United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
ANDREA R. WOOD, District Judge.
Plaintiffs Brian Knight ("Knight") and Strategic Lending Solutions ("SLS") have brought this lawsuit against Defendants Nelson Chase ("Chase"), Chase Enterprises I, LLC, Chase Enterprises, Inc., and Chase Companies, LLC (together with Chase, the "Chase Defendants") and United Defense Group LLP ("UDG"), alleging that they breached contracts to provide legal services to Plaintiffs by fraudulently concealing the relationship between the Chase Defendants and UDG so that they could collect two retainers instead of one. Now before the Court are Defendants' motions to dismiss the complaint, to transfer venue, and for sanctions, as well as Plaintiffs' motion for partial summary judgment. For the reasons provided below, the Chase Defendants' motion to dismiss and for sanctions (Dkt. No. 19) is granted in part and denied in part, UDG's motion to dismiss or to transfer venue (Dkt. No. 9) is denied, and Plaintiffs' motion for partial summary judgment (Dkt. No. 34) is denied. The previous iterations of Plaintiffs' motion for partial summary judgment (Dkt. Nos. 30, 31) are denied as moot.
Unless otherwise indicated, the following facts are drawn from the Complaint. In November 2007, SLS made a loan to another company, which in return began making loan payments to SLS by check. (Compl. ¶ 9, Dkt. No. 1.) SLS deposited the loan payment checks with its bank, Harris Bank, N.A. ("Harris"). ( Id. ) However, a number of the checks were soon returned to SLS marked "not sufficient funds." ( Id. ) Knight, as manager of SLS, received a call form Harris's fraud investigation department on or about August 1, 2008 inquiring about the bounced checks and requesting a meeting with Knight. Id. ¶ 10.) After the meeting, Knight became concerned that Harris might take action against SLS for depositing the bad checks. ( Id. ) As a result, Knight contacted UDG for legal assistance. ( Id. ¶ 11.)
On August 15, 2008, Plaintiffs and UDG entered into a retainer agreement ("Retainer Agreement") under which Plaintiffs agreed to pay UDG $15, 000 in consideration for UDG representing Plaintiffs "in the event that Harris were to pursue Plaintiffs." ( Id. ¶ 12.) The Retainer Agreement, which is attached to the Complaint, appears to be for "representation during a Fraud/Theft investigation" and states that, "[s]hould charges be filed, the $15, 000 would be applied to a new Agreement." (Compl. Ex. 1 at 2, Dkt. No. 1-1.) The Retainer Agreement further provides that "at no additional cost to the undersigned, the Law Firm may have more than one Attorney work on Client's case" and that "the Law Firm may divide a portion of the fee with other Attorneys who are not partners or associates of the Law Firm. However, the undersigned's fee will not be increased because of any such division of fees." ( Id. ) The version of the Retainer Agreement attached to the Complaint is signed only by Knight; it is not signed by any representative of UDG. ( Id. )
On August 18, 2008, UDG introduced Plaintiffs to Chase. According to Plaintiffs, in that initial meeting, "and in every conversation and other correspondence thereafter, both Chase and United Defense represented that they were separate entities and that the only connection between the two were [ sic ] that Chase's son was an employee of United Defense." (Compl. ¶ 14.) Plaintiffs allege that Chase "conveyed to Plaintiffs that Chase would be able to assist Plaintiffs if Harris were to ever pursue Plaintiffs, and in order to do so, Plaintiffs were to pay a retainer fee of $25, 000 to Chase." ( Id. ¶ 16.) SLS wired the requested $25, 000 retainer to Chase on September 18, 2008. ( Id. ) Plaintiffs claim that they were unclear if Chase was personally representing them or if one of Chase's companies ( i.e., Chase Enterprises I, Chase Enterprises, Inc., or Chase Companies, LLC) was representing them. ( Id. ¶ 17.) There was no written retainer agreement between Plaintiffs and any of the Chase Defendants. ( Id. ¶ 18.) The Chase Defendants never had any contact with Harris and the services that they provided to Plaintiffs consisted solely of reviewing documentation provided to them by Plaintiffs. ( Id. ¶ 19.)
Harris eventually decided not to pursue Plaintiffs. ( Id. ¶ 10.) Nonetheless, both UDG and Chase kept the amounts paid to them by Plaintiffs: $15, 000 to UDG and $25, 000 to Chase. Plaintiffs did not receive any bill or other accounting of time showing how their retainers had been utilized. ( Id. ¶ 21.)
Plaintiffs allege that they became aware Chase "was and remains a Senior Partner at United Defense" just a few months before they filed the Complaint in November 2013. ( Id. ¶ 15.) Plaintiffs claim that UDG breached its obligations under the Retainer Agreement by having them pay an additional fee to a UDG attorney and by failing to provide Plaintiffs with an accounting of time and expenses. ( Id. ¶ 26.) Plaintiffs also allege that the Chase Defendants breached their obligations under their oral contract with Plaintiffs (as there was no written retainer agreement) by concealing that Chase was a partner at UDG in order to receive an additional fee and by failing to provide Plaintiffs with an accounting of time and expenses. ( Id. ¶ 27.) Plaintiffs additionally claim that that all of the Defendants committed fraud when they "omitted and even actively concealed the fact that Chase was a partner in United Defense." ( Id. ¶¶ 31-33.) Plaintiffs seek $40, 000 in actual damages for the retainer fees and $120, 000 in punitive damages.
For the purposes of Plaintiffs' motion for partial summary judgment, it should also be noted that certain facts are disputed by the Chase Defendants. Specifically, the Chase Defendants deny that the cause of action alleged in the Complaint occurred in Illinois, claiming that the oral contract between Plaintiffs and Chase was entered into in South Carolina and that the $25, 000 payment was negotiated in South Carolina. The Chase Defendants also claim that all of their communications with Plaintiffs and Harris were "initiated and conducted by phone calls initiating in South Carolina." (Chase Resp. at 2, Dkt. No. 38.) In addition, Chase admits that he was a partner at UDG in 2008, but states that he is not currently a partner. ( Id. ) Chase also admits that "to his knowledge, although threatened by the Bank, formal charges were never filed" against SLS. ( Id. at 3.) He further asserts that the $25, 000 retainer was for "future services" and that Plaintiffs in fact retained Chase for "substantial future services" other than the issues with Harris, such as the matters where Chase represented Plaintiffs in litigation currently pending in South Carolina. ( Id. )
I. Defendants' Motions to Dismiss
The Chase Defendants and UDG have each filed a motion to dismiss the complaint. "To survive a motion to dismiss under Rule 12(b)(6), a complaint must state a claim to relief that is plausible on its face.'" Adams v. City of Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). When reviewing a plaintiff's complaint, the Court must accept all of the plaintiff's factual allegations as true. Id. In contrast, conclusory allegations merely restating the elements of a cause of action do not receive this presumption. Id. "Where a complaint pleads facts that are merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557).
A. Personal Jurisdiction
The Chase Defendants first argue that this Court lacks personal jurisdiction over them. They claim that they "have never had any contact in Illinois, which would rise to the level of personal jurisdiction, " as the oral contract was executed in California, the services rendered were performed in South Carolina, and the payment for those services was mailed to Chase in South Carolina. (Chase Mot. to Dismiss at 4, Dkt. No. 9.) In response, Plaintiffs point out that Knight and SLS are both Illinois residents and that Chase's legal representation was needed as a result of events that took place in Illinois involving Harris. Plaintiffs further argue that Chase phoned and e-mailed Knight, who was in Illinois, and helped prepare Knight for a meeting with Harris in Illinois.
The Court finds that it may appropriately exercise specific personal jurisdiction over Chase and Chase Companies, LLC. The Supreme Court has "emphasized that parties who reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanctions in the other State for the consequences of their activities." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 (1983) (quoting Travelers Health Assn. v. Virginia, 339 U.S. 643, 647 (1950)). Indeed, "[j]urisdiction in these circumstances may not be avoided merely because the defendant did not physically enter the forum State." Id. at 476 (emphasis in original). Here, the allegations against Chase and Chase Companies, LLC concern "tortious misrepresentations expressly aimed at [Illinois] for the purpose of causing injury there." Felland v. Clifton, 682 F.3d 665, 677 (7th Cir. 2012). Plaintiffs, who are Illinois residents, allege that they were deceived by UDG and Chase regarding their relationship, and as a result Plaintiffs paid for additional legal services that they would not have paid for had they been aware of the deception. Moreover, Plaintiffs allege specific conduct on the part of Chase regarding an oral contract for legal services and payment for the same. They also allege that Chase used the e-mail address firstname.lastname@example.org during the course of their correspondence regarding the Harris matter, thus directing activities toward Illinois residents to resolve an Illinois matter.
Nonetheless, the Court still must consider whether "the assertion of personal jurisdiction would comport with fair play and substantial justice.'" Burger King Corp., 471 U.S. at 477 (quoting Int'l Shoe Co. v. Washington, 326 ...