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HESS NEWMARK OWENS WOLF, INC. v. OWENS

United States District Court, N.D. Illinois, Eastern Division


September 28, 2004.

Hess Newmark Owens Wolf Inc., Plaintiff,
v.
Doris Owens, Owens Group, Ltd., Defendants.

The opinion of the court was delivered by: MICHAEL MASON, Magistrate Judge

MEMORANDUM OPINION AND ORDER

This matter is before the Court on Defendant Owens Group, Inc.'s (improperly named as Owens Group, Ltd.) motion to dismiss for lack of personal jurisdiction. This is a diversity action for breach of contract and breach of fiduciary duty. Plaintiff is an Illinois corporation. Defendant Doris Owens ("Owens") is an Ohio resident. Defendant Owens Group, Inc. ("OGI") is an Ohio corporation. For the reasons stated below, OGI's motion to dismiss for lack of personal jurisdiction is granted.

Facts

  Plaintiff, Hess Newmark Owens Wolf Inc., filed a three-count complaint against defendants Doris Owens and OGI.*fn1 Plaintiff alleges that in January 1998, Mary Hess, Doris Owens, Barry Newmark and Stuart Wolf formed Hess Newman Owens Wolf Inc. ("HNOW"), an Illinois corporation. HNOW provides advertising and/or publicity and promotional services to various major motion picture studios. On or about January 16, 1998, Hess, Newmark, Owens and Wolf executed a Shareholders' Agreement ("the Agreement") detailing among other things, share allocations, share values, dividend rights, appointing corporate officers and setting restrictions on shareholders, directors and officers from competing with and/or soliciting clients of HNOW. The Agreement specifically recognized that at the time it was executed, Owens operated OGI independently of HNOW. Plaintiff's complaint alleges that as a result, the Agreement provided that OGI and Owens could "continue to provide movie-related advertising to markets in Ohio and Kentucky, except for MGM and Warner Bros.," and "movie-related promotions" for any clients in Ohio, Kentucky and Indianapolis.

  Plaintiff further alleges that in or around June 2004, Hess and Newmark began hearing rumors in the industry that Owens was working for Terry Hines Associates ("THA"), a HNOW competitor. On July 15, 2004, HNOW's Board of Directors held a Special Meeting which all directors including Owens attended. At that meeting, Owens purportedly admitted that either individually and/or through OGI, she performed consulting services for THA since September 2003. According to the complaint, Owens' activities also involved setting up offices for THA in several cities and attending a THA corporate marketing strategy meeting.

  In Count I (for breach of contract), plaintiff alleges that Owens' work on behalf of THA, both individually and/or through OGI, constitutes a material breach of the Agreement. In Count II (for breach of fiduciary duty), plaintiff alleges that Owens' work on behalf of THA, both individually and/or through OGI, constitutes a material breach of Owens' fiduciary duty of loyalty to HNOW as an officer and director of HNOW. In Count III (also for breach of fiduciary duty), plaintiff alleges that Owens' work on behalf of THA, both individually and/or through OGI, constitutes a material breach of Owens' fiduciary duty not to usurp corporate opportunities of HNOW.

  Analysis

  A federal district court in Illinois has personal jurisdiction over a non-resident defendant in a diversity action only if an Illinois court would have such jurisdiction. Michael J. Neuman & Assoc. v. Florabelle Flowers, Inc., 15 F.3d 721, 724 (7th Cir. 1994); FMC Corp. v. Varanos, 892 F.2d 1308, 1310 (7th Cir. 1990). The plaintiff bears the burden of establishing a prima facie case that personal jurisdiction exists. Neuman, 15 F.3d at 724. To survive a motion to dismiss, the plaintiff must allege sufficient facts to support a reasonable inference that defendant is subject to personal jurisdiction. Jackam v. Hosp. Corp. of Am. Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir. 1986), cited with approval in Arnold v. Goldstar Fin. Sys., Inc., 2002 WL 1941546 (N.D. Ill., Aug. 22, 2002).

  Under the Illinois long-arm statute, an Illinois court may exercise personal jurisdiction over a defendant if: (1) the defendant submits to the jurisdiction of the Illinois courts by doing any of the acts enumerated in section 2-209(a), (2) the defendant is a natural person or corporation that is doing business in Illinois, or (3) on any other basis permitted by the Illinois Constitution and the Constitution of the United States. 735 ILCS 5/2-209(a); 735 ILCS 5/2-209(b)(4); 735 ILCS 5/2-209(c). Plaintiff's argument for jurisdiction is based solely on section 2-209(a) of the long-arm statute.*fn2 Thus, we may focus exclusively on specific jurisdiction. Specific jurisdiction applies when the court is asserting jurisdiction over a defendant in a suit "arising out of or related to the defendant's contacts with the forum." RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1276, 1277 (7th Cir. 1997). The court may exercise specific jurisdiction over OGI if it "purposefully established minimum contacts within the forum state" and those contacts "make personal jurisdiction fair and reasonable under the circumstances." Id.

  To establish that OGI has the requisite minimum contacts with Illinois, plaintiff relies on two of the enumerated acts giving rise to jurisdiction under section 2-209(a): the commission of a tortious act within Illinois, and the making or performance of any contract or any promise substantially connected with Illinois. 735 ILCS 5/2-209(a)(2) and (a)(7).

  In response to the motion to dismiss, plaintiff contends that this Court has personal jurisdiction as a result of OGI's negotiation of the Shareholders' Agreement. In particular, plaintiff argues that a federal district court sitting in Illinois has specific diversity jurisdiction over a non-resident defendant who negotiates and executes a contract in Illinois that is governed by Illinois law.*fn3 However, unlike here, the cases plaintiff relies on to support this contention each involve a defendant who was an actual party to the contract at issue. See Viktron Ltd. Partnership v. Program Data Inc., 326 Ill. App. 3d 111, 759 N.E.2d 186 (2d Dist. 2001); Prism Technologies, Inc. v. Buyer's Intern., Inc., 1989 WL 75443 (N.D. Ill., June 27, 1989); Old Republic Ins. Co. v. Ness, Motley, Loadholt, Richardson & Poole, 2004 WL 742096 (N.D. Ill., April 6, 2004). Here, plaintiff has not alleged that OGI is a party to the Agreement. In fact, it appears that Owens signed the Agreement in her individual capacity and not as a representative or agent of OGI. Plaintiff fails to allege any facts to the contrary.

  Furthermore, the complaint contains no allegations that OGI owes any contractual duties to the plaintiff or that OGI breached any such contractual duties. Instead, plaintiff alleges that Owens' conduct constitutes a material breach of the Agreement's covenant not to compete and covenant not to solicit. Because plaintiff has not alleged that OGI is a party to the Agreement or that OGI breached any contractual duties it owed to plaintiff, this Court may not exercise personal jurisdiction over OGI pursuant to section 2-209(a)(7). See, e.g., Sparks Tune-Up Centers, Inc. v. Strong, 1994 WL 87487 (N.D. Ill., March 16, 1994) (recognizing that because plaintiffs' claim against defendants was not one for breach of contract, reliance on section 2-209(a)(7) of the long-arm statute was inapt).

  Plaintiff also contends that this Court has personal jurisdiction as a result of OGI's participation in tortious conduct against HNOW, an Illinois business. However, the only tort alleged in the complaint is breach of fiduciary duty. Plaintiff fails to allege that OGI owed it any fiduciary duties or that OGI breached any fiduciary duties. Rather, plaintiff alleges that Owens breached various fiduciary duties she owed to the plaintiff. Further, plaintiff does not allege any other tortious conduct by OGI.*fn4 Because plaintiff failed to allege that OGI committed any tortious acts in Illinois, section 2-209(a)(2) does not confer personal jurisdiction over OGI. Old Republic Ins. Co., 2004 WL 742096, *5.

  Plaintiff's failure to establish requisite minimum contacts under Illinois' long-arm statute obviates the need to address whether the exercise of jurisdiction in this Court would be reasonable and fair under the circumstances. Accordingly, having considered and rejected all of plaintiff's arguments in support of personal jurisdiction over OGI, OGI's motion to dismiss is granted.

  Conclusion

  For the reasons set forth above, defendant OGI's motion to dismiss for lack of personal jurisdiction is GRANTED.


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