BMO Harris Bank N.A. v. AMC Trucking Inc et al

Filing 28

DECISION AND ORDER signed by Magistrate Judge William E Duffin on 6/12/2018. Lakeside International LLC and Navistar, Inc.'s motion to sever the third-party complaint of AMC Trucking Inc. and Agron Spahija (ECF No 17 ) is granted pursuant to Fed. R. Civ. P. 14(a)(4). The action of AMC Trucking Inc. and Agron Spahija against Lakeside International LLC and Navistar, Inc. is dismissed for lack of jurisdiction. (cc: all counsel) (lz)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
BMO HARRIS BANK, NA,
Plaintiff,
v.

Case No. 18-CV-216

AMC TRUCKING, INC. and AGRON SPAHIJA,
Defendants and Third-Party Plaintiffs,
v.
LAKESIDE INTERNATIONAL, LLC and NAVISTAR, INC.,
Third-Party Defendants.
DECISION AND ORDER
Background
According to the complaint, on May 25, 2017, AMC Trucking Inc. entered into a
loan and security agreement with BMO Harris Bank regarding the purchase of two semi
tractors. (ECF No. 1, ¶ 6.) On July 20, 2017, AMC and BMO Harris entered into a second
loan and security agreement so that AMC could purchase five more semi tractors. (ECF
No. 1, ¶ 13.) Each loan was personally guaranteed by Agron Spahija. AMC and Spahija
allegedly defaulted on their agreements. (ECF No. 1, ¶¶ 27-28, 34.) Because BMO
Harris has not been able to recover one of the semi tractors, in addition to seeking

damages for breach of contract it seeks replevin as to the semi tractor AMC and Spahija
allegedly refuse to turn over to it. (ECF No. 1, ¶¶ 35-40.)
In answering the complaint, AMC and Spahija filed a third-party complaint
against Lakeside International, LLC, the dealership that sold the semi tractors to AMC,
and Navistar, Inc., the manufacturer of the semi tractors. (ECF No. 5.) AMC and Spahija
allege that, because the semi tractors were defective, they “are entitled to indemnity
and/or contribution from” Lakeside and Navistar regarding BMO Harris’s claims. (ECF
No. 5, ¶¶ 83-85.)
Lakeside and Navistar moved “for an order severing the Third-Party Complaint
and dismissing it for lack of subject matter jurisdiction under Fed. R. Civ. P. 14(a)(4) and
Fed. R. Civ. P. 12(b)(1).” (ECF No. 17 at 1.) AMC and Spahija oppose the motion. (ECF
No. 26.) AMC and Spahija’s response was untimely. Because they have not shown that
the untimeliness was the result of excusable neglect, the response could be properly
stricken. See Civ. L.R. 7(b); see also, generally, Fed. R. Civ. P. 6. However, because
Lakeside and Navistar do not raise this issue, the court will not address it further.
AMC and Spahija contend that “the default on the loans occurred because the
Equipment identified in the Complaint was defective and Lakeside and Navistar did
not meet their obligations with respect to the warranty. In the interest of adjudicatory
economy, the action must remain as one.” (ECF No. 26 at 2-3.) They argue it will be
more efficient to try these matters together because “[t]here are common issues of fact

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and law.” (ECF No. 26 at 3.) Moreover, they state, “[w]hile Lakeside and/or Navistar
may not be a party to the Loan and Security Agreements entered into by and between
BMO and AMC and Spahija on two separate occasions for the purchase of a total of
seven trucks, the fact remains that the [sic] BMO provided funds to Lakeside and
Navistar provided a warranty.” (ECF No. 26 at 3.) In their view, “[t]he parties to the
transactions are, without question, BMO, AMC, Spahija, Lakeside, and Navistar. They
are interconnected and this action cannot be severed.” (ECF No. 26 at 4.)
Lakeside and Navistar replied. (ECF No. 27.) The motion is ready for resolution.
All parties have consented to the full jurisdiction of a magistrate judge. (ECF Nos. 10,
11, 20.)
Analysis
“A defending party may, as third-party plaintiff, serve a summons and complaint
on a nonparty who is or may be liable to it for all or part of the claim against it.” Fed. R.
Civ. P. 14(a)(1). “[A] third-party action … presupposes liability on the part of the
original defendant which he is attempting to pass on to the third-party defendant.” Parr
v. Great Lakes Exp. Co., 484 F.2d 767, 769 (7th Cir. 1973); see also 3 Moore’s Federal
Practice - Civil § 14.03 (2018) (“Impleader basically permits a defending party to join an
absentee for the purpose of deflecting to that absentee all or part of its potential liability
to the plaintiff on the underlying claim.”). “A third-party complaint depends at least in
part upon the resolution of the primary lawsuit. Its relation to the original complaint is

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thus not mere factual similarity but logical dependence.” Owen Equip. & Erection Co. v.
Kroger, 437 U.S. 365, 376 (1978) (internal citations omitted). “Any party may move to
strike the third-party claim, to sever it, or to try it separately.” Fed. R. Civ. P. 14(a)(4).
AMC’s and Spahija’s claims are not properly asserted by way of a third-party
complaint. If they are to be pursued, they must be pursued in a separate lawsuit.
Although Lakeside and Navistar allegedly warranted the trucks BMO Harris financed
for AMC and Spahija, there is no indication that, by virtue of any such warranty,
Lakeside and Navistar agreed to somehow be liable for AMC’s and Spahija’s loan
obligations. There is no “logical dependence” of the claims. See Owen Equip. & Erection
Co., 437 U.S. at 376. Whether Lakeside or Navistar breached a warranty due to AMC or
Spahija does not affect whether AMC or Spahija owed a debt to BMO Harris.
Conversely, BMO Harris’s right to collect on its loans does not depend on whether
Lakeside or Navistar breached a warranty to AMC or Spahija. There is no risk that
inconsistent judgments might result if these cases proceeded separately.
AMC and Spahija have not identified, and the court has not uncovered, any case
where a court has approved a third-party complaint on the theory that the third party’s
actions caused the default alleged in the underlying action. The court, however, has
identified numerous decisions rejecting such attempts. For example, a defendant facing
suit for his default on his student loans could not bring a third-party action against his
former university on the theory that the university’s breach of contract by not awarding

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him a degree led to the default of his loans. United States v. Olavarrieta, 812 F.2d 640, 643
(11th Cir. 1987). Similarly, a defendant sued by a lessor after it defaulted on its lease for
computer equipment cannot bring a third-party complaint alleging misrepresentation
against the company that induced defendant to enter into the lease. Wells Fargo Fin.
Leasing, Inc. v. Tulley Auto. Grp., Inc., No. 16-cv-218-LM, 2017 U.S. Dist. LEXIS 141624, at
*6-8 (D.N.H. Sep. 1, 2017); see also Leasetec Corp. v. Inhabitants of Cty. of Cumberland, 896 F.
Supp. 35, 41 (D. Me. 1995) (holding that in action by lessor to recover unpaid lease
payments lessee of computer equipment could not bring third-party complaint against
party that allegedly provided defective software that prevented lessor’s use of computer
hardware). Nor can a lessee of medical equipment sue, by way of a third-party
complaint in an action brought by the lessor against the lessee for default on the lease,
the manufacturer and supplier of that equipment for its actions that allegedly caused its
financial problems. GE Healthcare Fin. Servs. v. EBW Laser, Inc., 225 F.R.D. 176, 179-80
(M.D.N.C. 2004); see also Connell Bros. Co. v. Gannon Int'l, Inc., No. 4:10-CV-1795 (CEJ),
2011 U.S. Dist. LEXIS 63625, at *2-5 (E.D. Mo. June 16, 2011) (holding defendant debtor
could not bring third-party complaint against entities whose alleged unlawful actions
prevented debtor from paying loan).
Therefore, the court will grant Lakeside and Navistar’s motion to sever AMC and
Spahija’s third-party complaint. The court will dismiss that action because the court
concludes it lacks subject matter jurisdiction over it. AMC and Spahija do not allege any

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federal cause of action. Rather, they assert that diversity of citizenship exists. They
argue, “While AMC, Spahija, and Lakeside are all citizens of the State of Wisconsin,
Navistar is a foreign corporation outside the State of Wisconsin and the matter in
controversy exceeds $75,000.00.” (ECF No. 26 at 6.) This, of course, would only establish
that complete diversity of citizenship does not exist. Only if all defendants are citizens
of states other than the states of which the plaintiffs are citizens does the court have
jurisdiction under 28 U.S.C. § 1332. See Dalton v. Teva N. Am., No. 17-1990, 2018 U.S.
App. LEXIS 15008, at *3 (7th Cir. June 4, 2018).
Moreover, Lakeside is a limited liability company, and citizenship of an LLC is
determined not by the state in which it is organized but by the citizenship of its
members. Belleville Catering Co. v. Champaign Mkt. Place, LLC, 350 F.3d 691, 692 (7th Cir.
2003). The court has not been provided with information about who Lakeside’s
members are, much less their citizenship. However, in light of the fact that it is the
obligation of the proponent of diversity (here, AMC and Spahija) to prove that complete
diversity exists, Chase v. Shop 'N Save Warehouse Foods, 110 F.3d 424, 427 (7th Cir. 1997),
and given that AMC and Spahija concede that Lakeside is a citizen of Wisconsin (ECF
No. 26 at 6), the court will accept their concession and conclude that complete diversity
is lacking.

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IT IS THEREFORE ORDERED that Lakeside International LLC and Navistar,
Inc.’s motion to sever the third-party complaint of AMC Trucking Inc. and Agron
Spahija is granted pursuant to Fed. R. Civ. P. 14(a)(4).
IT IS FURTHER ORDERED that the action of AMC Trucking Inc. and Agron
Spahija against Lakeside International LLC and Navistar, Inc. is dismissed for lack of
jurisdiction.
Dated at Milwaukee, Wisconsin this 12th day of June, 2018.

_________________________
WILLIAM E. DUFFIN
U.S. Magistrate Judge

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