Opinion
No. 01 C 2948
August 28, 2001
ORDER
Plaintiffs, Peregrine Financial Group, Inc. ("PFG"), an Iowa corporation with its principal place of business in Illinois, and Utrade.com ("Utrade"), a Georgia corporation with its principal place of business in Augusta, Georgia, have filed an amended complaint alleging defamation, tortious interference with business expectancy, commercial disparagement and unfair competition against defendant, David Green, an individual residing in Arizona. Currently before the court is defendant's pro se "Motion to Dismiss, or in the Alternative For Transfer To The District of Arizona," which the court interprets as contesting personal jurisdiction and venue pursuant to Federal Rules of Civil Procedure 12 (b)(2) and 12(b)(3), or, alternatively, seeking transfer of the case to Arizona pursuant to 28 U.S.C. § 1404 (a). For the reasons explained below, the court finds that although this court has personal jurisdiction over defendant, this is not the proper venue. Thus, in the interest of justice, the court transfers the instant case to Arizona pursuant to 28 U.S.C. § 1406 (a).
Given the court's ruling, defendant's motion to transfer venue pursuant to 28 U.S.C. § 1404 (a) is denied as moot. Likewise, the court does not address defendant's contention the instant case should be dismissed because it "really has no merit," or his complaints that plaintiffs failed to "realistically negotiate settlement" and to prove their asserted amount in controversy.
BACKGROUND
According to plaintiffs, defendant, acting in his capacity as a principal of Commodities Traders Club, d/b/a "CTCN," contacted Utrade, an "Introducing Broker" dealing in commodities, sometime early this year concerning a possible business relationship. At that time, defendant allegedly represented himself as a system developer who wanted to sell subscriptions to what he represented was his trading system, "No Brainer."On March 30, 2001, CTCN and Utrade entered into a written agreement ("the Agreement"). Pursuant to the Agreement, the president of Utrade, Frank Ebel, agreed to take and fill trade orders using the "No Brainer" system for execution through PFG, a registered Futures Commissions Merchant. PFG was not a party to the Agreement. According to plaintiffs, Utrade followed the "No Brainer" system by executing orders through PFG for customers from April 9-11, 2001. Plaintiffs assert that after initiating use of "No Brainer," Frank Ebel became concerned about the validity of the "No Brainer" system, "the integrity of Defendant as one of the purported system developers, and the aggressive advertising utilized by Defendant." As a result of these concerns, Utrade sent a termination letter via facsimile to defendant after the close of trade on April 11, 2001.
The only mention of PFG in the Agreement is a single sentence: "CTCN and its principals do hereby acknowledge and confirm that they are in no way affiliated with or connected to UTRADE or its clearing firm, Peregrine Financial Group, Inc., and that no endorsement is being made, issued or implied as to the profitability, or lack thereof, of CTCN's trading software by same."
Plaintiffs allege that following Utrade's termination of the Agreement, defendant "began a campaign of defamation against Utrade and PFG" in the form of e-mails sent to "all of the Customers, as well as other persons." Plaintiffs contend that defendant's allegedly defamatory actions have caused plaintiffs to lose business, customer accounts, and valid business expectancies, and damage to their reputation and good will. Similarly, plaintiffs allege that through defendant's "campaign of publishing libelous material" about PFG and Utrade, he has "intentionally and unjustifiably interfered with PFG's and Utrade's valid business expectancies, resulting in damage." Plaintiffs also allege that defendant, motivated by malice, published disparaging comments to current and potential customers with reckless disregard for the truth of the statements. Plaintiffs finally allege that defendant's statements misrepresent the nature, characteristics, and quality of plaintiffs' services and constitute unfair competitive practices.
The term "Customers" derives from the following allegation in plaintiffs' complaint: "Some customers who elected to register to receive subscriptions to `NoBrainer' had opened accounts with PFG in order to trade commodities, futures and options contracts including, but not limited to, those contracts recommended by the `NoBrainer' system. (The `Customers')." Defendant asserts, and plaintiffs do not deny, that none of the approximately thirty "Customers" were situated in Illinois; on the other hand, at least one of these individuals lives in Arizona.
DISCUSSION
I. PERSONAL JURISDICTION
Plaintiffs carry the burden of establishing a prima facie case for personal jurisdiction. See Steel Warehouse of Wisc. Inc. v. Leach, 154 F.3d 712, 714 (7th Cir. 1998). The court has jurisdiction over a non-resident, non-consenting defendant in a diversity case if Illinois state courts would have jurisdiction. McIlwee v. ADM Industries, Inc., 17 F.3d 222, 223 (7th Cir. 1994); RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272 (7th Cir. 1997). Illinois courts have jurisdiction over nonresident defendants if they engage in conduct covered by the state's long-arm statute. 735 ILCS § 5/2-209. Section 209(a)(2) of the long-arm statute states that any individual who commits "a tortious act within this State" submits "to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of such acts."
Although plaintiffs allege a Lanham Act violation, that allegation has no impact on the court's jurisdiction analysis because the Lanham Act does not authorize national service of process.
In order to comport with due process, however, defendant "must have `minimum contacts' with Illinois such that maintaining this lawsuit does not offend `traditional notions of fair play and substantial justice.'"FMC Corp. v. Varonos, 892 F.2d 1308, 1311 n. 5 (7th Cir. 1990) (citingInternational Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Simply put, defendant must have "purposefully availed" himself of the privilege of conducting activities within Illinois, such that he should "reasonably anticipate being hauled into court" here. Worldwide Volkswagon Corp. v. Woodson, 444 U.S. 286, 297 (1980). Defendant may not be forced to defend this lawsuit in Illinois "solely as a result of random, fortuitous, or attenuated contacts" or because of the "unilateral activity of another party or third person." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985).
In the instant case, plaintiffs argue that the Seventh Circuit's holding in Janmark, Inc. v. Reidy, 132 F.3d 1200, 1202 (7th Cir. 1997), supports their claim that, "to sustain personal jurisdiction based on the alleged commission of a tortious act in Illinois, it is sufficient for a plaintiff to allege that Defendant's tortious act caused an injury in Illinois."
In Janmark, the Seventh Circuit noted Illinois' extension of its "long-arm power to the limit allowed by the Constitution of the United States, 735 ILCS 5/2-209(c)," and held that "there can be no serious doubt" after the Supreme Court's decision in Calder v. Jones, 465 U.S. 783 (1984), that "the state in which the victim of a tort suffers the injury may entertain a suit against the accused tortfeasor." 132 F.3d at 1202. This is true, according to Janmark, even though the actions taken by defendant constituting the alleged tort may have occurred wholly outside the borders of Illinois. Id.; see also Indianapolis Colts v. Metropolitan Baltimore Football Club Ltd. Partnership, 34 F.3d 410, 411-12 (7th Cir. 1994). Based on this, plaintiffs' allegations (that defendant defamed and commercially disparaged PFG, unfairly competed against PFG, and interfered with PFG's business expectancy — and that these actions injured PFG, which is located in Illinois) appear to be sufficient to establish the court's personal jurisdiction over defendant.
But, given the facts in this case, this outcome arguably stands on tenuous constitutional ground. The facts demonstrate that defendant conducted his alleged "campaign of defamation" via e-mail from his home in Flagstaff, Arizona. Defendant asserts, and plaintiffs do not contest, that none of the approximately thirty "Customers" who received defendant's e-mails (triggering the alleged harm to PFG) were in Illinois. Further, the facts show that PFG received defendant's first e-mail because a person who received it from defendant forwarded it to Frank Ebel of Utrade (who presumably was in Georgia at the time), who then forwarded it to Bob Cihlar, an employee of PFG in Illinois. Thus, up to this point defendant still had not sent an e-mail directly to anyone in Illinois.
Then, about ten days before the instant suit was filed, defendant began communicating with Bob Cihlar and plaintiffs' current counsel via e-mail, apparently attempting to reach some sort of settlement with PFG and Utrade for money he claims he is owed. These e-mails are not alleged to be actionable in the instant suit, but some of them do include some of the e-mails sent by defendant to the approximately thirty non-Illinois-resident "Customers" (which are alleged to have caused damage to PFG and Utrade). It appears, however, that the allegedly defamatory content of the group messages is directed almost completely at Greg Clements, defendant's past partner, and Utrade in Georgia; defendant hardly mentions PFG in his e-mail messages. Indeed, the Agreement is silent as to where PFG is incorporated or doing business. Further, plaintiffs' joint activities with defendant appear to be centered in Georgia, where Utrade is located. And finally, the court notes that PFG has not demonstrated that it suffered any actual damage from defendant's e-mails; instead, PFG and Utrade jointly allege that defendant has caused them to suffer unspecified damages. Hence, it is also not clear that a distinct injury was, in fact, suffered in Illinois.
As set forth in footnote 2 above, in the only reference to PFG in the Agreement is a vague disclaimer, that CTCN and its principals are "in no way affiliated with or connected to UTRADE or its clearing firm, [PFG]." PFG's location is not disclosed in the Agreement and there is nothing in the record to indicate that defendant knew where PFG was located prior to the initiation of the instant dispute.
One could argue that these facts do not appear to demonstrate the minimum contacts with and purposeful availment of the State of Illinois that the Supreme Court had in mind when it decided Calder, International Shoe, and Worldwide Volkswagon. Indeed, by filing this suit in Illinois, plaintiffs run dangerously close to forcing defendant to defend a suit because of his "random, fortuitous, or attenuated contacts" with Illinois, or because of the "unilateral activity of another party or third person." Burger King, 471 U.S. at 475. As the Illinois Constitution teaches, "jurisdiction is to be asserted only when it is fair, just, and reasonable to require a nonresident defendant to defend an action in Illinois, considering the quality and nature of the defendant's acts which occur in Illinois or which affect interests located in Illinois."RAR, Inc., 107 F.3d at 1276.
Defendant is appearing pro se, and his arguments, though thorough factually, are legally inartful.
Even so, under Janmark defendant's contact with Illinois appears to be enough to subject him to the court's personal jurisdiction. Consequently, defendant's motion to dismiss for lack of personal jurisdiction is denied.
II. VENUE
Next up is defendant's assertion that the venue chosen by plaintiffs is improper. The general venue statute, 28 U.S.C. § 1391 (b), provides that:
A civil action wherein jurisdiction is not founded solely on diversity of citizenship may . . . be brought only in (1) a judicial district where any defendant resides . . . (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought.
Applying the facts of the instant case to the above statute, it is clear that Arizona is the only proper venue under sections (1) and (3). The appropriate result under section (2), however, is not as clear.
The relevant portion of section (2) allows this action to be brought in any "judicial district in which a substantial part of the events or omissions giving rise to the claim occurred." 28 U.S.C. § 1391 (b)(2). This does not mean, however, that the majority of the events in the instant case must have taken place in Illinois. TruServ Corp. v. Neff, 6 F. Supp.2d 790, 792 (N.D. Ill. 1998). "The test is not whether a majority of the activities pertaining to the case were performed in a particular district, but whether a substantial portion of the activities giving rise to the claim occurred in the particular district." Id.
For the reasons explained above, the court concludes that a substantial portion of the activities giving rise to the instant case did not occur in Illinois and therefore this venue is not appropriate under 28 U.S.C. § 1391 (b). Accordingly, the court transfers the instant case pursuant to 28 U.S.C. § 1406 (a), which allows transfer to "any district or division in which [the instant case] could have been brought," if such action "be in the interest of justice."
Defendant urges the court to transfer the instant case to Arizona. Defendant points out that plaintiffs are both large corporations and he is an individual who cannot afford to obtain counsel, much less travel out of Arizona. Defendant further informs the court that he has "two serious diseases" and "another condition" which "eliminate travel outside of Arizona for court appearances." Finally, defendant argues that "most of the applicable evidence, witnesses, documentation, records, computers, client lists, etc. are located in Arizona."
In contrast, plaintiffs are silent on the issue of venue; they address defendant's jurisdictional argument and then skip directly to arguing that Illinois is the most convenient forum. As explained above, Illinois is no longer an option in the instant case. Arizona, however, is clearly an appropriate venue under all three sections of 28 U.S.C. § 1391 (b). Thus, the court concludes that it is in the interest of justice to transfer the instant case to Arizona.
Given this ruling, defendant's motion to transfer pursuant to 28 U.S.C. § 1404 (a) is denied as moot. The court also denies as moot defendant's motion for an extension of time to file his reply brief in support of the instant motion.