallinckrodt
Veterinary, Inc., in March 1994)
exercised its option to extend the
agreement for six months. In July 1995
Hart could have taken advantage of the
termination clause and demanded a
transfer home or severance pay if no
position then was available in Australia.
Instead he agreed to stay on at
Mallinckrodt, which substantially
increased his base salary but withdrew
the allowances and other benefits
required by the Foreign Assignment
Agreement. Mallinckrodt also sponsored
Hart for permanent residence under U.S.
immigration laws. That status, once
granted, allowed Hart to take any job
available in the U.S. (a privilege he did
not possess under the visa obtained to
carry out the Foreign Assignment
Agreement). Schering-Plough acquired
Mallinckrodt in July 1997 and promptly
told Hart that his services were no
longer required. It paid Hart a severance
benefit appropriate under its own
policies; Hart replied with this suit
demanding the rest of one year’s salary
under the Foreign Assignment Agreement--
though Hart did not return to Australia,
using his permanent-residence status to
take a new position in Connecticut. After
a bench trial, the district judge found
that the termination provision of that
Agreement expired in July 1995 and
entered judgment for Schering-Plough.
2000 U.S. Dist. Lexis 13879 (N.D. Ill.
Sept. 18, 2000).
For reasons that are not entirely clear,
the parties have agreed that Illinois law
rather than Australian law governs the
interpretation of the Foreign Assignment
Agreement. But it is hard to see how
choice of law could matter, or for that
matter why a trial was necessary. Both
the Agreement and its termination clause
are clear: the assignment lasts for 18
months at most. Work after the end of
June 1995 was governed by new terms. The
Agreement had lapsed, and Hart forewent
his opportunity to return home (or be
paid in lieu of reemployment). What the
trial added is confirmation that the
parties behaved in accordance with this
straightforward reading of the Foreign
Assignment Agreement and did not extend
its duration by conduct. See Foster v.
Springfield Clinic, 88 Ill. App. 3d 459,
410 N.E.2d 604 (4th Dist. 1980). When the
Agreement ran out, they forged a new
arrangement: the fringe benefits
specified by the Agreement vanished, the
base salary rose, and Hart’s visa status
changed. He became a permanent resident,
no longer exposed to the risks attendant
on visas linked to particular jobs and
therefore no longer in need of special
protection should that job come to an
end. The district judge found that the
parties’ conduct in mid-1995, and later,
confirmed the natural-language reading of
the Agreement and its termination clause.
No extrinsic ambiguity turned up. Hart
stresses that the Agreement was to last
for the period of the "assignment," but
the Agreement also shows (and the
parties’ conduct confirms) that the
"assignment" was to run a maximum of 18
months; the word "assignment" in this
contract was not a synonym for
"employment." None of the district
court’s findings or conclusions is
clearly erroneous.
Affirmed