                                       In the

      United States Court of Appeals
                     For the Seventh Circuit
                          ____________________  

No.  14-­‐‑2959  
JOSEPH  C.  MCCORMICK  and  MARY  C.  MCCORMICK,  
                                         Plaintiffs-­‐‑Appellants,  
                                          v.  

INDEPENDENCE  LIFE  AND  ANNUITY  COMPANY,  
                                        Defendant-­‐‑Appellee.  
                          ____________________  

              Appeal  from  the  United  States  District  Court  
                      for  the  Eastern  District  of  Wisconsin.  
            No.  12-­‐‑C-­‐‑763  —  William  C.  Griesbach,  Chief  Judge.  
                          ____________________  

          ARGUED  JUNE  2,  2015  —  DECIDED  JULY  24,  2015  
                    ____________________  

    Before  POSNER,  EASTERBROOK,  and  SYKES,  Circuit  Judges.  
    EASTERBROOK,  Circuit  Judge.  Joseph  and  Mary  McCormick  
bought   a   single-­‐‑premium   variable   life-­‐‑insurance   policy   that  
permits  them  to  borrow  against  its  cash  value.  Loans  are  se-­‐‑
cured   by   moving   an   equivalent   amount   from   sub-­‐‑accounts  
that   the   policyholder   can   invest   to   a   “general   account”   that  
draws  4%  interest.  The  policyholder  owes  4.7%  on  any  bor-­‐‑
rowed   sums,   so   the   net   is   0.7%   per   annum,   plus   foregoing  
the   opportunity   to   exercise   discretion   about   how   to   invest  
2                                                                  No.  14-­‐‑2959  

the   borrowed   sum.   The   policy   adds   that,   if   the   owner   does  
not   pay   the   annual   4.7%   interest,   “it   will   be   added   to   the  
principal  of  the  loan  and  will  bear  interest.”  
     The  McCormicks  borrowed  against  the  policy’s  cash  val-­‐‑
ue  and  did  not  pay  interest.  Independence,  the  insurer,  add-­‐‑
ed   the   amount   of   unpaid   interest   “to   the   principal   of   the  
loan”   (which   caused   additional   sums   to   be   moved   from   in-­‐‑
vestments  into  the  general  account  as  security)  and  charged  
interest   on   the   higher   indebtedness.   Over   the   years,   com-­‐‑
pound   interest   has   increased   the   debt   by   $44,000,   which   if  
not   repaid   will   reduce   the   policy’s   death   benefit.   The  
McCormicks   seek   a   declaration   that   they   do   not   owe   this  
$44,000.  As  they  see  things,  when  the  unpaid  annual  interest  
was   “added   to   the   principal   of   the   loan”   each   year   and  
moved  to  the  general  account,  it  was  thus  “paid”  automati-­‐‑
cally—and  what  has  been  paid  cannot  draw  interest.  The  in-­‐‑
surer  removed  the  suit  to  federal  court,  and  the  district  judge  
granted   judgment   on   the   pleadings,   since   the   dispute   turns  
entirely  on  the  policy’s  language.  The  judge  thought  that  the  
language   unambiguously   supports   the   insurer.   2014   U.S.  
Dist.  LEXIS  34981  (E.D.  Wis.  Mar.  18,  2014).  
    Our   mention   of   a   $44,000   dispute   is   a   tipoff   to   the   only  
question  we  need  address:  What  is  this  case  doing  in  federal  
court?   Removal   rested   on   diversity   of   citizenship,   and  
$75,000   is   the   minimum   amount   in   controversy   for   that   ju-­‐‑
risdiction.  28  U.S.C.  §1332(a).  Both  sides  nonetheless  support  
the   removal   and   maintain   that   it   was   proper   because   the  
McCormicks’   complaint   asked   for   cancellation   of   the   entire  
loan   balance   (roughly   $70,000)   in   addition   to   elimination   of  
the   interest.   The   problem   is   that   there   is   no   legal   basis   for  
No.  14-­‐‑2959                                                                      3  

that   request,   which   the   McCormicks   voluntarily   dropped  
soon  after  removal.  
      If   a   suit   is   filed   initially   in   federal   court,   a   plaintiff’s  
good-­‐‑faith  estimate  of  the  stakes  controls  unless  it  is  legally  
impossible  for  a  court  to  award  what  the  plaintiff  demands.  
St.   Paul   Mercury   Indemnity   Co.   v.   Red   Cab   Co.,   303   U.S.   283,  
289  (1938)  (asking  whether  it  “appear[s]  to  a  legal  certainty”  
that  the  plaintiff  cannot  recover  the  jurisdictional  minimum).  
The   same   approach   applies   to   a   removing   defendant’s   esti-­‐‑
mate   of   the   stakes.   Dart   Cherokee   Basin   Operating   Co.   v.   Ow-­‐‑
ens,  135  S.  Ct.  547,  553–54  (2014).  Cancellation  of  the  princi-­‐‑
pal   balance   as   a   remedy   for   excessive   interest   is   legally   im-­‐‑
possible   in   Wisconsin,   whose   law   supplies   the   rule   of   deci-­‐‑
sion.   When   pressed   at   oral   argument   for   any   authority   un-­‐‑
derlying   the   complaint’s   demand   for   this   remedy,   the  
McCormicks’  lawyer  conceded  that  there  is  none.  Wisconsin  
entitles  a  party  aggrieved  by  breach  of  contract  to  a  remedy  
that  will  restore  him  to  the  position  he  would  have  occupied  
had  all  promises  been  fulfilled.  See,  e.g.,  Thorp  Sales  Corp.  v.  
Gyuro  Grading  Co.,  111  Wis.  2d  431  (1983).  Cancellation  of  the  
principal  debt  would  be  a  windfall,  not  a  means  of  vindicat-­‐‑
ing  the  McCormicks’  contractual  rights.  
     Counsel  told  us  that  he  put  the  demand  in  the  complaint  
only  because  Joseph  McCormick  really  wants  cancellation  of  
the  debt  and  thinks  himself  entitled  to  it—though  without  a  
legal   basis.   The   complaint   might   as   well   have   demanded  
treble  the  amount  of  disputed  interest,  even  though  Wiscon-­‐‑
sin   law   offers   not   a   shred   of   support   for   a   treble-­‐‑damages  
remedy.  The  amount-­‐‑in-­‐‑controversy  requirement  would  not  
be  worth  the  paper  it’s  written  on  if  arbitrary  multipliers,  or  
4                                                                No.  14-­‐‑2959  

a  plaintiff’s  fondest  wishes,  counted  toward  federal  jurisdic-­‐‑
tion.  
    In   a   memorandum   filed   after   the   oral   argument,   the   in-­‐‑
surer   contends   that   jurisdiction   is   supported   by   the   com-­‐‑
plaint’s   request   for   an   injunction   against   cancellation   of   the  
policy.  The  policy  allows  cancellation  if  a  loan’s  unpaid  bal-­‐‑
ance   equals   or   exceeds   the   policy’s   cash   value.   The   McCor-­‐‑
micks’   loan   (including   interest)   was   nearing   that   point,   and  
Independence   sent   them   a   notice   of   proposed   cancellation.  
But  how  does  this  propel  the  stakes  over  $75,000?  If  the  poli-­‐‑
cy  really  was  at  (or  approaching)  a  negative  value,  then  the  
difference  between  its  continuation  and  its  cancellation  has  a  
correspondingly  small  value.  
     Suppose,   despite   this,   that   the   policy’s   value   exceeds  
$75,000.  The  policy  serves  as  security  for  the  loan.  Forget  in-­‐‑
surance   for   a   moment   and   consider   the   situation   in   which  
the  owner  of  a  parcel  of  land  worth  $1  million  uses  it  as  se-­‐‑
curity  for  a  $50,000  loan.  The  borrower  does  not  repay,  and  
the  lender  seeks  to  foreclose  and  sell  the  parcel  to  satisfy  the  
debt.  What  is  the  amount  in  controversy:  $50,000  or  $1  mil-­‐‑
lion?  The  amount  is  $50,000,  because  that  is  what  would  sat-­‐‑
isfy  the  lender’s  entire  demand  on  the  date  the  suit  was  filed.  
See   Gardynski-­‐‑Leschuck   v.   Ford   Motor   Co.,   142   F.3d   955   (7th  
Cir.   1998).   Similarly,   the   McCormicks   could   have   satisfied  
Independence’s   demand   by   paying   the   $44,000   it   claims   as  
interest—and  they  could  have  avoided  a  risk  of  the  policy’s  
cancellation  by  paying  even  less  (just  enough  to  keep  its  cash  
value  positive).  The  request  for  an  injunction  against  cancel-­‐‑
lation  therefore  does  not  turn  this  dispute  about  $44,000  into  
a  controversy  worth  more  than  $75,000.  
No.  14-­‐‑2959                                                                5  

      Finally,   the   insurer   maintains   that   the   district   court   had  
jurisdiction  when  it  entered  judgment,  even  if  not  when  the  
case   was   removed,   because   after   the   removal   the   McCor-­‐‑
micks   added   a   federal   securities-­‐‑law   claim   to   their   com-­‐‑
plaint,   furnishing   federal-­‐‑question   jurisdiction   under   28  
U.S.C.  §1331.  There  are  two  potential  problems  with  that  line  
of   argument.   First,   jurisdiction   usually   depends   how   things  
stand  when  a  case  is  removed,  not  on  what  happens  later.  St.  
Paul  Mercury,  303  U.S.  at  291–94;  In  re  Shell  Oil  Co.,  966  F.2d  
1130,  amended,  970  F.2d  355  (7th  Cir.  1992).  These  decisions  
hold  that  post-­‐‑removal  changes  to  the  pleadings  do  not  can-­‐‑
cel   federal   jurisdiction   that   existed   on   the   date   of   removal,  
which   leaves   open   the   possibility   that   new   bases   of   federal  
jurisdiction  could  be  added.  See  Caterpillar,  Inc.  v.  Lewis,  519  
U.S.   61   (1996).   Otherwise   a   court   might   dismiss   a   suit   for  
lack  of  jurisdiction,  only  to  have  it  re-­‐‑filed  the  next  day  with  
jurisdiction  secure.  Cf.  Newman-­‐‑Green,  Inc.  v.  Alfonzo-­‐‑Larrain,  
490   U.S.   826   (1989).   So   we   turn   to   the   second   problem:   the  
securities   claim   is   as   impossible   as   the   demand   for   zeroing  
out  the  loan’s  principal  balance.  
    Plaintiffs   invoked   §12   of   the   Securities   Act   of   1933,   15  
U.S.C.   §77l,   which   governs   the   sale   of   securities.   (Variable  
insurance  policies  are  securities.  See  SEC  v.  Variable  Annuity  
Life  Insurance  Co.  of  America,  359  U.S.  65  (1959).)  They  assert-­‐‑
ed  that  the  insurer  violated  §12  by  stating  in  the  registration  
statement   and   prospectus   that   interest   on   loans   will   be   de-­‐‑
ducted   from   the   policy’s   cash   value   if   not   paid   when   due.  
Yet   the   McCormicks’   complaint   avers   that   this   is   exactly  
what  the  policy  itself  says.  The  complaint  therefore  does  not  
allege   a   false   statement.   The   McCormicks   alleged   breach   of  
contract,  not  fraud.  On  the  difference  between  these  two  for  
6                                                                  No.  14-­‐‑2959  

the   purpose   of   federal   securities   law,   see   Wharf   (Holdings)  
Ltd.  v.  United  International  Holdings,  Inc.,  532  U.S.  588  (2001).  
     More  than  that:  As  the  district  court  observed,  2014  U.S.  
Dist.   LEXIS   34981   at   *11–14,   the   complaint   reveals   that   the  
claim  is  time-­‐‑barred—by  twenty-­‐‑four  years!  A  claim  under  §12  
arises   when   the   security   is   first   offered   to   the   public,   15  
U.S.C.   §77m,   and   a   statute   of   repose   sets   three   years   as   the  
outer   limit   for   suit.   The   McCormicks   bought   their   policy   in  
1987   (the   policy   may   have   been   “offered”   even   earlier)   and  
did  not  assert  a  securities  claim  until  2014.  Statutes  of  repose  
cannot  be  equitably  tolled,  see  Lampf,  Pleva,  Lipkind,  Prupis  &  
Petigrow   v.   Gilbertson,   501   U.S.   350,   363   (1991),   and   ongoing  
injury   (which   the   McCormicks   assert)   differs   from   a   new  
claim.  New  injury  from  an  old  wrong  does  not  affect  the  pe-­‐‑
riod  of  limitations.  See,  e.g.,  National  Railroad  Passenger  Corp.  
v.   Morgan,   536   U.S.   101,   110–15   (2002);   United   States   v.   Ku-­‐‑
brick,  444  U.S.  111  (1979).  The  securities  claim  is  wacky,  so  far  
beyond   the   pale   that   it   cannot   support   federal   jurisdiction.  
See  Hagans  v.  Lavine,  415  U.S.  528,  537  (1974)  (an  “essentially  
fictitious”  claim  does  not  support  jurisdiction  under  §1331).  
    The  judgment  is  vacated,  and  the  case  is  remanded  with  
instructions  to  dismiss  for  lack  of  subject-­‐‑matter  jurisdiction.  
