United States District Court, N.D. Illinois, Eastern Division
Midland Management Company, Plaintiff: Richard Lee Stavins,
LEAD ATTORNEY, Robbins, Salomon & Patt, Ltd., Chicago, IL.
American Alternative Insurance Corporation, Defendant,
Counter Claimant, Counter Defendant: Stanley V. Figura, LEAD
ATTORNEY, Bates Carey LLP, Chicago, IL; Robert J. Bates, Jr.,
Bates Carey Nicolaides LLP, Chicago, IL.
OPINION AND ORDER
Edmond E. Chang, United States District Judge.
Midland Management Company (Midland) brought this declaratory
judgment action in June 2015 in the Circuit Court of Cook
County, Illinois, against American Alternative Insurance
Corporation (American) and Lori and Jim Logan (the Logans).
R. 1, Exh. 1 at 3, Decl. J. Compl. Midland is seeking a
declaration that its insurer, American, must defend and
indemnify it in a lawsuit brought by the Logans against
Midland that is currently pending in state court.
Id. ¶ 1. American filed a notice of removal to
federal court on July 15, 2015, alleging that this Court has
diversity jurisdiction over the case under 28 U.S.C. §
1332. R. 1, Notice of Removal. Midland asks to remand the
case to the Circuit Court of Cook County. R. 15, Mot. to
Remand. Midland contends that this Court lacks diversity
jurisdiction over this case, and that American has failed to
satisfy the requirements for removal. Id. For the
reasons discussed below, the Court denies Midland's
motion for remand.
January 2015, the Logans filed a lawsuit against Midland in
the Circuit Court of Kendall County, Illinois, alleging that
they began experiencing medical problems as early as June
2013 due to the presence of " mold, mildew, fungi and
other microorganisms and/or toxic airborne pathogens" in
an apartment they had rented from Midland. Decl. J. Compl.
¶ 10; R. 1, Exh. 1 at 15, Logan Compl. ¶ ¶ 4-7
(Count I). The Logans brought both a negligence and nuisance
claim against Midland, alleging that their medical problems
were the direct result of Midland's negligence in
maintaining the property and that the presence of these
pathogens caused them to lose the use and enjoyment of their
home. Id. ¶ 12 (Count I), ¶ 6 (Count II).
The Logans seek damages " in excess of" $50,000.
Id. Their lawsuit remains pending in Kendall County.
R. 1, Exh. 1 at 13.
the Logans sued Midland, Midland notified American of the
Logans' claims and requested that American tender a
defense and indemnify Midland against any potential damages
award. Decl. J. Compl. ¶ 7. At the time of the
Logans' alleged injuries, Midland was covered by a
liability insurance policy issued by American. Id.
¶ 9; R. 1, Exh. 1 at 22 (Insurance Policy). That policy
was effective from March 31, 2013 through March 31, 2014, and
provided liability coverage for bodily injury claims so long
as the injury occurred during the policy period. Decl. J.
Compl. ¶ ¶ 9-10. The policy also included a "
Fungi or Bacteria Exclusion." Id. ¶ 7; R.
1, Exh. 1 at 128. Believing that this Fungi or Bacteria
Exclusion precluded coverage of the Logans' alleged
losses, American denied Midland's requests for a defense
and indemnity. Decl. J. Compl. ¶ ¶ 7-8.
then filed this suit in the Circuit Court of Cook County,
Illinois, seeking a declaration that American is obligated to
defend and indemnify Midland in the Logans' lawsuit.
Id. ¶ 1. In addition to naming American as a
defendant, Midland also named the Logans. With regard to the
Logans, Midland alleges that it is
" seek[ing] no separate relief or judgment against
defendant Lori Logan or against defendant Jim Logan,"
but that it is instead " seek[ing] only to bind those
two defendants to the outcome of this coverage dispute."
Id. ¶ 5.
removed the case to federal court on July 15, 2015, asserting
that this Court has diversity jurisdiction under 28 U.S.C.
§ 1332(a)(1). Notice of Removal; 28 U.S.C. §
1441(a) (allowing a defendant to remove a civil action from
state court to federal court when the federal court has
original jurisdiction). Midland is an Illinois corporation
with its principal place of business in Illinois. Notice of
Removal ¶ 4. American is a Delaware corporation with its
principal place of business in New Jersey. Id. Based
on those different states of citizenship, if this case pitted
only Midland against American, then there would be diversity
jurisdiction. But like Midland, the Logans are citizens of
Illinois. Id. ¶ 5; Decl. J. Compl. ¶ 4.
Thus, on the face of the complaint, complete diversity is
lacking. In its notice of removal, American acknowledges this
potential problem. Notice of Removal ¶ ¶ 3, 5.
American contends, however, that the Logans were fraudulently
joined and should be disregarded for jurisdictional purposes
because Midland is neither " asserting a cause of action
against ... [the Logans]," nor seeking any relief from
them. Id. ¶ ¶ 3, 6. With the Logans
disregarded, American argues, removal is proper and diversity
jurisdiction applies, because the amount in controversy
exceeds $75,000 and the proper parties to this suit--American
(a Delaware corporation with its principal place of business
in New Jersey) and Midland (an Illinois corporation with its
principal place of business in Illinois)--are completely
diverse. Id. In the alternative, American argues
that, even if the Logans are deemed to have an interest in
this declaratory judgment action, that interest is more
closely aligned with Midland's interests, and therefore,
the Logans should be realigned as plaintiffs, putting the
Illinois citizens on one side and American on the other.
Id. ¶ 7.
now asks to remand this case to state court on three
alternative grounds. Mot. to Remand. First, Midland argues
that the $75,000 jurisdictional amount required by 28 U.S.C.
§ 1332(a) is not satisfied. R. 16, Pl.'s Br. at 1.
Second, Midland argues that because the Logans are properly
named defendants, the parties are not completely diverse.
Id. Finally, Midland argues that two of the removal
statute's requirements have not been satisfied: 28 U.S.C.
§ 1441(b)(2), requiring that no defendant be a citizen
of the state in which the action is brought (a requirement
that the Logans, who are Illinois citizens, cannot meet), and
28 U.S.C. § 1446(b)(2)(A), requiring that all defendants
join in or consent to removal (something the Logans did not
is governed by 28 U.S.C. § 1441. A defendant may remove
a case to federal court if there is federal subject matter
jurisdiction. 28 U.S.C. § 1441(a). Removal based on
diversity requires that the parties be of diverse state
citizenship and that the amount in controversy exceed
$75,000, exclusive of interests and costs. 28 U.S.C. §
1332; Rubel v. Pfizer Inc., 361 F.3d 1016, 1017 (7th
Cir. 2014). It also requires that no defendant "
properly joined and served" be " a citizen of the
State in which [the] action is brought." 28 U.S.C.
§ 1441(b)(2) (forum defendant rule); Hurley v. Motor
Coach Industries, Inc., 222 F.3d 377, 378 (7th Cir.
The party seeking removal has the burden of establishing
federal jurisdiction." Schur v. L.A. Weight Loss
Ctrs., 577 F.3d 752, 758 (7th Cir. 2009). Failure to
meet this burden results in ...