Whittmanhart v. CA, Inc.

• Court: Appellate Court of Illinois
• Decided: June 22, 2010
• Docket: 1-09-3136 Rel
• Status: Published

Opinion

SECOND DIVISION FILED: June 22, 2010

No. 1-09-3136

WHITTMANHART, INC., ) APPEAL FROM THE ) CIRCUIT COURT OF Plaintiff-Appellant, ) COOK COUNTY. ) v. ) Nos. 08 L 13460 ) 09 L 7560 ) CA, INC., and NIKU, LLC, ) HONORABLE ) LEE PRESTON, Defendants-Appellees. ) JUDGE PRESIDING.

JUSTICE HOFFMAN delivered the opinion of the court:

Whittmanhart, Inc., ("Whittmanhart") appeals from an order

of the circuit court dismissing its complaint against CA, Inc.,

("CA") and Niku, LLC, ("Niku") pursuant to section 2-619(a)(3) of

the Code of Civil Procedure ("the Code") (735 ILCS 5/2-619(a)(3)

(West 2008)), on the basis that another action was pending

between the parties in New York. For the reasons which follow,

we reverse and remand the matter back to the circuit court for

further proceedings.

On November 12, 2008, CA and its wholly-owned subsidiary,

Niku, filed suit against Whittmanhart in the United States

District Court for the Eastern District of New York (hereinafter

"the federal action"). According to the federal complaint,

Whittmanhart and CA entered into an End User License Agreement

("EULA") in March of 2006. The EULA granted Whittmanhart a No. 1-09-3136

license for a group of computer software products marketed by CA

under the "Clarity" brand name. The EULA also provided that

Whittmanhart was entitled to receive professional services from

CA pursuant to a Statement of Work ("SOW") to be agreed upon by

Whittmanhart and CA on a future date. In June of 2006, CA and

Whittmanhart entered into a SOW, whereby CA agreed to assist

Whittmanhart in its implementation and development of the Clarity

software. In consideration for CA's performance under the SOW, Whittmanhart was to pay CA an agreed-upon hourly rate for the CA

employees working on the project, as well as the expenses

incurred by those employees. The federal complaint further

alleged that, during the course of the project, CA and Niku

issued a number of invoices to Whittmanhart for professional

services provided under the EULA and the SOW, which remain

unpaid. As relief, CA and Niku sought payment of the outstanding

invoices, asserting claims for breach of contract and account

stated. CA and Niku also sought attorney fees and costs pursuant to a provision of the SOW which allowed the prevailing party in a

judicial action to recover the costs and expenses incurred in

enforcing its rights under the agreement.

On December 3, 2008, counsel for Whittmanhart informed the

district court of its intention to move to dismiss the federal

action due to the lack of subject matter jurisdiction. Counsel

explained that, because all three parties were citizens of

Delaware, federal diversity jurisdiction did not exist.

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On December 3, 2008, at 2:01 p.m. Eastern Standard Time, CA

and Niku filed an action against Whittmanhart in the Supreme

Court of New York in the County of Suffolk (hereinafter "the

first New York State action"). That complaint contained

essentially the same allegations and claims as those in the

federal action. At 4:13 p.m. Eastern Standard Time, CA and Niku

voluntary dismissed the federal action.

Later that same day, at 3:55 p.m. Central Standard Time, Whittmanhart filed a three-count complaint against CA and Niku in

the Circuit Court of Cook County (hereinafter "the instant

action"). According to the complaint filed by Whittmanhart, the

terms of the EULA and the SOW required CA to deliver a fully

functional Clarity system by December 31, 2006, and required that

all invoices were to be issued monthly. In count I, Whittmanhart

sought monetary damages based on CA's and Niku's alleged breach

of its obligations under the EULA and the SOW by failing to

deliver a fully functioning Clarity system by the stipulated date, failing to issue monthly invoices for services rendered,

and failing to provide the agreed-upon professional services

necessary to integrate the Clarity software with Whittmanhart's

operating systems. In count II, Whittmanhart requested a

judgment declaring that it had no obligation to pay CA and Niku

any additional amounts under the EULA or the SOW. Finally, in

count III, Whittmanhart sought to recover the attorney fees and

costs it incurred in bringing the instant action.

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After Whittmanhart failed to answer the complaint in the

first New York State action, CA and Niku moved for a default

judgment. In response, Whittmanhart filed a cross-motion to

dismiss, arguing, inter alia, that it had not been properly

served. On April 15, 2009, Whittmanhart's cross-motion to

dismiss the first New York State action was granted based upon a

lack of personal jurisdiction. On June 2, 2009, CA and Niku

filed a notice of appeal from the dismissal of that action. On April 17, 2009, CA and Niku commenced another action in

the Supreme Court of New York (hereinafter "the second New York

State action"), asserting claims identical to those in the first

New York State action. Thereafter, on June 25, 2009,

Whittmanhart filed a motion to dismiss the second New York State

action based upon the pendency of the instant action and on the

ground of forum non conveniens. Whittmanhart's motion was

subsequently denied as untimely. Whittmanhart then appealed from

the denial of its motion to dismiss the second New York State action.

On July 29, 2009, CA and Niku filed a motion to dismiss the

instant action pursuant to section 2-619(a)(3) of the Code (735

ILCS 5/2-619(a)(3) (West 2008)), on the basis that there was

another action pending between them and Whittmanhart for the same

claims in New York State court. On October 14, 2009, the circuit

court issued a written memorandum order in which it granted the

motion, finding that the instant and New York actions involved

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the same parties and the same cause; and that the discretionary

factors of comity, the prevention of the multiplicity of

lawsuits, Whittmanhart's ability to obtain complete relief in New

York, and the res judicata effect of the New York action each

weighed in favor of dismissal. This appeal followed.

On appeal, Whittmanhart argues that the circuit court abused

its discretion in granting CA's and Niku's motion to dismiss. We

agree. Initially, CA and Niku assert that Whittmanhart has

voluntarily agreed to litigate in New York State court. In

support of their argument, CA and Niku cite to an answer

Whittmanhart filed in the second New York State action on

November 24, 2009, asserting affirmative defenses and three

counterclaims identical to the claims Whittmanhart set forth in

its complaint in the instant action. CA and Niku also cite to a

notice from Whittmanhart's attorney, dated March 24, 2010,

withdrawing its appeal from the denial of its motion to dismiss the second New York State action.

We note that both the answer and the notice to withdraw the

appeal are not contained in the record before us, but only appear

in the appendix to CA's and Niku's brief. It is well

established, however, that the record on appeal cannot be

supplemented by attaching documents to the appendix of a brief.

McCarty v. Weatherford, 362 Ill. App. 3d 308, 311, 838 N.E.2d 337

(2005); Jones v. Police Board of the City of Chicago, 297 Ill.

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App. 3d 922, 930, 697 N.E.2d 876 (1998). Moreover, the answer

and notice withdrawing the appeal were filed after the circuit

court's dismissal of the instant action on October 14, 2009.

Because new evidence not before the circuit court when it

rendered its decision cannot be considered by a reviewing court

(Kessler v. Zekman, 250 Ill. App. 3d 172, 188-189, 620 N.E.2d

1249 (1993)), it is inappropriate for us to consider either

Whittmanhart's answer or notice withdrawing its appeal in the second New York State action.

Generally, motions to dismiss do not require the circuit

court to weigh facts or determine the credibility of witnesses,

and, therefore, our standard of review is de novo. Overnite

Transportation Co. v. International Brotherhood of Teamsters,

Chauffeurs, Warehousemen & Helpers of America, 332 Ill. App. 3d

69, 73, 773 N.E.2d 26 (2002); Miller v. Thomas, 275 Ill. App. 3d

779, 786, 656 N.E.3d 89 (1995). However, a section 2-619(a)(3)

motion to dismiss is inherently procedural and urges the circuit court to weigh several factors when deciding whether it is

appropriate for the action to proceed. Overnite Transportation

Co., 332 Ill. App. 3d at 73; Hapag-Lloyd, Inc. v. Home Insurance

Co., 312 Ill. App. 3d 1087, 1090, 729 N.E.2d 36 (2000). Thus, we

review the circuit court's decision to dismiss an action pursuant

to section 2-619(a)(3) for an abuse of discretion. Continental

Casualty Co. v. Radio Materials Corp., 366 Ill. App. 3d 345, 347,

851 N.E.2d 857 (2006).

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Section 2-619(a)(3) is a procedural device designed to avoid

duplicative litigation. Quantum Chemical Corp. v. Hartford Steam

Boiler Inspection & Insurance Co., 246 Ill. App. 3d 557, 560, 616

N.E.2d 686 (1993). Specifically, this section allows a defendant

to move for a dismissal or a stay when there is "another action

pending between the same parties for the same cause." 735 ILCS

5/2-619(a)(3) (West 2008). The movant, in this case CA and Niku,

bears the burden of demonstrating by clear and convincing evidence that the two actions involved the "same parties" and the

"same cause." Northbrook Property & Casualty Insurance Co. v.

GEO International Corp., 317 Ill. App. 3d 78, 80, 739 N.E.2d 47

(2000).

There can be no dispute that the instant action and the New

York action involve the same, identical parties. Only their roles

have changed.

Additionally, the record reflects that the instant action

and the New York action involve the same cause. Actions present the same cause when the relief requested is based on

substantially the same set of facts. In re Estate of Hoch, 382

Ill. App. 3d 866, 869, 892 N.E.2d 30 (2008). Here, both actions

were based upon the same two contracts, the EULA and the SOW.

While different issues may have been raised in the two actions,

the critical inquiry is whether the Illinois and New York actions

arose out of the same transaction or occurrence, not whether the

legal theories, issues, or requested relief differ. See Kapoor

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v. Fujisawa Pharmaceutical Co., 298 Ill. App. 3d 780, 786, 699

N.E.2d 1095 (1998).

Although CA and Niku established the threshold requirements

of section 2-619(a)(3), the circuit court was not required to

automatically dismiss the instant action. See In re Marriage of

Epsteen, 339 Ill. App. 3d 586, 593, 791 N.E.2d 175 (2003).

Rather, "[m]ultiple actions in different jurisdictions arising

out of the same operative facts may be maintained where the circuit court, in a sound exercise of its discretion, determines

that both actions should proceed." Zurich Insurance Co. v.

Baxter International, Inc., 173 Ill. 2d 235, 244-45, 670 N.E.2d

664 (1996). In making this determination, a court should

consider the following factors: (1) comity; (2) the prevention

of multiplicity, vexation, and harassment; (3) the likelihood of

obtaining complete relief in a foreign jurisdiction; and (4) the

res judicata effect of a foreign judgment in the local forum.

Combined Insurance Co. v. Certain Underwriters at Lloyd's London, 356 Ill. App. 3d 749, 754, 826 N.E.2d 1089 (2005).

Turning to the first factor, courts of different states

having concurrent jurisdiction over a controversy may both

proceed simultaneously until one court reaches judgment.

Restatement (Second) of Conflicts of Laws § 86 (1971). Under the

principles of comity, however, one state may stay or dismiss the

proceeding pending before it out of respect for the other state's

laws and judgments. See Continental Casualty Co., 366 Ill. App.

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3d at 347; May v. SmithKline Beecham Clinical Laboratories, Inc.,

304 Ill. App. 3d 242, 248, 710 N.E.2d 460 (1999).

Prior to the filing of the instant action, CA and Niku filed

two suits, the federal action and the first New York State

action. The federal action, however, was voluntarily dismissed

after it was discovered that federal diversity jurisdiction was

lacking. Additionally, the first New York State action was

dismissed for want of jurisdiction. The second New York State action, the only foreign action where jurisdiction over

Whittmanhart was effectuated, was not filed until after

Whittmanhart filed its Illinois complaint. Consequently, it

appears that the instant action was the first to be properly

filed. Nevertheless, the Illinois Supreme Court, in A. E. Staley

Manufacturing Co. v. Swift & Co., 84 Ill. 2d 245, 253, 419 N.E.2d

23 (1980) (Staley), held that the fact that one suit was filed

prior to the other is not determinative in resolving a section 2-

619(a)(3) motion to dismiss. Staley, 84 Ill. 2d at 252. Instead, the Staley court focused on whether the cause had a

legitimate and substantial relation to Illinois. Staley, 84 Ill.

2d at 253.

The record before us reflects that Illinois has a legitimate

and substantial relation to the underlying dispute.

Whittmanhart's principal place of business is in Illinois.

Furthermore, the EULA and the SOW contemplated performance in

Illinois, and Whittmanhart's complaint alleged that a substantial

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number of the events which led to the breach of the two contracts

took place in Cook County, Illinois.1

Although CA's and Niku's principal place of business is in

New York and one of the contracts, the SOW, is to be interpreted

pursuant to New York law, we do not believe that New York's

connection to this case outweighs Illinois' strong interest in

the litigation. The second contract, the EULA, provides that it

is to be interpreted pursuant to the laws of the state of California, which neither Illinois nor New York will have an

expertise in applying. In addition, no evidence was presented

establishing that any of the events that led to breach of the

EULA and the SOW, and the commencement of this litigation,

1 In its briefs before this court, Whittmanhart also alleges that most of the negotiations leading up to the execution of the

EULA and the SOW occurred in Illinois. Whittmanhart's complaint, however, does not indicate where the negotiations for the two

contracts took place, nor did Whittmanhart provide any affidavits

or other evidentiary materials in support of this allegation. See

Atkinson v. Affronti, 369 Ill. App. 3d 828, 830, 861 N.E.2d 251

(2007) (In ruling on a 2-619 motion to dismiss, a court will

consider the complaint under attack, taking as true all well-pled

allegations contained therein, and the evidentiary material

submitted both in support of and in opposition to the motion).

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occurred in New York. Based on the record before us, Illinois is

clearly the more logical forum for this dispute.

Given the fact that the instant action appears to have been

the first to be properly filed and that this matter has a

legitimate and substantial relation to Illinois, we conclude that

the principles of comity do not require the dismissal of the

instant action in deference to the New York State court.

Accordingly, this factor weighs against the dismissal of Whittmanhart's Illinois complaint.

Next, we consider the prevention of multiplicity, vexation,

and harassment. Due to the similar nature of both actions, the

dismissal of the instant action would prevent the multiplicity of

lawsuits. There is no evidence, however, that Whittmanhart's

claims in Illinois are intended to vex or harass CA and Niku. On

balance, this factor weighs in favor of dismissal, but not

strongly.

With regard to Whittmanhart's likelihood of obtaining complete relief in a foreign jurisdiction, in their New York

action, CA and Niku seek to recover the amount they are allegedly

owed under the EULA and the SOW. Whittmanhart's Illinois

complaint contains a similar claim seeking a declaratory judgment

defeating CA's and Niku's ability to recover under the EULA and

the SOW. However, Whittmanhart also seeks to recover the amount

it alleges it is owed because of CA's and Niku's failure to

comply with the terms of the EULA and the SOW. Accordingly, the

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instant action is the broader and more comprehensive of the two

actions, and, therefore, there is a greater possibility of

completely resolving the controversy between the parties in

Illinois than in New York.

Furthermore, the dismissal of the instant action forces

Whittmanhart to assert its claims against CA and Niku by way of a

counterclaim in New York. In Staley, the supreme court held that

the policy of avoiding duplicative litigation did not require the filing of a counterclaim in a foreign jurisdiction where the

rules of that jurisdiction do not otherwise require it. Staley,

84 Ill. 2d at 253. New York does not require compulsory

counterclaims. 67-25 Dartmouth Street Corp. v. Syllman, 29

A.D.3d 888, 889, 817 N.Y.S.2d 299, 301 (N.Y. 2006); Classic

Automobiles, Inc. v. Oxford Resources, Corp., 204 A.D.2d 209,

209, 612 N.Y.S.2d 32, 33 (N.Y. 1994). Under the facts of this

case, we conclude that the instant action is more likely to

provide complete relief to the parties, thereby weighing against dismissal.

The final factor to be considered in determining whether the

instant action should be dismissed under section 2-619(a)(3) is

the res judicata effect of a foreign judgment in the local forum.

Like in New York, counterclaims in Illinois are permissive rather

than compulsory. See 735 ILCS 5/2-608(a) (West 2008); Fuller

Family Holdings, LLC v. Northern Trust Co., 371 Ill. App. 3d 605,

617, 863 N.E.2d 743 (2007). Consequently, a defendant may

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generally raise his or her claims against the plaintiff by way of

either a counterclaim or a separate action. Corcoran-Hakala v.

Dowd, 362 Ill. App. 3d 523, 530-31, 840 N.E.2d 286 (2005);

Restatement (Second) of Judgments § 22(1) (1982). Res judicata

bars a subsequent action only if the successful prosecution of

the action would in effect nullify the judgment entered in the

prior litigation. Corcoran-Hakala, 362 Ill. App. 3d at 531;

Restatement (Second) of Judgments § 22(2)(b) (1982). The rationale behind this rule is that a defendant should not be

required to assert his or her claims in the forum chosen by the

plaintiff but should be allowed to bring suit at a time and place

of his or her own selection. Restatement (Second) of Judgments §

22, Comment a, at 185-86 (1982).

As previously discussed, the instant action is broader than

the New York action. Even if a judgment is entered for CA and

Niku in New York, it is possible that Whittmanhart's claim that

CA and Niku breached their obligations under the EULA and the SOW could still proceed. Because it cannot be said that res judicata

would completely bar the instant action, this factor also weighs

against dismissal.

In sum, we find that, with the exception of the prevention

of the multiplicity of lawsuits, none of the discretionary

factors for consideration favor a dismissal of the instant action

under section 2-619(a)(3). As a consequence, we conclude that

the circuit court abused its direction in granting CA's and

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Niku's motion to dismiss. We, therefore, reverse the dismissal

of Whittmanhart's complaint and remand the matter back to the

circuit court for further proceedings.

Reversed and remanded.

THEIS and KARNEZIS, JJ., concur.

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