The Passavant Memorial Area Hospital Association v. Lancaster Pollard & Co. et al
Filing
78
OPINION entered by Judge Sue E. Myerscough on 01/20/2012. SEE WRITTEN OPINION. The Court GRANTS Third Party Defendants' Motion to Reconsider (d/e 65) and VACATES the portion of the September 30, 2011 text order granting Plaintiff leave to f ile a Second Amended Complaint. The Second Amended Complaint (d/e 60) is STRICKEN. Plaintiff may file a Motion for Leave to File a Third Amended Complaint on or before February 1, 2012. In that Motion, Plaintiff must address (1) whether joining Geo rge or Peck, Shaffer & Williams as defendants would destroy diversity and (2) the relevant factors for determining the propriety of post-removal joinder of a nondiverse party. Defendants and Third Party Defendants may respond to the Motion for Leav e to File a Third Amended Complaint on or before February 15, 2012. The Motion to Remand (d/e 61) and Motion to Dismiss the Second Amended Complaint (d/e 69) are DENIED AS MOOT. The Motions to Dismiss Third Party Complaint (d/e 23, 56) and the Motion to Dismiss for Failure to State a Claim (d/e 73) remain pending. (DM, ilcd)
E-FILED
Friday, 20 January, 2012 01:50:59 PM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
THE PASSAVANT MEMORIAL
AREA HOSPITAL ASSOCIATION,
Plaintiff,
v.
LANCASTER POLLARD & CO.,
LANCASTER POLLARD ASSET
MANAGEMENT, LLC, and STEVE
KENNEDY,
Defendants and Third Party
Plaintiffs,
v.
JASON L. GEORGE and PECK,
SHAFFER & WILLIAMS, LLP,
Third Party Defendants.
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No. 11-3116
OPINION
SUE E. MYERSCOUGH, United States District Judge.
This cause is before the Court on the Motion to Reconsider the
September 30, 2011 Text Order (d/e 65) filed by Third Party Defendants
Jason L. George and Peck, Shaffer & Williams, LLP. For the reasons that
follow, the Motion to Reconsider is GRANTED.
BACKGROUND
In April 2001, Plaintiff Passavant Memorial Area Hospital
Association filed a Complaint in state court against Defendants Lancaster
Pollard & Co., Lancaster Pollard Asset Management, LLC, and Steven
W. Kennedy. In May 2011, Defendants filed a Notice of Removal on
the basis of diversity jurisdiction. Thereafter, Defendants filed a Third
Party Complaint against the Third Party Defendants and Allison M.
Binkley. In November 2011, Binkley was dismissed from the case by
stipulation.
In August 2011, Plaintiff filed an amended complaint to add state
law claims against the Third Party Defendants. Third Party Defendants
moved to dismiss the amended complaint on the grounds that the
amended pleading was untimely and that amendment would be futile.
See d/e 31, 49. Defendants joined in Peck, Shaffer & Williams’ motion
but took no position on whether an attorney-client relationship existed
between Plaintiff and Peck, Shaffer & Williams. See d/e 36.
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On September 30, 2011, this Court entered a text order that
resolved numerous motions and allowed limited discovery on the issue of
personal jurisdiction over third party defendant George. Regarding the
Amended Complaint, the Court held:
Also pending are Motions to Strike the Amended
Complaint. Passavant Memorial Area Hospital
Association (Passavant) filed the Amended
Complaint on August 1, 2011. Although
Passavant has not yet responded to the Motions,
the Court, in the interest of judicial economy,
GRANTS Peck, Shaffer & Williams, LLP's Motion
to Strike the Amended Complaint (d/e 31),
Lancaster’s Motion Adopting Peck, Shaffer &
Williams, LLPs Motion (d/e 36), and George’s
Motion to Strike Plaintiff's Amended Complaint
(d/e 49) on the ground that Passavant's right to
amend its Complaint as a matter of course expired
21 days after Lancaster filed the Answer to the
Complaint. See d/e 6; Fed.R.Civ.P. 15(a)
(providing that a plaintiff can amend its complaint
once as a matter of course within 21 days of the
responsive pleading). Nonetheless, the Court
GRANTS Passavant leave to file an Amended
Complaint or indicate that it intends to stand on
the original Complaint on or before November 21,
2011, which is one week following the close of
discovery on the issue of personal jurisdiction.
Passavant is reminded, however, that the case is in
federal court on diversity jurisdiction. Peck Shaffer
& Williams, LLP is a limited liability partnership
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whose citizenship is the citizenship of each of its
members or partners. See Cosgrove v. Bartolotta,
150 F.3d 729, 731 (7th Cir. 1998).
On November 21, 2011, Plaintiff filed its Second Amended
Complaint (d/e 60) naming George and Peck, Shaffer & Williams as
defendants. That same day, Plaintiff filed a Motion to Remand (d/e 61)
asserting that the joinder of Peck, Shaffer & Williams destroyed
diversity. Specifically, Plaintiff asserted that Peck, Shaffer & Williams
was a limited liability partnership with an office in Chicago and that two
partners in the Chicago office reside in Illinois.
Defendants oppose the Motion to Remand, asserting that Plaintiff
has failed to demonstrate that Peck Shaffer & Williams is a citizen of
Illinois. See d/e 64. Third Party Defendants also oppose the Motion to
Remand, asserting, in part, that diversity is not destroyed because Peck
Shaffer & Williams is a citizen of Ohio and, as of the date of the filing of
the Complaint, Amended Complaint, and Second Amended Complaint,
had no equity partners residing in Illinois. See d/e 67.
Despite asserting that diversity was not destroyed in response to
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the Motion to Remand, Third Party Defendants also filed a Motion to
Reconsider the September 20, 2011 Text Order which granted Plaintiff
leave to file an amended complaint. See d/e 65. In the Motion to
Reconsider, the Third Party Defendants assert that this Court should
reconsider allowing Plaintiff leave to file the Second Amended Complaint
because the “Court did not have the benefit of the analysis of the [Third
Party Defendants] that amendment not only would be futile, but also
that joinder of the [Third Party Defendants] by an amended pleading
was a ‘fraudulent joinder’ designed to defeat jurisdiction[.]” See Motion
(d/e 65). That is, Third Party Defendants recognize the possibility that
the joinder of Peck, Shaffer & Williams would destroy complete diversity
and require remand. See, e.g., Cosgrove v. Bartolotta, 150 F.3d 729, 731
(7th Cir. 1998) (“The citizenship of a partnership is the citizenship of
the partners, even if they are limited partners, so that if even one of the
partners (general or limited) is a citizen of the same state as the plaintiff,
the suit cannot be maintained as a diversity suit”).
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ANALYSIS
“When joinder of a nondiverse party would destroy subject matter
jurisdiction, [footnote omitted] 28 U.S.C. § 1447(e) applies and provides
the district court two options: (1) deny joinder, or (2) permit joinder and
remand the action to state court.” Schur v. L.A. Weight Loss Center,
577 F.3d 752, 759 (7th Cir. 2009). To determine whether to allow postremoval joinder of a nondiverse party, a district court considers the
following factors:
(1) the plaintiff’s motive for seeking joinder,
particularly whether the purpose is to defeat
federal jurisdiction; (2) the timeliness of the
request to amend; (3) whether the plaintiff will be
significantly injured if joinder is not allowed; and
(4) any other relevant equitable considerations.
Schur, 577 F.3d at 759.
In this case, the Court has not had the opportunity to rule on the
propriety of joining a nondiverse party because (1) it remains unclear
whether Peck, Shaffer & Williams is a nondiverse party and (2) the
Court did not consider §1447(e) and the factors articulated in Schur
when the Court entered the September 30, 2011 text order. See 28
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U.S.C. §1447(e) (providing that “[i]f after removal the plaintiff seeks to
join additional defendants whose joinder would destroy subject matter
jurisdiction, the court may deny joinder, or permit joinder and remand
the action to the State court”). Where a court is unaware that joinder
will destroy diversity, the court may reconsider a prior decision to grant
leave to amend. See Schur 577 F.3d at 761 (citing with approval courts
that have concluded “that when a district court is unaware that joinder
will destroy diversity, it may reconsider its prior decision permitting leave
to amend a complaint”). Although this Court recognized, in the
September 30, 2011 text order, that adding Peck, Shaffer & Williams
might have jurisdictional implications, the Court did not conclusively
determine whether jurisdiction would be destroyed and did not consider
the relevant factors before allowing Plaintiff leave to amend.
CONCLUSION
For these reasons, the Court GRANTS Third Party Defendants’
Motion to Reconsider (d/e 65) and VACATES the portion of the
September 30, 2011 text order granting Plaintiff leave to file a Second
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Amended Complaint. The Second Amended Complaint (d/e 60) is
STRICKEN. Plaintiff may file a Motion for Leave to File a Third
Amended Complaint on or before February 1, 2012. In that Motion,
Plaintiff must address (1) whether joining George or Peck, Shaffer &
Williams as defendants would destroy diversity and (2) the relevant
factors for determining the propriety of post-removal joinder of a
nondiverse party. Defendants and Third Party Defendants may respond
to the Motion for Leave to File a Third Amended Complaint on or before
February 15, 2012. The Motion to Remand (d/e 61) and Motion to
Dismiss the Second Amended Complaint (d/e 69) are DENIED AS
MOOT. The Motions to Dismiss Third Party Complaint (d/e 23, 56)
and the Motion to Dismiss for Failure to State a Claim (d/e 73) remain
pending.
ENTER: January 20, 2012
FOR THE COURT:
s/Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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