891 F.3d 256
7th Cir.2018Background
- Prolite Building Supply bought Ply Gem windows, resold to Wisconsin builders; homeowners complained about air/moisture infiltration.
- Prolite, as the contracted principal servicer, and Ply Gem cooperated under a service agreement (3% discount, free parts; additional relief for "excessive" problems negotiable). Prolite sought to recover about $290,000 in repair costs.
- Contractors stopped buying from Prolite; Prolite withheld payments to Ply Gem. Prolite and a group of homeowners sued in state court; Ply Gem removed and counterclaimed for unpaid invoices and joined Prolite’s two members (guarantors). Great Lakes (affiliated) filed a separate federal collection suit; suits were consolidated.
- District court granted summary judgment for Ply Gem and Great Lakes, finding diversity jurisdiction for Prolite–Ply Gem claims and exercising supplemental jurisdiction over homeowners’ warranty claims; Prolite appealed limited issues.
- The Seventh Circuit affirmed the contract- and counterclaim-related judgments but held homeowners’ warranty claims were not part of the same Article III "case or controversy" as Prolite’s contract dispute and accordingly vacated and remanded those claims to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ply Gem breached the service agreement, excusing Prolite from paying invoices | Ply Gem failed to take the extraordinary remedial steps (reinstall or redesign) necessary to keep builders/customers satisfied | Service agreement required Prolite to perform repairs in exchange for discount and parts; Ply Gem provided agreed discounts and parts and was not obliged to keep customers happy | Court held service agreement did not require Ply Gem to make customers happy; Prolite had no defense to payment claims and summary judgment for Ply Gem was proper |
| Whether homeowners’ warranty claims fall within federal supplemental jurisdiction under 28 U.S.C. § 1367(a) | Homeowners argued their claims are part of the same controversy because all claims arise from Ply Gem windows | Ply Gem argued homeowners’ warranty claims involve different contracts, parties’ grievances, and operative facts from Prolite’s contract dispute | Court held homeowners’ claims lacked a sufficient common nucleus of operative facts with Prolite’s claim and thus are not within supplemental jurisdiction; they must be remanded to state court |
| Whether removal of the original state action was improper because it included non-diverse/homeowner claims under $75,000 | Prolite/homeowners argued whole case should be remanded because some claims did not meet diversity requirements | Ply Gem argued removal of Prolite–Ply Gem dispute was proper and surplus homeowners’ claims could be remanded; defendants also pointed to separately filed federal suit by Great Lakes | Court held removal was proper as to the diversity cases; procedural default (failure to move to remand within 30 days) and independent federal suit by Great Lakes supported affirming most of the district court judgment; homeowners’ claims remanded to state court |
| Effect of consolidated suits and separate federal suit by Great Lakes | Prolite/homeowners urged vacatur and remand of entire consolidated judgment | Ply Gem and Great Lakes urged affirmance except remand of homeowners’ claims | Court treated consolidated suits independently, affirmed judgment on Prolite–Ply Gem and Great Lakes claims, vacated disposition of homeowners’ claims and instructed remand to state court |
Key Cases Cited
- Snyder v. Harris, 394 U.S. 332 (statute disallows aggregation of separate plaintiffs’ claims for diversity jurisdiction)
- Houskins v. Sheahan, 549 F.3d 480 (standard for common nucleus of operative facts in supplemental jurisdiction analysis)
- Channell v. Citicorp National Services, Inc., 89 F.3d 379 (supplemental jurisdiction appropriate where claims share contracts, parties, and course of action)
- Stromberg Metal Works, Inc. v. Press Mechanical, Inc., 77 F.3d 928 (supplemental jurisdiction guidance where claims are closely related)
- Ammerman v. Sween, 54 F.3d 423 (loose factual connection may suffice for supplemental jurisdiction)
- CNH Industrial America LLC v. Jones Lang LaSalle Americas, Inc., 882 F.3d 692 (manufacturer-dealer contract disputes can support supplemental jurisdiction over related dealer claims)
- Grubbs v. General Electric Credit Corp., 405 U.S. 699 (forfeiture principles as to timely motions to remand after removal)
- Clark v. Paul Gray, Inc., 306 U.S. 583 (presence of a claim below jurisdictional amount does not bar federal resolution of other claims meeting diversity)
- Hall v. Hall, 138 S. Ct. 1118 (separate suits consolidated for pretrial purposes must be treated independently)