United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
RONALD A. GUZMN, District Judge.
Plaintiff, Spartan SP Investor, LLC ("Spartan") sues defendants, W. Gerald Yagen, Ruth Yagen, Training Services, Inc., Technical Education Services, Inc., American Trans Air Training Corporation, and Employment Services, Inc. for unjust enrichment, breach of contract, promissory estoppel and fraud. Defendants have filed a motion pursuant Federal Rule of Civil Procedure ("Rule") 12(b)(2), (3) and (6) to dismiss the suit for lack of personal jurisdiction, improper venue or failure to state a claim, or in the alternative, to transfer the suit to the Eastern District of Virginia pursuant to 28 U.S.C. § 1404(a). For the reasons set forth below, the Court grants the motion to transfer and denies and strikes the motions to dismiss.
Plaintiff, Spartan SP Investor, LLC ("Spartan") is a Delaware company with its principal place of business in Chicago. (Compl. ¶ 7.) Spartan is affiliated with Spartan Education, LLC, a/k/a/Spartan College, a vocational school in Tulsa, Oklahoma, and Sterling Partners LLC, a private equity firm based in Chicago. ( Id. ¶ 2.)
Defendants W. Gerald ("Gerald") and Ruth Yagen own defendants Training Services, Inc. ("TSI"), Technical Education Services, Inc. ("TES"), America Trans Air Training Corporation ("ATA"), and Employment Services, Inc. ("ESI"), which operate vocational schools across the country. ( Id. ¶¶ 1, 10-13.) The Yagens live in Virginia, and TSI, TES, and ESI are located there. ( Id. ¶¶ 10-11, 13.) ATA is located in Indiana. ( Id. ¶ 12.)
In May 2013, Gerald asked the Director of Spartan College if he was interested in buying one of Gerald's schools. (Pl.'s Resp., Ex. 1, Gerald Dep. at 62.) The Director told Gerald that the College was now owned by Sterling, and asked Gerald if he would like to speak to a Sterling representative. ( Id. at 63.) Gerald said he would, and shortly after received a call from a Sterling representative, who wanted to discuss buying several of Gerald's schools. ( Id. at 29.) Negotiations ensued, during which Gerald and Sterling exchanged "hundreds" of emails and phone calls, and Sterling personnel repeatedly visited Virginia both to conduct due diligence and to negotiate in-person with Gerald. ( Id. at 30-34, 52-53, 65-66; Mem. Law Supp. Mot. Dismiss, Ex. B, Gerald Aff. ¶¶ 4-6; id., Ex. C, TSI Aff. ¶ 6; id., Ex. D, TES Aff. ¶ 6; id., Ex. E, ESI Aff. ¶ 6; id., Ex. F, ATA Aff. ¶ 6; Pl.'s Resp. Mot. Dismiss, Ex. 2, Rosenberg Aff. ¶ 3.) Neither Gerald nor any other representative of defendants traveled to Illinois to negotiate the deal. (Mem. Law Supp. Mot. Dismiss, Ex. B, Gerald Aff. ¶ 7; id., Ex. C, TSI Aff. ¶ 7; id., Ex. D, TES Aff. ¶ 7; id., Ex. E, ESI Aff. ¶ 7; id., Ex. F, ATA Aff. ¶ 7.)
Spartan alleges that in May and June 2013, it analyzed the corporate defendants' operations, and with the use of its own personnel and outside accounting, education and turnaround experts, it developed and helped Gerald implement a business plan to address the myriad of problems his schools faced. (Compl. ¶¶ 18-21.)
On July 24, 2013, Gerald and the corporate defendants executed a term sheet for the sale of sixteen of their schools, which are located in California, Florida, Georgia, Indiana, Nevada, Pennsylvania, South Carolina, Texas, and Virginia, to Spartan. ( See Mem. Supp. Mot. Dismiss, Ex. A, Term Sheet at 1.) Among other things, the term sheet states:
The parties... agree to negotiate in good faith to execute and deliver an Asset Purchase Agreement and agree upon forms of... other transaction documents as soon as possible. If either Spartan, on the one hand, or Seller, on the other hand, fails to negotiate in good faith or refuses to proceed with a transaction or definitive documents on the terms and conditions expressly set forth in this Term Sheet, then the party that has failed to negotiate in good faith, or has refused to proceed, shall, immediately upon demand, reimburse the other party for its costs and expenses incurred in connection with this Term Sheet... subject to a cap of $500, 000....
This Term Sheet is a non-binding expression of the intentions of the parties and is subject in all cases to the negotiation, execution, and delivery of the Asset Purchase Agreement and ancillary documents. While the parties currently intend to proceed promptly to negotiate such agreements, it is expressly understood that no obligation of any nature is intended or created by the parties pursuant to this Term Sheet [except for the good faith/expense reimbursement provision]....
( Id. at 4-5.)
By mid-August 2013, the schools were stabilized, and defendants refused to have any further negotiations ...