Lakewood Prairie, LLC v. Ibarra Concrete Company, et al. (N.D.IL Doc. No. 08 C 1200)

Given the glut of Bankruptcy cases we have been seeing over the past four months where differing lien matters are being resolved over limited funds in bankruptcy actions, it's refreshing to see an interpleader action.  (An action filed by a party that has control or possession of property that should go to some other party, but first it needs the court to determine which party is the correct party.  In the context of this action, which involved a developer in control of funds that would have been paid to a general contractor but for the fact that the contractor was no longer in business.)  The reason this is refreshing is that lately we have been seeing cases where the GC gets behind and starts using all kinds of funds from different projects to pay its bills.  Often, the GC does not reveal its financial state to the parties it contracts with know of its financial state until it is too late.  The GC goes bankrupt, which consumes the remaining monen that was to be paid out to its subs and other creditors... resulting in a GC that can't pay and multiple liens filed against property owners who had no idea that the payments they were certifying weren't getting to the subcontractors and creditors.

In this action, the company that went under had also failed to make its FICA payments to the IRS.  At the time the interpleader action was filed, the developer was still in possession of some money that it intended to use to pay the GC.  This money was put forth in the interpleader action with a request to adjudicate a settlement of the pending mechanic's lien claims in state court.  The developer also added the US as a party because of the lien the US had on the missing FICA tax payments.  The US then filed a motion to remove the case to federal court to which the mechanic's lienors and other creditors objected.  The court denied the motion to remove the case back to state court finding that the interpleader action had properly consolidated all the cases, and that venue was correctly in federal court under the US Code.

The case is also a reminder that one quick way to federal court when you can't get diversity jurisdiction is to join the U.S. Government as a party.

The case is available here.

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