WHITE PEARL INVERSIONES S.A. (URUGUAY) and SANLO CORP. v. Cemusa, Incorporated

In the
United States Court of Appeals
For the Seventh Circuit
No. 10-2739
WHITE PEARL INVERSIONES S.A. (URUGUAY) and
SANLO CORP.,
Plaintiffs-Appellants,
v.
CEMUSA, INCORPORATED,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 07 C 6365—Wayne R. Andersen, Judge.
ARGUED JUNE 7, 2011—DECIDED JULY 26, 2011
Before EASTERBROOK, Chief Judge, and BAUER and
WILLIAMS, Circuit Judges.
EASTERBROOK, Chief Judge. Shelters at bus stops and
trash baskets on municipal streets are no longer just
shelters and trash baskets. They have become “street
furniture.” With the change of name comes an oppor-
tunity for advertising. Instead of paying someone to
build and maintain fixtures, cities invite specialized

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2 No. 10-2739
enterprises to pay them. The vendors erect and maintain
the street furniture at their own expense, financing the
venture by advertising. Vendors give the cities a cut of
that income. Whichever firm offers a city the most lucra-
tive deal gets the contract—provided the city deems
the bidder reputable and reliable.
Corporación Europea de Mobiliario Urbano, S.A., a
Spanish firm, places street furniture within the European
Union. Its subsidiary Cemusa, a Delaware corporation,
wanted to break into the United States market. It hired
White Pearl Inversiones as a consultant. White Pearl had
helped Corporación Europea de Mobiliario Urbano enter
the Brazilian market, and Cemusa hoped that it could
do the same in the United States. White Pearl offered
its aid on a handshake basis in Miami and San Antonio,
where Cemusa bid and won. They decided to make
their arrangement more formal and longer-lasting.
A contract between White Pearl and Cemusa, dated
March 25, 2003, says that White Pearl will “[p]rovide
advice and guidance on the strategy to be adopted by
Cemusa, as it relates to the City of New York street furni-
ture market”. White Pearl also agreed to “introduce
Cemusa as an important international company oper-
ating with the design, manufacture, installation, leasing
and management of street furniture in major markets,
and as a competent party to provide such services in the
City of New York”. This contract, which we call the
Letter Agreement, provides that White Pearl would be
paid $240,000 for these services over the next nine
months. The Letter Agreement contemplates that White

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No. 10-2739 3
Pearl and Cemusa would soon adopt a more general
contract, the Master Agreement, and provides that, if they
do, and Cemusa wins New York’s business, the $240,000
“shall be deducted from any compensation owed by
Cemusa to White Pearl pursuant to the Master Agree-
ment or any other agreements arising therefrom.”
Six days later they signed the Master Agreement. It
provides that, for each city in which Cemusa and White
Pearl join forces, they will negotiate a city-specific RFP
Agreement. (In government-contract lingo, RFP means
“request for proposals”: a unit of government invites
vendors to submit their prices and specifications for a
described task.) If they don’t have a RFP Agreement
providing a different fee for a given city, White Pearl is
to receive 3.75% of Cemusa’s net advertising revenue
realized after a successful bid. White Pearl’s right to
this fee becomes vested once a given city issues its RFP,
but until then the Master Agreement is terminable at
either side’s option on 30 days’ notice.
By early 2004 New York City still had not issued a RFP
for street furniture. On February 17, 2004, Cemusa exer-
cised its right to terminate the Master Agreement. White
Pearl contends, and we must assume, that Cemusa’s only
reason was its belief that 3.75% is excessive. It would
amount to more than $12 million, White Pearl believes,
if Cemusa got the business for all five boroughs in
New York City. Cemusa hoped to receive White Pearl’s
aid for less. The parties negotiated toward a substitute
contract that would have paid White Pearl $2 million, but
Cemusa never signed those papers.

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4 No. 10-2739
At the end of March 2004 New York City solicited
proposals for street furniture. Cemusa bid for the
business in all five boroughs, and it won the contract in
all five in July 2004. It has refused to compensate
White Pearl beyond the $240,000 paid under the Letter
Agreement. White Pearl filed this suit under the inter-
national diversity jurisdiction. 28 U.S.C. §1332(a)(3). The
complaint alleges that White Pearl is incorporated in
Uruguay and has its principal place of business in Rio
de Janeiro, and that Cemusa is a Delaware corporation
with its principal place of business in Chicago. (Sanlo
Corp., a second plaintiff, is a Florida corporation with
its principal place of business in Miami. It does not have
any claim independent of White Pearl’s, and its presence
as a litigant is mysterious. We do not mention it again.)
There is a problem in White Pearl’s jurisdictional al-
legations—a problem that we have seen too often. The
complaint asserts that White Pearl is “a corporation”;
the appellate briefs repeat this statement, which as-
sumes that Uruguay has business entities that enjoy
corporate status as the United States understands it.
Yet not even the United Kingdom has a business form
that is exactly equal to that of a corporation. For example,
it can be difficult to decide whether a business bearing
the suffix “Ltd.” is a corporation for the purpose of §1332
or is more like a limited partnership, limited liability
company, or business trust. See, e.g., Lear Corp. v. Johnson
Electric Holdings Ltd., 353 F.3d 580, 582–83 (7th Cir. 2003).
It can be hard to classify even firms under state law.
Businesses organized as trusts don’t have their own

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No. 10-2739 5
citizenship; they take the citizenship of the trustee (or
citizenships, if there are multiple trustees). Navarro Savings
Association v. Lee, 446 U.S. 458 (1980). Limited partnerships,
limited liability companies, and similar organizations
also are disregarded for jurisdictional purposes. For an
LP, LLC, or similar organization, the citizenship of
every investor counts. See, e.g., Carden v. Arkoma Associates,
494 U.S. 185 (1990) (limited partnership); Cosgrove v.
Bartolotta, 150 F.3d 729 (7th Cir. 1998) (limited liability
company); Guaranty National Title Co. v. J.E.G. Associates,
101 F.3d 57 (7th Cir. 1996) (essential to trace the
citizenship of investors through all levels, if, say, one LP
invests in another). If even one investor in an LP or LLC
has the same citizenship as any party on the other side
of the litigation, complete diversity is missing and the
suit must be dismissed. See, e.g., Indiana Gas Co. v. Home
Insurance Co., 141 F.3d 314, rehearing denied, 141 F.3d
320 (7th Cir. 1998) (ordering a suit against an insuring
syndicate at Lloyd’s of London dismissed for this reason).
But cf. Hoagland v. Sandberg, Phoenix & von Gontard, P.C.,
385 F.3d 737 (7th Cir. 2004) (a “professional corporation”
is a corporation even though it has many attributes of
a partnership).
If it is hard to determine whether a business entity
from a common-law nation is equivalent to a “corpora-
tion,” it can be even harder when the foreign nation
follows the civil-law tradition. Uruguay has at least
three forms of limited-liability businesses: sociedad
anónima (S.A.), sociedad anónima financiera de inversión
(S.A.F.I.), and sociedad responsabilidad limitada (S.R.L.).
White Pearl did not say which kind it is, and its lawyers

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6 No. 10-2739
did not analyze whether that kind of business organiza-
tion should be treated as a corporation. We learned at
oral argument that White Pearl’s lawyers did not
know—indeed, that they did not even know their
client’s legal name and had not tried to analyze the sig-
nificance of its (unknown) organizational attributes.
They simply assumed that Uruguay has such a beast as
a “corporation” and that White Pearl is one. The lawyers
for Cemusa made the same assumption.
A memorandum filed at our direction after oral argu-
ment reveals that White Pearl’s name is “White Pearl
Inversiones S.A. (Uruguay)”. The complaint and appel-
late briefs had called it simply “White Pearl Inversiones”;
the absence of any initials alerted the court to a poten-
tial problem. The post-argument memorandum, which
Cemusa joins, contends that a sociedad anónima in
Uruguay has the characteristics of a joint-stock company
in a common-law jurisdiction and therefore is treated
as a corporation under §1332. The memorandum cites
Twohy v. First National Bank of Chicago, 758 F.2d 1185,
1194–95 (7th Cir. 1985), which says that a civil-law
sociedad anónima is equivalent to a joint-stock company.
The parties add that regulations treat a sociedad
anónima as a corporation for income-tax purposes. 26
C.F.R. §301.7701–2. But here things get sticky, because,
no matter what we may have thought in Twohy, and no
matter what the tax regulations say, the Supreme Court
had held that joint-stock companies are not corporations
for purposes of the diversity jurisdiction. See Chapman
v. Barney, 129 U.S. 677 (1889) (joint-stock company is
treated as a partnership).

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No. 10-2739 7
A sociedad anónima may be best understood as a
corporation despite what we called it in Twohy. It has
many important attributes of corporate-ness (on which
see Lear, 353 F.3d at 583): it is a legal person with
perpetual existence, governed indirectly by an elected
board or administrator rather than by investors; it can
issue tradeable shares, and investors are liable only
for agreed capital contributions. Uruguay Commercial
Companies Law (No. 16.060) of 1 November 1989. But
we need not decide. If it is a joint-stock company, then
the citizenship of its equity investors controls. The joint
post-argument memorandum tells us that it has only
two, Marcelo Conde and Jorge Luz, both of whom are
citizens of Brazil. They reside in Rio de Janeiro, so
§1332(a)’s hanging paragraph, which treats aliens ad-
mitted for permanent residence as if they were citizens
of the states where they live, does not apply. Complete
diversity has been established—though the lawyers
took needless risk, and wasted a lot of the judges’ time,
by ignoring the proper treatment of foreign business
entities until the case reached the court of appeals.
The district court dismissed White Pearl’s complaint,
observing that it had received the agreed compensation.
2010 U.S. Dist. LEXIS 72141 (N.D. Ill. July 16, 2010). The
Letter Agreement says that Cemusa will pay $240,000
or any greater amount specified in a later contract. The
only later contract is the Master Agreement—which
does not entitle White Pearl to anything, because it
was terminated before New York City issued its RFP
for street furniture. White Pearl does not contend that
Cemusa owes it anything under the Master Agreement;

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8 No. 10-2739
it accepts the validity of the termination. (If White Pearl
were claiming something under the Master Agreement,
this suit would be the wrong forum: the Master Agree-
ment contains a broad arbitration clause.) Nonetheless,
White Pearl insists, it is entitled to more under the
Letter Agreement.
White Pearl’s lawyers have scoured the legal phrase-
book. Their complaint asserts breach of contract, breach
of a covenant of good faith and fair dealing, breach of a
settlement agreement, promissory estoppel, equitable
estoppel, quantum meruit, unjust enrichment, constructive
trust, accounting, reformation of contract, and several
flavors of fraud. The district court needlessly complicated
things by dismissing the complaint under Fed. R. Civ. P.
12(b)(6). This has led to a debate in this court about
whether the complaint contains enough to make out
plausible claims under the new approach to pleading
established by Bell Atlantic Corp. v. Twombly, 550 U.S. 544
(2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). But this
complaint is not too skimpy; instead it contains quite
enough to show that White Pearl must lose. The rule
that supports dismissal is Rule 12(c), judgment on
the pleadings. Trees could have been saved by citing
Rule 12(c) rather than Rule 12(b)(6).
The second question in a diversity suit is: What body
of law supplies the rule of decision? (The first question,
whether subject-matter jurisdiction exists, we have ad-
dressed already.) The Letter Agreement provides a
straightforward answer to the choice-of-law question:
“This agreement shall be governed by the laws of Spain.”

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No. 10-2739 9
So what does Spanish law have to say about White
Pearl’s claims for relief? The briefs are mum.
White Pearl is represented by the Chicago office of
Wilson, Elser, Moskowitz, Edelman & Dicker; Cemusa is
represented by the Miami office of Hunton & Williams
plus the Chicago office of K&L Gates. All three are sub-
stantial law firms with expertise in business law
and international trade—as one would expect when a
Uruguayan firm based in Rio de Janeiro sues the U.S.
component of a multinational enterprise based in
Madrid. Spanish law should not pose a challenge to
these firms. Instead of addressing that subject, however,
they ignored it. White Pearl’s brief cites Illinois and
New York cases indistinguishably and does not explain
why we should disregard Spanish law—and why, if we
do, we should prefer Illinois law over New York law, or
the reverse. Cemusa’s brief is equally indifferent to
choice of law. It is hard to know whether to treat the
subject as forfeited and dismiss the appeal, or use Illinois
law on the ground that the district court sits there. We
shall do the latter, because like the district court we
think the outcome straightforward, without foreclosing
the possibility of dismissal when the problem is more
complex and the parties leave the court adrift.
This case is governed by the principle that courts do
not invoke doctrines such as quantum meruit or unjust
enrichment to change the price term in a contract. White
Pearl tells us that it spent about $440,000 to assist
Cemusa. So what? No rule of law entitles every business
to a profit on every deal. White Pearl agreed to a fixed

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10 No. 10-2739
price; it did not negotiate a cost-plus contract, or one
that paid by the hour that its consultants devoted to
the project.
We doubt that all of the work White Pearl says it per-
formed is covered by the Letter Agreement. A substan-
tial fraction of its effort was devoted to persuading
Corporación Europea de Mobiliario Urbano to allow its
subsidiary to bid on the New York project. That’s not
what White Pearl was hired to do—at least, it is not
what the Letter Agreement engages White Pearl to do.
If White Pearl performed tasks outside the contract, it
has no legal right to payment. So we held in Indiana
Lumbermens Mutual Insurance Co. v. Reinsurance Results,
Inc., 513 F.3d 652 (7th Cir. 2008). Although that case
was decided under Indiana law, the rule in Illinois is the
same. See Hayes Mechanical, Inc. v. First Industrial, L.P.,
351 Ill. App. 3d 1, 9, 812 N.E.2d 419, 426 (2004);
Industrial Lift Truck Service Corp. v. Mitsubishi International
Corp., 104 Ill. App. 3d 357, 360–61, 432 N.E.2d 999, 1003
(1982). White Pearl did much of its intra-corporate-
family lobbying after Cemusa had terminated the Master
Agreement. Doubtless it hoped that Cemusa would be
grateful and reward it—but for the reasons we gave
in Indiana Lumbermens a business that volunteers
services must rely for compensation on the reputational
interest of its trading partner.
If Cemusa did not treat White Pearl well, it will pay
a penalty in the market; other consultants (and for that
matter professionals such as law firms, accountants,
and advertising agencies) will demand a premium price
to deal with a business known to take advantage of

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No. 10-2739 11
others. Still, a firm is not legally obliged to recompense
another for volunteered work, let alone to ensure that
its trading partners don’t lose money. Businesses them-
selves know best how to protect their interests. When
courts award sums on top of a contractual price, this
reduces entrepreneurs’ ability to allocate risks through
written agreements. Destabilizing or devaluating the
institution of contract would raise the transactions costs
of business, injuring economic productivity and growth.
As Learned Hand remarked, it is better for courts to
let some seemingly unjust outcomes alone than to inter-
vene in a way that makes contracts less reliable. See, e.g.,
Hemenway v. Peabody Coal Co., 159 F.3d 255, 258 (7th Cir.
1998), quoting from James Baird Co. v. Gimbel Bros., Inc.,
64 F.2d 344, 346 (2d Cir. 1933) (“in commercial trans-
actions it does not in the end promote justice to seek
strained interpretations in aid of those who do not
protect themselves”).
White Pearl insists that it is entitled to at least the
$2 million that the parties discussed during settlement
negotiations, even if it does not get 3.75% of the net
advertising revenue. But Cemusa never signed a
promise to pay White Pearl $2 million, and unsuccessful
settlement negotiations are inadmissible in federal litiga-
tion. Fed. R. Evid. 408(a). The negotiations therefore
cannot be used as a benchmark for an award under
the rubric of quantum meruit or unjust enrichment.
White Pearl has not tried to explain how its argument
could be reconciled with Rule 408(a).
The most that one can say for White Pearl’s position
is that Illinois provides a remedy under the quantum

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12 No. 10-2739
meruit rubric when a business terminates a contract
after most of the work has been done. For example, a
client may fire his lawyer at any time, for any reason.
Suppose a lawyer has invested substantial time under
a contingent-fee contract that entitles counsel to 40% of
any amount awarded by a jury. If the client fires his
lawyer moments before the judge opens the envelope
containing the jury’s verdict, the lawyer does not go
home empty-handed but receives compensation appro-
priate in light of the work done and the results obtained.
See Wegner v. Arnold, 305 Ill. App. 3d 689, 693–94, 713
N.E.2d 247, 250 (1999), citing Fracasse v. Brent, 6 Cal.
3d 784, 494 P.2d 9 (1972). Similarly, a real estate agent
who finds a buyer for the client’s mansion, and is fired
on the eve of closing, receives a full fee even though
buyer and seller tried to cut out the middleman and
appropriate to themselves the amount that the agent
would have received as a commission. See Kenilworth
Realty Co. v. Sandquist, 56 Ill. App. 3d 78, 371 N.E.2d 936
(1977). Illinois uses a similar rule for salesmen who are
fired after negotiating a deal but before the commission
is payable (usually at the end of a quarter or year,
when total sales are known). See Penzell v. Taylor, 219 Ill.
App. 3d 680, 579 N.E.2d 956 (1991). White Pearl contends
that it is entitled to more money because Cemusa
likewise has taken advantage of the fact that White Pearl
performed first and thus was exposed to opportunistic
termination.
This analogy is not a good one, however. White Pearl
is not in the position of a real estate agent fired after
locating a buyer ready, willing, and able to pay, or a
travelling salesman fired after making a sale but before

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No. 10-2739 13
the date commissions are distributed. When White Pearl
was “fired” (by termination of the Master Agreement),
New York City had yet to issue its RFP for street furni-
ture. White Pearl did not spend March through
June of 2004 lobbying New York on behalf of Cemusa;
its consultants were in Madrid lobbying Cemusa’s supe-
riors. What White Pearl did, translated to the world of
real estate sales, is more like visiting a property, taking
pictures, writing a good description, and giving the
client valuable advice about what price to ask and what
strategy to adopt. If such an agent is fired before the
house goes on the market (equivalent to ending the
Master Agreement before New York City called for
bids), the agent gets only the agreed fee for preparatory
services, or recompense for out-of-pocket expenses.
Similarly a contingent-fee lawyer who advises a client
whether to file suit, and what theories to use, is not
entitled to a fee if the client eventually hires someone
else, who achieves a smashing victory. See Rhoades
v. Norfolk & Western Ry., 78 Ill. 2d 217, 399 N.E.2d
699 (1979).
Cemusa agreed to pay White Pearl $240,000 for prepara-
tory services—defined in the Letter Agreement and the
Master Agreement as consulting and PR work done
before New York City issued a RFP for street furniture.
Cemusa kept that promise. It terminated the Master
Agreement before New York issued the RFP. White
Pearl, like the real estate agent fired before a house is
listed for sale, is not entitled to more.
AFFIRMED
7-26-11

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