### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No. 15

- 1846
M ICHAEL M AGRUDER , Plaintiff

- Appellant ,

v.

F IDELITY B ROKERAGE S ERVICES LLC , Defendant

- Appellee

.

____________________ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 15 C 1188

— John Robert Blakey
, Judge

.

____________________
S UBMITTED O CTOBER 29 , 2015

— D ECIDED M ARCH 17, 2016

____________________

Before W OOD , Chief Judge , and P OSNER and E ASTERBROOK , Circuit Judges

. E ASTERBROOK , Circuit Judge

. Michael Magruder bought 940,000 shares of Bancorp International Group ( Bancorp ) through his account at Fidelity Brokerage Ser vices. He paid $9,298 and some years later asked Fidelity to deliver a certi ficate showing his ownership of the shares. When Fidelity did not comply, Magruder initiated arbitration through the Financial Industry Regulatory Authority (FINRA). Magru d-2 No. 15

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er and Fidelity chose simplified arbitration (see FINRA Rules 12401, 12800). In a simplified arbitrati on, the arbitrator ca nnot awa rd more than $50,000 in damages or order specific performance that would cost the losing party more than $50,000. Magruder had demanded a total of $28,000 in da mages (actual plus punitive), so the dispute was amenable to the si mplified procedure. In March 2014 the arbitrator directed Fidelity to hand

over a stock certificate or explain why it could not do so. F idelity explained that in 2005 the Depository Trust & Clea ring Corporation (DTCC), which is responsible for issuing pape r certificates for Bancorp’s stock, had placed a “global lock” on that activity as a result of fraud reported by Ba ncorp , whose president asserted that fraudulent shares bea ring identification number 106 had been flooding the market. In 2012 Bancorp offere d to swap series 106 shares for new series 205 shares, but by then Bancorp had been delisted from stock exchanges and FINRA blocked the swaps . This left Fidelity unable to supply a certificate, for the series 106 shares remained subject to DTCC’s global lock. In October 2014 the arbitrator accepted this explanation and issued an award denying Magruder’s claim. Magruder then filed this suit, ask ing the district court to enforce the arbitrator’s March 2014 award. Fidelity asked the court to enforce the October 2014 award. The district judge sided with Fidelity, and Magruder appealed. Neither side’ s briefs in this court explain how the dispute come s within federal jurisdiction, so we directed the parties to file su pplemental memoranda addressing that subject. Fidelity contends that the district court had subject

matter jurisdiction under 28 U.S.C. §1332, which covers d i-No. 15

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versity of citizenship. We wil l assume that the parties are of diverse citizenship

— though Fidelity has not told us the cit izenship of its members and instead treats itself as a corpor ation, which it isn’t. See Americold Realty Trust v. ConAgra Foods, Inc. , No. 14

– 1382 (U.S. Mar. 7, 201 6); Cosgrove v. Ba rtolotta , 150 F.3 d 729 (7th Cir. 199 8). Citizenship does not ma tter, because the stakes cannot exceed $50,000, and the min imum under §1332(a) is $75,000. They can’t exceed $50,000 not simply because Magruder asked for less than $30,000 bu t also because the parties agreed to use FINRA’s simplified proce dure, which sets a $50,000 cap. Fidelity ignores these facts and instead tries to estimate the value of 940,000 shares of Bancorp’s stock. Yet Magruder already owns the stock , which cost him less than $10,000. This dispute is about a certificate, not ownership. What’s more, Fidelity does not try to expl ain how the fraud, DTCC’s refusal to issue certificates , and the end of market trading can have increased the value of Bancorp’s shares by a fa ctor of eight or more. It does not identify any actual transactions that give series 106 shares such a value high enough to reach $75,000 for 940,000 shares . So no matter how the stak es of an arbitrated dispute should be calculated for the purpose of §1332 , a subject on which the circuits do not agree, this di spute is worth less than the jurisdictional minimum. Magruder relies on federal

- question jurisdiction under 28 U. S.C. §1331. T he Federal Arbitration Act, 9 U.S.C. §§ 1

– 16, does not grant feder al jurisd iction. See Vaden v. Discover Bank , 556 U.S. 49 (2009); Moses H. Cone Memorial Hospital v. Mercury Construction Corp ., 460 U.S. 1, 25 n.32 (1983). But he contends that the claim presented to the arbitrator arose u nder 17 C.F.R. §240.15c3

– 3( l )(1), which he reads as establis h-4 No. 15

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ing every stock owner’s right to a certificate. Because his claim arose under federal law, Magruder maintains, a fede ral court has subject

- matter jurisdiction to confirm or set aside the award.
It is not clear to us that §240.15c3

– 3( l )(1) es tablishes a federal right. It says that “[n]othing stated in this section shall be construed as affecting the absolute right of a cu stomer of a broker or dealer to receive in the course of normal business ... the physical delivery of certificates for ... [f ]ully

paid securities to which he is entitled ”

. This declares that the section does not affect the customer’s right to receive certif icates to which “he is entitled.” And when is a customer so entitled? That seems to be left to contracts between customer

a nd broker, or to state corporate law. Let us suppose, however, that §240.15c3

– 3( l )(1) creates a federal right , as opposed to disclaiming federal interference with rights resting on state law. Vaden holds that, when a claim proposed to be arbitrated arises under federal law, a federal court has subject

- matter jurisdiction to rule on a pet ition to compel or forbid arbitration. Magruder supposes that this implies that, once the arbitration is over, a federal court also has subject

- matter jurisdiction to confir m the award or set it aside. But that’s not what Vaden holds, nor is it a logical extension of Vaden ’s holding.
Vaden dealt with a petition under 9 U.S.C. §4 to compel arbitration. Section 4 provides that a district court may do this if, “save for such [ar bitration] agreement, [it] would have jurisdiction under title 28, in a civil action ... arising out of the controversy between the parties”. In other words, if the claim sought to be arbitrated arises under federal law (or §1332 applies), then per §4 the di strict court has subject

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matter jurisdiction of a suit seeking an order to arbitrate

. That’s what Vaden concluded. Section 4 does not deal with requests to enforce or set aside an arbitrator’s decision. Secti on 9 deals with confirm ation and §10 with vacatu r. Neither §9 nor §10 has any la nguage comparable to that on which the Supreme Court r elied in Vaden . Long before Vaden we had reached the same conclusion about the effect of §4, and we also had held that a federal issue resolved by the arbitrator does not supply su bject

- matter jurisdiction for review or enforcement of the award . See Stone v. Doerge , 328 F.3d 343, 345 (7th Cir. 2003) ; Minor v. Prudential Securities, Inc. , 94 F.3d 1103 (7th Cir. 1996 ) . Other circuits agree with us . See, e.g., Carter v. Health Net of California, Inc ., 37 4 F.3d 830, 836 (9th Cir. 2004); Gree nberg v. Bear, Stearns & Co ., 220 F.3d 22, 26

– 27 (2d Cir. 2000) ; Kasap v. Folger Nolan Fleming & Douglas, Inc ., 166 F.3d 1243, 1247 (D.C. Cir. 1999); Collins v. Blue Cross Blue Shield o f Mic higan , 103 F.3d 35 (6th Cir. 1996).
This conclusion harmonizes the law of arbitration with the law of contracts

— appropriate because arbitration usua lly is a matter of contract, and the arbitrator usually serves as the parties’ mutual agent to resolve a dispute that the parties could have resolved themselves. Put FINRA and its rules aside for a moment and consider what would have ha ppened if Magruder had sued Fidelity under the federal sec urities laws, contending that Fidelity had violated §240.15c3

– 3( l )(1). Most litigation ends in settlement

— which is to say, in a contract. If Magruder and Fidelity had reached a contra ctual solution but later disagreed about performance, could they return to federal court under the securities laws? The answer is no. Kokk onen v. Guardian Life Insurance Co. , 511 U.S.6 No. 15

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375 (1994) , holds that , if parties settle litigation that arose under federal law, any contest about that settlement needs an independen t jurisdictional basis

— and as most contracts

are governed by state law, th is knocks out §1331 (unless pe rchance the district court entered the settlement as a jud gment or reserved jurisdiction to enforce it). Our conclusion in Doerge and Minor that a federal question can suffice to o rder arbitration under §4, but not to enforce or set aside the decision under §9 or §10, parallels the distinction Kokkonen draws between an original federal claim and a dispute about its contractual resolution. One passage in Lefkovitz v. Wagner , 395 F.3d 773 (7th Cir. 2005), could be read as inconsi stent with Doerge and Minor

. We remarked of one particular arbitration: “ [T]here was ne ither complete diversity nor a federal question; and an arb itration award cannot be enforced in federal court unless the dispute giving rise to the award w ould have been within the court’ s jurisdiction to resolve had the dispute given rise to a lawsuit rather than to an arbitration. ” 395 F.3d at 781. This implies a belief that , if the arbitrator resolves a federal issue, then §1331 supplies jurisdiction over an action und er §9 or §10. But Lefkovitz did not hold this; it stated that neither co mplete diversity nor a federal question existed

. Lefkovitz did not discuss Doerge or Minor and had no reason to do so. Even when a federal court finds jurisdiction, as this passage in Lefkovitz did not, an unreasoned assertion of jurisdiction lacks precedential value. See, e.g., Steel Co. v. Citizens for a Better Environment , 523 U.S. 83, 90

– 92 (1998) (drive

- by juri sdictional rulings may be ignored). The question addressed in Doerge , Mi nor , and our decision today simply was not on the table in Lefkovitz , which does not modify circuit law

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Neither §1331 nor §1332 authorizes resolution of the pa rties’ dispute about the arbitrator’s decision. The judgment of the district court is vacated, a nd the case is remanded with instructions to dismiss for lack of subject

- matter jurisdiction.