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MG Design Associates, Corp. v. Costar Realty Information, Inc.

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

July 19, 2017

MG DESIGN ASSOCIATES, CORP., Plaintiff,
v.
COSTAR REALTY INFORMATION, INC., APARTMENTS, LLC d/b/a APARTMENTS.COM, and NORTHWIND ENTERPRISES, INC. d/b/a ATLANTIC EXHIBITS, Defendants.

          OPINION AND ORDER

          SARA L. ELLIS United States District Judge.

         Plaintiff MG Design Associates, Corp. (“MG”) thought that it was going to design and build a tradeshow exhibit for Defendants CoStar Realty Information, Inc. (“CoStar”) and Apartments, LLC d/b/a Apartments.com (“Apartments”) (collectively the “CoStar Defendants”), but, after MG designed the exhibit, the CoStar Defendants took MG's designs and asked Defendant Northwind Enterprises, Inc. d/b/a Atlantic Exhibits (“Atlantic”) to build the exhibit instead. After the Court previously dismissed MG's suit without prejudice, finding that Defendants possessed sufficient contacts with Illinois to authorize personal jurisdiction but also finding that MG failed to properly allege a copyright claim and declining to review MG's pendent state law claims [38], MG filed its First Amended Complaint, alleging breaches of contract, fraudulent misrepresentation, and tortious interference with both contract and prospective economic advantage.[1] Defendants now move the Court to revisit its prior decision regarding personal jurisdiction and to dismiss the First Amended Complaint for failure to state a claim. The Court grants in part and denies in part the CoStar Defendants' motion [44], dismissing Count II for lack of personal jurisdiction but denying the motion to dismiss MG's other claims against them because MG adequately alleges a claim for breach of contract and fraudulent misrepresentation. Because the Court has personal jurisdiction over Atlantic and because MG plausibly alleges that it had a contract and a business relationship with the CoStar Defendants, about which Atlantic knew, the Court denies Atlantic's motion [46]. All Defendants must answer the First Amended Complaint by August 18, 2017.

         BACKGROUND[2]

         MG, an Illinois corporation with its principal place of business in Pleasant Prairie, Wisconsin, designs and constructs tradeshow exhibits. From 2000 to 2014, it did this type of work for exhibits relating to “Apartments.com, ” a real estate website that was owned by Classified Ventures, LLC (“Classified Ventures”).

         In 2014, CoStar, a real estate information company, bought the Apartments.com-related assets and liabilities from Classified Ventures. CoStar is a Delaware corporation with its corporate headquarters in Washington, D.C., Doc. 12-1, Ex. A ¶ 2, operates an office in Chicago, Illinois, and is registered to do business in Illinois.

         CoStar formed Apartments to run the Apartments.com website. Apartments is a Delaware limited liability company, and CoStar is Apartments' sole member. Id. ¶¶ 3-4. Although MG alleges that Apartments' primary office is in Chicago, Apartments' corporate executives, including its Chief Executive Officer, Executive Vice President of Operations, Executive Vice President of Accounting and Finance, and General Counsel and Secretary have “directed, controlled, and coordinated its business from Washington, D.C, ” id. ¶ 7. Apartments' only other corporate officer, its president, resided in Illinois until January 2016. Id. ¶ 9. Between April 2014 and the summer of 2015, Apartments maintained its departments for product design and development, multi-family field sales, finance, and customer service in Chicago. Id. ¶ 11. Apartments then moved the “majority of [its] departments, ” including its finance, marketing, and customer service departments, to Atlanta, Georgia between the summer of 2015 and January 2016. Id. ¶ 12. It is unclear whether any departments remain in Chicago. See id (explaining that majority of departments moved, but not stating that all departments moved).

         In April 2015, Sharon Patenaude, who had formerly worked for Classified Ventures and who was now an employee of CoStar after the Apartments.com purchase, contacted MG to design and build an exhibit for an upcoming conference in Las Vegas, Nevada. Between April 22 and 25, 2015, Patenaude was in San Antonio, Texas for a work project. Doc. 35-1 ¶ 4. During that time, Mark Klionsky, a CoStar employee in Washington, D.C. asked Patenaude to commission an exhibit for display in Las Vegas. Id. ¶ 5. Klionsky communicated a design idea to Patenaude. Id.

         Patenaude then called MG's Pleasant Prairie, Wisconsin headquarters to speak with Betty Kasper of MG. Patenaude wanted MG to design an Apartments.com-branded exhibit, making it “clear that Costar and Apartments would engage [MG] for all phases of work.” Doc. 39 ¶ 34. MG agreed to work on the Apartments.com exhibit at the traditional rates and costs. The parties, however, did not document their agreement in writing. The parties dispute from where Patenaude's call originated: MG presents evidence from Patenaude that she called MG “from her office in Chicago, Illinois” on or before April 28, 2015. Doc. 31-1 ¶ 7. The CoStar Defendants also present evidence from Patenaude that she called MG “[w]hile still in Texas” between April 22 and 25, 2015, Doc. 35-1 ¶ 7, and had reached out to MG by April 24, Doc. 35-2 ¶ 6 & Ex. 3 (noting that Patenaude had “put [MG] on notice”).

         Patenaude drove to MG's Pleasant Prairie office on April 27, 2015. Doc. 35-1 ¶ 7. While in the design phase for the exhibit, Patenaude was MG's primary contact. She worked out of Chicago, but because Pleasant Prairie was so close (“about one hour away”), she “preferred to discuss [the exhibit] in person at the Pleasant Prairie office, ” and “[t]he key discussions about the design . . . occurred at that office.” Id. ¶ 11. In Wisconsin, Patenaude “discussed the draft design” for about an hour. Id. ¶ 7. She raised Klionsky's display ideas, and she also suggested other themes and design necessities. Id. ¶ 8. On May 4, Patenaude visited MG's Pleasant Prairie office again, where she viewed MG's initial design renderings and asked for changes. Id. ¶ 10; Doc. 35-2 ¶¶ 7-8 & Ex. 4.

         On May 7, 2015, MG produced an initial set of design renderings for an Apartments.com exhibit. On May 8, 2015, CoStar employees in Washington, D.C. requested a few changes. Doc. 35-1 ¶ 12. On May 11, 2015, MG revised the design with a second set of design renderings (creating, the “Design Renderings”). MG emailed Patenaude the final copy of the Design Renderings on May 11.

         At some point during the week of May 11, Klionsky called Patenaude and told her that CoStar was not going to work with MG anymore, that another design firm would begin work on the Apartments.com exhibit for the Las Vegas conference, and that Patenaude was not going to work on the Las Vegas conference anymore either. Id. ¶ 13. On May 13, 2015, CoStar told MG that Patenaude was out and that CoStar was “terminating its business relationship with [MG] and that [MG] would not be performing any work for the production phase” for the Las Vegas exhibit. Doc. 39 ¶¶ 43-44. MG then sent an invoice for the design work to Patenaude in Chicago, which stated that no one could copy or use the Design Renderings without MG's approval. Id. ¶ 47; Doc. 39-2; Doc. 31-1 ¶ 11. CoStar paid MG $16, 500 for MG's work on the Design Renderings. Atlantic then built a physical exhibit at the Las Vegas conference (the “Las Vegas Exhibit”), using the Design Renderings “as the basis” for the construction. Doc. 39 ¶ 48.

         Atlantic advertised on its website that it designed the Las Vegas Exhibit. The Design Renderings, however, bore a legend on each page stating “[a]ll designs and ideas . . . are the creative property of [MG], ” id. ¶ 40, the paid invoice stated that the Design Renderings “remain the property of [MG], ” id. ¶ 47, and both the invoice and the Design Renderings stated that they “may not be reproduced in any manner without the express approval of [MG], ” id. ¶¶ 40, 47; Doc. 39-1; Doc. 39-2. MG never received a request from anyone to use the Design Renderings or to construct exhibits based on the Design Renderings.

         LEGAL STANDARDS

         A motion to dismiss under Rule 12(b)(2) challenges whether the Court has jurisdiction over a party. The party asserting jurisdiction has the burden of proof. See Tamburo v. Dworkin, 601 F.3d 693, 701 (7th Cir. 2010). The Court may consider affidavits and other competent evidence submitted by the parties. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). If the Court rules on the motion without a hearing, the plaintiff need only establish a prima facie case of personal jurisdiction. GCIU-Emp'r Ret. Fund v. Goldfarb Corp., 565 F.3d 1018, 1023 (7th Cir. 2009). The Court will “read the complaint liberally, in its entirety, and with every inference drawn in favor of” the plaintiff. Central States, Se. & Sw. Areas Pension Fund v. Phencorp Reinsurance Co., 440 F.3d 870, 878 (7th Cir. 2006) (quoting Textor v. Bd. of Regents of N. Ill. Univ., 711 F.2d 1387, 1393 (7th Cir. 1993)). “[O]nce the defendant has submitted affidavits or other evidence in opposition to the exercise of jurisdiction, ” however, “the plaintiff must go beyond the pleadings and submit affirmative evidence supporting the exercise of jurisdiction.” Purdue, 338 F.3d at 783. Any dispute concerning relevant facts is resolved in the plaintiff's favor. Id. at 782-83.

         A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed.R.Civ.P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (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.” Iqbal, 556 U.S. at 678.

         Rule 9(b) requires a party alleging fraud to “state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b). This “ordinarily requires describing the ‘who, what, when, where, and how' of the fraud, although the exact level of particularity that is required will necessarily differ based on the facts of the case.” AnchorBank, 649 F.3d at 615 (citation omitted). Rule 9(b) applies to “all averments of fraud, not claims of fraud.” Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir. 2007). “A claim that ‘sounds in fraud'- in other words, one that is premised upon a course of fraudulent conduct-can implicate Rule 9(b)'s heightened pleading requirements.” Id.

         ANALYSIS

         I. Revisiting Personal Jurisdiction

         Defendants again challenge whether the Court can exercise personal jurisdiction. The CoStar Defendants move the Court to reconsider its prior order finding personal jurisdiction, and Atlantic moves to dismiss due to lack of personal jurisdiction. MG opposes both arguments. Thus the Court must determine whether the issue of personal jurisdiction is reviewable and, if it is, the proper standard for the Court's review.

         Courts have held that if the plaintiff amends the complaint and adds new allegations after a previous ruling on personal jurisdiction in the plaintiff's favor, then the court can review the issue of personal jurisdiction again. E.g., Hallmark Cards, Inc. v. Monitor Clipper Partners, LLC, 757 F.Supp.2d 904, 911-12 (W.D. Mo. 2010) (addressing personal jurisdiction arguments in motion to dismiss amended complaint, despite previously finding personal jurisdiction over parties based on prior complaint, because ruling on personal jurisdiction was interlocutory in nature and by amending the complaint and adding new allegations, the plaintiffs had further developed facts regarding personal jurisdiction); see also Gregory v. Preferred Fin. Sols., No. 5:11-CV-422 MTT, 2013 WL 5725991, at *9 (M.D. Ga. Oct. 21, 2013) (acknowledging that if the defendants desired to again challenge personal jurisdiction following the plaintiff's planned amended complaint, they could do so by renewing motion to dismiss the amended complaint).

         “A ruling declining to dismiss for lack of personal jurisdiction is, by its nature, interlocutory in nature.” Hallmark Cards, Inc., 757 F.Supp.2d at 911 (citing Dakota Indus. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991)); Abelesz v. OTP Bank, 692 F.3d 638, 661 (7th Cir. 2012) (noting that an order finding personal jurisdiction over a defendant is an interlocutory decision absent final judgment). Courts can revisit an interlocutory decision. See Fed.R.Civ.P. 54(b); see also Hammer & Steel, Inc. v. K & S Engineers, Inc., No. 14-CV-10001, 2017 WL 569122, at *3 (N.D. Ill. Feb. 13, 2017) (addressing request for reconsideration raised by the plaintiff in its response to a motion rather than in a motion for reconsideration). Therefore, reconsideration of a ruling on personal jurisdiction is appropriate. See Mueller ex rel. Mueller v. Mueller, No. 02 C 488, 2002 WL 338874, at *2 (N.D. Ill. Mar. 4, 2002) (reconsidering personal jurisdiction upon further record after previously denying defendant's 12(b)(2) motion to dismiss).

         MG also has filed an amended complaint, which contains new claims and new substantive allegations. An amended complaint “completely supersedes all prior pleadings, and it is well-settled that defendants are entitled to use the same clean slate that plaintiffs are afforded when amendment is permitted.” Vasich v. City of Chicago, No. 11 C 04843, 2013 WL 80372, at *10 (N.D. Ill. Jan. 7, 2013). MG takes advantage of its clean slate, alleging new claims and adding new factual allegations in the First Amended Complaint. And MG provides additional argument in its opposition to Defendants' pending motions, arguing that the Court can exercise general jurisdiction even though MG did not devote attention to that argument in response to Defendants' motions to dismiss MG's original complaint.

         The Court finds no issue with Rule 12(g)(2), which “requires litigants to consolidate certain dismissal arguments in a single motion.” Ennenga v. Starns, 677 F.3d 766, 773 (7th Cir. 2012). Under Rules 12(g) and 12(h), a party who files a Rule 12 motion may not file another Rule 12(b)(2) motion that raises a defense or objection that could have been raised before but was not. Id.; see also Fed. R. Civ. P. 12(h)(1) (explaining that motions under Rules 12(b)(2)-(5) are waived if not filed initially with other motions required by Rule 12(g)(2)). But courts have interpreted these rules as bars to “piecemeal litigation of defenses.” E.g., GlaxoSmithKline Biologicals, S.A. v. Hospira Worldwide, Inc., No. 13-CV-04346, 2013 WL 5966918, at *2 (N.D. Ill. Nov. 7, 2013) (analyzing Ennenga). Here, there is nothing piecemeal about the sequence of Defendants' defenses, and it would not make sense to bar a new 12(b)(2) motion. After the Court dismissed MG's original complaint without prejudice (after first determining that the Court had personal jurisdiction over Defendants based on the dismissed claims), MG filed the First Amended Complaint, raising new claims and pleading new facts that will be reviewed for the first time under a personal jurisdiction analysis. The Court sees no bar to review of personal jurisdiction under the motion to dismiss standard.

         Still, the parties debate the proper method for addressing personal jurisdiction as it relates to the First Amended Complaint-as discussed, MG, CoStar, and Apartments want the Court to review its prior order on personal jurisdiction for error under the motion for reconsideration standard, and Atlantic asks the Court to review personal jurisdiction under the motion to dismiss standard. Some courts have chosen the motion for reconsideration standard after the denial of a Rule 12(b)(2) motion to dismiss the prior complaint, treating the defendant's second attempt to challenge personal jurisdiction as a motion for reconsideration because the Federal Rules of Civil Procedure bar a successive Rule 12(b)(2) motion. See Allen ex rel. Allen v. Devine, 726 F.Supp.2d 240, 257-58 (E.D.N.Y. 2010) (finding that the defendant's second motion to dismiss pursuant to 12(b)(2) had to be filed as a motion for reconsideration because Rules 12(g)(2) and 12(h)(1) prohibited another Rule 12(b)(2) motion, noting that the plaintiff did not amend claims against the moving defendant); see also Mueller, 2002 WL 338874, at *2 (addressing the defendant's motion to reconsider personal jurisdiction after previously denying the defendant's motion to dismiss for lack of personal jurisdiction). Other courts have chosen the motion to dismiss standard, considering a defendant's second challenge to personal jurisdiction following an amended complaint as a Rule 12(b)(2) motion to dismiss. See, e.g., Hallmark Cards, Inc., 757 F.Supp.2d at 911 (acknowledging interlocutory review of prior finding of personal jurisdiction over defendants but still treating challenge to personal jurisdiction as a Rule 12(b)(2) motion to dismiss rather than as a motion for reconsideration).

         The Court determines that personal jurisdiction should be reviewed under the motion to dismiss standard. The Court does not find that the Federal Rules of Civil Procedure bar a Rule 12(b)(2) motion in this situation: the First Amended Complaint wiped clean the parties' procedural positions and Defendants thus have an opportunity to raise new Rule 12(b)(2) arguments. The First Amended Complaint also changes the grounds on which the Court previously ruled on personal jurisdiction; MG adds new facts and claims to the amended complaint, which the Court did not consider in its prior analysis. The Court's truncated its analysis of personal jurisdiction regarding the original complaint's state law claims. Finally, practicality and judicial efficiency also suggest that the Court should fully re-analyze personal jurisdiction rather than just review its prior ruling for error: while the CoStar Defendants ask for reconsideration, Atlantic does not (and explicitly refused to partake in such an analysis when suggested by MG). ...


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