Donald R. Wild and Diana H. Wild v. Subscription Plus, Inc.
Docket: 01-3406
Court: Court of Appeals for the Seventh Circuit; May 31, 2002; Federal Appellate Court
A personal injury lawsuit was initiated by Donald R. Wild and Diana H. Wild following the death of their son in an accident in Wisconsin, with federal jurisdiction based on diversity of citizenship. Initially filed in Louisiana, the case was transferred to Wisconsin by a federal district judge, who found Louisiana to be an improper venue for the defendants. The Wisconsin court denied the plaintiffs’ motion to return the case to Louisiana and subsequently granted motions to dismiss or for summary judgment from several defendants. Following settlements with other defendants, a final judgment was issued, leading to this appeal, primarily questioning the legality of the transfer from Louisiana to Wisconsin.
A significant issue arose regarding the jurisdictional statement in the plaintiffs’ brief, which incorrectly suggested that Progressive Northern Insurance Company was a citizen of both Wisconsin and Ohio without confirming its corporate status. Under 28 U.S.C. § 1332(c)(1), a corporation is considered a citizen of its state of incorporation and where it has its principal place of business. The plaintiffs failed to specify that the insurance companies were corporations, although they are, thus implying possible compliance with the complete diversity requirement. Furthermore, one defendant's corporate charter had been revoked before the lawsuit was filed, raising questions about jurisdiction since it is typically assessed at the time of filing. A precedent from this court indicates that retroactive reinstatement of a corporate charter can confer jurisdiction, although generally, jurisdiction is determined as of the date of the suit when the charter was not active.
An entity's citizenship after the revocation of its corporate charter is determined by the law of the state that issued and revoked the charter. Many states, including Oklahoma, allow corporations with revoked charters to continue functioning for legal purposes until actual dissolution. Consequently, the revocation of Subscription Plus's charter does not affect its diversity status.
Mutual Fire and Automobile Insurance Company is described as a "foreign insurer" in Louisiana, with its actual incorporation in Ohio, which maintains diversity. Although the plaintiffs claim it is not a Louisiana citizen, the basis for this assertion is unclear, as they did not verify Mutual’s principal place of business. However, the issue of incomplete diversity was resolved when Mutual was dropped as a party, as allowed under Newman-Green precedent.
The case centers around Subscription Plus, owned by Karleen Hillery, which processes magazine subscriptions and contracted Y.E.S. for sales. Joseph Wild, a salesman for Y.E.S., was involved in a tragic van crash while on duty in Wisconsin, which resulted in multiple fatalities. Lawsuits were filed in Wisconsin against various parties, including Hillery and the liability insurers, due to Louisiana's legal provisions allowing direct actions against insurers.
Section 1406(a) of the Judicial Code allows a judge to transfer a suit filed in an improper venue to a proper district. In this case, the district judge in Louisiana determined that venue was improper because none of the defendants resided there or could be served, and a significant portion of the events related to the claim did not occur in Louisiana. The ruling is not contested, and the Western District of Wisconsin is deemed a suitable venue since the accident occurred there, making it more convenient for litigation. All related suits have been consolidated in Wisconsin, allowing the defendants to centralize their defense efforts.
The motion to retransfer was based on the judge's prior ruling that Hillery could not be served under Wisconsin's long-arm statute, which would have required splitting the Wilds' suit between Wisconsin and Louisiana. Subsequently, a suit against Hillery in Louisiana was transferred to Wisconsin after a Wisconsin state court interpreted the long-arm statute to include Hillery. Although the ruling is unpublished and not binding, its validity is not challenged by the parties.
Given these circumstances, there is little enthusiasm for returning the case to Louisiana, especially since venue cannot be established there, leading to either dismissal or transfer. If the judge had correctly applied Wisconsin law regarding Hillery's personal jurisdiction, the claim against her would have been part of the current case. Nonetheless, the claim remains active in the district court despite motions to dismiss it based on res judicata, and the plaintiffs are not in a worse position than they would have been had the previous dismissal not occurred.
The court disagrees with the plaintiffs' assertion that a transfer under section 1406(a) or the similar section 1404(a) is invalid if one defendant in a multi-defendant case cannot be served in the transferee district. In a scenario where only one defendant exists, the inability to serve would render transfer improper, as the suit "could not be brought" there. This principle holds even in a multi-defendant case, where the 13 defendants are geographically dispersed. If the initial venue in Louisiana was improper for any defendant, the case would need to be dismissed entirely, compelling the plaintiffs to sue each defendant in different jurisdictions. Such an outcome contradicts the intent of section 1406(a), designed to allow transfers to prevent the dismissal of cases and the resultant injustice to plaintiffs who may misjudge venue facts. The Supreme Court's decision in Goldlawr, Inc. v. Heiman underscores the legislative intent to provide remedies that avoid injustices like losing claims due to procedural missteps, emphasizing the importance of maintaining access to the courts in such situations.
There is no absolute prohibition against transferring a multidefendant lawsuit to a district where one defendant cannot be served. However, questions arise regarding whether an unserved defendant can be compelled to defend in the new district or whether that defendant must be severed from the suit, potentially leading to dismissal or transfer back to the original district where service is possible. Case law supports the dismissal of unserved defendants, reinforcing that transfer statutes do not change personal jurisdiction rules as defined by the Constitution.
Regarding the merits, the nonsettling defendants include Subscription Plus, the dealership involved, and several insurance companies. As Y.E.S. was an independent contractor for Subscription Plus, negligence from its employee, Holmes, cannot be attributed to Subscription Plus. Exceptions to this rule are not applicable here, and if Holmes were an employee, he would be covered by Wisconsin's workers' compensation law, which preempts tort claims against employers.
The claim against the dealership is deemed frivolous since Lane presented a valid driver's license and proof of insurance at the time of purchase, providing no basis for attributing negligence to the dealer.
The remaining claims are against the insurance companies. Acceptance and Scottsdale, the liability insurers for Subscription Plus and Hillery, respectively, cannot be directly sued unless their policies were issued or delivered in Wisconsin. Neither policy meets this criterion, and since both Subscription Plus and Hillery were properly dismissed from the case, their insurers were also dismissed.
Lane owned a green van involved in a crash and was insured by Progressive, which had previously covered a white van that was out of service. The green van was acquired in January 1999, while the insurance policy for the white van became effective on March 5, with the accident occurring on March 25. The insurance policy allows coverage for replacement vehicles for a maximum of 30 days without notifying the insurer. The plaintiffs contend that the 30-day period should start from March 5, despite the green van being in service prior to that date. The court concludes that the green van was either never covered due to being acquired before the policy began, or it was in use for over 30 days without the required notification. Additionally, the court emphasizes the necessity for the insurer to be informed about any vehicles to avoid insuring them indefinitely without knowledge. The document also criticizes the parties' jurisdictional statements, likening the case to a previous one where lawyers were reprimanded for neglecting jurisdictional requirements. The court ultimately affirms the decision.
