In the
United States Court of Appeals
For the Seventh Circuit

No. 99-4177

Elio Del Vecchio,

Plaintiff-Appellant,

v.

Conseco, Inc., Bankers National Life
Insurance Company, and Great American
Reserve Insurance Company,

Defendants-Appellees.



Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. IP 98-0091-C H/G--David F. Hamilton, Judge.


Argued May 8, 2000--Decided October 23, 2000



      Before Bauer, Posner, and Diane P. Wood, Circuit
Judges.

      Diane P. Wood, Circuit Judge. At one time, Elio
Del Vecchio held a $5,000 whole life insurance
policy issued by Bankers National Life Insurance
Company (Bankers Life). Many years later, he
turned it in and replaced it with a $10,000
universal life policy. He thought, in essence,
that he could transform the $5,000 policy into
the $10,000 policy for free. When that turned out
not to be true, he sued Conseco, Bankers Life,
and Great American Reserve Insurance Company for
defrauding him by inducing him to make the trade.
Del Vecchio’s suit was brought on behalf of
himself and other purchasers of the defendants’
life insurance products who had been similarly
defrauded. Because we find that the federal
courts do not have jurisdiction over this case,
it must be dismissed on that basis.

I

      In 1947, Del Vecchio purchased his $5,000 whole
life insurance policy from Bankers Life. For the
next 20 years, he paid premiums, and in 1967
Bankers Life informed him that he was "paid up"
and that his policy would remain in effect
without any further premium payments.
       In 1982, a Bankers Life agent, Joseph Gennaco,
contacted Del Vecchio and tried to convince him
to turn in his $5,000 whole life policy and
replace it with a $10,000 universal life policy.
Gennaco told him that after his initial premium
payment (equal to the value of his surrendered
policy, which was $3,137.27), he would not have
to make any further premium payments on the new
policy. As Del Vecchio understood it, Gennaco in
effect told him that he could double the size of
his policy without having to pay any additional
money.

      After mulling over Gennaco’s proposal for a
full two years, Del Vecchio purchased the new
policy in 1984. The policy included a "Table of
Premiums and Values," and it explained the table
as follows:

TABLE OF VALUES--Minimum Cash Values are shown in
the table on Page 4 ["Table of Premiums and
Values"] on the assumption that the Scheduled
Premiums are paid as shown. These values are
based on the Guaranteed Interest Rate and the
Maximum Annual Risk Charges shown in the table on
Page 9, and on the assumption that no loans,
partial withdrawals nor additional premium
payments are made.

      In 1985, Del Vecchio received his first policy
statement. The statement included the following
language:

With no loans, partial withdrawals, or future
increases made after this report date, based upon
current assumptions, your policy will remain in
force until maturity with no future premiums.

And, based upon guaranteed assumptions, your
policy will remain in force until 5/20/1997 with
no future premiums.

For the next nine years, Del Vecchio continued to
receive annual statements from Bankers Life. In
1994, however, he was distressed to observe that
for the first time, the actual cash value of his
policy was less than the cash value "guaranteed"
by the policy, by $366. The actual cash value was
$3,810 (the amount he would receive if he were to
surrender his policy), while the "cash surrender
loan value" listed for year 11 of the policy in
the "Table of Premiums and Values" was $4,176.
The shortfall increased every year thereafter.
Del Vecchio never paid any premium payments
beyond his initial payment on the new $10,000
policy.

      Believing that he had been duped by the
company’s representations at the time he made the
switch in policies, Del Vecchio filed a class-
action lawsuit in federal court in 1998. His
complaint included six counts, all based on state
law, including, among others, breach of contract,
fraudulent misrepresentation, and breach of
fiduciary duty. The district court granted the
defendants’ motion for summary judgment on the
basis that the statutes of limitations for Del
Vecchio’s various claims had run. Del Vecchio
appeals.

II

      In his complaint, Del Vecchio asserted that
federal jurisdiction was proper under 28 U.S.C.
sec.sec. 1332 and 1367. But in order to support
jurisdiction under sec. 1332, two requirements
must be satisfied: complete diversity of
citizenship between the plaintiffs and the
defendants, and the proper amount in controversy
(now and when Del Vecchio sued, more than
$75,000). Del Vecchio’s problem is not the
citizenship requirement, as the parties are
clearly diverse: Del Vecchio’s domicile is in
Massachusetts, while each of the three corporate
defendants is incorporated in either Indiana or
Texas, and all have their principal place of
business in Indiana. Rather, Del Vecchio’s
difficulty lies in meeting the amount in
controversy requirement.

      Snyder v. Harris, 394 U.S. 332 (1969), held
that Fed. R. Civ. P. 23 does not alter the
general rule that multiple persons’ claims cannot
be combined to reach the minimum amount in
controversy. A few years later, the Court
extended Snyder’s rule to the situation in which
the named plaintiff’s claim met the statutory
amount in controversy, but unnamed class members
had claims that did not. See Zahn v.
International Paper Co., 414 U.S. 291 (1973).
Since the passage of the supplemental
jurisdiction statute, 28 U.S.C. sec. 1367, there
has been a conflict in the circuits on the
question whether Zahn’s holding survives the
enactment of sec. 1367. This court concluded that
it did not, in Stromberg Metal Works, Inc. v.
Press Mechanical, Inc., 77 F.3d 928, 930-33 (7th
Cir. 1996). Although it had appeared that the
Supreme Court would resolve the issue, it did not
in the end, instead affirming by an equally
divided court the Fifth Circuit’s decision (which
had taken the same position as Stromberg Metal
Works) in In re Abbott Laboratories, 51 F.3d 524,
528-29 (5th Cir. 1995), aff’d as Free v. Abbott
Laboratories, Inc., 120 S.Ct. 1578 (2000). In any
event, the issue has been settled for this
circuit’s purposes for some time. See also In re
Brand Name Prescription Drugs, 123 F.3d 599, 609
(7th Cir. 1997). Ultimately, though, the
continuing vitality of Zahn is irrelevant here,
because unless we were to accept some of Del
Vecchio’s more creative arguments (which we
discuss below), this case fits into the Synder
pattern rather than the Zahn one. And, as we now
explain, Del Vecchio’s suit cannot proceed under
Snyder.

      Del Vecchio’s complaint included the following
allegations about the amount in controversy:

The amount-in-controversy exceeds $75,000,
exclusive of interests and costs. Specifically,
Plaintiff has alleged unjust enrichment and seeks
the imposition of a constructive trust. As a
result, he has an undivided interest in the full
recovery in this action, which will substantially
exceed the necessary jurisdictional amount.

From the language of his pleading, it appears
that Del Vecchio was trying to evade Snyder by
framing the amount in controversy in terms of
what the defendants would have at stake if the
class action were certified: their total unjust
enrichment over which Del Vecchio seeks the
imposition of a constructive trust. (Presumably,
he is proposing to act as the trustee for the
other class members.) Del Vecchio’s theory,
however, amounts to a complete end-run around the
principles enunciated in Snyder. See In re Brand
Name Prescription Drugs, 123 F.3d at 610
(discussing this problem). While this court has
adopted the "either viewpoint" approach (that is,
the amount in controversy can be determined from
either the plaintiff’s or the defendant’s
viewpoint), see McCarty v. Amoco Pipeline Co.,
595 F.2d 389, 395 (7th Cir. 1979), cited in In re
Brand Name Prescription Drugs, 123 F.3d at 609,
we have nonetheless maintained that "[w]hatever
the form of relief sought, each plaintiff’s claim
must be held separate from each other plaintiff’s
claim from both the plaintiff’s and the
defendant’s standpoint." In re Brand Name
Prescription Drugs, 123 F.3d at 610. That means,
for Del Vecchio, that the amount in controversy
from the defendants’ point of view is the amount
they risk paying him, not the amount they might
have to pay the entire class.

      Furthermore, this case does not fit into the
narrow exceptions to the anti-aggregation rule
recognized by the Snyder Court. It is not a case
where there is one res at issue, such as an
estate. In those cases, it is proper to consider
the value of the entire res for purposes of
determining jurisdiction, for even if several
plaintiffs have a claim to it, the recovery is
nonetheless a unitary whole that must then be
divided. See, e.g., Shields v. Thomas, 58 U.S.
(17 How.) 3, 4-5 (1854); Gilman v. BHC
Securities, Inc., 104 F.3d 1418, 1422-23 (2d Cir.
1997) (discussing Shields and the development of
the "common fund exception" to the "non-
aggregation rule"). This is not such a situation,
as each of the insureds Del Vecchio wants to
represent is entitled to his or her own separate
recovery. Under Snyder, Del Vecchio simply cannot
satisfy the amount in controversy requirement by
framing it in terms of the aggregate amount by
which Bankers Life and the other defendants have
been unjustly enriched through their insurance
contracts with the various unnamed class members.

      Noting this problem with jurisdiction, and our
duty to dismiss the case if jurisdiction is
lacking, McNutt v. General Motors Acceptance
Corp., 298 U.S. 178, 186-87 (1936), we asked the
parties to submit supplemental briefing regarding
the amount in controversy. Del Vecchio responded
by claiming that not only he, but each and every
class member, would be able to assert such high
punitive damages in good faith that each class
member individually would meet the amount
required by sec. 1332, and that the total amount
in controversy has ballooned to $1.5 billion. See
Bell v. Preferred Life Assurance Society, 320
U.S. 238, 240 (1943) (where both actual and
punitive damages are recoverable, each must be
considered to determine jurisdictional amount).
The defendant insurance companies also appear to
rely on the availability of punitive damages, as
we explain below, though they principally
complain that everyone proceeded in good faith
below and that they do not wish to lose their
favorable judgment on the merits.

      We have no quarrel in principle with the idea
that punitive damages may sometimes be taken into
account in deciding whether the proper amount is
in controversy. As we have written before:

[w]here punitive damages are required to satisfy
the jurisdictional amount in a diversity case, a
two-part inquiry is necessary. The first question
is whether punitive damages are recoverable as a
matter of state law. If the answer is yes, the
court has subject matter jurisdiction unless it
is clear "beyond a legal certainty that the
plaintiff would under no circumstances be
entitled to recover the jurisdictional amount."

Cadek v. Great Lakes Dragaway, Inc., 58 F.3d
1209, 1211-12 (7th Cir. 1995), quoting Risse v.
Woodard, 491 F.2d 1170, 1173 (7th Cir. 1974).
Generally, we give plaintiffs the benefit of the
doubt in these matters, but a complaint will be
dismissed if it "appear[s] to a legal certainty
that the claim is really for less than the
jurisdictional amount." See, e.g., Gardynski-
Leschuck v. Ford Motor Co., 142 F.3d 955, 957
(7th Cir. 1998), quoting St. Paul Mercury
Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289
(1938). And a claim for actual damages that
vastly exceeds the apparent amount at stake ($600
or so) and asserts a right to punitive damages at
the far upper end of the possible distribution of
outcomes must be assessed critically; otherwise,
the statutory limits on federal court
jurisdiction could be undermined. Compare
Gardynski-Leschuck v. Ford Motor Co., 142 F.3d
955 (7th Cir. 1998).

      Indiana does allow the award of punitive
damages for fraud and breach of fiduciary duty,
and so the first of the two requirements
mentioned above is met. See, e.g., Erie Ins. Co.
v. Hickman by Smith, 622 N.E.2d 515, 519 (Ind.
1993) (breach of duty of good faith); Bud Wolf
Chevrolet, Inc. v. Robertson, 519 N.E.2d 135,
136-37 (Ind. 1988) ("malice, fraud, gross
negligence"). Whether we have jurisdiction, then,
depends on whether, "to a legal certainty," we
are convinced that Del Vecchio is not entitled to
damages sufficient to meet the amount in
controversy requirement. In cases where the
defendants contest punitive damage allegations,
we require the plaintiff to support its claim
with "competent proof," lest fanciful claims for
punitive damages end up defeating the statute’s
requirement of a particular amount in
controversy. See Anthony v. Security Pacific Fin.
Servs., Inc., 75 F.3d 311, 315 (7th Cir. 1996).
Here, in the lower court the defendants were
certainly challenging Del Vecchio’s substantive
claims to entitlement to punitive damages; their
accommodating attitude did not arise until their
supplemental briefs on appeal, at which point
they found themselves in the slightly odd
position of urging that Del Vecchio indeed had
substantial claims for both actual and punitive
damages. We think it appropriate to review the
new punitive damage allegations with the same
level of scrutiny that we would give such
allegations had they been contested for
jurisdictional purposes below.

      The defendants now assert that Del Vecchio’s
compensatory damages could be as much as $15,000:
$5,000 for the policy he traded in and $10,000
for the policy he bought. The defendants then
reason that because Del Vecchio’s complaint
includes claims for which Indiana law provides
punitive damages may be available, it is entirely
possible that punitive damages exceeding $60,000
would be awarded. This, we assume, is not because
they are conceding that their behavior might
rationally be seen by anyone as sufficiently
culpable to deserve such an award; it is only an
observation that a 4 to 1 ratio of punitive to
compensatory damages is not uncommon for these
sorts of claims under Indiana law. See, e.g.,
Schimizzi v. Illinois Farmers Ins. Co., 928 F.
Supp. 760, 783-87 (N.D. Ind. 1996) (surveying
Indiana cases in which punitive damages were
awarded against an insurer).

      This seems like sheer speculation to us,
however, and we do not find it a persuasive
reason to conclude that Del Vecchio individually
has alleged a claim exceeding $75,000 in value.
And in any event, it is Del Vecchio who bears the
burden of proving that the case is properly in
federal court, as it is he who is trying to
invoke federal jurisdiction. McNutt, 298 U.S. at
189; Gilman, 104 F.3d at 1421. But his theory of
jurisdiction fares no better than that of the
defendants. Originally, Del Vecchio took an
approach similar to theirs. In his motion in
opposition to summary judgment, Del Vecchio
listed two types of damages: the shortfall
between the cash value guaranteed by the policy
and the actual cash value (which between 1994 and
1997 amounted to $4,879) and the failure of the
defendants to pay interest on the policy at fair
market rate (no figure is given for this amount,
but given the small dollar amounts at stake, it
cannot be substantial). Being very generous on
the up-side, Del Vecchio’s total damages under
this theory hover somewhere between $5,000 and
$10,000--plainly far short of what he needs.

      In his supplemental brief on appeal, Del
Vecchio abandons this theory for an entirely
different tack. He now asserts (perhaps in
partial response to some of the exchanges that
occurred at oral argument) that his compensatory
damages amount to a mere $600, which represents
the amount of the cash value lost between the
years 1988 and 1996. On top of that modest
figure, he claims that a punitive damage award in
the (coincidental?) amount of $75,000 (a ratio of
125 to 1) would be appropriate here. With all due
respect, these new claims strike us as bordering
on the farcical. (Del Vecchio also asserts that
he plans to represent a class of 200,000 policy
holders who have been similarly defrauded, each
of whom would be entitled to a similarly large
punitive damage award. The total recovery that
Del Vecchio expects is the enormous sum of $1.5
billion.)

      Although it is not unheard of for Indiana
courts to uphold punitive damage awards that
exceed the underlying compensatory awards by
several multiples, a multiplier of 125 lies at
the very outer edge of awards that have been
allowed. As we explained in Anthony, 75 F.3d at
317-18, where we faced a similar situation: "[A]
punitive damage recovery in such a large multiple
of a compensatory recovery as [125] times
stretches the normal ratio, and would face
certain remittitur. Considering the nature of
their claim and the amount of the potential
compensatory damage awards on that claim, a
punitive damages recovery if rendered for the
amount necessary to exceed $[75,000] would be
excessive." (Citations omitted.) Lenient though
it is, the St. Paul test for satisfying the
jurisdictional amount has some outer limits, and
we conclude that Del Vecchio has exceeded them.
His individual claim does not meet the
requirement of sec. 1332 that more than $75,000
must be at stake, and this is not a case in which
he can rely on the potential claims of his
putative class members.

III

      While we are not unsympathetic to the waste of
effort represented by a case that has been fully
litigated in the wrong court, both the Supreme
Court and we ourselves have noted time and again
that subject matter jurisdiction is a fundamental
limitation on the power of a federal court to
act. See, e.g., Steel Co. v. Citizens for a
Better Environment, 523 U.S. 83, 94-95 (1998);
Indiana Gas Co. v. Home Insurance Co., 141 F.3d
314, 318 (7th Cir. 1998). Once it appears, as it
has here, that subject matter jurisdiction is
lacking, only one path lies open to us. We hereby
Vacate the order dismissing the action on the
merits and Remand the case with orders to dismiss
it for want of federal subject matter
jurisdiction.
