Johnson v. Wattenbarger

• Decision Date: 22 March 2004
• Docket Number: No. 02-3707.,02-3707.
• Citation: 361 F.3d 991
• Parties: Raymond JOHNSON and Robert Johnson, Plaintiffs-Appellants, v. Lee WATTENBARGER and Ruth Wattenbarger, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

361 F.3d 991

Raymond JOHNSON and Robert Johnson, Plaintiffs-Appellants, v. Lee WATTENBARGER and Ruth Wattenbarger, Defendants-Appellees.

No. 02-3707.

United States Court of Appeals, Seventh Circuit.

Submitted March 4, 2004.

Decided March 22, 2004.

Raymond Johnson (submitted), pro se, Kenosha, WI, Robert A. Johnson, pro se, Chicago, IL, for Plaintiffs-Appellants.

William T. Rodeghier, Chicago, IL, for Defendants-Appellees.

Before EASTERBROOK, MANION, and EVANS, Circuit Judges.

EASTERBROOK, Circuit Judge.

All too often both litigants and judges disregard their first duty in every suit: to determine the existence of subject-matter jurisdiction. In this litigation, by contrast, the defendants and judge were alert to jurisdiction and endeavored to apply the requirements of 28 U.S.C. § 1332. Unfortunately, the judge waited until two years after the case began and the resolution of several claims on the merits had cut down the stakes. Because the diversity jurisdiction depends on matters as they stand when the complaint is filed, this was a misstep.

Lee and Ruth Wattenbarger hired Raymond and Robert Johnson (doing business as RLJ & Associates) to remodel their home. According to the Johnsons, the price was discounted in exchange for promotional assistance that the Wattenbargers agreed to provide. Relations eventually broke down: the Johnsons say that the Wattenbargers required changes after the contract had been signed, delayed in approving work, failed to move a utility pole, and then refused to pay or to provide the promised promotional consideration; the Wattenbargers say that the work was not done right and that they never promised to recommend the Johnsons to their friends and neighbors. In this federal suit, the Johnsons originally sought more than $200,000 — about $15,000 still unpaid on the contract, $33,000 for the value of the referrals and other assistance that the Wattenbargers did not furnish (the Johnsons describe this as the amount of the discount in the contract price), $28,000 in profits lost on other contracts because the extra work on the Wattenbarger residence kept them from other business, at least $59,000 in other lost profits that they attribute to disparagement and intentional interference with economic advantage, $42,000 in lost wages that they could have made had they been able to move on to other work, $75,000 for intentional infliction of emotional distress, and a few smaller items.

In a single motion the Wattenbargers sought dismissal on two grounds: that the amount in controversy did not exceed $75,000 (diversity of citizenship is not in question) and that the complaint failed to state a claim on which relief may be granted. First the district court dismissed on the merits all of the claims by Robert Johnson, ruling that he had not alleged a contractual relation with the Wattenbargers. Next the court dismissed several of Raymond Johnson's claims under Fed.R.Civ.P. 12(b)(6). At this point the judge calculated that the surviving claims exceeded $75,000. After discovery had been completed, however, the district court reassessed the amount in controversy with the benefit of an interrogatory answer in which the Johnsons more clearly set out their damages calculations. The district court concluded that the remaining dispute was limited to $47,745 for breach of the Wattenbargers' oral and written promises and $24,250 in lost profits from other contracts that the Johnsons say they had been forced to cancel in order to do extra work for the Wattenbargers. These come to $71,995, and as this is below $75,000 the judge dismissed the Johnsons' complaint (and the Wattenbargers' counterclaim) without prejudice.

Combining partial decision on the merits with a jurisdictional dismissal violates the norm that courts cannot decide any controversy over which they lack subject-matter jurisdiction. It is the case, rather than the claim, to which the $75,000 minimum applies. If the complaint as filed puts more than $75,000 at issue, then a district court has jurisdiction and may resolve on the merits every legal theory and aspect of damages. Whether § 1332 supplies subject-matter jurisdiction must be ascertained at the outset; events after the suit begins do not affect the diversity jurisdiction. See Freeport-McMoRan Inc. v. K N Energy, Inc., 498 U.S. 426, 111 S.Ct. 858, 112 L.Ed.2d 951 (1991); Louisville, New Albany & Chicago Ry. v. Louisville Trust Co., 174 U.S. 552, 566, 19 S.Ct. 817, 43 L.Ed. 1081 (1899); Mollan v. Torrance, 22 U.S. (9 Wheat.) 537, 539-40, 6 L.Ed. 154 (1824); Trans States Airlines v. Pratt & Whitney Canada, Inc., 130 F.3d 290, 292-93 (7th Cir.1997). (The few exceptions to this principle involve events, such as dismissal of a non-diverse party, that make federal jurisdiction secure. If a suit can start over in the same court immediately after being tossed out, there is no point to a dismissal. See Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989).) If, however, the case as a whole does not entail at the get-go a controversy exceeding $75,000, then the court must not resolve any aspect of it on the merits. By...