Heritage Vintage Investments LLC v. KMO Development Group, Inc. et al
Filing
82
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang on 10/24/2016: For the reasons stated in the Opinion, Defendant Owens's motion to dismiss for lack of personal jurisdiction is denied. Owens's answer is due by 11/07/2016. The status hearing of 11/03/2016 remains in place to set the discovery schedule. The parties shall engage in prompt settlement negotiations. Emailed notice(Chang, Edmond)
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
HERITAGE VINTAGE
INVESTMENTS, LLC,
Plaintiff,
v.
KMO DEVELOPMENT GROUP, INC.;
CAROLINA BUENO, LLC; BRUCE G.
BOLZLE; and GREG D. OWENS,
Defendants.
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No. 15 C 05582
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
Defendant Greg Owens filed a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(2) for lack of personal jurisdiction.1 See R. 15, Mot. to Dismiss.2
This motion has already been the subject of two previous Opinions by the Court. See
R. 34, 12/11/15 Opinion; R. 57, 3/30/16 Opinion. The first Opinion, issued in
December 2015, ordered the parties to submit supplemental briefs and affidavits
specifically addressing which of Owens’s contacts, if any, with Illinois—the forum
state—related to the negotiation and execution of Owens’s personal guaranties, as
possibly distinct from agreements with the corporate defendants. 12/11/15 Opinion
at 15. The second Opinion, issued in March 2016, ordered an evidentiary hearing to
resolve important factual disputes raised by the supplemental materials. See
1The
Court has subject matter jurisdiction over this case under 28 U.S.C. § 1332.
to the Court’s docket are labeled as “R.” followed by the docket number
and applicable page or paragraph number. The exhibits (“Pl.’s Exh.” and “Def.’s Exh.”) refer
to exhibits that were introduced at the evidentiary hearing on September 21, 2016.
2Citations
3/30/16 Opinion at 14. It further denied Owens’s motion to dismiss without
prejudice, with the chance to renew the motion after the evidentiary hearing. Id.
The evidentiary hearing was held on September 21, 2016. See R. 73, 9/21/16
Minute Entry. At the hearing, affiants Michael Christie and Mark Glazer testified
on behalf of Plaintiff Heritage Vintage Investments, LLC, and Owens testified on
his own behalf. See R. 79, 9/21/16 Hearing Tr. at 3. Afterward, both parties
submitted post-hearing briefs to support their positions. See R. 80, Def.’s PostHearing Br.; R. 81, Pl.’s Post-Hearing Br. Based on the evidentiary record, the
Court concludes that it has specific personal jurisdiction over Owens, so Owens’s
motion to dismiss is denied.
I. Background
Many of the facts underlying Owens’s motion to dismiss have already been
set forth in the prior Opinions, see 12/11/15 Opinion; 3/30/16 Opinion, so only the
most pertinent facts will be set forth here. Heritage filed this lawsuit to enforce two
promissory notes it had issued to Defendant KMO Development Group, Inc. and
Defendant Carolina Bueno, LLC, as well as to enforce two individual guaranties in
which Owens and Defendant Bruce Bolzle personally guaranteed the KMO
Development note and the Carolina Bueno note.3 See R. 1-1, Summons & Compl.
Heritage claims that KMO Development and Carolina Bueno have both defaulted
on their loans, and seeks, among other things, judgment against Owens on his
personal guaranties. See id.
3Heritage
initially filed this case in the Circuit Court of Cook County, Illinois, but
Owens filed a timely notice of removal to federal court. See R. 1, Notice of Removal.
2
Owens moved to dismiss the case against him under Federal Rule of Civil
Procedure 12(b)(2) for lack of personal jurisdiction. Mot. to Dismiss. Owens argued
that (1) this Court lacks both general and specific jurisdiction over him, (2) he is
protected by Illinois’s fiduciary-shield doctrine, and (3) the KMO Development
guaranty includes a forum-selection clause that requires suit to be brought in
Oklahoma. See R. 16, Def.’s Br. In the December 2015 Opinion, the Court held that
Heritage had failed to establish that Owens is subject to general jurisdiction in
Illinois, but the Court rejected Owens’s fiduciary-shield and forum-selection
arguments. See 12/11/15 Opinion at 7-9, 12-14. The Court ultimately believed more
information was needed to determine whether it has specific jurisdiction over
Owens:
The parties’ broadly worded and conclusory affidavits do not give the Court
enough information to decide the dispute over personal jurisdiction. In order
for the Court to determine whether Owens, as an individual, is properly
before this Court, Heritage must provide the Court with evidence (if it has
any) showing that Owens’s personal guaranties arose from Owens’s contacts
with Illinois.
Id. at 12. In order to get more information on the personal guaranties, the Court
ordered the parties to file supplemental briefs and affidavits focused on “the nature,
extent, and location of the negotiations that occurred between Heritage and Owens
on Owens’s personal guaranties (not on the transaction documents generally).” Id.
In compliance with the order, the parties filed supplemental briefs and
affidavits focused on the initiation, negotiation, and execution of the KMO
Development and Carolina Bueno guaranties. See R. 38, Pl.’s Supp. Br.; R. 38-2,
12/28/15 Christie Supp. Aff.; R. 38-3, 12/28/15 Glazer Supp. Aff.; R. 53, Def.’s Supp.
3
Br.; R. 53-1, 1/27/16 Owens Supp. Aff.; R. 55, Pl.’s Supp. Reply Br.; R. 55-1, 2/8/16
Christie Second Supp. Aff. These filings offered materially different accounts of how
and where the personal guaranties were initially mentioned, discussed, and agreed
to. Heritage’s supplemental submissions suggested that Owens personally
negotiated and agreed to both of the personal guaranties during face-to-face
meetings with Christie and Glazer in Park Ridge, Illinois. Pl.’s Supp. Br. at 1;
12/28/15 Christie Supp. Aff. ¶¶ 5-7; 12/28/15 Glazer Supp. Aff. ¶¶ 5-7; 2/8/16
Christie Second Supp. Aff. ¶¶ 4-9. In contrast, Owens’s supplemental submissions
asserted that both guaranties were discussed and agreed to during phone calls
between Christie and Owens—while Owens was in his office in Oklahoma—that
preceded the face-to-face meetings in Illinois. Def.’s Supp. Br. at 2-3; 1/27/16 Owens
Supp. Aff. ¶¶ 6-7. To the extent that the guaranties were mentioned at the face-toface meetings, it was only to reiterate what had already been said over the
telephone for Glazer’s benefit. Def.’s Supp. Br. at 3; 1/27/16 Owens Supp. Aff. ¶ 7.
Because the parties’ submissions created a dispute over facts pertinent to the
specific-jurisdiction determination, the Court decided to hold an evidentiary
hearing. 3/30/16 Opinion at 1, 14. During that hearing, Christie and Glazer testified
for Heritage, Owens testified for himself, and the parties each introduced a handful
of exhibits. See generally 9/21/16 Hearing Tr. In lieu of closing arguments, the Court
requested that the parties file concise post-hearing briefs, id. at 104-05, which they
did.
4
II. Findings of Fact
Having considered the testimony and evidence offered at the evidentiary
hearing, and having reviewed the post-hearing briefs, the Court now resolves all
pertinent factual disputes to decide the personal jurisdiction question.
A. KMO Development Group Personal Guaranty
Sometime in or around 2001, Christie and Owens met at an entrepreneurial
coaching program called “The Strategic Coach.” 9/21/16 Hearing Tr. at 7 (Christie
Testimony); id. at 62 (Owens Testimony). The two struck up a friendship that
ultimately developed into a business relationship: Owens became the president of
KMO Development, and Christie and Glazer formed Heritage Capital Investments4
to provide capital funding for KMO Development’s single-tenant restaurant buildto-suit business. Id. at 8-9 (Christie Testimony); id. at 42 (Glazer Testimony); id. at
62-63 (Owens Testimony). Christie ran the administrative and management side of
Heritage, and Glazer provided the capital. Id. at 9 (Christie Testimony); id. at 44
(Glazer Testimony).
Several years into their business relationship, the Chief Financial Officer of
KMO Development, Mike Francis, called Christie to ask whether he thought Glazer
would consider making an operating loan for KMO Development to expand its
business. 9/21/16 Hearing Tr. at 9-10, 20 (Christie Testimony); id. at 44 (Glazer
Testimony). Christie told Francis that Christie would have to speak to Glazer. Id. at
10, 20 (Christie Testimony). When Christie and Glazer conferred, Glazer said that
4Heritage
Capital Investments is same entity as Heritage Vintage Investments; the
corporation’s name changed in or around 2011. 9/21/16 Hearing Tr. at 8 (Christie
Testimony).
5
he would consider making the loan, but that he wanted to discuss the matter with
Owens and Bolzle5 in person at an upcoming meeting.6 Id. at 10 (Christie
Testimony). Glazer wanted to speak with Owens and Bolzle about the loan in
person because it was very different from previous financial dealings between
Heritage and KMO Development: it was an operating loan—not a capital
contribution for a build-to-suit deal—and it involved roughly four times more money
than any previous deal had. Id. at 44-45, 48 (Glazer Testimony); see also id. at 67
(Owens Testimony). Christie testified that he called Francis back and “said that Dr.
Glazer would be open minded, he had a lot of questions and concerns, and he would
like to talk face-to-face when they were in town.” Id. at 11; see also id. at 21. On
cross, Christie admitted that he told Francis that Glazer “would require
collateralization or a personal guaranty or both, depending on what was backing the
loan.” Id. at 21.
This is where Heritage’s and Owens’s factual accounts diverge: Christie
testified that, between his phone calls with Francis and the face-to-face meeting, he
did not discuss the matter with Owens. 9/21/16 Hearing Tr. at 11, 20. Owens
testified, however, that he and Christie discussed the loan over the phone after
Christie’s initial conversation with Francis and before the in-person meeting. Id. at
68. According to Owens, during their phone conversations, Christie informed him
5Bolzle
was the Executive Vice President of KMO Development. Id. at 62 (Owens
Testimony).
6Christie, Glazer, Owens, and Bolzle regularly met—sometimes in Illinois,
sometimes in Oklahoma—to review ongoing real estate development business. Id. at 10-12,
23-24 (Christie Testimony); id. at 46 (Glazer Testimony); id. at 64-67 (Owens Testimony).
6
that Glazer would require a personal guaranty, and the two discussed the terms of
the loan. Id. at 68-70.
The parties generally agree that, in mid to late June 2006, Christie, Glazer,
Owens, and Bolzle met at Christie’s office in Park Ridge, Illinois. 9/21/16 Hearing
Tr. at 11-12 (Christie Testimony); id. at 45-46 (Glazer Testimony); id. at 70 (Owens
Testimony). But they offer different accounts of what happened at the meeting.
Christie and Glazer testified that Owens and Bolzle presented their desire for the
loan and offered an 18-percent interest rate, to be paid monthly. Id. at 13 (Christie
Testimony); id. at 47 (Glazer Testimony). Glazer then said he would need collateral
or a personal guaranty to make the loan. Id. at 13 (Christie Testimony); id. at 46-48
(Glazer Testimony). When Owens and Bolzle each offered to execute a personal
guaranty, Glazer requested “personal financial statements and tax returns before
[he would] finalize approval.” Id. at 14 (Christie Testimony); see id. at 46-47 (Glazer
Testimony). Discussion of the loan concluded with “a handshake agreement
contingent on [Glazer] receiving the financial statements and tax returns, and
[being] comfortable that there was [sic] enough . . . resources to repay the loan.” Id.
at 14 (Christie Testimony); see id. at 49-50 (Glazer Testimony).
In contrast, Owens testified that any conversation at the meeting about the
loan and the personal guaranty was “very perfunctory.” 9/21/16 Hearing Tr. at 69;
see also id. at 70 (“I remember it as being at the very tail end of the meeting and a
very brief conversation.”). The personal guaranty requirement—which Christie had
already mentioned to Owens over the phone—was simply “reiterated.” Id. at 70. The
7
foursome did not discuss or negotiate any of the particular terms of the guaranty.
Id. at 74.
Christie testified that, sometime after the meeting, KMO Development
provided him with “a draft of a promissory note as well as financial statements and
tax returns.” 9/21/16 Hearing Tr. at 14. Christie forwarded the documents to Glazer,
and Glazer decided that he wanted to go ahead with the loan. Id. at 15-16 (Christie
Testimony); id. at 50 (Glazer Testimony). Christie, however, informed Francis that
KMO Development would need to provide a separate personal guaranty form; the
promissory note contained a personal-guaranty signature line but Glazer and
Christie wanted “an actual guaranty form.” Id. at 15-16 (Christie Testimony); see
Pl.’s Exh. 1 at 2 (including signature lines for Francis, Owens, and Bolzle under a
heading entitled “GUARANTORS”). Neither Christie nor Glazer could remember
whether it was KMO Development or Heritage that ultimately drafted the personal
guaranty form that was used,7 see 9/21/16 Hearing Tr. at 16, 24-25 (Christie
Testimony); id. at 59 (Glazer Testimony), but a form was created by someone and
later completed by Owens in Oklahoma, see Pl.’s Exh. 2; see also 9/21/16 Hearing Tr.
at 25 (Christie’s Testimony). Upon receipt of the executed note and personal
guaranties, Heritage funded the loan. See 9/21/16 Hearing Tr. at 16 (Christie
Testimony).
7Christie
and Glazer did state, however, that regardless of who generated the
guaranty form, they do not think that the parties attempted to specifically negotiate any of
the terms included in the form. See id. at 27 (Christie Testimony); id. at 59 (Glazer
Testimony).
8
Owens testified that both the note and the personal guaranty were provided
to him to sign by Heritage sometime after the in-person meeting in Illinois. See
9/21/16 Hearing Tr. at 72, 74 (Owens Testimony). There was no negotiation over the
terms contained in the guaranty form. Id. at 74 (Owens Testimony); see also id. at
27 (Christie Testimony); id. at 59 (Glazer Testimony). Owens executed the personal
guaranty in Oklahoma, and electronically sent the completed form to Christie. Id. at
74 (Owens Testimony).
On consideration of the evidence, the Court credits the version of events
offered by Christie and Glazer and finds that the KMO Development guaranty was
negotiated and agreed upon at the face-to-face meeting in Park Ridge, Illinois. As
an initial matter, Glazer provided a credible motivation for wanting to discuss the
loan and the guaranty in person before reaching an agreement: this deal was
starkly different from the previous deals that KMO Development and Heritage had
made. 9/21/16 Hearing Tr. at 44-45, 48. Instead of requesting a capital contribution
for a build-to-suit project, KMO Development requested an operating loan that
involved a significant amount of money. Id. Owens’s testimony corroborates this.
See id. at 67. In addition, all three witnesses testified that neither the note nor the
personal guaranty was physically brought to the face-to-face meeting. See id. at 24
(Christie Testimony); id. at 48-49 (Glazer Testimony); id. at 84-85 (Owens
Testimony). Rather, both were prepared and signed afterward. See id. at 49-51
(Glazer Testimony). If the parties had agreed to the personal guaranty requirement
over the phone before the meeting (as Owens claims), then one would think that the
9
documents would have been ready to go by the time of the meeting. The fact that
they were not undermines Owens’s assertions that he agreed to execute a guaranty
(and that Heritage agreed to accept it) when he spoke to Christie on the phone, and
that any discussion of the guaranty at the meeting was “very perfunctory,” see id. at
69. Thus, the Court finds that the KMO Development guaranty was discussed and
agreed upon while Owens was in Illinois.
B. Carolina Bueno Personal Guaranty
Separate from the KMO Development loan, on January 23, 2007, Owens
emailed Christie requesting an equipment loan and offering personal guaranties.
See Pl.’s Exh. 7 (“We have financing needs for equipment in our joint venture
restaurants in the greater Charlotte market. . . . This would be a fully amortizing
loan, with personal guarantees [sic] from [Bolzle] and [Owens]. . . .” (emphasis
added)); 9/21/16 Hearing Tr. at 17-18 (Christie Testimony). Christie testified that he
told Owens that Owens would need to discuss the matter in person with Glazer.
9/21/16 Hearing Tr. at 18. Glazer, Christie, Bolzle, and Owens subsequently met at
Christie’s office in Park Ridge, at which time Bolzle and Owens pitched the loan’s
terms—five years, self-amortizing—and offered their personal guaranties. Id. at 18,
36-37 (Christie Testimony); see id. at 51-52 (Glazer Testimony). Because this was a
large, longer-term loan, Glazer wanted to speak to a family member about financing
the loan with him. Id. at 18, 37 (Christie Testimony); id. at 54 (Glazer Testimony).
So, at the conclusion of their discussion, “there was a handshake reached subject to .
10
. . tightening up the terms.” Id. at 18 (Christie Testimony); see also id. at 53 (Glazer
Testimony).
On January 25, 2007, Christie emailed Owens to tell him that Glazer had
approved the funding. See Def.’s Exh. 11; see also 9/21/16 Hearing Tr. at 30. This
email detailed the proposed terms for the loan. See Def.’s Exh. 11. Little more than
an hour later, Owens sent an email to Christie in reply, confirming that the
proposed terms “work[] great.” Id. (Because the second and third emails followed
the first by only two days, Christie testified on cross that the face-to-face meeting
“must have happened on the 24th.” 9/21/16 Hearing Tr. at 33; see also id. at 34.)
Shortly thereafter, KMO Development sent a signed note and Owens’s personal
guaranty to Heritage. See id. at 38 (Christie Testimony); id. at 54-55 (Glazer
Testimony).
In sharp contrast to Christie’s and Glazer’s testimony, Owens testified that
no face-to-face meeting occurred between the January 23 and January 25 emails.8
See 9/21/16 Hearing Tr. at 77-79, 90, 94. To the extent that Christie and Owens
spoke between the emails, it was over the phone. See id. at 77-79. And Owens did
not speak with Glazer about this loan at all. Id. at 79, 90. Following the January 25
email, Heritage provided Owens with the guaranty form; at no time were its terms
discussed or negotiated. Id. at 82. Owens executed the personal guaranty in
Oklahoma. Id.
8Owens
acknowledged that his January 27, 2016 affidavit stated that there was an
in-person meeting at Park Ridge on January 23, 2007. See id. at 92; see also 1/27/16 Owens
Supp. Aff. He testified, however, that this date was first provided by Christie’s and Glazer’s
affidavits, and that subsequent review of the January 23 and January 25 emails refreshed
his recollection. See 9/21/16 Hearing Tr. at 93-94.
11
On consideration of the evidence, the Court credits the version of events
offered by Owens, and finds that a face-to-face meeting at which the parties
discussed and agreed to the Carolina Bueno guaranty did not occur. Rather, the
January 23 and January 25 emails, see Pl.’s Exh. 7; Def.’s Exh. 11, show that the
loan and guaranty were discussed and agreed upon via email—and possibly
telephone—only. Indeed, the content of the emails does not support Christie’s
contention that the in-person meeting “must have happened on the 24th,” 9/21/16
Hearing Tr. at 33. First, Owens’s January 23 email—which proposes the loan and
the guaranty—says “look forward to talking with you tomorrow.” Pl.’s Exh. 7. This
phrasing is more suggestive of an anticipated phone call than of an in-person
meeting. Second, the January 25 emails make no mention of any discussion, in
person or otherwise, that occurred on January 24. See Def.’s Exh. 11. Instead,
Christie’s email sets out proposed terms—as if the parties have not yet discussed
proposed terms—and Owens’s follow-up accepts those terms. Id. These are not the
types of emails one would expect to see following an in-person meeting of the sort
described by Christie and Glazer. Thus, the Court finds that the Carolina Bueno
guaranty was discussed and agreed to remotely, not in person in Illinois.
III. Legal Standard
Rule 12(b)(2) governs dismissals for lack of personal jurisdiction. Fed. R. Civ.
P. 12(b). A complaint need not allege personal jurisdiction, but the plaintiff bears
the burden of establishing that jurisdiction is proper once a defendant moves to
dismiss on that ground. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338
12
F.3d 773, 782 (7th Cir. 2003). When a motion is based solely on the submission of
written materials, the plaintiff need only establish a prima facie case of personal
jurisdiction. GCIU-Emp’r Ret. Fund v. Goldfarb Corp., 565 F.3d 1018, 1023 (7th Cir.
2009). But when there is a dispute in those written materials about the facts
necessary to rule on the issue, the Court must grant discovery and hold an
evidentiary hearing. See Hyatt Int’l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir. 2002).
In the latter scenario, the plaintiff bears a heavier burden; the plaintiff must “prove
what it alleged,” id., and establish personal jurisdiction by a preponderance of the
evidence, Purdue, 338 F.3d at 782.
IV. Conclusions of Law
The previous Opinions have already comprehensively discussed background
principles of personal jurisdiction, see 12/11/15 Opinion at 6-7, 9-10; 3/30/16 Opinion
at 5-7, so only the most pertinent principles are set forth here. When a federal
district court sits in diversity, it “has personal jurisdiction over a nonresident
defendant only if a court of the state in which it sits would have jurisdiction.”
Purdue, 338 F.3d at 779. In Illinois, a court has personal jurisdiction over a
nonresident defendant if Illinois’s long-arm statute authorizes jurisdiction, and if
asserting jurisdiction does not violate the Fourteenth Amendment’s Due Process
Clause. Hyatt, 302 F.3d at 713. Because Illinois’s “long-arm statute permits the
exercise of jurisdiction to the full extent permitted by the Fourteenth Amendment’s
Due Process Clause,” the two inquiries merge, Tamburo v. Dworkin, 601 F.3d 693,
700 (7th Cir. 2010); 735 ILCS 5/2-209(c), and a court may exclusively analyze
13
federal due process limitations on personal jurisdiction, Kipp v. Ski Enter. Corp. of
Wis., Inc., 783 F.3d 695, 697 (7th Cir. 2015). Federal due process requires that a
defendant have sufficient “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) (internal
quotation marks omitted).
“The nature of the defendant’s contacts with the forum state determines the
propriety of personal jurisdiction and also its scope—that is, whether jurisdiction is
proper at all, and if so, whether it is general or specific to the claims made in the
case.” Tamburo, 601 F.3d at 701. This Court has already determined that Owens’s
contacts are not “so continuous and systematic,” Goodyear Dunlop Tires Operations,
S.A. v. Brown, 564 U.S. 915, 919 (2011) (internal quotation marks omitted), as to
give rise to general jurisdiction, 12/11/15 Opinion at 7-9. It has yet to decide
whether Owens’s contacts with Illinois are sufficient to give rise to specific
jurisdiction.
Specific jurisdiction is proper when a defendant directs his activities at the
forum state and the cause of action arises from or relates to those activities. Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985). Put differently, “there must be
some showing that the defendant purposefully availed [him]self of the privilege of
conducting activities within the forum state.” Purdue, 338 F.3d at 780; see id. at
780-81 (“[T]he Supreme Court repeatedly has asked whether the defendant has
deliberately engaged in significant activities within the forum state, or whether [he]
14
has created continuing obligations between [him]self and a resident of the forum.”
(citations omitted)). “In applying this broad standard, the Supreme Court has found
that contacts supporting specific jurisdiction can take many different forms.” uBID,
Inc. v. GoDaddy Grp., Inc., 623 F.3d 421, 426 (7th Cir. 2010). The key is
purposefulness: “[t]he due process clause will not permit jurisdiction to be based on
contacts with the forum that are random, fortuitous, or attenuated.” Id.
With respect to contractual disputes, “contracting with an out-of-state party
alone cannot establish automatically sufficient minimum contacts in the other
party’s home forum.” Purdue, 338 F.3d at 781; see also Burger King, 471 U.S. at
478. Rather, to determine whether a party to a contract purposefully established
minimum contacts within the forum, a court must “place the contract in the context
of the entire transaction of which it is a part.” Purdue, 338 F.3d at 781. This
requires examination of “‘prior negotiations, contemplated future consequences, the
terms of the contract, and the parties’ course of actual dealing with each other.’” N.
Grain Mktg., LLC v. Greving, 743 F.3d 487, 493 (7th Cir. 2014) (quoting Purdue,
338 F.3d at 781). To that end, federal courts have considered factors such as: (i)
which party initiated the transaction, Heritage House Rests., Inc. v. Cont’l Funding
Grp., Inc., 906 F.2d 276, 283 (7th Cir. 1990); (ii) where negotiations took place,
O’Hare Int’l Bank v. Hampton, 437 F.2d 1173, 1176-77 (7th Cir. 1971); (iii) where
the contract was executed, id. at 1177; Cont’l Bank, N.A. v. Everett, 964 F.2d 701,
703 (7th Cir. 1992); (iv) where performance was to take place, Cont’l Bank, N.A.,
964 F.2d at 703; O’Hare Int’l Bank, 437 F.2d at 1177; and (v) whether the contract
15
included a choice-of-law provision, Cont’l Bank, N.A., 964 F.2d at 703; O’Hare Int’l
Bank, 437 F.2d at 1177. See also MAC Funding Corp. v. Ne. Impressions, Inc., 215
F. Supp. 2d 978, 981 (N.D. Ill. 2002). Here, the factors weigh in favor of the exercise
of personal jurisdiction over Owens.
A. KMO Development Group Personal Guaranty
Heritage argues that Owens is subject to this Court’s specific jurisdiction
because Owens purposefully availed himself of the privilege of conducting business
in Illinois. See Pl.’s Post-Hearing Br. at 1-2. With respect to the KMO Development
guaranty, Heritage points out that (1) Owens came to Illinois to negotiate the
underlying loan, and during the Illinois meeting the personal guaranty requirement
was discussed and agreed to, see id. at 2-4, and (2) the loan contains an Illinois
choice-of-law provision, id. at 6. Owens disagrees. He points out that Heritage
suggested the personal guaranty requirement, and that Owens executed the
guaranty in Oklahoma (not Illinois). See Def.’s Post-Hearing Br. at 5-6. Having
balanced the factors for and against a finding of specific jurisdiction, the Court
concludes that Heritage has shown by a preponderance of the evidence that Owens
is subject to specific jurisdiction in Illinois with regard to the KMO Development
guaranty.
Here, the facts—as found in the Findings of Fact section above, see supra
Section II.A.—demonstrate that Owens “purposefully directed” his conduct toward
Illinois, N. Grain Mktg., 743 F.3d at 493, such that he could “reasonably anticipate
being haled into court” in Illinois, World-Wide Volkswagen Corp. v. Woodson, 444
16
U.S. 286, 297 (1980). Heritage first mentioned the personal guaranty over the
phone, see 9/21/16 Hearing Tr. at 9-10, 20, 44, but Owens ultimately discussed and
agreed to provide the guaranty while meeting with Christie and Glazer in Illinois,
see id. at 13-14, 46-50. See NUCOR Corp. v. Aceros y Maquilas de Occidente, S.A. de
C.V., 28 F.3d 572, 580-81 (7th Cir. 1994) (finding personal jurisdiction where initial
negotiations occurred via telephone but detailed discussion occurred in the forum
state). Owens, Bolzle, Christie, and Glazer did not negotiate the specific terms of
the personal guaranty form at this meeting (or at any other time), see 9/21/16
Hearing Tr. at 27, 59, 74, but they did discuss Glazer’s desire to see Owens’s
financial information, see id. at 14, 46-47, and they did ultimately end the
conversation with the understanding that Owens would execute a personal
guaranty—and Glazer would make the loan—so long as Glazer found Owens’s
financial situation acceptable, see id. at 14, 49-50. Owens’s visit to Illinois was thus
“significant in the formation of the contract.” See Wis. Elec. Mfg. Co., v. Pennant
Prods., Inc., 619 F.2d 676, 678 (7th Cir. 1980) (finding personal jurisdiction where
two of the defendant’s agents visited the forum state “during negotiations to
determine, by inspecting [the plaintiff’s] facilities there, whether it would be able to
able to perform the contract, and later, while the contract was being performed, to
negotiate with [the plaintiff] about performance”).
What’s more, the underlying note contains an Illinois choice-of-law provision
and requires performance in Illinois. See Pl.’s Exh. 1. These facts further show that
Owens invoked the benefits and protection of the forum state. Though the guaranty
17
is itself silent as to choice of law and location of performance, the guaranty and the
note here “were part of an interrelated package dedicated to one overarching goal,”
see RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1279 (7th Cir. 1997): as a
general matter, the guaranty secured the note, see Pl.’s Exh. 2, and, in this
particular case, there would be no note but for the guaranty and there would be no
guaranty but for the note. Glazer expressly testified to this effect.9 See 9/21/16
Hearing Tr. at 56. And Christie’s testimony regarding the “GUARANTOR” section
of the note corroborates Glazer’s testimony. See id. at 14-16 (testifying that KMO
initially sent Christie a draft of the note and financial documents, and that the note
contained “a personal guaranty line” but that Glazer and Christie were not used to
seeing this and insisted upon a separate guaranty form). Because the note and the
loan are closely linked, the note’s Illinois connections must be considered in the
jurisdictional analysis.
Together, the discussion that occurred during the meeting in Park Ridge and
the note’s Illinois connections are sufficient minimum contacts for specific
jurisdiction. The Court finds that the combined force of these contacts with Illinois
outweighs the fact Heritage initiated the personal guaranty requirement and the
fact that Owens ultimately executed the guaranty in Oklahoma. The Court thus
concludes that Heritage has met its burden and shown by a preponderance of the
evidence that Owens purposefully availed himself of the privilege of conducting
business in Illinois.
9“Q:
And finally, with regard to [the KMO Development] loan, would you have given
that loan without the personal guaranty that was discussed at that meeting in June of
2006? A: No.” Id. at 56.
18
B. Carolina Bueno Personal Guaranty
Heritage also argues that Owens is subject to this Court’s specific jurisdiction
with regard to the Carolina Bueno guaranty. See Pl.’s Post-Hearing Br. Even
though the Court does not believe that Owens traveled to Illinois to discuss this
guaranty with Christie and Glazer in person, see supra Section II.B., the Court
concludes that a preponderance of the evidence shows that Owens purposefully
availed himself of the privilege of conducting business in Illinois during the course
of the Carolina Bueno transaction.
Owens did not travel to Illinois to suggest, negotiate, or execute the Carolina
Bueno guaranty, see supra Section II.B., but a defendant’s presence in the forum
state is “by no means essential” to a determination that that defendant is subject to
specific jurisdiction, Purdue, 338 F.3d at 781; see Burger King, 471 U.S. at 476;
Heritage House, 906 F.2d at 283. Indeed, if a “defendant’s efforts are directed
toward a particular jurisdiction, the fact that the actor did not actually enter the
jurisdiction is not of crucial importance.” Purdue, 338 F.3d at 781. Here, it is
obvious that Owens’s efforts were directed at Illinois: it was he who contacted
Christie via email to offer his personal guaranty in exchange for an equipment loan.
See Pl.’s Exh. 7; see also Heritage House, 906 F.2d at 284 (finding personal
jurisdiction where defendant “knowingly . . . reached out to [the plaintiff] and
created a continuing relationship or obligation”). This is strong evidence of
purposeful availment.
19
In addition, the Carolina Bueno note contains an Illinois choice-of-law
provision and requires performance in Illinois (just like the KMO Development
note). See Pl.’s Exh. 3. The link between the Carolina Bueno note and guaranty is
especially strong—Owens expressly signed the note as a guarantor in his personal
capacity, see Pl.’s Exh. 3 at 2—so the note’s Illinois connections are another
pertinent contact between Owens and the forum state.
Ultimately, Owens’s initiation of the personal guaranty and the note’s Illinois
connections are sufficient minimum contacts for specific jurisdiction. The Court
concludes that a preponderance of the evidence shows that Owens purposefully
directed his conduct toward Illinois such that he could foresee litigation in Illinois.
V. Conclusion
For the reasons discussed above, Owens’s motion to dismiss for lack of
personal jurisdiction, R. 15, is denied. Owens shall answer the complaint by
November 7, 2016. The status hearing of November 3, 2016 remains in place to set
the remainder of the discovery schedule, and in the meantime, the parties shall
start settlement negotiations as well.
ENTERED:
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: October 24, 2016
20
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