Hart v. Schering-Plough Corp.

• Decision Date: 07 June 2001
• Docket Number: No. 00-3689,00-3689
• Parties: (7th Cir. 2001) Fred J. Hart, Plaintiff-Appellant, v. Schering-Plough Corporation, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 272

253 F.3d 272 (7th Cir. 2001)

Fred J. Hart, Plaintiff-Appellant, v. Schering-Plough Corporation, Defendant-Appellee.

No. 00-3689

In the United States Court of Appeals For the Seventh Circuit

Argued April 2, 2001

Decided June 7, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 98 C 0814--David H. Coar, Judge.

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...