Chiropractic v. Stratacare Inc.

• Decision Date: 30 September 2010
• Docket Number: Civil No. 09–1061–MJR.
• Citation: 752 F.Supp.2d 896
• Parties: WALSH CHIROPRACTIC, LTD., Individually and on Behalf of Others Similarly Situated, Plaintiff,v.STRATACARE, INC., Defendant.
• Court: U.S. District Court — Southern District of Illinois

752 F.Supp.2d 896

WALSH CHIROPRACTIC, LTD., Individually and on Behalf of Others Similarly Situated, Plaintiff,

v.STRATACARE, INC., Defendant.

Civil No. 09–1061–MJR.

United States District Court, S.D. Illinois.

Sept. 30, 2010.

Andrew W. Kuhlmann, Jonathan B. Piper, Robert W. Schmieder, II, Lakinchapman, LLC, Wood River, IL, for Plaintiff.James Jason Coggins, Richard John Leamy, Wiedner & McAuliffe, Ltd., Chicago, IL, for Defendant.

MEMORANDUM AND ORDER

REAGAN, District Judge:

A. Introduction

On November 6, 2009, Plaintiff, Walsh Chiropractic, Ltd. (“Walsh”), filed this putative class action in the Third Judicial Circuit Court in Madison County, Illinois, alleging various breach of contract theories and a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), 815 ILCS 505/1 et seq., (Doc. 9–1). On December 17, 2009, Walsh filed its First Amended Class Action Complaint, adding two additional counts: one for unjust enrichment and the other alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) 18 U.S.C. §§ 1962(c), 1964(c) (Doc. 9–2). Defendant, StrataCare, Inc. (“StrataCare”) removed this action on December 28, 2009, pursuant to 28 U.S.C. § 1441, alleging this Court has federal question, supplemental, and diversity jurisdiction over the subject matter in dispute. 28 U.S.C. §§ 1331, 1367(a) and 1332(a)(1), respectively (Doc. 9). StrataCare then filed a Motion to Dismiss all seven of Walsh's counts pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc. 20). The motion has been fully briefed by the parties, and the Court now rules as follows.

B. Jurisdictional Analysis

As an initial matter, the Court notes the basis for its subject matter jurisdiction in this case. See Foster v. Hill, 497 F.3d 695, 696–97 (7th Cir.2007) (“It is the responsibility of a court to make an independent evaluation of whether subject matter jurisdiction exists in every case.”). This case was filed originally in the Circuit Court of the Third Judicial Circuit, Madison County, Illinois, and comes to this Court on removal from state court. StrataCare asserts federal subject matter jurisdiction on the basis of 28 U.S.C. § 1331, which grants federal courts jurisdiction over cases arising under the laws of the United States, because Walsh brings a claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq. See Bennett v. Southwest Airlines Co., 484 F.3d 907, 909 (7th Cir.2007), citing American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 36 S.Ct. 585, 60 L.Ed. 987 (1916) (a claim arises under federal law within the meaning of Section 1331 if federal law creates the Plaintiff's cause of action). Because Walsh asserts a claim arising under federal law, Walsh's pendent state-law claims are within the Court's supplemental jurisdiction. See 28 U.S.C. § 1367.

However, although Walsh's state-law claims are within the Court's supplemental jurisdiction, it is unnecessary for the Court to exercise such jurisdiction because StrataCare asserts an additional basis for federal jurisdiction; in this case, diversity of citizenship pursuant to 28 U.S.C. § 1332, as amended by the Class Action Fairness Act of 2005 (“CAFA”), Pub.L. No. 109–2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.). Under the CAFA, federal courts have jurisdiction, with specified exceptions, see 28 U.S.C. § 1332(d)(3), (d)(4), (d)(5), (d)(9), with respect to: (1) a class action, including a putative class action; (2) that is commenced on or after February 18, 2005; (3) in which claims are asserted on behalf of one hundred or more class members; (4) at least one class member is a citizen of a state different from at least one defendant or, alternatively, at least one class member is a foreign state or a citizen or subject of a foreign state and at least one defendant is a citizen of a state (and vice versa), and; (5) the class claims exceed in the aggregate $5 million, exclusive of interest and costs. See 28 U.S.C. § 1332(d)(1)(B), (d)(1)(D), (d)(2), (d)(5)(B), (d)(6), (d)(7), (d)(8); Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 447 (7th Cir.2005); Baker v. Acer Am. Corp., Civil No. 09–885–GPM, 2009 WL 3681865, at *1 (S.D.Ill. Nov. 3, 2009); Schillinger v. 360Networks USA, Inc., Civil No. 06–138–GPM, 2006 WL 1388876, at *2 (S.D.Ill. May 18, 2006), quoting Pub. L. 109–2, § 9, 119 Stat. 4.

Turning then to the matter of whether the prerequisites for the exercise of federal jurisdiction under the CAFA are satisfied in this case, the Court notes that this is a putative class action and that it was commenced, that is to say, filed, after the effective date of the statute. See Buller Trucking Co. v. Owner Operator Indep. Driver Risk Retention Group, Inc., 461 F.Supp.2d 768, 772 (S.D.Ill.2006), citing Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805, 806 (7th Cir.2005) (“In general a class action is commenced for purposes of removal under CAFA on the date it originally was filed in state court.”). Also, according to Walsh's operative complaint in the case, the proposed class exceeds one hundred members ( See Doc. 9–2, p. 9, ¶ 33).

With respect to diversity of citizenship as between the parties to this case, according to StrataCare's notice of removal, StrataCare is a corporation organized under Delaware law with its principal place of business in California; thus, StrataCare is a citizen of Delaware and California for purposes of federal diversity jurisdiction. See Nuclear Eng'g Co. v. Scott, 660 F.2d 241, 250 (7th Cir.1981), citing 28 U.S.C. § 1332(c)(1) (a corporation is, for diversity purposes, a citizen of both the state under the law of which it is incorporated and the state where it maintains its principal place of business). Unfortunately, StrataCare's notice of removal alleges Walsh's state citizenship for diversity purposes on the basis of “information and belief” (Doc. 9, p. 3, ¶ 7). In general, of course, federal jurisdiction can be invoked only by allegations made on personal knowledge, not information and belief. See America's Best Inns, Inc. v. Best Inns of Abilene, L.P., 980 F.2d 1072, 1074 (7th Cir.1992); Frakes v. B & J Food Serv. Equip. of Mo., Inc., Civil No. 10–247–GPM, 2010 WL 1418567, at *2 (S.D.Ill. Apr. 7, 2010).

Under the circumstances of this case, however, the Court does not believe it is necessary to require StrataCare to amend its notice of removal. The parties do not dispute that Walsh is an Illinois citizen. Additionally, the Court has checked Walsh's submissions to the Court against the records of corporations maintained online by the Illinois Secretary of State and accessible at http:// www. ilsos. gov/ corporatellc, which the Court can judicially notice. See Holmes v. Back Doctors, Ltd., Civil No. 09–540–GPM, 2009 WL 3425961, at *2 n. 3 (S.D.Ill., Oct. 21, 2009) (judicially noticing online records of corporations maintained by the Illinois Secretary of State); Bova v. U.S. Bank, N.A., 446 F.Supp.2d 926, 930 n. 2 (S.D.Ill.2006) (a court may judicially notice public records and government documents, including those available from reliable sources on the Internet) (collecting cases). The Illinois Secretary of State's records reflect that Walsh is a corporation organized under Illinois law. Therefore this case presents the requisite minimal diversity of citizenship for purposes of federal jurisdiction under the CAFA.¹

Turning then to the matter of the jurisdictional amount in controversy for purposes of federal diversity jurisdiction, as StrataCare points out in its notice of removal, the fact that Walsh refuses to stipulate that its claim is worth less than $75,000 creates an inference that Walsh believes the claim is worth more than that sum. See Oshana v. Coca–Cola Co., 472 F.3d 506, 512 (7th Cir.2006), quoting Workman v. United Parcel Serv., Inc., 234 F.3d 998, 1000 (7th Cir.2000) (“[I]f the Walsh does not stipulate to damages of $75,000 or less, ‘the inference arises that he thinks his claim may be worth more.’ ”). Assuming that Walsh's claim is worth $75,000 or more, then, if Walsh's claim is representative of the claims of the proposed class, the aggregate value of the claims of a proposed class of at least one hundred members more than exceeds the $5 million jurisdictional threshold under the CAFA.

Also, even a more conservative valuation of Walsh's claim shows that the threshold amount is satisfied. The actual loss Walsh claims is $4,383.43. It is well settled that, in appropriate cases, punitive damages can be reckoned into the jurisdictional amount for diversity purposes. “[W]here both actual and punitive damages are recoverable under a complaint each must be considered to the extent claimed in determining the jurisdictional amount.” Sharp Elecs. Corp. v. Copy Plus, Inc., 939 F.2d 513, 515 (7th Cir.1991), quoting Bell v. Preferred Life Soc'y, 320 U.S. 238, 240, 64 S.Ct. 5, 88 L.Ed. 15 (1943). “Where punitive damages are required to satisfy the jurisdictional amount in a diversity case, a two-part inquiry is necessary. The first question is whether punitive damages are recoverable as a matter of state law.” Cadek v. Great Lakes Dragaway, Inc., 58 F.3d 1209, 1211–12 (7th Cir.1995). “If the answer is yes, the court has subject matter jurisdiction unless it is clear ‘beyond a legal certainty that the plaintiff would under no circumstances be entitled to recover the jurisdictional amount.’ ” Id. at 1212, quoting Risse v. Woodard, 491 F.2d 1170, 1173 (7th Cir.1974).

Walsh asserts a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq. , alleging “willful and wanton” conduct and “intentional” misrepresentation by StrataCare (Doc. 9–2, p. 19, ¶ 78). If true, punitive damages may be available on Walsh's ICFA claim. See Smith v. Prime Cable of Chicago, 276 Ill.App.3d 843, 213 Ill.Dec. 304, 658 N.E.2d 1325, 1336 (1995) (in ICFA cases, “[p]unitive damages, while...