Van Gelder v. Taylor

Citation621 F. Supp. 613
Decision Date13 November 1985
Docket NumberNo. 85 C 5295.,85 C 5295.
PartiesEric VAN GELDER; and Eric Van Gelder on his own behalf and on behalf of all other shareholders of the Rookery, Inc., Plaintiff, v. Lamar S. TAYLOR, Jr.; James B. Kee; and the Rookery, Inc., a Georgia corporation, Defendants.
CourtU.S. District Court — Northern District of Illinois

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Michael Hawkins, Chicago, Ill., for plaintiff.

Terence J. Moran, Schiff, Hardin & Waite, Chicago, Ill., for defendants.

ORDER

BUA, District Judge.

Before the Court is defendants' motion to dismiss for lack of personal jurisdiction and improper venue or, in the alternative, to transfer this case to the United States District Court for the Middle District of Georgia pursuant to 28 U.S.C. §§ 1404(a) and 1406(a). For the reasons stated herein, defendants' motion to dismiss is denied and the motion to transfer is granted.

I. FACTS

Plaintiff Eric Van Gelder filed a two-count complaint against defendants. Count 1 has been brought by Van Gelder individually and purports to state a claim of fraud against the individual defendants, Taylor and Kee. Count 1 alleges that the individual defendants fraudulently induced plaintiff to invest in defendant corporation, The Rookery, Inc. Count 2 has been brought by Van Gelder as a shareholder's derivative action on behalf of The Rookery, Inc., a Georgia corporation, and purports to state a claim for breach of fiduciary duty to The Rookery, Inc. and to Van Gelder by defendants Taylor and Kee. Count 2 alleges that Taylor and Kee wrongfully and fraudulently used their fiduciary positions to utilize corporate assets and facilities for their own personal gain to the detriment of both defendant corporation and plaintiff, as a minority shareholder of the corporation.

For jurisdictional purposes, the citizenship of the parties must be established. Plaintiff is a citizen of the State of Illinois, defendants Taylor and Kee are both citizens of the State of Georgia, and defendant The Rookery, Inc. is a corporation duly organized and existing under the law of the State of Georgia with its principal place of business in Macon, Georgia.

Plaintiff's claims arise out of a business venture entered into by Van Gelder, Taylor and Kee. Taylor and Kee allegedly solicited Van Gelder to invest $30,000 in The Rookery, Inc. in return for one third of the stock in said corporation. Taylor and Kee were each to own one third of the same stock to constitute the remaining stockholders. It is alleged that Taylor and Kee also solicited Van Gelder to invest for the group $15,000 as a down payment for the purchase of the Georgia building in which The Rookery, Inc. conducts its retail business and to invest $7,500 for attorneys' fees. Van Gelder argues that he was to be reimbursed by the two individual defendants for their pro rata share of these latter two expenses. The control of The Rookery, Inc. is vested in Taylor and Kee through their control of the shareholder's meetings and the Board of Director's meetings.

The remedies plaintiff seeks in Count 1 are: (1) a rescission of the agreement between the parties relative to his purchase of the one-third interest in The Rookery, Inc.; (2) a judgment for Van Gelder against each of the individual defendants for the amounts of money loaned and advanced to them, and; (3) punitive damages. The remedies plaintiff seeks in Count 2 are: (1) an issuance of a summons to each individual defendant requiring them to appear in this Court to answer the complaint; (2) an appointment of a receiver to seize all property of The Rookery, Inc. and all shares of The Rookery, Inc. standing in the names of the individual defendants, pursuant to Rule 66 of the Federal Rules of Civil Procedure, to hold and preserve the shares until a final determination of the cause is made; and (3) an accounting for all sums of money, profits, and gains which Taylor and Kee have made as a result of the alleged conspiracy against Van Gelder.

II. DISCUSSION

In this case, federal subject matter jurisdiction is based solely on diversity of citizenship. In diversity cases, a federal district court has jurisdiction over the persons of the defendants only if a court of the state in which the federal court is sitting would have personal jurisdiction. Snyder v. Smith, 736 F.2d 409, 415 (7th Cir.1984); Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d 1209, 1212 (7th Cir. 1984); Lakeside Bridge & Steel v. Mountain State Construction Co., 597 F.2d 596, 598 (7th Cir.1979); cert. denied, 445 U.S. 907-08, 100 S.Ct. 1087, 63 L.Ed.2d 325 (1980). As such, Illinois law will govern the determination as to whether this Court has personal jurisdiction over the defendants. Welles Product Corp. v. Plad Equipment Co., Ltd., 563 F.Supp. 446, 448 (N.D.Ill.1983).

Under Illinois law, foreign defendants are subject to the jurisdiction of state and federal courts in Illinois only if they have committed any of the acts specified in the Illinois Long Arm Statute. Ill. Rev.Stat. ch. 110, § 2-209(a). Green v. Advance Ross Electronics Corp., 86 Ill.2d 431, 56 Ill.Dec. 657, 427 N.E.2d 1203 (1981). Commission of one or more of those specified acts will support jurisdiction over the persons of the defendants only as to causes of action arising from the commission of those acts. Ill.Rev.Stat. ch. 110, § 2-209(c). For specification as to the acts which submit a person to the jurisdiction of the state, the Illinois Long Arm Statute ch. 110, § 2-209 provides in pertinent part:

Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person ... to the jurisdiction of the courts of this State as to any cause of action arising from the doing of such acts:
(1) The transaction of any business within this State;
(2) The commission of a tortious act within this State;

A plaintiff bears the burden of proving that a court has personal jurisdiction over defendants, i.e., that defendants have committed acts that fall within the Illinois Long Arm Statute. Kutner v. DeMassa, 96 Ill.App.3d 243, 247, 51 Ill.Dec. 723, 421 N.E.2d 231 (1st Dist.1981).

Proper venue under Illinois law lies "in the county in which the transaction or some part thereof occurred out of which the cause of action arose." Ill.Rev.Stat. ch. 110, § 2-101(2).

A. Count 1

Count 1 is an action for fraud. Subject matter jurisdiction is conferred upon this Court through diversity of citizenship: plaintiff Van Gelder is a citizen of the State of Illinois whereas all defendants are citizens of the State of Georgia.

The existence of personal jurisdiction over defendants is, however, questionable. Plaintiff argues that the Illinois Long Arm Statute applies insofar as the business transactions and the tortious act of fraud occurred in Illinois. In support of this argument, plaintiff alleges that the negotiations inducing plaintiff to invest in The Rookery, Inc. were made in Illinois. An affidavit has been submitted by plaintiff in support of this allegation. Conversely, defendants allege that the Illinois Long Arm Statute is inapplicable insofar as all negotiations and transactions were made in Georgia. Therefore, defendants conclude that any purported tortious act would have necessarily occurred in Georgia. Three affidavits have been submitted by defendants in support of these allegations.

Although personal jurisdiction is questionable, this Court need not determine the issue. This Court finds that transfer under 28 U.S.C. § 1404(a) is proper. When transferring an action under § 1404(a), the transferor court is not first required to establish personal jurisdiction over the movant. Coats Co., Inc. v. Vulcan Equipment Co., Inc., 459 F.Supp. 654, 659 (N.D. Ill.1978).

§ 1404(a), governing transfer for the convenience of parties and witnesses, is designed to prevent waste of time, energy, and money, as well as to protect litigants, witnesses, and the public against inconvenience and expense. Cunningham v. Cunningham, 477 F.Supp. 632 (N.D.Ill.1979). § 1404(a) provides in pertinent part:

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district where it might have been brought.

Transfer, rather than dismissal, is the proper remedy if the convenience of parties and witnesses and the interest of justice describe a more appropriate forum elsewhere. Stinnett v. Third National Bank of Hampden County, 443 F.Supp. 1014, 1017 (D.Minn.1978).

In order to meet the requirements of § 1404(a), the movant must establish (1) that venue is proper in the transferor district; (2) that the transferor court has the power to transfer the case (the transferee district is one in which the case could have been brought); and (3) that the transfer is for the convenience of parties and witnesses in the interest of justice. Hotel Constructors, Inc. v. Seagrave Corp., 543 F.Supp. 1048, 1050 (N.D.Ill.1982). The first requirement is met since plaintiff is a citizen of Illinois. Likewise, the second requirement is met under 28 U.S.C. § 1391 since all defendants reside in the Middle District of Georgia.

The question of transfer thus turns upon the third requirement. To support a motion to transfer, the movant must show a "clear balance of inconvenience" in the transferor district over the transferee district. Hotel Constructors, Inc. v. Seagrave Corp., 543 F.Supp. 1048, 1050 (N.D.Ill. 1982); see also SEC v. First National Finance Corp., 392 F.Supp. 239, 240 (N.D.Ill. 1975). In determining whether the movant has met this burden, the Court must consider the factors specifically enumerated in § 1404(a), i.e., the convenience of parties, witnesses, and the interest of justice, while simultaneously giving weight to the plaintiff's choice of forum.

1. Plaintiff's Choice of Forum

Under the common law doctrine of forum non conveniens, plaintiff's choice of...

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