United States District Court, N.D. Illinois, Eastern Division
November 4, 2004.
Mohammmed Rawoof Plaintiff,
Texor Petroleum Company Defendant.
The opinion of the court was delivered by: MICHAEL MASON, Magistrate Judge
REPORT AND RECOMMENDATION
Plaintiff, Mohammed Rawoof ("Rawoof"), filed an action pursuant
to the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. 2801
et seq., alleging that Texor terminated the parties' franchise
relationship in violation of the PMPA. Plaintiff filed a motion
for substitution requesting leave to substitute SHL 95, Inc.
("SHL 95" or "the corporation") for Rawoof as the named
plaintiff. The District Court referred the motion for
substitution to us for a report and recommendation. For the
following reasons, we recommend that the District Court grant
plaintiff's motion for substitution and allow plaintiff to
substitute SHL 95 as the named plaintiff.
On August 19, 2002, Rawoof filed an action in the Northern
District of Illinois against Texor Petroleum Company ("Texor")
pursuant to the PMPA.*fn1 Rawoof's complaint alleges that he
entered into an oral agreement with Texor to purchase gasoline
exclusively from Texor. In exchange, Texor would arrange to have Rawoof's station
identified with the Marathon brand of gasoline. The complaint
alleges that between February 1998 and August 22, 2001, Rawoof
and Texor were involved in a franchise relationship as defined by
the PMPA. Rawoof further alleges that Texor terminated the
parties' franchise relationship without proper notice and without
just cause in violation of the PMPA.
Texor filed a motion to dismiss Rawoof's complaint alleging
that it was barred by the statute of limitations applicable to
PMPA claims. In his response brief, Rawoof again alleged that he
entered into a franchise agreement with Texor in February 1998.
Additionally, in an affidavit attached to the response brief,
Rawoof swore that he was damaged financially as a result of
Texor's removal of the Marathon brand from his station. Rawoof
did not mention SHL 95 in either the response or the affidavit.
Ultimately, the court denied Texor's motion to dismiss and the
parties engaged in discovery. Rawoof's answers to interrogatories
do not refer to or mention SHL 95. However, in response to
Texor's document requests, Rawoof produced corporate tax returns
for SHL 95, corporate bank and gasoline purchase records, and the
deeds and leases for the real property showing the corporation in
On July 27, 2004, Rawoof filed a motion for substitution of the
named plaintiff pursuant to Federal Rule of Civil Procedure 15.
In the motion, Rawoof contends that he is the sole officer,
director and shareholder of the S-Corporation, SHL 95. The
corporation was created to operate Rawoof's gasoline station and
mini-mart and to take title to the real property on which the
station operates. Rawoof contends that because Texor debranded
his gasoline station, the corporation suffered reduced sales
volume and sold the station at a reduced price. On the day the
sale of the station closed, the corporation executed documents providing for the payment of the sales proceeds into a
trust for Rawoof. Apparently, as a result of the transfer of the
proceeds to Rawoof and the corporation's status as an
S-Corporation, Rawoof's original counsel named Rawoof
individually as the plaintiff in this action. As discovery
proceeded, Rawoof's current counsel determined that the
corporation is the real party in interest. Rawoof then filed the
motion for substitution.
Plaintiff contends that the Court should allow substitution of
the corporation because the corporation is the real party in
interest and Federal Rule of Civil Procedure 17(a) requires that
all actions shall be prosecuted in the name of the real party in
interest. Fed.R. Civ. P. 17(a). Plaintiff also argues that if
the corporation substitutes for Rawoof as the named plaintiff,
the corporation's claims will relate back to the original
complaint under Rule 15. In response, Texor argues that Rule 15
has been applied sparingly to situations involving substitution
of a party when there has been a change in ownership of the cause
of action. However, Rule 15 is not as limited as Texor suggests.
Indeed, the Advisory Committee Notes state:
The relation back of amendments changing plaintiffs
is not expressly treated in revised Rule 15(c) since
the problem is generally easier. Again the chief
consideration of policy is that of the statute of
limitations, and the attitude taken in revised Rule
15(c) toward change of defendants extends by analogy
to amendments changing plaintiffs. Also relevant is
the amendment of Rule 17(a) (real party in interest).
To avoid forfeitures of just claims, revised Rule
17(a) would provide that no action shall be dismissed
on the ground that it is not prosecuted in the name
of the real party in interest until a reasonable time
has been allowed for correction of the defect in the
manner there stated.
Advisory Committee Note to Fed.R. Civ. P. 15(c).
Here, Rawoof seeks to cure the defect in his original complaint
by substituting the corporation as the named plaintiff. To date,
Texor has not raised a real party in interest defense. Therefore, plaintiff's motion for substitution is more
properly suited for analysis under Rule 15(c)'s relation back
provision. The issue is whether substitution of the corporation,
SHL 95, as the named plaintiff relates back to the original
Under Rule 15(c) and cases interpreting that rule, an amended
complaint adding or substituting a new plaintiff "relates back"
to the original complaint if: (1) the claim of the new plaintiff
arose from the "same conduct, transaction, or occurrence" set
forth in the original complaint, (2) the new plaintiff shares an
"identity of interest" with the original plaintiff, (3) the
defendant has fair notice of the new plaintiff's claim, and (4)
adding or substituting the new plaintiff does not prejudice the
defendant. Sherwin Manor Nursing Center, Inc. v. McAuliffe,
1997 U.S. Dist. LEXIS 9255, *16 (N.D. Ill., June 23, 1997); see
Staren v. American Nat'l Bank and Trust Co., 529 F.2d 1257, 1263
(7th Cir. 1976); Allied Int'l, Inc. v. International
Longshoremen's Ass'n, 814 F.2d 32, 35-36 (1st Cir. 1987).
A. Same Conduct, Transaction or Occurrence
In this case, SHL 95's PMPA claims against Texor depend upon
the same facts as were set out in Rawoof's original complaint.
The conduct complained of, Texor's termination of the parties'
franchise relationship in violation of the PMPA, is the same as
alleged in the original complaint. The only proposed change is
the change in the plaintiff's identity. The substitution of the
corporation as the named plaintiff does not create an entirely
new claim by a new party as Texor suggests. Rather, the change
here is merely a formal one which does not alter the known facts
and issues on which the action is based. Accordingly, we find
that SHL 95's claims arise from the "same conduct, transaction,
or occurrence" set forth in the original complaint. See Staren,
529 F.2d at 1263 (allowing substitution of a corporation for individual owners where there
were no other changes made to the original complaint); Allied,
814 F.2d at 35-36 (allowing plaintiff substitution where there
were no other changes to made to the original complaint).
B. Identity of Interest
Rule 15(c) allows relation back when an "identity of interest"
exists between the original plaintiff and the new plaintiff. When
a new plaintiff has an identity of interest with the original
plaintiff, courts generally assume that the defendant has notice
of the claims of the new plaintiff and suffers no prejudice by
the addition or substitution of the new plaintiff. See Staren,
529 F.2d at 1263; Sherwin Manor, 1997 U.S. Dist. LEXIS 9255 at
*19. As the sole shareholder of SHL 95, Rawoof's interests are
virtually identical to the corporation's. Thus, the identity of
interests between Rawoof and SHL 95 served to notify Texor of SHL
95's PMPA claims.
C. Fair Notice
A defendant has fair notice if substitution does not alter the
known facts and issues of the original complaint. See Staren,
529 F.2d at 1263; Sherwin Manor, 1997 U.S. Dist. LEXIS 9255 at
*20. Here, Texor was fully apprised, within the applicable
limitations period, that the thrust of the litigation was to hold
it responsible for terminating the parties' franchise
relationship in violation of the PMPA. Texor claims that it never
had any notice of SHL 95 or that Rawoof was affiliated with this
entity. However, Texor does not refute Rawoof's contention that
he produced corporate tax returns for SHL 95, corporate bank and
gasoline purchase records, and the deeds and leases for the real
property showing the corporation in title. Therefore, we find
that Texor had fair notice of SHL 95's claims. D. Prejudice
Rule 15(c) does not allow relation back if the addition or
substitution of the new plaintiff would cause the defendant undue
prejudice. Sherwin Manor, 1997 U.S. Dist. LEXIS 9255 at *22.
Here, Texor argues that the motion for substitution must be
denied because Texor will be prejudiced by the amendment. In
particular, Texor contends that it had no notice of SHL 95
because Rawoof did not mention the corporation in his
interrogatory answers and all discovery has been geared toward
Rawoof as the plaintiff. However, as detailed above, based on the
documents produced by Rawoof, Texor clearly had notice of the
existence of SHL 95. Further, the original complaint, which
alleged that Texor violated the PMPA, also served to notify Texor
of the actual claims being asserted against it. Accordingly, we
find that the substitution of SHL 95 does not prejudice Texor.
Staren, 529 F.2d at 1263 (finding that the substituted
corporate plaintiff had such an identity of interest with the
individual plaintiffs that the original complaint served to
notify the defendant of the actual claim being asserted against
it, with no resulting prejudice).
Furthermore, we are not persuaded by Texor's contention that it
needs "extensive discovery" to defend the new claim and determine
whether a franchise relationship existed between Texor and SHL
95. Generally, a new plaintiff prejudices the defendant if
relevant evidence has been lost or the defendant does not have
adequate time for discovery. Id. In this case, however,
discovery has not closed and plaintiff's counsel has offered to
allow Rawoof to be deposed as the corporation's 30(b)(6) witness.
In addition, Texor has not alleged that any evidence has been
lost. Consequently, the substitution of SHL 95 as the named
plaintiff does not prejudice Texor. E. Judicial Estoppel
Finally, Texor contends that Rawoof's motion for substitution
should be denied because Rawoof is judicially estopped from
alleging that the corporation is the real party in interest.
According to Texor, Rawoof made a judicial admission that he was
the real party in interest in the affidavit attached to his
response to Texor's motion to dismiss. However, contrary to
Texor's suggestion, Rawoof did not swear that he was the proper
plaintiff or the real party in interest in that affidavit.
Moreover, Texor's motion to dismiss had nothing to do with
whether Rawoof was the real party in interest. Instead, it was
based on the statute of limitations applicable to the PMPA
For the doctrine of judicial estoppel to apply, a party must
take a position that is clearly inconsistent with an earlier
position adopted by the court. See Ezekiel v. Michel,
66 F.3d 894, 904 (7th Cir., 1995).*fn2 Here, Rawoof did not take a
position in response to the motion to dismiss that is
inconsistent with the real party in interest position he takes in
the current motion to substitute. Accordingly, judicial estoppel
is inapplicable here.
This Court concludes that the relation back doctrine under Rule
15(c) applies because: (1) SHL 95's claims arose from the same
conduct set forth in the original complaint, (2) SHL 95 shared an
identity of interest with Rawoof, (3) Texor had fair notice of
SHL 95's claims, and (4) the substitution of SHL 95 does not
prejudice the defendant. Accordingly, we recommend that the
District Court grant plaintiff's motion for substitution and allow plaintiff to file an amended complaint substituting SHL
95 as the named plaintiff.
Specific written objections to this report and recommendation
may be served and filed within 10 business days from the date
that this order is served. Fed.R. Civ. P. 72. Failure to file
objections with the District Court within the specified time will
result in a waiver of the right to appeal all findings, factual
and legal, made by this Court in the report and recommendation.
Lorentzen v. Anderson Pest Control, 64 F.3d 327, 330 (7th Cir.