MG Design Assocs., Corp. v. Costar Realty Info., Inc.

• Decision Date: 19 July 2017
• Docket Number: No. 16 C 5166,16 C 5166
• Citation: 267 F.Supp.3d 1000
• Parties: MG DESIGN ASSOCIATES, CORP., Plaintiff, v. COSTAR REALTY INFORMATION, INC., Apartments, LLC d/b/a Apartments.com, and Northwind Enterprises, Inc. d/b/a Atlantic Exhibits, Defendants.
• Court: U.S. District Court — Northern District of Illinois

267 F.Supp.3d 1000

MG DESIGN ASSOCIATES, CORP., Plaintiff,

v.COSTAR REALTY INFORMATION, INC., Apartments, LLC d/b/a Apartments.com, and Northwind Enterprises, Inc. d/b/a Atlantic Exhibits, Defendants.

No. 16 C 5166

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

July 19, 2017

Timothy Liam Epstein, Brian Christopher Konkel, Duggan Bertsch, L.L.C., Chicago, IL, for Plaintiff.

Adrienne Elizabeth Van Winkle, Pro Hac Vice, Eric Hamilton, Pro Hac Vice, Nicholas Boyle, Pro Hac Vice, Williams & Connolly LLP, Washington, DC, Frederic R. Klein, Meredith S. Kirshenbaum, Goldberg Kohn Ltd., Bruce W. Lyon, Lindsay Erin Walsh, LaBarge, Campbell & Lyon, LLC, James Terrence Hultquist, Joshua William Newman, Reed Smith LLP, Chicago, IL, for Defendants.

SARA L. ELLIS, United States District Judge

OPINION AND ORDER

Plaintiff MG Design Associates, Corp. ("MG") thought that it was going to design and build a tradeshow exhibit for Defendants CoStar Realty Information, Inc. ("CoStar") and Apartments, LLC d/b/a Apartments.com ("Apartments") (collectively the "CoStar Defendants"), but, after MG designed the exhibit, the CoStar Defendants took MG's designs and asked Defendant Northwind Enterprises, Inc. d/b/a Atlantic Exhibits ("Atlantic") to build the exhibit instead. After the Court previously dismissed MG's suit without prejudice, finding that Defendants possessed sufficient contacts with Illinois to authorize personal jurisdiction but also finding that MG failed to properly allege a copyright claim and declining to review MG's pendent state law claims [38], MG filed its First Amended Complaint, alleging breaches of contract, fraudulent misrepresentation, and tortious interference with both contract and prospective economic advantage.¹ Defendants now move the Court to revisit its prior decision regarding personal jurisdiction and to dismiss the First Amended Complaint for failure to state a claim. The Court grants in part and denies in part the CoStar Defendants' motion [44], dismissing Count II for lack of personal jurisdiction but denying the motion to dismiss MG's other claims against them because MG adequately alleges a claim for breach of contract and fraudulent misrepresentation. Because the Court has personal jurisdiction over Atlantic and because MG plausibly alleges that it had a contract and a business relationship with the CoStar Defendants, about which Atlantic knew, the Court denies Atlantic's motion [46]. All Defendants must answer the First Amended Complaint by August 18, 2017.

BACKGROUND²

MG, an Illinois corporation with its principal place of business in Pleasant Prairie, Wisconsin, designs and constructs tradeshow exhibits. From 2000 to 2014, it did this type of work for exhibits relating to "Apartments.com," a real estate website that was owned by Classified Ventures, LLC ("Classified Ventures").

In 2014, CoStar, a real estate information company, bought the Apartments.com-related assets and liabilities from Classified Ventures. CoStar is a Delaware corporation with its corporate headquarters in Washington, D.C., Doc. 12–1, Ex. A ¶ 2, operates an office in Chicago, Illinois, and is registered to do business in Illinois.

CoStar formed Apartments to run the Apartments.com website. Apartments is a Delaware limited liability company, and CoStar is Apartments' sole member. Id. ¶¶ 3–4. Although MG alleges that Apartments' primary office is in Chicago, Apartments' corporate executives, including its Chief Executive Officer, Executive Vice President of Operations, Executive Vice President of Accounting and Finance, and General Counsel and Secretary have "directed, controlled, and coordinated its business from Washington, D.C," id. ¶ 7. Apartments' only other corporate officer, its president, resided in Illinois until January 2016. Id. ¶ 9. Between April 2014 and the summer of 2015, Apartments maintained its departments for product design and development, multi-family field sales, finance, and customer service in Chicago. Id. ¶ 11. Apartments then moved the "majority of [its] departments," including its finance, marketing, and customer service departments, to Atlanta, Georgia between the summer of 2015 and January 2016. Id. ¶ 12. It is unclear whether any departments remain in Chicago. See id. (explaining that majority of departments moved, but not stating that all departments moved).

In April 2015, Sharon Patenaude, who had formerly worked for Classified Ventures and who was now an employee of CoStar after the Apartments.com purchase, contacted MG to design and build an exhibit for an upcoming conference in Las Vegas, Nevada. Between April 22 and 25, 2015, Patenaude was in San Antonio, Texas for a work project. Doc. 35–1 ¶ 4. During that time, Mark Klionsky, a CoStar employee in Washington, D.C. asked Patenaude to commission an exhibit for display in Las Vegas. Id. ¶ 5. Klionsky communicated a design idea to Patenaude. Id.

Patenaude then called MG's Pleasant Prairie, Wisconsin headquarters to speak with Betty Kasper of MG. Patenaude wanted MG to design an Apartments.com-branded exhibit, making it "clear that Costar and Apartments would engage [MG] for all phases of work." Doc. 39 ¶ 34. MG agreed to work on the Apartments.com exhibit at the traditional rates and costs. The parties, however, did not document their agreement in writing. The parties dispute from where Patenaude's call originated: MG presents evidence from Patenaude that she called MG "from her office in Chicago, Illinois" on or before April 28, 2015. Doc. 31–1 ¶ 7. The CoStar Defendants also present evidence from Patenaude that she called MG "[w]hile still in Texas" between April 22 and 25, 2015, Doc. 35–1 ¶ 7, and had reached out to MG by April 24, Doc. 35–2 ¶ 6 & Ex. 3 (noting that Patenaude had "put [MG] on notice").

Patenaude drove to MG's Pleasant Prairie office on April 27, 2015. Doc. 35–1 ¶ 7. While in the design phase for the exhibit, Patenaude was MG's primary contact. She worked out of Chicago, but because Pleasant Prairie was so close ("about one hour away"), she "preferred to discuss [the exhibit] in person at the Pleasant Prairie office," and "[t]he key discussions about the design...occurred at that office." Id. ¶ 11. In Wisconsin, Patenaude "discussed the draft design" for about an hour. Id. ¶ 7. She raised Klionsky's display ideas, and she also suggested other themes and design necessities. Id. ¶ 8. On May 4, Patenaude visited MG's Pleasant Prairie office again, where she viewed MG's initial design renderings and asked for changes. Id. ¶ 10; Doc. 35–2 ¶¶ 7–8 & Ex. 4.

On May 7, 2015, MG produced an initial set of design renderings for an Apartments.com exhibit. On May 8, 2015, CoStar employees in Washington, D.C. requested a few changes. Doc. 35–1 ¶ 12. On May 11, 2015, MG revised the design with a second set of design renderings (creating, the "Design Renderings"). MG emailed Patenaude the final copy of the Design Renderings on May 11.

At some point during the week of May 11, Klionsky called Patenaude and told her that CoStar was not going to work with MG anymore, that another design firm would begin work on the Apartments.com exhibit for the Las Vegas conference, and that Patenaude was not going to work on the Las Vegas conference anymore either. Id. ¶ 13. On May 13, 2015, CoStar told MG that Patenaude was out and that CoStar was "terminating its business relationship with [MG] and that [MG] would not be performing any work for the production phase" for the Las Vegas exhibit. Doc. 39 ¶¶ 43–44. MG then sent an invoice for the design work to Patenaude in Chicago, which stated that no one could copy or use the Design Renderings without MG's approval. Id. ¶ 47; Doc. 39–2; Doc. 31–1 ¶ 11. CoStar paid MG $16,500 for MG's work on the Design Renderings. Atlantic then built a physical exhibit at the Las Vegas conference (the "Las Vegas Exhibit"), using the Design Renderings "as the basis" for the construction. Doc. 39 ¶ 48.

Atlantic advertised on its website that it designed the Las Vegas Exhibit. The Design Renderings, however, bore a legend on each page stating "[a]ll designs and ideas...are the creative property of [MG]," id. ¶ 40, the paid invoice stated that the Design Renderings "remain the property of [MG]," id. ¶ 47, and both the invoice and the Design Renderings stated that they "may not be reproduced in any manner without the express approval of [MG]," id. ¶¶ 40, 47; Doc. 39–1; Doc. 39–2. MG never received a request from anyone to use the Design Renderings or to construct exhibits based on the Design Renderings.

LEGAL STANDARDS

A motion to dismiss under Rule 12(b)(2) challenges whether the Court has jurisdiction over a party. The party asserting jurisdiction has the burden of proof. See Tamburo v. Dworkin , 601 F.3d 693, 701 (7th Cir. 2010). The Court may consider affidavits and other competent evidence submitted by the parties. Purdue Research Found. v. Sanofi–Synthelabo, S.A. , 338 F.3d 773, 782 (7th Cir. 2003). If the Court rules on the motion without a hearing, the plaintiff need only establish a prima facie case of personal jurisdiction. GCIU–Emp'r Ret. Fund v. Goldfarb Corp. , 565 F.3d 1018, 1023 (7th Cir. 2009). The Court will "read the complaint liberally, in its entirety, and with every inference drawn in favor of" the plaintiff. Central States, Se. & Sw. Areas Pension Fund v. Phencorp Reinsurance Co. , 440 F.3d 870, 878 (7th Cir. 2006) (quoting Textor v. Bd. of Regents of N. Ill. Univ. , 711 F.2d 1387, 1393 (7th Cir. 1983) ). "[O]nce the defendant has submitted affidavits or other evidence in opposition to the exercise of jurisdiction," however, "the plaintiff must go beyond the pleadings and submit affirmative evidence supporting the exercise of jurisdiction." Purdue , 338 F.3d at 783. Any dispute concerning relevant facts is resolved in the plaintiff's favor. Id. at 782–83.

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed. R. Civ. P. 12(b)(6) ; Gibson v. City of...