                              UNPUBLISHED ORDER
                         Not to be cited per Circuit Rule 53




          United States Court of Appeals
                            For the Seventh Circuit
                            Chicago, Illinois 60604

                             Submitted July 19, 2006*
                              Decided August 3, 2006


                                      Before

                   Hon. KENNETH F. RIPPLE, Circuit Judge

                   Hon. DANIEL A. MANION, Circuit Judge

                   Hon. DIANE P. WOOD, Circuit Judge

No. 05-2539

REP MCR REALTY, L.L.C.,                      Appeal from the United States
     Plaintiff-Appellee,                       District Court for the
                                               Northern District of Illinois,
              v.                               Eastern Division

MICHAEL W. LYNCH,                            No. 02 C 399
    Defendant/Third-Party
    Plaintiff-Appellant,                     Mark Filip, Judge.

              v.

SEYFARTH SHAW L.L.P. and
EDWARD J. KARLIN,
    Defendants/Third-Party
    Defendants-Appellees.




      *
         After an examination of the briefs and the record, we have concluded that
oral argument is unnecessary. Thus, the appeal is submitted on the briefs and the
record. See Fed. R. App. P. 34(a)(2).
No. 05-2539                                                                        Page 2


                                       ORDER


      Michael Lynch guaranteed a $31 million loan from Morgan Guaranty Trust
Company of New York to Lynch’s aluminum company, McCook Properties L.L.C.
McCook defaulted and filed for bankruptcy, prompting Morgan to sue Lynch in federal
court under the diversity jurisdiction, claiming that his personal liability on the
guaranty was triggered by the bankruptcy filing. Morgan was then replaced by its
assignee, REP MCR Realty, L.L.C.

        For his part, Lynch answered that, despite ambiguity in the guaranty, his
liability was limited to cases of fraud, waste, or gross mismanagement and that his
lawyers had explained those limitations to Morgan. He also impleaded his lawyers,
Seyfarth Shaw L.L.P. and partner Edward J. Karlin, under the authority of Fed. R.
Civ. P. 14, asserting that they had been negligent in representing him. Although his
legal theory was rather muddled, he contended in essence that he never would have
made the guaranty but for his lawyers’ malpractice. In pressing that claim, he relied
almost exclusively on three documents ostensibly showing that he never meant to
assume personal liability for the loan and that he had not agreed that a bankruptcy
filing should trigger the guaranty. He produced all three of them in a supplemental
document production filing, in conjunction with the discovery process.

       But suing his lawyers only worsened Lynch’s already substantial troubles: when
Seyfarth and Karlin responded that Lynch had forged the three documents and sought
sanctions, the district court agreed, dismissed the third-party complaint with prejudice,
and ordered Lynch to pay almost $370,000 in fees and costs. In the same order, the
court entered a judgment for REP MCR Realty on the $31 million guaranty. Lynch has
appealed only from the sanctions order.

       At the outset, we note that the district court’s subject-matter jurisdiction over
the third-party claim was clear. Diversity jurisdiction was secure over the main claim,
as Morgan (the original plaintiff) was a New York banking corporation with its
principal place of business in New York at the time the suit was filed, and Lynch was
(and is) a citizen of Illinois. (REP MCR Realty, Morgan’s assignee, is a Delaware
limited liability company with its principal place of business in Texas. The citizenship
of a limited liability company for diversity purposes is the citizenship of each of its
members. See Wise v. Wachovia Securities, LLC, 450 F.3d 265, 267 (7th Cir. 2006).
Based on a supplemental filing, it appears that REP MCR Realty is also diverse from
Lynch. In the end, however, this is a detail, because there is no hint of collusion in this
assignment, and thus the normal rule that diversity jurisdiction is determined at the
time the action is commenced applies. See, e.g., Grupo Dataflux v. Atlas Global Group,
L.P., 541 U.S. 567, 570-71(2004).) Because it was Lynch, the defendant, who impleaded
No. 05-2539                                                                      Page 3


the law firm and lawyer, the third-party claim (over which there was no independent
diversity jurisdiction, as all were from Illinois) fell within the court’s supplemental
jurisdiction. See 28 U.S.C. § 1367(a), (b); Aurora Loan Servs., Inc. v. Craddieth, 442
F.3d 1018, 1025 (7th Cir. 2006); State Nat’l Ins. Co. Inc. v. Yates, 391 F.3d 577, 580 &
n.16 (5th Cir. 2004) (collecting cases). We turn, therefore, to the court’s findings with
respect to each of Lynch’s three suspicious documents.

        First among the questionable documents was an undated purported draft of the
guaranty that contained no bankruptcy trigger and that named Lynch in his capacity
as chairman of McCook Properties rather than in his individual capacity. This
document was marked as Exhibit 16. One mystery suggested by that document is that
it is hard to imagine why Morgan would have wanted McCook Properties to guarantee
its own debt. But that mystery need not detain us here.

      The court found that Exhibit 16 is much the same as the other draft guaranties
and generic boilerplate used by Morgan at the time except for two suspicious pages
that were modified to omit the bankruptcy trigger and make McCook Properties the
guarantor rather than Lynch. A comparison between those two pages and other drafts
and boilerplate strongly suggests forgery. For example, numerous typographical errors
mar the two pages, suggesting that they had been retyped and changed. Additionally,
there are discrepancies in fonts and format, suggesting that someone not used to
generating the boilerplate guaranties made this particular draft.

        With these differences in mind, the district court took testimony from various
witnesses, including the document manager at the law firm that prepared all of
Morgan’s guaranties. The document manager testified that the discrepancies and
typographical errors reveal that the draft was not produced by the firm. He also
testified that this draft is one of two before the court marked “version two” (one
identifying Lynch only as chairman of McCook Properties and the other showing him
in his personal capacity). The document manager added that the firm’s records showed
that it printed only one “version two,” and so one of the two before the court had to be
a fake. He identified the draft produced by Lynch as the forgery. Additionally, a lawyer
from Morgan’s law firm testified that the signature line and titles referenced in the
draft were not titles that he would have chosen for a draft corporate guaranty.
Defendant Karlin also testified that he did not create this draft. For his part, Lynch
undermined his own credibility by forgetting key dates, changing testimony, and
refusing to answer some questions.

      The second suspicious document appears to be a copy of a letter signed by Lynch
and dated December 1, 1998, informing Karlin that Lynch would refuse to execute a
personal guaranty—especially one where liability was triggered by a bankruptcy filing.
The court decided that patent falsehoods pervaded this letter. First, the letter confuses
No. 05-2539                                                                        Page 4


significant dates. For example, it recounts that Karlin transmitted the guaranty
materials on December 1, when substantial evidence from various sources shows that
the transmittal took place a week before. This confusion of dates suggests that Lynch
wrote the letter later and back-dated it. Second, the letter states that investment
banker Scott Miller, Lynch’s fraternity friend, had confirmed that there would be no
personal liability on Lynch’s part. But Miller testified that he recalled saying no such
thing. Third, Karlin testified that the assertions in the letter were false and that he did
not see it until it was produced in litigation. Writing that “almost every sentence of the
letter is false,” the court found that it was clearly forged.

       The third suspicious document was a copy of a letter dated December 28, 1998,
purportedly memorializing the transmittal of several “signature plates” with Lynch’s
signature in his capacity as chairman of McCook Properties from one of his associates
to Karlin. The court based its finding of fraud here chiefly on inconsistencies between
the letter and McCall’s testimony. McCall did not recognize the letter or even know
what the term “signature plates” means. What is more, December 28 was five days
after the executed documents were actually sent back to counsel for Morgan. Finally,
Karlin denied receiving this letter.

       After finding fraud in all three documents, the court decided that Lynch was the
perpetrator. Lynch obviously had the motive but, more importantly, the court noted
that he had insisted all along that he wrote and signed the letter dated December 1.
That admission strengthened the court’s conviction that Lynch had falsified the other
documents. First, the letter would be worthwhile evidence only when combined with
the other fakes. Second, the three forgeries have similarities that suggest that they
were written by the same person for the same goal. Third, Lynch produced the two
letters suspiciously labeled with consecutive Bates numbers. Finally, Lynch’s
demeanor at the hearing and his shifting testimony suggested that he was lying.
Looking at the evidence as a whole, the court found that clear and convincing evidence
established that Lynch forged the documents.

       In imposing sanctions in response to Seyfarth and Karlin’s motion, the district
court invoked both its inherent power and Rule 37(b) and (c)(1) of the Federal Rules
of Civil Procedure. It considered lesser sanctions but ultimately decided that anything
short of dismissal with prejudice would downplay the severity of the wrongdoing. In
addition, the court also awarded costs and fees to Seyfarth and Karlin.

      On appeal, Lynch raises several arguments that are either irrelevant or
nonsensical. Reading his brief as generously as we can, we understand him to be
arguing that the district court’s findings were based on insufficient evidence. This is
a non-starter. We cannot discern any reversible error in the district court’s thorough
opinion. Indeed, the court correctly required clear and convincing proof, see Maynard
No. 05-2539                                                                      Page 5


v. Nygren, 332 F.3d 462, 468 (7th Cir. 2003), and made its finding based on the kinds
of evidence we have approved before, see, e.g., Greviskes v. Univ. Research Ass’n, Inc.,
417 F.3d 752, 758 (7th Cir. 2005); Jimenez v. Madison Area Tech. Coll., 321 F.3d 652,
655-56 (7th Cir. 2003).

       As for the choice of sanctions, Lynch does not contend that dismissal was too
harsh or that the award of fees and costs was too high. Therefore, those potential
issues are waived. See Hildebrandt v. Ill. Dep’t of Natural Res., 347 F.3d 1014, 1025
n.6 (7th Cir. 2003). Waiver aside, we can hardly consider dismissal of the third-party
claim inappropriate here. See Greviskes, 417 F.3d at 759; Maynard v. Nygren, 372 F.3d
890, 892-93 (7th Cir. 2004). Moreover, although fees and costs seem high, well more
than a year passed between Seyfarth and Karlin’s motion for sanctions and entry of
judgment, and Lynch has no one but himself to blame for persisting so long in his
fraud.

      Consequently, the judgment of the district court is AFFIRMED.
