United States District Court, N.D. Illinois, Eastern Division
FRANCIS T. FOSTER, Plaintiff
PRINCIPAL LIFE INSURANCE COMPANY, Defendants.
MEMORANDUM OPINION AND ORDER
REBECCA R. PALLMEYER, UNITED STATES DISTRICT JUDGE
Francis Foster's claims against Principal Life Insurance
Company are before the court for a second time. The court
initially dismissed those claims, but the Court of Appeals
reversed. Principal contends on remand that Foster
effectively released his claims against Principal when he
settled an earlier lawsuit against another party. Principal
moves the court for dismissal for failure to state a claim on
this basis, or for dismissal of the case for lack of
jurisdiction. For the reasons explained here, the motion is
facts in this case were explained in some detail in this
court's previous opinion and that of the Seventh Circuit.
See Foster v. Costello, No. 13 C 3066, 2014 WL
1876247 (N.D. Ill. May 9, 2014), rev'd sub nom.,
Foster v. Principal Life Ins. Co., 806 F.3d 967 (7th
Cir. 2015). This opinion presumes familiarity with those
earlier opinions but will present relevant facts and the
procedural history briefly here.
several years, Plaintiff Francis Foster, an attorney,
represented committees that supervised pension and retirement
plans for employees of six bus lines in northern Illinois.
The committees were composed of an equal number of union and
management representatives. The plans-referred to as the
“Pace” plans, because the six bus lines were part
of the Pace Suburban Bus Division of the Regional
Transportation Authority (“RTA”)-appointed
Defendant Principal Life Insurance Company as the plan
trustee for five of these plans. As trustee, Principal held
title to the assets of the plans and had the fiduciary duty
to adhere to the Pace plan documents. In 2011, Foster
alleges, Defendant Principal breached that duty when it
stopped paying Foster for his services as an attorney. Foster
claims Principal was following instructions from managers at
Pace rather than from the plan committees. He alleges,
further, that Pace gave those instructions to retaliate
against Foster for having notified Pace management that one
of the Pace plans (the one for which Principal was not acting
as trustee) was underfunded and in violation of the Illinois
Pension Code. Even after union committee members signed
statements confirming that they had not authorized Principal
to stop paying Foster, Principal refused to reverse course,
instead adhering to directions from management. Foster
nevertheless continued representing the plans for several
months without compensation.
management thus effectively ousted Foster from his position
as attorney for the plans. In response, on December 30, 2011,
Foster sued the Pace Suburban Bus Division of the RTA and
various Pace employees in the Northern District of Illinois.
Foster v. Pace Suburban Bus Div. of the Reg'l Transp.
Auth., No. 11-cv-9307. That case settled in 2012
pursuant to a confidential settlement agreement. Foster then
filed this lawsuit against Joseph Costello, the Executive
Director of the RTA, and Principal. On the theory that
Costello was ultimately responsible for Foster's removal,
Foster alleged, in his Amended Complaint , that Costello
had retaliated against him in violation of his First
Amendment rights (Counts I and II) and in violation of the
Illinois Whistleblower Act (Count III). As against Defendant
Principal, Foster alleged that by refusing to pay him,
Principal had interfered with prospective economic advantage
and with his attorney-client relationship with the plans
Costello and Principal moved to dismiss. This court granted
both motions. The court concluded that Foster had not alleged
any direct participation by Costello in actions or inactions
resulting in Foster's termination as attorney for the
plans. With respect to Principal, the court concluded that
any claims against it were “derivative” of the
claims Foster had asserted against Pace, and ultimately had
settled. Foster v. Costello, 2014 WL 1876247 at *11.
The Seventh Circuit overturned that decision. The Court of
Appeals acknowledged that Foster's complaint was not a
“model of clarity, ” but concluded Foster had
alleged that Pace repeatedly attempted to terminate him but
lacked the legal authority to do so. Pace then wrongfully
directed Principal to stop paying Foster, again without the
legal authority to do so. And even though Pace lacked the
legal authority to issue the stop-payment order, and even
though Principal was legally bound to accept orders only from
the Plan committees, Principal enacted Pace's unlawful
directive and stopped paying Foster . . . .
Foster, 806 F.3d 967, 973 (7th Cir. 2015). The court
observed, further, that on appeal, Principal conceded that
Foster's claims against it were neither
“derivative” of his claims against Pace, nor
barred by res judicata or collateral estoppel.
Id. Significantly, the court also found no
“indication that Principal was somehow released by the
terms of Foster's confidential settlement agreement with
Pace and Pace employees in the earlier litigation.”
Id. Indeed, the court noted, “Principal [did]
not assert that it was specifically named in a release in the
Pace litigation.” Id. at 974. And, the court
pointed out, at oral argument, Foster had confirmed that he
was “not fully compensated for his losses in his
settlement with Pace.” Id.
direction of the Court of Appeals, Foster has filed a second
amended complaint, asserting a single count against
Principal, for tortious interference with prospective
economic advantage and with his attorney-client relationship.
Principal asserts that the court lacks jurisdiction and that
Foster's settlement with Pace constitutes a complete
defense to this action. Both arguments rest on
Principal's understanding of the legal effect of
Foster's settlement agreement with Pace.
Subject Matter Jurisdiction
matter jurisdiction is, of course, a threshold issue.
Diversity of citizenship is undisputed: Foster is a resident
of Illinois, and Principal is organized under the laws of
Iowa and has its principal place of business there. (Second
Amended Complaint  ¶¶ 6, 7.) But Principal
contends Foster has not established that $75, 000 is at
stake, and that the court therefore may not exercise
jurisdiction over his case.
ruling on a Rule 12(b)(1) motion, this court is required to
“accept as true all material allegations of the
complaint, drawing all reasonable inferences therefrom in the
plaintiff's favor.” Lee v. City of
Chicago,330 F.3d 456, 468 (7th Cir. 2003) (citing
Retired Chicago Police Assoc. v. City of Chicago, 76
F.3d 856, 862 (7th Cir. 1996)). Under 28 U.S.C. § 1332,
federal courts have jurisdiction over civil suits between
citizens of different states “where the matter in
controversy exceeds the sum or value of $75, 000, exclusive
of interest and costs.” 28 U.S.C. § 1332(a). Only
if it is “‘legally certain' that the recovery
(from plaintiff's perspective) or cost of ...