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Sabo v. Dennis Technologies

July 2, 2007

SHERRILL SABO, PLAINTIFF,
v.
DENNIS TECHNOLOGIES, LLC, AND MICHAEL DENNIS, DEFENDANTS/THIRD-PARTY PLAINTIFFS,
v.
SPRINT NEXTEL CORPORATION, F/K/A UNITED UTILITIES, INC., F/K/A SPRINT CORPORATION, AND NEXTEL RETAIL STORES, LLC, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Herndon, District Judge

MEMORANDUM and ORDER

This matter is before the Court on the motion for remand to state court brought by defendants and third-party plaintiffs Dennis Technologies, LLC, and Michael Dennis (Doc. 13).*fn1 For the following reasons, the motion is GRANTED.

I. Introduction

On April 3, 2007, plaintiff Sherrill Sabo, an employee of the Dennis defendants, brought suit against her employers in the Circuit Court of the Third Judicial Circuit, Madison County, Illinois, alleging that they are indebted to her for an amount in excess of $50,000. See Doc. 2, Ex. A. The same day, the Dennis defendants filed an answer and impleaded as third-party defendants Sprint Nextel Corporation and Nextel Retail Stores, LLC. See id., Ex. B; Doc. 13, Ex. A ¶ 19.*fn2 The Dennis defendants alleged claims for breach of contract, intentional interference with contractual relations, defamation, and injunctive relief in connection with attempts by the Sprint defendants to terminate an agreement authorizing the Dennis defendants to act in the capacity of a retail sales representative of telephones for the Sprint defendants. See Doc. 2, Ex. B at 3-7.

Also on April 3, 2007, the Dennis defendants filed a motion for a preliminary injunction against the Sprint defendants, and scheduled a hearing on the motion for April 5, 2007. See Doc. 2, Ex. C; Doc. 4 ¶ 22; Doc. 13, Ex. A ¶ 20. Counsel for the Dennis defendants gave notice of the motion and hearing thereon to the Sprint defendants via a message to an e-mail account for shareholder relations on the website of Sprint Nextel Corporation and a telephone message to an area vice-president of the company. See Doc. 4 ¶ 22; Doc. 13, Ex. A ¶¶ 20-21.*fn3 On April 5, 2007, after a hearing at which the Sprint defendants were unrepresented, the Madison County court entered a preliminary injunction prohibiting termination of the retail sales representative agreement between the Sprint defendants and the Dennis defendants. See Doc. 2, Ex. D. On April 10, 2007, the Sprint defendants were served with the Dennis defendants' third-party complaint. See Doc. 2 ¶ 4.

On April 17, 2007, the Sprint defendants removed the case to this Court, asserting federal subject matter jurisdiction in diversity. They have moved the Court to vacate the state-court injunction and to order the parties to the third-party complaint to proceed to arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 et seq. See Doc. 4, 5. The Dennis defendants, as discussed, have requested remand of this case to state court for lack of subject matter jurisdiction, prompting the Sprint defendants to respond with a motion for leave to conduct discovery as to the existence of federal subject matter jurisdiction in this case. See Doc. 15. In addition to requesting jurisdictional discovery, the Sprint defendants have moved also for, somewhat paradoxically, an expedited ruling as to the Dennis defendants' pending motion for remand. See Doc. 18. In support of their request for an expedited ruling on subject matter jurisdiction, the Sprint defendants cite the harm they are suffering as a result of the state-court injunction, which has remained in place pending a ruling by the Court on the Dennis defendants' motion for remand. See id. Counsel for the Dennis defendants concur in the Sprint defendants' request for an expedited ruling on remand, citing the need to procure a judgment of contempt against the Sprint defendants in state court for violating the state court's injunction. See Doc. 19. Having reviewed carefully the submissions of the parties concerning subject matter jurisdiction, the Court now is prepared to rule.

II. Discussion

Under 28 U.S.C. § 1441, "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 the 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). A federal court may exercise jurisdiction in diversity if all parties to an action are of completely diverse citizenship, that is, no plaintiff is a citizen of the same state as any defendant, and an amount in excess of $75,000, exclusive of interest and costs, is in controversy. See 28 U.S.C. § 1332; Rubel v. Pfizer Inc., 361 F.3d 1016, 1017 (7th Cir. 2004); Ford v. Keck, No. 06-cv-667-DRH, 2007 WL 1022003, at *1 (S.D. Ill. Apr. 2, 2007); Johns v. Johns Mitchell, No. 06-924-GPM, 2007 WL 496391, at *2 (S.D. Ill. Feb. 13, 2007); Cassens v. Cassens, 430 F. Supp. 2d 830, 832-33 (S.D. Ill. 2006).

A party seeking removal has the burden of establishing federal jurisdiction. See In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 607 (7th Cir. 1997); Brooks v. Merck & Co., 443 F. Supp. 2d 994, 998 (S.D. Ill. 2006); Fiore v. First Am. Title Ins. Co., No. 05-CV-474-DRH, 2005 WL 3434074, at *2 (S.D. Ill. Dec. 13, 2005). "'Courts should interpret the removal statute narrowly and presume that the plaintiff may choose his or her forum.' Put another way, there is a strong presumption in favor of remand." Fuller v. BNSF Ry. Co., 472 F. Supp. 2d 1088, 1091 (S.D. Ill. 2007) (quoting Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993)). See also Potter v. Janus Inv. Fund, 483 F. Supp. 2d 692, 695 (S.D. Ill. 2007); Kuntz v. Illinois Cent. R.R. Co., 469 F. Supp. 2d 586, 589 (S.D. Ill. 2007). All doubts about the propriety of removal are to be resolved in favor of remand. See Disher v. Citigroup Global Mkts., Inc., Civil No. 04-308-GPM, 2007 WL 1231632, at *7 (S.D. Ill. Apr. 24, 2007); Morthland v. BRP US, Inc., No. 06-CV-01038-DRH, 2007 WL 853986, at *1 (S.D. Ill. Mar. 16, 2007); Littleton v. Shelter Ins. Co., No. 99-912-GPM, 2000 WL 356408, at *1 (S.D. Ill. Mar. 9, 2000).

In this case the record reflects that Sabo is an Illinois citizen, as is Michael Dennis. See Doc. 2 ¶ 5, ¶ 6. The record reflects also that Dennis Technologies, LLC, is a limited liability company organized under Illinois law of which Michael Dennis and Melinda Dennis, Illinois citizens, are the only members, see id.¶ 7, so that for diversity purposes, Dennis Technologies, LLC, is an Illinois citizen. See Lyerla v. Amco Ins. Co., 461 F. Supp. 2d 834, 837 n.1 (S.D. Ill. 2006)(citing Belleville Catering Co. v. Champaign Mkt. Place, L.L.C., 350 F.3d 691, 692 (7th Cir. 2003)) (the citizenship of an "unincorporated association, including a limited liability company, . . . [is] the citizenship of all members of such . . . [an] association."); LaRoe v. Cassens & Sons, Inc., 472 F. Supp. 2d 1039, 1040 (S.D. Ill. 2006) ("The citizenship of a limited liability company . . . for diversity purposes is the citizenship of each of its members."). Thus, complete diversity of citizenship does not exist in this case.*fn4

The Sprint defendants contend that there is complete diversity for three reasons. First, they argue that because they are third-party defendants, they are "defendants" entitled to remove this case within the meaning of 28 U.S.C. § 1441(a). Second, they argue that Sabo's claims against the Dennis defendants have been improperly joined with the latter's third-party claims against the Sprint defendants. If the third-party claims are severed from Sabo's claims against the Dennis defendants, complete diversity of citizenship exists because Michael Dennis and Dennis Technologies, LLC, are Illinois citizens, as discussed, while Sprint Nextel Corporation is a citizen of Kansas and Virginia, and Nextel Retail Stores, LLC, is a citizen of Delaware and Virginia. See Doc. 2 ¶ 8, ¶ 9. Finally, the Sprint defendants argue that complete diversity of citizenship exists because the joinder of Sabo's claims against the Dennis defendants with the latter's claims against the Sprint defendants is collusive in violation of 28 U.S.C. § 1359. The Court considers each of these arguments in turn.*fn5

A. Jurisdictional Discovery

As an initial matter, the Court addresses the request by the Sprint defendants for leave to conduct jurisdictional discovery in support of removal. The Court held recently that "post-removal discovery in support of a claim of [federal subject matter jurisdiction] is highly disfavored." Hill v. Olin Corp., No. 07-CV-0054-DRH, 2007 WL 1431865, at *5 (S.D. Ill. May 14, 2007). As the Court stated in Hill, "a defendant should conduct discovery in support of removal in state court before removal, not after removal." Id. (citing Garbie v. Chrysler Corp., 8 F. Supp. 2d 814, 821 (N.D. Ill. 1998)). Thus, post-removal discovery in support of a claim of federal subject matter jurisdiction should be allowed in "few" cases and then only on "a tight judicial tether." Id. (quoting Smallwood v. Illinois Cent. R.R. Co., 385 F.3d 568, 573-74 (5th Cir. 2004)). "[W]hen a party invokes subject matter jurisdiction based on diversity of citizenship, that party must have a solid factual basis supported by evidence in order to assert that the parties are indeed diverse." Savis, Inc. v. Warner Lambert, Inc., 967 F. Supp. 632, 641 (D.P.R. 1997). Accordingly, a court should not, in the exercise of its "broad discretion" regarding discovery matters, "allow the invoking party to utilize the Court's power to order discovery as a tool to fish for that solid factual basis." Id. See also Westefer v. Snyder, 472 F. Supp. 2d 1034, 1037 (S.D. Ill. 2006) (quoting Dole v. Local 1942 Int'l Bhd. of Elec. Workers, AFL-CIO, 870 F.2d 368, 371 (7th Cir. 1989)) ("District courts have broad discretion in matters relating to discovery.").

In general, post-removal discovery in support of a claim of federal subject matter jurisdiction means that non-removing parties are subjected to "the expense and delay" of discovery precisely at the time when a court's very power to adjudicate a case is "seriously questioned." In re Gas Water Heater Prods. Liab. Litig., Civ. A. No. 96-2484, 1996 WL 537748, at *2 (E.D. La. Sept. 20, 1996) (denying a request to defer a ruling on a motion for remand to state court pending discovery as to subject matter jurisdiction). This runs counter to the settled principles governing the exercise of federal jurisdiction on removal. "Post-removal discovery disrupts the careful assignment of burdens and the delicate balance struck by the underlying rules [governing removal]. A district court should not insert itself into the fray by granting leave for the defendant to conduct discovery or by engaging in its own discovery." Lowery v. Alabama ...


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