March 30, 2018
from the United States District Court for the Eastern
District of Wisconsin. Nos. 15-C-1049, 15-C-1205 - Lynn
Easterbrook and Rovner, Circuit Judges, and Gilbert, District
Easterbrook, Circuit Judge.
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.
and 12 homeowners filed suit in state court. Prolite
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 Andrew 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 actions, and the caption
that begins this opinion names the main contestants without
going into excessive detail.
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 diverse
citizenship. (Prolite's members are citizens of
Wisconsin, so Prolite itself is a citizen of Wisconsin, as
are all of the homeowner parties, while Ply Gem and Great
Lakes are incorporated 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 jurisdiction (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
and Prolite had three contracts: a sales agreement, a credit
agreement, and a service agreement (the "Service 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 exchange, Ply Gem
gave Prolite a 3% discount on the windows' price and
promised to furnish needed parts at no cost. Prolite 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"
problems (an undefined term) Ply Gem would furnish additional
aid, including complete window reinstallation, for a price to
be negotiated. Prolite never asked Ply Gem to replace windows
under this clause.
contends that what Ply Gem should have done was either
reinstall all of the windows, without specific requests, or
design a new line of windows with better attributes 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 require Ply
Gem to keep the customers happy. (That's the function of
the warranties.) Instead the service agreement requires
Prolite to keep the customers happy by performing
repairs in exchange for a discount. The district court's
opinion 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.
homeowners' claims, by contrast, pose a knotty problem.
They can be resolved under the supplemental jurisdiction 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 the solution to
any case. So, for example, supplemental jurisdiction is
appropriate when the supplemental claim involves the same
parties, contracts, and course of action as the claim
conferring federal jurisdiction. Channell v. Citicorp
National Services, Inc., 89 F.3d 379, 385-86 (7th Cir.
1996); Stromberg 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
jurisdiction. How loose is that? What does enough commonality
really mean? Still, unless there is a phrase better than
"nucleus 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.
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 dealerships' 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 windows. But that is all they share. The language of the
warranty (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 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 contractual terms.
might have been able to make the imbroglio a single 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 under 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 therefore cannot
proceed under the supplemental jurisdiction.
happens now? Ply Gem asks us to affirm the judgment 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 judgment and
remand the whole case.
dispute between Prolite and Ply Gem were one under federal
law, then 28 U.S.C. §1441(c) would supply the solution.
The federal claim would make the whole suit removable, and
§1441(c)(2) would require the immediate remand 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 removal (28
U.S.C. §§ 1441 to 1455) suggests that the presence
in a state ...