United States District Court, N.D. Illinois, Eastern Division
August 2, 2004.
GAS RESEARCH INSTITUTE, Plaintiff,
ADVANCED FUEL RESEARCH, INC.; ON-LINE TECHNOLOGIES, INC.; and MKS INSTRUMENTS, INC., Defendants.
The opinion of the court was delivered by: MATHEW KENNELLY, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Gas Research Institute, an Illinois not-for-profit
corporation that provides research for the benefit of the natural
gas industry, has sued three Connecticut-based entities, Advanced
Fuel Research, Inc., On-Line Technologies, Inc., and MKS
Instruments, Inc. GRI alleges that in 1995 it contracted with AFR
and OLT, then an affiliate of AFR, to perform research on a
low-cost emissions monitoring device. The contract, according to
GRI, provided that all know-how that arose from the work would be
GRI's property. AFR was granted a nonexclusive, royalty-free
license for four moths after work was completed to make and sell
any product or process for non-natural gas applications, and the
contract included a commitment to negotiate a royalty-bearing
license for the ensuing period. GRI alleges that AFR completed
work in 2000 and thereafter sold products incorporating the
know-how covered by the contract but refused to pay royalties or
enter into an agreement to do so. According to GRI, AFR sold such
products through OLT and later through MKS when MKS acquired OLT.
GRI has sued the defendants for breach of contract,
misappropriation of trade secrets, unjust enrichment, and conspiracy.
MKS and OLT answered the complaint and later filed a
cross-claim against AFR and one of its officers alleging fraud,
negligent misrepresentation, and breach of contract in connection
with MKS's purchase of OLT, and for indemnity and contribution.
AFR has moved to dismiss both the complaint and cross-claim for
lack of personal jurisdiction or to transfer the claims against
it to the District of Connecticut. For the reasons stated below,
the Court denies both motions.
Motion to dismiss
When personal jurisdiction is challenged, the plaintiff bears
the burden of establishing prima facie that the Court properly
may exercise jurisdiction over the defendant. Purdue Research
Found. v. Sanofi-Synthelabo, 338 F.3d 773, 782 (7th Cir. 2003).
The parties are permitted to submit affidavits in connection with
a motion to dismiss for lack of personal jurisdiction. Conflicts
in the parties' affidavits and other evidence are resolved in
favor of the exercise of jurisdiction. Id. at 782.
A federal court may exercise personal jurisdiction over an
out-of-state defendant if the defendant is amenable to process in
the forum state and the exercise of jurisdiction comports with
due process. Illinois' long-arm statute confers an Illinois court
with jurisdiction over a non-Illinois defendant to the extent
permitted by the due process clauses of the federal and Illinois
constitutions. 735 ILCS 5/2-209(c). The Seventh Circuit has
indicated that there is no significant difference between the
limits imposed on personal jurisdiction by the United States and
Illinois constitutions, and thus the personal jurisdiction
analysis collapses into a single inquiry focused on federal due
process requirements. Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 715 (7th Cir. 2002). Under the due process clause, before an
out-of-state defendant may be required to defend a case in the
forum state, it must have "minimum contacts" with the state "such
that the maintenance of the suit does not offend `traditional
notions of fair play and substantial justice.'" Int'l Shoe Co.
v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v.
Meyer, 311 U.S. 457, 463 (1940)).
There are two types of personal jurisdiction: general and
specific. Only the latter is at issue in this case. A court may
assert specific jurisdiction over an out-of-state defendant when
the minimum contacts standard is met and the plaintiff's cause of
action arises out of or relates to the defendant's contacts with
the forum state. E.g., Helicopteros Nacionales de Colombia S.A.
v. Hall, 466 U.S. 408, 414 (1984). The defendant's contacts with
the forum state must be of a nature and quality such that the
defendant has fair warning that it could be required to defend a
suit there. Burger King Corp. v. Rudziewicz, 471 U.S. 462, 472,
474 (1985). This ensures that jurisdiction over a defendant is
"not based on fortuitous contacts, but on contacts that
demonstrate a real relationship with the state with respect to
the transaction at issue" and that "the defendant retains
sufficient, albeit minimal, ability to structure its activities
so that it can reasonably anticipate the jurisdictions in which
it will be required to answer for its conduct." Purdue
Research, 338 F.3d at 780.
An important aspect of the analysis is whether the defendant
deliberately engaged in significant activities in the forum state
or "created continuing obligations between itself and a resident
of the forum." Id. at 781. Territorial presence, though
significant if it exists in a particular case, is not essential.
"If, for example, a commercial defendant's efforts are directed
toward a particular jurisdiction, the fact that the actor did not
actually enter the jurisdiction is not of critical importance." Id. (citing Calder v. Jones,
465 U.S. 782, 788-89 (1984)). "A substantial amount of business is
transacted solely by mail and wire communications across state
lines, thus obviating the need for physical presence within a
State in which business is conducted." Burger King, 471 U.S. at
GRI submitted an affidavit by its senior technology manager
Kevin Krist, and AFR submitted an affidavit from its chairman
Peter Solomon, who at the time of the relevant events also held
an unspecified position with OLT. These affidavits do not
conflict in any material respect.
In January 1994, GRI issued a request for proposals, inviting
interested parties to propose research into low-cost,
high-sensitivity gas sensor technology. In March 1994, Solomon
came to Illinois for a trade show for purchasers of scientific
equipment on behalf of OLT, a seller of such equipment. At
various times, Solomon was present in a hotel room where OLT was
displaying an emissions sensor device called an FT-IR device.
Krist came to the hotel room, and Solomon discussed the operation
of the device with him.
In October 1994, AFR and OLT submitted a contract proposal to
GRI in response to the request for proposals. The proposal
concerned development of an FT-IR device. In January 1995, GRI
sent a proposed contract, already signed, to AFR in Connecticut.
AFR signed the contract and returned it to GRI. One can fairly
infer that the parties understood or assumed that AFR would
perform its work under the contract at its facilities in
Connecticut. But the contract contemplated that AFR would work
"under the general technical direction of GRI's Project Manager,"
Contract ¶ 5.1, that it would submit quarterly written reports to
GRI, id. ¶¶ 6-1 6.5, and that it would make three oral
presentations to GRI personnel. Id. ¶ 6.6. The contract provided that it would be governed by Illinois law. Id. ¶ 21.1.
During the period of its work under the contract, AFR submitted
a number of written progress reports to GRI in Illinois. In
addition, Solomon met two or three times with GRI representatives
in Illinois to report on AFR's progress, as the contract
contemplated. Solomon says that two of these visits were timed to
coincide with occasions when he was traveling through Chicago for
other purposes. AFR also had extensive written (mail and e-mail)
communications with GRI that it sent to Illinois. Payments were
sent by GRI to AFR in Connecticut.
Though AFR performed all of its research work in Connecticut,
when one considers the parties' entire transaction including
their negotiations for a contract, contemplated future
consequences, the contract's terms, and their dealings under the
contract the Court would be hard-pressed to find that it was
unforeseeable to AFR that it could be brought into an Illinois
court regarding a dispute over its contract with GRI. AFR was one
of a number of entities that received GRI's request for
proposals. It did not ignore the request but instead reached out
to an Illinois entity to propose a multi-year contractual
relationship (that is what the request for proposals
contemplated). Though there is no evidence that Solomon made his
March 1994 trip to Chicago for the purpose of marketing his
company or its product to GRI, it would be foolish to believe
that the meeting he had with Krist in Chicago, at which OLT
displayed a product similar to the one involved in its later
contract proposal, had nothing to do with AFR later getting GRI's
business. AFR's relationship with GRI was one that contemplated
supervision by an Illinois-based project manager and regular
reporting in Illinois, including oral presentations which took
place in this state. Under the circumstances, the evidence
plainly establishes that AFR established minimum contacts with Illinois such that it
reasonably could anticipate being haled into court here.
Once a court determines, as we have in this case, that the
defendant purposefully established contacts with the forum state,
"those contacts may be evaluated in light of other factors to
determine . . . whether the exercise of jurisdiction would be
compatible with `fair play and substantial justice.'" Burger
King, 471 U.S. at 476 (quoting Int'l Shoe, 326 U.S. at 320)).
These factors include the burden on the defendant, the forum
state's interest in adjudicating the dispute, the plaintiff's
interest in obtaining convenient relief, the judicial system's
interest in the most efficient resolution of the dispute, and the
interests of the several states in furthering substantive social
policies. Purdue Research, 338 F.3d at 781 (citing Burger
King, 471 U.S. at 477). In the Court's view, these factors are
roughly a wash in this case. In any event, "[t]hese factors
rarely will justify a determination against personal
jurisdiction. Usually . . ., these considerations may be
accommodated through the consideration of means other than
jurisdiction," such as by the application of choice of law rules
or a change of venue. Id. at 781 n. 10. The Court does not
believe that fundamental fairness requires favoring AFR's desire
to litigate the case in its home forum over GRI's desire to do
Motion to transfer
A federal court may transfer an action to any other district
where it might have been brought, for the convenience of the
parties and witnesses and in the interests of justice.
28 U.S.C. § 1404(a). The party seeking transfer has the burden of
establishing that the proposed transferee district is "clearly
more convenient" than the district the plaintiff chose. Coffey
v. Van Dorn Iron Works, 796 F.2d 217, 219-20 (7thCir. 1986).
Transfer should be denied if the result would be simply to shift the burden of inconvenience from one
side of the case to the other. Heller Financial, Inc. v. Midwhey
Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989).
In evaluating the convenience of the parties and witnesses, the
court considers the plaintiff's choice of a forum, the relative
ease of access to evidence, the convenience of the witnesses, and
the convenience of the parties in litigating in the respective
forums. See, e.g., Millennium Products, Inc. v. Gravity Boarding
Co., 127 F. Supp.2d 974, 980 (N.D. Ill. 2000). The plaintiff's
choice of a forum is entitled to substantial weight, particularly
if, as in this case, some of the events significant to the
litigation took place in the forum state. Id.
The relevant events took place at both sides' offices, and each
party's documents are obviously kept at its own offices, so those
factors are a wash. AFR's primary argument in favor of transfer
is that there are a significant number of witnesses based in
Connecticut. But it has provided no affidavits regarding who is
likely to testify and why. Rather, it has provided only its
Rule 26(a)(1) disclosure, in which it was required to identify persons
with knowledge of relevant facts. The list consists primarily of
current and former employees of itself and OLT who performed work
on the contract. But AFR has provided little information about
the subjects of these persons' testimony, and thus the Court is
unable to evaluate how many of them are actually likely to
testify. Without explanation of the witnesses' likely role in the
litigation, the Court is unwilling to assume they will testify.
In short, AFR has failed to persuade the Court that its proposed
forum is clearly more convenient than the one that GRI chose.
Rather, this appears to be a case in which transfer would simply
shift the burden of inconvenience from AFR to GRI. Conclusion
For the reasons stated above, the Court denies defendant AFR's
motion to dismiss or for transfer [docket # 6-1, 6-2, 27-1,
27-2]. AFR is directed to answer the complaint on or before
August 13, 2004.
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