Schur v. L.A. Weight Loss Centers, Inc.

• Decision Date: 14 August 2009
• Docket Number: No. 07-3761.,07-3761.
• Citation: 577 F.3d 752
• Parties: Carolyn SCHUR, Special Administrator of the Estate of Pamela Hoppe, Deceased, Plaintiff-Appellant, v. L.A. WEIGHT LOSS CENTERS, INC., Shani Poole, and Courtney Morr, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

577 F.3d 752

Carolyn SCHUR, Special Administrator of the Estate of Pamela Hoppe, Deceased, Plaintiff-Appellant, v. L.A. WEIGHT LOSS CENTERS, INC., Shani Poole, and Courtney Morr, Defendants-Appellees.

No. 07-3761.

United States Court of Appeals, Seventh Circuit.

Argued February 26, 2009.

Decided August 14, 2009.

William J. Harte, Joan M. Mannix (argued), Harte & Associates, Chicago, IL, for Plaintiff-Appellant.

Pamela M. Triplett, Balfour & Associates, Chesterfield, MO, Andrew C. Efaw (argued), Wheeler Trigg Kennedy, Denver, CO, for Defendants-Appellees.

Before BAUER, KANNE, and SYKES, Circuit Judges.

KANNE, Circuit Judge.

Illinois citizen Pamela Hoppe died of liver failure a few months after beginning a diet program offered and administered by L.A. Weight Loss Centers, Inc. Hoppe's sister, Carolyn Schur, filed suit against the company on behalf of Hoppe's estate in Illinois state court. L.A. Weight Loss removed the case to the Southern District of Illinois based on diversity of citizenship. A magistrate judge subsequently granted Schur leave to amend her complaint to join three new defendants, two of whom were Illinois citizens. Eleven days after filing her second amended complaint, Schur moved to remand the case to Illinois state court because the new parties negated complete diversity. The district judge denied Schur's motion to remand, finding that Schur had fraudulently joined the two Illinois defendants to destroy the court's diversity jurisdiction. The judge struck Schur's second amended complaint and ultimately granted summary judgment against her.

In addition to appealing the summary judgment decision, Schur claims that the district judge erred by striking her second amended complaint after denying her motion to remand the case to state court. If that decision was error, she claims that the district court did not have jurisdiction to grant summary judgment. This case presents a series of interesting jurisdictional issues, some of which we have not previously considered. In the end, we agree with Schur that L.A. Weight Loss did not establish that joinder was inappropriate, and therefore the district judge erred in declining to remand the case to Illinois state court.

I. BACKGROUND

In mid-2004, forty-two-year-old Pamela Hoppe resolved to lose weight. To achieve her goal, Hoppe enrolled in a diet and weight loss program offered by her local L.A. Weight Loss Center in O'Fallon, Illinois ("the Center"). During Hoppe's initial visit on April 27, 2004, the Center's assistant manager, Courtney Morr, explained the services that L.A. Weight Loss offered, requested that Hoppe complete an information and medical history form, and enrolled her in a program. In addition to providing a strict diet and weekly counseling, the program suggested that Hoppe take a regimen of nutritional supplements. That same day, Hoppe purchased a three-month supply of five supplements marketed and sold by L.A. Weight Loss. She began her program, and less than one month later, she purchased an additional three-month supply of two of the supplements.

Tragically, Hoppe would not need the additional supply. On August 5, 2004, she visited a local hospital complaining of jaundice and nausea. The hospital transferred her to St. Louis University Hospital, where she was diagnosed with acute liver hepatitis. Hoppe's condition deteriorated, and she died on August 29.

On April 13, 2005, Carolyn Schur, Hoppe's surviving sister, filed suit on behalf of Hoppe's estate in Illinois state court. The complaint alleged a variety of state law claims against L.A. Weight Loss arising from the administration of Hoppe's diet program. Specifically, Schur claimed that the recommended nutritional supplements caused Hoppe's liver failure. She averred that L.A. Weight Loss improperly recommended supplements without testing their safety, failed to warn Hoppe of the associated risks, lacked adequate procedures for ensuring the safety of its diet plans, and provided dangerous mixtures of supplements. Schur later presented evidence from Hoppe's treating physicians and one expert witness suggesting that her liver condition was drug-induced. These witnesses also testified that certain ingredients in the supplements could be toxic to the liver: chromium, borage seed oil, Ho Shou Wu, Gotu Kola, and niacinamide.

On May 17, 2005, L.A. Weight Loss, incorporated in Delaware with its principal place of business in Pennsylvania, removed the suit to the Southern District of Illinois based on diversity of citizenship. See 28 U.S.C. §§ 1332(a), 1441(a). The parties proceeded with discovery in federal court for over one year, until August 3, 2006, when Schur filed a motion for leave to amend her complaint to add claims against three additional defendants. L.A. Weight Loss did not object to or oppose the motion.

A magistrate judge granted Schur's motion for leave to amend on August 10, 2006, and Schur filed her second amended complaint the next day. Among other amendments, Schur added negligence claims against two L.A. Weight Loss employees: Morr, the assistant manager who enrolled Hoppe in the weight loss program and sold her the supplements; and Shani Poole, the general manager, who allegedly approved, participated in, or supervised Hoppe's program. Poole and Morr, both Illinois citizens, each answered the newly amended complaint. Neither defendant moved to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). L.A. Weight Loss did not challenge the magistrate judge's order permitting the joinder.

On August 21, Schur moved to remand the case to state court because the addition of Poole and Morr as defendants destroyed the federal district court's diversity jurisdiction. L.A. Weight Loss opposed the motion on the ground that Schur had fraudulently joined the nondiverse defendants. The district judge agreed with L.A. Weight Loss on March 5, 2007, finding that it was "reasonably unlikely" that Schur could prevail against the individual defendants because Illinois law would not permit Poole and Morr to be personally liable for torts committed within the scope of their employment. The district judge also noted that joinder was untimely because Schur had known of Poole and Morr's identities for nearly one year prior to joining them as parties. Because Schur did not properly join the nondiverse defendants, the district judge struck her second amended complaint, and, with diversity jurisdiction still intact, denied her motion to remand. The judge granted Schur leave to re-amend her complaint, but she instead filed a motion for reconsideration, which the district judge denied.

The case progressed, and L.A. Weight Loss filed a motion for summary judgment on July 16, 2007, which the district court granted on October 17. Schur now appeals and claims that the district judge erred in (1) denying her motion to remand after she properly joined two nondiverse parties, and (2) granting summary judgment against her.¹ We agree with Schur that the district judge improperly denied remand, and we therefore do not reach the merits of the court's summary judgment ruling.

II. ANALYSIS

Before we may address Schur's substantive arguments, we must first examine the basis for federal jurisdiction. See Aaron v. Mahl, 550 F.3d 659, 662 (7th Cir.2008). We review de novo questions of subject matter jurisdiction, including the denial of a motion to remand, Price v. Wyeth Holdings Corp., 505 F.3d 624, 628 (7th Cir.2007), but we typically review a district court's decision to deny joinder for an abuse of discretion, see Perrian v. O'Grady, 958 F.2d 192, 194 (7th Cir.1992).

According to Schur, after the magistrate judge allowed her to join two nondiverse defendants, the district court no longer possessed diversity jurisdiction and was required to remand the case to state court. L.A. Weight Loss, however, maintains that the district judge had the authority to reconsider the magistrate judge's order, determine that joinder was inappropriate, refuse to join the nondiverse defendants, and retain subject matter jurisdiction. Both parties are correct on certain points, but the analysis is not as simple as either party suggests.

A. Diversity Jurisdiction, Removal, and Joinder of a Nondiverse Defendant

Although federal diversity jurisdiction provides a neutral forum for lawsuits between parties from different states, we interpret such jurisdiction narrowly and require complete diversity of citizenship to invoke it. Poulos v. Naas Foods, Inc., 959 F.2d 69, 71 (7th Cir.1992) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806)); see also 28 U.S.C. § 1332(a).² When a plaintiff files suit in state court but could have invoked the original jurisdiction of the federal courts, the defendant may remove the action to federal court. See 28 U.S.C. § 1441(a). The party seeking removal has the burden of establishing federal jurisdiction, and federal courts should interpret the removal statute narrowly, resolving any doubt in favor of the plaintiff's choice of forum in state court. Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993). L.A. Weight Loss properly removed this action to the Southern District of Illinois based on diversity jurisdiction on May 17, 2005.

Following removal, Schur sought to join as defendants two Illinois residents whose presence would destroy diversity jurisdiction. When joinder of a nondiverse party would destroy subject matter jurisdiction,³ 28 U.S.C. § 1447(e) applies and provides the district court two options: (1) deny joinder, or (2) permit joinder and remand the action to state court. See Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1486 (7th Cir.1996). These are the only options; the district court may not permit joinder of a nondiverse defendant and retain jurisdiction. See Mayes v. Rapoport, 198 F.3d 457, 462 (4th Cir.1999); see also David D. Siegel, Commentary on 1988 Revision of Section 1447, in 28...