Hoagland v. Sandberg, Phoenix & Von Gontad, P.C.

Donald Hoagland (plaintiff) filed a malpractice suit against the firm Sandberg, Phoenix & Von Gontad, P.C. (the firm) (defendant). Hoagland was a citizen of Illinois, and the firm was a professional corporation that maintained a principal place of business in Missouri. Twenty-two of the firm’s shareholders were citizens of Illinois. Taken together, 28 U.S.C. § 1332(a)(1) and (c)(1) stated that corporations were citizens. Missouri’s professional-corporation statute applied regular corporate law to professional corporations. In Coté v. Wadel, the Seventh Circuit held that professional corporations should be treated like any other corporation, and the citizenship of their shareholders was therefore irrelevant. In Carden v. Arkoma Associates and Great Southern Fire Proof Hotel Co. v. Jones, the Supreme Court held that business entities that were similar to corporations, but were not formally corporations, were not considered corporations for purposes of diversity jurisdiction. The firm removed the suit to federal court based on diversity. The district court entered a judgment in favor of the firm, and it found that Hoagland had not met the elements of legal malpractice. Hoagland appealed to the Seventh Circuit, and the court questioned whether federal jurisdiction was appropriate, given that there was not complete diversity between Hoagland and members of the firm.