McGreal v. Semke Consulting, Inc. et al
Filing
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MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 11/22/2011:Mailed notice(mpj, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
TIMOTHY R. MCGREAL,
Plaintiff,
v.
FREDERICK B. SEMKE, PATRICIA A.
SEMKE, SEMKE CONSULTING, INC. d/b/a
Semke Forensic,
Defendants.
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No. 11 C 5603
MEMORANDUM OPINION AND ORDER
Plaintiff Timothy McGreal filed a lawsuit against defendants
Frederick Semke, Patricia Semke, and Semke Consulting, Inc.
(“Semke Forensic”) alleging violation of the Illinois Wage
Payment and Collection Act (“IWPCA”), 820 ILCS 115/1, et seq.,
tortious interference with a contract, and breach of contract.
Before me is defendants’ motion to dismiss pursuant to Federal
Rules of Civil Procedure 12(b)(2), (3), and (6).1
For the
reasons discussed below, the motion is granted in part and denied
in part.
I.
McGreal began working for Semke Forensic in early December
2009.
At the time, McGreal worked as a Mechanical and Fire
1
Defendants frame their 12(b)(3) motion as a motion based
on the first-to-file doctrine, and I therefore treat it as such.
Protection Engineer and District Manager in Semke Forensic’s
Chicago office.
In November 2009, McGreal and Semke Forensic
entered into an Employment Contract which was drafted, negotiated
and signed by Frederick Semke, who is the President and Principal
Engineer of Semke Forensic.
The contract covered compensation
and benefits, including vacation and the payment obligations of
Semke Forensic upon termination of McGreal’s employment.
The
contract also stipulated that McGreal was an at-will employee.
On July 8, 2011, Frederick Semke terminated McGreal’s
employment with Semke Forensic.
Afterward, McGreal approached
Frederick Semke stating that he was owed vacation and a revenue
sharing payment.
On July 12, 2011, unbeknownst to McGreal, Semke
Forensic filed a petition for declaratory judgment in the Circuit
Court of St. Charles County, Missouri.
McGreal continued to call
Frederick Semke about what he was owed under the contract, but
did not hear back from Frederick Semke.
McGreal’s lawyer
contacted Frederick Semke in early August 2011, demanding payment
to his client.
lawsuit.
At that time, McGreal learned about the Missouri
On August 18, 2011, McGreal filed his coercive lawsuit
in this court.
Defendants now move to dismiss McGreal’s claims, arguing
that the Missouri action should have priority over this action
under the first-to-file doctrine, that the fiduciary shield
doctrine protects Frederick and Patricia Semke from personal
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jurisdiction, and that McGreal has failed to state a claim under
the IWPCA or for tortious interference with contract.
II.
Because this is a motion to dismiss, I assume to be true all
well-pleaded allegations in the complaint and draw all reasonable
inferences in favor of the plaintiff.
Marshall-Mosby v.
Corporate Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000).
The purpose of a motion to dismiss is to test the sufficiency of
the complaint, not to decide the merits of its claims or to
determine a plaintiff’s ability to succeed on his claims.
Weiler
v. Household Finance Corp., 101 F.3d 519, 524 n. 1 (7th Cir.
1996).
A complaint must do more than recite the elements of a
cause of action, and a court need not accept mere labels and
legal conclusions as factual allegations.
Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929
(2007).
A.
Nor will a court presume facts not alleged.
Id.
First-to-file rule
The Seventh Circuit has “repeatedly taught that this circuit
does not rigidly adhere to a first-to-file rule,” particularly
where parallel cases involve a declaratory judgment action and a
mirror-image action seeking coercive relief.
Research
Automation, Inc. v. Schrader-Bridgeport Int’l, Inc., 626 F.3d
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973, 980 (7th Cir. 2010).
In such cases, “we ordinarily give
priority to the coercive action, regardless of which case was
filed first.”
Id.
In this case, Semke Forensic filed a
declaratory judgment action on July 12, 2011 in the Circuit Court
of St. Charles County, Missouri.
Just over one month later, on
August 18, 2011, McGreal filed his coercive action in this court.
Therefore, barring other factors favoring transfer, the first-tofile doctrine is not a bar to McGreal’s coercive lawsuit.2
Further, Semke Forensic filed its declaratory judgment
action only two days after McGreal’s employment was terminated
and while McGreal was actively seeking to resolve the matter with
Frederick Semke directly.
McGreal has alleged, and stated in a
sworn affidavit, that he attempted to settle his claim repeatedly
through July 20, 2011, and that Frederick Semke indicated during
that time that he would be in touch with McGreal about what, if
anything, was owed to the former employee.
Meanwhile, Semke
Forensic had already filed its declaratory judgment action.
McGreal alleges he did not learn about the lawsuit until after
his attorney sent a demand for payment on August 1, 2011.
2
Such
No factors favoring transfer are present here.
Defendants have not alleged facts to suggest that litigating in
Illinois would be any more inconvenient than it would be for
plaintiff to litigate in Missouri, and there are questions of
Illinois and Missouri law at issue such that the interests of
justice do not favor one forum over the other.
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anticipatory filing counsels against giving priority to Semke
Forensic’s declaratory judgment action.
B.
Personal jurisdiction over Frederick and Patricia Semke
Where jurisdiction is contested in a motion to dismiss, a
plaintiff need only make a prima facie showing of jurisdictional
facts.
Tamburo v. Dworkin, 601 F.3d 693, 700 (7th Cir. 2010).
Accepting as true all well-pleaded facts, I conclude that McGreal
has made a prima facie showing of personal jurisdiction with
regard to Frederick Semke but not Patricia Semke.
A federal court exercising diversity jurisdiction has
personal jurisdiction over a defendant if the state in which it
sits would have such jurisdiction.
See, e.g., RAR, Inc. v.
Turner Diesel, Ltd., 107 F.3d 1272, 1275 (7th Cir. 1997).
The
reach of Illinois’ long-arm statute is coterminous with that of
the due process clauses of the Illinois and U.S. Constitutions.
735 ILCS 5/2-209(c).
“In almost all cases, when federal due
process concerns regarding personal jurisdiction are satisfied,
so are Illinois due process concerns regarding personal
jurisdiction.”
Keller v. Henderson, 834 N.E.2d 930, 941 (Ill.
App. Ct. 2005).
The exercise of personal jurisdiction satisfies the
requirements of federal due process when the defendant has
“certain minimum contacts with [the forum state] such that the
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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, 66 S.Ct. 154, 90 L.Ed. 95 (1945)
(quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85
L.Ed. 278 (1940)).
The scope of personal jurisdiction is determined by the
relationship between the cause of action and the defendant’s
contacts with the forum.
See Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80
L.Ed.2d 404 (1984).
A defendant with “continuous and systematic”
contacts with a particular forum is subject to general
jurisdiction there, which means that any action may be brought
against the defendant, regardless of whether the action is
related to the defendant’s contacts with the state.
Tamburo, 601
F.3d at 701 (citing Helicopteros Nacionales, 466 U.S. at 416).
A
defendant whose activities are not so extensive as to warrant an
exercise of general jurisdiction may nonetheless be subject to
specific jurisdiction.
A forum state may assert specific
jurisdiction over a defendant where: “(1) the defendant has
purposefully directed his activities at the forum state or
purposefully availed himself of the privilege of conducting
business in that state, and (2) the alleged injury arises out of
the defendant’s forum-related activities.”
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Tamburo, 601 F.3d at
702 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472,
105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).
Under the Due Process Clause of the Illinois Constitution, a
court may exercise jurisdiction “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.”
F.3d 707, 715 (7th Cir. 2002).
Hyatt Int’l Corp. v. Coco, 302
One situation in which the
Illinois Supreme Court has found “it is unfair and unreasonable”
to assert personal jurisdiction is where “an individual ... seeks
the protection and benefits of Illinois law, not to serve his
personal interests, but to serve those of his employer or
principal.”
1990).
Rollins v. Ellwood, 565 N.E.2d 1302, 1318 (Ill.
As such, the “fiduciary shield” doctrine “denies personal
jurisdiction over an individual whose presence and activity in
the state in which the suit is brought were solely on behalf of
his employer or other principal.”
Rice v. Nova Biomedical Corp.,
38 F.3d 909, 912 (7th Cir. 1994).
The “fiduciary shield”
doctrine will protect a non-resident whose contact with Illinois
is “by virtue of his acts as a fiduciary of a corporation.”
Plastic Film Corp. of America, Inc. v. Unipac, Inc., 128
F.Supp.2d 1143, 1146 (N.D.Ill. 2001) (quoting Alpert v. Bertsch,
601 N.E.2d 1031, 1037 (Ill. App. Ct. 1992)).
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However, “the
shield is withdrawn if the agent was acting also or instead on
his own behalf—to ‘serve his personal interest.’” Rice, 38 F.3d
at 912 (quoting Rollins, 565 N.E.2d at 1318).
Turning first to Patricia Semke, McGreal has not alleged
that Patricia Semke had any contacts at all with Illinois.
As
for Frederick Semke, McGreal has alleged a number of
jurisdictional facts, including that Frederick Semke: was in the
Chicago office when he fired McGreal, made significant decisions
regarding the Chicago office, signed a lease for the Chicago
office, and has maintained an Illinois professional engineering
license.
These facts are sufficient to support an exercise of
personal jurisdiction over Frederick Semke.
Frederick Semke argues, though, that he is protected from an
exercise of personal jurisdiction because of the fiduciary shield
doctrine.
Several courts in this district have concluded that
the fiduciary shield doctrine does not apply to high-ranking
corporate officers who are also shareholders of the corporation,
finding that such defendants had personal interests that would
render the fiduciary shield doctrine inapplicable.
See Consumer
Benefit Services, Inc. v. Encore Marketing Int’l, Inc., 2002 WL
31427021, at *3-4 (N.D.Ill. 2002) (refusing to apply the
fiduciary shield doctrine where defendant was the chief operating
officer and a shareholder); Plastic Film Corp., 128 F.Supp.2d at
1147 (“[t]he determinative factor is the individual’s status as a
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shareholder, not merely as an officer or director”); R-Five, Inc.
v. Sun Tui, Ltd., 1995 WL 548633, at *5 (N.D.Ill. 1995) (“[a]s
president, board member, and (most importantly) shareholder ...
[defendant] has a particularly personal interest in the
continuing future of [the corporation]”).
McGreal has alleged
that Frederick Semke is the President and Principal Engineer of
Semke Forensic as well as a shareholder of the corporation.
As
president and shareholder, Frederick Semke has a direct and
personal interest in Semke Forensic’s financial expenditures and
well-being.
I find that the fiduciary shield doctrine does not
protect Frederick Semke from being subject to personal
jurisdiction in Illinois.
Therefore, I find that I can assert
personal jurisdiction over Frederick Semke, but not over Patricia
Semke.3
C.
Claim under the Illinois Wage Payment and Collection Act
The IWPCA “applies to all employers and employees in this
State.”
820 ILCS 115/1.
The Illinois legislature has not
defined “employer ... in this State” and the Illinois courts have
not provided a definitive interpretation of this term either.
The leading case law has stated that the IWPCA only applies to
“Illinois employees and Illinois employers.”
3
Khan v. Van Remmen,
The issue of whether Frederick Semke was properly served
with process has been resolved by the waiver of service filed on
his behalf on November 3, 2011.
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Inc., 756 N.E.2d 902, 913, 325 Ill.App.3d 49 (Ill. App. Ct.
2001); see also Glass v. Kemper Corp., 920 F.Supp. 928, 931
(N.D.Ill. 1996) (“the Wage Act applies to a group consisting of
employers and employees, all of whom are in Illinois”).
However,
the Illinois courts have yet to resolve whether a corporation
that is a citizen of another state yet conducts substantial
business in Illinois and also maintains offices within the state
is an “Illinois employer” for purposes of the statute.
Indeed, in Khan, the Illinois Appellate Court explicitly
limited its holding to the facts of that case, stating “we do not
purport to create an all-encompassing definition of ‘employers in
this State’ for purposes of the Wage Act.
Rather, we determine
only that under the circumstances of this case plaintiff has not
pleaded any facts from which we could conclude that [defendant]
was an employer in this state.”
756 N.E.2d at 913.
easily distinguishable from this case.
Khan is
In that case, defendant
was a labor placement agency that had its principal place of
business in another state, had no physical presence in Illinois,
and had placed only four individuals with Illinois companies.
Id. at 912-13.
These facts led the court to find that the IWPCA
did not cover the defendant.
Id. at 913.
Defendants argue that Semke Forensic does not fall under the
purview of the IWPCA because it is a Missouri corporation with
its principal place of business in Missouri.
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However, McGreal
has alleged that Semke Forensic is an Illinois employer and at a
minimum maintains an office in Illinois, markets its services in
Illinois, and conducts substantial business in the state.
is a sufficient basis to withstand a motion to dismiss.
That
See
Musso v. Excellence in Motivation, Inc., 2010 WL 3385452
(N.D.Ill. 2010).
Additionally, Section 13 of the IWPCA states that “any
officers of a corporation or agents of an employer who knowingly
permit such employer to violate the provisions of this Act shall
be deemed to be the employers of the employees of the
corporation.”
820 ILCS 115/13.
Therefore, “[l]iability under
the Wage Act can be imposed upon ... any officers of a
corporation or agents of an employer who knowingly permitted the
Wage Act violation.”
894, 901 (Ill. 2005).
Andrews v. Kowa Printing Corp., 838 N.E.2d
In his complaint, McGreal alleged that
Frederick Semke purposefully and knowingly refused to pay McGreal
wages due to him.
Frederick Semke also is also alleged to have
continually put off McGreal and avoided any discussion of what,
if anything, McGreal was owed under the terms of the contract.
find that McGreal has alleged sufficient facts to state a claim
for relief against Frederick Semke, individually, under the
IWPCA.
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I
In sum, McGreal has alleged facts that, if proved, would
qualify Semke Forensic and Frederick Semke as Illinois employers
and create liability under the IWPCA.
D.
Claim for tortious interference with contract
In a case that bears a striking resemblance to the one in
front of me, the Seventh Circuit has found that corporate
officers could be liable for tortious interference with contract.
Stafford v. Puro, 63 F.3d 1436 (7th Cir. 1995).
In Stafford, a
former employee sued his former employer, a corporation, along
with two of the corporation’s owners and officers.
The
corporation at issue in Stafford was closely-held and its
shareholders were all family members.
Given these facts, the
Seventh Circuit rejected the very argument defendants rely on
here and found that shareholders and officers of a closely-held
corporation can tortiously interfere with a contract between the
corporation and an employee.
Id. at 1441-42.4
4
Drawing all inferences in favor of McGreal, I find that
for the purposes of this motion to dismiss, defendants have not
shown that there is no set of facts under which McGreal could
succeed in showing that Frederick Semke tortiously interfered
with the contract between McGreal and Semke Forensic. It does
not appear from the limited record at this point that Frederick
Semke is the sole shareholder and officer of Semke Forensic,
which would distinguish Stafford. See, e.g., Rao v. Rao, 718
F.2d 219, 225 (7th Cir. 1983) (emphasizing that a sole
shareholder, officer, and director could not be considered to be
an entity separate from the corporation).
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The Stafford court also noted that because a corporation can
only act through its officers and directors, such individuals
must be able to act on behalf of the corporation without fear of
personal liability.
63 F.3d at 1442.
Therefore, in Illinois the
decisions of corporate officers and directors are conditionally
privileged, and a plaintiff must prove actual malice to prevail
on a tortious interference claim.
Id.
Malice is defined as
“intentional and unjustified” interference with contract.
Id.
(quoting HPI Health Care Services, Inc. v. Mt. Vernon Hosp., 545
N.E.2d 672, 677 (Ill. 1989)).
McGreal has made ample factual
allegations to support his claim of malicious tortious
interference by Frederick Semke.
At the very least, McGreal has
alleged that Frederick Semke was unjustified in refusing to pay
McGreal according to the terms of the contract upon termination
of his employment.
The Seventh Circuit has found that a
violation of the IWPCA constituted illegal and unjustified
conduct.
Id.; see also HPI Health Care, 545 N.E.2d at 678 (“A
defendant who is protected by a privilege is also unjustified in
using illegal means to induce a breach of contract”).
Further,
McGreal has alleged that he notified Semke Forensic and Frederick
Semke of the corporation’s obligations under the contract and
that defendants were aware of Semke Forensic’s debt to McGreal,
thus rendering Frederick Semke’s refusal to pay intentional and
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unjustified.
Therefore, I find that McGreal has stated a claim
against Frederick Semke for tortious interference with contract.
III.
For the foregoing reasons, defendants’ motion to dismiss is
granted in part and denied in part.
As a result, Plaintiff may
pursue his breach of contract claim against Semke Forensic, his
claim under the IWPCA against Semke Forensic and Frederick Semke,
and his claim for tortious interference with contract against
Frederick Semke.
Claims against Patricia Semke are dismissed.
ENTER ORDER:
____________________________
Elaine E. Bucklo
United States District Judge
Dated:
November 22, 2011
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