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Kirschenbaum v. Asta Healthcare Co.

United States District Court, Seventh Circuit

October 21, 2013

BARRY KIRSCHENBAUM, Plaintiff,
v.
ASTA HEALTHCARE COMPANY and MICHAEL GILLMAN, Defendants.

MEMORANDUM OPINION AND ORDER

MARY M. ROWLAND, Magistrate Judge.

Barry Kirschenbaum initiated this lawsuit against Asta Care Center of Pontiac, LLC (Asta), Asta Healthcare Co. (Asta Healthcare), and Michael Gillman, alleging intentional interference with contractual obligations. On September 3, 2013, the Court dismissed without prejudice Count I of the First Amended Complaint, which had alleged a breach of contract claim against Asta, after the parties agreed that diversity does not exist between Kirschenbaum and Asta. (Dkt. 61). Similarly, the Court dismissed without prejudice Asta's Counterclaim for lack of jurisdiction. ( Id. ). On September 16, 2013, Plaintiff filed a Second Amended Complaint, deleting Count I and Asta as a defendant, and reiterating the Count II allegations. (Dkt. 67).

In his Second Amended Complaint (Complaint), Kirschenbaum alleges that Asta Healthcare and Gillman intentionally interfered with Asta's obligations to Kirschenbaum under two promissory notes dated November 20, 2002 (2002 Note) Kirschenbaum v. Asta Healthcare, No. 12 C 9435 Page 1 of 18 and November 12, 2004 (2004 Note, and together with the 2002 Note, the Notes). (Compl. ¶¶ 1, 7-19). Kirshenbaum contends that Asta Healthcare and Gillman "intentionally diverted and converted Asta's assets for its or his own use and/or to the use of other entities owned and/or controlled by Gillman with the result that Asta was or is unable to pay the sums due to Kirschenbaum on either the 2002 Note or the 2004 Note." ( Id. ¶ 19). The parties have consented to the jurisdiction of the United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). The Court has diversity jurisdiction over this case pursuant to 28 U.S.C. § 1332.

On January 28, 2013, Defendants filed a Motion to Dismiss Count II of the First Amended Complaint pursuant to Rule 12(b)(6), for failure to state a claim, and to strike various allegations as immaterial and irrelevant pursuant to Rule 12(f). (Dkt. 16). The Court will treat this motion as a motion to dismiss the sole count in the Second Amended Complaint. (Dkt. 75). On September 24, 2013, Defendants filed a Motion to Dismiss the Second Amended Complaint for Failure to Join Party under Rule 19(b), pursuant to Rule 12(b)(7). (Dkt. 70). For the reasons set forth below, the motions to dismiss are denied.

I. FACTUAL ALLEGATIONS[1]

Kirschenbaum alleges that in November 2002, Asta executed and delivered the 2002 Note to him. (Compl. ¶ 7). The principal amount of the 2002 Note is $50, 000, and it bears interest at 8% per annum. ( Id. ¶ 7 & Ex. A). In November 2004, Asta executed and delivered the 2004 Note to Kirshenbaum. ( Id. ¶ 8). The principal amount of the 2004 Note is $112, 500, and it bears interest at 10% per annum. ( Id. ¶ 8 & Ex. B). Asta has not made any principal or interest payments due on either of the Notes. ( Id. ¶¶ 13-14). On November 26, 2012, Kirshenbaum made a written demand to Asta, Asta Healthcare, and Gillman, demanding full payment of all amounts due on the Notes. ( Id. ¶ 15 & Ex. C).

Asta Healthcare is the "Manager" of Asta, as that term is used in the Illinois Limited Liability Company Act, 805 ILCS § 180/1, et seq. (Compl. ¶ 9). Gillman is the sole, or majority, shareholder of Asta Healthcare. ( Id. ¶ 10). Kirshenbaum alleges that Gillman has treated the assets and liabilities of Asta Healthcare as his own and otherwise acted as the alter ego of Asta Healthcare. ( Id. ¶ 12). Kirshenbaum contends that Gillman and Asta Healthcare have caused Asta to fail or refuse to pay Kirshenbaum the amounts due on the Notes. ( Id. ¶ 17).

II. DISCUSSION

A. Failure to Join a Party Under Rule 19

Plaintiff dismissed his breach of contract claim against Asta, after acknowledging that there was no diversity between Plaintiff, who is a citizen of Illinois, and Asta, which is a limited liability company and is a citizen of both Florida and Illinois. (Dkt. 70 at ¶ 2). Plaintiff's sole remaining claim is for tortious interference against Asta Healthcare and Gillman. (Compl. ¶¶ 1, 7-19). After inquiry from the Court, Defendants moved to dismiss, pursuant to Rule 19, based on Plaintiff's failure to join an indispensable party, Asta. (Dkt. 70 at ¶ 4). Because Asta cannot be joined without destroying diversity, Defendants argue that the case should be dismissed pursuant to Rule 12(b)(7). ( Id. ).

To determine whether a complaint must be dismissed for failure to join a party as required by Rule 19, the court conducts a two-step analysis. Askew v. Sheriff of Cook County, Ill., 568 F.3d 632, 635 (7th Cir. 2009). First, the court determines whether the party is a "required" party under Rule 19(a). Id. Rule 19 provides that an absent party must be joined if joinder is feasible and

(1) the court cannot accord complete relief among the existing parties in the party's absence, (2) the absent party's ability to protect an interest relating to the subject of the action will be impaired, or (3) an existing party would be subject to a substantial risk of multiple or inconsistent obligations if the absent party is not joined.

XPO Logistics, Inc. v. Gallatin, No. 13 C 1163, 2013 WL 3835358, at *2 (N.D. Ill. July 24, 2013) (citing Fed.R.Civ.P. 19(a)(1)). Second, if the court determines that the party is "required" but joinder is not feasible-usually because joinder would destroy diversity-the court must "determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." Fed.R.Civ.P. 19(b); Askew, 568 F.3d at 635. In this second step, the court considers "the prejudice to the existing parties, the adequacy of a judgment that would be rendered without the absent party, and whether the plaintiff would have an adequate remedy if the action were dismissed." XPO Logistics, 2013 WL 3835358, at *2 (citing Fed.R.Civ.P. 19(b)(1)-(4)). "If there is no way to structure a judgment in the absence of the party that will protect both the party's own rights and the rights of the existing litigants, the unavailable party is regarded as indispensable' and the action is subject to dismissal... under Federal Rule of Civil Procedure 12(b)(7)." Thomas v. United States, 189 F.3d 662, 667 (7th Cir. 1999). The moving party carries the burden to establish that the missing party is both "required" and "indispensable." XPO Logistics, 2013 WL 3835358, at *2.

Defendants contend that Asta is a required party under Rule 19(a). (Dkt. 70 at ¶¶ 10-14). They argue that because Asta is the principal obligor on the Notes, and the liability of the remaining Defendants is contingent on what Asta does or does not owe on the Notes, "there is no feasible way for complete relief to be accorded without Asta." ( Id. ¶ 11). Similarly, Defendants argue that Asta does not owe what Plaintiff contends it does and that without being a party, it would be precluded from defending the question of the extent of its liability. ( Id. ¶ 12). Defendants also argue that there is "a great likelihood of inconsistent results" if Kirshenbaum's claim proceeds in Asta's absence. ( Id. ¶ ...


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