iCare, LLC v. DCO Environmental and Recycling, LLC
Memorandum Opinion: BTR and WGP's motion to intervene is denied as a matter of law due to lack of subject matter jurisdiction. Accordingly, BTR and WGP's motion for protective order is denied as moot. re 47 41 Judge Jeffrey J. Helmick on 3/9/2018. (S,AL)
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
Case No. 17-cv-1586
DCO Environmental and Recycling, LLC,
Before me is BTR Industries, LLC’s (“BTR”) and Wayne Goshen Properties, LLC’s
(“WGP”) motion to intervene as Third-Party Plaintiffs. (Doc. No. 41). Defendant DCO
Environmental and Recycling, LLC (“DCO”) opposed the motion (Doc. No. 44), to which BTR
and WGP replied. (Doc. No. 46). In response, DCO filed a sur-reply. (Doc. No. 50). Though four
other parties to this action responded to the motion to intervene (Doc. Nos. 44, 52), the
jurisdictional issue presented by DCO is dispositive and the merits of intervention need not be
discussed at this time.
In September 2015, Plaintiff iCare, LLC (“iCare”) was formed by Defendant DCO and
proposed Intervenor BTR, each owning equal shares of iCare. (Doc. No. 41 at 2; Doc. No. 44 at 2).
Less than a year later in June 2016, BTR sold its fifty-percent interest in iCare to Third-Party
Defendant BBS Industries, LLC. (Doc. No. 41 at 2; Doc. No. 44 at 2). iCare continued to operate
as it had previously on land owned by WGP. (Doc. No. 41 at 2; Doc. No. 44 at 9).
During the time BTR was partial owner of iCare, BTR signed as a borrower on two
Commercial Loan Agreements for iCare financed through party to this action: The First Citizens
National Bank (“FCNB”). (Doc. No. 41-2; Doc. No. 41-3). WGP signed as a borrower on one of
these loans. (Doc. No. 41-3). Each of the two loans also listed iCare, Brett Cummings, and Todd
Fetter as borrowers. (Doc. No. 41-2; Doc. No. 41-3).
Although BTR sold its interest in iCare to BBS in June 2016, it remains listed as a borrower
on the loans. Based on BTR’s allegation that BBS and Brent Schulze failed to comply with the
terms of the Purchase Agreement for the June 2016 sale, including making payments on the two
loans, BTR filed suit in the Allen County, Ohio Court of Common Pleas. See BTR Industries LLC v.
Schulze, Case No. CV 2018 0078 (Allen Cnty. Ct. Common Pleas Feb. 7, 2018). Through the suit,
BTR hopes to rescind the Purchase Agreement and regain its former interest in iCare.
Based upon BTR’s claim of partial ownership in iCare over BBS, and both BTR and WGP’s
status as borrowers on two of iCare’s outstanding loans, BTR and WGP seek to intervene in this
action. In the proposed complaint accompanying the motion to intervene, BTR and WGP allege
three claims. (Doc. No. 42-1). The first seeks an injunction on behalf of iCare, BTR, and WGP, as
signatories on the two FCNB loans, to prevent any insurance proceeds from being distributed to
DCO, BBS, Schulze, or FCNB. (Doc. No. 42-1 at 7-8). The second, filed on behalf of iCare
through BTR, requests declaratory judgment that the damaged property is owned by iCare, not
DCO, BBS, or Schulze. (Doc. No. 42-1 at 8). And the final claim, also filed on behalf of iCare
through BTR, alleges Schulze, as director of iCare, breached his fiduciary duty owed to iCare. (Doc.
No. 42-1 at 9).
Federal Rule of Civil Procedure 24 provides for intervention of a party into an existing
principal action. But before considering the merits of intervention, the district court must first have
jurisdiction over the claims. See Fed. R. Civ. P. 82 (“These rules do not extend or limit the
jurisdiction of the district courts.”). When the principal action is one of diversity jurisdiction, a
district court may not exercise supplemental jurisdiction “over claims by persons … seeking to
intervene as plaintiffs under Rule 24 of such rules, when exercising supplemental jurisdiction over
such claims would be inconsistent with the jurisdictional requirements of section 1332.” 28 U.S.C. §
1367(b). Section 1332 requires diversity of citizenship. 28 U.S.C. § 1332.
Because the principal action here is one of diversity jurisdiction, I may only exercise
supplemental jurisdiction over BTR and WGP’s claims if there is diversity of citizenship. See 28
U.S.C. §§ 1332, 1367(b). 1 That is not the case. BTR and WGP are both citizens of Ohio. (Doc.
No. 42-1 at 4). BBS and Schulze are also citizens of Ohio. (Doc. No. 42-1 at 4). Allowing BTR and
WGP to intervene as plaintiffs to file claims against fellow Ohio citizens BBS and Schulze would be
inconsistent with the diversity of citizenship requirement of Section 1332. Therefore, as a matter of
law, BTR and WGP may not intervene to present the proposed claims.
For the foregoing reason, BTR and WGP’s motion to intervene is denied as a matter of law
due to lack of subject matter jurisdiction. (Doc. No. 41). Accordingly, BTR and WGP’s motion for
protective order is denied as moot. (Doc. No. 47).
s/ Jeffrey J. Helmick
United States District Judge
BTR and WGP argue that they may intervene regardless of diversity of citizenship, but that is not the current
state of the law. Prior to 1990, “courts, in considering an application for intervention by one whose joinder would
defeat diversity or otherwise destroy jurisdiction, examined the intervenor's relation to the action and allowed
intervention only if the intervenor otherwise met the tests of Rule 24(a)(2) [to intervene as a matter of right] and was not
an indispensable party to the original action.” 7C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure §
1917 (3d ed. April 2017). But when 28 U.S.C. § 1367 was amended in 1990, the option to exercise ancillary jurisdiction
in this manner was eliminated. Id. Instead, the district court may only exercise supplemental jurisdiction over claims of
an intervenor when diversity jurisdiction requirements are met, as provided in 28 U.S.C. § 1367(b). Id.
One case which was decided after 1990 to which BTR and WGP cite is Aurora Loan Services, Inc. v. Craddieth, 442
F.3d 1018 (7th Cir. 2006). In Aurora Loan Services, the Seventh Circuit carved a narrow, fact-sensitive exception to the
general rule requiring complete diversity to be maintained. 442 F.3d at 1024-26. The Sixth Circuit has not adopted this
exception. In the argument against requiring diversity of citizenship, rather than stating facts as to why the exception
should apply, BTR and WGP assert the exception outlined in Aurora Loans Services to be the general rule. Because there
is nothing to suggest BTR or WGP fall within the exception, I decline to adopt this rare and narrow exception.
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