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Dexia Credit Local v. Rogan

February 9, 2009

DEXIA CREDIT LOCAL, PLAINTIFF,
v.
PETER G. ROGAN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Intervenors Brian, Sara, and Robert Rogan have filed a motion to dismiss this action for lack of subject matter jurisdiction. Intervenor Judith Rogan has filed a nearly identical motion to dismiss. The Court issued a decision on January 29, 2009, preliminarily addressing certain issues raised by the motions and ordering supplemental briefing regarding the issues of jurisdiction and finality of the judgment entered by the judge to whom this case was originally assigned. See Dexia Credit Local v. Rogan, No. 02 C 8288, 2009 WL 230641 (N.D. Ill. Jan. 29, 2009).

For the reasons set forth below, the Court denies both motions to dismiss.

Facts*fn1

Dexia Credit Local, a French corporation, sued Peter Rogan, Braddock Management, L.P. (Braddock), Bainbridge Management, L.P. (Bainbridge L.P.), Bainbridge Management, Inc. (Bainbridge, Inc.), and others for fraud, conspiracy, and other torts. Dexia alleged diversity as the sole basis for subject matter jurisdiction in federal court pursuant to 28 U.S.C. § 1332. It alleged that Bainbridge, L.P. was an Illinois limited partnership; Dexia made no allegations, however, concerning the citizenship of Bainbridge, L.P.'s partners. Similarly, Dexia made no allegations concerning the citizenship or identity of defendant Braddock Management, L.P.'s partners. Rather, Dexia alleged only that Braddock Management, L.P. was a California limited partnership.

When the case was filed, it was assigned to another judge of this Court. As best as the Court can determine, neither that judge nor any of the defendants challenged or made any inquiry about the adequacy of Dexia's citizenship allegations. In March 2003, the case was reassigned to a different judge of this Court. That judge likewise appears to have made no inquiry regarding the adequacy of the citizenship allegations.

In September 2005, Bainbridge, L.P. filed for bankruptcy under Chapter 7 of the Bankruptcy Code. As a result of the automatic stay provision of the Bankruptcy Code, Dexia was prevented from pursuing its claims against Bainbridge, L.P. in this case. The docket, however, does not reflect entry of a stay order in this case. Bainbridge, L.P. was later liquidated.

In May 2007, the judge to whom the present case was then assigned entered a default judgment in Dexia's favor against Peter Rogan, Braddock Management, L.P., and Bainbridge, Inc. in an amount in excess of $124 million. Dexia's motion for a default judgment noted that "[b]ecause Bainbridge Management LP ('Bainbridge LP') is in bankruptcy, the automatic stay currently prevents Dexia from seeking entry of default and a default judgment against that entity." Pl. Mot. for Entry of Default & for Default Judg. Against Defs. at 2 n.1 (docket no. 318).

The orders entering judgment in May 2007 said that "final judgment" was being entered. The judge did not, however, make any findings pursuant to Federal Rule of Civil Procedure 54(b), even though he was entering judgment as to less than all defendants. See docket nos. 330, 331. The judge never entered a judgment or other disposition with respect to Bainbridge, L.P.

In March 2008, the case was reassigned to yet another judge, due to the resignation of the previously-assigned judge. That same month, Dexia moved to reassign the case to this Court, before whom a related, later-filed, still-open case was pending (United States v. Peter Rogan, et al., Case No. 07 C 6398). This Court and the other judge agreed to the reassignment of the present case to this Court, pursuant to Internal Operating Procedure 13(d).

Following the reassignment of the present case, this Court did not make any inquiry into subject matter jurisdiction, assuming that because the case was in a post-judgment phase, jurisdictional issues had been dealt with. As the Court has acknowledged, that was a serious mistake. See Dexia Credit Local, 2009 WL 230641 at *2.

Dexia subsequently pursued supplementary proceedings before this Court to satisfy its judgment. Those proceedings included, among other things, obtaining temporary restraining orders freezing assets that Dexia contended Peter Rogan had transferred to avoid collection or that were held by persons claimed to be his alter egos. Brian, Sara, and Robert Rogan (Peter Rogan's adult children) and Judith Rogan (his wife) then intervened to oppose the freeze orders. The Court ultimately entered preliminary injunctions that had the effect of extending the freeze orders in large part.

Dexia has moved for orders to turn over certain of the frozen assets. The Court has set for hearing at least one of those motions, concerning assets in which the Rogan children claim an interest. Discovery is currently proceeding.

During the supplementary collection proceedings, which have included at least a dozen significant court appearances, numerous filings by the Rogans, and evidentiary hearings, none of the Rogans (or anyone else) contested the existence of diversity jurisdiction. On January 15, 2009, however, the Rogan children and Judith Rogan filed separate motions to dismiss. In those motions, they argued that Bainbridge, L.P.'s partners included a Belizean corporation, Boulevard Investors, Ltd. As a result, the Rogans argued, diversity jurisdiction is lacking because there are foreign (non-United States) parties on both sides of the case. See, e.g., Karazanos v. Madison Two Assoc., 147 F.3d 624, 627 (7th Cir. 1998). Though this contention came rather late in the day -- to say the least -- ...


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