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Southern Illinois Beverage, Inc. v. Hansen Beverage Co.

October 12, 2007

SOUTHERN ILLINOIS BEVERAGE, INC., PLAINTIFF,
v.
HANSEN BEVERAGE COMPANY, DEFENDANT.



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

MEMORANDUM and ORDER

This matter is before the Court on the motion for remand to state court brought by Plaintiff Southern Illinois Beverage, Inc., ("SIB") (Doc. 11) and the motion to dismiss or stay this litigation pending arbitration brought by Defendant Hansen Beverage Company ("Hansen") (Doc. 4). SIB's motion for remand is DENIED. Hansen's motion for a stay of these proceedings pending arbitration is GRANTED, and this action is STAYED pending arbitration.

I. Introduction

According to the complaint in this cause, SIB is a company based in Nashville, Illinois, that distributes beverages to locations in southern Illinois pursuant to distribution/franchise agreements with beverage manufacturers. Hansen is a manufacturer of assorted beverages, including a non-alcoholic beverage called "Monster." In 2005, SIB entered into an agreement with Hansen whereby SIB would sell and distribute Monster in an exclusive sales territory consisting of six Illinois counties. In 2006, Hansen cancelled the agreement and began selling to third parties the right to distribute Monster in the contractual sales territory. In 2007, SIB filed this action in the Circuit Court of the Twentieth Judicial Circuit, Washington County, Illinois, asserting claims under the Illinois Franchise Disclosure Act of 1987 ("IFDA"), 815 ILCS 705/1-705/44, and for breach of the duty of good faith and fair dealing. Hansen has removed the case to this Court, asserting federal subject matter jurisdiction in diversity pursuant to 28 U.S.C. § 1332, and has moved for dismissal or a stay of these proceedings pending arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-307. SIB in turn has moved for remand of the case to state court for lack of subject matter jurisdiction. Both SIB's motion for remand and Hansen's motion for dismissal or a stay of these proceedings pending arbitration have been fully briefed and are ripe for decision. The Court has reviewed the submissions of the parties carefully and now rules as follows.

II. Discussion

A. Motion for Remand

As noted, SIB challenges the existence of federal subject matter jurisdiction in this case. Because "issues affecting a federal court's subject matter jurisdiction are 'fundamentally preliminary,'" the Court will address first the question of subject matter jurisdiction before turning to Hansen's arguments concerning dismissal or a stay of these proceedings pending arbitration. In re General Motors Corp. Dex-Cool Prods. Liab. Litig., 241 F.R.D. 305, 309 (S.D. Ill. 2007) (quoting Leroy v. Great W. United Corp., 443 U.S. 173, 180 (1979)). See also Kurz v.Fidelity Mgmt. & Research Co., No. 07-cv-592-JPG, 2007 WL 2746612, at *1 (S.D. Ill. Sept. 18, 2007) (quoting Hay v. Indiana State Bd. of Tax Comm'rs, 312 F.3d 876, 879 (7th Cir. 2002)) ("Jurisdiction is the . . . power to declare law, . . . and without it the federal courts cannot proceed."); Rutherford v. Merck & Co., 428 F. Supp. 2d 842, 845 (S.D. Ill. 2006) (quoting Meyers v. Bayer AG, 143 F. Supp. 2d 1044, 1048 (E.D. Wis. 2001)) (noting the "constitutional importance" of the rule that a district court should resolve issues pertaining to federal subject matter jurisdiction "first," before addressing any other aspect of a case).

1. Legal Standard

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(a); Rubel v. Pfizer Inc., 361 F.3d 1016, 1017 (7th Cir. 2004); Sabo v. Dennis Techs., LLC, No. 07-cv-283-DRH, 2007 WL 1958591, at *2 (S.D. Ill. July 2, 2007). 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); 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." . "All doubts about the propriety of removal are to be resolved in favor of remand." Clevenger v. Eastman Chem. Co., No. 07-cv-148-DRH, 2007 WL 2458474, at *1 (S.D. Ill. Aug. 24, 2007). See also Ford v. Keck, No. 06-cv-667-DRH, 2007 WL 1022003, at *1 (S.D. Ill. Apr. 2, 2007); Littleton v. Shelter Ins. Co., No. 99-912-GPM, 2000 WL 356408, at *1 (S.D. Ill. Mar. 9, 2000).

2. Amount in Controversy

In this instance the record shows that SIB is an Illinois citizen and Hansen is a citizen of Delaware and California, see 28 U.S.C. § 1332(c)(1), so that complete diversity of citizenship exists in this case. What is principally in dispute here is whether an amount in excess of $75,000, exclusive of interest and costs, is in controversy. The standard under which the amount in controversy is evaluated for diversity purposes in a removed case is well settled. The amount in controversy is determined by an evaluation of the claims described in the complaint, along with the record as a whole, as of the time a case was removed. See Andrews v. E.I. Du Pont De Nemours & Co., 447 F.3d 510, 515 (7th Cir. 2006); Geschke v. Air Force Ass'n, 425 F.3d 337, 341 (7th Cir. 2005); Tylka v. Gerber Prods. Co., 211 F.3d 445, 448 (7th Cir. 2000); Durbin v. Wal-Mart Stores, Inc., No. 1:04-CV-01570-JDT-TA, 2004 WL 2750256, at *1 (S.D. Ind. Oct. 27, 2004). In the event that any challenges are made regarding the amount in controversy, the party asserting the existence of federal subject matter jurisdiction has the burden of affirmatively establishing such jurisdiction. See Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 540 (7th Cir. 2006); Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 447 (7th Cir. 2005). A removing defendant "need not show that the plaintiff will prevail or collect more than $75,000 if he does." Rising-Moore v. Red Roof Inns, Inc., 435 F.3d 813, 816 (7th Cir. 2006) (citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938)) (emphasis omitted). Rather, the burden is to show "what the plaintiff hopes to get out of the litigation; if this exceeds the jurisdictional amount, then the case proceeds in federal court unless a rule of law will keep the award under the threshold." Id. See also Brill, 427 F.3d at 449 ("The demonstration concerns what the plaintiff is claiming (and thus the amount in controversy between the parties), not whether plaintiff is likely to win or be awarded everything he seeks."). A case must remain in federal court unless it is "legally certain" that the controversy is worth less than the jurisdictional amount. MeridianSec. Ins. Co., 441 F.3d at 543.

In this case, Count I and Count II of SIB's complaint allege violations of IFDA by Hansen, while Count III alleges a breach of the duty of good faith and fair dealing by Hansen. This requires the Court in turn to examine briefly SIB's standing to sue under IFDA. Section 3 of IFDA defines a "franchise" according to three criteria:

"Franchise" means a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which:

(a) a franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services, under a marketing plan or system prescribed or ...


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