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CZARNOWSKI DISPLAY SERVICES, INC. v. BELL

July 15, 2004.

CZARNOWSKI DISPLAY SERVICES, INC., Plaintiff,
v.
JAMES BELL, Defendant.



The opinion of the court was delivered by: CHARLES NORGLE, District Judge

OPINION AND ORDER

Plaintiff, Czarnowski Display Services, Inc. (hereinafter "CDS" or "Company") filed a six-count complaint that was later amended to contain only three-counts against Defendant, James Bell (hereinafter "Bell"), alleging breach of contract, breach of fiduciary duty and tortious interference with contractual relations. Now before the court is Defendant's Motion to Dismiss Plaintiff's Amended Complaint for lack of personal jurisdiction, brought pursuant to Federal Rules of Civil Procedure 12(b)(2) and (3), or in the alternative, Motion to Transfer Venue pursuant to 28 U.S.C. § 1404(a).

CDS is an Illinois Corporation with its principal place of business in Chicago, Illinois. Bell is a California citizen. The amount in controversy exceeds $75,000. The court, therefore, has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332(a)(2). For the following reasons, Defendant's Motion is granted in part and denied in part. I. BACKGROUND*fn1

  CDS is an Illinois Corporation with its principal place of business in Chicago, Illinois. CDS operates its business in various cities around the United States providing exhibit display services, including, but not limited to, installing and dismantling exhibits. It also provides rentals, graphics, shipping, storage and refurbishing services. CDS employs City Managers at its various locations. All City Managers report to and are accountable to the President of CDS, Mark Nagle, whose office is located at the Company's headquarters in Chicago, Illinois.

  Bell is a California citizen. He was employed as City Manager of CDS's Los Angeles office and later as Vice President of the Company. As part of his responsibilities, Bell attended two managers' meetings in Chicago, Illinois. He also traveled to Illinois four additional times to consult with two Illinois-based clients regarding projects in California. He made four sales calls to residents in Illinois and attended one trade show in Illinois. Bell received $110,000 per year as compensation and additional benefits from CDS until his termination on January 30, 2002. Bell received his paycheck every other week from the corporate office in Chicago, Illinois and he cashed the checks which were drawn from an Illinois bank account.

  Before CDS hired Bell as City Manager of its Los Angeles office, Bell was the President and Owner of Universal Exposition Services (hereinafter called "Universal"), a company that was a competitor of CDS. In March 1996, Universal sold all its assets to CDS for $200,000 through an Asset Purchase Agreement. Around the same time, Bell entered into a Non-Compete Agreement for $300,000. CDS paid Bell $50,000 by check and executed a Promissory Note of $250,000 for the Non-Compete Agreement, which CDS paid in full. CDS's payments of $500,000 to Universal for entering into the Asset Purchase Agreement and the Non-Compete Agreement (collectively "Agreements") were paid from checks from the corporate office in Chicago, and the money was drawn from an Illinois bank account. The Agreements contain the Non-Compete Agreement, which states in relevant part:
1. Covenant Not to Compete. Covenator and CDS acknowledge that CDS intends to continue the operation of the Business in the same manner as such has been operated by Covenator, by and through Universal Exposition Services, Inc. In consideration of the payment of the Fee, in the amount and upon the terms set forth below, Covenantor agrees that it shall not (a) establish or be employed or affiliated with any business involving the exhibit and display service for trade shows and conventions with the exception of employment or assistance with CDS; nor (b) directly solicit, by any means or in any manner, any past or current clients/customers of the Business, either himself or through any employee, agent, affiliate or any other person or entity. Covenator's covenant, as provided herein, shall be in effect for a period of five (5) years from the date hereof and shall prohibit any such actions by Covenantor within the geographic boundaries of the United States of America, including the States of Alaska and Hawaii. Covenator agrees that it shall not conduct any business under the trade name "CDS". Buyer shall have the right to enforce the provisions of this Covenant by all remedies available at law or in equity, including without limitation, by injunctive relief.
3. Scope and Duration of Covenant. Covenantor hereby expressly agrees that the geographic scope and duration of the Covenant is fair and reasonable, and warrants that it shall not interpose any claim of unreasonableness as a defense to the enforcement of the Covenant.
8. Miscellaneous. The laws of the State of California shall govern the validity, construction, performance and effect of this Agreement.
The Agreements were entered into in Las Vegas, Nevada. The preceding negotiations took place between Bell and CDS's officers and attorney by written correspondence and telephone from the corporate office in Chicago, Illinois. During the course of his six-year employment with CDS, Bell allegedly used CDS's credit card and checks to purchase personal items. Bell submitted his expense reports and misrepresented to CDS that the charges for the airline tickets, meals, merchandise and gasoline were business-related when they were for personal use and for his girlfriend, Robin Brown.

  CDS further alleges that during the course of his employment, Bell used CDS's materials and performed services for one of CDS's customers, Anglers Marine, but failed to invoice the customer for the full amount of the materials and services. Subsequently, Bell received a boat from the Anglers Marine. Additionally, Bell sent out invoices for the work to the customer in his name and not the company's name, and faxed incomplete invoices to the Chicago office. As a result of Bell's alleged actions, CDS lost revenue for services rendered, as well as profits stemming from those services.

  On August 18, 2003, CDS filed the present lawsuit. On October 10, 2003, Plaintiff filed a six-count First Amended Complaint. On November 7, 2003, Bell filed a Motion to Dismiss for lack of personal jurisdiction over the Defendant or alternatively, a Motion to Transfer Venue. On December 15, 2003, Plaintiff filed a Memorandum in Opposition to Defendant's Motion to Dismiss or Transfer and amended the complaint to three-counts alleging defendant's breach of contract, breach of fiduciary duty and tortious interference with contractual relations. Defendant's Motion to Dismiss or Transfer Venue is fully briefed and before the court.

  II. STANDARD OF REVIEW

  Once a defendant has challenged a court's exercise of personal jurisdiction, the plaintiff has the burden of demonstrating that the court's exercise of personal jurisdiction over a defendant is proper. See RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1995)). "In deciding a motion to dismiss for lack of personal jurisdiction, the court may receive and consider affidavits from both parties." Glass v. Kemper Corp., 930 F. Supp. 332, 337 (N.D. Ill. 1996) (citing Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987)). "The court resolves factual disputes in the pleadings and affidavits in favor of the plaintiff, but takes as true facts contained in the defendant's affidavit that remain unrefuted by the plaintiff." Id. (citing Nelson v. Park Industries, Inc. 717 F.2d 1120, 1123 (7th Cir. 1983)).

  III. DISCUSSION

  A. Personal Jurisdiction

  A federal district court exercising diversity jurisdiction has personal jurisdiction over a nonresident "only if a court of the state in which it sits would have jurisdiction." Purdue Research Foundation v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 779 (7th Cir. 2003). To determine personal jurisdiction, the court conducts a two-part inquiry: 1) whether the state's long-arm statute permits jurisdiction; and 2) whether the assertion of jurisdiction complies with constitutional due process standards. See Wilson v. Humphreys (Cayman) Ltd., 916 F.2d 1239, 1243 (7th Cir. 1990).

  1. Illinois Long-Arm Statute

  The Illinois long-arm statute, 735 Ill. Comp. Stat. 5/2-209(a), states in relevant 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, and, if an individual, his or her personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of such acts: . . . (2) The commission of a tortious act within this State; or . . . (7) The making or performance of any contract or promise substantially connected with this State; or . . . (11) The breach of any fiduciary duty within this State.
For purposes of the Illinois long-arm statute, the Illinois courts construe the phrase "tortious act" broadly to encompass any act that involves a breach of a duty owed to another and makes the person committing the act liable to the other for damages. See, e.g., Grand Vehicle Works Holdings, Corporation v. Frey, No. 03 C 7948, 2004 U.S. Dist LEXIS 5732, at 1, 15 (N.D. Ill. 2004).

  The facts in this case indicate Bell's conduct falls within the Illinois long-arm statute. First, CDS alleges Bell breached the Agreements, which were substantially connected to Illinois. Bell negotiated the Agreements by written correspondence and telephone with CDS's President and Controller on numerous occasions in Chicago, Illinois. The making and performance of the Agreements are substantially connected with the State in that Bell's employment with the Company, headquartered in Illinois, was contingent upon entering into the Agreements and performing his managerial responsibilities as City Manager of the Los Angeles office. See 735 Ill. Comp. Stat. 5/2-209(a)(7). Second, CDS alleges Bell breached his fiduciary duty as City Manager with the company when he used the Company credit card to buy personal items for himself and his girlfriend, and used Company checks to pay off the bills. He then submitted expense reports to the corporate office in Chicago, Illinois and requested reimbursement for his personal use. See 735 Ill. Comp. Stat. 5/2-209(a)(11). Finally, CDS alleges Bell committed a tortious act when he submitted some of the invoices to the Chicago office representing misleading information. See 735 Ill. Comp. Stat. 5/2-209(a)(2), see also FMC Corp v. Varonos, 892 F.2d at 1313 (1990) (holding defendant is subject to ...


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