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Timestamp: 2019-03-26 06:30:33
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Motion to Dismiss | businesscasualsuperstar
This was written in my second legal writing class, taught by Eric Pruitt, AUSA for the US Dept. of Justice, at the John Marshall Law School in Chicago, IL.
MARGARET SHAUNESSEY,
TIMOTHY SPADA, LAUREN EAVENSON, and GINA TRUBOW,
) Case No. 09 L 100
Judge Taylor Williams
DEFENDANTS’ MEMORNDUM IN SUPPORT OF THEIR
MOTION TO DISMISS PURSUANT TO § 735 ILCS 5/2-619
Defendants Timothy Spada, Lauren Eavenson, and Gina Trubow (“Defendants”) move this Court pursuant to § 735 ILCS 5/2-619 to dismiss the suit regarding unpaid wages at the time of a corporation’s dissolution brought by Plaintiff Margaret Shaunessey (“Shaunessey”) for lack of personal jurisdiction.
This lawsuit arises out of Ms. Margaret Shaunessey’s attempt to hold corporate officers Timothy Spada, Lauren Eavenson, and Gina Trubow responsible for the national economic downturn that forced the corporation to lay her off before dissolving its license and filing for bankruptcy a month later. The defendants are corporate officers who maintained their titles for corporate filing purposes and were not involved with daily operations, and it is inappropriate for them to be held responsible for a wage issue with a single disgruntled employee. Because it is not appropriate for them to be held liable for a situation resulting from this sour economic climate affecting most businesses nationwide, the defendants move this Court to dismiss this lawsuit.
The defendants have made it clear that Ms. Shaunessey had their sympathies and they attempted to help her to the best of their abilities. The fact that their state of retirement did not allow them control over ShoesRUs, Inc.’s finances does not mean that a former employee should prevail in targeting them personally for the actions of the corporation they both worked for. It is truly unfortunate that their attempts to help Ms. Shaunessey resolve this issue to her satisfaction meant that they made themselves vulnerable as unfair targets of such a suit. Dismissal is appropriate in this situation because anything else would send the distressing message that an attempt to help a subordinate when dealing with a symptom of a slumping economy makes one liable if one does not succeed in rendering proper assistance as defined by the disgruntled, litigating party.
Defendant Spada was the President of ShoesRUs, Inc. from 1995 through August 31, 2008. (Spada Aff. ¶ 2.) Defendant Eavenson held the position of Vice President of ShoesRUS, Inc. from 1997 through August 31, 2008. (Eavenson Aff. ¶ 2.) Defendant Trubow held the position of Treasurer of ShoesRUs, Inc. from May 2003 until August 31, 2008. (Trubow Aff. ¶ 2.) Plaintiff Margaret Shaunessey held the position of Director of Sales at ShoesRUs, Inc. from February of 2008 until July 31, 2008, during which time she alleges that she was not paid the agreed-upon salary of $10,000 per month to be paid on a bi-weekly basis. (Shaunessey Aff. ¶ 2.)
The defendants were not responsible for the daily operations of the company but maintained their titles for corporate filing purposes. (Spada, Eavenson, Trubow Aff. ¶ 3.) All three of them retired from their positions with ShoesRUs, Inc. in 2003 and moved to Sarasota, Florida, after which they had almost no contact with the company and never even returned to the state after 2005. (Spada, Eavenson, Trubow Aff. ¶ 4, 5, 6.) They did not attend any Board of Directors meetings, either in person or over the phone, since 2003, more than five years before the commencement of this suit. (Spada, Eavenson, Trubow Aff. ¶ 7.) Their only responsibility for the corporation was to sign a yearly form in order to preserve incorporation. (Spada, Eavenson, Trubow Aff. ¶ 8.)
Despite this, Shaunessey still obtained their personal contact information and frequently called the three retired corporate officers at their Florida homes to discuss this work-related matter. The three defendants unanimously state that the calls began in March of 2008 (Spada, Eavenson, Trubow Aff. ¶ 9.) Shaunessey, however, claims that she called them two months later (Shaunessey Aff. ¶ 4, 7.) Shaunessey wanted to discuss the fact that the last payment that ShoesRUs, Inc. made to her was in late February of 2008. (Complaint ¶ 10.) The reason for the delayed payment was that ShoesRUs, Inc. was experiencing financial difficulties due to the economy. (Complaint ¶ 8.) One month after laying off Shaunessey, the company filed for bankruptcy. (Complaint ¶ 12.)
The defendants were all very sympathetic to her situation but repeatedly informed her that as retired officers, they no longer had any control over the company’s finances or payroll department. Shaunessey continued to call the three defendants in Florida persistently, well into July of 2008, and even had a conference call with Trubow and Eavenson. (Shaunessey Aff. ¶ 10.) All three defendants state that they never made any promises to Shaunessey, though Spada said that if he spoke with the Chairman of the Board of Directors again, he would mention the situation. (Spada, Eavenson, Trubow Aff. ¶ 9.) Shaunessey then brought suit against the three corporate officers that had provided a sympathetic ear and attempted to help her, much to their own detriment.
In order to show a lack of jurisdiction, § 735 ILCS 5/2-301 is invoked; the statute provides in part that “a party may object to the court’s jurisdiction over the party’s person, either on the ground that the party is not amenable to process of a court of this State . . . by filing a motion to dismiss the entire proceeding.” 735 ILCS 5/2-301 (LexisNexis current through 2009).
More specifically, in order to prove cause to dismiss a suit based on certain defects, defendants invoke § 735 ILCS 5/2-619, which states in part:
Defendant may, within the time for pleading, file a motion for dismissal of the action or for other appropriate relief upon any of the following grounds. If the grounds do not appear on the face of the pleading attacked the motion shall be supported by affidavit:
(2) That the plaintiff does not have legal capacity to sue or that the defendant does not have the legal capacity to be sued.
§ 735 ILCS 5/2-619 (LexisNexis current through 2009). In this case, the defendants do not have the legal capacity to be sued for several reasons and the complaint must be dismissed. First, they are not subject to personal jurisdiction under Illinois’s long-arm statute, which requires that the exercise of jurisdiction comports with due process of law. International Business Machines Corp. v. Martin Property & Casualty Insurance Agency, Inc. 666 N.E.2d 866, 869 (Ill. App. 1996). Second, the exercise of jurisdiction over individuals whose only contact with the forum state is by virtue of their acts as fiduciaries of their corporation is inappropriate. Washburn v. Becker, 542 N.E.2d 764, 767 (Ill. App. 1989). Third, Illinois is a fact-pleading jurisdiction and so the plaintiff must allege facts in order to establish a valid cause of action, instead of the conclusory allegations Shaunessey makes. Napleton v. Vill. Of Hinsdale, 891 N.E.2d 839, 846 (ILL. 2008). The defendants can show that all three bases of dismissal apply to the suit at hand.
I. THERE IS A LACK OF PERSONAL JURISDICTION OVER THE DEFENDANTS.
This suit is inappropriate because the Court does not have jurisdiction over the three out-of-state defendants. In order to determine personal jurisdiction, the Court must look to § 735 ILCS 5/2-209, the Illinois long-arm statute. Even though the defendants satisfy the conditions of the statute, an exercise of jurisdiction over them would still not comport with the laws of due process.
A. The defendants do satisfy at least one of the enumerated acts in the Illinois long-arm statute, but this is not enough to allow jurisdiction.
The Illinois long-arm statute includes enumerated acts that the defendants must have committed if jurisdiction is to be permitted. The statute states in part:
(a) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his or her personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of such acts:
(12) The performance of duties as a director or officer of a corporation organized under the laws of this State or having its principal place of business within this State;
(b) A court may exercise jurisdiction in any action arising within or without this State against any person who:
(4) Is a natural person or corporation doing business within this State.
(c) A court may also exercise jurisdiction on any other basis now or hereafter permitted by the Illinois Constitution and the Constitution of the United States. . .
735 ILCS 5/2-209 (LexisNexis current through 2009). A two-step analysis is used to determine whether or not the Court acquires personal jurisdiction under this statute. First, the language of the statute must be used to determine whether or not the defendants have committed any of the enumerated acts. If not, no further inquiry is necessary. If it is found that jurisdiction is proper under the language of the statute, then it must be determined whether or not the exercise of such jurisdiction comports with due process. Kalata v. Healy, 728 N.E.2d 648, 653 (Ill. App. 2000).
Examining the enumerated acts, it becomes clear that Shaunessey will argue that the defendants transacted business within the state of Illinois, and that the duties they performed were performed under their titles as corporate officers of ShoesRUs, Inc., a corporation licensed under the laws of this state. (Complaint ¶ 2.) Shaunnessey will further assert that because of this, the three defendants from Florida should be subject to the jurisdiction of this Illinois Court. Despite the fact that the defendants satisfy a requirement of the statute, it is still improper that they be submitted the jurisdiction of this Court because this portion of the statute is superseded by a later amendment.
B. The exercise of jurisdiction over the defendants is not permitted by the Illinois Constitution or the Constitution of the United States.
Traditionally, an examination of jurisdiction pursuant to the Illinois long-arm statute required first a look at the enumerated acts and then at whether or not the exercise of jurisdiction was proper. That two-part analysis is no longer necessary. The Illinois long-arm statute was amended in 1989 to include a catch-all provision that states that a court can exercise jurisdiction on any other basis as is permitted by the Illinois constitution or the Constitution of the United States. Kostal v. Pinkus Dermatopathology Laboratory, P.C., 827 N.E.2d 1031, 1037 (Ill. App. 2005).
This provision extends the scope of the statute, and if the contacts between the three out-of-state defendants and Shaunessey satisfy both federal and due process concerns, then jurisdiction has been satisfied and it is no longer necessary to inquire into whether or not the defendants committed any of the acts in the enumerated list. Commerce Trust Company v. Air 1st Aviation Companies, Inc., 851 N.E.2d 131, 137 (Ill. App. 2006). In Commerce Trust Company, the court explained this provision and held that because it was possible that a difference existed between the federal due process guarantee and the Illinois due process guarantee, it was important to determine whether the exercise of jurisdiction in the case satisfied both instead of one or the other. Id. However, based on the undisputed facts in the affidavits signed by the defendants, it is clear that an exercise of jurisdiction in the suit at hand would not comport with state and federal due process guarantees.
1. The contacts between the defendants and the plaintiff do not satisfy federal due process concerns.
In examining the federal laws of due process, it becomes clear that jurisdiction over the defendants from Florida is not proper. There exist three elements of satisfying federal due process concerns: (1) the three out-of-state defendants must have sufficient minimum contacts with Illinois through ShoesRUs, Inc. that they would have had fair warning that they may be hailed into court in this state; (2) the action for unpaid wages must have risen out of or be related to the defendants’ contacts with Illinois through ShoesRUs, Inc.; and (3) it must be reasonable to require the defendant to litigate in Illinois. Kalata v. Healy, 728 N.E.2d at 655. Based on the undisputed statements made by all three out-of-state defendants, it is clear that the elements for satisfying federal due process concerns are not met and that it is wrong for them to defend in this state.
a. The out-of-state defendants do not have sufficient minimum contacts with Illinois.
As retired officers of ShoesRUs, Inc., not a single defendant named in this complaint has sufficient minimum contacts with Illinois so as to be litigated in this state. The standard that courts hold to is that the non-resident defendant’s minimum contacts with the forum state must be sufficient enough so that a suit brought in that state does not offend notions of fair play and justice. Morris v. Halsey Company Enterprises, Ltd., 822 N.E.2d 1079, 1085 (Ill. App. 2008). Furthermore, a non-resident must have a fair warning that its actions and activities in the forum state might subject it to suit in that state. This requirement is met if the defendant purposely directs its actions at residents of the forum state and the complaint results from injuries arising from or related to those actions. The focus must always be on the defendant’s conduct, not the conduct of the plaintiff. Id.
In Cook Associates, Inc., Lexington United Corporation, a non-resident corporation, contacted Cook Associates, Inc. and requested help filling a position. A candidate was picked and he refused the job; later, the associate from Cook started her own firm and worked with Lexington, and the candidate from before agreed when selected again. Cook brought suit for fees, but the court held that since Lexington had no office or employees in Illinois, did not advertise in Illinois, and did not even make sales directly in Illinois, it did not have sufficient minimum contact with Illinois. Cook Associates, Inc. v. Lexington United Corporation, 429 N.E.2d 847, 849-850 (ILL. 1981).
The situation in the case of these three defendants from Florida is very similar. The defendants worked for ShoesRUs, Inc. but all three of them retired in 2003 and moved to Florida, never once returning to Illinois after 2005. (Spada, Eavenson, Trubow Aff. ¶ 4, 5.) None of them attended any meeting of the Board of Directors either in person or over the phone, and had almost no contact with ShoesRUs, Inc. except for signing a yearly form to preserve incorporation. (Spada, Eavenson, Trubow Aff. ¶ 7, 8.) Furthermore, none of the defendants called the plaintiff. Instead, the defendants unanimously state that she was the one that started calling them at their homes in Florida in March of 2008. (Spada, Eavenson, Trubow Aff. ¶ 9.)
Shaunessey alleges that she started calling them two months after the date that all three of the defendants swear to. (Shaunessey Aff. ¶ 4.) This inconsistency is only material in the sense that the plaintiff attempts to downplay the duration of the relationship she unilaterally created with the out-of-state defendants by frequently calling them. This relationship lasted two months longer than Shaunessey states in her affidavit, according to the three affidavits the named defendants have sworn to. (Spada, Eavenson, Trubow Aff. ¶ 9.) The statement made by the plaintiff is not a vague assertion because she is able to name the month in which she claims she first contacted the defendants at their homes halfway across the country.
It was the plaintiff that frequently disturbed the defendants in their Florida homes; they never once contacted her on their own. (Spada, Eavenson, Trubow Aff. ¶ 9.) Nor did they in any way create a continuing relationship with Shaunessey, or derive benefits from their contact with her, which can also be used to satisfy the requirement of minimum contacts. Kalata v. Healy, 728 N.E.2d at 655. They extended their sympathies and that was the extent of their contact with Shaunessey. (Spada, Eavenson, Trubow Aff. ¶ 9.) Specific jurisdiction is sought here and the condition regarding minimum contacts has simply not been met. For all of the reasons stated above, it is clear that the defendants do not have sufficient minimum contacts with Illinois as they had been retired for five years before the suit was brought, and had not returned to the state in three years, in addition to never contacting anyone in Illinois on their own, the plaintiff included.
b. This action is not related to the very limited contact the defendants did have with Illinois as officers of ShoesRUs, Inc.
In order to satisfy federal due process concerns, the cause of action must arise from or be related to the defendant’s contact with the forum state. Kalata v. Healy, 728 N.E.2d at 655. In Kalata, the plaintiff gave the defendant $100,000, thinking the funds would be used to buy land in California, but the defendant embezzled the money and the conflict arose from the misappropriation that occurred during that period of communication despite the fact that the defendant never traveled to Illinois. Id. at 656. The same does not hold true in this situation.
The defendants repeatedly informed Shaunessey that they no longer had any control over ShoesRUs, Inc.’s finances since their retirement. (Spada, Eavenson, Trubow Aff. ¶ 9.) They were not the ones who personally failed to pay her, and the conflict arose not from her conversations with them but from an issue with the payroll department and at large, the economy. The defendants also repeatedly told Shaunessey that she needed to speak with the Chairman of the Board of Directors, who was in a better position to help her. (Spada, Eavenson, Trubow Aff. ¶ 9.) They made it very clear to the plaintiff that while they sympathized with her, they could do nothing else for her. Shaunessey’s conflict did not arise from her many phone calls to the defendants’ homes halfway across the country, and so this element of the federal due process guarantee is not satisfied.
c. It is unreasonable to require the three defendants from Florida to be litigated in this state.
To require the three out-of-state defendants to litigate in this state is unreasonable and offends the standards of fair play and justice. When a defendant purposefully avails himself of the privilege of doing business in the forum state then he invokes the benefits and protection of that state’s laws and must be subject to personal jurisdiction there. Kalata v. Healy, 728 N.E.2d at 656. In Kalata, the defendant purposely directed her activities at an Illinois resident and Illinois had sufficient interest in providing its citizen with a convenient forum for litigation. It was reasonable for the defendant to be sued in the state even though it was inconvenient for her. The court also noted that even if the defendant found herself inconvenienced, it would have been even more inconvenient for the case to be litigated in her home state of California. Id.
Here, the defendants are retired and have not returned to the forum state in several years. (Spada, Eavenson, Trubow Aff. ¶ 4, 5.) They are settled in Florida and have been for several years, and the only wrong they committed with regard to this situation was receiving the many phone calls of a disgruntled employee and being sympathetic to her situation. (Spada, Eavenson, Trubow Aff. ¶ 9.) They did not direct any activities toward Shaunnessey, an Illinois resident. The communications between Shaunessey and the defendants were a result of a unilateral action on the part of the plaintiff. It is unreasonable to expect the out-of-state defendants to return to Illinois to defend a suit related to a company from which they retired many years ago.
For these reasons, it cannot be said that the exercise of jurisdiction over the three defendants from Florida would comport with the federal guarantee of due process.
2. The contacts between the defendants and the plaintiff do not satisfy Illinois due process concerns.
The Illinois state constitution must also be examined in order to determine that the exercise of jurisdiction over the three defendants from Florida would not comport with the state due process guarantee. It is unreasonable under the Illinois constitution to assert personal jurisdiction over an individual who seeks the protection and benefits of Illinois not for his personal interests but for the interests of his employer or principal. Rollins v. the City of Baltimore, 565 N.E.2d 1302, 1317 (ILL. 1990). The court in Commerce Trust Company cited Rollins when it determined that, in a suit against Air 1st Aviation for wrongful death and survival death, it was appropriate to require Air 1st Aviation to defend itself in Illinois because the company had advertised in Illinois and entered into an ongoing relationship with an Illinois citizen. Commerce Trust Company, 851 N.E.2d at 142.
The same cannot be said to hold true in this situation. For many of the same reasons that jurisdiction over the three non-resident defendants does not comport with the federal due process guarantee, exercise of jurisdiction does not comport with the Illinois due process guarantee as put forth in the state constitution, either. The defendants did not act in their own self-interest when they sympathized with Shaunessey’s situation, and they did not act in their self-interest when she was not paid as a result of the company’s failing financial outlook due to a crumbling national economy that affected businesses worldwide. Also, it has been established that their contacts with Illinois as retired officers residing in Florida for the past five years with almost no contact with the corporation were not sufficient to allow for the extension of jurisdiction under the Illinois long-arm statute. For these reasons, exercise of jurisdiction over the defendants does not comport with Illinois’s guarantee of due process.
Because the exercise of jurisdiction over the defendants in this complaint does not comport with federal or state due process guarantees, it is not permitted by the United States Constitution or the Illinois state constitution, respectively, under the Illinois long-arm statute. Due to the fact that jurisdiction is not permitted according to either constitution, there is a proven lack of jurisdiction over the three non-resident defendants by an Illinois court pursuant to § 735 ILCS 5/2-619.
II. THE FIDUCIARY SHIELD DOCTRINE ALSO BARS JURISDICTION OVER THE DEFENDANTS.
It is often inappropriate to hold corporate officers liable for their actions on behalf of the corporation they work for. The fiduciary shield doctrine is recognized in the state of Illinois and implicates the balancing of fairness. The doctrine provides that if a defendant has contact with the forum state only by virtue of his acts as a fiduciary of a corporation, then those acts may not form the basis of the exercise of jurisdiction over him. Washburn, 542 N.E.2d at 767. Courts have held that it is simply unfair to force a defendant to defend himself personally in another state when his actions in that state were done for the benefit of his employer. Furthermore, courts have held that individual board members cannot be said to have transacted business in a state just because the corporation does business there. In Mergenthaler, the court held that the transaction of business with Illinois citizens was done by the corporation and not the individual employees, who were protected by the fiduciary shield doctrine, and that jurisdiction over the corporation did not extend to jurisdiction over those with whom it had common interests. Mergenthaler Linotype Co. v. Leonard Storch Enterprises, Inc., 383 N.E.2d 1379, 1386 (Ill. App. 1978).
In the suit at hand, the three non-resident defendants are retired officers of ShoesRUs, Inc. and maintain their titles for corporate filing purposes. (Spada, Eavenson, Trubow Aff. ¶ 3.) As retired officers that had almost no contact with the corporation, the defendants cannot be said to have personally transacted business in Illinois with Illinois citizen Shaunessey. Under the laws of this state, the three defendants from Florida cannot be haled into court in Illinois on the basis of their actions as fiduciary officers of ShoesRUs, Inc. Just because ShoesRUs, Inc. does business in Illinois does not mean that the retired officers themselves can be said to have done business there. For these reasons, the fiduciary shield doctrine applies in this situation to bar jurisdiction over the three out-of-state defendants. Because the affidavits from the three defendants establish that they acted as fiduciaries for ShoesRUs, Inc. when they acted in Illinois, it is appropriate for the Court to dismiss the complaint under § 735 ILCS 5/2-619.
III. THE PLAINTIFF MAKES CONCLUSORY ALLEGATIONS NOT PERMITTED BY ILLINOIS COURTS.
Illinois is a fact-pleading jurisdiction and because of this, a plaintiff must allege facts and not mere conclusory statements or allegations in order to establish a valid cause of action. Napleton v. Vill. Of Hinsdale, 891 N.E.2d at 846. In Anderson, the Court found that the plaintiff failed to state a cause of action for interference with prospective economic advantage because she failed to factually establish that she had an expectancy of employment that could be legally protected, instead relying on insufficient allegations. Anderson v. Vanden Dorpel, 667 N.E.2d 1296 (ILL. 1996). In order to establish a valid cause of action, the plaintiff must use facts to support the allegations and not rely on mere conclusory statements.
In her complaint, Shaunessey alleges: “Defendants, ShoesRUs, Inc.’s corporate officers, knowingly permitted ShoesRUs, Inc.’s violations of the Illinois Wage Payment and Collection Act. Thus, they are deemed Plaintiff’s employer.” (Complaint ¶ 14.) Under the Illinois Wage Act, if the corporate officers that are otherwise protected under the fiduciary shield doctrine knowingly violated or permitted the violation of the Illinois Wage Act, then they are deemed as employers and thus liable for their misconduct.
However, in alleging that the three defendants “knowingly” permitted the violation of the Wage Act, Shaunessey introduces no facts to the record to corroborate that vague assertion. Neither her affidavit nor the formal complaint contains any reference to how the defendants allegedly “knowingly” permitted the violation. It is the plaintiff’s burden to establish a prima facie basis for the facts she asserts, but in this case Shaunessey can offer none and the record includes mere conclusory statements that have no basis or grounding in any of the affidavits. Such conclusory statements offered as fact are not permitted in Illinois, which is a fact-pleading jurisdiction and demands that the plaintiff allege facts instead of unclear assertions. Napleton v. Vill. Of Hinsdale, 891 N.E.2d at 846.
Since the conclusory statements made by Shaunessey in the complaint are insufficient, it follows that her charge that the defendants are deemed employers and as such are liable under the Illinois Wage Act fails. The defendants cannot be held to be employers under the Wage Act and liable for the payment issue if the allegation that they “knowingly” permitted the violation is entirely unfounded and unsupported by any facts in the record. Because Shaunessey relies on conclusory statements to allege that the retired officers be seen as employers under the Wage Act instead of corporate officers protected by the fiduciary shield, her attempt to characterize them as such fails because conclusory statements are not permitted in a fact-pleading jurisdiction like Illinois, and the complaint should be dismissed pursuant to § 735 ILCS 5/2-619. because jurisdiction is not met.
For the reasons stated above, defendants Timothy Spada, Lauren Eavenson, and Gina Trubow respectfully request the Court to dismiss the complaint made by plaintiff Margaret Shaunessey pursuant to § 735 ILCS 5/2-619 for a lack of jurisdiction.
Dated: March 29, 2009 Respectfully submitted,
[fancy illegible signature that totally means srs bzns]
Attorney for Defendants Spada,
Eavenson and Trubow
Bicker, Back & Forth
One North Wacker Driver
(312) 382 – 1010