Scovill Manufacturing Co. v. Dateline Electric Co.

• Citation: 461 F.2d 897
• Decision Date: 15 May 1972
• Docket Number: No. 71-1344.,71-1344.
• Parties: SCOVILL MANUFACTURING COMPANY, a corporation, Plaintiff-Appellant, v. DATELINE ELECTRIC CO., Ltd., a corporation, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

461 F.2d 897 (1972)

SCOVILL MANUFACTURING COMPANY, a corporation, Plaintiff-Appellant, v. DATELINE ELECTRIC CO., Ltd., a corporation, Defendant-Appellee.

No. 71-1344.

United States Court of Appeals, Seventh Circuit.

April 12, 1972.

Rehearing Denied May 15, 1972.

Merle L. Royce, II, Donald A. Mackay, Chicago, Ill., for plaintiff-appellant; Leibman, Williams, Bennett, Baird & Minow, Chicago, Ill., of counsel.

Thomas R. Mulroy, John L. Conlon, Glen H. Kanwit, Chicago, Ill., for defendant-appellee; Hopkins, Sutter, Owen, Mulroy & Davis, Chicago, Ill., of counsel.

Before SWYGERT, Chief Judge, KNOCH, Senior Circuit Judge, and FAIRCHILD, Circuit Judge.

SWYGERT, Chief Judge.

The question presented for review is whether a federal district court in Illinois acquired personal jurisdiction over an English corporation in a diversity action for breach of contract. The district court, 319 F.Supp. 772, in applying the Illinois "long arm" statute, Ill.Rev.Stat. ch. 110 § 17 (1969),¹ held that jurisdiction over the defendant had not been acquired. We take the opposite view and reverse.

The plaintiff, Scovill Manufacturing Company, a Connecticut corporation, is engaged in the manufacturing and marketing of electric housewares products. The defendant, Dateline Electric Company, Ltd., an English corporation, is a manufacturer of electric housewares products. In 1968 Scovill became interested in marketing a line of electric hair curler sets, but lacked manufacturing facilities. At the July 1968 Housewares Show, the principal housewares industry trade show held twice yearly in Chicago, contact was made between representatives of Scovill and Dateline which, following negotiations in Chicago and elsewhere, resulted in a contract whereby Dateline was to manufacture hair curling sets for Scovill. After delivery under the contract had begun, a dispute arose over the quality of the sets. On October 1, 1969 Scovill terminated the contract for nonperformance and requested that Dateline return certain tooling owned by Scovill. The request was refused. Thereafter, Dateline attempted to dispose of a large quantity of the sets intended for Scovill to various outlets. These attempts were made in Chicago at the January 1970 Housewares Show.

The foregoing events precipitated the instant suit. The first three counts of the complaint alleged trademark and trade name infringements based on the claim that Dateline wrongfully solicited orders bearing the trademarks and trade names "Scovill" and "Hamilton Beach" (a division of Scovill) during the January 1970 Housewares Show in Chicago. The relief sought was an injunction to prohibit Dateline from offering the sets for sale and an accounting to Scovill for all profits realized by Dateline from the sale of such sets. Count IV presented a claim for damages premised upon Dateline's alleged breach of the written contract between Scovill and Dateline.

Subject matter jurisdiction was based upon the Lanham Trademark Act, 15 U.S.C. § 1051 et seq., 28 U.S.C. § 1338, and diversity of citizenship, 28 U.S.C. § 1332. Service of process was made in England pursuant to Rule 4(e), Fed.R. Civ.P. and sections 16 and 17 of the Illinois Civil Practice Act, Ill.Rev.Stat. ch. 110. Since the first three counts asserted tort claims allegedly committed in Illinois, Dateline conceded that service was proper under these counts, but moved to quash service and dismiss Count IV for want of personal jurisdiction.² The district court granted the motion and this appeal followed.

Several grounds are advanced by Scovill for maintaining that service on Dateline as to the contract claim was legally effective. First, Scovill claims that the "transacting business" test under section 17(1)(a) was met. Second, Scovill argues that the acts of infringement, "coming upon the heels of the breach and arising directly from it," are inseparable from the contract dispute and thus provide a basis for the proper application of section 17(1)(b). Third, Scovill maintains that Dateline's activities in Illinois were so extensive that it could be said that the defendant was "doing business" within the state under the Illinois common law jurisdictional standard for nonresidents. Finally, Scovill contends that the contract claim is so interrelated with the infringement claims that under the doctrine of pendent jurisdiction the district court entertaining jurisdiction on Counts I, II, and III acquired jurisdiction over the defendant with respect to Count IV. Inasmuch as we are convinced that the facts justify the conclusion that the "transacting business" test under section 17(1)(a) has been met, we need not consider the other reasons advanced by Scovill for validating the service.

The record shows that many of Dateline's products are manufactured for sale by other electric housewares companies under their own trademarks or "private labels." Since the beginning of 1967 a representative of Dateline has attended each of the semi-annual housewares shows in Chicago for the purpose of contacting prospective customers and soliciting private label contracts.

At the July 1968 Housewares Show Scovill's product manager for hair curler sets, Larry Pugh, was contacted by Hugh Sims-Hildich, Dateline's managing director and principal salesman. Sims-Hildich told Pugh that Dateline would be willing to make sets for Scovill, and Pugh, in turn, expressed an interest in the transaction. They then discussed possible prices, quantities, and the range of models that might be involved.

Thereafter, in September 1968, negotiations were conducted by representatives of the two companies in New York City and in October, in Waterbury, Connecticut, at which time a proposed agreement was submitted by Dateline. Further discussions were carried on by letter, transatlantic telephone, and Telex. By December Scovill had executed a contract and sent it to England, where it had been executed by Dateline. Because this copy was delayed in the mail, the contract was reexecuted in Waterbury upon Sims-Hildich's return to the United States in January 1969.

Although the contract had been signed, the parties continued to discuss various aspects of the proposed design of the hair curler sets. These discussions took place early in January 1969 in New York City and later in the month at the Housewares Show in Chicago, where Sims-Hildich and a representative of Scovill met several times. At the July 1969 Housewares Show, Sims-Hildich again met with representatives of Scovill to examine samples of the initial sets manufactured by Dateline, to discuss a problem that had arisen in connection with the latch mechanism of the hair curler sets, and to review the art work for the product cartons.

We are of the opinion that the district court erred in treating the contacts between the parties in Illinois as "nonsubstantial" and "fortuitous." Rather, we think these contacts were of such importance and substantiality as to meet the "minimum contacts" test that underlines the definition of transacting business encompassed by section 17(1)(a) of the Illinois Civil Practice Act. Dateline's activity within Illinois in connection with the contract in issue was much more extensive than that occurring in National Gas Appliance Corp. v. A. B. Electrolux, 270 F.2d 472 (7th Cir.1959), cert. denied, 361 U.S. 959, 80 S.Ct. 584, 4 L.Ed.2d 542 (1960), and Kropp Forge Co. v. Jawitz, 37 Ill.App.2d 475, 186 N.E.2d 76 (1962), where personal jurisdiction over nonresident defendants was sustained under section 17(1)(a).

Moreover, Dateline's Illinois contacts cannot be considered "casual" or "incidental" as the contacts of a nonresident defendant were characterized in Kaye-Martin v. Brooks, 267 F.2d 394 (7th Cir.), cert. denied, 361 U.S. 832, 80 S.Ct. 84, 4 L.Ed.2d 75 (1959). The three meetings between representatives of Scovill and Sims-Hildich in 1968 and 1969 in Chicago came about because of their regular attendance at the Housewares Show for business purposes. Indeed, the sole purpose of these shows was to promote business contacts and provide a place where business relationships would be initiated if not fully completed. Business needs prompted Scovill's periodic appearances. Dateline routinely attended the shows in order to solicit potential customers. The visits of Sims-Hildich were made to coincide with the shows since they represented an important part of Dateline's American business. A defendant who sends an agent into Illinois to solicit or to negotiate a contract is transacting business within the statutory definition. See Consolidated Laboratories, Inc. v. Shandon Scientific Co., Ltd., 384 F.2d 797 (7th Cir.1967).

The fact that some of the important pre-contract negotiations were conducted elsewhere than Illinois and that the actual execution of the contract occurred outside of Illinois' borders is immaterial. Likewise immateral are the facts that the contract was not to be performed in Illinois or that it was to be governed by the law of Connecticut. In addition, we attach no significance to the fact that neither party is a resident of Illinois. Nonresidents as well as residents of Illinois have access to the Illinois courts and to the federal courts sitting in that state. The only requirement is that the court has jurisdiction over the subject matter and the parties.

Finally, we find that Dateline's contacts were sufficiently meaningful as to fulfill the due process requirements laid down in Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), with respect to in personam jurisdiction over nonresidents. Our recent holding in Fisons, Ltd. v. United States, 458 F.2d 1241 No. Misc. 1235 (7th Cir.,1972), petition for cert. filed, 40 U.S.L. W. 3369 (U.S., Jan. 31, 1972) (No. 71-971), is applicable to the instant case: "We believe they the parties have purposefully availed themselves of the benefits and protections of local law and commerce, and that their contracts have significantly...