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Forteceo Services, Inc., D/B/A Forteone v. Terra Contracting

July 3, 2012

FORTECEO SERVICES, INC., D/B/A FORTEONE, PLAINTIFF,
v.
TERRA CONTRACTING, LLC, TERRA ABATEMENT SERVICES, LLC, TERRA I/S, LLC, PJT EQUIPMENT LEASING, LLC, AND DOWN UNDER MUNICIPAL SERVICES, LLC, DEFENDANTS.



The opinion of the court was delivered by: Judge Joan B. Gottschall

MEMORANDUM OPINION & ORDER

Plaintiff ForteCEO Services, Inc. ("ForteCEO"), located in Northbrook, Illinois, filed suit in the Northern District of Illinois against Defendants Terra Contracting, LLC and four affiliated Michigan companies (collectively "Terra"), for breach of an agreement under which ForteCEO provided consulting services to Terra ("the Agreement"). Terra now moves the court to dismiss or transfer this case on the grounds of improper or inconvenient venue, pursuant to 28 U.S.C. §§ 1391(a), 1406(a) and 1404(a). The court concludes that venue is proper in Illinois and that the balance of relevant factors weighs against transferring the case to Michigan, which is not a clearly more convenient venue.

I. BACKGROUND

ForteCEO filed a complaint against Terra for breach of contract on July 29, 2011. The complaint alleges that Terra is in the business of providing environmental remediation and industrial, sewer, and hazardous-material cleaning and abatement services. In May 2010, Terra executed the Agreement with ForteCEO. Under the Agreement, ForteCEO was to provide consulting services meant to improve Terra's profitability and market value, so that the five affiliated Terra companies could be sold as a unit at or above a target sale price. ForteCEO allegedly charged Terra 75% of its usual fee for its services in exchange for "incentive compensation," including a right to a percentage of any improvement over 2009 levels in Terra's "EBITDA" (earnings before interest, taxes, depreciation, and amortization), as well as a percentage of any increase in Terra's market value above a benchmark figure.

ForteCEO alleges that it provided Terra with consulting services between April 2010 and February 2011. The parties ended their engagement on or about March 9, 2011. During that period, Terra experienced considerable improvement in its EBITDA and market value. Terra, however, allegedly refused to pay ForteCEO the incentive compensation outlined in the Agreement. ForteCEO argues in its complaint that it is entitled to "the appropriate percentage of the improvement" in Terra's EBITDA over its 2009 level, and to a percentage of Terra's market value as of the end of the engagement, which ForteCEO asks this court to determine by ordering an accounting. ForteCEO further asks the court to declare that it is entitled to receive incentive payments for 2011 and subsequent years.

ForteCEO asserts that this court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332 and that venue is proper pursuant to 28 U.S.C. §§ 1391(a)(2) and (3). Although Terra and its affiliated companies are owned by Steve Taplin, who has his domicile in Michigan, ForteCEO alleges that one or more of Terra's affiliated companies regularly do business in Illinois and that Terra Contracting, LLC and Terra Abatement Services, LLC have registered agents in Illinois.

In support of its Motion to Dismiss or Transfer, Terra has submitted the declarations of Bruce Reder and Laura Rosenberg. Reder, Terra's Chief Financial Officer, states that all consulting services provided pursuant to the Agreement were performed by ForteCEO representatives at Terra's location in Kalamazoo, Michigan. Although one ForteCEO employee provided support from his home in Akron, Ohio, no services were peformed in Illinois. (Defs.' Mot. to Dismiss or Transfer Ex. A (Reder Decl.), ECF No. 13.) Rosenberg, Terra's Human Resources Director, also states that ForteCEO's invoices represent "work that was performed at Terra's offices in Kalamazoo." (Defs.' Mot. to Dismiss or Transfer Ex. B (Rosenberg Decl.), ECF No. 14.) Along with the declarations, Terra submits invoices stating that ForteCEO's services were performed in Michigan.

Reder's declaration further states that on July 26, 2010, Terra was hired as a contractor for an oil spill cleanup of the Kalamazoo River. (Defs.' Mot. to Dismiss or Transfer Ex. A (Reder Decl.).) Through the end of 2010, that project generated $15.5 million in revenue for Terra, causing its 2010 revenue to be its highest ever. Terra's EBITDA also increased significantly as a result. (Id.)

Terra attached another affidavit, from owner Steve Taplin, to its reply brief. Taplin states that he was contacted at his Kalamazoo office by ForteCEO's owner, Mark Rittmanic, who offered Terra consulting services. Rittmanic then traveled to Michigan to meet with Taplin in January 2010 and February 2010. Taplin subsequently met with Rittmanic once in Northbrook, Illinois. Taplin signed the Agreement on behalf of Terra at his office in Michigan and mailed it to Rittmanic. (Defs.' Reply in Supp. Mot. to Dismiss or Transfer Ex. D (Taplin Decl.), ECF No. 32.)

In turn, ForteCEO submits with its response to Terra's motion the declaration of ForteCEO president David Marshall. (Pl.'s Resp. to Mot. to Dismiss or Transfer Ex. 2 (Marshall Decl.), ECF No. 29.) Marshall states that, from January through May 2010, the Agreement was negotiated between Taplin in Michigan and Rittmanic and Marshall in Northbrook. After Rittmanic completed a business assessment of Terra, the parties met in person in Northbrook, Illinois in April 2010. In May 2010, Marshall executed the final version of the Agreement in Northbrook on behalf of ForteCEO. According to Marshall, the Agreement included no exclusions or exceptions for the Kalamazoo River cleanup or any other specific project or any particular cause of an increase or decrease in Terra's EBITDA. The Agreement, according to Marshall, also included a choice-of-law provision stating that it is governed by Illinois law.*fn1

II.LEGAL STANDARD

Rule of Civil Procedure 12(b)(3) provides that a party may move to dismiss a complaint filed in an improper venue. The plaintiff bears the burden of establishing proper venue. See Int'l Travelers Cheque Co. v. BankAmerica Corp., 660 F.2d 215, 222 (7th Cir. 1981). A court deciding a Rule 12(b)(3) motion must take the allegations in the complaint as true unless they are contradicted by affidavits, draw all reasonable inferences in favor of the plaintiff, and resolve factual disputes in the plaintiff's favor. See Kochert v. Adagen Med. Int'l, Inc.,491 F.3d 674, 677 (7th Cir. 2007); Nagel v. ADM Investor Servs., Inc., 995 F. Supp. 837, 843 (N.D. Ill. 1998). "When ruling on a motion to dismiss for improper venue, the district court is not 'obligated to limit its consideration to the pleadings [or to] convert the motion to one for summary judgment' if the parties submit evidence outside the pleadings." Faulkenberg v. CB Tax Franchise Sys., 637 F.3d 801, 809-10 (7th Cir. 2011) (quoting Cont'l Cas. Co. v. Am. Nat'l Ins. Co., 417 F.3d 727, 733 (7th Cir. 2005)).

Under 28 U.S.C. § 1406(a), a "district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." Section 1391 states the bases for proper venue:

(a) A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in (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 ...


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