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Bauer v. Lauth

United States District Court, E.D. Missouri, Eastern Division

November 14, 2016

DONALD W. BAUER, et al., Plaintiffs,
v.
BETTY A. LAUTH, et al., Defendants.

          MEMORANDUM AND ORDER

          ARLES A. SHAW UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on several motions to dismiss. Defendants Stephen R. Ryan and Ryan, Bennet and Radloff (the “Ryan Defendants”) move that the claims against them be dismissed because the Court lacks subject matter jurisdiction. The Ryan Defendants also argue that the Court lacks personal jurisdiction as to them; plaintiffs' Complaint fails to state a claim; and plaintiffs' allegations are barred by the doctrine of collateral estoppel. Defendants Edward T. Graham, Jr. and Beavers, Graham & Calvert (the “Graham Defendants”), defendants First Mid Illinois & Trust, National Association, Doug Kopplin, Unknown Employee and/or Unknown Employees of First Mid Illinois Bank & Trust, National Association, and Mary Jane Klitzing (the “First Mid Illinois Defendants”), [1] and defendants Betty A. Lauth, Carol Heilman, Rose Zimmer, Ralph F. Bauer, Ruth Smith, and Mary Jane Klitzing as Executrix for the Estate of Paul C. Bauer (the “Lauth Defendants”) also filed motions to dismiss arguing, among other things, that the Court does not have subject matter jurisdiction to hear this dispute. Plaintiffs Donald W. Bauer, Lauretta D. Bauer, Karla Dale Bauer, and David W. Bauer, who are proceeding pro se, oppose the motions.[2]For the following reasons, the Court will dismiss this cause of action because the Court does not have subject matter jurisdiction.

         Also pending before the Court is the Ryan Defendants' Rule 11 motion for sanctions against plaintiffs. Plaintiffs oppose the motion, which is fully briefed and ripe for review.[3] As discussed infra, the Court will grant, in part, the Ryan Defendants' motion for sanctions.

         I. Background

         The allegations in the Complaint arise from foreclosure proceedings that took place in Effingham County, Illinois beginning in 2001. According to the Complaint, in 1978 plaintiffs Donald W. Bauer and Lauretta D. Bauer gave two promissory notes and one mortgage to Ralph E. Bauer and L. Marie Bauer, Donald W. Bauer's parents. Plaintiffs allege that Ralph E. Bauer and L. Marie Bauer opened an escrow account for the two promissory notes and mortgage at First Mid Illinois Bank & Trust, but that persons at the bank tampered with the escrow account and changed the interest rates on the notes to higher interest rates and replaced the payment schedule. Following the death of Ralph E. Bauer and L. Marie Bauer, rights to the promissory notes and mortgage were allegedly assigned to Robert L. Bauer, Linda Bauer (n.k.a. Linda Garfield) and six of the defendants, Betty Lauth, Carol Heilman, Rose Zimmer, Ralph F. Bauer, Ruth Smith, and Paul C. Bauer.

         Sometime in 2001, six of the assignees, Betty Lauth, Carol Heilman, Rose Zimmer, Ralph F. Bauer, Ruth Smith, and Paul C. Bauer, all of whom are defendants in the present litigation, commenced foreclosure proceeding against Donald W. Bauer and Lauretta D. Bauer and their six children in Illinois state court. Robert L. Bauer and Linda Bauer were also named as defendants in the suit. Litigation proceeded in state court for many years and, according to the Complaint, judgment was entered against plaintiffs Donald W. Bauer and Lauretta Bauer in the amount of $250, 000.00 following a trial. Plaintiffs allege in their Complaint that the presiding judge in the state court proceedings made a number of errors including: holding ex parte hearings, ruling that the tampered escrow agreement was admissible, and allowing testimony regarding Donald W. Bauer's supposed inheritance. Following the entry of the judgment in Illinois state court, plaintiffs also allege that defendants attempted to block their redemption rights, and a “personal judgment” has been entered against them, which according to plaintiffs, is not allowed without a deficiency after sale under “Illinois Mortgage Foreclosure Law.” Doc. 1 at 13. Plaintiffs also allege that the defendants colluded to violate the rules of evidence and plaintiffs' due process rights, and they “conspir[ed] to not allow [plaintiffs] to exercise [their] rights under the Illinois Mortgage Foreclosure Law.” Id. at 15.

         Based on these allegations, plaintiffs Donald W. Bauer, Lauretta D. Bauer, Karla Dale Bauer, and David W. Bauer bring three claims against defendants Betty A. Lauth, Carol Heilman, Rose Zimmer, Ralph F. Bauer, Mary Jane Klitzing, as the executrix for the estate of Paul Bauer, Mary Jane Klitzing, Stephen R. Ryan, Ryan, Bennett, & Radloff, Edward T. Graham, Jr., Beavers, Graham & Calvert, First Mid Illinois Bank & Trust, Doug Kopplin, Unknown employee and/or employees of First Mid Illinois Bank & Trust, and Ruth Smith, which plaintiffs have entitled: “42 U.S.C. at 1983” (Count I); Civil Conspiracy at Law (Count II); and Abuse of Process (Count III). Plaintiffs seek over $10, 000, 000.00 in compensatory and punitive damages. All of the defendants move, among other things, to dismiss this action for lack of subject matter jurisdiction.

         II. Discussion

         “Federal courts are courts of limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Plaintiffs, as the side asserting jurisdiction, bear the burden of establishing that the Court has subject matter jurisdiction to hear the dispute. Ark. Blue Cross & Blue Shield v. Little Rock Cardiology Clinic, P.A., 551 F.3d 812, 816 (8th Cir. 2009) (citing Kokkonen, 511 U.S. at 377). Subject matter jurisdiction in federal court can be based on diversity jurisdiction, pursuant to 28 U.S.C. §1332, or federal question jurisdiction, pursuant to 28 U.S.C. §1331.

         A. Diversity Jurisdiction

         Plaintiffs seek to invoke this Court's subject matter jurisdiction on the basis of diversity jurisdiction pursuant to 28 U.S.C. §1332. A district court has original jurisdiction over a civil action in which the parties are citizens of different states, and the amount in controversy exceeds $75, 000.00, exclusive of interest and costs. 28 U.S.C. § 1332(a). “It is well established that diversity jurisdiction attaches only when all parties on one side of the litigation are of a different citizenship from all of those on the other.” Stouffer Corp. v. Breckenridge, 859 F.2d 75, 76 (8th Cir. 1988) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806)). “Complete diversity of citizenship exists where no defendants hold citizenship in a state where any plaintiff holds citizenship.” Owen Equip. & Erection v. Kroger, 437 U.S. 365, 373 (1978). Citizenship is determined by a person's physical presence in a state along with an intent to remain there indefinitely. Once an individual has established a state of citizenship, he or she is presumed to be a citizen of that state until he or she legally acquires a new state of citizenship. See Altimore v. Mount Mercy College, 20 F.3d 763, 768-69 (8th Cir. 2005); see generally 15 James Wm. Moore et al., Moore's Federal Practice, § 102.34[5]-[7] (3d ed. 2009). “The district court's determination of citizenship for purposes of diversity is a mixed question of law and fact, but mainly fact.” Altimore, 20 F.3d at 768.

         Plaintiffs allege that they all reside in Illinois. Plaintiffs do not make any allegations as to their intent to remain in Illinois. As for the defendants, plaintiffs allege that defendants Betty Lauth, Carol Heilman, and Ralph Bauer live in Missouri; defendant Rose Zimmer lives in Arizona; defendant Ruth Smith lives in Colorado; and defendants Mary Jane Litzing, executrix for the estate of Paul C. Bauer, Mary Jane Litzing, Stephen Ryan, Ryan, Bennett & Radloff, Edward Graham, Seavers, Graham & Calvert, First Mid Illinois Bank & Trust, Doug Kopplin, and Unknown employee or employees of First Mid Illinois Bank and Trust, all live or have their businesses in Illinois.

         The Court has examined the Complaint and plaintiffs' joint response in opposition to the motions to dismiss and finds plaintiffs have failed to plead or establish that all parties on one side of the litigation are of a different citizenship from all of those on the other side. As a result, complete diversity of citizenship ...


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