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Citadel Group Limited v. Washington Regional Medical Center

December 29, 2008

CITADEL GROUP LIMITED, A DELAWARE CORPORATION, PLAINTIFF,
v.
WASHINGTON REGIONAL MEDICAL CENTER, AN ARKANSAS NON-PROFIT CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Judge Marvin E. Aspen

MEMORANDUM ORDER AND OPINION

Plaintiff Citadel Group Limited ("Citadel") filed a complaint in the Circuit Court of Cook County, Illinois against Defendant Washington Regional Medical Center ("WRMC") to recover costs it expended pursuant to its contractual agreement breached by WRMC. (Compl. ¶¶ 6-11.) WRMC removed the case to this court under 28 U.S.C. §§ 1332, 1441, and 1446. (Not. of Removal at 1.) WRMC now moves to dismiss this case for improper venue under Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1391(a). (Mot. at 1.) In the alternative, WRMC moves to transfer the case to the Western District of Arkansas pursuant to 28 U.S.C. § 1404(a). (Mot. at 1-2.) For the reasons set forth below, we deny the motion.

Background

In May 2005, WRMC, an Arkansas corporation with its principal place of business in Arkansas (Compl. ¶ 2) issued Request for Proposals ("RFP"), which sought proposals to develop and lease a medical office building in West Springdale, Arkansas.

(Compl. ¶ 4.) Citadel, a Delaware corporation with its principal place of business in Chicago, Illinois, responded to the RFP and submitted its development proposal on May 13, 2005. (Id.) At the request of WRMC, sent to Citadel in Chicago, Citadel provided additional information to WRMC regarding its proposal. (Id. ¶ 7.) On August 24, 2005, Citadel sent WRMC in Arkansas a proposal letter for a transaction in which Citadel would acquire a ground lease estate from WRMC, finance and construct a new medical office building on the land, and then lease this building back to WRMC. (Id. ¶ 6.) The proposal letter contained a one-paragraph clause entitled Authorization to Proceed ("Authorization"), which would allow Citadel to conduct "Project development" under the terms specified by the agreement. (Id. ¶ 8, Ex. E; Mot., Ex. 1, Hutchison Aff. ¶¶ 12-22.) On September 15, 2005, WRMC's CEO, William Bradley, approved, signed, and returned the signed copy of the proposal letter, containing the Authorization, to Citadel in Chicago. (Compl. ¶ 7, Ex. F; Mot., Ex. 1, Hutchinson Aff. ¶ 13.) In addition, WRMC sent Citadel a significant good faith deposit. (Compl. ¶ 7; Resp., Ex. A ¶ 5.)

In accordance with the Authorization, Citadel prepared for the completion of the transaction by retaining attorneys, accountants, banks, and other professionals. (Compl. ¶ 9.) WRMC was aware of Project development efforts undertaken by Citadel, as it participated in regular conference calls with Citadel and the attorneys and banks hired by Citadel in Illinois. (Id.) Citadel continued Project development until May 2006, when WRMC informed Citadel that it would not complete the transaction. (Id. ¶ 10.) The Authorization requires WRMC to reimburse Citadel for all "legal expenses and other costs associated with Project development, except architectural and engineering fees, whether or not the Project is ultimately developed." (Id. ¶ 8.) Accordingly, Citadel filed suit against WRMC to recover the costs it incurred from Project development, a total of $587,841.94, which it argues was within the terms of the Authorization. (Id. ¶ 11.)

Analysis

I. 12(b)(3) Motion to Dismiss

In ruling on a motion to dismiss under Rule 12(b)(3) for improper venue, we take all allegations in the complaint as true unless contradicted by affidavit, and we may examine facts outside the complaint. Interleave Aviation Investors II (Aloha) LLC v. Vanguard Airlines, Inc., 262 F. Supp. 2d 898, 913 (N.D. Ill. 2003). The plaintiff bears the burden of establishing that venue is proper. See, e.g., Emjayco v. Morgan Stanley & Co., 901 F. Supp. 1397, 1400 (C.D. Ill. 1995). In addition, we must resolve any factual conflicts in the parties' submissions in favor of the plaintiff and draw any reasonable inferences from those facts in the plaintiff's favor. See, e.g., Nagel v. ADM Investor Srvs., Inc., 995 F. Supp. 837, 843 (N.D. Ill. 1998). Moreover, we must take all the allegations in the plaintiff's complaint as true unless they are contradicted by affidavit. Interleave Aviation, 262 F. Supp. 2d at 913.

Federal law dictates the requirements for proper venue. See 28 U.S.C. § 1391(a). For cases, like this, in which diversity serves the basis of jurisdiction, § 1391(a) provides three forums in which venue is proper:

(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.

Id. § 1391(a). WRMC does not reside in Chicago to establish proper venue under § 1391(a)(1). Citadel does not contest this point, and claims instead that venue is proper in this Court pursuant to § 1391(a)(2).

Under § 1391(a)(2), venue is proper in "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred." Id. § 1391(a)(2). "A'substantial part' of the events can occur in more than one place.... The test is not whether a majority of the activities pertaining to the case were performed in a particular district, but whether a substantial portion of the activities giving rise to the claim occurred in the particular district." TruServ Corp. v. Neff, 6 F. Supp. 2d 790, 792 (N.D. Ill. 1998). "Congress included the'substantial' language in section 1391(a)(2)'to preserve the element of fairness so that a defendant is not haled into some remote district having no real relationship to the dispute.'" Mercantile Capital Partners v. Agenzia Sports, Inc. No. 04 C 5571, 2005 WL 351926, at *5 (N.D. Ill. Feb. 10, 2005) (quoting Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 294 (3d Cir. 1994)). Moreover, "[w]hen determining whether the substantial portion requirement is met, [we] examine the location of the events giving rise to the claims alleged by the plaintiff and the nature of the dispute." Id. (internal quotations omitted).

WRMC argues that venue is improper in the Northern District of Illinois because "all substantial parts of the events relevant to the Authorization signed by WRMC and creating WRMC's relationship with Citadel took place in Arkansas." (Mem. at 5.) WRMC's statement, however, oversimplifies the parties' relationship. Clearly, events occurred in both places: WRMC sent an RFP to Chicago and in response, Citadel submitted a proposal; both parties communicated further to address remaining issues with the proposal. (Compl. ¶¶ 4-5; Mem., Ex. 1, Hutchinson Aff. ¶¶9-11.) During this time, WRMC contacted Citadel in Chicago, and Citadel responded to WRMC in Arkansas. WRMC signed the Authorization and returned it to Citadel in Chicago, accompanied by a substantial good faith deposit. (Compl. ¶¶ 6-7; Mem., Ex. 1, Hutchinson Aff. ¶¶ 12-13.) This Authorization gave some authority to Citadel to begin Project development in preparation for the completion of the underlying transaction--financing, building, and leasing to WRMC a medical facility. (Compl. ¶ 9; Mem. at 3.) ...


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