Armstrong, Juan v. LaSalle Bank Nat'l ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-2280
JUAN A RMSTRONG, JAMES E. D UCKETT,
R ODERICK G ILLESPIE, et al.,
Plaintiffs-Appellees,
v.
L AS ALLE B ANK N ATIONAL A SSOCIATION,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 01 C 2963—James B. Moran, Judge.
A RGUED JANUARY 17, 2008—D ECIDED JANUARY 13, 2009
Before R IPPLE, R OVNER, and T INDER, Circuit Judges.
R OVNER, Circuit Judge. This appeal originated as a
number of lawsuits against Amsted Industries, Inc., its
Employee Stock Ownership Plan (ESOP), and Amsted
officers, by participants in Amsted’s ESOP, charging
violations of ERISA, breaches of fiduciary duty, breach
of contract and conversion. Those cases were initiated in
district courts in Alabama, Illinois, and Florida, but on
2 No. 07-2280
August 22, 2001, the Judicial Panel on Multidistrict Litiga-
tion (the Panel) granted the defendants’ motion to trans-
fer the cases under 28 U.S.C. § 1407 to the Northern
District of Illinois for consolidated pretrial proceedings.
The Panel is authorized to transfer to one district civil
actions involving common questions of fact that were
pending in multiple districts. The Panel must first deter-
mine that the transfer will further “the convenience of the
parties and witnesses and will promote the just and
efficient conduct of such actions.” 28 U.S.C. § 1407. With
one exception not applicable here, the transfer and con-
solidation is only for pretrial proceedings, and the cases
are remanded to the original courts at the conclusion of
those proceedings. 28 U.S.C. § 1407, 1407(h).
Upon the transfer, the district court ordered the
parties to file two consolidated cases—one consisting of
Amsted retirees and one of non-retirees. The non-retirees’
consolidated complaint added LaSalle Bank, as Trustee
for Amsted’s ESOP, as a defendant. Through settlement or
dispositive motions, all retiree claims, and all non-retiree
claims against Amsted and its affiliated defendants, were
dismissed, and only the non-retiree claims against
LaSalle remain alleging that LaSalle made an imprudent
valuation of the company’s stock, causing heavy losses.
In the consolidated complaint, the non-retiree plaintiffs
(hereinafter simply the “plaintiffs”) included a statement
that “venue is proper in this court.” In addition, they
repeatedly acquiesced in the district court’s setting of a
timeline for discovery and trial, including the setting of
trial dates. At the close of pretrial proceedings and ap-
No. 07-2280 3
proximately two weeks before the pretrial order was due,
however, the plaintiffs moved for a remand of their
claims pursuant to 28 U.S.C. § 1407. LaSalle objected,
arguing that the plaintiffs by their conduct had waived the
right to a remand and had consented to venue in the
Northern District of Illinois.
The district court rather reluctantly granted the
remand request, holding that the plaintiffs had not con-
sciously waived their right to object to venue. In so hold-
ing, the district court stated that a waiver entails the
deliberate relinquishment of a known right, and that
waivers generally must be clear and unambiguous. Al-
though the dilatory behavior of the plaintiffs in failing to
make clear at an earlier time their intent to seek remand
caused the court consternation, the court believed that
the conduct was not enough to constitute waiver of
that remand right. The court further noted that it would
be a “nightmare scenario” for it to retain jurisdiction
and try the case only to have that initial decision over-
turned on appeal. Although the court granted the
remand request, it ultimately certified two questions to
this court under 28 U.S.C. § 1292(b): (1) “[w]hether the
filing of an amended complaint agreeing to venue and
jurisdiction in the transferee court, and which adds a
defendant that may only fairly be sued in the transferee
court, constitutes consent to trial in the transferee court
sufficient to overcome the right to seek remand under
28 U.S.C. § 1407(a) and the Supreme Court’s decision in
Lexecon, Inc. v. Milberg Weiss Berchad Hynes & Lerach,
523 U.S. 26 (1998)”; and (2) “[w]hether a waiver of the
right to remand under Section 1407(a) requires evidence
4 No. 07-2280
of a ‘deliberate relinquishment of a known right’ or may
be shown implicitly by conduct inconsistent with an
intent to seek remand.”
The defendant argues on appeal that the district court
erred in determining that the plaintiffs had not waived
their right to a remand under § 1407(a). In evaluating this
claim, we are guided in the first instance by the words of
the statute itself. Section 1407(a) provides for the transfer
and consolidation of civil actions involving common
questions of fact pending in different districts. The trans-
fers are made by the Panel upon its determination that
the transfers would further the convenience of parties
and witnesses and promote the just and efficient conduct
of such actions. Id. Section 1407(a), however, also pro-
vides that “[e]ach action so transferred shall be remanded
by the panel at or before the conclusion of such pretrial
proceedings to the district from which it was transferred
unless it shall be previously terminated.” (emphasis added)
Id. The Supreme Court in Lexecon, Inc. v. Milberg Weiss
Bershad Hynes & Lerach et al., 523 U.S. 26 (1998), was
emphatic that the remand language should be given its
plain meaning, stating that “[t]he Panel’s instruction
comes in terms of the mandatory ‘shall,’ which normally
creates an obligation impervious to judicial discretion.” Id.
at 35. In Lexecon, the Court struck down a long-standing
practice whereby a district court would transfer a case
to itself where retaining the case would promote efficient
resolution of the claims. The Panel itself had sanctioned
such assignments in a rule issued in reliance on its
rulemaking authority under 28 U.S.C. § 1407(f). Id. at 32.
The Court held that regardless of whether permitting
No. 07-2280 5
transferee courts to make self-assignments would be
more desirable than preserving a plaintiff’s choice of
venue, § 1407(a) categorically limits the authority of
courts to override the plaintiff’s choice and establishes
a right to remand once the pretrial stage has been com-
pleted. Id. at 41-42.
We begin, then, with the proposition that the case
shall be remanded by the district court at the conclusion
of the pretrial proceedings, unless it is otherwise termi-
nated as by the granting of a dispositive motion. Although
the defendant at times suggests otherwise, there is no
need for plaintiffs to assert their intention to seek such
remand in order for the right to exist. Instead, the pre-
sumption is that the case will be remanded at the close
of pretrial proceedings. Because § 1407(a) is a venue
statute, however, plaintiffs may waive their right to the
remand and consent to venue in the transferee court,
here the Northern District of Illinois. The district court
held that such a waiver may be found only if the plain-
tiffs deliberately relinquished a known right and that
the waiver must be clear and unambiguous. The court
held that the plaintiffs had failed to cross that threshold.
The proper standard to apply in demonstrating waiver
is the subject of much debate by the parties in this case.
The defendant asserts that the requirement that a
waiver be clear and unambiguous is applicable only for
the waiver of constitutional rights, and that any conduct
inconsistent with an intent to seek remand will suffice
to demonstrate waiver of the § 1407(a) remand right.
Neither party has been able to point us to any cases
discussing this issue in the context of § 1407—a reflection,
6 No. 07-2280
undoubtedly, of the relatively minimal caselaw on the
subject. We have addressed waiver in an analogous
context, however, involving the waiver of the right to
arbitration, and find that approach persuasive here.
As we noted in Automobile Mechanics Local 701 Welfare
and Pension Funds v. Vanguard Car Rental USA, Inc., 502
F.3d 740 (7th Cir. 2007), an arbitration clause is a
species of forum selection clause, reflecting an ex ante de-
termination by the parties of the most convenient forum to
resolve disputes. Id. at 746, citing Vimar Seguros y
Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 533-34
(1995). Such determinations are subject to waiver or
forfeiture, and as a general rule a district court should
not dismiss sua sponte either for improper venue or for
failure to follow a forum selection clause. In determining
whether a party has waived the right to enforce that
arbitration clause, we held that “[c]ourts must ‘determine
whether based on all the circumstances, the party
against whom the waiver is to be enforced has acted
inconsistently with the right to arbitrate.’ ” Halim v. Great
Gatsby’s Auction Gallery, Inc., 516 F.3d 557, 562 (7th Cir.
2008). That analysis of whether a party implicitly waived
the right to arbitrate should encompass a variety of
factors, providing significant weight to the diligence or
lack thereof. Id. We made clear in Halim that it was not
enough—as the defendant asserts in this case—to merely
demonstrate any conduct inconsistent with an intent to
seek arbitration. Accordingly, we held that “[a] party
does not waive its right to arbitrate a dispute by filing
a motion to dismiss or a motion to transfer venue,” al-
though those actions in isolation are consistent with an
No. 07-2280 7
intent to litigate in the courts rather than to arbitrate.
Id. Instead, the focus is properly on the actions taken as
a whole, and whether they are inconsistent with an
intent to arbitrate.
The standard for waiver under § 1407(a) must be at
least as strong as that employed in those arbitration cases.
In both circumstances, we are presented with a vehicle
for forum selection. With § 1407(a), however, we have
a statutory rather than contractual determination,
that if anything cautions for a stronger showing of
waiver. Unlike arbitration clauses, § 1407(a) requires the
district court to transfer the case—in language that the
Supreme Court recognized as “impervious to judicial
discretion.” Lexecon, 523 U.S. at 35. Although in the ar-
bitration context, we held that district courts should
not sua sponte dismiss a case for failure to follow the
arbitration clause, the district court is required to
transfer a case to the Panel at the close of pretrial pro-
ceedings. The mandatory nature of the § 1407(a) transfer,
and its statutory rather than contractual origin, counsel
for a more rather than less restrictive waiver standard
than that used in the arbitration context. Nevertheless,
we need not address whether that is in fact necessary,
because even under the standard articulated in the ar-
bitration cases, the defendant has failed to demon-
strate waiver here.
We consider, then, whether the plaintiffs, expressly or
through conduct, evidenced an intent contrary to that
statutory mandate, relinquishing the right to remand the
case and consenting to retention of the case by the trans-
8 No. 07-2280
feree court. There is little evidence of such consent in this
case. The defendant relies primarily on two actions by
plaintiffs—first, the filing of a consolidated complaint in
which the plaintiffs state that venue is proper in the
transferee court, the Northern District of Illinois, and
second, the participation in repeated pretrial proceedings
in which trial dates were set by the transferee court. In
the context of this case, those actions are insufficient to
demonstrate an intent to relinquish the right to remand
the case to the transferor court.
First, the filing of the consolidated complaint was
done at the behest of the district court. As is common
in such circumstances, the district court ordered the
plaintiffs in the cases transferred by the Panel to file
consolidated complaints—one consisting of Amsted
retirees and one consisting of non-retiree participants in
the ESOP. The complaint by the retirees included a state-
ment recognizing that venue is proper in the transferee
court, but that is not inconsistent with a desire to seek
remand under § 1407(a) at the close of the pretrial pro-
ceedings. Venue may be proper in more than one court,
and therefore the positions are not mutually exclusive.
See, e.g., Jenkins Brick Co. v. Bremer, 321 F.3d 1366, 1371 (11th
Cir. 2003).
The defendant, in arguing that the venue statement is
itself sufficient to establish consent, relies almost solely on
our decision in In re African-American Slave Descendants
Litigation, 471 F.3d 754 (7th Cir. 2006). In that case, multiple
lawsuits had been filed around the country seeking
monetary relief for harms stemming from slavery in the
No. 07-2280 9
United States. The Panel consolidated all the suits in the
district court in Chicago. On appeal, we noted that
the plaintiffs—with the exception of plaintiff Hur-
dle—“filed a consolidated complaint, and since venue
in Chicago was proper and in any event not objected to
by the parties (other than the Hurdle group, whose ob-
jection we consider later in the opinion), the district
court was unquestionably authorized, notwithstanding
Lexecon . . . to determine the merits of the suit.” (citation
omitted) Id. at 756. The defendant argues that African-
American Slave Descendants therefore holds that the filing
of a consolidated complaint without objecting to venue
constitutes a waiver of the right to seek a remand under
§1407(a). There are multiple problems with that argu-
ment. First, the question before the court in African-Ameri-
can Slave Descendants was whether the district court
could decide a motion to dismiss. We proceeded to hold
that the transferee court may decide such motions re-
gardless of plaintiff consent. Such motions are part of the
pretrial proceedings properly before the transferee court,
and therefore are resolved before the remand issue even
arises. The venue determination, therefore, was irrelevant
to the ultimate holding. Moreover, the opinion gives no
indication of the language used in the consolidated com-
plaint, and it is clear that the plaintiffs can in fact waive
the right to § 1407(a) remand. Whether they did so there
was simply not a question presented to the African-Ameri-
can Slave Descendants court, and not one decided by it. In
fact, at one point the court refers to the consolidated
complaint as a “new” complaint. Id. at 757. It is clear that
plaintiffs may file a new complaint, thus removing them-
10 No. 07-2280
selves from the Panel’s reach. For our purposes, it is
sufficient to note that the court was not presented with
the question as to whether a venue statement in a con-
solidated complaint automatically waives the right to a
§ 1407(a) remand, and did not decide that question.
Accordingly, that case does not support the defendant’s
proposition that the venue statement in this case consti-
tutes such a waiver.
Moreover, the intention of the plaintiffs in this case
was made clear shortly after the consolidated complaint
was filed, when both the retiree and non-retiree plain-
tiffs filed a motion for entry of a case management order.
Their proposed order included the following language:
6. Trial. Subject to further order of the court , the
parties are directed to have their cases ready for
trial on all issues by September of 2003. The
court acknowledges the parties may request the
remand of one or more of the above described
cases to the transferor court pursuant to Lexecon,
Inc. v. Millberg Weiss Bershad, Hynes & Lerach, 523
U.S. 26, 118 S. Ct. 956 (1998). The remand of any
cases will occur once the case is substantially
ready for trial.
The court granted the plaintiffs’ motion, although it
apparently entered an abbreviated order that did not
contain that language. Nevertheless, any ambiguity as to
plaintiffs’ intentions in recognizing that venue was
proper in the transferee court was nullified by the pro-
posed language. Even absent that statement, however, the
mere recognition that venue is proper in the transferee
No. 07-2280 11
court would not establish an intent to forego the manda-
tory remand set forth in § 1407(a), because it is not neces-
sarily inconsistent with the assertion of that remand right.
The defendant additionally points to the plaintiffs’
participation in pretrial proceedings in the ensuing years,
including the repeated establishment of specific trial dates.
In cases consolidated by the Panel, it is anticipated that
the transferee court will engage in all pretrial proceedings,
and that remand will occur upon the conclusion of
such proceedings. Therefore, the plaintiffs’ participation
in those proceedings is not inconsistent with the intent to
seek remand upon completion of those proceedings.
Certainly, much aggravation—for the parties, the district
court, and this court—could have been avoided if the
plaintiffs had simply made clear throughout those pro-
ceedings that they retained the option of seeking a
§ 1407(a) remand. Nevertheless, the question for this
court is whether the conduct was inconsistent with an
intent to seek remand under § 1407(a). The agreement as
to trial dates is not in itself dispositive of that issue. As the
plaintiffs note, the establishment of trial dates is critical
to pretrial proceedings in many respects, as in the pro-
motion of the timely completion of discovery and the
facilitation of settlement negotiations. A plaintiff’s acquies-
cence in the establishment of such dates, therefore, may
be an effort to facilitate the conclusion of the pretrial
stage, rather than an agreement to forego the remand
mandated by § 1407(a).
That is not to say that such an agreement is not rele-
vant. In In re Carbon Dioxide Industry Antitrust Litiga-
12 No. 07-2280
tion, 229 F.3d 1321 (11th Cir. 2000), the Eleventh Circuit
held that plaintiffs could not seek a § 1407 remand be-
cause they had repeatedly agreed to trial in the transferee
court thus consenting to venue there. The facts of that
case are illustrative of the type of action by plaintiffs
that can operate as a waiver of the remand right and a
consent to venue in the transferee court. In Carbon
Dioxide, at the final pretrial conference on December 11,
1995, the parties stipulated that venue and jurisdiction
were proper in the Middle District of Florida and that
the case would be tried by the transferee court in Orlando
on February 5, 1996. Id. at 1322. On February 5, after the
parties had assembled for jury selection, the court was
informed that some of the class plaintiffs had reached
settlements. Id. at 1323. As it happened, those settlors
included the plaintiff class and the largest group of opt-
out plaintiffs, whose attorneys had been expected to
provide the bulk of the trial work, including direct exami-
nation of plaintiffs’ major witnesses and cross-examina-
tion of defendants’ key witnesses. Id. at 1326 n. 8. It was
at that point, on the day that jury selection was to
begin, that the plaintiffs expressed their desire for a
§ 1407(a) remand. The Supreme Court instructed the
Eleventh Circuit to consider the matter in light of Lexecon,
and the Eleventh Circuit concluded that Lexecon did not
require remand in such a case where the plaintiffs con-
sented to trial in the transferee court, and in fact “were
fighting to keep their cases in the Middle District of
Florida, not to get them out.” Id. at 1325, 1326-27.
That case is materially different from the one
presented here. The plaintiffs in Carbon Dioxide con-
No. 07-2280 13
tinued to pursue the case in the transferee court
following the termination of the pretrial proceedings,
and only abandoned that intention on the day of jury
selection when the trial in that venue became less
desirable with the settlements by other plaintiffs who
were expected to do the bulk of the trial work. There is
no comparable conduct here. In this case, the pretrial
proceedings concluded on Friday, February 2, 2007, and
on Monday, February 5, 2007, the plaintiffs requested
remand pursuant to § 1407(a). They engaged in no
actions subsequent to the termination of the pretrial
proceedings that would indicate consent to trial in the
transferee court. The setting of trial dates as part of
pretrial proceedings is not in itself incompatible with
an intent to seek a § 1407(a) remand, particularly where the
parties expressly point out that possibility early in the
proceedings as was done here. There was no ongoing
effort to pursue a trial in the transferee court beyond the
pretrial proceedings. Accordingly, although Carbon Dioxide
provides a useful example of the type of actions that can
constitute consent to venue in the transferee court, we do
not have those types of actions here. The district court
properly granted the plaintiffs request for a suggestion of
remand to the Panel. Accordingly, the decision of the
district court is A FFIRMED.
1-13-09