United States District Court, N.D. Illinois, Eastern Division
September 28, 2004.
Hess Newmark Owens Wolf Inc., Plaintiff,
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.
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
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.
For the reasons set forth above, defendant OGI's motion to
dismiss for lack of personal jurisdiction is GRANTED.