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Wednesday, August 21, 2019

Seventh Circuit: Plaintiff should ‘count himself lucky’ not to be sanctioned after filing same suit twice

By Heather Isringhausen Gvillo | Aug 16, 2017

Seventh Circuit appellate judges affirmed the district court’s order dismissing a breach of contract suit on jurisdictional grounds for the second time after the plaintiff appeared to add a new Illinois defendant in an effort to defeat removal and dismissal.

“[Plaintiff Bernard] Henneberger should count himself lucky that defendants have not asked for sanctions. He cannot expect to avoid penalties if he continues his doomed attempt to litigate this claim in Illinois,” the opinion states.

Seventh Circuit judges Richard Posner, Frank Easterbrook and Daniel Manion delivered the Aug. 9 opinion affirming dismissal.

The order explains that Henneberger claims Ticom Goematics Inc. promised that if it was acquired by another firm it would reward the plaintiff “handsomely” for his work improving the defendant’s intellectual property.

Ticom was acquired by Six3 Systems in 2012 but allegedly refused to pay Henneberger a bonus, arguing that no such promise was made.

Henneberger filed a lawsuit in 2014 in an Illinois state court demanding $10 million from Ticom, Ticom president Mark Leach, Ticom manager David Feuerstein and CACI International, which purchased Six3 and its subsidiary in 2013.

The defendants removed the suit to the U.S. District Court for the Southern District of Illinois arguing diversity jurisdiction. The district court found that it lacked personal jurisdiction over any of the defendants.

Ticom is incorporated in Texas and has a principal place of business in Virginia. Leach and Feuerstein live and work in Texas. Six3 and CACI are Delaware corporations with a principal place of business in Virginia.

Henneberger worked at Ticom in Texas when the asserted promise was made.

“The judge observed that the suit’s sole connection with Illinois is that Henneberger now lives there, while personal jurisdiction depends on the activities of the defendants rather than those of a mobile plaintiff,” the opinion states.

The Seventh Circuit affirmed dismissal.

The opinion states that Henneberger could have followed up the district court’s decision by filing a lawsuit in Texas or Virginia, but he chose to again sue in Illinois, “perhaps hoping that the state judges would disregard the preclusive effect of the federal judiciary’s decisions.”

“Seeking to ensure that the suit stayed in state court this time, Henneberger added GTCR, LLC to the list of defendants,” the opinion explains.

GTCR is a private capital firm based in Illinois and had an indirect ownership interest in Six3 until the firm was sold to CACI in 2013.

The defendants again removed the suit to district court, arguing that GTCR had been fraudulently joined in an effort to prevent removal.

The district court denied Henneberger’s motion to remand and dismissed the suit on the same jurisdictional grounds as before.

The Seventh Circuit agrees with the lower court's decision, concluding that any claim against GTCR is frivolous.

“The district judge’s second decision is as sound as its first one,” the opinion states. “GTCR has nothing to do with the events of which Henneberger complains – it neither made the asserted promise to Henneberger nor owned Ticom when the promise supposedly was made, and by the time of the litigation GTCR did not have even an indirect interest in Six3, let along control of Ticom.”

The appellate court holds that GTCR has “no place in this litigation.”

Regardless, the court finds that the suit still could not proceed in Illinois as GTCR “would be entitled to insist that the other defendants bear the responsibility and must be joined, which would require the suit’s dismissal because they cannot be sued in Illinois.”

Henneberger argues that doctrines of piercing the corporate veil apply here in an effort to implicate GTCR. The Seventh Circuit disagrees, stating that Ticom is an “empty shell” that would be liable for its own debts.

Henneberger asks the court to disregard the first suit arguing that the defendants submitted a fake document.

“But Henneberger does not grapple with the venerable principle that a litigant who believes that a judge was deceived must return to that judge with a request that the judgment be reopened; he cannot simply file a new suit and ask the second court to disregard the first’s decision,” the opinion states.

U.S. District Court for the Southern District of Illinois case number 16-cv-138

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U.S. District Court for the Southern District of Illinois