Mutual Assignment and Indemnification Company v. Lind -Waldock & Company , LLC

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-1854
M UTUAL A SSIGNMENT AND I NDEMNIFICATION C OMPANY ,
Plaintiff-Appellant,
v.
L IND -W ALDOCK & C OMPANY , LLC ,
Defendant-Appellee.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 99 C 6828—David H. Coar, Judge.
____________
S UBMITTED M ARCH 24, 2004—D ECIDED A PRIL 9, 2004
Before E ASTERBROOK , M ANION , and E VANS , Circuit
Judges.
E ASTERBROOK , Circuit Judge. Two men are engaged
in shady financial dealings, perhaps with the goal of evad-
ing restitution obligations. One of them, Keith Maydak,
appears to be a fugitive from justice. See Maydak v. United
States, 2003 U.S. App. L EXIS 25182 (D.C. Cir. Dec. 11,
2003). He has filed documents using a mail drop in Pennsyl-
vania as a return address. The other, Paul Lee, is impris-
oned, and Maydak purports to be his assignee and spokes-
man. This opinion, together with the papers that Maydak
has filed in this court, will be sent to the United States

-- 1 of 6 --

2 No. 03-1854
Attorneys for the Northern District of Illinois and the
Eastern District of Pennsylvania, so that they may conduct
whatever investigation may be appropriate. In the mean-
time we must resolve the appeal.
Lee opened a commodity-trading account with Lind-
Waldock & Co. (We suspect that Maydak may have supplied
the money so that he could trade despite his legally precari-
ous position, but that suspicion is unimportant for current
purposes.) According to the complaint, Lind- Waldock & Co.
made a margin call and, when funds were not forthcoming,
liquidated part of Lee’s investment. The complaint seeks
damages under both state and federal law. This seems
substantively weak—in futures markets, unlike stock
markets, margin calls must be met immediately, as ac-
counts are marked to market daily. Nothing in either state
or federal law requires a commodities futures merchant to
give prisoners extra time to meet margin calls; anyone who
chooses to trade in a market where wire transfers are the
norm and immediate action the requirement must meet
those standards or accept the consequences. Nonetheless,
the district court declined to dismiss all of Lee’s claims on
Lind-Waldock’s motion under Rule 12(b)(6). Mutual Assign-
ment & Indemnification Co. v. Lind-Waldock & Co., 2001
U.S. Dist. L EXIS 14092 (N.D. Ill. Aug. 31, 2001).
As the caption on the district court’s opinion (and ours)
implies, Lee was not the only plaintiff. The complaint
alleges that he had assigned his claim to “Mutual
Assignment and Indemnification Company” (which we
abbreviate to MAIC ), and that Lee himself had been named
as a plaintiff only as a fallback in the event that the court
refused to enforce the assignment. The complaint did not
describe the nature or legal status of this “Company.” On
appeal Maydak calls it a proprietorship, with himself as
proprietor. Yet proprietors must litigate in their own
names. See Fed. R. Civ. P. 17(a) (“Every action shall be
prosecuted in the name of the real party in interest.”). To

-- 2 of 6 --

No. 03-1854 3
file suit in a business name is to imply that the venture has
its own personality. The complaint treats MAIC as an entity
distinct from Maydak, which it may well be. State records
in Pennsylvania show that before filing this suit Maydak
registered “Mutual Assignment and Indemnification
Company LLP ” as a “limited liability partnership”; if the
assignment of Lee’s claim is to that partnership, then
MAIC ’s suit should have been dismissed forthwith, as
Maydak is no attorney and lacks authority to pursue
litigation on behalf of anyone other than himself. See
Rowland v. California Men’s Colony, 506 U.S. 194, 201-02
(1993); Navin v. Park Ridge School District, 270 F.3d 1147,
1149 (7th Cir. 2001). The district judge did not broach this
possibility; instead he dismissed MAIC ’s claim on the ground
that the contract between Lee and Lind- Waldock contains
an anti-assignment clause. 2001 U.S. Dist. L EXIS 14092 at
*19-20.
Eighteen months later, Lee and Lind-Waldock filed a joint
stipulation of dismissal under Fed. R. Civ. P. 41. The
document does not reveal whether Lind-Waldock paid Lee
anything, though it does refer to a settlement agreement. A
lawyer from Neal, Gerber & Eisenberg signed on behalf of
Lind-Waldock. Lee signed “individually and on behalf
of Mutual Assignment and Indemnification Company, a
________ company.” (The blank is in the original and was
not filled in.) The notice of dismissal is transparently
defective—for, whether MAIC is a proprietorship or a part-
nership, Lee cannot represent it in court, as he is not a
member of the bar in the Northern District of Illinois (or
anywhere else). A notice must be signed by “the parties” or
their agents, see Rule 41(a)(1)(ii), and neither MAIC nor
anyone entitled to speak on its behalf consented. Counsel
for Lind-Waldock should have understood this, even if Lee
did not. Nonetheless the district court entered judgment on
the stipulation and dismissed the suit with prejudice.
Maydak, who says that he was taken unawares, has ap-

-- 3 of 6 --

4 No. 03-1854
pealed. Perhaps a motion under Fed. R. Civ. P. 59, pointing
out to the district judge that Lee could not bind MAIC , would
have solved the problem, but post-judgment motions (like
“exceptions” of all kinds) are not essential to preserve a
right to assert error. MAIC ’s claim was dismissed without its
consent; it is entitled to appellate review.
The judgment was erroneous, as we have said. But the
error was harmless if, as the district judge held in 2001, the
assignment is invalid, for then MAIC lost nothing to which
it is legally entitled. The district court dismissed MAIC ’s
claim because the agreement between Lee and
Lind-Waldock provides that “[a]ny rights that [Lee] may
have pursuant to this Agreement shall not be assigned,
transferred, sold or otherwise conveyed.” The district court
apparently assumed that “rights . . . pursuant to this
Agreement” includes the right to damages for breach of the
Agreement, in addition to rights under the Agreement. Yet
Illinois law, which the parties applied in the district court,
is to the contrary. Illinois distinguishes between rights and
duties under an agreement and rights to damages following
breach. Thus if a contract between Plácido Domingo and the
Lyric Opera contains an anti-assignment clause, and
Domingo decides that he is too pooped to participate, he
can’t send Neil Shicoff in his stead even if the opera is
Offenbach’s Tales of Hoffmann. But if Domingo sings, and
the opera does not pay, he can transfer to Shicoff (or anyone
else) the right to collect. See Lain v. Metropolitan Life
Insurance Co., 388 Ill. 576, 578, 58 N.E.2d 587, 588 (1944);
Westville v. Loitz Brothers Construction Co., 165 Ill. App. 3d
338, 519 N.E.2d 37 (4th Dist. 1988). The assignment from
Lee to MAIC is the transfer of a right to collect, not of a right
to make trades or otherwise act under the contract. It is
therefore compatible with Illinois law, and the district court
erred in dismissing MAIC . This also may mean that
Lind-Waldock has paid the wrong party in settlement;
and it cannot use payments to Lee to reduce its potential

-- 4 of 6 --

No. 03-1854 5
liability to MAIC (or, for that matter, to the beneficiaries of
any restitution orders outstanding against Lee or Maydak).
That we have been discussing the effect of Illinois law
brings out another potential problem: it is unclear whether
the district court had subject-matter jurisdiction. The com-
plaint purports to rest in part on §4b(a) of the Commodity
Exchange Act, 7 U.S.C. §6b(a), but this is an anti-fraud
rule, and implementing margin rules by selling collateral is
not fraud. Invocation of §4b(a) may be an effort to man-
ufacture jurisdiction over a state-law claim for breach of
contract. The amount in controversy appears to fall short of
$75,000, and the complaint does not reveal any citizenship
details. Maydak’s citizenship likely is his domicile before
going on the lam. See Lloyd v. Loeffler, 694 F.2d 489, 490
(7th Cir. 1982). As for Lee, we need to know the state of his
citizenship before his imprisonment, not just where his
prison is located. See Denlinger v. Brennan, 87 F.3d 214
(7th Cir. 1996). Lind-Waldock is a limited liability company,
which means that it is a citizen of every state of which any
member is a citizen; this may need to be traced through
multiple levels if any of its members is itself a partnership
or LLC . See Cosgrove v. Bartolotta, 150 F.3d 729 (7th Cir.
1998). Lind-Waldock has not provided any of these details;
indeed, it has disdained the opportunity to file a brief on
appeal, and thus courted the adverse outcomes (such as our
ruling on the validity of the assignment) that may ensure
when judges hear only one side. On remand the district
court should determine whether MAIC is a proprietorship (if
no, Maydak cannot represent it; if yes, Maydak should be
substituted as the litigant) and whether diversity jurisdic-
tion exists. If diversity jurisdiction is untenable, then even
if the claim under §4b is non-frivolous, the district court
may choose to relinquish supplemental jurisdiction under
28 U.S.C. §1367(c)(3).
The judgment with respect to MAIC is vacated, and the
matter is remanded for proceedings consistent with this
opinion.

-- 5 of 6 --

6 No. 03-1854
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—4-9-04

-- 6 of 6 --