good morning everyone welcome and before we begin this morning that me announce for the courtroom that judge rove nerd is with us thanks to the miracles of modern technology counsel will be able to see her from the podium  little video conferencing device so but please do account for a slight pause with the trance transition so please be alert to that so that the arguments will smoothly today all right with that we'll call our first case this morning which is see any industrial america versus jones lamb was set case number sixteen thirty eight hundred s heston may please the court this is a contract case that was tried to the bench in the eastern district of wisconsin and judgment was entered on behalf of c n n age there are two issues that i would like to focus the court's attention on this morning and the first is procedural it's whether there's diversity jurisdiction and the second is the substantive issue and that's whether section twenty six little i of the limitation of liability provision in the contract exclusively applies to limit c m h is recovery now on behalf of jail well we are asking that judgment be vacated in the case dismissed for lack of diversity jurisdiction or if the court wouldn't we have one that's a good question your honor and there's a very simple answer to that we are dealing with the dealers are they go to original jurisdiction not pendent party because there is one contract here and all the rights are together in stromberg forbes well ingredient for example the the investors had an independent basis to bring their claims in this instance we have one claim it's pleaded and proved as one claims there's only one liability claim here it's the contract and c m h and it's dealers are the plaintiffs and the jail is the defendant and so when you're dealing with original jurisdiction rather than a permissive party then you have to look at the citizenship of the dealers you're not looking at strong burger at all it seems to no need for c an h to collude with the dealers by taking assignments of their claims and in the brief your only response is to suggest that original jurisdiction ever the case was missing in the first instance know and worth their even if there was some sort of a problem with collusion you know the dealers claims could always be removed from the case in order to cure or any jurisdictional problem so  the end is near but ok this is the first time by the way on appeal that it seems to me you're even suggesting this argument am i wrong there too which argument that you're bringing up the jurisdictional or you know jurisdiction is being raised for the first time on appeal that is is see a nature is not here trying to recover for itself c n d is trying to recover for itself and the dealers as well as one claim this is not planted as multiple claims with multiple parties but the damages are in separate baskets the damages can be separately calculated but here's the trick you can't separately kalki you can't the liability is one there's one liability claim here there's not multiple liability right there's a different categories of damages those that were incurred by the dealers there are consequential damages there are there are damages for the signs and we can count up the various signs but that doesn't change that there's just one cause of action here the liability is the breach of contract that was right but but see n h s over four million dollars in damages to itself the dealers claims are just over a million and the sixteen of the several hundred of dealers the sixteen that were not diverse represent such a tiny fraction of the overall damage of what we've done at dealers to him which is that i mean why would why would anybody collude well first of all we don't know because the citizenship of the dealers was never put on the table at any time and it's well is because of you she wasn't raised the issue actually was raised and it was raised at the very start of the litigation when c n n age filed yet complaint it had one sentence in there and we're also going to be recovering on behalf of the dealers but they didn't say who the dealers were nobody knew who the dealers were and so what jalal did was they put that issue immediately by  denying they they lack sufficient information because they didn't know what pool of dealers was going to be included in this claim and as soon as you do that under rule eight that constitutes a denial and what that does is it requires c prove up diversity's jurisdiction at trial which see n h never did see an age is the party who has the obligation here to establish jurisdiction in the first instance and trying to put it back on the defendant is not an excuse so so what you look at when you have these assignments is you have to look and see who are the real substantial parties here because if the dealers which i think court just acknowledged they are real and substantial because they have a direct stake in the outcome and this is something that i think is determinative here because even though there was a fine mist the to get the signed specs they just have to look to see any age so in substance nothing has changed now before all this is a way of efficiently aggregating the claims for litigation purposes but i collusive reason for the assignment under greedy well if that you know what and i'll i would like to address greedy but if that were the rationale just simply efficiency well done kramer's and correct because that was sufficient countless times you can assigned to make it efficient and and that doesn't mean we can ignore the citizenship of the parties right merely going to recover the point of this rule and the doctrine under is to preclude the manufacturing of diversity jurisdiction this case was going to be in federal court no matter what there's any sixteen of the hundreds of dealers the claims because those dealers are not on diverse it's not the one i think the thing that's driving this litigation i don't think so because the litigation against arlen in california they knew t brought that first they brought it in state court now don't you think if there was a federal jurisdiction that's arlen's backyard why would you bring the claims why would you bring your case against our land in state court instead of federal court if you thought you had jurisdiction then you come back here to wisconsin where you could have a home court advantage and you go into federal court there's something funny going on here and i think it's hawkeye's it should be and filed in state court from the get go and it doesn't matter if they're only sixteen there could be one party the rule is one non diverse plaintiffs contaminates the jurisdiction and i don't think i don't think you have carefully read section thirteen sixty seven then which provide support shall have suffered mental illness in sion over a claim that is so closely related to claim over which the court is original part of the same case or controversy even even if this claim involves the jointer weren't intervention of additional parties but i have to tell you miss house and i think you should go on to your next point ok i will quickly addressed i just don't work we're really beating a dead horse here ok i do agree with how you read section thirteen sixty seven a but i would argue with that thirteen sixty seven b makes an exception for an indispensable party and these dealers are indispensable and as soon as they become indispensable then you don't have supplemental jurisdiction and with that i will move on to the other point that i was hoping to address which is the limitation of liability and the limitation of liability was put in the case was put in the contract to limit jails outside exposure and section twenty six divides the claims into two separate and mutually exclusive worlds one world covers claims arising out of acts or emissions of additional service providers which is our case and would include our he waived it's true it's absolutely true the judge that no reference section twenty six in his ruling but if you didn't argue below for the particular interpretation isn't because this is a purely legal question it's a matter of contract interpretation and this court in a high plea said if there's a purely question that we can that's a question of law the court has discretion to entertain it and i think what we're trying to to do here is to achieve the right end result and if the court can do that by properly interpret in the contract i think they should also i would add that traveled so at the very end of his closing argument before he sat down opened the door on those requesting relief under both because i couldn't figure out where where was the court getting coming from with this because there was an argument but i realized at the very end going through the transcript that counsel had requested both items at the very end and so they've opened the door this is a legal issue and it clearly bears on approach on the proper result here so i don't think the court should just close its eyes to it in jail al were found liable for every practice so it was incumbent upon jail al to alert or the district court as to how section twenty look at the contract because i think what you want to do is properly interpret and and i don't think you can do that under these circumstances if you just ignore it and so i would suggest that the problem stems from the word and between the first subsection and the second it's not used in an additive capacity it's it's used to say this world of claims and that world claims if you fall in this world of claims are going to be one or one remedy and it's important to think about what i'd like to point out that i think is persuasive and i can't see the white light is not on correct ok what's important here is it doesn't leave see n h without a of the contract as the intent of the parties as demonstrated by the contract and that was never to make j l l a guarantor and if you look you know to two reasons you know that one if you look at the text of twenty six little and the others if you look at the whole context if you look at the structure of the contract section nine a says it talks about j l l's liability and it has an explicit exclusion in there it says however well if it all right is from the any claim arising from the additional service providers jalal will not be held liable for those and that's what's happening here the light is on and i'd be happy to address any additional questions on the bottle thank you thank you thank you mr murphy on the jurisdictional point how would we separate out the dealings claims from the judgment if we were to conclude no prob with collusion here that the court could sever each of the dealers claims for that matter all the other claims whether diverse or non diversity ehlers without affecting the judgment whatsoever seen aitches damages alone on claims for signs that it owns are four point four million dollars the judge three million dollars so this is where the courts used to sever it wouldn't impact the judgment that the procedural device would be through rule twenty one in its briefs jail argued that will twenty one doesn't apply here because it speaks to adding and dropping parties that overlooks the last sentence of rule twenty one which speaks to severing claims against parties that's the provision that would apply here we're not talking about claims against  the the assignments are valid so see an h is always going to be pursuing the assigned claims if the court were to sever under rule twenty one it would sever claims against jail that are pursuant to assignments by non diversity letters from those that are pursuant to assignments by leaders and those that are that seen it is pursuing its own right as to the former category the court could dismiss them proceed on the second category and affirm the judgment without changing the monetary amount whatsoever had jail performed seen it would not be sitting on hundreds of defective signs jael acknowledged this true nature of c n h his claim in arguing a trial is that is the court is aware that this that is claimed falls within the sub subsection of twenty six point one the limitation of liability that applies to cases other than for performance by additional service providers it seeks to avoid that admission now on appeal and it cannot do so partly because it's weight but also because it was right c n n h did sue jail well for something other than the performance of additional service providers that suit jail well because jail had breached the contract by failing to perform services that were intended to prevent the very type of damages that soonish suffered here while our line is not an additional service provider within the meaning of the contract anyway true as i understand that be the sign manufacturers who in turn subcontracted with our line as the as the material supplier correct so even if this sub one is in pla it's it's not applicable here the only way it's applicable is as to jail those own claims against the sign manufacturers which were part of the suit at the outset by by way of their party claims which we referred to arbitration but as the scene ages claims against well you're absolutely right you're right this is a contract for for professional services not manufacturing of signs exactly project management services specifically   the essential terms of arlen's warranty were do you have grant was seven years that's being litigated in california your honor and what's what i know is the jail all told  a three different things at three different types it was not i don't believe in essential element of our claim against jail in this trial that we proved the actual terms of our lawns warranted it is sufficient in the district court found this to be the case to prove that jail did not disclose accurately and consistently what those terms should be or what those terms are other initially  you're not comfortable responding ass to this you know the seventy years or why no i certainly believe that that's the case your honor but i don't that was not an element that was necessary to prove the claims the trial is a jail as obligations to see n h included negotiating the best possible warranty for the family of signs disclosing all elements of the warranty providing ongoing project management services for the warranty and researching and documenting the warranty it didn't do those things regardless of what the warranty terms in fact are and quality control and quality control is focusing on the warranty obligations but you're right and the district judges findings of fact covered all of those contract breaches i don't think they read one that he found was unsubstantiated correct he found that jail had reached all of those obligations any one of which was a substantial factor in the damages that c n a suffered and this goes more to the waiver argument the jail is asserted here but they would have had to approve it see n h waived each of those obligations or excepted each of their defective performances because any one of them is sufficient cause of the union this caused each of them alone caused seen as to suffer the damages that issue and the district court's findings are not clearly  i do have a couple that's very specific rebuttal points that were just raise one is that you talked about four point four million and i did a little math this morning on the way over here and the cost of the family of signs for each dealership is eleven thousand eight hundred and ninety dollars based on the stipulation and the dealers paid ten thousand five hundred dollars and they struck a deal  that they were going to own two out of the three five signs and the dealers would own three of the five signs and if you do the man that means the dealers really have more like three million that state and c n a chose a lot less so i'll  just put that out there for you to think about on that one but council made a really important point and that was he said even though in the in his brief at page two he says that the problem was the defective vinyl and what see any each wanted in it's the second to last paragraph first sentence and then the following paragraph first sentence on page two of his brief he says and see any one of the signs they were always going after the signs honor you pointed out that this is a service contract and you're right and the contract provides what service damages c n a can recover and c n a to draft at this contract and you know what it says it's section three it says you get really funded only for that portion of the services that are deemed defective that you paid for the services that you paid they never put in any proof on those contract damages and those are the damages you can recover under this contract they didn't argue those they didn't prove those the district court didn't find or overboard those damages what happened here is you have a specific remedy in the contract and nobody paid any attention to it you have a second contract to manufacture that contract and what the district court did it was they awarded damages from the manufacturing contract that can't possibly be right you pointed out there's a difference here this is the service contract and then you have to follow section three if to to recover those damages and with respect to waiver the district court never ruled on the contractual waiver argument the district court ruled on the waiver by conduct but the the contract provide you have to give written notification and you have to give an opportunity to cure that's common practice that's good practice that's what business people decide they want to do because they want to keep the contract moving forward this is and they don't live rubles argument this yes this is a deliverable right although right as the judge was clearly wrestling with that he didn't even look at the contract it's defined in the contract he this is an integrated contract and he was with an integration clause he went outside of that and looked at pre contract negotiations and then tried to bring that in here to define this when the definition of just deliverables is right in the contract itself that if the court can't do that eat the court was bound by the terms of the contract but there were multiple breaches here not all of which are tied to liberals in my opinion they are your honor because the deliverables are services there  isn't if your honour's thinking the sign that's not a deliverable under this contract that's a deliverable under the manufacture contract this is a service contract every service here is a deliverable they don't have some one tangible object that's not this isn't a manufacturing contract it's a service contract so you can't there's not a the services as you are providing them are the deliverables there is a tangible item like the sign that's from the manufacturing country well the judge also held as i read the opinion that there there was no awareness that these services were faulty your honor in order to let me address that because my time is short see any was intimately involved in negotiating those contracts for the additional service providers this was their pet project from italy and the guy came over from italy and they sat down and they went through and they told us to decrease the warranty from three years which was the normal warranty period to one year they were intimately involved in this they were provided the warranty when the sign manufacturing contract was provided was tendered was executed and then they gave it and i'm sorry  the arrangements over see the installations and deal with any problems that emerged you just find some of the jail wells obligations and course that was jailed thank you all right thank you and our thanks to both counsel all counsel the case is taken under advisement