Basic v. Fitzroy Engineering, Ltd.

949 F. Supp. 1333, 1996 U.S. Dist. LEXIS 18319, 1996 WL 714559
CourtDistrict Court, N.D. Illinois
DecidedDecember 6, 1996
Docket96 C 1650
StatusPublished
Cited by18 cases

This text of 949 F. Supp. 1333 (Basic v. Fitzroy Engineering, Ltd.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Basic v. Fitzroy Engineering, Ltd., 949 F. Supp. 1333, 1996 U.S. Dist. LEXIS 18319, 1996 WL 714559 (N.D. Ill. 1996).

Opinion

OPINION AND ORDER

NORGLE, District Judge:

Before the court is Defendant’s motion to dismiss Plaintiffs Complaint for Declaratory Judgment. For the following reasons, the motion is granted.

*1335 1. 1

Plaintiff John N. Basic, Sr. (“Basic”) is an Illinois resident. Defendant Fitzroy Engineering, Ltd. (“Fitzroy”) is a foreign company incorporated in New Zealand. In his Complaint, Basic requests that this court make a variety of declarations, all of which will be discussed below.

Fitzroy, a construction and engineering company, entered into a construction contract with Auckland (New Zealand) International Airport to construct a “quarantine waste incinerator.” Fitzroy then negotiated and contracted with Basic’s company, known on the date of the contract as Basic Environmental Engineering, Inc. (“BEE”) (now known as Flame Engineering, Inc.), to design, manufacture, and supervise the installation of a single incinerator unit.

However, a dispute arose between BEE and Fitzroy. Fitzroy claimed that BEE failed properly to perform portions of the parties’ contract. Pursuant to the original contract between them, BEE and Fitzroy entered into an arbitration agreement. The arbitrator, bound by New Zealand civil procedure rules, entered a default order against BEE because of BEE’s failure to appear at the arbitration hearing. The arbitrator entered an award in the amount of N.Z. $2,057,-296.08 against BEE. United States District Judge Ann Claire Williams confirmed the arbitration award, pursuant to her authority under 9 U.S.C. § 207, in Fitzroy Eng’g Ltd. v. Flame Eng’g, Inc. f/k/a Basic Envtl. Eng’g, Inc., No. 94 C 2029, 1994 WL 700173 (N.D.Ill.Dec.4, 1994). The confirmed amount equates to an amount in excess of U.S. $1,345,362.

In October of last year, Fitzroy filed a lawsuit in a New Zealand court against Basic (“NZ action”). Though the Statement of Claim (known in the U.S. as a complaint) alleges that Basic transferred the assets of BEE to another company so that he could defeat enforcement of the judgment entered by both the arbitrator and Judge Williams, the document makes clear that Fitzroy’s claim does not rest on the illegal transfer. Rather, Fitzroy bases the NZ action on the negligent misrepresentations made to Fitzroy which induced Fitzroy to enter into the contract with Basic and BEE.

On January 26, 1996, Basie entered an “Appearance Under Protest of Jurisdiction” in the NZ action. In the protest, Basic argued that the New Zealand court lacked personal jurisdiction over him. .Alternatively, Basic contended that Fitzroy’s action should have been dismissed based on the forum non conveniens doctrine. Three days after Basic entered the “Appearance Under Protest,” Fitzroy moved to strike it. On March 20, 1996, the High Court of New Zealand entertained argument concerning both the jurisdiction and forum non conve-niens issues.

On March 22, 1996, Basic filed the instant Complaint. Basic requests that this court enter an order making six declarations. Among the sought-after declarations are: (1) that, because of issue and claim preclusion doctrines, the confirmed arbitration award against Basic and BEE/Flame Engineering, Inc. bars Fitzroy from filing the NZ lawsuit; (2) that New Zealand lacks personal jurisdiction over Basie; (3) that Illinois law provides no liability for negligent misstatements of facts by corporate officers; (4) that Fitzroy should have raised the alleged misstatements during the arbitration proceeding; (5) that Basic did not transfer assets to defeat enforcement of the confirmed arbitration award; and (6) that the NZ action is contrary to American public policy.

On April 19,1996, Basic informed the High Court of New Zealand of the instant action, and requested the High Court to consider this action as evidence that New Zealand was an inconvenient forum. On-May 14, 1996, the High Court of New Zealand granted Fitzroy’s motion to strike Basic’s “Appearance Under Protest” stating, in relevant part,

[ T]he fact that a proceeding has been filed in the District Court in Illinois is not sufficient to outweigh the reasons advanced by [Fitzroy] at the hearing as to why *1336 [Fitzroy] should not be entitled to continue with its claim in New Zealand.... I also think ... [Basic] had plenty of opportunity to make his application in the United States earlier than he did. It has obviously been issued with the sole view of preempting [Fitzroy] from proceeding with its claim in New Zealand.

On May 21, 1996, Basic applied for a review of the High Court’s May 14 ruling.

Fitzroy now moves to dismiss Basic’s Complaint for declaratory judgment on two grounds. First, Fitzroy argues that Section 2 — 619(a)(3) of the Illinois Code of Civil Procedure requires that the court dismiss the instant action because “there is another action pending between the same parties for the same cause.” 735 ILCS 5/2-619(a)(3). Second, Fitzroy contends that the court should decline to exercise jurisdiction over the subject matter of the instant Complaint. The court will discuss each of these arguments in turn.

H.

A. Applicability of Section 2-619 (a) (3)

Fitzroy urges the court to apply Illinois Code of Civil Procedure Section 2-619(a)(3) and dismiss the Complaint. In support, Fitzroy cites eight cases from the Northern District of Illinois, all of which found the Section to be one of substance and not procedure. The substance/procedure distinction is important; the Rules of Decision Act, 28 U.S.C. § 1652, commands a federal court sitting in diversity to apply federal procedural rules and state substantive laws. In re Air Crash Disaster Near Chicago, 803 F.2d 304, 313-14 (7th Cir.1986); Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

Not surprisingly, Fitzroy did not cite Seventh Circuit cases. That is because the United States Court of Appeals for the Seventh Circuit declined to decide the issue on several occasions. See Locke v. Bonello, 965 F.2d 534, 537 (7th Cir.1992); Aetna Cas. & Sur. Co. v. Kerr-McGee Chem. Corp., 875 F.2d 1252 (7th Cir.1989). Even less surprisingly, ADS Publ. Servs., Inc. v. The Summit Group, Inc., No. 95-6794, 1996 WL 332684 (N.D. Ill. June 13, 1996), was not among the eight cases to which Fitzroy cited. In ADS, this court found Section 2-619(a)(3) to be a rule of procedure and not substance. Id. at * 1-2 (“This court finds the recent trend of cases holding the section to be a rule of procedure to be the better rule. Indeed, the Illinois Supreme Court considers it to be procedural in nature: the section exists ‘to foster orderly procedure

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Cite This Page — Counsel Stack

Bluebook (online)
949 F. Supp. 1333, 1996 U.S. Dist. LEXIS 18319, 1996 WL 714559, Counsel Stack Legal Research, https://law.counselstack.com/opinion/basic-v-fitzroy-engineering-ltd-ilnd-1996.