Roger Knutson v. UGS CORP . and SDRC (STRUCTURAL DYNAMICS RESEARCH CORPORATION )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-2959
R OGER K NUTSON ,
Plaintiff-Appellant,
v.
UGS C ORP . and SDRC (S TRUCTURAL D YNAMICS
R ESEARCH C ORPORATION ),
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 1:05-cv-1319—Sarah Evans Barker, Judge.
____________
A RGUED F EBRUARY 27, 2008—D ECIDED M AY 13, 2008
____________
Before E ASTERBROOK , Chief Judge, and P OSNER and
W OOD, Circuit Judges.
P OSNER , Circuit Judge. The plaintiff brought this diver-
sity suit (governed by Indiana law) to recover almost
$700,000 in sales commissions that he claims are due
from the two defendants, a firm and its successor both of
which we refer to as the plaintiff’s “employer.” The dis-
trict court granted summary judgment for the employer.
The plaintiff seeks commissions on three sales or sets
of sales; we shall, again for the sake of brevity, pretend

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2 No. 07-2959
that there were just three sales. The first two the judge
held barred by the statute of limitations; the plaintiff
contends that the judge applied the wrong one. Indiana
has a two-year statute of limitations (the one the judge
applied) for “an action relating to the terms, conditions,
and privileges of employment except actions based upon a
written contract (including, but not limited to, hiring or
the failure to hire, suspension, discharge, discipline,
promotion, demotion, retirement, wages, or salary).” Ind.
Code § 34-11-2-1 (emphasis added). Although the plain-
tiff did not have a written employment contract, his en-
titlement to commissions was based on a written com-
pensation plan, and it is a breach (or rather breaches) of
that plan, which he characterizes as a written contract,
that he charges; and so he argues that the applicable
statute of limitations is Indiana’s 10-year statute of lim-
itations for “an action upon contracts in writing.” Ind.
Code § 34-11-2-11. If he is right, the claim based on the
first two sales are not time-barred (the claims arose in
2001, and the suit was filed in 2005); if the judge is right,
they are.
In a literal sense, the plaintiff’s suit is “based upon a
written contract,” but the Indiana Court of Appeals has
held that “written contract” in the two-year statute of
limitations means written employment contract. Kemper v.
Warren Petroleum Corp., 451 N.E.2d 1115 (Ind. App. 1983);
see also United Auto Workers v. Hoosier Cardinal Corp.,
383 U.S. 696, 705-06 (1966) (Indiana law); Miller v. Inter-
national Harvester Co., 811 F.2d 1150 (7th Cir. 1987) (same);
International Union of Elevator Constructors v. Home Elevator
Co., 798 F.2d 222, 229-30 (7th Cir. 1986) (same); State v.
Puckett, 531 N.E.2d 518, 526 (Ind. App. 1988); Peake v.
International Harvester Co., 489 N.E.2d 102, 105 (Ind. App.

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No. 07-2959 3
1986). This interpretation makes sense because the terms
of the oral employment relation out of which the claim
of breach of a separate written contract arises will often
be relevant to that claim, making it much like a case in
which the contract sued upon is partly written and
partly oral. The shorter statute of limitations is applied
to such claims, Michael v. Rainier, 205 N.E.2d 543 (Ind.
1965); Citizens Progress Co. v. James O. Held & Co., 438
N.E.2d 1016, 1021-22 (Ind. App. 1982), because they fall
outside the justification for the longer statute of limita-
tions applicable to suits on a written contract; the justi-
fication is that the evidence is unlikely to become stale
with time because most contract suits are resolved just
by the judge’s reading the contract. The difference in
treatment between a written contract on the one hand
and a part-written, part-oral contract on the other is not
entirely clear cut because oral evidence is sometimes
admissible in a suit on an entirely written contract, as
we shall see; but it makes some sense.
The compensation contract on which the plaintiff’s
claim to commissions is based is limited to employees. Yet
the contract does not state that the plaintiff is (or rather
was, during the period relevant to the lawsuit) an em-
ployee. The contract contains no space for signatures, but
is merely a statement of terms; so if one wanted to be
hypertechnical one could say that the contract itself was
an oral adoption of the terms stated in what is captioned
“Compensation Program for the SDRC Field Organiza-
tion.” There is no doubt that the plaintiff was an em-
ployee during the relevant period. But in other cases
there could be doubt dispellable only by recourse to
extrinsic evidence (that is, evidence outside the writing
itself), and then a 10-year statute of limitations would
be too long.

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4 No. 07-2959
There is, moreover, a tradition of short statutes of
limitations in employment cases. See, e.g., Title VII,
42 U.S.C. § 2000e-5(e)(1) (180 days, in some states 300 days,
to file a charge with the EEOC, 90 days to sue after the
EEOC dismisses charge); Age Discrimination in Employ-
ment Act (ADEA), 29 U.S.C. § 626(d), (e) (same); Na-
tional Labor Relations Act, 29 U.S.C. § 160(b) (six months
to sue); Fair Labor Standards Act, 29 U.S.C. § 255(a) (two
years to sue). The reasons are to limit the employer’s
uncertainty about the composition of his work force and
his exposure to claims for backpay, which would con-
tinue to mount up until the judgment if the plaintiff
could not find an equivalent job; and to facilitate rein-
statement. These particular concerns are not present in
this case, but another is—the desirability of heading off
vendettas by disgruntled former employees. An employee
should not be encouraged to spend 10 years threatening
suit against his former employer; he should get on with
his life.
And finally a plaintiff who needs an adventurous
interpretation of state law to prevail should sue in state
court rather than in federal court. Doe v. City of Chicago,
360 F.3d 667, 671-72 (7th Cir. 2004); Chang v. Michiana
Telecasting Corp., 900 F.2d 1085, 1087-88 (7th Cir. 1990);
Veilleux v. National Broadcasting Co., 206 F.3d 92, 131 (1st
Cir. 2000); Witzman v. Gross, 148 F.3d 988, 991 (8th Cir.
1998); In re C-T of Virginia, Inc., 958 F.2d 606, 611-12 (4th
Cir. 1992); Hinojosa v. City of Terrell, 834 F.2d 1223, 1231
n. 12 (5th Cir. 1988). The best evidence of Indiana law,
in light of the cases and our analysis, is that the two-
year statute of limitations applies. A change in that law
can come only from the Indiana courts. So, since that is
what the plaintiff needs, he should have sued in those

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No. 07-2959 5
courts. Had he done so, the defendants might have re-
moved the case to federal district court; they could do
so because they are citizens of states other than Indiana.
But they might not have done so, and then the case
would have remained in the state courts, which is where
a case in which the plaintiff seeks a change in state law
should remain.
The claim based on the third sale is not time-barred. It
is based on a provision in the compensation contract
entitling the plaintiff to specified commissions on “NX
Nastran Software and related PLM CAE Software sales.”
The plaintiff argues that the two types of software are
“related” and therefore he is entitled to commissions on
all sales of PLM CAE software that he assisted in making.
The employer argues that the plaintiff is entitled only
to commissions on PLM CAE software that was sold
simultaneously with NX Nastran. The district judge
sided with the employer after ruling that “related” was
ambiguous but that the ambiguity was “patent” and that
extrinsic evidence may not be admitted to dissolve such
an ambiguity.
The judge erred. As explained by Francis Bacon more
than 400 years ago, an ambiguity is “patent” when it is
recognized as an ambiguity just by reading the docu-
ment; it is latent when it is not recognized as an ambiguity
until you know something outside the contract. Bacon,
A Collection of Some Principal Rules and Maximes of the
Common Law 90-91 (1597); Rossetto v. Pabst Brewing Co., 217
F.3d 539, 543 (7th Cir. 2000); Texas v. American Tobacco Co.,
463 F.3d 399, 409 (5th Cir. 2006); Allegheny Int’l, Inc. v.
Allegheny Ludlum Steel Corp., 40 F.3d 1416, 1424 (3d Cir.
1994); 11 Williston on Contracts § 33:40 (2007 Supp., 4th ed.,
Richard A. Lord ed.). A contract that provides for

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6 No. 07-2959
shipping cotton on the ship Peerless is not ambiguous on
its face, but there is a latent ambiguity if there is more
than one ship by that name to which the contract might
(if all you know is what the contract says) refer. Raffles
v. Wickelhaus, 2 H. & C. 906, 159 Eng. Rep. 375 (Ex. 1864).
A latent ambiguity thus presupposes that extrinsic evi-
dence has been introduced—you need such evidence to
establish the ambiguity. A patent ambiguity leaps out at
the reader from the contract, and requires recourse to
extrinsic evidence to dispel. University of Southern Indiana
Foundation v. Baker, 843 N.E.2d 528, 532-33 (Ind. 2006);
Rossetto v. Pabst Brewing Co., supra, 217 F.3d at 543.
The court in the Baker case said that since extrinsic
evidence is admissible whether the ambiguity is patent
or latent, the distinction is erased. But that is not correct,
in view of decisions that require that evidence used to
create a latent ambiguity must be objective third-party
evidence rather than self-serving testimony of a party, as
otherwise the protection that parties obtain from the
vagaries of juries by putting their contracts in writing
would evaporate. E.g., Rossetto v. Pabst Brewing Co., supra,
217 F.3d at 542-43; AM Int’l, Inc. v. Graphic Management
Associates, Inc., 44 F.3d 572, 575 (7th Cir. 1995).
All this is rather to one side of this case because it is
plain without extrinsic evidence (more precisely, with-
out the extrinsic evidence beyond what has crept into the
case and has not been contested) that “related” cannot
bear the meaning the plaintiff ascribes to it, though the
employer is off-base too. The employer thinks “related”
means “connected” in almost a literal sense. It need not.
If you ask someone to buy you a rake and any related tools,
he is asking you to buy items from a set to which the
specified item belongs, whether or not you plan to use

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No. 07-2959 7
them together. So at the oral argument of the appeal
we asked the plaintiff’s lawyer whether NX Nastran is
included in the set of PLM CAE software programs, and
he said it was not. NX Nastran is a data-management
tool. CAE (computer assisted engineering) refers to soft-
ware for drawing engineering devices. CAE uses data
furnished by data-management tools such as NX Nastran,
but that is like saying that a hammer uses nails; a nail
is not therefore a hammer, the way a rake is a tool.
The plaintiff was supposed to assist in selling NX
Nastran, a new product, but he was offered a bonus
commission if he sold PLM CAE programs (also made by
the employer) to go along with the NX Nastran, in much
the same way that an automobile salesman might get
an extra commission for persuading a customer to buy a
30-speaker audio system as an accessory for his new
car. The employer didn’t want the plaintiff spending his
time selling PLM CAE programs that would not be used
with NX Nastran. That does not mean it wouldn’t give
him the extra commission if he sold the customer NX
Nastran on Monday and the PLM CAE to go with it
on Tuesday, as the employer argues. But the plaintiff does
not claim to have been denied the extra commission in
any case in which the PLM CAE was bought for use in
conjunction with NX Nastran that he had sold the cus-
tomer.
There is a further point. NX Nastran could not be used
without PLM CAE, so to sell NX Nastran the plaintiff
would have to sell PLM CAE with it, and this would
generate additional revenue for the employer and so
entitle the plaintiff to additional compensation. But PLM
CAE is usable without NX Nastran, so if the plaintiff
pushed PLM CAE programs that would not be used

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8 No. 07-2959
with NX Nastran he wouldn’t be helping to sell NX
Nastran, which was supposed to be the focus of his
sales efforts.
So the claim has no merit, and the other claims, as we
said, are time-barred. The judgment is therefore
A FFIRMED .
USCA-02-C-0072—5-13-08

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