In the

United States Court of Appeals

For the Seventh Circuit

No. 07-3425

ILLINOIS BELL TELEPHONE COMPANY, INC.,

Plaintiff-Appellant,

v.

GLOBAL NAPS ILLINOIS, INC., et al.,

Defendants-Appellees.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 06 C 3431—John W. Darrah, Judge.

ARGUED SEPTEMBER 11, 2008—DECIDED DECEMBER 22, 2008

Before EASTERBROOK, Chief Judge, and POSNER and

EVANS, Circuit Judges.

POSNER, Circuit Judge. This appeal in a suit against a

group of affiliated corporations charges that in violation

of the plaintiff’s federal tariffs filed with the Federal

Communications Commission, its state tariffs filed with

the Illinois Commerce Commission, and the interconnec-
2 No. 07-3425

tion agreement between the plaintiff and one of the

affiliates, Global NAPs Illinois, the defendants failed to

pay for telecommunications services that the plaintiff

had sold to that company.

Questions about our jurisdiction led us to invite supplemental briefs. The plaintiff’s points out that a suit

to enforce a tariff filed with the FCC is deemed to arise

under federal law and is therefore within the federalquestion jurisdiction of the district court. Louisville &

Nashville R.R. v. Rice, 247 U.S. 201, 201-03 (1918); Thurston

Motor Lines, Inc. v. Jordan K. Rand, Ltd., 460 U.S. 533 (1983)

(per curiam); Cahnmann v. Sprint Corp., 133 F.3d 484, 488-89

(7th Cir. 1998). It argues that the suit is within the

diversity jurisdiction as well because, while Illinois Bell is

an Illinois corporation, none of the defendants either is

incorporated in Illinois or has its principal place of business there. That the case is within the diversity jurisdiction

as well as the federal-question jurisdiction is potentially

important because the plaintiff has at least one, and

possibly two, claims under state law—one for failure to

comply with its state tariffs and the other for violation of

the interconnection agreement. Although both are within

the supplemental jurisdiction conferred on the federal

courts by 28 U.S.C. § 1367, the exercise of that jurisdiction

is, as the statute makes clear, discretionary; the exercise

of diversity jurisdiction is not.

An exhibit to the plaintiff’s supplemental brief contains

an admission by Global NAPs Illinois that “to the extent

Global [NAPs Illinois] denied [that] it is a Delaware

corporation with its principal place of business at 10
No. 07-3425 3

Merrymount Road, Quincy, MA that denial was inadvertent and in error.” The defendants’ supplemental brief

says, in a reversal of their previous position, that Global

NAPs Illinois “obviously has its principal place of

business in Illinois, the only state in which it is licensed

and has established interconnection facilities.” But its

being licensed to do business in Illinois and having

“established interconnection facilities” are not evidence

that it is a citizen of Illinois. AT&T is licensed to do business in Illinois and has “established interconnection

facilities,” but is not a citizen of Illinois.

When the facts that determine federal jurisdiction are

contested, the plaintiff—or if it is a case that has been

removed to federal court, the defendant—must establish

those facts by a preponderance of the evidence. Meridian

Security Ins. Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir.

2006); Gafford v. General Elec. Co., 997 F.2d 150, 159-60 (6th

Cir. 1993). Global NAPs Illinois has not mounted a sufficiently colorable challenge to diversity jurisdiction to

require the plaintiff to present additional evidence of

diversity. Global NAPs Illinois does not have an Illinois

corporate charter. Nor is Illinois where it has its principal

place of business. It admits that it has no employees other

than its corporate officers, and they are all in Massachusetts.

A company’s principal place of business is where its

“nerve center” is located, or, more concretely, where its

executive headquarters are located. Krueger v. Cartwright,

996 F.2d 928, 931 (7th Cir. 1993); Metropolitan Life Ins. Co. v.

Estate of Cammon, 929 F.2d 1220, 1223 (7th Cir. 1991);

Dimmitt & Owens Financial, Inc. v. United States, 787 F.2d
4 No. 07-3425

1186, 1191 (7th Cir. 1986). There are no nerves (in all but

the simplest animals) without a brain, and there is no

human brain without a human being. An executive headquarters without any executives is similarly oxymoronic.

We can imagine an automated company that has no

office anywhere but consists of pieces of equipment

operated by telecommuting employees scattered across

the globe. But what we have in this case is commonplace:

a company located in one state (Massachusetts) that has

contracts with firms in other states, including Illinois.

“[A] corporation whose center of gravity is in the same

state [as the opposing party] even though it may be

incorporated elsewhere . . . [is] sufficiently ‘local’—sufficiently identified with the state—to avoid the

obloquy that may attach to a ‘foreign’ corporation in

litigation with a local resident and that provides the

modern rationale of the diversity jurisdiction. The words

‘principal place of business’ are to be construed with this

purpose in mind.” Dimmitt & Owens Financial, Inc. v. United

States, supra, 787 F.2d at 1190. There is nothing local about

a corporation chartered in another state, managed in

another state, administered in another state, headquartered

in another state, its local “presence” actually a ghostly

absence of living bodies.

But the defendants argue that even if there is prima

facie federal jurisdiction, whether based on a federal

question or diversity of citizenship, the Telecommunications Act of 1996, 47 U.S.C. §§ 151 et seq., withdraws

that jurisdiction from a suit of this kind.
No. 07-3425 5

To understand the argument one must understand the

two types of charge that one telecommunications carrier

can extract from another pursuant to the Telecommunications Act. Iowa Network Services, Inc. v. Qwest Corp., 363

F.3d 683, 686 (8th Cir. 2004). First, an “incumbent local

exchange carrier” (a carrier that provided local phone

service when the Act was passed, such as Illinois Bell) is

required to interconnect on demand with other carriers

that provide local telecommunications services within

its service area. 47 U.S.C. § 251(c)(2). A carrier demanding

interconnection must negotiate with the incumbent local

exchange carrier on price and other terms. If the two

carriers cannot reach agreement, their disagreement is

submitted to what is called “arbitration” but is really the

first stage in a regulatory proceeding, as the “arbitration”

decision must be submitted to the state regulatory commission for its approval, as must an agreement reached

by negotiation. Id., §§ 252(a)(1), (b)(1), (e)(1); Illinois Bell

Tel. Co. v. Box, No. 08-1489, 2008 WL 5006614, at *1 (7th

Cir. Nov. 26, 2008); Illinois Bell Tel. Co. v. Box, 526

F.3d 1069, 1070 (7th Cir. 2008).

The interconnection agreement between the plaintiff and

Global NAPs Illinois was approved by the Illinois Commerce Commission. A party aggrieved by the state commission’s decision, whether imposing or altering the terms

of an interconnection agreement, can seek judicial review

in federal district court on the ground that the decision

violates sections 251 or 252 of the Telecommunications

Act. 47 U.S.C. § 252(e)(6). But so far as appears both

parties were content with the agreement and neither

sought judicial review of the commission’s order approving it. Nor did anyone else.
6 No. 07-3425

If as in this case the incumbent local exchange carrier

sues merely to collect the interconnection charge

specified in the approved interconnection agreement, the

suit is not based on federal law in any realistic sense, but

on a price term in a contract. Just as a suit to enforce a

copyright license is held to arise under state rather than

federal law even though the grant of a copyright is governed by federal law, Gaiman v. McFarlane, 360 F.3d 644,

652 (7th Cir. 2004); T. B. Harms Co. v. Eliscu, 339 F.2d 823,

824, 826-27 (2d Cir. 1964) (Friendly, J.), so likewise, while

“section 252(c)(6) authorizes a federal court to determine

whether the agency’s decision departs from federal law,”

“a decision ‘interpreting’ an agreement contrary to its

terms creates a different kind of problem—one under

the law of contracts, and therefore one for which a state

forum can supply a remedy.” Illinois Bell Tel. Co. v.

Worldcom Technologies, Inc., 179 F.3d 566, 574 (7th Cir. 1999);

see also Connect Communications Corp. v. Southwestern Bell

Tel., L.P., 467 F.3d 703, 708 (8th Cir. 2006); Southwestern Bell

Tel. Co. v. Public Utility Comm’n, 208 F.3d 475, 484-86

(5th Cir. 2000).

Judge Friendly analogized a suit on a contract by a

motor carrier regulated by the Interstate Commerce

Commission to a copyright license, in words equally

applicable to this case: “That the contracts could not

lawfully be carried out save with ICC approval does not,

without more, demonstrate that Congress meant all

aspects of their performance or non-performance to be

governed by law to be fashioned by federal courts rather

than by the state law applicable to similar contracts

relating to businesses not under federal regulation. This
No. 07-3425 7

is not to say that a particular issue concerning such a

contract, e.g., whether ICC approval had or had not been

granted prior to a particular date, would not require

determination under federal principles. But the complaint does not suggest that any such issue is present

here.” McFaddin Express, Inc. v. Adley Corp., 346 F.2d 424,

426-27 (2d Cir. 1965) (citation omitted); see also Chicago &

North Western Ry. v. Toledo, Peoria & Western R.R., 324

F.2d 936, 938-39 (7th Cir. 1963).

We are mindful that Verizon Maryland, Inc. v. Global

NAPs, Inc., 377 F.3d 355, 364-65 (4th Cir. 2004), says that

interconnection agreements are so important to the federal regulation of telecommunications that suits to

enforce them arise under the Telecommunications Act.

But that was a very different case from this. Verizon was

suing state commissioners to block their order requiring

it to pay compensation to another carrier, and while it

was doing so in part because it thought they had misinterpreted the interconnection agreement, “according to

Verizon’s complaint, whether it must pay reciprocal

compensation on ISP-bound traffic under the terms of the

agreement depends in substantial measure upon the requirements of the Act and the FCC’s regulations and

interpretations. On its face, then, Verizon’s contract claim

is tied directly to federal law, and its asserted basis in

federal law is not ‘insubstantial [or] frivolous.’ ” Id. at 363-

64 (emphasis in original).

BellSouth Telecommunications, Inc. v. MCIMetro Access

Transmission Services, Inc., 317 F.3d 1270, 1278-79 (11th Cir.

2003) (en banc), was a similar case—and the majority
8 No. 07-3425

opinion drew a powerful dissent by Judge Tjoflat, see id.

at 1285-1308—but we need not take sides, as our case is

distinguishable. Illinois Bell is seeking merely to collect

charges specified in the interconnection agreement.

The second type of charge that one carrier can levy

against another is a charge for transmission of a carrier’s

long-distance telecommunications. Such a charge must

be embodied in and collected pursuant to a tariff filed

with the Federal Communications Commission. 47 U.S.C.

§ 203(a). Carriers file similar tariffs with state commissions such as the Illinois Commerce Commission for

the transmission of long-distance intrastate communications, and the plaintiff’s other state-law claim is based

on such a tariff.

The defendants argue that the federal tariff cannot

create federal jurisdiction over this suit, as the plaintiff

claims it does, because, they say, the interconnection

agreement between the plaintiff and Global NAPs Illinois

“includes an ‘integration clause,’ whereby all the terms

and conditions of the interconnection to which Global

was entitled by the [Telecommunications Act] were

acknowledged by the parties to be set forth in the [interconnection agreement]. Thus, whatever the parties

might owe one another on account of the traffic passing

by virtue of their interconnection was plainly acknowledged to be set forth in the [agreement] (and not elsewhere) in compliance with the regime [created by the Act].

Tariff claims presented as ‘alternative pleading’ do not

create federal subject matter jurisdiction.”

But the clause is more limited than the defendants

claim. It reads: “Entire Agreement. This Reciprocal Com-
No. 07-3425 9

pensation Appendix is intended to be read in conjunction with the underlying Interconnection Agreement

between ILEC [Illinois Bell, the incumbent local exchange carrier, to which reciprocal compensation is due

from competing local exchange carriers that interconnect

with it, 47 U.S.C. § 251(b)(5); In re Core Communications, Inc.,

455 F.3d 267, 270 (D.C. Cir. 2006)] and CLEC [Global NAPs

Illinois, the competitive local exchange carrier], but that

as to the Reciprocal Compensation terms and conditions,

this Appendix constitutes the entire agreement between

the Parties on these issues, and there are no other oral

agreements or understandings between them on

Reciprocal Compensation that are not incorporated into

this Appendix.” The “entire agreement” to which the

clause refers is thus the reciprocal-compensation appendix, and a number of the plaintiff’s claims are

unrelated to reciprocal compensation. The duty to

provide such compensation is only one of the duties

created by the interconnection provisions of the Telecommunications Act. See 47 U.S.C. §§ 251(b)(1)-(4), (c).

We cannot find the “underlying Interconnection Agreement” in the record, but the plaintiff concedes that some

of the payments that it claims Global NAPs Illinois owes

it are based solely on the interconnection agreement, and

we have just ruled that a suit for nonpayment in violation of such an agreement does not arise under federal

law. And we suppose an integration clause (though not

this one, which is narrow in scope) could make all

claims for payment to a carrier arise under the agreement

rather than under filed tariffs. An ordinary agreement

couldn’t do that—the obligation created by a filed tariff
10 No. 07-3425

cannot be altered by an agreement of the parties. Maislin

Industries, Inc. v. Primary Steel, Inc., 497 U.S. 116, 126-30

(1990); Louisville & Nashville R.R. Co. v. Central Iron & Coal

Co., 265 U.S. 59, 65 (1924). But telecommunications common carriers are authorized to make binding interconnection agreements setting forth the prices of the

services agreed upon. 47 U.S.C. § 252(a)(1).

The possibility of turning a federal tariff claim into a

simple contract claim does not affect jurisdiction, however. A suit to enforce a federal tariff arises under federal

law even if the defendant has a good defense to the claim,

such as that the plaintiff had agreed not to make it. That

is the implication of the well-pleaded complaint rule.

Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). (For its

application to a case similar to this, involving one of the

defendants in this case, see Verizon New York Inc. v. Global

NAPs, Inc., No. 1:03-cv-05073-ENV-RML, at 6-7 (E.D.N.Y.

Sept. 20, 2007).) Only if the complaint’s invocation of

federal law is frivolous does the rule forbid access to

federal court under the federal-question jurisdiction. E.g.,

Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816

F.2d 1191, 1195 (7th Cir. 1987).

The integration clause is a reminder, however, that if

an interconnection agreement specifies a particular price

for a particular service, the seller cannot, simply by filing

a tariff, prevent the buyer from challenging the price in

the tariff as discrepant with the price in the interconnection agreement. Global NAPs Illinois argues that the

plaintiff’s claim is based on a misinterpretation of the

agreement. Such a disagreement should normally be
No. 07-3425 11

referred to the state regulatory agency, in this case the

Illinois Commerce Commission, before the federal court

decides the case. The agency had to approve the parties’

agreement and had the authority to impose a different

agreement on them, or, what amounts to the same thing,

to modify the agreement they had negotiated. 47 U.S.C.

§ 252(e)(1), (2). If a dispute over the meaning of the agreement arises, the agency will usually be in the best position to resolve it.

True, the Telecommunications Act does not expressly

authorize a state commission, after it approves an interconnection agreement, to resolve disputes arising under it.

Nor does the Act expressly authorize a federal court to

refer such a dispute, if the dispute arises in a suit in

federal court, to the state commission, either. But such

authority is a sensible corollary to the allocation of state

and federal responsibilities made by the Act. Core Communications, Inc. v. Verizon Pennsylvania, Inc., 493 F.3d 333,

344 (3d Cir. 2007); BellSouth Telecommunications, Inc. v.

MCIMetro Access Transmission Services, Inc., supra, 317 F.3d

at 1276-77; cf. Peter W. Huber, Michael K. Kellogg & John

Thorne, Federal Telecommunications Law § 3.3.4, pp. 226-28

(2d ed. 1999) (the Telecommunications Act of 1996 “directly controls intrastate issues that were once the exclusive province of the states. To that extent, the Act

federalizes these local interconnection issues. But the

respective roles of the state and federal agencies in implementing these market-opening provisions have been

a matter of considerable dispute . . . . As a backstop to

its primary reliance on privately negotiated

agreements . . . Congress enlisted the aid of state public
12 No. 07-3425

utility commissions to ensure that local competition

was implemented fairly and with due regard to the

local conditions and the particular historical circumstances

of local regulation under the prior regime”); Leon T.

Knauer, Ronald K. Machtley & Thomas M. Lynch, Telecommunications Act Handbook 127-31 (1996).

Regulatory agencies don’t usually engage in contract

interpretation. But since interconnection agreements are

complex and have to be approved by a state commission

and disputes over their meaning are very likely to present

issues related to the commission’s federal statutory

authority—for example whether the contractual interpretation urged by one of the parties would result in price

discrimination, 47 U.S.C. § 252(d)(1)(A)(ii)—the referral of

interpretive disputes to the state commission, unless they

seem contrived or are otherwise easy to resolve, is a

sensible procedure; and there is nothing in the Telecommunications Act to forbid it. And if this is right, then a

carrier seeking to enforce an interconnection agreement

must not be permitted to prevent referral by filing a

tariff and suing to enforce it rather than the interconnection agreement. U.S. West Communications, Inc., v. Hix,

183 F. Supp. 2d 1249, 1266 (D. Colo. 2000); see Global NAPs,

Inc. v. FCC, 247 F.3d 252, 255-56 (D.C. Cir. 2001).

To give the referral procedure a label, we are saying

that issues that arise in the course of a federal suit to

enforce an interconnection agreement may sometimes

be within the “primary jurisdiction” of the state regulatory agency. As explained in United States v. Western

Pacific Ry., 352 U.S. 59, 63-64 (1956), “the doctrine of

primary jurisdiction, like the rule requiring exhaustion of
No. 07-3425 13

administrative remedies, is concerned with promoting

proper relationships between the courts and administrative

agencies charged with particular regulatory duties . . . .

‘Primary jurisdiction’ . . . applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of

issues which, under a regulatory scheme, have been

placed within the special competence of an administrative

body; in such a case the judicial process is suspended

pending referral of such issues to the administrative

body for its views.” See also City of Peoria v. General

Electric Cablevision Corp., 690 F.2d 116, 120-21 (7th Cir.

1982). Although the role assigned by the Telecommunications Act to the state commission in approving, rejecting,

or imposing agreements is largely limited to assuring

that they are “nondiscriminatory” and serve the “public

interest, convenience and necessity,” 47 U.S.C.

§§ 252(d)(1)(A)(ii), (e)(2)(A), these are broad criteria that

create regulatory discretion based on familiarity with a

technical field. See also Illinois Public Utilities Act, 220

ILCS 5/9-250, 5/10-108. A federal court can properly stay

its proceedings to allow the state commission to interpret the terms of an interconnection agreement to assure

compliance with the statutory criteria before the court

addresses other aspects of the suit, including (as in

this case) federal tariff and veil-piercing claims.

Primary jurisdiction usually involves referral to a

federal agency, but in a case such as this, in which a

state commission is exercising in effect delegated federal

power, the logic of the doctrine permits a federal court’s

reference to a state agency. Cf. Kendra Oil & Gas, Inc. v.
14 No. 07-3425

Homco, Ltd., 879 F.2d 240, 242 (7th Cir. 1989). An alternative approach—the doctrine of Burford v. Sun Oil Co., 319

U.S. 315 (1943), which requires federal district courts to

decline to exercise federal jurisdiction over certain types

of cases confided by state law to state administrative

agencies—does not fit this case. The reason is not the

uncertainty about whether the state commission can

resolve the entire dispute over nonpayment of the plaintiff’s interconnection charges, even though, if not, the

proper disposition is a stay of the court case rather

than—what is the normal result of Burford abstention—its

dismissal. Hi Tech Trans, LLC v. New Jersey, 382 F.3d 295,

302 (3d Cir. 2004). For in a damages suit, a stay might be

an appropriate means of effectuating Burford abstention,

as explained in Front Royal & Warren County Industrial

Park Corp. v. Town of Front Royal, 135 F.3d 275, 282-83 (4th

Cir. 1998). The critical point, rather, is that Burford is

limited to cases in which “adjudication in federal court

would ‘unduly intrude into the processes of state government or undermine the State’s ability to maintain

desired uniformity,’ ” or invade “the State’s interests in

maintaining ‘uniformity in the treatment of an essentially

local problem’ . . . and [in] retaining local control over

‘difficult questions of state law bearing on policy problems

of substantial public import.’ ” Quackenbush v. Allstate Ins.

Co., 517 U.S. 706, 728 (1996) (citations omitted); see also

Behavioral Institute of Indiana, LLC v. Hobart City of

Common Council, 406 F.3d 926, 931 (7th Cir. 2005).

The regulatory issues that arise in cases governed by

the Telecommunications Act are not “local” in the Burford

sense. The role that the Act carves out for the states is
No. 07-3425 15

that of ancillary enforcers of the comprehensive scheme

of federal telecommunications regulation set forth in the

Act. The state commissions are not enforcing policies

central to state government when they are regulating

telecommunications; in that role they are “ ‘deputized’

federal regulator[s]” of the Telecommunications Act.

MCI Telecommunications Corp. v. Illinois Bell Tel. Co., 222

F.3d 323, 344 (7th Cir. 2000).

Despite the term primary jurisdiction, the reference of a

case to an agency pursuant to that doctrine, rather than

denying the jurisdiction of the court over the case, presupposes that jurisdiction. See, e.g., United States v. Western

Pacific Ry., supra, 352 U.S. at 63-64; Baker v. IBP, Inc., 357

F.3d 685, 692 (7th Cir. 2004); Clark v. Time Warner Cable, 523

F.3d 1110, 1114-15 (9th Cir. 2008). If the court lacked

jurisdiction it would have to dismiss the suit, not stay it in

anticipation of its eventual resumption after the agency

rules. As explained in Arsberry v. Illinois, 244 F.3d 558, 563-

64 (7th Cir. 2001) (citations omitted), we are at the heart of

the doctrine of primary jurisdiction when “in a suit involving a regulated firm but not brought under the regulatory

statute itself, an issue arises that is within the exclusive

original jurisdiction of the regulatory agency to resolve,

although the agency’s resolution of it will usually be

subject to judicial review. When such an issue arises, the

suit must stop and the issue must be referred to the agency

for resolution. If the agency’s resolution of the issue does

not dispose of the entire case, the case can resume, subject

to judicial review of that resolution along whatever path

governs review of the agency’s decisions, whether back to
16 No. 07-3425

the court in which the original case is pending or, if the

statute governing review of the agency’s decisions designates another court, to that court.” Despite the reference in

this passage to the “exclusive original jurisdiction of the

regulatory agency,” as we said earlier we do not think

the court need refer all disputes over an interconnection

agreement to the state commission, only those where the

dispute raises a genuine policy issue the resolution of

which has been confided by the Telecommunications

Act to the state commissions.

For completeness we note that in the absence of

diversity or federal-question jurisdiction, a suit to enforce an interconnection agreement would have to be

brought in state court, though if in the course of the

litigation a question within the primary jurisdiction of

the state commission arose the question would have to

be referred to the commission.

The defendants do raise issues concerning the meaning

of the interconnection agreement, as we said, but it

would be premature at this juncture to refer any of those

issues to the Illinois Commerce Commission. The only

issue addressed thus far in this litigation (apart from

subject-matter jurisdiction) is whether the district court

has personal jurisdiction over six affiliates of Global NAPs

Illinois on a theory of “piercing the corporate veil.” To ask

the Illinois Commerce Commission to opine on that topic

would be to ask it to rule on an issue unrelated to its

regulatory responsibilities. It is a threshold issue because

unless it is resolved in Illinois Bell’s favor this suit is

academic—Global NAPs Illinois has no assets out of which
No. 07-3425 17

to pay a judgment. The issue of piercing the corporate

veil has to be resolved before there is any referral to the

state commission. The district court therefore properly

addressed the issue and we have now to determine

whether the court resolved it correctly.

Ferrous Miner Holdings is the parent of Global NAPs

Illinois and the other defendants. The district court dismissed it as not being within the court’s personal jurisdiction. The judge entered that dismissal as a final judgment under Rule 54(b), finding no reason to delay the

entry of an appealable order letting Ferrous Miner out

of the case.

The plaintiff argues that the district judge was not

authorized to issue a Rule 54(b) judgment because the

question of personal jurisdiction over Ferrous Miner is

entwined with questions involving other defendants,

such as whether the doctrine of piercing the corporate veil

can be used by the plaintiff to fix liability on other

affiliates of Global NAPs Illinois, four of which (all but

Ferrous Miner) remain defendants in the district court.

The argument is frivolous. The rule provides that “when

an action presents more than one claim for relief . . . or

when multiple parties are involved, the court may [provided there is no just reason for delay] direct entry

of a final judgment as to one or more, but fewer than all,

of the claims or parties.” Multiple claims or multiple

parties. If there is one claim but multiple parties, the court

can enter judgment as to one or more of the parties,

releasing them from the threat of liability. E.g., United
18 No. 07-3425

States v. Ettrick Wood Products, Inc., 916 F.2d 1211, 1217-19

(7th Cir. 1990).

That the plaintiff should be seeking in this appeal to

change the judgment into a mere interlocutory ruling by

the district judge that the plaintiff cannot bring Ferrous

Miner into the case (a ruling without res judicata effect

until a final judgment is entered) is defeatist, and

surprises us, as the merits of the appeal—which fortunately for the plaintiff it has also argued—are compelling.

Ferrous Miner is the sole stockholder of Global NAPs

Illinois, which has no assets other than its Illinois certificate of convenience and necessity, no revenues, no

income, no financial statements, no payroll accounts, and

no employees besides its three officers.

The district judge seems to have thought that a court

in Illinois could obtain jurisdiction over Ferrous Miner

only if there was a basis for piercing Ferrous Miner’s

corporate veil. But the plaintiff is not trying to obtain

relief against Frank Gangi, the owner of Ferrous Miner. The

veil it wishes to pierce is that of Ferrous Miner’s subsidiary—the corporate limited liability of Global NAPs

Illinois—so that it can get at the parent company. United

States v. Bestfoods, 524 U.S. 51, 61-64 (1998); Papa v. Katy

Industries, Inc., 166 F.3d 937, 940-41 (7th Cir. 1999); APS

Sports Collectibles, Inc. v. Sports Time, Inc., 299 F.3d 624, 630-

31 (7th Cir. 2002). That corporation is a shell. For aught

that appears, the only reason for its existence is that

Ferrous Miner does not want to pay for the communications services that it bought from the plaintiff in the

name of the shell. Richard Gangi, the treasurer of Global

NAPs Illinois, has acknowledged that Ferrous Miner’s
No. 07-3425 19

subsidiaries are “file companies” that “don’t do anything.”

“They have no assets. They have no employees.” Frank

Gangi similarly described what he calls “regulatory”

corporations as ones that exist “for the purpose of serving

a regulatory requirement.” It “may have no assets, it

may have no income, it may have no expenses. It may be

just what we call a file drawer company.” The corporate

structure that the Gangi brothers have created appears

to be designed to keep all its assets in corporations that

have no liabilities and all its liabilities in corporations

that have no assets.

Ferrous Miner argues that the law applicable to piercing

the corporate veil in this case is Delaware law, and that

under Delaware law the veil can be pierced only upon a

showing of fraud. That is not true, as it would enable

companies to insulate themselves from tort liability by

operating through shell corporations. For if you are a

bystander injured by a truck driven by the employee of

a corporation that has no assets, you cannot cry

“fraud”—the corporation had made no representations

to you.

What is true is that in a contractual veil-piercing case,

such as this case, Delaware permits piercing the veil only

upon proof either of fraud or that the corporation

simply functioned as a façade for the dominant shareholder. See Stephen B. Presser, Piercing the Corporate Veil

§ 2:8 (2008). These are closely related criteria. See Trustees

of National Elevator Industry Pension, Health Benefit &

Educational Funds v. Lutyk, 332 F.3d 188, 193-94 (3d Cir.

2003); Southeast Texas Inns, Inc. v. Prime Hospitality Corp.,

462 F.3d 666, 674-75 (6th Cir. 2006), citing Wallace v.
20 No. 07-3425

Wood, 752 A.2d 1175, 1184 (Del. Ch. 1999). If there is no

substance at all to a corporation, so that it cannot be

made to answer for any of its debts, no rational person

would make a contract with it unless he were deceived.

“Suppose a controlling shareholder [Ferrous

Miner] . . . persuades a lender to extend credit on

favorable terms to the shareholder’s corporation [Global

NAPs Illinois] by representing that the corporation has

substantial net assets, but in fact it is a shell, and all

the assets ostensibly owned by the corporation are

actually owned by the shareholder. The corporation

defaults, and when the lender tries to sue the shareholder to collect his loan—for the corporation has no

assets out of which to collect it—he is met by the defense

of limited liability. This is the paradigmatic case for

rejecting the defense.” In re Kaiser, 791 F.2d 73, 75 (7th Cir.

1986); see also Browning-Ferris Industries of Illinois, Inc. v.

Ter Maat, 195 F.3d 953, 959-60 (7th Cir. 1999). Had

Global NAPs Illinois during its negotiations with the

plaintiff said that in the event it broke its contract the

plaintiff could forget about suing, because it is a shell, the

plaintiff would not have signed the contract without a

guaranty by Ferrous Miner. It is hard to imagine why,

except to commit such a fraud, a businessman would

create shell corporations other than for tax or regulatory

reasons, which would not justify using the shell to strip

unknowing contracting parties of all remedies for breach

of contract.

Not that the plaintiff has yet proved fraud, or even that

Global NAPs Illinois is just a shell; the only question at

this stage is whether the plaintiff produced enough

evidence to bring Ferrous Miner within the personal
No. 07-3425 21

jurisdiction of the district court, a preliminary issue to be

resolved summarily by the judge. The plaintiff has produced more than enough evidence. Phillips v. Prairie Eye

Center, 530 F.3d 22, 26 (1st Cir. 2008); see also Central States,

Southeast & Southwest Areas Pension Fund v. Phencorp

Reinsurance Co., 440 F.3d 870, 877-78 (7th Cir. 2006); Szabo

v. Bridgeport Machines, Inc., 249 F.3d 672, 675-77 (7th Cir.

2001).

Since we are not ruling that the plaintiff can pierce

Global NAPs Illinois’s corporate veil—only that there is

enough evidence to enable the company’s owner, Ferrous

Miner, to be brought within the personal jurisdiction of

the district court—we should consider, in order to

provide some guidance to the district court on remand,

the plaintiff’s argument that a federal common law of veil

piercing, less demanding than the Delaware standard,

should apply instead of that standard. The plaintiff is

correct that a state’s restrictive law of veil piercing is not

allowed to undermine the effectiveness of a federal

statute that provides remedies for persons who may

find it impossible to vindicate their federal rights if opposed by such a law. “[T]he policy underlying a federal

statute may not be defeated by such an assertion of state

power,” Anderson v. Abbott, 321 U.S. 349, 365 (1944); see

also United States v. Bestfoods, supra; First National City

Bank v. Banco Para El Comercio Exterior De Cuba, 462 U.S.

611, 629 (1983); Brotherhood of Locomotive Engineers v.

Springfield Terminal Ry., 210 F.3d 18, 25-30 (1st Cir. 2000);

Lowen v. Tower Asset Management, Inc., 829 F.2d 1209, 1220

(2d Cir. 1987).
22 No. 07-3425

But we doubt that there will be any need in this case

to depart from the Delaware standard. A person who

deals with a corporation knowing that it is radically

undercapitalized or otherwise unusually difficult to

obtain a collectible judgment against in the event of a

breach of contract either has only himself to blame or

was compensated by the other party for the increased

risk that its capital structure placed on him. Browning-Ferris

Industries of Illinois, Inc. v. Ter Maat, supra, 195 F.3d at 960.

(There is no suggestion that as a common carrier the

plaintiff was obligated to sell to a firm that could not

pay for the service it was buying.) The plaintiff argues that

it was misled by the shell’s appearing to be a real firm.

If that is right it is entitled to pierce the corporate veil,

id. at 959-60; In re Kaiser, supra, 791 F.2d at 76; Bridas

S.A.P.I.C. v. Government of Turkmenistan, 447 F.3d 411, 416-

17 (5th Cir. 2006); Torco Oil Co. v. Innovative Thermal Corp.,

763 F. Supp. 1445, 1450-51 (N.D. Ill. 1991), and if not, not.

Ferrous Miner is within the district court’s personal

jurisdiction. The judgment dismissing it is therefore

reversed.

12-22-08