minimum, RTI's claims must lie “in the wake” of SCI's commercial activities in Illinois. Gaidar v.
Tippecanoe Distribution Service, Inc., 702 N.E.2d 316, 323 (Ill. App. Ct. 1998). Prior to January 2,
2001, SCI had five clients in the Northern District with which it had entered into contracts over a period
of time from 1988 to 2000. The contracts, which GEMS have since assumed, provide for the delivery
and support of hardware and software in Illinois coupled with training and ongoing maintenance
agreements. RTI's claims alleging a violation of the Uniform Transfer Act (Count I), seeking to enforce
the judgment RTI obtained against SCI (Count II), and seeking to pierce the corporate veil (Count V)
do not lie in the wake of SCI's commercial activities in Illinois. Instead, RTI's claims arise from the
scheme Defendants allegedly hatched to sell some of SCI's assets at a sham foreclosure sale while SCI
gratuitously transferred its customer contracts, name, web site, goodwill, and personnel to GEMS with
an intent to delay, or defraud creditors of SCI while GEMS did business as a mere continuation of SCI.

RTI secondly asserts that its claims arise from SCI’s “commission of a tortious act” in the State
of Illinois. 735 ILCS 5/2-209(a)(2). To allege jurisdiction based on SCT's tortious acts, RTI:

must allege that the defendant performed an act or omission which caused an injury in

Illinois and that the act or omission was tortious in nature. Alternatively, the .. .

plaintiff [must] demonstrate[ ] an economic injury in Illinois coupled with activity [in

Illinois] indicating an intent to affect Illinois residents.
Heritage House Restaurants, Inc. v. Continental Funding Group, Inc., 906 F.2d 276, 282 (7th Cir. 1990);
see also Club Ass't Program, Inc. v. Zukerman, 594 F.Supp. 341, 346 (C.D.III. 1984) (explaining that
the activity indicating an intent to affect Illinois residents must occur in Illinois).

RTI contends that the transfer of SCI's contracts located in the Norther District of Illinois to
GEMS occurred in Illinois. In contrast, SCI, through Sharp, avers that SCI did not engage in any acts

underlying RTI's claims in Illinois. RTI has failed to counter Sharp's affidavit by demonstrating that the

transfer of the contracts at issue did occur in Illinois. Indeed, the cases to which RTI cites in support of

13



Cass entered into a Standstill and Forbearance Agreement (‘“Standstill Agreement”) with SCI and the
Sharps. In the Standstill Agreement, SCI acknowledged that it was in default under the terms of the
Note. Sharp agreed to a list of thirty-five actions that effectively transferred to Cass the power to operate
SCI? In tum, Cass agreed to forebear collection of the Note until October 9, 2000.

The Standstill Agreement was modified on or about October 3, 2000 to extend Cass' forbearance
until November 30, 2000. Pursuant to the modification, Sharp agreed to cooperate with Cass in the
transition that followed the sale of SCI assets or shares of stock. Specifically, Sharp agreed to join the
purchaser of SCI stock or assets under an employment contract as a full-time CEO for a period of up to
two years or as a consultant for up to one year. Cass extended the forbearance once more on or about
November 30, 2000. At that time, Cass developed a scheme to transport business from SCI to GEMS
through a sham foreclosure sale to benefit GEMS, Cass, and Sharp at the expense of SCI's creditors,
including RTI.

As part of Defendants' plan, on or about December 21, 2000, GEMS and Sharp entered into an
Employment Agreement detailing the intent of GEMS, Cass, and Sharp to transfer SCI's customer
contracts, revenue, web site, and goodwill to GEMS without any consideration being paid to SCI,
leaving it a shell corporation. Sharp was thereafter entitled to the following bonuses based on revenues
received by GEMS from SCT's customers:

[a] bonus of $20,000 in the event [GEMS] receives cash collected revenues over
$1,200,000 during the period January 1, 2001 to March 31, 2001 and [GEMS] retains

Sharp agreed, inter alia, that he would do the following: use his best efforts to sell SCI; tum
over SCI's monetary receipts to Cass and direct SCI's customers to make payments to a Cass Lock
Box; use his best efforts to maintain SCI's accounts receivable; provide weekly CEO, COO, and
CFO approved, updated cash flow projections to Cass; give Cass a detailed budget; use only standard
form contracts approved by Cass; not make any principal payments on SCI's debts without Cass*
approval; provide Cass with a list of all companies in competition with SCI; authorize Cass! agent to
teview SCI's accounts receivables, projections and records, including reasonable access to SCT's
financial records; and meet with Cass representatives on a weekly basis.

4


Section 1391(a)(2), however, focuses on the location of the events which give rise to a party's injury, not
the location of the injury itself. Second, RTI argues that its claims “lie in the wake” of Defendants'
transaction of business with five SCI customers located in the Northern District of Hlinois.§ Third, RTI
points out that the letter GEMS' Executive Vice President Bouchein sent to SCI's creditors, including
RTI, informing them that GEMS purchased certain SCI assets at a foreclosure sale and that “[GEMS]
does not accept any responsibility for the payment of [creditor's] outstanding balance” gave rise to RTI's
claims. Finally, RTI contends that its claims arise from Defendants’ acquisition of an ownership interest
in revenues generated from SCI's five customer contracts in the Northern District of Illinois.’ While
these last three events do give rise to RTI's claims, they do not form a substantial part of the events that
underlie RTI's complaint. To the contrary, the Defendants' alleged scheme to defraud creditors was
hatched and carried out, in large part, in Missouri. As a consequence, we find venue to be improper
under §1391(a)(2).

RTI alternatively asserts that its complaint is properly before the Northem District of Illinois
pursuant to §1391(a)(1) because all of the corporate Defendants reside in Illinois. For the purposes of
determining the propriety of venue, “a defendant that is a corporation shall be deemed to reside in any

judicial district in which it is subject to personal jurisdiction at the time the action is commenced.”

5Plaintiff does not identify which Defendants are currently transacting business with SCI's
five clients in the Northern District of Illinois. In examining the submissions of the parties, it is clear
that Defendant GEMS is transacting business in this jurisdiction. According to RTI's complaint, SCI
“was in the business of providing enterprise application software and software consulting services to
customers in the public sector. As of January 2, 2001, SCI effectively ceased ongoing business
operations.” Compl. at [8 (emphasis added). RTI does not allege that either Sharp, in his individual
capacity, or Cass is transacting business with SCI's customers in Illinois.

7Again, Plaintiff does not identify which Defendants obtained an ownership interest in the
revenues generated by SCI's customer contracts in the Northern District of Illinois. GEMS arguably
obtained such an interest at the time of the transfer of SCI's customer contracts from SCI to GEMS.
Under the Employment Agreement with GEMS, Sharp is entitled to a 24% interest in the value of
GEMS on or before December 31, 2003. Sharp has therefore not yet acquired his ownership interest.

9



[creditor's] outstanding balance.” GEMS sent this letter to at least forty-six creditors across the country,
including RTI. Bouchein did not inform creditors of GEMS' telationship to Cass, instead referring to
Cass as “a lender, a secured party.” Bouchein also did not inform SC1's creditors that GEMS and Cass
promised Sharp bonuses based on GEMS revenues received from SCI customers as well as a 24%
ownership interest in GEMS prior to the foreclosure sale.

Following the foreclosure sale, GEMS claimed to be doing business as SCI, assuming the
obligations of SCI customer contracts and using SCI's name in contracts and promotional materials.
Sharp sent a letter to SCI's customers informing them that “SCI has become a wholly-owned subsidiary
of Cass Information Systems (CIS) as of January 2, 2001.” GEMS also amended SCI's contracts with
SCI's customers in which GEMS advised those customers “{t]hat as of January 2, 2001, GEMS has
assumed all obligations and duties under the [date of] Agreement and shall have all Tights and benefits
under the Agreement previously inuring to SCI.” For months after the foreclosure, GEMS used SCI's
web site without revealing GEMS' identity. The web site, located at Wwww.sci-gateway.com,now states
that GEMS purchased “certain assets” of SCI in January 2001.

In May 2001, GEMS, using stationary with the logo “SCI Government e-Management Solutions,
Inc.,” solicited the City of Gainsville, Georgia to enter into an addendum to the City's contract with SCL
GEMS referred to itself as SCI in the letter and attachments. Furthermore, the addendum to the SCI
contract proposed by GEMS recites that the parties to the contract are the City of Gainsville and
“Government e-Management Solutions, Inc, doing business as Systems Consultants, Inc.” One year after
the foreclosure sale, GEMS was servicing at least fifty-eight SCI customer contracts. Several of those
contracts were and are located in Illinois, including the City of Berwyn, the City of ‘Champaign, the City
of Rolling Meadows, the Village of Downers Grove, the Village of Mount Prospect, and the Village of

Northbrook. Plaintiff brought a five-count complaint against Defendants on November 27, 2002.



substantially all current customers, but, in any event, customers with 200 hours of

undelivered software services and all business from such customers during this period.

Such bonus shall be paid on or before May 15, 2001. §4(f)(i).

The Agreement also sets forth that Sharp will receive a 24% ownership interest in GEMS if GEMS sells
SCT's business before December 31, 2003. SCI will not receive any value for its customer contracts,
goodwill, name, website, or the generated proceeds and profits in‘exchange for Sharp's receipt of his
ownership interest.

On January 2, 2001, SCI, Cass, GEMS and Sharp staged a purported foreclosure sale at 121
Hunter Avenue, St. Louis, Missouri, SCI's then-headquarters and GEMS' current headquarters, to pay
off the Note, At the sale, GEMS, acting either as a wholly-owned subsidiary of Cass or of CIS, was the
lone bidder, acquiring the right, title, or interest in any contracts between SCI and its customers for
$3,700,000.00.‘ SCI, through Sharp, gratuitously transferred most, if not all of its customer contracts
to GEMS. Cass never reduced the balance due on the Note to reflect GEMS’ purchase and payment.
Cass has not taken action against Sharp and his wife to collect the amount due on the Note.

On the same day as the foreclosure sale, GEMS' Executive Vice President, William C. Bouchein

(“Bouchein”) sent form letters to all known SCI creditors stating that GEMS purchased certain SCI

assets at a foreclosure sale and that “[GEMS] does not accept any responsibility for the payment of

3If GEMS sells the business before December 3 1, 2003, the monies are to be distributed to
Cass to satisfy any existing loan amount owed by SCI, and then to Cass and Sharp on a 76%/24%
split. If GEMS does not sell SCI's business before December 31, 2003, Sharp's interest in GEMS is
cashed out at a 24% hypothetical sale price established in the Employment Agreement less the loan
amount SCI owes to Cass.

4Under the Employment Agreement, Cass is entitled to $3,165,000.00, the difference
between the existing loan amount owed by SCI, $4,490,000.00, Cass’ estimate of SCI's value on the
date of the Agreement, $1,325,000.00. Cass' estimate represents the difference between SCI's assets,
estimated at $2,685,000.00 and certain SCI liabilities, estimated at $1,360,000.00. Cass' estimate did
not take into account any potential purchaser's bid at a future foreclosure sale. Cass' account also did
not factor in the value of SCI customer contracts, the SCI name, SCI goodwill, or the SCI web site.

5



(3) a judicial district in which any defendant is subject to personal jurisdiction at the

time the action is commenced, if there is no district in which the action may otherwise

be brought.

Plaintiff RTI asserts that its complaint is properly before the Northem District of Illinois because
it is where a “substantial part of the events or omissions giving rise” to its claims occurred. §1391(a)(2).
Each count of Plaintiff's complaint is premised on what it describes as Defendants' scheme to defraud
SCI's creditors, including RTI. The overwhelming part of this alleged scheme took place in the State
of Missouri. SCI, a Missouri corporation with its principal place of business in St. Louis County,
Missouri, defaulted on the loan from Cass, also a Missouri corporation with its principal place of
business in St. Louis County, Missouri, in Missouri. Sharp, a citizen and resident of Missouri, and Cass
executed the Standstill Agreement and modifications thereto in Missouri. Sharp entered into the
Employment Agreement with GEMS, a Missouri corporation with its principal place of business in St.
Louis County, Missouri, in Missouri. The purported transfer of SCI's customer contracts to GEMS
occurred in Missouri.’ GEMS' purchase of certain SCI's assets occurred at a foreclosure sale which took
place in Missouri.

RTI nonetheless points to four events which it contends constitute a substantial part of the events
giving rise to its claims, First, RTI emphasizes that it's injury — the inability to collect the judgment it

secured against SCI - occurred in Lisle, Illinois, which is located in the Northern District of Ilinois.

5In its submissions to this Court regarding the issue of personal jurisdiction, RTI asserts that
the Standstill Agreement and modifications thereto, the Employment Agreement, and the transfer of
SCTI's Illinois customer contracts to GEMS all occurred in Illinois. We disagree. Both agreements
were executed in Missouri by Missouri corporations and a Missouri citizen and pertained to the
obligations the Missouri parties had with respect to one another. Similarly, the transfer of SCI's
contracts allegedly took place between two Missouri corporations in Missouri, not Illinois. Although
RTI may be correct that the Illinois contracts are governed by Illinois law, they fail to identify any
law in support of their contention that when an out-of-state transfer of Llinois-based contracts occurs
from one non-resident defendant to another non-resident defendant, Illinois courts consider the
transfer to have occurred in Illinois.



A Minute Quder Form (06/97)

Kk

United States District Court, Northern District of Illinois

verge Magistrate Judge Marvin Aspen “than aisned Sudge

CASE NUMBER 02 C 8640 DATE 5/15/2003
CASE Repository Technologies vs. Systems Consultants, Inc., et al
TITLE

[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.]

MOTION:
DOCKET ENTRY:
(1) Oo Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due
(3) a Answer brief to motion due___. Reply to answer briefdue___.
@ oO Ruling/Hearingon___setfor___—_at
(5) oO Status hearing[held/continued to] [set for/re-set for]on__setfor___—__at
(()) a Pretrial conference[held/continued to] [set for/re-set for]on__setfor__——s—sat__
(7) oO Trial[set for/re-set for] on__—_at
(8) Oo (Bench/Jury trial] [Hearing] held/continuedto__—_aat
(9) ag This case is dismissed (with/without) prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) ClLocal Rule 41.1 OOFRCP41(a)(1) OFRCP41(a)(2).
(10) MM (Other docket entry] Enter Memorandum Opinion and Order: GEMS’ and Cass’ motion to dismiss

for improper venue (10-1) is denied. In the alternative, we grant GEMS’ and Cass’ motion to transfer (10-
2) this action to the United States District Court for the Eastern District of Missouri. Consequently, we
deny defendants’ motion to dismiss for lack of personal jurisdiction (14-1) and GEMS’ and Cass’ motion
to dismiss or failure to state a claim (15-1) as moot. The Clerk of the Court is directed to transfer the

above cause of action to the United States District Court for the Eastern District of Missouri.

(11) +O (For further detail see order attached to the original minute order.)
No notices required, advised in open court. : |
No notices required. umber of |
a | Notices mailed by judge’s staff. "
Notified counsel by telephone. date docket
Docketing to mail notices.
~¢ | Mail AO 450 form. Ee wan
Copy to judge/magistrate judge. fo?
FILED FOR UOCKETING snsoos
courtroom date mailed notice
ee ps pe ge
GL deputy's OS HAY IS Pu 2: 23 on
initials
Date/time received in. ;
ptral Clerles Offices railing deputy inka

VOCS TRIG T CGUNT



310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) (internal quotation omitted). To establish such
minimum contacts, a defendant must “purposefully avail| ] itself of the privilege of conducting activities
within the forum State, thus invoking the protections and benefits of its laws.” Hanson v. Denckla, 357
USS. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed. 1283 (1958). As a consequence, the defendant “should
reasonably anticipate being haled into court” in the forum State. Burger King Corp. v. Rudzewicz, 471
USS. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 ( 1985) (internal citations omitted).

This Court's assessment of minimum contacts turns on whether general or specific jurisdiction
is at issue. See RAR, 107 F.3d at 1277. General jurisdiction is proper if the defendant has “continuous
and systematic general business contacts” with the forum. Helicopteros Nacionales de Colombia, S.A.
v. Hall, 466 U.S. 408, 416, 104 S.Ct. 1868, 1873, 80 L.Ed.2d 404 (1984). Factors we may examine in
determining whether general jurisdiction exist include: (1) the extent to which the defendant conducts
business in Illinois; (2) whether the defendant maintains an office or employees in Illinois; (3) whether
the defendant sends agents into Illinois to conduct business; (4) whether the defendant advertises or
solicits business in Illinois; and (5) whether the defendant has designated an agent for service of process
in Ilinois. See id. 466 U.S. at 416, 104 S.Ct. at 1873. In contrast, specific jurisdiction is proper over
a non-resident deferdant when the claim arises from or is related to the defendant's contacts with the
forum. See id. 466 U.S. at 414 n, 8, 104 S.Ct. at 1872 n. 8.

Plaintiffcontends that we may exercise either general or specific personal jurisdiction over SCL

We disagree. For the exercise of general jurisdiction to be Proper, Illinois courts insist that a defendant's

‘RTI first set forth this basis for jurisdiction in its Response to SCI's Motion to Dismiss. SCI
argues that we may not consider RTI's claim because it failed to identify such a ground jurisdiction
in its complaint. Although FRCP 8(a)(1) states that a complaint must identify the basis of
jurisdiction, we may sustain jurisdiction if allegations in the complaint reveal a proper basis for
jurisdiction. See Jensen v. State Bd. of Tax Comm'rs of State of Indiana, 763 F.2d 272, 278 (7th Cir.
1985). We will therefore consider RTI's claim for general jurisdiction.

at


§1391(c). Unlike the corporate Defendants, Sharp is, of course, an individual, who resides in Missouri.
To accept RTI's alternate basis for jurisdiction, this Court would have to find personal jurisdiction
lacking over Sharp, dismiss Sharp from the litigation, and find that the corporate Defendants are subject
to personal jurisdiction in the Northern District of Illinois. Even if we were to dismiss Sharp, however,
we could not conclude that all corporate Defendants are subject to personal jurisdiction in this judicial
district. Indeed, at the very least, we would not be able to exercise personal jurisdiction over SCI.

As the plaintiff, RTI has the burden to establish a prima facie case for personal jurisdiction. See
RAR, Inc. v. Turner Diesel, Ltd. 107 F.3d 1272, 1276 (7th Cir. 1997). A federal district court may
exercise personal jurisdiction “only if the state in which it sits would have such jurisdiction.” Kiump
v. Duffus, 71 F.3d 1368, 1371 (7th Cir. 1995). As a federal district court sitting in Illinois, we may
exercise personal jurisdiction over Defendants if: (1) Illinois law grants such jurisdiction; (2) the
exercise of personal jurisdiction would not violate Illinois constitutional due process requirements; and
(3) the exercise of personal jurisdiction would not violate federal constitutional due process
tequirements. See Cent. States, Southeast & Southwest Areas Pension Fund v. Reimer Express World
Corp., 230 F.3d 934, 939 (7th Cir. 2000). Although the Illinois long arm statute provides a list of
specific actions that will authorize the jurisdiction of Hlinois courts, it also permits courts in Illinois to
exercise personal jurisdiction to the maximum extent allowed by the Illinois and federal constitutions.
See 735 ILCS 5/2-209(a), (c). The three inquiries listed above may therefore be reduced to an analysis
of whether the exercise of personal jurisdiction over Defendants would violate federal due process
Tequirements. See Klump, 71 F.3d at 1371.

In order to subject a non-resident defendant to personal jurisdiction “due process requires [that]
he 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.

10



Defendants subsequently filed their motions to dismiss based on lack of personal jurisdiction.
Defendants GEMS and Cass also filed their motions to dismiss for improper venue, for failure to state
a claim or, in the alternative, to transfer the action.

I. ANALYSIS

Although all Defendants have moved to dismiss the complaint for lack of personal jurisdiction
under FRCP 12(b)(2), we deem it prudent to first address the issue of venue. See Leroy v. Great W.
United Corp., 443 U.S. 173, 180, 99 S.Ct. 2710, 2715, 61 L.Ed.2d 464 (1987) (“when there is sound
prudential justification for doing so,” a court may consider venue before jurisdiction). With respect to
venue, Defendants GEMS and Cass have moved to dismiss the complaint for improper venue under
FRCP 12(b)(3) or, in the alternative, to transfer venue to the United States District Court for the Eastern
District of Missouri under 28 U.S.C. §1406. In resolving a motion to dismiss for lack of ‘proper venue,
the plaintiff bears the burden of establishing that venue is proper. See, e.g., Emjayco v. Morgan Stanley
&Co., Inc., 901 F.Supp. 1397, 1400 (C.D.IIl. 1995). We must resolve any factual conflicts in the parties’
submissions in favor of the plaintiff and draw any reasonable inferences from those facts in the plaintiff's
favor. See, e.g., Nagel v. ADM Investor Services, Inc., 995 F.Supp. 837, 843 (N.D.III. 1998). With these
standards in mind, we turn to GEMS’ and Cass' motion.

GEMS and Cass argue that the Northern District of Illinois is an improper venue for Plaintiff's
complaint. We agree. Venue in a diversity action, such as the case presently before us, is governed by
28 U.S.C. §1391(a), which declares that an action may only be brought in:

(1) a judicial district where any defendant resides, if all defendants reside in the same

(2) ejodilal district in which a substantial part of the events or omissions giving rise to

the claim occurred or a substantial part of property that is the subject of the action is
situated, or


services identical to those provided by SCI prior to January 2, 2001 to customers in the public sector.
GEMS is either a wholly-owned subsidiary of Cass or of Cass Information Systems, Inc. (“CIS”).
Defendant Cass is a Missouri corporation with its principle place of business at 13001 Hollenberg Drive,
Bridgeton, Missouri. Cass is in the business of providing banking services to privately-held businesses
in the St. Louis metropolitan area, as well as to churches and ministries throughout the country. Cass
is a wholly-owned subsidiary of CIS. Defendant Sharp is a Missouri citizen who resides at 7350 Cornell
Avenue, St. Louis, Missouri. Sharp was, at all times relevant to Plaintiff's complaint, the majority
shareholder of SCI.

B. Facts

On February 16, 2001, RTI filed a one count breach of contract suit against SCI in the United
States District Court for the Northern District of Illinois, Case No. 01-C-1103, to recover contractually
mandated fees due from SCI to RTI for the licensing of software and the provision of services pursuant
to a written agreement between RTI and SCI. On April 16, 2001, the Honorable Elaine E. Bucklo
entered judgment in favor of RTI and against SCI, awarding RTI $178,694.89 plus costs and post-
judgment interest. On or about June 14, 2001, RTI registered the judgment in the State of Missouri and
filed a supplemental proceeding in the United States District Court for the Eastern District of Missouri,
Eastern Division, Case No. 4:01MC00173 CEJ (“Supplemental Proceeding”), seeking to satisfy the
judgment. To date, RTT is still the owner and holder of the judgment, no portion of which has been paid.

RTI's inability to satisfy the judgment stems from a series of events that followed SCI's default
on a loan made by Cass. On or about December 6, 1999, SCI and Cass executed a promissory note
(“Note”) in favor of Cass for $3,500,000.00. Cass secured repayment of the Note through a Commercial
Security Agreement. Sharp and his wife, Victoria Sharp, were, at all relevant times, personal guarantors

of the Note. Prior to September 21, 2000, SCI defaulted on the Note. On or about September 21, 2000,


its contention are unavailing. In Fresco v. Haden Uniking Corporation, 1990 WL 304198 (N.D.IIl.
1990) the court held that a contract for products and services to be delivered and installed in Illinois are
governed by Illinois law. In United States Borax & Chemical Corporation v. Carpentier, 150 N.E.2d
818 (III. 1958), the Illinois Supreme Court found that Illinois is the site where revenues are generated
from transacting business in Illinois. The holdings in Fresco and Carpentier do not suggest that SCI's
transfer of its Norther District of Illinois customer contracts to GEMS occurred in Illinois rather than
in Missouri. Thus, we would not be able to exercise jurisdiction over SCI based on the transfer those
contracts.

RTI also contends that the letter SCI sent, though Sharp, to its Northem District of Hlinois
customers informing them that “SCI has become a wholly-owned subsidiary of Cass Information
Systems (CIS) as of January 2, 2001" constitutes a tortious act that took place in Illinois. Courts in this
jurisdiction have held that tortious mailings from a non-resident defendant to Illinois residents that affect
interests in Illinois are sufficient to confer jurisdiction over the non-resident defendant. See Cross v.
Simons, 729 F.Supp. 588, 592 (N.D.II]. 1989); see also McClub Services, Inc. v. Stovall, 714 F.Supp.
370, 373 (N.D.IIL. 1989), In McClub, the non-resident defendant moved to dismiss for lack of personal
jurisdiction arguing that its only contact with Illinois was a few telephone calls and mailings to the
Illinois plaintiff. 714 F.Supp. at 371. The McClub court denied the motion, finding that plaintiffs
successfully alleged that the tortious conduct consisted of mailing fraudulent statements into Illinois
where the defendant intended, and indeed caused, an economic injury to an Illinois resident, See id.

In this case, RTI posits that SCI sent the letter to its Illinois customers “to further convince SCI's
customers that SCI and GEMS were one and the same.” Compl. 27. RTI contends that the letter
demonstrates SCI's intent to affect the interests of its Illinois creditors, including RTI. See Pl. Resp. at

10-11. RTI fails to demonstrate that the mailing constituted a tort which was intended to and did cause

14



in Illinois. Thus, this Court lacks jurisdiction under Section 2-209(a)(7) of the Illinois long-arm statute.
Because we have neither specific nor general jurisdiction over SCI, we cannot exercise jurisdiction over
it in a manner consistent with protections affording by the Illinois and federal constitutions. Because
all corporate Defendants subject to RTI's complaint do not reside in the Norther District of Illinois,
venue is improper under 28 U.S.C. §1391(a)(1).

RTI has failed to establish that venue is proper under §1391(a). Although we may dismiss the
complaint on the basis of improper venue, we choose to exercise our discretion under 28 U.S.C.
§1406(a) and transfer the case to the United States District Court for the Eastern District of Missouri.
Section 1406(a) states that “[t]he district court of a district in which is filed a case laying venue in the
wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any
district or division in which it could have been brought.” Clearly, this action could have been filed in
the Eastern District of Missouri, since all Defendants reside there for the purposes of venue under 28
U.S.C. §1391(a). We therefore find that the interest of justice and the interest of judicial economy will
be served by transferring this case to the United States District Court for the Eastern District of Missouri.
Il. CONCLUSION

For the foregoing reasons, GEMS' and Cass' motion to dismiss for improper venue is denied.
In the alternative, we grant GEMS' and Cass' motion to transfer the action to the United States District
Court for the Eastern District of Missouri. Consequently, we deny Defendants’ motions to dismiss for
lack of personal jurisdiction and GEMS' and Cass' motion to dismiss for failure to state a claim as moot.

It is so ordered.

Vai

2
MARVIN ¥ se

United States Districtudge

Dated Ug 1, 03

16


under Federal Rule of Civil Procedure (“FRCP”) 12(b)(2). Also before us are the motions of Defendants
GEMS and Cass to dismiss the complaint for improper venue pursuant to FRCP 12(b)(3), for failure to
state a claim upon which relief can be granted under FRCP 12(b)(6), and, in the alternative, to transfer
venue to the United States District Court for the Eastern District of Missouri pursuant to 28 U.S.C.
§1406. For the reasons stated below, we deny GEMS' and Cass' motion to dismiss for improper venue,
but grant their motion to transfer venue to the United States District Court for the Eastem District of
Missouri. We deny as moot Defendants' motions to dismiss for lack of personal jurisdiction and GEMS'
and Cass’ motion to dismiss for failure to state a claim upon which relief may be granted.
L BACKGROUND!

A. Identity of the Parties

Plaintiff RTI is a Delaware corporation with its principal place of business at 1001 Warrenville
Road, Suite 104, Lisle, Illinois. RTI is in the business of developing and selling its CustomerFirst,
WebFirst, SalesFirst, TechSearch, and Inventory Management software products. Defendant SCI is a
Missouri corporation with its principal place of business at 7350 Cornell Avenue, St. Louis, Missouri.
Prior to January 2, 2001, SCI's principle place of business was located at 121 Hunter Avenue, St. Louis,
Missouri, and SCI was in the business of providing enterprise application software and software
consulting services to customers in the public sector. As of January 2, 2001, SCI effectively ceased
ongoing business operations, but remains a Missouri corporation, having changed its name to Hunter
Technology.

Defendant GEMS, formerly known as Government e-Business, Inc., is a Missouri corporation
with its principal place of business at 121 Hunter Avenue, St. Louis, Missouri, the former location of

SCI. GEMS is in the business of providing enterprise application software and software consulting

'The facts contained herein are adopted from Plaintiff's complaint.

2


DOCKETED

UNITED STATES DISTRICT COURT MAY 1 6 2003
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

REPOSITORY TECHNOLOGIES,
a Delaware corporation,

Plaintiff,

v. Case No. 02-C-8640
SYSTEMS CONSULTANTS, INC. n/k/a
HUNTER TECHNOLOGY, INC., a Missouri,
corporation, GOVERNMENT E-MANAGEMENT
SOLUTIONS, INC. f/k/a/ GOVERNMENT
E-BUSINESS, INC., a Missouri corporation,
CASS COMMERCIAL BANK, a Missouri
corporation, and JOHN A. SHARP, a Missouri
citizen,

eS SS Se SS Swe we were

Defendants.

MEMO) (6) (ON ORDER
MARVIN E. ASPEN, District Judge:

On November 27, 2002, Plaintiff, Repository Technologies, Inc. (“RTI”), filed a five-count
complaint against Defendants, Systems Consultants, Inc. (“SCI”), Government E-Management
Solutions, Inc. (“GEMS”), Cass Commercial Bank (“Cass”), and John A. Sharp (“Sharp”) (collectively
“Defendants”). Plaintiff seeks to enforce against Defendants the judgment it obtained against SCI for
money owed pursuant to a Software Licensing Agreement between RTI and SCI (Count II), and to pierce
the corporate veil of all Defendants (Count V). Plaintiff also claims that Defendants violated the
Uniform Fraudulent Transfer Act (“UFTA”), 740 ILCS 160/5(a)(1), 6(a) (Count I). Plaintiff further
alleges that Defendants GEMS, Cass, and Sharp intentionally interfered with RTI's contract with SCI
(Count Ill), and tortiously interfered with RTI's prospective economic advantage (Count IV). Presently

before us is the motion of Defendants to dismiss Plaintiff's complaint for lack of personal jurisdiction

S-



continuous and systematic business contacts “continue up to the time of suit.” Asset Allocation &
Management Co. v. W. Employers Ins. Co., 892 F.2d 566, 570 (7th Cir. 1989). RTI filed its complaint
on November 27, 2002. The complaint states that “SCI was in the business of providing enterprise
application software and software consulting services to customers in the public sector. As of January
2, 2001, SCI effectively ceased ongoing business operations.” Compl. at {8 (emphasis added). SCI's
business operations did not continue up to the time of suit, but instead effectively ceased almost two
years before RTI filed its complaint.°

Prior to January 2, 2001, SCI entered into contracts with six Illinois customers. RTI maintains

that SCI has had continued and systematic general business contacts with Illinois since January 2, 2001
in order to perform its obligations and duties under those contracts with its Illinois customers. RTI
points to Sharp's letter to SCI's customers informing them that “SCI has become a wholly-owned
subsidiary of Cass Information Systems (CIS) as of January 2, 2001.” According, to RTI's complaint,
however, GEMS “entered into amendments to SCI's contracts with SCI's customers” in which GEMS
stated “as of January 2, 2001, GEMS has assumed all [of SCI's] obligations and duties” as well as all of
SCI's “rights and benefits” under those contracts. Compl. at 426. As the complaint further explains,
GEMS “claimed to be doing business as SCI,” converting SCI to “a shell corporation.” Compl. at $926,
19. In light of the allegations in RTI's complaint, we would not be able to exercise general jurisdiction
over SCI.

RTI posits that this Court could nonetheless exercise specific jurisdiction over SCI because RTI's
claims arise from SCI's specific contacts with Illinois. Again, we disagree. RTI first argues that its

claims arise from SCI's transaction of business within Illinois. See 735 ILCS 5/2-209(a)(1). Ata

°SCI, through Sharp, avers that SCI has never maintained an office or other place of business
in Illinois, has never registered to do business in Illinois, has no registered office or telephone listing
in Illinois, and has no designated agent upon whom service of process can be made in Illinois.

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injury to an Illinois resident. While this Court acknowledges that RTI's inability to collect the judgment
it secured against SCI constitutes an economic injury, ithas failed to demonstrate that its injury stemmed
from SCT's letter to its Illinois customers. In contrast, Bouchein, GEMS' Executive Vice President, sent
aletter directly to RTI and other Illinois creditors of SCI stating that GEMS purchased certain SCI assets
at a foreclosure sale and that “[GEMS] does not accept any responsibility for the payment of [creditor's]
outstanding balance.” RTI bas shown that GEMS intended this letter to cause economic injury and did
cause economic injury to RTI, an Illinois resident. However, we would not be able to exercise specific
jurisdiction over SCI based on a letter that GEMS sent to RTI.

RTI finally argues that its claims arise from SCI's making of contracts “substantially connected
with” Illinois. 735 ILCS 5/2-209(a)(7). RTI does not specify which contracts subject SCI to the
jurisdiction of this Court, We interpret RTI's reference to SCI's making of contracts to pertain to the
Standstill Agreement and the Modification of the Standstill Agreement.'° To determine whether those
contracts are substantially connected with the State of Illinois, we must examine each contract as a
whole. See Goldberg v. Miller, 874 F.Supp. 874, 878 (N.D.IIL. 1995). According to RTI, the Standstill
Agreement set forth Cass' agreement to forbear on the collection of the Note in exchange for Sharp's
performance of certain actions that would effectively transfer the power to operate SCI to Cass. The
Modification of the Standstill Agreement further delayed Cass' forbearance on the collection of the Note
in exchange for Sharp's cooperation with Cass in the transition following the sale of SCI's assets or
shares of stock. The corporate parties to each contract, SCI and Cass, are Missouri corporations with
their principal places of business in Missouri. Sharp, the individual party to each contract, is a citizen

and resident of Missouri. SCI avers, through Sharp, that it did not perform any acts under either contract

‘RTT has the burden to identify which contracts subject SCI to the jurisdiction of this Court.
If RTI was referring to SCI's contracts with its Illinois clients, it has failed to demonstrate how its
claim arose from the making or performance of those contracts.

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