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Rustom v. Rustom

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

May 29, 2018

MAHER RUSTOM and PREFERRED OPEN MRI, LTD., Plaintiffs,
v.
NASER RUSTOM, GALILEE MEDICAL CENTER, S.C., and NORTH STAR TRUST COMPANY, Defendants.

          MEMORANDUM OPINION AND ORDER

          Hon. Marvin E. Aspen, Judge

         Presently pending before us are Plaintiff Maher Rustom's (“Maher”) motion for a turnover order and for an order of protection (Dkt. No. 25), motion for leave to file a verified second amended complaint (Dkt. No. 48), and motion to compel discovery (Dkt. No. 53). Also pending before us are Defendants Naser Rustom (“Naser”), Galilee Medical Center, S.C., and North Star Trust Company's motion to dismiss the amended complaint (Dkt. No. 39) and motion for a protective order and order to stay discovery (Dkt. No. 55). This case principally concerns a dispute between two brothers over the ownership of certain companies and commercial property located in Chicago, though the case has hardly left the ground due to numerous discovery-related disputes and amended pleadings. For the reasons set forth below, we grant Maher's motion for leave to file a second amended complaint (Dkt. No. 48), and we deny each of the remaining motions (Dkt. Nos. 25, 39, 55, 53).

         BACKGROUND

         Maher alleges his brother Naser committed fraud in connection with one property and two Chicago businesses in which Maher claims an ownership stake: (1) commercial real estate located at 4941 North Kedzie Avenue, Chicago, Illinois (“the property”); (2) Galilee Medical Center, SC (“the Medical Center”); and (3) Preferred Open MRI, Ltd. (“Open MRI”). Maher maintains he is the sole owner of the property and Open MRI. Maher alleges he purchased the property on September 26, 1995, and he entered into an agreement with Naser to manage the building. (Am. Compl. (Dkt. No. 28) ¶¶ 2, 13-14.) Maher also alleges that he and Naser, along with a third brother, formed the Medical Center and each took a one-third ownership interest. (Id. ¶¶ 2, 15.) As a result of the brothers' arrangement, the Medical Center operated out of the property rent-free. (Id.)

         In 1999, Maher signed a quit claim deed to the property, conveying his interest in the property to Naser for $10.00. (Id. ¶¶ 3, 24.) However, Maher alleges that he never intended to transfer ownership of the property to Naser, instead asserting Naser defrauded him into executing the deed and forged his signature on the Grantor and Grantee Statement attached to the deed. (Id. ¶¶ 3, 18-22.) Maher alleges he believed the deed would simply permit Naser to manage the building and act on Maher's behalf as the landlord. (Id. ¶ 18.) Maher maintains he is the owner of the property and is entitled to a claim for quiet title in order to remove the cloud on the title created by the quit claim deed. (Id. ¶ 32.)

         Maher also seeks an accounting from Naser “for all income and expenses for the subject commercial building's rent income” as well as income for the Medical Center from 1999 to present. (Id. ¶ 41.) Similarly, Maher contends he is entitled to an accounting from Naser “for all income and expenses” for Open MRI from 2002 to present. (Id. ¶ 47.) Maher alleges an accounting is necessary for the property, the Medical Center, and Open MRI because “[g]iven the 1999 false and fraudulent conduct of Defendant Naser, the income and expenses he reported . . . are not truthful.” (Id. ¶¶ 38, 45.)

         Maher filed a verified complaint against Naser and the Medical Center on December 17, 2017, invoking diversity jurisdiction and asserting claims for quiet title, for an accounting of the property and the Medical Center, and for common law fraud. (Dkt. No. 1.) Defendants moved to dismiss the complaint on February 9, 2018 pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(6), and 12(d), arguing there were “no factual or legal bases” for any of the claims in the complaint. (Dkt. No. 16.) In response, Maher sought leave to file an amended complaint, and we granted the motion. (Dkt. No. 27.)

         Maher filed a verified first amended complaint on March 22, 2018, adding Open MRI as a plaintiff and North Star Trust Company as a defendant. (Dkt. No. 28.) The first amended complaint asserted the same claims as the original complaint, but added a claim for an accounting of Open MRI's expenses. (Id. ¶¶ 43-48.) Defendants filed a motion to dismiss the first amended complaint on April 23, 2018, again arguing that there were no factual or legal bases for any of the claims in the amended complaint because: (1) Maher cannot meet the elements of quiet title under Illinois law; (2) Maher is barred under Illinois law from having an interest in the Medical Center or Open MRI as he is not a physician licensed in Illinois and therefore has no standing to demand an accounting; and (3) Maher has not owned Open MRI since 2005 and therefore has no capacity to name Open MRI as a co-plaintiff, nor is he entitled to an accounting. (Dkt. No. 39.) Maher's response to the motion to dismiss is due June 1, 2018. (Dkt. No. 42.)

         Maher also filed a motion for an evidentiary hearing and to permit discovery in order to determine Open MRI's ownership, contending Defendants' motion to dismiss wrongly asserts Maher transferred ownership of Open MRI to Naser and is supported by fraudulent documents. (Dkt. No. 43.) Specifically, Defendants argue Maher has not owned Open MRI since August 23, 2005, when Naser exercised an option to buy all of Open MRI's shares pursuant to an employment agreement Naser and Maher entered into on April 22, 2002. (Mem. in Support of Mot. to Dismiss (Dkt. No. 40) at 12.) We referred Maher's motion to Magistrate Judge Cole. (Dkt. No. 45.) Judge Cole entered an order on May 9, 2018 denying the motion for an evidentiary hearing and observing the verified complaint fails to plead that there is complete diversity among the parties, because one plaintiff (Open MRI) and two defendants (Naser and the Medical Center) are alleged to be citizens of Illinois. (Dkt. No. 47 at 1-2.)

         The next day, Maher filed a motion for leave to file a verified second amended complaint, attaching the proposed second amended complaint. (Dkt. No. 48.) The proposed second amended complaint includes the same allegations and causes of action as the first amended complaint, but removes Open MRI as a plaintiff and removes the Medical Center as a defendant. (See Proposed 2d Am. Compl. (Dkt. No. 48-1).) Maher seeks amend his complaint “for the purpose of accurately representing the assets at issue and to preserve complete diversity jurisdiction.” (Mot. to File 2d Am. Compl. (Dkt. No. 48) ¶ 2.) Defendants oppose Maher's motion, arguing the amendments in the proposed second amended complaint are “virtually identical to the two prior complaints, ” and are futile as they do not “cure any of the legal defects of Plaintiff's purported claims.” (Resp. to Mot. to File 2d Am. Compl. (Dkt. No. 51) at 1.) Defendants argue that for the same reasons set forth in their motion to dismiss the original complaint and the first amended complaint, Maher's claims in the proposed second amended complaint are “meritless, have no basis in fact or law, and do not give rise to cognizable causes of action.” (Id.)

         ANALYSIS

         I. MAHER'S MOTION FOR LEAVE TO FILE A SECOND AMENDED COMPLAINT

         We first address Maher's motion to file a second amended complaint in an attempt to cure the jurisdictional defects raised by Judge Cole. Defendants urge us to deny Maher's motion, arguing the “amendments in the proposed Second Amended Complaint (virtually identical to the two prior complaints) are futile and do not cure any of the legal defects of Plaintiff's purported claims in this litigation.” (Resp. to Mot. to File 2d Am. Compl. at 1.) Defendants contend we should deny Maher's motion and “either dismiss Plaintiff's claims for lack of diversity jurisdiction, as recommended by Judge Cole, or order that the parties proceed, as scheduled, in briefing Defendants' pending Motion to Dismiss.” (Id. at 5.)

         Pursuant to Federal Rule of Civil Procedure 15(a), if a party has already amended its pleading once, it must seek the opposing party's consent, or seek the court's leave. Fed.R.Civ.P. 15(a). Leave to amend a complaint “shall be freely given when justice so requires.” Id. “The Seventh Circuit has instructed that leave to amend should be granted unless a party has engaged in ‘undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of the allowance of the amendment, futility of amendment, etc.'” Villars v. Kubiatowski, 128 F.Supp.3d 1039, 1043 (N.D. Ill. 2015) (quoting Airborne Beepers & Video, Inc. v. AT & T Mobility LLC, 499 F.3d 663, 666 (7th Cir. 2007)). An amendment is futile when it “merely restates the same facts using different language, or reasserts a claim previously determined.” Bower v. Jones, 978 F.2d 1004, 1008 (7th Cir. 1992) (quoting Wakeen v. Hoffman House, Inc., 724 F.2d 1238, 1244 (7th Cir. 1983)). “Similarly, an amendment may be futile when it fails to state a ...


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