NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with
Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted December 8, 2011*
Decided December 12, 2011
Before
JOEL M. FLAUM, Circuit Judge
MICHAEL S. KANNE, Circuit Judge
DIANE S. SYKES, Circuit Judge
No. 10‐3322
BALSHE LLC and DAVID B. SIMON, Appeal from the United States District
Plaintiffs‐Appellees, Court for the Northern District of Illinois,
Eastern Division.
v.
No. 08 C 3256
ALAN J. ROSS, d/b/a
SAVE ASSOCIATES, James B. Zagel,
Defendant‐Appellant. Judge.
O R D E R
Balshe LLC and attorney David Simon (a solo practitioner calling himself The Simon
Law Firm) sued Alan Ross in an Illinois court in 2008 claiming that Ross had violated a
contractual duty to assign Balshe his interest in a patent. Ross, who does business under the
name SAVE Associates, removed the action to federal court based on diversity of
citizenship. 28 U.S.C. § 1332. The parties quickly settled and filed a “stipulation of dismissal
with prejudice.” That stipulation includes language agreeing to the district court’s exercise
of continuing jurisdiction to enforce the settlement. The district court signed an “agreed
*
After examining the briefs and the record, we have concluded that oral argument is
unnecessary. See FED. R. APP. P. 34(a)(2)(C).
No. 10‐3322 Page 2
order” dismissing the lawsuit with prejudice “pursuant to” the settlement. The court
purported to retain jurisdiction to enforce the terms of the settlement but did not include
those terms in the text of its order. Then in 2010, nearly two years after the dismissal, the
parties filed, under the docket number of the original lawsuit, cross‐motions to compel
compliance with their settlement agreement. The district court granted only partial relief for
Ross, and he appeals. We vacate that decision.
As part of their settlement, the parties agreed to create a new entity, owned jointly by
all of them, to hold and commercially exploit Ross’s patent. Yet the parties decided to put
off for future decision the details about the form and operation of the new entity, and a
dispute about those details prompted the two sides to return to the district court. Ross, who
is now pro se, asked the court to excise specific provisions from a draft document that
would form the new entity as a Pennsylvania limited‐liability company; Balshe and Simon
countered that the settlement agreement gives Ross an ownership stake in the new entity
but no say in matters concerning its formation or operation. They in turn asked the court to
compel Ross to transfer his interest in the patent immediately. The court sided with Balshe
and Simon except as to one provision that Ross found objectionable; the court ordered
deletion of that provision but otherwise denied Ross’s motion to compel and directed him
to transfer his interest in the patent as soon as the change was made.
On appeal Ross repeats his argument that the document setting forth the terms
under which the new company would be formed and operated includes several provisions
that are inconsistent with the settlement agreement. We cannot decide this issue on the
merits, however, because the district court’s attempt to retain subject‐matter jurisdiction
over this matter was ineffectual, a point we must raise sua sponte. See Büchel‐Ruegsegger v.
Büchel, 576 F.3d 451, 453 (7th Cir. 2009); Intʹl Union of Operating Engʹrs, Local 150, AFL‐CIO v.
Ward, 563 F.3d 276, 282 (7th Cir. 2009). A district court’s original jurisdiction to entertain a
lawsuit does not carry over to one party’s later claim that the other has breached their
settlement of that suit. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375 (1994). Thus, “when a
suit is dismissed with prejudice, it is gone, and the district court cannot adjudicate disputes
arising out of the settlement that led to the dismissal merely by stating that it is retaining
jurisdiction.” Dupuy v. McEwen, 495 F.3d 807, 809 (7th Cir. 2007) (emphasis added); see Shapo
v. Engle, 463 F.3d 641, 643 (7th Cir. 2006); Lynch, Inc. v. SamataMason Inc., 279 F.3d 487, 489
(7th Cir. 2002). The terms of a settlement can be embodied in an order dismissing the
lawsuit, which would allow that order to serve as an enforceable injunction. See FED. R. CIV.
P. 65; Blue Cross & Blue Shield Ass’n v. Am. Express Co., 467 F.3d 634, 636 (7th Cir. 2006). But
that step was not taken here, so any claim relating to nonperformance of the settlement
agreement must be brought as a breach‐of‐contract action.
No. 10‐3322 Page 3
This appeal, then, raises a claim that the district court was powerless to resolve
without an independent basis of subject‐matter jurisdiction. Ross filed a “motion to compel”
rather than a complaint alleging breach of the settlement agreement. This misstep might not
have prevented the district court from going forward if a basis for exercising subject‐matter
jurisdiction was clear. Blue Cross & Blue Shield Ass’n, 467 F.3d at 638. But it was not. The
question of jurisdiction was never addressed because of the mistake in assuming that the
purported retention of jurisdiction was effective. Because the substance of the claim is
breach of contract, see Kokkonen, 511 U.S. at 381; Lynch, 279 F.3d at 489, the only possible
basis for jurisdiction is diversity of citizenship, but we do not have complete information
about the citizenship of the parties or the amount of money at stake when the parties filed
their cross‐motions to compel. In particular, we note that Ross asserts that other parties to
the settlement have transferred their stakes in the new entity to other companies. If that’s
true, then we cannot even be certain that his new action was brought by or against the
proper parties, or that the true parties are diverse. Those questions are for the district court
to resolve.
Accordingly, the judgment of the district court is VACATED, and the matter is
REMANDED for further proceedings consistent with this order. If any party files a new
complaint asserting a claim for breach of the settlement agreement, the district court must
determine whether it has subject‐matter jurisdiction over the action.