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Foster v. Principal Life Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

September 29, 2016




         Plaintiff 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 denied.


         The 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.

         For 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.

         Pace 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 [23], 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 (Count IV).

         Both 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 effectively

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.


         At the 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.

         I. Subject Matter Jurisdiction

         Subject 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 [86] ¶¶ 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.

         When 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 ...

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