Aon plc et al v. Heffernan et al

Filing 127

MEMORANDUM Opinion and Order signed by the Honorable Andrea R. Wood on 2/6/2017.Mailed notice (aw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
AON PLC, a United Kingdom public limited
company, and AON GROUP, INC., a
Maryland corporation,
Plaintiffs,
v.
MICHAEL HEFFERNAN, an individual, and
ALLIANT INSURANCE SERVICES, INC.,
a Delaware Corporation,
Defendants.

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No. 16-cv-01924
Judge Andrea R. Wood

MEMORANDUM OPINION AND ORDER
Defendant Michael Heffernan left his employment with an affiliate of Plaintiffs Aon plc
and Aon Group, Inc. to work for a competitor, Defendant Alliant Insurance Services, Inc.
Plaintiffs allege that before his exit, and while he still had a fiduciary obligation to the Aon
companies, Heffernan took their confidential information to use in his planned position at
Alliant. Plaintiffs seek relief from Heffernan for breaches of his incentive compensation
agreements, his fiduciary obligations, and Illinois statutory prohibitions against trade secret
misappropriation. Plaintiffs also assert a claim against Alliant for aiding and abetting
Heffernan’s alleged fiduciary duty breaches. Now before the Court is Defendants’ motion to
dismiss this action based on the purported inconvenience of this forum or, alternatively, to
transfer it to the Northern District of California. The parties also dispute the choice of law to be
applied to any further proceedings here. For the reasons detailed below, Defendants’ motion to
dismiss or transfer is denied and Plaintiffs’ claims will be resolved in accordance with Illinois
law.

BACKGROUND
Plaintiff Aon plc is alleged to be a United Kingdom public limited company and the
parent of the following other affiliated Aon entities: Plaintiff Aon Group, Inc., a Maryland
corporation with its principal place of business in Illinois; Aon Corporation, a Delaware
corporation with its principal place of business in Illinois; and Aon Risk Insurance Services
West, Inc., a California corporation with its principal place of business in Illinois. (Compl. ¶¶ 2–
3. Dkt. No. 1.)
The parties agree that Heffernan was employed by an Aon entity from March 2000
through January 26, 2016. (Id. ¶ 8.) Which Aon entity he worked for is not so clear. Although
Plaintiffs assert that Heffernan’s tax forms and paychecks identify his employer as “Aon
Services Corporation, Chicago, Illinois” (Pls.’ Resp. at 1–2, Dkt. No. 97), that entity is not
named in the complaint. Heffernan contends that his work for Aon consisted of selling insurance,
that Aon plc, Aon Group, Inc., and Aon Services Corporation did not sell insurance, and that he
understood himself to be an employee of Aon Risk Insurance Services West, Inc. (Heffernan
Decl. ¶ 7, Dkt. No. 51–2.) Despite that disagreement, the parties do not dispute that at the time of
his departure on the January 26, 2016, Heffernan held the position of Executive Vice President
and Regional Managing Director of an Aon division, the Construction Services Group, located in
San Jose, California, and that he was the head of an Aon office there. (Compl. ¶ 8, Dkt. No. 1.)1

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In describing the events that resulted in this action, the parties frequently refer to “Aon” without
distinguishing between the various corporate entities that include the moniker Aon in their names. The
parties do not appear to be in complete agreement as to which entity conducted which activity. Where
such distinctions are both material and clearly established by the record, the Court will identify specific
Aon entities. The general label “Aon” will be used where the parties have not drawn clear distinctions.
“Plaintiffs” will refer to the two Aon entities that are parties to this action in the context of their roles
here.

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Heffernan and Aon plc were parties to two agreements that awarded Heffernan rights to
shares of Aon plc stock. (Dkt. Nos. 1-2, 1-3.) The agreements explicitly equated Aon plc, Aon
Group, Inc., and Aon Group’s subsidiaries and affiliates and divisions thereof (identified
collectively as “Aon”) as holders of interests to be protected by Heffernan’s agreements to
refrain from specified activities. (Compl. ¶ 9a, Dkt. No. 1.) Heffernan agreed that for a period of
two years following his termination from Aon, he would not directly or indirectly solicit, accept,
or engage in for any other company any business from (1) an Aon client for which he provided
or supervised services or with which he had become familiar “during the twenty-four (24)
months prior to [his] Termination Date or within twelve (12) months prior to such Termination
date;” or (2) any prospective client that he had directly or indirectly solicited and to which Aon
had submitted a service proposal during the six months prior to his termination date. (Id. ¶ 9b.)
The agreements also provided that Heffernan would not directly or indirectly solicit or cause any
third party to solicit any Aon employee to leave Aon employment for two years after his
termination and that he would not use any Aon confidential information except as required in the
course of his employment there. (Id. ¶¶ 9c, 9g.) Finally, the agreements provide that they are to
be “governed by and construed in accordance with the substantive laws of the State of Illinois,
without regard to the conflict of law principles, rules or statutes of any jurisdiction.” (Id. ¶ 10j.)
Venue for any legal proceedings “shall be Cook County, Illinois.” (Id. ¶ 10k.)
Plaintiffs allege that Heffernan requested and received access to an Aon proprietary and
confidential database of client information on January 11, 2016, and that he had no legitimate
business purpose for accessing the data he downloaded. (Compl. ¶¶ 31, 36, 57, Dkt. No. 1.) They
claim that he later used data derived from that database to make a client proposal for Alliant that
competed with an Aon proposal. (Id. ¶ 47.) Plaintiffs further allege, and Defendants do not

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dispute, that on the morning of January 26, 2016, without notice, Heffernan resigned from Aon
and immediately joined Alliant. (Id. ¶ 10.) On the same day, more than 20 employees who had
worked under Heffernan in Aon’s San Jose office also left for Alliant. (Id. ¶ 20.) Also on that
date, Heffernan filed suit in the California Superior Court, County of Santa Clara seeking a
declaration that the post-termination restrictions of the two stock unit agreements are invalid and
unenforceable as a matter of California law. (Id. ¶ 20 n.1.)
Plaintiffs filed this action on February 3, 2016. They assert claims for breaches of each of
the two stock unit agreements’ prohibitions against client solicitation, employee solicitation, and
misuse of confidential information. Plaintiffs further claim that, before his resignation, Heffernan
breached his fiduciary duties to Aon and that Alliant aided and abetted those breaches, and that
Heffernan’s use of Aon confidential information violated the Illinois Trade Secret Act, 765 ILCS
1065.
This Court granted Plaintiffs’ motion for a temporary restraining order (“TRO”)
enjoining the client and employee solicitation and confidential information use prohibited by the
stock unit agreements. (Dkt. Nos. 26, 28.) The Court’s order acknowledged the parties’
disagreement as to whether their dispute should be governed by the law of California or that of
Illinois and also recognized that the issue was “likely determinative of whether and to what
extent Plaintiffs will succeed on their claims.” (Feb. 10, 2016 TRO at 5, Dkt. No. 28.) The Court
held that Plaintiffs, in support of their argument for the application of Illinois law, had made a
showing sufficient to satisfy their burden at the TRO stage but recognized that this showing
could be rebutted following the development of a more complete record. (Id. at 3, 5.)
As discussed below, the parties’ arguments on the choice-of-law issue focus mostly on
the fact-intensive question of which state possesses the greater interest in the disputed matters.

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Due to the significance of the choice-of-law determination as a threshold issue, the parties
proceeded with discovery and briefing on the choice-of-law question before any preliminary
injunction hearing or other proceedings on the merits. The parties’ choice-of-law discovery
disputes were resolved by orders of February 22, 2016 (Dkt. No. 40), March 7, 2016 (Dkt. No.
55), March 21, 2016 (Dkt. No. 61), April 12, 2016 (Dkt. No. 85), and May 2, 2016 (Dkt. No.
100). As choice-of-law discovery progressed, Defendants filed their motion to dismiss this action
or, alternatively, to transfer it to the Northern District of California. Plaintiffs’ motion to conduct
additional discovery on that issue was denied. (Dkt. No. 87.) The parties then completed briefing
on the choice-of-law issue and dismissal motion. Both matters are now before the Court.
DISCUSSION
I.

Defendants’ Motion to Dismiss or Transfer
Defendants seek dismissal of the present action on forum non conveniens grounds or,

alternatively, transfer to the Northern District of California. Although the principles governing
each form of relief are related, federal law distinguishes the two.
A.

Forum Non Conveniens Dismissal

Defendants’ initial challenge to the propriety of this forum asserts the forum non
conveniens doctrine as a basis to dismiss Plaintiffs’ claims. Forum non conveniens, a commonlaw doctrine, allows a court to dismiss a case if an alternative forum is available and dismissal
would serve the interests of justice, even if the court may properly exercise jurisdiction over the
subject matter and parties. Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 717–18 (7th Cir. 2002). IN
this case, Defendants argue that the state courts of California provide an appropriate alternative
forum.

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When, as here, the proposed alternative forum is a state court rather than a foreign
jurisdiction, the continued viability of the forum non conveniens doctrine is unclear. The
existence of a specific statute governing transfer of domestic actions from one federal court to
another, 28 U.S.C. § 1404, has prompted the Supreme Court to observe that “the federal doctrine
of forum non conveniens has continuing application only in cases where the alternative forum is
abroad.” Am. Dredging Co. v. Miller, 510 U.S. 443, 462 n.2, (1994). The Supreme Court has
subsequently acknowledged the possibility of dismissal of a federal action in favor of a state
court forum “perhaps in rare instances where a state or territorial court serves litigational
convenience best.” Sinochem Int'l Co. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 430
(2007). But the Seventh Circuit has made clear that because application of the doctrine produces
the potentially more severe result of dismissal, a defendant seeking its invocation must meet a
higher burden than that required for transfer to another federal court. In re Hudson, 710 F.3d
716, 718 (7th Cir. 2013).
Although Heffernan’s declaratory judgment action is pending in California state court,
Defendants do not contend that convenience demands litigation of this action in a California
court rather than a federal forum. Nor do they suggest any other basis for characterizing this case
as one of the “rare” instances justifying dismissal in favor of a state forum. To the contrary, they
argue that an alternative to dismissal on forum non conveniens grounds is a transfer to another
federal court, i.e., the United States District Court for the Northern District of California.
Defendants’ motion is accordingly denied as to their request for dismissal.
B.

Transfer

To justify a transfer of venue pursuant to § 1404(a), the moving party must show that
venue would be proper in the proposed transferee district, that the transferee district is more

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convenient for parties and witnesses, and that transfer would serve the interests of justice.
Gueorguiev v. Max Rave, LLC, 526 F. Supp. 2d 853, 856 (N.D. Ill. 2007). The movant has the
burden of establishing that the transferee forum is clearly more convenient. Coffey v. Van Dorn
Iron Works, 796 F.2d 217, 219–220 (7th Cir. 1986). The interest-of-justice factor generally
involves consideration of issues such as trying related litigation together, ensuring a speedy trial,
and having the trial before a judge who is familiar with the applicable law. Delta Air Lines, Inc.
v. Perfekt Mktg., Inc., 861 F. Supp. 2d 919, 920 (N.D. Ill. 2012). Plaintiffs do not dispute that
venue would be proper in the Northern District of California.
As noted above, Plaintiffs allege that Heffernan breached three provisions of each of two
stock unit agreements; those agreements provided that venue for any related proceedings would
be “Cook County, Illinois.” A valid forum-selection agreement generally precludes consideration
of the contracting parties’ convenience as part of the transfer analysis. “When parties agree to a
forum-selection clause, they waive the right to challenge the preselected forum as inconvenient
or less convenient for themselves or their witnesses, or for their pursuit of the litigation. A court
accordingly must deem the private-interest factors to weigh entirely in favor of the preselected
forum.” Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S. Ct. 568, 581–82
(2013).
Defendants argue that the forum-selection provisions in the stock agreements are invalid
because they are unconscionable. An agreement may be invalid either because of its procedural
or substantive unconscionability. Jackson v. Payday Fin., LLC, 764 F.3d 765, 777–78 (7th Cir.
2014). An agreement is procedurally unconscionable where a term at issue is so difficult to find,
read, or understand that a party cannot fairly be said to have been aware that he was agreeing to

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it, and it is substantively unconscionable if its terms are so one-sided as to oppress or unfairly
surprise an innocent party. Id.2
Heffernan claims that he agreed to the restricted stock agreements electronically, that he
was not given paper copies, that he did not have “an opportunity to negotiate” their terms, and
that he did not notice their forum-selection clauses. But the evidence presented suggests that
Heffernan was an educated senior executive and that the agreements at issue were offered as part
of an offer of incentive compensation in addition to his salary. No evidence indicates that he was
prevented from reading the terms of the agreements, coerced into signing them, prevented from
raising any objections he may have had, or compelled by an inferior bargaining position to
accept objectionable provisions. In the absence of such evidence, Heffernan’s assertion that he
did not read the forum-selection clauses is insufficient to support a claim of unconscionability.
Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1292 (7th Cir. 1989). The forumselection clauses are neither procedurally nor substantively unconscionable and are enforceable
against Heffernan.
Defendants assert that because Alliant was not a party to the stock unit agreements their
terms cannot be enforced against it and that its convenience must be considered even if
Heffernan’s convenience is ignored. Yet the record indicates that Alliant, like Aon, is an entity
with national presence, capable of bearing the burden of litigation in any court in the United
States. Although the record demonstrates that a substantial majority of likely witnesses are
located in California, the nature of Plaintiffs’ claims suggests that the most relevant testimony
will be provided by individuals who are employees of either Aon or Alliant. The convenience of

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Defendants argue that the forum-selection clauses are unconscionable under either California or Illinois
law and do not suggest that any difference between the states’ laws would be outcome-determinative here.
As explained below, the Court concludes that Illinois law applies to this dispute. However, the Court
would also reject Defendants’ unconscionability argument under California law.

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employee witnesses is less important in a transfer analysis since party witnesses normally must
appear voluntarily. Moore v. Motor Coach Indus., Inc., 487 F. Supp. 2d 1003, 1007-08 (N.D. Ill.
2007); First Nat'l Bank v. El Camino Res., Ltd., 447 F. Supp. 2d 902, 913 (N.D. Ill. 2006).
The parties’ evidence indicates that the employees at issue, their activities, and the vast
majority of the business to which they relate are in California. The connection of that forum to
the events underlying this dispute thus weighs strongly in favor of litigation there. But the weight
of that public interest factor is insufficient to override the forum-selection clause that governs the
breach of contract claims against Heffernan. Atlantic Marine, 134 S. Ct. at 582 (forum-selection
clause should control “except in unusual cases,” which “will not be common”). The forumselection clauses thus control the claims arising from the stock unit agreements.
Although the forum-selection clauses do not control the non-contractual claims against
Heffernan or the claim against Alliant for abetting his alleged breaches of fiduciary duty, the
public-interest analysis should also include a consideration of the benefits of deciding related
claims in the same proceeding and avoiding the possibility of duplicate or inconsistent
proceedings in different federal courts. See Coffey, 796 F.2d at 221; F.T.C. v. MacArthur, 532
F.2d 1135, 1143 (7th Cir. 1976); see also Aquila v. Fleetwood, R.V., Inc., No. 12-CV-3281 LDW
GRB, 2014 WL 1379648, at *4–5 (E.D.N.Y. Mar. 27, 2014). The non-contractual claims here
are so clearly intertwined with the contractual claims governed by the forum-selection clause that
the public interest dictates they be resolved in the same proceeding and outweighs both Alliant’s
private interests and the public interest of California’s greater connection to the events at issue.
Defendants’ motion is therefore also denied as to their alternative request for transfer to the
Northern District of California.

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II.

Choice of Law
Generally, when a federal court hears a case in the exercise of its diversity jurisdiction,

the court applies the choice-of-law rules of the forum-state to determine which state’s
substantive law applies. Auto-Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d 543, 547
(7th Cir. 2009). Defendants here contend that Illinois choice-of-law rules dictate the application
of California law to the present dispute because of that state’s stronger interest in the events at
issue.
As an initial matter, it is not clear that an Illinois court would employ a conflicts analysis
to decide the law applicable to the stock unit agreements. As noted above, the agreements
themselves provide that they are to be “governed by and construed in accordance with the
substantive laws of the State of Illinois, without regard to the conflict of law principles, rules or
statutes of any jurisdiction.” Illinois courts construe such provisions as dictating application of its
substantive law without regard to the state’s conflicts principles. Hutcherson v. Sears Roebuck &
Co., 793 N.E.2d 886, 890–91 (Ill. App. Ct. 2003); see also Rabe v. United Air Lines, Inc., 636
F.3d 866, 871, n.2 (7th Cir. 2011). These authorities indicate that an Illinois court would employ
Illinois law to decide the claims under the stock unit agreements.
The same result is also dictated by a conflicts analysis. Defendants argue that Illinois
courts would determine the validity of a contractual choice-of-law provision by reference to the
Restatement (Second) of Conflict of Laws § 187. They contend that the Restatement precludes
enforcement of a contractual choice-of-law provision where the selected state has no substantial
relationship to the parties or transaction or where application of the chosen state’s law would be
contrary to a fundamental policy of a state with a materially greater interest in the dispute. The
Restatement’s analysis of the relative interests of competing states has been employed by the

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Illinois Appellate Court and in this District to determine the validity of contractual choice-of-law
provisions. See Int'l Surplus Lines Ins. Co. v. Pioneer Life Ins. Co. of Ill., 568 N.E.2d 9, 14 (Ill.
App. Ct. 1990); LKQ Corp. v. Fengler, No. 12-CV-2741, 2012 WL 1405774, at *3 (N.D. Ill.
Apr. 23, 2012).
But the Illinois Supreme Court and the Seventh Circuit have both held that under Illinois
law, contractual choice-of-law provisions are generally enforceable, and they have reached this
conclusion without resort to the Restatement’s significant contacts analysis. See, e.g., Hofeld v.
Nationwide Life Ins. Co., 322 N.E.2d 454, 458 (Ill. 1975) (“Generally, the law applicable to a
contract is that which the parties intended, assuming such an intent. When that intent is
expressed, it should be followed.”); Reighley v. Cont'l Ill. Nat. Bank & Trust Co. of Chicago, 61
N.E.2d 29, 33 (Ill. 1945) (“[I]t is permissible for the parties to agree, subject to certain limitation,
that the construction of a contract and the validity of the same may be governed and controlled
by a law agreed upon between the parties.”); Agfa-Gevaert, A.G. v. A.B. Dick Co., 879 F.2d
1518, 1520 (7th Cir. 1989) (“The district court was required in this diversity case to honor the
choice-of-law provision if an Illinois court would do so, and it would.”); SCA Servs., Inc. v.
Lucky Stores, 599 F.2d 178, 180 (7th Cir. 1979) (“Illinois courts give effect to choice of law
clauses.”); see also Lyon Fin. Servs., Inc. v. Ill. Paper & Copier Co., 732 F.3d 755, 758–59 (7th
Cir. 2013); H.B. Fuller Co. v. Kinetic Sys., Inc., 932 F.2d 681, 685 (7th Cir. 1991).
This Court “must attempt to resolve issues in the same manner as would the highest court
of the state that provides the applicable law.” Netherlands Ins. Co. v. Phusion Projects, Inc., 737
F.3d 1174, 1177 (7th Cir. 2013). Because the Illinois Supreme Court has applied Illinois
conflicts principles to permit enforcement of contractual choice-of-law provisions without
application of the Restatement’s significant contacts test—and because the Seventh Circuit has

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consistently interpreted Illinois law in the same manner—this Court concludes that, even if
Illinois conflicts analysis is applied, the contractual provisions here are properly enforced
without regard to California’s more significant contacts with this dispute. The choice-of-law
provisions in the stock unit agreements govern the claims arising thereunder.
As for Plaintiffs’ tort claims, Defendants again assert that California’s more significant
contacts with the events at issue dictate application of that state’s substantive law. But the parties
have not identified any difference between the laws of California and Illinois as to the breach of
fiduciary duty and aiding-and-abetting claims. Illinois courts do not conduct a choice-of-law
analysis in the absence of such differences. “A choice-of-law determination is required only
when a difference in law will make a difference in the outcome.” Townsend v. Sears, Roebuck &
Co., 879 N.E.2d 893, 898 (Ill. 2007). The party seeking the choice-of-law determination bears
the burden of demonstrating an outcome-determinative difference. Bridgeview Health Care Ctr.,
Ltd. v. State Farm Fire & Cas. Co., 10 N.E.3d 902, 905 (Ill. 2014). In the absence of that
showing, the mere assertion that a different state’s law applies is insufficient to trigger a conflicts
analysis or a most-significant-contacts test, and Illinois courts apply Illinois law. Id. at 909. Since
the necessary showing is absent here, Illinois law will be applied to Plaintiffs’ tort claims.

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CONCLUSION
For the foregoing reasons, Defendants’ motion to dismiss or transfer the present action
(Dkt. No. 50) is denied and further proceedings here will be governed by the substantive law of
the State of Illinois.
ENTERED:

Dated: February 6, 2017

__________________________
Andrea R. Wood
United States District Judge

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