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VAN GELDER v. TAYLOR

November 13, 1985

ERIC VAN GELDER; AND ERIC VAN GELDER ON HIS OWN BEHALF AND ON BEHALF OF ALL OTHER SHAREHOLDERS OF THE ROOKERY, INC., PLAINTIFF,
v.
LAMAR S. TAYLOR, JR.; JAMES B. KEE; AND THE ROOKERY, INC., A GEORGIA CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Bua, District Judge.

    ORDER

Before the Court is defendants' motion to dismiss for lack of personal jurisdiction and improper venue or, in the alternative, to transfer this case to the United States District Court for the Middle District of Georgia pursuant to 28 U.S.C. § 1404(a) and 1406(a). For the reasons stated herein, defendants' motion to dismiss is denied and the motion to transfer is granted.

I. FACTS

Plaintiff Eric Van Gelder filed a two-count complaint against defendants. Count 1 has been brought by Van Gelder individually and purports to state a claim of fraud against the individual defendants, Taylor and Kee. Count I alleges that the individual defendants fraudulently induced plaintiff to invest in defendant corporation, The Rookery, Inc. Count 2 has been brought by Van Gelder as a shareholder's derivative action on behalf of The Rookery, Inc., a Georgia corporation, and purports to state a claim for breach of fiduciary duty to The Rookery, Inc. and to Van Gelder by defendants Taylor and Kee. Count 2 alleges that Taylor and Kee wrongfully and fraudulently used their fiduciary positions to utilize corporate assets and facilities for their own personal gain to the detriment of both defendant corporation and plaintiff, as a minority shareholder of the corporation.

For jurisdictional purposes, the citizenship of the parties must be established. Plaintiff is a citizen of the State of Illinois, defendants Taylor and Kee are both citizens of the State of Georgia, and defendant The Rookery, Inc. is a corporation duly organized and existing under the law of the State of Georgia with its principal place of business in Macon, Georgia.

Plaintiff's claims arise out of a business venture entered into by Van Gelder, Taylor and Kee. Taylor and Kee allegedly solicited Van Gelder to invest $30,000 in The Rookery, Inc. in return for one third of the stock in said corporation. Taylor and Kee were each to own one third of the same stock to constitute the remaining stockholders. It is alleged that Taylor and Kee also solicited Van Gelder to invest for the group $15,000 as a down payment for the purchase of the Georgia building in which The Rookery, Inc. conducts its retail business and to invest $7,500 for attorneys' fees. Van Gelder argues that he was to be reimbursed by the two individual defendants for their pro rata share of these latter two expenses. The control of The Rookery, Inc. is vested in Taylor and Kee through their control of the shareholder's meetings and the Board of Director's meetings.

The remedies plaintiff seeks in Count 1 are: (1) a rescission of the agreement between the parties relative to his purchase of the one-third interest in The Rookery, Inc.; (2) a judgment for Van Gelder against each of the individual defendants for the amounts of money loaned and advanced to them, and; (3) punitive damages. The remedies plaintiff seeks in Count 2 are: (1) an issuance of a summons to each individual defendant requiring them to appear in this Court to answer the complaint; (2) an appointment of a receiver to seize all property of The Rookery, Inc. and all shares of The Rookery, Inc. standing in the names of the individual defendants, pursuant to Rule 66 of the Federal Rules of Civil Procedure, to hold and preserve the shares until a final determination of the cause is made; and (3) an accounting for all sums of money, profits, and gains which Taylor and Kee have made as a result of the alleged conspiracy against Van Gelder.

II. DISCUSSION

In this case, federal subject matter jurisdiction is based solely on diversity of citizenship. In diversity cases, a federal district court has jurisdiction over the persons of the defendants only if a court of the state in which the federal court is sitting would have personal jurisdiction. Snyder v. Smith, 736 F.2d 409, 415 (7th Cir. 1984); Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d 1209, 1212 (7th Cir. 1984); Lakeside Bridge & Steel v. Mountain State Construction Co., 597 F.2d 596, 598 (7th Cir. 1979); cert. denied, 445 U.S. 907-08, 100 S.Ct. 1087, 63 L.Ed.2d 325 (1980). As such, Illinois law will govern the determination as to whether this Court has personal jurisdiction over the defendants. Welles Product Corp. v. Plad Equipment Co., Ltd., 563 F. Supp. 446, 448 (N.D.Ill. 1983).

Under Illinois law, foreign defendants are subject to the jurisdiction of state and federal courts in Illinois only if they have committed any of the acts specified in the Illinois Long Arm Statute. Ill. Rev.Stat. ch. 110, § 2-209(a). Green v. Advance Ross Electronics Corp., 86 Ill.2d 431, 56 Ill.Dec. 657, 427 N.E.2d 1203 (1981). Commission of one or more of those specified acts will support jurisdiction over the persons of the defendants only as to causes of action arising from the commission of those acts. Ill.Rev.Stat. ch. 110, § 2-209(c). For specification as to the acts which submit a person to the jurisdiction of the state, the Illinois Long Arm Statute ch. 110, § 2-209 provides in pertinent part:

  Any person, whether or not a citizen or resident
  of this State, who in person or through an agent
  does any of the acts hereinafter enumerated,
  thereby submits such person . . . to the
  jurisdiction of the courts of this State as to
  any cause of action arising from the doing of
  such acts:
    (1) The transaction of any business within this
    State;
    (2) The commission of a tortious act within
    this State;

A plaintiff bears the burden of proving that a court has personal jurisdiction over defendants, i.e., that defendants have committed acts that fall within the Illinois Long Arm Statute. Kutner v. DeMassa, 96 Ill. App.3d 243, 247, 51 Ill.Dec. 723, 421 N.E.2d 231 (1st Dist. 1981).

Proper venue under Illinois law lies "in the county in which the transaction or some part thereof occurred out of which the cause of action arose." ...


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