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Dillon v. Naman, Howell, Smith & Lee, PLLC

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

June 12, 2018



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

         After Dillon Transport, Inc. was found liable for a $32 million verdict in a personal injury lawsuit in Texas, the trucking company and its principal, Jeff Dillon, sued the lawyers and law firms that provided the company legal advice in connection with the lawsuit. Dillon and the company filed their case in the Circuit Court of Cook County, alleging that due to the defendants' professional negligence Dillon and Dillon Transport had to pay $2.5 million beyond their insurance coverage as part of a post-verdict settlement. Defendant attorney Larry Warren removed the case to federal court, claiming that two other defendants, Michael Tannen and Tannen Law Group, P.C. (“TLG”), had been fraudulently joined to destroy diversity. After removal, the plaintiffs moved to remand the case to the state court, arguing that the defendants have not established fraudulent joinder. The Court agrees. Because the defendants have failed to show that Tannen and TLG were fraudulently joined, complete diversity among the parties does not exist and the Court lacks subject matter jurisdiction over this case. Accordingly, the Court grants the plaintiffs' motion to remand.


         Jeff Dillon and the trucking company Dillon Transport are citizens of Illinois. Michael Tannen is a lawyer and the owner of the Chicago law firm Tannen Law Group, P.C. (“TLG”). Tannen and TLG are also Illinois citizens. Larry Warren is a lawyer for Naman, Howell, Smith & Lee PLLC (“NHSL”), a law firm located in San Antonio, Texas. Warren and NHSL are citizens of Texas. At various times, Tannen and TLG (collectively, the “Tannen defendants”) and Warren and NHSL (collectively, the “Warren defendants”) provided legal counsel to Dillon Transport.

         In 2015, Dillon Transport was sued in Nueces County, Texas (the “Texas lawsuit”) for its role in an accident that caused permanent injuries to two individuals (the “Texas plaintiffs”) who were riding a motorcycle that collided with a Dillon Transport truck. The Texas lawsuit alleged that Dillon Transport was liable for its own negligence and vicariously liable for the negligent acts of its employee who operated the truck. Dillon Transport hired the Warren defendants to represent it in the case, up to the extent of the trucking company's $5 million liability insurance coverage. In September 2015, Warren authored a pre-trial and pre-mediation evaluation report on the lawsuit, stating that it was defensible at trial and that the evidence indicated that the plaintiff was the sole cause of the accident. In October 2015, a mediation was held, but Warren made no serious offers of settlement to the plaintiffs. Thereafter, the Texas plaintiffs amended their complaint to add claims of gross negligence and institutional negligence against Dillon Transport. The plaintiffs also succeeded in barring the trial testimony of a critical defense witness.

         On December 2, 2015, the Texas lawsuit went to trial, during which Dillon Transport suffered several setbacks. Closing arguments concluded on December 16, 2015, and the jury began its deliberations on that day. After deliberations commenced, the jury raised questions that indicated they were leaning toward a significant verdict in favor of the plaintiffs. Early the next morning, December 17, 2015, Warren contacted Dillon Transport and its insurance carriers to discuss a potential settlement offer to the Texas plaintiffs. Decl. of Larry Warren (“Warren Decl.”) ¶ 7, ECF No. 1-6. Later that day, in the evening, Dillon Transport executives contacted Tannen and requested his legal advice regarding the trial and the expected verdict. Aff. of TLG and Tannen in Supp. of Pet. for Removal (“Tannen Aff. I”) ¶¶ 22-32, ECF No. 23-2. Tannen began working on the case that night. Id. Dillon Transport retained Tannen and TLG to review the case, to advise it of its exposure and risk above the $5 million liability insurance policy limit, and to take action to protect it against an adverse verdict.[2] Comp. Counts I-IV ¶ 15, ECF No. 1-1.[3]

         While the jury continued to deliberate, Dillon Transport attempted to settle the case within its insurance policy limit, but the Texas plaintiffs rejected the company's settlement offer.[4] On December 18, 2015, the jury returned a $32 million verdict against Dillon Transport. Dillon Transport submitted post-trial briefs and appeals, and engaged in post-trial mediation and settlement negotiations. See Aff. of TLG and Tannen in Resp. to Mot. for Remand (“Tannen Aff. II”) n.3-5, Exs. F-J, ECF No. 24-1. Tannen was involved in these efforts, which continued throughout 2016. See Id. The company also issued a 50, 000-page financial disclosure regarding its corporate assets. On December 19, 2016, about a year after the verdict, the parties reached a settlement that required Dillon and Dillon Transport to pay $2.5 million above the limits of Dillon Transport's insurance coverage.

         In December 2017, Dillon and Dillon Transport filed a complaint against the Tannen defendants and the Warren defendants in the Circuit Court of Cook County alleging professional negligence related to the Texas lawsuit. On January 22, 2018, Warren filed a timely notice of removal in this Court.[5] The Tannen defendants sought leave to file a submission in support of the removal, which the Court granted. Dillon and Dillon Transport moved to remand the case to the Circuit Court of Cook County, and the defendants submitted briefs in opposition to remand.


         The plaintiffs argue that their case must be remanded to the Circuit Court because this Court lacks subject matter jurisdiction. Warren removed this case to federal court under 28 U.S.C. § 1441(a), which provides that any civil action filed in a state court may be removed by the defendant to the district court if the district court has original jurisdiction over the controversy. 28 U.S.C. § 1441(a). The Warren and Tannen defendants assert that original jurisdiction of the federal court exists based on the diversity jurisdiction provided for under 28 U.S.C. § 1332 (“Section 1332”). They claim that the Tannen defendants, who are Illinois citizens and are therefore not diverse from the plaintiffs, were fraudulently joined and therefore should be disregarded when determining whether there is complete diversity among the parties, as is required under Section 1332. In their motion to remand, Dillon and Dillon Transport argue that the defendants have not met their burden to establish that the Tannen defendants were fraudulently joined.

         The Seventh Circuit directs federal courts to interpret the removal statute narrowly, resolving any doubts in favor of the plaintiff's choice of forum in the state court. Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 758 (7th Cir. 2009). Under the fraudulent joinder doctrine, a court considering removal may “disregard, for jurisdictional purposes, the citizenship of certain non-diverse defendants, assume jurisdiction over a case, dismiss the non-diverse defendants, and thereby retain jurisdiction.” Id. at 763 (quoting Mayes v. Rapoport, 198 F.3d 457, 461 (4th Cir. 1999)). Fraudulent joinder exists if the plaintiff has made false allegations of jurisdictional fact, or if a claim against a non-diverse defendant has no chance of success. Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir. 1992). Here, the defendants argue that the plaintiffs' claims against Tannen and TLG have no chance of success.

         Defendants seeking to remove a case from state court to federal court based on fraudulent joinder of a non-diverse defendant bear “a heavy burden.” Id. The test for fraudulent joinder is even more favorable to the plaintiff than the standard for deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Livingston v. Hoffmann-La Roche, Inc., No. 09 C 2611, 2009 WL 2448804, at *4 (N.D. Ill. Aug. 6, 2009). Warren must show that, after resolving all issues of fact and law in favor of the plaintiffs, the plaintiffs cannot establish a cause of action against Tannen or TLG. Poulos, 959 F.2d at 73. The Court must determine whether there is “any reasonable possibility” that a state court would rule against Tannen or TLG. Id. Warren, however, need not negate “any possible theory” that the plaintiffs might allege in the future; “only [the] present allegations count.” Id. at 74.

         There is no dispute that Dillon Transport retained the Tannen defendants on December 17, 2015; thereafter, the Tannen defendants owed a duty to provide legal counsel and representation that was free of negligence. Dillon Transport hired the Tannen defendants to review the Texas lawsuit, to provide legal advice on its personal exposure and risk in excess of its insurance policy limits, and to take action to protect the company against an adverse verdict. The plaintiffs allege that Tannen and TLG negligently failed to issue timely pre-verdict settlement demand letters, negligently failed to initiate timely pre-verdict settlement negotiations, and negligently failed to timely advise Dillon Transport of the likelihood of an adverse verdict and the steps necessary to protect itself against an adverse verdict. The complaint alleges that these negligent acts caused Dillon and Dillon Transport to pay $2.5 million in “personal” assets (i.e., assets other than payments by their insurer) in the post-verdict settlement with the Texas plaintiffs. Compl. Counts I-IV ¶ 24, ECF No. 1-1.

         The Warren and Tannen defendants argue there is no reasonable possibility that these allegations suffice to state a cause of action for professional negligence against the Tannen defendants in an Illinois state court. In Illinois courts, whether a claim states a valid cause of action is analyzed in the context of a motion to dismiss. Gen. Elec. Railcar Servs. Corp. v. Nat'l Steel Car Ltd., No. 04 C 3043, 2004 WL 2392104, at *3 (N.D. Ill. Oct. 25, 2004) (citing 735 Ill. Comp. Stat. 5/2-615). On a motion to dismiss, Illinois courts accept all well-pleaded facts as true and consider them in the light most favorable to the plaintiff. Hartmann Realtors v. Biffar, 13 N.E.3d 350, 356 (Ill.App.Ct. 2014). “The complaint must be construed liberally and should only be dismissed when it appears that the plaintiff cannot recover under any set of facts.” Id. Under Illinois law, a cause of action based on professional negligence requires the ...

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