                                      In the

      United States Court of Appeals
                     For the Seventh Circuit
                          ____________________  

No.  15-­‐‑1846  
MICHAEL  MAGRUDER,  
                                                            Plaintiff-­‐‑Appellant,  
                                         v.  

FIDELITY  BROKERAGE  SERVICES  LLC,  
                                                           Defendant-­‐‑Appellee.  
                          ____________________  

            Appeal  from  the  United  States  District  Court  for  the  
              Northern  District  of  Illinois,  Eastern  Division.  
               No.  15  C  1188  —  John  Robert  Blakey,  Judge.  
                          ____________________  

   SUBMITTED  OCTOBER  29,  2015  —  DECIDED  MARCH  17,  2016  
                  ____________________  

   Before  WOOD,  Chief  Judge,  and  POSNER  and  EASTERBROOK,  
Circuit  Judges.  
    EASTERBROOK,   Circuit   Judge.   Michael   Magruder   bought  
940,000   shares   of   Bancorp   International   Group   (Bancorp)  
through  his  account  at  Fidelity  Brokerage  Services.  He  paid  
$9,298  and  some  years  later  asked  Fidelity  to  deliver  a  certif-­‐‑
icate   showing   his   ownership   of   the   shares.   When   Fidelity  
did   not   comply,   Magruder   initiated   arbitration   through   the  
Financial   Industry   Regulatory   Authority   (FINRA).   Magrud-­‐‑
2                                                                   No.  15-­‐‑1846  

er  and  Fidelity  chose  simplified  arbitration  (see  FINRA  Rules  
12401,   12800).   In   a   simplified   arbitration,   the   arbitrator   can-­‐‑
not   award   more   than   $50,000   in   damages   or   order   specific  
performance   that   would   cost   the   losing   party   more   than  
$50,000.  Magruder  had  demanded  a  total  of  $28,000  in  dam-­‐‑
ages   (actual   plus   punitive),   so   the   dispute   was   amenable   to  
the  simplified  procedure.  
     In   March   2014   the   arbitrator   directed   Fidelity   to   hand  
over  a  stock  certificate  or  explain  why  it  could  not  do  so.  Fi-­‐‑
delity   explained   that   in   2005   the   Depository   Trust   &   Clear-­‐‑
ing   Corporation   (DTCC),   which   is   responsible   for   issuing  
paper   certificates   for   Bancorp’s   stock,   had   placed   a   “global  
lock”   on   that   activity   as   a   result   of   fraud   reported   by   Ban-­‐‑
corp,   whose   president   asserted   that   fraudulent   shares   bear-­‐‑
ing  identification  number  106  had  been  flooding  the  market.  
In   2012   Bancorp   offered   to   swap   series   106   shares   for   new  
series   205   shares,   but   by   then   Bancorp   had   been   delisted  
from   stock   exchanges   and   FINRA   blocked   the   swaps.   This  
left   Fidelity   unable   to   supply   a   certificate,   for   the   series   106  
shares   remained   subject   to   DTCC’s   global   lock.   In   October  
2014   the   arbitrator   accepted   this   explanation   and   issued   an  
award  denying  Magruder’s  claim.  
    Magruder  then  filed  this  suit,  asking  the  district  court  to  
enforce  the  arbitrator’s  March  2014  award.  Fidelity  asked  the  
court   to   enforce   the   October   2014   award.   The   district   judge  
sided   with   Fidelity,   and   Magruder   appealed.   Neither   side’s  
briefs   in   this   court   explain   how   the   dispute   comes   within  
federal   jurisdiction,   so   we   directed   the   parties   to   file   sup-­‐‑
plemental  memoranda  addressing  that  subject.  
  Fidelity   contends   that   the   district   court   had   subject-­‐‑
matter   jurisdiction   under   28   U.S.C.   §1332,   which   covers   di-­‐‑
No.  15-­‐‑1846                                                                   3  

versity  of  citizenship.  We  will  assume  that  the  parties  are  of  
diverse  citizenship—though  Fidelity  has  not  told  us  the  citi-­‐‑
zenship  of  its  members  and  instead  treats  itself  as  a  corpora-­‐‑
tion,   which   it   isn’t.   See   Americold   Realty   Trust   v.   ConAgra  
Foods,   Inc.,   No.   14–1382   (U.S.   Mar.   7,   2016);   Cosgrove   v.   Bar-­‐‑
tolotta,  150  F.3d  729  (7th  Cir.  1998).  Citizenship  does  not  mat-­‐‑
ter,  because  the  stakes  cannot  exceed  $50,000,  and  the  mini-­‐‑
mum   under   §1332(a)   is   $75,000.   They   can’t   exceed   $50,000  
not  simply  because  Magruder  asked  for  less  than  $30,000  but  
also   because   the   parties   agreed   to   use   FINRA’s   simplified  
procedure,  which  sets  a  $50,000  cap.  
     Fidelity   ignores   these   facts   and   instead   tries   to   estimate  
the  value  of  940,000  shares  of  Bancorp’s  stock.  Yet  Magruder  
already   owns   the   stock,   which   cost   him   less   than   $10,000.  
This   dispute   is   about   a   certificate,   not   ownership.   What’s  
more,  Fidelity  does  not  try  to  explain  how  the  fraud,  DTCC’s  
refusal   to   issue   certificates,   and   the   end   of   market   trading  
can  have  increased  the  value  of  Bancorp’s  shares  by  a  factor  
of  eight  or  more.  It  does  not  identify  any  actual  transactions  
that  give  series  106  shares  such  a  value  high  enough  to  reach  
$75,000  for  940,000  shares.  So  no  matter  how  the  stakes  of  an  
arbitrated   dispute   should   be   calculated   for   the   purpose   of  
§1332,  a  subject  on  which  the  circuits  do  not  agree,  this  dis-­‐‑
pute  is  worth  less  than  the  jurisdictional  minimum.  
   Magruder  relies  on  federal-­‐‑question  jurisdiction  under  28  
U.S.C.   §1331.   The   Federal   Arbitration   Act,   9   U.S.C.   §§   1–16,  
does   not   grant   federal   jurisdiction.   See   Vaden   v.   Discover  
Bank,   556   U.S.   49   (2009);   Moses   H.   Cone   Memorial   Hospital   v.  
Mercury  Construction  Corp.,  460  U.S.  1,  25  n.32  (1983).  But  he  
contends  that  the  claim  presented  to  the  arbitrator  arose  un-­‐‑
der   17   C.F.R.   §240.15c3–3(l)(1),   which   he   reads   as   establish-­‐‑
4                                                                 No.  15-­‐‑1846  

ing   every   stock   owner’s   right   to   a   certificate.   Because   his  
claim  arose  under  federal  law,  Magruder  maintains,  a  feder-­‐‑
al   court   has   subject-­‐‑matter   jurisdiction   to   confirm   or   set  
aside  the  award.  
   It   is   not   clear   to   us   that   §240.15c3–3(l)(1)   establishes   a  
federal   right.   It   says   that   “[n]othing   stated   in   this   section  
shall   be   construed   as   affecting   the   absolute   right   of   a   cus-­‐‑
tomer  of  a  broker  or  dealer  to  receive  in  the  course  of  normal  
business  …  the  physical  delivery  of  certificates  for  …  [f]ully-­‐‑
paid  securities  to  which  he  is  entitled”.  This  declares  that  the  
section  does  not  affect  the  customer’s  right  to  receive  certifi-­‐‑
cates   to   which   “he   is   entitled.”   And   when   is   a   customer   so  
entitled?  That  seems  to  be  left  to  contracts  between  customer  
and  broker,  or  to  state  corporate  law.  
     Let  us  suppose,  however,  that  §240.15c3–3(l)(1)  creates  a  
federal  right,  as  opposed  to  disclaiming  federal  interference  
with   rights   resting   on   state   law.   Vaden   holds   that,   when   a  
claim   proposed   to   be   arbitrated   arises   under   federal   law,   a  
federal  court  has  subject-­‐‑matter  jurisdiction  to  rule  on  a  peti-­‐‑
tion  to  compel  or  forbid  arbitration.  Magruder  supposes  that  
this  implies  that,  once  the  arbitration  is  over,  a  federal  court  
also   has   subject-­‐‑matter   jurisdiction   to   confirm   the   award   or  
set  it  aside.  But  that’s  not  what  Vaden  holds,  nor  is  it  a  logical  
extension  of  Vaden’s  holding.  
     Vaden   dealt   with   a   petition   under   9   U.S.C.   §4   to   compel  
arbitration.   Section   4   provides   that   a   district   court   may   do  
this   if,   “save   for   such   [arbitration]   agreement,   [it]   would  
have   jurisdiction   under   title   28,   in   a   civil   action   …   arising  
out  of  the  controversy  between  the  parties”.  In  other  words,  
if  the  claim  sought  to  be  arbitrated  arises  under  federal  law  
(or  §1332  applies),  then  per  §4  the  district  court  has  subject-­‐‑
No.  15-­‐‑1846                                                                 5  

matter   jurisdiction   of   a   suit   seeking   an   order   to   arbitrate.  
That’s  what  Vaden  concluded.  
    Section   4   does   not   deal   with   requests   to   enforce   or   set  
aside  an  arbitrator’s  decision.  Section  9  deals  with  confirma-­‐‑
tion   and   §10   with   vacatur.   Neither   §9   nor   §10   has   any   lan-­‐‑
guage   comparable   to   that   on   which   the   Supreme   Court   re-­‐‑
lied   in   Vaden.   Long   before   Vaden   we   had   reached   the   same  
conclusion  about  the  effect  of  §4,  and  we  also  had  held  that  a  
federal  issue  resolved  by  the  arbitrator  does  not  supply  sub-­‐‑
ject-­‐‑matter   jurisdiction   for   review   or   enforcement   of   the  
award.  See  Stone  v.  Doerge,  328  F.3d  343,  345  (7th  Cir.  2003);  
Minor   v.   Prudential   Securities,   Inc.,   94   F.3d   1103   (7th   Cir.  
1996).  Other  circuits  agree  with  us.  See,  e.g.,  Carter  v.  Health  
Net  of  California,  Inc.,  374  F.3d  830,  836  (9th  Cir.  2004);  Green-­‐‑
berg  v.  Bear,  Stearns  &  Co.,  220  F.3d  22,  26–27  (2d  Cir.  2000);  
Kasap   v.   Folger   Nolan   Fleming   &   Douglas,   Inc.,   166   F.3d   1243,  
1247  (D.C.  Cir.  1999);  Collins  v.  Blue  Cross  Blue  Shield  of  Mich-­‐‑
igan,  103  F.3d  35  (6th  Cir.  1996).  
     This   conclusion   harmonizes   the   law   of   arbitration   with  
the  law  of  contracts—appropriate  because  arbitration  usual-­‐‑
ly  is  a  matter  of  contract,  and  the  arbitrator  usually  serves  as  
the  parties’  mutual  agent  to  resolve  a  dispute  that  the  parties  
could   have   resolved   themselves.   Put   FINRA   and   its   rules  
aside   for   a   moment   and   consider   what   would   have   hap-­‐‑
pened  if  Magruder  had  sued  Fidelity  under  the  federal  secu-­‐‑
rities  laws,  contending  that  Fidelity  had  violated  §240.15c3–
3(l)(1).  Most  litigation  ends  in  settlement—which  is  to  say,  in  
a   contract.   If   Magruder   and   Fidelity   had   reached   a   contrac-­‐‑
tual   solution   but   later   disagreed   about   performance,   could  
they   return   to   federal   court   under   the   securities   laws?   The  
answer  is  no.  Kokkonen  v.  Guardian  Life  Insurance  Co.,  511  U.S.  
6                                                                   No.  15-­‐‑1846  

375   (1994),   holds   that,   if   parties   settle   litigation   that   arose  
under   federal   law,   any   contest   about   that   settlement   needs  
an   independent   jurisdictional   basis—and   as   most   contracts  
are  governed  by  state  law,  this  knocks  out  §1331  (unless  per-­‐‑
chance   the   district   court   entered   the   settlement   as   a   judg-­‐‑
ment   or   reserved   jurisdiction   to   enforce   it).   Our   conclusion  
in  Doerge  and  Minor  that  a  federal  question  can  suffice  to  or-­‐‑
der   arbitration   under   §4,   but   not   to   enforce   or   set   aside   the  
decision   under   §9   or   §10,   parallels   the   distinction   Kokkonen  
draws  between  an  original  federal  claim  and  a  dispute  about  
its  contractual  resolution.  
     One  passage  in  Lefkovitz  v.  Wagner,  395  F.3d  773  (7th  Cir.  
2005),   could   be   read   as   inconsistent   with   Doerge   and   Minor.  
We  remarked  of  one  particular  arbitration:  “[T]here  was  nei-­‐‑
ther   complete   diversity   nor   a   federal   question;   and   an   arbi-­‐‑
tration  award  cannot  be  enforced  in  federal  court  unless  the  
dispute  giving  rise  to  the  award  would  have  been  within  the  
court’s  jurisdiction  to  resolve  had  the  dispute  given  rise  to  a  
lawsuit   rather   than   to   an   arbitration.”   395   F.3d   at   781.   This  
implies  a  belief  that,  if  the  arbitrator  resolves  a  federal  issue,  
then   §1331   supplies   jurisdiction   over   an   action   under   §9   or  
§10.  But  Lefkovitz  did  not  hold  this;  it  stated  that  neither  com-­‐‑
plete   diversity   nor   a   federal   question   existed.   Lefkovitz   did  
not   discuss   Doerge   or   Minor   and   had   no   reason   to   do   so.  
Even  when  a  federal  court  finds  jurisdiction,  as  this  passage  
in   Lefkovitz   did   not,   an   unreasoned   assertion   of   jurisdiction  
lacks   precedential   value.   See,   e.g.,   Steel   Co.   v.   Citizens   for   a  
Better   Environment,   523   U.S.   83,   90–92   (1998)   (drive-­‐‑by   juris-­‐‑
dictional  rulings  may  be  ignored).  The  question  addressed  in  
Doerge,  Minor,  and  our  decision  today  simply  was  not  on  the  
table  in  Lefkovitz,  which  does  not  modify  circuit  law.  
No.  15-­‐‑1846                                                                7  

    Neither  §1331  nor  §1332  authorizes  resolution  of  the  par-­‐‑
ties’  dispute  about  the  arbitrator’s  decision.  The  judgment  of  
the   district   court   is   vacated,   and   the   case   is   remanded   with  
instructions  to  dismiss  for  lack  of  subject-­‐‑matter  jurisdiction.  
