                            In the
United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 02-2298
ESTHER L. GAYMAN,
                                            Plaintiff-Appellant,
                               v.

PRINCIPAL FINANCIAL SERVICES, INC.,
PRINCIPAL FINANCIAL GROUP, INC.,
and PRINCIPAL LIFE INSURANCE COMPANY,
                                         Defendants-Appellees.
                         ____________
       Appeal from the United States District Court for the
         Northern District of Illinois, Western Division.
         No. 01 C 50346—Philip G. Reinhard, Judge.
                         ____________
 ARGUED NOVEMBER 7, 2002—DECIDED NOVEMBER 22, 2002
                    ____________


 Before BAUER, EASTERBROOK, and MANION, Circuit
Judges.
  EASTERBROOK, Circuit Judge. Principal Life Insurance
Co. converted from mutual to stock form in 2001. Although
the insurer itself had converted in 1998, it became a
wholly owned subsidiary of Principal Mutual Holding Co.,
which remained a mutual. This left the policyholders with
voting control and the right to receive any surplus should
the insurer liquidate, but it saddled the firm with a major
drawback—inability to raise capital via the stock market.
In the 2001 reorganization all vestiges of the mutual form
2                                              No. 02-2298

vanished. Conversion was authorized unanimously by the
holding company’s board of directors (elected by the policy-
holders) and ratified by 92% of those policyholders who
participated in the vote. Iowa, under whose law the firms
are organized, permits demutualization if the policyhold-
ers and the Commissioner of Insurance approve. See Iowa
Code §§ 508B2, 521A.14(5)(b). Administrative approval
was given on August 28, 2001, and the conversion occurred
on October 26, 2001.
   Dissenting policyholders could have sought judicial re-
view of the Commissioner’s decision under Iowa law but
did not. They might have asked the state courts to review
the transaction for compliance with state law but did not.
Instead policyholder Esther Gayman filed this suit in fed-
eral court, purportedly under 42 U.S.C. §1983, against the
insurer and its new parent corporations. (The suit also
named as defendants the old holding company and other
firms that vanished in the transaction. Their rights and
liabilities have been assumed by the surviving firms. We
have reformed the caption to list only the extant entities.)
According to the complaint, defendants violated the fed-
eral Constitution in numerous ways, all of which are var-
iations on the theme that they took the policyholders’
“property” (the right to receive any liquidating distribu-
tion) without just compensation. But a claim under §1983
is tenable only if the defendants acted under color of state
law—in other words, if they are state actors. See Rendell-
Baker v. Kohn, 457 U.S. 830, 838 (1982). The district
judge concluded that they are not and dismissed the suit
under Fed. R. Civ. P. 12(b)(1), for it cannot be recast as a
state-law claim under the diversity jurisdiction (Gayman
does not contend that her extinguished rights were worth
more than $75,000).
  According to Gayman, the insurer and its holding-com-
pany structure are state actors for two reasons: first, they
took advantage of provisions in state law that authorized
No. 02-2298                                                3

the conversion (and, she says, valued her interest below
its true worth); second, they sought and obtained permis-
sion from the Commissioner of Insurance. Neither of these
elements, however, demonstrates state action. The impetus
and the actors remain private. That “a business is sub-
ject to state regulation does not by itself convert its ac-
tion into that of the State for purposes of the Fourteenth
Amendment.” Jackson v. Metropolitan Edison Co., 419 U.S.
345, 350 (1974). See also, e.g., Blum v. Yaretsky, 457 U.S.
991 (1982); Flagg Bros., Inc. v. Brooks, 436 U.S. 149 (1978).
Nor does the need to obtain official approval turn private
action into public action. See, e.g., American Manufacturers
Mutual Insurance Co. v. Sullivan, 526 U.S. 40 (1999).
Putting state regulation together with official approval
does not affect the outcome: 0 + 0 = 0.
  If things were otherwise, most if not all private acts
would be attributed to the state and subject to constitu-
tional limitations—even though these limitations are
designed to protect people from government rather than
from each other. See DeShaney v. Winnebago County
Department of Social Services, 489 U.S. 189 (1989); Archie
v. Racine, 847 F.2d 1211 (1988) (en banc). All corporate
management is subject to control under state law (includ-
ing judicial review of managers’ competence and loyalty);
some decisions require advance approval; yet it would
be preposterous to say that all corporate acts therefore
are state acts. One might as well contend that all lawyers’
deeds are state action because lawyers have licenses
and are subject to regulation on ethics and other subjects,
or that all landlords are state actors because buildings
must conform to zoning and safety codes.
  A real state actor was involved in the demutualization:
Iowa’s Commissioner of Insurance. But she has not been
sued, perhaps because any claim that the Commissioner
took Gayman’s property would be frivolous. See Ordower
v. Office of Thrift Supervision, 999 F.2d 1183, 1187 (7th
4                                              No. 02-2298

Cir. 1993). The transaction was initiated and ratified by
the policyholders. Iowa did not compel any mutual to
convert; it just made reorganization possible, as state cor-
porate law facilitates mergers. Until early in the Twenti-
eth Century mergers required unanimous consent, and
in many states corporate charters were special legisla-
tive grants. Today anyone can incorporate and mergers
may be approved by majority vote. Those legal changes,
which facilitate private ordering, did not turn corpora-
tions into state actors. Instead they enlarged the scope
of private law. Just so for mutual-to-corporate conversions.
If the opportunity to buy securities at a discount (the
normal replacement for policyholders’ residual claims,
see Ordower and, e.g., SEC v. Jakubowski, 150 F.3d 675
(7th Cir. 1998)) was inadequate here, the proper remedy
was a suit in state court under state law seeking an order
blocking the conversion or altering its terms.
                                                 AFFIRMED

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit




                  USCA-02-C-0072—11-22-02
