Pollution Control Industries of America, Inc. v. Van Gundy

Decision Date04 April 1994
Docket NumberNo. 93-2259,93-2259
Citation21 F.3d 152
PartiesPOLLUTION CONTROL INDUSTRIES OF AMERICA, INC., a Missouri Corporation, Plaintiff-Appellant, v. Linda R. VAN GUNDY, Jack J. Genova and Michael J. Genova, Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Nathaniel Ruff, Lesniak & Ruff, East Chicago, IN (argued), for Pollution Control Industries of America, Inc.

Randall J. Nye (argued), Larry L. Chubb, Beckman, Kelly & Smith, Hammond, IN, for Linda R. Van Gundy, Jack J. Genova and Michael J. Genova.

Before GIBSON, * KANNE and ROVNER, Circuit Judges.

ROVNER, Circuit Judge.

Pollution Control Industries of America ("PCIA") filed this breach of contract action against Linda Van Gundy and Jack and Michael Genova on March 12, 1990. PCIA, a Missouri corporation with its principal place of business in Indiana, invoked the court's diversity jurisdiction, alleging that all of the defendants were residents of Kansas. (R. 1.) On May 4, 1990, the defendants filed a motion to dismiss for lack of personal jurisdiction, arguing that they had insufficient contacts with the state of Indiana to be sued there. (R. 5-6.) The defendants also requested that Fed.R.Civ.P. 11 sanctions be imposed on the plaintiffs for "bring[ing] suit in a plainly improper federal forum." (R. 6.) In attached affidavits, both Jack Genova and Linda Van Gundy attested, inter alia, that they were "resident[s] and citizen[s]" of Kansas and that they lived at Kansas addresses. Michael Genova attested as follows:

I am a resident and citizen of the State of Kansas. My residence address is 404 East 74th Street, Kansas City, Missouri.

(R. 5 (emphasis added).) The defendants did not contest the existence of diversity jurisdiction and, in view of their pending motion to dismiss, did not answer PCIA's complaint, which had alleged that Michael Genova was a "resident" of Kansas and that diversity existed.

The district court did not rule on the defendants' motion to dismiss and the parties proceeded with discovery. A bench trial was set for March 4, 1991. The defendants filed a motion for summary judgment on January 29. (R. 32.) At a final pre-trial conference held on February 15, 1991, the court indicated that it was inclined to grant the defendants' motion to dismiss for lack of personal jurisdiction, but did not cancel the March 4 trial date.

On February 19, 1991, PCIA filed a "Suggestion of Lack of Subject Matter Jurisdiction," indicating that complete diversity was lacking because Michael Genova was a "citizen" of Missouri. In particular, PCIA noted:

During a recent pretrial conference, Defendants' counsel stated that he does not believe that Federal jurisdiction would exist in the District Courts in Kansas or Missouri because of incomplete diversity, since one or more of the Defendants lives in each of these states.

* * * * * *

Following this suggestion, Plaintiff's counsel reviewed the deposition[ ] of Michael Genova ... taken January 10, 1991 ... It appears from [this] deposition[ ] that Michael Genova is a citizen of Missouri....

(R. 67, pp 5-6.) PCIA appended the following excerpt from Genova's January 10, 1991 deposition:

Q: What is your address?

A: 404 East 74th Street, Kansas City, Missouri, 64131.

Q: Is that where you live?

A: Yes.

(R. 67.) PCIA had apparently failed to notice the same statement in Genova's original affidavit, which had been filed in May 1990. PCIA's "Suggestion" also stated that "[p]laintiff's counsel has discussed the matters raised herein with Defendants' counsel. Michael Genova told Defendants' counsel that he was living in Missouri at the time the complaint was filed." (Id. at p 7.) 1

Finally, on March 15, 1991, the district court dismissed PCIA's complaint, without prejudice, finding that the court lacked personal jurisdiction over the defendants because they did not have sufficient contacts with the state of Indiana. (R. 70.) The court's eighteen page Memorandum Opinion and Order did not mention the issue of subject matter jurisdiction and did not rule on the defendants' request for Rule 11 sanctions. On March 25, the defendants filed a Fed.R.Civ.P. 59(e) motion to alter or amend the March 15 judgment to include an award of attorney's fees and costs under Rule 11. (R. 72.) In line with both their own litigating strategy and with the court's March 15 order, the defendants' motion focused only on the question of personal jurisdiction and did not mention subject matter jurisdiction. In its reply to defendants' motion, however, PCIA did advert to the latter issue, asserting that defendants were responsible for any factual deficiencies in that regard:

The face of the record shows that the complete diversity between Plaintiff and the Defendants required for subject matter jurisdiction based on diversity of citizenship does not exist in this case. Plaintiff is a citizen both of Missouri, its state of incorporation, and Indiana, its principal place of business, under F.R.C.P. 1332(c). Michael Genova is a resident and a citizen of Missouri, and was so at the time the lawsuit was filed. The Court recognized this fact in its Findings and Order of March 15, 1991. (See also Exhibit A, Defendants' affidavits, and documents submitted with it.) Defendants presented nothing to the Court indicating that Michael Genova's citizenship at the time this lawsuit was filed was different than Missouri.

* * * * * *

Defendants were the parties best placed to determine the incomplete diversity, and thus lack of subject matter jurisdiction, and present this to the Court by a motion to dismiss or otherwise.

(R. 73 pp 5-6.) Attached as Exhibit A to the reply was a "Petition on a Promissory Note" that had been filed by the Genovas and Van Gundy in a simultaneous state court action between the parties. The petition, dated July 13, 1990, stated:

Michael J. Genova, is a citizen and resident of Kansas City, Jackson County, Missouri ... Jack J. Genova and Linda Van Gundy are citizens and residents of Johnson County, Kansas.

(R. 73 Ex. A.)

The court granted Rule 11 sanctions in a May 15, 1991 order. 2 But, notwithstanding the basis of defendants' motion, the court's sanctions award did not rest on the issue of personal jurisdiction. Instead, the court sanctioned PCIA because of its failure to determine whether diversity existed before filing the action and its failure to promptly dismiss the action upon discovery of the error:

This court finds that had plaintiff's counsel made appropriate inquiry into the facts of this cause of action prior to filing the lawsuit in this district, and in this court, he would have known that this forum was inappropriate. Plaintiff's counsel's claim that the defendants were the appropriate parties to notify this court whether diversity jurisdiction was present is meritless. Counsel may not drop papers into the hopper and insist that the court or opposing counsel undertake bothersome factual or legal investigation to ascertain whether his claims are actually well-founded in fact and in law.

* * * * * *

As plaintiff's counsel concedes in his reply filed April 2, 1991, the face of the record shows that complete diversity, which is necessary in order for this court to exercise jurisdiction under 28 U.S.C. Sec. 1332(c), does not exist in this case and did not exist at the time this cause of action was filed. Plaintiff's counsel's actions in failing to voluntarily dismiss this cause of action when this information was brought to light only compounds his error in failing to ascertain the existence of diversity jurisdiction before he filed suit. Accordingly, this court will impose sanctions upon plaintiff's counsel under Rule 11 of the Federal Rules of Civil Procedure and under 28 U.S.C. Sec. 1927, which requires that counsel personally satisfy the award of sanctions.

(R. 78 at 7-8.) The court ordered the defendants to file an affidavit in support of fees and costs, and they did so on May 23, 1991.

PCIA had in the meantime filed a notice of appeal from the district court's March 15 judgment of dismissal, and we heard argument in the case on September 16, 1992, before the district court had entered a final judgment on the sanctions issue. PCIA conceded the propriety of the dismissal, but argued that it should have been based on the lack of subject matter rather than personal jurisdiction. We dismissed the appeal for lack of appellate jurisdiction, finding that PCIA could not appeal a judgment merely in order to contest the lower court's reasoning. See Pollution Control Indus. of America Inc. v. Van Gundy, 979 F.2d 1271 (7th Cir.1992). 3

On April 26, 1993, the district court awarded the defendants a total of $15,504.26 in fees and expenses. (R. 92.) The court arrived at that amount after excluding expenses related to defendants' motion for summary judgment and a portion of their discovery, both of which the court determined could be utilized in their pending state court action. PCIA now appeals from that order.

But, consistent with its conduct throughout this suit, PCIA has completely neglected on appeal to address the grounds on which sanctions were granted--its failure to properly investigate the existence of diversity jurisdiction. Instead, its entire brief focuses solely on the question of personal jurisdiction. In light of that oversight, we might hold simply that PCIA has waived its opportunity to challenge the district court's award of sanctions. But the defendants have been equally remiss in their response by failing to note PCIA's error and by themselves addressing only the issue of personal jurisdiction. They have thereby waived PCIA's waiver just as thoroughly as PCIA waived its own arguments in the first instance. Indeed, it is both parties' significant responsibility for the ill-fated course of this lawsuit and the resulting accrual of unnecessary costs that prompts us ultimately to vacate the district court's award of sanctions.

...

To continue reading

Request your trial
46 cases
  • Smart v. Local 702 Intern. Broth. of Elec. Workers, 07-4088.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • April 7, 2009
    ...jurisdiction, bears the burden of demonstrating that the requirements for diversity are met. See Pollution Control Indus. of America, Inc. v. Van Gundy, 21 F.3d 152, 155 (7th Cir.1994). Specifically, Mr. Smart must establish "complete diversity," "meaning that no plaintiff may be from the s......
  • Smith v. City of Chicago, 97 C 1865.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • February 6, 1998
    ...residency. Guaranty National Title Co., Inc. v. J.E.G. Assocs., 101 F.3d 57, 59 (7th Cir.1996); Pollution Control Indust. of America, Inc. v. Van Gundy, 21 F.3d 152, 155 n. 5 (7th Cir.1994); America's Best Inns, Inc. v. Best Inns of Abilene, L.P., 980 F.2d 1072, 1074 (7th Cir.1992); Viacom,......
  • Cassens v. Cassens, Civ. 06-186-GPM.
    • United States
    • United States District Courts. 7th Circuit. Southern District of Illinois
    • April 28, 2006
    ...by a party's domicile, see Gilbert v. David, 235 U.S. 561, 569, 35 S.Ct. 164, 59 L.Ed. 360 (1915); Pollution Control Indus. of Am., Inc. v. Van Gundy, 21 F.3d 152, 155 n. 4 (7th Cir.1994), which means the state where a party is physically present with an intent to remain there indefinitely.......
  • Metabolife Intern., Inc. v. Wornick, Civil Action No. 99-CV-1095 R(RBB).
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • July 19, 2002
    ...to mitigate damages even if the plaintiff is not completely blameless in bringing the case. See Pollution Control Industries of America, Inc. v. Van Gundy, 21 F.3d 152, 156 (7th Cir.1994). Although the Court acknowledges the validity of this principle, Pollution Control is easily distinguis......
  • Request a trial to view additional results
2 books & journal articles
  • Table of Cases
    • United States
    • James Publishing Practical Law Books Preparing for Trial in Federal Court
    • May 4, 2010
    ...Pollitt v. General Motors Corp. , 894 F.2d 858, 861 (6th Cir. 1990), §7:82 Pollution Control Industries of America, Inc. v. Van Gundy , 21 F.3d 152, 156 (7th Cir. 1994), §7:194 Polygon Ins. Co., Ltd. v. Honeywell Int’l Inc. , 143 F.Supp. 2d 211 (D. Conn. 2001), §7:116 Polys v. Trans-Colorad......
  • Motions
    • United States
    • James Publishing Practical Law Books Preparing for Trial in Federal Court
    • May 4, 2010
    ...11 for a violation serious enough to qualify for sanctions under that rule. Pollution Control Industries of America, Inc. v. Van Gundy , 21 F.3d 152, 156 (7th Cir. 1994). In fact, Rule 11 motions should be filed “promptly” after the violation is discovered. Be careful—a failure to file a pr......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT