Since there is no dispute regarding the activity of the
LLC's being a basis for exercising jurisdiction in Illinois, it
is unnecessary to detail the general rules regarding exercising

personal jurisdiction. See generally Hyatt International

Corp. v. Coco, 302 F.3d 707, 713-17 (7th Cir. 2002); YKK USA,
Inc. v. Baron, 976 F. Supp. 743, 745-47 (N.D. Ill. 1997). The
LLC's were doing business in Illinois, which would subject them
to general jurisdiction in Illinois, even as to cases that do not
arise from the particular contacts in Illinois. See Hyatt,

302 F.3d at 713. To the extent the conduct of the LLC's is
attributable to defendant, he would also be amenable to suit in
Illinois on any claim. Under the "fiduciary shield” doctrine,
however, an individual's acts performed in a representative
capacity generally will not be a basis for exercising
jurisdiction over the individual. YKK, 976 F. Supp. at 747.
One exception to the fiduciary shield doctrine, however, is the
"sham" or "alter ego" exception. "This exception is applicable
‘where the plaintiff seeks to pierce the corporate veil by
alleging that the corporation was a mere shell utilized by the
individual defendant for his own personal benefit.'" Id.

(quoting Torco Oil Co. v. Innovative Thermal Corp., 730 F. Supp.

126, 135-136 (N.D. Ill. 1989)). "If the 'alter ego' exception
is applicable, the corporation's contacts are attributed to
the individual for the purposes of personal jurisdiction
determination." Id.

Defendant contends that plaintiff cannot rely on this

theory because no alter ego, sham, or corporate piercing


off debts defendant would have otherwise owed. Also, defendant
allegedly intermingled funds among various LLC's and used some
funds for his own benefit. After the foreclosure on the loan,
defendant allegedly improperly purchased one of the aircraft that
had been security. Plaintiff lost his $2,000,000 investment and,
based on the personal guaranty, was required to pay $1,451,250 in
principal plus $92,940 interest and incurred $46,060 in attorney
fees.

In response to defendant's pending motion, plaintiff does
not contend that defendant directly solicited the investments
from him. Instead, plaintiff contends that the LLC's themselves
were based in Illinois and that defendant conducted his business
through the LLC's and through an agent, Phil Coleman, who was the
one who directly solicited plaintiff. Defendant does not dispute
that the LLC’s are based in Illinois* and that the LLC's
themselves engaged in conduct that would be a basis for personal
jurisdiction in Illinois. Defendant does not provide evidence
disputing the allegations of the complaint that he commingled
funds among the various LLC's or that he used assets for his
personal benefit.* Therefore, these allegations must be taken as
true for purposes of ruling on the motion to dismiss. Plaintiff
provides evidence supporting that defendant participated in

managing and directing the activities of the LLC's.

lAlthough operating in Illinois, the LLC's are organized
under the laws of Iowa.

on a personal jurisdiction motion, the substantive
allegations of the complaint are generally taken as true. See
Chen, 2003 WL 22995163 at *5 n.4.


allegations are contained in the complaint. The complaint only
contains allegations of direct liability on defendant's part.
However, here plaintiff is relying on general jurisdiction. The
basis for exercising personal jurisdiction, therefore, need not
be the same as the breach of fiduciary duty and fraud claims
contained in the complaint. Additionally, although the alter ego
exception to the fiduciary shield doctrine and piercing the
corporate veil for liability purposes are similar concepts, they
have differing elements and distinct purposes. See YKK, 976
F. Supp. at 747; Torco, 730 F. Supp. at 136. Plaintiff may raise
the alter ego doctrine even though he has not alleged a piercing
the corporate veil allegation in his complaint.

In response to the motion to dismiss, plaintiff need only
make a "minimally viable” showing that the LLC's are a sham.
YKK, 976 F. Supp. at 747 (quoting Torco, 730 F. Supp. at 136).

It is enough to show that the allegations are not "patently

without merit." Torco, 730 F. Supp. at 136; Van Ru Credit

Corp. v. Professional Brokerage Consultants, Inc., 2003 WL

22462607 *2 (N.D. Ill. Oct. 29, 2003). The alter ego rules
applicable to LLC's are generally the same as those for
corporations. See Iowa Code § 490A.603(2) (personal liability of
LLC member is same as that of a corporate shareholder except that
failure to observe formalities as to meetings is not a

consideration). See also Kaycee Land & Livestock v. Flahive,

46 P.3d 323, 327-28 (Wyo. 2002); Hollowell v. Orleans Regional

Hospital LLC, 217 F.3d 379, 385 (Sth Cir. 2000). Here, it must

be taken as true that funds of the various LLC's were commingled,


+ Minute Ofder Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Jud} Sitting Judge if Other
or Maghoste Judge WILLIAM T. HART hare Asetesed Suie
CASE NUMBER 03 C 7174 DATE APRIL al > 2004
CASE DANIEL NELSEN v. WALDO MORRIS, an individual
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:

qa) oO Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion due

(3) a Answer brief to motion due____. Reply to answer brief due.

(4) a Ruling/Hearingon___——ssetfor_—aat_

6) Status hearing set for May 12, 2004 at 11:00 a.m.

(6) o Pretrial conference[held/continued to] [set for/reset for]on__setfor sat.
(7) Q Trial[set for/reset for] on__at

(8) Q (Bench/Jury trial] [Hearing] held/continuedto at

(9) im This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OOFRCP4(m) OLocal Rule 41.1 OCOOFRCP41(a)(1) [1 FRCP4i(a)(2).

ao) [Other docket entry] Defendant's motion to dismiss pursuant to Rule 12(b)(2) [4-1]
is denied. Within 10 days, defendant shall answer the complaint. All discovery is to
be completed by August 3, 2004.

(11) Wl {For further detail see attached MEMORANDUM OPINION AND ORDER}
No notices required, advised in open court.

2

No notices required. ;
umber of notices.

U_ | Notices mailed by judge’s staff.

Notified counsel by telephone.

Docketing to mail notices.

Mail AO 450 form,

Copy to judge/magistrate judge.

4/2/2004
date mailed nati
courtroom late mailed notice
ow deputy’s
patie gm
initials

Date/time received in
sentral Clerk’s Office railing deputy initials

Pia d



that Interlease IV became insolvent in that the guarantors had to
pay off the outstanding balance of its loan, and that defendant
used LLC funds for his own benefit. There is also evidence that
defendant managed and/or directed activities of the LLC's. [It
cannot be held that plaintiff's alter ego theory is not viable.

Cf. Torco, 730 F. Supp. at 137-39. Therefore, the conduct of the

LLC's is attributable to defendant for personal jurisdiction
purposes and, at this stage of the proceedings, it is appropriate
to continue to exercise personal jurisdiction over defendant.
Because personal jurisdiction is being upheld on this basis, it
is unnecessary to consider whether the fiduciary shield doctrine
should not apply because defendant was acting in his own interest
instead of the interests of the LLC's and whether, on that basis,
it would be appropriate to exercise general and/or specific
personal jurisdiction.

IT IS THEREFORE ORDERED that defendant's motion to
dismiss pursuant to Rule 12(b)(2) [4-1] is denied. Within 10
days, defendant shall answer the complaint. All discovery is to
be completed by August 3, 2004. A status hearing will be held on
May 12, 2004 at 11:00 a.m.

ENTER:

Asbvie 7 Mot

UNITED STATES DISTRICT JUDGE

DATED: APRIL 21 2004


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

DOCKETED
APR 2 2 2004
DANIEL NELSEN,
Plaintiff,
No. 03 C 7174

v.

WALDO MORRIS, an individual,

Defendant.

MEMORANDUM OPINION AND ORDER

Plaintiff Daniel Nelsen, an Illinois resident, alleges
that he lost money investing in limited liability companies
("LLC's") that leased aircraft. Plaintiff alleges that defendant
Waldo Morris, an Iowa resident, caused these losses by breaching
his fiduciary duty as a managing member of the LLC's and by
committing fraud in order to induce plaintiff's investment.
There is complete diversity of citizenship and the amount in
controversy exceeds $75,000. Defendant has moved to dismiss
based on lack of personal jurisdiction.

The burden is on plaintiff to show that personal
jurisdiction over defendant is proper. Purdue Research

Foundation v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th

Cir. 2003); Steel Warehouse of Wisconsin, Inc. v. Leach, 154 F.3d

712, 714 (7th Cir. 1998); Chen v. Quark Biotech, Inc., 2003 WL

Jb



22995163 *1 (N.D. Ill. Dec. 15, 2003). For purposes of ruling on
the question of personal jurisdiction, all uncontroverted facts
alleged by plaintiff, all facts adequately supported by any
affidavit or other evidence submitted by plaintiff, and all
uncontroverted facts supported by defendant's affidavits or
documentary submissions are assumed to be true. ee Purdue

Research, 338 F.3d at 782-83; McIlwee v. ADM Industries, Inc.,

17 F.3d 222, 223 (7th Cir. 1994); Weidner Communications, Inc. v.

H.R.H. Prince Bandar Al Faisal, 859 F.2d 1302, 1306 n.7 (7th Cir.

1988); Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987). The
parties were permitted to engage in discovery prior to completing
briefing on defendant's motion. However, since the ruling on
personal jurisdiction is being made on written submissions, not
following an evidentiary hearing, plaintiff is only required to
make a prima facie showing in support of his claimed basis for
personal jurisdiction. Purdue Research, 338 F.3d at 782-83.
According to the allegations of the complaint, defendant
was the managing member of two LLC's known as Interlease IV and
Interlease V. Both LLC's were in the business of leasing
aircraft that were owned by the LLC's. Plaintiff was a 25%
member of Interlease IV and a 5% member of Interlease V.
Plaintiff allegedly loaned Interlease V $1,000,000 in return for
a promissory note secured by an aircraft, but later relinquished
the note for his 5% share of Interlease V. Plaintiff allegedly
invested another $1,000,000 and also personally guaranteed a
$5,800,000 loan as part of his purchase price for his interest in

Interlease IV. Defendant allegedly used the loan proceeds to pay