Appeal from the Circuit Court of Cook County. No. 10 L 7342 Honorable Bill Taylor, Judge Presiding.
The opinion of the court was delivered by: Presiding Justice Robert E. Gordon
PRESIDING JUSTICE ROBERT E. GORDON delivered the judgment of the court, with opinion. Justices Lampkin and Palmer concurred in the judgment and opinion.
¶ 1 After plaintiff Koss Corporation's senior vice-president, Sujata Sachdeva, was accused of embezzling approximately $34 million from Koss between 2004 to 2008, Koss brought claims of negligence, fraud, and negligent misrepresentation against defendant Grant Thornton, LLP (Thornton), Koss's auditor during this period of time.
¶ 2 The trial court granted Thornton's motion to dismiss on the ground of forum non conveniens in favor of an action in Milwaukee County, Wisconsin. This appeal followed.
¶ 3 For the reasons discussed below, we find that the trial court abused its discretion by granting Thornton's motion to dismiss on forum non conveniens grounds. First, the trial court overlooked a significant portion of Koss's factual allegations in making its analysis. The case at bar arose out of two distinct sets of factual claims. Koss alleges that: (1) Thornton's auditing team failed to discover the embezzlement in its audits of Koss during the fiscal years ending June 30, 2004, through June 30, 2008; and (2) inadequate firm-wide policies, procedures, and auditor training established by corporate headquarters led to the inadequate audits. Second, although many relevant witnesses reside in Wisconsin and the alleged embezzlement and audits all took place in Wisconsin, many relevant witnesses also reside or work in Cook County and Thornton is headquartered there. Third, most of the documentary evidence is online and thus is equally accessible in Milwaukee and Chicago. Fourth, the other private and public factors do not favor transfer. Last, we take judicial notice that Milwaukee is only an hour and a half's drive from downtown Chicago. Ill. R. Evid. 201(b) (eff. Jan. 1, 2011).*fn1 Given these facts, and considering that Thornton has the burden to prove that the relevant factors strongly favor transfer, we find that the trial court abused its discretion and should have denied the motion to dismiss for forum non conveniens.
¶ 6 Plaintiff Koss Corporation (Koss) is a public corporation whose principal place of business is in Milwaukee, Wisconsin. Koss markets and manufactures stereo headphones and related accessory products.
¶ 7 Defendant Thornton is a corporate public accounting firm with its principal place of business in Chicago, Illinois. Thornton has offices in 26 states. In addition to its headquarters in Chicago, Thornton has Illinois offices in Oakbrook Terrace and Schaumburg. Thornton's Wisconsin offices are located in Milwaukee, Madison, and Appleton.
¶ 8 II. The Claims in the Complaint
¶ 9 There is no dispute that during the fiscal years ending June 30, 2004, through June 30, 2008, Koss's former vice president of finance, Sujata Sachdeva, embezzled more than $30 million from Koss. Sachdeva pleaded guilty to wire fraud charges in the United States District Court for the Eastern District of Wisconsin on July 16, 2010.
¶ 10 The complaint alleges that during the years in which Sachdeva embezzled the funds, Koss engaged Thornton to audit Koss's financial statements and to conduct reviews of Koss's unaudited quarterly financial statements and they failed to disclose the embezzlement.
¶ 11 In the case at bar, Koss filed a three-count complaint in Cook County, Illinois, against Thornton for (1) professional negligence, (2) fraud and deceit, and (3) negligent misrepresentation. These counts arose out of two distinct sets of factual claims. First, Koss alleges that Thornton's auditing team failed to discover the embezzlement in its audits of Koss during the fiscal years ending June 30, 2004, through June 30, 2008. Second, Koss alleges that inadequate firm-wide policies, procedures, and auditor training established by Thornton's corporate headquarters led to the inadequate audits.
¶ 12 III. Forum Non Conveniens Motion and Related Discovery
¶ 13 On October 25, 2010, Thornton moved to dismiss Koss's complaint pursuant to Illinois Supreme Court Rule 187 based on the doctrine of forum non conveniens. Ill. S. Ct. R. 187 (eff. Aug. 1, 1986). The trial court granted leave to conduct discovery relating to Thornton's motion to dismiss prior to deciding the issue. Koss propounded written interrogatories and document requests, and served deposition notices upon Thornton. The following people were deposed: Melissa Koeppel, a Thornton partner; Amy Henselin, Thornton's corporate representative in this case; and Meg Hafer, human resources manager at Thornton in Milwaukee. On January 10, 2012, the trial court granted Thornton's motion to dismiss. This appeal followed.
¶ 14 IV. Summary of Discovery
¶ 15 Koss avers in its attorney's affidavit submitted in response to Thornton's forum non conveniens motion claims that Thornton's national headquarters located in downtown Chicago is 91.3 miles from the courthouse in Milwaukee County. The affidavit also provides 2009 statistics that in Cook County, more cases were disposed of than newly filed, and in Milwaukee County, more cases were opened than disposed of. However, these numbers tell us nothing about the relative speed with which these two counties could handle a complex case. Thornton avers in its attorney's affidavit in support of its motion to dismiss that both Koss and Thornton retained attorneys in Illinois and Wisconsin to litigate this case.
¶ 16 Since we find that the trial court overlooked Koss's factual claim concerning Thornton's firm-wide policies and training, the discovery below is organized into the two distinct factual claims: the auditing team's failure to uncover the embezzlement, and the corporate headquarters' failure to implement adequate policies and train its auditors.
¶ 17 A. Claims Concerning the Audits and the Embezzlement
¶ 18 1. Potential Witnesses
¶ 19 Melissa Koeppel, a partner at Thornton, avers the following in her affidavit:
¶ 20 Koeppel was the Thornton partner in charge of the Koss audit during the fiscal years ending June 30, 2004, through June 30, 2008. Koeppel resides in Brookfield, Wisconsin, and has maintained an office in Thornton's downtown Chicago office since April 2011, as well as the Milwaukee office.
¶ 21 The individuals who performed the Koss audits are called the Koss engagement team. The Koss engagement team comprised a total of 18 Thornton employees during the fiscal years ending June 30, 2004 through June 30, 2008. The engagement team worked out of Thornton's Milwaukee office, and 17 members reside in Wisconsin. Three reside in Milwaukee. Fourteen reside in other cities closer to Milwaukee than Chicago. One resides in New York.
¶ 22 Thornton's audits and reviews of Koss were planned and performed in Milwaukee, Wisconsin.
¶ 23 Other Thornton professionals who were not engagement team members also billed time to the Koss audits. Thornton calls these employees "other timekeepers."
¶ 24 Thornton provided the following in its responses to written interrogatories:
¶ 25 Three of the other timekeepers reside in Illinois: Mark Scoles is a Thornton partner and billed time to Koss in 2004. Scoles resides in Naperville, Illinois. Robert B. Emkow, a former senior manager, also billed time to Koss in 2004. Emkow resides in Park Ridge, Illinois. Emily Pratt, a former senior associate, also billed time to Koss in 2004, and resides in Chicago.
¶ 26 Thornton's corporate representative in this case, Amy Henselin, testified as to the following in her deposition:
¶ 27 The other timekeepers on the Koss audits provided support to the engagement team, for example, consulting on specific matters.
¶ 28 Wisconsin auditors have regularly travelled to Chicago and elsewhere in Illinois for other audit engagements, partnership interviews, and client meetings. Other than complaints about travel in general, no one has complained to Henselin that coming to Chicago is inconvenient.
¶ 29 Thornton named 15 current and former Koss directors, officers, and employees as subjects of potential testimony in its amended memorandum in support of its motion to dismiss. This list includes former employees Tracy Malone and Julie Mulvaney, who allegedly colluded in Sachdeva's embezzlement. Eight reside in Milwaukee County. Six reside in counties closer to Milwaukee than Chicago. One director resides in Kentucky.
¶ 30 Michael Koss averred the following in his affidavit in opposition to the motion for forum non conveniens.
¶ 31 The Koss directors, John Koss, John Stollenwoerk, Thomas Doerr, Theodore Nixon, Lawrence Mattson, and himself, are not inconvenienced by litigating this matter in Cook County. Koss will do what is necessary to ensure that the company's employees and members of its board are available to testify at trial, subject to any applicable objections other than those based on location or residence. Also, more than approximately 30 Koss shareholders reside in Illinois.*fn2
¶ 32 Koss's attorney in this case, Michael J. Avenatti, named in his affidavit in opposition to the motion for forum non conveniens the following potential third-party witnesses in Illinois:
¶ 33 James J. Hess is the vice president of the Chicago branch of Bank of America (formerly LaSalle Bank) from which Sachdeva made unauthorized wire transfers and withdrawals. Carolann Gemski and Kara Washington are Securities and Exchange Commission (SEC) attorneys who investigated Sachdeva. Donald Ryba was the SEC accountant on the case. The SEC investigation was based in Chicago.
¶ 34 Thornton's attorney in this case, Frank B. Vanker, presented four potential third-party witnesses in his affidavit in support of the motion for forum non conveniens.
¶ 35 James Malone was Sachdeva's employee who was paid with funds embezzled from Koss and resides in Milwaukee. Baker Tilly Virchow Krause LLP (Baker Tilly)*fn3 was the accounting firm that succeeded Thornton as Koss's auditor after Sachdeva's embezzlement was discovered. Individual partners and employees of Baker Tilly who worked on the Koss audit reside in Wisconsin and may be subjects of potential testimony. Specifically, Wayne T. Morgan is a partner at Baker Tilly. Morgan resides in Waukesha, Wisconsin. Jefferson Wells*fn4 was the accounting firm retained by Koss to investigate and assist in responses to Sachdeva's embezzlement. Individual partners and employees of Jefferson Wells who provided such services to Koss reside in Wisconsin and may be subjects of potential testimony.
¶ 36 In sum, although most Koss employees and most Thornton auditors who worked on the Koss audit reside in Wisconsin, there is no showing that these people would be inconvenienced by coming to Cook County. As detailed above, there are also potential third-party witnesses in Illinois.
¶ 37 2. Documentary Evidence
¶ 38 Frank B. Vanker, an attorney for Thornton, provided the following information in his affidavit in support of the motion for forum non conveniens.
¶ 39 Koss has made available 80 to 90 boxes of documents of accounting and business records in Milwaukee. Koss has posted more than 1 million pages of documents electronically to a secure Internet site. Thornton has electronically provided approximately 170,000 pages of documents, including audit and review work papers relating to Koss engagements.
¶ 40 Amy Henselin testified in her deposition that Thornton's servers are located in Oakbrook Terrace, Illinois; Thornton's auditors' e-mail and electronic audit work papers are located on these servers; the audit work papers also exist in hard copy in Thornton's local offices; and since most documentary evidence exists electronically, it should be readily available in either forum.
¶ 41 B. Claims Concerning Thornton's Policies, ...