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RGT Holdings, Inc. v. Harmon

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

March 13, 2017

RGT HOLDINGS, INC., derivatively on behalf of TICKET RESERVE, INC., Plaintiff,
v.
RICHARD M. HARMON et al. Defendants.

          MEMORANDUM OPINION AND ORDER

          John J. Tharp, Jr. United States District Judge

         Plaintiff 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.

         BACKGROUND

         Plaintiff 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.

         I. Harmon's Contacts with Texas

         Richard 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.

         Within 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. Ex. C.

         In 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. J.

         Harmon 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.

         Harmon 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.

         In 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.

         II. Harmon's Ties to Illinois

         When 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 Austin.”).

         Harmon 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 ...


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