Karazanos v. Madison Two Associates

• Decision Date: 23 June 1998
• Docket Number: No. 96-4170,96-4170
• Citation: 147 F.3d 624
• Parties: John KARAZANOS and Yiannis, Inc., Plaintiffs-Appellants, v. MADISON TWO ASSOCIATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 624

147 F.3d 624

John KARAZANOS and Yiannis, Inc., Plaintiffs-Appellants, v. MADISON TWO ASSOCIATES, Defendant-Appellee.

No. 96-4170.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 26, 1997.

Decided June 23, 1998.

Christopher V. Langone (argued), Chicago, IL, for Plaintiff-Appellant.

David G. Lynch (argued), Kristi Lynn Nelson, Rudnick & Wolfe, Chicago, IL, for Defendant-Appellee.

Before POSNER, Chief Judge, and EASTERBROOK and DIANE P. WOOD, Circuit Judges.

DIANE P. WOOD, Circuit Judge.

This case began as a simple contract dispute between the plaintiffs, John Karazanos and his corporation Yiannis, Inc., and the defendant, Madison Two Associates, a general partnership that owned the building in which Yiannis operated a restaurant. Like many similar cases, it started out in state court, was removed to federal court, and was eventually dismissed on summary judgment for the defendant. See Yiannis, Inc. v. Madison Two Assocs., No. 95-C-6704, 1996 WL 680239 (N.D.Ill. Nov. 21, 1996). In addition to arguing that the district court erred in granting summary judgment, Karazanos (the name we will use for both plaintiffs) argues that the district court never had proper subject matter jurisdiction over the removed action. We take up the jurisdictional challenge first, as we must. See Steel Co. v. Citizens for a Better Env't, --- U.S. ----, ---- - ----, 118 S.Ct. 1003, 1012-13, 140 L.Ed.2d 210 (1998).

When the case started in the Circuit Court of Cook County (Illinois), there were two plaintiffs: John Karazanos, a citizen of Illinois, and Yiannis, an Illinois corporation with its principal place of business--a Mediterranean restaurant on the ground floor of Three First National Plaza in Chicago--in Illinois. The defendant was Madison Two Associates, a general partnership and complex umbrella organization for 18 other partnerships, individuals, and corporations. Madison Two removed the case to federal court in November 1995. Only two facts about the notice of removal are important here. First, as is required, the notice furnished the names and citizenships of every partner in every partnership involved in the case. Carden v. Arkoma Assocs., 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990). Second, in several instances the notice indicated that someone was "a foreign citizen," but it did not specify the country of citizenship nor did it indicate where that individual was domiciled.

At the request of the district court, Madison Two supplemented its jurisdictional allegations in the removal notice by furnishing the court with a letter and a hand-drawn organizational chart from counsel that more clearly described the relationships among all the entities. In addition, in support of its motion for summary judgment Madison Two submitted an affidavit from Jeanine Hutchens, in which she described all of the relevant citizenships based on her personal knowledge. (Although the record reflects that Jeanine Hutchens worked as a senior tax manager at a limited partnership named "Hines Interests Limited Partnership," that entity is not a subentity under the Madison Two umbrella. Aside from using a name similar to several of the Madison Two sub-entities, the record is silent on her employer's relationship to the defendant and the basis of her personal knowledge of Madison Two's organizational structure.) This information satisfied the district court that jurisdiction was proper, and it proceeded to grant Madison Two's motion for summary judgment.

It is never too late, of course, to raise a jurisdictional challenge, and so we can and must consider the plaintiff's challenge to the district court's jurisdiction. Karazanos first misleadingly complains that Madison Two "disregarded" the district court's inquiry about the citizenship of the limited partners. This is simply untrue. Madison Two responded both in the December 7, 1995, letter from its counsel to the court, and in the Hutchens affidavit submitted at summary judgment. Despite Karazanos's protestations, it is irrelevant that Madison Two's letter responding to Judge Coar's informal inquiry was unsworn and not made part of the record. At the time Judge Coar made his inquiry, no one had suggested that Madison Two's jurisdictional allegation was deficient, and his minute order did not require a pleading to be filed. Indeed, considering a district court's broad discretion to consider "whatever evidence has been submitted" when deciding a Rule 12(b)(1) motion to dismiss for lack of jurisdiction, Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191 (7th Cir.1993) (per curiam), Judge Coar's purely prophylactic inquiry into the jurisdictional facts here was quite reasonable. Karazanos never put Madison Two to its proof by seeking jurisdictional discovery. Cf. Anthony v. Security Pac. Fin. Svcs., Inc., 75 F.3d 311, 316-17 (7th Cir.1996). Nor did Karazanos directly contest by a Rule 12(b)(1) motion or otherwise the truth of any of the alleged jurisdictional facts. Cf. Grafon Corp. v. Hausermann, 602 F.2d 781, 783 & n. 3 (7th Cir.1979). In fact, counsel for Karazanos conceded at oral argument that the plaintiffs do not challenge the truth of those facts even now. A court may accept the uncontested, good faith allegations of jurisdictional facts, Rexford Rand Corp. v. Ancel, 58 F.3d 1215, 1218 (7th Cir.1995), though of course it may also notice a jurisdictional defect sua sponte. Grafon, 602 F.2d at 783 n. 4 (7th Cir.1979). After deliberating, Judge Coar permissibly chose the former instead of requiring further exploration into the facts.

Karazanos also argues in passing that at summary judgment he obliquely put the jurisdictional issue into play because his response to Madison Two's proposed facts stated that he was "without knowledge or information sufficient ... to form a belief as to the truth" of certain jurisdictional facts. Some of these jurisdictional facts, he speculates, might have been untrue. This argument is also unpersuasive. Under Local Rule 12(N), "[a]ll material facts set forth in [Madison Two's 12(M) statement are] ... deemed to be admitted unless controverted." Thus, by the very language of Local Rule 12(N), Karazanos's equivocation was an admission, not a denial. Also, there is a critical difference between a statement that "Jurisdictional fact X could be wrong," and an allegation that "Jurisdictional fact X is wrong." The former is pure guesswork, while the latter is a falsifiable claim. Because a disproved statement of fact can in some circumstances lead to sanctions, see, e.g., Fed.R.Civ.P. 11, parties and counsel will choose carefully before committing themselves. Finally, if Karazanos lacked information to contest certain jurisdictional facts and truly doubted their veracity, he should have moved for additional discovery under Rule 56(f). He never did so, and thus, having failed throughout to contravene Madison Two's jurisdictional allegations, he cannot blindly speculate here about Jeanine Hutchens's competence to testify about Madison Two's organizational structure. Although Hutchens was not employed by an entity organized under the Madison Two umbrella, she swore to being a senior tax manager at the "Hines Interests Limited Partnership," an entity that in the absence of allegations otherwise, Judge Coar could reasonably have inferred was related in some way to one of the 10 entities and individuals organized under the Madison Two rubric that used the name "Hines." See Fed.R.Civ.P. 56(e).

The more difficult question is whether the facts as Judge Coar found them satisfied the jurisdictional requirements of 28 U.S.C. § 1332(a)(3). The only allegations that were at all vague were the ones labeling certain individuals as "foreign citizen[s]." Although a suit between aliens falls outside § 1332's jurisdictional grant, see, e.g., Hodgson v. Bowerbank, 9 U.S. (5 Cranch) 303, 3 L.Ed 108 (1809) (alien v. alien), jurisdiction exists in a suit between citizens of different states where aliens are additional parties. See 28 U.S.C. § 1332(a)(3); Hunter v. Shell Oil Co., 198 F.2d 485, 488 (5th Cir.1952) (citizen of state A v. citizen of state B + alien); Allendale Mut. Ins. v. Bull Data Sys., 10 F.3d 425, 427-28 (7th Cir.1993) (citizen of state A + alien v. citizen of state B + alien). (We noted in Allendale that courts have rejected jurisdiction in suits where "one side of the litigation had only foreign parties and the other had a mixture of foreign and domestic parties," because such a case does not fit within any of the statute's jurisdictional pigeonholes. 10 F.3d at 428. See also Israel Aircraft Indus. v. Sanwa Business Credit, 16 F.3d 198, 202 (7th Cir.1994) (rejecting jurisdiction in a suit following the pattern of alien v. citizen + alien). Supplemental jurisdiction is also apparently unavailable to bring in the extra alien, because it specifically does not extend to jurisdiction over persons made parties pursuant to Rules 14, 19, 20, and 24 when the case is based on § 1332.)

The statute does not say anything about specifying from which foreign state an alien hails, and so on its face it does not appear to demand more than an allegation that someone is "a foreign citizen or subject." Cf. Dresser Indus. v. Underwriters at Lloyd's of London, 106 F.3d 494, 500 (3d Cir.1997) ("For diversity purposes, an alien is an alien is an alien."). See generally 13B Charles Alan Wright et al., Federal Practice & Procedure § 3604, at 396 (2d ed. 1984) ("[I]f the allegation of alien citizenship is plain, technicalities are unimportant."), citing C.H. Nichols Lumber Co. v. Franson, 203 U.S. 278, 282-83, 27 S.Ct. 102, 51 L.Ed. 181 (1906) (irrelevant to jurisdiction that plaintiff described himself as a "citizen" of Sweden even though he was properly a "subject" of that country's monarchy). The only complication occurs because of a 1988 amendment to § 1332(a), which added the following language:

For the purposes of this section, section 1335, and section...