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
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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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