Consolidated Laboratories, Inc. v. Shandon Scientific Co.
| Decision Date | 29 August 1967 |
| Docket Number | No. 16086,16086 |
| Citation | 384 F.2d 797 |
| Parties | CONSOLIDATED LABORATORIES, INC., a corporation, Plaintiff-Appellant, v. SHANDON SCIENTIFIC COMPANY, Ltd., a corporation, Shandon Scientific Company, Inc., a corporation, Shandon Scientific Industries, Ltd., a corporation, Ernest R. Shandon, and George D. Welch, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Patrick W. O'Brien, George Bobrinskoy, Jr., Chicago, Ill., for plaintiff-appellant, Mayer, Friedlich, Spiess, Tierney, Brown & Platt, Chicago, Ill., of counsel.
Laurens G. Hastings, David P. List, Donald A. Mackay, Chicago, Ill., for defendants-appellees, Leibman, Williams, Bennett, Baird & Minow, Chicago, Ill., of counsel.
Before HASTINGS, Chief Judge, and KILEY and SWYGERT, Circuit Judges.
This diversity action charged that defendants Shandon Scientific Company, Ltd., and Shandon Scientific Industries, Ltd., both of England, referred to as Shandon/London,1 breached a contract with plaintiff; and that Shandon Scientific Company, Inc., of Pennsylvania, and its President, George Welch, and Ernest Shandon, of London, England, acted in concert unlawfully to induce Shandon/London to breach that contract. Plaintiff seeks an injunction and damages. The district court dismissed the suit for lack of personal jurisdiction over defendants, and plaintiff has appealed. We reverse and remand.
Shandon/London manufactures scientific equipment for biological and biochemical laboratories. Beginning in 1959 plaintiff acted as exclusive United States Distributor. In May, 1963, this relationship was expressed in a written five-year contract. In September, 1965, the parties agreed to terminate the 1963 contract, and a new written contract was made on October 6, 1965, under which plaintiff was no longer exclusive distributor. In May, 1966, Shandon/Pennsylvania was incorporated. On August 6, 1966, Ernest Shandon, representing Shandon/London, wrote plaintiff terminating the agreement, and this action followed.
The vital questions are whether plaintiff's contract claim arises from the transaction of business in Illinois by Shandon/London within the meaning of the "long arm" statute,2 and whether Shandon/Pennsylvania, Welch, and Ernest Shandon committed tortious acts in Illinois within the meaning of the statute.
So far as pertinent here, the complaint alleges in substance that the negotiations leading to the 1963 contract with Shandon/London were carried on in Illinois and England; that plaintiff's efforts greatly expanded the United States market for Shandon products; that the products were shipped from England to Illinois and paid for in Illinois; that following negotiations in Illinois in June and July, 1965 between plaintiff and Shandon/London, represented by Ernest Shandon, they agreed to a new contractual relationship in October, 1965, which was accepted by plaintiff in Illinois; that by the terms of this agreement plaintiff was to be appointed a major United States dealer for Shandon products by an American company to be formed as "main distributor"; that after the formation of Shandon/Pennsylvania in May, 1966, it was operated not as "main distributor" but as a direct seller; and that United States customers of Shandon/London, including plaintiff's, were notified of the direct sales policy in trade journals and press releases distributed in Illinois. The complaint alleges further that Shandon/London terminated and thereby breached the October 6, 1965 contract by a letter dated August 6, 1966; and that Shandon/Pennsylvania, Welch and Ernest Shandon maliciously induced the breach.
George Welch and Ernest Shandon filed affidavits in support of the motion to dismiss. They assert that in June, 1965, they met with plaintiff's Director, Dr. Scherr, for 3½ or 4 hours. Welch states that the June 23, 1965, discussion concerned the formation of Shandon/ Pennsylvania and its function as supplier of Shandon products "directly through representatives and * * * dealers." Ernest Shandon states that the discussion was on June 28 and concerned plaintiff's failure to perform under the 1963 agreement with respect to terms of payment, failure to promote Shandon's products "as such," and failure to provide growth in sales. He states that there was no subsequent meeting in Illinois regarding cancellation of the 1963 agreement and that no agreement was reached in Illinois to cancel, but that in September Scherr appeared in London to address Shandon/London's Board of Directors with respect to the 1963 agreement; that after the meeting Scherr was advised in London that the agreement was to be cancelled; that Scherr agreed but brought the "Memorandum of Agreement" back to Illinois, signed it there and sent it to England on October 6, 1965; and that no Shandon company has offices or bank accounts in Illinois.
Dr. Scherr filed an affidavit stating that twice between October, 1959, and May, 1963, Ernest Shandon and Newman, Shandon/London's export manager, came to Illinois to discuss formalizing the distributorship relation between Shandon and plaintiff; that copies of the signed May 15, 1963, contract were mailed to Scherr in Illinois; that in May, 1964, Ernest Shandon discussed a new contract with Scherr in Illinois to "reduce three significant problems" in the 1963 agreement: new styling of Shandon products, more expeditious shipping by Shandon/London and allocation of the credit burden between the parties; that the June 28, 1965, Illinois meeting between Scherr and three Shandon representatives lasted most of the business day; that they discussed the formation of Shandon/Pennsylvania and plaintiff's relationship with it; that on June 30 and July 1 a Shandon representative met again in Illinois with Scherr; that at no meeting was cancellation of the 1963 agreement discussed, although Shandon on June 28 expressed dissatisfaction with lack of growth of business but held plaintiff blameless; that plaintiff fully performed under that contract; that Scherr appeared in London to discuss a proposed "joint venture" between plaintiff and the planned Shandon/Pennsylvania, but that the "main distributor" idea was agreed to; that the "Memorandum of Agreement" was signed by him in Illinois, and mailed to England; and that four named periodicals printed the advertisement of Shandon/Pennsylvania and that Shandon/Pennsylvania solicited sales in Illinois by letter. This last statement was supported by a copy of a letter of August 17, 1966, from Welch to an Illinois hospital enclosing a catalogue of Shandon/Pennsylvania products, promising a list of prices, and offering to quote prices on products from "stock" in Pennsylvania.
The district court decided that Shandon/London transacted business in Illinois under the 1963 contract but that it did not do business in Illinois under the contract sued upon, the agreement of October, 1965. The district court held it had no jurisdiction over defendant Shandon/London because the claim did not arise from the transaction of business. With respect to the other defendants, Shandon/Pennsylvania, Welch and Shandon, the court decided that, although their alleged actions were tortious acts committed in Illinois, the exercise of jurisdiction over them would violate due process under Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). The court distinguished McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), because defendant there actively solicited and serviced plaintiff in his home state.
The evidence of sufficient contacts within a state, to avoid violation of due process by substitute service on non-residents, depends upon the particular facts of each case. Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761, 767 (1961). The service there was sustained in a tort case, where defendants only contact in Illinois was its sale in the course of commerce there of a valve put into a water heater in Pennsylvania which exploded and injured plaintiff. This is the pioneer and leading Illinois case determining the "extent to which due process permits substituted service where defendant had no agent or employee" in Illinois. 176 N.E.2d at 763.
It is needless to discuss the evolution of this idea of valid service from a forum state upon non-resident defendants, brought about by the nationalization of commerce through the use of the mails and otherwise.3 See Grobark v. Addo Machine Co., 16 Ill.2d 426, 158 N.E.2d 73 (1959); Gray v. American Radiator & Standard Sanitary Corp., 176 N.E.2d at 765. The due process implications were settled in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), and Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). There must be sufficient "minimum contacts" to make it reasonable and just according to our traditional concepts of fair play and substantial justice to satisfy due process requirements. See also National Gas Appliance Corp. v. AB Electrolux, 270 F.2d 472, 475 (7th Cir. 1959), cert. denied, 361 U.S. 959, 80 S.Ct. 584, 4 L. Ed.2d 542 (1960).
The Illinois Supreme Court in Gray said that requirements for jurisdiction "have been further relaxed" since International Shoe and now it is enough that the has a substantial connection with the forum state. 176 N.E.2d at 764. The court also said that the relevant inquiry as to the "fair and reasonable" test is whether defendant engaged in an act or in conduct by which he may be said to have invoked the benefits and protections of the forum state. The trend, it is said, in defining due process is away from territorial limitations and toward emphasis on notice...
To continue reading
Request your trial
-
Snyder v. Hampton Industries, Inc.
...e. g., Biltmoor Moving & Storage Co. v. Shell Oil Co., 606 F.2d 202, 206-07 (7th Cir. 1979); Consolidated Laboratories, Inc. v. Shandon Scientific Co., 384 F.2d 797, 800-01 (7th Cir. 1967); Promotion Network, Inc. v. C. Da Silva (Vinhos) S.A.R.L., 63 F.R.D. 435, 436-39 (N.D.Ill.1974). See a......
-
Southern Machine Company v. Mohasco Industries, Inc.
...the Tennessee statute. See Nelson v. Miller, 11 Ill.2d 378, 143 N.E.2d 673 (1957); see also Consolidated Laboratories, Inc. v. Shandon Scientific Company, Ltd., 384 F.2d 797, 800-801 (7th Cir. 1967). Third, as was well noted in Temco, Inc. v. General Screw Products, Inc., 261 F.Supp. 793 (M......
-
Hitt v. Nissan Motor Company, Ltd.
...ch. 110, § 17(1) (b). 45 1965 Perm.Supp., C.R.S. § 37-1-26(c). 46 N.M.S.A. § 21-3-16, subd. A(3). 47 Consolidated Laboratories, Inc. v. Shandon Scientific Co., 384 F.2d 797 (7th Cir. 1967); Hutter Northern Trust v. Door County Chamber of Commerce, 403 F.2d 481 (7th Cir. 1968); Metropolitan ......
-
Shellenberger v. Tanner
...v. Spindler, 256 Minn. 543, 99 N.W.2d 670; Elkart Engineering Corp. v. Dormier Werke, 343 F.2d 861, 5 Cir.; Consolidated Laboratories, Inc. v. Shandon Scientific Co., 384 F.2d 797, 7 Cir.; Etzler v. Dille and McGuire Mfg. Co., 249 F.Supp. 1, D.C.Va.; Hamilton Nat. Bank v. Russell, 261 F.Sup......