Guaranteed Rate, Inc. v. Conn, 17–cv–3289

• Decision Date: 28 August 2017
• Docket Number: 17–cv–3289
• Citation: 264 F.Supp.3d 909
• Parties: GUARANTEED RATE, INC., Plaintiff, v. Barden CONN, Craig Stelzer, Richard Romano, Richard Fedele, Terry Baker, Crosscountry Mortgage, Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

264 F.Supp.3d 909

GUARANTEED RATE, INC., Plaintiff,

v.Barden CONN, Craig Stelzer, Richard Romano, Richard Fedele, Terry Baker, Crosscountry Mortgage, Inc., Defendants.

17–cv–3289

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

Signed August 28, 2017

Andrew S. Rosenman, William Michael, Jr., Mayer Brown LLP, John Michael Murphy, Matthew G. Allison, Michael Elliot Bloom, Peter P. Tomczak, Baker & McKenzie LLP, Chicago, IL, for Plaintiff.

Jeffrey L. Widman, Allison Hudson, Laura Elizabeth Caplin, Shaw Fishman Glantz & Towbin LLC, Brent Daniel Knight, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

Thomas M. Durkin, United States District Judge

CrossCountry Mortgage, Inc. ("CCMI")¹ has moved to dismiss the conspiracy to breach fiduciary duties claim brought by Guaranteed Rate, Inc. ("GRI").² The basis for CCMI's motion is lack of personal jurisdiction. In addition, CCMI moves for a protective order from further discovery. Terry Baker and Craig Stelzer also have moved to dismiss GRI's conspiracy claim. Baker moves to dismiss for lack of personal jurisdiction, and Stelzer moves to dismiss for failure to allege facts demonstrating any act of misconduct committed by him individually. For the reasons that follow, CCMI's and Baker's motions are granted, and Stelzer's motion is denied.

BACKGROUND

GRI is a Delaware corporation that provides residential mortgage loans to consumers and then resells those loans in the secondary market to government-sponsored entities like Freddie Mac and Fannie Mae, national and regional banks, and other private investors. GRI is headquartered in Chicago, Illinois, but is licensed to do business in every state. It employs approximately 3,000 people in approximately 175 branch offices across the country. At the time of the events at issue, GRI organized its U.S. business into five regional "divisions." Among those was the Eastern Division, which included each of the states on the Atlantic coast except South Carolina and Georgia, as well as West Virginia and Vermont. The Eastern Division was organized into multiple regions, and each region contained one or more branch offices. Richard Fedele, Bardon Conn, Richard Romano, Craig Stelzer, and Terry Baker (collectively the "Individual Defendants") are all former high-ranking employees of GRI who lived in states on the east coast and worked for GRI in the Eastern Division.³

At some point during their employment, each of the Individual Defendants entered into written compensation agreements with GRI. While the exact language may vary in each of the agreements at issue, more or less they provide—by way of what GRI refers to as an "in-term employee non-solicitation covenant"—that the Individual Defendants, while still employed by GRI and for a period of either twelve or twenty-four months thereafter, would not

directly or indirectly, including through a third party, except in the interests of GRI, hire or retain, or solicit, encourage or have contact with any of GRI's employees for the purpose of encouraging them to end their employment with GRI and/or join the Employee as a partner, agent, employee, or otherwise in a business venture or other business relationship.

R. 26–1 at 23.

In the event that the Individual Defendants breached the non-solicitation covenant, they agreed to liquidated damages in the amount of $50,000 per solicited employee. The agreements further state that GRI would be entitled to specific performance of the non-solicitation covenant by way of temporary and/or permanent injunctive relief. Each of the agreements, with the exception of the one signed by Baker, has a choice of law and venue provision stating that the agreement is to be governed and construed in accordance with Illinois law, and that, by executing the agreement, the employee "irrevocably submit[s] to the exclusive jurisdiction of the courts of the State of Illinois and federal courts located in Cook County, Illinois, for the purposes of any action or proceeding arising with respect to this Agreement." Id.

GRI alleges that, beginning in February 2017, Fedele, Conn, and Romano began to plan their departures from GRI by shopping their business and the business of other GRI employees to GRI's competitors. To this end, they met with other competitors of GRI and ultimately with CCMI to discuss the potential of their employment and expansion of CCMI's East Coast business. CCMI, Fedele, Conn, and Romano referred to their joint plan as "Project Bruin." Fedele, Conn, and Romano allegedly solicited Stelzer as well as other GRI employees to join them at CCMI, and some or all of the Individual Defendants met in person with CCMI in Ohio where CCMI is located.⁴ GRI alleges that, in March 2017, Fedele, Conn, and Romano accessed GRI's confidential business information and shared that information with CCMI through the exchange of pro forma income statements.

In mid-April 2017, Fedele, Conn, and Romano made written demands on GRI for unpaid compensation allegedly owed to them. A few days later, Romano and Stelzer gave GRI notice of their resignations. Shortly thereafter, GRI questioned Conn about whether he had ever communicated with CCMI, and then terminated his employment after deciding that his responses were evasive. A day later, Stelzer made a demand to GRI for additional compensation, and a day after that, Fedele submitted his resignation.⁵

GRI filed this lawsuit slightly more than a month after Fedele's resignation. The original complaint, filed on May 1, 2017, named only three defendants—Conn, Stelzer, and Romano—and alleged claims for breach of contract, breach of fiduciary duty, and tortious interference with business relations. The amended complaint, filed on June 15, 2017, added Fedele, Baker, and CCMI as defendants, and alleges claims for (1) breach of fiduciary duties against Fedele, Conn, and Romano (Count I); (2) conspiracy to breach fiduciary duties against all defendants (Count II); and (3) breach of the contractual "in-term employee non-solicitation covenant" against Fedele, Conn, and Romano (Count III). See R. 26. GRI seeks an injunction prohibiting (i) CCMI from employing the Individual Defendants; (ii) the Individual Defendants from either working together or providing services to CCMI;⁶ and (iii) any of the defendants from disclosing GRI's confidential business information.⁷ R. 26 (¶ 7). GRI also seeks an order declaring that the Individual Defendants have forfeited their compensation in all forms for the period in which they were in breach of their fiduciary duties, as well as an order of disgorgement of the "wrongful gains" of the defendants in an amount to be determined at trial." Id.

DISCUSSION

A. PERSONAL JURISDICTION

"[A] complaint need not include facts alleging personal jurisdiction. However, once the defendant moves to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating the existence of jurisdiction." Purdue Research Found. v. Sanofi–Synthelabo, S.A. , 338 F.3d 773, 782 (7th Cir. 2003) (internal quotation marks and citation omitted). When the court rules on the motion without a hearing, the plaintiff need only establish a prima facie case of personal jurisdiction. Id. "In evaluating whether the prima facie standard has been satisfied, the plaintiff is entitled to the resolution in its favor of all disputes concerning relevant facts presented in the record." Id. (internal quotation marks and citations omitted). As the Court is sitting in diversity here, it has personal jurisdiction over the parties to the extent that an Illinois court could exercise such jurisdiction. Philos Techs., Inc. v. Philos & D, Inc., 645 F.3d 851, 855 n.2 (7th Cir. 2011). "Illinois extends personal jurisdiction to the limits allowed by the United States Constitution, so the state and federal standards are congruent here." Id.

1. CCMI

There are two branches of due process personal jurisdiction jurisprudence—general and specific. uBID, Inc. v. GoDaddy Grp., Inc. , 623 F.3d 421, 425 (7th Cir. 2010). GRI argues that the Court has personal jurisdiction over CCMI under either theory.

a. GENERAL JURISDICTION

A court's authority to assert personal jurisdiction over a defendant in a suit that does not arise out of or is not related to the defendant's contacts with the forum in known as general jurisdiction. Goodyear Dunlop Tires Operations, S.A. v. Brown , 564 U.S. 915, 924, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011) (discussing Helicopteros Nacionales de Colombia, S.A. v. Hall , 466 U.S. 408, 416, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984) ). The standard for finding general jurisdiction is a "demanding" one under which a defendant can only be haled into court when it has " ‘continuous and systematic general business contacts’ with the forum state." uBID, Inc., 623 F.3d at 425–26 (quoting Helicopteros Nacionales de Colombia, S.A , 466 U.S. at 415–16, 104 S.Ct. 1868 ).

The Supreme Court's opinions in BNSF Railway Co. v. Tyrrell , ––– U.S. ––––, 137 S.Ct. 1549, 198 L.Ed.2d 36 (2017), and Daimler AG v. Bauman , ––– U.S. ––––, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014), are conclusive on the general jurisdiction issue here. In BNSF Railway Co. , a Montana state court asserted general personal jurisdiction over the BNSF railroad on the ground that the railroad had over 2,000 miles of railroad track and employed more than 2,000 workers in Montana. The Supreme Court rejected that factual predicate as a basis for general jurisdiction, holding that general jurisdiction is only appropriate where the forum is the defendant's "home" state. The Court reiterated its earlier holding in Daimler that the "paradigm forums" in which a corporate defendant is "at home" are the corporation's place of incorporation and its principal place of business. Id. at 1558. GRI alleges that CCMI is an Ohio corporation with its principal place of business in Ohio, R. 26 (¶ 14), so CCMI does not fit within the paradigmatic...