Judges: Easterbrook
Filed: May 22, 2018
Latest Update: Mar. 03, 2020
Summary: In the United States Court of Appeals For the Seventh Circuit _ No. 17-3149 PROLITE BUILDING SUPPLY, LLC, et al., Plaintiffs-Appellants, v. MW MANUFACTURERS, INC., doing business as Ply Gem Win- dows, Defendant-Appellee, and GREAT LAKES WINDOW, INCORPORATED, Third-Party Plaintiff-Appellee. _ Appeal from the United States District Court for the Eastern District of Wisconsin. Nos. 15-C-1049, 15-C-1205 — Lynn Adelman, Judge. _ ARGUED MARCH 30, 2018 — DECIDED MAY 22, 2018 _ Before EASTERBROOK and RO
Summary: In the United States Court of Appeals For the Seventh Circuit _ No. 17-3149 PROLITE BUILDING SUPPLY, LLC, et al., Plaintiffs-Appellants, v. MW MANUFACTURERS, INC., doing business as Ply Gem Win- dows, Defendant-Appellee, and GREAT LAKES WINDOW, INCORPORATED, Third-Party Plaintiff-Appellee. _ Appeal from the United States District Court for the Eastern District of Wisconsin. Nos. 15-C-1049, 15-C-1205 — Lynn Adelman, Judge. _ ARGUED MARCH 30, 2018 — DECIDED MAY 22, 2018 _ Before EASTERBROOK and ROV..
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In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17‐3149
PROLITE BUILDING SUPPLY, LLC, et al.,
Plaintiffs‐Appellants,
v.
MW MANUFACTURERS, INC., doing business as Ply Gem Win‐
dows,
Defendant‐Appellee,
and
GREAT LAKES WINDOW, INCORPORATED,
Third‐Party Plaintiff‐Appellee.
____________________
Appeal from the United States District Court
for the Eastern District of Wisconsin.
Nos. 15‐C‐1049, 15‐C‐1205 — Lynn Adelman, Judge.
____________________
ARGUED MARCH 30, 2018 — DECIDED MAY 22, 2018
____________________
Before EASTERBROOK and ROVNER, Circuit Judges, and
GILBERT, District Judge.*
* Of the Southern District of Illinois, sitting by designation.
2 No. 17‐3149
EASTERBROOK, Circuit Judge. Prolite Building Supply
bought Ply Gem windows from MW Manufacturers. (The
parties use “Ply Gem” for both the product and its maker;
we do the same.) Prolite resold the windows to residential
builders in Wisconsin. Some of the homeowners were not
satisfied with the windows, which admitted air even when
closed. They complained to the builders, which complained
to Prolite, which complained to Ply Gem. Working together
under a contract that made Prolite the windows’ principal
servicer, Prolite and Ply Gem solved some but far from all of
the problems. Contractors stopped buying from Prolite,
which stopped paying Ply Gem for earlier deliveries.
Prolite and 12 homeowners filed suit in state court. Pro‐
lite contended that Ply Gem broke a promise to make the
builders and ultimate customers happy. The homeowners
made claims under the warranties that accompanied the
windows. Ply Gem removed the action to federal court and
counterclaimed against Prolite for unpaid bills. It added An‐
drew Johnson and Michael Newman, Prolite’s only two
members, as additional parties. (Johnson and Newman had
guaranteed payment of Ply Gem’s invoices.) Great Lakes
Window, a company affiliated with Ply Gem, filed its own
federal suit against Prolite, Johnson, and Newman, seeking
to collect other invoices. Additional homeowners intervened
in the removed suit. The district court consolidated these ac‐
tions, and the caption that begins this opinion names the
main contestants without going into excessive detail.
The district court granted summary judgment to Ply
Gem and Great Lakes. 2017 U.S. Dist. LEXIS 220922 (E.D. Wis.
Sept. 18, 2017). The judge found that the parties are of di‐
verse citizenship. (Prolite’s members are citizens of Wiscon‐
No. 17‐3149 3
sin, so Prolite itself is a citizen of Wisconsin, as are all of the
homeowner parties, while Ply Gem and Great Lakes are in‐
corporated in Delaware (Ply Gem) or Ohio (Great Lakes)
with their principal places of business in North Carolina.)
Prolite’s initial claim against Ply Gem comfortably exceeds
$75,000; Ply Gem’s counterclaim exceeds $180,000; Great
Lakes’ claim exceeds $260,000. None of the homeowners’
claims exceeds $75,000, so none meets the diversity jurisdic‐
tion (aggregation of different litigants’ claims is not allowed,
see Snyder v. Harris, 394 U.S. 332 (1969)), but the district
judge wrote that “the claims of the homeowner plaintiffs are
part of the same case or controversy as Prolite’s claim against
Ply Gem” and come within the supplemental jurisdiction. 28
U.S.C. §1367(a). We’ll return to that question, but we start
with the contract claims and counterclaims.
Ply Gem and Prolite had three contracts: a sales agree‐
ment, a credit agreement, and a service agreement (the “Ser‐
vice Rebate Obligation”). Prolite concedes that it does not
have any defense to the claims for payment by Ply Gem and
Great Lakes, which rest on the credit agreement, unless it
can show that Ply Gem broke its promises under the service
agreement. The service agreement requires Prolite to repair
the Ply Gem windows that the contractors installed. In ex‐
change, Ply Gem gave Prolite a 3% discount on the windows’
price and promised to furnish needed parts at no cost. Pro‐
lite says that it spent about $290,000 trying to fix the trouble‐
some windows but concedes that it received the 3% discount
and all the parts it requested. Another portion of the service
agreement provides that in the event of “excessive” prob‐
lems (an undefined term) Ply Gem would furnish additional
aid, including complete window reinstallation, for a price to
4 No. 17‐3149
be negotiated. Prolite never asked Ply Gem to replace win‐
dows under this clause.
Prolite contends that what Ply Gem should have done
was either reinstall all of the windows, without specific re‐
quests, or design a new line of windows with better attrib‐
utes and replace the old windows with the new ones, again
without requests. Only those two steps could have kept the
customers happy, Prolite insists. The problem, as the district
judge observed, is that the service agreement does not re‐
quire Ply Gem to keep the customers happy. (That’s the func‐
tion of the warranties.) Instead the service agreement re‐
quires Prolite to keep the customers happy by performing
repairs in exchange for a discount. The district court’s opin‐
ion meticulously discusses the contractual language. It is not
necessary to repeat that analysis in the Federal Reporter. Nor
need we repeat the district court’s convincing resolution of
the dispute about expert evidence that Prolite proffered.
The homeowners’ claims, by contrast, pose a knotty prob‐
lem. They can be resolved under the supplemental jurisdic‐
tion only if they “are so related to claims in the action within
such original jurisdiction that they form part of the same
case or controversy under Article III of the United States
Constitution.” 28 U.S.C. §1367(a). The statute does not define
“case or controversy,” nor does Article III. Courts often ask
whether the claims share a common nucleus of operative
facts. See, e.g., Houskins v. Sheahan, 549 F.3d 480, 495 (7th Cir.
2008). This jiggles the vagueness problem around a little
without solving it. The same phrase is used in the law of
preclusion. It does real work and can handle many disputes,
but not by prescribing an algorithm. It tells us that “enough”
commonality makes for a controversy but does not dictate
No. 17‐3149 5
the solution to any case. So, for example, supplemental ju‐
risdiction is appropriate when the supplemental claim in‐
volves the same parties, contracts, and course of action as the
claim conferring federal jurisdiction. Channell v. Citicorp Na‐
tional Services, Inc., 89 F.3d 379, 385–86 (7th Cir. 1996); Strom‐
berg Metal Works, Inc. v. Press Mechanical, Inc., 77 F.3d 928, 932
(7th Cir. 1996). Ammerman v. Sween, 54 F.3d 423, 424 (7th Cir.
1995), adds that “[a] loose factual connection between [ ]
claims is generally sufficient” to confer supplemental juris‐
diction. How loose is that? What does enough commonality
really mean? Still, unless there is a phrase better than “nu‐
cleus of operative facts,” there’s no point in complaining. No
one has come up with a better phrase, despite a lot of trying,
so we apply this one as best we can.
CNH Industrial America LLC v. Jones Lang LaSalle Americas,
Inc., 882 F.3d 692, 701–04 (7th Cir. 2018), suggests that, in an
action by a manufacturer for a breach‐of‐contract claim, the
court would also have supplemental jurisdiction over deal‐
erships’ independent breach‐of‐contract claims. That at least
entails a single contract and closely related parties. There’s
less commonality here. What the contract and warranty
claims have in common is that they concern Ply Gem win‐
dows. But that is all they share. The language of the warran‐
ty (three warranties, actually, for three series of windows)
and the service agreement do not overlap. The parties to the
agreements overlap through Ply Gem, but the grievances do
not. Prolite complained that Ply Gem did not do enough to
ensure that its customers (the builders) remained willing to
purchase Ply Gem windows. The homeowners, by contrast,
just wanted to stop drafts and moisture. Each homeowner’s
claim presented a different problem. Some could be fixed,
some not. The nature of the work done differed. The losses
6 No. 17‐3149
differed. There may well be savings from litigating the
homeowners’ claims together, because they have some
things in common with each other, but it is impossible to say
that Prolite’s claim and the homeowners’ claims are just one
big controversy. The operative facts differ, as do the contrac‐
tual terms.
Prolite might have been able to make the imbroglio a sin‐
gle case or controversy by framing a contract theory that
turned on the merits of the homeowners’ warranty claims. If
Prolite had alleged, for example, that Ply Gem refused to
acknowledge that the homeowners had warranty claims,
preventing Prolite from complying with its obligations un‐
der the service agreement, then the warranty claims would
have been integral to the whole dispute. But Prolite didn’t
make any such allegations. The homeowners’ claims there‐
fore cannot proceed under the supplemental jurisdiction.
What happens now? Ply Gem asks us to affirm the judg‐
ment on Prolite’s claims (and the counterclaims) and send
the homeowners’ claims back to state court. Prolite and the
homeowners, however, want us to vacate the whole judg‐
ment and remand the whole case.
If the dispute between Prolite and Ply Gem were one un‐
der federal law, then 28 U.S.C. §1441(c) would supply the
solution. The federal claim would make the whole suit re‐
movable, and §1441(c)(2) would require the immediate re‐
mand of any state‐law claim not within the supplemental
jurisdiction. The Judicial Code does not contain a parallel
provision for the combination of a diversity claim that is
within federal jurisdiction and a diversity claim that is not.
The dispute between Prolite and Ply Gem was removable in
principle, see §1441(a), and nothing in the chapter on remov‐
No. 17‐3149 7
al (28 U.S.C. §§ 1441 to 1455) suggests that the presence in a
state case of an additional claim worth less than $75,000 (and
not part of the same case or controversy as the first) blocks
removal of a claim otherwise within federal jurisdiction.
The way §1441(c) treats the combination of removable
and non‐removable claims implies that there is no jurisdic‐
tional obstacle to removing the whole suit and sending the
surplus claims back to state court. Section 1447(c) tells us
that a motion to remand on the basis of any ground other
than the absence of subject‐matter jurisdiction is forfeited if
not made within 30 days after the filing of the notice of re‐
moval. Prolite and the homeowners did not argue in the dis‐
trict court, during those 30 days, that the homeowners’
claims are outside the supplemental jurisdiction and that the
whole suit was therefore not properly removed. In this court
Prolite and the homeowners initially represented that the
entire case comes within federal jurisdiction, only to change
their minds after the supplemental‐jurisdiction issue was
raised at oral argument. Grubbs v. General Electric Credit
Corp., 405 U.S. 699 (1972), tells us that once a removed case
has gone to judgment, the decision should stand even if an
immediate remand would have been proper.
Imagine what would have happened if the original suit
had begun in federal court. The diversity jurisdiction of 28
U.S.C. §1332 would have covered the dispute between Pro‐
lite and Ply Gem. The tag‐along homeowners’ claims should
have been dismissed. The Supreme Court has never suggest‐
ed that the presence of one claim under the jurisdictional
amount prevents the resolution of other claims that exceed
it, if complete diversity is present. See Clark v. Paul Gray, Inc.,
306 U.S. 583, 590 (1939).
8 No. 17‐3149
What’s more, we cannot forget that we have two suits, the
second one (by Great Lakes) filed initially in federal court
with both complete diversity and stakes exceeding $75,000
for every litigant. Each of these consolidated suits must be
considered independently. Hall v. Hall, 138 S. Ct. 1118 (2018).
The dispute between Prolite and Ply Gem could be resolved
under the supplemental jurisdiction in the suit by Great
Lakes no matter what one makes of the homeowners’ claims.
The judgment of the district court is affirmed, except
with respect to the homeowners’ claims. The judgment deal‐
ing with those claims is vacated, and the case is remanded to
the district court with instructions to remand them to state
court.