In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 07-1708, 07-1821
OLYMPIA EXPRESS, INC. and NEOTOURS, LTD.,
Plaintiffs-Appellees,
Cross-Appellants,
v.
LINEE AEREE ITALIANE, S.P.A., doing business as
ALITALIA AIRLINES,
Defendant-Appellant,
Cross-Appellee.
____________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 02 C 2858—Sidney I. Schenkier, Magistrate Judge.
____________
ARGUED NOVEMBER 5, 2007—DECIDED NOVEMBER 30, 2007
____________
Before POSNER, EVANS, and SYKES, Circuit Judges.
POSNER, Circuit Judge. Alitalia appeals from an $8.5
million judgment in a suit for breach of contract under
Illinois law. The suit, brought by two firms that sell tickets
for seats on Alitalia flights, had been filed in an Illinois
state court. But Alitalia removed it to the federal district
court in Chicago under the Foreign Sovereign Immunities
2 Nos. 07-1708, 07-1821
Act (codified in 28 U.S.C. §§ 1330(a), 1441(d), 1602-1611),
at a time when the Italian government was Alitalia’s
majority shareholder. That made Alitalia a foreign-gov-
ernment instrumentality (a “foreign state,” in the language
of the Act) fully subject to the Act, 28 U.S.C. §§ 1603(a),
(b)(2), and therefore entitled to remove the case to federal
district court. The removal provision, 28 U.S.C. § 1441(d);
see In re Air Crash Disaster Near Roselawn, Indiana, 96 F.3d
932, 936 (7th Cir. 1996); Rex v. Compania Pervana de Vapores,
S.A., 660 F.2d 61, 63-64 (3d Cir. 1981), states that “upon
removal the action shall be tried by the court without jury.”
But after the case was removed, the Italian government
sold its majority shareholding in Alitalia, and the plain-
tiffs—four years into the case—demanded a jury. The
district court agreed to the demand. Alitalia sought
mandamus to prevent the jury trial, but while its petition
for mandamus was pending, the jury trial (which had not
been stayed) was held, resulting in the judgment from
which Alitalia now appeals. We denied the petition
without considering the merits of Alitalia’s claim to be
entitled to a nonjury trial. In re Linee Aeree Italiane (Alitalia),
469 F.3d 638 (7th Cir. 2006). So if the Foreign Sovereign
Immunities Act entitled it to a nonjury trial, we must
vacate the judgment. Matthews v. CTI Container Transport
Int’l, Inc., 871 F.2d 270, 282 (2d Cir. 1989); Houston v.
Murmansk Shipping Co., 667 F.2d 1151, 1154-55 (4th Cir.
1982); cf. Fisher v. Danos, 671 F.2d 904, 906 (5th Cir. 1982).
The only basis of federal jurisdiction in this case, at
least when it was filed and thus before Alitalia’s con-
version to a private firm, was the removal provision that
we cited. Because the suit arose under state rather
than federal law, it could not have been brought in or
removed to a federal district court under the federal-
Nos. 07-1708, 07-1821 3
question jurisdiction. Nor under the diversity jurisdic-
tion; a suit against a foreign state is not within that juris-
diction. 28 U.S.C. § 1332(a)(4); Ruggiero v. Compania Peruana
de Vapores Inca Capac Yupanqui, 639 F.2d 872, 875-76 (2d Cir.
1981) (Friendly, J.). (A suit by a foreign state against citi-
zens of one or more U.S. states is. 28 U.S.C. § 1332(a)(4).)
The district court thought that Alitalia’s conversion
changed the jurisdictional basis of the suit from foreign
sovereign immunity to diversity of citizenship. But in
Dole Food Co. v. Patrickson, 538 U.S. 468, 478-80 (2003),
the Supreme Court had held that whether the defendant is
a foreign state within the meaning of the Foreign Sover-
eign Immunities Act is to be determined on the basis of
the facts in existence when the suit was filed, and if this
principle governs our case the jurisdictional basis has not
changed.
The specific question in Dole was whether the Act
applied to a company that had ceased to be a “foreign
state” before it was sued rather than, as in our case, after.
But the Court based its decision on the familiar rule—
emphatically reaffirmed after Dole, in Grupo Dataflux v.
Atlas Global Group, L.P., 541 U.S. 567 (2004)—that juris-
diction is determined by the facts that exist when the suit
is filed. 538 U.S. at 478. It would be a big surprise to
discover that the Court has changed its mind and now
thinks that jurisdiction under the Foreign Sovereign
Immunities Act is determined when a party demands a
jury trial—in this case, demands it years after the suit
was first removed to federal district court under section
1441(d).
So the district court was wrong to think that when
Alitalia was privatized the jurisdictional basis of this
suit switched to diversity, which allows a suit by a U.S.
4 Nos. 07-1708, 07-1821
citizen against a foreign citizen, 28 U.S.C. § 1332(a)(2), as
distinct from a foreign state instrumentality. “There is no
doubt that 28 U.S.C. § 1330(a) and its counterpart dealing
with removal, § 1441(d), are the sole source of a district
court’s jurisdiction over a civil action against a foreign
state as defined by the FSIA.” Houston v. Murmansk Ship-
ping Co., supra, 667 F.2d at 1153.
We have found only two previous cases in which the
defendant ceased to be a “foreign state” after the suit
was filed. Leith v. Lufthansa German Airlines, 897 F. Supp.
1115 (N.D. Ill. 1995), held that the change of status did not
take the case outside the Foreign Sovereign Immunities
Act. Matton v. British Airways Board, Inc., No. 85 CIV. 1268,
1988 WL 117456, at *3 (S.D.N.Y., Oct. 27, 1988), held that
it did. We agree with Leith; the jurisdictional basis of the
suit continued to be, and remains, that Act, and nothing
else. But this does not mean that a change in the defen-
dant’s status that occurs after a suit is filed cannot alter
the plaintiffs’ right to a jury trial. A demand for a jury
trial is made “after [rather than at] the commencement of
the action and not later than 10 days after the service of
the last pleading directed to [an issue triable of right by
a jury].” Fed. R. Civ. P. 38(b). And while in this case the
demand was filed much later, it could be argued that the
deadline should be tolled whenever an unforeseen
change eliminates a bar to the demand—especially in this
case, because Alitalia stipulated that it would not object
to the plaintiffs’ demand for a jury trial on the ground
that it was untimely.
The tolling of the 10-day deadline would certainly be
impermissible were the bar to a jury trial in section 1441(d)
itself jurisdictional. That section is, we have just seen,
the only basis upon which this case is within federal
Nos. 07-1708, 07-1821 5
jurisdiction. Jurisdiction is power, as Holmes famously
said, Cordova v. Grant, 248 U.S. 413, 419 (1919); Michigan
Trust Co. v. Ferry, 228 U.S. 346, 356 (1913); see also Steel Co.
v. Citizens for a Better Environment, 523 U.S. 83, 94 (1998);
Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514 (1869), and the
power conferred by section 1441(d) does not include the
power to conduct a jury trial. The plaintiffs argue that the
ban on trial by jury in section 1441(d) cannot be important
enough to affect jurisdiction because the section is not
even a part of the Foreign Sovereign Immunities Act.
But that is incorrect. Both that section and 28 U.S.C.
§§ 6202-6211 are provisions of the Act (along with 28
U.S.C. § 1330(a), of which more in a moment). See Public
Law 94-583, 90 Stat. 2891 (Oct. 21, 1976). They simply
were codified in different parts of Title 28. Section 1441(d)
confers removal jurisdiction and was therefore grouped
with other, similar provisions.
What is true is that jurisdiction usually refers to a
court’s authority to entertain a case, rather than to pro-
cedural incidents such as whether to convene a bench trial
or a jury trial. Against this, however, can be cited the
text of 28 U.S.C. § 1330(a). Although the plaintiffs filed
this suit in state court, they could have filed it in federal
district court under—and only under—that section,
which provides that “the district courts shall have orig-
inal jurisdiction without regard to amount in controversy
of any nonjury civil action against a foreign state.” (Empha-
sis added.) That reads like a conferral of jurisdiction only
over nonjury suits, rather than the conferral of a broader
jurisdiction and then, incidentally as it were, an instruc-
tion to the judge not to convene a jury. The latter is a
more natural reading of section 1441(d). But it can’t be
right that if one brings a suit directly in federal court
6 Nos. 07-1708, 07-1821
against a foreign state a jury trial is absolutely barred,
while if instead one brings the identical suit in state
court and the foreign state removes it to the same federal
district court a subsequent change in the defendant’s
status may enable the plaintiff to obtain a jury trial. Cf.
Ruggiero v. Compania Peruana de Vapores Inca Capac
Yupanqui, supra, 639 F.2d at 876 n. 7.
Yet the court in the Houston case, which we cited earlier,
held that the bar to jury trial in sections 1330(a) and 1441(d)
is not jurisdictional; and though decided many years
ago, Houston remains the only decision to have ad-
dressed the question. The foreign-state defendant had
prevailed with the jury and was opposing the plaintiff’s
argument that the case must be retried without one,
though it was the plaintiff that had demanded the jury
and the defendant that had opposed the demand. Since
the bar in the Foreign Sovereign Immunities Act to trial by
jury is intended for the benefit of the foreign-state defen-
dant, it would have been a considerable paradox to
invoke the concept of subject-matter jurisdiction to force
that defendant, after it had prevailed in a jury trial, to
undergo a bench trial. There was every reason to termi-
nate the litigation on the basis of the jury verdict in favor
of the foreign-state defendant even though the plaintiff’s
demand for a jury should have been refused.
The facts of Houston make us reluctant to conclude that
the bar to a jury trial in a case under the Foreign Sover-
eign Immunities Act is jurisdictional, so that a jury trial in
a case governed by the Act must be treated as a nullity
even if the consequence would be to disserve the Act’s
purpose. We are mindful that the Supreme Court stated
emphatically just last term that “a clear and explicit
withdrawal of jurisdiction withdraws jurisdiction.” Rockwell
Nos. 07-1708, 07-1821 7
Int’l Corp. v. United States, 127 S. Ct. 1397, 1405 (2007)
(emphasis in original). But the Court distinguished that
case from one in which a statute confers “jurisdiction” to
issue a particular remedy, id.; or (we add), as in this case,
to provide a particular form of hearing. So Houston is not
undermined by Rockwell, but neither does it dictate
affirmance of the district court in this case. Far from it. The
basis of federal jurisdiction remains, as we have ruled,
section 1441(d), and nothing else. And that section
forbids a jury trial. Unless the prohibition is jurisdic-
tional, it can as in Houston be waived or forfeited by the
defendant, for whose benefit it exists. But it was not
waived or forfeited merely by Alitalia’s agreeing not to
object to a jury demand on grounds of untimeliness. Its
objection was and is not to the delay in making the de-
mand, but to the demand itself.
Our conclusion that the demand should not have been
granted because of Alitalia’s change of status follows
not only from the statutory wording but also from con-
siderations of judicial economy and of the underlying
purpose of the Foreign Sovereign Immunities Act. The
reason that Rule 38(b) of the civil rules sets a tight dead-
line for demanding a jury trial is that preparation for a
trial often depends critically on whether it will be a jury
trial or a bench trial. Lay jurors have different levels of
comprehension from professional judges and bring dif-
ferent cognitive and psychological biases to the task of
determining which witnesses to believe and which infer-
ences to draw from the evidence as a whole. Jury con-
sultants, mock juries, and submission of questions for
jury voir dire are illustrations of the preparations that
lawyers make for jury trials but not for bench trials.
Knowing which kind of trial it will be may also facilitate
8 Nos. 07-1708, 07-1821
settlement by dispelling a material uncertainty, since
some claims are known to be more appealing to juries
than to judges, and vice versa.
Moreover, allowing indefinite postponement of the
decision whether the trial shall be to a jury or to the
judge would invite strategic maneuvering. What has
been privatized can be renationalized. Suppose that con-
fronted with an unexpected demand for a jury trial a
privatized defendant owned 49 percent by the govern-
ment asks the government to repurchase 2 percent of the
shares from the private stockholders; conversely, sup-
pose that a defendant 51 percent owned by its govern-
ment decides when it is sued that it would prefer a jury
trial and so it asks its government to sell 2 percent of the
shares from the government’s holding, which the govern-
ment could then repurchase after the suit was over.
On all these counts it is vital, especially in a suit brought
under the Foreign Sovereign Immunities Act, that the
parties know as soon as possible after a case is filed
whether if there is a trial it will be to the judge or to a
jury. That would be a compelling reason why, even if the
district court had been correct that the Act had fallen out
as the jurisdictional basis of the suit and been replaced by
28 U.S.C. § 1332(a)(2), we would not countenance the
tolling of the 10-day deadline in Rule 38(b) because of
Alitalia’s change of status. Rule 39(b) allows the district
court to grant an untimely demand for a jury, but only, the
courts have held, if a good reason for the belated de-
mand is shown. Pacific Fisheries Corp. v. HIH Casualty &
General Ins., Ltd., 239 F.3d 1000, 1002 (9th Cir. 2001); SEC v.
Infinity Group Co., 212 F.3d 180, 195-96 (3d Cir. 2000).
Alitalia’s change of status might seem to be a good reason,
cf. Marseilles Hydro Power, LLC v. Marseilles Land & Water
Nos. 07-1708, 07-1821 9
Co., 299 F.3d 643, 649-50 (7th Cir. 2002), but it is not,
quite apart from the practical concerns of preparation
and predictability that we have emphasized so far. The
purpose of foreign sovereign immunity—“to give foreign
states and their instrumentalities some protection from
the inconvenience of suit as a gesture of comity between
the United States and other sovereigns,” Dole Food Co. v.
Patrickson, supra, 538 U.S. at 479—does not fall out of the
picture when a foreign-state entity is privatized. If the
result of the jury trial in this case is allowed to stand,
foreign governments may think twice before privatizing
one of its instrumentalities that has been sued in a U.S.
court. The timing of foreign governments’ decisions on
whether and when to privatize their instrumentalities
would be affected, creating a complication in these gov-
ernments’ decision-making process that could be an irritant
in their relations with the United States. Although the
plaintiffs brandish the Seventh Amendment at us, we are
confident that neither the 10-day deadline in Rule 38(b),
nor our refusal to countenance its being tolled in this
case, violates the amendment.
So Alitalia, we conclude at long last, was entitled to a
nonjury trial. And since the facts found on remand may
differ from those found by the jury in the trial that our
decision sets at naught, we shall not comment on the
merits of either the appeal or the cross-appeal (in which
the plaintiffs seek relief beyond what they got in the
district court)—except with regard to Alitalia’s statute of
frauds defense. That issue was decided by the magistrate
judge, is fully briefed here, and will govern the scope of
the breach and damages issues on remand; it would be
a waste of judicial resources to defer decision on it.
The question is whether the 2000 agreement between the
plaintiffs and Alitalia identifies the parties’ obligations
10 Nos. 07-1708, 07-1821
with sufficient certainty to be enforceable. On the answer
depends whether the liability and damages issues are
limited to the period covered by the parties’ 2001 sup-
plementary agreement (which Alitalia concedes satis-
fies the statute of frauds) or encompass the entire 2001-2005
contract period, as the magistrate judge ruled. We con-
clude that the 2000 agreement did not specify the parties’
obligations with sufficient certainty to comply with the
requirements of the statute of frauds. The agreement
specified neither price nor quantity nor a formula for
computing them. Price was to be based on “market needs”
and quantity on “mutually determined goals.” Price and
quantity were, of course, essential terms. Without them,
there was no enforceable contract. The magistrate
judge’s error was to allow oral evidence to be used to fill
the missing gaps, which destroys the purpose of re-
quiring that the essential terms of a contract governed by
the statute of frauds be in writing to be enforceable. Bartsch
v. Gordon N. Plumb, Inc., 485 N.E.2d 1105, 1111 (Ill. App.
1985); Monetti, S.P.A. v. Anchor Hocking Corp., 931 F.2d
1178, 1180-81 (7th Cir. 1991) (Illinois law). The remand
shall therefore be limited to the 2001 time period.
The other issues we remit to the nonjury trial. But to
provide further guidance on remand, we address an
ambiguity in the meaning of the term “nonjury trial.” Does
it mean that the trial must be conducted in the absence of
a jury, or merely that the “verdict” must be rendered by
the judge rather than by a jury? We think it is latter. In
many trials some factual issues are to be resolved by a
jury and others by a judge, e.g., Brine v. University of
Iowa, 90 F.3d 271 (8th Cir. 1996); Nelson v. J.C. Penney Co.,
75 F.3d 343 (8th Cir. 1996); Young v. Miller, 883 F.2d 1276
(6th Cir. 1989); Ogonowski v. State, 589 A.2d 513 (Md. App.
Nos. 07-1708, 07-1821 11
1991); People v. Willis, 577 N.E.2d 1215 (Ill. App. 1991), and
in these mixed bench/jury trials all the evidence is intro-
duced in the presence of both triers of fact and the jury
resolves the issues triable by the jury and the judge the
other issues, except that if there are factual issues com-
mon to both the jury- and the judge-tried claims the
jury’s verdict binds the judge. McKnight v. General Motors
Corp., 908 F.2d 104 (7th Cir. 1990).
Consistent with the practice in mixed trials, on remand
the magistrate judge should first decide whether the
development of the facts at the first trial was sufficient
to enable him to make his own findings of fact and con-
clusions of law on both liability and damages. If so, he
need not conduct a further evidentiary hearing; it would
be redundant. Fisher v. Danos, supra, 671 F.2d at 906. But
he may instead realize that he’s forgotten some of the
evidence (the trial took place more than a year ago), or
that since he was not the trier of fact he did not pay as
close attention to it as he would have done in a bench
trial, or that in a bench trial he would have elicited addi-
tional evidence (judges are reluctant to question wit-
nesses in jury trials for fear of confusing jurors about
who is the trier of fact, but there is no similar inhibition
in a bench trial). On any of these assumptions he should
conduct a further evidentiary hearing. Of course if he
takes the first course and decides the case without tak-
ing additional evidence he must give no weight to the
jury’s verdict, for there should not have been such a
verdict.
REVERSED AND REMANDED.
12 Nos. 07-1708, 07-1821
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—11-30-07