prejudice, and thereafter to consider whether this case should proceed against the remaining defendants-appellees in any form in federal court; or
2. If this Court decides to determine on its own whether the case should proceed after Mr. Bettison is dismissed with prejudice, then the Court should consider, en banc, whether the remaining defendants-appellees will be unduly prejudiced if the entire case is not dismissed; and
3. If this Court decides to enter a decision on the merits of the case after the dismissal of Mr. Bettison with prejudice, then the Court should consider, en banc, whether the original panel misapprehended the facts and the applicable law in its decision.
STATEMENT OF THE CASE
Newman-Green, Inc. ("Newman-Green") brought this action in 1982 to recover under a guaranty entered into by Alejandro-Alfonzo Larrain, Irene Larrain de Caplan, Rafael Tudela, Alberto Tudela and William L. Bettison (hereinafter jointly referred to as "guarantors"). The purpose of the agreement, as stated, was to guarantee only the payment of an amount up to the 5 percent royalty set forth in, and only for the period of time specified by, a license agreement between Newman-Green and a Venezuelan company, Newman-Green de Venezuela ("NGV"), for the sale of aerosol valves.
A panel of this Court reversed a district court judgment which had dismissed the guarantors from the suit. The panel construed Illinois common law to make the guarantors liable for royalty payments for as long as Newman-Green's technology was used. 832 F.2d 417, 422 (1987). The panel reached its decision, however, only after Mr. Bettison, a nondiverse party, was dismissed from the case. 832 F.2d at 419. Guarantors petitioned for a rehearing en banc. The Seventh Circuit granted the petition and vacated the panel's decision. 838 F.2d 968 (1987). On rehearing en banc, the Court held that it had no power to dismiss Mr. Bettison and ordered the case remanded to the district court for further consideration of whether the suit could proceed in any fashion in the federal courts. 854 F.2d 916 (1988).
The United States Supreme Court granted Newman-Green's petition for a writ of certiorari, 488 U.S. 1003, 109 S. Ct. 781, 102 L. Ed. 2d 773, and subsequently reversed the Court of Appeals, holding that "a court of appeals may grant a motion to dismiss a dispensable party whose presence spoils statutory diversity jurisdiction." 490 U.S. 826, 109 S. Ct. 2218, 2220, 104 L. Ed. 2d 893 (1988). The case was remanded to this Court on August 11, 1989 for further proceedings.
REASONS FOR THE ACTIONS SUGGESTED
The District Court Should Consider Whether This Case Should Proceed Against The Remaining Guarantors
This Court, sitting en banc, found that "the district court is better placed than the court of appeals to determine whether any party was harmed by the presence of the part that destroyed jurisdiction." 854 F.2d at 924. Indeed, the Supreme Court itself endorsed this general notion. 109 S. Ct. at 2226. ("If factual disputes arise, it might be appropriate to remand the case to the district court, which would be in a better position to make the prejudice determination"). Because of the protracted nature of this litigation, Judge Shadur has become intimately familiar with the ways in which Mr. Bettison's presence has affected the conduct of this litigation. Accordingly, defendants-appellees submit that the case should be remanded to Judge Shadur to consider whether the case should proceed against the remaining guarantors after the dismissal of Mr. Bettison. At that time, Mr. Bettison also intends to move that all payments made by him in satisfaction of the partial summary judgment be returned to him.
Admittedly, the Supreme Court's decision contains strong language which suggests that the district court should not be given that opportunity in this case. 109 S. Ct. 2226. That language is dictum, however, because it goes beyond the narrow issues framed by the petition for a writ of certiorari.
Because of the narrow scope of the matter that was presented by the certiorari petition, guarantors did not even address the reasons why merely dismissing Mr. Bettison will result in undue prejudice to the remaining guarantors. Accordingly, this Court is not bound to retain jurisdiction over the case and decide the merits of the appeal. Gertz v. Robert Welch, Inc., 680 F.2d 527, 533 (7th Cir. 1982) ("observations, commentary, or mere dicta touching upon issues not formally before the Court do not constitute binding determinations"). See also Quern v. Jordan, 440 U.S. 332, 347 n. 18, 99 S. Ct. 1139, 1148 n. 18, 59 L. Ed. 2d 358 (1979).
Alternatively, This Court Should Consider Guarantors' Constitutional Arguments
If this Court decides to dismiss Mr. Bettison on its own, there should be an en banc consideration of whether the prejudice the remaining appellees will suffer rises to the level of a due process violation if the evidence provided by Mr. Bettison continues to be used against them in a decision on the merits. Societe Internationale v. Rogers, 357 U.S. 197, 209, 2 L. Ed. 2d 1255, 78 S. Ct. 1087 (1958) (Federal Rules of Civil Procedure "must be read in light of the provisions of the Fifth Amendment that no person shall be deprived of property without due process of law"). This argument was not reached by the en banc Court because it concluded that it had no jurisdiction, and the Supreme Court was not faced with the issue.
Alternatively, The Court Should Reconsider En Banc The Original Panel's Decision On The Merits
If this Court decides to issue a decision on the merits, there should be an en banc reconsideration of the original panel's decision. Because of the jurisdictional ruling, there was no en banc decision on the guarantors' argument that the original panel misapprehended the scope of the their obligations under the license agreement. The guarantors submit that they have a meritorious argument in that regard that should be considered.
If this Court does not decide that issue, at a minimum the case should be remanded to the district court with directions that it determine whether the parties intended that the guarantors' obligations would cease upon Newman-Green's notice of termination or would continue until the license agreement was completed in accord with all its terms.
Dated this 1st day of September 1989.
Frank K. Heap
Charles G. Albert
Three First National Plaza
Chicago, Illinois 60602
Attorneys for Defendants-Appellees
Alejandro Alfonzo-Larrain, Irene Larrain de Caplan, Alberto Tudela,
Rafael Tudela and William L. Bettison
Of Counsel :
Bell, Boyd & Lloyd
Three First National Plaza
Chicago, Illinois 60602