## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 08

- 2203 K EN NE T H J. W OLF an d KJ W, LLC , P la intif fs-A pp ella nts, v. F ORD K ENNELL Y, R OSENT HAL C OLL I NS G R OUP, LLC an d L AWRENCE S PA IN, D efend a nts-A pp ellees.

A pp eal from the United S t ates Di strictC our t fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No . 1:07- cv-02218

—Rebec ca R. Pal lmey er, Judge .
A RGUED M AY 28, 2009

— D ECI DE D J UL Y 23, 2009

Befo re B AUER, F LA UM, an d K ANN E , C ircu it Judges . F LA UM, Cir cu i tJudg e . F o r d Kenne l l y pr ev ai l ed i n a N ati onalFutur es A sso ci ati on a rbi tr atio n aga i nst s eve ra l com m odi ti es bro ker s with w hom Kenn elly had acco unts and w ho, he a l l ege d, ra n “bo i l err oo m ” o perat i ons that c au sed hi m to i ncur s eve re l oss es. Those bro ker s then fi led sep arate p etitions to vaca te in I ll inois state cou rt and the N or ther n Distr i ct o fI l l i noi s. Kenn el l y s ought,2 N o. 08

- 2203 unsuccessfull y b ut o vera p er i od ofse ver alm onths, to r emov e th e st at e co ur t ca se t o fede r alc o ur t; a nd whi l e he was uns ucc es sfuli n getti ngthe c as e i nt o fede r alc o ur t he di d pe r su ade the di st r i ctc o ur t to barK J W , LLC , o ne o fthe c om m od itie s b ro ke rs , from se ek in g a tt or n ey s’ f ee s fo r h is att em pted re m ova l

. KJW now app eal s that r uling. Fo r th e fo llow in g re as on s, w e c on c lu d e t h at cle ar ly est abl i shed l aw f or ecl ose d Kennel l y’ s att em pts to re m ove t h e s t a t e c o u r t c a s e t o f e d e r a l c o u r t a n d a c c o r d i n g l y we r ev er se the di stri ctc o ur t’ s m i nut e o r derb ar r i ngthe peti ti on f orat torneys’ fees .
I . B a c kg r o und Ford K en ne ll y, an I nd iana citizen, sued K en W olf, KJW ( hi s br o k er ) , La w r en ce S pain ( an o th erb r o k er ) a nd the RosenthalCol l i ns Gro up, LL C (“ RC G”) i n a Nati onal Future s A ssoci ati on ( “N FA ”) arbi tr ati on. The arbi tr ati o n p an el fou n d in K en n elly ’s fa vo r, aw ar d in g h im $1 .3 m i l l i o n i n da m ag es , wi thRCG a nd W o l fj o i nt l y a nd s e v e r a l l y l i a b l e f o r $ 5 4 3 , 3 8 6
. 12, p l us i nt e r e s t
. R CG fi l e d a peti ti on t o vacat e that a w ar d in t h e N or ther n Dis tr i ct o f I l l i no i s, po st i ngb o nd i n the a m ounto fthe e nt i r e j o i nt an d se ve r al awar d pur su an t to N F A r ul es be f o re doi ng so . A c c or d in g t o W o lf, th ey als o m ad e d em an d s o n h im t o i nd e mni fy RC G un de r a n a g r e e men tb e t we e n RC G an d KJ W
. W o l fwas no t a par tyt o RCG’ s pet i ti o n. O n Ma r c h 2 5 , 2 0 0 7, Wo l fa n d KJ W fi l e d the i r o wn p et itio n to va c at e in C oo k C ou n ty C irc u it C ou r t. W olf i ncl ud ed i n hi s s tat e co urt p et iti on a co unt f ordecl ar a-N o. 08

- 2203 3 to r y r el i efa g ains t RCG unde rI l l i no i s st ate l aw, s ee k i ng a decl ar ati on that RC G di d no t have a val i d c laim f or i nde m ni fi ca ti o n. K ennel l y r esponded by s eek ingt o r e mov e Wo l f’ s peti ti on to f ed eralco urt. W ol f’ s co unsel, i n a l ett erse nt to K en n el l y’s co u n se l, w ar n ed th at R C G w as an Il lin ois c i t i z e n f o r p ur po s e s o fj ur i s di c t i o n a nd tha t2 8 U. S
. C. § 1441 ( b) , the “f or um defe nd ant r ule , ” pre vente d rem ova l to f edera l c ourt
. Kenn el l y no nethel ess so ught t o re m ove th e case in a m o t io n fil ed on A p ril23, 2007
. To cu re th e r emov alpr o bl ems pr es en te d b y the f o r um de f en dan t rul e, Kenn el l y a ske d the di strict cour t t o re al i gn RCG as a p et itio n er (ins te ad of a re sp on d en t) “ ac c or d in g t o t h eir actuali nter est s i n the l i ti gat i on. ” Ken n elly al so cl ai m ed tha t W o l f’ s de c l a r a t o r y j ud g men t a c t i o n a g a i nst RCG w as p rem atu re beca us e, ifthe ar bitration aw ard w ere vac ated , “the re w ou ld be n o need for a court to d eterm i ne wh etherKJW and W ol far e l ega l l y obl i gat ed to ind em nify RC G
. ” K en ne ll y also exp ressed his conc ern th at if th e s ta te c as e w er e no t rem ov ed , th er e w as a p os sibi l i ty ofi nconsi ste nt deci si ons. On M ay 21, 20 07, W ol fm ove d to re m and. W olf argued that because RC G was a re spondent, K ennel l y’ s rem oval vi o l a t e d § 1 4 4 1 ( b ) ’ s f o r um de f e nd a nt r ul e a nd that RC G had notco nsented t o re m ova l

. W ol fal so opposed realig n m e n t as the p etitioner i n th e I ll inois state cou rt c a s e . Wo l f’ s m o t i o n o pp o s i ngr e mov a l c i t e d Am e r i ca n M ot or ists Ins
. Co. v. Tr aneCo. , 657 F.2d 146 , 151 (7th C ir. 1981 ), w hich hold s tha t reali gn m en t is only p rop er “w he re th er e i s no a ctua l, su bstant i alc o nfl i ctb etwee n the4 N o. 08

- 2203 parti es that w oul d j usti fy pl aci ng the m o n op p os i te si des of the l aw sui t. ” W ol fem phasi zed i n hi s m oti on that ther e was a li ve contr ove rs y with RC G overthe i ssue of i nd em ni fi cati on. K ennel l y o pp ose d the m oti on t o re m and the ca se backto the I l l i noi s s tat e co urt. A t a st atus confer ence on J une 25, 20 07, the dist ri ct co ur t appe ar ed per su ade d b y Kenne l l y ’ s op p o si ti o n. The di st r i ctc o ur t st at ed th at“ i t do es s ee m t o me tha t th e re a l di s pu t e he r e i s b e t we e n the pa r t y tha t pr e v a i l e d at th e arbi tr at i o n an d th e par ti es th at wer e f o und by the arbitrator to hav e viol ated

. . . M r. K en ne ll y’s r ig ht s. So w i th thatunderstan d ing, Ido thi nk r em ova l was pr o pe r . ” T he di s t r i c tc o ur ts a i d tha ti twa s “ c o nc e r ne d” ab out W ol f’ s a rg um ent r ega rdi ng a substa nti aldi spute about i nd em ni fi cati on but su gge ste d that s he sa w an ot h er p ro b lem , th at K en n elly h ad n ot rais ed in h is m oti on t o re m ove , r ega rdi ng wh ether“co m ple te j usti ce can be done i n the a b se n ce o fthe W ol fand KJ W part i es” i n R C G’ s fe d e r a l c a s e . Ho we v e r, R C G i n d i c a t e d i t s i n t e ntion t o dism i ss i ts f edera l peti ti on a nd l i ti gat e i n sta te c ou rtif t h e d ist ric t c ou rtrem an d ed W olf’s ca se . W olf an d RCG fi l ed a su ppl ement al br i ef r es ta ting th ati nt en ti on o n J uly12 , 20 07. On A ugust 1 4, 20 07, Kenne l l y a rgued that W ol f’ s decl ar ator y j ud gm ent a cti on a gains t RCG sho uld be se ver ed an d tha t th e d i st r i ctc o ur t sh o ul d r eg ar d tha t par t o fthe case as a “sham o rche str ate d by W ol fand RC G j oi ntl y t o k eep K enne l l y o uto ffede r alc o ur t. ” The pa r ti es went th roug h m ed iation w ithou t s u cce ss. T he district cou rt he l d a no th erhe ar i ng o n S ept embe r 1 9, 2 00 7 i n whi chtheN o. 08

- 2203 5

co ur t si g na l ed o nc e ag ain i ts i nt en ti o n t o de ny the m o t i o n f o r r e man d. T wo mo r e mo nths the n e l a ps e d. On N ove m ber27, 20 07 , t he di str i ct c ourto rder ed W ol fto re sp o n d t o t h e a rg u m en ts K en n elly h ad rais ed in h is A ugust 1 4 br i efr ega rdi ng se ver ance o fthe i nd em nific ati on i ssue. A t s om e poi nt i n l ate N ove m bero r ear l y Dece m ber20 07, i t e m er ged thato ne o fRCG ’ s l i m i ted partners was an I nd i ana ci ti zen. I t thus now appeare d that RCG coul d not be r eal i gned as a peti ti onerbec ause K en n elly w as an I nd i ana ci ti zen a nd pl aci ng the two on opposi te si des w oul d destro y the di ver si ty ofthe sui t. On D ecem ber13 , 20 07, W ol fs u bm i tte d anotherbr i ef ar gui ng tha t A m er ican M otoris ts st ill ap p lied b u t th at it d id not m att erwh etherthe dist ri ct c ourtr eal i gned RCG o r not. A s RC G s tat ed, se nd i ng RCG ( an I nd i ana r esi dent) to th e pl aint i ff’ s si de ag ains t Ken ne l l y ( al so a n Indi an a re si dent) w ould d estro y di ver si ty. W ol fal so ci ted cas e law h old in g t h at m er e “ m isjoin d er ” o fa d efe n d an t c ou ld not cure re m ova l defects , as the sta nd ard w as the m uch m o r e i m po sing“ f r au dul en t j o i nde r . ” W o l fpo i nt ed o ut th ate ve n i fmisj o i nde r s ta nda r ds ap pl i ed, the r e was no pend i ng mo t i o n t o s e v e r R CG f r o m t he c a s e . Ke nn e l l y, i n re sponse to W ol f, m ade such a m oti on t o seve r on J anuary10 , 20 08. On Febr uary12 , 2008, the dist ri ct courtiss ued a t w el vepag e m emor an dum g r an tingthe mot i o n to r emand. The dist ri ct c ourtfi rs t f ound tha t it m ust r em and i fRCG was a r e s po nd e nti n the c a s e . As the di s t r i c tc o ur ts t a t ed, si nce j uri sdic ti on di d no t re st on a f edera l questi on, under § 14 41 ( b) the c as e was “ r emov ab l e o nl y i fno ne o fthe6 N o. 08

- 2203 par ti es i n i nt er es t pr o per l y j o i ne d a nd s er ve d a s defen d an ts is a c itiz en of th e s ta te in w h ich su c h ac tio n is bro ught. ” RCG was a citize n ofI l l i noi s, so thi s cr i ter i on w as not m et. The di str i ct c ourtal so f ound that r em ova l w as i m proper, as sum i ng RCG as a re spondent, bec ause co ur ts hav e i nt er pr et ed th e st atut o r y l an g ua g e pr o vi di ng for rem ov al “ b y t h e d efe n d a n t or th e d efe n d an ts ,” 28 U
. S. C. § 1 441( a) , as req u iring thatal l defendants con s e nt t o r e mov a l

. RC G wa s no t wi l l i ng t o c o ns ent t o r emov al

. Next, the di st r i ctc o ur t ex pl aine d tha t RCG ’s re al i gnm ent a s a peti ti onerwas not possibl e be cause it w oul d destro y di ver si ty between the p ar ti es. The di str i ct cour t a l so sta ted that, ev en i fRCG was not a r e s i de nto f I nd i ana, r eal i gnm ent w ou l d not be pro per because o f the s ub s t a nt i a l c o nt r o v e r s y b e t we e n W o l fa nd R CG re ga rd in g in d em n ifica tio n . Fin ally , th e d ist ric t cou rth eld that seve ra nce o fthe indem ni fi cati on di spute was not properwitho ut a showing offra ud u lent m i sj oi nd ero r p ro c ed u ra l m isjoin d er , ne it h er of w h ich K en n elly co u ld pr o ve . Acco r di ng l y , the di st r ictc o ur t r emande d the case bac k t o sta te cour t. W olfthen tried to recove r attorne ys’ fees for Ke nn ell y’s att em pte d r em ova l

. W ol fm ai l ed K ennel l y a n off erto co nfera l o ngwi th d eta i l ed i nv o i ce s. Re ce i vi ngno resp ons e from K en ne ll y, W olfm oved the d istri ct cou rt f ori n st ru cti ons to seta schedule f orco nfe rr i ng under L oc al R u le 5 4.3 (b ). K en n elly cr os s-m ov ed to ba r W o lf f ro m fi l i ng any m oti on f orfees and cos ts. The di s t r i c t c o ur t he l d a s t a t us c o nfe r e nc e o n Apr i l 14 , 2008
. The di str i ct c ourtgr anted Kennell y’ s cr oss - m oti on to barW ol ffro m fi l i ng f orfees and cos ts, st ati ng:N o. 08

- 2203 7 W i th o ut r ea ch i ng th atque st i o n, Ido n’ t th i nk

— Ithi nk e v e n i fw e w e r e t o v i e w f e e s h i ft i n ga s th e n o r m, Ithink th is case is ex cep tional. I t ’s n ot one w he re re m ova l was cl ear . H ad that been

— re m ov alwas c lea rly im p ro p er . H ad th at be en th e c as e, it w ou ld ce r ta i nl y no t ha ve t ak enme months t o r es o l ve the di spu te tha t Ithi nkwas a n un f o r tu na te l y c o st l y o ne f orbo th si des. Ia m n o ti n c l i n e d t o s h i ftfe e s i n t h i s c a s e . S o my i nstr ucti ons w oul d be that y ou pro ceed with sta te cour t. I n a min ut e o r derf o l l o wi ngthe st atus co nfer en ce , the dist ri ct c ourtst ate d that: “[T] he court dir ects the part i es to proce ed w i th lit iga ti on i n St ate co urt. Fe e- shi fti ng i s no t w ar ran ted i n thi s ca se. M oti on t o barther ef or e a l so gr an te d .” W ol fnow app eal s the deni alo fat torneys’ fees .

I I . Discussi on I n gene ra l, we re vie w a di str i ct c ourt ’ s deci si on t o a w ar d at to rn ey s’ fe es for a b u se of d isc re tio n . Ki n g v. I ll
. Sta te B d. of

Ele ct i ons , 4 1 0 F
. 3 d 4 0 4 , 4 1 1 ( 7 th C i r . 2 0 0 5 )
. As the Suprem e Court has poi nted out, how eve r, “[ a] di str i ct cou rt w ou l d necess ar i l y abuse i ts disc re ti on i fi t ba sed i ts r ul i ngo n a n e r r o ne o us v ie w ofthe l aw o r o n a cl ear l y e rr oneo us as ses sm ent o fthe evi d en ce. ” C o o ter & Gel l v. Har t m arx Corp. , 4 96 U
. S. 38 4, 4 05 ( 19 90 )
. Our review of th e leg a l issues un d erlyi ng the claim f or attorn ey s’ fe es is d e n ov o. See D upu y v . S a m uel s , 42 3 F
. 3d 714, 718 (7th Cir. 2005).8 N o. 08

- 2203 W olfm akes tw o argum en t s against the d istri ct cou rt’s rul i ng. Fi rs t, he a rgues tha t th e dist ri ct c ourt ’ s r uling o n th e a t t o r n e y s ’ fe e s i ss ue

— an d he r e he f o cus es o n the m i nute o rder

— was t o o s um m ar y t o a ss ur e a r ev i ewi ng co ur t th at th e di st r i ct co ur t i n f ac t ex er ci se d i ts di sc r et i o n. W e di sa g r ee . W hi l e th e di st r i ctc o ur t’ s wri tt enr ul i ng was i nde ed ve r y sum m ary, the min ut e o r derwas e ss en tiall y on ly m em orial ized w ha t had occu rred on th e record dur i ngthe e ar l ier st atus he ar i ng . I n tha t he ar i ng, the dist ri ct c ourtf ound that the pre sent case was “not[a case ] w he r e . . . r emov alwas c l ea r l y i m pr o per ” an d the r efo re de ni e d fe e s. A t the t i me tha tthe di s t r i c tc o ur tma de i ts r ul i ng, i t ha d i ss ue d a th o r o ugh o pi ni on on the re m ov al i ssue, not i ng bo th par ti es’ posi ti ons on that i s sue. I ta l s o h a d b e f o r e i tb o th W o l f’ s mo t i o n f o r s c he duli ngi ns t r uc t i o ns a nd Ke nn e l l y ’ s mo t i o n t o b a r fees . K enne l l y ’ s mo t i o n t o b a r fe e s c i t e d the a pp r o pr i a t e c a ses i n thi s ar ea ( i nc l udi ngb o th M ar t i n v . Franklin Corp. , 54 6 U. S
. 1 3 2 ( 2 0 0 5 ) a nd Lott v. P fiz er, Inc. , 49 2 F
. 3d 789 ( 7th Ci r . 2 00 7) )
. The di st r i ctc o ur t was thus a war e o fthe p ro p er st an d a r d for fe es an d ap p ea re d to u se it in re achi ng i ts deci si on . M oreo ver, the dist ri ct c ourtci ted r e a s o ns f o r i t s de c i s i o n, i nc l ud i ng the f a c t tha t the cas e w as “excepti onal” a n d noto ne wh er e r em ova l was c lea rly im p ro p er , an d th e u n u su al a m ou n t o f tim e it to o kthe c our t to r es o l ve the di spu te
. Be ca us e th e di st r i ctc o ur t’ s r ea so ns wer e su ppo r te d b y the rec ord, the m or e s um m ar y m i nute o rderd oe s not const i tute an ab u se of d isc re tio n . Se eD ugan v. Smerwic k S e werageCo. , 1 4 2 F
. 3 d 39 8, 4 0 8 ( 7 th C i r . 1 9 9 8 ) ( n o t i n gth a twe ha ve “ affi r m ed dec i si o ns refusings an ct i o ns wi th o utN o. 08

- 2203 9 el abor ati on wh en the r eas ons f ordoi ng so ar e cl ear from the record ”). W ol f’ s s eco nd ar gum ent i s that the di str i ct cour t abused i ts disc re ti on be cause c learl y e stabl i shed l aw f or ecl ose d re m ova l i n thi s ca se. W e a gr ee that at the t im e o f Kenne l l y ’ s at te m pte d r emov althe f o r um de f en dan t r ule b ar r ed an y a tt empt t o r emov e th e ca se wi th o ut re al i gni ng RCG as a peti ti oner, and that thi s ci rcui t’ s ca se l a w f o r e c l o s e d a nya t t e mptt o r e a l i g n RC G. “A n or der rem anding [ a] cas e m ay re quir e paym ent o f j ust cos ts and any ac tualexpenses , i ncl ud i ng at torney fees , in c u rre d as a re su lt of t h e re m ov al.” 28 U .S.C
. § 14 47 (c ). In M arti n v. Frankl i n Capi t al , the Suprem e C ourthel d that a dist ri ct c ourtm ay aw ar d a tt or neys’ fees under § 1447 ( c) on ly w h e r e t h e re m ov in g p ar ty lac ke d an “o b j ec tiv ely re as o n a b l e ba sis ” fo r se ek in g re m ov al. M arti n , 54 6 U.S
. at 14 1. M arti n r es o l ve d a ci r cui t spl i t o ve r th e co r r ect st an d ar d for s u c h sit u at ion s. C o m pa re H o r n b u ck le v. Sta te Fa rm Ll oyds , 3 8 5 F
. 3 d 5 3 8 , 5 4 1 ( 5 th Ci r . 2 0 0 4 ) ( “ F e e s sho uld be aw ar ded o nl y i fthe re m ovi ng defendant lac ked ‘ obj ecti vel y r easonabl e g ro und s t o bel i eve thatr em ova l was legall y prop er. ’ ”) wit h S i r otzky v. N
. Y. St oc k Exc h. , 347 F
. 3d 9 8 5 , 98 7( 7 th C i r . 2 0 0 3 ) ( “ [ P ] r o v i d e d r e mo v a l w a s i mproper, the pla i nti ffi s pre sum ptive lyenti tl ed to an a w ar d of f ees . ”) ( em phasi s i n or i gi nal )
. The S up re m e Cour t a dopted the F i fth Ci rcui t’ s a pp ro ach and poi nted o u t that “ [ i ] ffee shi fti ng were autom ati c, d efendants m i ght c hoos e t o exer ci se thi s r i ght o nl y in case s w here the ri ght t o re m ove w as obvi ous. ” M arti n , 54 6 U .S. a t 1 40. The Courtnot ed that Congre ss w oul d n ot have confer re d a r i ght t o10 N o. 08

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r emov e an d the n di sc o ur ag ed its exer ci se i n a l l b utthe ob vio u s c as es . Id

. T he Sup rem e C ou rt did not d efi ne w ha t sorts of belief s ar e “ obj ecti vel y r eas onabl e” i n i ts M ar t i n opi ni on be

cau se th e pa rties i n th at cas e agreed that th e d efend an t’s ba si s f o r r emov alwas r ea so nabl e. I n Lott v. P fizer, Inc. , 49 2 F
. 3d 78 9 ( 7th Ci r . 20 07 ) , w e de ci ded tha t “ qua l i fi ed i m m uni ty j uri sprudence pro vi des appropr i ate gui dan ce for d et er m in in g w h et h e r a d efe n d an t h ad an ob j ec tiv ely re aso nabl e ba si s f orr em ova l

. ” Id. at 793. A s we dis cussed i n Lott, the quali fi ed i m m unity doctr i ne ass um es th at s tat e offi c i a l s a r e a wa r e o fe xi s t i ngc a s e l a w a nd h o l ds o f fi c i a l s l i a b l e o n l y i f th e y v i o l a t e c l e a r l y e s t a b l i s h ed an d p ar tic u lar ize d r i gh ts
. See id
. at 792 ( ci ti ng Bros s e au v. H a ug en , 54 3 U.S
. 19 4, 19 9 ( 2004 ) )
. W e r eas oned thatj ust as the qual i fi ed i m m unity d oc tr i ne at tem pts to pro tect zeal ous l aw e n f or cem ent, the re m ova lst atute enco urag es l i ti g an ts t o m ak e l ibe r aluse off ede r alco ur ts , so l o nga s th e rig h t t o re m ov e is n ot ab u se d

. Id. a t 7 93. W e the n a nnounced the “ gener alr ule ” t o gov er n such cas es: i f, a t th e ti m e the defendant fi l ed hi s no ti ce in federa l co ur t, c lea r l y e st ab l i sh ed l aw de m o ns tr at ed th athe h ad n o b as is fo r r e m ov al, th en a d ist ric t c ou rtsh ou ld aw ar d a p lain tiff h is a tt or n ey s’ fe e s . B y co n tr as t, if clearly estab li sh ed l aw did not foreclose a defen d an t’s basi s f orr em ova l, then a dist ri ct c ourtsho uld not aw ar d atto rney s’ fees . Id. at 79 3. W olf a r g u e s t h at th is c ou rt ’s d ec isio n in A m er ican M o torists f or ecl ose d K ennel l y’ s a tte m pts at r emov al

. I n A m er ican M otoris ts we he ld th at“ [ r ] ea l i g n-N o. 08

- 2203 11

m ent i s pro per w hen the cour t fi nd s that no actual, subst an ti alc o nt r o ve r sye xi st s be twe enthe pa r ti es on o ne si de ofthe dispute and thei r nam ed opponents

. . . ” A m. M ot or i s ts , 6 57 F. 2d at 149 ( ci ti ng Indianapo li s v. C hase N at’l Bank, 3 1 4 U. S
. 6 3 ( 1 9 4 1 ) )
. We s t a t e d th a ti n d e t e r mi ni ng whethe r r ea l i g nm en t i s pr o per, c o ur ts m us t f o cus o n “ th e poi nts o fsubst anti alanta goni sm , n ot agr eem ent. ” Id. at 151. Thi s hel d true eve n i fthe parties shared an inter est in avoidin g l iabil ity i n t he suit altogeth er. “[A ] m ere m ut ua li ty o fi nt er es t i n e sc apingl i ab i l i ty ” do es no t m an d at e re alig n m en t. Id. W e ul tim at el y c oncl ud ed that re al i g nm en t was no t pr o peri n th atc as e be ca us e whi l e th e pla i nti ff i nsurance com pany and a defe nd ant i n su ra nce com pany both had an i nter esti n esc apin g l i abi l i ty f or anycl ai m s, the dispute ove r their re specti ve du ti es to defe nd was a r ealand substanti alco ntro ver sy that j us ti fi ed pl ac i ngthe pa r ti es o n o ppo si te s i des ofthe d isp u te
. Id. W e hav e sub seq ue nt ly he ld on the ba sis of Am e r i ca n M ot or is ts thati t i s “ und oubte dly i m proper ” t o re al i gn parti es f ort h e p urpose o fpre ser vi ng j uri sdic ti on i f“a n actual, substa nti al contr ove rs y exi sts between a p ar ty on on e s id e o f th e d isp u t e a n d its n am ed op p on en t.” Kru ege rv. Car t wright, 99 6 F
. 2d 928, 93 2 n. 5 ( 7th Ci r. 19 93) ( ci ti ng Am. M ot or i st s , 6 57 F. 2d at 149)
. A t the ti m e that K ennel l y s ought to re m ove KJW ’s sui t t o f edera l co urt, then , t h is c i rcui t had a l ong- sta nd i ng pre cedent that re alig n m en t is n ot p ro p er w h er e a n “a c tu al, su b st an tia l” co nt r o ve r sye xi st s be twe enthe pa r ti es, e ve n i fthe parti es shar e a n i nter esti n avo i ding l i abi l i ty i n the sui t.12 N o. 08

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Kenne l l y al s o al l eg es tha tW ol f’ s Il l i noi s st at e c our tpl ea di ngs 1 were defi c ient b eca us e t he y f ai l ed t o i nc l ude a c opy o fthe s uppos ed i ndem ni t y a gr ee m en tan d bec aus e t he pl ea di ngs f ailed t o s at i s fy I l l i noi s ’ f ac t
- pl ea di ng r equi re m en t s . Agai n, ho w ev er, w e no te tha t t h e d istrict cou rt fou nd tha t the d ispu te betw een RCG an d W ol fwas an“a c tual, s ubs t ant i al ” c ont ro ver sy, a nd the val i di t y ofthatdec i s i on or the ade qua c y ofthe pl ea di ngs i s no tani s s ue bef or e us i n a n a t t or ne ys ’ fee s pe t i t i on. Kenne l l y c o unt er s bya l l eging, a s he di d thr o ug ho ut the di str i ct c ourtpro ceedi ngs, thatthe i nd em ni fi catio n d isp u te w as a “s h am ” fa b ric at ed by W o lf an d R C G in or der t o kee p the ca se out offe d er al court

. H e a l l ege s, am ong othe r f acto rs , that the dispute i s du bi ou s because the par ti es have neverpro du ced a w ri tte n i nd em ni fi cati o n a g r ee m en t, RCG ha s ne ve r de m anded pay m en t, a nd th e p arties h ave been , in K en ne ll y’s view , l ess th an vigorous in pursui ng the i nd em ni fi cati on i ssue. I t i s t rue that the tw o p ar ties ul ti m ate l y a gr eed to di sm i ss the decl ar ator y acti on, and whil e thi s m ay have give n K ennel l y s o me ba si s to b eli eve, a t th e ti m e he r emov ed th e ca se , tha t th e i nde m ni fi ca ti o n di spu te was no t a “r ea l ” di spu te , the d ist ric t c ou rt ’s o p in ion on th e re m ov al iss u e u ltim at ely f o und tha t th e i nde m ni fi ca ti o n di spu te was “ ac tu al ” an d “subst anti al ” a nd the m er its ofthatr uling ar e no t on ap p ea l. 1 M o r eo ve r, we st at ed i n A m er ican M otoris ts tha t “the f acts w h ich form the basi s f orr eal i gnm ent m ust hav e b ee n in e x ist en c e at t h e tim e th e a c tio n w as co m m en c ed .” A m . M otorists , 65 7 F
. 2d at 149. Thus, the deci si on t o dism i ss the declara tor y a cti on a t a l ate r sta ge w oul d notN o. 08

- 2203 13 j us ti fy the a tt empt t o r emov e th e ca se a t th e st ar t of the l i ti g at i o n. K ennel l y a l so ar gues that hi s desi re d rea l i gnm ent was no t f o r ec l o se d b y l aw b ec au se , e ve n assum i ngtha t th e dispute between W ol f and RCG f orindem ni fi cati on w as co n c r e te , i t w as ins u b st an tia l in re lat ion to th eir “ul ti m ate i nter est ” i n the outco m e o fthe l i ti gat i on o ver the a rbi tr ati on a w ar d. I n supp ort ofthi s pos i ti on K ennel l y c i tes Indi anapo lis v . Chas eNat ’ l Bank, 31 4 U.S
. 63 ( 1941 ) , a case in wh i ch the Suprem e Cour t hel d that parti es shoul d be al i gned acco rdi ng to thei r “ul ti m ate i nt e r e s t s . ” I n th a tc a s e , the S up r e me Co ur tr e a l i g ne d a defe nd ant a s a pl ai nti ffdespi te a m i l l i on- dol l arco ntro
ver sy between them bec ause the m i l l i on- dol l ardi spute w as “fri vol ous” and the par ti es w er e “ col l oqui al l y s peaking, partners i n the l i ti gat i on. ” Id. at74
. Kenn elly i gnor es, however, that A m er ican M otoris ts i nter prete d Chas eNat i onal Banka nd f oreclo se d hi s des i r ed r ea l i g nm en t. Sp e c ifica lly, A m er ican M otoris ts held that “a m ere m u tu alit y o fin te re st in e sc ap in g liab ility is n ot of its elf suffi ci ent t o j usti fy r eal i gnm ent. ” Ame r i c an M ot or i st s , 65 7 F.2 d at15 1 (c ita tio n s o m itt ed ). Re ali g n m e n t is on ly properw h er e there i s no actual, subst anti alco nfl i ct between the parti es that w oul d j usti fy pl aci ng the m o n op p os ite sid es of th e s u it. Id. Kenne l l y a tt em p ts t o di st i ng ui shthe c as e buthi s ar g um ents ess enti al l y am ount to argum ents aga i nst the A m er ican M otoris ts t e s t
. A s t he di s t r i c tc o ur tr e c o g ni z e d, Kenne l l y ul ti m at el y want s th i s co ur t to aba ndo n Am e r i ca n M otoris ts a nd j o i n the maj o r i tyo f ci r cui ts i n a do ptingthe14 N o. 08

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Kenne l l y a l s o c i t es t hi s c i rc ui t ’ s dec i s i on i n Nai di t ch v. Ban que 2 d e G estion P rive e-S IB , N o. 92 C 5290, 1993 U.S
. D is t. Lexis 14681, 1993 W L 424248 ( N
. D
. Il l. O ct. 19, 1993) , to supp ort his beli ef tha t A m erica n M oto rists di d notf or ec l os e rea li gnm en t
. The N ai di t ch c ou r tc i t e d A m erica n M oto rists but ulti m atel y d eparted f rom i ts holding. The d is tr ic t c ourt the re fo und thatan “actual an d sub stan tial” con fli ct b etw een d efend an t an d an oth er en tity rendered “ ins ub st anti al in c om paris on” the c onfl ic t bet w een p la in tiff a n d th a t e n tit y . 19 9 3 U .S. D ist . L EX IS 1 4 6 8 1 at * 5. Thu s, the court real igned the enti ty as a plai nti f fand charact erized i t s r ea l i gnm en tas be i ng s uppor t ed by A m erica n M oto rists
. 1 9 9 3 U .S. D ist . L EX IS 1 4 6 8 1 a t *4 . A p p a re n tly , N ai di t ch read A m eri can M otors as endorsi ng a “prim ary pu rpose” t es t, w hich i s no ti t s t es tf or r ea l i gnm en t
. Atan y r at e, as we no t ed i n L ott, “[ d] i s t ri c tc our tdec i s i ons . . . do n otr en der the l aw cl early es tabli shed. ” L ott, 492 F. 3d at 793. “p rim ar y p u rp os e” te st, w h ich w ou ld h av e a llow ed h im t o re alig n R C G as a p et itio n er . A m er ican M otoris ts i s a m in or ity vie w am o n g t h e c irc u its
. See, e.g., 13B Charl es A lan W rig h t, et al., Fed eral P rac tice & P roc edu re§ 3607( 2007 Supp. at 417- 18) ( describi ng ci rcui t s pli t a nd not i ng tha t th i s ci r cuit’ s dec i si o n i n A m er ican M otoris ts p lac es it in the m i nor i ty ofci rcui ts w hi ch have adopted the “ actual and s u b stanti alco nfl i ct” tes t)
. W hatev erthe m er i ts of Kenne l l y ’ s des i r e f o r th i s ci r cui t to r ev i si t th e reali g nm ent tes t, how eve r, du ri ng thi s att or neys’ fee p eti ti on we a r e o nl y c o nc erne d wi thth e s tate ofthe l aw a t th e ti m e Kenne l l y s o ug htre m o va l, when A m er ican M otoris ts gov er ned his r eal i gnm ent a rgum ent. 2 K ennel l y’ s fi nal ar gum ent that r em ova l was not f or ecl o se d b y c l ea r l y e st ab l i sh ed l aw i s thatwhenheN o. 08

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re m ove d the case he l abor ed und erthe er ro neous i m pression th at R C G w as only a reside nt of I ll inois fo r pu rposes o fj uri sdic ti on. I n other w or ds, he a rgues that butf orRCG ’ s m i sta ke re gar ding i ts ci ti zenshi p he w oul d not have re m ove d the ca se at al l

. Kenn el l y’ s r epres enta tio n i n th i s r e g a r d i s p l a u s ib l e , b e c a u s e i f h e ha d k no wn RC G w as al so a ci ti zen o fI nd i ana h e w ou ld nothave pur su ed r emov alunde r the s ug g es te d r ea l i gn m ent
. But th e a rg u m en t is irre lev an t if, ta ki n g t h e fa c ts as K en n elly sa w th em at th e tim e, h e d id n ot h av e an o b j ec tiv ely re aso nabl e ba si s f orse eki ng r em ova l in t he fi rs t pl ace. Eve n i fRCG w as o nl y a n I l l i no i s ci ti ze n, r ea l i g nm en t sti l l would have been f or ecl ose d by A m erica n M o to rs .

I I I . Concl usio n Forthe f or ego i n g re aso ns, we R EV ERSE the dist ri ct cour t’ s o rd er bar ri ng a peti ti on f orfees and re m and fo r pr o ce eding s i n l i g hto fthi s o pi ni o n.

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