United States District Court, S.D. Illinois
August 24, 2005.
RONALD ALSUP, ROBERT CREWS, and MAGNUM PROPERTIES, L.L.C., Plaintiffs,
3-DAY BLINDS, et al., Defendants.
The opinion of the court was delivered by: G. PATRICK MURPHY, Chief Judge, District
MEMORANDUM AND ORDER
Before the Court is the issue of the Court's subject matter
jurisdiction. In accordance with this Court's normal practice on
these issues, the case was set for a hearing on Plaintiffs'
motion to remand on August 22, 2005. After reviewing the parties'
written submissions, the Court concluded that oral argument would
add nothing and only result in the expenditure of more time and
expenses by all involved. Accordingly, the hearing was canceled
with a promise that this written order would follow.
This class action lawsuit asserts state law claims*fn1 for
damages by purchasers of mini blinds. It was filed in Madison
County, Illinois, on February 17, 2005, and removed to this Court
on April 20, 2005, by Defendant Mitchell Blind and Shade Company
("Mitchell Blind"). Removal is premised upon 28 U.S.C. § 1452 because it allegedly arises under
and is related to cases pending under the United States
Bankruptcy Code and the CLASS ACTION FAIRNESS ACT § 9, Pub.L.
No. 109-2 (2005) ("CAFA"), because the parties are allegedly
citizens of different states and the amount in controversy,
exclusive of interest and costs, exceeds $5,000,000. Plaintiffs
filed a timely motion to remand on May 20, 2005.
It is fundamental that "[f]ederal courts are not courts of
general jurisdiction; they have only the power that is authorized
by Article III of the Constitution and the statutes enacted by
Congress pursuant thereto." Bender v. Williamsport Area School
Dist., 475 U.S. 534, 541 (1986). For this reason, district
courts must "interpret the removal statute narrowly," and any
doubt regarding jurisdiction should be resolved in favor of
remand to state court. Doe v. Allied-Signal, Inc.,
985 F.2d 908, 911 (7th Cir. 1993). As the party seeking to invoke the
Court's jurisdiction, Mitchell Blind bears the burden of proving
the existence of federal subject matter jurisdiction by
"competent proof," NLFC, Inc. v. Devcom Mid-America, Inc.,
45 F.3d 231, 237 (7th Cir. 1995), which means "proof to a
reasonable probability that jurisdiction exists." Target Market
Publishing, Inc. v. ADVO, Inc., 136 F.3d 1139, 1142 (7th
District courts have "original but not exclusive jurisdiction
of all civil proceedings arising under title 11, or arising in or
related to cases under title 11." 28 U.S.C. § 1334(b). A case may
be removed to the district court "if such district court has
jurisdiction of such claim or cause of action under Section 1334
of this title." 28 U.S.C. § 1452(a). Even if a removed claim is
related to a bankruptcy case, however, abstention is appropriate
in certain circumstances.
In this case, Mitchell Blind asserts that because Plaintiffs
seek relief from Defendants Jencraft Corporation ("Jencraft"), Menard, Inc. ("Menard"), and
Ames Department Store ("Ames"), entities which have filed
voluntary petitions for relief under the United States Bankruptcy
Code, Plaintiffs' claim "may substantially affect the
reorganization and liquidation plans of the Bankrupt Defendants,
allocation of property among creditors, and the distribution of
their assets." (See Doc. 1, para. 12.) Mitchell Blind further
asserts that "at least one defendant may file a proof of claim
against Jencraft for indemnification, and it is possible that
other defendants also will do so." (See Doc. 1, para. 15.)
The Seventh Circuit takes a narrow view of "related to"
jurisdiction a dispute is "related to" a bankruptcy only when
it "affects the amount of property available for distribution or
the allocation of property among creditors." In re Xonics,
813 F.2d 127, 131 (7th Cir. 1987). This suit certainly cannot be
said to meet this test. Plaintiffs have dismissed Jencraft,
Menard, and Ames from this suit. (See Doc. 43.) Any claims for
indemnification are nothing more than speculation.
Moreover, even if the action were properly removed, remand is
appropriate pursuant to the doctrines of permissive abstention
and equitable remand. Under 28 U.S.C. § 1334,
Nothing in this section prevents a district court in
the interest of justice or in the interest of comity
with state courts or respect for state law, from
abstaining from hearing a particular proceeding
arising under title 11 or arising in or related to a
case under title 11.
28 U.S.C. § 1334(c)(1). Similarly, 28 U.S.C. § 1452, the
provision which governs removal of actions related to bankruptcy
proceedings, provides that "[t]he Court to which such claim or
cause of action is removed may remand such claim or cause of
action on any equitable ground." 28 U.S.C. § 1452(b).
The Seventh Circuit had identified numerous factors to be
considered in the permissive abstention decision, including the
extent to which state law issues predominate over bankruptcy issues, the jurisdictional basis, if any, other than Section
1334, the degree of relatedness or remoteness to the main
bankruptcy case, the likelihood that one of the parties was forum
shopping by commencing the proceeding in the bankruptcy court,
the existence of a right to a jury trial, and the presence in the
proceeding of nondebtor parties. In re Chicago, Milwaukee, St.
Paul & Pacific Railroad Co., 6 F.3d 1184, 1189 (7th Cir.
In this case, the foregoing factors favor remand. Absent some
argument that Plaintiffs' claims relate to the bankruptcy
proceedings, the action was properly filed in Illinois state
court, and it belongs in an Illinois state court a venue which
certainly has an interest in resolving matters concerning
consumer fraud. Accordingly, under principles of permissive
abstention and equitable remand, remand is appropriate.
Defendants' next argument that the CAFA applies to this action
because it was filed on the date the CAFA was enacted by
Congress, February 17, 2005, flies completely in the face of
recent Seventh Circuit decisions. See Knudsen v. Liberty Mutual
Insurance Co., 411 F.3d 805 (7th Cir. 2005); Schorsch v.
Hewlett-Packard Co., No. 05-C-3397, 2005 WL 1863412 (7th
Cir. Aug. 8, 2005). As the Seventh Circuit stated in Schorsch,
"creative lawyering will not be allowed to smudge the line drawn
by the 2005 Act: class actions `commenced' on or before February
18, 2005, remain in state court." Id. at *3 (emphasis added).
This action was commenced on February 17, 2005. As Judge Posner
opined earlier this month,
companies that pressed for the enactment of the Class
Action Fairness Act were doubtless acutely aware, as
the bill that became the statute was wending its way
through Congress en route to enactment, that the
prospect of its enactment would spur the class action
bar to accelerate the filing of state-law class
actions in state courts. Doubtless the companies made
their concerns known to Congress. The fact that
Congress did not respond by writing `removed' (or
`removed after the date of enactment but within 30
days of the original filing') instead of `commenced' is telling.
Pfizer, Inc. v. Lott, No. 05-8013, 2005 WL 1840046, at *2
(7th Cir. Aug. 4, 2005). The argument that the Act was
actually enacted on the date it was passed by Congress (as
opposed to the date it was signed by the President) lacks support
from any authority.
Finally, the Court notes that removal would fail even in spite
of the foregoing because Mitchell Blind has not properly
identified the citizenship of each Plaintiff. Allegations based
upon "information and belief" (see Doc. 1, para. 6) are
insufficient to invoke this Court's jurisdiction. See America's
Best Inns, Inc. v. Best Inns of Abilene, L.P., 980 F.2d 1072,
1074 (7th Cir. 1992). Moreover, in C.T. Carden v. Arkoma
Associates, 494 U.S. 185 (1990), the Supreme Court articulated
the general rule that "every association of a common law
jurisdiction other than a corporation is to be treated like a
partnership." Indiana Gas Co. v. Home Ins. Co., 141 F.3d 314,
317 (7th Cir.), cert. denied, 119 S. Ct. 339 (1998).
Congress has chosen to establish special rules for determining
the citizenship of certain kinds of associations specifically,
corporations, decedents' estates, and insurers named as
defendants in direct actions, see 28 U.S.C. § 1332(c); however,
because the statute is silent with respect to limited
partnerships and limited liability companies, the Court must
"apply the norm that all unincorporated associations are treated
as partnerships." Indiana Gas, 141 F.3d at 318. Unincorporated
business entities, i.e., limited liability companies, are
treated as citizens of every state of which any partner or member
is a citizen. Id. at 316-17. The notice of removal says nothing
about the citizenship of the members of Plaintiff Magnum
Plaintiffs are entitled to recover their costs in seeking
remand to state court, see Garbie v. DaimlerChrysler Corp.,
211 F.3d 407 (7th Cir. 2000), and the request for fees and costs
is granted. CONCLUSION
For the foregoing reasons, the motion to remand (Doc. 53) is
GRANTED. This action is REMANDED to the Circuit Court for the
Third Judicial Circuit, Madison County, Illinois, pursuant to
28 U.S.C. §§ 1452(b) and 1447(c). Plaintiffs' counsel shall file an
affidavit setting forth the fees and costs incurred as a result
of the removal on or before September 2, 2005.
IT IS SO ORDERED.
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