JDA eHealth Systems, Inc. v. Chapin Revenue Cycle Management, LLC et al
MEMORANDUM and Order Signed by the Honorable Blanche M. Manning on 6/23/2011:(mb, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
JDA eHEALTH SYSTEMS, INC.,
CHAPIN REVENUE CYCLE
MANAGEMENT, LLC; AUDITZ,
L.L.C., KEITH HENTHORNE; and
10 C 7781
Judge Blanche M. Manning
MEMORANDUM AND ORDER
JDA eHealth Systems, Inc. sued Chapin Revenue Management Cycle, LLC, Auditz,
L.L.C. and individual defendants Keith Henthorne and Timothy Carda alleging copyright
infringement, unfair trade practices and competition under the Lanham Act and various state law
claims resulting from a nascent business relationship. Defendants Chapin, Henthorne and Carda
have filed a motion to dismiss for lack of personal jurisdiction and failure to state a claim. All
defendants have filed a separate motion to transfer. For the reasons stated below, the motion to
dismiss for lack of personal jurisdiction is granted as to Henthorne and Carda. The motion to
transfer is granted and the case is hereby transferred to the United States District Court for the
Middle District of Florida. Given the transfer, the court did not consider and does not rule on the
issues raised by the motion to dismiss for failure to state a claim.
Bon Secours Health Systems, Inc. is a not-for profit health care system that owns,
manages or forms joint ventures with 18 acute-care hospitals, one psychiatric hospital, five
nursing care facilities, four assisted living facilities and 14 home care and hospice programs in
seven states, primarily on the East Coast. BSHS bills individuals directly for medical services
not covered by insurance. It outsources most of its debt collections to third-party debt collection
JDA is a software developer that licenses its proprietary software. Over the course of
more than 15 years, JDA developed its proprietary copyrighted Parathon revenue cycle solution,
primarily for hospitals and health care systems. JDA and BSHS began a business relationship in
1999. On or about July 26, 2002, BSHS executed a Master Services Agreement which includes
provisions regarding confidential disclosures and access to JDA’s intellectual property licensed
Chapin is a debt collection company. At some point before January 1, 2008, Chapin
contracted to be a debt collection agent for BSHS. Because much of BSHS’s patient accounts
receivable information was stored in JDA’s Parathon revenue cycle solution, BSHS requested
that JDA provide Chapin and individual defendants Henthorne and Carda access to JDA’s
Parathon revenue cycle solution. JDA did so.
JDA alleges that, on information and belief, Henthorne and Carda formed Auditz, L.L.C.
on or around April 10, 2008, for the purpose of covertly developing a revenue cycle management
software solution that competes with and infringes JDA’s Parathon revenue cycle solution.
In January 2010, JDA and Chapin entered into a confidentiality agreement under which
JDA would disclose certain trade secret information to Chapin and its principals Carda and
Henthorne. The agreement binds the parties until January 29, 2012. According to JDA, Chapin,
Carda, Henthorne and Auditz used their access to JDA’s revenue cycle solution and confidential
information to develop a competing software that infringes on JDA’s revenue cycle solution.
The defendants then sold and/or licensed their revenue cycle software to Emdeon, Inc. for $18.9
JDA brings suit alleging the following claims: Count I–Copyright Infringement; Count
II–Unfair Trade Practices under the Lanham Act; Count III–Unfair Competition under 815 ILCS
505/1; Count IV–Deceptive Trade Practices under 815 ILCS 505/2; Count V--Trade Secret
Misappropriation under the Illinois Trade Secrets Act, 765 ILCS 5/1065; and Count VI–Breach
of the Confidentiality Agreement.
Because the court concludes that personal jurisdiction does not exist as to Henthorne and
Carda, the action is dismissed as to these defendants. The court also concludes in its discretion
that the case be transferred to the United States District Court for the Middle District of Florida.
Because the case is being transferred, the court does not rule on the motion to dismiss for failure
to state a claim.
Motion to Dismiss for Lack of Jurisdiction
Personal Jurisdiction–Applicable Law
Neither the Copyright Act nor the Lanham Act authorize nationwide service of process.
See Janmark v. Reidy, 132 F.3d 1200, 1201 (7th Cir. 1997) (Copyright Act); ISI Int'l, Inc. v.
Borden Ladner Gervais LLP, 256 F.3d 548, 551 (7th Cir. 2001) (Lanham Act). “In [a] federal
question case where federal statutes do not authorize nationwide service of process, a federal
court in Illinois may exercise personal jurisdiction over [the defendant] if it would be permitted
to do so under the Illinois long-arm statute.” Ubid, Inc. v. The GoDaddy Group, 623 F.3d 421,
425 (7th Cir. 2010)1. Because Illinois’ long-arm statute extends to the maximum extent permitted
by the Illinois and United States constitutions, jurisdiction under the long-arm statute is
coextensive with federal due process requirements. 735 ILCS 5/2-209(c); see, e.g., RAR, Inc. v.
Turner Diesel Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). Thus, “the personal jurisdiction
analysis collapses into a federal due process inquiry.” Foley v. Yacht Management Group, Inc.,
No. 08 C 7254, 2009 WL 2020776, at *2 (N.D. Ill. Jul. 9, 2009) (citations omitted).
The Due Process Clause of the Fourteenth Amendment to the United States Constitution
limits when a state may assert personal jurisdiction over nonresident defendants. Pennoyer v.
Neff, 95 U.S. 714, 733 (1878). To exercise personal jurisdiction consistent with federal due
process, a defendant must have certain minimum contacts with the forum state such that the
“maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’”
Int'l. Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citations omitted).
“Personal jurisdiction can be either general or specific, depending on the extent of the
defendant’s contacts with the forum state.” Ubid, Inc., 623 F.3d at 425. Specific jurisdiction
refers to jurisdiction over a defendant if a suit “arises out of” or “relates to” the cause of action
even if those contacts are “isolated and sporadic.” Burger King Corp. v. Rudzewicz, 471 U.S.
462, 472-73 (1985). General jurisdiction is applicable when the lawsuit neither arose from nor
was related to the defendant's contacts with the forum state. RAR, Inc., 107 F.3d at 1277. Such
jurisdiction is permitted only where the defendant has “continuous and systematic general
business contacts” with the state. Id.
“When a defendant's motion to dismiss is based on the submission of written materials,
without the benefit of an evidentiary hearing, the plaintiff need only make out a prima facie case
of personal jurisdiction.” GCIU-Employer Retirement Fund v. Goldfarb Corp., 565 F.3d 1018,
1023 (7th Cir. 2009) (citation omitted). The court draws all reasonable inferences in favor of the
plaintiff and resolves all factual disputes in its favor. Purdue Research Foundation v.
Sanofi-Synthelabo, S.A., 338 F.3d 773, 783 & n.14 (7th Cir. 2003) (citations omitted).
Defendants Chapin, Carda and Henthorne contend that this court cannot exercise personal
jurisdiction over them. Defendant Auditz does not move to dismiss for lack of personal
Personal Jurisdiction over Chapin, Carda and Henthorne
The defendants have set forth in affidavits the facts they believe are relevant to the
As to the plaintiff’s state law claims, the court has subject matter jurisdiction under the
diversity jurisdiction. Federal courts sitting in diversity may exercise personal jurisdiction over
nonresident defendants only if a court in the forum state would have such jurisdiction. Hyatt Int'l
Corp. v. Coco, 302 F.3d 707, 713 (7th Cir. 2002). Thus, the personal jurisdiction inquiry in this
case is the same for the federal question claims as well as the state law claims.
resolution of the personal jurisdiction issue.
Defendant Henthorne. Henthorne’s affidavit indicates that he was the chairman of the
board of directors of Chapin for the time relevant to this dispute. As the chairman of the board of
directors, he attests that he had no responsibility for day-to-day management of Chapin and that
his responsibilities related solely to strategic management issues. According to Henthorne, he
met with JDA’s president once in Florida where they discussed potential strategic alliances
between Chapin and JDA. Henthorne then executed a confidentiality agreement and “was
invited” to meet with JDA representatives at JDA’s offices in Illinois in February 2010. This
was the only meeting with JDA in Illinois. Henthorne attests that all negotiations between JDA
and Chapin were completed by the end of March 2010 and that no relationship ever materialized
between the companies.
Henthorne currently has no ownership interest in Chapin and prior to June 21, 2010, he
did not have a majority ownership in Chapin. As for Auditz, Henthorne was a member of its
board of directors prior to June 21, 2010, but is no longer a member of Auditz’s board. He states
he was never an employee of Auditz and that any ownership interest he has is indirect in that he
has ownership in an entity (Emdeon) that owns Auditz. Finally, Henthorne states that he has
never lived in Illinois, has not maintained any offices in Illinois, has not owned any property in
Illinois, has not reached into Illinois to solicit or initiate any business, has not “deliberately
engaged in significant or long-term business activities in Illinois,” and has not “purposefully
directed any commercial activities into the State of Illinois.”
Defendant Carda. Carda’s affidavit indicates that he has been employed by Emdeon
Business Services, Inc., as vice president of its subsidiary Chapin Revenue Cycle Management,
LLC. From February 2009 through June 21, 2010, he served as president of Chapin and was
responsible for the day-to-day management of the company. In January 2010, Carda met with the
president of JDA at the Richmond, Virginia offices of BSHS to have initial discussions regarding
potential strategic alliances between Chapin and JDA. Dudley then traveled to the Chapin
offices in Tampa on January 26, 2010 for an additional meeting to explore the strategic alliance.
Carda never traveled to Illinois to meet with JDA regarding any matters. After the initial two
meetings between Carda and Dudley, Henthorne communicated with JDA.
Carda presently has no ownership interest in Chapin and prior to June 21, 2010, he did
not hold a majority interest in Chapin. From its inception in 2008 to June 21, 2010, Carda was
the chief executive officer of Auditz, but is no longer employed there and is contractually
prohibited from actively participating in Auditz’s day-to-day business operations. Carda never
had a direct ownership interest in Auditz of more than 5% and any indirect ownership he has in
Auditz has never constituted a majority interest. Like Henthorne, Carda also attests that he has
never lived in Illinois, has not maintained any offices in Illinois, has not owned any property in
Illinois, has not reached into Illinois to solicit or initiate any business, has not “deliberately
engaged in significant or long-term business activities in Illinois,” and has not “purposefully
directed any commercial activities into the State of Illinois.”
James Dudley. Dudley attests that at all relevant times he was the principal of JDA
eHealth Systems. Sometime shortly after January 1, 2008, BSHS asked him to provide login
credentials to Chapin to access JDA’s proprietary software and database that warehouses
significant amounts of BSHS accounts receivable information. JDA provided several sets of
login credentials to Henthorne and Carda for use by Chapin and its agents. Since then, Dudley
attests that Chapin, Henthorne and Carda have used the login credentials to access the software
interface and database warehoused on JDA’s servers located at JDA’s offices in Naperville,
Beginning in early March 2008, after having accessed JDA’s software for nearly two
months, Chapin requested that JDA make changes to JDA’s software to provide specialized
access for Chapin. Chapin identified the specific categories of information it required and JDA
modified the source code to export the data. The changes were made on JDA’s servers located in
Naperville. Dudley asserts that from 2008 through at least December 2010, Chapin “has
regularly, systematically, and continuously accessed JDA’s software and database to access
BSHS data warehoused on JDA’s servers and in JDA’s database located on servers in Naperville,
Illinois. Chapin’s access was solely for a commercial purpose.” Dudley Aff. at ¶ 6. According
to Dudley, he was contacted by Carda in early 2010 to discuss possible business relationships
between Auditz and JDA and/or Chapin and JDA. Dudley traveled to Chapin’s offices in
Tampa, Florida, in late January 2010. On February 4, 2010, Henthorne traveled to JDA’s offices
in Naperville. As a result of these meetings, the parties signed a written confidentiality
agreement regarding information that JDA was to disclose to Chapin.
The plaintiff asserts that the court may exercise general jurisdiction over Chapin because
it engaged in a business relationship with JDA since January 2008 at the earliest and January
2010 at the latest, which included at least one meeting between JDA and Chapin in Illinois. In
addition, Chapin acknowledges that it has at least one additional client in Illinois, and JDA
contends that Chapin indicated to JDA at some point in time that it serviced at least five clients
As already discussed, general jurisdiction is permitted only where the defendant has
“continuous and systematic general business contacts” with the state. RAR, Inc., 107 F.3d at
1277. Contacts sufficient to establish general jurisdiction must be “so extensive as to be
tantamount to [defendant] being constructively present in the state.” Purdue Research
Foundation v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 787 (7th Cir. 2003).
JDA’s allegations and Dudley’s affidavit fail to establish that Chapin was constructively
present in Illinois such that it could be subject to the court’s general jurisdiction. According to
Carda and Henthorne’s affidavits, Chapin’s one Illinois client is St. Mary’s Hospital in Decatur,
Illinois, which represents less than 1% of Chapin’s business. Dudley, JDA’s president, attests in
his opposing affidavit that “Chapin” told him that it serviced at least five businesses in the state
of Illinois. Even accepting Dudley’s version of the facts as we must, the mere servicing of five
businesses in Illinois does not establish that general jurisdiction is properly exercised over
Chapin. The record does not indicate the extent of the contacts in servicing the five businesses or
how much business they represented to Chapin. Moreover, the plaintiff’s attempt to rely on
JDA’s purported business relationship with Chapin to establish general jurisdiction is unavailing
as “[g]eneral jurisdiction is for suits neither arising out of nor related to the defendant's contacts
with the State . . . “ GCIU–Employer Retirement Fund, 565 F.3d at 1023.
Because “[t]he threshold for general jurisdiction is high . . . [and] the contacts must be
sufficiently extensive and pervasive to approximate physical presence,” Tamburo v. Dworkin,
601 F.3d 693, 701 (7th Cir. 2010), the plaintiff has failed to meet its burden of establishing a
prima facie case of general jurisdiction as to Chapin.
JDA also contends that specific jurisdiction exists over Chapin based on its commercial
internet contacts with Illinois. JDA argues that “[c]ourts in this district have adopted the ‘sliding
scale’ approach” but fails to cite to any cases in this jurisdiction in support, and only cites to
Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997). This failure might
be due to the fact, as noted by another court in this district, that “the Seventh Circuit has spoken
yet again on this [jurisdictional] issue and has unequivocally rejected the ‘sliding scale’ approach
to personal jurisdiction suggested by [the plaintiff].” Roser v. Jackson & Perkins Wholesale,
Inc., No. 10 C 1894, 2010 WL 4823074, at *4 (N.D. Ill. Nov. 15, 2010) (quoting Illinois v. Hemi
Group LLC, 622 F.3d 754, 759 (7th Cir. 2010) (“[W]e think that the traditional due process
inquiry ... is not so difficult to apply to cases involving Internet contacts that courts need some
sort of easier-to-apply categorical test.”)). Because the Seventh Circuit has rejected the sliding
scale approach relied on by JDA, this court will not consider it in assessing whether specific
jurisdiction exists over Chapin.
Nevertheless, the court concludes based on the evidence presented that specific
jurisdiction exists over Chapin. Dudley, JDA’s president, states in his affidavit that JDA
provided several sets of login credentials to Chapin so that multiple individuals at Chapin could
access or delegate access to JDA’s software to retrieve BSHS account receivable information.
JDA further asserts that Chapin, Henthorne and Carda have routinely and systematically accessed
JDA’s software utilizing JDA’s computer servers located in Naperville. While Henthorne and
Carda deny in their affidavits that they received any login credentials or personally accessed
JDA’s software, they do not deny that employees at Chapin did so.
Chapin’s attempts to characterize its accessing JDA’s online database as “passive” and
thus insufficient to establish specific jurisdiction are unpersuasive. In the case cited by Chapin,
Dakota Beef, LLC v. Pigors, 445 F. Supp.2d 917 (N.D.Ill. 2006), the court concluded that
jurisdiction cannot be premised on a defendant’s maintenance of a “passive” website from which
individuals in foreign jurisdictions may obtain information about the company. As the Seventh
Circuit has stated:
With the omnipresence of the Internet today, it is unusual to find a company that
does not maintain at least a passive website. Premising personal jurisdiction on
the maintenance of a website, without requiring some level of “interactivity”
between the defendant and consumers in the forum state, would create almost
universal personal jurisdiction because of the virtually unlimited accessibility of
websites across the country.
Jennings v. AC Hydraulic A/S, 383 F.3d 546, 550 (7th Cir. 2004).
This case is distinguishable. Specific jurisdiction is not being premised on Chapin’s
website; rather, JDA alleges and Dudley attests that Chapin actively and purposefully accessed
its software and database situated on a server in Naperville “regularly” and “systematically” since
January 2008. Construing the facts in JDA’s favor, as the court must, the court concludes that
Chapin could expect to be haled into court based on this contact.
JDA also alleges that specific jurisdiction exists based on the written confidentiality
agreement between the parties. The court need not address this basis for personal jurisdiction
given that it has already concluded that personal jurisdiction exists.
Because the court finds that JDA has set forth a prima facie case for personal jurisdiction
over Chapin, the motion to dismiss Chapin for lack of personal jurisdiction is denied.
Carda and Henthorne
The plaintiff fails to articulate any valid basis for exercising general jurisdiction over
Carda or Henthorne. JDA briefly makes reference to the fact that Carda and Henthorne are
principals of Auditz, which maintains an office in Chicago, Illinois. While it is true that
maintaining an office in a jurisdiction is one factor a court may consider in ascertaining whether
the exercise of general jurisdiction is appropriate, JDA fails to cite to any authority which would
support of finding of continuous and systematic general business contacts based solely on the fact
that a person is a principal in an entity that maintains an office in Illinois. Carda and Henthorne
attest that they have never personally accessed JDA’s software located on the Naperville, Illinois
server, have not maintained any offices in Illinois, have not owned any property in Illinois, have
not reached into Illinois to solicit or initiate any business, have not “deliberately engaged in
significant or long-term business activities in Illinois,” and have not “purposefully directed any
commercial activities into the State of Illinois.”
The court acknowledges that Dudley attests that Henthorne and Carda personally
accessed JDA’s database in Naperville on a regular and systematic basis. However, Dudley does
not provide any foundation for this statement. Even if Henthorne and Carda did receive login
credentials, Dudley has provided no basis of personal knowledge for his statement that
Henthorne and Carda (as opposed to other Chapin employees) used these login credentials to
access the JDA database. Moreover, as already noted above, “[g]eneral jurisdiction is for suits
neither arising out of nor related to the defendant's contacts with the State . . . .”
GCIU–Employer Retirement Fund, 565 F.3d at 1023.
Accordingly, based on the record as it stands, the court finds that general jurisdiction over
Carda and Henthorne does not exist. JDA asks for the opportunity to conduct jurisdictional
discovery in the event the court concludes that jurisdiction does not exist. “Generally,
jurisdictional discovery is justified if the plaintiff can show that the factual record is at least
ambiguous or unclear on the jurisdictional issue.” Trading Technologies Inter., Inc. v. BCG
Partners, Inc., No. 10 C 715, 2011 WL 1220013, at *3 (N.D. Ill. Mar. 28, 2011) (citation
omitted). JDA fails to make such a showing with respect to the facts related to general
jurisdiction over Carda and Henthorne. Accordingly, the motion for jurisdictional discovery is
JDA does not contend that specific jurisdiction exists over Carda and Henthorne;
accordingly, this basis for jurisdiction has been waived. DDI Seamless Cylinder Int'l, Inc. v.
Gen. Fire Extinguisher Corp., 14 F.3d 1163, 1168 (7th Cir. 1994) (“An issue must be pressed,
must be argued and supported; a bare conclusion is not enough.”).
Fiduciary Shield Doctrine
The parties devote significant portions of their briefs to a discussion of whether Illinois’
fiduciary shield doctrine protects the individual defendants from this court’s jurisdiction.
Because the court has concluded that personal jurisdiction over the individual defendants is
lacking, the court need not address the applicability of the fiduciary shield doctrine.
Motion to Transfer
After considering the motions to dismiss for lack of personal jurisdiction, the remaining
defendants are Chapin and Auditz. The defendants seek to transfer this case to the Middle
District of Florida pursuant to 28 U.S.C. § 1404(a), which provides that, “[f]or the convenience
of the parties and witnesses, in the interests of justice, a district court may transfer any civil
action to any other district or division where it might have been brought.” Under § 1404(a), the
party seeking transfer must demonstrate that: (1) venue is proper in the transferor court; (2)
venue would be proper in the transferee court; and (3) transfer will serve the convenience of the
parties and witnesses and promote the interests of justice. Van Dusen v. Barrack, 376 U.S. 612,
616 (1964). In addition, “the movant has the burden of establishing, by reference to particular
circumstances, that the transferee forum is clearly more convenient.” Coffey v. Van Dorn Iron
Works, 796 F.2d 217, 219-20 (7th Cir. 1986). “When deciding a motion to transfer venue, the
court must accept as true all of plaintiff's well-pleaded facts in the complaint, unless they are
contradicted by affidavits or other appropriate evidence from the defendant.” Andrade v. Chase
Home Fin., LLC, No. 04 C 8229, 2005 WL 3436400, at *2 (N.D. Ill. Dec. 12, 2005).
Venue in the transferor court
Venue is proper in the Northern District of Illinois as to Chapin and Auditz, the only two
defendants left in this case, because under 28 U.S.C. § 1391(b), venue is proper in any district in
which the defendant resides. A corporation is deemed to reside in any district “in which it is
subject to personal jurisdiction at the time the action is commenced.” Id. § 1391(c). Auditz
concedes that venue is proper in this district and the court has concluded that Chapin is subject to
this court’s personal jurisdiction. Thus, venue is proper here as to both Chapin and Auditz.
Venue is proper in the transferee court
The plaintiff does not assert that venue is improper in the Middle District of Florida;
accordingly, because all of the defendants reside in Florida, and at least one resides in the Middle
District of Florida, see 28 U.S.C. § 1391(b), the court concludes that venue is proper in the
Middle District of Florida.
Private interest factors (convenience of parties and witnesses)
When evaluating the private interest factors, the court considers: (1) the plaintiffs' choice
of forum; (2) the situs of material events; (3) the availability of evidence in each forum; (4) the
convenience of the witnesses; and (5) the convenience of the parties litigating in the respective
forums. Handler v. Kenneth Allen & Associates, P.C., No 10 C 3728, 2011 WL 1118499, at *2
(Mar. 24, 2011) (citations omitted). The court also considers whether the parties have met their
burden of specifically identifying the witnesses they intend to call, as well as the general content
of the witnesses' proposed testimony. Mattsson By and Through Mattsson v. Gerry Wood
Products Co., No. 95 C 2314, 1997 WL 158334, at * 1 (N.D. Ill. Mar. 31, 1997).
Plaintiff’s choice of forum
The plaintiff's choice of forum is normally given substantial weight when the court
considers a motion to transfer. Amorose v. C.H. Robinson Worldwide, Inc., 521 F.Supp.2d 731,
736 (N.D. Ill. 2007). Here, JDA eHealth Systems chose to file suit in the Northern District of
Illinois. Standing alone, this fact weighs against transfer. However, “where the plaintiff's choice
of forum has a relatively weak connection with the operative facts giving rise to the claim ... the
deference traditionally given to the selection is lessened.” Brady v. Hanger Orthopedic Group,
Inc., No. 05 C 0492, 2006 WL 2560953, at *2 (N.D. Ill. Aug. 30, 2006). In the face of a weak
relationship between the operative facts and the plaintiff's chosen forum, the plaintiff's choice of
forum becomes “only one of the many factors the court considers.” D'Ancona & Pflaum LLC v.
M2 Software, Inc., No. 00 C 7150, 2001 WL 873021, at *2 (N.D. Ill. Aug.2, 2001). Finally,
“[t]he plaintiff’s choice of forum is given less deference if another forum has a stronger
relationship to the dispute.” Rendon v. Wexford Health Services, Inc., No. 10 C 1590, 2010 WL
5129818, at * 5 (N.D. Ill. Dec. 10, 2010) (citation omitted) (citing Powell v. Sparrow Hosp., No.
09 C 3239, 2010 WL 582667, at *3 (N.D. Ill. Feb 12, 2010) (collecting cases)).
The question thus becomes whether Illinois has a stronger connection, relative to Florida,
to the operative facts giving rise to JDA’s claims, most of which are based on the defendants’
purported illegal copying of the plaintiff’s software. “In an infringement action, one locus of
operative facts is the place where the allegedly-infringing product was designed and developed.”
Atlantic Recording Corp. v. Project Playlist, Inc., 603 F. Supp.2d 690 (S.D.N.Y. 2009). Here,
the allegedly infringing product was designed in Florida. The plaintiff’s attempt to convolute the
issue by asserting the copying “took place not only on Defendant’s computers, but also on
Internet routers in every district through which a data packet was routed . . .” is unpersuasive.
While the information may have passed through multiple locations, the court agrees with the
Atlantic Recording Corp. court that in an infringement action, one locus of operative facts is the
places where the allegedly-infringing product was designed and sold. Thus, while the plaintiff’s
choice of forum is normally given substantial weight, it is given less deference in this case given
that the purported infringement took place in Florida.
As to the breach of the confidentiality agreement, the situs of material events in a breach
of contract case “is where the business decisions causing the breach occurred ....” First Nat'l
Bank v. El Camino Res. Ltd., 447 F. Supp.2d 902, 912 (N.D. Ill. 2006) (quoting Hyatt Corp. v.
Personal Commc'ns Indus. Ass'n, No. 04 C 4656, 2004 WL 2931288, at *3 (N.D. Ill. Dec.15,
2004)). Neither the complaint nor any evidence in the record expands on where the business
decisions related to the breach occurred. Accordingly, the court does not factor this claim in its
decision on this issue.
Based on the above, the court concludes that the plaintiff’s choice of forum, Illinois, is
not entitled to substantial weight in this case.
Situs of Material Events
As noted above, to the extent that infringing software was developed in Florida, that state
is a situs of material events. On the other hand, the plaintiff’s server and software is located in
Illinois. The plaintiff attempts to analogize this case to Sunrise Bidders, Inc. v. GoDaddy Group,
Inc., No. 09 C 2123, 2011 WL 1357516, at *2 (N.D. Ill. Apr. 11, 2011), in which the court stated
that “the situs of material events is potentially everywhere Sunrise’s website is accessible.”
Based on this observation, the plaintiff asserts that “[j]ust as Sunrise’s websites were available
everywhere, so to [sic] is Plaintiff’s website available everywhere.” As an initial matter, the
plaintiff fails to articulate the relevance of this last assertion to the instant analysis. Moreover,
the plaintiff fails to take into account the rest of the Sunrise Bidders quotation. The full quote
Relatedly, in a case such as the one at hand, the situs of material events is
potentially everywhere Sunrise's website is accessible; Sunrise could have easily
sued in many different districts since GoDaddy's business is entirely conducted on
the internet. However, since Sunrise chose Illinois, its home forum, as the
preferred venue for this action, we will defer to Sunrise's choice of forum if other
factors remain equal between the parties.
Here, no record evidence exists that the defendants’ business is entirely conducted on the
internet and therefore the defendant could have been sued in many different districts. Thus,
because the facts of the case are distinguishable, the conclusion, that the court should defer to the
plaintiff’s choice of forum, is inapplicable. The court finds this factor to be neutral.
Availability of Evidence
The court agrees with the parties that the record does not appear to be voluminous and
“[c]hanges in copying technology and information storage ... have rendered many traditional
concerns about document production moot.” Cypress Medical Products, L.P. v. Worthington,
No. 04 C 7034, 2005 WL 936903, at *4 (N.D. Ill. Apr.18, 2005). Accordingly, this element is in
Convenience of the Witnesses
The party seeking transfer bears the burden of specifying the key witnesses to be called
and summarizing their expected testimony. Vandeveld v. Christoph, 877 F. Supp. 1160, 1167-68
(N.D. Ill. 1995). Moreover, when considering the convenience of witnesses, the court must
evaluate the nature and relevance of the expected testimony instead of merely comparing the
length of each party's witness list. Id. at 1168. The convenience of the witnesses “is often
viewed as the most important factor in the transfer analysis.” Preussag Int'l Steel Corp. v. Ideal
Steel & Builder's Supplies, Inc., No. 03 C 6643, 2004 WL 783102, at *5 (N.D. Ill. Jan.20, 2004)
The defendants are located in Florida and assert that they will call a significant number of
witnesses who live in Florida in order to demonstrate that no infringement occurred. According
to their proposed witness list, see Dkt. #27-3, the defendants list 14 witnesses they intend to call
who reside in Florida. Two of these, Philip Shasteen and Lisa Shasteen, who are prior minority
owners of Chapin, appear to be offering duplicative testimony regarding corporate history. Thus,
only one of them would likely need to testify. Keith Henthorne and Timothy Carda have been
dismissed as defendants. While the plaintiff contends that their testimony would be duplicative,
given their prior status as defendants, it is not unreasonable to assume that each would be called
to testify, and certainly Keith Henthorne appears to be a likely witness as he signed the
confidentiality agreement that is the subject of the breach of contract count.
Most of the remaining defendants’ party witnesses in Florida appear to be testifying
regarding the development of the software at issue. While there is potentially some overlap in
the testimony, given that the development of the software at issue is the critical issue in the case,
it is probable that the defendants will be calling numerous different witnesses to testify on this
topic. As for Don Steigman, who is the chief executive officer of Auditz, a defendant in the case,
and another, David Finkel, who is the chairman of Auditz, the substance of their testimony is not
provided and the court assumes that it would be overlapping such that each would not have to
The defendants name six non-party witnesses (or classes of witnesses). Two of them,
Charles Van Der Veer and representatives of Tribridge, are located in Tampa and would testify to
the development of the software at issue. James Dudley is the president of JDA and lives in
Illinois. The other three witnesses (or class of witnesses) are located in neither Florida or Illinois.
Bon Secours Health Systems, Inc. representatives, who are located in Richmond, Virginia, and
John McCann, who is also located in Richmond, Virginia, would testify to BSHS’ relationship
with the defendants. Jason Maronge lives in Friendswood, Texas, and would testify regarding
the software at issue. James Dudley is in the subpoena power of this court. However, Charles
Van Der Veer, representatives of Tribridge, representatives of BSHS, John McCann and Jason
Maronge are not. Assuming these non-party witnesses were to appear voluntarily, each of the
five would be required to travel whether it be to Illinois or Florida.
Accordingly, as to the defendants’ witness list, while a number of their employees who
live in Florida would be testifying on a topic relevant to this litigation (i.e., software
development, the confidentiality agreement and the business of the corporate defendants), the
majority of the non-party witnesses live neither in Florida or Illinois and thus would be required
to travel regardless. While one non-party witness, Charles Van Der Veer, is within the subpoena
power of the Middle District of Florida court, the rest are not within the subpoena power of either
The plaintiffs state they will call Mark McVeety, the chief strategic officer of Auditz,
who lives in Illinois. While they state that Mr. McVeety was highly involved with Emdeon,
Inc.’s acquisition of Chapin while he was at B.C. Ziegler, the plaintiff fails to specify nor can the
court ascertain how this testimony is relevant to the issues in this case. The plaintiff also states
that it intends to call “other employees and agents of Ziegler, as well as employees and agents of
Emdeon, responsible for the due diligence Emdeon performed prior to its acquisition of Chapin.”
Plaintiff’s Opposition to Defendants’ Motion to Change Venue, Dkt. #28, at 10-11. Again, the
plaintiff fails to articulate the relevance of this testimony or the reason that more than one person
would need to testify regarding due diligence
The plaintiff states that it also will call multiple representatives of BSHS, who are
presumably located in Richmond, Virginia, including John McMahon (whom the court believes
to be the same person listed as John McCann on the defendants’ witness list). As noted above,
these individuals would be out of the subpoena power of the district courts in both Illinois as well
as Florida and would be required to travel wherever the trial is held.
Finally, the plaintiff indicates that it will call representatives of Intersoft Solutions “to
testify to the proprietary software JDA developed specifically for Defendants.” Again, the
plaintiff does not specify the relevance of such testimony to the case at hand or why “multiple
representatives” would be required to testify. Moreover, the plaintiff fails to indicate where
Intersoft Solutions witnesses are located, and only states that it “believes” that representatives of
Intersoft are outside the subpoena power of both the Northern District of Illinois court and the
Middle District of Florida court.
Ultimately, the plaintiff fails to identify any Illinois witness whose testimony is relevant
to this case (though the court assumes the plaintiff would call James Dudley, its president, even
though he was not identified by the plaintiff). As to the non-party witnesses, the only ones
identified by the plaintiff are located in Richmond, Virginia, and would be required to travel
regardless of where the trial is conducted. In addition, as already noted, these witnesses are not
within the subpoena power of either court.
Thus, we have several non-party witness located in neither Illinois nor Florida and not
subject to the subpoena power of either court. One non-party witness, Charles Van Der Veer,
resides in Tampa and thus, not only would it be more convenient for him if the case were in
Florida but he is also within the subpoena power of the court in the Middle District of Florida.
Accordingly, consideration of the non-party witnesses leans slightly in favor of the Florida court.
In addition, given the number of the defendants’ witnesses who are located in Florida and the
relevance of their testimony to the issues in the case, this factor, one of the more important ones,
militates slightly in favor of transfer.
Interests of Justice Factors
When evaluating the interests of justice, the court considers: (1) each forum’s familiarity
with the applicable law; (2) each forum’s relationship with the cause of action and respective
desirability of resolving controversies in each locale; and (3) “the speed at which the case will
proceed to trial.” Research Automation, Inc. v. Schrader-Bridgeport Intern., Inc.
626 F.3d 973, 978 (7th Cir. 2010). “The interests of justice pertain to the efficient administration
of the federal court system and may be determinative in a case, warranting transfer even where
the convenience of the parties and witnesses dictates an opposite result.” CMG Worldwide, Inc.
v. Bradford Licensing Assocs., No. 1:05-cv-0423-DFH-TAB, 2006 WL 3248423, at *5 (S.D.Ind.
Mar.23, 2006) (citing Coffey, 796 F.2d at 220-21). See also Mitchell v. First N. Credit Union,
No. 07 C 1891, 2007 WL 2948374, at *4 (N.D.Ill. Oct.4, 2007) (noting that the interests of
justice may decide the outcome of a motion for transfer, “even though the court would otherwise
find the [selected] forum inconvenient for the parties and witnesses”).
Forums’ familiarity with the law
The parties agree that the court’s familiarity with the law does not favor either district.
Accordingly, the court determines this to be a neutral factor.
Forums’ relationship with the cause of action
The plaintiff is located in Illinois, which has an interest in “‘adjudicating injuries to the
intellectual property rights of businesses that operate in this state.’” Q Sales & Leasing, LLC v.
Quilt Protection, Inc., 01 C 1993, 2002 WL 1732418, at *4 (N.D. Ill. July 26, 2002) (citation
omitted). Accordingly, this factor weighs in favor of the case remaining in Illinois.
Speed at which the case will proceed to trial
According to the Judicial Caseload Profile, the median time for the twelve-month period
ending September 30, 2010, from filing to disposition in civil actions is 6.2 months while the
median in the Middle District of Florida is 7.4 months–as the defendants note, a negligible
difference. However, as to the same period, the median time from filing to trial in the Northern
District of Illinois is 28.2 months while the median time in the Middle District of Florida is 19.2
months. This difference is notable and slightly favors the Middle District of Florida.
As recently noted by the Seventh Circuit, “[t]he statutory language [of § 1404] guides the
court's evaluation of the particular circumstances of each case and is broad enough to allow the
court to take into account all factors relevant to convenience and/or the interests of justice.”
Research Automation, 626 F.3d at 978. In addition to the factors just discussed, the court notes
that the defendants in this case, along with several other interested parties, have recently filed suit
in Florida alleging claims related to the facts and claims alleged in this case. Specifically, in
Chapin Revenue Cycle Management, LLC et al v. JDA eHealth Systems, Inc. et al., No. 8:11-CV858-T-33AEP, which is pending in the District Court in the Middle District of Florida, Chapin
alleges that JDA and Dudley, president of JDA, tortiously interfered with an advantageous
business relationship. According to Chapin and the other plaintiffs, JDA and Dudley accused
Chapin, Auditz, Henthorne and Carda of copying JDA’s software and sent a letter to a key client
of Chapin and JDA, and prospective client of Auditz, stating that Chapin had copied JDA’s
software. Chapin alleges that the client then ceased doing new business with Chapin and
abandoned its plans to expand its relationship with Chapin and Auditz, which caused Chapin
“It is axiomatic, of course, that related suits should be concentrated in the same forum.”
Avante Intern. Technology, Inc. v. Hart Intercivic, Inc., Nos. 08-636-GPM, 07-169-GPM, 2009
WL 2448519, at * (S.D. Ill. July 22, 2009) (citing Van Dusen v. Barrack, 376 U.S. 612, 644, 84
S.Ct. 805, 11 L.Ed.2d 945 (1964) (transfer to the district where a related suit is pending is
generally “accompanied by the full benefits of consolidation and uniformity of result”)); Coffey,
796 F.2d at 221 (noting that “related litigation should be transferred to a forum where
consolidation is feasible.”). The lawsuits in Florida and Illinois, while not mirror images of each
other, are clearly related and judicial efficiency and cost-savings to the parties could be achieved
by consolidating them fully or at least for purposes of discovery. The court acknowledges that
the plaintiff filed its case here first. However, the Seventh Circuit has recently noted that in the
motion to transfer context, no preference for the first-filed case exists in this circuit. Research
Automation, 626 F.3d at 982 (“[w]here a case is filed first should weigh no more heavily in the
district court's analysis than the plaintiff's choice of forum in a section 1404(a) calculation. We
apply the same standard to a section 1404(a) motion regardless of whether there is a second-filed
case.”). Because the court has already considered the plaintiff’s choice of forum above, it need
not consider the filing order again.
Finally, the court notes that it has concluded that the plaintiff lacks personal jurisdiction
over Carda and Henthorne. These defendants concede, however, that personal jurisdiction exists
over them in Florida. Thus, a transfer to Florida will be advantageous to the plaintiff to the
extent that it will allow Carda and Henthorne to be named as defendants in the case.
The court acknowledges that Illinois has an interest in resolving injuries to the intellectual
property rights of its residents and that the plaintiff filed its case here first. However, based on
the lack of any other factors favoring Illinois over Florida, the number and relevance of the
defendants’ witnesses based in Florida, the fact that most of the non-party witnesses will have to
travel regardless of where the trial is held and are not within the subpoena power of either court,
that one non-party witness is located in the Middle District of Florida, and the efficiencies that
would result from having related cases pending in the same jurisdiction, the court, in its
discretion, grants the defendants’ motion to transfer the case to the United States District Court
for the Middle District of Florida.
The motion to dismiss for lack of personal jurisdiction and for failure to state a claim  is granted in part and denied in part. The motion to dismiss for lack of personal jurisdiction is
granted as to Timothy Carda and Keith Henthorne but denied as to Chapin. The motion to
transfer [25-1] is granted and the case is hereby transferred to the United States District Court for
the Middle District of Florida. Given the transfer, the court does not consider the motion to
dismiss for failure to state a claim.
June 23, 2011
Blanche M. Manning
United States District Court