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Hammer & Steel, Inc. v. K & S Engineers, Inc.

United States District Court, N.D. Illinois, Eastern Division

February 13, 2017

HAMMER & STEEL, INC., Plaintiff,



         On March 14, 2016, the court dismissed the first three counts of Hammer & Steel, Inc.'s (“Plaintiff” or “Hammer & Steel”) first amended complaint for lack of a good-faith basis and allowed it to amend its complaint to show that the remaining counts exceeded the minimum amount in controversy under the diversity jurisdiction statute, 28 U.S.C. § 1332(a). The court expressed serious concerns about Plaintiff's bringing those claims when it filed this action on December 12, 2014, because everyone involved knew that the equipment Hammer & Steel wanted to recover would soon be the subject of personal injury litigation in state court. Ultimately, the court found that Plaintiff had no good-faith basis for continuing to press those claims in its amended complaint because a state court subsequently issued a protective order regarding the equipment. (See Mem. Op. at 8-12, Mar. 14, 2016, Dkt. 132.) Defendants move to dismiss Hammer & Steel's second amended complaint for lack of subject matter jurisdiction, contending that the attorney's fees sought in the remaining counts still fail to satisfy the amount- in-controversy requirement. Hammer & Steel disagrees and asks the court to reconsider its dismissal of its replevin, conversion, and breach of contract claims. Because the amount in controversy “must be determined by the district court at the beginning of the suit, and [it] is not dependent on subsequent dismissal of individual claims used to satisfy the jurisdictional threshold, ” the court concludes that, though it may arguably have been vexatious, Plaintiff's conversion claim managed to satisfy the amount-in-controversy requirement at the commencement of this action and denies the motions to dismiss. Clark v. State Farm Mut. Auto. Ins. Co., 473 F.3d 708, 711 (7th Cir. 2007) (citing Johnson v. Wattenbarger, 361 F.3d 991, 993 (7th Cir. 2004)).

         I. BACKGROUND

         This lease and property dispute stems from an alleged construction accident that occurred on December 1, 2014, in which Rudolph Das (“Das”), a construction worker, was allegedly injured. Edward Kraemer & Sons, Inc., (“Kraemer”) and Kenny Construction Company (“Kenny”) allegedly served as general contractors on the project. (See 2d Am. Compl. ¶¶ 9-10.) K&S Engineers, Inc. (“K&S”) had leased a piece of heavy construction equipment, a “Model 58 HS Vibratory Driver/Extractor System, ” (“the equipment”) from Hammer & Steel and had put it to use at the job site where the accident allegedly occurred. Hammer & Steel has consistently pleaded that the equipment's fair market value is $350, 000. (E.g., Orig. Compl. ¶ 6, Dkt. 1; 2d Am. Compl. ¶ 12.) The accident also allegedly involved a crane owned by Imperial Crane Services, Inc. (“Imperial”). Finally, in its amended complaints, Hammer & Steel sues several companies it alleges were sureties on the project's payment and performance bonds. (2d Am. Compl. ¶ 26.)

         A Kraemer representative sent an e-mail message on December 5, 2014, stating that the equipment would be moved from the accident scene to a storage facility where it could be inspected. (See Imperial's Mot. to Dismiss, Dkt. 15, Ex. B.) That same day, an attorney for one of the contractors involved in the project reminded the participants of their obligations to avoid spoliation of evidence. (See ECF No. 1 Ex. B.) The parties have submitted evidence of communications coordinating efforts to move, inspect, and store the equipment. Those efforts apparently broke down on or around December 8 and 9, 2014, [1] and Plaintiff's counsel, David M. Duree (“Duree”), sent a letter to K&S terminating the rental agreement and seeking the equipment's return. (Orig. Compl., Dkt. 1, Ex. D.) Duree stated, “It is my understanding that the vibratory driver/extractor system is currently located at 15 N. 320 Route 25, East Dundee, Illinois 60118.” (Id.) Duree asked K&S to arrange for Hammer & Steel to retrieve the equipment, after which Plaintiff would make the equipment “available for inspection, upon request, at the expense of the requesting parties” at Plaintiff's yard in Hazelwood, Missouri. (Id.) Duree's letter concluded with the warning that “[f]ailure to return the equipment will be an act of conversion.” (Id.)

         Despite the risk of spoliation if it prevailed, Hammer & Steel commenced this action against K&S and Imperial on December 12, 2014. (Orig. Compl., Dkt. 1.) In its original complaint, Hammer & Steel pleaded replevin, conversion, and breach of contract claims stemming from the defendants' failure to return the equipment. (Id.) In support of its breach of contract claim, Hammer & Steel alleged that K&S owed $27, 000 for the use of the equipment. (Id.)

         On December 17, 2014, Hammer & Steel, Imperial, and Kraemer allegedly reached an agreement to secure and protect the equipment until an inspection could be conducted the next day (“Agreement”). (1st Am. Compl, Dkt. 20, Ex. F.) The Agreement required Kraemer to release the equipment on December 18, 2014 and the equipment would be tested on December 19, 2014. (Id.) Hammer & Steel also covenanted not to sue Kraemer for any claims asserted in the complaint before the court. (Id. ¶ 4.) The inspection did not occur, however, and Plaintiff renewed its previously denied motion for replevin on December 19, 2014. It was Imperial's understanding that, under the Agreement, it would be dismissed from the federal action. Also on December 17, 2014, this court held an initial hearing on Plaintiff's replevin action. The attorneys for Plaintiff and Imperial informed the court that their clients had settled. However, Plaintiff's counsel, Duree, interjected that Plaintiff still sought an order of replevin. The court denied Plaintiff's request because it did not provide any authority justifying its request for replevin given that the parties had agreed to return of the equipment to Plaintiff. The court questioned whether it had authority to allow testing and discharge of the property knowing that it was involved in an accident that might ultimately result in a lawsuit in state court. Plaintiff Das sued in state court on December 22, 2014. Two days later, the state court entered a protective order on Das's motion (to which Kramer agreed). (1st Am. Compl., Dkt. 20 Ex. I.) The protective order provided in pertinent part that:

Defendant, Edward Kraemer & Sons, Inc., will maintain the Hammer & Steel, Inc. vibratory hammer, and its appurtenances and the Terex crane, its boom, jib, O-Ring components and appurtenances in a protected and unchanged condition, and to the extent practicable protected from the elements until the proposed inspection contemplated by the parties is concluded and further order of this Court.


         With leave of court granted before entry of the protective order, Hammer & Steel filed an amended complaint in this action on January 7, 2015. (Dkt. 20.) It added Kraemer, Kenny, and the surety companies as defendants. (See id. ¶¶ 2-10.) The protective order notwithstanding, Hammer & Steel pressed forward with a replevin claim against Kraemer; a conversion claim against K&S, Kraemer, and Kenny; a claim that Kraemer and Kenny breached the December 17, 2014, settlement agreement; a claim against K&S for breach of the rental agreement; and a claim against the surety companies for breach of payment and performance bonds.

         On July 17, 2015, this court ordered Plaintiff to show cause as to (1) how it had a Rule 11 basis to bring claims for conversion and replevin in its first amended complaint in light of the protective order; and (2) how the first amended complaint satisfies the amount-in-controversy requirement if the court disregards Plaintiff's claims for conversion and replevin. After receiving briefing, the court entered a memorandum opinion and order on March 14, 2016. It ruled that Plaintiff's first amended complaint “was not well founded when filed as its claims for replevin (Count I), conversion (Count II), and breach of the Agreement (Count III) were based on conduct controlled by the state court protective order, entered two weeks before” Hammer & Steel filed its first amended complaint. (Dkt. 132 at 9-10.) The court dismissed those counts with prejudice (id. at 10) and turned to the question of whether the remaining counts satisfied the $75, 000 amount in controversy requirement for diversity jurisdiction (id. at 1012). Hammer & Steel claimed “the unpaid rent for use of Plaintiff's equipment in the sum of $27, 000, $6, 000 for return of the equipment, and $45, 000 in attorneys' fees, ” (id. at 11) but the court found Hammer & Steel's attorney's fees too be too conclusory and speculative (see id. at 11 (“Conclusory assumptions about billing rates and the number of hours worked (which are not even provided in this case) do not rise to the level of competent proof regarding the amount in controversy.” (quoting Frederick Quinn Corp. v. West Bend Mut. Ins. Co., No. 14 C 3850, 2015 WL 2210336, at *3 (N.D. Ill. May 8, 2015)) (other citations omitted))). The court gave Hammer & Steel an opportunity to amend its complaint, stating that it did not “need [to] provide the level of detail necessary for a fee petition but given the issues concerning the amount in controversy, it must do more than it has done.” (Id. at 11-12.)

         Hammer & Steel filed a second amended complaint on March 17, 2016. (Dkt. 133.) Kraemer and K&S responded with separate motions to dismiss for lack of subject matter jurisdiction focusing on the fee allegations in the second amended complaint.

         II. ANALYSIS

         In its responses to the pending motions to dismiss, Hammer & Steel urges the court to reconsider the dismissal of the first three counts of the first amended complaint. It cites Federal Rule of Civil Procedure 54(b), which provides in relevant part that “any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment.” Defendants urge the court to bypass Hammer & Steel's request for reconsideration because it did not file a proper motion to reconsider. Hammer & Steel expressly addresses the reconsideration standard, however, and the court determines that it has jurisdiction ...

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