General Electric Capital Corporation et al v. Malaszuk Specialized Logistics, LLC et al
Filing
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ORDER granting 15 Motion to Dismiss for Lack of Jurisdiction by Defendant Lisa Malaszuk and Denying 17 Motion for leave to file amended complaint by Plaintiffs General Electric Capital Corporation and GE Capital Commercial, Inc.'s. Signed by District Judge James D. Peterson on 11/24/2015. (voc)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
GENERAL ELECTRIC CAPITAL CORPORATION and
GE CAPITAL COMMERCIAL, INC.,
v.
Plaintiffs,
OPINION & ORDER
15-cv-191-jdp
MALASZUK SPECIALIZED LOGISTICS, LLC,
JOHN MALASZUK, and LISA MALASZUK,
Defendants.
This is a breach of contract case arising out of a series of loans that plaintiffs General
Electric Capital Corporation (GECC) and GE Capital Commercial, Inc. (GE Capital) made to
defendant Malaszuk Specialized, LLC, and to one of its members, defendant John Malaszuk.
John personally guarantied two of the loans, and his wife, defendant Lisa Malaszuk,
guarantied another one. But when Malaszuk Specialized defaulted, John and Lisa failed to
make good on their guaranties. GECC and GE Capital therefore filed suit to recover the
amounts due.
Lisa has moved to dismiss GE Capital’s claim against her for lack of subject matter
jurisdiction, contending that the claim is for less than $75,000. Dkt. 15. GECC and GE
Capital have conceded the point by moving for leave to file a proposed amended complaint
that largely repeats the allegations and claims in the initial complaint, but that names GECC
as the only plaintiff. Dkt. 17-1. Lisa opposes the motion to amend, contending that her
guaranty did not cover the loans for which GECC’s proposed claims would impose liability
upon her. Thus, according to Lisa, the claim against her still fails to meet the amount in
controversy requirement for jurisdiction under 28 U.S.C. § 1332.
On November 10, 2015, the court held a hearing on the parties’ motions. The
principal issues at the hearing were: (1) whether the court could exercise supplemental
jurisdiction over GE Capital’s breach of contract claim against Malaszuk Specialized; and, if
so, (2) whether the court could exercise supplemental jurisdiction over GE Capital’s breach of
warranty claim against Lisa. The parties have submitted supplemental briefing on these
points, Dkt. 33 and Dkt. 34, and their motions are now ripe for consideration.
The court will grant Lisa’s motion to dismiss and deny GECC and GE Capital’s
motion for leave to file their proposed amended complaint. The end result will be that GECC
can proceed with breach of contract claims against John and Malaszuk Specialized and with
breach of guaranty claims against John. GE Capital can proceed with a breach of contract
claim against Malaszuk Specialized and with breach of guaranty claims against John. But the
court must dismiss Lisa from this case, as well as the claims against her.
ALLEGATIONS OF FACT
The court draws the following facts from the amended complaint and the exhibits that
GECC and GE Capital attached to it. Dkt. 24. 1
GECC is a Delaware corporation with its principal place of business located in
Connecticut. GE Capital is a Delaware corporation with its principal place of business located
in Texas. Both corporations are wholly owned subsidiaries of General Electric Company, and
both companies provide financing to transportation businesses. Malaszuk Specialized is a
Wisconsin limited liability company that is in the transportation business. Malaszuk
1
GECC and GE Capital filed an amended complaint to properly allege a basis for subject
matter jurisdiction. Dkt. 24. This is the pleading that GECC’s “proposed amended
complaint,” Dkt. 17-1, would replace.
2
Specialized has two members: John and Lisa Malaszuk, who are husband and wife. John and
Lisa are both citizens of Wisconsin, and so Malaszuk Specialized is a citizen of Wisconsin for
purposes of establishing diversity jurisdiction.
There are four loans at issue in this case, all of which occurred between February
2012, and September 2013. Malaszuk Specialized used these loans to finance the purchase of
vehicles to use in its transportation business. The first loan was from GECC to John, for a
principal sum of just over $620,000. The second and third loans were from GECC to
Malaszuk Specialized, for a combined principal sum of almost $280,000. John signed
personal guaranties for both loans. The fourth loan was from GE Capital to Malaszuk
Specialized, for a principal sum of $75,000. Lisa signed the loan documents on behalf of
Malaszuk Specialized, and she also signed a personal guaranty for the loan.
John and Malaszuk Specialized defaulted on all four loans. In February 2015, GECC
and GE Capital sent demand letters to John and Lisa notifying them of Malaszuk
Specialized’s default under the loan agreements and of their own defaults under the guaranty
agreements. The demand letter to Lisa referred only to the fourth loan (by reference number)
and gave Lisa 10 days to pay a past due amount of $4,496.31 on that loan. The letter warned
Lisa that if she failed to pay, then “GE Capital” 2 would accelerate the loan, making a balance
of $61,410.11 due immediately.
Malaszuk Specialized, John, and Lisa failed to pay the demanded past due amounts.
Thus, as of February 13, 2015, the amount due and owing exceeded $660,000. GECC and
GE Capital filed suit on March 25, 2015, alleging three claims: (1) breach of contract against
Malaszuk Specialized; (2) breach of contract against John; and (3) breach of guaranty against
2
It is not clear whether this refers to GECC or to GE Capital.
3
John and Lisa. Dkt. 1. A month later, Lisa moved to dismiss the claim against her for lack of
subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1). Dkt. 15.
GECC and GE Capital responded with a motion for leave to file an amended complaint. Dkt.
17. The proposed amendment omits claims arising out of the fourth loan and names GECC
as the only plaintiff in this case. Dkt. 17-1.
The court has subject matter jurisdiction over GECC’s claims against John and
Malaszuk Specialized pursuant to 28 U.S.C. § 1332, because the parties are completely
diverse and the amount in controversy exceeds $75,000. As explained below, the court has
supplemental jurisdiction over GE Capital’s claims against Malaszuk Specialized pursuant to
28 U.S.C. § 1367, because they form part of the same case or controversy.
ANALYSIS
The parties’ opening briefs principally focused on whether this case could proceed
with claims against Lisa. But in their supplemental filings, the parties discussed whether any
claims over which the court lacks original jurisdiction can nevertheless stay in this case
through supplemental jurisdiction. The court will address each issue separately.
A. Claims against Lisa
The proposed amended complaint purports to moot Lisa’s motion to dismiss by
naming GECC as the only plaintiff in this case. Dkt. 17. Rule 15 permits a party to amend its
pleadings once as a matter of course, within 21 days of being served with an answer or a
motion to dismiss under Rule 12(b), and in all other cases with leave of court. 3 But “[u]nder
3
GECC and GE Capital filed their motion 22 days after John and Malaszuk Specialized filed
their answer and 21 days after Lisa filed her motion to dismiss.
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either circumstance, a district court may deny leave to amend if the proposed amendment
fails to cure the deficiencies in the original pleading, or could not survive a second motion to
dismiss.” Perkins v. Silverstein, 939 F.2d 463, 472 (7th Cir. 1991); see also Arlin-Golf, LLC v.
Vill. of Arlington Heights, 631 F.3d 818, 823 (7th Cir. 2011). Here, Lisa contends that GECC
and GE Capital’s proposed amendment does not correct the defects that she identified in the
initial complaint. 4 The court agrees and will therefore deny GECC and GE Capital’s motion.
The proposed amended complaint alleges that Lisa is liable to GECC for breaching her
guaranty with regard to the second and third loans. Dkt. 17-1, ¶¶ 40-46. The agreement that
Lisa signed provided that:
[f]or Valuable Consideration, the receipt and sufficiency of
which is hereby acknowledged, [Lisa] unconditionally
guarantee[s] to [GECC and to GE Capital] that MALASZUK
SPECIALIZED LOGISTICS LLC (the Company) . . . shall
promptly and fully perform, pay and discharge all of its present
and future liabilities, obligations and indebtedness to GE
Capital, whether direct or indirect, joint or several, absolute or
contingent, secured or unsecured, matured or un-matured, and
whether originally contracted with or otherwise acquired by GE
Capital (all of which liabilities, obligations and indebtedness are
herein individually and collectively called the “Indebtedness”).
Dkt. 24-7, at 2.
GECC contends that Lisa’s guaranty covered the second and third loans because it
referred to Malaszuk Specialized’s present liabilities, obligations, and indebtedness. Malaszuk
Specialized had not fully repaid the second and third loans when Lisa signed the guaranty,
4
Lisa’s motion to dismiss invoked only Rule 12(b)(1). See Dkt. 15, at 1. But in opposing
GECC’s motion to amend, Lisa implies that she would have also presented a merits-based
motion to dismiss the initial complaint had GECC and GE Capital clearly indicated their
theory that Lisa’s guaranty covered the second and third loans. See Dkt. 19, at 2.
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and so GECC argues that these loans qualified as “present” indebtedness. Lisa responds by
directing the court to Associates Financial Services Company. v. Eisenberg, a case in which the
Wisconsin Supreme Court held that “[a] guaranty is to be construed to be prospective rather
than retrospective unless it clearly appears that the parties intended it should cover past
transactions.” 51 Wis. 2d 85, 186 N.W.2d 272, 275 (1971). 5
The facts in Eisenberg are similar to this case. Northern Financial Corporation—which
later assigned its rights to the plaintiff—issued three separate loans to DEC Aviation
Corporation, of which Eisenberg, the defendant, was a director. Id. at 273-74. DEC secured
the first loan with a chattel mortgage, and the company’s president and his wife both signed
personal guaranties. Id. at 273. For the second loan, DEC provided another chattel mortgage,
but this time, the company’s president, his wife, and Eisenberg signed personal guaranties. Id.
DEC secured the third loan with only a chattel mortgage. Id. at 274. After DEC experienced
financial hardship, the company sold its assets to Eisenberg and then repaid the second loan
with the proceeds. Id. The plaintiff filed suit against Eisenberg, alleging that he was obligated
to guaranty the first and third loans. Id. at 273.
The trial court determined that Eisenberg’s guaranty covered all three transactions. Id.
The supreme court reversed, concluding that “the guaranty include[d] the third loan, the
second loan, but not the first loan.” Id. at 275. The court’s analysis turned on the language of
Eisenberg’s guaranty agreement, which stated that he:
guarantee[d] the payment of any and all obligations of [DEC],
which may be contracted with or owing to Northern Illinois
Corporation . . . . I further guarantee the prompt and faithful
5
The court is sitting in diversity and therefore applies Wisconsin substantive law to analyze
whether GECC can state a claim against Lisa for breach of guaranty. See Shady Grove
Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 417 (2010).
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performance and discharge by [DEC] of any and all of its
obligations under any notes as present or future agreements of
[DEC] with Northern Illinois Corporation.
Id. at 273-74. After concluding that the guaranty’s language was ambiguous, the court
construed the agreement to contemplate future obligations (i.e., the third loan) and present
obligations (i.e., the second loan). Id. at 275. But the court held that “the word ‘present’ used
in a parallel context means a contract made in the present, or presently, not a contract made
in the past but whose obligations presently exist.” Id. (emphasis added).
GECC contends that Eisenberg is distinguishable because the guaranty at issue in that
case referred to “obligations” as opposed to “indebtedness”—a term that Lisa’s guaranty
includes. See Dkt. 24-7, at 2. According to GECC, indebtedness implies an amount already
owed, and so the phrase “present indebtedness” was necessarily retrospective because it
required looking into the past to determine how much money Malaszuk Specialized owed to
GECC at the time that Lisa signed her guaranty. This argument is not persuasive. Like
indebtedness, an obligation can be a responsibility for something that has already happened.
Guarantying a present obligation would also require looking into the past to determine the
extent of that obligation. Under Eisenberg, guaranties that refer to “present” obligations are
not retrospective. 186 N.W.2d at 275. There is no principled difference between an
obligation and an indebtedness, and so Eisenberg forecloses the claims that GECC is trying to
assert against Lisa.
Even if the court were to credit GECC’s argument that an indebtedness could be
retrospective, this would leave the guaranty ambiguous. And the court would have to resolve
that ambiguity in Lisa’s favor because she is the guarantor. Bank of Sun Prairie v. Opstein, 86
Wis. 2d 669, 273 N.W.2d 279, 282 (1979). For all of the guaranty’s verbosity, there is no
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language specifically mentioning debts incurred in the past. Thus, because it does not “clearly
appear[] that the parties intended [Lisa’s guaranty to] cover past transactions,” Eisenberg, 186
N.W.2d at 275, GECC cannot state a claim against Lisa that is premised on a retrospective
interpretation of her guaranty agreement. The proposed amended complaint could not
survive a second motion to dismiss because Lisa’s guaranty did not cover the second and
third loans. The court must therefore deny GECC and GE Capital’s motion for leave to
amend.
This leaves Lisa’s motion to dismiss. GECC and GE Capital do not dispute that if
they cannot overcome Eisenberg—which they cannot—then there is no basis for this court to
exercise jurisdiction over GE Capital’s claim against Lisa. Dkt. 34, at 4. The court will
therefore grant Lisa’s motion to dismiss GE Capital’s breach of guaranty claim against her,
without prejudice, for lack of subject matter jurisdiction. See Bovee v. Broom, 732 F.3d 743,
743 (7th Cir. 2013).
Lisa also asks the court to dismiss GECC’s breach guaranty claims against her with
prejudice, for failure to state a claim upon which relief can be granted. But it is not clear that
GECC actually pled any such claims; the amended complaint broadly alleges only that John
and Lisa breached their guaranties and caused damages to GECC and GE Capital. Dkt. 24,
¶¶ 42-48. True, GECC proposed to bring claims against Lisa in an amended complaint, but the
court refused to accept that amended complaint.
The standards that the court uses to determine whether a proposed amended
complaint is futile match the standards that the court would use to review a motion to
dismiss under Rule 12(b)(6). Runnion ex rel. Runnion v. Girl Scouts of Greater Chi. & Nw. Ind.,
786 F.3d 510, 524 (7th Cir. 2015). However, Lisa has not identified authority that would
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allow the court to dismiss proposed claims with prejudice simply because they were not
proper amendments to a complaint. Preclusion principles may prevent GECC from asserting
similar claims in a new complaint. But that would be a determination for a future tribunal to
make, not this court.
B. Supplemental jurisdiction
The parties appear to agree that GE Capital has claims against John and Malaszuk
Specialized over which the court could exercise supplemental jurisdiction. Dkt. 33, at 3 and
Dkt. 34, at 4. Under § 1367(a), “once a court has original jurisdiction over some claims in
the action, it may exercise supplemental jurisdiction over additional claims that are part of
the same case or controversy.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552
(2005). “Two claims are part of the same case or controversy if they derive from a common
nucleus of operative facts. A loose factual connection between the claims is generally
sufficient.” Sanchez & Daniels v. Koresko, 503 F.3d 610, 614 (7th Cir. 2007) (internal citations
and quotation marks omitted). Here, GE Capital’s breach of contract claim against Malaszuk
Specialized and breach of guaranty claims against John satisfy these requirements.
This case concerns a series of four loans and three corresponding guaranties. All seven
transactions occurred within the span of less than two years, between essentially the same
parties. Moreover, GE Capital was the lender for one of the loans to Malaszuk Specialized,
Dkt. 24-6, at 2, and each of John’s guaranty agreements guarantied repayment to GECC and
GE Capital, Dkt. 24-3 and Dkt. 24-5. The amended complaint alleges that Malaszuk
Specialized and John have defaulted on these agreements. Dkt. 24. Based on these
allegations, the court concludes that there is at least “a loose factual connection” between GE
Capital’s claims and GECC’s claims, such that supplemental jurisdiction exists.
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Although there is a basis for exercising supplemental jurisdiction over GE Capital’s
claims against John and against Malaszuk Specialized, the same is not true for GE Capital’s
claim against Lisa. Section 1367(b) precludes courts from exercising supplemental
jurisdiction over claims “against persons made parties under Rule 14, 19, 20, or 24 . . . when
exercising supplemental jurisdiction over such claims would be inconsistent with the
jurisdictional requirements of section 1332.” John and Malaszuk Specialized are proper
defendants in this case by virtue of GECC’s claims. But because Lisa will be dismissed from
this case, GE Capital would have to join her as a defendant pursuant to Rule 20. As the
parties agree, GE Capital’s claim against Lisa does not satisfy the amount in controversy
requirement of § 1332. Thus, the court cannot exercise supplemental jurisdiction over this
aspect of the case.
Under the facts of this case, this result is inefficient. As long as this court must
address the disputes between John, Malaszuk Specialized, GECC, and GE Capital, it would
not take that much more effort to take up the matters involving Lisa, too. But the limits on
this court’s jurisdiction are strict, and the court may not disregard them simply because it
might save some time to do so.
ORDER
IT IS ORDERED that:
1. Defendant Lisa Malaszuk’s motion to dismiss, Dkt. 15, is GRANTED. Count III,
as alleged against Lisa Malaszuk, is DISMISSED without prejudice.
2. Plaintiffs General Electric Capital Corporation and GE Capital Commercial, Inc.’s
motion for leave to file an amended complaint, Dkt. 17, is DENIED.
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3. Lisa Malaszuk is DISMISSED from this case.
Entered November 24, 2015.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge
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