Ashenden v. Lloyd's of London, 96 C 0852.

• Decision Date: 02 August 1996
• Docket Number: No. 96 C 0852.,96 C 0852.
• Citation: 934 F. Supp. 992
• Court: U.S. District Court — Northern District of Illinois
• Parties: Mary Jane ASHENDEN, et al., Plaintiffs, v. LLOYD'S OF LONDON, et al., Defendants.

934 F. Supp. 992

Mary Jane ASHENDEN, et al., Plaintiffs, v. LLOYD'S OF LONDON, et al., Defendants.

No. 96 C 0852.

United States District Court, N.D. Illinois, Eastern Division.

August 2, 1996.

Michael J. Hayes, Darren Steven Cahr, Gardner, Carton & Douglas, Chicago, IL, for plaintiffs.

Michael T. Hannafan, Michael T. Hannafan & Associates, Ltd., Chicago, IL, for defendants.

MEMORANDUM OPINION AND ORDER

CASTILLO, District Judge.

The plaintiffs in this action are current or former members ("Names") of Lloyd's of London — investors in insurance syndicates operating in the marketplace controlled by Lloyd's. This action is one of many arising from the recruitment of U.S. investors into Lloyd's during the roaring 1980s at a time when Lloyd's financial health was faltering due to many syndicates' underwriting of "long tail" risks — risks in which liability for an insured's earlier actions may surface years after those actions were taken (and years after the insurance policies covering those actions were written), e.g., asbestos- or pollution-related liability. The lawsuits between Lloyd's and its U.S. investors typically involve either Lloyd's efforts to collect funds to make good on the risks underwritten by those investors, or the investors' claims that Lloyd's fraudulently withheld information about the extent of the long-tail risks from them. This suit is in the latter category.

On December 28, 1995, the plaintiffs commenced this action against Lloyd's and several of its member's agents in the Circuit Court of Cook County, Illinois, alleging violations of the Illinois Securities Act and the Illinois Consumer Fraud and Deceptive Business Practices Act. On February 14, 1996, Lloyd's removed the action from the Cook County Circuit Court to the United States District Court for the Northern District of Illinois pursuant to 28 U.S.C. §§ 1332 and 1441. On March 21, 1996, the plaintiffs moved this Court to remand the action to the Circuit Court or, in the alternative, to abstain from hearing this case until an administrative proceeding brought by the Illinois Securities Department against the same defendants is resolved. For the following reasons, we hold that this Court has jurisdiction, deny the plaintiffs' motion for remand, and decline to abstain and stay this case.

ANALYSIS

I. Remand

The sole question in deciding a motion to remand is the district court's authority to hear the case under the relevant removal statute. See Commonwealth Edison Co. v. Westinghouse Elec. Co., 759 F.Supp. 449, 451 (N.D.Ill.1991). The applicable statute here, 28 U.S.C. § 1441(a), states that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants." 28 U.S.C. § 1441(a) (1996). The party attempting to preserve the removal has the burden of showing that the requirements of removal have been met. See Jones v. General Tire & Rubber Co., 541 F.2d 660, 664 (7th Cir.1976). The case should be remanded if there is doubt to the right of removal. Id.

The removability of a case is determined from the record as a whole. See Kennedy v. Commercial Carriers, Inc., 739 F.Supp. 406, 409 (N.D.Ill.1990) (citing Oglesby v. RCA Corp., 752 F.2d 272, 277-78 (7th Cir.1985)). Therefore, the Court considers affidavits and other party submissions in determining whether or not it has jurisdiction over this case.

In seeking remand, the plaintiffs make two arguments: first, that the defendants' removal petition was untimely; and second, that removal was not proper because this Court does not have original jurisdiction over this suit. We address each argument in turn.

A. Timeliness of the Removal Petition

Under 28 U.S.C. § 1446(b), the removal statute, a defendant seeking to remove a case to federal court must file a removal petition within thirty days after receiving the complaint "through service or otherwise." 28 U.S.C. § 1446(b) (1996). Here, Lloyd's filed its petition to remove on February 14, 1996, less than thirty days from January 16, 1996, the day it says it first got the complaint. The plaintiffs claim that the petition is untimely because Lloyd's actually received the complaint before January 16.

The plaintiffs assert that Lloyd's received the complaint on January 11, 1996, through its agent, the Chicago law firm of Peterson & Ross. Peterson & Ross represents various syndicates that operate in Lloyd's insurance marketplace, which are often sued mistakenly under the name "Lloyd's of London." Accordingly, Peterson & Ross docket clerks routinely copy pleadings naming "Lloyd's of London," and they did so here, copying the complaint in this case on January 11. Lloyd's has submitted, however, and the plaintiffs have not refuted, that Peterson & Ross does not represent Lloyd's of London itself (the defendant in this lawsuit), only various Lloyd's syndicates. The two are legally distinct, and the plaintiffs have presented no evidence that the syndicates or their attorneys are the agents of Lloyd's for the service of process. In addition, an attorney at Peterson & Ross has testified by way of affidavit that Peterson & Ross did not forward the complaint to Lloyd's itself, or to Lloyd's Chicago lawyers, the law firm of Lord, Bissell & Brook. The plaintiffs' assertion that Lloyd's received the complaint through Peterson & Ross has been refuted and their untimeliness argument must fail.¹

B. Diversity Jurisdiction

The plaintiffs' second argument, that Lloyd's is a citizen of Illinois and thus there is no federal diversity jurisdiction, requires more attention. In removing this case to federal court, Lloyd's cited 28 U.S.C. § 1332 (diversity jurisdiction) as the jurisdictional basis for removal. We now consider whether this jurisdictional basis is indeed present here.

The original jurisdiction of federal district courts under § 1332 is limited to cases between, inter alia, citizens of different states, or of a state and a foreign state, in which the "matters in controversy exceed $50,000." 28 U.S.C. § 1332(a)(1)-(a)(2) (1996). Section 1332 has been interpreted to require "complete diversity," that is, each and every defendant must have different citizenship from each and every plaintiff. Carden v. Arkoma Assocs., 494 U.S. 185, 187 (1990) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806)). It is undisputed that the amount in controversy in this case exceeds $50,000. At issue is whether there is complete diversity of citizenship between the parties.

The individual plaintiffs in this case are all Illinois citizens. The only organizational plaintiff, Illinois Names Association, Inc., is an Illinois corporation and thus likewise an Illinois citizen. The member's agents defendants are all English corporations with their principal places of business in England, and therefore are undisputedly English citizens. The remaining defendant is the entity known as Lloyd's of London.²

Because all of the plaintiffs are Illinois citizens, and all the defendants except Lloyd's are acknowledged English citizens, the existence of diversity jurisdiction depends on whether Lloyd's is properly considered a citizen of Illinois. That issue, in turn, hinges on whether Lloyd's should be considered a corporation for diversity purposes.

A corporation is deemed to be a citizen of (1) any state in which it is incorporated, and (2) the state where its principal place of business is located. 28 U.S.C. § 1332(c). By contrast, unincorporated associations do not have a legal identity that is separate from that of their constituent members or partners for jurisdictional purposes. Accordingly, non-corporations "are not considered citizens of any state for diversity purposes. Consequently, in cases involving such unincorporated associations, the relevant citizenship is that of the individual partners." Northern Trust Co. v. Bunge Corp., 899 F.2d 591, 594 (7th Cir.1990) (citing Great S. Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 20 S.Ct. 690, 44 L.Ed. 842 (1900) (partnerships); Carden v. Arkoma Assocs., 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990) (limited partnerships)). See also Chapman v. Barney, 129 U.S. 677, 682, 9 S.Ct. 426, 427-28, 32 L.Ed. 800 (1889) (joint stock companies, another type of unincorporated association, likewise held to be citizens of every state of which any company member is a citizen).

Indeed, the Supreme Court held in Carden that the only entity that has its own citizenship, rather than that of its members, is a formal, de jure corporation: "We have often had to consider the status of artificial entities created by state law insofar as that bears upon the existence of federal diversity jurisdiction. . . . While the rule regarding the treatment of corporations as `citizens' in their own right has become firmly established, we have . . . just as firmly resisted extending that treatment to other entities." Id., 494 U.S. at 187, 189, 110 S.Ct. at 1017, 1018. This is essentially a bright line rule: a corporation has its own citizenship; other entities do not. If Lloyd's is a corporation, it is not a citizen of Illinois, see infra, and thus this Court has diversity jurisdiction over this action. If, on the other hand, Lloyd's is properly considered a non-corporation, its citizenship is that of its members, some of whom (like the plaintiffs) are Illinois citizens. In that case, there is no diversity. The question is thus, is Lloyd's a corporation?

What is This Thing Called Lloyd's?

There is no doubt that Lloyd's is, at least on its face, a corporation. Lloyd's has submitted a copy of an 1871 act of Parliament, the Lloyd's Act, which created the corporation of Lloyd's as a successor to the former unincorporated association that had been known by the same name. Nevertheless, it is by no means obvious that this ends the inquiry. A look at the actual structure and operation of Lloyd's reveals a complex entity with several...