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Hocker v. R.Z.& Associates, LLP

United States District Court, C.D. Illinois

January 25, 2017

JAMES D. HOCKER, Plaintiff,
v.
R.Z. & ASSOCIATES, LLP, Z.Z. & ASSOCIATES, PLLC, and DAVID ZIGO, Defendants.

          ORDER AND OPINION

          James E. Shadid, Chief United States District Judge

         This matter is now before the Court on Plaintiff's Motion [11] to Remand. For the reasons set forth below, Plaintiff's Motion [11] is GRANTED, Plaintiff's Request for Fees is DENIED, and Defendants' Motion [6] to Dismiss is MOOT.

         Background

         On August 11, 2016, Plaintiff James Hocker filed a Complaint against Defendants R.Z. & Associates, LLP (“RZ”), Z.Z. & Associates, PLLC (“ZZ”), and David Zigo (“Zigo”) in the Circuit Court of the Ninth Judicial Circuit in Fulton County, Illinois. RZ was a Missouri limited liability partnership; ZZ is a Texas professional limited liability company. Zigo was a partner in RZ and is a member of ZZ. Count 1 of the Complaint states a claim for breach of a promissory note against Defendants RZ and ZZ. Count 2 states a claim for breach of a promissory note against Defendant Zigo. Defendants were served with the Complaint on August 15, 2016, and filed a Notice of Removal in this Court 30 days later, on September 14, 2016. ECF Doc. 1. Defendants filed a Motion to Dismiss on September 20, 2016, and Plaintiff filed a Motion to Remand on October 3, 2016. See ECF Docs. 6, 11.

         The following facts are culled from Plaintiff's Complaint and the attached exhibits. Plaintiff Hocker and Robert Fitzjarrald were shareholders and owners of Hocker & Fitzjarrald, P.C., an accounting firm located in Canton, Illinois. On October 1, 2015, Plaintiff retired and sold his share of the firm to Joshua Richardson. Thereafter, the firm was known as Hocker, Fitzjarrald & Richardson, P.C. On January 1, 2015, the firm decided to sell certain clients to RZ, who was opening a new office in Canton. In his Complaint, Plaintiff states that he and Fitzjarrald (“Sellers”) entered into a written Agreement for Purchase and Sale of Tax and Audit Clients (“Agreement”) to sell certain tax and audit clients to RZ and ZZ (“Buyers”). Buyers made a $15, 000 down payment on the date of closing, and Zigo, as Authorized Officer for the Buyers, executed a Promissory Note promising to pay Hocker (individually) the principal amount of $149, 480 plus interest. The Note was secured by RZ and ZZ's accounts receivable and evidenced in UCC financing statements perfecting Plaintiff's security interest in Missouri, Illinois, and Texas. The Agreement and Note required Buyers to make quarterly payments, beginning on April 30, 2015, of 15% of the previous three months' revenues collected from the clients purchased under the Agreement. The Note also contained a choice-of-law provision and a forum selection clause, providing that:

This Note and the obligations of the MAKER shall be governed by and construed in accordance with the law of the State of Illinois. The parties hereto agree that any legal action or proceeding with respect to this Note shall be brought in the Circuit Court of the Ninth Judicial Circuit, Fulton County, Illinois, and that this Note shall be deemed to have been made in Fulton County, Illinois, for the purpose of any legal action or proceeding. The Circuit Court of Fulton County, Illinois, shall be the sole jurisdiction and venue for the resolution of any such disputes hereunder.

ECF Doc. 12-2, at 3-4.

         The Note contained nine “Events of Default, ” that would make the outstanding balance on the Note become immediately due and payable upon demand. Buyers triggered one of the Events of Default by failing to make the required payment on the Note in October 2015. On March 23, 2016, Sellers sent a Notice of Default to the addresses of RZ and ZZ, but the Notice was returned undelivered. On April 12, 2016, Sellers sent a second Notice, which was successfully served on Zigo and Michael Kohn, Registered Agent for RZ. After Buyers failed to cure the defaults within 30 days, Plaintiff sent a letter to Zigo, on behalf of the Buyers, requesting the full amount due. As of August 11, 2016, the principal balance of $147, 147.32 plus interest in the amount of $3, 575.55 remains due.

         Plaintiff's Complaint also asserts an alternative claim for relief against Zigo individually for breach of the Note. RZ was administratively dissolved for failing to file their renewal application when it became due in December 2014. The liquidation, dissolution, or cessation of RZ or ZZ constituted an Event of Default under the terms of the Note. On May 14, 2015, Zigo applied for the registration of B.R.Z. & Associates, LLP (“BRZ”), a Missouri limited liability partnership. On June 1, 2016, BRZ was also administratively dissolved for failing to file a renewal application. Plaintiff alleges, upon information and belief, that Zigo's trend of registering LLPs and letting them fall into administrative dissolution shows that the companies were merely a façade for Zigo. Plaintiff further alleges that Zigo controls, owns, manages and oversees RZ, ZZ, and BRZ, and there is a unity of ownership and interest such that the separate personalities of the entities no long exist. Plaintiff also claims that the clients and accounts receivable of RZ and ZZ are now owned or utilized by BRZ.

         Plaintiff's Motion argues that this action should be remanded because: (1) the forum selection clause in the Note mandated that disputes be resolved in the Fulton County state court; (2) RZ and ZZ waived their right to removal; (3) the forum selection clause is enforceable against Zigo because of his close relationship with RZ and ZZ; and (4) Defendants should be responsible for costs and attorney's fees incurred as a result of the removal. Defendants' Response opposes remand because: (a) Defendants timely and properly removed; (b) Zigo disputes personal jurisdiction over him by an Illinois court; (c) Zigo was not a party to the agreement that forms the basis of Plaintiff's claims; and (d) Defendants dispute voluntarily waiving any rights by virtue of the forum selection clause and contend that they were fraudulently induced into executing the Note by Plaintiff.

         Legal Standard

         Subject to certain limitations, “any civil action brought in a state court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.” 28 U.S.C. § 1441(a). Section 1332(a) confers jurisdiction upon district courts to hear state law claims when complete diversity of citizenship exists between the parties and the matter in controversy exceeds $75, 000. “While § 1332 allows plaintiffs to invoke diversity jurisdiction, § 1441 gives defendants a corresponding opportunity.” Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005). Even though both § 1332 and § 1441 allow parties to invoke a federal court's diversity jurisdiction, “[t]he scales are not evenly balanced.” Id. at 89-90. For example, an in-state plaintiff may use § 1332 to establish diversity jurisdiction, but § 1441(b) bars defendants from removing an action to federal court on the basis of diversity if they are citizens of the state in which the action is brought. Id. at 90. Additionally, § 1446 places several procedural restrictions on removal. See 28 U.S.C. § 1446.

         First, § 1446 requires that “[a] defendant or defendant desiring to remove any civil action from a State court shall file in the district court … a notice of removal … containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.” Section 1446(b)(1) sets forth the time requirements for filing the notice of removal-the earlier of 30 days after receipt by the defendant of the initial pleading, or 30 days after the service of summons. Section 1446(b)(2)(A) requires that “all defendants who have been properly joined and served must join in or consent to the removal of the action.” After a case is removed to federal court, “[a] motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a) . . ...


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