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Saleh v. Merchant

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

June 5, 2017

NABIL SALEH, as Trustee of the Nabil Saleh MD Ltd. Pension Plan Plaintiff,
v.
HASAN MERCHANT, et al., Defendants. MUSKEGAN HOTELS LLC, M.D. 1 LLC, MD GLOBAL LLC, GLOBAL DEVELOPMENT, INC., and HASAN MERCHANT, Cross-Plaintiffs,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for the NATIONAL REPUBLIC BANK OF CHICAGO, HIREN PATEL, EDWARD FITZGERALD, WOLIN & ROSEN LTD., SMITHAMUNDSEN LLC, THE STATE BANK OF TEXAS, CHANDRAKANT PATEL, ADVANCED APPRAISAL CONSULTANTS, INCORPORATION, ADVANCED APPRAISAL CONSULTANTS, LLC, and WILIAM DADDONO Cross-Defendants.

          MEMORANDUM OPINION AND ORDER

          John J. Tharp, Jr. United States District Judge.

         Cross-Plaintiffs Muskegan Hotels LLC, M.D. 1 LLC, Global Development, Inc., MD Global LLC, and Hasan Merchant[1] have moved to reassign and consolidate this case with two later-filed cases, Phoenix v. Shashtriji, No. 15-cv-10697, and Delaware Motel Associates v. Lehman Brothers, No. 17-cv-01715, pursuant to Fed.R.Civ.P. 42(a)(2) and Local Rule 40.4. Because reassignment of these cases is not likely to result in substantial savings of judicial time and effort, among other reasons, the motion to reassign and consolidate is denied.

         BACKGROUND

         Each of the cases at issue is complex, but the Court will provide a brief overview of each of the claims in order to demonstrate why these cases should not be consolidated. The Court discusses each of these cases in turn.

         I. The Saleh Case

         This case was filed in Illinois state court in 2010 and removed to this Court in late 2014. The underlying complaint, brought by Nabil Saleh, alleged eighteen counts of Illinois state law violations stemming from a series of investments he alleges were stolen or mishandled. See Compl., ECF No. 1-4. The Federal Deposit Insurance Corporation (“FDIC”) removed the suit to federal court when it took over as receiver for one of the defendants. See Notice of Removal, ECF No. 1. Many of those defendants banded together and filed a series of cross-complaints (the second amended cross-complaint was filed on May 7, 2017). See Second Am. Cross-Compl., ECF No. 127. The current 51-page cross-complaint, to which some cross-defendants have not yet responded, alleges eight counts stemming from an alleged conspiracy to inflate appraisal prices. The alleged three-tier conspiracy had the goal to “purchase, service and sell National Republic Bank's fraudulent commercial loan accounts” and use appraisals by William Daddono and Advanced Appraisal to inflate the value of the properties. See id. at ¶ 7. Several of the cross-defendants have indicated they intend to respond to the second amended cross-complaint by motion, although such motions are not yet due.

         II. The Phoenix Case

         The Phoenix case came to this District in 2014 from Michigan state courts after the FDIC accepted receivership of a bank involved in that case. See Notice of Removal Ex. 4, Phoenix ECF No. 1-4. The underlying state court action sought to enforce certain promissory notes through Michigan state law claims for enforcement of contract and guarantees and appointment of a receiver. Id. Fact discovery closed in the underlying claim on December 16, 2016, see Phoenix ECF No. 67; Phoenix Opp. to Mot. at 5, Saleh ECF No. 124 (indicating depositions have been completed). On November 10, 2016, defendants Ghanshyam Patel and Pradyuman Shah (represented by the Saleh cross-plaintiffs' attorney) filed an amended answer and counterclaims alleging intentional interference with prospective economic advantage, unjust enrichment, and quantum meruit. Am. Answer, Phoenix ECF No. 86. There are no RICO claims as in Saleh; the counterclaims allege only that Phoenix (a distinct entity not named in the Saleh case anywhere) inflated property appraisals, not that there was a pervasive scheme to do so. See id. at ¶ 4. Those counterclaims are subject to a motion to dismiss, which is currently stayed pending this Court's ruling on the reassignment and consolidation motion. See Phoenix ECF No. 104. Although the Phoenix defendants twice brought motions to add further defendants and RICO claims, one was stricken and the other was withdrawn following a colloquy with the judge assigned to the case. See Phoenix Tr. of Hr'g of Jan. 9, 2017, Tr. of Hr'g of Jan. 24, 2017, Phoenix ECF No. 100-101. Thus, the only mention of the Saleh RICO conspiracy is as an affirmative defense that National Republic Bank, which is no longer a party because the loans in question were assigned to Phoenix (see Phoenix Order Granting Substitution of Party, ECF No. 26), fraudulently induced the defendants to enter into the loans. See Am. Answer Affirmative Def. ¶ 1-21.

         III. The Delaware Case

         The Delaware case was removed from Illinois state court on March 3, 2017, where it had originally been filed in January. See Notice of Removal, Delaware ECF No. 1. There, a group of entities and individuals (represented by the Saleh cross-plaintiffs' attorney) sued 18 defendants claiming a RICO conspiracy to increase appraisal values. An amended complaint was filed on May 3, 2017 in response to four pending motions to dismiss (as well as one granted motion to dismiss the Lehman entities). See Delaware ECF No. 45. The amended complaint names over 25 defendants, including Phoenix and some of the Saleh cross-defendants as well as many entities not named in either of the other suits. Id. The current complaint, which has not been answered by any defendant or even served on some of the defendants, claims RICO conspiracies as well as Illinois state law claims for fraud, tortious interference, and various equitable remedies. Id.

         DISCUSSION

         A district court may consolidate actions before the court if they “involve a common question of law or fact.” Fed.R.Civ.P. 42(a)(2). Whether or not to consolidate is left to the judge's discretion, Blue Cross Blue Shield of Mass. v. BCS Ins. Co., 671 F.3d 635, 640 (7th Cir. 2011), although this district has provided more structure to the exercise of that discretion in Local Rule 40.4. Under the Local Rule section claimed here, cases may be related if they involve “some of the same issues of fact or law” and may be reassigned if four criteria are all met:

(1) both cases are pending in this Court; (2) the handling of both cases by the same judge is likely to result in a substantial saving of judicial time and effort; (3) the earlier case has not progressed to the point where designating a later filed case as related would be likely to delay the proceedings in the earlier case substantially; and (4) the cases are susceptible of disposition in a single proceeding.

         Local R. 40.4. Here, the motion is for reassignment and consolidation, not mere finding of relatedness. Such motions “should not generally be filed until after the answer or motions in lieu of answer have been filed in each of the proceedings involved.” Local R. 40.4(c). As the non-movants correctly point out, this is not true in this case (responsive pleadings have not been filed to the cross-complaint in Saleh ...


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