Mergenthaler Linotype Co. v. Leonard Storch Enterprises, Inc., 78-358

• Decision Date: 30 November 1978
• Docket Number: No. 78-358,78-358
• Citation: 23 Ill.Dec. 352,383 N.E.2d 1379,66 Ill.App.3d 789
• Parties: , 23 Ill.Dec. 352 MERGENTHALER LINOTYPE COMPANY, a division of Eltra Corporation, a New York Corporation, Plaintiff-Appellee, v. LEONARD STORCH ENTERPRISES, INC., a New York Corporation, and Leonard Storch, Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 1379

383 N.E.2d 1379

66 Ill.App.3d 789, 23 Ill.Dec. 352

MERGENTHALER LINOTYPE COMPANY, a division of Eltra Corporation, a New York Corporation, Plaintiff-Appellee, v. LEONARD STORCH ENTERPRISES, INC., a New York Corporation and Leonard Storch, Defendants-Appellants.

No. 78-358.

Appellate Court of Illinois, First District, Fourth Division.

Nov. 30, 1978.

Sonnenschein, Carlin, Nath & Rosenthal, William J. Harte, Ltd., Chicago (Harold C. Hirshman, Gary S. Gildin, and William J. Harte, Chicago, of counsel), for defendants-appellants.

Jerold S. Solovy, Robert L. Byman, Jenner & Block, Chicago, for plaintiff-appellee.

ROMITI, Justice:

The questions before this court are whether an Illinois court has jurisdiction to enjoin the committing of allegedly tortious acts of unfair competition taking place in Illinois and other states when neither party is a resident of Illinois, and whether, under the circumstances, the Illinois trial court should entertain even that part of the complaint concerned with the defendant's activities in Illinois or should dismiss the case on the ground of Forum non conveniens. We hold that Section 17 of the Civil Practice Act (Long Arm Statute) (Ill.Rev.Stat.1977, ch. 110, par. 17), does not give an Illinois court jurisdiction to enjoin a New York corporation from selling a product made exclusively in New York to someone in one of the forty nine states other than Illinois since, as the plaintiff is not an Illinois resident, no injury was suffered in Illinois because of such sales. We do hold that we have jurisdiction over the defendant corporation (but not its president) as to that part of the claim of unfair competition arising out of the shipping of goods into Illinois. But we further hold that in view of the facts that neither party is a resident of Illinois; the defendant, a small corporation, would be seriously disadvantaged if forced to defend in Illinois; the defendant corporation's contacts with Illinois, while sufficient for jurisdictional purposes, are slight; the witnesses to the alleged piracy are all in New York; New York law is the appropriate law to be applied; and, most importantly, an Illinois court can resolve only a part of the litigation leaving much of the question unresolved, whereas a court in New York would have jurisdiction to resolve the whole controversy between the parties, the complaint should be dismissed on the grounds of Forum non conveniens.

The plaintiff Mergenthaler Linotype Company (Mergenthaler) is a division of Eltra Corporation. Both Mergenthaler and Eltra are New York corporations authorized to do business in Illinois. Mergenthaler's midwest office is located in Illinois. This office is the largest sales office in the Mergenthaler Company. The total sales volume for the midwest office in the fiscal year 1977 was in excess of six million dollars.

On October 17, 1977 Mergenthaler filed a suit in Cook County, Illinois accusing Leonard Storch Enterprises, and Leonard Storch individually, of unfair competition in copying its V.I.P. film fonts. V.I.P. photocomposing machines are used by commercial typesetters, advertisers, printers and others to set type for printed material. A film font used by the V.I.P. machine contains 96 typographical characters including letters and other characters. Mergenthaler offers more than 900 different type faces. A typical V.I.P. owner owns from twenty to several hundred of these fonts.

According to Mergenthaler's complaint, it is necessary for it to go through many extensive steps to design and manufacture these film fonts. For this reason, each one costs between $50 and $150. Storch Enterprises apparently is selling exact copies of these fonts at a substantially lower price, thus diverting sales from Mergenthaler. Mergenthaler, in its complaint, alleges that the defendants produce these fonts simply by making inexpensive photographic reproductions of the fonts and then reproducing them. Since the production costs are minimal, the corporation is able to sell the fonts at a lower price than Mergenthaler can. This, Mergenthaler complains, is unfair competition.

Mergenthaler, in its complaint, asks that the defendants be enjoined from duplicating or directly reproducing plaintiff's film fonts, in whole or in part, and from making any further sales of film fonts that duplicate or directly reproduce, in whole or in part, plaintiff's film fonts. Mergenthaler further asks that the defendants be ordered to return any and all fonts in their possession which are, in whole or in part, duplicates of plaintiff's fonts; that plaintiff be awarded $1.5 million in actual damages and $1.5 million in punitive damages; and further that the defendant be made to account for any profit realized as a result of the conduct alleged in the complaint.

In its complaint, Mergenthaler alleges that the cause of action arises out of the transaction of business in Illinois and the commission of a tortious act in Illinois. In fact, however, it is clear that the complaint does not limit itself to those acts committed in Illinois and the damage resulting therefrom.

Storch Enterprises, like Mergenthaler, is a New York corporation. Unlike Mergenthaler, it does not have a midwest office. Its only office outside of New York is in Texas where one of its sixteen employees (seventeen including Leonard Storch, its president) works. All of Storch's business outside of New York is done by mail and phone order; it advertises in national magazines and by mail solicitations sent into all states. Only about 5 per cent of its sales are to Illinois residents. During the two years preceding this lawsuit, Storch Enterprises sold only about $50,000 worth of fonts to Illinois customers, and not all of these were V.I.P. fonts. None of these sales were obtained by personal contact in Illinois. Mr. Storch was in Illinois only twice in the year preceding the lawsuit; once overnight to attend a meeting, the second for the taking of a deposition in connection with an antitrust suit filed in a New York Federal court against Alphatype Corporation.

Both the plaintiff's and the defendants' fonts are manufactured, in this country, solely in New York. (Mergenthaler also manufactures fonts in Germany.) Mergenthaler manufactures its fonts in Plainview, New York. The machinery involved in the manufacture cannot be moved from New York. All the letter drawings, friskets and plaques Mergenthaler uses to produce fonts are catalogued and stored in Plainview.

Likewise, all of the defendants' fonts are produced in New York. (Some of the technical assistance comes from the Dallas employee.) Also, all supplies currently used by Storch Enterprises to manufacture the fonts are purchased in New York City. All fonts are stored in New York City and are shipped from there; none are stored in or shipped from Illinois. All orders are submitted to and approved in New York. All of the corporation's files, records and bank accounts are in New York.

Storch is a small corporation. Leonard Storch is its sole stockholder. The year before the complaint was filed Storch Enterprises' total revenues were about $700,000.

After the complaint was filed, the defendants filed a special appearance and moved to dismiss for want of jurisdiction. The trial judge denied the motion but indicated he was inclined to grant a motion to dismiss for Forum non conveniens. After hearing arguments, however, he denied the defendants' motion to dismiss for Forum non conveniens on February 10, 1978, apparently reasoning that since the plaintiff does business in Illinois, it had a right to sue in Illinois. He also stated at that time that it was a close question and certified both the question of jurisdiction and of Forum non conveniens for immediate review by this court. On April 27, 1978, this court granted the defendants leave to appeal under Supreme Court Rule 308 (Ill.Rev.Stat.1977, ch. 110A, par. 308), which permits interlocutory appeal of controlling questions of law in certain cases where the trial court finds that there is substantial ground for difference of opinion and that an intermediate appeal from the order may materially advance the ultimate termination of the litigation. We also granted the defendants' motion to stay the trial court proceedings pending our determination on appeal.

Early in 1978, Storch Enterprises filed a complaint in a New York Federal court against Mergenthaler alleging violation of the federal anti-trust law through exclusive dealing, disparagement of Storch's products, harassment through legal action, false assertion of exclusive rights and false assertion and representation of exclusive protection and seeking a declaration that Mergenthaler's type fonts are not covered by a design patent or copyright, and that the material appearing on such fonts is therefore in the public domain. On May 24, 1978 the federal district court denied Mergenthaler's motion to dismiss or stay the proceedings because of the suit pending in Illinois.

I.

It is clear from the facts, and the plaintiff does not contend otherwise, that the defendants are not authorized to do business in Illinois and are not doing business in Illinois to such an extent as to be subject to suit in Illinois in the absence of a statute purporting to extend jurisdiction to the limits permitted by the due-process clause. Illinois does have such a statute. (Nelson v. Miller (1957), 11 Ill.2d 378, 143 N.E.2d 673; International Merchandising Associates v. Lighting Systems, Inc. (1978), Ill.App., 20 Ill.Dec. 838, 380 N.E.2d 1047. The Illinois Long Arm Statute (Ill.Rev.Stat.1977, ch. 110, par. 17(1)), extends the jurisdiction of the court

"to any cause of action arising from the doing of any of such acts:

(a) The transaction of any business within this State;

(b) The commission of a tortious act within this State;

* * *"com

The plaintiff's claim against the defendant is in tort. It is well established that under section 17(1)(b)...