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ONE POINT SOLUTIONS, INC. v. WEBB

January 5, 2005.

ONE POINT SOLUTIONS, INC., Plaintiff,
v.
ANTHONY WEBB, MICHAEL VIRNIG, and TIM YOON, Defendants.



The opinion of the court was delivered by: JAMES HOLDERMAN, District Judge

MEMORANDUM OPINION AND ORDER

On June 10, 2004, plaintiff One Point Solutions, Inc., ("One Point"), invoking this court's diversity jurisdiction, 28 U.S.C. § 1332, filed a four count amended complaint against defendants Anthony Webb, ("Webb"), Michael Virnig, ("Virnig"), and Tim Yoon, ("Yoon"), (collectively "defendants"), alleging Breach of Fiduciary Duty and Tortious Interference with a Contract by Webb, and Breach of Contract and Conversion by Virnig and Yoon. (Dkt. No. 3.) The defendants moved in July 2004 for dismissal for lack of personal jurisdiction or, in the alternative, for change of venue. (Dkt Nos. 11, 15.) This court, in its minute order of August 13, 2004, (Dkt. No. 20), ordered the parties to engage in a period of expedited discovery in order to develop additional factual evidence on the personal jurisdiction issue. The parties have provided supplemental briefings to the court based on the additional discovery. On November 30, 2004, Webb filed a motion for sanctions, pursuant to Rule 11 of the Federal Rules of Civil Procedure, ("Rules") against One Point. (Dkt. No. 36). For the reasons set forth below, this court denies the defendants' motions. BACKGROUND

According to the complaint, One Point was incorporated as an Illinois company in January 2003 by Michael Mancini, ("Mancini), Travis Hess, ("Hess"), and Webb. (Compl. ¶¶ 3, 7.) Each had a one-third interest in the company and comprised One Point's Board of Directors. (Id. at ¶ 3.) One Point's purpose was to "create and produce printed marketed materials and provide direct consultation and marketing services which could be created, customized, serviced and ordered via the Internet." (Id. at ¶ 7.) Yirnig and Yoon were hired by One Point to develop a web-based software application. (Id. at ¶ 4.)

  Although Webb was a director of One Point in 2003, he was a resident of North Carolina. (Id. at ¶ 5.) In fact, it appears from the information provided from the parties' supplemental discovery, that all the parties involved with One Point were able to perform their activities in different locations. Although the company is incorporated in Illinois, the business' structure was that of an Internet based company. Each director was able to perform his work at a different location and the directors communicated mostly through telephone and email. Virnig and Yoon were also able to perform their work for One Point through electronic means. Yirnig and Yoon are residents of Minnesota. Since their tasks related to creating an online software program for One Point, they were able to perform these activities from Minnesota. Although One Point had directors and contractors physically located in Illinois, Minnesota and North Carolina, it could be said that One Point's primary place of business was the ether of the Internet. The law has yet to recognize that locale for jurisdictional purposes so this court must find firmer ground.

  One Point asserts that Webb has breached his fiduciary duty as a director of One Point. The breach centers around the fact that Webb allegedly has an "on-going close personal relationship with Yoon." (Id. at ¶ 8.) Webb allegedly recommended Virnig and Yoon to OPS to develop the software, but did not disclose his personal relationship with Yoon. (Id.) OPS asserts that the terms and conditions of Yirnig and Yoon's contractual relationship was established in the Software Development and Sale Agreement. ("Software Agreement") (Id. at 9 and Ex. A). One Point alleges that Webb has attempted to undo the Software Agreement to the detriment of One Point and in the benefit of Yirnig and Yoon. One Point has failed to provide a signed copy of the Software Agreement and Virnig and Yoon assert that they never signed the Software Agreement and therefore its terms are not binding. One Point counters in its brief that either Webb has mislead One Point by previously asserting that the software agreement had been signed or by concealing the signed copy. Furthermore, allegedly Webb drafted and executed on One Point's behalf a "Letter of Understanding" in January 2004 stating that all previous agreements between One Point and Virnig and Yoon were invalid. (Id. at 15.) One Point also alleges that Webb attempted to create a competing business with Virnig and Yoon at the domain name of "Printlive.net" while he was still a director and shareholder at One Point, and took software that had been licensed to One Point with him to his new business. (Id. at 17-23.)

  One Point also asserts that Virnig and Yoon wrongfully took control of the One Point website and shut it down in January 2004. (Id. at 14.) These actions were allegedly taken after Yirnig and Yoon had rejected a One Point proposal in September 2003 to become minority shareholders with a 10% interest in the company, claimed to own the software that they had developed for One Point and demanded additional payment for work performed for One Point. (Id. at 11-14.)

  STANDARD OF REVIEW

  One Point, as the plaintiff, "bears the burden of demonstrating the existence of personal jurisdiction" over the defendants. Budget Rent a Car Corp. v. Crescent Ace Hardware, No. 03 C 930, 2003 WL 21673932, at *2 (N.D. Ill. July 16, 2003) (citing RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997)). "The court may consider affidavits from the parties," Greenberg v. Miami Children's Hosp. Research Inst., Inc., 208 F. Supp. 2d 918, 922 (N.D. Ill. 2002), and "the court must resolve any factual disputes in the pleadings and affidavits in the plaintiff's favor, but takes as true any unrefuted facts in the defendant's affidavits." Riddell, Inc. v. Monica, No. 03 C 3309, 2003 WL 21799935, at *1 (N.D. Ill. July 25, 2003).

  ANALYSIS

  A. Personal Jurisdiction

  "A federal district court in Illinois has personal jurisdiction over a party involved in a diversity action only if Illinois courts would have personal jurisdiction." Michael J. Neuman & Assocs., Ltd. v. Florabelle Flowers, Inc., 15 F.3d 721, 724 (7th Cir. 1994). This court has personal jurisdiction over the defendants if "(1) Illinois statutory law properly grants jurisdiction; (2) the exercise of personal jurisdiction would not violate Illinois constitutional law due process requirements; and (3) the exercise of personal jurisdiction would not violate the United States constitutional law due process requirements." Allman v. McGann, No. 02 C 7442, 2003 WL 1811531, at *2 (N.D. Ill. Apr. 4, 2003) (citing Central States, Southeast and Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 936 (7th Cir. 2000)).

  The "Illinois Long Arm Statute authorizes personal jurisdiction to the constitutional limits," thus it collapses into the two constitutional inquiries. Mitchell v. Shifffermiller, No. 03 C 4794, 2004 WL 178188, at *2 (N.D. Ill. Jan. 14, 2004) (citations omitted); see 735 ILCS 5/2-209(c) (providing jurisdiction to the constitutional limit). Furthermore, although the Illinois Supreme Court has made clear to note that the Illinois Constitutional due process requirement is distinct from the federal requirement, Rollins v. Ellwood, 565 N.E.2d 1302, 1316 (1990), "the Seventh Circuit has suggested that [since] there is no operative difference between the limits imposed by the Illinois Constitution and the federal limitations on personal jurisdiction . . . the two constitutional analysis blend together." Wasendorf v. DBH Brokerhaus AG, No. 04 C 1904, 2004 WL 2872763, at *2 (N.D. Ill. Dec. 13, 2004) (internal citations omitted).

  Personal jurisdiction for federal due process purposes requires that a "defendant have `minimum contacts' with the forum such that the exercise of personal jurisdiction over the defendant does not offend `traditional notions of fair play and substantial justice." Budget Rent a Car Corp., No. 03 C 930, 2003 WL 21673932, at *2 (citing International Shoe Co v. Washington, 326 U.S. 310 (1945)). The defendants' contacts with the forum demonstrate that the "defendants purposefully avails themselves of the privileges of conducting activities within the forum state," Wasendorf, No. 04 C 1904, 2004 WL 2872763, at *3 (citing Hanson v. Denckla, 357 U.S. 235, 253 (1958)), and the "defendant should reasonably anticipate being haled into court" in the forum state. Id. (citing (World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)).

  Personal jurisdiction can be categorized as either: (1) general jurisdiction and (2) specific jurisdiction. "A defendant is subject to general jurisdiction in Illinois when the defendant is domiciled in Illinois or where the defendant has continuous and systematic general business contacts with the forum." Budget Rent a Car Corp., No. 03 C 930, 2003 WL 21673932, at *2 n. 5 (internal citations omitted). "Specific jurisdiction exists when `the defendant has a lessor degree of contact with the state [than in a general jurisdiction case], but the litigation arises out of or is related to those ...


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