United States District Court, N.D. Illinois
March 26, 2004.
C.D.A.N.A., a California non-profit mutual benefit corporation Plaintiff,
CULLIGAN INTERNATIONAL COMPANY, a Delaware corporation, MICROPACK CORPORATION, a Delaware corporation and DOES 1-50 Defendants
The opinion of the court was delivered by: PAUL PLUNKETT, Senior District Judge
MEMORANDUM OPINION AND ORDER
Before the Court is plaintiffs 28 U.S.C. § 1447(c) motion to
remand the action to the Superior Court of the State of California, San
Bernadino County. For the reasons stated below, the motion is granted.
This is a diversity case brought by C.D.A.N.A., a non-profit trade
association representing over fifty of independent Culligan International
Company ("Culligan") franchisees ("Members").*fn1 Its general
administrative services are performed by an independent contractor
located in Texas and its executive offices are in California, Defendant
Culligan is a Delaware corporation whose principal
place of business is in Illinois. Defendant Micropack Corporation
("Micropack") is a Delaware corporation whose principal place of business
is in Massachusetts. C.D.A.N.A. filed this action in California state
court on September 27, 2002, seeking declaratory and injunctive relief
with respect to certain franchise agreements between Culligan and the
Members, The case was removed to federal court in California in November
2002 and thereafter transferred to this district on Culligan's
28 U.S.C. § 1404(a) motion.
Culligan, joined by Micropack, has filed a motion to dismiss, asserting
that C.D.A.N.A. lacks standing to seek declaratory relief. Culligan
argues that, because C.D.A.N.A. is not a party to any contract with
Culligan nor does it allege any injury to itself, the only way in which
it can maintain its suit is through the concept of "associational
standing," which permits representational standing under certain
circumstances. See Retired Chicago Police Ass'n v. City of
Chicago, 76 F.3d 856, 862-63 (7th Cir. 1996) (discussing
requirements of associational standing). C.D.A.N.A., says Culligan, does
not meet the requirements of associational standing. C.D.A.N.A, responds
that it does.
C.D.A.N.A. has since filed the instant motion to remand under
28 U.S.C. § 1447(c) on the grounds that this Court lacks subject matter
jurisdiction. There is no federal question involved in this action and so
our jurisdiction must be based on diversity. C.D.A.N.A, says it recently
became of aware of Seventh Circuit law which says that when a trade
association sues as a representative of its members, the members are the
real parties in interest and it is their citizenship that controls for
diversity purposes. Because some of the Members are Illinois residents
and Culligan is an Illinois resident, there is no complete diversity of
citizenship, says C.D.A.N.A. Accordingly, this case must be remanded to
the state court where it originated.
We held in abeyance our ruling on the motion to dismiss pending
resolution of the motion to remand.
Removal of actions from state court to federal court is governed by
28 U.S.C. § 1441(a), which provides that "any civil action brought in a
State court of which the district courts of the United States have
original jurisdiction, may be removed by the defendant or defendants, to
the district court of the United States for the district and division
embracing the place where such action is pending." 28 U.S.C. § 1441(a).
Thus, only state court actions that could have been filed in
federal district court maybe removed there. Caterpillar, Inc. v.
Williams, 482 U.S. 386, 392 (1987). If "at any time before final
judgment it appears that the district court lacks subject matter
jurisdiction," the district court must remand the case to the state court
from which it was removed. 28 U.S.C. § 1447(c).
Culligan does not seem to contest the lack of complete diversity
between the Members and the defendants. It argues instead that
associational standing is a threshold issue that can be resolved as to
C.D.A.N.A., on the one hand, and Culligan and Micropack on the other
hand, without exercising jurisdiction over any "non-diverse" parties
because C.D.A.N.A. is a California citizen.*fn2 Both sides refer us to
two cases, National Ass'n of Realtors v. National Real Estate Ass'n
Inc., 894 F.2d 937 (7th Cir. 1990) and Gingiss Owners Ass'n Inc.
v. The Gingiss Group, Inc., 2003 U.S. Dist. Lexis 16022 (N.D. Ill.
Sept. 8, 2003), with C.D.A.N.A. arguing that the decisions in these cases
are on all fours with this case and Culligan arguing that the cases are
In National Ass'n of Realtors v. National Real Estate Ass'n
Inc. ("NAR"), a non-profit corporation comprised of real
estate agents sued a rival trade association for fraud and unfair trade
practices in connection with the sale of insurance to the plaintiff's
members. Determining the plaintiff trade association members to be the
real parties in interest to the suit, the Seventh Circuit looked to the
citizenship of the members rather than to the citizenship of the trade
association itself to determine whether complete diversity of citizenship
existed. The general rule, that for purposes of diversity jurisdiction
the relevant citizenship is that of the corporation (even a non-share
corporation) rather than its shareholders, was inapplicable. The court
explained the distinction this way:
If the defendants had blown up NAR's corporate
headquarters, or broken a contract they had with
the association, the wrong would be to the
association even though the loss resulting from it
would be borne ultimately by [its members].
Id., at 939. In this case, said the court, "the members
were in the front line. They received the blow."*fn3
940. Cf. CCC Info. Servs., Inc. v. American Salvage Pool Ass'n
230 F.3d 342
, 347 (7th Cir. 2000) (court found NAR case
applicable but found that, unlike in NAR, it was contract with
plaintiff trade association that was breached, not contract with trade
association's members, so citizenship of trade association informed
diversity jurisdiction analysis).
In Gingiss, a trade association brought a diversity suit on
behalf of its members stemming from the franchise agreement between
Gingiss International and the trade association members. The court found
the NAR case applicable. Looking to the "crux of the complaint,"
the court said that the trade association was essentially arguing breach
of contract. The trade association was not a party to the franchise
agreement; rather its members, the franchisees, were. It was clear to the
court that the trade association was suing on behalf of its members.
Finding a lack of complete diversity
between the trade association members and the defendant, the court
dismissed the complaint for lack of subject matter jurisdiction. See
Gingiss Owners Ass'n Inc., 2003 U.S. Dist. Lexis, at *9.
Culligan argues that neither of these cases dealt with the issue of
associational standing (the subject of its motion to dismiss) and thus
they do not preclude our consideration of that very limited issue.
According the Culligan, deciding the issue with respect to C.D.A.N. A., a
California citizen, does not implicate Members' rights "and therefore
does not involve any exercise of jurisdictional authority beyond the
diversity jurisdiction authorized by the Constitution." (Opp'n Mot. to
Remand at 3.) Culligan urges us to consider the complaint "as drafted,"
see that C.D.A.N.A. is asserting its own claim and rule (in its favor, of
course) on the associational standing issue.*fn4 We understand the
distinction between the two issues, but are not persuaded by Culligan's
argument that we should address the associational standing issue first.
Subject matter jurisdiction should be considered early on in a case,
see United Phosphorus, Ltd, v. Angus Chem. Co., 322 F.3d 942,
946 (7th Cir. 2003), and we are obligated to remand a case to state court
if, "at any time . . . it appears that [we lack] subject matter
jurisdiction." 28 U.S.C. § 1447(c). We thus use NAR as a
guide to determine whether we have subject matter jurisdiction.
It is clear from the complaint as drafted that C.D.A.N.A. has always
been representing the interests of its Members. (Compl. ¶¶ 5, 8, 11.)
The subject of the complaint is the interpretation of certain provisions
of two franchise agreements and it is the Members, not C.D.A.N.A., who
signed the franchise agreements with Culligan. Thus, the Members
are the real parties in interest*fn5 Looking to their citizenship, as
NAR instructs us to do, we find complete diversity of
citizenship lacking. Some of the Members are Illinoisans, citizens of the
same state as Culligan, one of the defendants. Accordingly, we do not
have subject matter jurisdiction and remand the case to the court from
which it originated.*fn6
C.D.A.N.A. also seeks costs and expenses, including attorneys' fees,
pursuant to 28 U.S.C. § 1447(c), which states in part that "an order
remanding the case may require payment of just costs and any actual
expenses, including attorney fees, incurred as a result of the removal."
The statute contains no guidelines for determining whether an award of
fees is appropriate, but "cases are pretty much at one in holding that
the plaintiff must show that the remand order was correct (that is, that
removal was improper), but need not show that removal was in bad faith."
Sirotzky v. New York Stock Exch., 347 F.3d 985, 987 (7th Cir.
2003). The district court has broad discretion in deciding whether to
award fees. Id. If removal was improper, then the plaintiff is
presumptively entitled to an award of fees. Id.
This case does not fit neatly into the statute, however. The statute
provides for the payment of just costs and actual expenses "incurred as a
result of the removal." 28 U.S.C. § 1447(c). The initial removal to
the United States District Court for the Central District of California
was, apparently, proper; C.D.A.N.A. takes no issue with it. (Mot. to
Remand at 3,) However, it is the transfer to this district, initiated by
Culligan, which results in the remand. Culligan had the burden of
establishing that transfer of venue under 28 U.S.C. § 1404(a) was
appropriate. See Sutherland
v. Cybergenics Corp., 907 F. Supp. 1218, 1223 (N.D. Ill.
1995). C.D.A.N.A. should have raised its jurisdictional argument at that
time, but jurisdictional issues are open to consideration at any time.
In keeping with the purpose of the fee-shifting rules, however, we
believe it is appropriate to award fees under section 1447(c) in this
case. See Wisconsin v. Hotline Indus., Inc., 236 F.3d 363,
367-68 (7th Cir. 2000) (discussing rationale of fee-shifting rules and
stating when "adversary wrongfully drags [a party] into a second judicial
system the loser must expect to cover the incremental costs") (internal
quotation and citation omitted). Section 1447(c) contemplates the
recovery of expenses associated with a motion to remand, which is what is
before us now. C.D.A.N.A.'s recovery under section 1447(c) is limited,
however, to "actual" expenses "incurred." C.D.A.N.A. may submit
evidence to support its request for expenses associated with its motion
to remand only; we presume many of C.D.A.N.A.'s expenses associated with
litigating in federal court would have been incurred had the case
remained in federal court in California. The Court will set a briefing
schedule on this matter under separate Order. Id. at 365
(district court can retain jurisdiction to consider collateral matters
after remand to state court).
For the reasons stated above, C.D.A.N.A.'s motion to remand is granted.
The clerk of the court is directed to remand this action to the Superior
Court of the State of California for San Bernadino County. All pending
motions are dismissed as moot.