Chemical Waste Management, Inc. v. Sims

• Decision Date: 12 December 1994
• Docket Number: No. 94 C 1964.,94 C 1964.
• Parties: CHEMICAL WASTE MANAGEMENT, INC., a Delaware Corporation, Plaintiff, v. James R. SIMS; James T. McVey; Adam J. Liff; Jan Liff; Judy Liff, custodian for Zachary Liff; Judy Liff, custodian for Terence Liff; Darren Liff; Daniel Liff; James C. Bow; Abe Freeman; Elizabeth Baisley; Gary Baisley; Kim Baisley-Wyatt; and Mike Schweitzer, Defendants.
• Court: U.S. District Court — Northern District of Illinois

870 F. Supp. 870

CHEMICAL WASTE MANAGEMENT, INC., a Delaware Corporation, Plaintiff, v. James R. SIMS; James T. McVey; Adam J. Liff; Jan Liff; Judy Liff, custodian for Zachary Liff; Judy Liff, custodian for Terence Liff; Darren Liff; Daniel Liff; James C. Bow; Abe Freeman; Elizabeth Baisley; Gary Baisley; Kim Baisley-Wyatt; and Mike Schweitzer, Defendants.

No. 94 C 1964.

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

December 12, 1994.

Kenneth J. Gumbiner, Randall W. Reavis, Patton, Boggs & Blow, Greensboro, NC, James T. Hynes, Law Office of James T. Hynes, Chicago, IL, for plaintiff.

James A. Cherney, Andrew E. Skopp, Latham & Watkins, Chicago, IL, for defendants.

MEMORANDUM OPINION AND ORDER

BUCKLO, District Judge.

Before this Court is defendants' motion to dismiss this action for lack of jurisdiction and improper venue pursuant to FED.R.Civ.P. 12(b), or, in the alternative, to transfer the action to the Middle District of Tennessee pursuant to 28 U.S.C. § 1404(a). For the reasons stated herein, this Court denies defendants' motion.

Facts

In deciding a motion to dismiss for lack of personal jurisdiction, a court must accept all undenied factual allegations and resolve all factual disputes in favor of the plaintiff. Diamond Mortgage Corp. of Illinois v. Sugar, 913 F.2d 1233, 1245 (7th Cir. 1990), cert. denied, 498 U.S. 1089, 111 S.Ct. 968, 112 L.Ed.2d 1054 (1991) (citing Saylor v. Dyniewski, 836 F.2d 341, 342 (7th Cir.1988); Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d 1209, 1215 (7th Cir.1984)).

Diversified Scientific Services, Inc. ("DSSI") is a Tennessee corporation engaged in the business of processing mixed liquid wastes and providing on-site environmental remediation services at its plant in Kingston, Tennessee. Chemical Waste Management ("CWM") is a Delaware corporation with its headquarters and principal place of business in Oak Brook, Illinois. Chem-Nuclear Environmental Services ("CNES") and Chem-Nuclear Systems, Inc. ("CNSI") are CWM subsidiaries incorporated in Delaware with their principal place of business in Columbia, South Carolina.

Prior to February, 1991, CNSI officials had considered DSSI as a possible acquisition candidate and had discussed the possibility of acquisition with DSSI's management. In February, 1991, a CNSI employee informed CWM that it should consider the acquisition of DSSI on behalf of CWM or one of its subsidiaries. On May 13, 1991, Michael Lang ("Mr. Lang"), a CWM Vice President, visited the DSSI facility and informed two DSSI shareholders, James Sims and James McVey, that he was visiting DSSI on behalf of CWM and its subsidiaries about a possible acquisition. Mr. Lang reported back to CWM management that further investigation of DSSI was warranted, and recommended that CWM issue a letter of intent to seriously consider the acquisition of DSSI. On May 23, 1991, CWM issued a letter of intent to the DSSI shareholders. Between May and August, 1991, employees from CWM and CNES visited DSSI to inspect its facility in Kingston, Tennessee.

During July and August 1991, CWM's attorney, Jeffrey Everett ("Mr. Everett") exchanged several drafts of a proposed Stock Purchase Agreement ("SPA") with DSSI's attorney, Allen Lentz ("Mr. Lentz"). However, despite the fact that the SPA had passed through several drafts, there was no final agreement as to several important terms of the agreement, including price, warranties, representations and indemnities. On September 4, 1991, Adam Liff ("Mr. Liff'), one of the DSSI shareholders, and Mr. Lentz met with Mr. Lang and Mr. Everett at CWM's corporate offices in Oak Brook, Illinois to negotiate the unresolved terms of the SPA. At that meeting, the parties agreed upon a final purchase price and finalized the representations, warranties, and indemnities.

On September 6, 1991, Mr. Everett sent Mr. Lentz and Mr. Liff a revised draft of the SPA which incorporated the items agreed upon two days earlier at the Oak Brook meeting. The final SPA, dated September 19, 1991, was prepared by Mr. Everett and signed by Bruce Tobecksen, CWM's Chief Financial Officer, in Oak Brook, and was subsequently forwarded to Mr. Lentz in Nashville for signature of the various stockholders. Under the terms of the SPA, CWM purchased one hundred percent of the issued and outstanding shares of capital stock in DSSI. On November 1, 1991, Mr. Lang and Mr. Everett visited the law offices of Mr. Lentz in Nashville for the purpose of delivering closing documents.

Since the closing, CWM has owned and managed DSSI. During this period, CWM has allegedly spent over ten million dollars to bring the DSSI facility into compliance with applicable regulations and to pay fines for non-compliance. On March 29, 1994, CWM brought this action for damages and declaratory relief against the former shareholders of DSSI, alleging that the defendants breached the express contractual warranties contained in the SPA. On May 18, 1994, defendants brought this motion to dismiss for lack of personal jurisdiction and improper venue pursuant to FED.R.CIV.P. 12(b), or, in the alternative, for a transfer of venue to the Middle District of Tennessee pursuant to 28 U.S.C. § 1404(a). On November 3, 1994, the case was reassigned to this Court.

Analysis

For purposes of this motion, the Court accepts plaintiff's argument that Mr. Liff acted as an agent of defendant shareholders in negotiating CWM's acquisition of DSSI. This finding is buttressed by the affidavits of defendants Elizabeth and Gary Baisley, James C. Bow, and others, all of which assert that "this transaction was principally negotiated by Adam J. Liff, who acted on behalf of the shareholders as Sellers' Representative." Affidavit of Elizabeth Baisley, p. 1, ¶ 3; Affidavit of Gary Baisley, p. 1, ¶ 3; Affidavit of James C. Bow, p. 1, ¶ 3. Although defendants' reply brief insists that Mr. Liff's role was limited to that of a "lead negotiator," the conflict must be resolved in plaintiff's favor for purposes of this motion. See Vena v. Western General Agency, Inc., 543 F.Supp. 779, 783 (N.D.Ill.1982). As such, defendants are subject to the personal jurisdiction of this Court to the extent that this Court may properly exercise jurisdiction over Mr. Liff. See Vena v. Western General Agency, Inc., supra, 543 F.Supp. at 783-84; Scovill Manufacturing Co. v. Dateline Electric Co., 461 F.2d 897, 900 (7th Cir.1972); Petty v. Cadwallader, 135 Ill.App.3d 695, 90 Ill.Dec. 518, 482 N.E.2d 225 (4th Dist.1985).

I. Jurisdiction

Jurisdiction in this case is based on diversity of citizenship. In a diversity action, a federal district court in Illinois has personal jurisdiction over a nonresident defendant only if an Illinois state court would have personal jurisdiction. Michael J. Neuman & Associates, Ltd. v. Florabelle Flowers, Inc., 15 F.3d 721, 724 (7th Cir.1994) (citing Dehmlow v. Austin Fireworks, 963 F.2d 941 (7th Cir.1992)). On a 12(b)(2) motion to dismiss, the burden of proving personal jurisdiction rests with the party asserting jurisdiction, the plaintiff in this case. Publications International, Ltd. v. Simon & Schuster, Inc., 763 F.Supp. 309, 310 (N.D.Ill.1991); Wysnoski v. Millet, 759 F.Supp. 439, 442 (N.D.Ill.1991) (citing Saylor v. Dyniewski, supra, 836 F.2d at 342).

A. Illinois Long-Arm Statute

Prior to September, 1989, a nonresident defendant could be sued in Illinois only if he or she (1) performed one of the acts enumerated in the Illinois long-arm statute; and (2) established minimum contacts with Illinois which satisfy due process requirements. Mors v. Williams, 791 F.Supp. 739, 741 (N.D.Ill.1992) (citing FMC Corp. v. Varonos, 892 F.2d 1308, 1310 (7th Cir.1990)). Effective September 7, 1989, however, Illinois amended its long-arm statute to include a new "catch-all" provision, which provides that "a court may also exercise jurisdiction on any other basis now or hereafter permitted by the Illinois Constitution and the Constitution of the United States." 735 ILCS 5/2-209(c). This "catch-all" provision renders the first inquiry (i.e., did the defendant perform one of the enumerated acts under the long-arm statute) unnecessary because jurisdiction under the Illinois long-arm statute is now co-extensive with the limits of due process. Dehmlow v. Austin Fireworks, supra, 963 F.2d at 945; FMC Corp. v. Varonos, supra, 892 F.2d at 1311 n. 5; Mors v. Williams, supra, 791 F.Supp. at 741; Damian Services Corp. v. PLC Services, Inc., 763 F.Supp. 369, 371 (N.D.Ill.1991) (citations omitted). Accordingly, this Court must ascertain whether the exercise of jurisdiction over these defendants satisfies the requirements of due process. This determination requires an analysis under both the United States and Illinois Constitutions. Mors v. Williams, supra, 791 F.Supp. at 741 (citing Rollins v. Ellwood, 141 Ill.2d 244, 152 Ill.Dec. 384, 398, 565 N.E.2d 1302, 1316 (1990)); Damian Services Corp. v. PLC Services, Inc., supra, 763 F.Supp. at 371 (citation omitted).¹

B. Federal Due Process

Under the Due Process Clause of the Fourteenth Amendment, a state court may exercise personal jurisdiction over a nonresident defendant only if the defendant has "certain minimum contacts with the forum state such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940)); Michael J. Neuman & Associates, Ltd. v. Florabelle Flowers, Inc., supra, 15 F.3d at 725. In determining the reasonableness of forcing a nonresident defendant to defend in the forum state, the critical inquiry is whether there is "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Asahi Metal Industry Co., Ltd. v. Superior...