United States District Court, N.D. Illinois, Eastern Division
RGT HOLDINGS, INC., derivatively on behalf of TICKET RESERVE, INC., Plaintiff,
RICHARD M. HARMON et al. Defendants.
MEMORANDUM OPINION AND ORDER
J. Tharp, Jr. United States District Judge
RGT Holdings, Inc., (“RGT”) has filed a verified
shareholder derivative complaint against The Ticket Reserve,
Inc., (“Ticket Reserve”) and several of its
officers. It alleges various breaches of fiduciary duty going
back to July 8, 2005 and claims the diversity jurisdiction of
this Court under 28 U.S.C. § 1332. However, the
defendants contend that diversity is lacking because both RGT
and defendant Richard Harmon are citizens of Texas. RGT's
Texas citizenship is uncontested. Upon reviewing the
parties' extensive submissions, the Court determines that
Harmon is also a Texas citizen. Therefore, the
defendants' motions to dismiss for lack of subject matter
jurisdiction are granted.
RGT Holdings is incorporated in Texas and has its principal
place of business in Dallas, Texas. Compl. ¶ 12. It has
held stock in Ticket Reserve since July 8, 2005. Id.
Defendant Richard Harmon is the Chief Executive Officer of
Ticket Reserve. Id. at ¶ 14. The Complaint
alleges that Harmon is a citizen of Illinois. Id.
However, the defendants challenge this assertion, arguing
Harmon is actually a Texas citizen. Since the crux of the
motions is where Harmon is a citizen, the Court will now
focus on the affidavits and extensive documentation submitted
by both parties.
Harmon's Contacts with Texas
Harmon resided in Illinois from 1998 until December 2010.
First Harmon Decl. ¶ 3, ECF No. 19-1. He had previously
resided in Texas for some period of time, during which he
obtained a bachelor's degree and MBA from the University
of Texas. Id. at ¶ 14. In January 2011, Harmon
relocated to Universal City, Texas (near San Antonio) for two
reasons. Id. at ¶ 4. First, he wanted to take
care of his elderly stepfather (who had helped raise him);
second, he wanted to work (for Ticket Reserve) in Austin,
Texas. Id. at ¶ 6. According to his affidavit,
Harmon believed Ticket Reserve would fit in well in
Austin's technology industry and a presence there would
help Ticket Reserve recruit employees and gain access to
partnerships and other resources. Id. at ¶ 12.
After his 2011 move, Ticket Reserve considered Harmon to be
employed in Texas and paid unemployment taxes to Texas.
See Kaptrosky Decl. ¶ 5-6, ECF No. 19-2.
a month of moving to Texas, Harmon obtained a Texas
driver's license. See First Harmon Decl., Ex. A.
In February 2011, he also registered to vote in Texas.
See First Harmon Decl, Ex B. According to
Harmon's declaration, he voted while living in San
Antonio. First Harmon Decl. ¶ 8. In March 2012, Harmon
served on a San Antonio jury. See First Harmon Decl.
September 2012, Harmon's stepfather was moved into a
“care facility” and Harmon moved to Austin,
Texas. First Harmon Decl. ¶ 10. He has lived at the same
address, which is a condominium, since 2012 and states he has
“no plans or intention to leave.” Id.
The condo is leased to Ticket Reserve's business alias
(Forward Market Media), with the “tenant” section
of the lease stating “Forward Market Media, Inc. c/o
Richard Harmon.” Pl.'s Ex. D, ECF No. 34. It
appears that Ticket Reserve paid the rent on the condo,
rather than Harmon. See Pl.'s Ex. F. Harmon
stated in an email that the condo “[g]ets lots of use
as a company meeting place, ” but he also appears to
have been in control of who used the condo at any time.
See Pl.'s Ex. G. Harmon, who appears to travel
frequently for work, often allowed visiting family and
friends to stay in the condo while he was out of town.
See Pl.'s Ex. H (allowing a friend to stay when
he could not find a hotel room), Ex. GGG (emailing to see if
mother-in-law will be using the condo). For example,
Harmon's son John stayed at the condo with one of his
friends over his birthday weekend. See Pl.'s Ex.
registered to vote in Austin when he moved there in 2012 and
has voted in Austin. First Harmon Decl. ¶ 11. Harmon has
two cars registered in Texas, one of which was purchased in
Texas. Id. at ¶ 17. Harmon maintains a Northern
Trust bank account (which he previously had in Chicago) with
his Austin address. Id. at ¶ 18. Harmon's
federal tax filings reflect a Texas address and he has not
filed an Illinois income tax return since 2010. Id.
at ¶ 19. Harmon stated in his declaration that he spends
“at least 60% of the time” that he is not
traveling for business in Texas, with the remainder divided
between Illinois and California. Id. at ¶ 21.
has at least four children. His daughter Lisa lives in
Houston, Texas, along with her four children. Id. at
¶ 16. Harmon states that his move to Texas was partly in
order to be closer to his grandchildren. Id.
Harmon's son John attended the University of Texas in
Austin from 2012-2016, where he received in-state tuition
after his first year. Second Harmon Decl. ¶ 4, ECF No.
38-1. The record indicates John may now be attending graduate
school in California. See Pl.'s Ex. WWW.
Harmon's daughter Tanya appears to also live in
California. See Pl.'s Ex. YYY (“our
daughter Tanya is now a 10 year successful teacher in the
San Francisco public school system”). Harmon's son
Matthew appears to currently attend Kansas University.
See Second Harmon Decl. ¶ 5. As of 2016,
Harmon's wife Sue is in the process of relocating to
Texas permanently, including putting their Illinois house on
the market in August 2016. First Harmon Decl. ¶ 20;
Second Harmon Decl. ¶ 3. Although it is not mentioned by
either party, a March 2016 letter indicates that Harmon was
seeking a mortgage in order to purchase a home in Austin
during 2016. See Pl.'s Ex. DDD.
terms of community activities, Harmon states he is active in
the University of Texas' athletic department and serves
on their Development Board. First Harmon Decl. ¶ 15. The
record bears that involvement out, reflecting at least one
large donation and several conversations and meetings with
University of Texas staff. See, e.g., Pl.'s Ex.
BBBB (confirming donation), Ex. ZZZ (referencing visit
earlier in the week), Ex. YYY (confirming attendance at
University luncheon). Harmon also maintains at least passing
ties with a few Illinois organizations, which will be
discussed in the section below on his ties to Illinois.
Harmon's Ties to Illinois
Harmon moved to Texas, his wife Sue stayed behind in the Lake
Forest, Illinois home that they jointly own (although the
house has since been placed on the market). Second Harmon
Decl. ¶ 3. Both of his sons were at that point in school
in Lake Forest, and they remained there through their high
school graduations (which took place in 2012 and 2014).
Id. at ¶ 4-5. After Harmon's move to Texas,
the Harmon family continued to celebrate holidays in Lake
Forest. See Pl.'s Ex. U (stating the
“Harmon family will be in Lake Forest for
Thanksgiving”). These trips, however, were generally
brief. For example, in November 2014, Harmon emailed a
contact to state that he was in Illinois for Thanksgiving but
would be in London on business the following Monday.
See Pl.'s Ex. X. Similarly, Harmon indicated in
a December 2015 email that he would be back in Austin the
Monday following Christmas. See Pl.'s Ex S. A
2013 email shows Harmon leaving Chicago to go to Palm Springs
the day after Christmas that year. See Pl.'s Ex
Y. Another 2012 email shows Harmon trying to connect with a
friend in Illinois while he was in town for the holidays.
See Pl.'s Ex. Z. Similarly, Harmon's emails
show the family coming in to Illinois for Matt's high
school graduation. See Pl.'s Ex. BB-CC. Harmon
repeatedly refers to Lake Forest as “home” in his
emails. See, e.g., Pl.'s Ex. OO (telling son to
“bring that home with you”), Ex. PP (“I
need to make a deposit there before coming home”), Ex.
WW (“I arrive in Denver tomorrow, Thursday afternoon
and return to Chicago (my home base) Saturday
afternoon”), Ex. IIII (“I really want to come
home on the 19th”). Harmon, however, has
also referred to Austin as “home.” See
Pl.'s Ex. YYY (“Once our son Matthew graduates this
spring from high school in Lake Forest, we'll start
spending considerably more time in our home in
also continued to have a number of relationships in Illinois
with local business and organizations. For example, Harmon
continued to contribute to his church in Lake Forest.
See Pl.'s Ex. DD. Harmon acknowledges in his
affidavit that Sue has continued to attend their Lake Forest
church, and that Harmon attends functions when he is in town,
“which tends to occur around the holidays.”
Second Harmon Decl. ¶ 7. Harmon has also continued to
belong, as an out of state member, to a golf club in Lake
Forest, where he occasionally entertains and conducts
business. See Pl.'s Ex Q (expense report showing
Conway Farm Country Club entertainment expenses), Ex. KK
(invoice for private party held at the Country Club), Second
Harmon Decl. Ex. B (showing 2012 request to change membership
to “National” category “restricted to those
whose residence and principal place of business” are