John N. Basic, Sr. v. Fitzroy Engineering, Ltd.

132 F.3d 36, 1997 U.S. App. LEXIS 39790, 1997 WL 753336
CourtCourt of Appeals for the Seventh Circuit
DecidedDecember 4, 1997
Docket97-1052
StatusUnpublished
Cited by5 cases

This text of 132 F.3d 36 (John N. Basic, Sr. v. Fitzroy Engineering, Ltd.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
John N. Basic, Sr. v. Fitzroy Engineering, Ltd., 132 F.3d 36, 1997 U.S. App. LEXIS 39790, 1997 WL 753336 (7th Cir. 1997).

Opinion

132 F.3d 36

NOTICE: Seventh Circuit Rule 53(b)(2) states unpublished orders shall not be cited or used as precedent except to support a claim of res judicata, collateral estoppel or law of the case in any federal court within the circuit.
John N. BASIC, Sr., Plaintiff-Appellant,
v.
FITZROY ENGINEERING, LTD., Defendant-Appellee.

No. 97-1052.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 22, 1997.
Decided Dec. 4, 1997.

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, Charles R. Norgle, Judge.

Before WOOD, MANION and ROVNER, Circuit Judges.

ORDER

John N. Basic, Sr. ("Basic") brought a declaratory judgment action against Fitzroy Engineering Ltd. ("Fitzroy") asking the district court to declare that Fitzroy's potential negligent misstatement judgment against him, arising out of a pending New Zealand proceeding, would be unenforceable against him in Illinois. Concluding that it lacked subject matter jurisdiction because there was no case or controversy and, in the alternative, declining to exercise its discretionary jurisdiction to hear the declaratory judgment action, the district court dismissed Basic's suit.

After considering the briefs and hearing oral argument, we conclude that the thorough analysis and decision of the district court, dismissing Basic's suit, is correct. Accordingly, we adopt Judge Charles R. Norgle's December 5, 1996, unpublished Opinion and Order in No. 96-C-1650 as the judgment of this court.

AFFIRMED.

OPINION AND ORDER

Before the court is Defendant's motion to dismiss Plaintiff's Complaint for Declaratory Judgment. For the following reasons, the motion is granted.

I.1

Plaintiff John N. Basic, Sr. ("Basic") is an Illinois resident. Defendant Fitzroy Engineering, Ltd. ("Fitzroy") is a foreign company incorporated in New Zealand. In his Complaint, Basic requests that this court make a variety of declarations, all of which will be discussed below.

Fitzroy. a construction and engineering company, entered into a construction contract with Auckland (New Zealand) International Airport to construct a "quarantine waste incinerator." Fitzroy then negotiated and contracted with Basic's company, known on the date of the contract as Basic Environmental Engineering, Inc. ("BEE") (now known as Flame Engineering, Inc.), to design, manufacture, and supervise the installation of a single incinerator unit.

However, a dispute arose between BEE and Fitzroy. Fitzroy claimed that BEE failed properly to perform portions of the parties' contract. Pursuant to the original contract between them, BEE and Fitzroy entered into an arbitration agreement. The arbitrator, bound by New Zealand civil procedure rules, entered a default order against BEE because of BEE's failure to appear at the arbitration hearing. The arbitrator entered an award in the amount of N.Z. $2,057,296 08 against BEE. United States District Judge Ann Claire Williams confirmed the arbitration award, pursuant to her authority under 9 U.S.C. § 207, in Fitzroy Eng'g Ltd. v. Flame Eng'g. Inc. f/k/a Basic Envtl. Eng'g. Inc., No. 94 (C 2029, 1994 WL 700173 (N.D.Ill.Dec. 4, 1994). The confirmed amount equates to an amount in excess of U.S. $1,345,362.

In October of last year, Fitzroy filed a lawsuit in a New Zealand court against Basic ("NZ action"). Though the Statement of Claim (known in the U.S. as a complaint) alleges that Basic transferred the assets of BEE to another company so that he could defeat enforcement of the judgment entered by both the arbitrator and Judge Williams, the document makes clear that Fitzroy's claim does not rest on the illegal transfer. Rather, Fitzroy bases THe NZ action on the negligent misrepresentations made to Fitzroy which induced Fitzroy to enter into the contract with Basic and BEE.

On January 26, 1996, Basic entered an "Appearance Under Protest of Jurisdiction" in the NZ action. In the protest, Basic argued that the New Zealand court lacked personal jurisdiction over him. Alternatively, Basic contended that Fitzroy's action should have been dismissed based on the forum non conveniens doctrine. Three days after Basic entered the "Appearance Under Protest," Fitzroy moved to strike it. On March 20, 1996, the High Court of New Zealand entertained argument concerning both the jurisdiction and forum non conveniens issues.

On March 22, 1996, Basic filed the instant Complaint. Basic requests that this court enter an order making six declarations. Among the sought-after declarations are: (1) that, because of issue and claim preclusion doctrines, the confirmed arbitration award against Basic and BEE/Flame Engineering, Inc. bars Fitzroy from filing the NZ lawsuit; (2) that New Zealand lacks personal jurisdiction over Basic: (3) that Illinois law provides no liability for negligent misstatements of facts by corporate officers. (4) that Fitzroy should have raised the alleged misstatements during the arbitration proceeding; (5) that Basic did not transfer assets to defeat enforcement of the confirmed arbitration award; and (6) that the NZ action is contrary to American public policy.

On April 19, 1996, Basic informed the High Court of New Zealand of the instant action, and requested the High Court to consider this action as evidence that New Zealand was an inconvenient forum. On May 14, 1996, the High Court of New Zealand granted Fitzroy's motion to strike Basic's "Appearance Under Protest" stating, in relevant part,

[T]he fact that a proceeding has been filed in the District Court in Illinois is not sufficient to outweigh the reasons advanced by [Fitzroy] at the hearing as to why [Fitzroy] should not be entitled to continue with its claim in New Zealand.... I also think ... [Basic] had plenty of opportunity to make his application in the United States earlier than he did. It has obviously been issued with the sole view of preempting [Fitzroy] from proceeding with its claim in New Zealand.

On May 21, 1996, Basic applied for a review of the High Court's May 14 ruling.

Fitzroy now moves to dismiss Basic's Complaint for declaratory judgment on two grounds. First, Fitzroy argues that Section 2-619(a)(3) of the Illinois Code of Civil Procedure requires that the court dismiss the instant action because "there is another action pending between the same parties for the same cause." 735 ILCS 5/2-619(a)(3). Second, Fitzroy contends that the court should decline to exercise jurisdiction over the subject matter of the instant Complaint. The court will discuss each of these arguments in turn.

II.

A. Applicability of Section 2-619(a)(3)

Fitzroy urges the court to apply Illinois Code of Civil Procedure Section 2-619(a)(3) and dismiss the Complaint. In support, Fitzroy cites eight cases from the Northern District of Illinois, al of which found the Section to be one of substance and not procedure. The substance/procedure distinction is important: the Rules of' Decision Act, 28 U.S.C. § 1652, commands a federal court sitting in diversity to apply federal procedural rules and state substantive laws.

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Bluebook (online)
132 F.3d 36, 1997 U.S. App. LEXIS 39790, 1997 WL 753336, Counsel Stack Legal Research, https://law.counselstack.com/opinion/john-n-basic-sr-v-fitzroy-engineering-ltd-ca7-1997.