United States District Court, N.D. Illinois, Eastern Division
ETRANSMEDIA TECHNOLOGY, INC., VIKRAM AGRAWAL, VIKASH AGRAWAL, BRENDAN HARNETT, BHAGWATI PRASAD AGRAWAL, SATYA BALA AGRAWAL, VIKASH AGRAWAL FAMILY 2013 GRANTOR RETAINED ANNUITY TRUST, VIKRAM AGRAWAL FAMILY 2013 GRANTOR RETAINED ANNUITY TRUST, AGRAWAL FAMILY 2013 GRANTOR RETAINED ANNUITY TRUST, VIKASH AGRAWAL CHARITABLE REMAINDER TRUST, VIKRAM AGRAWAL CHARITABLE REMAINDER TRUST, and AGRAWAL FAMILY CHARITABLE REMAINDER TRUST, Plaintiffs,
ALLSCRIPTS HEALTHCARE, LLC, Defendant.
MEMORANDUM OPINION AND ORDER.
Technology, Inc., together with several entities and
individuals that used to own its shares (“Former
Shareholders”), brought this diversity suit against
Allscripts Healthcare, LLC, alleging that Allscripts made
fraudulent representations, used unfair and deceptive trade
practices, and breached its contract with Etransmedia in an
effort to pilfer Etransmedia's clients. Doc. 1.
Allscripts moves to dismiss the suit under Federal Rules of
Civil Procedure 12(b)(1) and 12(b)(6). Doc. 14. The motion is
granted in part and denied in part.
facial challenge to subject matter jurisdiction under Rule
12(b)(1), as on a Rule 12(b)(6) motion, the court must accept
as true the complaint's well-pleaded factual allegations,
with all reasonable inferences drawn in Etransmedia's
favor, but not its legal conclusions. See Smoke Shop, LLC
v. United States, 761 F.3d 779, 785 (7th Cir. 2014);
Apex Digital, Inc. v. Sears, Roebuck & Co., 572
F.3d 440, 443-44 (7th Cir. 2009). The court must also
consider “documents attached to the complaint,
documents that are critical to the complaint and referred to
in it, and information that is subject to proper judicial
notice, ” along with additional facts set forth in
Etransmedia's brief opposing dismissal, so long as those
additional facts “are consistent with the
pleadings.” Phillips v. Prudential Ins. Co. of
Am., 714 F.3d 1017, 1020 (7th Cir. 2013). The facts are
set forth as favorably to Etransmedia as those materials
allow. See Pierce v. Zoetis, Inc., 818 F.3d 274, 277
(7th Cir. 2016). In setting forth those facts at the pleading
stage, the court does not vouch for their accuracy. See
Jay E. Hayden Found. v. First Neighbor Bank, N.A., 610
F.3d 382, 384 (7th Cir. 2010).
and Allscripts were parties to a contract. Doc. 1 at ¶
40. In May 2015, Etransmedia brought an arbitration action
before the American Arbitration Association
(“AAA”) against Allscripts pursuant to the
contract's arbitration provision, which provided that any
disputes would resolved by arbitration in North Carolina
“in accordance with the law of the state of North
Carolina and the rules of the American Arbitration
Association.” Allscripts Healthcare, LLC v.
Etransmedia Tech., Inc., 188 F.Supp.3d 696, 698 (N.D.
Ill. 2016) (quoting the contract in a related case brought by
Allscripts against Etransmedia). In August 2016, the Former
Shareholders entered into a Stock Purchase Agreement in which
they sold their Etransmedia shares to a buyer but retained
“sole control” over the “Allscripts
Litigation, ” including “the right to any and all
amounts collected.” Doc. 25 at pp. 58-59, §
5(1)(i)-(ii). The Former Shareholders also promised to
“indemnify [Etransmedia and the buyer] … for all
Losses” arising out of the litigation. Id. at
argued to the arbitration panel that, given this transaction,
the arbitration agreement between Etransmedia and Allscripts
no longer governed the claims that Etransmedia had brought
against Allscripts. The panel agreed. Doc. 15-1. The panel
observed that because “[Etransmedia] effectively
transferred its interest in the outcome of this arbitration
to” the Former Shareholders, Etransmedia “no
longer had any significant interest in the outcome of this
arbitration, and [Etransmedia] ceased to be the real party in
interest herein.” Id. at 4, 5. The panel
further observed that while the contract provided for
arbitration between Etransmedia and Allscripts,
“[t]here [was] no agreement to arbitrate between the
[F]ormer [S]hareholders … and [Allscripts].”
Id. at 5. The panel concluded that because the
Former Shareholders “are now the real parties in
interest here, not [Etransmedia], ” the panel
“[was] without jurisdiction to hear and decide the
claims asserted in this arbitration.” Ibid.
For reasons unexplained, Etransmedia did not seek to modify
or vacate the panel's decision. Doc. 20 at 9-10.
months later, Etransmedia and the Former Shareholders filed
this suit, bringing here the claims that Etransmedia had
brought against Allscripts in the arbitration. Doc. 20 at 7.
argues that Etransmedia lacks standing and that the complaint
states no claim on behalf of the Former Shareholders.
Whether Etransmedia Has Standing
first contends that the issue preclusion doctrine requires
this court to hold that Etransmedia lacks
“standing” to bring its claims in federal court.
Doc. 15 at 4-6. According to Allscripts, the arbitration
panel held that Etransmedia is not a real party in interest,
which in turn (again, according to Allscripts) means that
Etransmedia lacks standing. And that ruling, Allscripts
concludes, has preclusive effect in this suit.
this suit was filed in an Illinois federal court, Illinois
choice of law principles govern. See Klaxon Co. v.
Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Those
principles honor the choice of law clause in the
Allscripts-Etransmedia contract, which, as noted above,
provides that North Carolina law governs. See Dancor
Const., Inc. v. FXR Const., Inc., 64 N.E.3d 796, 812-13
( Ill. App. 2016); Restatement (Second) of Conflict of
Laws § 187 (1971). And because North Carolina law
governs the contract and the contract gave rise to the
arbitration, the preclusive effect of the arbitration
panel's decision is determined by North Carolina law.
See Restatement (Second) of Conflict of Laws §
95 (“What issues are determined by a valid judgment is
determined … by the law of the State where the
judgment was rendered.”); Osco Motors Co. v. Marine
Acquisition Corp., 2014 WL 2875374, at *11-12 (D. Del.
June 24, 2014) (applying § 95 to an arbitral decision).
Carolina law gives preclusive effect to arbitration awards.
See Whitlock v. Triangle Grading Contractors Dev.,
Inc., 696 S.E.2d 543, 546 ( N.C. App. 2010)
(“[C]ollateral estoppel may apply to [an] unconfirmed
arbitration award.”). North Carolina law further
provides that issue preclusion applies where “the
earlier suit resulted in a final judgment on the merits,
… the issue in question was identical to an issue
actually litigated and necessary to the judgment, and
… both [the defendant] and [the plaintiff] were either
parties to the earlier suit or were in privity with
parties.” Turner v. Hammocks Beach Corp., 681
S.E.2d 770, 773-74 ( N.C. 2009) (citation omitted). And
although the arbitration panel styled its dismissal of
Etransmedia's arbitration claims as a dismissal for lack
of jurisdiction, jurisdictional dismissals “still
operate” under North Carolina law “to bar
relitigation of issues actually decided by that former
judgment.” Stroock, Stroock & Lavan LLP v.
Dorf, 2010 WL 532911, at ¶ 31 ( N.C. Super. Ct.
Feb. 16, 2010) (quoting Goldsmith v. Mayor & City
Council of Baltimore, 987 F.2d 1064, 1069 (4th Cir.
1993)); see also Okoro v. Bohman, 164 F.3d 1059,
1063 (7th Cir. 1999) (“[A] jurisdictional dismissal is
res judicata on the jurisdictional issue.”).
preclusion argument fails for two reasons. First, the
arbitration panel held that Etransmedia was not a real party
in interest, not under federal law, but under North Carolina
law. Doc. 15-1 at 3 (citing Anderson v. SeaScape at
Holden Plantation, 773 S.E.2d 78, 87 ( N.C. App. 2015);
Beachcomber Props., L.L.C. v. Station One, Inc., 611
S.E.2d 191, 193-94 ( N.C. App. 2005)). As the North Carolina
precedents cited by the arbitration panel provide, North
Carolina procedural law holds that “the proper
plaintiff to bring a civil action is a ‘real party in
interest.'” Anderson, 773 S.E.2d at 87
(citing N.C. Gen. Stat. § 1-57 (2013)); see
also N.C. Gen. Stat. § 1A-1, Rule 17 (“Every
claim shall be prosecuted in the name of the real party in
interest … .”). Relying on a North Carolina case
stating that “[a] real party in interest is one who
benefits from or is harmed by the outcome of the case,
” Beachcomber ...