United States District Court, N.D. Illinois, Eastern Division.
MEMORANDUM OPINION AND ORDER
Inter-Fidelity Corporation (“AIFC”), acting as
attorney-in-fact for American Inter-Fidelity Exchange
(“AIFE”), an insurance company, sued M.L.
Sullivan Insurance Agency, Inc. and Sebastian Miklowicz in
federal court for misrepresenting important data that AIFE
used to calculate the premiums that it charged its clients.
Doc. 51-1 (reproducing the second amended complaint in
American Inter-Fidelity Corp, as Attorney in Fact for
American Inter-Fidelity Exchange v. M.L. Sullivan Insurance
Agency, Inc., No. 15 C 4545 (N.D. Ill.)). That suit will
be called “the underlying suit.” Sullivan and
Miklowicz asked their insurer, Westport Insurance Corp., to
defend them in the underlying suit, and in response Westport
brought this suit against them seeking a declaratory judgment
that it is not required to defend them or to reimburse them
for any damages judgment they incur in the underlying suit.
Doc. 19. Westport alleged that the court could hear this suit
under the diversity jurisdiction, 28 U.S.C § 1332(a), on
the ground that Westport is a citizen of Kansas and Missouri,
while Sullivan is an Illinois corporation with its principal
place of business in Illinois and Miklowicz
“resides” in Illinois. Doc. 19 at ¶¶
parties to this suit filed cross-motions for judgment on the
pleadings under Federal Rule of Civil Procedure 12(c). Docs.
30, 31, 33. While those motions were pending, the court
ordered Westport to show cause why AIFE should not be joined
under Rule 19(a) as a defendant. Doc. 43. The order cited a
string of precedents holding that, when a defendant in a tort
suit is also a party to a declaratory action over whether its
insurer must defend or indemnify it in the underlying suit,
the plaintiff in the underlying suit is a necessary party to
the declaratory action. See Great W. Cas. Co. v.
Mayorga, 342 F.3d 816, 817 (7th Cir. 2003); M.F.A.
Mut. Ins. Co. v. Cheek, 363 N.E.2d 809, 811 (Ill. 1977);
Williams v. Madison Cnty. Mut. Auto. Ins. Co., 240
N.E.2d 602, 604 (Ill. 1968); W. States Ins. Co. v.
Weller, 701 N.E.2d 542, 545 (Ill.App. 1998).
discharged the show cause order by filing a second amended
complaint that joined AIFC as a defendant “as Attorney
in Fact for” AIFE. Doc. 44 at 1. The second amended
complaint alleges that AIFC is a corporation incorporated in
Indiana. Id. at ¶ 4. It further alleges that
“AIFE is named as a defendant as a required party under
Federal Rule of Civil Procedure 19(a)” and that
AIFE’s and AIFC’s collective principal place of
business is in Indiana, but it makes no further allegations
about AIFE’s citizenship and does not explain the
relationship between AIFE and AIFC in any detail.
Id. at ¶¶ 1-6. Like the first amended
complaint, the second amended complaint alleges that
Miklowicz “resides” in Illinois. Id. at
second amended complaint raises two jurisdictional problems.
The first involves Miklowicz’s citizenship. A court may
exercise diversity jurisdiction only when the parties are
“completely diverse”-that is, when no plaintiff
shares a citizenship with any defendant. Penn.
Chiropractic Ass’n v. Independence Hosp. Indem. Plan,
Inc., 802 F.3d 926, 930 (7th Cir. 2015). The problem is
that, while the second amended complaint alleges that
Miklowicz is a “resid[ent]” of Illinois, an
individual’s citizenship “depends not on
residence but on domicile.” RTP LLC v. ORIX Real
Estate Capital, Inc., __ F.3d __, 2016 WL 3568090, at *2
(7th Cir. July 1, 2016). The court needs to know
Miklowicz’s domicile to ascertain whether he is diverse
from Westport. See Heinen v. Northrop Grumman Corp.,
671 F.3d 669, 670 (7th Cir. 2012) (explaining that the
appeals court had ordered the parties in a diversity suit to
amend their jurisdictional allegations to allege domicile
rather than residence).
second jurisdictional problem involves the addition of AIFC
and AIFE as defendants. The diversity inquiry is often
straightforward, but sometimes a question arises about whose
citizenship matters. Pertinent here, when one party litigates
as another party’s representative, the
representative’s citizenship is all that matters for
diversity purposes provided that the representative
exercises a fair amount of control over the represented
party’s affairs outside of the litigation; however, if
the representation is a mere formality, or if the
representative is joined “only as designated performer
of a ministerial act, ” the represented party’s
citizenship is all that matters. Lincoln Prop. Co. v.
Roche, 546 U.S. 81, 82 (2005); see also Navarro Sav.
Ass’n v. Lee, 446 U.S. 458, 464 (1980) (in a suit
naming the trustees of a trust as defendants, holding that
the trustees were the jurisdictionally relevant parties
because their “control over the assets held in their
names [was] real and substantial”) (footnote omitted);
Walden v. Skinner, 101 U.S. 577, 588-89 (1879) (to
simplify somewhat, holding that the beneficiaries of a trust,
rather than the trustee, were the jurisdictionally relevant
parties because the trustee was “merely joined to
perform the ministerial act of conveying the title [of the
disputed property] if adjudged to the complainant”);
FDIC v. Elefant, 790 F.2d 661, 665 (7th Cir. 1986)
(observing that a failed bank’s receiver, rather than
the bank, was the jurisdictionally relevant party if the
receiver “ha[d] full control of the [bank’s]
assets”); Gross v. Hougland, 712 F.2d 1034,
1038-39 (6th Cir. 1983) (“[T]he court should consider,
among other things, whether the fiduciary [the
representative] has duties other than prosecuting the
lawsuit; whether the fiduciary is the ‘natural’
representative; whether the appointment was in fact motivated
by a desire to create diversity jurisdiction; and whether the
suit is local in character.”) (citations and footnotes
omitted); see also 13E Charles Alan Wright &
Arthur R. Miller, Federal Practice & Procedure
Jurisdiction § 3606 (3d ed. 2016) (“In order
to come within the rule that a bona fide
representative’s citizenship controls, the
representative must have actual powers with regard to the
matter in litigation.”).
suit, Westport sued AIFC as AIFE’s representative. If
AIFC exercises enough control over AIFE, then only
AIFC’s citizenship matters for diversity purposes, and
the court has diversity jurisdiction (provided that Miklowicz
is a citizen of Illinois); AIFC is a citizen of only Indiana
because it is a corporation incorporated in Indiana with its
principal place of business in Indiana. Doc. 44 at ¶ 4;
28 U.S.C. § 1332(c)(1). But if AIFC does not exercise
enough control over AIFE, then AIFE’s citizenship
matters, and the court may not have diversity jurisdiction.
AIFE appears to be an unincorporated association, and if that
is so then it is a citizen of every State of which at least
one of its members is a citizen. See Americold Realty
Trust v. ConAgra Foods, Inc., 136 S.Ct. 1012, 1015
(2016); Hoagland ex rel. Midwest Transit, Inc. v.
Sandberg, Phoenix & von Gontard, P.C., 385 F.3d 737,
738-39 (7th Cir. 2004). So, if AIFE is the jurisdictionally
relevant party, if it is unincorporated, and if any one of
its members is a citizen of either Kansas or Missouri-the
States of which Westport is a citizen-then the parties are
not diverse and the court lacks jurisdiction.
“[e]nsuring the existence of subject-matter
jurisdiction is the court’s first duty in every
lawsuit, ” McCready v. White,417 F.3d 700,
702 (7th Cir. 2005), the court seeks the parties’ input
on the following questions. First, what is Miklowicz’s
domicile? Second, is AIFC or AIFE the relevant party for
jurisdictional purposes? Third, is AIFE an unincorporated
association or a corporation? Fourth, if AIFE is an
unincorporated association, who are its members, and are any
of them citizens of Kansas or Missouri; and if it is a
corporation, where is it incorporated? And fifth, if AIFE is
the jurisdictionally relevant party and a citizen of Kansas
or Missouri (or both), thus destroying diversity
jurisdiction, must the court dismiss the suit, or should AIFE
be dismissed as a non-indispensable party under Rule 19(b)?
Defendants shall file their brief(s) by September 12, 2016.
Westport shall file its brief by September 26, 2016. If
Defendants wish to reply, ...