with Smith. Compl. GG 10, 11. But Master Tech alleges that the
telephone call was in furtherance of the scheme to defraud, id. 4
22.B, and communications may be actionable under federal mail fraud
statutes even if they occur after the object of the fraud has been
achieved. United States v. Brocksmith, 991 F.2d 1363, 1367-68 (7th
Cir. 1993) (“Use of the mails to lull victims into a false sense of
security . . . violates the mail fraud statute, even if it occurs
after the money has been fraudulently obtained.”). The use of the
mails to send communications to Illinois as part of a scheme to
defraud an Illinois company can serve as a basis for personal
jurisdiction, FMC Corp. v. Varonos, 892 F.2d 1308, 1314 (7th Cir.
1990), so Smith’s call is a relevant contact.

Master Tech also argues that James Moore’s and Brian
Mitchell’s contacts with Illinois should be attributed to Smith for
the purposes of personal jurisdiction because they were acting as
Smith’s agents. According to the complaint, Smith directed Moore
and Mitchell, employees of Prism, to contact companies and acquire
confidential information under the guise of negotiating an
acquisition even though Prism did not intend, and was unable, to
follow through with the purchase. Compl. { 21. Mitchell testified
that Smith instructed him to string companies along about
acquisition by Prism even though Prism lacked the funds to purchase
any companies. Pl.’s Ex. C at 134. Smith denies that he ever

instructed any Prism employee to misuse confidential information


motion to dismiss for lack of personal jurisdiction and venue is

DENIED.
ENTER ORDER:
Lg 2
&
Elaine E. Bucklo
United States District Judge
Dated: January IS , 2002


II. Venue

Neither party argues that the RICO venue provision, 18 U.S.C.
§ 1965(a),+ applies here, so I look to the general venue statute.
Venue is proper in a federal question case “in a judicial district
in which a substantial part of the events or omissions giving rise
to the claim occurred.” 28 U.S.C. § 1391(b) (2). There is no dispute
that Smith was never personally in Illinois, and that his only
contacts with Illinois are telephone conversations with Master
Tech. Smith argues that correspondence and telephone conversations
are insufficient to support venue under § 1391(b) (2), but that
depends on the nature of the contacts and their relationship to the
claim. In Pfeiffer v. Insty Prints, No. 93 C 2937, 1993 WL 443403
(N.D. Tll. Oct. 29, 1993) (Hart, J.), cited by Smith, the court
held that, in a breach of contract case, telephone conversations
merely reporting ongoing activities were not a “substantial part of
the events or omissions giving rise to the claim” because they were
not part of the conduct underlying the breach of contact; they were
only incidental to the claim. Id. at *2-3 (under § 1391 (a) (2)).
However, venue under the “substantial part” provisions of § 1391
“may be satisfied by a communication to or ffro]m the district in
which the cause of action was filed, given a _ sufficient

relationship between the communication and the cause of action.”

1 Section 1965(a) states that venue is proper in a civil RICO
case in “any district in which such person resides, is found, has
an agent, or transacts his affairs.”

6


Aff. I 7, but I must resolve conflicts in the affidavits and draw
inferences in favor of Master Tech, RAR, Inc., 107 F.3d at 1275,
and Mitchell’s testimony shows that he was acting at Smith’s
direction when he contacted Master Tech and signed the
confidentiality agreement. These communications to and from
Illinois are central to the RICO claim, and the claim arises
directly out of them, so they are jurisdictionally significant
contacts. The only question is whether they may be attributed to
Smith for the purposes of this lawsuit.

The Illinois long-arm statute expressly authorizes personal
jurisdiction over a person for acts done “through an agent,” 735
ILCS 5/2-209(a), and this comports with due process notions of
fairness. See Wisconsin Elec. Mfg. Co., Inc. v. Pennant Prods.,
Inc., 619 F.2d 676, 677 (7th Cir. 1980) (holding that “visits by
the buyers’ agents to [the forum] in connection with the business
on which the claim is based” were sufficient minimum contacts to
satisfy due process); Madison Consulting Grp. v. South Carolina,
752 F.2d 1193, 1200-01 (7th Cir. 1985) (same); Tri-Meats, Inc. v.
NASL Corp., No. 99 C 3692, 2001 WL 292621, at *3 (N.D. Ill. March
26, 2001) (Moran, J.) (same). Viewing Smith’s contacts with
Illinois--his own and those attributed to him through his agents--
in their totality, the exercise of personal jurisdiction over Smith
by an Illinois court would be consistent with due process, so

personal jurisdiction is proper here.


the instant suit.” Uffner v. La Reunion Francaise, S.A., 244 F.3d
38, 42 (1st Cir. 2001). In Uffner, the First Circuit held that, in
a claim against an insurer for wrongful denial of a claim, venue
was proper in the district where the property was damaged even
though the defendant insurer did not cause the damage. Id.; cf.
Woodke v. Dahm, 70 F.3d 983, 985 (8th Cir. 1995) (holding that only
the acts of the defendant are relevant for purposes of venue).
Uffner noted a split of authority, but joined the Second, Third and
Sixth Circuits in taking “a more holistic view of the acts
underlying a claim.” 244 F.3d at 42 n.6 (citing cases). The Seventh
Circuit has not taken sides on this issue, but I consider the
reasoning of the majority of circuits to be sound and I follow it
here. Smith’s own actions directed at Master Tech in Illinois, as
well as Moore’s and Mitchell’s actions, including making telephone
calls and sending confidentiality agreements, are even more than
“part of the historical predicate” for the RICO claim; they are the
essence of the claim and form a substantial part of the events
giving rise to it. Thus they are sufficient to establish venue in
this district under § 1391(b) (2). See Sacody Techs., Inc. v. Avant,
Inc., 862 F. Supp. 1152, 1157 (S.D.N.Y 1994} (holding that
transmission of confidentiality agreement to and from the district
was sufficient to demonstrate that “substantial part” of action for

breach of that agreement took place in the district). Defendant’s


Minute OrderForm (06/97)

United States District Court, Northern District of Illinois

Nan f Assigned Jud; i ik Sitting dge if Other
oe Magistrate Jude Elaine E. Bucklo than Aesigned Judge
CASE NUMBER 01 C 6976 DATE 1/15/2002
CASE Master Tech Products vs. Smith
TITLE

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

of the motion being presented.}

MOTION:
DOCKET ENTRY:
qd) Oo Filed motion of [ use listing in “Motion” box above.]
(2) oa Brief in support of motion due
(3) Qo Answer brief to motion due___. Reply to answer briefdue___y
(4) o Ruling/Hearing on__setfor____at
(5) a Status hearing[held/continued to] [set for/re-set for]on___setfor_____at
(6) Oo Pretrial conference[held/continued to] [set for/re-set for]on__setfor__—at__
(7) Q Trial[set for/re-set for]on______at
(8) ai] [Bench/Jury trial] [Hearing] held/continued tot
(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) O General Rule21 OO FRCP41(a)(1) O FRCP41(a)(2).
do) i [Other docket entry] | Enter Memorandum Opinion and Order denying defendant’s motion to

dismiss for lack of personal jurisdiction and venue (4-1 & 2). Discovery is ordered closed on 8/16/02.
Any dispositive motion will be due by 9/15/02. Any extension of discovery will not change the date for
the filing of any motion for summary judgment. Pretrial order due by10/4/02; and response to any
motions in limine by 10/18/02. Pretrial conference set for 11/7/02 at 4:00 p.m. Trial set for 1/6/03 at 9:30

2

No notices required. number of notices

a.m.
dl) ff [For further detail see order attached to the original minute order.]
No notices required, advised in open court. |. Désiithent

Number.

Notices mailed by judge's staff. JAN 16 2
Notified counsel by telephone. date doketed

Docketing to mail notices.

Mail AO 450 form. «aby htin, ity Jit
Copy to judge/magistrate judge. ng Loe ~
Oe sdb
= FAfle mailed notice
courtroom vA fom iy
P eputy” egd lye
MPJ deputy’s Os. Vg ¥ Oo MPI6

initials
Date/time received in...
central Clerk's Office



Celozzi v. Boot, No. 00 C 3285, 2000 WL 1141568, at *6 (N.D. Ill.
Aug. 11, 2000) (Kocoras, J.); see also Pasulka v. Sykes, 131 F.
Supp. 2d 988, 994 (N.D. Ill, 2001).

The telephone calls between Smith and Master Tech occurred
after Master Tech had divulged the confidential information, but as
I noted above, they are an actionable part of the RICO scheme, and
not merely incidental to the alleged wrongful act like the calls in
Pfeiffer. Furthermore, Moore’s and Mitchell’s contacts with Master
Tech in Illinois, in their capacity as Smith’s agents, are
attributable to Smith for venue purposes. See Emjayco v. Morgan
Stanley & Co., Inc., 901 F. Supp. 1397, 1401 (C.D. Ill. 1995)
(Mills, J.) (rejecting conspiracy theory of venue, but applying
agency theory to analysis of venue under § 1391).

Moreover, although Moore’s and Mitchell’s conduct is
attributable to Smith, it need not be. “Venue under 28 U.S.C. §
1391 usually respects defendants’ interests,” Board of Trustees v.
Elite Erectors, Inc., 212 F.3d 1031, 1036 (7th Cir. 2000), but
fairness is insured by the requirement that the events in the
district be “substantial.” Cottman Transmission Sys., Inc. v.
Martino, 36 F.3d 291, 294 (3d Cir. 1994). The test for venue under
§ 1391 looks not to the defendant’s contacts with the forum, but
the location of the events giving rise to the cause of action. Id.
To be “substantial,” it is enough to establish that the events that

took place in Illinois were “part of the historical predicate for


jurisdiction of the Illinois courts. Fed. R. Civ. P. 4(k) (1) (A);
Janmark, Inc. v. Reidy, 132 F.3d 1200, 1201 (7th Cir. 1997)
{holding that even in federal question case, where federal statute
does not authorize service of process, the court must determine
under Rule 4(k) (1) (A) whether the state in which the district court
is located is authorized to exercise personal jurisdiction). This
requires a traditional minimum contacts analysis.

Master Tech does not argue that general jurisdiction is proper
here, so I consider only whether there is specific jurisdiction;
that is, whether Master Tech’s cause of action arises out of or is
related to Smith’s contacts with Illinois. RAR, Inc. v. Turner
Diesel, Ltd., 107 F.3d 1272, 1277 (7th Cir. 1997). Smith is not a
resident of Illinois, does not own property in Illinois, and has
never visited Illinois for the purpose of conducting business with
Master Tech. Smith Aff. (7 1, 2, 6. His only personal contact with
Illinois related to this case is a telephone call between Smith and
the president of Master Tech in which Smith allegedly said that
Prism was still interested in acquiring Master Tech but that there
were funding delays, and that Prism would not take advantage of
Master Tech. Compl. 9 22.B.viii. Master Tech alleges that this
phone call was part of a scheme to defraud Master Tech by inducing
it to divulge confidential information under the guise of an
acquisition deal. The complaint says that Master Tech disclosed the

confidential information in 1998, before the telephone conversation


I. Personal Jurisdiction

Personal jurisdiction must comport with due process, and the
defendant must be amenable to service of process. United States v.
De Ortiz, 910 F.2d 376, 381 (7th Cir. 1990). In a federal question
case, “due process requires only that each party have sufficient
contacts with the United States as a whole rather than any
particular state.” Id. at 382. Service of process is proper when
authorized by a federal statute. Fed. R. Civ. P. 4(k)(1)(D). Here,
RICO authorizes nationwide service of process, but only if “it is
shown that the ends of justice require that other parties residing
in any other district be brought before the court.” 18 U.S.C. §
1965(b); Stauffacher v. Bennett, 969 F.2d 455, 460 (7th Cir. 1992),
superseded on other grounds by amendment of rule (finding
nationwide service of process under § 1965(b)). Here there is only
one defendant, and because he is a resident of Texas and doing
business there, a district court in Texas would have jurisdiction,
so the ends of justice do not require his presence here. Lisak v.
Mercantile Bancorp, Inc., 834 F.2d 668, 671-72 (7th Cir. 1987); see
also Sadighi v. Daghighfekr, 36 F. Supp. 2d 267, 273 (D.S.C. 1999)
(Under § 1965(b), “nationwide service of process is not automatic;
instead, a plaintiff has to demonstrate that the ends of justice
require the assertion of such process.”). Because § 1965(b) and
Rule 4(k)(1)(D) do not authorize nationwide service of process,

Master Tech must demonstrate that Smith could be subject to


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

MASTER TECH PRODUCTS, INC.,
Plaintiff,

No. 01 C 6976

Vv.

JAN 16 2002

MERLE SMITH,

Defendant.

MEMORANDUM OPINION AND ORDER

Master Tech Products, Inc., sues Merle Smith, the president of
Prism Enterprises, Inc., for civil violations of RICO, 18 U.S.C. §
1961 et seq. According to the complaint, Prism employees, acting
at the direction of Smith, deliberately acquired confidential
information about one of Master Tech’s products under the guise of
a potential acquisition of the company, and Smith and Prism used
that information to develop a competing product and drive Master
Tech out of business. Smith moves to dismiss for lack of personal
jurisdiction under Fed. R. Civ. P. 12(b) (2) and for improper venue
under Rule 12(b)(3). On such a motion, I read the complaint
liberally and draw all reasonable inferences in favor of the
plaintiff. Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999).
Where conflicting evidence is presented, I resolve factual disputes
in the plaintiff's favor. RAR, Inc. v. Turner Diesel, Ltd., 107

F.3d 1272, 175 (7th Cir. 1997).

\5