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Anderson v. AON Corp.

June 16, 2008

ROBERT M. ANDERSON, PLAINTIFF,
v.
AON CORPORATION, AON RISK SERVICES OF SOUTHERN CALIFORNIA, AND PETER ARKLEY, DEFENDANTS.



The opinion of the court was delivered by: Blanche M. Manning United States District Judge

MEMORANDUM AND ORDER

Plaintiff Robert Anderson (a California citizen) contends that Aon Corporation (a Delaware corporation with its principal place of business in Illinois) made false and misleading statements that induced him to hold rather than sell his Aon stock. He also contends that defendants Aon Risk Services, Inc. of Southern California and Peter Arkley, the President and Chief Executive Officer of one of Aon Risk Service's business units, are liable for these alleged misrepresentations. Specifically, in the most recent version of his complaint, Mr. Anderson asserts a "holder's action" based on a theory of common law fraud (Count I), a claim based on § 17200 of California's Business & Professions Code (Count II), and claims for breach of fiduciary duty (Count III) and civil conspiracy (Count IV). The defendants' motion to dismiss is before the court. For the following reasons, the court finds that Illinois law applies and grants the defendants' motion to dismiss but will allow Mr. Anderson to replead.

I. Background

A. Procedural Posture*fn1

1. The 2003 Complaint

In September of 2003, Mr. Anderson filed suit against Aon, Patrick Ryan (Aon's principal executive officer), and Harvey Medvin (Aon's principal financial officer) in the California Superior Court for the County of Orange based on federal securities fraud and common law fraud theories. In this complaint, Mr. Anderson claimed, among other things, that Aon's public filings and statements contained misrepresentations that caused him to hold onto the corporation's stock rather than sell it for a profit.

The defendants removed the state court action to the United States District Court for the Central District of California on the basis of both diversity and federal question jurisdiction. Next, they filed a motion to dismiss or transfer the case to the Northern District of Illinois, arguing that the California district court lacked personal jurisdiction over Ryan and Medvin (both of whom are Illinois citizens) and that venue was improper. In response, Mr. Anderson filed an amended complaint that dropped Messrs. Ryan and Medvin.

After Aon renewed its motion to transfer or dismiss, the California district court issued a tentative ruling expressing its intention to transfer the case to Illinois. This tentative ruling indicated -- but did not expressly hold -- that Illinois law likely governed the dispute based on California's "governmental interest" choice-of-law test. Before the California court could obtain a draft order from the parties and issue a formal transfer order, Mr. Anderson voluntarily dismissed his case without prejudice.

2. The 2005 Complaint

On June 15, 2005, Mr. Anderson filed a second complaint in the California Superior Court for the County of Orange. This complaint named Aon, as well as Aon Risk Services, Inc. of Southern California ("ARS"), and Peter Arkley (collectively, "the California defendants"), as defendants. ARS is a California-based Aon subsidiary, and Mr. Arkley is President and Chief Executive Officer of an ARS business unit called Aon Construction Services Group ("CSG"). This complaint repeated Mr. Anderson's contention that he had been defrauded into holding Aon stock, and included counts based on state law common law fraud, unfair competition, breach of fiduciary duty, and civil conspiracy, as well as federal RICO violations.

The defendants removed this action to the United States District Court for the Central District of California based on federal question jurisdiction. Their notice of removal also argued that the California defendants had been fraudulently joined and thus raised diversity jurisdiction as an additional basis for removal. In response, Mr. Anderson voluntarily dismissed his RICO claim and filed a motion for remand, claiming that the parties were not diverse and that the court could not exercise federal question jurisdiction.

The California district court denied the motion to remand. In support, and relying on Ninth Circuit law, it held that jurisdiction must be evaluated as of the time of removal and that it had the discretion to retain jurisdiction over the state law claims even after Mr. Anderson's dismissal of his RICO claims. It then decided to retain jurisdiction because it had already invested a considerable amount of time into the first removed case. It also indicated, but did not expressly hold, that Mr. Anderson had fraudulently joined the California defendants since the complaint did not appear to state a colorable claim against them.

3. The California District Court's Transfer of this Case to this District

After the California district court denied Mr. Anderson's motion to remand, the defendants renewed their motion to transfer or dismiss. The California district court granted the motion to transfer and thus did not reach the merits of the motion to dismiss. In issuing this ruling, the court applied California's governmental interest test and held that "under California choice of law rules, courts in fraud cases apply the law of the jurisdiction where the misrepresentations were made." See Order Granting Transfer at 7 (attached to the defendants' memorandum as Ex. A). It then found that "[n]one of the statements and or omissions that are the subject of the action were discussed, reviewed or approved ...


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