Ford Motor Credit Co. v. Aaron-Lincoln Mercury

• Decision Date: 29 April 1983
• Docket Number: No. 82 C 5350.,82 C 5350.
• Citation: 563 F. Supp. 1108
• Parties: FORD MOTOR CREDIT COMPANY, INC., a Delaware corporation, Plaintiff, v. AARON-LINCOLN MERCURY, INC., an Illinois corporation, Elliott Dulberger and Arthur Nelson, Defendants, Counter-Plaintiffs and Third Party Plaintiffs, v. FORD MOTOR COMPANY, a Delaware corporation, Third Party Defendant.
• Court: U.S. District Court — Northern District of Illinois

563 F. Supp. 1108

FORD MOTOR CREDIT COMPANY, INC., a Delaware corporation, Plaintiff, v. AARON-LINCOLN MERCURY, INC., an Illinois corporation, Elliott Dulberger and Arthur Nelson, Defendants, Counter-Plaintiffs and Third Party Plaintiffs, v. FORD MOTOR COMPANY, a Delaware corporation, Third Party Defendant.

No. 82 C 5350.

United States District Court, N.D. Illinois, E.D.

April 29, 1983.

Alfred Y. Kirkland, Jr., Brady, McQueen, Martin, Collins & Jenson, Elgin, Ill., for plaintiff.

Arnold I. Kramer, Chicago, Ill., for defendants counter-plaintiffs and third party plaintiffs.

Thomas B. McNeill, Michael R. Feagley, John T. Hundley, Mayer, Brown & Platt, Chicago, Ill., for third party defendant.

MEMORANDUM OPINION

PRENTICE H. MARSHALL, District Judge.

In this case we must decide an important question of federal jurisdiction — whether a third party defendant may remove an action filed in state court to this court when the original action is not removable.

On June 25, 1981, plaintiff Ford Motor Credit Corp. ("FMC") filed a complaint against defendants-third party plaintiffs Aaron-Lincoln Mercury, Inc. ("Aaron-Lincoln"), Elliott Dulberger ("Dulberger") and Arthur Nelson ("Nelson")¹ in the Circuit Court of McHenry County, Illinois. FMC sought to hold Aaron-Lincoln liable on a financing contract, and Dulberger and Nelson liable on their guarantees of the debts Aaron-Lincoln owed on the contract. Since the defendants in this action were all citizens of Illinois,² they could not remove the action to this court. See 28 U.S.C. § 1441(b) (1976).

On July 29, 1982, the defendants in the state action filed a second amended answer to the complaint which contained a counterclaim against FMC and a third party complaint against Ford Motor Co. ("Ford")³ In the counterclaim and third party complaint, it was alleged that Ford had induced the franchisees to purchase a Ford dealership franchise by means of false and misleading statements, and that FMC had not lived up to its promise to provide the franchisees with adequate financing. It was also alleged that Ford had violated the Illinois Franchise Disclosure Act when selling the franchise. The third party complaint was served on Ford that day, and on August 27, 1982 it filed a timely petition to remove the case to this court under 28 U.S.C. § 1446(b) (1976).

The parties have not raised the issue of whether this case is removable under 28 U.S.C. § 1441 (1976).⁴ However, since the question goes to the court's subject matter jurisdiction over the case, the question can be raised on the court's own motion. See Fed.R.Civ.P. 12(b)(1). Research discloses that there is substantial doubt as to whether a third party defendant may remove an otherwise nonremovable action.⁵ Many courts have held that there is no removal jurisdiction in this situation.⁶ This is also the position taken by the two leading commentators.⁷ Other courts, including the only court of appeals to decide the question, have held that a third party defendant may remove a "separate and independent claim" within the meaning of 28 U.S.C. § 1441(c) (1976).⁸

I

Removal in this case is predicated upon 28 U.S.C. § 1441(c) (1976). Therefore, we turn first to the question whether this case fits into that section.

The statute provides,

Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction.

28 U.S.C. § 1441(c) (1976). The statutory language raises two questions: has Ford removed "a separate and independent claim or cause of action" and is its claim "joined with one or more otherwise non-removable claims or causes of action"? We examine both questions in turn.

The Supreme Court has construed § 1441(c)'s requirement of a separate and independent claim as necessitating a claim not based on the same wrongful conduct as that which gave rise to the non-removable claims. See American Fire & Casualty Co. v. Finn, 341 U.S. 6, 11-16, 71 S.Ct. 534, 538-541, 95 L.Ed. 702 (1951).⁹ Where recovery in the allegedly removable claim is dependent on the result in the non-removable claim, the claims are not "separate and independent" within the meaning of § 1441(c).¹⁰

Here, FMC seeks to recover money owed it. In the franchisees' action against Ford, they attack Ford's conduct in inducing the franchisees to purchase the dealership. The course of conduct by which Ford induced the franchisees to buy the dealership was entirely separate from FMC's conduct in loaning the franchisees money.¹¹ Ford may well have misrepresented facts and violated the Illinois Franchise Disclosure Act's provisions but that in no way operates as a defense to FMC's claim for money owed it. The two claims are based on entirely separate contractual relationships — one between the franchisees and their franchisor, Ford, and another between the franchisees and their finance company, FMC. Ford's liability is in no way dependent on the result in the action between FMC and the franchisees.

Ted Lokey Real Estate Co. v. Gentry, 336 F.Supp. 741 (N.D.Tex.1972) is similar to this case. There the plaintiff sued on a contractual warranty, and the defendant filed a third party action alleging that its breach of the warranty was caused by the failure of the third party defendant to live up to a separate contract it had entered with the defendant. The court held that the third party action was a separate and independent claim, since it was premised on a separate contractual relationship from that between the plaintiff and defendant. The same is true here. The third party action against Ford is based on a separate relationship and a different course of allegedly wrongful conduct — Ford's inducements to get the franchisees to buy the dealership — than is the original action against the franchisees which is based on FMC's financing contract with them. The "separate and independent claim" requirement of § 1441(c) is satisfied here.

For removal to be proper under § 1441(c), it must also be the case that the third party action be "joined with one or more otherwise non-removable claims." A number of courts have concluded that this language refers only to claims "joined" by the plaintiff, so that a removable claim added to the case by a third party plaintiff fails to satisfy the statute.¹² However, nothing in the statute compels this construction.

The word "join" is defined "to become united, associated or combined" or "to bring or put together." citing dictionaries This Court sees no reason to apply any other meaning to the word "joined" in its statutory sense. Had Congress intended that the statute be construed to apply only to separate causes of action "joined" by the plaintiff, it could easily have added the words "by the plaintiff" to the statute. The third party practice rules ... contemplate the joining, combining and associating of two causes of action for the purpose of trial. That practice facilitates the trial of multiple issues wherein several liability of parties may more easily be determined in one cause, and it, therefore, fulfills the national purpose of facilitating judicial procedure by avoiding duplication of effort and diminishing multiplicity of suits so that full justice may be done as simply and expeditiously as possible. This Court is, therefore, of the opinion that a third-party procedure is a procedure which is "joined" with the original proceeding for determination by a court within the meaning of the term "joined" as it appears in § 1441(c).

Gamble v. Central of Georgia Railway Co., 356 F.Supp. 324, 330 (M.D.Ala.), rev'd on other grounds, 486 F.2d 781 (5th Cir.1973). Construing § 1441(c) to include only claims joined by the plaintiff inserts qualifying language into the statute not placed there by Congress. A separate and independent claim against a third party defendant placed into a single lawsuit with the claims brought by the original plaintiff is as much "joined" to those claims as any other type of claim, and may be removed under § 1441(c). Carl Heck Engineers, Inc. v. Lafourche Parish Police Jury, 622 F.2d 133, 136 (5th Cir.1980).

Determining that the third party complaint presents a "separate and independent claim" that is "joined" to a non-removable claim within the meaning of § 1441(c) does not end the analysis, however.¹³ It must still be determined whether that separate and independent claim "would be removable if sued on alone" within the meaning of the statute. For that we must look to the other subsections of § 1441.¹⁴

II

The general rule on removability of actions is stated in 28 U.S.C. § 1441(a) (1976).

Except as otherwise expressly provided by Act of Congress, 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, to the district court of the United States for the district and division embracing the place where such action is pending.

Id.

Some courts have held that a third party defendant such as Ford is not a "defendant" within the meaning of the statute.¹⁵ If Congress intended "defendant" to include only defendants in the original state action, Ford would not be eligible to remove under § 1441(a).

The starting point for examining the meaning of the term "defendant" in the statute, which is a question of federal law and does not turn on how the party seeking removal is characterized under state law, see Chicago, Rock Island & Pacific Railroad Co. v. Stude, 346 U.S. 574, 579-80, 74 S.Ct. 290, 294-295, 98 L.Ed. 317 (1954), is West v. Aurora City, 73 U.S. (6 Wall.) 139, 18 L.Ed. 819 (1867). There, the plaintiff filed a non-federal claim in state court. The defendant responded with a counterclaim which could have...