Court Opinion

ID: 9477314
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:19:51.01515+00
Date Added: 2024-06-11T17:45:48.483134
License: Public Domain

CUDAHY, Circuit Judge,
dissenting:
The majority has decided this difficult case on a wholly novel theory that was ignored by the district court. The majority purports to see the case as a matter of “traditional res judicata doctrine,” see supra p. 1365, preponderating over mere “policy” arguments. But, of course, res judicata itself rests on well-known policy objectives. These policies seem to me not much furthered by the majority result nor are other important policies (such as those involving comity and considerations of federalism) adequately considered here. The majority opinion is little more than a ritual incantation against “claim splitting” as a mechanical response to all the contradictions inherent in the problem before us.
The majority has declared that, when a plaintiff fails to plead diversity of citizenship as an alternative basis of federal subject-matter jurisdiction over claims otherwise pleaded as pendent, and the federal claim is dismissed and the state claims concurrently dismissed under United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966), the latter dismissals are res judicata of the state claims. Merely to state this apparent holding is to underline its novelty. First, I do not believe the majority’s rule materially advances the policies underlying res judica-ta doctrine: judicial economy and protection of defendants against the harassment of repetitive and duplicative lawsuits. See Brown v. Felsen, 442 U.S. 127, 131, 99 S.Ct. 2205, 2209, 60 L.Ed.2d 767 (1979) (“Res judicata ... encourages reliance on judicial decisions, bars vexatious litigation, and frees the courts to resolve other disputes.”). For, if a federal claim is dismissed before trial (as here by summary judgment) the judicial burden is about equally onerous whether the pendent claims are then tried in federal or in state court. The defendant’s burden likewise is not altered significantly by the transferring of the state claims against him from federal to state court. (In fact, the pendent state claims may never be resurrected once they are dismissed in federal court.)
Second, and most fundamentally, this is not a case of the plaintiffs splitting his claims. He brought in federal court all the claims arising from the relevant nucleus of operative facts. But the court, pursuant to United Mine Workers v. Gibbs, dismissed the pendent claims, freeing the plaintiff to bring them in state court. The *1369Fifth Circuit, in comparable circumstances, has explained the claim-splitting rule:
Put another way, the rule — protective both of the court and of the defendant— precluding litigants from splitting causes has no function where the court itself, rather than the litigant, does the splitting and does it by reason of no default on the part of the litigant, who timely advanced all his claims in the initial proceeding.
Nilsen v. City of Moss Point, Miss., 701 F.2d 556, 563 (5th Cir.1983).
Third, the comity and federalism problems presented by the majority’s approach are profound and cannot be explained away merely by citing Harper Plastics v. Amoco Chems. Corp., 657 F.2d 939 (7th Cir.1981). Harper Plastics, of course, says:
[I]f the district judge finds that the federal claims are insubstantial, the entire action may be dismissed and the plaintiff will be permitted to pursue the common law claims in a state tribunal.
657 F.2d at 946. On this point, Harper Plastics merely follows United Mine Workers v. Gibbs. But the crucial question in the instant case is this: if the dismissed pendent claims are brought in the state court, must that court dismiss these claims as barred by the res judicata effect of the federal suit? To dismiss these claims, the state court would have to apply a purportedly federal res judicata bar (involving failure to invoke diversity jurisdiction) to a state cause of action brought, of course, in a state court. Such a requirement seems to me so disruptive of any notions of federalism that I cannot imagine the Supreme Court’s approving it. In fact, I have never heard of a state court’s requiring a litigant to invoke the diversity jurisdiction (nor has such a requirement ever emerged from a federal court, for that matter).
Fourth, perhaps the “answer” to the third point, above, is that, while the state court need not find a res judicata bar, the case may be removed to federal court, which can and will apply res judicata. But this “solution” creates an obvious Erie problem. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The result clearly would depend entirely on the forum (a huge incentive to forum shopping). Federal courts would apply a putative federal res judicata rule and state courts would ignore it. This would be absurd.
The issues here of comity and federalism are so much more crucial than any issue of alleged claim splitting that the majority’s outcome cannot stand.
Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law. Certainly, if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well.
United Mine Workers v. Gibbs, 383 U.S. at 726, 86 S.Ct. at 1139 (footnotes omitted). In addition, of course, the majority here requires recourse to the diversity jurisdiction at a time when many authorities (notably including former Chief Justice Burger) advocate the abolition of that jurisdiction.1
*1370Essentially, the majority’s res judicata analysis must fail because (1) the plaintiff did not split his claims (the court did) and (2) for good reason there is no authority anywhere that a plaintiff may be required to invoke the diversity jurisdiction.
On the merits, although the matter is close and I have the highest regard for Judge Curran’s analysis of Wisconsin law, I believe the summary judgment must be reversed. Employee handbooks may be express contracts of employment in Wisconsin. Ferraro v. Koelsch, 124 Wis.2d 154, 368 N.W.2d 666 (1985). The circumstances in Ferraro are analogous in many ways to the facts of the case before us. For example, both Ferraro and Shaver had agreed in their employment applications that they could be terminated at any time. Id. at 158, 368 N.W.2d at 669; Brief of Plaintiff-Appellant at 7. Ferraro, however, received a handbook that “require[d] that employees not be dismissed or laid-off without just cause.” 124 Wis.2d at 159, 368 N.W.2d at 669. Shaver also received a handbook; it provided that Woolworth would lay off employees only on the basis of seniority:
It is important for you to know that if a reduction of staff should be necessary, lay-off and recall after lay-off will be determined on the basis of seniority and an employee’s skill and ability to do the available work. Where the factors are relatively equal among several employees, those with the greatest seniority will be given preference over those employees with less seniority.
Appendix of Defendant-Appellee at 9 (emphasis added).2
Both Shaver and Ferraro signed written acknowledgements of receipt of their handbooks. Ferraro’s stated that he understood “the policies and rules and accepted] them as a condition of [his] continued employment.” 124 Wis.2d at 158, 368 N.W.2d at 669. Although Shaver’s Acknowledgement Form did not condition his employment on the terms of the handbook, Woolworth had prefaced the booklet as follows:
This booklet will assist you in understanding our policies and procedures, and will explain many aspects of your duties in the Central Accounting Office. It will tell you what we expect from you, and what you may expect from us.
Appendix of Defendant-Appellee at 3 (emphasis added).
Finally both handbooks contained express promises from the employee. See, e.g., 124 Wis.2d at 166, 368 N.W.2d at 672 (two-week notice prior to leaving); Appendix of Defendant-Appellee at 4 (telephone notification of absence prior to starting time).
In Ferraro, the Supreme Court of Wisconsin considered these factors and instructed courts “to examine the nature of the handbook” to determine whether it created an express contract. 124 Wis.2d at 167, 368 N.W.2d at 673. The court then held that
whatever the original relationship between the parties — and it is apparent that if no other evidence were available than that in the original application for employment, the relationship would be “at will” — the promises in the handbook, coupled with the return promises of the employer Ferraro, resulted in an express contract incorporating all the provisions thought desirable by the employer in respect to obligations of the employee, misconduct, and employee discipline and discharge.

Id.

In the present case, the provision of the handbook outlining the seniority policy, in conjunction with its preface of mutual expectation, arguably created an enforceable agreement between the company and its employees. Therefore, under Ferraro, I *1371believe summary judgment is inappropriate in this case.

. In one of his annual state of the judiciary reports, the former Chief Justice stated that
diversity cases have no more place in the federal courts in the second half of the twentieth century, and surely not in the final quarter of this century, than overtime parking tickets or speeding on the highways simply because the highway is federally financed.... In any event, nonfederal cases must be decided under state law and can best be handled by state judges. They are at least as familiar with that law as federal judges. Appeals in such cases can better be reviewed by those state judges than federal judges from other states.
Burger, Annual Report on the State of the Judiciary, 1976 A.B.A.J. 443, 444. For a description of the debate and citations of articles written in favor of retaining or abolishing diversity jurisdiction, see C. Wright, The Law of Federal Courts, 127-37 (4th ed. 1983).
My purpose in citing these authorities is simply to show that the majority is swimming upstream in terms of much current thinking about diversity jurisdiction. I would hasten to add that I continue to regard that jurisdiction as important and have never advocated its abolition. In any event, despite the assertions of the majority, I am unaware of a “trend” in the law *1370toward the mandatory invocation of diversity jurisdiction.

. The Supreme Court of Wisconsin found a similar provision in Ferraro’s handbook to be evidence of a contractual limitation of the at-will relationship:
That this was an abrogation of an at-will relationship, if such were originally intended, is clear from the language of the handbook. For example, the [employer] promised that, in the event of layoffs, any layoff "will be based on your seniority."
124 Wis.2d at 165, 368 N.W.2d at 672.