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SKF USA Inc. v. Equipment Reliability Svcs., Inc.: US District Court : CIVIL PROCEDURE - venue transferred to Illinois, where specific jurisdiction exists

SKF USA Inc., Civil No. 08-6198 (DWF/RLE)
Equipment Reliability Services, Inc.,
Arthur G. Boylan, Esq., and Daniel Oberdorfer, Esq., Leonard Street and Deinard, PA;
and Elizabeth S. Campbell, Esq., and Stephen J. Sundheim, Esq., Pepper Hamilton LLP,
counsel for Plaintiff.
Brian V. Alcala, Esq., and Nicholas Anaclerio, Esq., Ungaretti & Harris; and Laura A.
Pfeiffer, Esq., and Megan M. Ruwe, Esq., Winthrop & Weinstine, PA, counsel for
This matter is before the Court on a Motion to Transfer Venue to the United
States District Court for the Northern District of Illinois or, in the Alternative, to Stay
Proceedings brought by Defendant Equipment Reliability Services, Inc. (ERSI). For
the reasons stated below, the Court grants in part ERSIs motion and transfers this action
to the Northern District of Illinois.
SKF U.S.A. Inc. (SKF), is a Delaware corporation with its principal place of
business in Norristown, Pennsylvania. SKF is in the business of manufacturing and
selling ball and roller bearings and related products. In addition, SKF provides
diagnostic, preventative maintenance, and performance monitoring services for owners
and operators of manufacturing machines. SKF Reliability Systems is a unit of SKF that
provides performance monitoring services. SKF Reliability Systems main office is in
Elk Grove Village, Illinois.
ERSI, a direct competitor of SKF, is a Minnesota corporation with its
headquarters and principal place of business in Minnesota. ERSI was formed as a startup
company by Dale H. Bjerkness, who is also the President of ERSI. (Decl. of Dale
Bjerkness (Bjerness Decl.) 2.) Prior to starting ERSI, Bjerkness was employed at
SKF as a Director for SKF Reliability Systems in Elk Grove Village, Illinois. (Id. 2-3
& Ex. A at 2.) ERSI employs three additional former-SKF employees, Kevin Koch,
Joseph J. Sever, and Walter Remick, Jr. (together with Bjerkness, the Individual
Defendants). The Individual Defendants and Bjerknesss daughter are the sole
employees of ERSI. All of the Individual Defendants reside in Minnesota.
In August 2008, SKF sued the Individual Defendants in the Northern District of
Illinois (the Illinois Lawsuit) seeking injunctive and monetary relief. SKF later
amended its complaint in the Illinois Lawsuit. (Bjerkness Decl. 3, Ex. A (Ill. Am.
Verified Compl.).) In the Illinois Lawsuit, SKF asserts that the Individual Defendants
are liable for trade secret misappropriation, violations of the Computer Fraud and Abuse
Act, unfair competition, and violations of non-compete, non-disclosure, and nonsolicitation
agreements. Specifically, SKF alleges that the Individual Defendants
improperly took SKFs electronic data and used it to start and operate ERSI. In addition,
SKF alleges that Bjerkness improperly solicited and induced the other Individual
Defendants to work for ERSI and that the Individual Defendants have improperly
solicited SKFs customers, interfered with SKFs contracts, and stolen SKFs
confidential information and trade secrets. The agreements under which SKF sued the
Individual Defendants all contained choice of law and forum selection clauses providing
that the agreements will be governed by the substantive laws of the State of Illinois, that
any disputes arising out of the agreements shall be tried in an Illinois court, and that the
defendants submitted to the jurisdiction of the Illinois court.1 (Ill. Am. Verified Compl.
at Exs. A-D at 10.) In the Illinois Lawsuit, SKF moved for a preliminary injunction.
After the parties conducted expedited discovery, the court in the Illinois Lawsuit heard
SKFs motion for preliminary injunction during a six-day evidentiary hearing that was
concluded in December 2008. A written order is forthcoming.
1 These agreements were entered into between each of the Individual Defendants
and SKFs predecessor in interest, Preventative Maintenance Company, Inc.
On November 26, 2008, SKF filed the present lawsuit. In this lawsuit, SKF
alleges that ERSI misappropriated SKFs trade secrets, tortiously interfered with SKFs
employment agreements with the Individual Defendants by hiring them away from SKF,
and interfered with SKFs customers and contractual relationships in Minnesota and
surrounding states. The allegations made in the Verified Complaint in the present action
are nearly identical to those made in the Amended Verified Complaint in the Illinois
Lawsuit. For example, in the Illinois Lawsuit, SKF asserts that the Individual
Defendants misappropriated SKFs trade secrets and that it is inevitable that Defendants
will use or rely on the information that they obtained while working for SKF in
connection with their positions at [ERSI]. (Ill. Am. Verified Compl. 132-141.)
Similarly, in this action, SKF asserts that ERSI misappropriated SKFs trade secrets via
the actions of the Individual Defendants. (Verified Compl. 54-66.) In addition, in the
Illinois Lawsuit, SKF asserts that Bjerkness tortiously interfered with SKFs
employment agreements with Sever, Remick, Jr., and Koch by hiring these individuals
away from SKF to work at ERSI. (Ill. Am. Verified Compl. 120-131.) Similarly, in
this action, SKF asserts that ERSI tortiously interfered with SKFs employment and
prospective contractual agreements by hiring the Individual Defendants away from SKF.
(Verified Compl. 66-78.)
I. Motion to Transfer
ERSI moves to transfer this action to the Northern District of Illinois pursuant to
28 U.S.C. 1404(a). That section provides: AFor the convenience of the parties and
witnesses, in the interest of justice, a district court may transfer any civil action to any
other district or division where it might have been brought.@ 28 U.S.C. 1404(a). When
deciding a motion to transfer pursuant to 1404(a), the Court must consider the
convenience of the parties, the convenience of the witnesses, and the interest of justice.
See Terra Intl, Inc. v. Miss. Chem. Corp., 119 F.3d 688, 691 (8th Cir. 1997). In
considering these factors, the Court must make a case-by-case evaluation of the
particular circumstances at hand and a consideration of all relevant factors. Id. The
burden is on the party seeking the transfer to show that the balance of factors strongly
favors the movant. Graff v. Qwest Commcns Corp., 33 F. Supp. 2d 1117, 1121
(D. Minn. 1999).
A. Jurisdiction Over ERSI in Illinois
ERSI contends that SKF could have filed the present action against ERSI in the
Northern District of Illinois because both subject matter and personal jurisdiction exist.2
Specifically, ERSI asserts that an Illinois court would have personal jurisdiction over it
because ERSI transacts business in Illinois and alternatively because the situs of SKFs
injury is in Illinois. With respect to ERSIs business dealings in Illinois, ERSI points to
2 There is no dispute that SKF and ERSI are diverse and that the amount in
(Footnote Continued on Next Page)
a Service Agreement it entered into with Kraft Foods Global, Inc. (Kraft Foods),
whereby it entered into a vendor-customer relationship with Kraft Foods (the Kraft
Foods Agreement). Kraft Foods is a former SKF customer and has its principal place of
business in Northfield, Illinois. In both lawsuits, SKF alleges that ERSI interfered with
SKFs relationship with Kraft Foods, and other customers, using information stolen from
SKF. (Verified Compl. 45; Ill. Verified Am. Compl. 89-90.) The Kraft Foods
Agreement also provides that Illinois law governs disputes relating to the Kraft Foods
Agreement. (Bjerness Decl. 13, Ex. E at 13.)3 SKF, however, maintains that it could
not have sued ERSI in Illinois because ERSI is not subject to personal jurisdiction in
Illinois. SKF asserts that none of ERSIs activities that gave rise to this lawsuit took
place in Illinois. In particular, SKF asserts that the events giving rise to this litigation are
different than those giving rise to the Illinois Lawsuit. In addition, SKF asserts that
ERSIs employees stole SKFs trade secrets and confidential information in Minnesota,
transferred information to ERSI in Minnesota, solicited SKF customers in Minnesota,
and is using SKFs information in Minnesota. SKF also asserts that ERSI and SKF have
no relationship that requires SKF to bring this suit in Illinois and that ERSI has no
(Footnote Continued From Previous Page)
controversy is met.
3 The specific language reads: The law applying to contracts made and fully
performed in Illinois will govern this Agreement. (Bjerkness Decl. 13, Ex. E at 13.)
SKF asserts that the choice of law provision does not apply to the Kraft Foods Agreement
because that agreement is to be performed in Iowa and is therefore not to be fully
performed in Illinois. The Court disagrees with SKFs reading and finds that the choice
(Footnote Continued on Next Page)
contacts with Illinois that give rise to personal jurisdiction. SKF further maintains that
ERSI has no business relationship warranting Illinois specific jurisdiction, that the choice
of law provision of the Kraft Agreement has no bearing on jurisdiction in this case, and
that ERSIs voluntary participation in the Illinois lawsuit does not confer jurisdiction in
Illinois. Finally, SKF asserts that ERSIs resulting effects argument is unavailing.
In determining whether a court has personal jurisdiction over a non-resident
defendant, an Illinois court must look to the requirements of the state long-arm statute as
well as both state and federal constitutional law regarding due process. RAR, Inc. v.
Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). The Illinois long-arm statute
provides that an Illinois court may exercise jurisdiction on any . . . basis now or
hereafter permitted by the Illinois Constitution and the Constitution of the United
States. Id. (citing 735 Ill. Comp. Stat. 5/2-209(c)). The Illinois long-arm statute
permits an Illinois court to exercise personal jurisdiction over a defendant if the
defendant submits to the personal jurisdiction of an Illinois court by doing any of the acts
enumerated in Section 2-209(a) of the Illinois Code of Civil Procedure. Rains v. PPG
Indus., 359 F. Supp. 2d 720, 723 (S.D. Ill. 2004) (citing 735 ILCS 5/2-209(a)).
Section 2-209(a) of the Illinois Code of Civil Procedure gives Illinois courts personal
jurisdiction over non-resident defendants who transact business in Illinois:
(Footnote Continued From Previous Page)
of law provision clearly provides that Illinois law governs the Kraft Foods Agreement.
(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:
(1) The transaction of any business within this State . . .
735 ILCS 5/2-209(a)(1).
Federal due process requires that a defendant have certain minimum contacts
with the forum state such that maintenance of the suit does not offend traditional notions
of fair play and substantial justice. Intl Shoe Co. v. Wash., 326 U.S. 310, 316 (1945)
(internal quotations omitted). The defendants conduct and connection with the forum
state must be such that the defendant should reasonably anticipate being haled into court
there. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). It is
essential in each case that the defendant has purposefully availed itself of the privilege of
conducting activities within the forum state, thus invoking the benefits and protections of
its laws. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson v.
Denckla, 357 U.S. 235, 253 (1958)). What these standards mean depends on whether the
court asserts general or specific jurisdiction. In a general jurisdiction case, a
defendant maintains such continuous and systematic contacts with a state that it
becomes subject to the jurisdiction of that states courts for any purpose. See
Helicopteros Nacionales de Columbia v. Hall, 466 U.S. 408, 414 n.9, 416, 418-19 (1984).
Specific jurisdiction, on the other hand, requires that the defendant has purposely
directed its activities at residents of the forum and that the litigation results from alleged
injuries that arise out of or relate to those activities. See Burger King, 471 U.S. at 472.
Here, the central issue is whether ERSIs contacts with Illinois give rise to specific
jurisdiction under the Illinois long-arm statute.
ERSI has submitted evidence demonstrating that it negotiated and established an
ongoing relationship with Kraft Foods, an Illinois resident and former customer of SKF.
The record demonstrates that the Kraft Foods Agreement was made with the
Illinois-based Kraft Foods and that ERSI is providing services to and is getting paid by
Kraft Foods.4 In addition, ERSIs contractual relationship with Kraft Foods is at issue in
both this action and the Illinois Lawsuit. In particular, SKF alleges that ERSI improperly
solicited and obtained the business of Kraft Foods using information stolen from SKF.
The record shows that ERSI negotiated its relationship with the Illinois-based Kraft
Foods and that this negotiated relationship gave rise, at least in part, to the causes of
action asserted against ERSI. Finally, the Kraft Foods Agreement contains an Illinois
choice of law provision and a mandatory arbitration clause providing for dispute
resolution in Chicago, Illinois. (Bjerkness Decl. 13, Ex. E at 13.) While this
contractual provision is not dispositive on the issue of jurisdiction, particularly because
SKF is not a party to the Kraft Foods Agreement, it supports the notion that ERSI
4 The Court acknowledges that the Kraft Foods Agreement provides that ERSI will
provide services for Kraft Foods facility in Mason City, Iowa. This, however, does not
mean that those services are not also provided to the benefit of Kraft Foods in Illinois.
availed itself to the benefits and protections of Illinois law and could expect to be subject
to jurisdiction in Illinois with respect to this lawsuit.
Based on the foregoing, the Court concludes that ERSIs on-going business
relationship with Kraft Foods provides the Illinois court with specific jurisdiction over
ERSI. This suit arose, at least in significant part, out of ERSIs contacts with Kraft
Foods and ERSI could reasonably expect to defend this suit in Illinois. The nature of
ERSIs relationship with Kraft Foods and the connection between that relationship and
the subject matter of the current lawsuit supports personal jurisdiction over ERSI in
Illinois such that the exercise of personal jurisdiction over ERSI in Illinois will not
offend traditional notions of fair play and substantial justice.5
B. Convenience of the Parties
Having determined that this action could have been brought in the Northern
District of Illinois, the Court evaluates the remaining relevant transfer factors. [S]ection
1404(a) provides for transfer to a more convenient forum, not to a forum likely to prove
equally convenient or inconvenient, and a transfer should not be granted if the effect is
simply to shift the inconvenience to the party resisting the transfer. Graff, 33 F. Supp.
5 The Court need not consider whether jurisdiction is proper due to the situs of
SKFs alleged injury because it has already determined that specific jurisdiction is
satisfied by reason of ERSIs business transactions with Kraft Foods in Illinois. Even so,
the Court notes that the record demonstrates that the alleged damage to SKF occurred, at
least in significant part, in Elk Grove Village, Illinois, the location of SKFs Reliability
Systems unit. In addition, ERSI could have reasonably anticipated that its alleged
tortious activities would affect SKF in the state of Illinois.
2d at 1121. Normally, there is a presumption in favor of the plaintiffs forum. Id. That
presumption is given significantly less deference when the plaintiff does not reside in
the chosen forum. Nelson v. Soo Line R.R. Co., 58 F. Supp.2d 1023, 1026 (D. Minn.
1999). ERSI asserts that the Northern District of Illinois would be more convenient
primarily because SKF has filed a case alleging nearly identical claims against the
Individual Defendants in the Northern District of Illinois. SKF asserts that the Northern
District of Illinois is not a more convenient forum.
Here, SKF chose Minnesota as its forum. However, SKF does not reside in
Minnesota and has filed a substantially similar lawsuit against the Individual Defendants
(the employees of ERSI) in the Northern District of Illinois. The Illinois Lawsuit
involves nearly identical underlying facts and overlapping witnesses. Accordingly, the
Court gives SKFs forum selection in this case little deference. Because there is a case
currently pending in the Northern District of Illinois that is based largely on the same
underlying facts and involves substantially similar parties, the Court finds that the
convenience of the parties weighs heavily in favor of transferring this case to the
Northern District of Illinois.
C. Convenience of Witnesses
The convenience of witnesses is an important factor for the Court and the parties
because it affects the access to sources of proof. Graff, 33 F. Supp. 2d at 1121. In
considering the convenience of witnesses, courts have focused on the number of
non-party witnesses, the location of all witnesses, and the preference of courts for live
testimony as opposed to depositions. See id. ERSI contends that Illinois would be a
more convenient forum for the material witnesses who have knowledge regarding the
most significant claims in this case; in particular, SKFs claims that ERSI
misappropriated SKFs trade secrets and tortiously interfered with its employment and
customer contracts.
ERSI further submits that many material witnesses located in Illinois have already
testified in the Illinois Lawsuit. SKF, on the other hand, contends that Minnesota is a
more convenient forum because the witnesses with relevant information include the
Individual Defendants who reside in Minnesota, as well as former and current SKF
customers that now do business with or have been solicited by ERSI. SKF has submitted
evidence that several ERSI customers, or potential customers, reside in Minnesota. The
Court concludes that the convenience of the witnesses weighs neither in favor nor
against transferring this action to the Northern District of Illinois.
D. Interests of Justice
The Court must also evaluate what venue will best promote the interests of
justice. Id. This factor is weighed very heavily. Id. A number of relevant
considerations include judicial economy, the plaintiffs choice of forum, the costs of
litigating in each forum, obstacles to a fair trial, choice of law issues, and the advantages
of having a local court determine questions of local law. See Terra Intl, 199 F.3d at
696. As explained above, the Court recognizes the interest in protecting a plaintiffs
choice of forum; but also recognizes that SKFs choice here is given less protection since
SKF does not reside in Minnesota. The Court also notes that the issues and claims in this
case overlap significantly with those in the Illinois Lawsuit. SKF asserts that this case
and the Illinois Lawsuit are different. In particular, SKF asserts that the Illinois Lawsuit
is against the Individual Defendants and seeks to enforce the Individual Defendants
obligations under certain non-competes and other agreements and that the Illinois
Lawsuit seeks to remedy the Individual Defendants misappropriation of SKF trade
secrets. In contrast, SKF contends that the lawsuit pending before this Court is
fundamentally different because it was filed to restrain and redress ERSIs targeting of
SKF customers and employees while using SKF trade secrets. In essence, SKF asserts
that the Illinois Lawsuit focuses on the Individual Defendants while this action focuses
on ERSI. SKF also contends that a holding in the Illinois Lawsuit will not enjoin ERSI
or provide for damages against ERSI.
The Court rejects SKFs assertion that the two lawsuits are different. Instead, the
Court finds that this case and the Illinois Lawsuit are fundamentally similar and that they
should be tried by the same court.6 In addition, the Court notes that each of SKFs
agreements with the Individual Defendants, which will be relevant in both lawsuits,
contain choice of law provisions requiring the application of Illinois law. The State of
Illinois has an interest in providing a forum for SKF and that court would have the
advantage of being familiar with Illinois law.
In sum, the Court concludes that transferring this case to Illinois so that it can be
tried alongside the originally filed action in Illinois would promote the interests of justice
and conserve judicial resources. Accordingly, the Court finds that this factor weighs
heavily in favor of transferring this action to the Northern District of Illinois.
Based on the files, records, and proceedings herein, and for the reasons set forth
above, IT IS ORDERED that:
1. Defendants Motion to Transfer Venue to The United States District Court
for the Northern District of Illinois or, in the Alternative, to Stay Proceedings (Doc. No.
12) is GRANTED IN PART consistent with this Order.
6 In rejecting SKFs assertion that the cases are different, the Court notes that the
allegedly tortious activity of ERSI will necessarily be based on the allegedly tortious
actions of the Individual Defendants.
2. The Clerk of Court shall transfer this action to the Northern District of
Dated: March 30, 2009 s/Donovan W. Frank
Judge of United States District Court


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