govinfo:USCOURTS-ilsd-3_25-cv-01889-0

Page 1 of 14 
 
 
IN THE UNITED STATES DISTRICT COURT 
FOR THE SOUTHERN DISTRICT OF ILLINOIS 
 
MICHAEL WALSH KEELEY and 
RACHEL M. KEELEY 
 
Plaintiffs, 
 
vs. 
 
LOANCARE, LLC, 
 
 Defendant. 
) 
) 
) 
) 
) 
) 
) 
) 
) 
) 
 
 
 
 

 
 
MEMORANDUM AND ORDER 
 
BEATTY, Magistrate Judge: 
This matter is currently before the Court on the motion to dismiss filed by 
Defendant LoanCare, LLC (Doc. 6) and the motion to remand filed by Plaintiffs Michael 
and Rachael Keeley (Doc. 17). For the reasons explained below, the Court concludes that 
this matter was improperly removed to federal court and therefore the motion to remand 
(Doc. 17) will be granted. Because this case must be remanded, LoanCare’s motion to 
dismiss (Doc. 6) will be terminated on the docket without a ruling. 
PROCEDURAL BACKGROUND 
There is an extensive procedural history that preceded the removal of this case to 
federal court in October 2025 (Doc. 1). It began on December 19, 2017, when LoanCare, 
LLC filed a complaint in the state circuit court in St. Clair County, Illinois against Michael 
and Rachael Keeley, seeking to foreclose on the mortgage held by the Keeleys on a home 
 
 
1 This case was assigned to the undersigned for final disposition upon consent of the parties pursuant to 
28 U.S.C. §636(c) (see Doc. 15). Page ID
#<pageID>
Page 2 of 14 
 
 
in Belleville, Illinois after they defaulted on their payments (the “Foreclosure Action”) 
(Doc. 17, p. 1; Doc. 19, p. 1; see also Doc. 17, pp. 7 –10 (state court complaint)). On 
September 16, 2018, the Keeleys filed a counterclaim against LoanCare, alleging that 
LoanCare, through its agents, changed the locks on their home and 
converted/appropriated their personal property that was still in the home (Doc. 17, p. 1; 
Doc. 19, p. 2; see also Doc. 1-1, pp. 8–9 (state court counterclaim)). The Keeleys alleged the 
value of the property exceeded $50,000 (Doc. 1 -1, pp. 8 –9). LoanCare’s attorney was 
served with the counterclaim on September 26, 2018 (Doc. 1 -1, p. 6, para. 4; Id. at p. 7), 
and LoanCare responded by filing a motion to strike and dismiss the counterclaim ( see 
Doc. 17, p. 2; see also id. at p. 17). The state court denied LoanCare’s motion on November 
8, 2018 (Doc. 17, p. 2; see also id. at p. 17). LoanCare never filed an answer or otherwise 
pleaded in response to the Keeley’s counterclaim (Doc. 1-1, p. 6, para. 5). 
Years later, Community Loan Servicing, LLC (“Community Loan”) became the 
mortgagee and holder of the note secured by the mortgage at issue (Doc. 19, p. 2). On 
September 26, 2023, LoanCare and Community Loan jointly moved to substitute 
Community Loan as the plaintiff in the Foreclosure Action, and also jointly moved to 
sever the Keeley’s counterclaim from the Foreclosure Action (Id.). Then, a year and a half 
later, on March 26, 2025, the state court granted both motions —Community Loan was 
substituted in as plaintiff in the Foreclosure Action, and the Keeley’s counterclaim was 
severed from the Foreclosure Action and “transferred to the Law Division for 
Reassignment” (Doc. 17, p. 14). Page ID
#<pageID>
Page 3 of 14 
 
 
It appears that the clerk of the circuit court did not automatically implement the 
judge’s order and open a new case with the counterclaim as the initiating pleading. 
Rather, the Keeleys had to open a new case by filing the counterclaim restyled as a 
Complaint, which they did on August 28, 2025 (see Doc. 1-1, pp. 5 –10). LoanCare was 
served with the summons and complaint on September 12, 2025 (Doc. 1, para. 3). 
LoanCare filed its notice of removal twenty-eight days later on October 10, 2025 (Doc. 1). 
A week later, LoanCare filed a motion to dismiss for failure to state a claim (Doc. 6), to 
which the Keeleys filed a response in opposition (Doc. 18). The Keeleys then filed a timely 
Motion to Remand (Doc. 17), to which LoanCare filed a response in opposition (Doc. 19). 
No reply briefs were filed to either motion. 
After reviewing the Notice of Removal, the pending motions, and the response 
briefs, the Court ordered LoanCare to file an Amended Notice of Removal in order to 
properly allege its own citizenship (Doc. 20). LoanCare filed its Amended Notice of 
Removal on May 21, 2026 (Doc. 21), which rectified the deficiencies in its jurisdictional 
allegations. The Court, having been assured that federal subject matter jurisdiction is 
secure, will now address the parties’ respective motions , beginning with the Keeleys’ 
motion to remand. 
DISCUSSION 
This case was removed pursuant to the general removal statute, 28 U.S.C. § 1441(a) 
(Docs. 1, 21). That statute provides that “any civil action brought in a State court . . . may 
be removed by the defendant or the defendants” as long as federal district courts would 
have “original jurisdiction” over the action. 28 U.S.C. § 1441(a); Home Depot U. S. A., Inc. Page ID
#<pageID>
Page 4 of 14 
 
 
v. Jackson, 587 U.S. 435, 438 (2019). Federal courts are courts of limited jurisdiction, and 
thus there is a “long -established precedent that the removal statutes are to be strictly 
construed . . . .” Morris v. Nuzzo, 718 F.3d 660, 670 (7th Cir. 2013) (citing Shamrock Oil & 
Gas Corp. v. Sheets, 313 U.S. 100, 108–09 (1941)); see also Home Depot, 587 U.S. at 437 (federal 
courts are “courts of limited jurisdiction”). Upon a motion to remand, the removing party 
bears the burden of establishing that the state court suit was properly removed to federal 
court. Schur v. L.A. Weight Loss Centers, Inc., 577 F.3d 752, 758 (7th Cir. 2009). Doubts about 
the propriety of removing an action should be resolved in favor of remand. Id. (citing Doe 
v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993)). 
The Keeleys argue that removal was improper because LoanCare, as a state-court 
plaintiff/counterclaim defendant, is not authorized to remove a counterclaim to federal 
court (Doc. 17, pp. 4 –5). They further contend that “the actual controversy is not a new 
proceeding . . . but simply one where the counterclaim was severed and assigned a new 
case number.” ( Id. at p. 5). In other words, they say the nature of their claim as a 
counterclaim as well as the parties’ positions in the litigation all remained the same 
despite the state court’s severance order. LoanCare opposes th e motion to remand, 
arguing that once the counterclaim was severed from the original foreclosure action, it 
became a new, separate, and removable action and LoanCare became a defendant 
entitled to remove (Doc. 19). 
Under the general removal statute, only a “defendant” can remove an action from 
state court to federal court. Home Depot, 587 U.S. at 438 (quoting 28 U.S.C § 1441(a)). The 
Supreme Court has made clear that the “defendant” referred to in § 1441(a) is “only . . . Page ID
#<pageID>
Page 5 of 14 
 
 
the party sued by the original plaintiff ”—meaning the original defendant. Home Depot, 
587 U.S. at 437. The general removal statute “ does not permit removal by any 
counterclaim defendant . . . .” Id. at 441. That means “a litigant who files suit in state court 
is a ‘plaintiff’ and cannot remove the case, even if the defendant files a counterclaim and 
the original plaintiff then wears two hats, one as plaintiff and one as defendant —and 
even if the counterclaim is distinct from the original claim and could have been a separate 
piece of litigation.” First Bank v. DJL Props., LLC , 598 F.3d 915, 916 (7th Cir. 2010) (citing 
Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941)). See also Home Depot, 587 U.S. at 443 
(“Shamrock Oil held that a counterclaim defendant who was also the original plaintiff 
could not remove under § 1441(a)’s predecessor statute.”) (citing Shamrock Oil, 313 U.S. 
at 106–09). Likewise, “a third-party counterclaim defendant,” meaning “a party brought 
into [the] lawsuit through a counterclaim filed by the original defendant” also cannot 
remove to federal court. Home Depot, 587 U.S. at 437, 444. 
Additionally, the general removal statute “has long been interpreted to allow 
removal only of ‘independent suits[.]’” Travelers Prop. Cas. v. Good, 689 F.3d 714, 724 (7th 
Cir. 2012); accord Fed. Sav. & Loan Ins. Corp. v. Quinn, 419 F.2d 1014, 1018 (7th Cir. 1969) . 
“A supplementary proceeding, a proceeding which is substantially a continuation of a 
prior suit, is not removable.” Quinn, 419 F.2d at 1018. 
The question of whether a party is the “defendant,” or a controversy is a separate 
suit, for removal purposes is ultimately a federal question involving the interpretation 
and application of the removal statute. Quinn, 419 F.2d at 1018. See also Chicago Rock Island 
& Pac. R.R. v. Stude, 346 U.S. 574, 580 (1954) (“For the purpose of removal, federal law Page ID
#<pageID>
Page 6 of 14 
 
 
determines who is plaintiff and who is defendant.”). The state court’s own 
characterization of the proceeding or the parties is not decisive. Travelers, 689 F.3d at 724. 
Accord City of Indianapolis v. Chase Nat. Bank of City of New York , 314 U.S. 63, 69 (1941) 
(“Diversity jurisdiction cannot be conferred upon the federal courts by the parties' own 
determination of who are plaintiffs and who [are] defendants.”); 29A FED. PROC., L. ED. § 
69:22 (“A federal district court is not bound by the technical form of the state proceedings 
or the parties' own designation of plaintiffs and defendants.”) The removal statute, as the 
Supreme Court explained, must be “construed as setting up its own criteria, irrespective 
of local law, for determining in what instances suits are to be removed from the state to 
the federal courts,” so that it can be applied uniformly across the nation, “unaffected by 
local law definition or characterization of the subject matter to which it is to be applied.” 
Shamrock Oil, 313 U.S. at 104, 108–09. 
Based on these principles, it is clear that LoanCare’s status as both plaintiff and 
counterclaim defendant made it impossible for LoanCare to remove the Keeley’s 
conversion claim to federal court when it was first filed as a counterclaim in the 
foreclosure suit in September 2018, or at any point during the ensuing six and a half years 
that LoanCare remained the plaintiff in the foreclosure suit. After Community Loan was 
substituted in as the plaintiff in the foreclosure suit, it was still not possible for LoanCare 
to remove the conversion claim because third -party counterclaim defendants are not 
eligible to remove. It was only after the state court agreed to sever the Keeleys’ conversion 
claim that LoanCare sought removal to federal court . According to LoanCare, “[t]he 
severance fundamentally altered the parties’ procedural posture” because once the Page ID
#<pageID>
Page 7 of 14 
 
 
Keeleys counterclaim was severed, it became a new, independent civil action eligible for 
removal and LoanCare became a “defendant” eligible to remove it (Doc. 19, pp. 3–5). 
LoanCare claims that “Federal courts consistently hold that severed claims are 
treated as distinct lawsuits eligible for removal.” (Doc. 19, p. 4). However, the three cases 
LoanCare points the Court to simply do not support that contention. Gaffney v. Riverboat 
Servs. of Indiana, Inc addresses the difference between severance under Federal Rule of 
Civil Procedure 21 versus bifurcation under Rule 42, completely outside of the removal 
context. 451 F.3d 424 , 442 (7th Cir. 2006) . Gaffney says nothing about how to determine 
whether severance by a state court results in commencement of a new action eligible for 
removal. See id. Next, Vogel v. Merck & Co., actually held the opposite of what LoanCare 
claims. See 476 F.Supp.2d 996, 1000 (S.D. Ill. 2007). The Vogel court found that although 
there was a state court order purporting to sever certain claims, there was “no indication” 
that the claims “truly [had] been severed so as to render them separate judicial units” 
eligible for removal. Id. The only case that LoanCare cited in which the federal court 
concluded that the state-court severance order truly severed certain claims into an 
independent action was Sanders v. Merck & Co., 2007 WL 924497 (S.D. Ill. Mar. 27, 2007). 
However, in Sanders, the court ultimately determined that removal was procedurally 
defective because it violated the voluntary-involuntary rule. Id. at * 4, 7.2 
 
 
2 The voluntary-involuntary rule holds generally that a case can be made removable only by a plaintiff's 
voluntary act. See Sanders, 2007 WL 924497, at * *5-7; Vogel, 476 F.Supp.2d at 1002-07. See also Poulos v. Naas 
Foods, Inc., 959 F.2d 69, 71 (7th Cir. 1992) (“[T]he Supreme Court held that cases with non -diverse parties 
did not become removable just because a non-diverse defendant was dismissed from the case. . . . Instead, 
the Court held that such suits were removable only if the plaintiff voluntarily dismissed a non -diverse 
defendant.”) (internal citations omitted). Page ID
#<pageID>
Page 8 of 14 
 
 
Determining whether a claim severed in state court created an independent suit 
potentially subject to removal is simply not as straightforward as LoanCare seeks to 
portray. Under Illinois law, the term “severance” can arise in at least three distinct 
contexts, only one of which creates a truly separate action. Vogel, 476 F. Supp. 2d at 1001 
(citing Carter v. Chicago & Illinois Midland Railway Co., 518 N.E.2d 1031 (Ill. 1988)). As the 
Illinois Supreme Court explained, “ [t]he term ‘sever’ is used broadly, and when a trial 
court orders an issue or claim severed, more often than not the court is simply providing 
for separate trials and has not determined that the claims thereafter should proceed as 
separate actions.” Carter, 518 N.E.2d at 1037. In other words, not every order of severance 
results in the commencement of a new action and, therefore, “[i]n the context of removal 
to federal court in diversity jurisdiction, the mere fact that an order of a state court 
purports to have ‘severed’ claims generally is insufficient to make a case removable.” 
Vogel, 476 F.Supp.2d at 999. 
To determine whether a case is truly severed and a new action is commenced for 
removal purposes, the Court must consider the specific circumstances. Travelers, 689 F.3d 
at 724. “Whether a particular state judicial procedure qualifies as a separate action [for 
removal purposes] is not an all-or-nothing proposition. It depends on the context of each 
case in which it arises. ” Id. (citing Quinn, 419 F.2d at 1018 –19). “[A] proceeding is 
independent, and thus potentially removable, where it presents ‘genuine disputes with 
new parties and raise[s] new issues of fact and law. ’” Cf. Rizvi v. Allstate Corp., 833 F.3d Page ID
#<pageID>
Page 9 of 14 
 
 
724, 727 (7th Cir. 2016) (quoting Travelers, 689 F.3d at 725 ) ( stating test for deciding 
whether a proceeding is independent or an ancillary/supplementary proceeding). 
Here, the Court cannot discern from the state court order what the state court 
judge intended with the severance order. The severance order merely says “Defendant’s 
Counterclaim is severed from the present action and transferred to the Law Division for 
Reassignment.” (Doc. 17, p. 14). The severance order did not cite to any section of the 
Illinois Code of Civil Procedure or other authority for its issuance (nor did LoanCare 
mention which section of the Code it invoked in asking for the severance (see Doc. 19)) or 
otherwise “clearly and unequivocally” indicate that the severed counterclaim was to 
proceed as separate and apart from the foreclosure case. See Carter, 518 N.E.2d at 1036 
(“In determining whether an action has been severed so that it thereafter will proceed as 
a separate case, and a judgment thereon will be appealable . . . courts have used such 
words as ‘separate actions’ or ‘a single claim’ or ‘separate issues and parties.’”). LoanCare 
did not make any argument or cite to any case law explaining what “transferred . . . for 
reassignment” means in the context of the Illinois Code of Civil Procedure ( see Doc. 19). 
Nor did LoanCare make any argument t hat the Keeleys’ counterclaim was improperly 
joined as a counterclaim and should have been filed as a separate action from the outset 
(see Doc. 19). 
Under these circumstances, the Court cannot say with certainty that the state court 
severed the conversion claim with the intent that it proceed as an entirely separate action 
on which an entirely separate and appealable judgment would enter, just as if the case 
had proceeded as a single -claim action . It is possible that the state court severed the Page ID
#<pageID>
Page 10 of 14 
 
 
conversion claim so that it could be tried separately from the foreclosure claim for the 
sake of convenience and efficiency. See Carter, 518 N.E.2d at 1036 (“Section 2–614(b) of the 
Code of Civil Procedure (Ill.Rev.Stat.1985, ch. 110, par. 2 –614(b)) provides that the court 
may, in its discretion, ‘order separate trial of any causes of action, counterclaim or third-
party claim if it cannot be conveniently disposed of with the other issues in the case. ’”). 
See also Kelly v. JP Morgan Chase Bank, Nat'l Ass'n, No. CV TDC-15-1115, 2015 WL 9183428, 
at *2 (D. Md. Dec. 17, 2015) (explaining that counterclaim severed from a foreclosure 
proceeding was “severed for litigation” in order to give the state court “ more flexibility 
in addressing the thorny issues that often arise when counterclaims are filed in 
foreclosure actions.”) (citing Fairfax Sav., F.S.B. v. Kris Jen Ltd. P'ship, 655 A.2d 1265, 1275 
n.9 (Md. 1995) (noting the “practical difficulties” that stem from the docketing of 
counterclaims in foreclosure proceedings)). 
The Court further notes that there are no new parties in the severed case—it is still 
just the Keeleys and LoanCare, the original parties to the foreclosure suit. And the 
severed case does not raise new issues or distinctly new claims from those in the 
foreclosure suit. The core issue in the foreclosure suit is whether the Keeleys defaulted 
on their mortgage and whether the lender (originally LoanCare) has the legal right to 
seize and sell the property to recover the debt. The core issue in the Keeley’s conversion 
claim is whether LoanCare wrongfully and prematurely seized the property during the 
foreclosure process. It seems to the Court that l itigation of both the foreclosure suit and 
the conversion claim will rely on many of the same facts. Page ID
#<pageID>
Page 11 of 14 
 
 
While the Keeleys were required by the state court to refile their counterclaim as a 
complaint in a new case, i t is unclear why a change in form should be understood to 
create an entirely new action. The Keeleys’ conversion claim against LoanCare already 
started when it was filed as a counterclaim in 2018 in the foreclosure action. LoanCare 
was put on notice of the claim and even tried to have it dismissed, which was rejected. 
The claim continued to be maintained as a counterclaim for the next six-and-a-half years. 
When the conversion claim was severed, it was not the start of a new action; it was simply 
the continuation of a years -old claim under a new case number . In other words, it was 
the same challenge to LoanCare’s conduct, just now in a different form. 
For these reasons, the Court concludes that the state court’s severance order did 
not create a new, independent action. See Cicero Chamber of Com. & Indus. v. De Oca , No. 
12 C 1404, 2012 WL 1419346, at *1 (N.D. Ill. Apr. 23, 2012) (holding no second lawsuit was 
created when the plaintiff successfully moved to have counterclaims severed); Rodriguez 
v. Federal National Mortgage Association, 268 F.Supp.2d 87, 90–91 (D. Mass. 2003) (holding 
no second lawsuit was created when parties agreed that original plaintiff FNMA would 
dismiss its state -court complaint and original defendant Gonzalez would re -file his 
counterclaims as a new state-court complaint, identifying Gonzalez as the “plaintiff” and 
FNMA as the “defendant”; “the reidentification of the parties . . . [pursuant to their 
stipulation] was nothing more than a convenient handle”). See also Quinn, 419 F.2d at 1018 
(explaining counterclaim remaining in a state court suit after the plaintiff dismissed the 
original complaint does not become an independent suit and is not removable) (citing 
West v. Aurora City , 73 U.S. 139 (1868)); Moss Land & Min. Corp. v. Fid. & Cas. Co. of New Page ID
#<pageID>
Page 12 of 14 
 
 
York, No. CIV.A. 03-AR-845-J, 2003 WL 21360803, at *3 (N.D. Ala. June 6, 2003) (“Fidelity's 
status as a cross-claim defendant did not change magically at the moment of the dismissal 
of the original action. No metamorphosis took place to make the ugly non -removable 
caterpillar into a beautiful removable butterfly.”). 
A contrary result, as other courts have pointed out, would invite “jurisdictional 
havoc” by permitting parties to circumvent the well -settled law that counterclaim 
defendants cannot remove to federal court by simply agreeing, or successfully moving, 
to have a counterclaim severed. Rodriguez, 268 F.Supp.2d at 90; Cicero, 2012 WL 1419346, 
at *1. See also Home Depot, 587 U.S. at 464 (Alito, J., dissenting) (restating Shamrock Oil’s 
holding that “[i]f A sues B in state court, and B brings a counterclaim against A, this does 
not then allow A to remove the case to federal court. As the original plaintiff who chose 
the forum, A does not get to change its mind now .”) A contrary result would also 
“radically expand” the class of removable case s in contravention of Shamrock Oil ’s 
holding that the federal removal statute determines whether a suit is removable, 
irrespective of the state court’s characterization, and the removal statute must be 
construed narrowly and against removal in order to preserve the limited jurisdiction of 
federal courts. Cicero, 2012 WL 1419346, at *1. 
The Court cannot allow LoanCare to circumvent the well-settled law by having 
itself dismissed from the original complaint and then the counterclaim severed. Parties 
should not be allowed to so easily manufacture federal jurisdiction and channel 
previously unremovable cases into the federal courts given the strict limitations Congress 
has imposed on the jurisdiction of federal district courts. Moreover, it is worth noting that Page ID
#<pageID>
Page 13 of 14 
 
 
removal in this instance —seven years after the Keeleys’ conversion claim was first 
asserted—would entirely undermine the one-year limitation on removing cases based on 
diversity jurisdiction. 28 U.S.C. § 1446(c)(1). “Congress clearly intended that, after a point, 
cases should remain in state court.” In re Roundup Prods. Liab. Litig., 396 F. Supp. 3d 893, 
900 (N.D. Cal. 2019) (citing H.R. Rep. 100-889, at 72 (“[T]here is no reason why either State 
or Federal courts, or the parties, should be subject to the burdens of shuttling a case 
between two courts that each have subject matter jurisdiction.”) ). Accord New York Life 
Ins. Co. v. Deshotel, 142 F.3d 873, 886 (5th Cir.1998) (“Congress found that ‘[r]emoval late 
in the proceedings may result in substantial delay and disruption’ of a case, and enacted 
the one-year limit as ‘a means of reducing the opportunity for removal after substantial 
progress has been made in state court.’”) (citing H.R.Rep. No. 100-889 (1988)).3 
Having concluded that this matter was improperly removed and must be 
remanded back to state court, the Court must decline to address LoanCare’s Motion to 
Dismiss. LoanCare can refile it (if necessary) once this case returns to state court. 
Conclusion 
The Court concludes that removal was improper in this case. The Keeley’s Motion 
to Remand (Doc. 17) is GRANTED. This action is hereby REMANDED to the Circuit 
Court for the Twentieth Judicial Circuit, St. Clair County, Illinois. LoanCare’s Motion to 
Dismiss (Doc. 6) is TERMINATED on the docket without a ruling. 
 
 
3 To be clear, the Court is ordering remand because the state -court’s severance of the Keeley’s conversion 
claim did not create a new, independent action . The Court simply notes the one -year limitation as a 
supportive aside, not as an independent grounds for remand. Page ID
#<pageID>
Page 14 of 14 
 
 
IT IS SO ORDERED. 
 DATED: June 11, 2026 
 
 MARK A. BEATTY 
 United States Magistrate Judge Page ID
#<pageID>

Passage view · GavelSight