Performance Network Solutions, Inc. v. Cyberklix US, Inc., 1–11–0137.

• Decision Date: 17 February 2012
• Docket Number: No. 1–11–0137.,1–11–0137.
• Parties: PERFORMANCE NETWORK SOLUTIONS, INC., an Illinois Corporation, Counterweight, Inc., an Illinois Corporation, Eric S. Perkins, William Perkins, and Jesse Korn, Plaintiffs–Appellants, v. CYBERKLIX US, INC., a Delaware Corporation, Cyberklix, Inc., a Foreign Corporation, and John Menezes, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

966 N.E.2d 396

PERFORMANCE NETWORK SOLUTIONS, INC., an Illinois Corporation, Counterweight, Inc., an Illinois Corporation, Eric S. Perkins, William Perkins, and Jesse Korn, Plaintiffs–Appellants,

v.CYBERKLIX US, INC., a Delaware Corporation, Cyberklix, Inc., a Foreign Corporation, and John Menezes, Defendants–Appellees.

No. 1–11–0137.

Appellate Court of Illinois, First District, Sixth Division.

Feb. 17, 2012.

David A. Novoselsky, Novoselsky Law Offices, Chicago, for Appellants.

Patrick G. Cooke, Patzik, Frank & Samotny, Ltd., Chicago, for Appellee.

Presiding Justice ROBERT E. GORDON delivered the judgment of the court, with opinion.

¶ 1 Plaintiffs, Performance Network Solutions, Inc. (PNS), Counterweight, Inc., both Illinois corporations, and three individuals Eric Perkins, William Perkins, and Jesse Korn (collectively the Illinois plaintiffs), filed a three-count complaint in the circuit court of Cook County against defendants, Cyberklix US, Inc., a Delaware corporation, Cyberklix, a Canadian corporation, and an individual, John Menezes. The complaint alleges breach of contract and seeks a declaratory judgment and injunctive relief. Defendants filed a motion to quash service and dismiss the complaint pursuant to section 2–619(a)(3) of the Illinois Code of Civil Procedure (Code) ( 735 ILCS 5/2–619(a)(3) (West 2008)), claiming that they had filed an earlier action in a Canadian court involving the same parties and that the claims arose out of the same transactions. The trial court granted defendants' motion.

¶ 2 On appeal, the Illinois plaintiffs claim that the trial court erred in dismissing their complaint under section 2–619(a)(3) of the Code, which allows dismissal when "there is another action pending between the same parties for the same cause" ( 735 ILCS 5/2–619(a)(3) (West 2008)), because they were not properly served with process in the Canadian court, and as a result there was no prior action pending. The Illinois plaintiffs do not claim that a section 2–619(a)(3) motion to dismiss does not apply to a Canadian court proceeding. We affirm.

¶ 3 I. BACKGROUND

¶ 4 A. The Parties

¶ 5 Plaintiff PNS is an Illinois corporation that designs computer security software with its principal place of business in Chicago. Plaintiff Eric Perkins, a resident of the State of Wisconsin, is the president of PNS. Plaintiffs William Perkins and Jesse Korn are residents of the State of Illinois and employees of PNS. Plaintiff Counterweight, Inc., is an Illinois corporation whose shareholders and employees include Eric, William and Jesse.

¶ 6 Defendant Cyberklix US, Inc., is a Delaware corporation with its principal place of business in Chicago. Cyberklix U.S. is a wholly owned subsidiary of Cyberklix, Inc., a Canadian corporation with its principal place of business in Ontario, Canada. Cyberklix U.S. and Cyberklix also design computer security software. Defendant John Menezes, is the president and chief operating officer of Cyberklix.

¶ 7 B. Procedural History

¶ 8 1. The Canadian Lawsuit

¶ 9 On June 1, 2009, Cyberklix U.S. and Cyberklix filed a "Statement of Claim" (Claim) in the superior court of justice located in Ontario, Canada, against the Illinois plaintiffs. According to the Claim, on May 21, 2008, Cyberklix US, PNS, and Eric entered into an "asset sales agreement" (Agreement) in the State of Illinois whereby Cyberklix U.S. agreed to buy, and PNS agreed to sell to Cyberklix US, certain assets of PNS. A copy of the notice of the Claim, dated June 1, 2009, is included in the record and addressed to PNS, Counterweight, Eric, William and Jesse.

¶ 10 Pursuant to the Agreement, Cyberklix agreed to pay an initial sum in the amount of $700,000 to PNS on a specified "closing date," defined in the Agreement as May 27, 2008. Cyberklix also agreed to pay a second and final sum in the amount of $300,000 by the first anniversary of the closing date. PNS and Eric agreed to noncompetition and confidentiality provisions, prohibiting them from disclosing or using confidential information developed by PNS and Eric, and prohibiting them from engaging in competition with Cyberklix U.S. or Cyberklix for a period of four years commencing May 21, 2008.

¶ 11 Also pursuant to the Agreement, Eric agreed to enter into an employment agreement with Cyberklix US, in which he was to be employed for a period of two years as a chief technical officer unless otherwise terminated. The Agreement also provided that Cyberklix was obligated to offer William and Jesse employment positions with Cyberklix US, as office manager and director of application delivery, respectively.

¶ 12 According to the Claim, Cyberklix paid the initial sum of $700,000. William and Jesse were both hired by Cyberklix U.S. on May 27, 2008. Eric terminated his employment on February 5, 2009. William terminated his employment with Cyberklix U.S. on February 27, 2009, and Jesse terminated his employment on March 27, 2009. Counterweight was incorporated in the State of Illinois on February 24, 2009. After its incorporation, Eric, William, and Jesse became shareholders and employees of Counterweight.

¶ 13 Also according to the Claim, before the first anniversary of the closing date and before Cyberklix paid the second and final sum of $300,000, Cyberklix alleges that Counterweight was in direct competition with Cyberklix. In response, Cyberklix U.S. and Cyberklix filed their Canadian lawsuit against PNS, Counterweight, Eric, William and Jesse seeking injunctive relief and damages.

¶ 14 2. The Illinois Lawsuit

¶ 15 More than one month later, on July 7, 2009, PNS, Counterweight, Eric, William and Jesse filed this three-count complaint in the circuit court of Cook County against Cyberklix US, Cyberklix, and John Menezes. In the complaint, the Illinois plaintiffs (1) allege that Cyberklix breached the Agreement by failing to pay the second and final sum of $300,000; (2) seek a declaratory judgment for William, Jesse and Counterweight that they are not bound by the restrictive provisions of the Agreement because they were not signatories to the Agreement; and (3) seek injunctive relief concerning the defendants' Canadian lawsuit which "unlawfully restrain[s] William, Jesse and Counterweight by proceeding in a foreign jurisdiction (Canada) to seek relief against these parties despite a lack of jurisdiction and despite the failure to properly obtain service on or jurisdiction over these parties."

¶ 16 3. Partial Judgment Entered in Canadian Court

¶ 17 On October 27, 2009, the superior court of justice in Ontario entered a written order concerning Cyberklix's Claim. The Canadian justice presiding over the matter stated that he had reviewed the record before him, including "the Statement of Claim in this action and the proof of service of the Statement of Claim on Defendants[, i.e., the Illinois plaintiffs,] and the Defendants having been noted in default [as of] July 20, 2009." The Canadian justice then entered partial judgment against the Illinois plaintiffs concerning Cyberklix's request for injunctive relief. Even though the Illinois plaintiffs indicated at oral argument that the matter is not now pending before the Canadian court, the order reflects otherwise and states that "this action shall proceed to Trial to deal with the damage claims made in * * * the Statement of Claim." The Canadian justice also ordered that "this Order shall be served on the defendants."

¶ 18 4. Defendants' Motion to Dismiss in Illinois Lawsuit

¶ 19 On December 7, 2009, Cyberklix US, Cyberklix, and Menezes filed in the circuit court of Cook County a motion to quash service pursuant to section 2–301(a) of the Code ( 735 ILCS 5/2–301(a) (West 2008)) and dismiss the Illinois plaintiffs' complaint pursuant to section 2–619(a)(3) ( 735 ILCS 5/2–619(a)(3) (West 2008)). Concerning the dismissal of the complaint, defendants argue that the Illinois plaintiffs' complaint should be dismissed because it involves the same parties and claims arising out of the same transactions that are already pending in a Canadian court. The Illinois plaintiffs respond that dismissal is not proper because they were not served with process in the Canadian lawsuit and have not otherwise participated in that lawsuit.

¶ 20 On December 23, 2010, the trial court entered a written order granting defendants' motion. In regard to dismissing the complaint, the trial court found that "there is a case pending in the [Canadian] Court concerning these same parties and purports to state claims arising out of the same transactions, namely the [Agreement]." The trial court also found that the Canadian justice had already determined that "the Canadian Court has jurisdiction over the matter" and that the Illinois plaintiffs in the case at bar "have been properly served" because they "were found to be in default as of July 20, 2009." The trial court also found that the Canadian court had "already entered partial judgment in this matter." The court further found that "while [the Illinois] plaintiffs assert that they have not been served in the Canadian action, no [Illinois] plaintiff has submitted any affidavits to refute the Canadian Justice's conclusion that not only had service been effected but they have been appropriately defaulted."

¶ 21 In determining whether dismissal was proper, the trial court next considered factors such as "comity; the prevention of multiplicity, vexation, and harassment; the likelihood of obtaining complete relief in the foreign jurisdiction; and the res judicata effect of a foreign judgment in the local forum" and found that those factors favored dismissal. Specifically, the court found that it must recognize other jurisdictions; that the identity of the parties and claims were similar in both lawsuits; and that defendants did not demonstrate that the Canadian court did not follow proper procedures or that they would be unable to obtain relief in the Canadian lawsuit. In sum, the trial court concluded that "the [Illinois] plaintiffs have already seen...