Tag: long arm jurisdiction

E-Mails, Phone Calls, and Web Activity Aimed at Extracting $ From IL Resident Passes Specific Jurisdiction Test – IL First Dist.

In Dixon v. GAA Classic Cars, LLC, 2019 IL App (1st) 182416, the trial court dismissed the Illinois plaintiff’s suit against a North Carolina car seller on the basis that Illinois lacked jurisdiction over the defendant.

Reversing, the First District answered some important questions concerning the nature and reach of specific jurisdiction under the Illinois long-arm statute as informed by constitutional due process factors.

Since the defendant had no physical presence or office in Illinois, the question was whether the Illinois court had specific jurisdiction [as opposed to general jurisdiction] over the defendant.

Specific jurisdiction requires a plaintiff to allege a defendant purposefully directed its activities at the forum state and that the cause of action arose out of or relates to those contacts.  Even a single act can give rise to specific jurisdiction but the lawsuit must relate specifically to that act. [¶ 12]

In the context of web-based companies, the Court noted that a site that only imparts information [as opposed to selling products or services] does not create sufficient minimum contacts necessary to establish personal jurisdiction over a foreign defendant.  Here, though, the defendant’s site contained a “call to action” that encouraged visitors like the plaintiff to pay the defendant.  [¶ 14]

The court found that plaintiff’s allegations that defendant falsely stated that the Bronco’s frame was restored, had new brakes and was frequently driven over the past 12 months [when it hadn’t] were sufficient to allege a material misstatement of fact under Illinois fraud law.  It further held that fraudulent statements in telephone calls are just as actionable as in-person statements and can give an Illinois court jurisdiction over a foreign defendant.  [¶ 17]

Viewed in the aggregate, the plaintiff’s allegations of the defendant’s Illinois contacts were enough to confer Illinois long-arm jurisdiction over the defendant.

The plaintiff alleged the defendant (i) advertised the Bronco on a national website, and (ii)  e-mailed and telephoned plaintiff several times at his Illinois residence.

Next, the court considered whetherspecific jurisdiction over the defendant was  consistent with constitutional due process considerations.

The due process prong of the personal jurisdiction inquiry focuses on the nature and quality of a foreign litigant’s acts such that it is reasonable and fair to require him to conduct his defense in Illinois.

Factors the court considers are (1) the burden on the defendant to defend in the forum state, (2) the forum’s interest in adjudicating the dispute, (3) the plaintiff’s interest in obtaining effective relief, (4) the interstate judicial system’s interest in obtaining the most efficient resolution of the case, and (5) the shared interests of the several states in advancing fundamental social policies.

Once a plaintiff shows that a defendant purposely directed its activities at the forum state, the burden shifts to the out-of-state defendant to show that litigating in the forum is unreasonable.

The Dixon court held the defendant failed to satisfy this burden and that specific jurisdiction over it was proper.

Next, the Court declined to credit defendant’s Terms & Conditions (“T&C”) – referenced in the Defendant’s on-line registration form and that fixed North Carolina as the site for any litigation.

Generally, one written instrument may incorporate another by reference such that both documents are considered as part of a single contract.  However, parties must clearly show an intent to incorporate a second document.

Here, the court found such a clear intent lacking. Defendant did not argue that it sent the T&C to Plaintiff or referenced them in its multiple e-mail and telephone communications with Plaintiff.

The court also pointed out that defendant’s registration form highlighted several of the T&C’s terms.  However, none of the featured [T&C] terms on the registration form mentioned the North Carolina venue clause.  As a result, the bidder registration form didn’t evince a clear intent to incorporate the T&C into the contract.

Afterwords:

A foreign actor’s phone, e-mail and on-line advertisements directed to Illinois residents can meet the specific jurisdiction test;

Where a Terms and Conditions document contains favorable language to a foreign defendant, it should make it plain that the T&C is a separate document and is to be incorporated into the parties’ contract by using distinctive type-face [or a similar method];

If the defendant fails to sufficiently alert the plaintiff to a separate T&C document, especially if the plaintiff is a consumer, the defendant runs the risk of a court refusing to enforce favorable (to defendant) venue or jurisdiction provisions.

 

 

Getting Jurisdiction Over A Foreign Corporation – IL Case Note

Q: Can Spanish companies be subject to Illinois jurisdiction where the companies’ U.S.-based subsidiaries signed contracts that contained an Illinois forum selection clause. 

A: Yes

 In , LLC v. Acciona, 2014 IL App (1st) 123403, the plaintiff entered into a multi-million dollar contract with two U.S. subsidiaries of the Spanish corporate defendants to develop power plants.

The US entities were owned by one or more companies owned by the defendants.

The operative contract documents contained forum selection clauses fixing Illinois as the site for litigation.  When the deal fell through, plaintiff sued the foreign parent companies for damages.

The defendants moved to dismiss on the basis that they lacked sufficient contacts with Illinois and didn’t sign the contract.  The trial court denied the motion and the defendants appealed.

Held: Affirmed.  The foreign defendants are “closely related” enough to the underlying contracts and parties to be subject to Illinois jurisdiction. 

Reasons:  

  • To sue a nonresident defendant in IL the plaintiff has the burden of showing a basis for personal jurisdiction;
  • Illinois courts can assert general or specific jurisdiction;
  • General jurisdiction over a nonresident requires a showing of continuous and systematic business contacts such that it can be sued for matters unrelated to its contacts with Illinois;
  • Specific jurisdiction requires a showing of minimum contacts –that a defendant purposefully directed its activities at Illinois and the litigation arises from those activities;
  • A corporation is subject to general jurisdiction where it is organized under Illinois law or is doing business in Illinois;
  • The Illinois long-arm statute (735 ILCS 5/2-209) permits jurisdiction over a foreign defendant on any basis permitted by the Illinois Constitution and U.S. Constitution;
  • If an out-of-state defendant’s contacts with Illinois are sufficient to satisfy state and federal due process concerns, the Illinois long-arm statute is satisfied;
  • Federal due process requires that a foreign defendant have certain minimum contacts with a forum such that maintenance of the suit doesn’t offend traditional notions of fair play and substantial justice.

 ¶¶ 34-37.

The trial court found jurisdiction on the basis that the foreign defendants were “closely related” to the dispute such that it was foreseeable they would be bound by the forum selection clause. 

In Illinois, forum selection clauses are construed broadly to include related claims ancillary to the contract.  The clauses are generally valid and enforceable and a non-party can be bound by them if it is closely connected to the dispute.  (¶¶ 36-37). 

Where there is a sufficiently close relationship between the non-party, the dispute and the contracting parties, the non-party is considered to impliedly consent to the forum selection clause and a foreign state’s exercise of personal jurisdiction over it.  (¶¶ 43-44).

Applying these principles, the Court found the defendants subject to specific jurisdiction in Illinois.  The Court pointed to the broad forum selection text and the fact that the defendants controlled all business aspects of their subsidiaries; including funding, hiring and firing decisions.

The Court also noted the U.S. subsidiaries had few employees, scant business operations and in one case, was purely a stockholding vehicle for the defendants’ multi-national business ventures.  (¶¶ 47-48).

Afterwords:

– Forum selection clauses are construed and enforced to the letter in Illinois- especially in contracts involving sophisticated commercial parties with equal bargaining power;

– a parent company that sufficiently controls or is intermixed with its subsidiary’s business affairs can be bound by a forum selection clause signed by the subsidiary.

 

 

 

 

 

 

  

 

Apparent Agency, Ratification and Long-Arm Jurisdiction: IL Law

The First District examines a slew of important substantive and procedural litigation issues in Graver v. Pinecrest Volunteer Fire Dept., 2014 IL App (1st) 123006, a commercial lease dispute pitting an Illinois corporation against a Tennessee corporation and an agent of that corporation.

The parties signed a fire truck lease that called for seven years’ worth of monthly payments.

The lease was signed by defendant’s former treasurer who said he had authority to sign on defendant’s behalf.  Plaintiff sued after the defendant defaulted and won an Illinois default judgment against both the corporate and individual defendants of over $92,000.

About fifteen months later, the corporate defendant moved to vacate the judgment under Code Section 2-1401 (for judgments more than 30 days but less than 2 years old).  It claimed the Illinois court lacked personal jurisdiction over it.   The trial court denied the motion and found that defendant  was subject to Illinois long-arm jurisdiction.

The First District reversed.

Holding that the trial court lacked jurisdiction over the Tennessee defendant, the court catalogued the key Illinois jurisdictional rules for foreign defendants:

– the plaintiff has the burden of establishing jurisdiction over an out-of-state defendant;

– Code Section 2-209(c) (Illinois’ long-arm statute) provides that an Illinois court can exercise jurisdiction over a foreign defendant if permitted by the Illinois Constitution and the U.S. Constitution;

– Federal due process requires a foreign defendant to have “minimum contacts” with the forum state and to have “purposely availed” itself of the privileges of conducting activities in the forum state;

– Federal due process involves three factors: (1) whether the defendant had minimum contacts such that it had “fair warning” it may be haled into the forum state’s court; (2) the claim against the foreign defendant arose from or is related to the defendant’s contacts with the forum state; and (3) whether it’s reasonable to require the foreign defendant to litigate in another state;

– For Illinois to have general jurisdiction over an out-of-state defendant, the defendant must have “continuous and systematic” business contacts with the forum state;

– Where specific jurisdiction applies, the foreign defendant can only be sued if the action arises from or is related to the defendant’s conduct in the forum state;

– In a breach of contract suit against an out-of-state defendant, the critical jurisdictional factors are (1) who initiated the transaction; (2) where the contract was formed; and (3) where the contract was performed;

– A choice-of-law contractual provision is relevant, but is not by itself a sufficient basis to subject a defendant to jurisdiction in another state.

(¶¶ 13-17).

Applying these rules, the First District found that Illinois lacked jurisdiction over the Tenn. defendant.  First, there was no general jurisdiction since the corporation’s contacts with Illinois were sparse: they weren’t continuous and systematic.  Also, the agent who signed the lease lacked authority to bind the defendant.  It offered an uncontested affidavit that established the agent was never authorized to sign contracts for the defendant.  The court also found that since defendant didn’t know about the lease until after the default judgment was entered, there was no ratification of the agent’s signing the lease.  ¶¶ 19-20.

The Court reversed the trial court’s jurisdiction ruling and voided the judgment against the defendant.

Take-aways: For an out-of-state corporation to be subject to Illinois specific jurisdiction, its contacts with Illinois must form the basis for the lawsuit.  In addition, where a plaintiff is trying to impute an agent’s actions to a corporate principal, the plaintiff must show that the principal said or did something to create in the plaintiff the reasonable belief that the agent could bind the principal.  My question is why didn’t the plaintiff file a counter-affidavit which detailed the actions of the agent and principal which led the plaintiff to assume the agent had authority to bind the principal? It’s not clear whether it would have made a difference; but a counter-affidavit would have at least given the plaintiff a fighting chance.