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Illinois Supreme Court Curbs General Jurisdiction for Non-Resident Corporations

04/20/2020Cassiday Blog
Joseph A. PanateraDina  Lupancu

Illinois Supreme Court Curbs General Jurisdiction Over Non-Resident Corporations

The Illinois Supreme Court in Aspen American Insurance Company v. Interstate Warehousing, Inc.[i]narrowed personal jurisdiction over non-resident corporate defendants, essentially closing the door to plaintiffs suing for claims that have minimal ties to Illinois.

The application of the International Shoe[ii] minimum contacts test has traditionally permitted courts to exert power over non-resident corporations that were deemed to have “continuous and systematic contacts” with the forum, even when the suit was unrelated to the corporation's activities in the forum. Its application has proven to be particularly beneficial to toxic and mass tort personal injury litigation. However, Aspen effectually altered the trajectory of this long standing practice in Illinois by arguably invalidating a portion of Illinois' long-arm statute that authorizes a court to exercise jurisdiction in any action against a defendant “doing business within this State.”[iii] Aspen went even further and closed off another avenue of jurisdiction by holding that a company does not consent to general jurisdiction in Illinois by registering to do business in Illinois pursuant to the Illinois Business Corporation Act of 1983.

In Aspen, plaintiff filed a subrogation suit alleging breach of contract and negligence based on damage to goods in a warehouse in Michigan. The Illinois Supreme Court held it had no jurisdiction over defendant, an Indiana corporation, based on the fact that it did business through a warehouse in Illinois. The warehouse in Illinois was insufficient to show consent to the exercise of general jurisdiction. The court further raised and ruled on an issue of first impression in the Illinois Supreme Court, noting the provisions of the Illinois Business Corporation Act of 1983[iv] do not require foreign corporations to consent to general jurisdiction as a condition of doing business in Illinois.

The court applied Daimler AG v. Bauman,[v] a decision of the United States Supreme Court which distinguished between specific and general jurisdiction. In cases involving specific jurisdiction, a state can establish jurisdiction over a defendant when the cause of action arose out of or occurred within the jurisdiction. General jurisdiction is based on the principal that a defendant may be sued where they are domiciled. In cases involving a corporation, a corporation is domiciled where they are incorporated, where they have their principal place of business, or when their connection to the forum state is so substantial that it is deemed an “exceptional” case. To illustrate what is meant by an “exceptional case,” the United States Supreme Court in Daimler pointed to Perkins v. Benguet Consolidated Mining Co.[vi] In that case, the defendant corporation was forced to relocate temporarily from the Philippines to Ohio because of World War II.[vii] Ohio was thus “the center of the corporation’s wartime activities” and, effectively, a “surrogate for the place of incorporation or head office.”[viii] As such, the defendant corporation was subject to general jurisdiction in that state.[ix]

Subsequent to Aspen, Illinois courts have continuously rejected plaintiff’s attempts at asserting general jurisdiction over corporate non-resident defendants.

In Jeffs v. Ford Motor Co., plaintiff argued that because defendant registered to do business in Illinois under the Business Corporation Act of 1983[x] and because defendant had a registered agent in Illinois for service of process, it “subjected itself to the jurisdiction and laws of Illinois.”[xi] Plaintiff also argued Ford, having conducted substantial business in Illinois, is essentially at home in Illinois. The court, citing to Daimler and Aspen – and in particular – finding Aspen controlling and informative as to the narrow definition of general personal jurisdiction in Illinois, disagreed on both accounts.

In Torio v. Davidson Surface/Air, Inc.,[xii] the plaintiff argued the defendant's occasional pickups, deliveries, and its utilization of Illinois roads and highways was sufficient to establish that the defendant has sufficient continuous and systematic contacts within the state to make it subject to general personal jurisdiction in Illinois. The defendant argued it should not be subject to personal jurisdiction because its contacts were so sporadic and on an as-needed basis such that it was not at home in Illinois. The court, in applying the Aspen decision, concluded the defendant should not be subject to general personal jurisdiction because the defendant’s business in Illinois fell far below the standard of an exceptional circumstance found in Perkins.

In a case heard by the U.S. District Court for the Northern District of Illinois, Congdon v. Cheapcaribbean.com, Inc. et al., [xiii] the Court denied plaintiffs’ motion to remand to state court and dismissed the case for lack of personal jurisdiction based on Aspen. In Congdon, plaintiffs suffered injuries when they were involved in an automobile accident in Mexico during a vacation booked through the defendants. The vehicle was being operated by an employee of the defendants at the time of the accident. Plaintiffs alleged that defendants were “doing business” in Cook County, Illinois because they sold travel packages through the internet and telephone sales. However, none of the defendants were Illinois corporations and none had their principal place of business in Illinois. The Court, citing to Aspen, determined that the Illinois long-arm statute cannot constitutionally be applied to establish general jurisdiction where there is no evidence that the defendants’ contacts with Illinois have rendered it “essentially at home” in Illinois.   

A more recent trend that seems to have resulted from the Aspen decisionis an attempt to expand specific personal jurisdiction instead of arguing for general jurisdiction. In Zamora v. Lewis, et al.,plaintiffs filed suit in Cook County against multiple entities as a result of two deaths caused by a fire at a rented home in Maine. [xiv] The suit focused on the smoke detectors installed in the rented home. The court referenced the Aspen opinion, noting it requires a defendant to have affiliations with the forum state that are so continuous and systematic as to render the defendant “at home” there. The court further indicated that plaintiffs were not arguing the court had general jurisdiction over the defendants, but instead that the court had specific jurisdiction over the defendants. The appellate court concluded that in order to have specific jurisdiction there must be an affiliation between the forum and the underlying controversy and there must be an activity or an occurrence that takes place in the forum State before they can be subject to the State’s regulation. When there is no such connection, the State lacks specific jurisdiction regardless of the extent of the defendant’s unconnected activities in the State. Consequently, the appellate court affirmed the dismissal of defendants based on a lack of personal jurisdiction.

In Dixon v. GAA Classic Cars, LLC, [xv] an Illinois resident e-mailed the defendant, a North Carolina based company that live-streamed auto auctions, about an on-line advertisement for a 1973 Ford Bronco. The two communicated about the vehicle on multiple occasions via e-mail, text message, and phone calls. Ultimately, plaintiff’s bid for the vehicle was accepted. When plaintiff received the vehicle, it had several issues and plaintiff sued for fraud. The court found the defendant was subject to specific personal jurisdiction in Illinois. The appellate court held that Illinois courts could exercise jurisdiction over the defendant due to the nature and quality of the communications between the parties about the vehicle, the fact that the defendant actually engaged in a nationwide advertising campaign for its auction website, and because the defendant received payment from plaintiff through its website. 

As demonstrated by Aspen and cases following its precedent, non-resident companies may be able to avoid suit altogether in Illinois when specific jurisdiction cannot be established. Thus, plaintiffs may attempt to expand specific jurisdiction or plaintiffs might be forced to bring suit elsewhere, perhaps in less-favorable jurisdictions that they would otherwise attempt to avoid. This may be particularly relevant in mass tort cases, strict product liability cases, transportation cases, or cases involving internet related businesses. As plaintiff and defense attorneys continue to adjust to the framework for establishing personal jurisdiction in Illinois, it is important to keep the Illinois Supreme Court’s straightforward Aspen opinion in mind for all cases, as the court made no exception for certain types of claims or defendants.

 



[i] Aspen Am. Ins. Co. v. Interstate Warehousing, Inc., 2017 IL 121281

[ii] Int'l Shoe Co. v. Wash., 326 U.S. 310 (1945)

[iii] Baker v. Smith & Wesson Corp., 2019 U.S. Dist. LEXIS 10300, *6 n5

[iv] 805 ILCS 5/1.01 et seq. (2012)

[v] Daimler AG v. Bauman, 571 U.S. 117 (2014)

[vi] Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437 (1952)

[vii] Perkins, 342 U.S. at 447-48

[viii] Daimler, 571 U.S. at n.8 (quoting Arthur T. von Mehren & Donald T. Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv. L. Rev. 1121, 1144 (1966)).

[ix] Perkins, 342 U.S. at 448

[x] 805 ILCS 5/1.01 et seq. (2012)

[xi] Jeffs v. Ford Motor Company2018 IL App (5th) 150529-U, 13

[xii] Torio v. Davidson Surface/Air, Inc., 2018 Ill. App. Unpub. LEXIS 375

[xiii] Congdon v. Cheapcaribbean.com, Inc., 2017 U.S. Dist. LEXIS 182500

[xiv] Zamora v. Lewis, et al., 2019 Ill. App. (1st) 181642

[xv] Dixon v. GAA Classic Cars, LLC, 2019 Ill. App. (1st) 182416

 

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