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December 31, 1985


The opinion of the court was delivered by: Shadur, District Judge.


1. breach of his fiduciary duties; and

    2. misappropriation of Duff & Phelps' facilities
  for use in Guy's own business.

On July 12, 1985 this Court granted Duff & Phelps' motion for summary judgment on each of Guy's claims. Guy has now moved under Fed.R.Civ.P. ("Rule") 56 for summary judgment on Duff & Phelps' counterclaim. For the reasons stated in this memorandum opinion and order, Guy's motion is denied.


Duff & Phelps is an Illinois corporation in the service business: providing investment research, credit ratings, financial consulting and investment management. In 1978 Guy joined Duff & Phelps as a vice president responsible for developing Duff & Phelps' computer capability and for studying, teaching and implementing new methods of quantitative analysis in investment research and management.

In 1981 (while still employed by Duff & Phelps) Guy applied to the Commodities Futures Trading Commission ("CFTC") to become a registered commodities trading advisor. He then began a small commodity trading business without informing anyone at Duff & Phelps. He operated the business from his home and then from an office in the basement of a friend's home (Guy Dep. 6-7, 292-94). He did some of the work at Duff & Phelps' offices between 7:00 and 7:30 a.m., before Duff & Phelps' regular business hours (id. at 154). During that time he did however use Duff & Phelps' telephones and occasionally its computer (id. at 131, 154, 171-72), and he frequently used Duff & Phelps' telephones during its regular business hours (Hansen Aff. ¶ 3; Guy Dep. 171).

By July 1983 Guy had 50 to 60 customers and managed portfolios with total assets of about $4 million (Guy Dep. 105-06, 108, 124). Earnings from his business exceeded $95,000 in 1982 and $43,000 during the first 8 1/2 months of 1983 (D. Ex. A).

Duff & Phelps did not learn of Guy's business until late May or early June 1983, when Hansen questioned Guy about the early morning phone calls he often received at work (Guy Dep. 148-51; Hansen Dep. 33-34). Guy told Hansen about the business and provided him with documents at his request (Guy Dep. 150-51; Hansen Dep. 35-44). About a month later Hansen told Guy he would have to abandon his own business if he wanted to stay with Duff & Phelps (Guy Dep. 163-64), giving Guy another month to think over his choice (id. at 164). On July 29 Guy met with Hansen again and said he would not give up his own business (Hansen Dep. 61). Hansen then fired him effective December 31, 1983. That date was later advanced to September 15, 1983 by agreement (at least in the sense Guy was given a choice between a September 1 and 15 departure) (Guy Dep. 188-89, 245).

Subject Matter Jurisdiction

Guy maintains Duff & Phelps' counterclaim is permissive in Rule 13(b) terms, thus requiring an independent federal jurisdictional basis. Guy then says the counterclaim falls outside this Court's diversity jurisdiction because Duff & Phelps has not alleged in good faith an amount in controversy exceeding $10,000. That notion is wholly without merit.

Guy's argument totally misperceives the thrust of the jurisdictional amount requirement. St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 590, 82 L.Ed. 845 (1938) (footnotes omitted) remains the leading authority on that subject:

  The rule governing dismissal for want of jurisdiction
  in cases brought in the federal court is that, unless
  the law gives a different rule, the sum claimed by
  the plaintiff controls if the claim is apparently
  made in good faith. It must appear to a legal
  certainty that the claim is really for less than the
  jurisdictional amount to justify dismissal. The
  inability of plaintiff to recover an amount adequate
  to give the court jurisdiction does not show his bad
  faith or oust the jurisdiction. Nor does the fact
  that the complaint discloses the existence of a valid
  defense to the claim. But if, from the face of the
  pleadings, it is apparent, to a legal certainty, that
  the plaintiff cannot recover the amount claimed, or
  if, from the proofs, the court is satisfied to a like
  certainty that the plaintiff never was entitled to
  recover that amount, and that his claim was therefore
  colorable for the purpose of conferring jurisdiction,
  the suit will be dismissed.

Here Duff & Phelps' breach-of-fiduciary-duty claim seeks to recover: (1) all Guy's profits (over $100,000) plus (2) damages for the unauthorized use of Duff & Phelps' equipment. Unquestionably that puts more than the jurisdictional amount into controversy.*fn2

Guy claims his proffered evidence establishes Duff & Phelps must lose on the merits. But even if he were right (and the later discussion shows he is not), his bizarre view of subject matter jurisdiction would convert every successful summary judgment motion by a diversity-jurisdiction defendant (and even many a final judgment for such a defendant after trial) into a jurisdictional dismissal. Pursued to its logical end, Guy's position would foreclose federal courts from ever ruling for defendants on the merits in diversity cases, for the very decision that a plaintiff could ...

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