Avon Equity Holdings, LLC v. Unity Ultrasonic Fixation, LLC
| Decision Date | 26 March 2013 |
| Docket Number | CASE NO. 12-CV-12-WDS |
| Parties | AVON EQUITY HOLDINGS, LLC, WILLIAM F. SHEA, LLC, Plaintiffs, v. UNITY ULTRASONIC FIXATION, LLC, PETER M BONUTTI, BORIS P BONUTTI, DEAN A KREMER, Defendants. |
| Court | U.S. District Court — Southern District of Illinois |
Before the Court is defendants' Unity Ultrasonic Fixation, LLC ("Unity"), Peter M. Bonutti, Boris P. Bonutti, and Dean A. Kremer's (collectively "defendants") motion to dismiss this action for improper venue (Doc. 4.), to which plaintiffs Avon Equity Holdings, LLC, ("Avon"), and William F. Shea, LLC, ("Shea, LLC"), collectively ("plaintiffs") have filed a response (Doc. 14). Also before the Court is the parties' joint motion for a limited stay (Doc. 31), in which the parties seek a stay of this lawsuit until the completion of trial in a related action pending in the United States District Court for the Southern District of Ohio. The Court will address each motion, in turn, below.
Plaintiffs filed this action seeking, among other things, their alleged rightful compensation for services provided to the defendants. Plaintiffs and defendants agreed that in return for William Shea's services to defendants, plaintiff Avon received a 17.4% ownership interest in Unity. Plaintiffs claim that this arrangement was based upon a mutual agreement of all parties, as reflected in a document entitled "General Terms of Understanding 10/25/02," and a Consultant Agreement executed on August 21, 2003, and made effective as of March 1, 2002. Defendantsclaim, however, that a Unity Operating Agreement, which the Court will refer to as the "2004 Document" governs their agreement. Plaintiffs assert they never agreed to any version of a Unity Operating Agreement which was proposed by defendants. It is the 2004 Document under which defendants claim to have rightfully redeemed Avon's interest in Unity, and the same document which contains the forum selection clause at issue now. Plaintiffs assert that the 2004 Document was never a valid agreement between the parties.
Plaintiffs' complaint consists of seven separate counts, including, in general terms: (I) breach of fiduciary duties; (II) aiding and abetting breach of fiduciary duties; (III) promissory estoppel, requesting the Court to enforce Unity and Peter Bonutti's alleged promise to compensate Shea, LLC for its services through Avon's ownership interest in Unity; (IV) unjust enrichment, claiming that defendants have been unjustly enriched at Shea, LLC's expense; (V) a request for declaratory relief to eliminate any uncertainty regarding the validity and effectiveness of the 2004 Document; (VI) a request for declaratory relief to resolve the controversy between the parties concerning plaintiffs' rights to inspect the accounts, books, and records of Unity and the Bonutti Entities;1 and (VII) a request for an accounting of the accounts, books, and records of Unity and the Bonutti Entities.
Plaintiffs request judgment against defendants and demand the following relief: (a) reinstatement of Avon's rightful interest in Unity; (b) the rightful value of Avon's interest in Unity; (c) a constructive trust holding Avon's interest in Unity and/or other funds; (d) compensatory damages in an amount in excess of $75,000, to be established at trial; (e) punitive damages in an amount in excess of $75,000, to be established at trial; (f) a declaration that the 2004 Document is not and never was an effective or valid operating agreement for Unity; (g) a declaration that plaintiffs are entitled to an inspection of the accounts, books, and records of Unityand the Bonutti Entities; (h) an Order requiring Unity to permit plaintiffs to inspect the accounts, books, and records of Unity and the Bonutti Entities; (i) an accounting of the accounts, books, and records of Unity and the Bonutti Entities; (j) plaintiffs' attorneys' fees and costs of this action; and (k) all other appropriate relief.
In their motion to dismiss for improper venue, defendants argue that plaintiffs' claims are subject to the forum selection clause contained in the 2004 Document, requiring their claims to be brought in Chicago, Illinois. Plaintiffs counter that their claims are not subject to this clause because it, and the 2004 Document containing it were neither agreed upon, nor signed by all of the members of Unity, and the document was never a valid or effective operating agreement of Unity. Further, plaintiffs claim they are not seeking any relief pursuant to the terms of the 2004 Document.
Before proceeding to the merits of the motion, the Court must consider a number of threshold issues. To begin with, the Seventh Circuit has determined that "[a] lack of venue challenge, based upon a forum-selection clause, is appropriately brought as a Rule 12(b)(3) motion to dismiss." Continental Ins. Co. v. M/V Orsula, 354 F.3d 603, 606-07 (7th Cir. 2003). Accordingly, defendants' venue challenge was appropriately filed as a 12(b)(3) motion, as opposed to a motion to dismiss for failure to state a claim or for lack of subject matter jurisdiction.
Latino Food Marketers, LLC v. Ole Mexican Foods, Inc., No. 03-C-0190-C, 2003 WL 23220142, at *2 (W.D. Wis. Aug. 20, 2003). As one district court reasoned, the personal jurisdiction standard is applicable to venue challenges "because venue and personal jurisdiction are similar insofar as a defendant may waive the plaintiff's failure to meet either requirement." Id. (citing Reed v. Brae Railcar Management, Inc., 727 F.Supp. 376, 377 (N.D. Ill. 1989)).
Under the particular circumstances of this case, however, the burden of proof inquiry is more complex. Defendants claim that the 2004 Document, which contains a forum selection clause requiring claims to be brought in Chicago, Illinois, was a binding agreement between the parties, notwithstanding the lack of William Shea's signature, because his signature was not required to create an LLC operating agreement under Delaware law. Plaintiffs claim that they never agreed to the terms of the 2004 Document, and it did not create a binding agreement between them. In this respect, the essential inquiry is whether the 2004 Document was a contract between the parties, and ultimately, the venue determination turns on this issue.
In a factually similar case, in which the defendants claimed that plaintiff's suit was subject to a forum selection clause included in a contract that was unsigned, and under which the plaintiffwas not seeking relief, the Western District of Wisconsin determined that the defendant bore the burden to show that it had entered into a contract with the plaintiff. Latino Food Marketers, LLC v. Ole Mexican Foods, Inc., No. 03-C-0190-C, 2003 WL 23220141, at *2 (W.D. Wis. Nov. 24, 2003), affirmed after trial, 407 F.3d 876, 880-81 (7th Cir. 2005). In that case, as in the one before this Court, the critical question was not the validity of the venue clause, but the existence of a contract. Id. Additionally, in that case, as in this one, the laws of both states which were potentially applicable provided that "a party seeking to rely on a contract must prove the existence of the contract." Id.; see, e.g., Reese v. Forsythe Mergers Group, Inc., 682 N.E.2d 208, 213 (Ill. App. Ct. 1997) (); Montgomery v. Achenbach, C.A. No. 04C-11-048 WLW, 2007 WL 1784080, at *2 (Del. Super. May 17, 2007) ().
The Seventh Circuit agreed with the Latino Food Marketers Court that the burden was appropriately placed on the defendant with respect to this issue. Latino Food Marketers, LLC v. Ole Mexican Foods, Inc., 407 F.3d 876, 880-81 (7th Cir. 2005). Accordingly, this Court concludes that the defendants bear the burden of proof for the purposes of this motion.
The Court also notes, however, that the existence of a contract is a question of fact, and under these circumstances, is an issue intertwined with the merits of the case. See Lexington Insurance Co. v. DSC Logistics, No. 09-cv-7003, 2010 WL 1910310, at *3 (N.D. Ill. May 6, 2010). In their complaint, plaintiffs seek a declaration from the Court regarding the status of the 2004 Document. Furthermore, the defendants' actions in redeeming plaintiffs' interests in Avon, the crux of the lawsuit, were, according to defendants, performed in accordance with the terms of the 2004 Document. In other words, whether the 2004 Document is binding on the parties is a pivotal determination.
At this point in the proceeding, the relevant facts are in dispute, and it is unclear who the ultimate trier of fact will be. Plaintiff has not requested trial by jury, and "[e]ven should...
To continue reading
Request your trial