United States District Court, N.D. Illinois, Eastern Division
NABIL SALEH, as Trustee of the Nabil Saleh MD Ltd. Pension Plan Plaintiff,
HASAN MERCHANT, et al., Defendants. MUSKEGAN HOTELS LLC, M.D. 1 LLC, MD GLOBAL LLC, GLOBAL DEVELOPMENT, INC., and HASAN MERCHANT, Cross-Plaintiffs,
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
J. Tharp, Jr. United States District Judge.
Muskegan Hotels LLC, M.D. 1 LLC, Global Development, Inc., MD
Global LLC, and Hasan Merchant 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.
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.
The Saleh Case
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.
The Phoenix Case
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.
The Delaware Case
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.
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
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 ...