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Marquette Bank v. Brown

United States District Court, N.D.Illinois, Eastern Division

March 31, 2014

MARQUETTE BANK, an Illinois banking association, Plaintiff,


JOHN F. GRADY, District Judge.

Before the court is defendants' motion to dismiss for lack of personal jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(2), or, in the alternative, to transfer this action to the Southern District of Indiana pursuant to 28 U.S.C. § 1404(a), or, in the alternative, to dismiss this action for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons explained below, we grant the motion to dismiss for lack of personal jurisdiction.


Plaintiff, Marquette Bank ("Marquette"), is an Illinois banking association that in April 2008 made a $3.5 million mortgage loan to Kankakee Motel Associates L.P. ("Kankakee Associates"), an Indiana limited partnership owned and controlled by an Indiana citizen named Lester Lee. Neither Kankakee Associates nor Lee is a party to this lawsuit. The purpose of the loan was to refinance Kankakee Associates' motel property, located in Bourbonnais, Illinois. Marquette alleges that it made the loan based on Lee's purported personal financial strength as well as his guaranty. When Lee applied for the loan in November 2007, he furnished Marquette with a financial statement indicating that as of January 1, 2007, he had a net worth of more than $19 million. In October 2008, he furnished Marquette with a financial statement indicating that he continued to have approximately the same net worth.

In mid-2009, Kankakee Associates became delinquent on its loan payments (and by January 2010, the motel was closed). Lee subsequently furnished Marquette with an October 2009 financial statement representing that he now had a negative net worth. On August 18, 2010, Marquette obtained a judgment of foreclosure against Kankakee Associates in the amount of $3, 999, 738.66. In January 2012, Lee filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Southern District of Indiana. It is alleged that as of March 28, 2013, Kankakee Associates and Lee (by virtue of his guaranty) owed plaintiff $2, 597, 823.58, plus interest, fees, and costs. Marquette has brought an adversary proceeding against Lee in the bankruptcy case to determine the dischargeability of the debt.

Marquette alleges that Lee misrepresented his financial condition both before and after the issuance of the loan and that after its issuance, Lee "engaged in a series of artifices and fraudulent transfers to entities owned by his" family members and "transferred assets that had been pledged" to Marquette without Marquette's knowledge or permission. (First Am. Compl. ¶ 1.) Marquette claims that in order to induce Marquette to make the loan, Kankakee Associates had executed an "Assignment of Contract" that granted Marquette a security interest in a Land Contract between Kankakee Associates and an entity called Youngevity Mineral Spa, LLC ("Youngevity"), for the sale of Kankakee Associates' real estate and related motel operation. (First Am. Compl. ¶ 80.) According to Marquette, the Land Contract provided that Youngevity's down payment would consist of an option to purchase a "certain tract of real estate" on Grand Cayman Island. (First Am. Compl. ¶ 43.) Marquette alleges that Lee misrepresented the terms of the Land Contract and that Kankakee Associates was never actually granted an option to purchase the Grand Cayman property; rather, the option was granted by an individual named Joel Wallach to one of Lee's other business entities, the Lee Group Holding Company ("Lee Group Holding"), and then transferred to Lee. (First Am. Compl. ¶¶ 44, 46, 48.) It is Marquette's position that Lee "wrongfully usurp[ed]" the option, worth $1.3 million. (First Am. Compl. ¶ 47.)

It is also alleged that in mid-2008, Lee "participated in the entry of a judgment in a collusive action brought by him and corporations owned and/or controlled by him" wherein one of his business entities, Lee Group Holding, sued another of his business entities, Lees Inns of America, Inc. ("Lees Inns"). (First Am. Compl. ¶ 87.) Lee then caused the parties to enter into an agreed judgment pursuant to which all of the assets of Lees Inns were transferred to Lee Group Holding, which was owned by Lee's wife and children. (First Am. Compl. ¶ 93.) Lee then misrepresented to Marquette in October 2008 that he still owned shares in Lees Inns valued at $1.7 million, although he had actually transferred all of his assets to an entity nominally owned by his wife and children. (First Am. Compl. ¶ 95.)

In the instant suit, Marquette alleges that Lee "was aided in his defalcations and deceptions by the defendants[, ]... who actively conspired with him." (First Am. Compl. ¶ 1.) The defendants are Debra Jo Brown, Melinda Gabbard, and Meegan Collier, Lee's daughters; Brenda R. Lee, Lee's wife; Michael Collier, Lee's son-in-law and an employee and/or officer of one or more of Lee's businesses; John D. Gay, a lawyer who served as counsel to all of Lee's businesses; and Ruthy Large, an employee of Lee's businesses.

Defendants, who are all citizens of Indiana, move to dismiss for lack of personal jurisdiction. Alternatively, defendants ask us to transfer the case pursuant to 28 U.S.C. § 1404(a) or for dismissal for failure to state claims for civil conspiracy.


"The plaintiff has the burden of establishing personal jurisdiction, and where... the issue is raised by a motion to dismiss and decided on the basis of written materials rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts." Tamburo v. Dworkin , 601 F.3d 693, 700 (7th Cir. 2010). In analyzing personal jurisdiction, we take well-pleaded allegations of the complaint as true unless they are refuted by the defendant in an affidavit. See id. "A federal court exercising diversity jurisdiction has personal jurisdiction only where a court of the state in which it sits would have such jurisdiction." Philos Techs., Inc. v. Philos & D, Inc. , 645 F.3d 851, 855 n.2 (7th Cir. 2011). Illinois's long-arm statute authorizes personal jurisdiction to the extent permitted by the Illinois Constitution and the United States Constitution. 735 ILCS 5/2-209(c). "[T]here is no operative difference between these two constitutional limits, " so a single constitutional inquiry will suffice. Mobile Anesthesiologists Chicago, LLC v. Anesthesia Assocs. of Houston Metroplex, P.A. , 623 F.3d 440, 443 (7th Cir. 2010). "The key question is therefore whether the defendants have sufficient minimum contacts' with Illinois such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'" Tamburo , 601 F.3d at 700-01 (quoting Int'l Shoe Co. v. Washington , 326 U.S. 310, 316 (1945)).

There are two types of personal jurisdiction: general and specific. General jurisdiction exists where a defendant has "continuous and systematic general business contacts" with the forum, while specific jurisdiction refers to jurisdiction over a defendant in a suit "arising out of or related to the defendant's contacts with the forum." RAR, Inc. v. Turner Diesel, Ltd. , 107 F.3d 1272, 1277 (7th Cir. 1997) (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall , 466 U.S. 408, 416, 414 n.8 (1984)). Plaintiff relies only on specific jurisdiction. "Specific personal jurisdiction is appropriate where (1) the defendant has purposefully directed his activities at the forum state or purposefully availed himself of the privilege of conducting business in that state, and (2) the alleged injury arises out of the defendant's forum-related activities." Tamburo , 601 F.3d at 702.

Defendants contend that they are not subject to specific jurisdiction in Illinois because they did not purposefully direct their activities at the state or purposefully ...

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