United States District Court, N.D. Illinois, Eastern Division
May 3, 2005.
JAMES CRAIG JENNINGS, Plaintiff,
DEBBIE KELLER HILL, Defendant, and MULHERIN, REHFELDT & VARCHETTO, P.C., a necessary Party Defendant.
The opinion of the court was delivered by: AMY J. ST. EVE, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff James Craig Jennings ("Plaintiff") filed this unjust
enrichment action against Defendants Debbie Keller Hill ("Hill")
and the law firm of Mulherin, Rehfeldt & Varchetto, P.C.
("Mulherin"). Plaintiff and Mulherin move to remand this matter
to DuPage County Circuit Court pursuant to 28 U.S.C. § 1447(c).
The Court grants Plaintiff's and Mulherin's motions to remand
this case to state court.
Plaintiff is a resident of the State of Illinois. (R. 5-1;
Answer at 2, ¶ 1.) Hill is a resident of the State of North
Carolina, while Mulherin is an Illinois corporation with its
principal place of business in Wheaton, Illinois. (Id. at 2, ¶¶
In August 1998, Plaintiff sought the legal services of Mulherin
on behalf of his daughter and Hill. (Id. at 1, ¶ 6.) Plaintiff entered into an oral
agreement with Mulherin, obligating him to pay for Mulherin's
legal work and expenses. (Id. at 2, ¶ 15.) Plaintiff alleges
that he paid over $130,000 to Mulherin for legal services
provided for both his daughter and Hill. (Compl. at 5, ¶ 17.)
Outstanding fees, however, remain owed to Mulherin, totaling
$48,799.32. (R. 5-1; Answer at 3, ¶ 39.) On January 14, 2005,
Plaintiff filed this suit in DuPage County Circuit Court,
alleging that his payment for Mulherin's services unjustly
enriched Hill. (R. 1-2; Compl. at 7, ¶ 32.) Plaintiff joined
Mulherin to this action, alleging that Mulherin was a necessary
party with an interest in this controversy. (R. 1-2; Compl. at 8,
¶ 41.) Hill removed this action to this Federal Court, and
Plaintiff and Mulherin now move the Court to remand this action
back to DuPage County Circuit Court.
Plaintiff and Mulherin move to remove this action to state
court because Plaintiff and Mulherin are both Illinois residents
and, therefore, complete diversity between the parties does not
exist. In opposing the motion, Hill first argues that Mulherin's
presence in this matter constitutes an improper or fraudulent
joinder because Plaintiff is not able to assert an "actual claim
or controversy" against Mulherin. Hill next argues that the Court
should disregard Mulherin's nondiverse citizenship because
Mulherin is a nominal party.
I. Legal Standard
Federal diversity jurisdiction requires complete diversity
between the real and substantial parties in interest.
28 U.S.C. § 1332(a)(2). See also Ruhrgas AG v. Marathon Oil Co.,
526 U.S. 574, 580 n. 2, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999). If
diversity jurisdiction is challenged, the burden of proof remains
on the party invoking federal court jurisdiction. Chase v. Shop
"N Save Warehouse Foods, Inc., 110 F.3d 424, 427 (7th Cir. 1997);
NLFC, Inc. v. Devcom Mid-Am., Inc., 45 F.3d 231, 237 (7th
Cir. 1995). In such a case, the court resolves all doubts as to
the court's jurisdiction in plaintiff's favor. Doe v.
Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993);
Peters v. AMR Corp., No. 95-C-588, 1995 WL 358843, at *1 (N.D.
Ill. 1995); Katonah v. USAIR, 868 F.Supp. 1031, 1033 (N.D. Ill.
1994). Further, in considering an allegation of fraudulent
joinder, the court may consider the entire record, not just the
pleadings. Peters, No. 95-C-588, 1995 WL 358843, at * 2;
Poulos v. NAAS Foods, Inc., 132 F.R.D. 513, 517 (E.D. Wis.
II. Hill's Fraudulent Joinder Argument
An out-of-state defendant may preserve federal jurisdiction by
demonstrating that the plaintiff has fraudulently joined a
nondiverse party to the action. See Schwartz v. State Farm
Mutual Auto. Ins. Co., 174 F.3d 875, 878 (7th Cir. 1999);
Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir.
1992). Also see In re Bridgestone/Firestone, 260 F.Supp.2d 722,
726 (S.D. Ind. 2003). The party seeking removal bears the burden
of proving that there is no reasonable possibility a plaintiff
can state a cause of action against a nondiverse defendant in
state court, or that there has been outright fraud in plaintiff's
pleading of jurisdictional facts. Schwartz, 174 F.3d at 878;
Bridgestone/Firestone, 260 F.Supp.2d at 726.
Hill has failed to demonstrate that Plaintiff cannot possibly
establish a cause of action against Mulherin. Polous,
959 F.2d at 73. Hill contends that Plaintiff's complaint does not assert
any right to recover fees from Mulherin and does not request
relief from Mulherin. Plaintiff's Complaint, however, alleges
that Mulherin unjustly enriched Hill by collecting fees from
Plaintiff rather than Hill. (R. 1-2; Compl. at 7, ¶ 32, 38.)
Plaintiff also seeks reimbursement for legal fees which he paid Mulherin in excess of
Plaintiff's share of the fees. (Id. at 7, ¶ A.) Hill also
points to the fact that all parties acknowledge the debt owed to
Mulherin, arguing that there is no real controversy involving
Mulherin. A dispute remains, however, regarding which party will
compensate Mulherin and whether Mulherin will partially reimburse
Plaintiff for legal fees already paid to Mulherin. For these
reasons, Hill has not satisfied its heavy burden of demonstrating
that Plaintiff has failed to allege any possible cause of action
against Mulherin. See Schwartz, 174 F.3d at 878.
III. Hill's Nominal Party Argument
Hill next argues that even if Mulherin was not fraudulently
joined, the Court should ignore its citizenship for purposes of
diversity jurisdiction because it is a nominal party. In
considering diversity jurisdiction, the court must disregard
nominal parties and rest jurisdiction only upon the citizenship
of real parties to the controversy. Navarro Sav. Ass'n v. Lee,
446 U.S. 458, 460-61, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980).
Nominal parties have no interest in the subject matter litigated.
See S.E.C. v. Cherif, 933 F.2d 403, 414 (7th Cir. 1991). A
nominal party's presence in a suit is merely incidental, and "it
is of no moment whether the one or the other side in [the]
controversy succeeds." Ampere Automotive Corp. v. Fullen, No.
01-C-6818, 2001 WL 1268554, *3 (N.D. Ill. 2001) (quoting
Cherif, 933 F.2d at 414).
Hill, as the party invoking federal jurisdiction, has failed to
meet its heavy burden of demonstrating that Mulherin is a nominal
party. Nagy v. Berkshire Life Ins. Co. of America, No.
03-C-2219, 2003 WL 22388911, at *2 (N.D. Ill. 2003) (citing
Polous, 959 F.2d at 73). Both Plaintiff and Mulherin explain
that Mulherin has an interest in collecting outstanding legal
fees. (R. 5-1; Answer at 3, ¶ 39.) Mulherin's ownership interest
in the outstanding fees constitutes a legal interest in this litigation that defeats Hill's argument
that Mulherin is nominal. See Selfix, Inc. v. Bisk,
867 F.Supp. 1333, 1335 (N.D. Ill. 1994) (holding that a nominal defendant
"has no ownership interest in the property which is the subject
of litigation"). Further, Plaintiff seeks reimbursement of money
paid to Mulherin on behalf of Hill. Mulherin plainly has an
ownership interest in fees already paid to it by Plaintiff. Hill
cites several cases supporting the standard that courts must
disregard nominal parties in considering diversity. Hill,
however, does not explain why Mulherin's interest in collecting
outstanding legal fees from Plaintiff and Hill is not a
sufficient real interest in this litigation. Accordingly, Hill
has failed to carry its burden of demonstrating that Mulherin is
a nominal party to this action. CONCLUSION
For the foregoing reasons, the Court grants Plaintiff's and
Mulherin's motions to remand this case to DuPage County Circuit
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