Random Florida-to-Illinois Texts, Emails and Phone Calls Not Enough to Subject Fla. LLC to IL Jurisdiction

In McGlasson v. BYB Extreme Fighting Series, LLC, 2017 WL 2193235 (C.D.Ill. 2017), the plaintiff sued a Florida LLC and two Florida residents for pilfering the plaintiff’s idea to host MMA fights on cruise ships off the coast of Florida.

Plaintiff claimed that after he sent a rough video of the concept to them, the defendants hijacked the concept and then formed their own MMA-at-sea event, causing the plaintiff monetary damages.

All defendants moved to dismiss the plaintiff’s claims on the basis that they weren’t subject to Illinois jurisdiction.

The Court granted defendants’ motion to dismiss and in doing so, discussed the requisite contacts for an Illinois court to exercise jurisdiction over an out-of-state defendant who commits an intentional tort.

In breach of contract actions, personal jurisdiction turns on whether a defendant purposefully avails itself or the privilege of doing business in the forum state. With an intentional tort defendant, by contrast, the court looks at whether a defendant “purposefully directed” his conduct at the forum state.

Purposely directing activity at a state requires a finding of (1) intentional conduct, (2) expressly aimed at the forum state, with (3) defendant’s knowledge the effects would be felt in the forum state.  If plaintiff makes all three showings, he establishes that a defendant purposefully directed its activity at the forum state.

A plaintiff in an intentional tort case cannot, however, rely on his own unilateral activity to support jurisdiction over a defendant.  Similarly, a defendant’s contact with a third party with no connection to a forum state isn’t relevant to the jurisdictional analysis.

Here, the lone Illinois contacts alleged of defendants were a handful of emails, phone calls and text messages sent to the Illinois resident plaintiff.  To strengthen his case for jurisdiction over the Florida defendants, plaintiff alleged he suffered an economic injury in Illinois.

Rejecting plaintiff’s argument, the court viewed e-mail as not existing “in any location at all:”  instead, it bounces from server to server and the connection between where an e-mail is opened and where a lawsuit is filed is too weak a link to subject an out-of-state sender to jurisdiction in a foreign state.

The Court also noted that (a plaintiff’s) suffering economic injury in Illinois isn’t enough, standing alone, to confer personal jurisdiction over a foreign resident.  The focus is instead whether the defendant’s conduct “connects him to [Illinois] in a meaningful way.”

Since plaintiff’s MMA-at-sea idea had no connection to Illinois and the defendant’s sporadic phone calls, emails and texts weren’t enough to tie him to Illinois, the Court lacked personal jurisdiction over the Florida defendants.

Take-aways:

1/ In intentional tort setting, a foreign defendant’s conduct must be purposefully directed at a forum state for that state to exercise personal jurisdiction over the defendant;

2/ plaintiff’s unilateral actions vis a vis an out-of-state defendant don’t factor into the jurisdictional calculus;

3/ A defendant’s episodic emails, texts and phone calls to an Illinois resident likely won’t be enough to subject the defendant to personal jurisdiction in Illinois.

 

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.

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