First Financial Leasing Corp. v. Hartge

• Decision Date: 21 September 1987
• Docket Number: No. 87 C 1041.,87 C 1041.
• Parties: FIRST FINANCIAL LEASING CORPORATION, Plaintiff, v. JoAnn HARTGE, individually and d/b/a JoAnn's Concessions, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

671 F. Supp. 538

FIRST FINANCIAL LEASING CORPORATION, Plaintiff, v. JoAnn HARTGE, individually and d/b/a JoAnn's Concessions, et al., Defendants.

No. 87 C 1041.

United States District Court, N.D. Illinois, E.D.

September 21, 1987.

George W. Hamman, Marvin N. Benn, Wayne H. Michaels, Dawn M. Cassie, Adler & Adler, Chicago, Ill., for plaintiff.

Mitchell Edelson, Larry Carlson, Mitchell, Edelson & Assoc., Lawrence M. Gavin, Brain Martin, Bell, Boyd & Lloyd, George W. Spellmire, Thomas P. McGarry, Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago, Ill., Richard R. Veit, Florissant, Mo., Thomas C. Croft, St. Louis, Mo., for defendants.

MEMORANDUM OPINION AND ORDER

WILLIAM T. HART, District Judge.

Plaintiff First Financial Leasing Corporation brought this action against seventeen corporate and individual defendants, alleging violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO") (Count I), violations of the Illinois Consumer Fraud and Deceptive Practices Act, Ill.Rev.Stat. (1986), ch. 121½, § 270a (Count II) and common law fraud (Count III). Of the original defendants, a number have settled with plaintiff, one is in default, and several others have not yet filed their appearances. Four of the remaining defendants, Richard N. Zahnow, Eveready Heating and Sheet Metal, Inc. ("Eveready"), Ralph L. Menees and Thomas C. Croft, have filed motions to dismiss and/or transfer for lack of jurisdiction and/or improper venue. For the reasons stated below, this case is transferred to the United States District Court for the Eastern District of Missouri pursuant to 28 U.S.C. § 1406(a).

FACTS

The complaint alleges that defendants formed and participated in a "confidence scheme" according to which certain defendants induced plaintiff to enter into an agreement to purchase non-existent "funnel cake" machines from defendant Eveready and another defendant who purportedly manufactured the equipment, and to lease back the machines to the other individual defendants as purportedly legitimate lessees. Defendant Zahnow is the president of Eveready, defendant Croft was an officer and director of the other defendant manufacturer, and defendant Menees was one of the alleged lessees. Like all of the defendants in the case except for one, who resides in Georgia, all four of the defendants who have brought these motions are either Missouri corporations or residents of Missouri. Plaintiff is an Illinois corporation. Plaintiff claims that the purchase and leaseback transactions were initiated by defendants, who provided plaintiff with both corporate and personal financial information in Illinois through an alleged broker, T.E. Mattingly. After receiving credit approval, plaintiff alleges, the individual defendants signed the equipment leases, and certain other defendants signed written guarantees for the payment of the leases.

According to plaintiff, the defendant lessees were paid varying amounts in exchange for providing their credit information to fraudulently obtain the leases, and sent signed, written acknowledgements that they had received the equipment. Other defendants would then purportedly issue invoices to plaintiff for payment. Plaintiff complains that it entered into a total of six purchase and leaseback transactions, sustaining approximately $75,000 in damages, and that it was forced to reacquire the leases when they went into default.

Defendants deny any participation whatever in the alleged fraudulent scheme. They insist that neither Mattingly nor anyone else was acting as their agent when purportedly negotiating and carrying out the transaction, and that any signatures on documents involved in the transaction purporting to be theirs are, in fact, forgeries. Zahnow, Eveready, Menees and Croft have each moved to dismiss, or alternatively, for transfer, arguing variously that this court lacks personal jurisdiction over them under both § 1965(b) of RICO, 18 U.S.C. § 1965(b) and the Illinois long arm statute, Ill.Rev.Stat. (1986), ch. 110, § 2-209,¹ and that venue in this district is improper under both § 1965(a) of RICO, 18 U.S.C. § 1965(a) and the general venue statute, 28 U.S.C. § 1391(b). Defendants also argue that the written consent to jurisdiction and venue provisions contained in the guarantees neither confer jurisdiction nor establish that venue is proper in this district, since they were never actually signed by defendants.

DISCUSSION

Personal Jurisdiction

The burden of demonstrating the existence of personal jurisdiction rests on plaintiff as the party asserting jurisdiction. O'Hare International Bank v. Hampton, 437 F.2d 1173, 1176 (7th Cir.1971). In resolving factual disputes on a motion to dismiss for lack of personal jurisdiction, the party asserting that jurisdiction is proper is entitled to the favorable resolution of all relevant factual disputes. Neiman v. Rudolf Wolff & Co., 619 F.2d 1189, 1190 (7th Cir.), cert. denied, 449 U.S. 920, 101 S.Ct. 319, 66 L.Ed.2d 148 (1980); United Steelworkers of America, AFL-CIO v. Fermet Reclamation, Ltd., 627 F.Supp. 1213, 1215 n. 8 (N.D.Ill.1986).

The parties may file affidavits relative to a motion to dismiss, and ordinarily, when they do, all conflicts in such affidavits must be resolved in favor of the plaintiff. Jacobs/Kahan & Co. v. Marsh, 740 F.2d 587, 589 (7th Cir.1984). However, where an affidavit refutes the allegations of the complaint, the affidavit must be taken as true unless the plaintiff submits counteraffidavits which dispute the representations made. Professional Group Travel, Ltd. v. Professional Seminar Consultants, Inc., 136 Ill.App.3d 1084, 91 Ill. Dec. 656, 659-61, 483 N.E.2d 1291, 1294-96 (2d Dist.1985); Kutner v. DeMassa, 96 Ill. App.3d 243, 51 Ill.Dec. 723, 421 N.E.2d 231 (1st Dist.1981).

In support of its claim that jurisdiction exists over defendants under the long arm statute, plaintiff points to the correspondence, financial information, leases and guarantees purportedly sent into Illinois by defendants, as well as the telephone and other contacts made in Illinois by Mattingly (who, plaintiff claims, was an agent of defendants) and Hartge (one of Eveready's employees). Plaintiff also claims that defendant Menees later signed and mailed to plaintiff at least one check in connection with the transaction which was drawn on his own bank account. Plaintiff also emphasizes that it was defendants who initiated the transaction by soliciting the lease agreements from plaintiff in Illinois, and that the guaranty agreements purportedly signed by certain of the defendants contained provisions waiving objections to being sued in Illinois.

The affidavits submitted by Zahnow (on behalf of himself and Eveready), Menees and Croft squarely dispute plaintiff's allegations that they had any jurisdictional contacts with the state of Illinois. All three defendants represent in their sworn statements that they never signed any leases or guarantees, or authorized anyone else to sign for them, and that the purported signatures relied on by plaintiff are actually forgeries. Defendants all deny having sent — or having authorized anyone else to send on their behalf — any financial information or other communications to plaintiff. All deny that Mattingly was ever authorized to act as their agent; defendant Zahnow further denies that Hartge — or any other officer or employee of Eveready—was ever authorized to sign any resolutions expanding the corporate purpose or business of Eveready into any such business as leasing or guaranteeing leases of funnel cake machines. Defendant Menees also specifically denies having ever sent any checks or documents to plaintiff in Illinois, or knowing of or consenting to any checks being sent. Menees points out that the payee on the check plaintiff claims he sent was left blank, and that the check was not accompanied by any letter or other notation indicating that it was to have been intended as a payment under the lease. All defendants deny ever having ratified any aspect of the alleged funnel cake machine transaction by corporate action, acquiesence, or receipt of benefits.

Given these specific representations made in the various affidavits submitted by defendants, it was incumbent on plaintiff to submit counteraffidavits refuting the factual claims made in at least the four critical areas of (1) the authenticity of the signatures on the leases and lease guarantees; (2) the claimed agency of Mattingly; (3) the authority of Hartge to act for Eveready; and (4) the purpose of the check purportedly sent by Menees. Importantly, however, the affidavits submitted by plaintiff are essentially silent on all of these issues.

For example, on the question of authenticity, plaintiff merely reiterates its contention that the leases and guarantees sent to plaintiff in Illinois bore the signatures of defendants, in their individual or corporate capacities, but it makes no attempt to address the pivotal issue whether the signatures themselves were real or forgeries. This deficiency is particularly significant because plaintiff's counsel was apparently informed in October 1986 that the signatures appeared to be forgeries, and was provided with handwriting exemplars which should have enabled him either to confirm or refute defendants' claim of forgery.

Similarly, while plaintiff's affidavits recite that Hartge signed both corporate resolutions authorizing the transaction and a guaranty on behalf of Eveready, they say nothing to counter the contention made in Zahnow's affidavit that Hartge was not authorized to sign either the resolution or the guaranty. In addition, while plaintiff states that Mattingly represented himself as an agent of defendants when he dealt with plaintiff in Illinois, it nowhere counters defendants' explicit claim that Mattingly was not, in fact, an agent. Since the existence of an agency relation cannot be established solely by statements of the agent, Prudential...