Herremans v. Carrera Designs, Inc.

• Decision Date: 20 October 1998
• Docket Number: No. 98-1100,98-1100
• Citation: 157 F.3d 1118
• Parties: 137 Lab.Cas. P 58,508, 4 Wage & Hour Cas.2d (BNA) 1797 Timothy HERREMANS, Plaintiff-Appellant, v. CARRERA DESIGNS, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1118

157 F.3d 1118

137 Lab.Cas. P 58,508, 4 Wage & Hour Cas.2d

(BNA) 1797

Timothy HERREMANS, Plaintiff-Appellant, v. CARRERA DESIGNS, INC., Defendant-Appellee.

No. 98-1100.

United States Court of Appeals Seventh Circuit.

Argued Sept. 11, 1998.

Decided Oct. 20, 1998.

David P. Taylor (argued), Edwardsburg, MI, for Plaintiff-Appellant.

Tracy D. Knox (argued), Barnes & Thornburg, Elkhart, IN, for Defendant-Appellee.

Before POSNER, Chief Judge, and BAUER and EASTERBROOK, Circuit Judges.

POSNER, Chief Judge.

Timothy Herremans, the appellant in this diversity damages suit for breach of contract and violations of Indiana's wage payment statute, was employed by Carrera Designs (which paints recreational vehicles) as the manager of one of its plants. Until he was fired at the beginning of November of 1996, he received a salary plus a bonus equal to 45 percent of the plant's (calendar) year-end before-tax profits. His suit seeks, in three separate counts (ordinarily a meaningless detail, but not here, as we are about to see): (1) $2,500 in statutory double damages (see Fardy v. Physicians Health Rehabilitation Services, Inc., 529 N.E.2d 879, 882 (Ind.App.1988)) as a penalty for Carrera's failure to pay him vacation pay within 10 days of the accrual of his right to that pay, in violation of Indiana's wage payment act, Ind.Code § 22-2-5-2; (2) actual plus the statutory double damages--an aggregate of some $94,000--for a portion of his bonus for 1995 that he claims was due him but not paid, and in the alternative actual damages under Indiana's common law of contracts; and (3) actual plus statutory double damages of some $92,000 for unpaid bonus for the ten months that he worked in 1996 as plant manager before being fired, and again, in the alternative, actual damages under contract law. The district judge granted summary judgment for Carrera on the two bonus claims, and having done so he dismissed the entire suit on the ground that with those claims out of the case there was no federal diversity jurisdiction over the remaining claim--the claim for vacation-pay statutory damages of $2,500--because that amount is less than the minimum amount in controversy specified in the diversity statute ($50,000 when this suit was filed, $75,000 today). 28 U.S.C. § 1332(a).

The dismissal of the $2,500 claim was error regardless of the correctness or incorrectness of the judge's disposition of the other claims. The test for whether a case satisfies the amount in controversy requirement is whether the complaint makes a good-faith claim for the amount, St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938); Pace Communications, Inc. v. Moonlight Design, Inc., 31 F.3d 587, 591 (7th Cir.1994); Suber v. Chrysler Corp., 104 F.3d 578, 583 (3d Cir.1997), not whether the plaintiff is actually entitled to such an amount. Otherwise every diversity case that a plaintiff lost on the merits would be dismissed for lack of federal jurisdiction, allowing the plaintiff to start over in state court. Ross v. Inter-Ocean Ins. Co., 693 F.2d 659, 663 (7th Cir.1982). There would be no merits decisions for defendants in diversity cases and no finality when defendants won. And if losing an entire case does not deprive the district court of jurisdiction, neither does losing part of it. The diversity statute confers federal jurisdiction over "civil actions" satisfying the required minimum amount in controversy, 28 U.S.C. § 1332(a), not over counts, thus permitting the plaintiff to aggregate the stakes in his separate claims or counts to come up to the minimum. Snyder v. Harris, 394 U.S. 332, 335, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969); Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955, 958 (7th Cir.1998); Suber v. Chrysler Corp., supra, 104 F.3d at 588. The district judge could not have believed in his heart of hearts that the law is otherwise, for if it were he would have had to dismiss the vacation-pay count before taking up the merits of the other counts, which he did not do.

It is true that Shanaghan v. Cahill, 58 F.3d 106 (4th Cir.1995), treats claims that fail to come up to the jurisdictional minimum as supplemental claims within the meaning of 28 U.S.C. § 1367, and so authorizes the district court in its discretion to relinquish jurisdiction over such claims to the state court if all the other claims in the case (whether federal-law claims or state-law claims that reach the jurisdictional minimum) fall out before trial. § 1367(c)(3). We doubt that the decision comports with the diversity statute and the cases that interpret it to permit aggregation of claims. But we need not try to resolve our doubt. Neither party has cited the decision or its principle (nor did the district court), and so the point is waived; and no basis appears for relieving the defendant of the consequences of the waiver. See Sullivan v. Conway, 157 F.3d 1092, 1095 (7th Cir.1998), and cases cited there. The dismissal of Count I must therefore be vacated and that part of the case returned to the district court for decision on the merits; now let us turn to the bonus counts.

We agree with the district judge that Herremans' claims for bonus do not come within the reach of the wage payment statute. The statutory term is "wages," defined in another part of the statute as "all amounts at which the labor or service rendered is recompensed, whether the amount is fixed or ascertained on a time, task, piece, or commission basis, or in any other method of calculating such amount." Ind.Code § 22-2-9-1(b); Licocci v. Cardinal Associates, Inc., 492 N.E.2d 48, 55 (Ind.App.1986). Wages so defined include vacation pay, the subject of Count I, Baesler's Super-Valu v. Indiana Commissioner of Labor, 500 N.E.2d 243, 248-49 (Ind.App.1986); Die & Mold, Inc. v. Western, 448 N.E.2d 44, 48 (Ind.App.1983), and salesmen's commissions, Licocci v. Cardinal Associates, Inc., supra, 492 N.E.2d at 56, to which Herremans analogizes his bonus. It was not to be based on his own time or effort or product, however as in Gurnik v. Lee, 587 N.E.2d 706, 709 (Ind.App.1992), but on the profits of his plant. Profits are not wages, and neither is a fraction of profits wages; and so a bonus that is based on the performance of a plant rather than on the time or determinable output of the employee is not wages either. Pyle v. National Wine & Spirits Corp., 637 N.E.2d 1298, 1300-01 (Ind.App.1994); Jeurissen v. Amisub, Inc., 554 N.E.2d 12 (Ind.App.1990). Herremans' lawyer conceded at argument that if the plant his client had been managing had burned down through no fault of his and as a result generated no profits for the year, he would not have been entitled to any bonus. The fact, moreover, that his entitlement was to a share of annual profits counts heavily against his statutory claim, in view of the statutory requirement that wages be paid within 10 days of their accrual. Ordinarily it would take weeks to determine a plant's profits for the year just ended. To impose punitive damages on the employer for failing to pay an amount of compensation that could not be computed in time to avoid the penalty would be absurd.

This does not end the case, because Herremans argues that even if he is not entitled to the damages prescribed by the wage payment law, he is entitled to his actual damages for breach of a contractual entitlement to the bonuses. His bonus for 1995 was depressed by the failure of a major customer of the plant to pay its bills--thus underscoring our point that Herremans' entitlement to bonus did not depend on just his own time and effort and product. Carerra decided that since the failure was not Herremans' fault, the company would, though not contractually obligated to do so, pay him the additional bonus that he would have earned had it not been for the customer's default. It promised to pay him the additional bonus in three equal annual installments and the promise was supported by consideration--Herremans' promise to continue working for Carrera.

Carrera argues that since, as the record shows, Herremans intended to work for Carrera until his retirement, which was not due within the next three years, he gave up nothing by agreeing to continue working. But consideration is a formal rather than substantive requirement of the law of contracts. A promise is supported by consideration if it is formally conditioned on a promise by the promisee, even if the promisor would have carried out the promised undertaking without a reciprocal promise. E. Allan Farnsworth, Farnsworth on Contracts § 2.10 (3d ed.1999); Restatement (Second) of Contracts § 71, illustration 1 (1979). If X promises to go to work for Y, a successful investment advisor, at a salary of $40,000 a year, Y's reciprocal promise of that salary is enforceable without inquiry into whether X, who let us say is independently wealthy, would have agreed to work for Y without any pay at all, perhaps for the experience or because he likes Y. To allow promisors' motives to be dissected would disserve an important purpose of contract law--to minimize the occasions on which parties to contracts must submit themselves to the vagaries of juries. E.g., PMC, Inc. v. Sherwin-Williams Co., 151 F.3d 610, 614 (7th Cir.1998); McElroy v. B.F. Goodrich Co., 73 F.3d 722, 727 (7th Cir.1996).

It is not as if Herremans had been contractually obligated to remain in Carrera's employ; in that event, the promise of the bonus in exchange for his agreeing to stay on would have been a modification of the contract unsupported by consideration and so unenforceable. E.g., Hamlin v. Steward, 622 N.E.2d 535, 539 (Ind.App.1993); United States v. Stump Home Specialties Mfg., Inc., 905 F.2d 1117, 1121-22 (7th Cir.1990); Alaska Packers' Ass'n v. Domenico, 117 F. 99, 102-04 (9th Cir.1902). His contract was one of employment at will; he was free to quit at any time; and his giving up that right in exchange for the promise of a bonus was...