Thomas, Carl E. v. Guardsmark Inc ( 2007 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-3865
CARL E. THOMAS,
Plaintiff-Appellee,
v.
GUARDSMARK, LLC,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division
No. 02-C-8848—Suzanne B. Conlon, Judge.
____________
ARGUED APRIL 10, 2006—DECIDED JUNE 5, 2007
____________
Before EASTERBROOK, Chief Judge, and RIPPLE and
ROVNER, Circuit Judges.
ROVNER, Circuit Judge. On the heels of the terrorist
attacks of September 11, 2001, Channel 2 news in Chicago
ran a story about lax regulation of security guards in
Illinois. Carl E. Thomas, a security officer for Guardsmark,
LLC (then Guardsmark, Inc., hereinafter “Guardsmark”),
appeared in that story and stated that once, while work-
ing as a security guard at an oil refinery, he had worked
alongside a fellow guard who boasted of having a criminal
record. Guardsmark suspended and then fired Thomas
for speaking to the media. Thomas brought suit for re-
taliatory discharge and a jury awarded him back pay and
damages. Guardsmark unsuccessfully moved for judg-
2 No. 05-3865
ment as a matter of law on several grounds, including the
one on appeal—that Mr. Thomas’ claim should have been
dismissed because it did not satisfy the requirements of
the Illinois Whistleblower Act. We affirm.
I.
As in any case involving diversity jurisdiction, before
proceeding to the merits, this court must independently
determine whether the parties meet the diversity and
amount in controversy requirements of 28 U.S.C. § 1332.
Camico Mut. Ins. Co. v. Citizens Bank, 474 F.3d 989, 992
(7th Cir. 2007). Guardsmark’s opening brief stated only
that the district court had jurisdiction “due to the diversity
of citizenship of the parties.” Thomas’ brief incorrectly
affirmed that Guardsmark’s jurisdictional statement
was complete and correct.
We hope to make it clear once and for all (if such a wish
for finality were possible) that an appellant’s naked
declaration that there is diversity of citizenship is never
sufficient. Our Circuit Rule 28 requires more. It states, in
no uncertain terms, that if jurisdiction depends on diver-
sity of citizenship, the statement shall identify the citizen-
ship of each party to the litigation. It then goes on to
say, “[i]f any party is a corporation, the statement shall
identify both the state of incorporation and the state in
which the corporation has its principal place of business.
If any party is an unincorporated association or partner-
ship the statement shall identify the citizenship of all
members.” Cir. R. 28(a)(1). We have repeatedly warned
that when one party to the litigation is someone other
than a natural person suing in her own capacity, “a
jurisdictional warning flag should go up” and the parties
should carefully scrutinize the requirements of Circuit
Rule 28(a)(1). Cosgrove v. Bartolotta, 150 F.3d 729, 731
(7th Cir. 1998). In this case, Guardsmark was, at the time
No. 05-3865 3
of removal, a limited liability company. For diversity
jurisdiction purposes, the citizenship of an LLC is the
citizenship of each of its members. Camico Mut. Ins. Co. v.
Citizens Bank, 474 F.3d 989, 992 (7th Cir. 2007). Conse-
quently, an LLC’s jurisdictional statement must identify
the citizenship of each of its members as of the date the
complaint or notice of removal was filed, and, if those
members have members, the citizenship of those members
as well. In its opening brief, Guardsmark failed to iden-
tify the citizenship of any of its members. And in its
Notice of Removal before the district court, Guardsmark
incorrectly identified itself as a corporation rather than
an LLC. (R. at 1).
When this court determined that both the appellant’s
and the appellee’s jurisdictional statements were deficient,
it issued an order directing the parties to submit cor-
rected statements. In that order the court not only cited
Circuit Rule 28(a)(1), but went two steps further; it
specifically ordered the appellant to “provide a complete
disclosure of its members’ identities and citizenships
and, if necessary, the members’ members’ identities and
citizenships.” March 27, 2006 Order. The order then cited
three Seventh Circuit cases to which the appellant could
turn for guidance regarding the level of specificity re-
quired (and, parenthetically, for a fair warning of the fate
of those who fail to comply).
In response to the order, Guardsmark filed a supple-
mental jurisdictional statement revealing that the LLC
had two members, one, a corporation, and the other, a
partnership. Despite the clear instructions in the order,
Guardsmark’s corrected jurisdictional statement neg-
lected to identify the partnership or the names of the
partners in that partnership. “Once the court sounds the
alarm, the litigants must be precise,” America’s Best Inns,
Inc. v. Best Inns of Abilene, 980 F.2d 1072, 1073 (7th Cir.
1992), and the court can no longer take on faith the law-
4 No. 05-3865
yer’s blanket declaration that the partners are citizens of
another state.
The normal course of events at this point is to dismiss
for want of subject matter jurisdiction. See Guar. Nat’l
Title Co. v. J.E.G. Assoc., 101 F.3d 57, 59 (7th Cir. 1996);
America’s Best Inns, Inc., 980 F.2d at 1074. In this case
we gave the parties a more-than-generous third opportu-
nity by order of April 10, 2006, and their response satis-
fies the requirements of diversity jurisdiction. Had we
done otherwise, Guardsmark would have received a
windfall—having the verdict against it vacated and the
case dismissed for want of jurisdiction, due to its own
failure to correctly identify the source of diversity jurisdic-
tion. See Guar. Nat’l Title Co., 101 F.3d at 59; America’s
Best Inns, Inc., 980 F.2d at 1074. Thomas, who re-
covered a verdict below, should not now lose that ver-
dict based on the faulty lawyering of his opponent.1
1
We should note, however, that Thomas did contribute to the
error by asserting in its brief that Guardsmark’s jurisdictional
statement was “complete and correct.” “We have warned liti-
gants about the precise pattern observed here—a patently
erroneous jurisdictional statement by the appellant, and a
patently erroneous statement by the appellee that the appellant’s
jurisdictional statement is complete and correct.” Cincinnati Ins.
Co. v. E. Atl. Ins. Co., 260 F.3d 742, 747 (7th Cir. 2001). In this
case “patently erroneous” might be too strong of a claim, as we
do recognize that some information may be in the hands of the
appellant and difficult for the appellee to obtain. In this case, for
example, Thomas would have had no reason to question
Guardsmark’s identification as a corporation in its notice of
removal. (Guardsmark altered its status from corporation to
limited liability company six days after filing the initial state
court complaint in this matter.) On the other hand, Thomas
certainly should have noted that Guardsmark’s brief failed to
“identify both the state of incorporation and the state in which
(continued...)
No. 05-3865 5
Guardsmark’s additional opportunity to correct the
jurisdictional statement, however, comes with a loud and
close shot across the bow. The next time our cannons may
not be aimed so high. As for this case, we order
Guardsmark to pay the court $1,000 as a sanction for
violations of this court’s rules and orders as described
above.
II.
Having scraped by that hurdle, we can begin our analy-
sis of the merits of the case which will be aided by a more
detailed description of the facts. In October 2001, a news
reporter in Chicago approached Thomas for a story about
lax regulation of security guards in Illinois. It was then
that Mr. Thomas told the reporter that he had worked
alongside another newly hired Guardsmark security
guard who told Thomas he had a criminal record. The
reporter asked Thomas if he would be willing to be in-
terviewed on camera. Thomas contacted his supervisor
for permission, before agreeing to the on-air interview.
One week after the interview aired, on November 16, 2001,
the Chicago regional manager of Guardsmark sum-
moned Thomas to his office and suspended him pending
further investigation into whether he had proper authori-
zation to appear on the telecast. From that time until some
1
(...continued)
the corporation has its principal place of business” as Circuit
Rule 28(a)(1) requires for a corporation, or to “identify the
citizenship of all members,” as the rule requires for unincorpo-
rated associations or partnerships. Cir. R. 28(a)(1). Nevertheless,
dismissing a legitimately earned verdict in its favor where it
turns out that the district court did indeed have proper federal
jurisdiction would have been a high price to pay for a failure
to catch opposing counsel’s error.
6 No. 05-3865
time in fall 2002, Thomas’ employment status was unclear.
Guardsmark did not initiate the paperwork to terminate
Mr. Thomas until just before he filed his lawsuit in
October 2002.
After a jury award in Thomas’ favor, Guardsmark raised
numerous claims of error, all of which the district court
judge rejected. In a motion for judgment as a matter of
law filed two weeks after the jury verdict, Guardsmark
argued for the first time that Mr. Thomas’ claim should
have been dismissed because it did not satisfy the require-
ments of the Illinois Whistleblower Act, 740 Ill. Comp.
Stat. 174/1-35. Thomas countered that he had never
alleged a claim under the Act and that its similarity to
common law retaliatory discharge claims did not convert
his tort claim into a claim under the new Act. The district
court agreed with Thomas emphasizing simply that
“Thomas did not assert an Illinois Whistleblower Act
Claim.” (R. at 111, p.4). That is the sole issue on which
Guardsmark seeks our de novo review. See Pearson v.
Welborn, 471 F.3d 732, 737 (7th Cir. 2006) (appellate
court applies de novo review to the district court’s denial
of judgment as a matter of law).
The Illinois Whistleblower Act prohibits an employer
from “retaliat[ing] against an employee for disclosing
information to a government or law enforcement agency,
where the employee has reasonable cause to believe that
the information discloses a violation of a State or federal
law, rule, or regulation.” 740 Ill. Comp. Stat. 174/15. The
tort of retaliatory discharge under Illinois common law
is a narrow exception to the at-will employment doctrine
and can be established if a plaintiff shows that (1) she has
been discharged; (2) in retaliation for her activities; and
(3) the discharge violates a clear mandate of public policy.
Zimmerman v. Buchheit of Sparta, Inc., 645 N.E.2d 877,
881 (Ill. 1995).
No. 05-3865 7
On appeal, Guardsmark argues that the Illinois common
law tort of retaliatory discharge has been codified—and
thus superseded—by the Illinois Whistleblower Act, 740
Ill. Comp. Stat. 174/1-35, and that Thomas failed to state
a cause of action for retaliatory discharge because he did
not engage in activity protected by the Whistleblower Act.
Thomas counters that the Whistleblower Act did not
abrogate the common law cause of action for retaliatory
discharge but merely gave employees additional protection
for whistle-blowing activities. Thomas further argues
that even if the Whistleblower Act did abrogate the
common law claim, the Whistleblower Act could not be
applied to a lawsuit brought over a year before the effec-
tive date of the Act. Guardsmark terminated Thomas some
time between November 15, 2001 and October 2002, for
conduct which occurred in November 2001.2 The Illinois
Whistleblower Act went into effect on January 1, 2004.
Because the entirety of Guardsmark’s appeal hangs on the
question of whether Thomas stated a claim for retaliatory
discharge under the Whistleblower Act, first we must
determine whether the Act can be applied retroactively.
To determine whether a statute applies retroactively, the
Illinois Supreme Court has adopted the same approach
that the United States Supreme Court enunciated in
2
The date of termination was one of the disputed issues sent
to the jury. Guardsmark suspended Thomas on November 16,
2001. In March 2002, Thomas asked for the money accumulated
in his 401(k) account. Guardsmark denied the request on the
grounds that he was still an employee. Guardsmark did not
initiate the paperwork to terminate Thomas until just before he
filed suit in October 2002. The jury answered the following
special interrogatory in the negative: “Do you find that Mr.
Thomas knew or reasonably should have known by April 30,
2002, that his employment with Guardsmark was terminated?”
(Trial transcript at 481).
8 No. 05-3865
Landgraf v. USI Film Product., 511 U.S. 244 (1994).
Allegis Realty Investors v. Novak, 860 N.E.2d 246, 252 (Ill.
2006), cert. denied, 127 S. Ct. 2100 (2007). It begins with
the default presumption that a statute acts prospectively
only. Landgraf, 511 U.S. at 272. Of course a clear legisla-
tive intent to apply a statute retroactively can defeat
this default rule. Id. at 280. Consequently, the first step
under the Landgraf analysis is to determine whether the
legislature expressly prescribed the statute’s temporal
reach. Landgraf, 511 U.S. at 280; Allegis Realty, 860
N.E.2d at 253. If so, the legislature’s intent must be given
effect unless it would violate the Constitution. Id. If the
statute contains no express provision regarding retro-
activity, then the court must go on to step two and deter-
mine whether the new statute would have a retroactive
effect by considering whether the retroactive application
of the new statute will impair rights a party possessed
when acting, increase a party’s liability for past conduct,
or impose new duties with respect to transactions already
completed. Id.The Illinois Supreme Court has concluded, however, that
an Illinois court (and consequently, a federal court apply-
ing substantive Illinois law) need never go beyond step
one of the Landgraf test. People v. Atkins, 838 N.E.2d 943,
947 (Ill. 2005). This is so because even if the legislature’s
intention regarding temporal reach is not found in the
statute itself, it can be found in section 4 of Illinois’
Statute on Statutes (5 Ill. Comp. Stat. 70/4). Caveney v.
Bower, 797 N.E.2d 596, 603 (Ill. 2003). According to that
section, unless otherwise stated, procedural changes to
statutes may be applied retroactively while substantive
ones may not. Atkins, 838 N.E.2d at 947. In short, because
of section 4 of Illinois’ Statute on Statutes “the legisla-
ture will always have clearly indicated the temporal
reach of an amended statute, either expressly in the new
legislative enactment or by default in section 4 of the
No. 05-3865 9
Statute on Statutes.” Allegis Realty, 860 N.E.2d at 253.
Because the Illinois General Assembly did not expressly
indicate whether the Whistleblower Protection Act ap-
plied retroactively, we look to section 4 of the Statute
on Statutes and evaluate whether the Whistleblower
Protection Act is a procedural or substantive change to
the previous common law tort of retaliatory discharge.
Guardsmark makes the stupefying and bald declara-
tion that the Whistleblower Act is procedural. Rules of
procedure are concerned solely with accuracy and economy
in litigation. Barron v. Ford Motor Co., 965 F.2d 195, 199
(7th Cir. 1992). They are rules “addressed to lawyers
and judges in their professional roles and govern the
means by which disputes regarding the content or applica-
tion of substantive rules should be resolved. The purpose
of these rules is to achieve accuracy, efficiency, and fair
play in litigation, without regard to the substantive
interests of the parties.” Michael Lewis Wells, The Impact
of Substantive Interests on the Law of Federal Courts, 30
Wm. & Mary L. Rev. 499, 504 (1989). Or as another
scholar similarly explained,
A procedural rule is [ ] one designed to make the
process of litigation a fair and efficient mechanism for
the resolution of disputes. Thus, one way of doing
things may be chosen over another because it is
thought to be more likely to get at the truth, or better
calculated to give the parties a fair opportunity to
present their sides of the story, or because . . . it is a
means of promoting the efficiency of the process.
John Hart Ely, The Irrepressible Myth of Erie, 87 Harv. L.
Rev. 693, 724-25 (1974). Substantive rules, on the other
hand, are concerned with directing behavior outside of the
courtroom. Barron, 965 F.2d at 199. They tell individuals,
organizations and governments to do certain things or
abstain from certain conduct on pain of some sanction.
Lewis, supra, at 504.
10 No. 05-3865
It is true that, in some cases, the line between substance
and procedure is not always crystal clear. Atkins, 838
N.E.2d at 947. But this is not one of those cases. The
substantive nature of the Whistleblower Act could not
be more clear. It does not regulate the behavior of lawyers
and judges in order to make the process of litigation fair
and efficient. It instructs employers to abstain from
certain activities such as retaliating against employees
who blow the whistle. It addresses the substantive
rights of employees to protection from retaliatory con-
duct by employers. Finally, it tells employers what sorts
of sanctions they face for failing to obey the statute.
Guardsmark’s only argument for defining the Whistle-
blower statute as procedural is that the new act “defined
the statutory means by which a whistleblower plaintiff
could seek redress for retaliatory discharge.” (Guardsmark
Brief at 9). Any new substantive remedy, however, defines
the means by which a plaintiff can seek redress by saying,
in short, “yesterday you had to sit at home and suffer
silently for your harm. Today, you may file a complaint
in the Circuit Court of Cook County, Illinois.” This does
not turn every new substantive statute into a procedural
one. There can be, of course, other procedural ramifica-
tions of substantive changes. For example, court proceed-
ings under section 25 of the Act (which makes a violation
of the Whistleblower Act a Class A misdemeanor) would
likely be initiated by the State and not a private employee.
“Procedural ramifications of a substantive amendment,”
however, “do not make the amendment procedural.”
Atkins, 838 N.E.2d at 948. It is beyond question that the
Illinois Whistleblower Act is a substantive act which
shapes behavior occurring outside of the courtroom.
Guardsmark wants desperately for the Whistleblower
Act to apply and to preempt the common law tort of
retaliatory discharge because Thomas’ actions, which a
jury properly found were protected under the common
No. 05-3865 11
law tort of retaliatory discharge, would not be protected
under the new Whistleblower Act. This is so, Guardsmark
claims, first because Thomas did not communicate infor-
mation that he reasonably believed to be a violation of
a state or federal law, rule, or regulation. See 740 Ill.
Comp. Stat. 174/15. Second, Thomas did not disclose the
information to a government or law enforcement agency.3
See id. Both of these are requirements under the Whistle-
blower Protection Act, but not under the common law tort
of retaliatory discharge. By making these claims, however,
Guardsmark has hoisted itself with its own petard. To
state a claim under the Whistleblower Protection Act, a
plaintiff must allege certain factors that are substan-
tively different from the elements required to state a
claim for retaliatory discharge under the common law
tort. And as we have already established, substantive
changes cannot be applied retroactively. Our holding that
the Illinois Whistleblower Protection Act does not apply
retroactively to claims accruing before the effective date
of the Act eviscerates Guardsmark’s claim in toto.
Thomas makes the related argument that the Illinois
Whistleblower Act did not replace the common-law tort for
retaliatory discharge, but merely offers an additional cause
of action for employees. Pursuant to Rule 28(j) of the
Federal Rules of Appellate Procedure and Circuit Rule
28(e), the parties have submitted several supplemental
authorities addressing the question as to whether the
Whistleblower Act abrogated the common law tort. We
need not decide how the Illinois Supreme Court would
3
There is some evidence that Thomas reported the alleged
violation to a police officer in the Village of Lemont police
department. Because we have determined that the Whistleblower
Protection Act does not apply, resolution of this issue is not
necessary to the outcome of this case.
12 No. 05-3865
rule on this issue, however, as even if it did, it would
not apply retroactively to the facts of this case.
Because the Whistleblower Protection Act cannot be
applied retroactively, the only question that remains is
whether Guardsmark’s actions meet the requirements
for the Illinois tort of retaliatory discharge. See Zimmer-
man v. Buchheit of Sparta, Inc., 645 N.E.2d 877, 880 (Ill.
1994) (“a plaintiff states a valid claim for retaliatory
discharge only if she alleges that she was (1) discharged;
(2) in retaliation for her activities; and (3) that the dis-
charge violates a clear mandate of public policy.”) The
jury found that Guardsmark’s actions met the require-
ments for retaliatory discharge and Guardsmark wisely
chose not to appeal on those grounds. After all, it is
uncontroverted that Guardsmark discharged Thomas for
speaking to the media about security breaches at an oil
refinery. Guardsmark would be hard pressed to overturn
a jury finding that the discharge violated a mandate of
public policy. It is clearly important to the public to hear
about breaches of security that could affect public health
and safety. In any event, Guardsmark has not placed
these issues before us.
Thomas’ final argument is that Guardsmark forfeited
its Whistleblower Act claim by failing to raise the issue
until the motion for judgment as a matter of law, filed on
July 27, 2005—fourteen days after the jury’s verdict.
Guardsmark counters that it argued from the get-go that
Thomas had failed to state a claim upon which relief may
be granted. This may be so, but it was not until the post-
verdict motion that Guardsmark argued specifically that
Thomas failed to state a claim under the Whistleblower
Protection Act. Unfortunately, however, by responding
substantively to the argument that Guardsmark made
regarding the Whistleblower Protection Act (Plaintiff ’s
Response to Guardsmark’s Motion for Judgment as a
Matter of Law, p.7; R. at 105, p.7), Thomas waived this
No. 05-3865 13
waiver argument. See Cromeens, Holloman, Sibert, Inc. v.
AB Volvo, 349 F.3d 376, 389 (7th Cir. 2003).
Thomas asks this court to sanction Guardsmark, under
Fed. R. App. P. 38, for filing a frivolous appeal. An appeal
is frivolous if it is so meritless that the result is foreor-
dained. See Jimenez v. Madison Area Tech. Coll., 321 F.3d
652, 658 (7th Cir. 2003). There is no evidence, however,
that Guardsmark continued to litigate in bad faith, and
we think this case is too close to the line to warrant
sanctions. Bowman v. City of Franklin, 980 F.2d 1104,
1110 (7th Cir. 1992) (“[t]ypically the courts have looked
for some indication of the appellant’s bad faith sug-
gesting that the appeal was prosecuted with no reason-
able expectation of altering the district court’s judgment
and for purposes of delay or harassment or out of sheer
obstinacy.”) See also Ross v. RJM Acquisitions Funding
LLC, 480 F.3d 493, 499 (7th Cir. 2007) (sanctions not
awarded but attorney warned that he was “skating near
the edge of his pond”); Flaherty v. Gas Research Inst., 31
F.3d 451, 459 (7th Cir. 1994) (denying sanctions where
appeal bordered on frivolous, but no evidence of bad faith).
The judgment of the district court is affirmed; the
appellee’s motion for sanctions for a frivolous appeal is
denied. For violations of our rules and orders, we fine the
attorneys for the defendant-appellant $1,000, payable
to the court.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-5-07