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WEYENT v. VERTICAL NETWORKS

February 3, 2004.

PETER E. WEYENT, Plaintiff
v.
VERTICAL NETWORKS, INC., a California Corporation; and ALAN FRASER, a California Resident, Defendants



The opinion of the court was delivered by: JOHN W. DARRAH, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff, Peter E. Weyent, filed suit against Defendants, Vertical Networks, Inc. ("Vertical Networks") and Alan Fraser, in connection with a breach of an employment contract. Now before the Court is Eraser's Motion to Dismiss Counts VI and VII of Plaintiff's Amended Complaint, pursuant to Federal Rule of Civil Procedure 12(b)(2). For the reasons that follow, that motion is denied.

LEGAL STANDARD

  Plaintiff has the burden of establishing a prima facie case of personal jurisdiction, See Steel Warehouse of Wisc., Inc. v. Leach, 154 F.3d 712, 714 (7th Cir. 1998). When deciding whether the plaintiff has made a necessary showing, a court can look to affidavits and exhibits submitted by each party. Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987). When determining whether the plaintiff has met the burden of establishing a prima facie showing of jurisdiction, jurisdictional allegations in the complaint are taken as true, unless controverted by the Page 2 defendant's affidavits or exhibits. The remaining facts come from the declarations and exhibits submitted by the parties. All factual disputes must be resolved in favor of the plaintiff.

  In diversity actions, a federal court has personal jurisdiction over a non-resident defendant only if a court of the state in which the federal court sits would have personal jurisdiction. Dehmlow v. Austin Fireworks, 963 F.2d 941, 945 (7th Cir. 1992) (citation omitted). A determination of whether an Illinois court would have jurisdiction requires an examination of three sources of law: "(1) state statutory law, (2) state constitutional law, and (3) federal constitutional law." RAR, Inc. v. Turner Diesel Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997) (RAR).

  Under Illinois law, a court can have personal jurisdiction over a non-resident via the state's long-arm statute. 735 ILCS § 5/2-209. The statute states that an Illinois court may exercise jurisdiction on any basis permitted by the state or federal constitution. 735 ILCS § 5/2-209(c). Therefore, the statute authorizes the exercise of personal jurisdiction by the Illinois courts to the fullest constitutional limit; and the statutory analysis collapses into a two-prong analysis: one based on the Illinois Constitution, and one based on the United States Constitution. RAR, 107 F.3d. at 1276.

  "Illinois courts have given little guidance as to how state due process protection differs from federal protection in the context of personal jurisdiction." RAR, 107 F.3d at 1276. The Due Process Clause of the United States Constitution permits an Illinois court to exercise jurisdiction over a non-resident defendant only if the defendant has "certain minimum contacts with [the state] such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice. "`International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Page 3 Milliken v. Meyer, 311 U.S. 457, 463 (1940)); Neuman & Assoc. v. Florabelle Flowers, 15 F.3d 721, 725 (7th Cir. 1994).

  Specific jurisdiction "refers to jurisdiction over a defendant in a suit `arising out of or related to the defendant's contacts with the forum.'" RAR, 107 F.3d at 1277 (quoting Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408 (1984)). To determine whether specific jurisdiction exists, a defendant must have "purposefully established minimum contacts within [Illinois];" and those contacts must make personal jurisdiction reasonable and fair under the circumstances. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (Burger King). Defendant must have "purposely availed" itself of the privilege of conducting activities within the forum state, invoking the benefits and protections of its laws such that they would "reasonably anticipate being haled into court there." Asahi-Metal Indus. Co. v. Superior Court, 480 U.S. 102, 119(1987).

  Plaintiff must satisfy two elements for specific jurisdiction: (1) the plaintiff must show that the defendant is amenable to service of process; and (2) the plaintiff must establish that haling the defendant into court is consistent with the Fourteenth Amendment's due process clause. LFG, LLC. v. Zapata Corp., 78 F. Supp.2d 731, 734 (N.D. Ill. 1999).

  BACKGROUND

  The facts, for the purposes of this motion, are as follows. Vertical Networks is a California corporation with its principal place of business in California. At all times relevant to this action, Fraser was the President and Chief Executive Officer ("CEO") of Vertical Networks.

  From March 1, 1999, until December 31, 2002, Weyent was employed by Vertical Networks as a Regional Enterprise Manager. Weyent and Vertical Networks entered into and Page 4 executed two employment contracts, which are at issue in this action. Thereafter, Weyent performed the majority of his work in Illinois, where Vertical Networks transacted business by selling its products to Illinois businesses.

  For each year of Weyent's employment, Vertical Networks prepared a Sales Compensation Plan (the "Plan" or "Plans") for members of its sales team. The Plans are a series of written documents that were formally executed by a Vertical Networks representative and Weyent. The Plans provided for a certain amount of additional compensation if Weyent reached applicable revenue targets.

  In 2001, Weyent secured a purchase order from an Illinois-based company, Household Finance Corporation (the "Household Finance deal"). Pursuant to the terms of the 2001 Plan, Weyent was eligible to receive increased compensation; but he was not paid the full amount due under the 2001 Plan. In 2002, Weyent secured another purchase order from Household Finance Corporation. Pursuant to the terms of the 2002 Plan, Weyent ...


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