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Apex Digital, Inc. v. Sears

July 16, 2009

APEX DIGITAL, INC., PLAINTIFF-APPELLANT,
v.
SEARS, ROEBUCK & COMPANY, DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 06 C 3972-George W. Lindberg, Judge.

The opinion of the court was delivered by: Kanne, Circuit Judge.

ARGUED JUNE 2, 2009

Before POSNER, RIPPLE, and KANNE,Circuit Judges.

Apex Digital sued Sears to collect an unpaid debt. Sears filed a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), claiming that Apex lacked standing because it had assigned all of its rights in the debt to the CIT Group/Commercial Services, Inc. The district court agreed with Sears and granted its motion. We now affirm.

I. BACKGROUND

On July 24, 2006, Apex Digital brought a diversity suit against Sears in the Northern District of Illinois for breach of contract and other related claims. The complaint alleged that over several years, Sears had pur-chased products from Apex worth in excess of $100 million. According to Apex, Sears accepted delivery but stopped paying for these products in 2005; the outstanding amount due after all potentially applicable credits is at least $8,185,302.24.

Sears responded on August 14 with a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) or, in the alternative, Rule 12(b)(6). Sears claimed that Apex sold and assigned all of its rights in its accounts receivable to CIT and therefore no longer had standing to sue. In support of its motion, Sears attached a letter from Apex dated June 20, 2003, which stated:

We are pleased to inform you that we have entered into a factoring arrangement with The CIT Group/Commercial Services, Inc. (herein "CIT"). Under our agreement with CIT, all of our existing and future accounts receivable have been sold and assigned to CIT. We feel that this arrangement will provide a higher level of service for all our customers.

In accordance with our arrangement with CIT, commencing immediately, payment on all outstanding invoices and all invoices hereafter rendered by us must be made directly to CIT, strictly in accordance with the terms of sale . . . . In the event of any merchandise returns or claims, you thereof must give prompt notice to CIT.

Apex offered nothing in response to dispute Sears's factual allegations. Instead, it pointed to perceived defects in Sears's argument. Apex claimed that its letter to Sears was insufficient to determine the terms of the assignment between Apex and CIT and that, at most, it suggested that at some point in the last three years CIT and Apex had entered into an assignment of collection. Apex claimed that because an assignment of collection does not transfer beneficial ownership to the assignee under Illinois law, see Ecker v. Big Wheels, Inc., 483 N.E.2d 639, 641-42 (Ill. App. Ct. 1985), the assignment Sears had alleged was not sufficient to divest Apex of its interest in the suit. Apex averred that because there was no facial defect in its complaint, Sears's motion was without merit.

Sears replied that the letter established a sale and assignment of all of Apex's rights in the debt, not merely the right to collect. The district court apparently agreed and granted Sears's motion on September 27, 2006, noting that the only relevant evidence presented was the letter from Apex's president stating, "[u]nder our agreement with CIT, all of our existing and future accounts receivable have been sold and assigned to CIT." The court concluded that, in the absence of further evidence*fn1 to the contrary, Apex lacked standing to sue. This appeal followed.

II. ANALYSIS

We review de novo a district court's dismissal for lack of subject matter jurisdiction. Johnson v. Orr, 551 F.3d 564, 567 (7th Cir. 2008). Apex claims that the district court applied the wrong standard to Sears's motion to dismiss. According to Apex, because the district court looked beyond the pleadings and considered extrinsic evidence, it improperly converted Sears's Rule 12(b)(1) motion into a Rule 56 summary judgment motion. In support of its argument, Apex cites cases establishing that to survive a motion to dismiss for lack of subject matter jurisdiction, a plaintiff need only show the existence of facts that could, consistent with the complaint's allegations, establish standing. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992); Lac du Flambeau Band of Lake Superior Chippewa Indians v. Norton, 422 F.3d 490, 495 (7th Cir. 2005). Because no facts in the pleadings defeated its standing, Apex claims that the district court erred in dismissing the suit. We disagree.

Standing is an essential component of Article III's case-or-controversy requirement. Lujan, 504 U.S. at 560. " 'In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or particular issues.' " Perry v. Vill. of Arlington Heights, 186 F.3d 826, 829 (7th Cir. 1999) (quoting Warth v. Seldin, 422 U.S. 490, 498 (1975)). As a jurisdictional requirement, the plaintiff bears the burden of establishing standing. Id. Because standing is "not [a] mere pleading requirement[] but rather an indispensable part of the plaintiff's case, [it] must be supported in the same way as any other matter on ...


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