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Vasilj v. Duzich

May 13, 2008

ILIJA VASILJ, PLAINTIFF,
v.
MARION B. DUZICH, DIANE DUZICH, G. CHARLES HATCH, AND WATERMAN INTERNATIONAL, INC., DEFENDANTS.



The opinion of the court was delivered by: Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

Plaintiff Ilija Vasilj filed suit against Defendants Marian B. Duzich, Diane Duzich, G. Charles Hatch, and Waterman International, Inc. ("Waterman") over an alleged scheme to defraud Vasilj out of his proper stake in Waterman. Defendants now move for dismissal for lack of personal jurisdiction and for improper venue under Rules 12(b)(2) and 12(b)(3) of the Federal Rules of Civil Procedure. In the alternative, Defendants seek a transfer of venue to the United States District Court for the Southern District of Texas, pursuant to 28 U.S.C. § 1404. For the following reasons, Defendants' motion to dismiss for lack of personal jurisdiction is granted with regard to Defendant Hatch, and the remainder of the motion is denied.

I. Factual Background

Ilija Vasilj and Marion Duzich first met in 1998 at an event in Virginia. At this meeting, they discussed the idea of forming an investment partnership in the tourist and hospitality industry in Croatia. Upon returning home to Illinois, Vasilj received regular follow-up calls from Duzich, which expanded the next year to include calls from Diane Duzich, Marion's wife, and Charles Hatch, the Duzichs' business associate. In addition to seeking out Vasilj's financial contribution, these calls sought to make use of Vasilj's political and business contacts within Croatia to find suitable investment opportunities. In February 1999, Marion and Diane Duzich visited Vasilj at his home in Skokie, Illinois, where they discussed the creation of Waterman and Vasilj's investment in the company. During this visit, Vasilj agreed to invest up to $1 million if the right opportunity arose. Additional discussions took place in Chicago in April and October 1999, with Charles Hatch joining the Duzichs on the latter visit. Together, Vasilj and the Duzichs also traveled to Croatia to look at potential investments. During this time, Defendants continued to stay in touch Vasilj by phone, fax, and letter.

In late May 2000, Waterman invested $3 million to purchase a majority of the shares of Svpetrvs Hoteli, dd, a publicly traded Croatian company which owns and operates the Svpetrvs Hotel, a resort hotel on the island of Braè, Croatia. Vasilj invested $600,000 in Waterman, giving him a twenty percent stake in the company. The hotel ran into some financial troubles during the next year, however, which resulted in frequent calls and written communications from the Defendants to Vasilj in Illinois requesting additional financial contributions. In September 2001, Vasilj agreed to an additional $600,000 investment, and in exchange his stake in Waterman would be increased to thirty-three percent. Much of these investments were not made in the form of a lump-sum payment to Waterman; rather, Vasilj made payments on behalf of the hotel, such as to creditors, which would be considered additional investment. By December 2001, a dispute had already arisen between Vasilj and Defendants regarding Vasilj's proper stake in Waterman based on his financial contributions. That month, the Duzichs attended a meeting in Skokie, Illinois with Vasilj to discuss a number of different issues related to Waterman, including the dispute with Vasilj, the terms of his investment, bringing in additional investors, and the hotel's financial situation. To this day, Vasilj claims that he has not been awarded a proper interest in Waterman proportionate to his actual financial contributions, while also complaining that in the interim, the Duzichs, using their majority stake in Waterman, voted to grant themselves and others additional shares in the company, diluting Vasilj's ownership.

Ilija Vasilj is a resident of the state of Illinois. Marion Duzich, Diane Duzich, and Charles Hatch are all residents of the state of Texas. Waterman is a Texas corporation with its principal place of business in Galveston, Texas.

II. Personal Jurisdiction

The plaintiff has the burden of demonstrating the existence of personal jurisdiction over the defendant. See RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). In order to defeat a defendant's motion to dismiss for lack of personal jurisdiction, the plaintiff need only make a prima facie showing that personal jurisdiction exists. Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir. 2002). In reviewing the complaint and affidavits, I must read the complaint liberally and draw all reasonable inferences in favor of the plaintiff. Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999). Furthermore, when faced with conflicting evidence, I must resolve factual disputes in the plaintiff's favor. RAR, 107 F.3d at 1275.

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); RAR, 107 F.3d at 1276--77. Due process requires that a defendant have "certain minimum contacts with [the state] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). 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 (1980).

A. Minimum Contacts

Minimum contacts with a particular forum can establish either general or specific jurisdiction. General jurisdiction for suits neither arising out of nor related to the defendant's contacts is permitted only where the defendant has "continuous and systematic general business contacts" with the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984). Specific jurisdiction exists when "the defendant has a lesser degree of contact with the state, but the litigation arises out of or is related to those contacts." Logan Prods. v. Optibase, 103 F.3d 49, 52 (7th Cir. 1996). Plaintiff argues that this court has both general jurisdiction over Defendants, through the Duzichs' seafood business, as well as specific jurisdiction, through Defendants' contacts with Plaintiff in Illinois related to their business arrangement. Because the record is incomplete with regard to the Duzichs' seafood business at this time, I focus here on the question of whether I can assert specific jurisdiction over Defendants.

Defendants have established sufficient minimum contacts with Illinois such that jurisdiction by this court comports with due process. Under the Illinois long-arm statute, jurisdiction is proper when an injury transpires in Illinois, even if all other conduct takes place elsewhere. Interlease Aviation Investors II (Aloha) LLC v. Vanguard Airlines, Inc., 262 F. Supp. 2d 898, 910 (N.D. Ill. 2003); Celozzi v. Boot, No. 00 C 3285, 2000 WL 1141568, at *3 (N.D. Ill. Aug. 11, 2000). Where the injury is economic, the plaintiff must additionally demonstrate intent to affect an Illinois interest. Celozzi, 2000 WL 1141568, at *3 (citing Arthur Young & Co. v. Bremer, 554 N.E.2d 671, 676 (Ill. App. Ct. 1990). The Seventh Circuit has determined that communications by a nonresident defendant, coupled with an intent to further her scheme to defraud an Illinois corporation, was a sufficient basis for jurisdiction, and that making such communications as part of a scheme to defraud an Illinois resident clearly evidenced an intent to affect an Illinois interest. FMC Corp. v. Varonos, 892 F.2d 1308, 1313 (7th Cir. 1990). In this case, Vasilj has alleged an economic injury in Illinois as a result of Defendants' fraudulent conduct, and Defendants are therefore subject to the reach of Illinois' long-arm statute.

Furthermore, soon after Vasilj's first meeting with Defendant Marion Duzich in 1998 in Virginia, a steady stream of communication flowed from Defendants to Vasilj here in Illinois. First Defendants contacted Vasilj to discuss bringing him in as a partner in pursuing investment opportunities in the tourist and hospitality industry in Croatia. Later they contacted Vasilj to maintain the business partnership that resulted from his investment. Also, Defendants' presence in the forum state "while conducting business relevant to the dispute" is a significant factor in determining whether the exercise of personal jurisdiction is appropriate. Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d 1209, 1213--14 (7th Cir. 1984). For example, visits to a forum state in order to negotiate with a plaintiff are "significant in the formation of the contract" and can constitute sufficient contact so as to satisfy due process. See Wis. Elec. Mfg. Co. v. Pennant Prods., Inc., 619 F.2d 676, 677--78 (7th Cir. 1980). In this case, Defendants Marion and Diane Duzich traveled to Illinois to meet with Vasilj on three separate occasions between February 1999 and October 1999 to discuss investment opportunities in Croatia and the extent of Vasilj's investment in a joint venture. Defendant Hatch joined the Duzichs on the October 1999 trip. Then, following the acquisition of the Svpetrvs Hotel, the Duzichs again came to Illinois to meet with Vasilj in December 2001 to discuss, inter alia, the terms of his investment, the future of Waterman and the Svpetrvs Hotel, the hotel's financial problems, and the dispute that is now at the center of this lawsuit. These visits to the forum state were significant in the formation of the business relationship between Defendants and Vasilj. As such, those visits satisfy the due process requirement that Defendants purposefully availed themselves of the privilege of conducting those activities here, and thereby invoked the benefits of Illinois laws. Accordingly, it is presumptively not unreasonable to require Defendants to submit to the burdens of litigation in Illinois as well. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985).

In addition to these visits, all Defendants regularly communicated with Vasilj via telephone, facsimile, and letter. "Illinois courts have held that a defendant that initiates phone and mail communications in furtherance of a business agreement has sufficient minimum contacts, regardless of whether the defendant traveled to Illinois." Wasendorf v. DBH Brokerhaus AG, No. 04 C 1904, 2004 WL 2872763, at *4 (N.D. Ill. Dec. 13, 2004) (citing Kalata v. Healy, 728 N.E.2d 648, 654--55 (Ill. App. Ct. 2000)). Thus, "[w]hen a defendant is responsible for initiating several significant links with the forum plaintiff leading to the transaction at issue, this is sufficient to satisfy the requirements of due process." Reid v. GSI Lumonics, Inc., No. 01 C 927, 2002 WL 318288, at *4 (N.D. Ill. Feb. 25, 2002) (citing Madison Consulting Group v. South Carolina, 752 F.2d 1193, 1203 (7th Cir. 1985)). Vasilj estimates that he received hundreds of phone calls from Defendants between 1998 and 2002, sometimes daily, sometimes multiple times per day. He also received dozens of written communications, usually by fax. Early on, these communications sought Vasilj's partnership and investment money; later, these communications dealt with Waterman, the hotel, and requests for additional infusions of cash by Vasilj into the failing business. Further, Charles Hatch played a lead role in negotiating and drafting the promissory note that he eventually forwarded to ...


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