Nabil Saleh v. Federal Deposit Insurance Corporation, et al

Filing 152

MEMORANDUM Opinion and Order Signed by the Honorable John J. Tharp, Jr on 6/5/2017: For the reasons stated in the attached Memorandum Opinion and Order, Cross-Plaintiffs' motion for reassignment and consolidation 117 is denied. The 6/28/17 status stands. Mailed notice(air, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NABIL SALEH, as Trustee of the Nabil
Saleh MD Ltd. Pension Plan
Plaintiff,
v.
HASAN MERCHANT, et al.,
Defendants.
___________________
MUSKEGAN HOTELS LLC, M.D. 1
LLC, MD GLOBAL LLC, GLOBAL
DEVELOPMENT, INC., and HASAN
MERCHANT,
Cross-Plaintiffs,
v.
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver for the
NATIONAL REPUBLIC BANK OF
CHICAGO, HIREN PATEL, EDWARD
FITZGERALD, WOLIN & ROSEN
LTD., SMITHAMUNDSEN LLC, THE
STATE BANK OF TEXAS,
CHANDRAKANT PATEL,
ADVANCED APPRAISAL
CONSULTANTS, INCORPORATION,
ADVANCED APPRAISAL
CONSULTANTS, LLC, and WILIAM
DADDONO
Cross-Defendants.

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No. 14-cv-09186
Judge John J. Tharp, Jr.

MEMORANDUM OPINION AND ORDER
Cross-Plaintiffs Muskegan Hotels LLC, M.D. 1 LLC, Global Development, Inc., MD
Global LLC, and Hasan Merchant1 have moved to reassign and consolidate this case with two
later-filed cases, Phoenix v. Shashtriji, No. 15-cv-10697, and Delaware Motel Associates v.
Lehman Brothers, No. 17-cv-01715, pursuant to Fed. R. Civ. P. 42(a)(2) and Local Rule 40.4.
Because reassignment of these cases is not likely to result in substantial savings of judicial time
and effort, among other reasons, the motion to reassign and consolidate is denied.
BACKGROUND
Each of the cases at issue is complex, but the Court will provide a brief overview of each
of the claims in order to demonstrate why these cases should not be consolidated. The Court
discusses each of these cases in turn.
I. The Saleh Case
This case was filed in Illinois state court in 2010 and removed to this Court in late 2014.
The underlying complaint, brought by Nabil Saleh, alleged eighteen counts of Illinois state law
violations stemming from a series of investments he alleges were stolen or mishandled. See
Compl., ECF No. 1-4. The Federal Deposit Insurance Corporation (“FDIC”) removed the suit to
federal court when it took over as receiver for one of the defendants. See Notice of Removal,
ECF No. 1. Many of those defendants banded together and filed a series of cross-complaints (the
second amended cross-complaint was filed on May 7, 2017). See Second Am. Cross-Compl.,
ECF No. 127. The current 51-page cross-complaint, to which some cross-defendants have not yet
responded, alleges eight counts stemming from an alleged conspiracy to inflate appraisal prices.
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The motion indicates it is brought by Hasan Merchant. After this motion was filed, the
Court granted a motion to substitute Michael Merchant for Hasan Merchant, who has died. The
Court construes the motion to be brought on behalf of Michael Merchant as administrator for the
estate of Hasan Merchant.

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The alleged three-tier conspiracy had the goal to “purchase, service and sell National Republic
Bank’s fraudulent commercial loan accounts” and use appraisals by William Daddono and
Advanced Appraisal to inflate the value of the properties. See id. at ¶ 7. Several of the crossdefendants have indicated they intend to respond to the second amended cross-complaint by
motion, although such motions are not yet due.
II. The Phoenix Case
The Phoenix case came to this District in 2014 from Michigan state courts after the FDIC
accepted receivership of a bank involved in that case. See Notice of Removal Ex. 4, Phoenix
ECF No. 1-4. The underlying state court action sought to enforce certain promissory notes
through Michigan state law claims for enforcement of contract and guarantees and appointment
of a receiver. Id. Fact discovery closed in the underlying claim on December 16, 2016, see
Phoenix ECF No. 67; Phoenix Opp. to Mot. at 5, Saleh ECF No. 124 (indicating depositions
have been completed). On November 10, 2016, defendants Ghanshyam Patel and Pradyuman
Shah (represented by the Saleh cross-plaintiffs’ attorney) filed an amended answer and
counterclaims alleging intentional interference with prospective economic advantage, unjust
enrichment, and quantum meruit. Am. Answer, Phoenix ECF No. 86. There are no RICO claims
as in Saleh; the counterclaims allege only that Phoenix (a distinct entity not named in the Saleh
case anywhere) inflated property appraisals, not that there was a pervasive scheme to do so. See
id. at ¶ 4. Those counterclaims are subject to a motion to dismiss, which is currently stayed
pending this Court’s ruling on the reassignment and consolidation motion. See Phoenix ECF No.
104. Although the Phoenix defendants twice brought motions to add further defendants and
RICO claims, one was stricken and the other was withdrawn following a colloquy with the judge
assigned to the case. See Phoenix Tr. of Hr’g of Jan. 9, 2017, Tr. of Hr’g of Jan. 24, 2017,

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Phoenix ECF No. 100-101. Thus, the only mention of the Saleh RICO conspiracy is as an
affirmative defense that National Republic Bank, which is no longer a party because the loans in
question were assigned to Phoenix (see Phoenix Order Granting Substitution of Party, ECF No.
26), fraudulently induced the defendants to enter into the loans. See Am. Answer Affirmative
Def. ¶ 1-21.
III. The Delaware Case
The Delaware case was removed from Illinois state court on March 3, 2017, where it had
originally been filed in January. See Notice of Removal, Delaware ECF No. 1. There, a group of
entities and individuals (represented by the Saleh cross-plaintiffs’ attorney) sued 18 defendants
claiming a RICO conspiracy to increase appraisal values. An amended complaint was filed on
May 3, 2017 in response to four pending motions to dismiss (as well as one granted motion to
dismiss the Lehman entities). See Delaware ECF No. 45. The amended complaint names over 25
defendants, including Phoenix and some of the Saleh cross-defendants as well as many entities
not named in either of the other suits. Id. The current complaint, which has not been answered by
any defendant or even served on some of the defendants, claims RICO conspiracies as well as
Illinois state law claims for fraud, tortious interference, and various equitable remedies. Id.
DISCUSSION
A district court may consolidate actions before the court if they “involve a common
question of law or fact.” Fed. R. Civ. P. 42(a)(2). Whether or not to consolidate is left to the
judge’s discretion, Blue Cross Blue Shield of Mass. v. BCS Ins. Co., 671 F.3d 635, 640 (7th Cir.
2011), although this district has provided more structure to the exercise of that discretion in
Local Rule 40.4. Under the Local Rule section claimed here, cases may be related if they involve
“some of the same issues of fact or law” and may be reassigned if four criteria are all met:

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(1) both cases are pending in this Court; (2) the handling of both cases by the same judge is
likely to result in a substantial saving of judicial time and effort; (3) the earlier case has not
progressed to the point where designating a later filed case as related would be likely to
delay the proceedings in the earlier case substantially; and (4) the cases are susceptible of
disposition in a single proceeding.
Local R. 40.4. Here, the motion is for reassignment and consolidation, not mere finding of
relatedness. Such motions “should not generally be filed until after the answer or motions in lieu
of answer have been filed in each of the proceedings involved.” Local R. 40.4(c). As the nonmovants correctly point out, this is not true in this case (responsive pleadings have not been filed
to the cross-complaint in Saleh or the complaint in the Delaware case). This would be reason
enough to deny the motion. However, there are many more.
The movant bears the burden of demonstrating that the prerequisite conditions in the
Local Rule are met. See Mitchell v. City of Chi., No. 09 C 3315, 2012 U.S. Dist. LEXIS 89249,
at *4 (N.D. Ill. June 28, 2012). The cross-plaintiffs argue that all three cases arise out of the same
alleged conspiracy and therefore present common question of fact and law, particularly expert
testimony. They argue that roughly 40% (the background and foundation) of their experts’
testimony would have to be repeated across each trial and they would also save on transcription
fees.2 See Reply at 1. They further argue that each complaint contains some mention of the
alleged scheme as well as fraud and unjust enrichment claims (of course, there are dozens of
counts spread across the three complaints and cross-complaints). In reply, they further argue that
the cases are susceptible to determination is a single proceeding, because if they win on their
RICO claim in Saleh, that would provide an affirmative defense in the Phoenix case and also
resolve their similar claims in the Delaware case. They also argue that all the cases are similarly
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The Court notes, of course, that it is not clear at this point that there will ever be a trial
in any of these cases. The cross-plaintiffs focus on perceived trial cost savings, without
acknowledging that in two of the cases the validity of the complaints is still being litigated and
any trials are a long way off.

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situated in that discovery has not progressed as to any of their claims; that is simply wrong, as
discovery in the Phoenix case has been completed. Finally, they argue the risk of jury confusion
and increased trial costs to their opponents are overblown.
The Court need not address all these arguments because in order to grant reassignment,
the Court must find all the 40.4(b) factors are present.3 To begin, the cases are not likely to be
resolved in a single proceeding. A ruling on the RICO claim in Saleh would only be
determinative for the common parties, and the cross-plaintiffs would still have to prove that the
other properties were part of the conspiracy (there are no common properties across the cases).
Further, and as noted below, to the extent a combined case proceeds through discovery, the Court
will likely face numerous motions for summary judgment that involve discrete fact issues.
Nor are the cases at the same stage, as the cross-plaintiffs maintain. One case, Phoenix,
has completed discovery and is merely awaiting the resolution of a fully briefed motion to
dismiss an amended counterclaim before proceeding to summary judgment. In the Delaware
case, by contrast, the amended complaint has yet to be served. And in this case, much (though
not all) of the wrangling over the pleadings has been completed. Forcing these cases together on
a single track would unquestionably delay progress with respect to all of the claims they present.
3

The Court notes that the cross-plaintiffs have also not carried their burden to
demonstrate that the cases involve sufficiently related issues of fact or law under Local Rule
40.4(a). Having the same legal issues “on a general level” is not sufficient to automatically
justify relatedness. See Donahue v. Elgin Riverboat Resort, No. 04 C 816, 2004 WL 2495642, at
*1 (N.D. Ill. Sept. 28, 2004) (that Title VII were claims brought against the same defendant
alleging failure to hire due to race not sufficient). As the non-movants note, each of these cases
involves a number of distinct appraisals, each of which would have to be discussed
independently. The counterpoint to the cross-plaintiffs’ 40% estimate is that well over half of the
expert testimony in each trial would be different. Furthermore, the fact that a party intends to call
a specific expert across multiple trials cannot be sufficient, especially when the fact witnesses are
anticipated to be different. As noted later, each of these cases also involves other distinct state
law claims (under the law of two different states) against different parties. As in Donahue, the
fact that a general practice may be presented repeatedly is not sufficient grounds even for
relatedness, much less reassignment and consolidation.

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Perhaps most importantly, the consolidation of these cases will plainly not produce
judicial efficiency. The combined super-suit would include over 50 parties, the law of three
jurisdictions (federal, Illinois, and Michigan), and five active complaints (the original Saleh
complaint, the Saleh cross-complaint, the Phoenix complaint, the Phoenix counterclaims, and the
Delaware complaint) with dozens of counts. Those daunting numbers might even grow as the
complaints are answered, perhaps with counterclaims or cross-claims of their own. Such a case
would require compounding levels of judicial effort as the Court would have to constantly sort
through a barrage of unrelated parties, theories, and applicable laws to address even the smallest
motion.
Such a behemoth case has several other downsides that independently would be sufficient
to deny the motion. At the outset, combining three complex cases dealing with different
transactions, parties, and claims could easily lead to jury confusion. See Davis v. City of
Springfield, No. 07-3096, 2007 WL 3243053, at *2 (C.D. Ill. Nov. 1, 2007) (“The risk of jury
confusion is great enough to decide against consolidation.”); In re Caterpillar Inc. S'holder
Derivative Litig., No. 113CV01104SLDJEH, 2015 WL 12806591, at *2 (C.D. Ill. Sept. 21,
2015) (risk of jury confusion must be considered). Furthermore, the inevitably lengthy discovery
process and interminable trial would undoubtedly prejudice several of the parties in this case.
The FDIC correctly points out that it is involved in only two counts of one complaint, but if the
motion were granted it would become enmeshed in a much wider trial. Similarly, Phoenix
(which is preparing a motion for summary judgment on its underlying complaint) would
potentially be prejudiced by delaying the resolution of its claims, depending on the outcome of
its pending motion to dismiss. The parties not alleged to be involved in the RICO conspiracy
would suffer greatly if they were forced to undergo discovery into those claims and then try their

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cases alongside numerous RICO cases. See Iron Workers Mid-S. Pension Fund on Behalf of
Caterpillar Inc. v. Oberhelman, No. 113CV01104SLDJAG, 2014 WL 1302032, at *2 (C.D. Ill.
Mar. 31, 2014) (considering “impact of consolidation on each party's right to receive a fair
trial”). Such unfairness and inefficiency easily outweighs the cross-plaintiffs’ purported $32,000
savings in transcription costs and expert fees. See Mot. at 14, ECF No. 117.
*

*

*

For the foregoing reasons, the motion to reassign and consolidate the Phoenix and
Delaware cases is denied.

Dated: June 5, 2017

John J. Tharp, Jr.
United States District Judge

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