689 F.3d 714 (7th Cir. 2012), 11-2790, Travelers Property Cas. v. Good

Docket Nº:11-2790.
Citation:689 F.3d 714
Opinion Judge:HAMILTON, Circuit Judge.
Party Name:TRAVELERS PROPERTY CASUALTY and Travelers Indemnity Company, Plaintiffs-Appellants, v. Ross GOOD, individually and on behalf of a class, Defendant-Appellee.
Attorney:Thomas M. Crawford, Attorney, Litchfield Cavo, Chicago, IL, Charles E. Spevacek (argued), Attorney, Meagher & Geer PLLP, Minneapolis, MN, for Plaintiffs-Appellants. David M. Oppenheim (argued), Attorney, Anderson & Wanca, Rolling Meadows, IL, for Defendant-Appellee.
Judge Panel:Before EASTERBROOK, Chief Judge, and CUDAHY and HAMILTON, Circuit Judges.
Case Date:July 27, 2012
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 714

689 F.3d 714 (7th Cir. 2012)

TRAVELERS PROPERTY CASUALTY and Travelers Indemnity Company, Plaintiffs-Appellants,


Ross GOOD, individually and on behalf of a class, Defendant-Appellee.

No. 11-2790.

United States Court of Appeals, Seventh Circuit.

July 27, 2012

Argued Jan. 17, 2012.

Page 715

[Copyrighted Material Omitted]

Page 716

Thomas M. Crawford, Attorney, Litchfield Cavo, Chicago, IL, Charles E. Spevacek (argued), Attorney, Meagher & Geer PLLP, Minneapolis, MN, for Plaintiffs-Appellants.

David M. Oppenheim (argued), Attorney, Anderson & Wanca, Rolling Meadows, IL, for Defendant-Appellee.

Before EASTERBROOK, Chief Judge, and CUDAHY and HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge.

This case is an appeal from the district court's discretionary decision not to exercise jurisdiction over a declaratory judgment action because parallel state court proceedings were pending. We affirm the dismissal, but on a different ground. After exploring some of the more arcane borders of federal jurisdiction based on diversity of citizenship, we conclude that the district court lacked subject matter jurisdiction. The plaintiffs' small disputes with many claimants cannot be aggregated to satisfy the amount-in-controversy requirement of 28 U.S.C. § 1332(a).

I. Facts and Procedural Background

The plaintiffs-appellants are two affiliated insurance companies we will simply call " Travelers." They filed this federal action seeking a declaratory judgment that they had no duty to defend their insured, Rogan Shoes, Inc., in a class action suit brought against it in Illinois state court for violations of the federal Fair and Accurate Credit Transactions Act of 2003, 15 U.S.C. § 1681c(g). That act prohibits businesses from including on sales receipts the expiration date or more than the last five digits of the purchaser's credit or debit card, authorizing damages of up to $1,000 per unlawful receipt. § 1681n(a). On behalf of a class, customer Ross Good sued Rogan Shoes in state court for violating the act by printing 387,291 receipts displaying the expiration dates of his and other class members' charge cards in 2008 and 2009. Good sought statutory damages for class members in the staggering amount of $387 million. Rogan Shoes tendered Good's suit to Travelers for defense pursuant to its liability insurance policies. Travelers denied coverage, leaving Rogan Shoes to its own devices.

Rogan Shoes eventually settled with Good and the class for $16 million, but not in cash, or at least not Rogan Shoes' cash. The settlement agreement specified that the judgment would be satisfied only through proceeds from Rogan Shoes' insurance policies with Travelers, with the exception of an up-front cash payment by Rogan Shoes of $50,000 to cover Good's legal costs. As part of the settlement agreement, Rogan Shoes assigned to the plaintiffs all of its " claims against and rights to payments from Travelers" under the policies, excepting the store's claim for attorney fees in defending the suit and its claim for reimbursement of its $50,000 out-of-pocket payment. The state trial court approved the settlement on July 1, 2010.

Page 717

On January 4, 2011, Good filed a supplementary action in the state court to discover Travelers' assets for the satisfaction of his judgment against Rogan Shoes. In Illinois, such actions are called " citation" proceedings. See 735 ILCS 5/2-1402. The state court citation was served on Travelers' agent two days later. The citation summoned Travelers to court to appear in court on February 1 to produce several categories of documents relevant to the insurance policies Travelers had issued to Rogan Shoes. On January 31, Travelers filed this action in federal district court seeking a declaratory judgment that insurance policies it had issued to Rogan Shoes did not cover Good's statutory claims based on the credit card receipts. The district court dismissed Travelers' complaint on the basis of Wilton / Brillhart abstention, under which a federal district court has discretion to dismiss a declaratory judgment action when parallel proceedings are pending in state court. See Wilton v. Seven Falls Co., 515 U.S. 277, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995); Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). Travelers has appealed, arguing that the district court abused its discretion by dismissing its action. During oral argument we ordered supplemental briefing on the issue of subject matter jurisdiction. We directed the parties to address whether the case satisfies the amount-in-controversy requirement for diversity jurisdiction, 28 U.S.C. § 1332(a), in light of the fact that Rogan Shoes had assigned its interests in its Travelers policies to Good and his fellow class members, none of whom individually claim a share of more than $75,000.

II. Discussion

To invoke the diversity jurisdiction of the federal courts, a party must establish both that diversity of citizenship is complete and that " the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs." 28 U.S.C. § 1332(a). Complete diversity is present in this case. Both Travelers companies are Connecticut corporations that also have their principal places of business in that state. Good is a citizen of Illinois, and Rogan Shoes is a Wisconsin corporation with its principal place of business in Wisconsin. The amount-in-controversy requirement, however, bars the exercise of federal jurisdiction here. We address first the general rule against aggregating different parties' claims to meet the amount in controversy and some of its exceptions. We then turn to issues that arise from the fact that Rogan Shoes assigned its claims against Travelers to the plaintiff class, and address how an insurer in Travelers' position could obtain a federal forum for such disputes.

A. The Rule Against Aggregation and its Exceptions

No individual defendant, including Rogan Shoes, has a claim for more than $75,000 against Travelers. The general rule is that the claims of multiple litigants cannot be aggregated to reach the jurisdictional amount in controversy. See Snyder v. Harris, 394 U.S. 332, 335, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969). The anti-aggregation rule applies both to cases in which multiple plaintiffs seek to combine their claims against a single defendant, see Thomson v. Gaskill, 315 U.S. 442, 62 S.Ct. 673, 86 L.Ed. 951 (1942), and to those brought by a single plaintiff against multiple defendants, see Middle Tennessee News Co. v. Charnel of Cincinnati, Inc., 250 F.3d 1077, 1081 (7th Cir.2001); see also

Page 718

14AA Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure, § 3704, at 566-95 (2011) (hereinafter " Wright & Miller" ) (collecting cases).

Travelers contends that there is no need for aggregation in this case because " from Travelers' perspective, there is only one claim, by its insured, for the $16 million judgment entered against it." In support of this theory, Travelers cites Meridian Security Insurance Co. v. Sadowski, 441 F.3d 536 (7th Cir.2006), in which an insurer sought a declaratory judgment that its liability policy did not cover a suit under the Telephone Consumer Protection Act then pending in state court against its insured. We held that the case satisfied the amount-in-controversy requirement. The anti-aggregation rule " does not apply to a federal declaratory-judgment action between a single plaintiff and a single defendant, just because the unitary controversy between these parties reflects the sum of many smaller controversies." Id. at 539, citing Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 347-48, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977).

The decisive difference between this case and Meridian Security is that at the time the insurer filed the declaratory judgment action in that case, the insured's arguable right to recover under its policy was still completely its own. No assignment had been made. By the time Travelers filed this action, however, Rogan Shoes had already assigned its claims to the members of the Good class, and no individual class member had a claim for more than $75,000.

According to Travelers, the fact of an assignment in this case is immaterial because the assignment " does not change whose claim it is." But that is precisely what an assignment does. It transfers one person's property, interest, or rights to another. Once Rogan Shoes made the assignment of rights, this was no longer a " unitary controversy" between the insurer and its insured. It had become a multi-party dispute between Travelers and thousands of class claimants. Meridian Security is inapposite.

For purposes of this case, the most relevant exception to the general rule against aggregation is that the claims of co-parties may be added together when they have a " common and undivided interest" in a " single title or right." Snyder v. Harris, 394 U.S. 332, 335, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969). Can the relatively small claims of these class members be aggregated as " common and undivided" interests in a " single title or right" ? Travelers declined to address this question in its supplemental memorandum, and it took that course at its peril. Jurisdictional objections cannot be forfeited or waived, of course, for this court has an " independent obligation to satisfy itself that federal subject matter jurisdiction exists." Smith v. American General Life & Accident Ins. Co., 337 F.3d 888, 892 (7th Cir.2003). The court need not bend over backwards to construct alternative theories to persuade itself that subject matter jurisdiction exists, see Travelers Indem. Co. v. Dingwell, 884 F.2d 629, 637 (1st Cir.1989), but since the district court considered the case and we raised this issue, we address it here.

The anti-aggregation rule had its origin in a case involving the...

To continue reading