Court: Court of Appeals for the Seventh Circuit; May 22, 2018; Federal Appellate Court
Prolite Building Supply purchased Ply Gem windows from MW Manufacturers and resold them to builders in Wisconsin. Homeowners reported issues with the windows allowing air in, leading to complaints that escalated through the builders to Prolite and then to Ply Gem. Despite efforts under a contract where Prolite served as the primary service provider, many problems remained unresolved, resulting in lost business and Prolite's failure to pay Ply Gem for prior deliveries. Prolite and twelve homeowners sued in state court, alleging Ply Gem breached its promise to satisfy the builders and homeowners, while the homeowners claimed under the windows' warranties. Ply Gem removed the case to federal court and counterclaimed against Prolite for unpaid invoices, adding Prolite's members, Johnson and Newman, who had guaranteed payment. Great Lakes Window, associated with Ply Gem, filed a separate federal suit for additional claims. The district court consolidated the actions and granted summary judgment to Ply Gem and Great Lakes, confirming diversity jurisdiction based on the parties' citizenship and the monetary thresholds for claims. Prolite's claims exceeded $75,000, while the homeowners' claims did not meet the threshold for diversity, but the court allowed them under supplemental jurisdiction. Prolite acknowledged no defense against Ply Gem’s payment claims unless it could prove Ply Gem breached the service agreement, which required Prolite to repair installed windows in exchange for a discount and parts. Prolite claimed to have spent approximately $290,000 on repairs but admitted receiving the agreed discount and parts. Additionally, under the service agreement, Ply Gem was to provide additional assistance for “excessive” problems if requested, but Prolite did not seek window replacements. Prolite argued that Ply Gem should have proactively replaced or redesigned the windows to ensure customer satisfaction.
The district judge noted that the service agreement does not obligate Ply Gem to ensure customer satisfaction; rather, it is Prolite's responsibility to maintain customer satisfaction through repairs for a discount. The district court thoroughly analyzed the contractual language, which does not need reiteration. The homeowners' claims present a complex issue that can only be addressed under supplemental jurisdiction if they are sufficiently related to the original claims as defined by Article III of the U.S. Constitution and 28 U.S.C. 1367(a). While the statute and Article III do not clearly define "case or controversy," courts typically assess whether the claims share a common nucleus of operative facts. Previous case law indicates that supplemental jurisdiction can apply when claims involve the same parties, contracts, and factual circumstances. However, in this situation, the connection between Prolite's claim and the homeowners' claims is minimal. Although both concern Ply Gem windows, the warranty and service agreement do not intersect, and the grievances differ significantly. Prolite's issues relate to customer retention by builders, while homeowners seek solutions for specific issues like drafts and moisture. Each homeowner's claim is unique, and while there may be some commonalities among the homeowners' claims, they do not constitute a single controversy with Prolite's claim. Prolite could have established a unified case by alleging that Ply Gem's refusal to acknowledge the homeowners' warranty claims hampered Prolite's ability to fulfill its service agreement. However, since Prolite did not make such allegations, the homeowners' claims cannot proceed under supplemental jurisdiction.
Ply Gem seeks affirmation of the judgment regarding Prolite's claims and counterclaims, while Prolite and the homeowners request vacating the entire judgment and remanding the case. Under 28 U.S.C. § 1441(c), if the dispute were federal, the federal claim would allow for complete removal, with non-supplemental state claims needing immediate remand. However, no similar provision exists for diversity claims straddling federal and state jurisdictions. The case involving Prolite and Ply Gem was removable, as indicated by § 1441(a), and the presence of an additional claim under $75,000 does not obstruct the removal of claims within federal jurisdiction.
According to § 1447(c), any remand motion based on grounds other than lack of subject-matter jurisdiction is forfeited if not raised within 30 days of removal. Prolite and the homeowners did not contest the removal's validity within this timeframe and initially asserted federal jurisdiction before changing their stance post-oral argument. Grubbs v. General Electric Credit Corp. establishes that a judgment stands even if immediate remand would have been appropriate. If the case originated in federal court, the diversity jurisdiction would cover Prolite and Ply Gem's dispute, with homeowners' claims subject to dismissal. The Supreme Court has not indicated that the existence of one claim exceeding the jurisdictional amount prevents resolution of others under complete diversity.
Furthermore, the existence of a second suit by Great Lakes, which was properly filed in federal court with complete diversity and claims exceeding $75,000, necessitates independent consideration of each case. The dispute between Prolite and Ply Gem could still be addressed under supplemental jurisdiction in the Great Lakes suit, irrespective of the homeowners' claims. Consequently, the district court's judgment is affirmed regarding Prolite and Ply Gem, but the homeowners' claims are vacated and remanded to state court.
