The Thomas D. Philipsborn Irrevocable Trust dated July 10, 2005 v. Avon Capital, et al.
Filing
130
Memorandum Opinion and Order Signed by the Honorable Harry D. Leinenweber on 1/24/2014:Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
THE THOMAS D. PHILIPSBORN
IRREVOCABLE INSURANCE TRUST,
dated July 10, 2005, and ANDREW
I. PHILIPSBORN, as Trustee on
Behalf of THE THOMAS D.
PHILIPSBORN IRREVOCABLE
INSURANCE TRUST, dated July 10,
2005,
Plaintiffs,
v.
AVON CAPITAL, LLC and DONALD
TRUDEAU, BENISTAR, LTD., and
BENISTAR ADMIN SERVICES, INC.,
Defendants.
and
AVON CAPITAL, LLC.
Third-Party Plaintiff,
v.
FINANCIAL LIFE SERVICES, LLC,
Third-Party Defendant.
and
FINANCIAL LIFE SERVICES, LLC,
Fourth-Party Plaintiff,
v.
AVON CAPITAL, LLC, THOMAS
PHILIPSBORN and ANDREW
PHILIPSBORN,
Fourth-Party Defendants.
Case No. 11 C 3274
Hon. Harry D. Leinenweber
MEMORANDUM OPINION AND ORDER
Third Party Defendant Financial Life Services, LLC (“FLS”)
has moved this Court to certify an interlocutory appeal of the
Court’s Opinion and Order dated November 18, 2013 [ECF No. 119].
For the reasons stated herein, the Motion is denied.
I.
BACKGROUND
This case was filed originally as a contract dispute between
Plaintiff Thomas D. Philipsborn Irrevocable Trust (“the Trust”)
and Defendant Avon Capital, LLC (“Avon”).
Avon filed a third-
party complaint against FLS alleging that FLS was liable to Avon
under the contract. FLS brought a fourth-party complaint against
Andrew Philipsborn, Thomas Philipsborn, and Avon.
Two years into the litigation, after the Court had already
issued two written opinions on various matters, FLS challenged
this Court’s subject matter jurisdiction on the ground that the
Trust is not a legal entity, and thus it has no capacity to sue
or be sued.
The Court’s Opinion and Order dated November 18,
2013 recognized that the Plaintiff had maintained the suit in
violation of Federal Rule of Civil Procedure 17, but held that
the Court’s exercise of jurisdiction over the parties did not
violate Article III of the Constitution.
ECF No. 119 at 6-7.
The Court denied the motion to dismiss for lack of jurisdiction
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and substituted the proper plaintiff under Rule 17.
FLS now
seeks immediate appellate review of that Order.
II.
LEGAL STANDARD
A District Court may certify an otherwise non-appealable
order
for
interlocutory
appeal
if
the
order
“involves
a
controlling question of law as to which there is substantial
ground for difference of opinion and . . . an immediate appeal
from that order may materially advance the ultimate termination
of the litigation.”
28 U.S.C. § 1292(b).
Such appeals are
“rarely granted,” Nystrom v. TREX Co., 339 F.3d 1347, 1351 (Fed.
Cir. 2003), and the movant bears the burden of showing that
“exceptional circumstances justify a departure from the basic
policy of postponing appellate review until after the entry of a
final judgment.” Coopers & Lybrand v. Livesay, 437 U.S. 463, 475
(1978).
But when the statutory criteria are met, the District
Court has a duty to allow the appeal.
Ahrenholz v. Bd. of Trs.
Of Univ. of Ill., 219 F.3d 674, 677 (7th. Cir. 2000).
III.
ANALYSIS
To establish the second requirement, that the question of
law is one as to which there is substantial ground for difference
of opinion, “the movant must show that there are substantial
conflicting decisions regarding the claimed controlling issue.”
NMHG Fin. Servs., Inc. v. Wickes Inc., No. 07 C 2962, 2007 WL
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3087146, *3 (N.D. Ill. Oct. 17, 2007).
“The movant may not
prevail by simply showing a lack of judicial precedent or that
the issue is one of first impression.”
“demonstrate
that
a
substantial
Id.
The movant must also
likelihood
exists
that
the
interlocutory order will be reversed on appeal.” Tr. of Jartran,
Inc. v. Winston & Strawn, 208 B.R. 898, 901 (N.D. Ill. 1997).
There is no dispute that this litigation was commenced and
maintained in the name of a trust, which violated Rule 17’s real
party in interest requirement.
FLS’s Motion to Dismiss for lack
of subject matter jurisdiction hinged on its assertion that a
violation of Rule 17 requires the Court to dismiss the case and
vacate all prior rulings.
As support, FLS cited cases that hold
that plaintiffs who lack Article III standing cannot maintain
their lawsuit in federal court. See, e.g., Pollack v. U.S. Dep’t
of Justice, 577 F.3d 736, 743 (7th Cir. 2009).
In its November 18, 2013 Opinion and Order, this Court
distinguished Federal Rule of Civil Procedure 17 from Article III
of the Constitution, and explained that even though Plaintiff had
not complied with Rule 17, the Court’s exercise of jurisdiction
over the parties did not violate Article III.
7.
ECF No. 119 at 6-
Because Article III was not violated, the Court did not need
to dismiss the case and vacate all prior rulings.
Rather, the
correct procedure was to follow the instructions from Rule 17 for
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substituting the proper party.
The Court’s citation to Levinson
v. Deupree, 345 U.S. 648 (1953) – the case that stands as the
basis for Rule 17 – was supposed to illustrate the difference
between Article III and Rule 17, and show that a violation of one
is not necessarily a violation of the other.
At no point did
this Court place its conception of justice above the requirements
of Article III.
FLS has cited various cases in its attempt to show a
“substantial ground for difference of opinion.”
Those cases are
inapplicable because they arise in situations where the plaintiff
lacked standing under Article III.
See, e.g., Perry v. Village
of Arlington Heights, 186 F.3d 826, 830 (7th Cir. 1999) (where
Plaintiff had not suffered an injury in fact); Walters v. Edgar,
163 F.3d 430, 437 (7th Cir. 1998) (where “the district court
never acquired jurisdiction over the present suit”); Zurich Ins.
Co. v. Logitrans, Inc., 297 F.3d 528, 531 (6th Cir. 2002) (where
Plaintiff “admittedly has not suffered injury in fact”). In this
case, however, the Court found no violation of Article III
because “a trust recognized by state law can suffer an injury in
fact” and the trust at issue here “suffered an injury when
contractual obligations related to the property held in trust
were unfulfilled.”
ECF No. 119 at 6.
The Court’s Opinion does
not conflict with the cases cited by FLS.
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At its core, FLS’s Motion relies on misstatements of this
Court’s findings.
For example, FLS asserts that the Court
“reli[ed] on a Federal Rule of Civil Procedure to retroactively
remedy an absence of constitutionally-required jurisdiction.”
ECF No. 121 at 5.
But at no point did this Court indicate that
there was an absence of constitutionally-required jurisdiction.
The only violation was of Federal Rule of Civil Procedure 17,
which specifies the mechanism by which the parties and the Court
can correct the error.
Once this misunderstanding is revealed,
FLS’s broader argument unravels.
In all of the cases cited by
FLS, the Court lacked jurisdiction under Article III, which was
not the case here.
FLS has not presented this Court with any precedent that
conflicts
with
this
Court’s
actual
holding,
that
a
trust
organized under state law can suffer an injury in fact sufficient
to confer Article III standing.
FLS has directed the Court to
various materials that show that the trustee, not the trust, must
maintain those lawsuits brought to enforce the trust’s rights.
But the Court addressed those materials in its prior ruling, and
FLS gives the Court no reason to doubt its holding that those
principles relate to the proper party rule, not Article III
standing. See also, Sullivan v. Kodsi, 836 N.E.2d 125, 131 (Ill.
App. Ct. 2005) (explaining that a trust “possesses a distinct
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legal existence” and is more than just an arrangement relating to
property).
FLS has failed to show a substantial ground for difference
of opinion. Because the Court decides the Motion on this ground,
it need not address the other requirements for the Court to
certify the appeal.
IV.
For
the
reasons
CONCLUSION
stated
herein,
the
Motion
for
an
Interlocutory Appeal [ECF No. 120] is denied.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
DATE: 1/24/2014
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