United States District Court, N.D. Illinois, Eastern Division
November 19, 2004.
EXPERIAN INFORMATION SOLUTIONS, INC. and EXPERIAN MARKETING SOLUTIONS, INC., Plaintiffs,
I-CENTRIX LLC and ROBERT G. GAITO, Defendants.
The opinion of the court was delivered by: JAMES ZAGEL, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs Experian Information Solutions, Inc. and Experian
Marketing Solutions, Inc., filed a four-count complaint against
Defendants I-Centrix LLC and Robert G. Gaito alleging: (1)
misappropriation of trade secrets under the Illinois Trade
Secrets Act, 765 Ill. Comp. Stat. 1065/1; (2) breach of an
Employee Agreement; (3) breach of a Consulting Services
Agreement; and (4) breach of the duty of loyalty. Defendants seek
to dismiss Experian's complaint pursuant to Federal Rules of
Civil Procedure 12(b)(2) and (3) and 28 U.S.C. § 1406(a) for
lack of jurisdiction and venue; or, in the alternative, seek to
transfer this case to the United States District Court for the
Northern District of New York pursuant to 28 U.S.C. § 1404(a).
Experian Information Solutions, Inc. ("EIS") is an Ohio
corporation with its principal place of business in Costa Mesa,
California. Experian Marketing Solutions, Inc. ("EMS") is a
Delaware corporation with its principal place of business in
Schaumburg, Illinois*fn1 and is a corporate affiliate of EIS. The two companies operate
collectively as "Experian." I-Centrix LLC ("I-Centrix") is a New
York limited liability company with its principal place of
business in Rensselaer, New York. Robert Gaito is permanently
domiciled in Troy, New York and maintains an office at
I-Centrix's corporate headquarters in Rensselaer, New York.
EMS's corporate predecessor, Brigar Computer Services ("BCS"),
hired David Gaito in 1992. Gaito became a Senior Account
Executive on January 2, 1997, and was promoted to Vice President
for Database Solutions that same month. On September 8, 1997,
Gaito entered into a confidentiality agreement with BCS.*fn2
Later that year, BCS liquidated into its parent company, Direct
Marketing Technology, a subsidiary of Experian Holdings. On March
31, 2000, Direct Marketing Technology transferred substantially
all of its assets to a wholly-owned subsidiary, Metromail
Corporation. On May 8, 2000, Metromail changed its name to
Experian Marketing Solutions ("EMS"), with its principal place of
business in Schaumburg, Illinois. Gaito remained employed with
the company through this process.
Among other things, Experian is in the business of providing
its clients data management services, including customer
relationship management products and services. While employed by
Experian, Gaito and his colleague Jeremy Green were involved in
the strategic design of Experian's allegedly proprietary and
confidential methods of using "pinning" or "linkage" technology,
which assigns "PIN" identifiers to individuals in order to link
those individuals across multiple databases. This project became
the foundation of Experian's custom solution for Providian Bank and was called "Providian PIN." Based on that
project, Experian developed Custom TrueVue, a pinning solution
generally applicable to a wide variety of companies. Each of
these projects involved Experian's allegedly proprietary and
confidential method of using pinning technology, also known as
its "matching technology." Gaito and Green had access to the
designs, code, and documentation of this matching technology
during their employment with Experian.
Gaito left Experian and formed his own company, I-Centrix, in
March, 2000.*fn3 One month later, Gaito entered into a
consulting agreement with EIS. The agreement defined EIS as
encompassing "any and all business units, divisions,
subsidiaries, affiliates and joint ventures of Experian
Information Systems, Inc.," which included EMS, its corporate
affiliate. The agreement referred to these entities collectively
as "Experian." The consulting agreement stipulated that
I-Centrix's employees and approved subcontractors would perform
work as requested by Experian at such times and places as
mutually agreed upon, and was to continue indefinitely unless
terminated by either party.
The consulting agreement specified that any work product
developed by I-Centrix within the scope and during the time
period of the agreement belonged to Experian. It also contained a
confidentiality agreement, which stated that I-Centrix and its
employees would not disclose to any third party proprietary
information provided by Experian to I-Centrix under the
consulting agreement. Additionally, Gaito agreed not to solicit,
hire, contract with, or engage the services of any Experian
employee with whom I-Centrix personnel had contact during the
performance of the consulting agreement or twelve months after
its termination. Between May, 2000 and March, 2002, Gaito and I-Centrix
consulted on several Experian projects, including the migration
of two Experian products, Z-24 and Circbase, using the Custom
TruVue package and pinning technology developed while Gaito was
an Experian employee. The Experian teams responsible for the
production and development of resources for the Z-24 and Circbase
projects were located in Schaumburg, Illinois. While providing
consulting services to Experian on these and other projects,
Gaito and other I-Centrix personnel traveled to Experian's
offices in Schaumburg twelve times. I-Centrix personnel also
communicated by mail, fax, telephone, and e-mail with Experian
personnel in Schaumburg and used computers that accessed servers
located in Schaumburg. During this time, Gaito, Finnerty, and
Green had access to Experian's allegedly proprietary methods of
using its pinning technology, as well as access to a detailed
proposal for marketing services to AOL that included a design
based on Experian's pinning technology.
On March 6, 2002, Gaito filed a patent application for a
"Contact Relationship Management System and Method," assigning
rights to I-Centrix. On August 7, 2002, Gaito terminated the
consulting agreement. Experian claims that Gaito's patent
application "disclosed core capabilities of Experian's
proprietary and confidential methods of using pinning
technology," as well as "proprietary system architecture details
substantially similar to Experian's proposed AOL solution" and to
another project on which Gaito, Green and Finnerty participated
while Experian employees. Experian also alleges that I-Centrix
provides marketing services in direct competition with Experian
and solicits Experian customers (some of whom have transferred
their business to I-Centrix) using Experian's proprietary
information. These allegations form the basis of Experian's complaint claiming
violations of the Illinois Trade Secrets Act, breach of contract
by Gaito and I-Centrix, and breach of the duty of loyalty.
In order to defeat Defendants' motion to dismiss for lack of
personal jurisdiction, Plaintiff Experian need only make a prima
facie showing of personal jurisdiction. Hyatt Int'l Corp. v.
Coco, 302 F.3d 707, 713 (7th Cir. 2002); Master Tech Prods.,
Inc. v. Smith, 181 F. Supp. 2d 910, 911 (N.D. Ill. 2002). In
reviewing the complaint and affidavits, I must draw all
reasonable inferences in favor of Plaintiffs. Master Tech,
181 F. Supp. 2d at 911. Furthermore, when faced with conflicting
evidence, I must resolve factual disputes in the Plaintiffs'
favor. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272 (7th
In a case based on diversity of citizenship, a federal district
court sitting in Illinois has personal jurisdiction over a
nonresident defendant only if an Illinois court would have
jurisdiction. Hyatt, 302 F.3d at 713. In Illinois, the long-arm
statute extends personal jurisdiction to the limit allowed under
the due process clause of the Fourteenth Amendment. See
735 ILCS 5/2-209(c); and Sutherland v. Cybergenics Corp.,
907 F. Supp. 1218, 1221 (N.D. Ill. 1995). Thus, the court's inquiry is
whether the district court could assert personal jurisdiction
over the defendant consistent with due process. Sutherland,
907 F. Supp. at 1221 (citations omitted). Due process requires that a
defendant have "minimum contacts" with a forum "such that the
maintenance of the suit does not offend `traditional notions of
fair play and substantial justice.'" See Glass v. Kemper Corp.,
930 F. Supp. 332, 338 (N.D. Ill. 1996) (quoting Int'l Shoe Co.
v. Washington, 326 U.S. 310, 316 (1945)). A defendant
establishes "minimum contacts" through actions demonstrating
purposeful availment of "the privilege of conducting activities within the forum." Hanson v. Denckla, 357 U.S. 235, 253 (1958).
Moreover, the defendant should "reasonably anticipate being haled
into court" in the forum as a result of these minimum contacts.
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297
A federal district court may exercise two types of jurisdiction
over an out-of-state defendant: general and specific. Glass,
930 F. Supp. at 338. In this case, Plaintiff does not allege
grounds for general jurisdiction over Defendant but argues that
specific jurisdiction exists. For a court to assert specific
jurisdiction, the defendant's contacts with the forum must be
"related to the controversy underlying the litigation." Id. at
339 (citing Wilson v. Humphreys (Cayman) Ltd., 916 F.2d 1239,
1244 (7th Cir. 1990)). If there is such a relationship, the
plaintiff must show only that the defendant's contacts with the
forum reached a "minimum" threshold. Sutherland,
907 F. Supp. at 1222.
Gaito and I-Centrix argue that this court has no personal
jurisdiction in this matter, either specific or general, because
they did not establish sufficient minimum contacts with Illinois
to anticipate being haled into court. I disagree. Defendants were
present in Illinois twelve times during the course of the
consulting agreement; far fewer visits to the forum state have
been found sufficient to constitute minimum contacts. See, e.g.,
Vandeveld v. Christoph, 877 F. Supp. 1160, 1165 (N.D. Ill. 1995)
(holding that "one visit to the state is sufficient to establish
the minimum contacts necessary to support personal jurisdiction,
if the cause of action arose out of the defendant's conduct on
that visit"). A defendant's presence in the forum state "while
conducting business relevant to the dispute" is a significant
factor in determining whether personal jurisdiction may be
exercised validly. Deluxe Ice Cream Co. v. R.C.H. Tool Corp.,
726 F.2d 1209, 1213-14 (7th Cir. 1984); and United States Gypsum
Co. v. All Tank Sales & Supply Co., 977 F. Supp. 1340, 1343 (N.D. Ill. 1997) ("All Tank's [single]
visit to Illinois during the course of performance is a
significant contact with the state.") Experian alleges that
Defendants maintained an ongoing relationship with Experian staff
in Illinois as a result of the consulting agreement and Gaito's
former employment with Experian. Defendants also admit
communicating with individuals located in Schaumburg via
telephone and e-mail throughout the consulting agreement. Drawing
all reasonable inferences in favor of the plaintiff, Defendants'
travel to Illinois to meet with Experian during the consulting
agreement was pursuant to the agreement and therefore related to
this dispute, which alleges breach of the agreement and a
violation of the Illinois Trade Secrets Act based on Defendants'
work under the agreement (as well as Gaito's prior work for
Plaintiffs also bear the burden of establishing that the
exercise of jurisdiction in Illinois would be fair and reasonable
by demonstrating that personal jurisdiction over Gaito and
I-Centrix would comport with "fair play and substantial justice."
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985).
Relevant factors to consider in determining whether jurisdiction
is fair and reasonable include the forum's interest in
adjudicating the dispute, the interest of the forum in regulating the activity involved, the burden on the defendant,
the relative burden of prosecution elsewhere on the plaintiff,
and the extent to which the claim is related to the defendant's
local activities. Id. at 476-77 (citations omitted).
The first two factors are of primary significance in this case.
Illinois has a strong interest in providing a forum for
Plaintiffs, who bring their claim in part under the Illinois
Trade Secrets Act. Further, EMS has its principal place of
business in Illinois and suffered injuries within Illinois's
borders. Despite Defendants' claim that EMS's principal place of
business is in California, where its office headquarters are
listed, Experian has demonstrated sufficiently that EMS's
principal place of business is indeed Schaumburg, Illinois.
Defendants also argue that their activities in Illinois have no
relationship to Plaintiffs' claims. Experian, though, has
demonstrated that the Defendants' contacts with Illinois took
place during the execution of the consulting agreement, through
which Defendants allegedly gained access to and misappropriated
confidential information used in Gaito's patent application.
Plaintiffs have also demonstrated that it would not be unduly
burdensome for Defendants to litigate in Illinois, given that
Experian employees, along with other key witnesses, work and
reside in Illinois. These first three factors strongly indicate
that jurisdiction in Illinois comports with fair play and
substantial justice. Furthermore, the party objecting to a forum
bears the burden of presenting a "compelling case" that
litigating there would be unreasonable. Burger King,
471 U.S. at 477. Defendants have not presented a compelling case that
litigating in Illinois would be unreasonable and have therefore
not met their burden, whereas Plaintiffs have demonstrated that
this court's exercise of personal jurisdiction would be fair and
I-Centrix and Gaito also move to dismiss on the basis of
improper venue. Venue is proper in a judicial district in which a
substantial part of the events or omissions giving rise to the
claim occurred or a substantial part of the property that is the
subject of the action is situated. 28 U.S.C. § 1391(a)(2).
Experian has established that a substantial part of the events or
omissions giving rise to the claim occurred in Illinois.
Defendants' communications with Experian staff in Illinois
pursuant to the consulting agreement and their physical presence
in Illinois on twelve separate occasions, also pursuant to that
agreement, establish venue as a matter of law. See Master Tech,
181 F. Supp. 2d at 913-14.
Transfer of Venue
Finally, in the event that I find personal jurisdiction and
venue to be proper, I-Centrix and Gaito seek to transfer this
case to the United States District Court for the Northern
District of New York pursuant to 28 U.S.C. § 1404(a) "for the
convenience of parties and witnesses, in the interests of
justice." To transfer a case under Section 1404(a), Defendants
must show that: (1) venue is proper in this court, (2) venue and
jurisdiction are proper in the Northern District of New York, and
(3) the transfer will serve the convenience of the parties and
witnesses and the interests of justice. Vandeveld,
877 F. Supp. at 1167 (citation omitted). This motion to transfer
turns on the third factor: the convenience of the parties and witnesses and
the interests of justice.*fn5 Defendants must demonstrate
that the transferee forum is "clearly more convenient" than this court. Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219-20 (7th
Cir. 1986). The decision to transfer is committed to my sound
discretion. Id. (citations omitted).
The parties disagree as to the convenience of litigating in
Illinois versus New York, though it seems likely that both
locations will serve as sources of proof. Defendants have
demonstrated that litigating in Illinois would be inconvenient,
given that their primary witnesses work and reside in New York.
However, Experian would be similarly inconvenienced by litigating
in New York. Experian plans to call as witnesses individuals who
work or reside in the Northern District of Illinois, including a
signatory to the consulting agreement. Experian also asserts that
the members of the production and resource development teams for
the Z-24 and Circbase projects at issue in this case "were"
located at Experian's Schaumburg facility; if this is still
accurate, the balance would not clearly weigh in favor of
Defendants. Furthermore, Experian's complaint seeks relief under
the Illinois Trade Secret Act, and it is likely that an Illinois
federal court will be more familiar with this statute than would
a New York federal court. See Int'l Molding Machine Co. v. St.
Louis Conveyor Co., No. 01 C 8305, 2002 U.S. Dist. LEXIS 14790
at *18 (N.D. Ill. Aug. 12, 2002) (a court's familiarity with the
applicable law is a relevant consideration in determining whether
transfer is in "the interests of justice").
Defendants have not demonstrated that litigating in New York
would be significantly more convenient and therefore have not met
their burden to transfer venue. A plaintiff's choice of forum
"should rarely be disturbed unless the balance weighs strongly in
the defendant's favor." Vandeveld, 877 F. Supp. at 1167.
Defendants note that this standard does not apply when the "cause
of action did not conclusively arise in the chosen forum."
Spherion Corp. v. Cincinnati Fin. Corp., 183 F. Supp. 2d 1052,
1058 (N.D. Ill. 2002) (citation omitted). However, at this time
the situs of the cause of action appears to have arisen in both
the transferor and transferee forum. Given that the other factors do not weigh more
heavily on either side, the motion to transfer is denied, though
I may revisit the matter after the close of discovery.
For the reasons stated above, the motion to dismiss for lack of
jurisdiction and venue, and in the alternative, to transfer
venue, is denied.