United States District Court, N.D. Illinois, Eastern Division
June 15, 2005.
GMAC REAL ESTATE, LLC, Plaintiff,
CANYONSIDE REALITY, INC. ET AL. Defendants.
The opinion of the court was delivered by: JAMES HOLDERMAN, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff GMAC Real Estate, LLC ("GMAC"),*fn1 invoking
this court's diversity jurisdiction pursuant to 28 U.S.C. § 1332,
filed a one count first amended complaint on February 18, 2005
alleging breach of contract against defendants Canyonside Realty,
Inc., and Canyonside Reality, Inc.'s owners and principles Bonny
J. Ross, Daniel A. Suhr, and Wanda Foster (collectively
"Canyonside"). (Dkt. No. 8). On March 15, 2005, Canyonside filed
its current motion to dismiss for lack of personal jurisdiction
and improper venue, pursuant to Rule 12(b)(2) and 12(b)(3) of the
Federal Rules of Civil Procedure ("Rules"), or in the alternative
to transfer this case, pursuant to 28 U.S.C. § 1404 or
28 U.S.C. § 1406, to the venue of the United States District Court for the
District of Idaho. (Dkt. No. 15). For the reasons set forth
below, Canyonside's motion to dismiss for lack of personal
jurisdiction and improper venue, or in the alternative to
transfer venue, is denied. BACKGROUND
According to its first amended complaint, GMAC sells franchises
to residential real estate brokerage offices throughout the
United States. (Dkt. No. 8 at ¶ 1). Under the franchise
agreement, the franchisee is allowed to use GMAC's trade and
service marks. (Id.) In return, the franchisee pays GMAC
transaction and advertising fees based on the commissions and fee
income produced by the franchisee. (Id. at ¶ 12). The agreement
provides GMAC with a right to inspect and audit the franchisee's
accounting records and books in order to determine whether the
franchisee is making the appropriate fee payment to GMAC. (Id.
at ¶ 13).
GMAC is currently a limited liability company existing under
the laws of the State of Delaware having its principle place of
business in Illinois.*fn2 (Id. at ¶ 1). Canyonside is an
Idaho company with its principle place of business in Idaho
(Id. at ¶ 3), and the individual defendants are all Idaho
citizens and residents. (Id. at ¶¶ 4-6). GMAC and Canyonside
entered into a franchise agreement in 1999 that allowed
Canyonside to operate GMAC franchises in Idaho. The individual
defendants also personally guaranteed Canyonside's obligations
for the first eighteen months following the consummation of the
1999 agreement up to a total liability of $15,000. (Id. at ¶
When GMAC and Canyonside entered into the franchise agreement
at dispute in this case in 1999, GMAC had its principle place of
business in New Jersey. The parties' briefs disagree as to when GMAC moved its offices to Illinois, GMAC stating February
4, 2002 (Dkt. No. 21 at pg. 7), Canyonside saying it was in early
2003. (Dkt. No. 16 at pg. 5).
GMAC alleges that upon auditing Canyonside's books and records,
it determined that Canyonside owed GMAC an additional $86,230.21
due to under reporting by Canyonside. (Dkt. No. 8 at ¶ 15-17).
GMAC alleges that Canyonside abandoned its contract instead of
paying GMAC so the total sum now due to GMAC is $132,906.11.
(Id. at ¶ 23).
Canyonside argues for dismissal or transfer to Idaho because it
is an Idaho business run by Idaho residents who have never
engaged in any type of contact with Illinois. It states that it
has no assets, property or bank accounts in Illinois, that all
communications creating the franchise agreement occurred between
Idaho and New Jersey, its owners and employees never traveled to
Illinois in connection with the franchise agreement, that no
payments under the agreements have ever been sent to Illinois,
all reports were created in Idaho, the audit that resulted in the
alleged under reporting of fees occurred in Idaho and it has
never sent any emails or made any telephone calls to Illinois.
(Dkt. No. 16 at pg. 6-7).
GMAC counters that this is an Illinois case because Canyonside
is attempting to break its contract with an Illinois company.
According to GMAC, Canyonside has had a series of on going
communications with GMAC when GMAC was located in Illinois
including financial reports and requests for reimbursements.
GMAC's position is that Canyonside has been doing business with
an Illinois company over an extended period of time, so
Canyonside should not be surprised when it is sued in an Illinois
court. STANDARD OF REVIEW
GMAC, as the plaintiff, "bears the burden of demonstrating the
existence of personal jurisdiction" over Canyonside. Waldock ex
rel. John H. Waldock Trust v. M.J. Select Global, Ltd., No. 03 C
5293, 2004 WL 2278549, at *2 (N.D. Ill. Oct. 7, 2004) (citing
Jennings v. AC Hydraulic A/S, 383 F.3d 546, 549 (7th Cir.
2004); RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276
(7th Cir. 1997)). "A plaintiff need only make a prima facie
showing that jurisdiction over a defendant is proper." 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 Michael J.
Neuman & Assoc., Ltd. v. Florabelle Flowers, Inc., 15 F.3d 721,
724-25 (7th Cir. 1994)). "The court may receive and consider
affidavits from both parties" on the question of jurisdiction.
Interlease Aviation Investors II v. Vanguard Airlines, Inc.,
254 F. Supp. 2d 1028, 1031 (N.D. Ill. 2003) (citing Greenberg v.
Miami Children's Hosp. Research Inst., Inc.,
208 F. Supp. 2d 918, 922 (N.D. Ill. 2002)). The "court must also resolve all
factual disputes in the plaintiff's favor and accept as true all
uncontroverted allegations made by both plaintiffs and
defendants." Softee Mfg., LLC v. Mazner, No. 03 C 3367, 2003 WL
23521295, at *2 (N.D. Ill. Dec. 18, 2003) (citing Saylor v.
Dyniewski, 836 F.2d 341, 342 (7th Cir. 1988); Turnock v. Cope,
816 F.2d 332, 333 (7th Cir. 1987); Allman v. McGann, No. 02 C
7442, 2003 WL 1811531, at *2 (N.D. Ill. Apr. 4, 2003)).
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). "An Illinois state court has personal jurisdiction when the Illinois long-arm
statute, the Illinois state constitution and the due process
clause of the federal constitution authorize it." Joy v. Hay
Group, Inc., No. 02 C 4989, 2003 WL 22118930, at *3 (N.D. Ill.
Sept. 11, 2003) (citing Central States, Southeast and Southwest
Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934,
939 (7th Cir. 2000); Quantum Color Graphics, LLC v. Fan Ass'n
Event Photo GmhH, 185 F. Supp. 2d 897, 902 (N.D. Ill. 2002);
Jones v. Sabis Educ. Sys., Inc., 52 F. Supp. 2d 868, 883 (N.D.
The "Illinois long-arm statute authorizes personal jurisdiction
to the constitutional limits," so the analysis of the Illinois
long-arm statute collapses into the constitutional analysis.
Mitchell v. Shiffermiller, No. 03 C 4794, 2004 WL 178188, at *2
(N.D. Ill. Jan. 14, 2004) (citations omitted); see
735 ILCS 5/2-209(c) (proving the long-arm statute to assert 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, see Rollins v. Ellwood, 565 N.E.2d 1302,
1316 (Ill. 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." One Point Solutions, Inc. v. Webb et al., No. 04 C
3850, slip op. at 4-5 (N.D. Ill. Jan. 5, 2005) (citing 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 under the federal due process clause
requires that "the defendants must have minimum contacts with the
forum state such that the maintenance of the suit does not offend
`traditional notions of fair play and substantial justice.'"
Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 716 (7th Cir. 2002)
(quoting International Shoe Co. v. Washington, 326 U.S. 310,
316 (1945) (citations omitted)). Minimum contacts sufficient to
support the exercise of personal jurisdiction is established when
the defendants' contacts with the forum demonstrate that the
"defendants purposefully avail 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 "defendants should reasonably
anticipate being haled into court" in the forum state. Id.
(citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286,
Personal jurisdiction can be categorized as either: (1) general
jurisdiction or (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 contacts.'" Wasendorf, No. 04 C
1904, 2004 WL 2872763, at *3 (citing Logan Prod. v. Optibase,
103 F.3d 49, 52 (7th Cir. 1996)). This is a specific jurisdiction
The court agrees with GMAC's analysis on the jurisdiction issue
and holds that there is personal jurisdiction over the Canyonside
defendants. There is substantial evidence presented by GMAC of an
ongoing business relationship between Canyonside and GMAC while
GMAC was located in the Illinois. The exhibits included in GMAC's
response of April 12, 2005 demonstrates that Canyonside was
purposefully availing itself of the privilege of doing business
in Illinois during 2003 and 2004. (Dkt. No. 21). Canyonside
submitted financial reports and requests for financial
reimbursements based on those financial reports to GMAC in
Illinois. It also sent letters to GMAC in Illinois discussing issues that it
had with its business relationship with GMAC and sought support
from GMAC in an effort to improve the franchisor/franchisee
relationship with GMAC.
The court also agrees with GMAC that the most significant
factual event bearing on the question of jurisdiction is the
alleged breach of contract by GMAC. The alleged breach of
contract occurred when Canyonside sent its letter repudiating its
franchise agreement in February 2004. That letter, like other
letters written by Canyonside to GMAC during the 2003-2004
period, were addressed to GMAC's office in Oak Brook, Illinois.
During this period, Canyonside was aware that it was doing
business with a company located in Illinois because that was the
address that Canyonside was placing on its letters to GMAC.
The fact that Canyonside has never done business in Illinois,
has no business presence in Illinois or has never been physically
present in Illinois addresses the question of whether or not the
court has general jurisdiction over Canyonside. GMAC, however, is
attempting to assert specific jurisdiction, not general
jurisdiction, over Canyonside. In a specific jurisdiction case,
the court must look to the nature of the alleged breach, in this
case the alleged breach of the 1999 franchise agreement which
allowed Canyonside to operate GMAC franchises in Idaho. The
breach of contract did not occur, as Canyonside suggested, by
Canyonside's alleged under reporting of franchise revenue and
non-payments to GMAC. The breach occurred when Canyonside sent
the February 2004 letter repudiating the franchise agreement to
GMAC. That event occurred while GMAC was located in Illinois.
There is also personal jurisdiction over the individual
defendants since their liability is dependent on the actions of
the corporation. This appears to be a closely-held corporation
where the individual defendants are carrying out the activities on
behalf of the corporation. Therefore, if the court has
jurisdiction over the corporation, it must also have jurisdiction
over the individual defendants.
Canyonside carried on a business relationship with GMAC, a
corporation located in Illinois, for a two year period.
Canyonside sent communications and financial reports and sought
franchise service support and financial compensation that it
though it was owed under the franchise agreement. GMAC was
located in Illinois during this activity. The breach of contract,
caused by the sending of February 2004 repudiation of the
franchise agreement, occurred through a letter sent to Illinois.
Canyonside purposefully availed itself of the privilege of
conducting a business relationship in Illinois and it could
reasonably anticipate being sued in an Illinois court when that
1. Dismissal for Improper Venue
Canyonside also seeks dismissal due to improper venue pursuant
to Rule 12(b)(3). It argues that the substantial portion of the
events, such as the alleged non-payment of the franchise fee, the
ceasing of the operation of the franchise and the alleged under
reporting of the franchise income, occurred in Idaho, not
GMAC may bring its suit before this court if "a substantial
part of the events or omissions giving rise to the claim
occurred" in this judicial district. 28 U.S.C. § 1391(b). As
discussed above, GMAC is bringing a claim for an alleged breach
of contract. The breach of contract allegedly occurred when
Canyonside sent a letter to GMAC in Illinois repudiating the
franchise agreement between the two parties in February 2004. The
repudiation occurred upon receipt of the letter by GMAC at its offices in Oak Brook, Illinois.
There are substantial events related to this case that occurred
in Idaho, namely the audit that identified the alleged under
reporting of franchise income, the preparation of the financial
reports by Canyonside and the decision by Canyonside not to pay
the franchise fees demanded by GMAC. These events, although
related to the breach of contract claim, are not the prime event
that gave rise to the claim. The primary event creating the
breach of contract claim is the February 2004 repudiation letter.
Venue is proper in this judicial district.
2. Transfer of Venue
Canyonside seeks a transfer of this case to the United States
District Court for the District of Idaho. "For the convenience of
the parties and witnesses, in the interest of justice, a district
court may transfer any civil action to any other district or
division where it might have been brought." 28 U.S.C. § 1404.
"[T]ransfer is appropriate if: (1) venue is proper in both the
transferor and transferee district; (2) the transfer is
consistent with the convenience of the parties and witnesses; and
(3) the transfer is in the interest of justice." Mercantile
Capital Partners v. Agenzia Sports, Inc., No. 04 C 5571, 2005 WL
351926, at *5 (N.D. Ill. Feb. 10, 2005) (citing Heller Fin.,
Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1293 (7th Cir. 1989);
Rouse Woodstock, Inc. v. Sur. Fed. Sav. & Loan Ass'n,
630 F. Supp. 1004, 1007-08 (N.D. Ill. 1986)). Although the primary event
creating the breach of contract claim is the repudiation letter,
venue would be proper in either this district or in the District
of Idaho, so the court will consider the convenience of the
parties and witnesses and the interests of justice.
In evaluating the convenience to the parties and witnesses the
court considers "(1) the plaintiff's choice of forum, (2) the
site of the material events; (3) the access to evidence; (4) the convenience of the witnesses and (5) the convenience to the
parties of litigating in each forum." Id. at *6 (citing
Brandon Apparel Group v. Quitman Mfr. Co. Inc.,
42 F. Supp. 2d 821, 833 (N.D. Ill. 1999); College Craft Cos. Ltd. v. Perry,
889 F. Supp. 1052, 1054 (N.D. Ill. 1995)). Neither district is
clearly a better forum under this analysis. Both parties will
have witnesses and evidence in their home state because their
business records and associated employee custodians are located
in their home state. The audit that identified the alleged under
reporting of franchise income did occur in Idaho. However, as
this court noted above, the key event is not the audit, but
instead is the repudiation of the franchise contract through the
February 2004 letter. Since neither state is clearly more
convenient to the parties and witnesses, the court will not
interfere with the plaintiff's chosen forum.
The interests of justice also do not suggest that this case
should be transferred to the District of Idaho. Although the
parties have presented various statistical information as to both
court's docket and the speed that each court disposes of cases,
neither court is clearly superior in terms of the speed in which
it addresses cases. There is also no legal issue present in this
case that requires the transfer to a court with specialized
experience because this case involves a straight forward breach
of contract claim.
For the reasons set forth above, defendant Canyonside's motion
to dismiss for lack of personal jurisdiction or improper venue,
or in the alternative to transfer venue, is denied. Defendant
Canyonside is ordered to file an answer to plaintiff GMAC's
amended complaint on or before June 30, 2005. Counsel are advised
to hold a Rule 26(f) conference and file a jointly completed Form
35 signed by counsel for each party on or before July 14, 2005.
This case is set for a report on status and entry of a scheduling order at 9:00am on
July 19, 2005.