CCC Info. Services v. American Salvage Pool, s. 99-3393

• Decision Date: 22 September 2000
• Docket Number: Nos. 99-3393,s. 99-3393
• Citation: 230 F.3d 342
• Parties: (7th Cir. 2000) CCC INFORMATION SERVICES, INCORPORATED, a Delaware corporation, Plaintiff-Appellee, v. AMERICAN SALVAGE POOL ASSOCIATION, a Florida non-profit corporation, Defendant-Appellant. & 99-3565
• Court: U.S. Court of Appeals — Seventh Circuit

Page 342

230 F.3d 342 (7th Cir. 2000)

CCC INFORMATION SERVICES, INCORPORATED, a Delaware corporation, Plaintiff-Appellee, v. AMERICAN SALVAGE POOL ASSOCIATION, a Florida non-profit corporation, Defendant-Appellant.

Nos. 99-3393 & 99-3565

In the United States Court of Appeals For the Seventh Circuit

Argued April 4, 2000

Decided September 22, 2000

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 97 C 8634 & 98 C 4535--David H. Coar, Judge. [Copyrighted Material Omitted] Before COFFEY, ROVNER and DIANE P. WOOD, Circuit Judges.

ROVNER, Circuit Judge.

We are presented in this case with a purely jurisdictional question regarding member corporations and diversity jurisdiction. The district court found that the members had a direct interest in the litigation and that therefore their citizenship, as the real parties in interest, should control in determining whether complete diversity existed. Because we believe that the corporation itself is the real party in interest, we reverse and remand.

I.

CCC Information Services, Inc. ("CCC") contracted with the American Salvage Pool Association ("ASPA") to share information. ASPA is a Florida not-for-profit corporation with its principal place of business in Arizona. Because it is a not-for-profit corporation, ASPA does not have shareholders but rather has members. Its members are 210 automobile salvage businesses that store and sell automobile salvage. CCC is a Delaware corporation with its principal place of business in Illinois. CCC is in the business of collecting automobile-related information, processing that data and then selling it to insurance companies. Under the contract, ASPA agreed that its participating members would provide CCC with information about automobile salvage, including, for each vehicle make, model and year; selling price; sale date; mileage; and other useful information. CCC would, in turn, use this data to create average salvage valuations, which it would then sell to insurance companies. The contract provided, in relevant part, that ASPA owned the data, and that CCC had the right to use the ASPA name and any ASPA trademarks or trade names in selling the compiled information. The contract also provided that CCC would not compete with ASPA or its members in the automobile salvage business.

In 1997, CCC notified ASPA that it was terminating the agreement. CCC planned to create a new subsidiary that would engage in the business of brokering salvage, a business that arguably violated the non-compete provision in the contract. CCC also wished to create a new information product using ASPA's data, but the agreement did not allow this particular use of the data. CCC filed a declaratory judgment action in federal court, seeking a declaration that its new brokerage business would not violate the non- compete agreement, or in the alternative that the non-compete agreement was unenforceable. CCC also sought a declaration of the value of the ASPA data that it was using without authorization. ASPA filed a three-count counterclaim for breach of contract, for a declaration that the non- compete provision was enforceable, and for violations of the Illinois Trade Secret act. In its prayer for relief, ASPA sought compensatory and punitive damages, an order enjoining CCC from violating the non-compete provision, a declaration that the non-compete was enforceable, an order requiring CCC to return all of ASPA's proprietary information, and an order enjoining CCC from using ASPA's name and trademark in the promotion of CCC's information products. At approximately the same time that ASPA filed its counterclaim in federal court, ASPA's largest member, Insurance Auto Auctions, Inc. ("IAA"), filed suit against CCC in the chancery division of the Circuit Court of Cook County, Illinois. IAA is an Illinois corporation with its principal place of business in Illinois. In the state court suit, IAA alleged trade secret claims and breach of contract. At CCC's request, the Illinois court added ASPA as an indispensable party to the state court suit, and allowed CCC to file a counterclaim against ASPA. IAA then voluntarily dismissed its claims in state court and ASPA sought to remove CCC's counterclaim to federal court. The state court action was subsequently removed to federal court and consolidated with the federal case initiated by CCC.

Following discovery and only six weeks before the trial date set by the district court, CCC moved to dismiss the federal suit for lack of subject matter jurisdiction. CCC contended that, in the course of discovery, it had determined that ASPA's members were the real parties in interest. Because some of the members, including IAA, are Illinois citizens, and CCC is also an Illinois citizen, CCC contended that the requirement of complete diversity was not met, and the action should be dismissed. The district court agreed. Remarking that the real party in interest was the person who possessed the contractual right to be enforced, the district court found that the contract gave ASPA members a direct interest in the litigation of the non- compete clause. Because the ASPA members were at the "front line" of the litigation, the court found that the members were real parties in interest, and that their citizenship should therefore control for diversity purposes. The court therefore granted CCC's motion to dismiss. ASPA appeals.

II.

ASPA contends on appeal that when a corporation itself has a direct interest in the controversy, the corporation's citizenship should control for purposes of diversity, without regard to the citizenship of the members. ASPA cites the general rule that when a corporation is a party, the court should rely on the citizenship of the corporation alone when determining whether complete diversity exists. See 28 U.S.C. sec. 1332(c). According to ASPA, this Court's exception to that rule, carved out in National Association of Realtors v. National Real Estate Association, 894 F.2d 937 (7th Cir. 1990) ("NAR"), is limited to those situations where the named corporate party has no interest in the outcome of the litigation. Because this case involves ASPA's contractual rights, ASPA maintains that it is the real party in interest, and the court should consider only its corporate citizenship and not the citizenship of its members. ASPA also advocates a bright line analysis for diversity jurisdiction, and urges us to find that a rule focusing on the citizenship of the corporation even when the members have an inchoate interest in the litigation is more consistent with precedent. In response, CCC attempts to turn our attention to ASPA's request for injunctive relief, and specifically to the request to enjoin CCC from competing with ASPA's members. CCC contends that the members are the real parties in interest because it is the members and not the corporation that will suffer any financial loss from CCC's misappropriation of the data, and it is the members who will suffer if CCC begins to conduct business in the auto salvage field. Indeed, CCC argues, because ASPA itself does not engage in the auto salvage business, CCC could not breach the non-compete unless it was competing with the members themselves. CCC cites every reference in the contract to the members, and points to ASPA's prayer for relief which includes requests that CCC be enjoined from competing with ASPA's members.

We review de novo the district court's dismissal for lack of subject matter jurisdiction. Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999). We look first to the complaint to determine...