Channon v. Westward Mgmt., Inc.
| Decision Date | 13 March 2020 |
| Docket Number | No. 19-cv-05522,19-cv-05522 |
| Parties | HARRY CHANNON and DAWN CHANNON, individually and on behalf of all others similarly-situated Plaintiffs, v. WESTWARD MANAGEMENT, INC., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Plaintiffs Harry and Dawn Channon (the "Channons") have brought this putative class action against Defendant Westward Management, Inc. ("Westward"), alleging that Westward violated the Illinois Condominium Property Act, 765 ILCS 605/22.1(c), and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2, by charging fees for condominium owners looking to sell their properties to obtain documents that Illinois law requires them to provide prospective buyers. The action was originally filed in Illinois state court but Westward removed it here. The Channons now seek to have the case remanded to state court. (Dkt. No. 14.) For the reasons that follow, the Channons' motion is granted.
On April 16, 2019, the Channons filed their complaint against Westward in the Circuit Court of Cook County, Chancery Division. They attempted to serve Westward on May 7, 2019 with the assistance of the Cook County Sheriff's Office, which left a copy of the summons and complaint at the Chicago address listed for Westward's registered agent. A Westward employee working at the reception desk, Laz Estrada, accepted service.
In July 2019, Westward retained counsel. One of Westward's attorneys, Krista Stoumbos, emailed the Channons' attorney, Terrie Sullivan, on July 9 to inform her that Stoumbos had been assigned to the matter. Sullivan responded by informing Stoumbos that she wanted to schedule a phone call to discuss the case. The attorneys scheduled a call for the next day, July 10. During that call, Sullivan asked when Westward's counsel would be filing an appearance in the matter. Stoumbos responded that she would be filing an appearance in the next week and indicated that she would need additional time to answer or otherwise plead on behalf of her client. In a follow-up email confirming the substance of their call, Sullivan also attached an appearance filed by her co-counsel in the matter, Liz Al-Dajani.
Sullivan and Stoumbos spoke again on July 18, 2019 when they ran into each other at court after a hearing in a different matter. Sullivan asked Stoumbos whether she had filed an appearance in the present action, and Stoumbos replied that she had not because she was waiting for authorization from her client. The next day—72 days after service was delivered at the address listed for Westward's registered agent—the Channons moved for default judgment due to Westward's failure to appear or file a responsive pleading. On July 25, Westward filed a motion to quash service of process. In its motion, Westward argued that service was ineffective because the Westward employee who accepted service was not authorized to do so. Included as exhibits to the motion were two declarations, one from Estrada and one from David Westveer, Westward's registered agent. Westveer stated in his declaration that he never received a copy of the summons and complaint. And while Estrada acknowledged receiving the summons and complaint on May 7, he stated that he did not give Westveer those documents on that day.
At the default judgment hearing on July 29, 2019, Westward's counsel agreed to accept service in open court and withdrew Westward's motion to quash. In exchange, the Channonswithdrew their motion for default judgment. However, the Channons did not concede that the initial May 7 service was improper. The Agreed Order entered that day stated: "Defendant's counsel to accept service of process as of July 29, 2019." (Mot. to Remand, Ex. J, Dkt. No. 14-11.) Furthermore, the order gave Westward until August 28, 2019, to file a responsive pleading. Instead of filing a responsive pleading, Westward filed a notice of removal to this Court on August 15 under the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d)(2). (Dkt. No. 1.)
The Channons argue that this action must be remanded to state court for three reasons. First, they contend that Westward's notice of removal was untimely because it was filed 102 days after Westward received a copy of the summons and complaint. Second, the Channons argue that Westward engaged in conduct that evinced an intent to litigate this action in state court and therefore waived its right to remove. Finally, the Channons argue that this Court lacks diversity jurisdiction under CAFA because Westward is a citizen of Illinois. This Court addresses each of the Channons' contentions in turn.
According to the Channons, they properly served Westward at the address of its registered agent on May 7, 2019. Even if that initial service was ineffective, the Channons contend that the removal clock started running on July 10, 2019, at the latest, because Westward received notice of the lawsuit when its counsel received a copy of the additional appearance filed by Al-Dajani, one of the Channons' counsel. And because Westward filed its notice of removal on August 15, 2019, the Channons assert that both possible dates of service are outside the 30-day removal window. On the other hand, Westward argues that it only received formal service of process at the July 29, 2019 hearing before the state court and its notice of removal was therefore timely.
Under 28 U.S.C. § 1446(b), "[t]he notice of removal of a civil action or proceeding shall be filed within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based." The Supreme Court has held that the 30-day removal clock "is triggered by simultaneous service of the summons and complaint, or receipt of the complaint, 'through service or otherwise,' after and apart from the service of the summons, but not by mere receipt of the complaint unattended by any formal service." Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 350 (1999). In reaching that conclusion, the Supreme Court rejected the "receipt rule" whereby a defendant's time to remove begins once the defendant has received a copy of the initial pleading even in the absence of formal service. Id. at 349, 356.
When an attempted service of process occurs before the action is removed to federal court, state service of process rules govern. Cardenas v. City of Chicago, 646 F.3d 1001, 1005 (7th Cir. 2011). A corporation may be served in Illinois by leaving a copy of the summons and complaint with the corporation's registered agent or "any officer or agent of the corporation found anywhere in the state." MB Fin. Bank, N.A. v. Ted & Paul, LLC, 990 N.E.2d 764, 774 (Ill. App. Ct. 2013). But "for service of process on a corporation to have been properly made upon an agent of the defendant, the agent must have had actual authority to accept service on behalf of the corporation." Id. at 775. Thus, "a challenge to or denial of agency within the corporate service context can call the ultimate issue" of the propriety of service into question. Id.
Westward contends that the original May 7 service of process was ineffective because Estrada did not have actual authority to accept service on behalf of Westward. Indeed, Estrada submitted a declaration stating that he "was never trained or designated by Westward to receive service of summons and complaints on Westward's behalf." (Mot. to Remand, Ex. I ¶ 4, Dkt. No.14-10.) While he acknowledged receiving process, Estrada stated that he "did not understand the legal import of service of process" and he "did not deliver a copy of the Summons and Complaint to David Westveer," Westward's registered agent. (Id. ¶¶ 6-7.) Similarly, Westveer confirmed that Estrada was "a mere employee of Westward," who worked at the reception desk and "was never trained or designated to receive process on Westward's behalf." (Mot. to Remand, Ex. H ¶¶ 6, 9, Dkt. No. 14-9.) Thus, given the evidence that Estrada did not have actual authority to accept service on Westward's behalf, Westward cannot be deemed to have received service of process on May 7.
Yet the Channons contend that even if service was not made on May 7, the removal clock began running on July 10 when the Channons' counsel, Sullivan, sent Westward's counsel a copy of Al-Dajani's appearance in the action as an additional counsel for the Channons. The Channons contend that under 28 U.S.C. § 1446(b)(3), the 30-day removal clock can be triggered by the defendant's mere receipt of "other papers" that are part of state court proceedings. However, the Channons' reliance on § 1446(b)(3) is misplaced because that subsection only "comes into play 'if the case stated by the initial pleading is not removable.'" Fultz v. Target Corp., 28 F. Supp. 3d 783, 784 (N.D. Ill. 2014) (quoting 28 U.S.C. § 1446(b)(3)). Put differently, § 1446(b)(3) applies where grounds for removal are not apparent from the initial pleading but are only supplied at some later point by "an amended pleading, motion, order or other paper." 28 U.S.C. § 1446(b)(3); see also Ayotte v. Boeing Co., 316 F. Supp. 3d 1066, 1071 (N.D. Ill. 2018).
While the Channons contest the removability of the action, they do not contend that Al-Dajani's appearance supplies any grounds for removal not present in the complaint. See Gross v. FCA US LLC, No. 17 C 4889, 2017 WL 6065234, at *2 (N.D. Ill. Dec. 7, 2017) . Nor does Westward contend that its basis for removal comes from any document other than the complaint. Indeed, Westward's notice of removal cites only the complaint in...
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