Arthur Young & Co. v. Bremer

• Decision Date: 20 April 1990
• Docket Number: No. 1-89-0748,1-89-0748
• Citation: 143 Ill.Dec. 736,197 Ill.App.3d 30,554 N.E.2d 671
• Parties: , 143 Ill.Dec. 736 ARTHUR YOUNG & COMPANY and Arthur Young United States, Plaintiffs-Appellants/Cross-Appellees, v. Christopher D. BREMER, David W. Glogowski, Raymond B. Jones, Gary R. Kerslake, John L. Knapp, Phillip J. Mihok, William R. Muns, James D. Read, Randall E. Smith, Alvin Larry Thomas, William K. Whaling and Nicholas H. Yoo, Defendants-Appellees/Cross-Appellants.
• Court: United States Appellate Court of Illinois

Page 671

554 N.E.2d 671

197 Ill.App.3d 30, 143 Ill.Dec. 736

ARTHUR YOUNG & COMPANY and Arthur Young United States Plaintiffs-Appellants/Cross-Appellees, v. Christopher D. BREMER, David W. Glogowski, Raymond B. Jones Gary R. Kerslake, John L. Knapp, Phillip J. Mihok, William R. Muns, James D. Read, Randall E. Smith, Alvin Larry Thomas, William K. Whaling and Nicholas H. Yoo Defendants-Appellees/Cross-Appellants.

No. 1-89-0748.

Appellate Court of Illinois First District, Sixth Division.

April 20, 1990.

Arthur Young & Co., New York City (Carl D. Liggio, of counsel), McCullough, Campbell & Lane, Chicago (Dennis L. Frostic, Michael C. Cook, Steven R. Smith, of counsel), for plaintiffs-appellants/cross-appellees.

Grippo and Elden, Chicago (Gary M. Elden, John R. McCambridge and Katherine R. Rakowsky, of counsel), for defendants-appellees/cross-appellants.

Justice McNAMARA delivered the opinion of the court:

This appeal arises out of an action for declaratory and injunctive relief and for damages, brought in the circuit court of Cook County by plaintiff, Arthur Young & Company and Arthur Young United States, against twelve former employees. The trial court dismissed the action against eight of the defendants, Gary R. Kerslake, Phillip J. Mihok, Raymond B. Jones, James D. Read, Randall E. Smith, Alvin Larry Thomas, William K. Whaling and Nicholas H. Yoo, for lack of personal jurisdiction, and dismissed the action against the remaining four defendants, Christopher B. Bremer, David W. Glogowski, William R. Muns and John L. Knapp, under section 2-619(a)(3) of the Illinois Code of Civil Procedure. (Ill.Rev.Stat.1987, ch. 110, par. 2-619(a)(3).) Bremer, Glogowski, Knapp and Muns additionally moved to dismiss on forum non conveniens grounds, but this motion was denied. Plaintiff appeals, contending that the trial court's orders of dismissal were improper. Bremer, Knapp, Glogowski and Muns cross appeal, alleging that the trial court's denial of their motion to dismiss on forum non conveniens grounds was error.

Defendants are all former employees of plaintiff, a national partnership headquartered in New York. Upon accepting employment with plaintiff, some of the defendants signed an employment agreement with plaintiff. These agreements contained a restrictive covenant purporting to bar them, for a period of two years after their termination, from

"directly or indirectly solicit[ing] or provid[ing], without the consent of the firm, any professional services such as those provided by the firm for anyone who was a client of the firm anytime during the 12 months prior to your leaving the firm and for whom you provided any service as an employee of the firm during the prior five years * * *."

During their employment, each defendant provided management consulting services to one or more of plaintiff's clients. While employed by plaintiff, defendants worked almost exclusively at their clients' places of business, which for the most part were outside of Illinois. Each defendant was assigned to one of plaintiff's operating groups known as Midwest Management Consulting Group ("MMCG"). MMCG was based in Illinois. During their employment, defendants' residences were as follows:

                Smith            California
                Whaling          California
                Jones            Texas
                Read             Texas
                Thomas           Texas
                Muns             Texas
                Mihok            Arizona
                Kerslake         Wisconsin
                Yoo              Michigan
                Bremer           Illinois
                Glogowski        Illinois
                Knapp            Illinois
                

Most of the defendants spent a significant portion of their time working on a project in California for Northrop Corporation's B-2 Division. Northrop is an aerospace and defense contractor which operates through eight independent divisions. The B-2 Division is headquartered in Pico Rivera, California. Defendants' work for Northrop involved an information systems consulting project.

Each of the defendants resigned from plaintiff between May and December 1988. After defendants resigned, plaintiff assigned Richard Van Kirk, a partner in its Los Angeles office, to supervise the completion of the B-2 project. Plaintiff initially insisted that Northrop could not ask any defendant to continue working on the B-2 project after they left plaintiff's employ. Northrop B-2 employees, however, advised plaintiff that it was imperative to keep the team intact in order to insure success. Plaintiff, through its Los Angeles office, entered into subcontracting arrangements with Read, Thomas, Whaling and Jones. The subcontracting arrangements expired on December 31, 1988.

Each of the defendants began to work for Technology Solutions Company ("TSC"), a Chicago based firm. In October 1988, TSC responded to Northrop Electronics Division's request for proposals for certain management consulting services by submitting a bid. Plaintiff, through its Los Angeles office, also bid on the Northrop project. In late December, Northrop awarded the contract to TSC. All Northrop employees having knowledge of the bidding process, contract negotiations and the work performed to date are located in California.

On January 4, 1989, defendants filed a suit against plaintiff in California state court. The complaint was served on plaintiff later that day. Defendants sought a declaratory judgment that plaintiff's restrictive covenants could not be enforced to stop them from working in California for Northrop. Plaintiff answered the complaint and filed a counterclaim. A discovery supervision and scheduling order was entered, and defendants have deposed three witness pursuant to it. Subsequently, defendants and TSC filed an amended complaint. Plaintiff has moved to dismiss the amended complaint in favor of New York litigation which it filed against TSC.

Also on January 4, 1989, plaintiff filed a suit against Muns in Illinois. Plaintiff did not serve the complaint. Rather, after receiving notice of the California suit, plaintiff filed its first amended complaint, naming as defendants the twelve California plaintiffs. Plaintiff's action seeks an injunction preventing defendants from working in California for Northrop. Plaintiff subsequently filed second, third and fourth amended complaints, each adding new claims which either modified or deleted old ones.

Plaintiff appeals the trial court's orders of dismissal. We first will address the propriety of the order dismissing eight of the twelve defendants for lack of personal jurisdiction.

Plaintiff contends that each of the eight defendants who raised jurisdictional objections engaged in significant activity in Illinois while under the employ of plaintiff and subsequently, while under the employ of TSC. Plaintiff maintains that an analysis of the contacts between Illinois and each of these defendants discloses conduct that is more than sufficient to subject the defendants to personal jurisdiction in Illinois under the long-arm statute. Ill.Rev.Stat.1987, ch. 110, par. 2-209.

The Illinois long-arm statute provides in relevant part as follows:

"(a) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his or personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any such acts:

(1) The transaction of any business within this State;

(2) The commission of a tortious act within this State." (Ill.Rev.Stat.1987, ch. 110, par. 2-209(a).)

The long-arm statute is applicable only when the cause of action arises from the activity which serves as the basis of jurisdiction. (Ill.Rev.Stat.1987, ch. 110, par. 2-209(c).) The purpose of the Illinois long-arm statute is to assert jurisdiction over nonresidents to the extent permitted by the due process clause. (Green v. Advance Ross Electronics Corp. (1981), 86 Ill.2d 431, 56 Ill.Dec. 657, 427 N.E.2d 1203.) Thus, the reach of the long-arm statute may lie within or may touch, but cannot extend outside, the fence marked out by due process requirements as defined in International Shoe Co. v. Washington (1945), 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95. If a party's actions are not embraced by the long-arm statute, application of the tests the Supreme Court has fashioned to determine whether the assertion of jurisdiction by a State over a nonresident is prohibited by due process safeguards is unnecessary. (Green v. Advance Ross Electronics Corp.) Accordingly, our analysis first will consider whether each defendant falls within the ambit of the long-arm statute.

Initially we note that when a defendant contests personal jurisdiction, the party asserting it has the burden of demonstrating a prima facie case that jurisdiction exists under the long-arm statute. (People v. Parsons Co. (1984), 122 Ill.App.3d 590, 78 Ill.Dec. 74, 461 N.E.2d 658.) Here, plaintiff alleges that each defendant either transacted business or committed tortious acts in Illinois within the meaning of the long-arm statute.

Generally, "transaction of business" within the meaning of the long-arm statute means business in the commercial sense. (Carlson v. Carlson (1986), 147 Ill.App.3d 610, 101 Ill.Dec. 384, 498 N.E.2d 708.) Thus, plaintiff's claim must be one which lies in the wake of commercial activities by which defendants submitted to the jurisdiction of Illinois courts. (See, e.g., Financial Management Services, Inc. v. Sibilsky & Sibilsky, Inc. (1985), 130 Ill.App.3d 826, 86 Ill.Dec. 100, 474 N.E.2d 1297; Loggans v. Jewish Community Center (1983), 113 Ill.App.3d 549, 69 Ill.Dec. 484, 447 N.E.2d 919.) Further, plaintiff must allege that some definite act by defendants occurred in Illinois. See Mott Corp. v. Montanya (1986), 141 Ill.App.3d 943, 96 Ill.Dec. 284, 491 N.E.2d 98.

A defendant transacts business in Illinois when substantial performance of contractual duties is to be rendered in Illinois or when a defendant invokes the...