Diamond v. Nicholls et al

Filing 56

MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 3/1/2018. Mailed notice. (mgh, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

David Diamond,

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Plaintiff,

v.
Mark Nicholls and Sid
Nicholls,
Defendants.

No. 17 C 3900

MEMORANDUM OPINION AND ORDER
In

this

resident

and

securities

fraud

citizen—alleges

case,

that

plaintiff—an

defendants—a

Illinois

father

(Sid

Nicholls) and son (Mark Nicholls) who reside in Ottawa, Canada—
violated
conspired

federal
to

and

breach

Illinois
a

securities

contract

and

laws;

fiduciary

breached
duties;

or
and

defrauded and conspired to defraud investors through a scheme
involving
controlled

the

sale

various

of

securities

entities

in

in

the

a

holding

synthetic

company

turf

that

industry.

Before me is defendant Sid Nicholls’s motion to dismiss for lack
of personal jurisdiction, which I deny for the following reasons.
According to the complaint, between July 2008 and January
2009, Mark Nicholls formed four related Delaware entities—Turf

1

Industry,

Inc.,

UBU

Sports,

Inc.,

Turfscape,

Inc.,

and

Turf

Nation. Am. Compl. at ¶¶ 16-19. “At some point,” the complaint
continues, Sid Nicholls “assumed primary responsibility for and
de

facto

control

over

Turf

Nation,”

although

Mark

was

the

President of Turf Nation in 2011 and 2012 and continues to serve
as

a

director

or

officer

of

Turf

Nation,

exercising

joint

authority and control over the company with Sid. Id. at ¶¶ 19-20.
Turf Nation was the sole supplier of artificial turf to Turfscape
and UBU Sports, the latter of which has its principal place of
business

in

Downers

Grove,

Illinois.

Id.

at

¶¶

21,

10.

UBU

Sports’s primary business was the sale of synthetic turf surfaces
for

sports

fields

and

facilities,

which

it

purchased

in

substantial quantities between 2009 and 2013 pursuant to a line
of credit from Turf Nation. Id. at ¶¶ 17-22.
In 2013, Mark formed a Georgia holdings company called Turf
Industry Holdings, LLC (“TIH”), as a vehicle for investment in
UBU Sports, Turfscape, and a third, related company. Defendants
then began marketing and selling membership interests and notes
in TIH, some of which plaintiff purchased. Plaintiff alleges that
Mark

made

numerous

misrepresentations

to

investors

on

topics

ranging from his (Mark’s) past business experience and successes;
his

(Mark’s)

significant

personal

investment

in

TIH;

and

the

existence of valid pre-existing agreements to ensure, among other
things, the stability of UBU Sports’s supply chain.
2

Plaintiff’s most salient allegations against Sid involve his
alleged participation in the fabrication of a supply contract
between Turf Nation and UBU Sports. According to the complaint,
at the time defendants began seeking investors for TIH, there was
no written supply agreement between UBU Sports and Turf Nation.
Fearing

that

the

absence

of

such

a

contract

would

“spook”

investors, Mark and Sid created one in October of 2014, which
they backdated to January 15, 2013, and represented as having
been in force since that time. Then, in November of 2014, Sid
purported to “terminate” the fabricated contract in a letter he
sent to Mark at his home in Ontario. Sid and Mark did not inform
plaintiff, the TIH Board of Managers, or UBU Sports’s management
or employees about the putative “termination” of the fabricated
agreement.
Sid

argues

that

I

lack

personal

jurisdiction

because

plaintiff has offered no evidence that he has relevant contacts
with the state of Illinois or that he “expressly aimed” the
alleged wrongdoing at Illinois, knowing it would harm plaintiff
in Illinois. I disagree. Plaintiff attaches to his complaint the
allegedly phony supply contract, between Turf Nation (on whose
behalf Sid signed in his capacity as a corporate officer) and UBU
Sports,

an

entity

headquartered

in

Illinois.

Plaintiff

also

attaches correspondence between Mark and Sid that on its face,
supports

his

allegations

that

Sid
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(and

Mark)

intentionally

fabricated and backdated a supply contract with no intent that
the entities on whose behalf they purported to sign would perform
under

the

contract,

solely

for

the

purpose

of

misleading

potential investors.
Sid does not dispute that he knew UBU Sports operated out of
Illinois, but he claims that because he did not know that the
supply contract between UBU Sports and Turf Nation would be used
to defraud investors located in Illinois, personal jurisdiction
is inappropriate under Mobile Anesthesiologists Chicago, LLC v.
Anesthesia Associates of Houston Metroplex, P.A., 623 F.3d 440
(7th

Cir.

2010).

But

that

case

is

factually

inapposite.

The

defendant in Mobile Anesthesiologists was an entity that operated
only

in

Texas,

business,

and

formed

whose

contracts,

sole

member

attended

had

never

events,

or

conducted
performed

professional duties in Illinois. The plaintiff’s assertion of
personal jurisdiction was based exclusively on the defendant’s
use

on

its

website,

accessible

by

Illinois

residents

among

others, of a name that allegedly infringed an Illinois entity’s
trademark.

The

court

concluded

that

the

maintenance

of

a

generally accessible website alone did not establish defendant’s
“express aiming” of tortious misconduct at Illinois. It does not
stand for the proposition that a defendant who enters into a sham
contract with an Illinois entity for the purpose of defrauding

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investors

can

be

sued

only

in

a

forum

where

he

knows

those

investors reside.
Indeed, while a defendant’s awareness that the plaintiff
will be injured in the forum state is certainly a factor that can
support personal jurisdiction, none of Sid’s authorities suggests
that such awareness is a sine qua non of personal jurisdiction.
As

Sid

acknowledges,

specific

jurisdiction

exists

“where

the

cause of action arises out of or relates to the defendant’s
activities in the forum state.” Mem. at 8 (quoting Andersen v.
Sportmart, Inc., 57 F. Supp. 2d 651, 656-57 (N.D. Ind. 1999)
(stream

of

personal

commerce

theory

jurisdiction

over

did

not

Taiwanese

support
entity

Indiana
that

courts’

acted

as

a

purchasing agent for a product that caused injury in Indiana).
Regardless
Illinois,

of
he

whether
surely

Sid

knew

knew
that

that
UBU

plaintiff

Sports

resided

operated

out

in
of

Illinois, and the complaint fairly alleges claims arising in part
out

of

Sid’s

alleged

participation

in

forming

a

fraudulent

contract with that entity.
There
“fiduciary

is

no

shield”

merit

to

doctrine

Sid’s

argument

insulates

him

that

Illinois’

from

personal

jurisdiction because he signed the phony contract on behalf of
Turf Nation. Sid cites Club Assistance Program, Inc. v. Zukerman,
594 F. Supp. 341, 345 (N.D. Ill. 1984), for this argument, but as
that

very

case

acknowledges,

a
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defendant’s

tortious

conduct

undertaken on his own behalf and directed at the forum does not
trigger the “fiduciary shield” doctrine. Id. Construing all of
the complaint’s allegations in plaintiff’s favor, I conclude that
Sid’s fabrication of the supply contract was at least in part for
his own benefit, not solely for the benefit of the entity on
whose behalf he purported to sign it.
Because I conclude that Sid’s alleged participation in the
fabricated supply contract and supporting evidence are sufficient
to confer personal jurisdiction, I need not consider plaintiff’s
remaining allegations directed to Sid. The motion to dismiss is
denied.

ENTER ORDER:

Elaine E. Bucklo
United States District Judge
Dated: March 1, 2018

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