corporate headquarters and at several manufacturing plants. On December 22, 2000, OMC filed
bankruptcy.
I. Motion to Dismiss For Lack of Personal Jurisdiction

Greenmarine argues that this Court lacks personal jurisdiction. Plaintiffs are residents of
Illinois and former employees of OMC in Illinois. Greenmarine is incorporated in Delaware and has
its principal executive offices in New York.

The plaintiff bears the burden of demonstrating the existence of personal jurisdiction. RAR,
Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1275 (7th Cir. 1997) (RAR). The allegations in the
complaint are taken as true unless controverted by the defendants’ affidavits. Any conflicts in the
affidavits submitted by the parties are resolved in the plaintiff's favor. See Berthold Types Ltd. v.
European Mikrograph Corp., 102 F. Supp. 2d 928, 930 (N.D. Ill. 2000), citing Turnock v. Cope, 816
F.2d 332, 333 (7th Cir. 1987).

In cases involving federal questions, a plaintiff must show that (1) the defendant is
amendable to service of process and (2) the exercise of personal jurisdiction over the defendant
comports with due process under the Fifth Amendment of the United States Constitution.
Euromarket Designs, Inc. v. Crate & Barrel Ltd., 96 F. Supp. 2d 824, 833-34 (N.D. Ill. 2000)
(Euromarket).

The Illinois long-arm statute provides, in part, that personal jurisdiction may be exercised
over defendants that commit certain enumerated acts within Illinois or “on any other basis ...
permitted by the Illinois Constitution and the Constitution of the United States”. 735 ILCS § 5/2-
209(a)(2), (c). Because of this broad statute, “the statutory analysis collapses into a due process

inquiry, and [the court} need not consider whether the defendants engaged in any of the acts


Greenmarine held OMC as an agent; or that the method of payment made to Greenmarine by OMC
establishes control by Greenmarine. The parties do not dispute that there was some shared directors
and officers. As to the last factor, while Plaintiffs allege that Greenmarine made decisions affecting
OMC, the allegations do not establish or raise the reasonable inference that Greenmarine exerted
control over the daily affairs of OMC. The shared board members and directors, the acts of creating
anew OMC board, and the effect the new board had on such issues of selecting vendors, terminating
marketing programs, and the hiring and firing of certain employees are consistent with the normal
relationship between a parent company and its subsidiary, in which parent companies may “control,
direct, and supervise subsidiaries to some extent”. See IDS, 136 F.3d at 540; LaSalle, 85 F. Supp.
2d at 866.

Based on the above, Greenmarine’s and OMC’s corporate formalities were substantially
observed, and Greenmarine did not exercise an unusually high degree of control over OMC to
establish that Greenmarine purposefully availed itself of the privilege of conducting activities in the
forum state of OMC. Therefore, this Court lacks personal jurisdiction over Greenmarine. See

Central States, 230 F.3d at 943.


we

Purposefully Availed Itself Of The Privilege Of Conducting Activities In The Forum State

The critical issue in this first requirement is whether “the defendant’s conduct and connection
with the forum State are such that he should reasonably anticipate being haled into court there.”
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). This requirement is not met
if the defendant’s conduct and connection with the forum state is the result of “random”,
“fortuitous”, or “attenuated” contacts with the forum state. See Burger King Corp. v. Redzewicz, 471
U.S. 462, 475 (1985).

Plaintiffs argue that the totality of Greenmarine’s contacts with Illinois meet this first
requirement. These contacts include: (1) Greenmarine’s acquisition of OMC; (2) executives of
Greenmarine occupied some of the seats on OMC’s Board of Directors; (3) Greenmarine’s role in
putting together an OMC management team; (4) Greenmarine’s officers and directors made certain
hiring, firing, and promotional decisions; (5) Greenmarine and Soros Group personnel had offices
at OMC.

“[P]ersonal jurisdiction cannot be premised on corporate affiliation or stock ownership alone
where corporate formalities are substantially observed and the parent does not exercise an unusually
high degree of control over the subsidiary.” Central States, Southeast & Southwest Areas Pension
Fund y. Reimer Express World Corp., 230 F.3d 934, 943 (7th Cir. 2000) (Central States). The
determination the court must make is just how much control is enough to constitute “an unusually
high degree of control”. In making this determination, the court must be mindful that the general
rule assumes some degree of control, direction, and supervision of a subsidiary in a normal
parent/subsidiary relationship. See IDS Life Ins. Co. v. America Life Ins, Co., 136 F.3d 537, 540 (7th

Cir. 1998) (IDS).


enumerated in the long-arm statute”. Euromarket, 96 F. Supp. 2d at 834, quoting LFG, LLC v.
Zapata Corp., 78 F. Supp. 2d 731, 735 (N. D. Ill. 1999).

The Fourteenth Amendment Due Process Clause permits a court to exercise jurisdiction over a
nonresident defendant only if the defendant has had “certain minimum contacts with [the state] such that
the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.”
International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945), quoting Milliken v. Meyer, 311 U.S.
457, 463 (1940); Neuman & Assoc. v. Florabelle Flowers, 15 F.3d 721, 725 (7th Cir. 1994). This
determination depends on whether the plaintiff asserts general or specific jurisdiction against the
defendant. RAR, 107 F.3d at 1277. “General jurisdiction ... is for suits neither arising out of nor related
to the defendant’s contacts, and it is permitted only where the defendant has ‘continuous and systematic
general business contacts’ with the forum state.” RAR, 107 F.3d at 1277. Specific jurisdiction “refers
to jurisdiction over a defendant in a suit ‘arising out of or related to the defendant’s contacts with the
forum.” RAR, 107 F.3d at 1277, quoting Helicopteros Nacionales de Columbia, S.A. v. Hall, 486 U.S.
408 (1984).

In the instant case, Plaintiffs do not allege that Greenmarine had “continuous and systematic”
contact with Illinois. As a result of their failure to raise issues of general jurisdiction in the complaint
and in their response to the Motion to Dismiss, Plaintiffs have waived any general jurisdiction
arguments. See RAR, 107 F.3d at 1277.

Specific jurisdiction exists if: (1) the defendant purposefully availed itself of the privilege
of conducting activities in the forum state; (2) the claim arises out of or is related to those activities;
and (3) the assertion of personal jurisdiction is reasonable and fair. See Euromarket, 96 F. Supp.

2d at 834.


corporate records. Greenmarine also provided the affidavits of Eric Martinez (“Martinez”), the
Chief Executive Officer, Chief Financial Officer, and Senior Vice President of OMC, and Frank Sica
(“Sica”), the Managing Director of Soros Private Funds Management LLC, member of the
management Committee of Greenmarine Holdings LLC, and member of the OMC Board of
Directors. Martinez and Sica aver that OMC was a self-contained and self-managed business. In
addition, contrary to any status of inadequate capitalization, Defendants invested millions of dollars
of additional funds into OMC to try to keep OMC viable. Lastly, Plaintiffs’ assertion that the
Greenmarine officers and directors that were also on OMC’s board made decisions affecting OMC,
including choosing vendors, halting marketing programs, closing plants, and hiring and firing
personnel, fails to demonstrate that Greenmarine was an alter ego of OMC. OMC board members
would have a role in these decisions, and merely sharing some executives does not demonstrate
control to establish jurisdiction. See IDS, 136 F.3d at 540; Gruca, 19 F. Supp. 2d at 870.

The second approach for determining if sufficient control existed is whether the parent
company has substantially controlled the subsidiary. See LaSalle, 85 F. Supp. 2d at 865; Gruca, 19
F. Supp. 2d at 866. Factors included in this analysis include: whether the parent company arranges
financing for and capitalization of the subsidiary; whether officers and directors are the same;
whether separate books, tax returns, and financial statements are kept; whether the parent company
holds its subsidiary as an agent; the method of payment made to the parent by the subsidiary; and
how much control is exerted by the parent company over the daily affairs of the subsidiary. See
LaSalle, 85 F. Supp. 2d at 865; Gruca, 19 F. Supp. 2d 862, 867.

Here, there are no allegations: that OMC did not arrange for its own financing and

capitalization; that OMC did not keep separate books, tax returns, and financial statements; that


® Minute der Form (06/97)

. Kp United States District Court, Northern District of Illinois
Name of Assigned Judge John W. Darrah Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 01 C 899 DATE 7/3/2002
CASE TOM CACCAMO vs. GREENMARINE HOLDINGS LLC
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintif¥, defendant, 3rd party plaintif¥, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
(1) Oo Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due
(3) Oo Answer brief to motion due___. Reply to answer briefdue___.
(4) oO Ruling/Hearingon___esetfor__—_at
(5) im Status hearing[held/continued to] [set for/re-set for]on__—_—setfor__—_at
(6) a Pretrial conference[held/continued to] [set for/re-set for]on__—ssetfor__——sat_—
(7) oO Trial[set for/re-set for]on_——s at.
(8) oO [Bench/Jury trial] [Hearing] held/continued to at
(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OOFRCP4(m) OGeneralRule21 OFRCP41(a\(1) CFRCP41(a)(2).

(10) WM [Otherdocketentry] Status hearing held. Enter Memorandum Opinion And Order. Greenmarine’s
motion to dismiss is granted without prejudice.

(11) [For further detail see order attached to the original minute order.]

No notices required, advised in open court.
No notices required, 5 )
Notices mailed by judge’s staff.
Notified counsel by telephone, JUL 0.3 2002
wv | Docketing to mail notices. a dM)
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Copy to judge/magistrate judge. wus JUL 0 8 2002
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II. Motion to Dismiss Because Greenmarine Was Not an Employer Under WARN

In light of this Court’s lack of personal jurisdiction over Greenmarine, the Court need not
address Greenmarine’s argument that the action should be dismissed because Greenmarine is not an
employer under WARN.

For the reasons stated above, Greenmarine’s Motion to Dismiss is granted without prejudice.

Dated: l uly 3 2002

OHN W-DARRAH
United States District Judge

10


a

Two different approaches are utilized in determining how much control is enough. See
LaSalle Nat’! Bank v. Vitro, 85 F. Supp. 2d 857, 864 (N.D. Ill. 2000) (LaSalle); Gruca v. Alpha
Therapeutic Corp., 19 F. Supp. 2d 862, 866 (N.D. Ill. 1998) (Gruca). The first approach is the
traditional test for piercing the corporate veil. See IDS, 136 F.3d at 540; LaSalle, 85 F. Supp. 2d
at 864; Gruca, 19 F. Supp. 2d at 866.

When determining whether to pierce the corporate veil, a court applies the law of the state
of incorporation. See Stromberg Metal Works, Inc. v. Press Mech., Inc., 77 F.3d 928, 933 (7th Cir.
1996). Here, Greenmarine is a Delaware corporation; therefore, Delaware law applies. Under
Delaware law, the corporate veil may be pierced where there is fraud or where a subsidiary is in fact
amere instrumentality or alter ego of the parent. See Geyer v. Ingersoll Pub. Co., 621 A.2d 784, 678
(Del. Ch. 1992). Relevant factors in determining whether the subsidiary is merely an instrumentality
or alter ego include: (1) whether the dominant shareholders siphoned corporate funds; (2) whether
the corporation is a facade for the dominant shareholders; (3) whether the corporation was solvent
and adequately capitalized; and (4) whether corporate formalities were followed, including payment
of dividends and separate corporate records. See Alberto v. Diversified Group, Inc., 55 F.3d 201,
205 (5th Cir 1995), quoting Harco Nat’l Ins. Co. y. Green Farms, Inc., 1989 WL 110537 (Del. Ch.
Sept. 19, 1989). Piercing the corporate veil may only be done if it is in the interest of justice “when
such matters of fraud, contravention of law or contract, public wrong, or where equitable
consideration among members of the corporation ... are involved”. Pauley Petroleum Inc. v.
Continental Oil Co., 239 A.2d 629, 633 (Del. 1968).

In the instant case, there are no allegations of fraud or that Greenmarine siphoned OMC

corporate funds or that corporate formalities were not followed, including the failure to keep separate


company anticipated the elimination of approximately 900 jobs.

In January 1999, Greenmarine and OMC completed their analysis of the FICHT engine issue
and determined that certain further technological improvements were needed to improve overall
performance of the FICHT engines. Additional upgrade kits containing performance enhancements
were provided to dealers in April 1999.

In 1999, OMC also began outsourcing production. However, OMC experienced significant
difficulties in transitioning production to third-party vendors. Asa result, full production capabilities
for certain engine components took longer than anticipated. Greenmarine and OMC significantly
curtailed production from February to July 2000 as they worked without source vendors with
production and other quality issues. During this time period, OMC reported substantial losses.

As OMC’s business began to falter, Greenmarine, and specifically the Soros Group, invested
$65 million in OMC in the beginning of 2000 and another $20 million in May 2000. By the end of
2000, the Soros Group had invested $120 million into OMC to keep the company afloat.

On December 5, 2000, the company announced the termination of approximately 1,000 of
its 7,200 employees at all levels. On December 20, 2000, Greenmarine and OMC further reduced
OMC’s workforce by temporarily laying off 700 hourly factory workers at its Waukegan, Illinois
plants. Greenmarine and OMC also announced the possibility that not all of the 700 laid-off workers
would be called back to work.

On December 21, 2000, Greenmarine and OMC distributed notices to its employees
announcing the permanent layoff of approximately 1,190 employees at OMC’s corporate offices and
manufacturing plants in Illinois. Greenmarine and OMC also terminated approximately 4,000 OMC

white-collar employees across the country. In the end, 600 to 700 employees remained at the


Duberstein is the Vice President, Secretary, and Treasurer of Greenmarine. Quasar and Quantum,
along with several other companies, are generally known as the Soros Group. Greenmarine is a
Delaware Corporation with its principal executive offices in New York.

Immediately after the acquisition, Greenmarine demonstrated its intention to take control of
OMC’s operations. On the “Control Date”, OMC’s Board of Directors would be transformed to
include four designees of the Greenmarine and Greenmarine Acquisition Corporation (“GAC”) and
two designees of OMC. Kingsley assumed the chairmanship of OMC. Greenmarine then hired
David D. Jones as the President and Chief Executive Officer of OMC; and Richard Katz (“Katz”),
a member of the Soros Group, assumed the position of Vice Chairman of OMC,

In an interview in September 1997, Duberstein and Kingsley stated, “We want to take
{OMC} back to its glory days.” That same month, Katz stated, “We’re absolutely committed to
restoring {OMC} to profitability.” In November 1997, Kingsley announced, “We’re in the engine
and boat business.” By the end of 1997, the Soros Group stated that it had “assumed full control of
[OMC)....”

In December 1997, Greenmarine and OMC closed a Tennessee boat-building plant,
eliminating approximately 400 jobs. In April 1998, Greenmarine and olic announced a further
reduction in workforce by eliminating 200 jobs throu ghout the company’s worldwide locations. At
this same time, Greenmarine and OMC began to identify the causes of certain performance issues
associated with engines utilizing the FICHT technology. In response, Greenmarine and OMC
prepared and distributed upgrade kits to dealers.

In September 1998, Greenmarine and OMC declared that, over the next two years, they

would close OMC’s two largest engine manufacturing facilities. As a result of the closures, the


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

, DabkCT

ran 08%

TOM CACCAMO, JOHN FLESHER, RICHARD
KOLB, and CY WERDA, on behalf of themselves
and all other similarly situated,

Plaintiffs, No. 01 C 0899
Judge John W. Darrah

DOCKETED

JUL 08 2002

v.

GREENMARINE HOLDINGS LLC, et al.,

weeverernvervrrwrervererv

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiffs, former employees of Outboard Marine Corporation (““OMC”), filed a class action
suit against Defendants, alleging Defendants violated the Worker Adjustment and Retraining
Notification Act (“WARN”), 29 U.S.C. §§ 2101-2109. Before the Court is Greenmarine’s Motion
to Dismiss.

OMC is a Delaware corporation based in Waukegan, IIlinois. OMC conducted its operations
from over thirty manufacturing, distribution, warehouse, and office facilities worldwide.

On or about September 11, 1997, Greenmarine completed a takeover of OMC. Greenmarine
acquired 91% of OMC’s outstanding shares. Greenmarine is a limited liability company. The
members of Greenmarine are Greenlake Holdings LLC “(Greenlake”), Quasar Strategic Partners
LDC (“Quasar”), and Quantum Industrial Partners LDC (“Quantum”). Greenlake, Quasar, and
Quantum have approximately 30.5%, 34.75% and 34.75% interest in Greenmarine, respectively.

Greenlake is controlled by Alfred D. Kingsley (“Kingsley”) and Gary Duberstein

(“Duberstein”). Kingsley is the Chief Executive Officer (“CEO”) and President of Greenmarine.

5