UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
April 20, 2006
DICK CORPORATION, A PENNSYLVANIA CORPORATION, PLAINTIFF,
SNC-LAVALIN CONSTRUCTORS, INC., A DELAWARE CORPORATION AND PCL INDUSTRIAL CONSTRUCTION, INC., A COLORADO CORPORATION, JOHN GILLIS AND MICHAEL RANZ, DEFENDANTS.
The opinion of the court was delivered by: Marvin E. Aspen, District Judge
MEMORANDUM ORDER AND OPINION
Plaintiff Dick Corporation's Fourth Amended Complaint against Defendants SNC-Lavalin Constructors, Inc., PCL Industrial Construction, Inc., John Gillis, and Michael Ranz, alleges copyright infringement, tortious interference with prospective business relations, tortious interference with contractual relations, conversion, and misappropriation of trade secrets. Presently before us is defendants Gillis' and Ranz's ("Defendants") motion to dismiss for lack of personal jurisdiction and for failure to state a claim upon which relief can be granted. As set forth below, we find that the fiduciary shield doctrine prevents us from exercising personal jurisdiction over Defendants.
Plaintiff Dick Corporation ("Dick") is a company registered and organized under the laws of Pennsylvania with its principal place of business in Large, Pennsylvania. (Fourth Am. Compl. ¶ 1.) Around May 12, 1999, Dick entered into a joint venture with the National Energy Production Corporation ("NEPCO"), a Delaware corporation, to serve as the general engineering, procurement and construction contractor for the Kendall County Generation Facility ("Kendall"), a power plant located in Minooka, Illinois. (Id. ¶¶ 2, 12-13.) "As part of the [j]oint [v]enture, Dick and NEPCO created certain engineering designs, drawings, design data, calculations, specifications, intellectual property and other related documents [("Drawings")] ... [and] certain scheduling information, cost projections, cost information, bidding information and other financial reports ... [("Data")] for the purpose of constructing the Kendall facility." (Id. ¶¶ 18-19.) The Dick/NEPCO joint venture agreement included exclusivity provisions, such as "all documents produced for or by the [j]oint [v]enture shall be owned by the [j]oint [v]enture ... [N]either party shall use the documents for other projects without the prior written consent of the others." (Id. ¶ 17.) The agreement also prohibited either party from transferring or assigning any joint venture work product without prior written consent. (Id. ¶ 16.)
On December 21, 2000, NEPCO executed a contract with LSP-Nelson to perform engineering, procurement, and construction services for the Nelson facility ("Nelson"), a power plant located in Dixon, Illinois. (Id. ¶¶ 12, 21.) NEPCO created a joint venture with PCL Industrial Construction, Incorporated ("PCL"), a Colorado corporation, regarding performance of the Nelson contract on February 28, 2002, at which time LSP-Nelson and PCL entered into an "Amended and Restated Turnkey Engineering, Procurement and Construction Agreement dated as of December 21, 2000 ("Restated Nelson Contract")." (Id. ¶ 22.) The Restated Nelson Contract provides that "major power block design, equipment layout, building general arrangement, condensate/feedwater/steam piping design, and electrical design for the [Nelson] [f]acility are substantially similar to that for the Kendall Project." (Id. ¶ 24.) In the spring of 2002, SNC Lavalin Constructors, Inc. ("SNC"), SNC Lavalin's subsidiary, "entered into an arrangement to perform construction-related services at the Nelson [f]acility." (Id. ¶ 23.)
Dick filed a five count complaint in the Northern District of Illinois alleging that SNC, PCL, John Gillis, and Michael Ranz improperly and without consent copied, distributed, misappropriated, used, and created derivative works from the joint venture Drawings and Data to construct Nelson. (Id. ¶ 29.) Gillis, former President of NEPCO and current Chief Operating Officer at SNC, and Ranz, former Vice President of NEPCO and current Senior Vice President of SNC - both residents of Redmond, Washington - moved to dismiss the charges against them claiming a lack of personal jurisdiction. (Mot. to Dismissat 5,6.) Dick counters that both individual defendants established minimum contacts with Illinois since they each 20-31, 34-41; Pl. Resp. to Mot. to Dismiss at 9-19.)
STANDARD OF REVIEW
In a motion to dismiss under Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden of showing a prima facie case of personal jurisdiction. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003); see RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir.1997); Wasendorf v. DBH Brokerhaus AG, No. 04 C 1904, 2004 WL 2872763, at *2 (N.D. Ill. Dec. 13, 2004). In determining whether we have personal jurisdiction, we may receive and consider affidavits and other materials submitted by the parties.
See Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987), superceded by statute on other grounds as stated in FMC Corp. v. Varonos, 892 F.2d 1308, 1310 (7th Cir. 1990). For purposes of a motion to dismiss based on personal jurisdiction, we "accept all allegations of the complaint as true except those controverted by defendants' affidavits." Northwestern Corp. v. Gabriel Mfg. Co., No. 96 C 2004, 1996 WL 73622, at *2 (N.D. Ill. Feb. 6, 1996). Where the defendant submits an affidavit contesting personal jurisdiction, "the plaintiff must go beyond the pleadings and submit affirmative evidence supporting the existence of jurisdiction." Purdue, 338 F.3d at 783 (emphasis added). We resolve all factual disputes in the record in plaintiff's favor, but we may accept as true those facts presented by defendant that remain uncontested. Id.; RAR, 107 F.3d at 1275.
I. Personal Jurisdiction
In a case based on diversity of citizenship, a federal court sitting in Illinois may exercise personal jurisdiction over a nonresident defendant only to the extent that an Illinois court could do so. Klump v. Duffus, 71 F.3d 1368, 1371 (7th Cir.1995); see Michael J. Neuman & Assoc., Ltd. v. Florabelle Flowers, Inc., 15 F.3d 721, 724 (7th Cir.1994). Therefore, to survive a motion to dismiss the plaintiff must make a prima facie showing that exercising jurisdiction over a nonresident party complies with the Illinois long-arm statute, the Illinois Constitution, and federal constitutional due process requirements. See Cent. States, Southeast & Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 939 (7th Cir. 2000); see also RAR, 107 F.3d at 1276.
The Illinois long-arm statute permits Illinois courts to exercise jurisdiction over a defendant where the cause of action arises from the transaction of business, commission of a tort, "making or performance of any contract or promise substantially connected with this State[,]" or any basis permitted by the state and federal Constitutions. 735 Ill. Comp. Stat. 5/2-209 (a) (1, 2, 7), (c); Cent. States, 230 F.3d at 940; RAR, 107 F.3d at 1276. The record demonstrates that Gillis and Ranz each established minimum contacts with Illinois subjecting themselves to this court's jurisdiction. For example, Gillis executed and Ranz was involved with negotiating and overseeing the two contracts at issue, which were to be performed in Illinois.*fn1
Gillis' and Ranz's lack of material presence in Illinois does not preclude finding that they established the requisite minimum contacts because the Supreme Court has held that an individual who never physically enters the forum state could nonetheless be subject to its jurisdiction if he purposefully directs conduct towards residents of the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472-73, 105 S.Ct. 2174 (1985) (finding personal jurisdiction in Florida where the defendant knowingly engaged in a business relationship with the plaintiff, a Florida company, even though he never entered Florida to conduct business); see also Calder v. Jones, 465 U.S. 783, 788, 104 S.Ct. 1482 (1984) (finding that despite the lack of physical contacts with the forum state, an editor and journalist of a Florida-based tabloid periodical were subject to personal jurisdiction in California in an action arising out of an allegedly defamatory article regarding a California resident). Gillis and Ranz purposefully directed their actions toward Illinois by entering into contracts that called for performance in the state and by participating in and overseeing performance in Illinois.*fn2
Defendants argue that the above described principle, coined "the effects doctrine," does not apply because plaintiff is not an Illinois resident. We disagree. In applying the effects doctrine, the Seventh Circuit focuses on the location of the alleged injury rather than the plaintiff's residency. See Janmark, Inc. v. Reidy, 132 F.3d 1200, 1202 (7th Cir. 1997) ("[T]he state in which the injury (and therefore the tort) occurs may require the wrongdoer to answer for its deeds even if events were put in train outside its borders."); see also Interlease Aviation Investors II (ALOHA) L.L.C. v. Vanguard Airlines, Inc., 262 F. Supp. 2d 898, 910 (N.D. Ill. 2003) (quoting and applying Janmark); see also Spank! Music & Sound Design, Inc. v. Hanke, No. 04 C 6760, 2005 WL 300390,at *3 (N.D. Ill. Feb. 7, 2005) ("The Seventh Circuit has interpreted the effects doctrine broadly to permit the state in which the victim of a tort suffers injury to entertain the suit, even if all other relevant conduct occurred outside the state."). Discussing its reasoning in Janmark, the Seventh Circuit noted that if a California corporation injured an Illinois corporation in New Jersey, New Jersey would retain jurisdiction despite the fact that the victim would suffer financial consequences in Illinois. Id. at 1202. Similarly, a Pennsylvania corporation doing business in Illinois can be injured in Illinois, thus allowing Illinois to exercise jurisdiction upon the wrongdoers. Plaintiff allegedly suffered harm in Illinois, inter alia, because the Nelson power plant - located in Illinois - was built using Kendall's Drawings and Data in violation of the agreement with NEPCO, which prohibited transfer, distribution, or use of intellectual property created by the Dick/NEPCO joint venture for Kendall.*fn3
Gillis and Ranz "purposefully availed [themselves] of the privilege of conducting activities within [Illinois], thus invoking the protections and benefits of its laws." See Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228 (1958). Dick's claims arose from and relate to Gillis' and Ranz's contacts with Illinois, justifying the exercise of specific jurisdiction.*fn4
The deposition testimony and unrefuted allegations in the complaint show that Gillis and Ranz were substantially involved (in their official capacity) with the execution and performance of the two contracts to build power plants in Illinois. Consequently, the defendants "should [have] reasonably anticipate[d] being haled into court" in Illinois. See Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 716 (7th Cir. 2002) (quoting Burger King Corp., 471 U.S. at 474 (internal citations omitted)).
Nonetheless, exercising jurisdiction over Gillis and Ranz would offend traditional notions of fair play and substantial justice under Illinois law. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158 (1945); see also Rollins v. Ellwood, 141 Ill.2d 244, 275, 565 N.E.2d 1302, 1316 (Ill. 1990) ("[J]urisdiction is to be asserted only when it is fair, just, and reasonable to require a non-resident defendant to defend an action in Illinois, considering the quality and nature of the defendant's acts which occur in Illinois or which affect interests located in Illinois."). Generally, "[t]he most important factors relevant to this inquiry are the interests of the states involved and the relative convenience of litigating in each state."*fn5 Spank!, 2005 WL 300390, at *3. However, if an individual has contact with a state only by virtue of his acts as a fiduciary of a corporation, such acts may not form the basis for the exercise of personal jurisdiction in Illinois. Brujis v. Shaw, 876 F. Supp. 975, 978 (N.D. Ill. 1995) (citation omitted). This "fiduciary shield" gives effect to the concept of limited liability in corporations.
When assessing applicability of the equitable doctrine, courts consider the fiduciary's discretionary actions, personal interest, and whether the fiduciary is merely the corporation's alter-ego. See Interlease Aviation, 262 F. Supp. 2d at 912; TruServe Corp. v. St. Yards, Inc., No. 99 C 6806, 2001 WL 743642, at *6 (N.D. Ill. June 29, 2001). There is no clear consensus in Illinois over the significance of each factor when applying the doctrine to high ranking corporate officials.*fn6 Although, the most recent string of cases have allowed high ranking officers with discretionary authority to benefit from the fiduciary shield doctrine so long as they did not have an appreciable ownership interest in the company.*fn7
Gillis and Ranz were (and still are) high ranking officials of NEPCO/SNC who established contacts with Illinois in their roles as corporate fiduciaries. In their official capacities, defendants were endowed with discretionary authority, and in fact used their discretion to enter into, execute, and monitor contracts*fn8 calling for performance in Illinois. See n.1, supra. However, the evidence shows that Gillis' involvement with the contracts at issue was perfunctory: he executed the contracts without close inspection, he could not recall any involvement in soliciting, negotiating, or performing the contracts, and he never copied or distributed (or directed anyone else to do so) the Drawings and Data. (Gillis Aff. ¶¶ 11-12; Gillis Dep. at 15-21, 23-24, 30.) Ranz took a more active role in the Illinois ventures: he engaged in the negotiating process for Nelson and visited Illinois on three occasions related to the Kendall project. (Ranz Dep. at 40.) The disparity between the defendants' involvement with Kendall and Nelson is inconsequential since "[t]he determinative factor is the individual's status as a shareholder[.]" Plastic Film Corp., 128 F. Supp. 2d at 1147.
Gillis and Ranz received stock options in Enron, NEPCO's parent company, and owned Enron stock through their respective 401-K programs. (Gillis Dep. at 34-35; Ranz Dep. at 107-08.) After 2002, Gillis also held stock options for shares in SNC-Lavalin, Inc., SNC's parent company. (Gillis Dep. 36-37.) The evidence, however, does not suggest that the issuance of stock options was related to the corporate officials' performance or company profitability. (Ranz Dep. at 107-08.) Moreover, most courts infer personal interest only where corporate officers have a direct, meaningful financial stake in the company.*fn9 Dick does not allege that Gillis or Ranz owned a direct interest in NEPCO and/or SNC, nor does it allege that either defendant held an appreciable interest in their employers' parent companies. Defendants' stock options and 401-K shares do not evince the kind of meaningful, direct financial stake and/or personal interest contemplated by Benda, Plastic Film Corp, and Continental Casualty Company.*fn10
Additionally, the Fourth Amended Complaint contains no allegations that Gillis and/or Ranz acted "to advance personal rather than employer interests[,]" nor do the pleadings or the evidence support such an inference. See Benda, 2004 WL 1375361, at *2 (quotation omitted). The allegations in the pleadings, the affidavits, and the deposition testimony all indicate that Gillis's and Ranz's actions were "a product of, and [were] motivated by, [their] employment situation and not [their] personal interest, ...[Thus] it would be unfair to use [such] conduct to assert personal jurisdiction over [them] as  individual[s]." Cons. Benefit Svcs., Inc., 2002 WL 31427021, at *2 (quoting Rollins,141 Ill.2d at 280, 565 N.E.2d at 1318). Absent a showing of meaningful, direct personal interest in NEPCO or SNC, barring application of the fiduciary shield would not comport with fair play and substantial justice.*fn11
For the reasons discussed above, defendants' motion to dismiss for lack of personal jurisdiction is granted.*fn12 It is so ordered.
MARVIN E. ASPEN United States District Judge