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FORD MOTOR CREDIT CO. v. AARON-LINCOLN MERCURY

April 29, 1983

FORD MOTOR CREDIT COMPANY, INC., A DELAWARE CORPORATION, PLAINTIFF,
v.
AARON-LINCOLN MERCURY, INC., AN ILLINOIS CORPORATION, ELLIOTT DULBERGER AND ARTHUR NELSON, DEFENDANTS, COUNTER-PLAINTIFFS AND THIRD PARTY PLAINTIFFS, V. FORD MOTOR COMPANY, A DELAWARE CORPORATION, THIRD PARTY DEFENDANT.



The opinion of the court was delivered by: Prentice H. Marshall, District Judge.

MEMORANDUM OPINION

In this case we must decide an important question of federal jurisdiction — whether a third party defendant may remove an action filed in state court to this court when the original action is not removable.

On June 25, 1981, plaintiff Ford Motor Credit Corp. ("FMC") filed a complaint against defendants-third party plaintiffs Aaron-Lincoln Mercury, Inc. ("Aaron-Lincoln"), Elliott Dulberger ("Dulberger") and Arthur Nelson ("Nelson")*fn1 in the Circuit Court of McHenry County, Illinois. FMC sought to hold Aaron-Lincoln liable on a financing contract, and Dulberger and Nelson liable on their guarantees of the debts Aaron-Lincoln owed on the contract. Since the defendants in this action were all citizens of Illinois,*fn2 they could not remove the action to this court. See 28 U.S.C. § 1441(b) (1976).

On July 29, 1982, the defendants in the state action filed a second amended answer to the complaint which contained a counterclaim against FMC and a third party complaint against Ford Motor Co. ("Ford")*fn3 In the counterclaim and third party complaint, it was alleged that Ford had induced the franchisees to purchase a Ford dealership franchise by means of false and misleading statements, and that FMC had not lived up to its promise to provide the franchisees with adequate financing. It was also alleged that Ford had violated the Illinois Franchise Disclosure Act when selling the franchise. The third party complaint was served on Ford that day, and on August 27, 1982 it filed a timely petition to remove the case to this court under 28 U.S.C. § 1446(b) (1976).

The parties have not raised the issue of whether this case is removable under 28 U.S.C. § 1441 (1976).*fn4 However, since the question goes to the court's subject matter jurisdiction over the case, the question can be raised on the court's own motion. See Fed.R.Civ.P. 12(b)(1). Research discloses that there is substantial doubt as to whether a third party defendant may remove an otherwise nonremovable action.*fn5 Many courts have held that there is no removal jurisdiction in this situation.*fn6 This is also the position taken by the two leading commentators.*fn7 Other courts, including the only court of appeals to decide the question, have held that a third party defendant may remove a "separate and independent claim" within the meaning of 28 U.S.C. § 1441(c) (1976).*fn8

I

Removal in this case is predicated upon 28 U.S.C. § 1441(c) (1976). Therefore, we turn first to the question whether this case fits into that section.

The statute provides,

    Whenever a separate and independent claim or
  cause of action, which would be removable if sued
  upon alone, is joined with one or more otherwise
  non-removable claims or causes of action, the
  entire case may be removed and the district court
  may determine all issues therein, or, in its
  discretion, may remand all matters not otherwise
  within its original jurisdiction.

28 U.S.C. § 1441(c) (1976). The statutory language raises two questions: has Ford removed "a separate and independent claim or cause of action" and is its claim "joined with one or more otherwise non-removable claims or causes of action"? We examine both questions in turn.

The Supreme Court has construed § 1441(c)'s requirement of a separate and independent claim as necessitating a claim not based on the same wrongful conduct as that which gave rise to the non-removable claims. See American Fire & Casualty Co. v. Finn, 341 U.S. 6, 11-16, 71 S.Ct. 534, 538-541, 95 L.Ed. 702 (1951).*fn9 Where recovery in the allegedly removable claim is dependent on the result in the non-removable claim, the claims are not "separate and independent" within the meaning of § 1441(c).*fn10

Here, FMC seeks to recover money owed it. In the franchisees' action against Ford, they attack Ford's conduct in inducing the franchisees to purchase the dealership. The course of conduct by which Ford induced the franchisees to buy the dealership was entirely separate from FMC's conduct in loaning the franchisees money.*fn11 Ford may well have misrepresented facts and violated the Illinois Franchise Disclosure Act's provisions but that in no way operates as a defense to FMC's claim for money owed it. The two claims are based on entirely separate contractual relationships — one between the franchisees and their franchisor, Ford, and another between the franchisees and their finance company, FMC. Ford's liability is in no way dependent on the result in the action between FMC and the franchisees.

Ted Lokey Real Estate Co. v. Gentry, 336 F. Supp. 741 (N.D.Tex. 1972) is similar to this case. There the plaintiff sued on a contractual warranty, and the defendant filed a third party action alleging that its breach of the warranty was caused by the failure of the third party defendant to live up to a separate contract it had entered with the defendant. The court held that the third party action was a separate and independent claim, since it was premised on a separate contractual relationship from that between the plaintiff and defendant. The same is true here. The third party action against Ford is based on a separate relationship and a different course of allegedly wrongful conduct — Ford's inducements to get the franchisees to buy the dealership — than is the original action against the franchisees which is based on FMC's financing contract with them. The "separate and independent claim" requirement of § 1441(c) is satisfied here.

For removal to be proper under ยง 1441(c), it must also be the case that the third party action be "joined with one or more otherwise non-removable claims." A number of courts have concluded that this language refers only to claims "joined" by the plaintiff, so that a removable claim added to the case by a third party plaintiff fails to ...


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