GE Betz, Incorporated v. Zee Company, Incorporated

In the
United States Court of Appeals
For the Seventh Circuit
No. 12-3746
GE B ETZ, INC.,
a Pennsylvania corporation,
Plaintiff-Appellant,
v.
Z EE C OMPANY, INC.,
a Tennessee corporation,
Defendant-Appellee,
and
BMO H ARRIS B ANK,
Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:12-cv-07302—Milton I. Shadur, Judge.
A RGUED F EBRUARY 27, 2013—D ECIDED M AY 3, 2013
Before F LAUM, S YKES, and T INDER, Circuit Judges.
T INDER, Circuit Judge. After winning a multi-million
dollar judgment against Zee Company in a North Carolina
2 No. 12-3746
state court, GE Betz discovered that Zee had tied up
virtually all of its assets in a credit facility agreement
with BMO Harris Bank before the entry of final judg-
ment. As a result, GE Betz registered the North Carolina
final judgment in the Circuit Court of Cook County,
Illinois, Harris’s principal place of business, and served
Harris with a citation to discover Zee’s assets. Zee subse-
quently removed the Cook County case to federal court
based on diversity jurisdiction under 28 U.S.C. § 1441(b).
But GE Betz objected to Zee’s removal, arguing that
it ran afoul of (1) subject-matter jurisdiction, and (2) the
forum-defendant rule. The district court rejected both
removal arguments, and less than three months later,
dismissed GE Betz’s case entirely. GE Betz filed a
timely appeal. Contrary to the district court, we find that
GE Betz raised a timely and sound objection to Zee’s
removal under the forum-defendant rule, and the
district court should have remanded the case back to
the Cook County Circuit Court. Without any overwhelm-
ing concerns of finality, efficiency, or judicial economy
standing in our way, we now vacate the district court’s
dismissal order and remand the case to the district
court with instructions to send GE Betz’s case back to
the Cook County Circuit Court.
I
The complicated history of this case began in April 2006,
when the CEO and sole shareholder of Zee Company,
Robert Bullard, decided to expand his chemical sales
business into the water treatment industry. In an effort
No. 12-3746 3
to become competitive in water treatment, an area
in which he lacked experience, Bullard hired several
new employees who were currently working or had
previously worked for other companies in the industry.
Four of the new employees came from GE Betz, a wholly-
owned subsidiary of General Electric that specializes
in water treatment technology.
Unfortunately for Bullard and Zee, these four em-
ployees were still bound by non-compete agreements
that they had signed while employed at GE Betz. As a
result, in April 2007, GE Betz sued both Zee and its
former employees in North Carolina state court for
breach of contract, tortious interference with contract,
and unfair trade practices. From the start, the North
Carolina litigation did not go well for Zee and the
former GE Betz employees. The state court issued a
temporary restraining order and a preliminary injunc-
tion against Zee and the four employees within a
month after the case was filed. In February 2010, the
state court found all four non-compete agreements en-
forceable. In July 2011, the state court held Zee and
the four employees jointly and severally liable for
$288,297.00 in compensatory damages as a result of
unfair and deceptive trade practices. Finally, in
May 2012, the North Carolina court found Zee and
the four employees jointly and severally liable for
$5,769,903.10 in attorney fees, $864,891.00 in punitive
damages, and $257,931.44 in costs. These large awards
came as a result of the state court finding that Zee
had “[n]ot only . . . elicit[ed], encourage[d], and com-
pensate[d] the illegal conduct of the Individual Defen-
4 No. 12-3746
dants, but . . . [also had] lied about its employees activ-
ities before the litigation and throughout the course of
the lawsuit, including before this Court.”
Yet still the plot thickens: after the North Carolina
state court had determined that Zee was liable to GE
Betz and had awarded compensatory damages—but
before the state court had determined punitive damages
and attorney fees—Zee entered into a financial arrange-
ment with BMO Harris Bank. On December 1, 2011,
Harris agreed to extend a $22 million credit facility to
Zee and its thirteen sister companies, which are also
solely owned by Bullard. As part of its commitment
to Harris, Zee agreed to pay a final judgment of up to
$2 million in the GE Betz case, and if the final judgment
exceeded $2 million, Bullard personally guaranteed
the amount exceeding $2 million. In exchange for ex-
tending the credit facility, Harris placed a lien on all
fourteen borrowers’ “accounts, instruments, documents,
chattel paper, general intangibles . . . , letter-of-
credit rights, investment property, deposit accounts,
inventory, equipment, commercial tort claims, fixtures,
and real estate.” Later in December 2011, Harris filed
a UCC financing statement in Tennessee, where Zee and
its co-borrowers are headquartered, in an attempt to
perfect its lien.
GE Betz did not become aware of Zee’s credit arrange-
ment and Harris’s ensuing lien until many months
later. After the North Carolina state court entered final
judgment of more than $7 million dollars in favor of
GE Betz in May 2012, Zee filed a timely appeal with the
No. 12-3746 5
North Carolina Court of Appeals. Nonetheless, even a
timely appeal “does not stay the execution of the judg-
ment” in North Carolina “unless a written undertaking . . .
by one or more sureties,” such as a bond, “is executed
on the part of the appellant.” N.C. Gen. Stat. § 1-289(a).
Despite its timely appeal, Zee never posted a bond, nor
did Zee do anything else resembling a “written under-
taking . . . by one or more sureties” to stay the judgment.
In its brief to our court, Zee offers no explanation for
its failure to stay the North Carolina judgment, stating
only that “[f]or various reasons, Zee was unable to
secure a bond on appeal.” Nor was Zee’s explanation
at oral argument any more satisfactory: despite Zee’s
“attempt to bond this matter,” Zee blamed GE Betz for
its failure, arguing that GE Betz had repeatedly objected
to the chosen surety companies. Yet instead of asking
the North Carolina Court to approve the bonds over
GE Betz’s objection, Zee decided to do nothing, offering
only this excuse: “Given the vagaries of the decisions
coming out of the court in North Carolina, we felt that
it would have been futile to have gone before the court
to have the bonds approved.”
Whatever Zee’s reasons for failing to post a bond,
without a stay of the execution of the judgment, nothing
stood in GE Betz’s way from initiating the collection
process against Zee. On July 6, 2012, GE Betz obtained
two ex parte orders from a North Carolina trial court,
which prohibited Zee from disposing of any North
Carolina property and further required Zee to pay
any proceeds from its North Carolina accounts
6 No. 12-3746
receivable into the county clerk’s office. Only then did
GE Betz discover Zee’s credit facility agreement with
BMO Harris. As part of this agreement, Zee had trans-
ferred its financial assets, including its accounts re-
ceivable, to BMO Harris, and Harris had placed a lien
on seemingly all of Zee’s assets.
Concerned that it may never collect anything from
Zee—and that it would lose creditor priority—GE Betz
registered the North Carolina judgment in the Cook
County, Illinois, Circuit Court on August 24, 2012. Al-
though BMO Harris is a Delaware corporation, Illinois
is Harris’s principal place of business. Thus, Illinois was
the new home of some or all of Zee’s assets and a
place—if not the only place—where GE Betz believed it
had any chance of collecting the judgment. In addition
to registering the North Carolina judgment, GE Betz
served Harris with a citation to discover Zee’s assets,
which in Illinois has the effect of freezing all of
Zee’s property in Harris’s possession. See 735 Ill. Comp.
Stat. 5/2-1402. Harris moved to quash the citation five
days later in Cook County Circuit Court, and on Septem-
ber 12, 2012, Harris and GE Betz (without Zee’s participa-
tion) set a briefing schedule and a hearing date on
the citation action.
But at the same time that GE Betz and Harris were
setting the briefing schedule and hearing date in Cook
County Circuit Court, Zee was busy pursuing its own
ends in federal court—unbeknownst to either GE Betz or
Harris. Zee alone filed a notice of removal of the Cook
County case to the federal district court in the Northern
No. 12-3746 7
District of Illinois on September 12, 2012. Zee alleged
that removal was proper based on diversity jurisdic-
tion, under 28 U.S.C. § 1441(b), because GE Betz (a Pennsyl-
vania corporation with its principal place of business
in Pennsylvania) was a citizen of Pennsylvania, Zee
(a Tennessee corporation with its principal place of busi-
ness in Tennessee) was a citizen of Tennessee, and
the amount in controversy well exceeded $75,000—
$7,604,083.00 at the time of removal, to be exact. Harris
neither joined in nor consented to Zee’s notice of re-
moval. On the same day that Zee filed the notice, Zee
also filed an emergency motion in the federal district
court for relief from the citation issued to Harris in
the Cook County Circuit Court.
Two days later, on the morning of September 14,
2012, GE Betz, Zee, and Harris all appeared in federal
district court, and GE Betz made an oral motion to
remand the case back to the Cook County Circuit Court
based on improper removal. The district court judge
asked the parties to submit case law on the propriety of
the removal and set a time for them to return to
court that afternoon. In a matter of a few hours, GE Betz
scrambled to assemble a written memorandum, which
focused solely on the issue of subject-matter jurisdic-
tion (and not the forum-defendant rule, which is a statu-
tory problem, see Hurley v. Motor Coach Indus., Inc., 222
F.3d 377, 378-80 (7th Cir. 2000)). GE Betz filed the brief
later that morning. When the parties returned in
the afternoon, the district court judge orally denied GE
Betz’s motion to remand, finding Zee’s removal proper.
The district court believed that the case was properly
8 No. 12-3746
characterized as “an independent proceeding,” instead
of an ancillary proceeding, which gave the federal
court subject-matter jurisdiction over the case as long
as the other requirements for diversity were met.
Even though GE Betz had not submitted case law on
the forum-defendant rule in its late-morning filing, the
district court judge brought up the potential prob-
lem posed by the rule during the afternoon hearing on
September 14, 2012. The forum-defendant rule prohibits
removal to federal court if “any of the parties in interest
properly joined and served as defendants is a citizen of
the State in which such action is brought.” 28 U.S.C.
§ 1441(b)(2). With its principal place of business in
Illinois, BMO Harris would run into a problem with the
forum-defendant rule if it were properly characterized
as a defendant (since the case was removed to the
Northern District of Illinois). Instead of having the
parties submit additional briefing on BMO Harris’s
status in the case, however, the district court judge
sua sponte addressed the matter from the bench at the
September 14th hearing. The judge orally con-
cluded—without explanation—that Harris was not prop-
erly characterized as a defendant—or even as a “party” to
the case. Harris, according to the district court judge,
was merely a third-party citation respondent, so Zee’s
removal of the case to federal court did not run afoul of
the forum-defendant rule.
Given that these rather complex jurisdictional and
statutory determinations were made orally, in the course
of a day, and without much briefing, GE Betz filed a
No. 12-3746 9
motion to reconsider two weeks later on September 28,
2012. In its memorandum accompanying the motion
to reconsider, GE Betz more clearly articulated its argu-
ments for remand back to the Cook County Circuit
Court. First, GE Betz argued that the federal court
lacked subject-matter jurisdiction over the case, as it was
merely an ancillary proceeding “to register and enforce
state court judgments.” Second, GE Betz argued that
even if the proceeding were independent, Harris was
“the true party in interest” to the case. As such, Harris
was properly characterized as a defendant, and re-
moval ran afoul of the forum-defendant rule.
Despite the clearer articulation of GE Betz’s two argu-
ments, the district court denied the motion to reconsider
on October 2, 2012. Rejecting both of GE Betz’s
arguments, the district court judge held that Harris was
“a new and independent party” but not “a party in in-
terest.” As a new and independent party that had not
participated in the North Carolina proceedings, Harris
made the federal case sufficiently different from
the North Carolina case, according to the district court.
Harris’s presence rendered the federal case more than
just a supplemental proceeding and, since the di-
versity requirements were satisfied, gave the federal
court subject-matter jurisdiction. Nonetheless, even
though the district court recognized Harris as a party,
it did not recognize Harris as a party in interest. The
district court reasoned that Zee was the only party in
interest (besides GE Betz) because Zee was the sole
party that could be harmed by an adverse decision of
the district court. According to the court, Harris was
10 No. 12-3746
protected from harm because any money in its posses-
sion that was “drain[ed] off” as a result of the citation
action would result in Zee’s “indebted[ness] to Harris
in the full amount.” The district court did not consider
the somewhat likely event that Zee would default and
never be able to satisfy its indebtedness to Harris.
Meanwhile, as GE Betz was unsuccessfully trying to
get the case remanded back to the Cook County Circuit
Court, Zee and Harris—now apparently collaborating
on their legal strategy—were busy pursuing an
emergency motion for relief from the citation served on
Harris while the case was in the Cook County Circuit
Court. On September 20, 2012, the district court granted
a temporary restraining order (TRO) modifying the
Cook County citation, which partially lifted the freeze
on Zee’s accounts at Harris and allowed Zee to pay
its employees and necessary suppliers. Because Harris
had filed UCC financing statements covering all of Zee’s
assets in December 2011—before the North Carolina
court entered final judgment in the GE Betz case—the
district court judge believed that the “first in time, first
in right” rule controlled, and Harris had a priority
security position over GE Betz with regard to Zee’s
assets. Unless GE Betz could establish an exception to
this general rule, the district court thought that Harris
and Zee were likely to succeed on the merits.
Over the course of the next several months, GE Betz,
Zee, and Harris continued to fight ruthlessly in
the federal district court over both the priority and
the propriety of Harris’s credit agreement with Zee.
No. 12-3746 11
Indeed, the district court docket demonstrates ninety-
eight entries in the two-and-a-half months following
the case’s removal on September 12, 2012. In addition
to the existing citation that GE Betz had served on
BMO Harris Bank while the case was in Cook County,
GE Betz served a second citation directly on Zee. More-
over, GE Betz aggressively sought discovery about
the credit arrangement between Zee and Harris, in an
effort to gather evidence to support its multiple theories
of why its North Carolina judgment should jump ahead
of Harris’s lien in terms of creditor priority. GE Betz’s
theories included that payment of the GE Betz judg-
ment was a stipulation of the credit agreement, that
Harris had failed to perfect its lien over all Zee’s assets,
that Harris lost its priority status once it declined to
enforce its rights and remedies against Zee, and that
the arrangement between Harris and Zee constituted
a fraudulent transfer. In response, Harris and Zee
argued that GE Betz’s theories were groundless, and
additional discovery was unwarranted. In the midst of
these battles over discovery, it appears the only thing
that the parties could agree on was an order to extend
the September 20th TRO until the district court could
“actually set up a schedule for meaningful determination.”
That “meaningful determination” came on Novem-
ber 28, 2012—less than three months after Zee removed
the case to federal district court. At a status hearing
that morning, the district court declared, “[I]t is time to
call a halt to all this. . . . Betz . . . begins with a false prem-
ise. And guess what? That ends with a false conclu-
sion.” The district court judge did not believe that
12 No. 12-3746
GE Betz had adequately established any of the excep-
tions to the general rule of “first in time, first in right.”
Dismissing GE Betz’s theories as “fallacious,” the judge
characterized them as requiring Harris “to act contrary
to its own economic interest.” Furthermore, the district
court judge found “nothing to suggest . . . anything other
than arm’s length arrangements . . . between Harris
and Zee.” All in all, the judge found GE Betz’s attempts
to jump ahead of Harris “absurd,” and as a result,
quashed both the citation served on Harris and the
citation served directly on Zee, and dismissed the
case. GE Betz filed a timely appeal of all the district
court’s decisions.
Before we can address any of the district court’s later
merits-based decisions, we must first review the district
court’s earlier denial of GE Betz’s motion to remand, as
this motion questioned the basis for subject-matter juris-
diction in federal court. Schur v. L.A. Weight Loss Ctrs.,
Inc., 577 F.3d 752, 758 (7th Cir. 2009). We review a
district court’s denial of a motion to remand de novo. Id.II
GE Betz advances two arguments regarding the im-
propriety of Zee’s removal. First, GE Betz argues that
the federal court lacks subject-matter jurisdiction over
such an action. Second, GE Betz argues that even if the
federal court had subject-matter jurisdiction, Zee’s
removal violated the forum-defendant rule, and the
action should have been remanded back to the Cook
County Circuit Court upon GE Betz’s timely objection.
No. 12-3746 13
Subject-matter jurisdiction is our foremost concern; with-
out it, “the court cannot proceed at all in any cause.”
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94
(1998) (quoting Ex parte McCardle, 7 Wall. 506, 514 (1868)).
Accordingly, we begin by addressing GE Betz’s subject-
matter jurisdiction argument.
GE Betz’s subject-matter jurisdiction argument is, in
reality, twofold. Although GE Betz admits that the case
complies with the requirements of diversity jurisdic-
tion under 28 U.S.C. § 1441(b), it argues that the case
runs into trouble with two other statutes that limit the
subject-matter jurisdiction of federal courts, namely
28 U.S.C. § 1441(a) and 28 U.S.C. § 1963. With respect
to 28 U.S.C. § 1441(a), GE Betz contends that the Cook
County Circuit Court case was not a “civil action
brought in a State court of which the district courts of
the United States have original jurisdiction,” and there-
fore, was not removable. We have long interpreted
§ 1441(a) “to allow removal only of ‘independent
suits’ but not ancillary or ‘supplementary’ proceedings.”
Travelers Property Cas. v. Good, 689 F.3d 714, 724 (7th
Cir. 2012) (quoting Fed. Sav. & Loan Ins. Corp. v. Quinn,
419 F.2d 1014, 1018 (7th Cir. 1969)). This prudential inter-
pretation of § 1441(a), which dates back as early as
Barrow v. Hunton, 99 U.S. 80, 83 (1878), “seeks to avoid
the waste of having federal courts entertain satellite
elements of pending state suits and judgments.” Travelers,
689 F.3d at 724 (quotations and citations omitted). Ac-
cording to GE Betz, the Cook County Circuit Court case
was nothing more than a satellite element of the pending
North Carolina state court suit; it was merely an action
14 No. 12-3746
to enforce the North Carolina judgment. As a result,
GE Betz argues that § 1441(a) prohibited removal to
federal court.
GE Betz’s first jurisdictional argument has some
merit—especially considering that the North Carolina
suit remains pending in the state court of appeals, and a
decision vacating GE Betz’s judgment there would
render the instant matter moot. To be sure, this pro-
ceeding is similar to the North Carolina case, and our
court has never developed a “bright-line formula . . . for
separating the independent and removable sheep from
the ancillary and nonremovable goats.” Travelers, 689
F.3d at 724. Still, we believe that the matter before us
contains one distinction that places it squarely on the
side of the removable sheep: the presence of BMO Harris.
BMO Harris has been heavily involved in this
matter since its inception in the Cook County Circuit
Court. It first came into the proceeding when GE Betz
served it with a citation to discover Zee’s assets. Since
then, Harris has sought to quash the citation, vigorously
asserting “the priority of its security interest in Zee’s
assets and its right of setoff.” In contrast, BMO Harris is
wholly uninvolved in the underlying North Carolina
case. Harris’s presence also renders the subject of
the dispute in this case completely different from the
subject of the dispute in the North Carolina case. In
North Carolina, GE Betz and Zee are fighting about
covenants not to compete and trade practices. Here, GE
Betz, Zee, and BMO Harris are fighting about Harris’s
priority as Zee’s secured creditor. As we pointed out in
No. 12-3746 15
Travelers, 689 F.3d at 724 (quoting Buford v. Strother, 10
F. 406, 407 (C.C.D. Iowa 1881)), “ ‘where the supplemental
proceeding is not merely a mode of execution or relief,
but where it, in fact, involves an independent con-
troversy with some new and different party, it
may be removed into the federal court.’ ” In the instant
proceeding, we have a new and different party (BMO
Harris) as well as an independent controversy (the
priority of Harris’s lien). Therefore, under Travelers,
we have an action that was removable under 28 U.S.C.
§ 1441(a).
Although we reject the argument that Zee’s removal
violated 28 U.S.C. § 1441(a), Zee “is not out of the jurisdic-
tional woods.” Abbott Labs. v. CVS Pharmacy, Inc., 290 F.3d
854, 858 (7th Cir. 2002). For GE Betz makes a second
jurisdictional argument based on 28 U.S.C. § 1963. Section
1963 provides that a “judgment in an action for the re-
covery of money or property entered in any court of
appeals, district court, bankruptcy court, or in the Court
of International Trade may be registered” in a federal
court (emphasis added). GE Betz argues that this
language only permits a federal court to register
foreign judgments from other federal courts. Judgments
from state courts, according to GE Betz’s interpretation
of § 1963, may not be registered in a federal court. To
support its interpretation, GE Betz cites a host of
district court decisions, including Polo Realty Inc. v.
Kruse, 2010 WL 3087417, at *2, *5 (N.D. Ind. Aug. 2, 2010)
(concluding that federal courts “cannot enforce a state
court judgment,” even though there is “no authority in
the Seventh Circuit addressing this question”); Marbury
16 No. 12-3746
Law Group, PLLC v. Carl, 729 F. Supp. 2d 78, 83 (D.D.C.
2010) (finding that a federal court “lacks jurisdiction
to enforce state court judgments”); and Euro-Am Coal
Trading, Inc. v. James Taylor Mining, Inc., 431 F. Supp. 2d
705, 707 (E.D. Ky. 2006) (holding that “the registration
procedures of 28 U.S.C. § 1963 contain jurisdictional
limitations that prohibit federal courts from registering
state court judgments”). Since 28 U.S.C. § 1441(a) limits
removal to actions in “which the district courts of the
United States have original jurisdiction,” parties can
only remove matters that could have originally been
brought in federal court. GE Betz argues that this case is,
at heart, the registration of a foreign state-court judg-
ment, which under several district courts’ interpretations
of 28 U.S.C. § 1963, could not have been originally
brought in federal court. As a result, GE Betz contends
that removal was improper.
GE Betz’s argument invites us to join several district
courts—at least one of which is in our own circuit—in
holding that 28 U.S.C. § 1963 bars federal courts from
enforcing judgments rendered by state courts. We
decline this invitation. Although the language of § 1963 is
somewhat ambiguous, GE Betz’s interpretation requires
reading additional words into the statute. GE Betz
insists that § 1963 explicitly allows for the registration
of federal court judgments, and thus, implicitly bars the
registration of state court judgments. But we note
that neither the word “state” nor the word “federal”
appear in the text of § 1963.
It is true that only the federal system has a “bankruptcy
court” and a “Court of International Trade.” But every
No. 12-3746 17
state system has the equivalent of a “district court” and
a “court of appeals”—even if the state-court versions
of these courts go by a different name. Moreover, some
state-court systems actually use the same names as the
federal-court system; Minnesota and Virginia, for
example, refer to their trial courts as “district courts” and
their appellate courts as “courts of appeals.” See, e.g.,
Minnesota Judicial Branch, Minnesota District Courts,
available at http://www.mncourts.gov/?page=238 (last
visited May 1, 2013); Office of the Executive Secretary
of the Supreme Court of Virginia, Virginia’s Judicial System,
available at http://www.courts.state.va.us/courts/gd.html
(last visited May 1, 2013). Thus, it is not clear that
the language of § 1963 refers solely to judgments
rendered by federal courts.
And even if § 1963 did refer only to judgments
rendered by federal courts, the statute does not contain
any other language barring federal courts from
enforcing state-court judgments. Section 1963 merely
states that a “judgment . . . entered in any court of ap-
peals, district court, bankruptcy court, or in the Court of
International Trade may be registered.” Section 1963
could have said, “Only a judgment . . . entered in any
federal court of appeals, district court, bankruptcy court,
or in the Court of International Trade may be regis-
tered”—but it does not. Nor is there any other language
in § 1963 that suggests that a state-court judgment
meeting the other requirements for federal jurisdiction
may not be enforced by a federal court. Reading a bar
against the enforcement of state-court judgments by
federal courts requires reading additional words into
18 No. 12-3746
§ 1963 that are not there. A court has “ ‘no right, in the
guise of construction of an act, to either add words to or
eliminate words from the language used by congress.’ ”
King v. I.R.S., 688 F.2d 488, 491 (7th Cir. 1982) (quoting
DeSoto Sec. Co. v. Comm’r, 235 F.2d 409, 411 (7th Cir. 1956)).
We have no right to add words into the text of § 1963,
and we certainly have no right to add a restriction that
is not already there.
As a result, we conclude that § 1963 does not prohibit
the removal of all matters related to the registration of
state-court judgments; more specifically, we conclude
that § 1963 does not prohibit the removal of the cita-
tion proceeding initiated by GE Betz. We acknowledge
that this conclusion runs contrary to previous interpreta-
tions by several district courts. But we note that
GE Betz has not cited, nor have we been able to locate,
any decisions by sister circuits that interpret § 1963
as barring post-judgment proceedings of the sort
presented here. Moreover, we are not concerned that
our refusal to read a bar against the enforcement of state-
court judgments into 28 U.S.C. § 1963 will open the flood-
gates to new litigation in federal court. In order to be
enforceable by a federal court, a state-court judgment
enforcement proceeding must still meet the other require-
ments for federal jurisdiction, including the amount
in controversy and the diversity requirements under
28 U.S.C. §§ 1332 and 1441(b) as well as the independent
proceeding requirement under 28 U.S.C. § 1441(a).
We believe that the § 1441(a) independent proceeding
requirement particularly limits the number of state-
court judgments that a federal court may enforce, as
No. 12-3746 19
most state-court judgment enforcement proceedings are
more properly characterized as ancillary or supple-
mentary suits. As a result, we expect that the
instant matter is not the norm, but rather one of the
rare judgment-enforcement proceedings that is suf-
ficiently independent from the underlying state-
court proceedings to give the federal court jurisdiction
under § 1441(a).
III
Having satisfied ourselves that federal court jurisdic-
tion is secure under 28 U.S.C. § 1441(a) and not precluded
by 28 U.S.C. § 1963, we now turn to GE Betz’s second
argument why Zee’s removal to federal court was im-
proper: the forum-defendant rule. Codified under 28
U.S.C. § 1441(b)(2), the forum-defendant rule prohibits
removal “if any of the parties in interest properly joined
and served as defendants is a citizen of the State in
which such action is brought.” The purpose of this rule
is “to preserve the plaintiff’s choice of a (state) forum,
under circumstances where it is arguably less urgent
to provide a federal forum to prevent prejudice against
an out-of-state party.” Hurley, 222 F.3d at 380. Although
the forum-defendant rule arises under 28 U.S.C.
§ 1441—which, as we know from the discussion above,
contains some jurisdictional requirements—the forum-
defendant rule itself is nonjurisdictional. See Hurley,
222 F.3d at 380 (endorsing “the longstanding line of
authority that holds that the forum defendant rule is
nonjurisdictional”). As a result, noncompliance with the
20 No. 12-3746
forum-defendant rule is a statutory, not a jurisdictional,
defect. Holmstrom v. Peterson, 492 F.3d 833, 838-40 (7th
Cir. 2007) (discussing the reasons why the forum-defen-
dant rule is a statutory defect).
This distinction between statutory and jurisdictional
defects is important because it determines when a
plaintiff may object to removal. Of course, a plaintiff
may object to removal based on a jurisdictional defect
at any time. See Ruhrgas AG v. Marathon Oil Co., 526
U.S. 574, 583 (1999) (reminding that “subject-matter
delineations must be policed by the courts on their own
initiative even at the highest level”). But the timeframe
for objecting to removal based on a statutory defect is
much smaller. Under 28 U.S.C. § 1447(c), a plaintiff’s
“motion to remand the case on the basis of any defect
other than lack of subject-matter jurisdiction must be
made within 30 days after the filing of the notice of re-
moval.” The reason behind this thirty-day time limit is
“to ‘prevent a party who is aware of a defect in
removal procedure from using the defect as insurance
against later unfavorable developments in federal
court.’ ” Holmstrom, 492 F.3d at 838-39 (quoting In re Shell
Oil Co., 932 F.2d 1518, 1522 (5th Cir. 1991)). Consequently,
if a plaintiff fails to raise a forum-defendant objection
within thirty days of removal, the plaintiff waives the
right to raise the objection later. Hurley, 222 F.3d at 378-80.
With this general overview of the rule in mind, we
turn to the specifics of GE Betz’s forum-defendant argu-
ment. GE Betz asserts that Zee’s removal to the federal
district court in the Northern District of Illinois violated
No. 12-3746 21
the forum-defendant rule because BMO Harris was both
a defendant and a citizen of the forum. (Recall that
Harris’s principal place of business is Illinois.) GE Betz’s
forum-defendant objection was timely under 28 U.S.C.
§ 1447(c); it raised the argument in its motion to
reconsider, filed sixteen days after Zee’s removal. Still,
GE Betz’s argument only holds water if (1) BMO Harris
is properly considered a defendant to this action, and
(2) the forum-defendant rule can pose a problem even
when a non-forum defendant removes the case without
the participation of the forum defendant. We address
each argument in turn.
A
Zee and BMO Harris spent much of oral argument
addressing the first issue, insisting that Harris is not a
“defendant” for the purposes of 28 U.S.C. § 1441(b)(2).
According to them, Harris is merely a “third-party
citation respondent” under Illinois law. Harris and Zee
admit that this status makes Harris a “party in interest” to
the suit, but they contend that Harris’s status does not
rise to the level of a defendant. In order to decide
whether Harris is properly classified as a defendant, we
now consider the governing law, and how this law
informs Harris’s status in the present action.
Because we sit in diversity in the present action, “we
are required to apply the substantive law of the forum
state . . . as we believe the highest court of the state would
apply it.” Wolverine Mut. Ins. v. Vance ex rel. Tinsley, 325
F.3d 939, 942 (7th Cir. 2003); see also Erie R.R. Co. v.
22 No. 12-3746
Tompkins, 304 U.S. 64, 78 (1938). Therefore, we are re-
quired to apply the substantive law of Illinois that governs
citation actions to discover assets. At the same time, we
must apply federal procedural law to this case. See Erie,
304 U.S. at 78; Windy City Metal Fabricators & Supply, Inc.
v. CIT Tech. Fin. Servs., Inc., 536 F.3d 663, 670 (7th Cir.
2008). Although formally titled as a citation action to
discover assets, this case is, at bottom, an enforce-
ment action to collect a money judgment. Fed. R. Civ.
P. 69(a)(1), which governs the enforcement of money
judgments in federal court, provides that the “procedure
on execution—and in proceedings supplementary to
and in aid of judgment or execution—must accord with
the procedure of the state where the court is located.”
Illinois is the state where the federal district court is
located, so we look again to Illinois law for the procedural
rights and processes accompanying a citation to discover
assets. We endeavor to provide the same procedural
rights and processes that the parties would enjoy in
Illinois state court here in federal court; however, we
need not “apply[] every jot and tittle of Illinois pro-
cedural law.” Resolution Trust Corp. v. Ruggiero, 994
F.2d 1221, 1226 (7th Cir. 1993); see also Star Ins. Co. v.
Risk Mktg. Grp. Inc., 561 F.3d 656, 661 (7th Cir. 2009)
(holding that a “district court was correct in turning to
state law” because under Rule 69, “the Federal Rules of
Civil Procedure are not strictly applicable to [Illinois]
supplementary proceedings”); Vukadinovich v. McCarthy,
59 F.3d 58, 62 (7th Cir. 1995) (noting that Rule 69
“governs collection proceedings in the federal courts,
[and] adopts whatever procedures are followed by the
No. 12-3746 23
state courts in the state in which collection is sought”).
Instead, our principal objective under Rule 69 is to “con-
form[] collection proceedings to state law.” Star, 561
F.3d at 661 (quoting Matos v. Richard A. Nellis, Inc., 101
F.3d 1193, 1195 (7th Cir. 1996)).
With this framework in mind, we turn now to study
both the substantive and procedural rights accorded the
parties to an Illinois citation action to discover assets.
Specifically, we seek to determine the procedural
rights, the substantive rights, and the remedies to
which parties to a citation action are entitled. Once
we understand the specifics of an Illinois citation action,
we will be in a better position to assess whether a third-
party citation respondent like BMO Harris is properly
classified as a defendant for purposes of federal
removal law.
Often referred to as “supplementary proceedings,”
citations to discover assets are the “dominant procedure
of the modern era” used in Illinois to enforce money
judgments. Robert G. Markoff, Survey of Illinois Law:
Enforcement of Judgments, 33 S. Ill. L. Rev. 631, 639-40
(Summer 2009). Two provisions of Illinois law govern
citation actions. The first provision, 735 Ill. Comp. Stat. 5/2-
1402, provides in part:
A judgment creditor, or his or her successor in
interest when that interest is made to appear of
record, is entitled to prosecute supplementary
proceedings for the purposes of examining the
judgment debtor or any other person to discover assets
or income of the debtor not exempt from the
24 No. 12-3746
enforcement of the judgment. . . . A supplementary
proceeding shall be commenced by the service of
a citation issued by the clerk.
735 Ill. Comp. Stat. 5/2-1402(a) (emphasis added). The
second provision, Ill. Comp. Stat. S. Ct. R. 277, outlines
the procedures of a citation action in more detail. It re-
quires the party to whom the citation is directed,
whether the judgment debtor or a third party, “to
appear for examination . . . concerning the property or
income of or indebtedness due the judgment debtor.”
Ill. Comp. Stat. S. Ct. R. 277(c)(3). The rule also allows
the party bringing the citation action to demand that
the judgment debtor or third party produce “any
books, papers, or records in his or its possession or
control which have or may contain information con-
cerning the property or income of the debtor.” Ill. Comp.
Stat. S. Ct. R. 277(c)(4). Furthermore, the rule provides
for discovery and a hearing on the citation, allowing
“[a]ny interested party”—including a third-party cita-
tion respondent—to “subpoena witnesses and adduce
evidence as upon the trial of any civil action.” Ill. Comp.
Stat. S. Ct. R. 277(e).
At the conclusion of these citation proceedings, the
trial court may order the party to whom the citation
is directed to turn over the judgment debtor’s assets to
the judgment creditor. 735 Ill. Comp. Stat. 5/2-1402(b);
see also Pyshos v. Heart-Land Development Co., 630 N.E.2d
1054, 1057 (Ill. App. Ct. 1994). Regardless of whether
the trial court decides to order the turnover of
assets, the trial court’s final order in a citation pro-
No. 12-3746 25
ceeding is appealable by both the creditor and the party
to whom the citation is directed. Ill. Comp. Stat. S. Ct.
R. 304(b)(4).
Not surprisingly, our court has previously en-
countered Illinois citation actions. Indeed, in Resolution
Trust, 994 F.2d at 1223, we even provided a brief
summary of the rights of the parties in a citation action:
The relevant provisions of Illinois law . . . [for
citation actions:] Entitle the judgment creditor
to question the judgment debtor, or anyone else
who might have relevant information, under oath
regarding the existence and whereabouts of
assets that might be used to satisfy the judg-
ment. . . . Entitle any third party who claims
an interest in those assets to appear and be heard
on his claim. Empower the court to order the
debtor to turn over property to the creditor to
satisfy the judgment.
Moreover, we held in Dexia Crédit Local v. Rogan that
a bench trial was within “the proper scope” of a citation
action since Illinois law “ ‘give[s] the court broad powers
to compel the application of discovered assets or income
in order to satisfy a judgment.’ ” 629 F.3d 612, 624 (7th
Cir. 2010) (quoting Dowling v. Chi. Options Assocs., Inc.,
847 N.E.2d 741, 746 (Ill. App. Ct. 2006)). Distinguishing
it from “a mere discovery statute,” we further observed
that 735 Ill. Comp. Stat. 5/2-1402 “permit[s] the court to
determine the rights of third parties.” Id. (emphasis added).
Our previous examinations of Illinois citation proceed-
ings in Resolution Trust and Dexia are certainly helpful
26 No. 12-3746
in teasing out the substantive and procedural rights
accorded the parties. But perhaps the most helpful exami-
nations of these proceedings come from the Illinois state
appellate courts. Regarding the scope of permissible
discovery by the judgment creditor, more than one ap-
pellate court has held that extensive searching for as-
sets—even described as “a ‘fishing expedition’ ”—is
permissible against a third-party citation respondent
“if it is based on a belief that such assets are in the third
party’s possession.” Regan v. Garfield Ridge Trust &
Sav. Bank, 617 N.E.2d 818, 820 (Ill. App. Ct. 1993)
(quoting Federal Loan Corp. v. Harris, 308 N.E.2d 125, 127
(Ill. App. Ct. 1974)). In addition to these extensive dis-
covery rights, the parties to a citation action are entitled
to broad procedural safeguards. According to Workforce
Solutions v. Urban Servs., 977 N.E.2d 267, 275-76 (Ill. App.
Ct. 2012) (emphasis added), both 735 Ill. Comp. Stat. 5/2-
1402(a) and Ill. Comp. Stat. S. Ct. R. 277
impos[e] a requirement on the court to conduct a trial
or evidentiary hearing to determine ownership of a
third party’s assets where both the judgment
creditor and the third-party citation respondent
claim entitlement to those assets. . . . Failure to do so
is reversible error. . . . We specifically held that it is
insufficient for the court to decide the matter based
solely on the arguments of counsel without hearing
evidence on a fraudulent conveyance allega-
tion. . . . In order for a dispute to arise, the third-
party citation respondent also must have made
a claim on the asset at some point in the proceed-
ings. Resolving that dispute raises a question of
No. 12-3746 27
fact requiring an evidentiary hearing regardless
of which party raises it. Cf. Harmon v. Ladar Corp.,
557 N.E.2d 1297, 1299 (Ill. App. Ct. 1990) (“if
the judgment creditor claims entitlement to the
assets of a third party and the third party
contests the claim, a trial must be held”).
In sum, the above rules and cases tell us that a judg-
ment creditor in Illinois, like GE Betz, is entitled to “pros-
ecute” a citation action to discover assets against a
third party, like BMO Harris, as long as the creditor
reasonably believes that the third party holds a judg-
ment debtor’s assets. 735 Ill. Comp. Stat. 5/2-1402(a).
After bringing the citation action, the creditor is entitled
to search through the third party’s books, papers, and
records to locate the debtor’s assets and to determine
the validity of the third party’s claim to those assets.
Regan, 617 N.E.2d at 820. The creditor is then entitled to
a trial or evidentiary hearing on the evidence it obtains
from its discovery efforts. Workforce, 977 N.E.2d at 275-
76. If the creditor successfully proves at trial that it has
the superior claim to the debtor’s assets, the court is
empowered to order the third party to turn over the
debtor’s assets to the creditor. 735 Ill. Comp. Stat. 5/2-
1402(b); Resolution Trust, 994 F.2d at 1223. And if any
party—whether the judgment creditor or the third
party—is dissatisfied with the outcome of the citation
proceedings, that party has the right to appeal the out-
come. Ill. Comp. Stat. S. Ct. R. 304(b)(4).
With this background on Illinois citation actions, we
now return to the issue at hand: is a third-party citation
28 No. 12-3746
respondent in such an action properly characterized as
a “defendant” under 28 U.S.C. § 1441(b)(2)? Unfor-
tunately, the term “defendant” is not defined within
§ 1441, and, surprisingly, very few courts have had to
grapple with its definition in the past. The Supreme
Court has only briefly considered the meaning of the
term as used within § 1441, concluding that “the word
‘defendant’ as there used is directed toward more im-
portant matters than the burden of proof or the right
to open and close.” Chicago, R.I. & P.R. Co. v. Stude, 346
U.S. 574, 579 (1954) (holding that the labels assigned to
parties by state law do not matter because “federal
law determines who is plaintiff and who is defendant”
for the purposes of removal). In addition, the Eleventh
Circuit has suggested that a defendant under § 1441 is a
party whose interests are in opposition to the plaintiff’s
interests. See City of Vestavia Hills v. Gen. Fid. Ins. Co., 676
F.3d 1310, 1314 (11th Cir. 2012) (noting that “[w]here
the parties’ interests are the same, we have held that
those parties must be aligned together [for the purposes
of removal] and have reversed a district court’s failure
to do so, even where the parties’ interests were in op-
position outside of the issues raised in the subject action”).
Without much direction from either the Supreme
Court or our sister circuits, we turn to dictionaries for
additional guidance on the meaning of the word “defen-
dant.” Black’s Law Dictionary does not offer much help,
defining a civil defendant as a “person sued in a civil
proceeding.” Black’s Law Dictionary, “Defendant” (9th ed.
2009); see also Black’s Law Dictionary, “Sue” (9th ed. 2009)
(defining to “sue” as “[t]o institute a lawsuit against
No. 12-3746 29
(another party)”). The Merriam-Webster Dictionary pro-
vides slightly more assistance, describing a defendant as
“a person required to make answer in a legal action or
suit.” Merriam-Webster Dictionary Online, available at
http://www.merriam-webster.com/dictionary/defendant
(last visited May 1, 2013).
Although the guidance provided by dictionaries and
prior case law is not substantial, it all points in the
same direction—indicating that a third-party citation
respondent in an Illinois citation action is a defendant.
The Supreme Court indicated in Chicago, R.I. & P.R. Co.,
346 U.S. at 579, that a party can be a “defendant” for
the purposes of § 1441 even if state law labels the party
with another name. As a result, the fact that Illinois
law refers to parties like Harris as “third-party citation
respondents” instead of “defendants” is not determina-
tive of a party’s status under federal removal law. What
is determinative—as the Eleventh Circuit has previously
held in Vestavia Hills, 676 F.3d at 1314—is the alignment
of the parties’ interests. Here, Harris’s interests are
clearly in opposition to the interests of the plaintiff, GE
Betz. Moreover, we note that third-party citation respon-
dents like BMO Harris fit all dictionary definitions of
the word defendant. When GE Betz served Harris with
a citation to discover assets, it instituted a legal action
to recover assets from Harris. As a result of being
served with the citation, Harris was required to make
answer in the legal action in order to retain the con-
tested assets.
Furthermore, throughout our inquiry into whether a
third-party citation respondent in an Illinois citation
30 No. 12-3746
action is a “defendant” for the purposes of 28 U.S.C. § 1441,
we have been continually reminded of the famous duck
test: “if it walks like a duck, swims like a duck, and quacks
like a duck, it’s a duck.” Lake v. Neal, 585 F.3d 1059, 1059
(7th Cir. 2009). If something has all of the qualities of
a duck, then inductive reasoning tells us that it must, in
fact, be a duck. Similarly, if a participant in a judicial
proceeding has all the qualities of a defendant, then
inductive reasoning tells us that the participant must,
in fact, be a defendant.
And indeed, a third-party citation respondent in
Illinois has all of the qualities traditionally associated
with a defendant. A third-party citation respondent is
initially served with notice of the action against it; it is
in direct opposition to the party bringing the action
(the judgment creditor); it has the opportunity to
vindicate its rights at trial; and it has the right to
appeal any adverse judgment against it. There is no
reason to think that, in drafting § 1441, Congress
intended the word “defendant” to be understood in
some unusual or extraordinary way. Therefore, we
hold that a third-party citation respondent in an Illinois
citation action is a “defendant” for the purposes of 28
U.S.C. § 1441. (Note that, in spite of our painstaking
efforts to reach this holding, it is not a far cry from
our previous characterizations of third-party cita-
tion respondents under Illinois law. In fact, we have
previously referred to a third-party citation respondent
as “a party to the postjudgment proceeding.” See Resolu-
tion Trust, 994 F.2d at 1224 (finding a third-party
citation respondent’s motion to intervene in the citation
No. 12-3746 31
action unnecessary since “she was already a party to
the postjudgment proceeding and had been from
the outset”).)
Despite the fact that BMO Harris clearly possesses all
the qualities of a defendant, at oral argument, both Zee
and Harris likened Harris’s status to that of a third-
party defendant, who—according to our precedent—is not
generally authorized to remove a case to federal court
under 28 U.S.C. § 1441(c). See Thomas v. Shelton, 740
F.2d 478, 487 (7th Cir. 1984) (concluding that “in the
broad run of third-party cases . . . the third-party defen-
dant cannot remove the case under section 1441(c)”).
We note, as an initial matter, that this argument is not
on point. The instant action was removed under § 1441(a),
not § 1441(c), since all claims in this case came within
the original jurisdiction of the federal court.
Even if Thomas were on point, it makes no sense to
liken Harris to a third-party defendant. A third-party
defendant is a “party brought into a lawsuit by the
original defendant.” Black’s Law Dictionary, “Third-Party
Defendant” (9th ed. 2009). But Harris was not brought
into this suit by the defendant, Zee; Harris was brought
into this suit by the plaintiff, GE Betz—in the same
manner that a plaintiff would bring any original
defendant into a lawsuit. Similarly, as we noted in
Thomas, “[t]he most common third-party claim is a
claim for indemnity, that is, a claim that should the de-
fendant (third-party plaintiff) be held liable to the
plaintiff, the third-party defendant must reimburse the
defendant for the cost of satisfying the plaintiff’s judg-
32 No. 12-3746
ment.” 740 F.2d at 486. A third-party defendant stands
in opposition to the original defendant (the third-
party plaintiff). Harris, in contrast, stands side-by-side
with Zee. Harris and Zee appear to be in complete agree-
ment with respect to this case; they are working to-
gether—even coordinating litigation strategies—to
fight off GE Betz.
Harris and Zee’s reliance on Thomas is clearly
misplaced, but they make other arguments as to why
Harris is not a “defendant” to the present suit. They
ignore the Supreme Court’s holding in Chicago, R.I. &
P.R. Co., 346 U.S. at 579, that the label assigned by state
law to a party is not dispositive as to whether that party
is a defendant for the purposes of 28 U.S.C. § 1441.
Harris and Zee instead point to our holding in Shaw v.
Dow Brands, Inc., 994 F.2d 364, 369 (7th Cir. 1993), arguing
that the definition of “defendant” in 28 U.S.C. § 1441(b)
is very narrow and does not include “[n]ominal or
formal parties.” According to Shaw, a “defendant is
nominal if there is no reasonable basis for predicting
that it will be held liable.” Id. There are two reasons
why Harris is more than just a “nominal or formal” party
to this suit. First, Harris does not fit the Shaw definition
of a nominal party. On the contrary, there is a very rea-
sonable basis for predicting that Harris will be held
liable to GE Betz. If, for example, GE Betz were to prove
its fraudulent transfer claim successfully, then Harris
would be liable for the funds that Zee fraudulently trans-
ferred to it. Second, recalling our discussion from
Section II, Harris’s presence is the only reason why this
case was removable to federal court in the first place.
No. 12-3746 33
Without Harris, this matter would have been a purely
ancillary matter to the North Carolina suit, and 28 U.S.C.
1441(a) would bar removal to federal court. Travelers,
689 F.3d at 724. Consequently, it is difficult to reduce
Harris to a mere nominal party in this suit.
Along these lines, we are troubled by the way in
which Zee and BMO Harris are talking out of both sides
of their mouths. They play up Harris’s status as a “new
and independent party” to support removal under
§ 1441(a), but in the same breath, they discount
Harris’s status as a “nominal party” to avoid a conflict
with § 1441(b)(2) and keep the case in federal court. An
examination of Zee’s brief to this court demonstrates
just how contradictory their arguments are. On one
page, Zee argues that “Harris is still a new party with a
new claim and a new controversy—which party has
lien priority over Zee’s assets,” in order to get around
the § 1441(a) jurisdictional problem. But on the very next
page, Zee argues that “Zee was the only named de-
fendant . . . and the only party against whom liability
could be found,” in order to avoid the § 1441(b)(2) forum-
defendant rule problem. As we have stated before,
parties “cannot have it both ways” in order to ensure a
case remains in their desired forum; allowing parties to
have it both ways “would be unjust.” Oshana v. Coca-Cola
Co., 472 F.3d 506, 512-13 (7th Cir. 2006) (rejecting a plain-
tiff’s attempt to argue that the value of her case
was less than $75,000 in order to defeat removal, while
simultaneously seeking to preserve her right to recover
more than $75,000 upon remand to the state court). In
34 No. 12-3746
spite of the attempts to characterize Harris otherwise,
Harris is a defendant to this action.
B
With regard to the second issue—whether it matters
that only the non-forum defendant, Zee, consented to
the removal of this case—the parties spend a great deal
of time arguing about the importance of who removed
the case, as though it makes a difference now. It could
have made a difference during the first thirty days fol-
lowing Zee’s removal. 28 U.S.C. § 1441(a) “require[s]
that all defendants (or none) join a notice of removal.”
McMahon v. Bunn-O-Matic Corp., 150 F.3d 651, 653 (7th
Cir. 1998). Here, there were two defendants, Zee and
BMO Harris, but only one defendant, Zee, joined the
notice of removal. Harris’s failure to consent to Zee’s
removal constituted a removal defect. Id. But such a
defect is statutory, not jurisdictional. Id. Because GE Betz
failed to raise this defect in either its initial motion
to remand or its motion to reconsider, GE Betz waived
it after thirty days. Doe v. GTE Corp., 347 F.3d 655, 657
(7th Cir. 2003). Nevertheless, even if BMO Harris had
properly consented to Zee’s removal of this case, the
forum-defendant rule would still stand in the way of
removal. It is true that only Zee removed the case, and
Zee is not a forum defendant. But, as our analysis in
Section III.A demonstrated, Harris is a forum defendant.
28 U.S.C. § 1441(b)(2) clearly prohibits removal “if any
of the parties in interest properly joined and served as
No. 12-3746 35
defendants is a citizen of the State in which such action
is brought” (emphasis added). Harris and Zee cannot
run around the forum-defendant rule by having only the
non-forum defendant remove the case.
In sum, this case was sufficiently independent of
the North Carolina suit to be removable under 28 U.S.C.
§ 1441(a). If neither Harris nor Zee had been citizens
of Illinois, then this case would have been properly
removed to federal court. But Harris is a citizen of
Illinois, and removal to the federal district court
violates the forum-defendant rule, 28 U.S.C. § 1441(b)(2).
Because GE Betz pointed out Harris’s citizenship to
the district court within thirty days—and thus, raised
a timely objection to removal based on the forum-defen-
dant rule—the federal district court should have
remanded this case back to the Cook County Circuit Court.
IV
As we know from the procedural posture of this
case, however, the federal district court did not remand
the case back to the Cook County Circuit Court. It
retained the case for two months after denying GE Betz’s
motion to reconsider. During that time, the district
court granted a TRO that partially lifted the freeze on
Zee’s accounts at BMO Harris, and the three parties filed
an abundance of discovery-related motions. The case
concluded on November 28, 2012 without the district
court judge addressing many of these motions. Deciding
that the “first in time, first in right rule” was dispositive
36 No. 12-3746
of all issues in the case, the district court judge quashed
the citations and dismissed the case.
Despite the fact that the federal district court
improperly retained this case, Zee and BMO Harris
urge that we need not remand the case back to Cook
County now. Relying on Caterpillar Inc. v. Lewis, 519 U.S.
61, 75 (1996), Zee and Harris argue that “considerations
of finality, efficiency, and economy” overwhelm the
district court’s incorrect decision on the motion to
remand because the case has subsequently proceeded to
a final determination on the merits. But the way in
which Caterpillar proceeded to a final determination is
very different from the way in which the present case
proceeded to a final determination.
In Caterpillar, a district court improperly denied a plain-
tiff’s motion to remand the case back to state court.
The plaintiff correctly argued that the parties lacked
complete diversity: one of the initial defendants was
a citizen of the same state as the plaintiff. Despite this
rather obvious flaw in subject-matter jurisdiction, the
district court denied the plaintiff’s motion to remand,
and the case remained in federal court. Id. at 64-66.
During the course of the next four years, the plaintiff
settled with the non-diverse defendant. Once the non-
diverse defendant dropped out of the case, diversity
was complete. Id. at 65-67. The case proceeded to a jury
trial, and the jury returned a verdict for the remaining
defendant. The plaintiff appealed, arguing that the
district court lacked subject-matter jurisdiction to
enter judgment for the defendant since the court had
No. 12-3746 37
lacked subject-matter jurisdiction at the time of the
case’s removal. Id. at 67. The Supreme Court rejected
the plaintiff’s argument, holding that “a district court’s
error in failing to remand a case improperly removed is
not fatal to the ensuing adjudication if federal juris-
dictional requirements are met at the time judgment is
entered.” Id. at 64. Given that the case had gone to a
jury trial—not to mention that the case had been in
federal court for more than seven years by the time it
reached the Supreme Court—the Supreme Court be-
lieved that “considerations of finality, efficiency, and
economy [were] overwhelming.” Id. at 75. Emphasizing
that “no jurisdictional defect [had] lingered through
judgment,” the Court noted remanding the case back to
state court “would impose an exorbitant cost on our
dual court system, a cost incompatible with the fair
and unprotracted administration of justice.” Id. at 77.
Caterpillar stands for the proposition that when
remand to state court would “impose an exorbitant
cost,” a federal court may overlook a jurisdictional defect
at the time of removal that has subsequently been cured.
Id. Zee and BMO Harris ask us to extend the holding
of Caterpillar to find that a federal court may overlook
a statutory defect at the time of removal that has not
subsequently been cured. We decline to make such
an extension in the case at hand.
The situation faced by the Supreme Court in Caterpillar
is distinguishable from the situation we face here for
four reasons. First, and most obviously, this case has
been in federal court for only a fraction of the time that
38 No. 12-3746
the Caterpillar case was in federal court. The final deter-
mination in Caterpillar consisted of a jury trial more
than four years after removal to federal court. But in
this case, the final determination consisted of a dismissal
less than three months after removal to federal court. It
is true that during the course of these three months,
GE Betz, Zee, and BMO Harris flooded the district court
judge with a “paper blizzard.” Yet the fact remains
that, even now, the case has been in federal court for
less than one year, weakening any considerations of
finality, efficiency, and economy.
Further weakening any considerations of finality,
efficiency, and economy is the way in which the dis-
trict court judge dismissed GE Betz’s case. On a day
that the parties thought they were merely going in
front of the judge to argue about a protective order, the
judge instead decided from the bench “to call a halt to
all this.” Although we certainly understand the dis-
trict court judge’s frustration with all the “garbage” that
the parties have filed in this case, the judge did not ade-
quately address at least two of GE Betz’s arguments
in his dismissal. For example, the district court judge
failed to address GE Betz’s argument that BMO
Harris’s UCC filing did not perfect its security interest
in all of Zee’s assets, and in particular, its real property.
Additionally, while the judge briefly addressed GE
Betz’s fraudulent-transfer claim, the judge misstated
the claim’s required elements. The judge found the
fraudulent-transfer claim meritless because “Harris has
no stake in pursuing remedies that would somehow
No. 12-3746 39
jeopardize its own interest,” suggesting that GE Betz
would need to prove that Harris had fraudulent
intent when it entered into the credit facility. But fraudu-
lent transfer requires proving that Zee—not Harris—
had “actual intent to hinder, delay, or defraud” when
it entered into the credit facility. 740 Ill. Comp. Stat.
160/5(a)(1). Furthermore, neither the fraudulent-transfer
argument nor the real-property argument is auto-
matically resolved by the “first in time, first in right”
rule, which formed the basis of the judge’s dismissal.
The way in which the district court judge dismissed
the case particularly weakens any considerations of
finality, efficiency, and economy in light of the dis-
covery and procedural rights to which GE Betz would
have been entitled had the case remained in the Cook
County Circuit Court. As detailed in Section III.A, it is
“reversible error” for an Illinois state court “to decide
[a citation action] based solely on the arguments of coun-
sel”—which is precisely what occurred here. Workforce,
977 N.E.2d at 276. In this case’s original venue, GE Betz
would have been entitled to additional, extensive dis-
covery, including the discovery of all “books, papers, or
records in [Harris’s] possession or control which have
or may contain information concerning the property or
income of [Zee].” Ill. Comp. Stat. S. Ct. R. 277(c)(4). This
additional discovery would have been particularly
useful on the issues of fraudulent transfer and the per-
fection of Harris’s security interest. More importantly,
GE Betz would have been entitled to an evidentiary
hearing or trial, in which it could have “subpoena[ed]
40 No. 12-3746
witnesses and adduce[d] evidence as upon the trial of
any civil action.” Ill. Comp. Stat. S. Ct. R. 277(e). GE Betz
enjoyed none of these benefits in the federal district court.
The final reason why we are unmoved by considera-
tions of finality, efficiency, and economy is that the under-
lying removal defect remains uncured in this case. In
the Caterpillar case, the Supreme Court was moved by
such considerations because “no jurisdictional defect
lingered through judgment.” 519 U.S. at 77. Yet the re-
moval defect lingers on in the present case. BMO
Harris was a forum defendant when the case was
removed; BMO Harris is still a forum defendant today.
True, the removal defect in Caterpillar was jurisdictional;
the defect here is only statutory. But considering the
district court’s lightning-fast resolution of this very
complicated case—made possible, in part, by its refusal
to let GE Betz conduct the full exploration that a
citation proceeding allows on at least two of its claims
against Zee and Harris—the fact that a statutory defect
remains uncured only strengthens our conclusion that
considerations of finality, efficiency, and economy are
virtually nonexistent here.
V
In a last-ditch attempt to keep this case in federal
court, Zee and BMO Harris make one final argument
why we should ignore the statutory defect in removal:
waiver. According to them, GE Betz waived the
removal defect created by the forum-defendant rule for
No. 12-3746 41
two reasons: (1) GE Betz failed to mention the forum-
defendant rule in its initial filing to support remand,
and (2) GE Betz proceeded to litigate the case on the
merits despite the forum-defendant removal defect.
We consider both waiver arguments in detail below.
A
Zee and Harris’s first waiver argument centers on
GE Betz’s failure to mention the forum-defendant rule
in its initial memorandum to the district court
addressing the propriety of removal. Zee and Harris
concede that GE Betz raised the forum-defendant issue
well within the thirty-day period required by 28 U.S.C.
§ 1447(c). But the first time that GE Betz mentioned the
forum-defendant rule in a written filing was in its
motion to reconsider. As a result, Zee and Harris
argue that under Brooks v. City of Chicago, 564 F.3d 830,
833 (7th Cir. 2009), GE Betz automatically waived the
forum-defendant argument because “any arguments . . .
raised for the first time in [a] motion to reconsider
are waived.”
This argument ignores what transpired in the court-
room prior to GE Betz filing a motion to reconsider.
Technically, this argument was not raised for the first
time in GE Betz’s motion to reconsider; it was raised
earlier, during the hearing on GE Betz’s initial oral
motion to remand. At this hearing, the district court
judge, on his own, brought up the forum-defendant
problem, stating:
42 No. 12-3746
There is, of course, a complicating factor, if you
wait just a minute, and that has to do with
looking at 1441(b)(2), . . . if Harris partakes of
Illinois citizenship . . . . So under 1441(b)(2), if
Harris were a party as such, the action could not
be removed because . . . we . . . permit removal
by foreign corporations but not by a domestic
corporation.
Evidently, the forum-defendant rule gave the district
court judge some pause at that first hearing. But, as we
know, the judge ultimately decided not to take more
time considering Harris’s status in the case and ask
the parties for additional briefing. Instead, the judge
dismissed the forum-defendant problem as a nonissue.
In deciding whether an argument has been properly
preserved, one factor we evaluate is when the opposing
party was on notice of the argument. See, e.g., Hernandez
v. Cook Cnty. Sherriff’s Office, 634 F.3d 906, 913 (7th Cir.
2011) (explaining that the “underlying concern [with
waiver] is to ensure that the opposing party is not preju-
diced by being denied sufficient notice to respond
to an argument”). Given the judge’s discussion of the
forum-defendant rule at the hearing on the initial
motion to remand, Zee and Harris should have been
on notice of a potential forum-defendant problem from
the outset.
Another factor we evaluate is whether the district
court “effectively considered” the argument during its
initial determination. See Kunz v. DeFelice, 538 F.3d 667,
No. 12-3746 43
681 (7th Cir. 2008) (finding an argument waived if it
“require[d] the application of a novel legal theory” that
was “not fully developed” during the initial determina-
tion); see also Bloch v. Frischholz, 587 F.3d 771, 784 (7th
Cir. 2009) (finding an argument waived because the
district “court never considered” the plaintiffs’ argument
before the motion to reconsider). Perhaps the district
court judge did not evaluate the forum-defendant argu-
ment as thoroughly as he should have, but there is
no question that the judge effectively considered the
implications of the forum-defendant rule at the
first hearing.
Furthermore, we find this waiver argument even
more unpersuasive given the circumstances sur-
rounding that first hearing. On September 12, 2012, Zee
filed both a notice of removal and an emergency motion
for relief from the citation served on BMO Harris. Only
two days later, on September 14th, all three parties ap-
peared before the district court at 9:15 a.m. to argue
the emergency motion. At that time, GE Betz orally con-
tested the propriety of Zee’s removal, citing several
cases to support its position, including Travelers, 689
F.3d at 714. The judge had his law clerk print these
cases and, after briefly glancing at them on the bench,
told GE Betz “that the cases that you have provided
me with don’t create a very inspiring position for your
argument.” GE Betz then begged the judge to delay his
determination until the afternoon, noting that it had
not received Zee’s notice of removal and emergency
motion until 3:30 p.m. on September 13th and had
44 No. 12-3746
“worked during the night to try to pull [its argu-
ment] together.” The judge allowed GE Betz more time,
instructing the parties to come back at 2:30 p.m. It was
during those few hours of recess that GE Betz filed its
written memorandum to support remand. When the parties
returned at 2:30 p.m., the district court denied remand
on the basis of both subject-matter jurisdiction and the
forum-defendant rule.
Undoubtedly, this entire case was adjudicated at light-
ning speed, but GE Betz’s initial motion to remand
was decided particularly rapidly. Yet Zee and BMO
Harris ask us to find that GE Betz waived an argu-
ment in the memorandum supporting its initial motion,
despite the fact that it had less than twenty-four hours
to research it and only a few hours to write it. We
remind Zee and Harris that the “[r]ules of practice and
procedure are devised to promote the ends of justice, not
defeat them.” Hormel v. Helvering, 312 U.S. 552, 557 (1941).
Because GE Betz had almost no time to collect its
thoughts or even find its best argument before filing
this initial memorandum, we decline to hold GE Betz to
the exceptionally strict waiver rule that Zee and Harris
advocate. Cf. Fleishman v. Cont’l Cas. Co., 698 F.3d 598,
608 (7th Cir. 2012) (noting that we enforce the appel-
late waiver rule “unless . . . ‘the equities heavily prepon-
derate in favor of correcting it’ ” (quoting Judge v. Quinn,
624 F.3d 352, 360 (7th Cir. 2010))); Johnson v. Artim Transp.
Sys., Inc., 826 F.2d 538, 548 (7th Cir. 1987) (explaining
that in the context of the appellate waiver rule, “[t]here
are narrow exceptions,” including “ ‘exceptional circum-
No. 12-3746 45
stances where justice demands more flexibility’ ” (quoting
Zbaraz v. Hartigan, 763 F.2d 1532, 1544 (7th Cir. 1985))).
In closing our discussion of Harris and Zee’s first
waiver argument, we note that it is not our intent to
criticize the speed with which the able district judge
addressed this litigation. In fact, his promptness in at-
tempting to sort out this messy case is to be com-
mended. Our only disagreement with his creditable
efforts in this matter is with the conclusions he reached
on the remand request, security interest perfection, and
fraudulent transfer issues.
B
Even though their first waiver argument fails, BMO
Harris and Zee claim that they have a second, “brighter
bulb” reason for finding that GE Betz waived the forum-
defendant argument (despite formally presenting the
argument only sixteen days after removal). Harris and
Zee argue that GE Betz “consented” to being in federal
court by litigating the case on the merits after losing its
initial motion to remand. In fact, Zee told us at oral argu-
ment that “before [GE Betz] presented [its] motion to
reconsider, [it] had a separate citation issued by the
district court to Zee. . . . [GE Betz] filed a motion to
modify the TRO . . . for [its] own benefit with the
district court. And then [it] issued a deluge of discovery.”
Zee and Harris then cite Bernstein v. Lind-Waldock & Co.,
738 F.2d 179, 186 (7th Cir. 1984), for the proposition
that a plaintiff cannot “thr[o]w in the towel” and start
46 No. 12-3746
litigating the case on the merits after losing a motion to
remand; instead, a plaintiff must “st[i]ck by his guns
and . . . [be] vindicated . . . on appeal.”
This argument misconstrues the holding in Bernstein.
The plaintiff in that case brought suit in an Illinois state
court alleging that the defendants had violated state
law. The defendants removed the action to federal
court, claiming that federal law, not state law, governed
the plaintiff’s rights (the underlying facts involved unsuc-
cessful transactions in securities). Id. at 181-82. The
plaintiff disputed the defendants’ claim and filed a
motion to remand the case back to state court based on
lack of subject-matter jurisdiction. The federal district
court incorrectly denied the plaintiff’s motion. Id. at 182.
At that point, the plaintiff then decided to amend his
complaint and add a federal cause of action against one
of the defendants. Id. at 185. Even though the federal
district court had lacked subject-matter jurisdiction
over the plaintiff’s first complaint, the district court
now had original jurisdiction over his amended com-
plaint. Id. Under these circumstances, our court
held that “once [the plaintiff] decided to take ad-
vantage of his involuntary presence in federal court to
add a federal claim to his complaint he was bound
to remain there.” Id.Unlike the plaintiff in Bernstein, GE Betz has done
nothing to take advantage of its involuntary presence
in federal court. It has never added a federal claim to
its original registration and citation action. Nor has
GE Betz taken any actions that resolve the underlying
problem with removal. There was a forum-defendant
No. 12-3746 47
problem at the time of removal because BMO Harris
was a defendant; there is a forum-defendant problem
now because BMO Harris is still a defendant. Contrast
the plaintiff’s actions in Bernstein, which resolved the
underlying problem with removal. When the Bernstein
defendants filed a notice of removal, the federal district
court did not have subject-matter jurisdiction over the
controlling complaint. But once the Bernstein plaintiff
amended his complaint to include a federal cause of
action, the district court gained jurisdiction.
Besides misconstruing the holding in Bernstein, Harris
and Zee’s argument also misconstrues the record in
this case. Zee’s statement at oral argument that GE Betz
had a citation issued to Zee, filed a motion to modify
the TRO, and issued discovery requests before presenting
its motion to reconsider is not true. In the fourteen-day
period between the denial of the motion to remand and
the filing of the motion to reconsider, the only thing that
GE Betz filed was an attorney appearance form. Mean-
while, during that same fourteen-day period, Zee
and BMO Harris filed an emergency motion for a prelimi-
nary injunction, set a hearing for a TRO, drafted a TRO,
and filed another motion to quash the citation served
on BMO Harris. Eventually, GE Betz would issue a
second citation to Zee, file a motion to modify the TRO,
and issue discovery requests—but only after filing its
motion to reconsider.
Upon reviewing the record, it is clear that GE Betz has
not “invoke[d] the jurisdiction of the federal court, and
then disclaim[ed] it when [it] los[t].” Bernstein, 738 F.2d
48 No. 12-3746
at 185-86. Two days after Zee filed a notice of removal,
GE Betz began asking the federal district court to
remand the case back to Cook County where it belongs.
Only after it properly preserved its forum-defendant
argument did GE Betz begin litigating the case on the
merits. Nor has GE Betz ever “thr[own] in the towel” on
its forum-defendant argument. Id. at 185. On the con-
trary, GE Betz raised the argument again in its first
filing with our court, and it has continued to raise the
argument in every subsequent filing. Clearly, GE Betz
has stuck to its guns on the forum-defendant argument
throughout this litigation. Now, under Bernstein, 738
F.2d at 186, it is time for us to vindicate GE Betz’s forum-
defendant argument on appeal.
VI
No matter how many ways Zee and BMO Harris try
to recharacterize what happened in this case, the funda-
mental facts are as follows: Zee removed this case to
federal court even though its co-defendant, BMO
Harris, was a forum-defendant, in violation of 28 U.S.C.
§ 1441(b)(2). GE Betz objected to the removal based
on the forum-defendant rule within the thirty days pre-
scribed by 28 U.S.C. § 1447(c). Despite GE Betz’s timely
objection, the federal district court improperly retained
the case and eventually dismissed it on the merits.
Because the district court should never have reached
the merits of this case, we now V ACATE its dismissal.
Furthermore, we R EMAND the case to the district court
with instructions to R EMAND the case back to its original
No. 12-3746 49
venue, the place where it properly belongs: Cook County
Circuit Court.
5-3-13