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Rehabcare Group East, Inc., D/B/A Rehabcare Group Therapy v. Camelot Terrace

December 15, 2010

REHABCARE GROUP EAST, INC., D/B/A REHABCARE GROUP THERAPY SERVICES, INC., PLAINTIFF,
v.
CAMELOT TERRACE, INC.; REGAL HEALTH AND REHAB CENTER, INC.; FOREST HILL HEALTH AND REHAB CENTER, INC.; GALESBURG TERRACE, INC.; GEM HEALTHCARE MANAGEMENT, INC.; AND MICHAEL LERNER A/K/A MOSHE LERNER, DEFENDANTS.



The opinion of the court was delivered by: Hon. Amy J. St. Eve

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Court Judge:

On April 15, 2010, Plaintiff, Rehab Group East, Inc., brought suit against the named defendants, alleging that they had failed to pay Plaintiff for therapy services that it had provided to residents of the Camelot Terrace nursing facility. (R. 1.)Defendants have moved to dismiss the lawsuit on the ground that the Court lacks subject-matter jurisdiction. (R. 32.) Although Defendants are mistaken in this regard-complete diversity exists between the parties and thus the Court enjoys subject-matter jurisdiction under 28 U.S.C. § 1332-Plaintiff does lack the capacity to bring suit. There is no dispute that the Illinois Secretary of State revoked Plaintiff's certificate of authorization. Nor do the parties contest the fact that the Illinois Business Corporation Act ("the Act") prohibits a foreign company lacking such a certificate from maintaining a civil action within the state. See 805 ILL. COMP. STAT. 5/13.70(a). Because the Act precludes Plaintiff from pursuing an action in federal court sitting in diversity in Illinois, the Court grants Defendants' motion to dismiss, without prejudice.

BACKGROUND

Plaintiff alleges that it entered into separate agreements with Camelot Terrace, Inc., Regal Health and Rehab Center, Inc., Forest Hill Health and Rehabilitation Center, Inc., and Galesburg Terrace, Inc., to provide therapy services at their skilled nursing facilities. (R. 10 at 2-3.) Plaintiff contends that it performed all obligations required under those agreements, and that Camelot Terrace, Regal, Forest Hill, and Galesburg must pay for the services Plaintiff has provided. (Id. at 3.) Defendants have failed, Plaintiff alleges, to pay the outstanding invoices or otherwise to perform as they are required to under the pertinent agreements. (Id. at 5.) The First Amended Complaint contends that Defendants are liable under certain state-law causes of action, including breach of contract, promissory estoppel, unjust enrichment, account stated, tortious interference with contracts, and fraudulent conveyance. (Id. at 6-10.)

On July 27, 2010, Defendants moved to dismiss the First Amended Complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction. (R. 32.) Defendants contend that Plaintiff "has failed to allege that it has obtained any certificate of authority to do business in the State of Illinois" and observe that the Illinois Business Corporation Act ("the Act") provides that "[n]o foreign corporation transacting business in this State without authority to do so is permitted to maintain a civil action in any court of this State."

(R. 32 at 1-2 (citing 805 ILL. COMP. STAT. 5/13.70(a).). Defendants further point out that the State of Illinois revoked Plaintiff's authority to transact business, and thus Plaintiff lacks standing. (Id. at 2.)

LEGAL STANDARD

When reviewing a motion to dismiss under Rule 12(b)(1) for lack of subject-matter jurisdiction, the Court should generally accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff. See, e.g., Harris v. Quinn, No. 10-CV-2477, 2010 WL 4736500, at *4 (N.D. Ill. Nov. 12, 2010) (citing Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999)). On such a motion, however, the Court is not necessarily bound to accept the truth of the complaint's allegations, but may look beyond the complaint and the pleadings to evidence that calls the Court's jurisdiction into doubt. Bastien v. AT&T Wireless Servs., Inc., 205 F.3d 983, 990 (7th Cir. 2000).

ANALYSIS

I. The Court Has Subject-Matter Jurisdiction Over the Present Case

As a preliminary matter, Defendants improperly frame their motion as one to dismiss under Rule 12(b)(1) for want of subject-matter jurisdiction. (R. 32.) The Illinois Business Corporation Act does not affect this Court's subject-matter jurisdiction. See, e.g., Wagner Furniture Interiors, Inc. v. Kemner's Georgetown Manor, Inc., 929 F.2d 343, 345 (7th Cir. 1991); Summers v. Interstate Tractor and Equip. Co., 466 F.2d 42, 50 (9th Cir. 1972); APC Filtration v. Becker, 646 F. Supp. 2d 1000, 1004-05 (N.D. Ill. 2009). Rather, the Act deprives foreign corporations that lack certificates of authority of the capacity to maintain suit in any court in Illinois. Id. The First Amended Complaint alleges that Plaintiff is a Delaware corporation with its principal place of business in St. Louis, Missouri, and that Defendants are comprised of Illinois corporations with their principal places of business in Chicago, Illinois, and a citizen of Illinois, who maintains his domicile within Illinois. (R. 10 at 2-3.) Because the parties do not direct the Court to any contrary evidence, and as the First Amended Complaint seeks damages in excess of $75,000, the Court has subject-matter jurisdiction under 28 U.S.C. § 1332. See, e.g., Morgan Guaranty Trust Co. of New York v. Blum, 649 F.2d 342, 345 n.3 (5th Cir. 1981) ("We do not believe that the failure to obtain a certificate of authority deprives the district court of subject matter jurisdiction."); see also A.S. Int'l Corp. v. Salem Carpet Mills, Inc., 441 F. Supp. 125, 126 (N.D. Ga. 1977).

II. Defendants Have Properly Raised Plaintiff's Lack of Capacity to Sue in their Motion to Dismiss Rule 9(a) requires that, to raise a party's capacity to sue, "a party must do so by a specific denial, which must state any supporting facts that are peculiarly within the party's knowledge." Fed. R. Civ. P. 9(a). The Seventh Circuit has held that a party must raise a corporation's incapacity to bring suit under the Illinois Business Corporation Act in an appropriate pleading to avoid waiver. Wagner Furniture, 929 F.2d at 345-46. Defendants raise this defense effectively in the instant motion. Delta Consulting Group, Inc. v. R. Randle Const., Inc., 554 F.3d 1133, 1140 (7th Cir. 2009) ("The lack of capacity to sue or be sued is a defense that must be pleaded with specificity or it is waived."). Defendants have not yet answered, and so they have raised their objection in a timely manner. See, e.g., Swaim v. Moltan Co., 73 F.3d 711, 718 (7th Cir. 1996) ("Questions involving a party's capacity to sue . . . must . . . be identified in either a responsive pleading or motion.").

III. The Illinois Business Corporation Act Requires Plaintiff to have a Certificate of Authority to Bring this Action Plaintiff concedes that "the Illinois Secretary of State revoked [its] certificate of authority on May 8, 2009," but submits, first, that "the failure of a foreign corporation to obtain authority to transact business in this State . . . does not prevent the corporation from defending any action in any court of this State" and, second, that it "believes it has nearly ...


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